Arriving at Trend Micro, tasked with creating a Marketing & eCommerce department for the B2B & B2C Internet Security divisions based around Online and eCommerce it became quickly apparent that there was a disjoint between senior management expectation and assumption, and the reality within the consumer market across EMEA. The belief was that the business could only be successful long-term via aggressive new customer acquisition programmes yet without the corresponding developmental work to the existing base. The software we were selling was an annual license (approx £30pa) and required repeat purchase to avoid expiration and a lapsed customer.
A retention rate of less than 10% existed amongst customers who were willing to continue to pay for the Trend Micro internet security software annually after the initial purchase, a shockingly low figure yet this was considered second in importance to ‘Filling the Funnel’ with new customers. The business would clearly fail if the flow of customers away from our business was not stymied, as without a renewal rate significantly higher the net gains from acquisition would be lost with the net loss of failed retention. Customer Lifetime Value had never been calculated and sales teams were incentivised based solely on initial sales – not annual renewals. To achieve resolution I introduced several changes to infrastructure and marketing programmes utilising internal resources and trusted suppliers.
Data needed to be utilised proactively and effectively. The tools were not available so I sourced them via our eCommerce provider Digital River to generate a model of what the true Customer Lifetime Value looked like, as well as what our true retention rate was tracking at, pulling together in real-time all available data points, metrics and KPIs into a single online report to allow for rapid action-reaction. This facilitated longevity in our analysis as well as future-proofing our reactive capabilities to campaign activity. This complex report allowed the dissemination of information by country, by product, by hour/day/week/month, to super-users like my team, but also senior management to facilitate large-scale quarterly or annual reporting activity. One simple yet highly important change that the focus on data and information quality generated was that I discovered that renewing customers were often accounted by our indirect channel as a new business sale, thus artificially inflating acquisition revenue and deflating renewals. Overnight the business model changed.
Research was lacking and a black hole in our consumer planning. No one in the company was able to answer some of the fundamental questions about our customers, from demographics, geography, proposition and values through to product feature usage. I introduced a rigorous and long-term research programme to ensure we had benchmarks of the present state, as well as qualitative and quantitative information across the product and customer range, including regular integration of information from our Customer Service team.
Flowing naturally from the data and research information came a renewed focus on proper marketing communications with a suitable message for our existing customer base. This focused now around the value-add that our software products offered, rather than an aggressive or scare-mongering tone which did not suit our brand values. The education of customers as to what features were available, how and when to use these features as well as education around the situation with the actual situation the software product addressed – viruses, malware, hacking, computer theft or loss, spyware et al – gave the customer a feeling of understanding as to why were promoting to them.
Alongside this honest communication was transparency around auto-renewing their product – the process of automatically debiting their credit card from stored information at the renewal anniversary. Our competition had a terrible time of doing this and it turned into a PR disaster but our research had shown customers were open to the idea…if dealt with honestly. I introduced a programme of advance warning and clear opt-out for any customers who had signed up for auto-renewal (what seemed like a good idea at purchase often is forgotten one year on). As a result over the long-term we had little to no customer service issues and the overall benefit from the auto-renewal campaign accounted for over 20% of our annual renewal rate.
Pricing was tested, tested and tested some more – of particular interest was a multivariate test, time-based as customer renewal approached, with the differing groups getting a mixture of static, increasing or decreasing discounts off of their renewal price. As is often the case there wasn’t a simple winner-takes-all, various pricing was popular with different customer demographics, differing days of the week, varying time-to-renew; what was learned was that smart testing rarely gives a black or white answer. But this did allow me to narrow the focus of pricing to specific bands of customers and renewal timings.
The end result of the shift in focus of the business unit to renewals was senior management buy-in to my strategy shift, and an increase in the annual customer renewal rate from single digits to peaks over 60%, with a long-term average above 40%. Other metrics from this programme I am particularly proud of include:
- 146% increase in revenue from email
- 85% email open rates
- 12:1 campaign ROI via web, email, search, trials, affiliates, partners and resellers
After four years the percentage of business for the Consumer team generated from New versus Renewing customers had shifted from 75/25% to 60/40% but with a significant overall revenue increase in both.
A true paradigm shift in the business.