About two years ago, I made it a goal to read as many marketing books as possible.
So I went ahead and picked up the classics.
You know… Influence, Ogilvy on Advertising, and Scientific Advertising.
I was hooked, so I thought … why not read some eCommerce books?
Not a great idea.
A few books in, and literally all of them started sounding the same.
Outdated concepts, fluffy tactics, and just advice I didn’t resonate with.
Eventually, I got so tired of reading.
I told myself, I’m not going to read another goddamn marketing book ever again!
…. Until last week.
Because as I was scrolling through my Kindle, I saw something which I hadn’t seen before.
A book on eCommerce retention marketing!
It’s called Retention Economics by Thomas Lalas.
Spoiler alert: I LOVED IT!
Here are my 7 takeaways from Retention Economics:
The $1 Billion Dollar Question In eCommerce Is…
How do I get more customers from order #1 to #2?
Truth is… there are tons of brands out there that go viral, make tons of sales and get praised for their marketing strategy.
But behind the scenes, they’re struggling to stay afloat and pay their bills, because they haven’t addressed the one-time buyer problem.
Low CAC isn’t always better than high CAC
Last week I listed 7 different acquisition offers and how they can impact your CLV. One of the offers was free samples. If your product is actually good, free samples can act as a gateway to lower your acquisition costs and increase your CLV (assuming customers come back at some point).
But a low customer acquisition cost (CAC) can also mean you’re acquiring lower quality customers. These people rarely shop at full price and it becomes increasingly difficult to break even. A great example of this is Black Friday shoppers.
On the other hand, a high CAC can be fine as long as you increase your CLV along with it.
Which brings me to my next point:
The quicker you win the 2nd purchase, the more aggressively you can scale
In other words, the faster a customer pays back their CAC, the quicker you can reinvest that money back into acquisition. Ideally, that would happen within the first 30 days post-purchase.
But if you’re already cashflow positive from purchase #1, congratulations! You have a real competitive advantage over others because you can double down on ad spend, test new creatives fast, and outbid competitors.
However, say you aren’t first sale profitable, and it takes you more than 90 days to break even, you’re playing the game on hard mode. You can still invest in acquisition, but it’s more risky because you’re essentially borrowing money assuming it will return at some point in the future.
Fix your retention by fixing your product first
Most brands think the answer to retaining more customers is sending more email campaigns. Usually, this ends in cannibalization where email steals attributed revenue from other channels, but the overall revenue stays the same.
If your repeat revenue isn’t where you want it to be, your first question should always be “is the product I’m selling actually any good?”
Eat the frog first, then worry about channel level tactics and other variables.
Get Retention Insights Every Friday
Every Friday, I send a short-form essay on how DTC eCommerce brands can generate more profit from every customer in their database.
Investing in good CS is critical
Another takeaway I had from the book is how big of an impact CS has on retention. Customers who contact support within the first 30 days are up to 60% more likely to churn. That’s a substantial increase if you ask me!
And the most retention-critical CS interactions happen in the first 2 weeks post purchase. Remember, it takes only one bad experience for the customer to be gone for good.
On the other hand, if you handle the ticket well, it can re-build trust. A lot of happy customers will also leave you a 5-star review for handling their issue well.
What this means on a practical level is you should invest in good CS — ensure when customers reach out, they talk to an actual human with good English skills.
Your post purchase offer must be the best deal your customer sees
I’ve analyzed thousands of post-purchase emails, and I always see the same two mistakes. The first mistake is jumping to cross-category selling too early.
The easiest way to win a second purchase is to offer the customer the same item at a discounted price. Or the same item in a different color/material if you sell fashion.
The second mistake is a bad offer. I’ve seen tons of brands offer new customers 10% off their next purchase when they’re welcome sign up deal is a 20% discount. It just doesn’t add up. Your post purchase offer must be the best deal your customer sees.
Subscription brands have a huge advantage
“If you’re not subscription first, you’re leaking money.”
The book recommends brands to prioritize subscriptions, especially on product pages. Or even go all-in and remove one-time purchases completely. Obviously, that’s easier said than done and largely depends on the type of product you sell.
I think what’s crucial though is that if you have a subscription-friendly product, you have some sort of starter kit or a “buy more, save more” type of deal on the first purchase.
For example, Hostage Tape, a sleep tape company offers a 1 month, 3 month, and 6 month supply. The more you spend, the more you save.
Stars + Honey sells protein bars and offers a 10, 20, and 30-pack of their protein bars, as well as a signature tasting bundle with all 12 flavors.
The key is that you move away from those boring “subscribe & save 10%” type of offers and find creative ways to increase AOV & CLV from order #1.
All KPIs lead back to revenue
Finally, what I really enjoyed about this book is the economics behind it. I mean, the book is called Retention Economics, so duh!
It has a lot of math frameworks on profitability, cashflow, and how retention plays a key role in impacting these. You normally wouldn’t expect that out of an eCommerce book.
And I think that’s a good thing, because that’s the end goal, right. You want to be able to scale the brand, grow the revenue, and keep more of it in your pocket.
There are so many marketers out there on the internet who only measure their attributed Klaviyo revenue and call themselves “retention marketers.”
If you want to measure what actually matters, or even better, get a clearer picture of where your brand is currently at, this book will help you do that.
