📍 Hi everyone. And welcome back to the e commerce impact podcast today. We've got an exciting guest. We have Alex Greifeld and she is here to talk to us today about customer retention and life cycle marketing.

So welcome along, Alex. Thank you for having me. It's great to be here. Yeah, and I'm coming at you today for those who are watching on video, I'm still semi on vacation. So I'm in the Coromandel of New Zealand and the lovely summery outdoor outdoor place here. 

So Alex, it would be great before we get started, if you could give our guests a quick introduction to you and some of the brands you've been working on and what you're working on at the moment. Sure. So I've been working in e commerce and digital marketing for more than 10 years, primarily focusing on brands in the fashion footwear and apparel space, but more recently expanding it to a number of different categories.

My most recent role before I went out as a As a freelance contract consultant type of person was at tapestry, which is coaching Kate Spade. And since I've been independent since 2022, and I've worked with a number of brands of all kinds of sizes and categories, I've worked with Jones Road, BD, Bonobos Some other health and supplement and beauty brands but those are some of the big ones Awesome.

Yeah, and I've been a follower of your newsletter for gosh over a year now and I Definitely recommend quick plug for your newsletter. No best practice Alex Alex she has a ton of insight that she's gaining from her work with these brands that is Really worth following along.

So quick plug there. Awesome. Okay. Well, let's dive into our topic. So my first question to you is what spiked your interest in this particular area, like when did you start to kind of put a focus on more around retention and life cycle marketing and, and what sort of successes have you seen focusing in this area?

So I think I really got interested in it a number of jobs ago. It was like my first full, it was my first e commerce dedicated role. And when I entered the brand, we were up, you know, 20 percent year over year. And within a year we were like down 20 percent year over year in terms of sales. And no one could figure out why.

And a lot of what we were trying to was, was related to metrics like ROAS and conversion rate. It didn't dig into the customer level and customer behavior. And those metrics weren't answering the question of why are our sales down? So that started, that sent me down the rabbit hole of, of customer behavior and trying to understand some of the lifecycle behaviors in more depth so that I could set future brands up for success.

 Great. So, and how do you define the customer life cycle and the context of e commerce? What are we talking about when we talk about the customer life cycle here? So I like to split it up into three phases.

There's prospect, which is, you know, They're not your customer yet. There is the nurture phase, which is typically customers who have between like one to three lifetime purchases with you. And then there's the loyalty phase. And that's when they reach the fourth or fifth order and beyond. And the reason that I split it out that way is because your, your customers who have only made a single purchase with you.

They still need some, some handholding and some education and just some general trust building to become fully bought in to your brand and what you're about. So the way that you market to them is going to be different than the way you market to a customer who's already loyal. I like to define loyalty as a customer who has a greater, greater than 50 percent chance of coming back for another order.

So I've run this analysis for like a number of brands and that inflection point where the customer becomes loyal usually happens between the third and fifth purchase. That's a really interesting way to define it. Yeah. So when they've only made one purchase, they're not yet loyal. So it's a different phase in terms of the relationship with the customer versus someone who's like It's a part of their habit, right?

 So when they are at that point where they're not yet loyal, what strategies do you, have you found to be effective to move them from kind of like trying you out to being a loyal customer? So There's two parts.

This is a two part answer. The first part, I think a lot of brands kind of don't like to hear, which is that a lot of a customer's loyalty potential is kind of baked in before they ever make the first purchase. So the more brand marketing you do. And effective brand marketing, the more, the more places that a customer is going to encounter you in their lives before they make the purchase,  the stronger impression the brand is going to make, and the more of a connection there's going to be, and that increases the chances that the person will come back and buy a 2nd and a 3rd and a 4th time a customer's disposable income level is also going to increase.

A huge factor into loyalty because if you have like a thousand dollar yearly budget for cosmetics, you're going to buy more than someone who has like a 50 yearly budget. That's just kind of. It's reality, it's like you can't market your way out of that. So a big component of building lifetime value and loyalty is thinking about who you're marketing to, and understanding within your acquisition strategy, what is the balance of Like purely going out and trying to pluck some in market customers, like running Facebook and Google ads, essentially.

