How to Systematically Acquire and Retain Customers, at Scale
Learn why and how to build what we call a "strategic marketing funnel."
Note: “Strategic Marketing Funnel” is one of the frameworks featured in Growth Marketing SuperBoost.
You can also listen to the podcast version of this article on Spotify, Apple Podcasts, and YouTube.
Every marketing strategy should start with a funnel: a process by which prospective customers become aware of your business or organization and its offering (awareness), self-select to learn more about it (interest), continuously engage with your business or organization (interaction), convert to being a paying customer (conversion), and then become a loyal advocate for your business or organization and its offering (loyalty and advocacy).
Within a funnel, there are three marketing components: message, market, and media. Each type of media is tied to one of three tiers: paid media, owned media, and earned media.
Paid media is a placement you pay for, such as an advertisement; owned media are assets you fully control, such as your website; and earned media is publicity you receive through organic means, such as PR, social media sharing, online reviews, and SEO.
Together, working in tandem, these tiers are known as “converged media marketing” which is the most effective type of media marketing.
Whereas most businesses and organizations utilize some variation of paid, owned, and earned media, many of them do not orchestrate these three tiers in unison, thus minimizing the effectiveness of each one and ultimately desired results.
To maximize their individual and collective effectiveness, plot your business or organization’s paid, owned, and earned media within the funnel. For example, the Growth Marketing Institute’s strategic marketing funnel is as follows:
Prospective customers see an advertisement on Facebook (paid media) prompting them to subscribe to our email newsletter, “Growth Marketing Insider” (owned media).
Upon subscribing, they are redirected to our website (owned media) and they receive a series of automated emails (paid media) spread out over the course of a few days, for “lead nurturing.”
Each time they receive our email newsletter, they are incentivized to forward it to others (earned media), thus reducing our ad spend over time while adding more prospective customers. (Those who get at least 10 other people to subscribe receive a free one-hour growth marketing consulting session.)
Admittedly, this funnel is simple (and purposefully designed as such). Other businesses and organizations will (and should) have more aspects to each of their media tiers, but not too many, because ultimately each aspect must correlate and collaborate with one another in order to maximize effectiveness and results.
Once you have a funnel in place, the next step is to improve activation, which at its core is about increasing the rate at which you get new customers to their “aha moment” — the moment that the utility of the product or service really clicks for your average customer, when they truly receive or at least fundamentally understand its core value: what the product or service is for (the “job to be done”), why they must have it, and what benefit they derive from using it (i.e. completing the “job to be done”).
Start by mapping all of the steps that get prospective customers to arrive at this “aha moment.” Then, create a funnel report that profiles the conversion rates for each of the steps and segments prospective customers by the channel through which they arrive, and the conversion rate between each step. Look for differences between current customers, those who activated but did not convert into a paying customer, and those who never activated.
Ultimately, to improve activation, you can either increase your customers’ desire or reduce the friction they experience between each step leading up to your “aha moment”. Making a product or service more desirable is generally much more challenging and resource-intensive. In some cases, adding some positive friction can be good, since prospective customers make a small commitment (i.e. sunken cost fallacy) and get to activation with more reliability.
You can also do what is known as “flipping the funnel,” or allowing prospective customers to experience “aha” value before asking them to pay.
The third phase in developing your funnel should be bolstering retention, which has three phases: initial, medium, and long-term. The initial retention period is the critical time during which a new customer either becomes convinced to keep using or buying a product or service, or goes dormant after one or a few visits, tries, et cetera.
Once new users have crossed the threshold of initial retention, they move into the medium retention phase, a period when the interest in a product or service's novelty often fades. The core mission for growth teams in retaining customers who are in this midterm phase is to make using a product or service a habit; working to create such a sense of satisfaction from the product or service that over time, customers do not need to be prodded to use it again because they have incorporated the use of the product or service into one or more of their routines.
Finally, there is long-term retention, in which growth teams can help to assure that a product or service keeps offering customers more value. Teams must experiment with ways to keep improving the product or service, helping product development teams to determine the timing for and cadence of introducing enhancements of existing features or entirely new features.
