Michael and guest Steve Decker discuss customer retention.
Michael: Hello folks, and welcome to eCommerce Q&A. This is the podcast where store owners, directors of eCommerce and eCommerce managers can stay up-to-date on the latest tools and technologies in eCommerce. I'll be joined on the show by my colleague and partner-in-crime, Dillon Holst. Our goal is to handle one or two questions per episode. You can check us out on the web at www.ecommerceqa.tv. There, you will be able to get in touch, ask us questions, and just generally participate. Hello everybody, and welcome to another episode of eCommerce QA. I’m joined today by Steve Decker, who is the co-founder of a company I’m really excited about, been following them for a long time, been using their products in a variety of use cases, and the company in question is Sweet Tooth. Sweet Tooth is an excellent loyalty program; works really well with all of the top eCommerce platforms, has an API, it’s amazing. Hi Steve, thanks for joining.
Steve: Hey! Thanks for having me on, I’m really excited to be on. You know, I’ve listened to some of your previous podcast episodes and there’s really a lot of value in these, so thanks for including us.
Michael: Absolutely. Well, we are really excited about giving merchants immediate up-front value on the most important things they can be thinking about. And these days, everybody’s thinking about customer lifetime value. How can we get more value out of our customers, how can we keep our customers happier longer, because that’s where we ultimately get them to refer other people. And you gave an excellent presentation for my team this week, and I was blown away by the content you were bringing, not just on the topic of loyalty, but on the topic of retention in general. I’m wondering if you can help us understand the relationship of customer lifetime value works with retention and loyalty. Like, if we can visualize a Venn diagram, are some of these inside the others?
Steve: Right, right, absolutely. So, customer lifetime value is probably the most important, if not a top three metric that every retailer needs to know. And you can kind of map customer lifetime value to a customer’s progression into their journey in discovering your store. Someone that goes from a visitor to a purchaser, and from a purchaser to a repeat purchaser, and a repeat purchaser to hopefully, ultimately a brand advocate that absolutely loves your brand, tells everyone about it. You can kind of map different customers to those stages, and customer lifetime value actually maps really well to that as well. And you kind of have —there are two sides, basically: you have customer acquisition, which is about getting new customers and getting them to buy, and then there’s customer retention which is about after they’ve made their first purchase, keeping them around, keeping them happy, getting them to purchase more, and getting them to refer their friends and tell others about your store. So that is kind of a general framework that we want to use when we’re thinking about customer lifetime value and making sure that we’re retaining customers and keeping them coming back. And customer retention which is, again, just keeping customers coming back. You know, there are different ways that you can do this. There are different strategies that you can use, and it’s not one or the other; they’re very complimentary. So there are different ways you can do that. There’s customer loyalty programs, that’s what we do at Sweet Tooth, but there’s also things like lifecycle email, there are things like amazing customer support that is remarkable, there are things like personalization…there’s a whole bunch of different ways we can actually keep customers coming back.
Michael: So, what’s the typical blocker for people moving from the acquisition side to the retention side?
Steve: The reason why someone doesn’t go from acquisition to more of the retention is because they’re stuck in a transactional relationship with a retailer. So, for them, their relationship with the retailer pretty simply: it’s a price, it’s a product, and it’s a place, that’s it. And, that works as long as you are at the right place with the right product at the right time. You’re only as good as the products you’re selling; you’re almost like a vending machine. And for you to get to customer retention and to get customers coming back to you, you need to start forming an emotional connection with those customers. Something more.
Michael: Something I really liked about what you shared earlier this week in the private demo you gave, er, presentation you gave for our team, was even though you guys do loyalty, you made the point that when you’re looking to invest into your store, it’s always a question of where should I invest. Should I invest in email marketing, and approving that? Should I display ads? Should I do something totally different? The question being, how can a merchant know where they need to invest in their store?
