The Retention Revolution: A Nayi Disha for Marketing

Published October 29-November 4, 2024

1

New Direction

In 2017, I launched Nayi Disha (‘new direction’) with a vision for a free and prosperous India. The message was clear: “The primary reason for the failure to produce wealth in India is incompetent governance, myopic leadership, and bad policies. It is time we – all of us – took up the challenge and changed India’s direction with a new model of governance and politics.” Alongside this, I published a manifesto that analysed why India remains impoverished and what was needed to make prosperity a reality for all Indians.

The ‘Nayi Disha’ need came into sharp focus when a CMO at an eCommerce company confided to me recently, “Do you know how much we spend on Google and Meta each month? 100 crore ($12 million). And our spend on martech? Just 5% of that. The same goes for every one of my competitors. It’s an arms race, and we’re all losing. How do I break this cycle without jeopardising business growth?” This conversation underscored the dilemma marketers face: the relentless chase for growth at any cost versus the imperative of maintaining profitability. In the frenzy to acquire new customers, the retention of existing ones often becomes an afterthought. As I’ve written, marketers have essentially become collection agents for BigAdTech — companies like Google, Meta, and their counterparts.

Reflecting on this and similar discussions, it became clear that a new direction for marketing is necessary. Excessive funds are being poured into acquiring and reacquiring customers, while retention is neglected. This imbalance is detrimental to brand profits and customer experience. Despite writing about these issues for the past few years, I’ve observed little change in industry practices or spending ratios.

Marketing needs a Nayi Disha moment – a movement towards a fundamental shift in priorities. Brands must pivot from acquisition to retention, from “one and done” to multi-monetisation, from focusing on new customers to nurturing existing ones, from profit killers to profit creators, from high Customer Acquisition Costs (CAC) to high Lifetime Value (LTV), from AdWaste to brand profits, from being profitless to building a profipoly (profits monopoly).

Consider the potential impact: by 2025, half of the projected $700 billion annual digital advertising spend will be wasted. That’s $350 billion – and climbing – every year that brands could reallocate to customer retention, boosting profits, and sparking innovation. This shift could transfer trillions of dollars in value from BigTech to brands – a seismic change in the business landscape. While no single company or individual can drive this change alone, raising awareness of alternatives and sharing success stories can help make this new future a reality.

In the Nayi Disha manifesto, I wrote: “People create wealth when they have the freedom to produce what they are capable of and trade in free markets. But Indian government policies coerce people and deny them economic freedom, thus ensuring poverty. Only those nations which enjoyed the benefits of free trade, and in which individual rights were protected by law became wealthy. If Indians have to become prosperous, India must become free. For India to become free, Indians must demand freedom from government control. This is Nayi Disha’s objective… In the past 70 years, India’s rulers have become rich, but not its people. It is time to change that.”

A similar narrative applies to businesses, both large and small. Over the past decade, BigTech has grown wealthy, but brands have not. For businesses to thrive, they must break free from the obsession with new customer acquisition and turn their attention to existing customers. They need to reimagine customer engagement, re-engineer retention strategies, and reset their vision toward becoming a profipoly. What every business needs now is a Nayi Disha for marketing. Fortunately, the tools to make this shift are within reach.

2

Wake-Up Calls

Imagine every CEO receiving a memo like this:

Dear CEO,

Your profits are declining, and here’s why: your marketing spend is out of control. It’s the single biggest profit killer in your company. Half of your digital budget is wasted on low-value acquisition and reacquisition of existing customers – AdWaste. Meanwhile, you’re dedicating only a fraction of your resources to the most crucial task: delighting and retaining your existing customers, turning them into repeat buyers, and encouraging them to bring their family and friends.

Your marketing strategy needs a new direction – a Nayi Disha. Done right, this shift can not only boost your profits but also lay the groundwork for exponential, sustainable growth – a profipoly.

If your CMO isn’t already thinking along these lines, it’s time to either change their mindset or change the person. Otherwise, you’ll remain trapped in a vicious cycle where your marketing spend grows faster than your topline and profits.

What will you do?