What's your balance between that and more of like a holistic marketing strategy? That's one aspect of it. And then when you do convert them and, you know, you have them in your customer file, then Typically new customers buy more of what they've already purchased. So if you're a brand with a really broad assortment, you want to try to personalize the post purchase marketing so that it's focused on the product or the category that.

They entered the brand with,

yeah. So that's interesting. So if we're talking about fashion, if they bought a dress, you show them more dresses. Is that the kind of thing we mean? Or if they bought moisturizer, you show them more skincare stuff rather than showing them mascara. Yes. Yes. I mean, when you're, when you're not selling like a replenishable product, it's a little bit more challenging, but I've, I've worked with I can think of the top of my head.

I can't name names, but a men's wear brand and a footwear brand. And their best customers came in through one of like two to three products, and then they came back on their second purchase and they bought that same product in a different color way. So when we took those learnings and applied them to like post purchase email marketing or post purchase direct mail.

That helped drive a lift in first to second order conversion.

That's really interesting. So yeah, you're saying like the first and foremost, they've got to be the right person that has the potential to be a long term customer. So there's no point kind of barking up the wrong tree. So market to the right people in the first place, build a great relationship with the brand first and foremost.

And then secondly, show them. The right second product that's most, you know, going to be the most likely thing that someone who bought that first product is going to be wanting to buy. So it's a very nuanced and there's a lot of kind of steps to it as well.  So, we talked about what the key stages of the customer life cycle are.

Do you want to talk us through a little bit more in detail about those? So how are you marketing differently to a prospect? How are you marketing to loyal customers? We've talked a little bit about how to move those people from kind of that first purchase into that, into that loyal phase. But how are you marketing to people before they're a customer and how are you marketing to them once they're loyal?

So before before they're a customer, it depends a lot on the brand's financial objectives because it's challenging to to balance broader brand messaging and direct response in a way that. Is like that gets you really tight financials, like that gets you 1st order profitable on the majority of your orders.

So if a brand is really concerned with 1st order profitability I, I encourage them to. Promote their best selling products and their most expensive channels. So put your best sellers in your meta and Google ads, basically because that will lift your conversion rate more than any other kind of, like, creative tweak you might be trying, that said, that result, that approach can become, it can limit your scope over time, like as you're getting larger and larger as a brand, and that's when you have to start moving into some of like the, the broader, either expanding the set of products that you're marketing or broader brand messaging. That's vastly oversimplifying a complicated topic, but for the sake of time then  when the customers are into the nurture stage, they have made that first, second purchase with you you want to filter out your customers who have the highest likelihood of coming back and make sure you're communicating with them, whether it's through email, SMS, or direct mail.

Depending on your email strategy for a lot of brands, the VIPs don't opt into email at a very high rate. Like they're, they don't have the time to be opening, you know, a daily email. A different promo. It's like, it's kind of like information overload. So that's why I encourage my clients to like, to get an understanding of, what percent of their customers are opted into email and potentially support that with direct mail and then? moving on to the loyalty phase Those are the customers who typically do stay opted into your email file And so it's easier to market it to them at a lower cost what's challenging about marketing to loyal customers is for most brands, especially consumable brands like cosmetics when you analyze like order frequency for loyal customers, by the time they get to the fourth and fifth purchase, they're basically buying from you like every month.

So lifting that frequency is hard, like using marketing to drive incremental spend from loyal customers is hard because they're already buying so much. So, like, squeezing even incremental dollars. That is challenging. So, I think the most important aspect of marketing to loyal customers is just measuring it the right way.

Like trying to run holdout tests on any new offers or tactics or things that you're, you're trying to market against that group, just to make sure that it's doing what you think it's doing. That's really interesting. Yeah. And it's a good point. So I guess a lot of our, what's really going to move the needle is probably making those customers who aren't yet loyal, loyal so that they do spend a lot rather than trying to squeeze and squeeze the people who are already loyal.

Would that be a fair comment? Yeah, and that's 1 of the biggest things that brands kind of get wrong because for every 100 new customers you acquire, if you're an E com brand, if you're a single, like a mono, a mono brand, not a multi brand retailer. If you're a single brand e commerce store you will.

