Learn more about your customers if you want to retain them

Have you ever asked yourself the following questions: What kind of people use my service? Why do they use it? Why they chose my business over other competitors? What are their expectations?

Understanding your customers and their needs is the first step towards reducing churn and increasing the Customer Lifetime Value.

Buyer Personas

You’ve probably heard this term, but buyer personas are a great way to conceptualise your current (and potential) customers and target audience. Depending on the industry, you can also call it a customer persona or a marketing persona, but for simplicity’s sake I’ll always refer to it as a buyer persona.

What’s great about it is that you can use it to represent a large group of your audience (or even the whole of it). When you are a big business, you can’t know each user personally, so you need to collect information about them and see if there are any patterns that can help you create these personas. Notice that the key word here is collect information. We don’t want to make any assumptions. Even if you think you know who your customers are, it’s always better to have the written proof.

Okay, so what type of information do you need to gather? The most useful things to start are age, location, language, occupation. If you are dealing with B2B clients, then you should also be interested in company details such as size, locations, industry, and revenue. Let’s go one by one and see why it’s important to know these things:
• Age: it can tell you a lot about your clients and where they are in life. You don’t need to know their exact range, it doesn’t matter if the person is 33 or 34, so try to get a general range, for example between 30 and 40.
• Location: someone living in Los Angeles can have very different needs and opportunities than someone from a small US town in Colorado. Knowing the location (and time zone) can also help with personalising the content for different audience — not just language, but also writing style.
• Occupation: this is a way of learning your customers’ income without directly asking them for it. Of course, it’s not as accurate, but you can get a good estimate. The CEO of a big company can afford a wider range of products and services than someone who works lower down the chain, so you will be able to target them better.
• Interests: knowing their interests might not seem as important as the other factors listed here, but with this information you can get a full picture of the person and make him “real”. For example, if you are selling groceries online and you know that a customer likes to play sports and workout, you can target him with things such as protein bars, isotonic drinks, and healthy products in general.
• Company size, locations, industry, and revenue: It’s fairly obvious how this information can be helpful. For SaaS companies, there is a huge difference if they are offering their service to a one man shop or a huge business with multiple locations. You can include these fields in the signup form because they are vital to your business.
These are the most likely details that you will need to create buyer personas. I’m not saying they are the only ones, but they are universal for almost all types of businesses. You can also include things like challenges and goals if you feel that they will help you get a better sense of your customers.
Now that you know what to look for, it’s time to collect the information. If you don’t have these things from the signup form, the best way to do it is to send your customers a survey and maybe offer them an incentive (something for free) if you feel like the participation will be low.
Let us look at some examples of buyer personas for a fictional appointment scheduling business (e.g. Calendly):

Marcus, 28, is a dentist. He’s graduated recently, but is having a hard time getting clients because he recently relocated and doesn’t have many connections in his new city. It’s a big town with a lot of tech and progressive people who like to use the internet for everything.

Shauna, 50, has a hair salon. Recently, she’s lost a lost of customers to new hair salons popping up every day on Google’s front page. She has a website which she hasn’t updated since the early 2000s, and it starting to get left behind. She’s not that technical and needs a lot of help with setting up simple things.

As you can see, we have two vastly different buyer personas who use exactly the same product. However, it’s important to separate them so that we can understand better how they’re using our services and to target them with more personalised marketing messages. Understanding why your customers use your business can be the key to knowing how to keep them engaged and increase their CLV over time.

Using Cohort Analysis to gain additional insights

Cohort Analysis is a great way to break your data into different groups and find different patterns across the customer lifecycle. If this sounds too complicated, just think of it as a way of creating groups of people with shared characteristics. One of the most popular use cases of Cohort Analysis is to determine the retention of your customers and when do they start to churn. Here is an example of a Cohort Analysis for an app:

As you can see, it tracks the percentage of users who are continuing to use the app X days after sign up. Obviously, as time passes, less and less people remain as active users. Around 70% of customers stop using the app the next day after installing it, so obviously for this company Day 1 is of crucial importance in minimising churn and retaining most of its customers.

In this example, we see that the period is measured in days, which is more suitable for newer companies. If your business has been around for a while, probably it would make sense to use a longer timeframe. Also, here we are taking the first 8 days, but you may also want to do this in the middle (8-90 days) and long (90+ days) term to see what is the retention for different periods.
After you have figured out when the users usually leave, it’s time to see why. There is no straightforward answer or template for this, so you will have to use your brain. Maybe the onboarding isn’t good and people ditch the app on the first day. If the problem comes at a later stage, then you can check if you provide enough engaging content for the users up to the point of when they churn.

Another good way to find out what’s going on is to compare the activity between engaged users and those who churn. Let’s say you see something unusual, like the engaged customers using one feature way more than the average. Maybe that’s the solution to your problem and you should try pushing that feature more. Or if a lot of the engaged users have enabled push notifications in comparison to the average, you can try being more aggressive in the beginning and convince more people to turn them on. Of course, these are just examples, you’ll have to dig deep and know your product well to find the real reason.

Usually, it’s not just one thing, but most likely a combination of some factors that leads to churn. After you’ve identified the potential culprits, instead of making big changes on production, it’s better to do an A/B test to see if your hypothesis is valid.

Last but not least, it’s also crucial to know how to interpret the data. Is a 30% retention rate for day 1 good or bad? It depends. If you app is cheap/free and starting up is quick, then it’s likely that a lot of people will and to try it out because it won’t cost them much and they’ll churn fast if the app isn’t what they want. Whereas if the app is expensive and has a high entry barrier, then a high churn % is a valid reason for concern.

What other methods do you use to differentiate and segment your customers? Leave a comment and start a discussion :)

P.S. This was a chapter from my book, so if you want to learn more about how to use CRM methods to improve things like your onboarding and customer engagement, check out The Ultimate CRM Guide for SaaS.