The 10 Tenets for Re-engineering Retention

Published November 20, 2024

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Writings – 1

I’ve written extensively about the need for brands and marketers to shift their focus from growth at all costs to sustainable, profitable growth. This transformation requires a fundamental pivot from acquisition and reacquisition to prioritising retention. However, achieving this transition demands more than traditional retention marketing; it calls for a complete re-engineering of retention strategies. This approach is also the secret for a brand to evolve from being profitless (generating no profits or diminished profits) to becoming a profipoly (profits monopoly). In this series, I will explore the rationale behind this shift and present a playbook built on 10 key tenets for re-engineering retention to construct a profipoly.

I will begin with excerpts from some recent essays.

Profitless to Profipoly: A CEO-CMO Dialogue on Marketing’s New Direction: “The reason so many businesses rely heavily on adtech spending is because current retention marketing efforts are simply ineffective. It’s not easy to get existing customers to spend more, so the default solution becomes constant new customer acquisition. And adtech platforms make it incredibly simple: hire an agency, set a cost-per-click budget, and open the spending tap… Welcome to the world of Retention Re-engineering, where we transform random, one-off revenues into predictable, recurring streams, and pave the way for exponential, forever profitable growth. This is how we build a true profipoly. Now, let’s begin by reframing the challenges you face with retention. There are three core issues: first, a lack of deep customer understanding, which limits effective personalisation; second, the absence of hotlines, leading to what I call “attention recession”; and third, the underutilisation of your martech platforms, which prevents you from unlocking their full potential for driving retention…Three breakthroughs are about to transform the way you approach retention: AI Twins, Channels 2.0, and Kaizen Services. Together, they form the foundation of what I call “Retention Re-engineering.”

The Retention Revolution: A Nayi Disha for Marketing: “A new approach is needed for customer relationships. I call it “retention re-engineering” – which is much more than the lip service often paid to “retention marketing.” Retention Re-engineering is built on three principles: multi-maximise the LTV of every customer, strive for near-zero CAC, implement Velvet Rope Marketing for the Best Customers [VRM is about creating differentiated experiences based on exclusivity, ease, and access for the most valuable customers]… The magic formula for success and creating a profipoly is elegantly simple: (Lo CAC + Hi LTV)n. With every additional data point from customers, the platform becomes stronger. The AI layer is fine-tuned to bring a new level of customer understanding, personalisation, and adtech and martech efficiency. Enhanced RoI will result in increased revenues and profits, generating free cash flows to invest in innovation and new products. The Profipoly Playbook is the best moat a business can construct: by draining the oxygen of profits from slower competitors, agile brands can emerge as the dominant players in their respective markets.”

Retention Re-engineering: Random to Recurring Revenues: “Retention and growth of existing customers should be the top priorities for modern marketers. However, over the past decade, the focus has shifted disproportionately towards new customer acquisition and reacquisition of lapsed customers. This shift has led to an explosion in marketing budgets, driven by relentless bidding wars on adtech platforms. Today, adtech (customer acquisition) spending accounts for over 80% of marketing budgets, with a meagre 10% allocated to martech (customer engagement) and the remaining 10% to branding… Five groundbreaking innovations promise to revolutionise retention. These innovations go beyond traditional marketing; they will fundamentally re-engineer how marketers approach and implement retention strategies, and break the barriers between brands and their customers. [These are: ] Agentic AI and the Co-Marketer, Digital Twins for Segments and Individuals, AI-Powered Large Customer Models, Epps (Email Apps) and ActionAds, and Bundled Kaizen Services…This next-generation martech, combined with innovative email strategies and advanced services, will equip marketers with the tools to drastically reduce AdWaste and embark on a Profipoly Quest – achieving exponential forever profitable growth. This will mark the most significant shift in marketing since the advent of adtech. Retention marketing – retention re-engineering – will finally claim its rightful place at the forefront of marketing strategies.”

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Writings – 2

AI Twins: The Future of Marketing Intelligence: “AI Twins in marketing, particularly Segment Twins, offer a unique advantage by synthesising data from various sources, including customer data platforms, marketing automation tools, and ad platforms. They analyse behavioural patterns, engagement metrics, and demographic details from major platforms like Google, Meta, and TikTok, effectively bridging the gap between martech and adtech insights. This comprehensive view of customer segments enables marketers to develop highly targeted strategies and personalised experiences. The true game-changer lies in the conversational interface of AI Twins. Marketers can directly interact with these digital entities, asking questions, testing hypotheses, and gaining deeper insights into customer mindsets. This level of interaction facilitates a degree of customisation and personalisation previously unattainable in marketing strategies.”