Be lucky to retain 25 out of that 100. If you retain 30, 35, you're doing an excellent job. I have never seen an, an e comm brand without a subscription model that's like core to the business exceed a retention rate of like 40 customers of every hundred new customers that they acquire. So. There is just an incredible amount of churn inherent in the business model and you just have to kind of acknowledge that you don't solve that without solving the business model like a software company is going to have lower churn.

People don't really subscribe to shoes or like skin cream at scale. And like, I think we've seen that by the way that some of these big venture funded subscription boxes and other startups have kind of. It's like, it just doesn't work that way. So knowing that churn is, is inherent in your business. Reducing the churn from first to second purchase is typically your biggest opportunity. Especially when the brand is young. Because what happens is, you know, you'll, you'll retain 25 of the hundred into, into your second purchase. And then by the time you get to that fourth or fifth, you only have like three to five of every hundred.

Remaining. So the pool gets smaller and smaller. And if you've been around for 20 years, that core audience of loyal buyers can get significant. But if you've been around for 3 to 5 years, it's even if you decide to focus on really optimizing that audience is just such a small slice of the pie that. It doesn't really do anything for you in terms of revenue.

So what I see often and, and honestly, why a lot of Browns come to me to work on retention is like, they're, they're looking at retention marketing in terms of channels, it's like we have our email strategy and our SMS strategy. And that's what you're basically saying is like, okay, we're using email and SMS.

We're probably speaking to people who are already loyal when we run tests. It's going to be skewed by the preferences of these people who are already loyal. So it's the thing, the programs or the optimizations we're enacting are not actually making our repeat customer revenue go up because it's, it's addressing a very small segment of the audience.

So how do we shift out of that channel focus mindset and think more about. Speaking to, to customers in terms of nurture versus loyalty and progressing more first customers down the path. Right. That makes sense. So you're, you're suggesting then a very segmented approach for each of those particular segments and treating them very differently in terms of what you're sending them, how you're measuring them, the metrics you're measuring them against, et cetera.

I don't think it has to be hyper segmented. The, the bigger the brand is, and I'm talking about, like, getting up into the hundreds of millions of dollars of revenue. The more upside there is to segmentation. What I like to do for, for most brands, because I mean, I'd say maybe like a third to a quarter of the brands I work with are that large are like 100 million dollar brands for most brands I work with them.

Like, okay, how can we split things into? Meaningful buckets and how do we tease out like the meaningful moments when we should be talking to these different people where we're going to be you know, putting in 20 percent of the work for 80 percent of the payoff, basically. And a lot of that, I mean, recency is very important.

Like, if you look at basically, like, if, if you acquire a customer and they haven't made a 2nd purchase within. Three months, there's a 50 50 chance they're going to repeat purchase at all. So it's like, if you don't get in front of them and stay top of mind in that first 30 to 90 days, it's kind of like, you know, it, it's not a complete, it's all is not lost, but it's, it, it's not as meaningful of an effort.

So making sure that the communications plan for like the first 30 days is really tight is. One thing I always tell brands to focus on the other is understanding what are the key moments in your calendar during the year that drive loyalty. Like most brands, I mean, holiday promotions are a big one for most brands, but then.

There are typically other tentpole events. So it's making sure that those events are communicated broadly, not just limiting it to email, like, layering in paid media, direct mail. And then the other is putting putting together, like, an at risk slash reactivation strategy. That's relatively like set it and forget it because that's another opportunity to to drive a bit of, of incremental conversion.

But again, it's like, when customers reach that, that stage, there's, you know, they've almost like already tuned you out. So it's like, you want to make sure you're doing something, but you don't want to invest disproportionate effort into it.

 That's really interesting. Yeah. Okay. So I'd love to hear from you, like what with the clients, cause you've got the benefit of kind of diving into lots of different brands, working as a consultant the way you do. So. Let's talk about, say, your typical eight figure e commerce brand.

