Georg Keferböck - Growth Strategist, Performance Marketer, Developer, Data Scientist and Unicorn.

Building Brands from Scratch: A Growth Marketer's Approach to Retention and Referral

Growth marketing often gets mistaken as just being about paid acquisition. But let me tell you, real sustainable growth starts at the crossroads where product development, analytics, and customer experience meet — and that happens well before you even think about launching your first advertisement. For startups and businesses that are self-funded, it’s all about creating brands that can flourish organically, without being solely reliant on hefty media spending.

One of the most potent and budget-friendly tools available to growth marketers is found in the retention and referral stages of the ARGGG framework, which stands for Acquisition, Retention, Growth, Gain, and Go-viral. This is basically a modern take on the classic AARRR pirate framework we’ve been using in the growth marketing world.

Retention: Keeping Users Engaged and Activated

So, what exactly is retention? Well, it refers to how well users come back after their first experience, whether that's a visit to your site or a purchase. It’s both a product metric and a marketing metric rolled into one. Sustainable retention means that customers keep coming back because they find real value in what you offer, and it's up to the marketing team to truly understand, communicate, and amplify that value.

Measuring Retention

Cohort Analysis: This approach helps you to keep tabs on groups of users and their behaviours over time, starting from the moment they first engaged with your product. For instance, you can plot out retention rates on Day 0, Day 7, and Day 30 to really see where users might be dropping off and identify patterns in their behaviour.
Rolling Retention: Rather than just checking if users come back on a specific day, this measures whether they return at any point after a certain timeframe. For example, you may ask, "Are users still active 30 days later?" This gives a broader view of long-term engagement.
Return Frequency: This could vary depending on what type of product you’re offering. If it’s a transactional product, you’d look at how many repeat purchases a customer makes. For mobile apps, it might be the number of times a user opens the app within a week, which can give insights into engagement.
Customer Lifetime Value (LTV): This metric combines the average order value with retention rates and gross margins to give you a snapshot of how sticky your users are. Understanding LTV helps you make informed decisions about how much to invest in acquiring new customers based on their long-term value.
Survival Analysis: This is a more sophisticated statistical technique that models the time until a user churns. This method can deal with data that doesn’t fit neatly into typical analyses, allowing you to get a clearer picture of user behaviour.

Driving Retention on a Budget

Onboarding & First Value: The onboarding process is crucial; it’s about mapping out the quickest route to that "aha moment" for users. You want to eliminate any unnecessary friction and ensure that users get immediate utility from your product. For example, if you're running an app, guide users through the essential features right from the get-go.
Email & Push Workflows: It’s vital to segment users based on their behaviour. For example, if someone browsed three products but didn’t end up purchasing anything, they might need a gentle nudge through a targeted email showcasing what they viewed. On the other hand, if someone made a purchase but hasn’t returned in 14 days, sending them a loyalty reminder with a special offer might entice them back.
Lifecycle Content: Tailoring content to the user’s journey plays a big role. New buyers could receive emails with tips on how to get the most out of their purchase, while repeat customers who have made multiple purchases may appreciate getting sneak peeks of new products or exclusive bundles to boost their engagement.
Gamification: Incorporate point systems, badges, or progress bars into your product. These elements can significantly boost user engagement, especially for lifestyle brands or applications. For instance, fitness apps often use progress tracking to motivate users to reach their goals.

Referral: Turning Customers into Advocates

Now, when we talk about referrals, it’s not just about saying “share this link and get 10% off.” It’s really about crafting memorable experiences that make your customers excited to share what you do and creating a structured way to encourage that sharing.

How to Measure Referrals

Referral Rate: This metric helps you see what percentage of your customers are referring others. To calculate it, simply divide the number of referrals by the total number of users. This gives you a clear picture of how well your referral system is working.
K-Factor: Also known as the viral coefficient, the K-Factor tells you how many new customers each existing customer brings in. So, if each customer brings in an average of 1.1 new users, your product is becoming self-sustaining, which is the dream for any business model.
Attribution Models: Use various tools like UTMs, referral codes, partner IDs, and first-touch logic to clearly trace the impact of referrals on your growth. This insight allows you to see which channels are driving the most referrals and where to focus your efforts.
Customer Surveys: Don't shy away from asking your customers how they heard about you. This feedback helps you understand the effectiveness of your referral strategies and allows you to cross-check their responses with digital tracking to get a complete picture.
Net Promoter Score (NPS): While this isn’t strictly a referral metric, a high NPS suggests that customers are likely to refer others. If customers feel positively about your brand, they're more inclined to spread the word.

Generating High-Quality Referrals

To be effective, your referral process must be easy, relevant, and rewarding:

On-Site Sharing Tools: Make it easy for customers to share by adding social and messaging buttons on pages where they complete purchases or within their user dashboards. You could also prompt sharing after they leave a review or achieve a milestone, making it a natural follow-up.
Double-Sided Rewards: This is a strategy where both the referrer and their friend receive a benefit, like "You get £10 and they get £10." This approach has been proven to outperform single-sided rewards, making everyone feel like they’ve gained something.
Contextual Calls to Action (CTAs): Timing is critical. After a customer reaches a specific goal, such as completing onboarding or hitting a certain milestone, that’s the perfect moment to prompt them to share their experience with a friend.

Partner-Based Referral Models

Some of the most successful referral systems are built around ecosystem partnerships:

Cross-App Discounts: Think about a car care app teaming up with a detailing service. Users who book through the app could receive a discount on a branded cleaning kit, creating a win-win situation.
Industry Synergies: For example, a yoga studio collaborating with a health food store can be beneficial. They can share traffic, offer mutual discounts, and even co-host events to attract more customers while building a community.
Local Authority Boosts: Partnering with well-respected local bloggers or content creators can enhance your reach as they can introduce your product to an audience that trusts their recommendations.
API-Integrated Referrals: If you’re in the SaaS space, consider allowing integrations that automatically broadcast affiliate or co-branded links. This can make spreading the word about your service incredibly seamless and efficient.

Statistical Concepts

Poisson Distribution: This can be helpful when trying to model the number of referrals each user might generate over a specific timeframe, allowing you to predict potential growth accurately.
Bayesian Updating: This technique allows you to continuously adjust your expectations about user behaviour based on new incoming data. It helps in refining your strategies as you gather more insights.
Survivorship Bias Adjustments: It's essential to ensure that you're not merely focusing on vocal or high-usage users when measuring word of mouth. A broader approach will give you more comprehensive insights into the overall customer experience.

Word of Mouth: The Dark Matter of Growth

Word of mouth, or WOM, can be notoriously tricky to measure, yet it’s possible:

Branded Search Lift: One way to gauge the impact of WOM is by tracking any increase in searches for your brand name. If more people are searching for you, it usually indicates positive word of mouth is at play.
Social Listening: Keep a close eye on brand mentions, hashtags, sentiment, and overall volume over time. Tools that track social media can give you valuable insights into how your brand is perceived in the wider conversation.
Engagement Metrics: Look out for changes in engagement metrics on your social media or website following a positive WOM event, such as a product launch or customer success story going viral. Increased likes, shares, or comments can all be indicators of effective WOM.

By focusing on retention and referral strategies, you can create a self-reinforcing cycle that not only brings in new customers but also keeps them coming back for more. Understanding your users and how they interact with your brand is key to turning them into loyal advocates who willingly promote your business to others.