A Well-Wisher.

Also imagine every CMO simultaneously receiving a memo like this:

Dear CMO,

You’ve become the roadblock to your company’s profit growth. Your digital spending is out of control. While you may achieve short-term gains, you know this approach isn’t sustainable. So, why continue down this path? Is it because you’re confident that when questioned, you can simply leap to another CMO position that’s waiting?

But there’s another option – if you’re interested. Stay where you are and address the issue (the one you and your predecessors have created). You have the opportunity to become a change champion – a profit creator rather than a profit killer. By transforming yourself into the ‘Chief Profits Officer’ of your company, you can position yourself as a strong candidate for the next CEO role.

What path will you choose? A new job for yourself, or a Nayi Disha for your marketing and company?

A Well-Wisher.

**

The first steps toward change occur when key players recognise there’s a problem. It’s only when the CEO and CMO jointly acknowledge that the current approach is unsustainable and a new direction is needed that real opportunities emerge. It’s easy to maintain the status quo: CEOs can attempt to cut costs in other areas, and CMOs can keep hitting their weekly targets with adtech spending. These are Pyrrhic victories, keeping the wheels turning but not driving true progress. The blame is often shifted to external factors – macroeconomic uncertainty, market slowdowns, reduced customer spending. And so, the cycle continues.

But once the CEO and CMO wake up to the reality, change can begin. This is where a magical new world awaits. Breakthrough technologies and innovative ideas are already within reach. From Agentic AI to Channels 2.0, from AI Twins to AMP and Epps, from Co-Marketer to ActionAds, from Large Customer Models to Kaizen Services – a Nayi Disha for marketing can truly come to life.

3

Leaky Bucket

Marketing today is riddled with challenges – AdWaste, funnel frictions, poor data – but they all boil down to one core issue: a leaky bucket, or perhaps more accurately, a revolving door. Customers come, most leave. Then they are lured back through ad spend or discounts, only to depart once more, triggering yet another cycle of reacquisition. This constant churn has become the norm, with marketers accepting the leaky bucket as an inevitable reality, convinced either that there’s no solution or that fixing it would be too complex and cumbersome.

But this doesn’t have to be the case. The leaky bucket metaphor perfectly captures the inefficiencies that plague modern marketing. Imagine the resources poured into acquiring new customers — only to watch them slip away, forcing marketers to spend even more to bring them back. This cycle is not only costly but unsustainable in the long term. The true cost of a leaky bucket isn’t just in wasted ad spend; it’s in missed opportunities for deeper customer relationships, brand loyalty, and exponential growth.

Fixing the leaky bucket requires a shift in mindset – a move away from short-term tactics and toward long-term strategies that prioritise customer retention and engagement. Instead of constantly chasing new customers, marketers need to focus on keeping the ones they already have, turning them into loyal advocates who return time and again, and who bring others along with them.

This is where innovation comes in. New technologies can help plug the leaks by creating more relevant and engaging experiences for customers. But it’s not just about technology; it’s about a fundamental change in how we approach marketing. It’s about building trust, delivering consistent value, and fostering genuine connections with customers.

The time has come to abandon the revolving door and instead create a virtuous cycle – one where customers stay longer, spend more, and advocate for the brand. By addressing the root cause of the leaky bucket, marketers can transform their approach, turning a perpetual problem into a powerful engine for growth.

This transformation requires a holistic approach. It means rethinking every touchpoint in the customer journey, from initial awareness to post-purchase support. It involves creating seamless, personalised experiences that anticipate customer needs and exceed their expectations. It’s about leveraging data intelligently to understand customer behaviour and preferences, not just to sell more, but to serve better. It is about fostering an ethos of continuous improvement, where every interaction is an opportunity for growth and refinement.

Moreover, this new approach demands a cultural shift within organisations. It requires breaking down silos between marketing, sales, and customer service, fostering a company-wide commitment to customer retention. It means empowering employees at all levels to contribute to customer satisfaction and loyalty. By aligning the entire organisation around the goal of plugging the leaky bucket, companies can create a sustainable competitive advantage that’s hard to replicate.

