Retention Hacking: What Makes Customers Stay – and What Makes Them Leave?

@johnnyforeigner
Retention Hacking
@johnnyforeigner
All content copyright: Ian Collingwood 2014
retentionhacking.com
Wednesday, 25 June 14

@johnnyforeigner
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@johnnyforeigner

@johnnyforeigner
Ask any two year old: When an experience is enjoyable, we like to repeat it.
And if you’re in business, people repeating things is good news
Belgium has a lot of rollercoasters
We went back to this one every year - we were extremely loyal customers
In fact, three years ago I went back with my wife.
I’ll deﬁnitely go back there as soon as my son’s old enough.
That’s long term customer retention.
Like I said - creating experiences that people enjoy is good business.

@johnnyforeigner
By contrast...

@johnnyforeigner
The measure of a good experience is whether people want to repeat it.
If you’re in business - repeat business is good business.
When people come back, everything is good.

@johnnyforeigner
“Always, retention is our north star” - Neil Hunt, Chief Product Officer, Netﬂix
Almost every decision they make considers customer retention. Their marketing, their
segmentation, the content they choose, their customer service department.
They have teams of PhD statisticians and UX researchers looking into this constantly. As a
subscription service it’s obviously vital.
They have a culture of over-delivering - of obsessive focus on understanding customers.
And it pays off... 1000% rise in Market Cap in 5 years

@johnnyforeigner
Amazon is another example - have you ever bought something and it’s not arrived or it’s
been damaged?
Amazon will bend over backwards to replace it ASAP. No questions asked.
Is this the cheapest way to manage customer service?
Why?
Because they know that people don’t leave because something goes wrong - they leave
because of what happens next. How you deal with that error.
And it pays off... 380% rise in Market Cap in 5 years

@johnnyforeigner
Apple of course takes this to the level of a religious experience.
When your MacBook dies they don’t send you to a dusty industrial unit on the edge of town
for “tech support”.
Instead they invite you on a pilgrimage... for an audience with a Genius

@johnnyforeigner
Enter a light, airy space ﬁlled with fellow
believers...

@johnnyforeigner
Touch and feel the holy relics...

@johnnyforeigner
...onboarding
See the groups of happy novices being initiated and baptised into the one true faith

@johnnyforeigner
...onboarding
...onboarding
...or “customer onboarding” as we call it.

@johnnyforeigner
Is this the cheapest way to manage customer service and tech support?
Using half of the ﬂoorspace of some of the most expensive real estate in the world to NOT
sell stuff?
Not the cheapest, but very, very effective.
Apple market capitalisation increased 500% in past 5 years.

@johnnyforeigner
But still for most companies its...
“Press 1 for sales.... 2 for customer service”

@johnnyforeigner
50%
GDP
There is a huge payoff, (AMZN, AAPL, NFLX market cap = 50% of Spain’s GDP) so why aren’t
all companies doing this?

@johnnyforeigner
Short term thinking
Retention is a noisy metric - it crosses departments.
Retention is a lagging metric - changes take time to become apparent.
But our companies are divided into silos and our investors think short term.
This forces us to think short term too...like miners, not farmers.
Instead of seeing customers as something to be nurtured and grown, we are forced to see
them as a mere resource, to be extracted as quickly and efficiently as possible.
Miners don’t care about the damage they do because by the time the damage is visible, their
money has been made and the resource is all used up.

@johnnyforeigner
Long term thinking
Farmers are the opposite. The money is made at harvest time, after a whole year of hard
work. They know that the decisions they take today have an impact months or years forward
in time.
They know that they are dealing with a system and that changes in one place have effects in
others.

@johnnyforeigner
What’s needed is a proper shift in culture. But in the meantime, what can we ﬁx?

@johnnyforeigner
Segment
Not all your customers have equal tendency to loyalty
Some have much greater loyalty than others and in particular, different channels of
acquisition have markedly different retention patterns. Outbound sales often produces lower
retention if you aren’t careful about it.
Identify which customer segments stick around and go out to ﬁnd more of them. Build
retention metrics into your conversion analytics and optimise for customers who stick
around.

@johnnyforeigner
Dig in
Slice and dice all the data you already have to ﬁnd Proxies: Things that correlate with churn
eg: Netﬂix use “Hours of video streamed” (But remember: it’s only a proxy. if you focus only
on that you will go wrong).
Also think about what I call “canaries” - events in a customer’s lifecycle that seem to predict
they are likely to leave. Like an early warning. eg sudden reduction in usage pattern, series of
calls to customer service, long periods kept on hold... etc.

