This article is from Tom Burrell’s, Retention Blueprint Newsletter. Transform your retention impact in just five minutes per week. Written specifically for Subscription businesses, 'The Retention Blueprint' is a free, retention-focused digest delivered straight to your inbox every Friday, providing you with the insights you need to drive retention-led growth.

And that is the crux of it.

Customers expect you to provide relevant information that helps them achieve their goals because, ultimately, the key to customer retention is helping them achieve their desired outcomes.

So, if you share uncurated experiences or irrelevant information, in the best case, the customer will ignore it, and some will opt out. In the worst case, customers will start to feel that you are not a fit for their needs.

> Unlocking Customer Lifetime Value: The Power of Personalized Subscriber Onboarding at The Washington Post

Key Personalization Dimensions

There are four dimensions to personalization: content, timing, channels, and frequency.

Content Personalization

When most people talk about personalization, they talk about content.

There are essentially three key elements to content personalization:

• Cohorts: What you know about customers’ interests, preferences, habits and life stage.
• How to execute personalization content leveraging content feeds and tailored emotionally resonant messaging.
• Moments of Truth: What you know about the customer’s likely journey outside and inside of interaction with your brand.

There are key principles that help you to respond effectively at key moments of truth; some of these have been covered before in previous episodes of this newsletter, but what makes a critical difference at moments like onboarding, usage declines, or the cancel journey is personalization.

Timing Personalization

Rather than operate to your business’s desired cadence (e.g. regular Tuesday email), it can be highly effective to leverage customer-level data to ensure messages arrive at the most relevant time for each customer.

This, of course, overlaps directly with moments of truth since it’s about ensuring you drive the right content to the right customer at the right time to help the customer achieve their desired outcomes.

Data inputs to send time personalisation can include:

1. Historical behavioral analysis of previous engagements by the customer. However, if you have typically operated standard send times, you may need to conduct some timing tests to identify this accurately.
2. Historical analysis of customer behaviors: when does the customer typically engage with what you wish to promote or undertake the action you want the customer to take? Does a specific e-commerce cohort usually buy on Saturday afternoon, or does a streaming customer cohort typically watch on the weekends?

Channel personalization

If a customer doesn’t open your emails, click on your push notes, or engage in your in-app messages, it is potentially not a channel they wish to engage with.

The benefit of excluding a customer from a channel is to protect against any future all channel opt-outs.

But it takes time to assess this, and exclusion of a customer cohort from a specific channel should only occur once you have a high degree of confidence that they are unlikely ever to engage.

Frequency Personalization

In some sectors (e.g. gambling or e-commerce), the more messages you send to each customer, the more sales/engagements you get.

Hence, some brands bombard their audiences with messaging to maximise short-term revenues.

However, while more messages drive increased sales and engagement, it will also increase unsubscribes.

The key is establishing engagement frequency models to identify the maximum number of messages per cohort by period and optimise frequency accordingly.

When you do this, you will often find specific cohorts require less communication while others need more. In most cases, this will result in a net increase in total communication send volume and associated impact.

Personalization & AI

The dream of one-to-one personalization has been around for a couple of decades. While brands like Amazon, Tesco, Netflix, HBO, and DAZN have set the benchmark for delivering hyper-relevant content to audiences, this has typically been based on flat content modules that are merely descriptive.

With generative AI, brands can create their LLMs from their master content, which includes everything they know about their business, products, and customer motivations. Then, leveraging AI Agents, brands can create content that is relevant, emotionally engaging, and hyper-personalized at scale.

All while delivering the most appropriate frequency, timing and channel priorities according to predicted customer behaviors at an individual customer level.

Think dynamic, hyper-relevant, emotionally engaging journeys built just for you.

I have seen brands demo CRM Marketing journeys delivered with a prompt (see Airship, Netcore cloud) while others have built AI-driven decisioning (see Optimove, High-Touch).

Case studies

Doom scrolling is a big issue for Netflix, which is why they put so much effort into personalization. Netflix’s personalization strategy focuses on delighting customers through highly relevant personalized content recommendations, including trending and most popular content. This is executed within the product and across CRM Marketing.

