Growth Hacking: How to Increase Retention

Understand your customers before you scale! Running small experiments opens a treasure chest of information about your customers' secret preferences. With Growth Hacking, you make product decisions based on evidence.

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Increase Retention by Understanding Your «Aha Moment»

The term “Growth Hacking” is less than 10 years old, but it has already become one of the most used buzz words among innovators. The ultimate goal of growth hacking is growing your business using data analytics, customer interviews and product improvements. However, growth hacking is not primarily about winning as many new users as possible with marketing campaigns. Just as important as acquiring new users is retaining existing users. In fact, a study by Bain & Company found that increasing retention by 5% increases profits by 25% to 95%. The fictional example below illustrates what growth hacking can do for your business.

1. Don’t scale yet, understand your clients first!

Vincent is the founder of Pizza Click: a pizza delivery app, which allows customers to order pizza with just one click. Vincent launched a new app last year with a lot of enthusiasm. He focused on acquiring new users and successfully generated 500’000 downloads of the app. Unfortunately, he realized too late that there was a problem with customer satisfaction. In fact, most pizzas arrived cold at the customer, which upset many of them. So, customer loyalty is very low now. He brings in Michelle as a growth hacker to better understand the users experience and hopefully increase user retention.

Your profit increase after your retention boost

 

After a few critical questions, Michelle knows what is going on. A lot of innovators are eager to see their product in the hands of as many people as possible. That is why they love to start with acquisition, pushing their product out into the world and adding new users quickly. However, she suggests to better understand the user experience first. Only once customer retention is high, Michelle plans to boost acquisition. She walks Vincent through the following exercise:

 

2. Create a Conversion Funnel

Using post-its, Vincent and Michelle map the entire customer journey. They write every step on post-its and put them up on a wall in the order a typical customer would experience it. For example, a customer journey might look as follow:

·       Google search

·       Website / landing page

·       Download app*

·       Open the app for the first time

·       Create an account*

·       Place pizza order for the first time*

·       Receive and eat the pizza

·       Order again a few days later*

 

These are a lot of steps to keep track of, that is why Michelle suggest to track only 4 to 5 stages of the customer journey on a regular basis. Both of them get five sticky dots. They put the dots on the stages they think are most important. Vincent and Michelle agree to track Downloads, Accounts created, First time orders placed and Second orders placed. This is Pizza Click’s conversion funnel.

Example Conversion Funnel

3. Learn everything you can about the «aha moment»

Next, Michelle wants to identify the “aha moment”: the critical moment, when customers experience the product for the first time and understand why Pizza Click is better than other offers out there. Vincent thinks the “aha moment” is when customers taste one of his delicious pizzas for the first time and realize that it is much better than other pizzas. But Michelle demands more evidence.

 

To better understand what customers like about Pizza Click, Michelle introduces a small change in the app: a brief questionnaire. 30 minutes after the pizza delivery, the customer should have finished eating their pizza and thus experienced the critical moment. At this point, the app prompts the customer to rate their experience. In some cases, they ask additional questions to better understand what customers liked and what could be improved.

 

4. Analyse feedback routinely to feed current insights into product development

After collecting answers from the survey for two weeks, they analyze the data. Vincent is surprised to learn that it is not the taste of the pizza that gets customers most excited. Instead, what his best customers really love about Pizza Click is how quickly they have a pizza in their hands after ordering one. In fact, the happiest users receive their pizza within 20 minutes. That is the “aha moment”!

 

Now that Vincent knows the aha moment, he pulls all the available levers to further reduce the delivery time:

He starts to prepare the toppings for the most popular pizzas already in the morning; he prioritizes pizza orders from the app over those from his restaurant; and finally hires additional bicycle delivery messengers to carry the load during peak hours. After implementing all the changes, 86% of all orders are delivered within 20 minutes. As a consequence, more users order pizza for a second time, the customer retention increases significantly, Pizza Click has more monthly active users than ever before and pizza orders reach a new high.

 

5. Create a culture of informed product decisions

However, this is just the beginning, Vincent and Michelle are planning to launch growth experiments on a regular basis now. Each test is an opportunity to better understand their customers’ needs and motivations. Before, Vincent was guessing what his customers might want, now he makes informed product decisions. Looking at the conversion funnel, Michelle recently noticed that they lose a lot of customers between downloading the app and creating an account. This is what they are going to improve next… with a series of growth experiments.

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