So, you know, they've got some pretty good traction, but they're not yet a hundred million dollar brand. What are you seeing as like the big, what are you seeing as the patterns when you, when you work with brands like this that you notice the mistakes that they're making and that. You're going in and saying you're repeating the same message over and over that these are the things that, you know, three or four things they need to be doing to improve their retention and have a better handle on the life cycle of their customer.

I think one of the big things I see is over reliance on email. And under over alliance on email and SMS under alliance on direct mail I almost never come into a brand and see that they have like a triggered post purchase postcard set up or, or other direct mail focused on like, some of those key inflection points.

So that's one. The other is an email strategy that's either over segmented or under segmented. So I'll either see the brand only mailing messages to people who have, like, let's say a brand sells category A, B, and C, the only people getting emails about category A or category A buyers, that's, that's a missed opportunity.

Or on the flip side, it's like a very batch and blast. Like every email is a really long Photoshop image sliced into pieces, not mobile optimized. It's like, everyone's getting the same messaging and it's all the nature of the messaging is being driven. By some department that's like outside of marketing, so it's, they're almost treating it like a newspaper circular and the file is, is under engaged.

And then I think the 3rd, the 3rd thing that I see a lot is teams, not really knowing how to measure whether retention is getting better or worse over time and not knowing how to measure. Different retention initiatives that they're testing in the right way. So you always want to be understanding the incrementality of any new programs you're testing.

And a lot of what brands will do is they'll either use the vendors dashboard, which is always biased. Or they'll do like a pre post. They'll say like, okay, well, the month before we implemented this, we, the metric was X and the month that we implemented, it was Y and there, that doesn't isolate the performance of whatever it is you're testing, because there's a lot of different things that are happening.

In the pre and the post period that could be, you know, throwing off your results. So in terms of those metrics, then how would you, what are the metrics that you looked to use to track both pre and post, but generally what metrics are you going in and looking at for a brand to measure their their retention strategies? What should brands be looking to, to be measuring on a regular basis?

So in terms of understanding. The, the health of the customer base as a whole. I encourage brands to look at a monthly cohort performance. So that's like for every, for all the customers you acquired in June. I like to look at two things. The first is how many of them came back, what percentage of them came back for a second purchase.

And then I also like to look at either six or 12 month revenue per customer first purchase not included. So that will tell you both like, at what rate are you retaining the customers? And then how much lifetime value are you extracting from the customers? And you look at how that changes over time, both.

Like in a linear fashion and then year over year what, what you have to be aware of with that is that the harder you scale, like the harder and faster you scale, the lower your repeat rate is going to be, like, blitz scaling, if you want to call it, that really depends on. Bringing in a lot of casual customers who are just who are like impulse buyers.

It's like their, their probability of repeat is really low. Or even if you think about products that have gone viral on tick tock or like in, in the greater media culture that really boosts your sales. But like those people aren't coming back. They're kind of like looky lose. So, it's a good metric to understand how things are, are changing over time.

And, you know, if you, you start the year and you're like, okay, we're implementing these five retention programs, we really think they're going to improve our metrics. And then you get to the end of the year. And those two metrics I mentioned have been trending down, and you haven't gone viral. Then you're like, okay, things didn't work out the way we planned.

So those are, that, that's like the core of, you know, is retention good? Is retention bad? Yeah, that's really interesting. And it's actually so simple when you put it that way. And often, you know, we get over complicated with the way we measure things and actually having a really simple North Star metric for any kind of program or channel that we're working on is a really smart way of going about it.

So you mentioned about direct mail as well, which I love hearing about kind of new ideas beyond the kind of.

The standard e com stuff that we all talk about all the time. So, and you said most brands you go into don't have any kind of direct mail postcard automatically sending to new customers. So yeah, tell me more about that. What kind of strategies have you seen work there and what does a, what does good look like when it comes to direct mail for e com brands?

So, I'll either see brands have no direct mail in place, or if they're, if they've been around for a number of years, they'll be, I'll see them doing like a traditional seasonal catalog strategy where they're just, you know, mailing their entire file of recent buyers, like three to six times a year with the catalog.

