The product has attracted new users, how to retain them?

In the past, “born by attracting new customers, die by retaining existing customers” may have been a gimmick. As traffic dividends disappear, users are becoming increasingly difficult to please, and “death by retention” is gradually becoming the curse of collapsed companies.

Today, in SaaS businesses, keeping users subscribed is a popular way to retain them. For example: subscriptions to stores, content, interests, items, etc. There is even a subscription box service in Japan, where you can subscribe to 18 different subscription boxes for $9 a month. You can subscribe to clothes, food, etc., and these items will appear in a box on your doorstep every month.

Imagine having everything you need delivered straight to your doorstep via a monthly subscription for $9 or equivalent. This completely overturns many past concepts, such as how to view marketing? How to think about what the product is and how to meet user needs? Let’s look at the keyword “every month”. This means that users create value for the company every month. Obviously, this is different from the past. In the past, you may only have one connection with the user.

This shift moves users from brand promiscuity to brand loyalty, and at the same time, turns unpredictable and chaotic revenue into predictable revenue because the company knows that users will continue to use the product. This approach enables users to "try before they buy" (try the product first, then consider buying) instead of the old model of "try before buying" (buy the product first, then consider whether it is useful). It also transforms the complex sales process of the past into a simple sales process where users can choose independently.

Most importantly, a subscription business enables you to think about marketing as a function of satisfying user needs, rather than just transactions.

User retention is more important than conversion

The subscription economy is a lucrative world of predictability and scalability, a fundamentally different business model that changes everything from how businesses market and communicate with their users.

This is also a reflection of the fact that retention is more important than conversion. Over the years we’ve learned a lot in the industry about conversions, the goal is to increase landing page traffic, continually directing users to a website where you might do things like: run A/B testing.

A simple A/B test can reveal differences that are not normally observed. For example, can businesses discover how to place a button in the right place? Should the button's color be red or green? What colors have meaning...

Because most businesses already know too much about conversions, prompting a guy named Benedict Evans to tweet the following:

It’s a cool idea to make an app reach 1 million users and it’s the new normal, but it’s a problem for the business to actually retain those growth users and move on.

— Benedict Evans (@benedictevans) March 22, 2015

This sentence clearly shows that attracting new users is only the first step. The real challenge is to get 100 million users and keep them. This is also the focus that product and marketing teams need to focus on. Based on this idea, companies need to avoid guiding the wrong users to register and reduce the energy wasted on vanity indicators, but find the right users and keep them for a long time.

As a simple example, here's the question: Do you serve a million users in 4 days or a million active users in 16 months?

The former's business, a chat app called Yo, appears to be growing and quickly becoming successful. The latter's business is Slack. Today, Yo no longer exists, and Slack is worth tens of billions of dollars. Therefore, activity and retention are what make your business successful, not new customer acquisition.

User retention metrics

There is an indicator to measure the user retention value of an enterprise - NDR (net dollar retention).

How much value will the people who register today create in a year? Are they spending more or less money? Are they still there?

The variables here are usually considered to be churn and expansion (deep usage expansion), and the company's business people should maximize user retention and deep usage of the product to minimize the possibility of their churn. If you do either of these two things, it will have a huge impact on the business.

To give you a visual representation of how this is typically measured, here’s a graphic that shows it in action: All user groups become more valuable over time. If we extrapolate this pattern, it’s easy to see that net new users are actually less important than the value growth of all existing users in any month. In this way, the company controls the direction, while retained users create value and promote business growth.

NDR is measured as a percentage, and companies would do best to keep NDR above 100%, but the sweet spot is around 120% to 140%.

As shown in the figure above, some listed companies all exhibit this key feature of NDR exceeding 100%.

Therefore, businesses need to focus on the lifetime value (LTV) of their users and compare the LTV with the customer acquisition cost (CAC). If LTV<CAC, the company needs to control its budget; if LTV>CAC, the company can increase investment to acquire users. Because the value return to users in the future will be higher than the investment, but it should be noted that the validity of this formula requires the company to be in a continuous growth environment. If the company's business scope shrinks over time, then the company's increased investment is actually buying a leaky bucket that will not have any effect.

Product onboarding is key to user retention

The usual situation of an enterprise is:

Companies do a lot of wonderful marketing activities, attract a lot of users to the product's homepage, and then it's all worthless. Maybe some of them will register and then become "zombie users". In rare cases, you’ll end up with a happy user, in which case it’s your job to keep that user happy and keep them in this positive cycle where they continue to use more and more product features. Because if you don't, they're going to become a churned user or become someone else's user.

Companies must prevent users from becoming registered “zombie users” to avoid keeping the user lifetime value at the beginning. When someone is willing to use a product, how can a company ensure that he actually uses it? And how do you ensure they stay and stay active, and continue to gain more value over time?

Product onboarding is key to retaining users. Can you really satisfy your users? If you can get users to sign up and use the product properly, it absolutely changes the dynamic of the entire business. We’ve spent many years exploring product onboarding at Intercom, and here are some of the lessons we’ve learned along the way.

