Returning
We caught an interesting datapoint among Repeat’s customers this week: Returning customer revenue is up ~30% since the start of the year—and up 7% MoM.
This looks a lot different than Shopify's global GMV figures or other data that's available.
Consider:
Shopify GMV: +16% YoY (May quarterly earnings)
Facebook revenue data: -2% YoY (last 28 days, as reported by Common Thread Collective)
Facebook revenue data: -6% MoM (last 28 days, as reported by Common Thread Collective)
In other words, returning customers appear to be carrying the day.
We don’t spend much time in this space talking tactical execution, but we will today, because the knee-jerk reaction to this type of insight is often to double down. Send more emails. Send more SMS. Maybe even retarget customers on your ad channels.
There is a risk, though, of squeezing the sponge dry (as Taylor Holiday of Common Thread Collective calls it).
Here’s the thing, though: it doesn’t seem like there’s much room to do that. Because CPG brands already are.
Postscript's SMS benchmarks from 2021 and 2022 show that EPMs at the top end of their range on winback and post-purchase messages are down ~20% with brands that have high repurchase rates.
Klaviyo's Q1 22 benchmarks show per-campaign conversion rates have dropped from .28% in 2020 to .20% in 2022 for Food & Bev and from .15% in 2020 to .1% in 2022 for Health & Beauty.
This is pretty significant data.
The most generous reading of this is that brands are already sending more emails and more SMS to grow revenue from existing customers.
So, what are the alternatives?
There's been a lot of renewed talk recently about subscriptions. Yes, sure. By all means get your most frequent purchasers there. Protect that share of wallet.
But how many brands do you subscribe to?
It's rare for consumers to carry a lot of them. And that makes your non-subscribers hugely important right now—but you have to watch that sponge.
In the world of acquisition, we often focus on the funnel and optimizing at bottlenecks. We rarely do this in retention.
If we did, we’d look at that Klaviyo data and, possibly, take a swing at improving conversion rate.
For returning customers, that means different experiences and different landing pages than new customers. That means building purposefully for the existing customer.
While the majority of resources for an emerging brand go to acquisition, it is common for all of the resources for the website to go to acquisition. Any segmentation and personalization happens at the channel level—email, SMS—not the website level.
Part of that has to do with cost. Part of it has to do with resources. Part of it has to do with what the business needs.
If a business primarily needs to grow by growing its customer base, there’s an opportunity cost to investing too much elsewhere.
But the net of this is a disjointed experience: Why, as customers, are the emails we get from brands relevant to our past order history while our visits to those same brands’ websites not?
As we found out this week, the implications of this are clear: brands may be able grow revenue more quickly from their retention efforts than acquisition efforts right now, but it’s less efficient than it was a year ago. Mostly because everyone is just doing more of the same.