$60 billion. That’s how much will be spent on acquiring new mobile users this year according to Apps Flyer. Meanwhile, day one retention is at just 25.2%. Do the math and that means mobile marketers a potentially $40 or $50 billion is going up in smoke nearly as soon as its spent. But as our Mobile presence hosts point out, if you spent just a fraction of those billions actually fixing retention and building the kind of brand experience that would attract new organic customers, you’ll be way ahead of the competition.
The keys to app retention
John Koetsier and I sat down with Sunil Thomas, CEO and Co-founder of CleverTap—who has helped solve retention for more than 8,000 apps—to talk about the keys to improving app retention and the metrics you need to measure to know if your efforts are effective.
Listen to the podcast:
Make your app “magnetic”
Retaining users is all about creating a user experience that is magnetic—keeping users coming back day after day. Sunil says it’s all about taking action—two very specific actions:
- Omni-channel messaging—You have to be proactive about bringing users back to your app, especially new users who have not yet formed a habit and made your product a daily destination. Sunil says, “We allow our customers to reach out to their users over 12 or 13 channels, push notifications, in-app messages, app inboxes, WhatsApp for business, text messages and so on.”
- Personalization—All marketers know that personalization is the name of the game in the digital age. In fact, users expect a personalized experience as part of the agreement to give you their data. “There’s a first-time user, there’s a champion user, there is a loyal customer,” says Sunil. And you have to treat each of them differently, every time they come into the app (or when reaching out to them through your omni-channel messaging).
Keep an eye on RFM
If you want to make the most of your messaging and personalization efforts, you must pay attention RFM (recency, frequency, monetary) and target the right users. As Sunil says, “it’s about understanding your users and really segmenting them into small buckets.”
Sunil describes CleverTap’s approach as an “automated segmentation methodology that allows users to break their user base into 10 unique segments based on three key metrics: recency, frequency, and monetary. On one end of the spectrum “are your champion users. These are the most recent, most frequent, and have the most monetary value typically.” On the other end are your hibernating users. “And the key here is to automate your life cycle management so that as people fall up and down these spectrums, they get the right experience that you’ve designed,” says Sunil.
The 3 must-measure metrics
No matter what vertical you are in, CleverTap recommends paying close attention to three metrics as part of measuring the effectiveness of your retention efforts:
- Retention rate—The speed of your business will determine whether you’re interested in a daily, weekly, or month retention rate but it’s a number you need to track.
- Conversion rate—“Every app, every business really has three to five key conversion rates that makes or breaks their business,” says Sunil. Whether you’re concerned with tracking first install to first purchase, or converting free users to paid subscribers, but you need to be focused on the conversions that matter to you.
- Customer lifetime value (LTV)—This metric is your “North Star,” according to Sunil. “Now the problem with lifetime value is that it’s a little bit of a lagging indicator as compared to the first two,” he says, but it’s just as important to track.
Success by the numbers
If you put in the work, and heed the advice of experts like Sunil, you can expect to see dramatic results. Sunil says he often sees as much as 50% improvement in retention rates, conversions, and LTV within 12 months of taking action. With billions of dollars at stake, it’s time to get your strategy in place and start keeping the users you spent so much to acquire.
To take a deeper dive into our Retention Masterclass, check out the transcript below.
Peggy Anne Salz: Welcome to Retention Masterclass. I’m Peggy Anne Salz.
John Koetsier: And my name is John Koetsier.
Peggy Anne Salz: Here we are at Retention Masterclass, and in kicking it off with the first show, I think very true to the name, it’s all about … what do you think, John? You guessed it, retention, right? And how to crush it. That’s what we’re going to be doing here on your show, on our show rather. And hey, I think it’s pretty much the time to do it because from what I’m seeing in the industry, what you’re probably seeing in the industry, the research out there, marketers do not yet have their head around this. They are still trying to figure out retention.
John Koetsier: Absolutely, according to AppsFlyer, brands are spending $60 billion this year to acquire new mobile users. I mean, $60 billion, that might be a generous estimate. I’m not a hundred percent sure I believe every billion that’s there, but even if it’s half true, that’s a lot of marketing burn.
