Episode 8 - The Science of (CRM) Marketing Creativity

Welcome to the eighth episode of the Retention Blueprint. This newsletter promises to transform your retention impact in just 5 minutes per week, providing digestible retention content that adds value every time. This week's edition focuses on the science of (CRM) Marketing creativity. CRM is in brackets because it is regularly referred to in this newsletter, but the tips here apply to many aspects of acquisition, product or retention marketing. 

Anyone can push out an email with fairly basic tooling and a basic understanding of concepts like deliverability or build a landing page with a simple drag-and-drop tool. Still, CRM Marketing, done well, can be one of the most efficient ARPU growth drivers and the most important marketing channel available to retention teams. There is a big difference between average CRM Marketing and great CRM Marketing, and the difference results in greater ARPU (Average Revenue Per Customer), increased tenure, higher volumes of referrals, and reduced churn = essentially top-line and bottom-line P&L impact. 

CRM Marketing always seeks to drive behaviour 

Dr B J Fogg of Stamford Univesity tells us that any action is a result of this formula: 

B = M + A + P

That is Behaviour is a result of Motivation, plus Ability and a Prompt. 

In essence, the Fogg model teaches us that if someone has enough motivation, finds the behaviour easy to do, and is prompted at the right time, they are likely to perform the behaviour. If any of these elements are missing or insufficient, the behaviour is much less likely to happen. This model is particularly relevant when thinking about CRM Marketing. 

In CRM Marketing, the behaviour we are looking for is typically either purchasing something new, upgrading to a higher tier, cross-grading to a longer plan, reversing a decision to cancel, or simply using a feature or service that comes with the subscription (to enhance retention). 

Underlying motivation can be stimulated, but if the customer-product fit is not there, no matter how good your CRM marketing is it is unlikely to create a desired action. This means sending the upgrade tier message to all customers won't be all that effective because it won't resonate with everyone. It is critical to find cues in your data and identify the right customer profile for your upgrade message in order to avoid turning those with no motivation off from engaging in your messages or worse driving unsubscribes.  

Ability is determined by how easy it is to complete the action you are asking for. If you want your customers to do something, make it very simple. For instance, if a customer needs to go to your website, log in, and then struggle to find how to take advantage of an offer mentioned in an email, it's not effective. One-click purchases and seamless product conversion journeys are crucial to drive desired behaviours. 

Prompt: This relates to using your data to understand when the best time to send your message is. Is it triggered based on an action in your product or following a customer's interaction with your sales, success, or service team? Do other customers demonstrate behaviours organically that could be used to time your interactions? (For example, do organic upgrades usually happen often after 7 p.m. on weekdays?)  

So while the Fogg model teaches us the basics on how and why behaviours occur, lets go a little deeper and understand how we can actually trigger behaviour. 

How to trigger desired behaviours 

Behavioural economics is a field of study that combines insights from psychology and economics to understand how people make economic decisions. It shows that people don't always act rationally; emotions, cognitive biases, and social influences can all dramatically impact decision-making. Behavioural economics principles can be applied in a retention context to drive incremental tenure or value, over and above baseline expected customer lifetime value (ECLV), that your customer was ‘born’ to you with.  

Kahneman (1) has shown that we leverage our automatic minds to make the majority of our decisions. Behavioural economics allows brands to influence customers' outcomes by tapping into the automatic system to create biases towards our preferred outcomes. If we position our product or service correctly, we can trigger desired actions.

Some proven behavioural economics techniques include:

• Anchoring refers to the context in which we present something. In New York City, when credit card payments were introduced in yellow taxi cabs, three options were presented for tips: 15%, 20%, or 25%. Most people picked the middle option, and as a result, tips roughly doubled compared to the cash-only option (2). 

• Loss aversion, Linkedin do a great job of highlighting exactly what you will lose by cancelling your paid subscription. Reinforcing this in the cancel journey and follow-up CRM Marketing can be enough to encourage customers to consider changing their minds.  

• Framing refers to the way in which you present precisely the same information. For example, if you tell a consumer they will save $350 per year if they use energy conservation techniques, they are much less likely to respond than if you tell them not using energy conservation techniques means they will lose $350 per year (2). 

• Social proof: We are likelier to buy/act if others like us have done the same and rate the experience positively. Amazon understood this really early, and reviews have been key to Amazon's growth ever since. 

• Scarcity: Emphasizing the limited availability of a product or a time-sensitive offer can create a sense of urgency, increase perceived value, and prompt quicker decision-making.

• Default Options: These settings require less effort for the customer to accept. They are often used in subscription services where opting out requires action (for example, when notifying customers of a subscription price rise).

• Endowment Effect: Making customers feel ownership of a product before they purchase it, such as through free trials or allowing them to handle the product, increases their perceived value of it. Apple does this brilliantly in its stores, encouraging customers to touch and feel its products because it knows this creates a sense of ownership. 

• Reciprocity: Encouraging customers to respond to a positive action with another positive action can be a hugely effective way to tap into the reciprocity bias. Giving gifts to customers, particularly early in life, can be a great way to do this. 

• Labour - illusion effect: This is the idea if something has taken a long time to create, we value it more. A great example of this is the Kayak loading bar. Search for a flight on Skyscanner or Kayak, and it takes a few seconds, displaying a screen explaining that it is searching for all options. This is not necessary, the product could immediately provide you with the answers, but it doesn't because research showed that customers valued the outcome more and were more likely to buy with this short delay when returning results (3) 

• Reminders and checklists: Product usage is critical to driving short-term retention, particularly where the product has multiple features, content, or options. Customers welcome nudges when they are unsure of the effect of the options available to them or how to use them, and checklists or profile completion metrics can be very powerful tools in prompting customers to undertake actions that benefit them over the long term. 

Final Thoughts 

Mastering the science of CRM Marketing can significantly enhance your Average Revenue Per Customer (ARPU), increase customer tenure, boost referrals, and reduce churn. Tailoring your messages to match customer motivation, using techniques like anchoring, loss aversion, social proof, and reciprocity to foster deeper connections with your customers while simplifying required actions and timing prompts accurately can transform your CRM marketing impact. 

That's it for this week. Of course, there is lots more to cover in behavioural science and its value to customer retention, and we will return to this topic in future newsletters. In the meantime, please post your thoughts on my LinkedIn post and share your experiences using behavioural science.