How to "Fix" Customer Retention

Hi Team,

Bit of a shorter week–I hope you all had some time to touch grass over the extended weekend.

The last few months have been beyond busy, and it’s always great to slow down and reflect on what’s important to you outside of your 9-5 (or 9-9—#hustle).

"Almost everything will work again if you unplug it for a few minutes...including you."

- Anne Lamott

For this week’s newsie, I am taking inspo from two of my favorite newsletter writers, Nik Sharma and Cody Plofker. They chatted about how to get ads to work again when sh*t hits the fan.

Same, but let’s tackle this from a retention angle.

Imagine this: Your product is fantastic. The vibes are immaculate. You are seeing excellent efficiency on the acquisition side and great reviews.

Then why on earth are customers not returning to buy again?

  1. The Audit: Where you think vs. Where customers are saying

  2. Metrics that Matter: Identifying some KPI’s to Optimize Retention

  3. Turning Data into Action: Using Insights to Drive Successful Retention

This newsletter is brought to you by Tapcart.

In my opinion, one of the easiest ways to drive serious and scalable retention is by adding a mobile app to your marketing mix. The results are high impact and low effort on your end.

A marketer’s dream right? I keep seeing more and more brands getting a mobile shopping app.

​​How does a mobile app make a retention strategy stronger and customers stickier?

App users have proven they’re more die-hard fans, with higher conversion rates, revenue per session, and lifetime value than mobile and desktop web.

With an elevated mobile shopping experience and push notifications, your customers will feel special, won’t churn, spend more, and stay forever.

Your biggest fans will almost always download your app, and that top 10-30% of consumers is worth 6X your regular customer cohort. Tapcart makes it easy for any brand to build an elevated for your community and grow revenue.

Maybe you’re thinking that an app might not be necessary, and that it seems like a hassle to manage, or you just don’t have time to set it up. Let me bust those myths really quickly.

  1. Brands using Tapcart see a 43x Return on App Spend.

  2. The app can also help you save on retargeting ad spend because you can reach your customers directly on their phones in a snazzy push.

  3. The app syncs with your Shopify store so you can launch it literally in two weeks.

  4. Managing the app is so easy an intern can do it.

It’s low-hanging fruit.

Launch your own app with a killer marketing strategy in less than two weeks AND get your first month free on me using the link here:

The Audit: What you think vs. What customers are saying

So much has changed in the land of DTC over the last few years, but some things have stayed the same.

With a higher AOV and solid creative strategy, creating ads that convert customers into the door and break even is still pretty straightforward.

If we learned anything at all from the dropshipping advertisers on youtube pre-rolls, it’s this:

You can start a business with pricing arbitrage and some FB ads acumen.

Here is where brands fail to grow sustainably and stay alive:

They have a leaking bucket.

If you can’t get any of your customers to repurchase and your margins are not monstrous, you are just squeezing by.

Spare me the mattress example. For the bulk of us, especially in CPG, it’s pretty simple: You need more dollars from existing customers.

Here’s where it gets tricky.

Most founders you talk to think their product and experience is 8/10 or above, but their retention rates don’t tell a similar story.

Give your customers a mic and a podium, and let them tell the story of what they expected vs. what they got.

Instead of doing that, we incentivize 5-start reviews, highlight wins, and hide shortcomings.

I took a deep dive into the steps to get customer data two weeks ago here.

Metrics that Matter: Identifying some KPI’s to Optimize Retention

Once you get an idea of where you are struggling to deliver as promised, here are some metrics to track, i.e., ways to measure “better retention.”

Customer Lifetime Value (CLV or CLTV):

This is a crucial metric representing the total revenue a customer is expected to generate over their entire lifetime with your brand. It takes into account their purchase history, frequency of purchases, and other relevant factors. By tracking CLV, you can identify high-value customers who are worth investing in for long-term retention.

It’s basically answering the age-old question: “If I get this customer into the door, how much can I expect to see them spending over their lifetime with us?”

Pro move: Sometimes, you’ll want to slice this up into 30/60/90 or even 6-month LTV if you are at a CPG brand. For example, if you can get a 60-day LTV from $100 to $105, that could change a company's P&L massively. The tiniest LTV changes can massively affect a business.

Lastly, it’s important to slice and dice this by cohort to understand your “strongest customers” better.

Are your customers that shop on your tapcart app higher LTV customers? Or your customers that purchase product A much stronger than those that come in on product B?

Average Order Value (AOV):

This metric measures the average amount of money customers spend on each order. By tracking AOV, you can identify opportunities to increase revenue by encouraging customers to purchase more products or to upgrade to higher-priced items.

Increasing AOV is one of the biggest levers to pull to increase revenue per customer. It won’t harm your brand or customer experience if done tactfully.

Some tactical ways to increase AOV:

  • Bundle products: Create product bundles that offer customers a discount for purchasing multiple items together. This can encourage customers to buy more items at once, thus increasing AOV.

  • Upsell and cross-sell: Use upselling and cross-selling techniques to encourage customers to purchase additional products that complement or enhance the product they already buy. You can do this through product recs, in-cart upsell opportunities, or email marketing campaigns.

  • Offer free shipping thresholds: Set a free shipping threshold that incentivizes customers to add more items to their cart to reach the free shipping threshold. This can encourage customers to spend more and increase AOV.