Sunil Thomas, CEO of CleverTap
Peggy Anne Salz: That’s a lot of money. And you know, let’s stay with the data. I love data, right John? And you look at the other data also from AppsFlyer by the way, and we’re looking at day one retention, day three, day seven, and you start out at 25.2% of the 100 on day one. So you’ve already lost that significant amount and it just goes downhill from there, it just goes south. We’re talking about nearly 70% of your users by day seven.
John Koetsier: So if we look at that $60 billion figure, that means $40 or $50 billion of those just went up in smoke. Now we know that brands need some level of user acquisition. It’s going to happen. You need that, you want that, you’re growing absolutely. But, if you spent just a fraction of those billions actually fixing retention and maybe building the kind of brand experience that would attract new organic customers, you’d be way ahead.
Peggy Anne Salz: Absolutely. But I have to say, John, you know I’m always going to be the positive person, there is research out there that does say that marketers are getting this right. So an app trends report, this time from Liftoff together with AppsFlyer, looks at growth markers … not the world, but a good 300 – 400 growth marketers … so a good survey, and says basically, ‘okay, what are your top three challenges in 2020.’ So our favorite, retention, number three, interestingly enough right after scaling growth. So they’re challenged by growth. They’re equally challenged by retention. Probably a great reason to tune in here.
John Koetsier: Absolutely. Well, if you’re listening or watching right now because you want to rock at retention, hey, you’re in the right place. Today we’re going to talk with someone who has solved retention for more than 8,000 apps. Yeah, you heard that right … 8,000. How? You build a platform that enables individualization at scale and scalable analytics that are instantly actionable. That’s a new one. We’ve got lots of analytics, but not many of them are instantly actionable to save customers or users from churning.
Peggy Anne Salz: Absolutely. So I would just love to welcome our guest, Sunil Thomas, CEO and co-founder of CleverTap. Hey Sunil, great to have you on the show today.
Sunil Thomas: Thank you, Peggy, it’s awesome to be here. Hi John.
John Koetsier: Hi.
Peggy Anne Salz: So you know, this is it, this is the place, it’s a Retention Masterclass. We’re serious about this. We want to deep dive into what you’re doing and the lessons from 8,000 apps. But first, let’s talk a little bit about CleverTap and your own professional journey, finding this company with a mission that is basically laser focused on retention, at a time perhaps, when other companies didn’t have it on the radar.
Sunil Thomas: Right. We took a holistic view at retention right from day one. We have three co-founders, Peggy, and all three of us come from a technical background. I’m a computer science engineer myself, a school lab, professionally came up the chain being a software engineer, a senior software engineer, VP engineering, and so on and so forth. As CTO, I ran a couple of big teams in the US, in India. And the real need came from the three of us having led multiple-sized engineering teams that keep getting these requirements like every Valentine’s day, every Thanksgiving, or Christmas, or Diwali, or what have you … and the need from marketing to sort of dress up your site, dress up your apps, do some specialized campaigns, things like that. And you know this is not high end engineering work. Engineering teams don’t like to do this work. So we thought, why not actually build a product around this whole thing?
John Koetsier: Very cool. Very cool, Sunil. So retention’s a big topic obviously, there’s a lot of reasons why customers churn, why users leave apps. We’re going to get into all that stuff, but maybe let’s start here. Why has retention historically not gotten the attention that acquisition has?
Sunil Thomas: I think it’s a little bit to do with vanity metrics, John. I mean it’s nice to see your daily active users go up and your monthly active users go up over a period of time. And then the easy way to make it go up is actually to acquire new users and just put a lot of money into Facebook, Google or your favorite ad network, really to try to acquire temporary downloads. And it’s a little harder to actually try to keep those if you break up those MAUs and to find out how many of them are really the newly acquired ones, versus the ones that keep coming again and again. It’s actually a little harder to get people to keep coming back again and again.
Peggy Anne Salz: So it’s a bit of a new mindset, probably also a new skill set. But you also have a new framework as well to get marketers starting to think about retention, not just think about it, but actually approach it, you know, make those segments actionable. Sunil, why don’t you deep dive a little bit more into the framework and tell us a little bit more about how you actually have progressed beyond this framework to what you’ve built in …baked in to CleverTap.