Welcome to the world of retention re-engineering – where random revenues transform into recurring revenues, where every customer’s lifetime potential is fully realised, where smarter (and lower) marketing spend drives higher returns, and where profitable growth becomes a way of life. This is the Nayi Disha for marketing.

4

Adtech Trap

Marketers have long taken the easy way out through acquisition and reacquisition via adtech spending. They hire an agency, negotiate the cost per click, and rely on the agency to deliver the numbers. Retention, on the other hand, is hard work. It requires understanding customers, creating segments, running campaigns, measuring outcomes, and much more. Just as water moves on the path of least resistance, so do people’s actions. The end result is a lopsided allocation: 80-90% of budgets go towards acquisition, some towards branding, and a paltry sum on retention.

The truly alarming aspect of adtech spending is that half of it is being wasted. Unlike traditional advertising, where it’s hard to tell which half is wasted, digital marketing allows for precise tracking and identification of AdWaste. Yet, few marketers have the inclination to do so. Consequently, low-value customers are acquired and paid for, along with dormant and churned customers who should not have been allowed to leave in the first place. Rarely do they ask for our preferences to personalise recommendations or for referrals from our network, which could significantly reduce CAC.

It’s no wonder that adtech reigns supreme. Consider these eMarketer charts sourced via Perplexity. The interesting point to note is that the rate of growth of digital advertising is 5-10X that of traditional. Two of every three dollars are being spent on digital. The travesty is that in a medium where everything can be measured, marketers wilfully ignore the data and are complicit in letting AdWaste to persist.

No prizes for guessing where the AdWaste comes from: brand profits. In the 2021-25 period, this figure comes to a whopping $1.5 trillion (half of the $3 trillion digital ad spending).

With many businesses struggling to achieve consistent profitable growth, it should be obvious where the CEO and CMO’s focus should be. But that’s not the case. Seduced by the allure of easy and perpetual revenue growth, digital ad spends have stayed at a 10% growth rate even after the pandemic bump. This means there’s little or no scrutiny on the quality of outcomes from digital ad spending. The perfection of the auction model ensures this gravy train for BigAdTech will continue – they are the real profipolies.

Just as Gen AI is disrupting many industries, 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.]

Three new ideas are poised to revolutionise retention re-engineering, offering forward-thinking CMOs and CEOs a huge opportunity to get ahead of the pack and build profipolies.

5

Transformative Trio

Three groundbreaking ideas are set to revolutionise retention re-engineering:

Agentic AI: The Intelligent Stack

The first idea powering retention re-engineering is Agentic AI, a multi-agent system that goes beyond task execution to deliver meaningful outcomes. Agentic AI will drive the modern AI stack for marketing:

  • Large Customer Model (LCM) that incorporating martech and adtech data, to surpass the traditional CDP or even the upgraded Content Data Warehouse,
  • Co-Marketer, an AI copilot for marketers which orchestrates multiple sub-agents, and
  • AI Twins, which are conversable personas built with observable and deterministic data

Drawing data from the LCM, a Co-Marketer can collaborate with multiple Segment Twins to create tailored and tested content, campaigns, and journeys for every customer cohort. As more data is generated and customers progress further in their journey with the brand, the Co-Marketer can interact with Singular Twins for N=1 personalisation, the cornerstone for maximising every customer’s LTV.

AMP for Email: Channels 2.0

The second breakthrough for retention re-engineering is AMP for email, part of a broader upgrade to Channels 2.0. Historically, email has yielded the highest RoI among all push channels, yet innovation has been stagnant. New channels like push notifications, RCS, and WhatsApp are bringing interactivity to the forefront, reducing friction for customers by eliminating the need to click through to a website or app for conversion. AMP for Email not only levels the playing field but advances it, thanks to the addressability and openness that make email unique. Imagine a new type of email with an “Email Envelope”, a wrapper around the email body which combines a Subject magnet in the form of Mu (Atomic Rewards), email apps (Epps) in the header and footer that are containers for AMPlets, and ActionAds which combine the 4 Ps of PII, push, in-place, and payments to deliver superior responses and additional revenues. Together, this triad built using AMP can drive more opens and actions, bringing marketers closer to their dream of ensuring no email is ever ignored – thus building a direct line of communication with every customer, which in turn reduces the need for expensive reacquisition via adtech spending.

