The Shifting Sands of Acquisition Versus Retention

07/28/15

Those of us that spent much time on the agency side of the business likely spent the bulk of our time and energy acquiring new customers for brands, versus targeting existing users. In most organizations, there was (is?) a responsibility divide between the two efforts. One team responsible for getting new users, the other on getting existing customers to transact again.

That is, perhaps, not an unwise approach – giving a person or a team responsibility for one key lever ensures that the interests of either acquisition or retention are promulgated and defended with passion.

But it was the budget split that always surprised me. I worked on dozens of brands that spent 90%+ on acquisition, and relied on weekly or monthly email blasts to carry along the customers. What made that even more problematic was that we typically offered HUGE trial discounts to attract a new user, and nothing to reward the customer for their loyalty. The logic behind that is that we’ve already got them and the quality of the product or service should drive the repurchase.

I am not arguing here for giving away margin for the heck of it. But consider how it makes you feel when, as a long-time customer, you must pay full price while the newcomer gets 40% off. Does that seem like the right way to treat a loyalist?

Even if a brand doesn’t want to “subsidize a user”, does it really make sense to spam the loyalist while spending millions on people who have not (yet?) demonstrated brand loyalty? There are other ways to add value for users than just discounts. But a one-size fits all email that they get because you pre-checked the opt-in box for them is NOT one of them.

Fortunately, the massive bias toward acquisition is something that a lot of brands are rethinking. One of the most prominent examples is Macy’s, which focuses a great deal of its energy working hard to please its loyalists. If you are interested in how this is done right, study them.

The math for customer marketing is too good to ignore. Various studies say that it costs 80-90% less to drive an incremental purchase versus a new customer. This is why retargeting works so well. Who’s more likely to make a purchase? A past purchaser? A site visitor? Or some person “in the demo” who’s never visited the site or downloaded the app.

In the app space, acquisition has long been the name of the game for several reasons. First, the category was, until recently, totally dominated by games, where the world is upside-down as far as relative profitability goes. Acquisition is probably more cost effective than retention marketing for games. In most cases.  After all the number of people likely to make a virtual goods purchase is in the single digits. It’s hard to get scale with that math underpinning the business. Second, we are in a “land grab” era where mcommerce apps are fighting for screen space against other well-funded commerce apps. All that money and activity have made a lot of brands focus on installs Finally, in the past it was relatively difficult to speak to high-performing app user audiences without a lot of waste.

That has recently changed, with our own offering, Apsalar Audiences for Facebook, being a great example. In addition, marketing automation platforms powered by trigger data from Apsalar and other platforms enable brands to send emails, push messages, message center communications, and more to customers with zero waste. Advertising also offers a fantastic channel for these sorts of efforts because the relatively low costs of digital media make it cost effective as a reach vehicle – especially for app users that opt out of push notifications and emails.

Our analysis shows that customer and user targeting are particularly cost effective for travel, personal finance, retail, and some types of on demand services.

Blown-Out  Umbrella Funnel

Further, these tactics help to improve the shape of the buyer funnel for mcommerce apps. From one like that above, with massive installs but not much of anything else, to the one below, which shows a greater sense of balance and much higher conversions.

Picture1

If you are looking for ways to quickly improve the BUSINESS METRICS of your app, precision user targeting at scale is something you should definitely consider.

 

Share Button