Capturing Repeat Customers Is the Magic of Growth Hacking
Marketers focus almost exclusively on acquiring more customers and are willing to spend God knows how much to do so.
As I learned from my time leading marketing for a fashion company like American Apparel as well as for authors like Robert Greene and Tim Ferriss, my job as a marketer is to get the leads that will bring in potential customers.
It’s someone else’s job to figure out what to do with them or to convert their interest into sales (and another person’s job to come up with the money and write the checks that allow me to do this work).
It's not just traditional companies that think this way. In the hockey-stick-growth-or-die world of Silicon Valley startups, thinking falls into the same trap.
But why compete in the red ocean of customer acquisition when client retention is so ignored? What’s the point of driving a bunch of new customers through marketing channels if they immediately leak out through a hole in the bottom?
Why try to make your company be Groupon or Myspace, which grew and grew their sizes (and then ultimately crashed), when you could create Amazon, which has continuously expanded its relationships with customers?
By thinking this way, some of the best marketing decisions you can make for your company might not feel like marketing at all.
Take Josh Elman, a growth hacker at Twitter in its early days. Though the company was getting PR attention like crazy and users were flocking to the service in droves, these efforts weren’t resulting in long-term, regular users. But looking at the data showed that when a new Twitter user signed up to follow a handful of accounts, that person was much more likely to stick around. So instead of trying to get more users with marketing, the company focused its efforts on nudging the behavior that locked in the interest already there.
When I interviewed Elman for the ebook of Growth Hacker Marketing, he explained it like this: "When I first joined the company, the suggested user list had 20 random people who were default selected to follow."
But "given this data insight, we reset the new user flow to encourage people to follow their first ~10 people and offer them a lot of choices, but no default selection," he added.
"Then we later built a feature that continually suggested new users to follow on the sidebar of the website," Elman recalled. "These two changes helped people get started following, and more importantly understand that following was important to get the most out of Twitter. So over time more people did just this and became more and more likely to be retained."
I love this because for most people, Twitter's suggested users list probably looked like an innovation from the product team (a good one at that), but in reality the marketing and growth team developed it. And it was a huge success.
This way of thinking has totally changed how Pinterest, Facebook and Dropbox do marketing. Pinterest, for example, has new users automatically follow a selection of high-quality users of its platform. Anyone who joins is therefore much more likely to see compelling, attractive content right off the bat. This arrangement also provides users a great way to start off rather than hoping they figure it out on their own.
Facebook’s growth hackers saw that users who added seven friends in 10 days were the most engaged and active, so that’s what they designed features and campaigns to promote.
At Zynga, the focus was all about capturing D1 users, that is users who came back after the first day.
Dropbox's focus was on when a user dragged at least one file into his or her Dropbox folder -- not just on creating an account.
Airbnb noticed that users had trouble with photography for their listings. So Airbnb set up a program that sent out talented freelance photographers to do it for them. As the company put it, “Taking crisp, well-lit and composed photographs that accurately convey the look and feel of the space is the most difficult part of creating a listing, so we make it easy.” This also boosted marketability.
Typically this has not been part of the marketer’s job: to figure out not only how to bring in customers but to keep them.
I think a lot about Amazon as an example of a company that has done this incredibly well over the last few years. Sure, it has probably spent a lot of time and energy trying to recruit new customers but I can also see tangibly from my own credit card statements how much time Amazon has spent trying to get more money out of me.
As Bezos himself put it: "In the old world, you devoted 30% of your time to building a great service and 70% of your time to shouting about it. In the new world, that inverts."
Programs like Amazon Prime when seen in this light are genius marketing ideas. By getting me to pay up front for shipping (and understanding that it would lose money to do so) Amazon has me hooked to buy more each year. The company's algorithm is uncanny at suggesting additional products I might like because it’s easier to get me to buy related things than it is to get a stranger to buy one thing.
The same goes for Amazon's subscription products, preorder buttons and numerous other innovations designed to increase the value of an order and the total lifetime value of its customers. Who was responsible for all this? Was it the product team? Was it engineering, sales or the ecommerce teams?
Your company probably isn't big enough to have those various departments. So just think of this type of thinking as growth, as marketing, period.
On the other hand, look at the mistakes that daily-deal sites like Groupon and Living Social made. Groupon was at one point one of the fastest growing companies in history. But today, what part of peoples' lives is it? The answer is nothing for most people.
Because Groupon was so focused on growth, on adding as many deals as possible from as many vendors and building its list without qualification, its service became a fad that came and went. Instead of Groupon's building reliability among customers slowly but surely the way that Amazon did, the site felt more like a going-out-of-business sale.
The service may have been posting superficially impressive stats, but in reality the public was becoming increasingly fatigued with the products. I bet if Groupon had been monitoring the customer experience more holistically, it would have seen that all this growth was coming at an incredibly high cost.
Groupon was alienating its core users who were abandoning it service even as new users joined.
Growth hacking -- this new form of marketing -- is at is best about maximizing the return on investment, expending entrepreneurial energies and efforts where they will be most effective. You’re better off rolling out new features that elicit more from your customer base and turning potential users into active users than going out and pounding the pavement for more leads.
You’re better off teaching your customers how to use your product (such as Dropbox's rewarding users with 250 megabytes of extra storage if they take a tour of the basics of the service) than chasing some new person who doesn’t even care.
Sean Beausoleil, the engineering lead at Mailbox, put it bluntly in an interview with ReadWrite: “Whatever your current state is, it can be better.” Well, getting better is a marketing decision, too.
All marketers have email lists and customer databases, plenty of people who have been marketed to over the years. Due to problems on the marketing front, the prospects weren't converted into customers or the marketers didn't make the best use of the opportunity. Yes, it’s more seductive to chase new marketing initiatives. Yes, it would be more fun to get some press. But it’s better for businesses to retain and optimize what their marketers already have.
Bronson Taylor, host of Growth Hacker TV, puts it in a phrase: “Retention trumps acquisition.” It’s the easiest variable in the equation to fix. So get to it.
This piece is adapted from the revised and expanded paperback of Growth Hacker Marketing: A Primer on the Future of PR, Marketing & Advertising.