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Amol Ghemud Published: August 14, 2018
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80% of a business’ future revenue comes from just 20% of existing customers.
Bhaskar Thakur, Co-Founder of upGrowthrecently conducted a workshop on “How to Growth Hack Customer Retention”.
About the Workshop
The workshop was all about learning the best growth hacks to retain customers for your business using digital marketing and technology.
The workshop covered how to design out-of-the-box growth strategies which works only when you can show measurable changes through web and mobile analytics.
It basically defines the “what” when it comes to your startup business before discussing the “how” of automation and scaling up.
Why Growth Hacking is important for your startup?
The growth hacking mentality pushes results over process in a data-driven environment. Everything comes down to what works.
Applying Growth Hacking will place you in an exclusive club – and you’ll gain so much more than your competitors. Because lot of people struggle to figure out how to grow their business.
But doing this in the right manner is important…otherwise it can backfire at your business BIG TIME.
Customer retention in “A2R2” framework
A2R2 framework for growth provides the perfect toolkit to engineer growth around the customer lifecycle. It gives powerful techniques to gain massive amount of attention, followers, and customers for your business.
AttractGet visible to the right target audience, for new products these are early adopters who are constantly looking for better ways of solving a problem.ActivateGet the users understand the core benefit of your product as soon as possible- – the Aha! Moment and get them to sign up.RetainKeep them coming back. We optimize new user engagement to keep them coming back & engaging.ReapNurture brand champions. We build and run virality loops & viral campaigns to engage evangelists & large communities.
In order to achieve long-term sustainable growth, growth teams focus on delivering delightful and personalised experiences at scale.
Why you should care about Customer Retention?
It costs 7 times more to ACQUIRE one new customer than it does to RETAIN one.
More than anything, the fact that marketers are acknowledging the need for growth in customer retention is a sign of the changing times – and the rising importance of customer retention.
Calculate the Customer’s Retention Rate and Churn Rate
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Why do customers drop off out of your product or services?
Businesses mostly focus on attracting new customers and often forget about existing customers who have been staying with them for a long time.
In any business existing customers leave and new customers arrive.
These are possible reasons why customers leave:They are no longer buying in your service/product categoryThey have found better solutionThey turned down by product or service dissatisfactionMoved to a competitor
Customer retention strategies
Retaining customers is the ultimate goal for any business. Whether online or offline, ensuring that customers are satisfied is critical for long-term success.
With a strong customer retention strategy, it’s much easier to grow your revenue and profitability.
Engaging with existing customers, using content marketing strategies & going extra mile with them are few of the strategies useful to retain your customers.
Continue refining and improving your customer retention strategy and execution — it may deliver the highest marketing ROI of all your marketing programs.
1. Use CRM
With the total cost of acquiring new customers many times higher than servicing existing clients it’s no surprise that retaining business is at the heart of many organisations CRM strategy.
CRM systems have numerous service functions and they can be used to help you keep your best customers and protect future revenues.
2. Focus on product/service.
Companies that shift their focus to customer retention often use the the approach of focusing on their product and service.
3. Engaging with existing customers by giving them special offers.
Another way to achieve customer retention is by engaging with them by giving them special offers and making them feel special. This will make them want to use your service/product again and again.
The A2R2 framework positions retention as a core pillar for sustainable growth, focusing on keeping users engaged after their initial 'Aha! Moment'. This stage is critical because it costs 7 times more to acquire a new customer than to retain an existing one, making it the most cost-effective path to profitability. The framework emphasizes a data-driven approach to creating personalized experiences that build loyalty and prevent churn.
The 'Retain' phase in the A2R2 framework (Attract, Activate, Retain, Reap) is about optimizing new user engagement to ensure they keep coming back. Rather than just preventing customers from leaving, the goal is to create delightful experiences at scale that transform them into active, engaged users. This is achieved by:
Analyzing user behavior to understand engagement patterns and identify drop-off points.
Implementing personalized communication through channels like email and in-app messages.
Continuously improving the product based on feedback to address dissatisfaction.
A deep focus on retention ultimately nurtures brand champions for the final 'Reap' stage. To fully understand how to apply this model, you need to explore the specific growth hacks that drive engagement.
A growth hacking mentality prioritizes tangible results over established processes, using a data-driven environment to discover what works for customer retention. This mindset is crucial because it acknowledges that your most valuable asset is your existing customer base, which is responsible for 80% of future revenue. Instead of relying on broad marketing campaigns, growth hacking focuses on targeted experiments designed to improve engagement and loyalty with this core group.
This approach directly challenges traditional marketing by focusing on the entire customer funnel, not just acquisition. Key differences include:
Focus on data: Every strategy is tested, measured with web and mobile analytics, and optimized for retention.