New Intelligent Interaction Interfaces: Websites and Apps to Agents and Epps: “Brands struggle to drive engagement, conversion, and retention (what I call “EnCoRe”). This leads to increased spending on adtech platforms to reach their own customers via retargeting. Every dollar spent on reacquisition reduces the brand’s bottom line, enriching adtech platforms, which have become “profipolies” (profit monopolies). A transformation is on the horizon. The balance of power is shifting from clutter to clean, from adtechs to brands, and from acquisition to retention. New interaction interfaces, such as email apps (Epps) and AI agents, will revolutionise our daily lives and change the way brands connect with their customers.”

Commerce Metaverse: Shaping Marketing’s Future with Agentic AI and Digital Twins: “The Age of Agentic AI is dawning, bringing these new interactions to life. As the Internet of Things connects physical devices, the Interaction of Twins will create a dynamic ecosystem of virtual entities, revolutionising how businesses understand and engage with their customers. This new paradigm promises unprecedented levels of personalisation and predictive capability in marketing and customer relationships, creating for “Wow” moments and experiences.”

Marketing’s AI Triad: Large Customer Model, Digital Twins, Co-Marketer: “Digital marketing to maximise customer LTV (lifetime value) typically has three primary components: zero- and first-party data, segments and cohorts, and campaigns driven by martech platforms. There are other elements also: push channels to send messages, analytics to help personalise recommendations, and in the case of eCommerce companies, product catalogs. But at the core, it is about data, segments, and multi-channel campaigns. The new world of agentic AI will transform all the three: customer data will be subsumed in a marketing LLM (what I call a “Large Customer Model”), segments will be represented by Digital Twins, and journey orchestration and campaign management done by marketing teams will be coordinated by a Co-Marketer. This new AI-powered triad will make marketing more efficient, helping businesses in their Profipoly Quest by maximising LTV for every customer and reducing CAC (customer acquisition cost). This will be driven primarily by Agentic AI’s ability to use data to hyper-personalise conversations and anticipate intent, and then use Channels 2.0 (powered by Email’s triad of AMPs, Epps, and Ads) to influence actions by creating hotlines to solve the attention recession problem. In doing so, marketers will finally be able to address the three big profit killers: poor data, funnel friction, and marketing waste. Customer retention and development will take precedence over constant new acquisition. This will help businesses create a flywheel of exponential forever profitable growth.”

Martech’s 10+1 Foundations in the AI Age: “The golden age of Martech is approaching. For the first time in two decades, the focus is shifting from uncontrolled spending on acquisition and reacquisition to retention and growth. To capitalise on this shift, martech companies must reinvent themselves as AI-first entities. The prize is substantial: $250 billion of annual AdWaste, far exceeding the current market size for martech. Although the transformation will be challenging, a glorious and winning future awaits those who can a(i)dapt.”

The Profipoly Quest: “Change is on the horizon for marketing. The rise of digital in the past two decades led to the rapid growth of companies like Google and Meta (formerly, Facebook) and created trillions of dollars in wealth for their shareholders on the back of advertising spending which is now close to $500 billion annually…Half of that spend is wasted on wrong acquisition and reacquisition. This spending costs digital businesses heavily because it reduces their profitability. The belief until now has been that they have little or no choice: their past, present and future customers are online, and they need to go to where their attention is. Breakthroughs in tech and thinking can become the harbingers of change and transform profitability for digital businesses plagued by high CAC (customer acquisition costs) and low CLV (customer lifetime value). The profitless age in digital will give way to the profipoly (profits monopoly) era, where businesses for the first time can dream of exponential forever profitable growth. To bring this new world to life, businesses and marketers will have to change… New ideas and innovations are emerging, offering businesses an opportunity to shift their focus. This new paradigm can help a digital business move not just from being profitless to profitable, but also lay the foundation for building a profipoly.”

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Themes

There have been a few recurring themes across my writings.

Shift from Growth to Profitable Growth: Emphasising a shift from pursuing growth at all costs to achieving sustainable, profitable growth. This requires a fundamental pivot from acquisition and reacquisition to focusing on customer retention.

Retention Re-engineering: Traditional retention marketing is insufficient. A complete re-engineering of retention strategies is needed to transform random, one-off revenues into predictable, recurring streams. This shift is crucial for businesses aiming to transition from being profitless to building a “profipoly” (profits monopoly).

Multi-Maximisation of LTV and Near-Zero CAC: One of the core principles of retention re-engineering is maximising customer lifetime value (LTV) while striving for near-zero customer acquisition costs (CAC). This approach increases profitability by reducing dependence on high-cost adtech platforms.

