The Importance Of Personalization At Every Step Of The User Journey
~ Radha Tulsyan, Disney+ Hotstar
Overview: We misunderstand the concept of conversion. Conversion isn't just about hitting some statistics and does not only mean the final purchase of a product or service. Good conversion rates come from good acquisition, engagement, and retention methods, supported by segmentation, good use of features, and data analysis.
Lest to say – a consumer's journey is important. A higher conversion at each step of the user journey is imperative to business success, and more importantly, it gives you a lot of information about your consumer. All this quantifiable information can further create a foolproof communication strategy.
Now, when aiming for a good conversion at each step of the funnel, it is important:
To know where and how to put effort
Prioritize user segments that show potentially high impact and cover a majority of the user base, instead of focusing on each user segment at the same time – do the return (revenue, sales, etc.) vs. investment (cost, bandwidth/effort) analysis for each segment independently.
To maximize incrementality
We must understand what communication will work for what kind of user group (target cohorts). While the easiest way out is to communicate the same thing to all users, not all users are the same, and not all needs are the same.
To understand what works for a user group, we must identify key parameters that drive users’ next action on the platform. Let’s delve into these parameters based on the user journey stage:
1. ACQUISITION
The user journey starts at acquisition; before a consumer is acquired, we have little information about the intent or spending capacity of the user.
Here, the key parameters that can help segregate users into different cohorts are engagement metrics like
Users’ interaction with the platform,
The limit of the interaction,
Why does the extent matter? You don’t want to spend money on window shopping users since their visit frequency will be less than average.
Users’ response to off-platform communications like App Push Notifications, etc.
What does this mean? It’s important to compare responses for users who’ve browsed/viewed multiple products on the app vs those who’ve never viewed any.
Both these segments need different types of motivation to move ahead in the funnel – the first is in the ‘exploratory’ stage while the second is still ‘discovering.’ Identify the major touchpoints on the app and group users based on those.
The abovementioned are behavioral identifiers. However, you should also look for demographic and geographic info if available.
Using variables like name, native language, etc., in your communication is the cherry on the cake. A straightforward message like, “Take 20% off and purchase,” might not help. But imagine receiving something like this: “Hello Ankita, we know your eyes are set on these Lavie Handbags. Here’s an extra 10% off just for you”.
For some companies, acquisition could be a transaction/purchase, but for some, it
could be a simple account creation or registration. The latter focuses on activation via an excellent onboarding experience.
ACQUISITION → AHA MOMENT → ACTIVATION
Next, I want to talk to you about an aha moment – a moment of sudden insight or discovery, by definition – with a memory.
At Pepperfry, we gave away ₹1000 as cashback for every new registration, and for the first time, Pepperfry Credit had a 100% redemption rate. It was an incredible moment for us; users went crazy and bought products throughout the night, and we had to roll back the offer at 5 AM (just 5 hours after launch).
Aha moments are supposed to excite new users about their chosen product and brand. It’s a great tactic in the world of marketing and sales, and it worked out well for us, but remember to take these strategies with a pinch of salt.
Aha moments do not ensure sustainability.
Long-lasting strategies are not built out of one magical moment.
Acquisition is great; it essentially widens the top of the funnel, but it’s not your only source of income, engagement, or conversion. In fact, 80% users stop using the app after the first three days of use; hence, turning a newly acquired user into an engaged user is equally important.
2. ENGAGEMENT
In a generation where people get bored quickly, keeping users engaged with new and exciting communication every time is challenging. This is the stage where users may or may not purchase from you immediately, but that doesn’t mean that they lose the brand recall either.
At the least, keeping users engaged during the cool-off period between two purchases is imperative. This period could be as low as a day for some companies (brands that sell utility/functional items/services) or as high as a year for others (low-frequency purchase items). While the latter has to focus on engagement strategies, companies with high-frequency repetitive purchases cannot completely ignore the cool-off period.
How do we go about it?
As mentioned earlier, not all users can be engaged similarly, so customer segmentation is required at this stage. The most important parameter to segregate users here is the last activity on your platform/app (in days/months).
Once you have divided the user base on this key parameter (the timeline differs with the nature of the product/service), the communication needs to be designed to let the user relate with their last purchase.
(Note: Analyze campaigns and ROI to ensure your efforts go in the right direction since personalization demands effort/bandwidth.)
However, to ensure you’re communicating with the right strategy, check the objective of your engagement with the nature of your product or service.
Engage for attention: OTT platforms and gaming industries must try to maximize the time the user spends on the product.
