This isn’t even up for debate, because it’s true.
A lot of the things happening in the ecommerce retention space isn’t doing very much to actually improve customer retention and customer lifetime value, much less profit.
It’s a huge missed opportunity by marketers and brands all over the world.
Everyone is so obsessed with improving marketing metrics on a specific channel to hit new sales highs…
… They end up gaming the system in one way or another – willingly or otherwise.
To do good marketing, we have to understand a few things:
Before we even begin, you should only sell solid products that people want.
If you haven’t achieved product-market fit yet, this post isn’t going to do much for you. Get that sorted out first, that’s literally the bare minimum.
For everyone else still here, I’ll assume you’ve got some traction in the market and there’s decent demand for your products.
First thing.
A percentage of your customers are going to come back to buy again. Even if you don’t do any form of marketing at all.
Yes, email marketing is essential and should be in your strategy kit. But facts are facts.
Think of the cafe near your place.
They didn’t send you emails or SMS or make you download their app, didn’t need to stuff flyers in your door either
You still go back because coffee is amazing, service is great, food is orgasmic, ambience is 100.
That’s what you call “Baseline Retention Rate”.
Most retention marketing activities should increase that retention rate a little more. Maybe from a baseline of 18% to 21% (yeah it’s not gonna increase it that much).
Majority of the “increase” in email-attributed revenue comes from:
To fully appreciate this concept, we have to look at cohort retention over time.
Looking at metrics like:
Eg. Of the 100 new customers acquired in March, 16% of them came back within 60 days, 26% of them came back within 180 days. 60-day LTV growth rate was 14%, 180-day LTV growth rate was 31%.
Anyone not measuring retention numbers based on cohort analysis is, honestly, just guessing. No one should make recommendations without proper data to back them up.
We are allergic to marketers who implement new flows or suggest campaigns or promos without hard stats. But that’s a topic for another time because that’s a 3h long rant.
Another thing about retention is balancing long-term results with short-term channel performance.
At times, sales tactics might very well lower customer lifetime value.
The purpose of email marketing isn’t to send more emails.
It’s to stay top of mind, so that when it’s time to buy, they think of your brand and buy from you.
Similarly the purpose of a subscription programme isn’t to get people to subscribe.
Well, partially, with the intention that they purchase more frequently, which is a behaviour.
That email, that sms, that postcard, that web banner, that membership programme? They all have their own metrics of success.
But essentially, it’s to influence customers’ behaviour.
Many marketers are disconnected here though.
They get a little too tunnel-vision with the channel and the medium that they forget that real marketing is effecting change in the customer journey.
Your email marketing programme must be tailored as such.
Once you can influence customer behaviour effectively, you can influence repurchases, and downstream customer lifetime value.
If you’re an agency want training on retention strategy, we’ve got a programme to train you and your team here.
If you’re a brand and need help with this, book a strategy call with us and we can help.
Now let’s talk about how to actually move numbers that matter.
This is one of the prime movers of growth – new vs returning customers. You’ll need to look at this on several levels:
Since this is a retention specific conversation, we’re going to focus on this subset of customer segment metrics:
Your most powerful lever to improve new customer acquisition efforts is to improve lifetime value within a short window (usually 60 days would suffice).
“Whoever can spend the most on marketing, wins”.
The more cash you generate after breakeven, the better your ability to acquire new customers.
Of the customer segment metrics mentioned above, the more impactful would be increasing your 1st - 2nd purchase order conversion rate. Aka, moving as many one-time customers to their second order as possible.
Most brands would see similar trends in their repurchase rate breakdowns. Once someone makes a second order, chances of them repurchasing drastically shoots up. Partially because they’ve experience the product’s value and it’s not “sticky” in their lives.
Again, this re-emphasises my point about earlier about product onboarding – product activation, consumption, value maximisation, value acceleration and discovery.
After this point, you don’t need to specifically give discounts for people to come back.
It’s pretty much a waste of margin to squeeze returning customers of value. People who think this group is the best to focus on to improve retention rates, clearly hasn’t looked at enough data. Gosh, I digress.
You’re better off getting your post-purchase process absolutely dialled in.
The last thing you want to do is trigger your replenishment and cross-sell flows at random timings, or use an unreliable AI tool.
Time your flows based on actual behavioural data.
Each product has different complementary products people normally buy with.
And each product has a different journey of what people are likely to buy next. These two tools are one of our favourites to use to get accurate cross-sell recommendations.
Let’s say you have post-purchase done up right. It’s time to move to the next priority.
About 75-80% of your list will not buy from you.
That’s one of the reasons why focusing on pop-up opt-in rates isn’t going to do much for you in terms of actual dollars in the bank. You can have a massive list but what good is that do you if no one buys?
A better metric to look at is your lead:conversion % – of the number of people who sign up, how many convert.
You must be thinking, “ok so how do we increase this?”
The short answer, is the hyper-segment the heck out of your welcome flow. Why?
Data shows that of most visitors who’ll convert, will do so within the first 24h of signing up.
This means there’s massive leverage by tailoring your message to a customer’s exact purchase intent in message 1 and 2, or within the first 24-48h.
Pre-purchase zero party data is extremely useful in situations like this.
We see up to 18% increase in conversion rate of email 1 and 2 with this hyper-segmentation.
But this also comes with another set of problems:
Zero-party data is an entire strategy on its own.
Here’s a sneak peak at how we use some of it in our welcome messaging.
One point to note though, is that there’s a ceiling as to how much marketing can reasonably do. You might be able to move metrics a few points, but don’t expect repurchase rates to jump from 20% to 40%.
For that, you need to look at product, merchandising and the business model.