Sunil Thomas: Right. So, at the end of the day, solving retention with first principles is really giving your users a magnetic experience, right? They’ve got to enjoy coming back into your apps, coming back into your websites, finding it useful, finding information they need, and so on and so forth. So it’s about actions, and we are the only company out there that provides two actions. One action is more popular at least, and that’s through omni-channel messaging. We allow our customers to reach out to their users over 12 or 13 channels, push notifications, in-app messages, app inboxes, WhatsApp for business, all kinds of different channels, text messages and so on. So there’s omni-channel messaging is one channel.
And the second channel which, I mean the second action which most people miss out or don’t do as part of a retention framework, is actually personalizing the apps themselves when users come in. So the users that come into your apps are of different types. I mean, there’s a first time user, there’s a champion user, there is a loyal customer, all of these different things and you’ve got to treat them differently or specially, or contextually really, every time they come into the app. So if you can combine app individualization with omni-channel messaging that sort of rounds up your retention story from an action point of view.
John Koetsier: That makes a ton of sense. I mean, one of the things that you do as well is you kind of have this methodology for measuring the health of mobile customers that you call RFM, that it speaks to recency, frequency, and monetization. Can you talk a little bit about what that sounds like, what that looks like, how that works?
Sunil Thomas: Yeah, John, so that’s a framework I think you know that we allow. It starts with user segmentation. Your actions are only effective if you action the right set of users with that, whether it’s a message, whether it’s a different version of the homepage, it’s about understanding your users and really segmenting them into as small buckets. You know, people talk about the segment of one and so on. So we cleared it out of the box a few segmentation models. RFM is very, very popular. It actually shows a lot of good results in our customer base. And that is a segmentation, automated segmentation methodology that allows our users, literally our customers at the click of a button, really to take that entire user base, and based on these three metrics … recency, frequency, and monetization … break that user base into 10 unique segments.
The best of the right hand segment in the spectrum are your champion users. These are the most recent, most frequent, and have the most monetary value typically. And on the left of that spectrum is your sort of hibernating users. These are the least recent, least frequent, and the least monetizing users. And you have the spectrum of ten and users drop in and drop out as a new user comes in, he or she either makes it up the ladder to become a champion user or a loyal customer, or falls down the ladder to become an at-risk or a hibernating user. And the key here is to automate your life cycle management so that as people fall up and down these spectrums, they get the right experience that you’ve designed. They get the right messaging at the right time, and more importantly, they also get the right home page and app experience at the right time.
So John, if you have not opened, if you haven’t gone into an application say for three months that’s on your phone, the way it welcomes you back could be like, ‘Hey, here are the three new things that we’ve launched in the app.’ Or that could be a very unique individual homepage experience for you, even if you haven’t been messaged to so to speak. And that’s very different from Peggy, say for example, where she’s in the app every day, three times a day, and it’s just a different experience. You know she gets exactly the stuff that she’s in there for every time and it just keeps getting better.
John Koetsier: Peggy’s such a keener, right? So she’s doing it every day … sure, absolutely, whatever. I like that you said it was automated, because of course everybody wants a segment of one, everybody wants that individualization. But it’s hard to do. It’s hard to get there because if you’re creating segments manually, how many can you actually do? You’re probably going more with cohorts and when somebody onboarded into the app rather than actual segments based on their activity in the app. Interesting.
Sunil Thomas: Yeah, that is absolutely right. And like RFM … just fyi, coming up on the roadmap for us this year are two really exciting segmentation models too. One is we’ve invented it along with our partner based out of Berlin. He’s an app retention specialist, a company called Phiture. The segmentation framework is called AIC, stands for acknowledgement, interested and converted. And the whole idea is this is a three segment model, if you will, this breaks your user base into people who just acknowledge it, acknowledge you, meaning they come into an app maybe once in a while, they’re sort of barely aware, but they are aware kind of a thing. That’s at the bottom of the pyramid. At the top of the pyramid are the users who are interested in you and at even the top of the tip of the pyramid is how people who have converted with you, meaning they’ve purchased, they’ve subscribed, they’ve done whatever you want them to do from a monetary point of view. And this is a simple version, RFM breaks it into 10 groups so you have to deal with a little more complexity.
