Thread Lightly: Don't Ignore Customer Retention in Your Rush to Scale
Only three things matter in real estate: location, location, location. Nowhere have we seen this ring more true than in Nashville.
In digital marketing, many believe the same rings true: acquisition, acquisition, acquisition. Scale.
One model claims that as long as you’re able to acquire a customer for a few pennies less than the value you squeeze out of them, you’ve got a marketing machine & it's time to scale. But this is flawed logic. It rejects the fundamental law of commerce: it’s not about how many customers you acquire, but how many you can retain over time.
Threads is Falling Apart
Let's take a moment to dissect the recent hype train that is Threads - a soon-to-be classic case study of why acquisition and new users are not the only metrics that matter.
In a matter of days, Threads achieved the unthinkable - 100m users. It was epic to watch & a thrill to get caught up in the sign-up frenzy. Truly, it felt like Taylor Swift Era's tour ticket release day all over again - everyone was asking "Did you get in?"
Yet, here we are mere weeks later & their active users are down 60%. Some dropoff is expected, but 60%?! - that's troubling.
How does this happen? Threads was an acquisition super-magnet. But once users were in there, they realized it was not better than the competition. In this instance - just as in your business - the competition isn’t just other social apps- it’s life. It's dirty diapers, it's Netflix, is mowing the grass. What value is another app adding to Metas customers?
The Threads saga serves as a strong reminder that driving customers to a weak product is the same as gathering a crowd for a play, only for the actors to forget their lines. The stage is set, and the lights are on, but the audience leaves halfway through the performance, disappointed and unlikely to return. So before you unleash your customer acquisition cannon, make sure your product is compelling and deserving of the spotlight.
The Lesson: Retention > Acquisition. Always has been. Always will be.
As an ad agency, one of our roles is to ensure that each dollar spent on advertising goes to the next best use. In reality, the next best use of your advertising dollar likely isn’t increasing your FB budget, but investing in your customer retention program.
How are you following up with customers?
Are you responding to & resolving their concerns?
Do you know, with accuracy, what your retention rate is?
Would refunding a customer's order - and minting a customer for life drive more revenue than increasing your ad budget by $100? Almost certainly.
Keep in mind, your opportunities for new customer acquisition in the future are nearly endless. Your opportunities to serve your current customers, build relationships, and drive retention, decrease with each day you ignore them. Choose your next move wisely.