The Future of Martech in the AI Age: The AI-first martech landscape is transforming, offering opportunities to eliminate inefficiencies like AdWaste and focus on retention-driven growth. Martech companies need to adapt to this new AI-powered environment to capitalise on the emerging $250 billion opportunity.

AI-Powered Personalisation and Efficiency: AI Twins and Agentic AI are central to re-engineering retention by enabling hyper-personalization and predictive capabilities. These tools allow marketers to anticipate customer needs, automate personalised interactions, and make data-driven decisions that enhance customer loyalty and lifetime value.

Channels 2.0 and New Interaction Interfaces: Channels like AMP for Email, Epps (email apps), and AI agents represent the next evolution in customer communication. These Channels 2.0 create seamless, interactive customer experiences that reduce the need for reacquisition spending, turning email and other touchpoints into more than just push channels.

Velvet Rope Marketing (VRM): Implementing Velvet Rope Marketing for Best Customers involves creating exclusive, personalised experiences for high-value customers, ensuring their loyalty and maximising their LTV. This aligns with the idea of forming a dedicated Strategic Business Unit (SBU) for top-tier customers​.

Kaizen Services and Progency Model: Continuous improvement through AI-powered services is key to retaining customers. The concept of Kaizen Services involves evolving from static software to a service-based partnership, where marketing vendors act as ongoing collaborators focused on retention and profit growth.

The Profipoly Quest: The overarching goal of these strategies is to help businesses transition from a profitless state to a profipoly. By reducing AdWaste, improving retention, and maximising customer value, businesses can build a profits monopoly, leading to exponential forever profitable growth.

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I will distil these into 10 tenets. Here’s an interesting backstory about the word “tenet: “[It] originates from Latin, where it is derived from the verb tenere, meaning “to hold” or “to keep.” In Latin, tenet translates to “he holds” or “he maintains,” reflecting the idea of something firmly believed or upheld. The term began to appear in English in the early 1600s and was used to refer to a principle, belief, or doctrine that is held by a group or individual. It typically denotes a core or fundamental belief that serves as a guiding principle in various fields, including religion, philosophy, and other systems of thought. Today, “tenet” retains this meaning and is commonly used to refer to the key beliefs or principles that underpin a particular ideology or practice.”

My hope is that these tenets will ignite a modern marketing revolution – one that shifts the focus to existing customers and retention, disrupting the last two decades of relentless spending on new customer acquisition and reacquiring churned customers as if they were new.

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The List

Creating lists is never easy; the challenge lies in narrowing down from abundance. Yet, lists have an undeniable allure. They distil a complex world into something concise and manageable. In our information-saturated age, lists serve as cognitive shortcuts, offering clarity amidst chaos. They promise order and structure, a semblance of control over vast and often overwhelming topics. A good list should be seen not as the end of understanding, but as a beginning – a framework for deeper exploration and discussion.

The 10 tenets for re-engineering retention offer a strategic compass for marketers navigating the critical shift from a profitless state to becoming a profipoly. Each tenet is not merely a principle, but a portal to profound insights, providing a scaffold for reimagining customer relationships and propelling business growth in the digital era. Collectively, these tenets have the potential to catalyse the most significant paradigm shift in marketing since the advent of adtech with the Internet’s rise.

Adtech has burgeoned into a $670 billion behemoth, growing 10% annually, and now commanding close to 70% of global media ad spending. Beneath this veneer of growth, however, lies a disturbing reality: half of this spending – over $300 billion annually – is AdWaste, squandered on wrong and low-value acquisition along with costly reacquisition efforts. These are funds that could have significantly bolstered brand profits and fostered genuine customer relationships.

This underscores the critical importance of re-engineering retention – it promises to rebalance the power dynamic, shifting it from BigTech intermediaries back to brands and customers. Through this shift, brands can redirect their resources towards forging stronger, direct connections with customers – investing in AI-driven personalisation, building better hotlines, and, crucially, developing superior products.

The transition from adtech to martech, and from acquisition to retention, harbours the potential to disrupt entire industries, paralleling the transformative promise of AI. While no single technology will drive this change in isolation, the collective impact of innovations will fuel the re-engineering of retention. The productive redeployment of hundreds of billions of dollars from AdWaste to brand growth and customer satisfaction could be truly disruptive, reshaping not just the marketing landscape, but the broader business world for the better.

