Customer retention strategies for online service providers: Understanding how value perceptions have changed

Customer retention strategies for online service providers

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Online service providers have enjoyed a boom in sales this year. Consumers have either increased their consumption or been forced to try services ranging from media streaming and online subscriptions to food delivery apps.

As we gradually return to ‘normalcy’, many companies are wondering: Which services will consumers continue to subscribe to, and which will be abandoned? Will these new habits stick?

Knowing how consumers value your service today and how that perception may have shifted will be key to ensuring retention. Here we explore strategies online service providers can adopt to build customer loyalty and decrease churn.

Redefining ‘essential’ online services and the challenge of customer retention

While low introductory rates and free trials during the stay-at-home period were enough to attract new customers, the new online behaviour might not have become a habit.

The context of the original decision to sign up has changed – for example, when more entertainment options are available outside the home or when the full price charge comes into effect. Consumers are making more deliberate choices in this space and are asking: Do I still consider this service valuable?

As an individual’s immediate needs change (e.g. needs for entertainment and connection), so too does the value perception for online services.

Whether your company offers media, technology, subscription boxes, or food services, you will need to plan your next steps considering these questions:

How will the post-COVID recovery phase affect consumer perception in your industry?

• How likely is your brand to be affected by a next wave of disruption (e.g. a recession?) Which customer segments will cut costs by dropping services they no longer consider essential?

• What is the impact of changes in value perception on my product assortment, features, pricing, and/or communications strategies?

Five research approaches to identify changes in value perception

With pressure mounting to differentiate yourself online, you need to learn what is relevant to consumers or segments in your specific category today – and how that has shifted. As more consumers are facing economic hardship, this is especially important.

Here are five approaches that can help uncover changes in the value perception of your service:

1. Explore low-cost research options: Basic options include assessing the data that your company has gathered, investigating feedback received by customer service reps, and looking at your reviews to find out more about how and where consumer sentiment has changed.

2. Rerun previous research: If additional budget is available, repeating either a whole or partial study (depending on your needs) can be cost-effective. You can compare pre- and post-COVID findings to adjust your marketing strategies accordingly.

3. Employ data fusion techniques for a more comprehensive view: Combining data sources can help get richer insights than the individual sources alone can provide. For online service providers, consider combining survey data and database data for a more comprehensive view of what consumers may be willing to pay for your service.

4. Move qualitative research online: Traditional qualitative research approaches, such as focus groups and in-depth interviews, still have a place in a socially distanced world, with the added benefit that you can reach a much wider geographical area and ‘hard to reach’ consumer groups online. Other techniques, like online bulletin boards allow for virtual conversations, and smart qual solutions can be used to analyse consumer feedback videos and to unlock consumer emotions in voice messages.

5. Dial up social listening efforts: The increase in social media usage during the COVID-19 pandemic adds even more value to social listening as a research tool. What consumers are saying about your service can affect perceived value: Positive reviews can boost purchase intent as well as the willingness to pay. So, it is vital to understand how your product, brand, and the purchasing context are being discussed online.

Adapting to the new normal: Optimising online services to build brand loyalty

Once you know if and how the value perception of your services has changed, how can you adapt your offering to ensure brand loyalty and decrease churn? Consider these three interconnected strategies:

1. Optimise online features for today’s emerging consumer needs

It is crucial to understand what is changing for consumers, and to adapt specific features to those needs. Features that are more valuable in the post-COVID context can drive preference, affect how much consumers are willing to pay, and ensure repeat purchases or subscriptions. These features will also create differentiation, which is vital in today’s fiercely competitive online marketplace. Here are two examples of how you can adapt to emerging needs:

Food delivery apps: Consider how health and safety precautions are perceived by consumers who order from restaurants now. Are ‘leave at the door’ delivery options ‘must have’ or ‘nice to have’ features? What additional offers will maximise the guest check?

Media and entertainment services: Determine how you can differentiate to ensure loyalty and prevent churn. This could be through content (Spotify, for example, are investing heavily in podcasts) or by adding features such as ‘shared’ viewing.

2. Adapt online pricing and promotion strategy for sustainable growth

You may have experienced a surge in sales, but having the right pricing and promotions structure is key to driving customer retention. For example, do you know which techniques are proven to drive users to upgrade to more premium subscription plans? Or which promotion format or fee structures are best suited for food delivery apps?

Depending on your customer segments, you need to consider carefully whether you have too much promotion and/or how deep promotions need to go. We’ve seen from past crises that frequent reductions can damage long-term value, price perception, and revenue potential.

3. Leverage ‘push’ notifications and optimise messaging to drive loyalty

Shifting your messaging is one way to address changing value perceptions without changing product features. Think about optimising in-app communications. These communications can be effective, but it can also be a tricky balance to get them right.

There are countless apps to contend with, and consumers can simply silence these alerts (which is why live A/B testing is not a reliable approach for this). To ensure consumers remain in the habitual decision loop, you need to know which messages encourage loyalty and which could have the opposite effect.

Working out how, and to what extent, consumer perceptions have altered this year will guide your marketing strategies in the coming recession. How you uncover these insights will depend on your specific needs, budget, and timeline. As trusted partner to several leading online service providers around the globe, we can work with you to define the best research approach for your business question and help your brand to thrive.

By Michael Hetherington LinkedIn, APAC Director at SKIM