Steve: Right, right. So, that’s a question we get all the time, and it’s a hard problem to solve but you can solve it. So, just like we can understand a customer’s experience and as they go through their entire experience with our brand, they go from that acquisition– so, visitor/first-time purchaser –to more retention, which is repeat purchasers and brand advocates. And the way that we need to understand that relationship between the two, between customer acquisition and customer retention, is that you need to acquire customers, and you need to do the things that are necessary for that customer to make their first purchase, so you do need to have the right price, you do need to have good shipping, you need to start that journey with those first few steps. But after those are complete, and after you’re doing well enough in those, then you need to start looking at investing in things like customer retention and keeping them around. And so, a really good way to determine when you should start investing in things like customer retention, you can do it with metrics, you can look at, you know, okay, do I have a good conversion rate? You can try and benchmark yourself, but there’s a really simple way, and that’s just sending out emails to your customers, asking for feedback. You can ask a very simple question, like how likely are you to refer your friends or family to this brand and why? And all they have to do is reply to that email. You can do some other complicated things like net promoter score, where you’re actually sending out surveys, and you’re collecting statistics and stuff, but a really really simple way is to just send an email a few weeks after their first purchase, and after they’ve had time to engage with the brand, and figure out where those holes in the customer experience are. If you get nine out of ten customers complaining about shipping, maybe we need to fix that before we can look at retaining customers, and keeping them coming back.
Michael: That’s great. Love that. So basically, if I’ve got a store and I want to know whether or not I need to focus on more immediate things related to the transaction, I can easily do that just by asking customers after the order, love that.
Steve: Exactly.
Michael: We have encouraged customers to do something that I think is pretty simple, with a thing called Hotjar. It has a little poll that you can ask people. In their case it’s on the site, and we’ve encouraged people immediately after purchase to say what’s one thing that would’ve prevented you from purchasing today?
Steve: Yeah, that’s great. And it’s that kind of feedback, it’s as simple as that. You can try and make it quantitative, metrics-based, but if you get one hundred customers giving you feedback, you are going to start to notice when there are some common issues.
Michael: Yeah. So, let’s assume that you’re getting consistent feedback that they’re happy with the transaction in terms of price and shipping and customer support, and you allude from that, ok you know what let’s invest in more of the retention side. How do we go about that?
Steve: Really, there are a couple ways to evaluate which tools to invest in. You shouldn’t be thinking of them as one or the other. They really do work together –– there’s a lot of synergy there that you can get out of something like, say, a loyalty program and lifecycle email for example. But a good way to determine what’s going to work for you is looking at your demographic and trying to determine what kind of tactics work really well with that demo, you know, what kind of incentives work really well for that demographic. And also things like, what are my competitors doing, because that’s important as well. We want to make sure that we’re providing a better experience, and we’re differentiating ourselves. So, you know, we don’t want to end up offering the exact thing that our competitors are offering, we want to offer something better.
Michael: So, if I’m looking at doing life-cycle email or a loyalty program, which I know is a false dichotomy, but let’s say I need to invest in one before the other just for budgetary reasons or something like that. How would I know whether loyalty is a good thing to implement on my store?
Steve: Yes. So, a really good way to determine if something like loyalty, specifically, is good for your store, is if you have a lot of micro-actions that you want to incentivize that are all under one nice, unified program. So when you think about things like micro-actions, there are things like creating a customer account, or sharing something on Facebook, or you want to incentivize them to purchase on their birthday, or you want them to refer their friends. These are all micro-actions, and most retailers, what they would do is run four separate promotions and probably just offer discounts for those type of things. But what’s good about loyalty programs for this example is that they can kind of cover all of those micro-actions with one umbrella program.
Michael: Yeah.
Steve: And another important component is that you don’t need to offer just discounts, right? So, with a points program you can offer several options that they can spend their points on. Whether that’s discounts or free products or free things that aren’t even in your inventory. Or, maybe experiences, or exclusive status. Things that are tailored for different types of customers, that will motivate different customers more effectively. So, not every customer is just looking for a discount–– that’s more on the transactional side, more on the visitors and first-time purchasers, and customers that aren’t emotionally connected to your brand. And what’s good about a loyalty program is that you can kind of offer a full spread of rewards for customers to perform those micro-actions.
Michael: And I think –– we had an interesting conversation earlier this week about the whole fact that Sweet Tooth, your particular methodology, is very much a point-based system. It’s not that you can’t make it work with a dollar based system, and I thought that was really good insights you had about the fact that points-based systems are better in a lot of ways.
Steve: Yeah, yeah. One of the benefits of it, of offering points over something like a discount is–– let’s take the example of just sharing a product on Facebook. So, you might determine that, for your business, that is worth, let’s say 17 cents. So, with a points program, I can kind of mask how much that is, and customers can do several actions to get one large reward, whereas if you were to be giving a discount for social sharing one product on Facebook, I don’t think a 17 cent discount is really going to reward customers and incentivize them to do that; they might actually be de-motivated by that.