HBO Max found that most customers watch movies on the weekends and series during the week. However, one segment does the opposite, and HBO Max tailors product content according to customer behavior and content preferences.

Final Thoughts

Personalization is a key differentiator for effective retention. By tailoring content, timing, channels, and frequency to align with customers’ needs, you can maximise your chances of helping them achieve their desired outcomes.

Focus must be placed on moments of truth to maximise customer and commercial outcomes.

As we enter an era in which generative AI takes personalization to unprecedented heights, brands that invest in understanding their customers and deliver hyper-relevant experiences will gain a competitive advantage.

Watch or listen to my conversation with Rasmus Houlind for the Hello $Firstname podcast to explore some of these concepts in more detail. Also if you want to dive deeper into personalization, I recommend following Rasmus for personalization strategy and Frans for AI & technology strategy. They have also produced a brilliant book.

Transform your retention impact in just 5 minutes per week, with ‘The Retention Blueprint’ Newsletter“.

This article is from Tom Burrell’s, Retention Blueprint Newsletter. Transform your retention impact in just five minutes per week. Written specifically for Subscription businesses, 'The Retention Blueprint' is a free, retention-focused digest delivered straight to your inbox every Friday, providing you with the insights you need to drive retention-led growth.

1. Gain a better understanding of an individual customer’s immediate and long-term needs and assist them in recognizing and communicating those needs.
2. Understand groups of customers, allowing us to improve existing products or create new products and to develop policies and programs to support customer retention at moments of truth. 

The key to realizing value in customer data is developing experiences that support customers at moments of truth and as a result improve customer retention. 

Ok, so this makes sense, I hear you say, but how do you do that practically? Let’s dive in.

1 – Analyze all recent voluntary churn events e.g. 12- 24 months of data   

• Ensure you have a complete view of customer interactions immediately before the churn event; this will be easy if you have CDP with this data consolidated. Otherwise, you must build a temporary data store to conduct the analysis. 
• These are the types of variables that you will need (lots of these are widely applicable, but some are more relevant to one kind of subscription business vs another):
  • Tenure
  • Usage patterns 
  • Service contact reason 
  • Service contact resolution customer effort 
  • Technical/service issues 
  • Delivery problems/delays
  • Actions in early life vs tenured customers 
  • Content consumed 
  • Acquisition source/channel 
  • Most recent NPS response 

> To read next: Publisher unsubscription journeys: benchmarking and best practices

2 – Identify the most significant cohorts

• Identify the most significant cohorts— in terms of the volume of customers that experienced one of the above categories immediately before churn, e.g., the volume of customers churning who experienced the same service issue prior to churn or the volume of customer cancelling in the first month.
• Your customers are all different. There are likely to be different ‘events’ that trigger churn for different cohorts. 
• The data is likely to contain some quick wins. For example, the way a specific service issue was handled may lead to churn for a particular cohort. If this is the case, you can jump to step 5 for this cohort; if not, proceed to step 3.

3 – Research your most significant cohorts to understand why

• 1-1 interviews, focus groups and even ethnography can help you understand the why behind the churn decision.
• Then, using qualitative insights, extrapolate them to the base through surveys to ensure you do not make assumptions based on small samples.
• Additional customer data and analytics may help here, too. 
• Sometimes, a combination of things cumulates in the churn event, not just the most recent moment, research / further analysis can help uncover false positives.

4 – Leverage learnings from others 

• Case studies from how other brands handle similar moments can help massively.  
• I shared four examples from Netflix, Starbucks, The FT and Apple in episode 15 of this newsletter here 
• Another from Amazon in episode 1 is here.
• Learning what others do can help you identify what to do and sometimes what not to do.  