Agency Evolution: The Progency Model

The third breakthrough isn’t from a new technology but from a rethink of the role of an agency. Traditionally, agencies have focused on delivering services to marketing teams – content, creative, analytics, campaign execution, and so on. They have been compensated based on human hours. The next-gen agency will be an extension of martech platforms, combining software with a thin layer of service, a “Progency” fusing product and agency. Such a team will deliver strategy and service on a revenue sharing model, aligning their interests with the brand’s success. Moreover, the service will extend beyond mere labour; much of which will eventually be automated by AI. The new “Kaizen Services” will focus on continuous improvement, enhancing the platform daily by refining the AI models that underpin it.

**

Together, Agentic AI, AMP for Email, and the Progency will address the three pressing problems which have plagued retention through the years: the “Not for Me” problem where brands fail to anticipate intent due to insufficient data, the “No Hotline” problem, where brands struggle to influence actions because of attention recession, and the “Not by Product alone” problem, where the lack of intelligent services hinders the full utilisation and post-purchase customisation of the martech SaaS platform. Collectively, they will lay the foundation for the shift from retention marketing to retention re-engineering.

6

Phased Implementation

So, how can CMOs embark on this Nayi Disha? Let’s break it down into phases.

The starting point assumes that the fundamentals are in place: a CDP, a martech platform (ideally, a Unistack rather than a patchwork of software solutions), a search and product discovery platform for eCommerce companies, and the 1.0 communications channels.

Phase 1 (30 days)

  • CMO-CEO alignment is crucial for this mission to succeed. An audit of ad spend should be conducted to estimate the AdWaste resulting from misguided acquisition and reacquisition efforts. This identified AdWaste should become a key target for both the CMO and CEO to address.
  • Organise a Strategy Foundry to align various teams for the next stage of the journey.
  • Set the North Star Metric as “Earned Growth.” This metric refers to the expansion a company experiences due to the actions and recommendations of its loyal customers. In essence, it’s growth driven not by traditional marketing or sales efforts, but by organic growth and revenues generated through word-of-mouth promotion. It thus combines the power of retention and referrals.
  • Collaborate with the Email Service Provider to implement the Email Envelope, along with AMP-powered Epps in the body to drive in-channel conversion.
  • Begin establishing the Large Customer Model.
  • Create AI Twins for segments initially using adtech data.
  • Develop a Velvet Rope Marketing plan for Best Customers. Ideally, the team handling this should be housed in a separate business unit.
  • Start tracking key metrics such as customer retention rate, LTV, and CAC to establish a baseline for improvement.

Phase 2 (90 days)

  • By this stage, the Large Customer Model (which can also be considered as a Composable CDP) should be operational.
  • The Co-Marketer and AI Twins can now start working together. AI Twins (for Segments) should start integrating martech data alongside adtech data, laying the foundation for Generative Journeys that adapt based on customer actions.
  • The Email Envelope will have started yielding results leading to an improvement in email open rates, more actions, and increased collection of zero-party data. Additionally, ActionAds should begun generating incremental revenue from non-competing brands.
  • Expand Channels 2.0 to WhatsApp and RCS for specific use cases bearing in mind that these are more expensive channels.
  • The Progency should have a team in place for Kaizen services.
  • Implement A/B testing for key marketing initiatives to measure the impact of new strategies.
  • Begin phasing out low-performing adtech spend based on insights from the Large Customer Model and AI Twins.
  • Initiate training programmes for marketing teams to ensure they can effectively leverage the new tools and strategies.

