81% of Americans are set to buy from a DTC brand in 2023, and the market is estimated to be worth $8bn by 2028 [1]. The potential for DTC is massive, but there are many industry hurdles to overcome. Today’s CRM and eCommerce managers are battling with rising acquisition costs, crushing iOS updates and clunky flows. The challenge to turn one-time buyers into repeat customers grows bigger, while time and budgets shrink. There will be winners and losers in this competitive market - only the most resilient will survive.
To create this guide, we spoke to hundreds of DTC brands to find out their biggest pain points. Drawing on their professional experience and expert advice from Klaviyo and Recharge, we’ll cover the tactics and challenges involved in:
- Turning one-time customers into repeat customers
- Turning repeat customers into subscription customers
- Retaining subscription customers
Part 1. Turning one-time customers into repeat customers
After spending a tonne of budget on acquisition, beating off the competition and persuading the customer to make an initial purchase, the last thing you want is for that person to only buy from you once.. If you’re seeing second purchases drop off a cliff, you’re not alone. The average reorder rate in DTC hovers around the 24% mark [2]. This means that as many as 7 out of 10 people will never buy from your brand again.
To understand why, we’ll look at the tactics brands are currently using to get customers to reorder, hear about the real world challenges faced by top DTC leaders, and offer insights from Klaviyo, Recharge and Relo.
Post purchase email flows
The process of generating repeat purchases begins with great communication. Slowly building momentum and nurturing your customer through a series of post-purchase emails can drive brand awareness, engagement and eventually, sales. Avoid the temptation of targeting customers with 'salesy' content straight away, instead focus on communicating your value and providing excellent customer experience throughout the post-purchase flows.
Jordan Bourchier-Lee, Strategic Partnerships Manager at Klaviyo says, “When done right post-purchase flows help brands to
- Tempt people to come back to your site
- Lay the groundwork for a second purchase
- Collect feedback from your customers
- Create an exceptional customer experience
Some examples of how leading DTC brands nurture their customers towards placing a second order include...
Order confirmation emails
Beauty Pie uses a simple order confirmation email, whilst also calling out how much buyers have saved through their purchase as well as a short and snappy description of their brand mission.
Shipping notification emails
A shipping confirmation tells a customer that their order is on the way. In this example, Beauty Pie is still using this as an opportunity to shout about the value of their proposition, while complementing the customer and making them feel valued.
Post-order review emails
Beauty Pie also sends review prompts to customers a week after purchase to determine intent.
Replenishment emails
Many brands send emails prompting customers to reorder when they think they might be running low. Here Ultimate Nutrition have asked their buyers to restock on protein power in an attempt to drive repeat revenue.
While some of these examples may seem like hygiene factor messages rather than strategic tactics, post order emails offer the opportunity to nurture customers and increase lifetime value. Order confirmation emails for example have a 60% open rate [3]. CRM and eCommerce Managers are under increasing pressure to get better results with less budget, so optimizing the post purchase flow effectively can yield fantastic results.
Post purchase flow challenges - Personalization
Even with the best intentions, post-purchase flows often end up as a one-size fits all approach. Email service providers often aren’t aligned closely enough with customer data to enable simple customisation. This is a problem that Oliver Martin, Founder of DTC cookie brand Snackcidents, is all-too familiar with. Commenting on the limitations of email customisation, he said,
Rosie Leeson, Marketing Executive at Butternut Box said she “would love to make email flows more personalized” but cited data integrity as a blocker. For example, at a recent pet event the company tried to glean information about their customers to target them with better personalisation, but as there was so much data, lots of it ended up being inaccurate when trying to implement.
Data integrity is becoming increasingly difficult to make actionable as it comes from so many different sources (surveys, on-page forms, reviews etc) often without a clear implementation path. With today’s brands trying to achieve more with less time and resources, rigid flows are often the only solution. Sadly, the result of this is often poor conversion.
Post purchase flow Klaviyo insights
We asked Jordan Bourchier-Lee, Strategic Partnerships Manager at Klaviyo for his advice on personalizing post-purchase flows. He said,
Furthermore, Jordan says "For providing a better and more personalized experience, it's about who to reach, when to reach them, and what to reach them with." On actioning this in Klaviyo, Jordan suggests personalising by:
- Location of customer - personalise based on language, climate, etc.