5 – Adjust the experience 

• Armed with knowledge of what happens immediately before a churn event, why it happens and what others do, plan your tests to optimise the experience.
• Tests could be conducted on Products, CRM Marketing, Customer Service, Operations (like delivery), Instructional information, and more.  
• Remember to ensure you run an A/B test, keeping the existing experience as is for a proportion of the customer base and adjusting the experience for the others.  
• Running with the idea without setting up a proper test is dangerous because you could positively impact churn but not be aware of it because of other external factors like market dynamics, seasonality, and other significant events impacting overall churn.

6 – Monitor & iterate 

• Monitor the incremental impact on retention of your actions vs your control experience.  
• Iterate the experience to improve it further.
• Track CLV improvements and map them to your actions.   
• (There is more on CLV in episode 1).

Note, we have looked at churn events here, but this approach can also work for retention by examining the patterns and behaviors of long-term customers and the interactions and experiences that drive tenure.  

Final Thoughts: 

To effectively realize the retention opportunity in customer data, brands must focus on transforming customer data into actionable insights. By analyzing churn events, identifying key customer cohorts, and understanding the deeper reasons behind churn, you can craft targeted experiences that address critical moments of truth and turn a churn event into a retention event. 

Transform your retention impact in just 5 minutes per week, with ‘The Retention Blueprint’ Newsletter“.

This is an extract of an article published in Tom Burrell’s Retention Blueprint Newsletter. The Retention Blueprint' is a free, retention-focused digest delivered straight to your inbox every Friday, providing you with the insights you need to drive retention-led growth.

The math is simple: if you meet your retention targets, your acquisition targets don’t move. Miss your retention targets, and your acquisition efforts and associated media costs skyrocket, reducing profitability. The most successful subscription brands (think Amazon, Netflix, Spotify, and Apple) prioritise protecting Annual Recurring Revenue (ARR), which hinges on successful retention. 

The Problem – Lack of Focus 

While working within and consulting to subscription brands, one of the key challenges I have observed is a real lack of understanding of where to focus retention efforts. There can be a desire to optimize all customer interactions and this would be fine with infinite resources, but I have never encountered an organization that has infinite resources. So what ultimately transpires is a very haphazard approach to customer retention efforts, with teams often differing to HIPPO syndrome (the highest paid person’s opinion). 

Where to Focus Customer Retention Efforts 

There are two key aspects to focus: 

1. Focusing on the right customers 
2. Focussing on the right moments 

Focusing on the right customers is about leveraging customer lifetime value to prioritise your retention efforts. This is the subject for another post. 

In this post, we will explore how to focus on the right moments. 

Focussing On The Right Moments 

In any subscription business, there are key moments in the relationship; the first 90 days, or in life when usage drops, an important service issue, the cancel journey – these are all often key moments of truth which require the most focus. Other aspects of the experience matter much less. 

The key is to understand your subscription business’s most important moments of truth. You can do this using analytics and data science to understand what happened immediately before a churn event or to identify which types of interactions, experiences, or behaviors have led to improved retention. You can also understand these moments through experiential NPS tracking or qualitative research. 

The Path Forwards 

Once you have identified the right moments, you must obsess about them to drive the most optimum retention and, therefore, P&L outcomes. This means extensive experimentation and a program of always-on optimisation, ideally at a sub-cohort level. As you do this, you will see ARR (Annual Recurring Revenue) grow. 

Case Study – Amazon Prime

One of the best examples of a brand prioritizing its their most important moment comes from Amazon Prime. In 2005, when Jeff Bezos launched Amazon Prime, there was a lot of concern at Amazon that this would be a margin reducer and indeed, when it first launched it absolutely was. Jeff even acknowledged this at the launch: “We expect Amazon Prime will be expensive for Amazon in the short term. In the long term, we hope to earn even more of your business..”

Almost 20 years later Amazon Prime customers are worth 5X more than the rest and the company has grown 30X since the Prime launch ($30m v $900m), all as a result of protecting the highest value customers and prioritizing the moment that mattered most to them, the delivery window. 

Some case studies:

Like many data-heavy brands, The Financial Times runs a digest of each subscriber’s consumption, e.g., articles viewed, number of stories per month, favourite topics, etc. However, rather than being an annual all-subscriber communication sent at a specific time of year (like Spotify), it is tailored to each subscriber’s contract end date, and where usage is heavy, it is linked to an upsell.  

