Stickiness
23rd December 2011 · 0 Comments
Peter Drucker famously said: “the purpose of a business is to create a customer.” However, in my travels through the investor scene I believe today the emphasis is more on retaining that customer. The era of lean startups and easy 3-day creation of businesses whose sole product is an app is flooding the market with shiny new objects that can capture a customer’s attention. It’s very easy to see why yesterday’s toy can get discarded in favor of today’s, and why apps can easily get displaced to that 20th screen on your iPhone and forgotten. I’m familiar with numerous examples of roaring successes at launch only to be followed by a quick demise.
This issue is not unique to the app market but applies to many types of Internet-based businesses and more traditional companies as well (think fashion). I’ve come up with a list of some ways to address this issue:
1. If your product is to be used in events that occur sporadically, make sure there is some way to replenish your customer base in the interims. I can think of the Capital Factory’s StoryMix Media, which serves the wedding video marketplace. The end customers may repeat, but not that many times and not too frequently. However, there are tens of thousands of wedding planners, caterers, DJ’s, bridal shops, and other businesses that make their livings from this market every single day. StoryMix has multiple natural distribution channels for which their product can remain top of mind. So, the lesson is to create and retain sales partners who in their own self-interest will be sure your product gets used when the moment is there.
2. Go deep in your product design and your marketing so you are providing continual and measureable value to your end customer. Sink roots where use of your offering is a natural reflex and provides some positive reinforcement. Foursquare has 10M+ users, but where are they? I’ve been experimenting again with that product after some period of lapse, and I’m finding myself after 2-3 visits to be the mayor of popular entertainment venues like Threadgill’s and consistently used meeting spots like the ATT conference center right in front of the Texas Tower. I have yet to get a single tangible benefit from a check-in. In fact, I’ve had to take care to prevent Foursquare from polluting my Twitter and Facebook streams with routine check-ins and mayorships. Nobody cares, and some even complain. To me, Foursquare might be valuable if it had a very deep user base in Austin and helped me get tickets to the UT-OSU game next week. I know they have made some deals with credit card companies, and they may in fact be accomplishing this notion of going deep in the Union Square area of NYC, but not here.
3. Make it hard to switch. There are some apps and many software products that I use that would be would be have to be pried from my “cold, dead fingers.” My workflow is pretty comfortable. I even hung in with Evernote during their recent bum release for the iPad which introduced a long delay between key touch and letter appearance on the screen. I already had hundreds of notes archived, and the product installed and synchronized on 4 devices. I figured Evernote would fix that issue fairly quickly, and perhaps the latest release of the last few days accomplished that. To me the time to switch to another platform and learn its nuances was a bad bet versus just being patient. If you have an enterprise product, the Holy Grail is getting that integrated with other systems on a SaaS model where you are just clipping coupons for many, many years. You’ve no doubt studied switching costs if you’ve taken any business courses in college, so this is just a gentle reminder. If you have high switching costs, you may have accomplished your goal just be creating the customer.
4. Make sure you provide continuous value to the check writer. Your business model may include a free offering the ultimate end user, but if someone else, say a sponsor, is providing the revenue, then you need to think in terms of campaigns that have breadth, depth, and continuity. Ongoing creative engagement with the customer paying the bills is a good way to keep stoking consumer interest and retaining all levels of your value chain.
5. “Love on” your customers. Products that have sporadic check points, e. g. auto insurance where it’s either a premium due or a claim, require special attention to customer service when there is one of those interactions. I have Progressive insurance (but no bobble-head of their TV spokeswoman). One of those phantom parking lot accidents damaged my vehicle last week while I was inside a store, and I have found Progressive’s online claims site and their on-the-ground “concierge” center to be first-rate. Not that I want to be a return visitor, but I’d certainly recommend them to anyone considering automobile insurance carriers. And, I drive in a city and have come to expect occasional mishaps like this; it’s comforting to know that my carrier has figured out how to provide top-notch customer service.
6. Innovate your way into your customers’ hearts. MailChimp is a prime example of this. They have mastered the freemium model, and they certainly enjoy the advantages of switching costs, but they have done an extraordinary job of continuous innovation in product features and product support, combined with really cool marketing. If you just follow their blogs and Tweets, you can’t help but form a very positive impression of the company and get a sense of the culture that backs up that impression. MailChimp has an “Apple-like” attention to detail and the customer experience, and I’m sure their retention rate is extraordinarily high.
7. Take the money and run. Heck, I’ve seen some companies that made so much money so quickly that retention is only an academic question. The founders and investors made their returns and could afford to go to the beach. That’s not all bad.
Tags: 400-bad-request, Angel Investor, browser, browser-sent, techdrawl