Phase 3 (180 days)

  • By now, all the three ideas discussed – Agentic AI, AMP in Email, and Progency – should be in full flow.
  • The AI Twins program can be expanded to include the creation of Singular Twins for Best Customers, as well as other types of twins, such as product twins, store twins, and location twins. The ability for a marketer or a Co-Marketer to converse 24×7 with any of these twins will provide extraordinary insights into customer behaviour and competitive activities.
  • Analyse the impact of the Velvet Rope Marketing plan on Best Customer retention and LTV. Adjust strategies based on the insights gained to further enhance customer loyalty and value.
  • Leverage advanced predictive analytics to anticipate customer needs and behaviours, enabling proactive and personalised marketing initiatives. The interactions between the Co-Marketer and AI Twins will be invaluable in this process.
  • Create a comprehensive, real-time dashboard that offers actionable, real-time insights into key metrics, allowing for agile decision-making across the organisation.
  • The success of these retention initiatives should lead to a reduction in AdWaste, accompanied by an increase in revenues as more customers are guided towards maximising their LTV.

**

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.

7

A Time for Transformative Leadership

Written with inputs from Claude and ChatGPT

As the Nayi Disha takes hold, CMOs will find themselves at the vanguard of a marketing revolution. This isn’t merely a shift in tactics; it’s a fundamental reimagining of marketing’s role within organisations. By pivoting from acquisition to retention, harnessing cutting-edge AI and data technologies, and cultivating deeper customer relationships, marketing leaders can drive sustainable growth and forge unassailable competitive advantages.

For CMOs, this new approach redefines their role within the organisation. Today’s CMOs must evolve into Chief AI and Profits Officers, architecting growth strategies that transcend superficial metrics. By championing retention re-engineering, they ensure every marketing pound is invested wisely, focusing on long-term customer relationships that maximise LTV and minimise CAC.

The journey ahead is challenging, requiring bold vision and a willingness to challenge long-held assumptions. But for those who dare to embrace this new direction, the rewards are immense: unprecedented customer loyalty, peak operational efficiency, and financial performance that eclipses previous benchmarks – ultimately transforming the business into a profipoly with exponential forever profitable growth.

This new mandate demands a cultural shift. CEOs and CMOs must collaborate closely, breaking down silos to foster company-wide commitment to customer retention. CEOs must empower their CMOs to take bold steps, experiment with new technologies, and adopt innovative strategies aligned with the broader business vision. This unified leadership is crucial for the success of the Nayi Disha.

To CMOs on the precipice of this transformation: Seize this moment. You stand at a crossroads where your choices will shape not just your career, but your organisation’s future. Embrace your new role and become the architect of your company’s profipoly journey. Let data be your guide, but don’t lose sight of the human element underpinning all great marketing. Foster a culture of experimentation, where failure is a stepping stone towards innovation.

For CMOs who champion this Nayi Disha, an even greater prize awaits: the opportunity to ascend to the role of CEO. By demonstrating mastery in AI implementation, driving profitable growth, and reshaping the brand-customer relationship, CMOs can position themselves as ideal candidates to steer their organisations through digital transformation and beyond.

To CEOs: The time for half-measures has passed. The Nayi Disha for marketing is a strategic imperative that demands your personal attention and commitment. The potential to redirect billions in wasted ad spend towards sustainable, profitable growth is too significant to ignore. Empower your CMO to lead this charge, but stand beside them in this journey. Your active involvement will underscore the criticality of this shift throughout the organisation.

The Nayi Disha isn’t just about transforming your marketing department; it’s about revolutionising your entire business model. It creates a virtuous cycle where customer satisfaction drives loyalty, loyalty fuels advocacy, and advocacy propels growth, building a business that thrives in the face of change.

The future of marketing is here – a future where retention reigns supreme, every customer interaction is an opportunity for growth, and businesses partner with customers in a journey of mutual value creation. The boundaries between marketing and customer experience blur into insignificance.

To the visionary leaders reading this: The retention revolution is upon us, and the Nayi Disha for marketing beckons. Will you rise to the challenge? Will you pioneer this new era where customer retention becomes the cornerstone of your strategy? By shifting focus from wasteful acquisition to meaningful retention, you have the power to transform not just your marketing department, but your entire business model.

The retention revolution starts now. Are you ready to lead it?