The Science and Secret to Retention Marketing: Determining Your Customer’s Magic Moment

By: Aaryn Kobayashi | July 13, 2017 | Artificial Intelligence, Personalization, Retention

For anyone who has a fancy fuel economy gauge in their vehicle (and/or common sense), you’ll know that accelerating onto the freeway takes a lot more gas than staying at cruising speed. Physics aside, the same can be said for the time and resources spent for consumer acquisition and retention. Acquiring a consumer is much like getting onto the freeway in that it can cost you 5-7x more than simply retaining a consumer. Yet, only 32% of leadership says that consumer retention is a priority.

So, why isn’t consumer retention your #1 priority?

A recent HubSpot poll shows consumer retention taking the bronze for most marketers when it should be the gold medal winner when it comes to priorities. Your existing consumer base is a wellspring of opportunity for referrals, repeat purchases, feature adoption etc. In fact, you are over 60% more likely to be able to “sell” to an existing consumer than a new consumer.

As competition rises and your industry landscape gets more crowded, the answer to beating your competitors may be more obvious than scouring countless blogs for the latest tactics on consumer acquisition. If you can manage to retain and engage the consumers you currently have, you will likely be a guaranteed industry leader.

Retention is a hot topic because it is seemingly elusive. Unlike the science of driving a car where physics can explain why it takes more gas to accelerate than to cruise at constant speed, there is no formula that can universally explain consumer retention. And, for most, looking at a consumer retention graph can be a bit depressing because the majority of your consumers will be gone by Day 3.

Meet Customer X

Customer X is a Kahuna customer in the lifestyle industry. They rely heavily on app engagement for class bookings, blog subscription and readership, loyalty program promotion, etc. As mentioned, there is a very small window to get buy-in from a consumer from first-day install. The retention curve is typically very steep from Day 1 to Day 3 in most industries, across many channels.

 

This graph shows mobile app users over a 30-day period from install

 

But, consumer retention is not as elusive as you think—it can be demystified. Hidden within your total audience are power users. These are your superstars, your favorite child, your go-to drink—these users are GOLD.

So, what separates the power user from the rest? Why are they so much more engaged and look so pretty in an Excel graph? Alex Shultz, VP of Growth at Facebook, calls it a magic moment. For Facebook, their magic moment was getting a new user to make at least 10 friends by Day 14. Shultz says this formula is a solid predictor of retention and identifies high lifetime value (LTV) consumers.

To do this, Shultz worked backwards in plotting the path to Facebook’s magic moment. Using this method, we can look at today’s disruptive companies and make an educated guess at each of their magic moments. For Uber, it might be a certain number of requested rides by a specific time after app install. For Amazon it is likely a combination of a first purchase and product searches per unit of time. For Facebook, Shultz uncovered that when a user made at least 10 friends by Day 14, users were usually active 3 years after account creation making that user a power user.

Customer X and their magic moment

Following a similar methodology, Kahuna uncovered Customer X’s power users through data ingestion that isolated specific commonalities indicating high LTV.

 

In this example, a power user is someone who has engaged at least 10 times over the course of 30 days.

 

 

For Customer X, users who booked at least 3 fitness classes by day 4 were 3x more likely to stay engaged and become a high LTV customers—the magic moment.

Bridging the gap: Making everyone a power user

Okay, maybe not everyone, but there’s no harm in trying. Once the formula for a power user is known, execution is just a matter of setting up marketing automation rules that encourage new users down a similar path of your power users. So, from first install, every interaction Customer X has with that user should be encouraging that user to book classes by Day 4.

But, it isn’t just about incessant messaging because you can imagine that would have the opposite effect. In order to achieve a 3x lift in engagement and prolonged retention, Customer X messaged each individual user at their preferred time with the best performing hyper-personalized message variant. Only through AI is this kind of real-time, hyper-personalized message delivery possible. So, if you were wondering how the AI craze is going to affect your industry, this is it.

 

Final thoughts

In addition to identifying your power users and how to get to the magic moment, you also need to recognize that each user is an individual with individual preferences. There is a higher standard of brand-consumer interaction that demands hyper-personalized messaging. Not only through message content but also being sent at the right time and on the right channel and device. Your consumers want a good experience—they want to identify with your brand to feel connected and engaged. Strengthening that bond is done by ingesting every user interaction to create an experience unique to each person. Not to mention that your happy customers are the best Sales team you could ask for…and you don’t have to pay them!

 

Data guru: Blake Shiafone, Senior Analyst @ Kahuna
Sloan

Author: Aaryn Kobayashi

Aaryn Kobayashi is Growth Marketer at Kahuna. Previously, she was flexing her muscles as a digital marketing consultant to stem the hemorrhaging of funds while she traveled across Europe and Asia. Aaryn moved to the Bay Area from San Diego where she was a digital marketing account manager by day and wannabe coder by night. Her interests beyond marketing include power yoga, running on single-track trails, taking conquering pictures on top of summits, and carving up a freshly powdered mountain. Read more about Aaryn on her website aarynk.com where she details some of her travel adventures and coding projects.

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