Communicating to customers that some new features or offerings are just around the corner, and telling them how they will benefit, can be a powerful inducement for them to stick with you. The key here is to keep refreshing the customer’s perception of the product as a “must-have.” To maximize your retention rate, break your retention data into cohorts based on entry date, channel, and other relevant factors.
For long-term retention, you can use a two-pronged approach that involves (1) optimizing the current set of features, notifications, and subsequent rewards from repeated use; and (2) introducing a steady stream of new features over a long period of time.
Another important element of long-term retention is figuring out how to move your customers along a learning curve. They should gradually be introduced to new features and new ways of using them as they become more familiar with your product or service.
Lastly, develop a “resurrection” strategy for when you notice that customers' purchasing or user activity has dropped to zero, after some designated time (which you should experiment to determine). These dormant customers should be added to a “resurrection flow” — a series of communications (e.g. emails, notifications, retargeted advertisements) designed to win them back, often by reminding them of the “aha moment” or core “elements of value” that once drew them to the product or service.
The fourth and final phase of developing your funnel should be focused on monetization, the goal of which is to highlight all of the opportunities in the funnel — from awareness to loyalty and advocacy — that you have to earn revenue from customers. It starts by returning to the basic mapping of the entire strategic marketing funnel.
Then, analyze where in the funnel your business or organization is driving the most revenues, sales, et cetera, and where there seem to be pinch points (steps during which potential earnings are lost). Patrick Campbell, CEO of Price Intelligently, offers a wealth of advice about best practices for finding pricing sweet spots. To determine your value metric, Campbell recommends asking yourself three questions:
Does the value metric align with where your customer perceives value?
Does the metric scale as the customer uses the product more?
Is it easy to understand?
Pricing is often seen as a proxy for value, so lowering prices may not help increase your revenues, volume, or sales.
The supreme aim of a strategic marketing funnel is to design “customer loops” — a virtuous cycle of growth. Marketing teams should be constantly innovating, diving back into the data, and coming up with new experiments. Push yourself to make the most of what is working, not only finding new things to try. And opening up the ideation process to your entire business or organization as a whole can help push through stalls or being short of ideas.
According to Sean Ellis and Morgan Brown, authors of Hacking Growth, you should not move into high-tempo growth experimentation until you know your product or service is “must-have,” why it is “must-have,” and to whom it is a “must-have” — in other words, what is its core value, to which customers, and why.
It is also beneficial to pinpoint when your average customer has an “aha moment” and why they do so. Thus, the key to knowing when it is time to start a high-tempo push for growth is simple: Can you identify an “aha moment” that customers love?
To determine if your product or service is a “must-have,” simply ask yourself: How disappointed would our customers be if this product or service no longer existed tomorrow? And choose between four options: very disappointed, somewhat disappointed, not disappointed, or not applicable (i.e. most customers do not continue using it).
If 40 percent or more of responses are “very disappointed” then your product or service has achieved sufficient “must-have” status. If it is less than 40 percent, then you know you need to focus on increasing this number by tweaking the product or service, or the messaging used to describe it. In the latter case, a set of additional questions will help point you toward next steps:
What would customers likely use as an alternative to your product or service if it was no longer available?
What is the primary benefit that customers receive from your product or service?
How do customers typically describe your product or service when they recommend it to others?
What type of person do you think would benefit most from your product or service?
How can you improve your product or service to better meet your customers' needs and/or wants?
Once you are willing, able, and ready to begin marketing experiments, start with high-impact, high-potential tests first. Testing small changes is unlikely to have the kind of big impact you likely want, and such tests will take too long. You need to identify the “levers of growth” for your business or organization, to summarize in a fundamental growth equation.
The way to determine your essential metrics is to identify the actions that correlate most directly to customers experiencing the core value of your product or service. To hone your funnel equation and narrow your focus, it is best to choose one key metric of ultimate success that all growth activity is geared toward. This “North Star” should be the metric that most accurately captures the core value that your product or service creates for its customers.
According to Sean Ellis and Morgan Brown, metrics should be reported as ratios rather than static numbers, and they should also have an indicator as to whether they are above trend, on par, or below past performance. You can also use “cohort analysis” based on various demographics and/or behaviors to gain insights into certain groups of customers.
There’s more where this came from at the Growth Marketing Institute.