Netflix approached one moment of truth very differently from most subscription brands. Netflix used to offer free trials and near the end of the free trial period, they provided a clear reminder that customers would be charged after they ended the free trial period (many brands simply avoid communication and let the customer roll onto a paid plan). This transparency helped to avoid bill shock, reduce complaints, improve brand perception, facilitate referrals, and, in fact, reduce churn from cohorts who would have been annoyed had Netflix not told them about the expiry of the trial. This is an excellent example of examing customer data and behaviour at a moment of truth and responding accordingly, despite being against common wisdom. 

The Starbucks loyalty program is a brilliant tool for understanding customer behaviour and optimising moments of truth and is leveraged by more than 40million people in the US. By linking purchase history, payment history, and basic demographic information, Starbucks can create highly personalised experiences that drive retention (2). For instance, when you visit a Starbucks in a new city and leverage your loyalty program details, the order screen will display your favourite drink, recommend your favourite treat, the barista will call you by your name and you will earn rewards for your transaction, which you can use in any other Starbucks in the country. This is another great example of leveraging customer data to optimise a key moment of truth.

For more from Tom, and to transform your retention impact in just 5 minutes per week, subscribe to ‘The Retention Blueprint’ Newsletter.

This article is from Tom Burrell's, Retention Blueprint Newsletter. Written specifically for Subscription businesses, 'The Retention Blueprint' is a free, retention-focused digest delivered straight to your inbox every Friday, providing you with the insights you need to drive retention-led growth.

Consider three scenarios where you miss your retention targets. 

Scenario 1: You missed the retention targets by 10 percentage points. This means that in order to reach the 110% customer base target, the acquisition target needs to increase by 50%, from 20 percentage points to 30 percentage points.

Scenario 2: You missed the retention targets by 20 percentage points. This means that in order to reach the 110% customer base target, the acquisition target needs to double, from 20 percentage points to 40 percentage points. 

Scenario 3: You missed the retention targets by 30 percentage points. This means that to achieve your overall 110% target, your acquisition target must increase by 250%, from 20pp to 50pp.

In any of these scenarios, you will need an increased acquisition budget, which will reduce profit, or you will need to accept lower growth or worse.

In simple terms, an effective retention strategy: 

• Maximises profit protection
• Maximises the opportunity for profit growth without putting undue pressure on acquisition marketing
• Allows for cost optimisation/reduction because exceeding your retention target can allow for lower acquisition spend

Keep more customers than you budget for to spend less on acquisition

If you have an effective customer retention strategy and as a result retain more customers than you had planned, you can reduce your spend on customer acquisition. If this happens you will need to allocate less towards acquisition marketing to reach your targets and therefore your spend will be focused on attracting the easiest-to-reach customers, who tend to convert more cost-effectively. As a result, this can decrease your Customer Acquisition Cost (CAC), making your customer acquisition efforts even more efficient. Obvious right? 

The example of First Republic Bank

Let’s take an example of a brand that did this so well at retention that it ended up spending virtually nothing on acquisition. 

Between 2013 and 2019, 82% of First Republic Bank’s deposit growth was achieved without spending any acquisition marketing budget. First Republic’s retention strategy focuses on providing exceptional experiences from the beginning to ensure that the customer feels they made the right choice, delivering outstanding customer service, and recognising the moments that matter, such as giving customers notice before imposing a late fee. Their effective retention strategy led to high NPS (Net Promoter Score), and a very high number of customer referrals. As a result, First Republic customers deposited more money and referred others, resulting in outstanding deposit growth without any acquisition spend (Reichheld, F (2020) Winning on Purpose). 

But let’s take this a step further….  

Strategically focussed customer retention begins with an accurate CLV (Customer Lifetime Value) analysis. If you do this correctly, you will understand who your highest-value customers (critical for revenue protection), mid-value growth cohorts and low value customers are (see Retention Blueprint Newsletter 1 & 3 for more on this).  

