Life as a product marketer can be rewarding, but if you’re gonna rub shoulders with the top dogs in the industry, you need to master two fundamental product marketing skills: customer retention and cross-sell techniques.
What is customer retention?
Customer retention is when a customer continues to buy your product or use your service despite the availability of others on the market.
Companies use a range of methods to encourage buyers to stick with their company, such as loyalty cards, discounted subscriptions, and VIP programs.
Irrespective of which method they choose, their intention remains the same: they’re trying to convince the customer to remain loyal for as long as possible.
What is cross-selling?
Cross-selling is when companies identify products to accompany an initial purpose, to satisfy additional, complementary needs that the original product may not fulfill.
For example, a hairbrush could be cross-sold to a customer who initially bought a hairdryer; while the hairdryer can dry the hair, it can’t style the hair. Therefore, there’s an opportunity for the vendor to secure further custom.
Attracting new customers is considered to be more difficult than retaining existing ones. In refining your customer retention skills, you’ll protect existing clientele, while cross-selling methods create opportunities to sell more products and increase your company revenue.
We spoke with Igor Kranjcec, Product Marketing Lead at Lemax, and an expert in customer retention and capitalizing on cross-sell opportunities.
He discussed the role customer segmentation plays in helping product marketers retain their clientele, and the cross-selling process, as well as:
- How to understand market needs
- Market segmentation advice
- Recommended segmentation techniques
- How to improve sales methods
- How to maximize product sales
How to understand customer needs
Q: Heightened competition is often a common barrier to customer retention. What steps can teams proactively take to understand customer needs and introduce new innovative products to retain existing products and attract new ones?
A: “I would personally tackle this from two directions, with the first being focused on the competitive landscape and knowing what your competition does.
“This not only involves trying out their product, but it also means seeing what they're publishing on their website and social media channels, and what they're changing. Even checking their new hires can provide invaluable insights because this will often give an indication of which new direction they’re taking their product.
“You also need to collaborate well with product managers. In customer interviews, I think that's something we’re not utilizing enough.
“When I say customer interviews, I don't mean that you come and ask the customer ‘what do you want?’, or ‘what do you need?’. When you structure the question like that, customers tend to solution scope, and that isn’t something that you want.
“Instead, you should talk to them and take the time to try to discover their pain points; listen to what they’re having trouble with and develop a product with features that’ll be beneficial in helping them relieve their issues.
How does market segmentation affect customer retention?
Q: Market segmentation is commonly used to assist with targeted messaging and so forth, but how can the process help businesses retain their customers? What would be your advice to product marketers, who may be considering this method?
“Of course, there's the revenue, the company size, the monthly recurring revenue, so all of the standard segmentations that we do, and the demographical data of your customers can be classified as the baseline, but don't stop there.
“There are two things that I consider to be important, and the first is product adoption. You need to measure and segment the customers by the level of adoption of your product that they have, and especially in the software business, I think that's one of the most important things.
“And following on from that, segmentation based on trend prediction models. This segmentation is based on past behaviors of customers who’ve previously churned. With the support of data analysts and data scientists, we mapped those behaviors, and if there are triggers that are repeating, we would then segment those customers in the high propensity to churn low.
“It's a huge value for the customer success team with the high touch customers to know that their customer is in the high churn risk segmentation, then for the low touch customers, it's a good trigger for customer-based managers for marketing automation guys to know what messages to put forward to reduce the churn.
“An example of combining the product adoption and the churn models, we've managed to decrease churn by about half a percentage point a month. I know it doesn't sound a lot, but when you take into consideration that the base had 500,000, half a million users, half a percent monthly is a lot.
“So when you take it every year, it is a huge decrease. And it was only because of having the segmentation of ‘did they adopt the product?’ and ‘will they turn based on some churn prediction models?’”
How to effectively segment your target market
Q: What would you consider the most powerful form of segmentation product marketers can use to improve their understanding of customers, offer a more refined customer experience, and in theory, retain more customers?
A: “I would choose product adoption, mainly because it's something every PMM can do with collaboration with their product manager, to assess the level of adoption of their product per customer.
“Then, we’ll have low adopters and high adopters. You can make high product adopters brand ambassadors; they can be your product champions, and you can gather more information from them and make them your brand investor and your product ambassador on the market.
“Even more so, I think it's extremely important to pay attention to the other segment, and that's the ones with low adoption. It's very important to nurture them to increase product adoption because, in my experience, those with a low adoption experience a time when their boss says, ‘why are we paying for this? If we're using only 10% of the product, the product is dispensable’.
“When the time comes, when someone needs to decrease the budget, you will be the first one to leave, or the competition will come and show them a wide spectrum of solutions that they have and solve their problems. They could leave you just because they didn't know they could do the same thing with your product.
“I would make the segmentation based on product adoption when it comes to software business because it's the quickest win if you ask me.”
How to improve sales methods
Q: In terms of cross-selling, there are times when the effectiveness of cross-selling can be hindered by poor internal selling techniques, but what methods should practitioners embrace to improve the methods and general output?
A: “The obvious answer to this is knowing when the time is right to cross-sell, but it's not as easy as it sounds.
“On the one hand, you wouldn’t try to cross-sell (or upsell) a customer that has like ten tickets on the support, that has an invoice dispute, or has a very low NPS score.
“You need to train your sales team and your customer success team to recognize the point when cross-selling and upselling is needed, and how to go more into the use case-based selling because this is your customer.
“Try to make it as personal for them as possible, but to be able to do that, product, sales, and customer success teams need to communicate and establish the best methods to use, how to structure the messaging, and so on."
How to improve cross-sell techniques
Q: Before customers buy a product in the first place, they need to know A) what it is, B) core features, and C) why it'll make a difference to them. What's the best way to educate customers during the cross-sell process to maximize sales and add value to the product you’re selling?
A: “Step into their shoes. If we're talking about cross-selling, then we’re talking about an existing customer, so you should already know a lot about them.
“You need to be prepared, you need to know who they are, what they are doing. Here, the customer success and sales teams play a key role. Collaboration here with product marketing is crucial to provide the materials and messaging to push the cross-sell through.
“Customer Success is the key contact here; I think that PMMs are here to help them structure what to send when to send it, you know how to recognize the need, especially for the high touch customers when it comes for the low touch customers. I think that PMMs can help a lot with automation-based segmentation. This means you can set up different flows that will target customers at different points of their customer lifecycle.
“When again, based on the previous experience, you've realized when's the best time to send something to increase the cross-sell. So definitely try to work here as much as possible, when it comes to high touch with customer success, and with the marketing automation, when it comes to low touch customers, I would recommend building as many smart models, with data analysts and data scientists to help you through different propensity models, willingness to buy models, and also, the pricing models.
“In my career, we realized, ‘okay, if we give even a 50% discount on the highest tier we will make such a huge impact on the revenue’. But it all depends on how you segment your customers. Be the person in your team who creates the messaging that brings value to the customer at every touchpoint.”