The two pictures above represent what companies often do to users - users learn about the many benefits and introductions of buying a camera through promotional materials, buy the camera, but in the end they get a boring manual. Companies often make users excited before purchasing, but disappoint them after purchasing. This is a typical bad experience that companies provide to users. Therefore, product entry is something that every business needs to pay attention to.

Product introduction is the prerequisite for enterprises to establish deep links with users. The following are successful examples of enterprise product onboarding:

• Slack, the company has been obsessed with guiding users to get started better. They let users use each feature, such as letting users upload profile photos to learn how to set pictures; letting users understand the uploading of file attachments and how it works; letting users chat with Slackbot to understand how to interact in the product, etc.
• Apple Music, the company has been working hard to create a good listening experience for users. For example, let users easily delete or add music to the library.
• Super human, the hottest new email client in the Valley. The company's advantage is that keyboard shortcuts greatly improve efficiency, and it has also established multiple interactive games to gradually make users feel good about the product during use...

It is not difficult to find that these examples all capture the good and core entry experience they bring to users to assist retention. In this state, it would be a mistake for a company's marketing team to over-promise. The key question here is whether the business is building what it markets and whether the business is marketing what it builds. In most companies, no one actually understands this, resulting in a huge gap between product and marketing.

5 tips to improve your product entry success rate:

(1) Interview different users who recently registered the product

The following are some examples of interview questions for different types of users:

• Users who are ready to use the product. What impressed them? What do they want to achieve?
• Users who registered and then churned. What are they looking for? Are they real potential users?
• Users who signed up to try out your product and recently converted. What is right? What is the point that promotes their conversion?
• Users who signed up for a trial product but recently canceled it. What went wrong? What changed their minds?
• Users who are currently trying your product. What unresolved issues do they have? What else are they doing? What were they doing before they came to your product?

In all cases, companies need to try to understand and provide appropriate solutions to promote user retention.

（2）Determine your target users

You can’t satisfy everyone, and not everyone is ready to use it. In fact, businesses need to find people who need your product, want to use your product, and are able to use your product.

(3) Use 4 driving forces

Most users try or abandon your product because of some driving force behind conversion. The Rewired Group found that there are 4 forces, 2 of which are positive driving forces and 2 are negative driving forces.

Companies can manipulate these four forces through advertising and marketing, as follows:

• Increase momentum: Demonstrate the benefits of existing products.
• Increase product attractiveness: Improve product's ability to solve problems.
• Reduce uncertainty and anxiety: Assure consumers of the convenience and flexibility of the product.
• Reduce attachment to the status quo: Eliminate consumers’ irrational attachment to the current situation.

If you make the force at the top of your product greater than the force at the bottom, users will try to use your product. The point to emphasize here is that companies should position their products against each of these forces. Maximize the upside and minimize the downside.

(4) Design specific getting started guides for each type of user

If a product has various functions, it also means that it will have various types of users. Usually what people do is when you sign up for anything, they just put everybody through the same onboarding guide, even though their reasons for using the product might be very different. For example, your users might be students, teachers, or principals. They may all use your product, but they need to see and value completely different things.

Therefore, companies need to tailor onboarding guidance to their products based on user intent. Understand the user's intention for using the product and make the product meet their intention.

（5）Understand the key behavioral indicators of user retention

Measure the changes you want to see. Companies need to know the key behavioral indicators of users. Do they invite their friends right away? Do they upload 10 files? Whether they follow three friends... No matter what the behavior is, you need to know that this behavior is the key behavior to promote user retention, and make good use of it for retention.

As your product improves, your onboarding instructions must improve

The key thing to note here is that your marketing and product teams need to work in parallel. They need to work together because if your marketing team runs a new campaign, your product team needs to use that campaign and deliver on that promise. Likewise, if your product gets better, your marketing team needs to change the onboarding guide so they can see the improvements.

Generally speaking, people tend to get stuck in a black hole of tiny optimizations. We have made the sign up button green, we are making it greener. We've got it in the red now, and we've made a one percentage point improvement every step we take.

In fact, unless you’re a large, multi-billion dollar company, you should default to redesign in most situations. There's usually a bigger, better way, and it doesn't involve subtle shades of green.

The only case where you need to optimize is when you are very happy with the performance and just need to tweak it slightly, but for the rest of the scenarios, a redesign is usually better.

Focus only on high-impact work

The work done by teams across the business can have a high impact or a low impact.

As shown in the four quadrants in the above figure, most people are good at staying in the lower right corner, where there is a lot of work but little impact; the upper left corner is often an area with less work but can help quickly establish impact; the upper right corner is the core strategy area of ​​the enterprise, and the work here will have a huge impact; the lower left corner is the lowest efficiency area with less work and small impact.

The hardest thing many companies have to do is get their team out of the bottom left corner. The lower left corner is easy to work with but does nothing. Companies need to focus teams on high-impact work and avoid making meaningless minor adjustments.

To sum up, companies need to focus on retention from the perspective of ultimate value, rather than just focusing on attracting new customers and conversions. I hope this helps!

By Des Traynor

Source: Sensors Data