I think in terms of direct mail, a strong program, if you are, if you do decide to do a catalog, you want to hold out, test it and understand for which segments. That catalog is driving incremental sales because the catalog is going to be really expensive and if someone is a loyal buyer who's visited your site in the past month, getting a catalog probably isn't going to, you know, drive some extra money over the line.

Although it might, like, there are certain segments who. Who are just like catalog people. So making sure that you have a program in place to, to really understand the incremental value of any catalogs you're doing. And then in terms of triggered or automated direct mail, you will, I think the biggest opportunity for every brand is post purchase like using you sending a postcard, like, 20 to 30 days after the 1st purchase.

If they haven't purchased a 2nd time by then. Just to remind them that you exist, and if you can, like, if your brand allows it send them an offer to try to encourage them to come back. You there are a number of vendors that you can use. To send triggered direct mail that works the same way your triggered email works.

So it's, that's actually something that's relatively new. Like when I started working in e commerce and maybe 2014, 2015, that wasn't around. And it really, it, I, I've tested it with a number of brands and it can be really effective, especially if you're mailing people who are not opted into your email list.

And then you can also do, I mean, that's really the big ones you can layer on a number of other triggered programs. Like, if you think of, you know. Whatever your, your most effective trigger programs are an email, you can enhance them with direct mail for people who aren't opted in. And then making sure you're getting in front of people during your critical retention moments.

So. If you have a sale every April, that really drives a ton of repeat purchases, like making sure you're sending out a postcard or a mailer around that for people who aren't in your email file. Yeah. I mean, no brainer, right? Like that's. That's ideal. Cause I'm someone who just opts out of everything, even brands I love because I just my emails cluttered so they could reach me with mail.

 I think I have my newsletters that I like, but yeah, I have them all go to a separate inbox that I use for like research, but I think in my first job, I, I tried. I'm subscribing to, to brands and things that I purchased from. And it was just, you'd be sitting there and you just, it would be like, okay, 10 a.

m. Like everyone's sending their emails and it was like too distracting. Totally. Totally. And I can't, I don't know what it is, but for me, the other inbox and Gmail just doesn't work because then I miss stuff from my friend, my son's school, or I miss important things because they all go, you know, they accidentally go in there.

So I think a lot of people. You know, I'm very overwhelmed by emails that might really still want to hear from your brand. So that's important to remember. Okay. And what about loyalty programs? What's your point of view on these? How are these done well? And how are these done badly? And what are the mistakes that are commonly made around loyalty programs?

So I have kind of a hot take on this. I think loyalty programs are one of the most misrepresented and misused tactics in marketing. The, the loyalty programs that you always hear about in the media are like, Starbucks and Sephora. So that's Starbucks. They're selling essentially two addictive substances, caffeine and sugar, and they have a location like every five miles in the U.

S. So that's that itself already creates the conditions for loyalty. So if you have a brand like that, if you're selling drugs, Essentially, then like, yes, you can probably drive some incremental activity by giving people like a free something every time they buy from you 10 times or whatever it is. And then Sephora is like, they dominate the category of beauty.

So if you're shopping for all of your beauty needs, it's like you, you go to Sephora almost in the same way that like DTC is a really challenging model for food because it's like you don't want to place your grocery order across. 10 different brand websites. You want to go to one place and just pick it all up.

So, brands like that, again, because of the frequency involved in the purchase, loyalty, a loyalty program can help increase switching costs and help a brand like that. That doesn't describe most Single brand DTC focus brands. So a loyalty program is not going to, it's just not going to move the needle for a business model where like 75 percent of your new customers are turning.

The, the things that I see with loyalty programs are. They're never holdout tested before they're launched publicly. So all of the stats that you see around loyalty program effectiveness for single brands, or they're skewed by the fact that the people who are more likely to opt in or the people who are more engaged at a baseline, like if you ever see a stat, like, well, our loyalty program buyers.

spend, you know, 50 percent more than our non loyalty program buyers. It's like that's selection bias of who is opting into the loyalty program. Yeah, the other, the other issue I see with loyalty programs is that they don't have a clear objective in terms of. Like, who they're targeting or what they're trying to do, like, are you trying to get more revenue out of your loyal buyers?

