Episode 15 - Why Customer Data Is the Key to Retention-Led Growth
Tom Burrell
September 20, 2024
Welcome to episode fifteen of the Retention Blueprint. This episode and the next one focus on the importance of customer data for retention.
Customer Data & Moments of Truth
Regular readers of this newsletter and followers of my content on LinkedIn will understand how much importance I place on optimising moments of truth to maximise retention impact.
For people who are less familiar with my content; in any business, there are critical moments in the relationship: the conversion / sign-up journey, the first 90 days, or in life when usage drops, a vital service issue, or the cancel journey - these are all often moments of truth that require the most focus to maximise customer retention. Other aspects of the experience matter much less (see episode 1 for more details).
In subscription businesses, a 1-2% improvement in retention at each moment of truth can drive between a 25% and 100% improvement in profit (I broke down the calculations in episode 13, this will be on the website next week).
This episode explores how customer data can be used to optimise moments of truth and drive retention impact.
It sounds obvious, but….
Customer data enables us to:
Gain a better understanding of an individual customer's immediate and long-term needs and assist them in recognising and communicating those needs.
Understand groups of customers, which can allow us to improve existing products and create new products, policies and programs to support customers at moments of truth.
This diagram (1) illustrates this concept:
Using customer data in aggregate, at a cohort or individual level, can allow us to understand:
Which interactions create higher retention/churn propensity
Customers' pain points/desires
Whether the usage of certain features translates into retention
The relationship between experiential NPS and churn by interaction type/outcome when dealing directly with the brand
Behaviours that drive past 90 days e.g. product features used, 'results' achieved
Behaviours leading to a cancel journey or actions that stop customers making cancel decisions in the cancel journey or elsewhere
and more…
Let's take a few examples..
Like many data-heavy brands, The Financial Times runs a digest of each subscriber's consumption, e.g., articles viewed, number of stories per month, favourite topics, etc. However, rather than being an annual all-subscriber communication sent at a specific time of year (like Spotify), it is tailored to each subscriber's contract end date, and where usage is heavy, it is linked to an upsell.
Netflix approached one moment of truth very differently from most subscription brands. Netflix used to offer free trials and near the end of the free trial period, they provided a clear reminder that customers would be charged after they ended the free trial period (many brands simply avoid communication and let the customer roll onto a paid plan). This transparency helped to avoid bill shock, reduce complaints, improve brand perception, facilitate referrals, and, in fact, reduce churn from cohorts who would have been annoyed had Netflix not told them about the expiry of the trial. This is an excellent example of examing customer data and behaviour at a moment of truth and responding accordingly, despite being against common wisdom.
The Starbucks loyalty program is a brilliant tool for understanding customer behaviour and optimising moments of truth and is leveraged by more than 40million people in the US. By linking purchase history, payment history, and basic demographic information, Starbucks can create highly personalised experiences that drive retention (2). For instance, when you visit a Starbucks in a new city and leverage your loyalty program details, the order screen will display your favourite drink, recommend your favourite treat, the barista will call you by your name and you will earn rewards for your transaction, which you can use in any other Starbucks in the country. This is another great example of leveraging customer data to optimise a key moment of truth.
Apple leverages subscriber IDs to track your purchase history at any store worldwide and online, the apps you purchase, the content you watch on Apple Music and Apple TV, and your family connections (2). When you go to the store to buy a new item, the store person will ask for your Apple ID and connect your new product to your account. When you have issues, the same things happen. Apple uses this data to tailor interactions and improve services at multiple moments of truth.
Final Thoughts
Customer data is critical to optimising moments of truth to drive retention and reduce churn. Whether it's understanding individual behaviours or spotting trends across customer groups, leveraging the right data allows you to meet your customer's needs when it matters most. Examples from brands like The Financial Times, Netflix, Starbucks, and Apple highlight how data can enhance and optimise experiences at moments of truth, improve retention, reduce churn, and drive value.
In next weeks episode, we'll explore how to prioritise your data science efforts to maximise customer retention.
References
(1): Diagram adaptted from Siggelkow.N & Terwiesch.C (2019) Connected Strategy. HBR Press.
(2) Tzuo. T (2019) Subscribed. Penguin Random House UK.
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