Michael: Yeah, totally. I’ve got a customer right now that wants to implement loyalty and they’ve really been vying for a dollar-based system. I think it may be because they’re trying to tie it into an affiliate/distributorship situation where their customers are looking for cash discounts; ultimately it’s an expressed need. So it’s going to be interesting to think about how loyalty fits in with affiliate-type scenarios and wholesale vs retail pricing. How do you guys handle the type of question?
Steve: It really does depend on the situation, but we have had some retailers that actually wrap their affiliate program in with their loyalty program as well. So, instead of giving affiliates just cash, they can still offer that but again, just like we can offer different rewards to different customers, we can do the exact same thing with affiliates. So, some affiliates might love your product and might actually just want to spend points on a product. Some affiliates, they might value experiences more. Maybe they’re a stay-at-home mom that really wants a vacation, that’s a really good pairing. You can find, if you have suppliers or if you have products, you can usually offer it a little bit less expensive than if they were to just be paying cash and just have to buy it outright. And usually, with an affiliate program, we’re basically taking advantage of the referral aspects of a loyalty program where we’re giving customers points, or affiliates points, for sending people to your site and those people having made their first purchase in all those kinds of activities.
Michael: Yeah, I’d love to see how that would work. I’m kind of interested in that thing technically, but it seems like it would make a lot of sense, and I can even see a use-case there in B2B scenarios, which typically I wouldn’t think a loyalty program would apply to. Well, tell you what, I’d love to know if there’s anything we can leave our listeners with. Is there anything, in terms of resources, you’d like to point people to so they can understand how this works better, or maybe get started with some initial steps in implementing retention/loyalty?
Steve: Absolutely. So, a really good start for strategy is what we call The Ultimate Guide to Customer Retention. That’s available…it’s an eBook that’s available on our site, and that’s going to go over why a retention strategy will work for you, which tactics you should use to help you retain customers, and that will help you to decide which strategy should I go with. And then, we also have another guide called The Complete Guide to Customer Retention Tools, and that goes over all the tools you have available, at your disposal, if you are choosing to invest in something like customer retention. And it lets you know when to select which type of tool to do which type of job, so between those two guides you can get a lot of information, really help make an nice educated decision on, “should I invest in retention? And if I should, what should I spend that money on?”
Michael: And I really like the fact that you guys aren’t actually just saying “oh, well, obviously you should use Sweet Tooth and do the loyalty”, and that’s why I feel really comfortable about having our listeners look at your guides. So, to get those, we’ll have the links in the show notes, and we’ll also–– is there a URL that people can go to, and then just search from there?
Steve: Yup, so people can go to our website which is www.sweettoothrewards.com. We have an eBook section which is available in navigation under Resources. So, we have case studies, eBooks, we even have a video learning center which is really useful as well, where in about 30 minutes or so you can go over all of the loyalty basics that you need to know, should you decide to choose a loyalty program. But yeah, the way we look at loyalty and retention is that there are different paths up the same mountain, and sometimes they cross over and sometimes they help each other out, but ultimately your goal is just to keep customers coming back and retain them to make sure that they’re happy.
Michael: Fantastic. Well, I can’t think of a better way to end it than that. Is there any last thought you’d like to leave people with?
Steve: I would say, do what you believe. A lot of the times, we show the analytics and the metrics, and we have a very scientific approach to customer experience and what to invest in as business owners. But also we need to trust ourselves and go with what we believe in, and personally I believe in taking care of people and making sure that people are happy with me, and people keep coming back, and that I develop real relationships with our customers. And I think, with a lot of retailers, that echoes with them too. So, we can go over all of the benefits and all of the metrics that we can help improve, but I think that at the end of the day a lot of the value that people get is being able to do what they believe.
Michael: Well, that’s why most people listening are in eCommerce, right? It gives you such a powerful way to launch into new territory and control your destiny.
Steve: Exactly.
Michael: Thanks so much, Steve, for your time. We really appreciate your being a part of the eCommerce community for a long time now. You guys have been around now for what, ten years maybe?
Steve: Yeah, almost ten. We’ve been around for a while, yeah. We existed as an agency before, and then made the foray into being an app.
Michael: Well, you’ve always been a really trusted resource for my company and we’re looking forward to helping our customers take advantage of loyalty, and so thank you so much for that.
