To grow, organizations must focus on optimizing the experiences they deliver to customers, not on the inventory or features they feel should be valuable to them.
“No enterprise can exist for itself alone. It ministers to some great need, it performs some great service, not for itself, but for others; or failing therein, it ceases to be profitable and ceases to exist.” -Calvin Coolidge
TL;DR:
- The only thing outside of the Product team’s control is session start.
- Building for customer lifetime value is a team sport.
Let’s Deconstruct.
Product teams continue to evolve, and many are adopting OKRs that are more fluid. The most sophisticated ones rally around at least one north star metric. What can a Mobile PM do when a user downloads their app yet fails to sign-up or even opt-in for push notifications? Better yet, what happens if they do provide an email and say “sure” to push notifications? If you do receive a push in the first week, then it’s likely to be a generic one along the lines of “10% off your first purchase.” Disney+ sends this one every week: “See what’s trending.”
Disney+ reached 50M subscribers in a mere six months, although I would bet a Bitcoin that time spent on their apps is averaging far less than that of their competitors in Netflix or even Amazon Prime. “A lack of people consistently watching Disney+ wouldn’t be due to a lack of content.”-Captain Obvious.
Understanding the behaviors that differentiate paid, engaged, retained app users versus those who abandon or churn, is essential for Product teams if they want to build an app people use. It is also equally vital for marketing, as driving healthy behaviors that bond people to their digital experiences attribute to revenue and generates a tangible business impact. Unfortunately, very few organizations align teams towards what’s valuable for their customers, so it remains a massive growth opportunity for virtually every DTC brand in the world.
Distributed Responsibilities.
Who owns what? Apps are technical, and often misunderstood by those who own P&L. As a result, often, Developers are responsible for customer experience on mobile apps. Many executives with budget authority continue to view mobile as a channel solved by a checkbox. Internally, it goes like, “yes, we have an app.” To consumers, it’s “download our app!” As a consumer, the question you ask yourself is, “why should I?” Spenser Skates, Co-Founder/CEO of Amplitude, sums this up nicely when speaking to his employees, “What makes a great digital product? The number of iterations.” No matter how beautiful an app is, its’ success will become defined by how many users remain active at the 3-month mark.
Mobile app retention is a leaky bucket and is a persistent challenge for not only Marketers but organizations as a whole. It’s what keeps many CFOs who work for mobile-first companies up at night. Unlike the web, statistics around mobile, as a whole, remain skewed because there is no standard, and they emanate from various mobile vendors. Keeping that in mind, some say that roughly a quarter of app users abandon the app after a single-use. Many also point out that between 68% to upwards of 80% of users ghost an app after 90-days, on average.
To develop and market a successful app, it needs to aim for the customer and anticipate their next move. Marketers must work alongside Product, Design, Engineering, and develop campaigns that promote the value of the app experience for the customer if they want to drive sustainable growth and retain app users.
However, the CMO function continues to turn over, and maybe that’s a result of teams chasing vanity metrics tied to the timeless, ambiguous buzzword “engagement.” That word, as a metric, can, even in 2020, still mean each campaign’s “percentage rate of clicks and opens.” On multiple occasions, I’ve witnessed entire Business Intelligence teams transition over to Marketing, since tying campaigns to revenue has already absorbed every drop of BIs bandwidth.
“What gets measured gets managed — even when it’s pointless to measure and manage it, and even if it harms the purpose of the organization to do so.” -Peter Drucker
Late last year, Keith Johnston from Forrester Research (Forrester Research, Inc., you know how finicky they are) laid down his predictions for the CMO in 2020, stating that “elite CMOs will establish a span of control.” Keith elaborates on his take further, saying that “in 2020, one designated C-suite leader will be responsible for all that surrounds the customer, clarifying the role of marketing in a business environment obsessed with growth.”
Quantifying the Problem.
No matter the size of the company, or even the service that you offer, every single business relies on building a healthy CAC to LTV ratio. As referenced previously, app stats are difficult to trust. So, take with a grain of salt, that, on average and across all industries, it costs $3.20 to acquire each iOS app user. For media, meditation, and others monetizing via subscriptions, the same report shows that $33.12 is the average cost of capturing an active subscriber on iOS. Apple then takes a cut for all subscriptions delivered through their ecosystem. It’s no surprise why Spotify does everything possible to go around Apple’s payment ecosystem and only pay their 15% fee on a mere 0.5% of paid subscribers on iOS.
As a formula, CAC vs. LTV isn’t rocket science. Let’s use an example for companies monetizing via a monthly subscription, like Spotify, and are not leaking revenue through Apple’s ecosystem. Using an average of $33.12, which is likely much lower than reality, as our baseline to acquire a paid subscriber, with a monthly fee of $9.99 to use the service, then it will take roughly 13 weeks to break even on that spend. With an average day-90 retention rate of 20%, we will also assume that users will cancel upon churning from the app. The opportunity cost of losing these potentially loyal customers is drastic. “‘Cause if it don’t make dollars, it don’t make sense.”-DJ Quik
The Solution.
The experiences that resonate with customers drive habits, which are hard to break. Organizations that understand this have aligned their metrics, teams, and then integrate their technologies and datasets. They are also the ones who will continue to accelerate growth through building products and experiences around their customers, which generates loyalty.
To build products and experiences for customer lifetime value, the Product team should define a north star metric centered around what makes the customer connect with the in-product experience. The primary objectives should not relate to how they monetize, which happens far too frequently. Disney+ might think about “the number of paid subscribers who are active (or even active for X hours) on two or more devices every month.” Since the Product org cannot control who comes back to the app, then Marketers must deploy messaging that’s more enticing to users than “See what’s trending.” There were 532 new shows produced in 2019. Marketers in media can no longer rely on their content catalog as the primary driver for capturing consumer attention. In the same way, a Bank cannot expect to positively impact their bottom line by sending a push notification letting you know that you paid a bill, and especially when you just did so in the f**king app!
Until organizations build muscle around customer empathy and integrate their, hopefully modern, technologies and datasets, then growing retention and customer lifetime value will remain ever-elusive.