Product-centricity: The core product or service is seen as the primary driver of retention, not just marketing messaging.
Rapid experimentation: Growth teams constantly run small-scale tests to find effective ways to keep users coming back.
This shift allows you to gain a significant advantage over competitors who are stuck struggling with how to grow their business. Learning to implement these strategies correctly is the first step toward building a more resilient revenue model.
A CRM-based strategy focuses on managing customer relationships through personalized communication and service, while a product-focused approach, exemplified by Apple, centers on creating an indispensable and superior product experience. The best choice depends on your business model; service-oriented businesses may lean toward CRM, while tech companies often succeed by making their product the core of their retention effort. A CRM strategy is excellent for tracking interactions and delivering targeted offers to protect future revenues.
Choosing the right approach requires evaluating several factors:
Business Model: Subscription services like Netflix benefit from CRM-driven engagement (e.g., special offers), whereas hardware or software companies like Apple thrive by making their product ecosystem indispensable.
Customer Expectations: Do your customers value personalized service and special treatment, or do they primarily care about product functionality and performance?
Resource Allocation: A product-focused approach requires significant investment in R&D and engineering, while a CRM strategy demands resources for marketing automation and data analysis.
Ultimately, a hybrid approach often delivers the highest marketing ROI. Integrating CRM data to inform product improvements can create a powerful feedback loop, as detailed in advanced retention playbooks.
Customers typically leave for a handful of predictable reasons, which smart businesses can anticipate and mitigate. The primary drivers of churn include finding a better solution, product or service dissatisfaction, moving to a competitor, or no longer needing the service category. Ignoring these signs while focusing solely on attracting new customers is a common mistake that a proactive retention strategy is designed to prevent.
A strong retention plan directly counteracts these churn triggers:
Finding a better solution:Continuously innovate and communicate your value proposition. Use analytics to show users how your product solves their problems better than alternatives.
Product or service dissatisfaction: Actively solicit and act on customer feedback. A growth hacking approach uses data to identify pain points and rapidly iterate on the product.
Moved to a competitor: Build loyalty through engagement. Special offers, personalized content, and community-building efforts, like those used by Netflix, make your service feel indispensable.
By shifting focus from acquisition to retention, you can plug these leaks in your customer funnel. The next step is learning to build the systems that automate these retention activities.
Engaging with existing customers and going the extra mile are crucial tactics for turning satisfaction into long-term loyalty. This involves creating a continuous dialogue with your users through personalized communication, special offers, and valuable content. Content marketing is a powerful tool in this strategy, as it allows you to provide ongoing value outside of your core product, reinforcing your brand's authority and keeping you top-of-mind.
A robust engagement strategy includes several key components:
Personalized communication: Use a CRM to send targeted emails or messages that acknowledge a customer's history with your brand.
Exclusive offers: Reward loyal customers with discounts, early access, or other perks that aren't available to new users. This makes them feel special and valued.
Content marketing: Develop tutorials, case studies, or thought leadership articles that help customers get more value from your product and solve related problems.
These tactics work together to build a strong, lasting relationship. Refining your execution in these areas is explored further in workshops on growth hacking customer engagement.
The focus of growth teams is shifting from a primary emphasis on acquisition to a more balanced approach centered on the entire customer lifecycle, especially retention. This evolution is driven by the clear economic advantage, as it costs 7 times more to acquire a new customer. In the coming years, marketing will become less about broad campaigns and more about engineering delightful and personalized experiences at scale to foster long-term loyalty.
This strategic shift will elevate the importance of specific skills:
Data Analysis and Interpretation: The ability to use web and mobile analytics to understand user behavior and measure the impact of retention initiatives will be paramount.
Marketing Automation and CRM Expertise: Proficiency in using technology to deliver personalized experiences to large user bases will be essential.
Product-Led Growth Mindset: Marketers will need to think like product managers, focusing on how the product itself can drive engagement and retention.
As more marketers acknowledge this trend, the competition for customer loyalty will intensify. Staying ahead requires mastering the tools and strategies discussed in advanced growth hacking workshops.
An e-commerce business can optimize its conversion funnel for retention by shifting focus from the initial sale to the entire post-purchase journey. This involves using data to create a delightful and personalized experience that encourages customers to come back. The strategy should be built around the 'Retain' and 'Reap' stages of the A2R2 framework, turning one-time buyers into loyal brand champions.
Here is a stepwise plan:
1. Analyze Post-Purchase Behavior: Use analytics to understand how soon customers return, what they buy next, and where they drop off.
2. Implement a CRM System: Track customer interactions and segment your audience based on purchase history and engagement level.