AIC breaks it into three groups, for example, and you have to deal at least to start off with, you can deal with a little less complexity. We’re also going to launch, you know Dave McClure’s very popular AARRR life cycle management model, and this is a five stage model. This is acquisition, awareness, retention, things like that. And it’s basically a five step model. So depending on how comfortable you are with where you want to start your automation journey for life cycle management, etc. you can sort of pick the right automated model, is the idea.
Peggy Anne Salz: So I love that it’s actionable, which is really important because we’ve had lifecycle management already, you know Sunil. I mean, we’ve talked about stages, we’ve talked about funnels. You’ve turned it on its head so we have an engagement, we have this AIC model which is pyramid the other way around. I would be interested in understanding more about how your clients are using this. We’re talking about what you’ve done solving customer retention, 8,000 apps at a time, which means you have a lot of learnings for us. We’ve got different models here, almost for anywhere you are, any vertical where you could be … maybe you can share some of the uplift. What’s the uplift in a specific vertical, or what have you seen with your clients?
Sunil Thomas: Yeah this is a good question, Peggy. So we focus our clients on three key metrics. I mean it’s easy in this world to sort of get enamoured by activity and count things like number of campaigns, or number of messages sent, or things like that which don’t really … again, that’s a little bit more on the side of vanity metrics, if you will. So we focus our customers on three metrics really, and that boils down retention for us at least, and for a lot of our customers who now are using us. One is your retention rate. Now, it could be a weekly retention rate, it could be a monthly retention rate, it really depends on the speed of your business. But you know monthly retention is a nice metric, and this takes into account people who are coming back to your app on a monthly basis. So that’s metric number one.
The second metric are your key conversion rates. Every app, every business really has three to five key conversion rates that makes or breaks their business. This could be people, first install to first purchase could be a conversion, right? A free subscriber to a paid subscriber could be a conversion, but it could be even more bottom of the funnel, like people who add to cart and actually purchase. That could be a conversion. So every business can be boiled down into three key conversion rates, and we focus on that and we focus them right from day one on that.
And the third metric is really the one North Star, it’s your customer lifetime value metric. Now the problem with lifetime value is that it’s a little bit of a lagging indicator as compared to the first two. So with your monthly retention rates, with your key conversion rates, you take an action and you can actually see those move up and down. So it’s a little easier to engage your teams with, to sort of keep morale and see successes as you go along. And lifetime value, you must measure but it’s a little bit, you know, it takes a little time to sort of take effect. These are the three metrics that we really hone our customers on, and it makes it easy.
John Koetsier: So, if a customer comes on board and starts doing some of these things, using some of these technologies and applying some of these metrics, what kind of lift do you see? Peggy talked off the top about some really awful retention, and we’ve known that for years, right? Andrew Chen brought that up in 2015 when he was with Uber, and we’ve seen the retention is absolutely horrible. We know people are spending, spending, spending to fill a bucket that just leaks out the bottom. But what are you seeing in terms of results? What are people actually achieving when they use the technology?
Sunil Thomas: So we’ve seen dramatic results, John. I mean, 50% improvement in either of these three things within 12 months of taking action on it. There are a few verticals we internally at least, we broadly call it these ‘demand tech verticals’ that includes things like food delivery, live sports, media streaming apps, event ticketing and travel. So anything that’s sort of on demand, right? Cab hailing is a big vertical that we do extremely well at.
So anything that are these sort of on-demand services where timely contextual messaging, as well as contextual timely experiences make a difference, see dramatic improvements. For example, like your Uber is five minutes away, you know that’s a message that you cannot … I mean you’re not going to turn that message off. It’s actually useful for you. Similarly, like your United Airlines flight gate has changed from number 87 to 72. You know you want that message. So if you think of … in cases like this … you know your food has left the kitchen, or your delivery is expected in the next 30 minutes. These are things, and it’s funny right, when you’re going to check into a hotel, why shouldn’t that reservation confirmation number be right on your homepage when you open the app?
John Koetsier: Yes.