@johnnyforeigner
Success
Understand what “success” with your product means for your customers
One easy place to start is to check out what your heaviest users are doing and use this to
guide your product dev and also to rethink your onboarding process
Twitter example is useful here - they know what makes a customer likely to become a serious
user and their onboarding process focuses on that alone.

@johnnyforeigner
But all these are mere tactics, and unless you make serous changes, you’ll come unstuck
once the quarterly earnings call or board meeting comes around.
If you really want to make an impact, you need proper hacks. Hacking as in “hacking through
the undergrowth to clear the land”.

@johnnyforeigner
make a commitment
The whole company, including investors need to agree:
“We are in the business of making customers happy. The single best metric we have for
knowing if we are succeeding is long term customer retention.”

@johnnyforeigner
make a commitment
back it up
Remove all bonus and incentive schemes that are not directly tied to measurable increases in
retention.
Put in place a single metric that pays out to everyone in the company based on an agreed
measure for retention for your business.

@johnnyforeigner
Get everyone aligned on the goal and give them skin in the game and a focus on what THEY
can contribute.
NASA’s famous janitor story - “I’m putting a man on the moon.”
Netﬂix: “Highly aligned... loosely coupled”

@johnnyforeigner
make a commitment
back it up
practice listening
If you friend asked you to advise on why they can’t sustain a long term relationship, you
might ask them to work on their listening skills.
Learn to listen
Commit to spending 5% of the company’s time on actively listening directly to customers.

@johnnyforeigner
How?
Net Promoter System is as good as anything.
It’s simple, it’s good for everyone who isn’t comfortable conducting proper interviews and it’s
relatively painless for customers.
Most of all, it provides actionable data over time and is (usually) a pretty good proxy for
retention.

@johnnyforeigner
make a commitment
back it up
practice listening
build your team
You will need:
A numbers person (quantitative analytic skills)
A people person (qualitative analytic skills)
A sponsor or champion (preferably CEO)
A project person (to get things done)
Access to the whole company as required

@johnnyforeigner
TWO RULES
transparency1
We all own the work of the team. We all get a say in what they do to help us all get better at
retention.

@johnnyforeigner
TWO RULES
transparency1
qualitative & quantitative2
All ideas, projects, analysis and solutions include both qual and quant insight.

@johnnyforeigner
50%
GDP
It’s a lot of work...
But the payoffs are huge.
Which leads to the main point: Companies are now more important on our lives than
governments.
They like to talk about “relationships” and “trust” and “loyalty”.

@johnnyforeigner
LET’S TALK
ABOUT
LOYALTY
So let’s look not at the loyalty that customers have to the company.
Let’s look at how loyal companies are to their customers.

@johnnyforeigner
My mum has a BT ADSL service for which she pays £50 a month.
She lives on very modest savings and a state pension of £100 a week

@johnnyforeigner
£2,800,000,000
BT last year made £2.8 billion in pre-tax proﬁt.
That is £53 million per week

@johnnyforeigner
Gavin E. Patterson
£4,250,000
Gavin E. Patterson - CEO
£4.25 million pounds in compensation per year
In a month: £354,166
£81,730 per week
In one hour: £1,643

@johnnyforeigner
£33
When I discovered my mum was paying too much for a crappy service, I checked out BT’s
website.
To new customers, BT are selling a 5x better service at £17/month less than what she is
paying.
Better service, nearly half the price.

@johnnyforeigner
1962
My mum’s had a BT line since 1962
Literally, since before Gavin E. Patterson, current CEO was even born.
Now THAT is loyalty.

@johnnyforeigner
Gavin E. Patterson
“Companies can't take
loyalty for granted...”
How did BT choose to repay this loyalty? (Given that Gavin Patterson in 2013 said that
companies can’t take loyalty for granted).

@johnnyforeigner
£33
Did they call and say “Hey - we’ll come and upgrade your service and reduce your costs. For
free!”

@johnnyforeigner
£50
Nope.
Instead they left her with a crappy service delivered through 2 cables falling of the wall and
kept ﬁlching an extra 17 quid a month from a pensioner, in order to boost the proﬁts of BT
and the bonus of Mr. Gavin “Can’t take loyalty for granted” Patterson

@johnnyforeigner
Gavin E. Patterson
“Companies can't take
loyalty for granted...”
Don’t fucking lecture me about loyalty, Mr Patterson... when you clearly don’t have a clue
what that word means.

@johnnyforeigner
Thank you
retentionhacking.com
@johnnyforeigner

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