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Factors that drive Customer Retention

Purpose of any business is to create and retain a customer because high retention is always a deciding factor for achieving high profit. A research done by Bain & Company has revealed that a 5 % increase in customer retention rate increases the profit from 25% to 95%. As we all know that it takes so much money to acquire new customers, the loss of each customer comes at a high cost. Increase in the average revenue you earn per customer, in turn, could be invested more in the company’s growth, creating a virtuous cycle.

The best example of retaining customers to a large extent is Amazon. The company’s subscription program, Prime membership was a great success in retaining customers. 73% of the free trial subscribers converted to paying subscribers and 91% of the first-year subscribers have renewed for the second year.

Factors that increase the retention rate

Let us see the 7 major factors that drive retention on which the companies should work to stop defections/churn (rate of loss of new users) as early as possible

  1. Providing high-quality product/service that continually addresses their needs, making it a must-have product for the customers.
  2. Refining the new user experience and making the users experience your product’s core value as quickly as possible.
  3. The use of triggers, such as mobile notifications and emails can be effective in helping to trigger the usefulness of your product in a user’s mind.
  4. Must be constantly watching competitor’s new feature or promotion and make your product being “top of mind” with the customers. Communicating to the customers about your product’s new features and benefits easily accessible to make them stick with you. Out of sight, out of mind.
  5. Looking for the opportunity to capitalize on the power of stored value, the more information customers have saved with your app/product, the more likely people will return to access the data and add more to it.
  6. To solidify user’s commitment to your product by making the use of it habitual for them. It can be done by convincing them of the ongoing rewards hey will receive from returning to your product or service.
  7. Consider having a large number of more specialized products with a limited number of features rather than loading all possible features into a single product.

In order to ensure maximum retention, your first area of focus should be on early retention of new users. Also putting efforts at the resurrection (winning back customers who have abandoned your product) can also be valuable since it increases the revenue. To proceed this, first investigate why did they disappear in the first place just simply by interviewing them. By creating specific custom email and push notification campaigns for these customers can sometimes bring them back. 

With all these efforts put to place, every customer who is ultimately retained will represent ongoing opportunities to earn more revenue for your company which is our ultimate goal. 

Srisakthi. K

Community Manager, Cultiv8


Optimizing New User Experience

How do you optmize new user experience for your app/website ?

After you have put so much efforts to attract new customers to use your product/app, the first ever experience your product give them should be special to them that makes them irresistible to use.

The first rule of designing and optimizing your new user experience is to craft a special experience that makes the users to engage with the product and appreciate it for its offerings.

The second rule is your product’s landing page should accomplish these 3 fundamental things.

  1. Relevant communication – how well the page matches the intent and desire the visitors. Do they have what they want?
  2. Value of your product – what’s in it for the visitors should be clear and concise.
  3. A clear call to action – if they are convinced, we should provide a next compelling step for them to take.

According to Bryan Eisenberg, these 3 factors are considered as the conversion trinity. Optimizing these pages requires running many experiments with the language, taglines, images and so on..

In designing the user experience, eradicating friction helps the customers to accomplish the action they are trying to complete. What is tricky here is as a developer or marketer, we don’t recognize the sources of friction in our own products. In many cases it might be surprising for the designers to see how the users stumble to use their products. With every step the user has to jump through, if the value of your product isn’t clear or too many hurdles, even the slight irritation can send them back often for good.

According to Sean, a simple formula would help you reduce the friction as much as possible which is  Desire – Friction = Conversion Rate

To improve the user experience, you should either increase your customer’s desire or reduce the friction experienced by them out of which the latter is the low hanging fruit. Below tactics can be quiet useful to enhancing the user experience.

  1. Simplifying the sign-up process – using single-sign-on has been a game changer in recent days. Most of the sign ups with our existing google or social media accounts has simplified the process making the users create their account in a single click. With this one tag “ sign Up using your Google Account” most of the companies offering consumer products and also B2B have reported a stunning increase in acquiring new potential customers. Always remember one thing what works for one product does not work for the other. So keep experimenting.
  2. Flipping the funnel – allowing the customers experience your product’s aha moment quickly by making them to enjoy the features of your product without sign up. This technique works well for web and non-web based products. Giving them a trial period to enjoy your product has been proven successful in cases of Netflix, Amazon Prime, You tube and so on…
  3. Psychological commitment – At times, you have to put some positive friction on their way to help them understand the value of their product. Robert Cialdini, a psychologist explains once people take an action, no matter how small, as long as they have a good experience, they are more likely to take any action in the future. It is a form of a psychological commitment they have. The more information people put into their product, the more their commitment increases.
  4. Art of Questionnaire – asking customers about their interests or problems they are seeking solutions immediately creates a form of commitment and creates a personal connection with you and your product. This works best if customizing your product to meet their needs is possible.
  5. Gamification – offering rewards to the customers for certain actions. The rewards should be meaningful and offer relevant value to the customers in such a way they should feel some gratification.

No matter how good your product is, these tactics should be implemented as a foundation for building strong relationships with your customers. With providing great user experience and developing a strong relationship with the customers you should next focus on processes to achieve larger retention rate.


Community manager, Cultiv8


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