- Type of purchase - personalise based on up-sell opportunities, or general product specific attributes (e.g. if the merchant is a sports goods retailer and the customer buys from the skateboarding category, personalise to reflect that interest)
- VIP customers - personalise message for those who purchase over X amount, or Y number of times.
The impact of smart segmentation is massive. Overall, "Highly segmented [Klaviyo] emails have the power to drive three times more revenue per recipient (RPR) than unsegmented emails."
New product drops
New product drops another way to win back customers that have bought from you before. They keep your brand in the customers mind’s eye, pique their interest and generate demand. The example above from DTC drinks brand, Olipop notifies customers about the release of two highly anticipated products which are guaranteed to sell out.
New product drops are usually marketed with a sense of urgency to maximize hype, they’re not intended to run for long periods of time. A huge amount of resources go into the conception, execution and promotion of new products. Success is the difference between selling out or losing thousands of pounds in revenue.
The challenge - Precise timing
Timing is everything when it comes to the success of new product drops, but humans are unique and so are their purchasing habits and usage rates. While one customer may have polished off their last bowl of cereal and be ready to re-order, another might already have 3 boxes in the cupboard. Despite this, DTC brands often don’t have the data to time their campaigns effectively.
It’s a problem that Lucy Marvell, Managing Director of Mission knows well. Commenting on timing, she says...
Without the accurate data, emails are often just blanket sent at best practice times on the same day, rather than when the customer is most likely to buy.
Even when brands do have some accurate data around customer re-ordering periods, it’s tricky to use this effectively. Brands are usually forced to choose a single reorder timeframe to target (eg. every 30 days) which goes out to the whole database, resulting in poor customer experience. Damian Soong, Founder of Form Nutrition has tried a number of workaround solutions such as data analysis, but admits
It’s clear that customers aren’t receiving personalized reorder communications at the right time, and until now there’s been no clear market solution to tackle this. Email flows are often too complex to manage, or too simple to offer great customer experience.
At Relo, we’ve built Repeat Buy to solve common problems around reordering.
How it works
- We analyze data across all customer orders
- We give you the best possible data around when customers are likely to reorder
- We sync with Klaviyo in seconds, so you can push this data into your existing flows.
- Convert customers with Magic Cart - a clickable CTA button embedded into flows.
- Customers can repurchase in seconds.
- You can target customers at the most optimum time and convert better.
What people say about Repeat Buy
Last chance campaigns
Sometimes brands get so carried away with aggressive acquisition campaigns, they have no sustainable strategy in place to retain customers and end up leaning on last-chance campaigns. The purpose of a last chance campaign is to offer the customer a discount they can’t refuse - the catch is they only have a very limited time to use it.
64% of customers say that a catchy subject line is what compels them to open the email, and brands are finding new and creative ways to personalize emails. This example from lunch subscription, MealPal is definitely attention grabbing.
Last chance campaign challenges - Low conversion
The trouble with last chance campaigns is that they’re not super relevant to the customer and lean on the price point as the main value driver. This can actually cheapen the brand long-term and lead to the customer going to a competitor when they are later presented with full price. Even in the short term, the ‘lets send everyone a discount and hope for the best’ approach often doesn’t yield desired results. Franky Athill, Chief Marketing Manager at Finisterre spoke of his previous experience with a last chance campaign at a different brand.
Last chance campaign Klaviyo insights
Jordan from Klaviyo believes having a churn risk prediction strategy from the offset can help brands to hold onto their current customer base.
If as a brand, you want to get started with churn risk prediction techniques, Jordan recommends "Klaviyo predictive analytics - this feature allows merchants to understand when a customer is at risk of churning. The platform leverages data science and machine learning techniques to analyse the merchant's customer data to achieve this."
Part 2. Turning repeat customers into subscription customers
Once you’ve achieved a steady stream of repeat business from a customer, it’s prime time to offer them a subscription. Turning a routine purchase into a subscription is a huge opportunity as the lifetime value of a subscriber is 2.7x bigger - based on surveying our own customers. This number is only going to increase as the subscription eCommerce market is projected to reach $473 billion by 2025, up from $15 billion in 2019 [4].