Are you trying to convert more casual buyers into loyal wires? And like, how are you measuring that most brands when they do a loyalty implementation? They're not doing any testing around that before they launch and they're also not measuring it at that level. Like, if anything, again, it's like they use vendor dashboards, which are never, you know, they're, they, they never tell you exactly what you need to know.

Yeah, they're going to be biased towards making. Their own software look good. sO interesting. And what about, what about the concept of like paid loyalty programs? So I guess Amazon prime being the most obvious example, you could say Costco paid membership is kind of an example of that. Have you ever seen any brands be able to pull that off in the DTC space?

Or is that a very. Unlikely thing, do you think I think that's an exception and I would call that a membership program. Not a loyalty program. I'm sure. Yeah, it's I've actually, I can't really share much detail, but I guess a colleague of mine in the space has implemented a membership program, even as like a new customer acquisition offer and.

It improved conversion rate and lifetime value for those customers. So membership, if you're providing enough context and creating enough desire around what you're selling. Membership can even be like a customer nurture level lever. And it can also like, it, it increases switching costs and kind of keeps you top of mind.

I think the challenging part is you need people coming in who value what you're selling enough where they're like, I'm going to use this throughout the year. Or the membership offer. On the 1st, purchase just has to be. It's so compelling that people are like, I'll pay the upfront cost. Even if I only use this once.

So it's another situation where you should test it before you launch it publicly. Like, I think that's the most challenging thing about all of these programs is. If they're vendor led, they encourage you to just launch them as fast as you can. Because once, once you've launched, it's kind of like you've burned the boats.

It's like, you can't really walk it back without irritating your customers. So you're locked in, which is great news for the vendor. So I think no matter how you structure the loyalty program, you need to test it. You need to do a private beta before you launch it publicly.

So, so you must be working with, you know, us being right here at the beginning of 2024. You must be working with a lot of your clients planning out their retention strategies for the year. How are you looking at kind of planning out programs for your clients and what advice do you have for people listening in their planning efforts for this kind of area?

So my number one piece of advice is just to approach it in a structured way. A lot of what I see is brands plan their marketing calendar for retention based on like a backlog of things they couldn't get done in the prior year, or they kind of they let a junior team member build the road map because I guess management doesn't think that any of the stuff has a chance of really moving the needle.

So they're like, okay, this will be a fun project for, like, our assistant manager to take on. That's you need to approach it in a, in a way that's a bit more structured than that. And, and the way I like to start is with a customer forecast. So, understanding basically, like, if we don't change anything about our retention strategy, how much revenue can we expect to get from repeat buyers?

And then breaking the opportunity down into revenue from people you acquired before 2014 and revenue for, from people you're going to acquire from in 2014, and that will help you understand the relative size of the opportunity in focusing on the nurture phase versus the loyalty phase. And if the company is younger and growing.

Typically, the bigger opportunity is getting more of those 2024 new buyers to convert to a 2nd purchase and spend more. But it's not, that's not always true. It depends on, you know, how deep your customer file is. So using those forecasts to really set a baseline and then. Selecting picking priorities that aren't just, you know, full file email testing to increase open rates or like, let's test subject lines this year, making sure your testing priorities are really focused on those specific customer segments and objectives.

Awesome. I love that. Well, that seems like a good note to end on. So Alex, where can our audience follow you for more, where can they find you on social media? And is there anything else you'd like to share with the audience? So I, I recommend if you, if any of this that I shared was interesting, I recommend signing up to my newsletter.

You can do that at NoBestPractices. co, C O. That's also where you can read all of my, like, my newsletter archive where I go really in depth into some of the things that we talked about today. And then you can find me on Twitter at heyitsalexp. P as in Peter. I always, that's where I post my spiciest takes.

So if you're just looking to be entertained then, then that's where you should find me. Amazing. Definitely follow Alex. She's got some great stuff to say. I always appreciate your content. So yeah, thanks for coming along, Alex. It's been really great having this chat with you. I learned a lot myself and I'm sure our listeners did too.

 All right. Well, thanks again for having me. This was a lot of fun.