Customer attrition is a killer. After a massive amount of time and cost you’ve secured a new user. They went though your purchase process and committed to you. Some for only a trial period, or maybe just a free account. Your most important customers will have bought something – either a hardware product or a service priced on a reoccurring basis.
But now the surprise. Tracking use of your product you quickly uncover an issue – usage is less than expected, to the point where some customers simply stop using the product. You’ve stumbled onto the key issue with consumer tech products, connected products, and especially web-service business solutions. Customer Attrition. Your expensive customer acquisition cost may not be recovered. But worse, your growth rate is impacted as every departing customer must be replaced before you can grow your top line. Ouch!
Signs of a Customer Attrition problem.
While the signs of such a problem may seem obvious, it can take months before you recognize and start to deal with the issue. Attrition takes two forms: Quick and early attrition due to issues that can be turned if faced quickly, and the dreaded gradual usage decline that signals a fundamental issue with your value proposition.
These three early problems are fixable:
No turn on.
Purchasers are not even unboxing the product. Or after the initial download, installing the app. This happens far more often than you’d think. Especially around the holidays when many consumer electronic products are given as gifts. Track it. These customers never become users – you probably won’t even know who they are.
Frustration at startup.
A poor out-of-box experience quickly leads to discouragement and more. Customer support becomes overwhelmed with setup issues. Your social network lights up. And don’t’ be fooled, many frustrated users will never call, they’ll just stop – every caller represents many more departing users.
Your messaging was misleading – you over promised. Your initial surveys (usually taken 4 weeks after purchase) show a big disconnect between what users thought they were buying, and what they perceive themselves to be using. And they are mad.
You may not like it, but you can address these. Too much discounting is often the cause of unopened product. Poor user guides or clumsy product issues cause startup anxiety. Don’t oversell – it won’t work out for you.
Now for the dreaded decline.
But there is a last group of fading customers – those who slowly cease using your product. Over time, these users turn to your product with decreasing frequency until they just stop. Your value proposition is not working for them. And unlike the execution issues of the first three, this problem is cancerous.
The most loved products deliver a valuable benefit that is constantly reinforced. Adjusting a product to do so does not happen six months into a product launch. There is no quick fix. The benefit is core to the product or service itself. And startups with limited funds can’t handle a redo. You need to get ahead of this during your product development stage.
These seven rules can help you address user attrition when it is still manageable. Going to market holding strong hypotheses on these points will speed you to a working value proposition for your business.
1. Keep benefit visible.
The benefit of something frequently used stays visible. Opening your favorite daily paper offers built in reinforcement. The benefit of your iPhone accrues dozens a time a day. But with many products or services this is not always possible.
Getting an alert from your ADT security system is the last thing you want, but regular assurance that your system is working and still needed is valuable. Arming your home upon leaving provides you daily feedback. ADT commercials remind users of external threats and the continued need for personal home security.
WPEngine touts rock solid WordPress hosting with fast download, security, and always-there support. They backup your site daily and remind you of that every time you download a plugin. With every WordPress upgrade (of which there are too many!) an automated email stream alerts you of the pending auto-update, and then confirms and offers a reversion if needed. WPEngine value stays visible.
Your benefit may not accrue daily, but simple feedback loops can keep your benefit visible.
2. Reinforce users’ motivation.
Understand your customer’s underlying motivation for buying your product and reinforce that repeatedly. Not surprisingly, for many big brands a primary goal of their consumer communications is to provide this reminder. This is branding at its core.
Classic motivations are Fear, Greed, Value, or Self. But you don’t need to be so pure. Your users might value lifelong learning, personal growth, discovery, or belonging. What is the core motivation behind the use of your product? How will you keep that front and center?
3. Manage engagement experience.
Customers that engage with a product use it more. Think through your engagement model.
Is your engagement product lead?- make sure it works as expected. Strong consumer hardware offerings work reliability and are supported with feature upgrades. WordPress is constantly updated. Your new Macbook Pro gets better with every OSX push.
Many SaaS offerings are support lead – keep in constant touch with your users. People paying for service expect support. A quick path to question resolution will be key to keeping your users happy. Consumers fighting for your attention will leave.
Others are lead by content – keep it fresh and flowing. Seems obvious, but what’s fresh to one might be off topic to another. Understand who’s reading what or you’ll be talking to a vacuum. Zite does a great job of tuning content for the users, but without the stale sameness of other news aggregators. Other such as Yelp often seem so un-policed that their primary value of product recommendations is questionable.
Whatever your engagement model – understand it and actively manage it.
4. Grow value with use.
There are several flavors of this, some virtuous and others not so much. The classic lock-in strategy of closed ecosystems such Nintendo in game players works over the medium term, but often leads to an eventual crash. But when value increases due to investment by your user, it’s all good.
User investment can take several forms. Getting more proficient at the task being performed is a powerful model. Complex software products do this. PowerPoint and Photoshop are great examples. Gaining priority or status with use is a model used by airlines, games, and social networks. More Twitter followers exponentially facilitate getting even more followers. Another is the “body of work” model. As you grow your WordPress blog you gradually accumulate links and custom capabilities making your total blog more valuable.
Products that grow in value from your own investment are loved. How does your product allow users to invest in themselves?
5. Stay engaged.
With a typical hardware repurchase cycle of 2 to 3 years, some companies seldom touch their customers. In-between contact usually takes the from of mindless newsletters or ignored advertising. Connected offerings and web services change this dynamic. Knowing and regularly touching your customer becomes part of the product experience.
But regardless of your offering, keep your company engaged with your market and customers. With social media there are so many ways to maintain contact. Marketing locally with relevant messaging is easier than ever. Sponsorship of events in one city can be broadcast to your users worldwide. One of the best strategies here is to build strong brand advocates. Help your users be your voice.
Don’t start over with your customers every two years! Instead consider their purchase the bringing of a long and productive conversation.
6. Be part of something bigger.
More than ever, hot products are either part of an ecosystem or make up an ecosystem – think Nike and Apple.
Others lay tightly against a major social trend – Fitbit fitness trackers or NEST learning thermostats for energy efficiencies. With the move toward wearable computing and IOT these will only get stronger.
Working within an ecosystem creates continual value for all participants; streamlining on a trend provides constant customer reinforcement at a motivational level. And you don’t pay for it – the market does!
7. Reduce drag.
All products have some elements that make them a pain to use. Recognize that and minimize it. Too many “bug fix” upgrades will fatigue users. If your product requires consumables, be wary of piling your total profitability into that bucket. Monthly or annual subscription required? High fees, especially those considered unfair, make for customers looking elsewhere. Align such reoccurring fees with the value delivered. Consumers are smart. Minimize factors that undermine your customer relationship.
Some of the most insightful recent work I’ve seen on this subject is from Nir Eyal. He focuses on service products, but his concept of creating a habit forming experience provides a powerful framework for all consumer focused companies. His model is surprisingly simple: Know what triggers a use of your product, What action is then required, The immediate reward, and then the User investment gained from repeated use. A virutous cycle.
Nothing is more discouraging for a new consumer tech startups then combating customer attrition. It’s a hole that only gets deeper. Address this issue early. Your payoff will be huge.
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