If you want to build a resilient DTC brand, converting recurring revenue into subscription revenue is a solid growth strategy. We have Growth Coach, Daphne Tideman with more.
Let’s take a look at some of the common tactics brands use to turn repeat customers into subscribers, hear why they are not as effective as they could be and offer insights from Enquire Labs, Blend Commerce and Klaviyo.
Repeat Customer Campaigns
Once a customer is buying from you on a regular cadence, it’s important to keep nurturing them with relevant content that will show the value of choosing your brand over a competitor. According to Nik Sharma, a staggering 40% of the investment raised by DTC brands is spent on Google & Meta ads for customer acquisition. High acquisition costs mean it’s far more financially sustainable for brands to turn existing customers into subscribers than it is to go out and chase more first time buyers.
Some examples of repeat customer campaigns include...
Meet the Founder / Mission statement
Lucky Saint keeps customers engaged by spotlighting their founder and explaining their mission value proposition.
Impact of purchase
Veg rescue brand, Oddbox regularly reminds customers of the positive impact they’re having on food waste to make them feel empowered and part of something bigger.
Repeat customer campaign challenges - Adding value
Customers are individuals and have different reasons for choosing a subscription. Although we generally know the reasons customers choose a subscription (see below), ascribing a specific reason to individual customers is very difficult to do. This usually leads to blanket communications targeting all customers for all the different reasons to subscribe, diluting the overall message.
Furthermore, subscriptions are a nice-to-have for customers rather than a necessity, so unless you can narrow the focus and drill down into customer needs, they’re likely to feel apathetic about your comms.
Obtaining feedback from your customers is key to understanding how better to upsell them to subscriptions. But this information can be hard to come by.
Insights from Enquire Labs and Blend Commerce
Mitch Turck, Head of Communications at EnquireLabs believes there are ways that subscription brands can work with the resources they’ve got to generate better insights. Mitch says,
Meanwhile, Adam Pearce of Blend Commerce Agency believes better insights start right at the beginning of the customer journey - before a purchase has even been made.
He says, “Rather than having a standard sign up pop-up on the website, why not implement something more interactive where you can ask [in the case of a fashion retailer] what their favorite color and fit is or even create an interactive quiz?” By doing this, you can avoid blanket offers and target customers with more intent.
Subscribe and save
A subscription often works out cheaper for the customer than continuously buying the same product as a store customer. DTC brands know this and use the price factor to convert more customers to a subscription. Letting the customer know they can save a chunk of money by choosing a subscription is usually communicated with an on-site landing page or a button underneath products. Get it right, and you can make a genuine impact on the life-time value of your customer, get it wrong and growth is stunted.
Below are a few examples of subscribe and save in action.
Subscribe and save challenges - Low conversion
Converting customers to subscribers relies heavily on having the tech in place to support good user experience. In a recent interview with Arsh Sidhu, Director of eCommerce at Asystem he said,
It’s a common issue. Aspects such as page loading speeds, pop-ups, broken links and confusing messaging can all have a negative effect on conversion. Even when the tech is in place, it can be cumbersome and clunky for a customer to have to log-in and fill in their details in order to subscribe.
The other issue is that subscribe and save is a ubiquitous tactic that every DTC brand in the book does - standing out from the competition and making the customer experience super relevant to the individual is increasingly difficult to do. Often, brands don’t have a subscribe and save page and instead bundle these comms into their product pages like in the example below from Dollar Shave Club.
For instance, Dollar Shave Club has a clean and sophisticated website design but all customers land on the same product page. The page doesn’t immediately communicate the value of subscriptions and is focused on new customers rather than being optimized for unique users.
Subscribe and save solution - Optimized landing pages
Current subscribe and save landing pages are clunky and offer limited personalization. If DTC brands really want to drive subscription growth, customer experience needs to be enhanced.