Sunil Thomas: But it’s not, I’ve always got to go into my trips and details, and then find the little number that they want, right? Either at a kiosk, at the airline, or at a hotel counter or whatever. So these are just simple things that can be very easily automated with the live segment. For example, people who are landing in the city of New York today is a live segment, and you can do interesting things with that group of people, even outside of messaging, like on the homepage with messaging. So 50% improvement is very, very common in a period of 8 to 12 months really.
John Koetsier: That’s absolutely huge.
Peggy Anne Salz: That’s impressive.
John Koetsier: And it’s absolutely huge right now especially. I was talking this morning with a technology executive in Beijing because I do the TechFirst podcast, and obviously coronavirus is huge right now. It’s global and growing, and I wanted to talk somebody right at the epicenter in China, and he was talking about, ‘hey, I come out of my house once every three days,’ right? And the restaurants are closed, the shops are closed, the malls are closed. Now the restaurants are open in a sense, but you can’t go in, you can order … so the on-demand services are just going off the roof right now. And so this is really actually very timely.
Sunil Thomas: It really is. I mean anything on demand that you’re sort of sitting and waiting for … and these apps also, John, you know super apps, right? I mean coronavirus, temporary, hopefully it goes away, we are back to normal. But if you think of these super apps, even there, there is so much of an opportunity to cross-sell and up-sell if you do it smartly. We have telco customers, for example, I mean you would not think telco is on demand really, but telco customers driving direct ROI by getting more bill payments on time, all because of a simple button that shows up saying, ‘pay your bill now.’ You know, for all those users whose bill is due within a week kind of a thing, right? But these are just simple things that people do and that’s really putting bottom line dollars into their business.
And it’s not complex, but the problem is there has not been any platform that you can do it easily. You know it’s been part of the problem. There’s a lot of data, but that data is not actionable. If you’re able to bring all that user data, make it actionable via segmentation, make it actionable via the ability to personalize and the ability to message, it really makes this holistic experience come true.
Peggy Anne Salz: That makes a lot of sense and it’s great that it’s not rocket science. You know, you’re talking about removing the friction at certain points, understanding those points, understanding the context, understanding what we as consumers would find useful. And if you take it out beyond that, it’s also getting us into that area we’ve been talking about for probably a decade, Sunil, which is the whole idea of being able to be assistive but also predictive. And I can imagine with all of that data that you have, you know, tell me about that journey and how far are we to being very predictive? Not just helpful, which is a big part of this, but to also understand how to engage with users, because we understand them perhaps even without them asking. So we can see that journey one step further out.
Sunil Thomas: Yes. So we are very close. I mean, we are already live even with CleverTap. And there’s a lot of companies doing a lot of different work, but we put it in the same platform. So today we do intent-based segmentation and that is predicting for the future. And our customers can, in the platform, tell us about what activity that they want intent to be generated. So it would be making a purchase or whatever, or becoming a subscribed user, or a paid subscribed user, or it could be intent to churn also, right? And we are able to predict this. So we take, again, the entire user base that the customer wants to deal with, and we put them into three buckets … people most likely, least likely, and moderately likely to do that activity. So it could be like these 2000 people are most likely to churn in the next 30 days, or these 5,000 people are most likely to purchase a red t-shirt in the next 45 days, or whatever. So we break users into those kind of segments: most likely, least likely, moderately likely. And again, they are available for actions. So knowing intent, you can actually really fine tune your actions.
We’ve had e-commerce customers, for example, knowing an intent to purchase, trying to upsell the cart size, right? Put some related products, and knowing that they’ll purchase something is the right time to sort of up-sell with a little bit more to increase the cart size. But we’ve also had e-commerce customers knowing the intent to purchase, leave the customer completely alone. Like save your messaging ammunition for later kind of a thing. So your strategies and tactics, whether it’s seasonal, whether it’s whatever, it can totally change and that is all the creativity. But intent-based segmentation is very powerful. Knowing intent, you can actually do much better than you’ve done before really.
John Koetsier: That makes a ton of sense. It’s funny that you mentioned you can choose to message somebody who left a cart or didn’t leave a cart. I mean the cart’s kind of like a bookmark, right, in some cases. I’m saving that product, I know I’m leaving my cart, I’ll come back to that when I’m ready. Or maybe I’ll get a message and you can test as a brand which works best or which doesn’t obviously. So that makes a ton of sense. Question for you … you’re a retention expert, you’ve built your business on that. What are some of the biggest mistakes you see marketers make with regard to retention?
