John Warrillow is the founder of five companies, a regular contributor to Inc.com and The Globe and Mail, and the author of Built To Sell: Creating A Business That Can Thrive Without You, which was recognized by both Fortune and Inc magazines as one of the best books of 2011. Called one of the “Top Ten Business-To-Business Marketers” in the United States by B2B Marketing, John has been assessing businesses for over 15 years, sharing his expertise in areas ranging from entrepreneurship, sellability, and the benefits of subscription based marketing to build–and sustain–success. In this recent column for Inc., John stresses the importance of the first three months when it comes to keeping customers:
The first 90 days of any new relationship are critical:
- A president has about three months to inspire the electorate and gain the political capital he needs to govern.
- A young team prospect has but a few months to impress his coach before being sent down to the minors.
- A new CEO has 90 days to learn her job before the rank and file start expecting tangible leadership.
The Onboarding Window: The First 90 Days
For a young company, the first 90 days of a customer relationship are equally important. In doing the research for my upcoming book on the subscription business model, I found that getting a customer to effectively start using your product in the first 90 days has led to an increase in lifetime value of up to 300 percent for some companies.
Take a look at marketing software provider Constant Contact, which used to struggle with the first 90 days of a new customer relationship. In the old days, Constant Contact took a “who, what, when” approach to onboarding new customers. Who stood for who a customer wanted to send an email campaign to; what stood for what the customer wanted to send; and when described the timing of the campaign.
After users signed up for its service, Constant Contact would ask customers to upload their email database (the who in the three-step onboarding process). This required the new user to upload a customer list–which is the trickiest part of the onboarding experience. It required the customer to leave Constant Contact’s site and struggle with how to export a contact list–often from a jury-rigged database kept in Excel or Outlook.
The process was awkward, and many new customers stopped using Constant Contact because they hit a barrier before they had a chance to fall in love with the Constant Contact software.
What, Who, When
Wanting to stem new customer churn, Constant Contact changed its on boarding to focus first on the what. Immediately after signing up, new users were encouraged to create their first email campaign. Suddenly customers were seeing their campaign come to life in front of their eyes. Constant Contact offered customers a library of stock images that looked more beautiful than anything a business owner had used in the past. Customers could see firsthand how professional their company was going to look.
Only after the customer had completed the what stage and earned the emotional reward of seeing its first campaign come to life, did Constant Contact switch to the who part of creating a campaign. The difference was, by this point, Constant Contact had enough relationship equity with the customer to get it over the hump of uploading its database.
This minor reordering of the onboarding flow led to a dramatic reduction in customer churn–which is the death knell of any subscription business.
If you’re looking to design your own customer onboarding experience, I’d encourage you to get to know Nir Eyal, the author of Hooked: How to Build Habit-forming Products. In his book, Eyal lays out his formula for creating habits; he calls it the Hooked Model. It has four components that create an infinite loop of habit-forming behavior:
1. TriggerCustomers first start using your product or service on the basis of a trigger. It could be an external trigger (e.g., a Buy Now button on your website) or an internal trigger. Internal triggers are caused by the user wanting to change an emotional state (e.g., a lonely person checking their Facebook feed to feel more connected).
In Constant Contact’s case, customers often sign up because they’re having a slow day of sales, a factor that can lead to a feeling of despair, in which case the idea of software for winning new customers is highly attractive.
Next, the user takes an action, which is the simplest behavior a customer can take in anticipation of a future reward. For a lot of products, this means the customer either signs in or signs up.
The next stage of the Hooked Model is the reward phase, where the user gets an emotional benefit from using the product. Think of the bump in mood you get when you check your Facebook feed to find out an old friend has commented on your latest post.
In Constant Contact’s case, the reward for small companies is seeing how professional they can look using its design templates and resources.
The final step of the Hooked Model is the investment phase, where your use of the product will lead to a better experience in the future. You give Homeland a five-star rating on Netflix, because you want Netflix to suggest more series just like it.
In Constant Contact’s case, customers upload their customer databases in anticipation of the reward of more sales in the future.
The Hooked Model is an infinite loop, meaning the investment stage leads to another trigger that starts the cycle all over again.
And if you can get your customers hooked early, the chances they’ll stay for the long term grow dramatically.