Using Relo's Subscription Converter, you can target customers for subscription better and optimize their experience. We analyze all customer data to let you know the best time to target customers for subscription and sync with Klaviyo. You can add an optimized subscription portal to the CTA button of your existing email flows. When the customer clicks the CTA, they are taken to a personalized Magic Cart portal where they have the option to subscribe in 1-click.
It’s expertly tailored to the customer and designed for smooth subscription adoption.
VIP Treatment
It’s not enough to just make fantastic products anymore, there are already heaps of brands nailing this. In fact, between March 2020 and January 2022 the number of Shopify stores increased by 2.5 million [5]. To put this into perspective, there are 2.5 million people living in Chicago at the time of writing. It’s now de rigueur for DTC brands to offer extra incentives, and customers expect it. 17% of customers say they’ll try a subscription that offers member-only perks and a further 14% want fun items and experiences [6]. The jury is out - customers love to feel they’re getting extra value. If you don’t level up the VIP treatment, you are likely to lose out to a competitor.
Daniela Rouse, Partner Marketing Manager at Recharge suggests the following VIP treatment tactics to tempt customers to try a subscription.
- Free items
- Early access to sales
- Limited Editions
- In-house expert concierge
- Events and masterclasses
- Providing benefits after a minimum spend
VIP Treatment challenges - Precise targeting
Knowing exactly when and who to target with subscription incentive flows is very difficult to do - customers are individuals and have different motivations to subscribe. It’s a problem Pact Coffee’s Head of CRM, Lowri Rhys is familiar with.
Part 3. Keeping subscription customers
As we touched on earlier, subscription customers drive 2.7x more lifetime value than store customers. Retaining your active subscriber base is also what separates the lowest and highest quartile of DTC brands. Parsa Sajoughian, Vice President of DTC health brand, Whoop asserts that top subscription brands “retain 65%+ of their revenue after one year. Retention above 50% is considered in the top quartile and 42% as the median. Many companies hover between 40–45%.” [7] As customer acquisition costs soar and iOS updates continue to create hurdles for advertisers, it’s more important than ever to have tactics in place to retain your subscribers.
Let’s take a look at how DTC brands drive subscription retention and hear about the real world challenges they face with insights from Recharge and Relo.
Points-based rewards
Encouraging loyalty through subscription points rewards is a tried and tested strategy for holding onto your active base. It’s a lever that craft ale brand, Beer 52 use to retain subscribers.
For every subscription box the customer receives, they earn points towards extra products. These points keep totting up, but if the subscriber chooses to cancel, their points will be erased.
Points-based rewards challenge - Too much product
The trouble with product-based loyalty rewards is that subscribers are often already in excess of it. Commenting on his own subscription customers, Damian Soong of Form Nutrition said, “too much product is the number one reason people pause or cancel.” After all, nobody wants to have three unused bags of protein powder gathering dust in the cupboard and so in these cases the typical action is to cancel.
To resolve the problem of excess product, customers need to be given the flexibility to manage their subscription. Although this is commonly offered by brands, it’s often a headache to log in as nobody can remember their password. A better solution would be to offer log-in free subscription management.
Cancellation Saves
Another tactic subscription brands use to hold onto their base is ‘cancellation saves.’ This is usually a pop-up form located in the subscriber’s account area that appears when they take the action to cancel their subscription. In the example above from Pact Coffee, the subscriber is asked to detail exactly why they are canceling. Each option takes the customer to a new box which challenges their decision to leave offering alternatives (see below).
This tactic not only helps to reduce subscription churn, but it also gives brands more knowledge about the customer so that if they do press ahead and cancel, they can be targeted more closely in winback campaigns. Cancellation saves are a tactic that Huel has used very effectively, its Ecommerce Manager Mario Tarantino, says since implementing this tactic “we’ve seen about a 15% decrease in cancellations weekly. [8]”
Cancellation Saves Challenge - Poor Customer Experience
Although cancellation saves are a great way to learn more about your customer base and drive retention, they’re not so great for customer experience. In the case of passive or angry customers, presenting them with hurdles to cancel (beyond the already irritating log-in process) the customer may churn for good.
As mentioned in the last section on excess product, ideally the customer would be able to manage their account in a few clicks without admin barriers.