Sunil Thomas: I mean, to be honest, John, in this group the biggest mistake is to not have that holistic view of retention.
If you think messaging is just marketing automation, it’s just campaigns. I think that’s a very small picture of what [it] really is … if you really want to solve retention, and you think holistically, that includes messaging, that includes omni-channel, that includes real deep segmentation, that includes personalization, that includes, you know, there’s many things that have to come together. A mindset of experimentation and iteration, right? You’ve got to be able to iterate, measure, experiment, iterate again. So there’s a little bit of mindset miss almost in today’s world, but happy to see, you know, we started our business like six and a half, seven years ago now, and it’s dramatically changed in those seven years. Today these are not foreign conversations. Today the world is talking about it and that’s good actually for us.
Peggy Anne Salz: And good for us here on the show, that’s why we started it. But you touched upon it, Sunil, you’re talking about the mindset. That’s always exciting because that means something has to shift, something has to change. Maybe even jobs would be created. John was talking about retention specialists, marketer focused on this. Is there anything that you can provide in the way of best practice or advice on that journey … we need to change our mindset, we need to cultivate these retention specialists. I mean what are some first steps to take or something that our listeners, our viewers rather, can take back to the office directly on Monday morning.
Sunil Thomas: Yeah. I think, again we recommend three things Peggy. One is to eliminate the user data silos. It’s important that you get to use as much user data that you can use. So whether it’s for segmentation, whether it’s behavioral, whether it’s intent, all of these things come into real … I mean it can be really powerful, if you can eliminate those user data silos and bring together as much user information as you can, behavior information outside of sort of demographic profile information, that’s the first mindset change.
Then you’ve got to align. I mean, the second thing is to align, do some metrics. And I talked about three metrics, your retention rates, your key conversion rate, your lifetime value … if you don’t know where to start, these are great starting points, if anything else. So that’s the second mindset change, to align on these metrics and every campaign you’ve got to measure these metrics, not the click-through rate of the campaign, for example, operationally.
And the third big mindset change is to have an experimental sort of mind frame. You’ve got to, you know, Jeff Bezos actually from day one has been telling us if you double the number of experiments you do per year, you’re effectively doubling your effectiveness, right? So, more experiments. So you’ve got to have this experimentation mindset. So new people, I mean, there’s just a lot of creativity. It’s just that in today’s world you’re bogged down by fetching data, by just trying to, you know, getting this data science out of your data scientists and your data analysts. And all takes away the bulk of the time, as opposed to you having these data at the tips of your fingertips or these segments that are automatically created or whatever. And then all the creativity goes in trying to optimize the actions for that segment.
John Koetsier: I love that, getting the data out of the hands of the data scientists. Absolutely. We love data scientists. We need data scientists, 100%, but you know what? We need the fruits of that, we need the data from that, we need that in the hands of the marketers so they can actually make the decisions in real time, quickly and do the right thing. That’s a wonderful, wonderful thing.
Sunil Thomas: And that’s what we enable John, at least parts of it, so …
John Koetsier: Wonderful. Sunil, this has been so wonderful. Thank you so much for sharing your insights.
Sunil Thomas: Thank you, John. It was awesome to be here. Thank you, Peggy. Really, really good.
Peggy Anne Salz: Great to have you.
John Koetsier: It’s been a real pleasure.
Sunil Thomas: Same here, thank you.
John Koetsier: Excellent. Well, thank you for joining us on Retention Masterclass. We hope you have enjoyed this deep dive, a primer if you will. We’re just getting started, so watch for more amazing guests to come.
Peggy Anne Salz: Absolutely, and don’t forget to subscribe, to check out the website, check out all of the materials around this show as well. And we have lots more coming, so strap in, it’s going to be an amazing ride here with John here at Retention Masterclass.
John Koetsier: Awesome. Thanks so much. Again until next time, this is John Koetsier.
Peggy Anne Salz: Peggy Anne Salz.
John Koetsier: Wonderful.
Peggy Anne Salz: See you soon.