> To read more on CLV: A whistle stop tour of lifetime value

When CLV is used, it is often seen as a financial, customer, and retention metric and not always leveraged for acquisition efforts. Most acquisition teams use a single target for CAC (Customer Acquisition Cost), which results from an average customer value. Since there are always way more low-value customers than high-value customers in any given market, a blended approach to CAC (Customer Acquisition Cost) results in:  

1. Overspending on low-value customers and acquiring higher volumes than desirable. 
2. Underspending on high-value customers and acquiring less than desirable.

To drive more efficient acquisition spend and a more valuable return from your acquisition efforts: 

1. Invest in higher CAC to acquire higher-value customers based on the CLV of existing high-value customers and leverage look-a-like tools to find prospects that look similar to those high-value customers. 
2. Invest in lower CAC to acquire lower-value customers.  

Let’s take a hypothetical example:

Red circles: In this example, leveraging a blended CAC would result in losing $1 on every low-value customer acquired. 

Blue rectangle: If the brand spent $100k, leveraging a blended CAC approach, this brand would acquire 61 high-value customers, 242 mid-value customers and 1273 low-value customers, generating $153k CLV revenue. 

Green Rectangle: If the brand instead used a CLV approach and spent $75k on acquiring 375 high-value customers, $20k on acquiring 200 mid-value customers and $5k on acquiring only 100 low-value customers (at an acceptable $50 CAC), the brand would generate $206k LTV revenue, 35% more than leveraging a blended approach. It would also acquire fewer customers, reducing retention cost per customer, and all customers acquired would be profitable.   

An effective retention strategy focuses on the right customers at the right moments in the lifecycle

When you get retention right, you don’t miss your retention targets, and if you are doing well (like First Republic Bank), you can overachieve against them. If you do this, your acquisition spend becomes more efficient because you will invest less and your acquisition marketing efforts will focus on the lowest-hanging fruit and, as a result, become even more efficient. In addition, if you overlay one of the most important retention metrics; CLV, onto your acquisition marketing efforts, you can transform the value you generate and improve the profitability of your entire business. 

Retention is key to growth since it drives ARR (Annual Recurring Revenue). It is also key to profitability because if you miss your retention targets, you must spend more. Hit your retention targets or overachieve, and business profitability soars. In fact evidence suggests that increasing customer retention rates by just 5% can increase profits by between 25%-95%…

So, how do you drive a 5-10% improvement in retention?  

To drive 5-10% reduction in churn, improve retention 1-2% at each moment of truth.    

As we explored in episode 1 of this newsletter, in any subscription business, there are key moments in the relationship: the first 90 days, or in life when usage drops, an important service issue, or the cancel journey—which are all often key moments of truth that require the most focus. 

The key is to understand your business’s most important moments of truth and alter the experience to optimise retention. 

Brands can understand the most important moments using analytics and data science to understand what happened immediately before a churn event or to identify which types of interactions, experiences, or behaviours have improved retention. They can also understand these moments through experiential NPS tracking or qualitative research.   

Employing systems for onboarding (nurturing customers to undertake activities that benefit their long term usage), cancel journey management (which helps customers ponder the decision, without being obstructive), creating habit, customer love and embedding the product into customers lives are all vital here to improve retention at moments of truth (see previous newsletters for insight on all these areas).  

Behavioural economics and proven channel execution techniques across CRM Marketing, product and customer service can also be important.

Final Thoughts 

Small improvements in retention can lead to significant gains in profitability. As we’ve seen, a 5-10% reduction in churn can have a powerful impact on margins. The key to achieving this lies in focusing on retention at critical moments of truth, whether it’s during the onboarding phase, when customer engagement dips, or even in the cancellation process. By utilising data-driven insights and implementing proven retention systems, you can optimise these moments, reduce churn, and ultimately substantially improve profitability.

Here more from Tom to transform your retention impact in just 5 minutes per week, with ‘The Retention Blueprint’ Newsletter.