Engage for transactions: E-commerce and food delivery platforms must lead consumers to make another transaction through recommendation engines, deep discounting or incentives, upselling or cross-selling, etc.
Engage in enhancing productivity: B2B software must track metrics like the number of paid features sold per business using the users’ last activity on the dashboard.
Here are a few engagement examples for various industries:
FURNITURE:
The cool-off period in the furniture industry can be as high as 6 months.
Given the high involvement nature of the product (meaning high on rational and emotional aspects as well as expense), users might become inactive immediately after the purchase.
However, furniture is an aspirational product, and consumers are attached to the pieces they keep at home, and that emotion is exactly what needs to be targeted here.
Since we know the product category the user purchased, engagement can look like discussing maintenance and care of those products, after-sales service, guides and tips on best living room/bedroom setups, etc.
FOOD DELIVERY:
Not everybody orders food every day, and that’s a fact.
Even Zomato and Swiggy customers have a cool-off period (a week, two weeks, or even a month).
One must go beyond selling to get inactive users back on the platform.
Engagement strategies like gamification, topical content, and moment marketing help keep consumers excited.
Copy and creatives play a pivotal role in achieving the same.
SOCIAL MEDIA/OTT:
An average user spends over 3 hours daily* on social media and around 44 minutes* on OTT platforms.
*Source: Business Standard
Here the objective would be to increase the average watch time or consumption per user.
Communication strategies like boosting trending content (reels and episodes) through push notifications, etc., in a targeted manner are beneficial here.
For instance, post-Bollywood news/reels for users who engage more with pages like Filmgyan, etc.
3. RETENTION:
Retention is challenging as well as beautiful in its own way.
Acquisition isn’t the whole answer; just filling in the top of the funnel won’t help business for long. You are filling a leaky bucket if your retention game isn’t strong. Good and effective retention strategies are required to stop users from churning to ensure a sustainable business.
As per my personal experience, retention is the most challenging step of a user journey from a business point of view. Why?
Because it’s dependent on the user’s experience in the initial stages of the journey.
Budgets are lower with heavy ROI expectations.
Keeping communication exciting becomes difficult since users are well aware of your tactics.
However, retention starts looking a great way through hurdles when the business can overcome the abovementioned problems since it guarantees long-term revenues. Retention ensures repeat purchases and delivers such good value that users become co-promoters of your product or service with the second purchase.
Therefore, retention should be the topmost growth metric for any business that aspires to be sustainable.
How do we measure retention?
Determine the recency of your product or service, also called usage interval.
Usage interval is the time gap between the first and second purchase or two subsequent purchases.
Identify one action you want your customer to take – a transaction, simple consumption, or a certain kind of engagement for some businesses.
Understand nth day retention rate basis above two pieces of information and draw the retention curve (nth-day retention curve where n = recency). Focus on shifting the curve from yellow to red (refer to the image below).
Determining recency:
Your product knowledge will give you an idea of an ideal usage interval.
For example, a beauty soap brand/product can have a recency of 20-30 days.
Check when the majority of customers (80 or 90 percentile) return.
Identifying critical events:
A critical event is one action you want your user to perform to ensure that you have created value for the user and the business and that the customer is truly retained. For e-commerce, the critical event could be as simple as a purchase. For social media apps, it could be an app visit or a new connection. For LinkedIn, it could be premium reactivation, and so on. Once you know recency and the final action you want your users to take on the platform, draw a retention curve to determine the retention rate and align your marketing efforts in shifting the curve. Always keep a target in mind based on your business goals.
How do you master retention?
EXPERIMENT. LEARN. RETAIN
Once you’ve finalized the critical event/action, you will also understand what leads a user to those critical events and identify those key events/attributes.
But what happens when you don't know your key events?
Design an A/B experiment to validate your hypotheses.
For example, suppose I believe that users who add videos to the watchlist are more likely to convert than users who do not. In that case, I will simply run an A/B experiment between these two sets and validate my hypothesis. Once validated, I will align my retention marketing efforts to get more and more users to add videos to the watchlist.
Suppose Ola Cabs notices that users who use Ola money convert quicker than users who don’t. In that case, they might just start incentivizing users to opt for Ola money so that the critical event of booking a cab is achieved faster. Multiple small experiments can be run to understand what drives your users towards the critical event.
But you cannot do such experiments with the entire base. You must understand the cohorts you need to focus on and then align your marketing efforts for those cohorts only. I am sharing my understanding of a model I used in my previous experience with an e-commerce brand.