  • Provide limited-time offers: Create a sense of urgency with limited-time products or discounts that encourage folks to purchase more items before the offer expires.

  • Increase prices: If your profit margins allow, consider increasing prices slightly to increase the AOV of each purchase. Be careful not to overprice your products, as this might not have a net-positive impact.

Repeat Purchase Rate: 

This metric measures the percentage of customers who make a repeat purchase after their initial investment. By monitoring this metric, you can determine how successfully you retain customers over time. A high RPR indicates that customers are satisfied with your products and will likely continue buying from your brand.

Pro move: As a fun exercise, it’s worth splitting this by the percentage of customers who order two times, three times, four times, etc.

This helps you get a better idea of how strong your strongest customers are, and see if you can track any defining differences (other than those customers potentially being rich, lol).

Churn Rate:

This metric measures the percentage of customers who stop purchasing from your brand over a given time period. By monitoring your churn rate, you can identify when customers are leaving your brand and try to figure out why. A high churn rate could indicate issues with product quality, customer service, or other factors driving customers away.

This is even more relevant with subscription brands, and there is usually a discount for folks to join. Stay.Ai does a great job putting together these churn metrics and giving actionable tips to increase subscription retention.

Net Promoter Score (NPS):

This metric measures customer satisfaction and loyalty by asking customers how likely they are to recommend your brand to others on a scale of 0-10. NPS can help you understand how your customers feel about your brand and how likely they are to refer others to your products.

NPS is another metric that becomes 10x more powerful when you ask secondary actionable questions, or even dive deeper on the commentary along with the score.

Turning Data into Action: Using Insights to Drive Successful Retention

You’ve now got a better idea on how to audit your retention to discover what’s broken, and key retention metrics. What’s next?

First things first, how do you ascertain where you are doing well vs. could use a ton of help. For example, AOV on a beverage is obviously different from AOV on a bike or mattress.

It’s essential to compile a list of your key metrics and benchmark them to others in your specific vertical (Varos does precisely that).

Next, allow me to introduce you to the "Effort-Impact Matrix."

It is a tool to evaluate different options or ideas by assessing the effort required to implement them versus their potential impact or value. The matrix typically has two axes: effort or lift on the horizontal axis and impact on the vertical axis.

The Effort-Impact Matrix is a valuable tool for decision-making because it allows you to categorize ideas or options based on their potential return on investment.

High-lift and low-impact ideas are typically categorized as "low-hanging fruit" or quick wins, while low-lift and high-impact ideas are often seen as strategic opportunities or game-changers that require more investment and planning.

Using the Effort-Impact Matrix can help you prioritize and focus your efforts on the ideas that are likely to have the most significant impact on your business while avoiding ideas that may require a lot of effort but have little effect.

Some examples:

High-lift, high-impact: Implementing a mega detailed pre and post-purchase education journey with email, sms, and direct mail.

High-lift, low-impact: Putting unique postcards with each SKU, so unboxing is perfect. Cost for printing, cost for pick and pack… and can be an email.

Low-lift, high-impact: Adding an upsell module into your current email welcome flow to increase CLTV or personalizing current flows to upsell customers differently based on their customer journey.

Low lift, low-impact: Sending more emails or texts without any direction. It can work, but doubtful it’s a long-term or large-impact project.

Once you have this list, you can start chipping off the most impactful moves to fix your retention.

That's it for this week!

Ending this with my fav Steve Jobs quote:

“Get closer than ever to your customers. So close that you tell them what they need well before they realize it themselves.”

Steve Jobs

Any topics you'd like to see me cover in the future?

Just shoot me a DM or an email!

See you next week,

Eli 💛

For this week’s CX Chronicles, I’m thrilled to have Jillianne Estevez. Jilliane is the CX manager at Last Crumb Cookie, the world’s most delicious cookie.

We connected way back when she was at Away, and her journey has been an incredible one to watch.

She just recently won a Whalie for Best CX in her first year at Last Crumb!

What is your CX Philosophy?

I hate to sound cliché, but my CX philosophy would have to be: follow the “Golden rule,” aka treat others how you’d want to be treated.

I’ve had my fair share of interactions with CXers from other companies/brands. I feel that because we typically deal with a lot, we easily fall into the trap of just going into autopilot, sending out a macro, and calling it a day. This often leads to the customer feeling super underwhelmed and sometimes even unheard.

When we can imagine a customer's situation as our own, we can better help them and create an incredible experience at the same time. If we can go above and beyond for a customer and/or personalize their interaction, then why not do it?

That's how I would want my interaction to go with any other business, and it would absolutely leave a lasting impression. They'll feel heard, and appreciated, and it'll hopefully keep them coming back for more!

Your favorite Last Crumb CX story?

My favorite last crumb CX story…this is so hard!! I’ve had some great interactions with our customers, but overall I think my favorite is when people email us/dm us and speak with a Last Crumb tone. If you know of Last Crumb and our branding, you’ll know exactly what I mean. This happens VERY often, and I absolutely love it. It almost feels like people are auditioning for a spot on our marketing team 😂 It’s hilarious to see people put so much effort into an email and make up scenarios and stories just for fun. It's a reminder that there are people out there who understand that we are humans and also need a good laugh sometimes.

*Disclosure: I might get an affiliate commission if you click on some of the links in this newsletter and choose them for your business. That being said, these are tools I personally use and love, and I would not recommend them if I did not think you would love them too!