Acquisition as a Retention Strategy
AMA with Matt Cronin, Founder at House of Kaizen
As you and your team continue to accelerate the subscription-based digital transformation, we want to focus on discussing proven and adaptable acquisition and onboarding strategies that not only drive growth, but ultimately lead to a better full-journey subscriber experience and an increased customer lifetime value. Our goal was to deliver actionable insights and provide connections for your continued success.
MATT CRONIN, HOUSE OF KAIZEN
“Reaching the point where the business is strong in recurring revenue with retained subscribers is absolutely the better place to be - it's the foundation from which to build a truly healthy subscription business.”
Full Transcript
*Questions submitted by community members
Question: What do you feel is the most common key tactic/strategy for onboarding that new clients who come to HOK aren't using and should be?
Well, most subscription product companies I talk to have a pretty basic definition of onboarding -- usually a confirmation email and access to the product (if digital). And they all seem to know that it's ripe for optimization.
I like to use the analogy of a dinner party (remember those?!) when a guest arrives at your place you don't just open the door and let them wander around to see what's going on. A good host welcomes their guests with a smile, takes their coat, shows them where the washroom is, the food, the drinks and introduces them to a few people -- that way they break the ice with a nice introduction and the feeling of confidence that they know how to engage.
Most products can benefit from a more welcoming first impression that walks a new subscriber through the product and affirms the delivery of the value proposition - that the subscriber is really getting what they've just paid for.
Question: If a company could only focus on one, which one would you prioritize? Acquisition or retention?
Yikes! That's like asking me to pick just coffee or chocolate! No one should be put in such a situation!
It really depends on the product and the market. Generally, a balanced approach is better than a lopsided one, but I think we're presently in a unique moment in time when a lot of product teams can benefit greatly from a strong focus on retention. Most subscription products have benefitted from a 'rising tide' during the pandemic, making acquisitions easier than before and giving them a ton of new subscribers with unknown retention patterns. A strong focus on retaining this group is going to be the best bet for net growth in the coming year, IMO.
The difference between the cost of acquisitions and thought/attention or even effort needed for effective retention is a really important one.
Question: We often hear about acquiring the right customer that will retain longer. But to understand if that person retains longer, it takes a long time to understand new churn levels. Are there indicators you look for immediately after acquisition that will help show if you've actually acquired a better (stickier) customer?
Such a good question. Any company that has been around for some time should have the ability to do some analysis to determine what sources, behaviors, etc are correlated with better retention or CLV and then look to acquire more new subscribers with those characteristics. But this is impossible for new products.
It's critical to begin tracking and testing behaviors that might elucidate early indications of subscriber quality (again sources or acquisition, product selection, onboarding success rates) are good places to start at the earliest phases of the journey. For example, have they completed or skipped the onboarding tutorial? Are they choosing the monthly or annual subscriber payment? Are they downloading the app right away?
There's a myriad of ways in which a new subscriber can indicate their level of intent and thus quality as long as we're making ourselves aware of what those might be and tracking them accordingly.
That's a pretty general response, I know. Happy to think it through with a more specific product example.
Question: How have retention strategies evolved over the years? What's currently trending, and what's actually working?
Just this week I spoke with someone who was adamant that the best strategy for retention is simply making it incredibly hard to cancel - I thought I had heard the last of that approach years ago.
Despite that conversation, I do think there's a widespread appreciation for "saving" subscribers who are at the point of voluntary churn. Clearly, there was a reason that person subscribed in the first place, so there should be a way to determine how, and how to resolve, the imbalance in the value equation that they're now experiencing. A simple pause feature is a great example of a trending tactic - made better when preceded with the question "Would you consider pausing your subscription for a period of time rather than canceling?"
The more we can ask, the more options we have to re-balance the value equation and keep the subscriber - that is definitely working wherever I see it happening.
Question: I've heard you say that the VP should evolve, can you share more about that?
This is a fun conversation and a fun challenge to sort out across different products. I always think about Netflix in this case - how most subscribers joined many years ago and their reason for doing so at the time is probably a distant memory. And their current reason for staying is probably quite different. As subscription growth professionals we dream of subscribers sticking around for many years but even in shorter timeframes the immediate needs of the subscriber change considerably.
A trial or promotional proposition that succeeds in getting a new subscriber to provide their CC info isn't the message that's going to get them through a meaningful onboarding experience. So we need to break that down and think about the VP at each stage of the journey - what's the proposition of each meaning moment and how can we best deliver that in messaging and experience?
This goes on and on through engagement, expansion, retention, and even win-back - the proposition has to be evolving through the journey and over time. It's quite exciting to think about (yes, that's what I find exciting).
Question: What indicates a healthy mix between investment and return from acquisition and retention? Should most of our revenue come from existing subscribers?
This is why subscribers are better than customers. Why subscription growth isn't E-commerce.
Reaching the point where the business is strong in recurring revenue with retained subscribers is absolutely the better place to be - it's the foundation from which to build a truly healthy subscription business. And it helps to ensure that you're still providing the market what it needs (high churn can be a leading indicator of the product's initial decline).
And of course, it should be far less costly to serve and retain existing subscribers than to acquire new ones - at least new quality subscribers.
We've seen scenarios where an over-emphasis on low CPA/CAC acquisition drives high numbers of subscribers that quickly churn out leaving the company in a perpetual tail-chasing scenario. That's a dangerous place to be.