Cancellation Save Recharge Insights
We asked Recharges’ Partnerships Marketing Manager, Daniela Rouse to offer her top tips for better subscription retention. She says,
Subscription Flexibility
Flexibility in subscriptions is absolutely critical. Customers are constantly in flux and they expect subscriptions to fit around their lifestyle. In a recent Attest survey, 37% of customers reported they wanted the freedom to choose what they want, when they want it [10]. Today’s subscription brands need to align with high consumer expectations to survive and thrive.
The ability to skip, pause, delay, fast-track or add products are all sensible ways to offer subscription flexibility. Let’s take a look at how DTC brands push this tactic to retain subscribers.
Flexibility Calculators
Frequency calculators, such as this one from Pact Coffee are a good bonus to ensure the customer only has as much product as they’ll use.
Education
Veg rescue brand, Oddbox sends customers reminder updates about their ability to make subscription changes in their account area. It’s really important to keep driving education around flexibility since customers may not be aware of how much control they actually have. Education can be the difference between a cancellation or a short break. However, this tactic relies on customers actually opening and reading their emails.
Account Area Flexibility
The most common way that brands show flexibility is in the account area like this example from Vitamin supplement brand, Heights. Once customer’s have logged in, they can take control of their subscription.
Subscription flexibility challenges - Ease of editing
Having to go through the faff of logging into a portal in order to edit a subscription is a pain for customers. To avoid the hassle, many end up simply canceling outright. Passive subscribers or those on the verge of churn particularly, are less engaged in the first place and less likely to remember their account details to manage things easily. Putting the onus on the customer to log-in is a poor customer experience and a problem Customer Experience teams often bear the brunt of.
Having to go through the faff of logging into a portal in order to edit a subscription is a pain for customers. To avoid the hassle, many end up simply canceling outright. Passive subscribers or those on the verge of churn particularly, are less engaged in the first place and less likely to remember their account details to manage things easily. Putting the onus on the customer to log-in is a poor customer experience and a problem Customer Experience teams often bear the brunt of.
It’s a challenge Mindful Chef’s Retention Manager, Joseph Westlake is managing to overcome. He says,
Offering customers a smooth way to manage subscriptions can put you ahead of your competitors, drive subscriber lifetime value and reduce churn.
At Relo, we’ve created a 1-click Subscription Manager that enables customers to manage their subscription, without ever needing to log in. Customers can delay a shipment, change, swap and add one-time items to their next order, reducing churn and increasing retention.
Subscription Manager can be added to SMS and email CTAs and is expertly personalized to the individual.
What brands say about Subscription Manager
"We've seen a 31% decrease in subscription churn using Relo."
Conclusion
We hope this repeat revenue guide has given you some useful food for thought on how to generate more value from your existing customer base. It’s clear that while there are many available strategies in place to support the 3 pillars of re-orders, subscribers and retention, the current tools on the market leave something to be desired.
Things need to change, post-pandemic, eCommerce transactions have declined 1.8% compared to a year ago [11], and this is likely to keep tanking as people return to brick and mortar shops for their needs. Only the strongest DTC brands will stay afloat in this market.
At Relo, we create fast and effective solutions for DTC brands. Our repeat revenue platform is the easiest way to get customers to reorder, try a subscription and stay subscribed. Stuck in a loop of rising costs, falling customer retention and subscription churn?
Sources:
- Adopting a DTC strategy can help brands establish long-term customer relationships - YouGov America, 2022
- Real-time Customer Lifetime Value (CLV) Benchmark Report, Omniconvert, 2021
- Order confirmation emails: best practices and examples, Omnisend, 2021
- How to start a subscription business, 2022, Shopify
- Number of Shopify stores, 2022, Ecommerce news
- Creating customer value with subscriptions, 2021, Mckinsey
- Consumer subscription KPI benchmarks, 2020, Medium via Parsa Saljoughian
- Huel - Customer Stories, 2021, Heap
- Customer retention should outweigh customer acquisition, 2020, Retention Science
- Subscription Issue, D2C digest, 2022
- Ecommerce stocks plummet, 2022, CNBC
