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Swrve has spoken to many different companies all over the world, and one thing we’ve noticed, that has become somewhat of a theme and an infinite source of frustration, is a disconnect between teams; user acquisition on one side, and engagement, loyalty and CRM teams (or post-acquisition) on the other. This blog examines what that disconnect is, why it happens, why it is a problem, and what can potentially be done about it.
The Acquisition Problem
Let’s start with a quick review of how acquisition works. Brands spend colossal amounts of money to acquire new users for their services. It’s literally in the billions. And of course, for the most part, this is very important – if people aren’t downloading your app, what’s the point in having one?
But an acquisition team’s success is, with some honorable exceptions, often judged simply on the pure number of new users acquired, and not if they are good users that will generate ROI. The philosophy is very much ‘throw enough mud at the wall and hope that some of it will stick’, which can end up being very expensive and doesn’t come with any guarantee of success.
20% of users open an app only once, while 80% of users churn after 90 days
That’s because there is a big difference between getting people to download an app and getting people to spend money in an app. In fact 20% of users open an app only once, while 80% of users churn after 90 days. It’s safe to say that a lot of acquisition spend is being wasted.
Focus on Increasing Customer Lifetime Value
There is another philosophy, that runs counter to the one above: ‘it is easier and cheaper to retain existing customers than to acquire new ones’. This is the job of engagement, loyalty and CRM teams, who carefully nurture new and existing users along the customer journey to convert them into long-term, paying customers.
So what exactly do these unsung heroes do? Well, given the right tools, they can optimize the first-time user experience to make sure that customers understand the true value of the service. They can also point out to users certain features that haven’t yet been used. They can encourage account registration, free trial sign-ups, and ultimately convert the hordes of casual users into power users. They can encourage first purchases, second purchases, third purchases and beyond. They notice when it mightn’t be going so well with certain users, and swoop in to stop them from disappearing forever. They help to find out what users like or don’t like, so that it can be improved in future iterations. They can win the moments of engagement that otherwise could have gone to your competitors. In short, their job is essential, and provides the fastest way to grow your business.
A 5% increase in retention can lead to 25%-95% increase in profits
But unfortunately engagement is an underfunded growth engine. Marketing budgets are dominated by user acquisition – a gargantuan 88% is allocated to it on average. This doesn’t leave much left over for engagement, loyalty and CRM teams to scrap over for the resources and tools they need to carry out their jobs to the best of their abilities.
And yet, as we’ve seen above, these post-acquisition teams have an incredibly important role to carry out. The figures back it up too: even moving numbers by a little bit can be extremely profitable; for example just a 5% increase in retention can lead to 25%-95% increase in profits. What more is there to say other than it is time to start distributing the marketing budget more evenly, and begin investing in the tools that post-acquisition teams need to increase customer lifetime value.
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