Steve: Yeah, thanks for having me on Michael, and really happy to help anyone, anyone who needs some insight into customer retention and loyalty and customer experience.
Michael: Steve, if someone were to email you from our listenership and asked a question about loyalty, would you respond to that email? Would you give them some advice?
Steve: Yup, absolutely: steve@sweettoothhq.com. Happy to discuss anything at all.
Michael: There we go.
Steve: You can also get me on Twitter @SteveDecker.
Michael: Fantastic. Well, folks, we’re out of time for today. I am actually, Steve if you don’t mind, I’d like to ask you a couple of questions a particular use-case that I’m dealing with, with a client. But folks, if you need to sign off, we try to keep it short in general. Again, we’ve got the show notes, and you can cut it here or you can keep listening. So, Steve, if you have a couple more minutes, and I know you need to go pretty soon, I was just thinking about a particular customer ––actually the same one I’m thinking of implementing loyalty with–– where they have had a pretty significant downturn in their traffic and revenue since we relaunched their site. And I was curious how you think we should go about evaluating what to do next in a non-optimal situation like this. And we kind of talked about in the first part of the episode here that if you’re looking at everything with a level playing field, a way that you could tell what you should invest in. What if the customer’s experiencing a significant downturn in their metrics? Maybe not a full on rescue situation, but getting there. How would you approach that?
Steve: If they’re not doing very well on the acquisition side of things, I would say two things. You can do things to help improve and get more customers coming, and a lot of the stuff that you’re generally gonna do, things like SEO or any sort of search engine marketing, whether that’s paid or organic, a lot of that will take time to build up, and you really should be able to lean on your existing customers in this time.
Michael: Yeah, that’s the big thing ‘cause they actually have ––a lot of their customers have been really loyal for a long time, but we re-launched the site and a lot of people didn’t like new design. So, it’s that weird thing of okay, well we’ve always had good customer retention, now we’re losing some of that, but we can’t go backwards in time and stay with the 2007 web design.
Steve: Right, yeah, and it’s tough when you have to make those kinds of changes. If you can help those existing customers go through this kind of painful time, hopefully giving them some sort of incentive to continue shopping and maybe learn, and maybe see that the website is actually a better resource than it previously was. Any sort of incentive there will work. For them, if they’re very frequent shoppers, things like free shipping or discounts or maybe even a gift, so if you want to add something to their cart. Just to come and check, literally checkout, and just see what the experience is like. Don’t let their doubts stop them from at least trying it out once. But I’d say, in a time like this, email is going to be a very important channel where, making sure you’re driving a lot of sales through those existing customers. And this is a good time, where a customer retention program will really have helped. If you are completely acquisition-focused, you know where something like 80% or more of your orders are coming from people who are searching on Google and they are just clicking on the first search result. Or if you’re doing something like paid search advertising, that kind of stuff is great but when it stops working you really feel the pain.
Michael: Totally. Well, I think that’s exactly what we felt, is that they had a lot of…it’s basically underlined how important customer retention is and keeping customers ––I don’t want to say just blindly doing whatever customers want, because that’s the way to become irrelevant over time. You’ve got to lead the way, help your customers understand what’s important. When you do a major re-design, explain it to them. But I think, maybe, we needed to be more attentive to the fact that so much of this particular client’s customer base was loyal, and we got to keep them that way.
Steve: Yeah, things like a concierge service might help too, so if they don’t have live chat, that might help, where they can lean on someone. Especially if they have, over the past few years or months, developed a relationship with someone on the customer service team. Having that person available on the website might help, and you can lean on those emotional connections with customers as opposed to just the technology that’s being presented to them. That might help as well, but this is a good time where, if you need to augment your acquisition with paid advertising, you’re probably going to look at an ROI, and the amount that you can spend will probably depend on your customer lifetime value. Right, so I’m willing to spend $50 because I know over a customer’s lifetime, they’ll spend $500, and that’s my return, right? So, making sure you have programs in place to realize that full customer lifetime value, those customers will help you justify spending a little bit more on those acquisition methods that you’re going to need to do to boost up your sales.
Michael: Well, thank you so much again, Steve. I think everybody still listening, it’s totally obvious how knowledgeable Steve and his team at Sweet Tooth are, so you might be getting a flood of emails here, haha!
Steve: Haha, that’s ok, I love talking about this stuff.
Michael: Thanks again, Steve. Have a great rest of the day.
Steve: Thanks, you too. Take care.
Michael: Bye.