3. Launch Targeted Engagement Campaigns: Send personalized emails with special offers, product recommendations, or valuable content to specific segments. For example, offer a discount on a related product.
4. Create Virality Loops: Encourage repeat customers to become evangelists. Implement referral programs or reward them for sharing their purchases on social media.
This systematic approach transforms your funnel into a loyalty loop. You can kickstart your project by learning more about these techniques in a growth hacking consultation.
A Customer Relationship Management (CRM) system is a powerful engine for retention because it enables businesses to deliver personalized experiences at scale, which is essential for keeping their best customers. Given that it costs 7 times more to acquire a new customer, protecting future revenues from your existing client base is paramount. A CRM centralizes customer data, allowing you to track interactions, segment audiences, and automate engagement in ways that make customers feel valued.
Key service functions of a CRM that directly boost retention include:
Personalized Communication: Sending targeted emails with special offers or relevant content based on a customer's purchase history.
Proactive Service: Identifying at-risk customers based on their engagement patterns and reaching out before they churn.
Loyalty Program Management: Tracking points, rewards, and milestones to nurture brand champions.
By making retention the heart of your CRM strategy, you can systematically improve customer satisfaction and increase the lifetime value of your client base. Exploring how to fully integrate CRM with your marketing programs is a logical next step.
A strong customer retention strategy provides a compounding advantage that directly boosts profitability and fortifies a company's market position. Because 80% of a business’ future revenue comes from just 20% of existing customers, even small improvements in retention lead to significant long-term revenue growth. This creates a more stable and predictable business model, reducing dependency on costly and often volatile new customer acquisition channels.
The long-term impacts are substantial:
Increased Profitability: Retaining customers is more cost-effective than acquiring new ones, leading to higher profit margins. Loyal customers also tend to spend more over time.
Competitive Moat: High switching costs, driven by a great product and personalized service, make it difficult for competitors to steal your customers.
Brand Advocacy: Happy, long-term customers become brand evangelists, creating powerful virality loops and organic growth channels that your competitors cannot easily replicate.
Companies that master retention place themselves in an exclusive club, gaining a sustainable edge. To join them, one must understand how to execute these strategies effectively.
The 'Reap' stage of the A2R2 framework is where the value of successful retention is multiplied, turning loyal customers into a powerful growth engine. This final phase focuses on nurturing brand champions and building virality loops that leverage your existing user base to attract new customers. Instead of paying to acquire every new user, you empower your most engaged customers to do the work for you, creating a sustainable and scalable growth model.
This stage is the culmination of the framework's earlier efforts:
Attract: Brought in the right audience.
Activate: Showed them the product's core value.
Retain: Kept them engaged and happy over time.
Once a customer is retained and delighted, they become a potential evangelist. Viral campaigns and referral programs then provide the tools for these champions to spread the word, creating loops where each happy customer brings in one or more new users. This organic growth is far more credible and cost-effective than traditional advertising, as explored in workshops on hacking business revenue.
The most significant strategic error is viewing the customer journey as complete once a sale is made or a user signs up. Businesses often pour resources into attracting new customers and achieving that initial 'Aha! Moment' but then forget about the existing customers who have been with them for a long time. This transactional mindset ignores the fact that it costs 7 times more to acquire a new customer than it does to retain one, leading to a leaky bucket scenario where churn negates acquisition efforts.
This imbalance stems from a focus on vanity metrics over sustainable growth. Companies get caught up in tracking new sign-ups or initial sales, failing to measure and optimize for long-term user engagement and lifetime value. Overcoming this requires a cultural shift toward a retention-first mindset, where the entire organization recognizes that true growth comes from building lasting relationships, not just closing one-time deals. A free growth hacking consultation can often help businesses diagnose and correct this imbalance.
For Apple, the product itself is the most powerful retention tool, creating a 'stickiness' that transcends traditional marketing. By focusing relentlessly on product and service excellence, Apple builds an ecosystem where the user experience is so integrated and superior that switching to a competitor feels like a significant downgrade. This strategy turns customers into long-term loyalists who are less susceptible to competitor pricing or promotions.
This product-as-retention approach works because it creates inherent value that marketing alone cannot replicate. Key elements of this strategy include:
Seamless integration between hardware, software, and services, which increases the switching costs for a user.
Consistent innovation and quality that builds trust and anticipation for future products.
A focus on user experience that makes products intuitive and delightful to use, fostering an emotional connection.
While Apple also engages in marketing, its core retention power comes from making its products indispensable. This philosophy is a key takeaway for any business looking to build a durable customer base.
Amol has helped catalyse business growth with his strategic & data-driven methodologies. With a decade of experience in the field of marketing, he has donned multiple hats, from channel optimization, data analytics and creative brand positioning to growth engineering and sales.
