The popularity of online learning has been steadily increasing in recent years, and the COVID-19 pandemic has further emphasized its importance. According to research conducted by HolonIQ, investment in the EdTech industry in Europe has increased from €152 million in 2010 to €2.72 billion in 2020, representing a 17.9x growth over the decade (HolonIQ, 2022). Also, ReportLinker in 2020 forecasted a positive CAGR of 14.6% from 2020 to 2027.
Despite the positive recent growth of the market, there are factors that hinder its growth. One of the key issues restricting the market is the inability to reach the middle-class and low-income families, as well as a mismatch between business and education. Additionally, there is still concern regarding the high cost of customer acquisition (CAC). In this regard McKinsey reported Edtech players are merging and partnering to achieve scale and efficiency. As they seek sustainable ways to drive down the high customer acquisition costs, some edtech firms are turning to M&A in hopes of reaching economies of scale (2022). Recently, 2U announced an $800 million acquisition of edX; Anthology and Blackboard agreed to a $3 billion merger.
The increase of CAC is due also because EdTech is getting more competitive, putting pressure on the importance of allocating the marketing budget to deliver more efficient acquisition strategies.
BrightEye Venture in 2018 published “The State of EdTech Marketing Report” by surveying a sample of 50+ CEOs and CMOs EdTech companies based in Europe, US & Israel. Despite the effectiveness of customer retention which increase LTV, startups surveyed are pursuing a different approach by focusing primarily on customer acquisition.
Chart: BrightEye Venture, 2018
What other interesting information can we gather from the report? Organic marketing (i.e. SEO, inbound, email) was the most common strategy implemented by 50 CMO. Paid marketing budget tends to be higher for startups targeting B2C and schools. Referral, organic search and social media were the most effective lead generation channels. To conclude, spending a significant percentage of revenue on marketing is required to see growth in the market.
The Importance of Retention Rate
Calculating CRR
Before moving forward to analyse the 5 retention tactics, let’s review with an example how to calculate the customer retention rate:
Calculating customer retention rate involves the use of a basic formula: CRR = [(E-N) ÷ S] x 100. To compute the customer retention rate, you need to determine:
– E: the total number of customers at the end of a given period.
– N: the number of new customers acquired during that period.
– S: the total number of customers at the start of that period.
Let’s assume an eLearning Platform such as ThePlay Academy wants to calculate its retention rate over a six-month period. The company started with 150 customers (S), ended with 120 (E), and gained 5 new customers (N). In this case, (E-N) would be 115. Using the formula, ThePlay Academy’s CRR would be:
120 – 5 = 115 ÷ 150 x 100 = 76%
You can use this free calculator calculator to measure your customer retention rate.
Customer Retention Rate
As we have seen in the previous graph, in the research carried out in 2019, the majority of companies did not prioritize their marketing investment in retention strategies although existing customers are often more valuable than new customers. Numerous research in various verticals have confirmed that returning customers spend more and are more likely to make repeat purchases than new customers, driving referrals.
In the next paragraph, we will look at four tactics for increasing engagement and retention among current customers.
6 Tactics To Boost EdTech Startups Retention Rate
1. Testimonials
The EdTech market is experiencing significant growth, with the online education segment projected to generate revenues of $350 billion by 2025, CAGR of 14.6%. Despite the swift expansion of the EdTech sector, there are certain concerns that exist. The competition among players led to an increase in Customer Acquisition Cost (CAC) and M&A in the industry where CMO focus their time and marketing budget mainly on acquiring new customers rather than retain old customer. In this blog post I have suggested 5 examples of customer retention strategies that may be implemented by EdTech startups to reduce their CAC.
Online reviews and influencers marketing have a significant impact on purchase decisions, as more than 97% of customers acknowledge being influenced by them. Additionally, when prospective observe that many other individuals and businesses similar to themselves are already utilizing a product, they are often motivated to do the same. Brands can follow Codeacademy’s lead and incorporate student testimonials into their marketing strategies. This can involve highlighting the stories of loyal customers on websites and social media, sharing their successes and creating a sense of community among users. By emphasizing the benefits and successes experienced by real customers, businesses can establish trust and encourage growth.
2. Storytelling
Storytelling is one of the most effective technique to improve engagement and retention in marketing. When information is presented in the form of a story, it becomes more memorable and engaging for learners. The use of narratives helps learners to better understand and retain information. For instance, email marketing could feature more visuals such as pictures or engaging animated content that tells the story of learners’ transformation, along with the benefits of attending the course.
3. Interactive Contents
Instead of passive listening to lectures or assigned material, interactive learning involves a hands-on approach to transferring knowledge. Interactive content, including quizzes, videos, simulations, and gaming, can enhance student engagement and provide a more immersive learning experience, leading to better information retention and real-world application. Incorporating interactive activities into online learning can create a more enjoyable and effective experience (ie. GoPractice is a simulation based startup).
4. Personalisation
Continuous assessment in teaching and learning is an effective way to enhance customer retention in EdTech. By offering immediate feedback and personalized learning paths, students can receive feedback on their performance in real-time and quickly identify areas for improvement. This type of feedback can motivate students and keep them engaged in the learning process.
In fact, according to research 49% of students consider personalization extremely important, and 66% believe that adaptive technology such as personalized quizzes aid in learning and retention. Edtech startups can create a more effective and engaging learning experience by tailoring the experience to individual needs, which can lead to higher retention rates. Speaking specifically about marketing, to personalize the website or marketing campaigns, I can suggest A/B testing tools such as VWO, without requiring a significantly high website traffic to be utilized.
5. Customer Feedback
To enhance customer retention, it’s crucial to continually enhance and update a product by utilizing customer feedback and keeping up with industry trends. Design thinking tools, such as user research, surveys, focus groups, and visualization tools, can aid in gaining a deeper understanding of customer needs. This could involve launching A/B testing experiments, testing shorter video courses, removing or adding specific features, and experimenting with new buyer personas. Additionally, for customers who have signed up for an annual subscription, sending them emails or conducting interviews to collect feedback on their satisfaction levels before they cancel their subscription can also be beneficial.
6. Exceed Customers’ Expectations
Not all brands should necessarily create their own community, but it’s still important to show gratitude towards customers for choosing to do business with the brand and to establish a positive relationship with them. Seize every opportunity to make them feel valued and appreciated. By providing customers with an unexpected gift or benefit that goes above and beyond their expectations, you can create a memorable experience that they will cherish.
Bibliography
42 Souls. (n.d.). Edtech Market Research Report. Retrieved May 10, 2023
Brighteye Ventures. (2018). The State of EdTech Marketing Report.
Education Week. (2019, October 15). Ed-Tech Usage Levels Are Low. What Should Schools Do?
HolonIQ. (2022). 2022 Global Education Outlook.
GlobalData. (November 2022). Edtech Market Analysis.
Icts.io. (2022, November 21). 30 Ed Tech Benchmark Statistics Benefits Your Business in 2023.
McKinsey & Company. (2021, March 31). Five trends to watch in the edtech industry. McKinsey & Company.
MindK (2021, September 23). EdTech Challenges and Opportunities. MindK Blog.
TIP Knowledge Services. (2021). Europe EdTech and Smart Classroom Market Forecast to 2027 – COVID-19 Impact and Regional Analysis by Component, Deployment Type, and End-User.
TIP Knowledge Services. (2019). Europe EdTech and Smart Classroom Market Forecast to 2027 – COVID-19 Impact and Regional Analysis by Component, Deployment Type, and End-User.
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