Your priorities summarised:
Time to rethink your email marketing strategy. Email alone might not be enough. You need a retention marketing strategy that can see things full funnel.
As I mentioned before, no test should ever be conducted without data.
A test should only happen after going through this process. At NLE, we call this the OHRA loop.
It’s a non-negotiable.
Every single copy update, design update, change in time delay of an email, change in URL has to go through this loop.
No OHRA, no go.
Optimisation therefore, is not a process.
It’s an outcome.
An outcome of a carefully thought-out test. Which was executed based on a recommended plan with an expected result during a given time period. That was based on a hypothesis done by looking at multiple data points to ensure data sufficiency. Because a certain observation was made.
This is the true meaning of being “data-driven”.
There aren’t many email marketing agencies that can reliably do this to be honest. I can count with one hand how many are worth their salt.
It’s easy to just do things in an email marketing software and call it a day. They might provide emailing services but the marketing part is questionable. We don’t even need to talk about the data aspect. It’s non-existent.
Reason why I say this is because there’s quite a lot more that gets involved other than new email designs.
All these play quite a big part in retention marketing and email marketing companies should have the ability to make these things happen, if you’re outsourcing it.
There are several things to consider here.
And many other questions that you need to ask yourself here.
We have an entire exercise within our unit economics calculator just for offer comparisons for one campaign. If you haven’t done any of this, you shouldn’t be running a promotion yet.
Similar questions as above, should be asked.
But here, you also want to be strategic:
These are just some of the many questions you should be asking yourself when creating new bundles.
And of course, each should then have a calculation on its effect on CAC or conversion rate.
Once you’ve launched these bundles, you then need to track the take-up rate for these and where they should sit in your funnel.
This brings us to the next point, the email funnel.
When I say email funnel testing, I don't just mean welcome flow > site/browse/cart/checkout abandonment flow > post-purchase flow > replenishment/cross-sell flow.
That is a structure, but not exactly targeted in really moving people to their first purchase, or subsequent purchase.
I mean a funnel in line with the customer journey AND product journey.
For this, we deep dive into funnel conversion rates to determine who sees what in emails.
Caveat: Take the image above at face value. How our client partner brands’ audience buys, might not be the same way your audience buys. Now that I’ve got my ass covered (go away, “Dave” who’ll find every excuse to find fault with me…)
Even in your welcome flow, which products should you be showing, when? In what sequence?
The higher your funnel conversion rate, the more efficient you are at moving customers from order to order. This can be further split based on the number of orders placed by a customer. First-time customers, second-time customers, third-time customers etc can buy in very different ways.
Your hero product or bestseller might not always be what people want.
But would you know if you never tracked or tested?
Finally we have landing pages, the place where the final purchase decision is made.
Can we improve our conversion rate with different formats (advertorials, listicles, influencer landing page etc)
The landing page is very closely related to your email and sms marketing efforts.
Remember, the objective of those channels is to drive curiosity and get the click.
Place order rate is largely determined by the page the user lands on.
While you could argue that the messaging in your email did increase the reader’s desire and intent to buy, therefore attributing the sale solely to the email.
It’s marginal.
The bulk of that decision is dependent on the landing page.
That’s why at NLE, we bring some of these landing-page building capabilities in-house, so we can control the variables.
We might not be website CRO experts. But at least our strategists know the 101 on what makes a high-converting landing page and how to optimise for readability and conversions. And we can align campaign messaging with landing page messaging for a seamless customer experience.
This concept deserves a section on its own because it’s huge. Check out our lead strategist Josh’s podcast on novelty, merchandising and its role in retention marketing.
Novelty includes:
Imagine you own a coffee subscription brand and someone just purchased 4 months’ worth of pods from you.
Is there a need for someone to visit your store again?
No. Their demand has been met. They know what you have to offer. There’s literally no need any more.
Now what if you created a new blend?
There’ll be new demand.
Bring it one step further and let’s say you collaborated with a celebrity barista.
There’s an element of social proof and herd mentality now at play.
Let’s go ahead and say there’s a limited run of 2000 capsules only.
You now included urgency and scarcity.
That’s novelty at play.
And you can do the same thing for almost any product.
Just to name a few examples of what we’ve done with our partner brands.
NEW always has and always will be one of the biggest ways to drive returning traffic back to your site. And it’s got an insane potential to reactivate dormant customers.
So how many of these big releases can you do? How much budget? How do you prioritise them? That depends on the growth goal you need to complete.
In terms of goals, you want to be clear on these:
There’s a difference in them and it’s also a reality check.
Based on where you are, even if you have things you want to do, it might not be reasonable to achieve what you want to achieve.
In terms of prioritisation, you always need to weigh three factors:
And in all things you do, ensure it aligns with your brand’s messaging and core competencies.
Anything you do should create more momentum for the brand as a whole, or at least accelerate success for one or more existing products in your line.
Growth is risky. Growth is costly.
But it can be managed a lot better with proper measurement.
We’ve worked with way too many brands that run around like headless chickens because they don’t know where they should be looking.
So many activities, so many metrics, so little focus.
A good measurement system should solve for your business goals first and foremost.
At a high level, we like to track the following:
Then our customer segment performance:
Sometimes we do cohort comparisons to see how effective our respective loyalty/subscription/membership/auto-ship programmes are.
For pop-ups:
On a Email/SMS flow and campaign level:
That’s it.
There’s a whole lot to take in here, and we can definitely go a lot more in-depth into each. We’re not even talking tactics, tricks and hacks yet.
But as the ecommerce industry matures, competition gets tougher and your brand grows, these become a necessity.
Build your ship and ride the wave confidently, or drown naked and afraid.
It’s your choice.