Here is my list of the 10 tenets for re-engineering retention:

  1. Measure and Minimise AdWaste: Implement systems to track and progressively reduce spending on misguided acquisition and repeated reacquisition, redirecting those funds to retention and customer development efforts.
  2. Forge a Unified Foundation: Build a robust base with an integrated tech stack (Unistack) and seamlessly connected channels (Unichannel).
  3. Harness the Large Customer Model: Leverage a comprehensive data ecosystem to centralise insights across martech and adtech, driving more informed decision-making.
  4. Deploy AI-Powered Co-Marketer: Augment human creativity with AI assistants to orchestrate personalised campaigns and adaptive customer journeys at scale.
  5. Create AI Twins for Hyper-Personalisation: Develop AI-driven customer personas to deliver bespoke experiences for each segment and eventually every customer.
  6. Revolutionise Customer Engagement Touchpoints: Transform search into an AI-powered “omnibar” for product discovery and chat-based interactions. Upgrade push channels with interactive Email Apps (Epps) and rich messaging platforms (WhatsApp, RCS) to enable frictionless conversions, streamlining the customer journey from engagement to purchase.
  7. Implement Velvet Rope Marketing: Craft a separate business unit to deliver exclusive experiences and dedicated services for the most valuable customers.
  8. Partner with a Kaizen Progency: Foster continuous improvement through AI-driven services, ensuring the software platforms evolve in tandem with customer needs.
  9. Establish Earned Growth as the North Star Metric: Use a new metric which combines revenue retention and organic referrals to measure true business health.
  10. Redefine the CMO as the Chief Profits Officer: Elevate the CMO role to spearhead profitability and lead the Profipoly Quest, driving the journey towards exponential forever profitable growth.

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References

I have written many essays discussing the 10 tenets in detail. Below are some references for further exploration of each tenet.

Measure and Minimise AdWaste

Forge a Unified Foundation

Harness the Large Customer Model

Deploy AI-Powered Co-Marketer

Create AI Twins for Hyper-Personalisation

Revolutionise Customer Engagement Touchpoints

Implement Velvet Rope Marketing

Partner with a Kaizen Progency

Establish Earned Growth as the North Star Metric

Redefine the CMO as the Chief Profits Officer

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Memo from CMO to CEO

I asked Claude to write a memo from the CMO to the CEO for embarking on a shift in company direction.

MEMO

To: [CEO Name]
From: [CMO Name]
Subject: Strategic Shift: From Profitless to Profipoly – A New Era in Marketing

Dear [CEO Name],

It has been a month since you asked me to lead marketing and re-evaluate our direction. In this time, I’ve conducted a comprehensive analysis of our current strategies and market position. What I’ve uncovered is both concerning and filled with opportunity.

We stand at a pivotal moment in our company’s history, facing a chance to redefine not just our marketing strategy, but our entire business model. The digital marketing landscape, dominated by adtech giants, has led us into an unsustainable cycle of wasteful spending and diminishing returns. I propose a transformative shift in our approach – from chasing growth at all costs to pursuing sustainable, profitable growth. This memo outlines our potential journey from being profitless to becoming a profipoly.

Current Situation:

  • Our CAC is rising faster than revenue
  • Approximately half of our marketing spend is wasted on misguided acquisition and reacquisition
  • Our company’s profitability is being eroded by the combination of rising CAC and stagnant LTV

Proposed Strategy: I recommend a complete re-engineering of our retention strategies, built on 10 key tenets:

  1. Measure and Minimise AdWaste
  2. Forge a Unified Foundation
  3. Harness the Large Customer Model
  4. Deploy AI-Powered Co-Marketer
  5. Create AI Twins for Hyper-Personalisation
  6. Revolutionise Customer Engagement Touchpoints
  7. Implement Velvet Rope Marketing
  8. Partner with a Kaizen Progency
  9. Establish Earned Growth as the North Star Metric
  10. Redefine the CMO as the Chief Profits Officer

Expected Outcomes:

  • Significant reduction in AdWaste, potentially saving significant sums in marketing spend
  • Increase in Customer Lifetime Value through improved retention and engagement
  • Shift from random, one-off revenues to predictable, recurring streams
  • Greater profits – enabling increased investment in product innovation, AI, and enhanced customer experiences
  • Potential for exponential, forever profitable growth – the hallmark of a profipoly

Next Steps:

  1. Conduct a comprehensive audit of our current marketing spend and AdWaste
  2. Develop a detailed implementation plan for each of the 10 tenets
  3. Create a cross-functional team to lead this transformation
  4. Set clear KPIs to measure progress, with Earned Growth as our North Star metric
  5. Schedule quarterly management reviews to ensure alignment and progress

This shift represents more than a change in tactics; it’s a fundamental reimagining of our approach to customer relationships and business growth. As CEO, your leadership is crucial in driving this change across the organisation.

I recommend we convene a strategy foundry with key stakeholders to discuss this proposal in depth and chart our course forward. This is our opportunity to lead our industry into a new era of marketing effectiveness and business profitability.

Respectfully,

[CMO Name]
Chief Marketing Officer

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.