Today’s Ecommerce brands are under increasing pressure to do more with less. The challenge to turn one-time into repeat customers grows bigger, while time and budgets shrink. Meanwhile, external problems like rising CAC, market volatility and the cost of living crisis mount up. With 7 out of 10 Ecommerce customers buying from a brand once and never again, it’s clear something needs to change.
To survive and thrive as a DTC brand in 2022, it’s critical to drive repeatable revenue from your existing customer base. We recently invited a panel of industry leaders to share key insights around how to drive repeat revenue effectively.
Here, we share their findings and simple steps you can take to increase your retention and LTV.
From the Suez Canal to empty supermarket shelves, there’s been no shortage of supply chain disasters in the news lately. However getting the stock to sell in your Ecommerce is one piece of the puzzle, knowing how much to order is another issue.
Phoebe Barber, CRM Manager of Puresport cites a lack of consistency over order numbers as a macro factor that can negatively impact business.
Over the past 12 months, iOS privacy updates have made it harder for marketers to track and target customers, but the cost of acquiring customers itself has soared. Aaron Orendorff’s agency Common Thread Collective looks after some of the biggest Ecommerce brands in the world. Commenting on the surge, he said:
If you were able to hold onto more customers, you wouldn’t need to spend like crazy to acquire more. Taking a look at Pipecandy’s analysis of retention vs. churned subscribers from their recent report is shocking.
One thing that is often overlooked is the cumulative impact of increasing repeat revenue over time, often because it doesn’t get measured effectively or it’s difficult to measure. Relo Founder, Harvey Hodd says:
The struggle to get one-time customers to buy again and again from a brand is not lost on our guests, we asked them what the common problems seen are, and how they solve them day-to-day.
These are some of the biggest problems we’ve found the DTC brands we work with face in getting customers to repurchase. Let’s see what our guests had to say…
Although market volatility is making it harder to predict when customers will reorder, James White, Partnerships Manager at Klaviyo believes there are ways around this. He says,
Phoebe recommends finding out when your customers historically order and customizing dates so that repurchase flows go out on these predicted days.
“There’s no rhyme and reason for it, but at Puresport we only seem to sell products on Monday, Tuesday and Wednesday. The weekend drops off a cliff so we’ve pivoted to ensure our comms are aligned with this.”
Predicting when customers will repurchase is synonymous with how much product they use. Aaron finds that sending instructional product videos in Klaviyo SMS and email flows showing users how to get the best out of the product and use it effectively is a great method to give them a better customer experience and help them use it at the rate they should be using it. “If you can get them using the product right it’s got so many wins and they’re more likely to reorder at predictable intervals.”
Aaron recommends sending instructional product content within the initial first order email and SMS flows as these are known to have the highest open rates over the entire customer lifecycle.
Phoebe Barber finds that adding educational content in the packaging order boxes themselves can help customers to familiarize themselves with the brand and enjoy a better experience.
In addition to utilizing Klavyio’s predictive analytics for replenishment cycles, Aaron Orendorff is curious about finding out what the best possible first products are to target customers with. After all, if they don’t like the product they’ll never return. Aaron has found his best success with a combination of 'Onsite quizzes and customized trial packs to find out what they like.'
Phoebe on the other hand is working on a ‘hero product subset’ with bestsellers across the year compared with the less frequent orders. By knowing where each product sits across the customer lifecycle journey, you can start to make better predictions and double down on the promotion and cross-sell of these items to gain higher repeatable revenue.
As Harvey mentioned earlier, the cumulative effect of increasing your revenue overtime cannot be understated. In the image above you can see how incrementally and consistently increasing repeat rates by 10% can have a profound impact on growth over a 1 year period. The revenue impact is almost 25% more, and this is with current customers.
James recommends looking at this over a 2 year period, “Start now, make small changes such as tweaking your flows, optimizing for revenue, subscriber rates etc otherwise you are going to miss out on this incremental growth.”
Subscribers are like gold dust to an Ecommerce business. Having a steady stream of recurring income significantly increases lifetime value (LTV) and gives you much clearer growth projections. However, gaining subscribers is easier said than done. We asked our guests what the roadblocks to subscription are, and how they overcome them.
These are some of the biggest problems we’ve found the brands we work with face in getting customers to subscribe. Let’s see what our guests had to say.
One problem many brands face is cutting through all the various beep beep notifications and getting their voice heard to enable that subscription adoption to happen. James at Klaviyo cites his personal experience with SMS as being a great driver. SMS typically has a very high open rate, as much as 98% in some cases.
Puresport recently rolled out a subscription service, and one of the big hurdles they’ve found is striking the right balance with pricing. The prospect of an enticing discount is often what hooks people in, but it’s not without problems. Phoebe says,
Puresport have managed to get around this by implementing an internal minimum-subscription-length to target the right people. “Otherwise you ruin your revenue and don’t build loyalty.”
Aaron agrees, “There are a litany of brands that grew really quickly with the overdiscounting model and now it’s fallen apart.”
Keeping a customer subscribed for the long-haul is notoriously difficult. A ‘good’ churn rate for DTC subscriptions is considered to be 9.62% for consumer packaged goods. But losing 9% of steady revenue every month is less than ideal. As the cost of living crisis increases and a recession looms, how can brands hold onto their active subscribers?
To find this out, first we need to understand why subscription customers churn in the first place.
Too much product is the number one reason why subscribers cancel. Phoebe says, “Customers go on holiday or have other priorities. You need to work around the customer and offer them flexibility. The ‘freeze’ function which allows a subscription customer to temporarily pause their subscription until they’re ready to resume it themselves has enabled us to hold onto subscribers who would have otherwise churned.”
James on the other hand believes that adding ‘freeze’ or ‘pause’ functionality can be detrimental as it could be counterintuitive to reducing churn. “My gut from a user perspective is to stay away from ‘freeze’ and make it more challenging to do this. Generally if people have subscribed, they do love your products but perhaps not at the cadence you offer. Instead, focus on other functions such as ‘reschedule, skip, add or delay’.
To this, Phoebe adds that gifting subscriptions is something Puresport are looking into. “This tackles the churn problem, communicates a brand message around sharing and would increase LTV, too.”
Like everything in life, after a while mystery gives in to knowledge and the initial shine wears off. A few months into the subscription journey, customers' eyes start to wander as they become more familiar with the products and brand. Perhaps they are being targeted by competitor #1 or simply want to try something different. Puresport finds this shift tends to happen between months 4-6 and recommends using surprise and delight as a retention tactic.
“We’ll send them something nice, a card through the post or a gift. It usually works for a couple of months.”
As this piece is all about driving more repeatable revenue from your existing base, you might also be looking into ways to get current subscribers to spend more with your brand. Harvey suggests offering your subscribers one-time products they can add to their subscription.
As we’ve seen in the other examples, decreasing subscription churn rates by just 1% can have a huge impact on revenue growth over a 12 month period. Customer’s staying on subscription one or two orders longer can have a profound impact over time.
To wrap up the event, we handed the floor over to the audience to ask us their burning questions around repeat revenue.
At Relo, we’re laser focused on getting existing customers to buy again, try a subscription and stay on subscription. Discover how we’re helping the world’s best DTC brands generate 17 x more repeat revenue.