4. RFM MODEL OF CUSTOMER SEGMENTATION:
The RFM model is one of the most popular, easy-to-use, and effective segmentation methods for companies to analyze customer behavior.
R stands for Recency, which determines the freshness of customers’ activities/purchases.
F is Frequency, which is how often a customer buys in a given period.
M stands for Monetary, a customer’s spending overall in a given period.
While frequency and monetary value impact the customer's lifetime value, recency affects retention. RFM analysis helps group users with similar purchase behavior, enabling marketers to execute personalized, relevant communication/campaigns.
How does RFM work?
It comes down to 3 simple steps:
Determine a benchmark value for each parameter (R, F, M).
Assign scores for each parameter against the benchmark value (1 being the highest score).
Once assigned, create groups/segments that are the target cohorts.
Let’s delve further into these segments:
Determine the benchmark value: I used the percentile route, where if the 20th percentile of recency is 60 days, it means 80% of users have recency. If it’s over 60 days, and the 50th percentile is ten months, 30% of users have a recency between 60 and 10 months, and the remaining 50% has a recency of over ten months. Likewise, determine the benchmark values for F and M parameters.
The lower the recency, the higher the score. Therefore, the 20% base with recency over 60 days gets an R score of 1, and so on. Likewise, assign scores for other parameters as well.
The idea is to make relevant combinations of the three scores that make logical sense for the category/business.
The snippet below shows the 5X5 matrix of RFM, but I would suggest going with a 2X2 or 3X3 matrix and not beyond that. In my experience, micro-cohorting leads to confusion and does not give quantum results to analyze.
Major segments (objective is to move users towards higher scores):
1,1,1:
Users assigned the highest scores across all parameters are the most loyal customers; they are champions and will be the co-promoters of the brand.
These users do not usually need monetary incentives to stay with the brand; they need consistent, delightful experiences. But unfortunately, they will form a minimal share of the overall user base.
A few interventions to keep these users engaged are loyalty programs, freebies on birthdays and anniversaries, early bird registrations, social media features, etc.
121, 131:
These users are not price sensitive, so to speak, and are recent buyers.
Hence, they have a high potential to buy again if targeted correctly. I call them ‘potential loyalists’.
Upselling and cross-selling are the two most important interventions for this segment.
In the case of furniture, cross-selling is done more, but in the case of FMCG products, even upselling would help.
These users can move to the champions cohort if targeted well.
112, 113, 212, 213:
The brand does not hold a high pocket share for these users, but these users are volume drivers. They can be called promising/faithful buyers.
Incentive schemes and a good discount structure can work well for this segment.
The objective could be twofold: either smartly increase their AOV or keep getting transactions from them at lower AOVs.
Choose one objective based on your business goals.
Examples - BXGY offers cross-selling through a good recommendation module.
23X,33X,32X,31X:
These are lapsed/dormant customers.
This cohort occupies most users in a business with low-frequency purchases.
When I made the RFM model in my previous experience, it was very challenging to bring these users back, mainly because they weren’t even active on the platform.
We planned and worked on a few interventions – free credits (and of high amounts) with a controlled redemption mechanism, deep discount coupons, and flash deals during peak purchase hours.
Note: There is no universal method to segment users; it depends on the nature of the business and its objectives. For a business, the lapsed base may be a minimal percentage of the overall user base and can be ignored. In that case, the focus should be shifted to driving more and higher transactions from promising and loyal buyers.
5. CONCLUSION
Let's sum this up. Turning potential customers into die-hard fans isn't just about crunching numbers. It's a whole journey, and understanding why segmentation matters is like holding the magic key to unlock its true potential.
Think of it this way – conversion isn't just about hitting some statistics. It's about having a strategy that dances with personalization and stays flexible. You can't treat every stage of the customer journey the same because, well, people aren't the same at every stage.
And it’s never about the one-size-fits-all approach. It just doesn't cut it in the fast-paced world of digital marketing. Segmentation, the real game-changer, is about tailoring your approach for different customer groups, understanding their quirks, and giving them an experience that feels like it was made just for them.
So, the big takeaway here is that this journey isn't just about getting numbers on the board. It's about getting personal. When your users feel like you get them at every step, those numbers become more than just conversions – proof that your strategy is on point.
As we sail through the ever-changing sea of digital commerce, let's keep in mind that revenue isn't the final destination; it's more like a side effect of building solid, personalized connections. Embrace segmentation as your main game plan, and watch how it transforms transactions into lasting relationships. After all, it's not just about making a sale; it's about turning customers into your biggest fans.
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