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I want to follow up on a newsletter I wrote about a month ago about customer retention.

I had mentioned that before I take on any new client for email marketing or Meta ads, I always make sure to ask for a cohort analysis. Today, I want to dig a little deeper into the metrics I look at to optimize retention.

Let’s get right into it.

Lifetime value

I used to believe that maximizing the average customer lifetime value (LTV) was the goal of email marketing.

However, a strong email marketing strategy doesn’t simply look at LTV because you can’t make data-backed decisions based off a metric that has several inputs.

To improve LTV, you need to look at the levers that control it and adjust your email marketing strategy to optimize those particular levers:

a. First-time and returning customer average order value (AOV)

The best way to increase your LTV is to start off on the right foot with a high AOV for the first purchase followed by an even higher AOV for the second purchase.

Use email campaigns to encourage first-time buyers to make larger initial purchases by offering exclusive discounts or bundles. Highlight the value proposition of your products or services to convince them to spend more.

For repeat purchases, create targeted email campaigns aimed at returning customers, offering incentives for larger purchases such as free shipping thresholds or limited-time promotions such as free gifts over a certain order value. Implement upselling and cross-selling strategies by recommending complementary products or upgrades based on their purchase history to increase the value of each order.

b. Time between orders

You can find the average time between orders using Klaviyo or Lifetimely (which I use for cohort analysis).

Implement flows triggered by the time elapsed since the last purchase to re-engage customers. Offer personalized recommendations based on their past purchases to encourage repeat purchases sooner. Additionally, use dynamic content to showcase new products or updates since their last purchase to maintain interest.

With these strategies, you can reduce the time between orders, easing your cash flow burden.

c. Number of repeat orders per customer

Develop VIP programs that reward repeat purchases and customer referrals. Send personalized emails acknowledging their loyalty and offering exclusive perks or discounts to incentivize future purchases. Implement segmentation to tailor messaging based on a customer's order frequency, ensuring they feel valued regardless of how often they purchase.

d. Accumulated gross margin per customer

Instead of looking at LTV based on revenue, it’s important to look at your accumulated gross margin per customer. Identify high-margin products or categories and offer exclusive deals or early access to new products with higher margins to incentivize repeat purchases to increase accumulated gross margin.

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Opt-In Rates

There's often a misconception that high opt-in rates directly correlate with the success of a pop-up. Many marketers focus solely on increasing the number of email subscribers without considering the impact on revenue.

Merely gathering a large number of subscribers doesn't guarantee revenue generation. The quality of those leads matters significantly.

A high opt-in rate means nothing if they don’t convert into customers.

Plus, you’ll be spending more on emailing the low quality leads, leading to an increase in costs without a proportional increase in sales.

This is why looking at your lead to customer conversion rate is just as important as looking at your opt-in rate. 

Make sure you’re optimizing for a high lead to customer conversion rate, not just a higher opt-in rate.

Campaign Revenue

You may think that emailing your non-customers on your list more frequently would add more revenue to your business.

But the truth is that 80% to 90% of your email revenue will come from existing customers.

Given the substantial contribution of existing customers to campaign revenue, you need to make a strategic shift towards prioritizing the time to first purchase.

To reduce the time to first purchase, you can offer a strong incentive for first-time buyers and provide personalized recommendations based on subscribers’ preferences (use zero party data!).

Use the strategies discussed above to increase revenue from your existing customers as well.

I’ll probably add a part three to this retention analysis series, but in the coming days, I’ll share a couple of stories related to scaling Meta ads from $0 per month to $100,000 per month and beyond.

Talk soon,

Sharad

@pmktg00

Next Steps

If you own or operate an e-commerce brand generating at least $1,000,000 in annual revenue, feel free to book a call with me to discuss how we can improve your ad creatives, landing pages, and email/SMS marketing strategy.

To further enhance your e-commerce and marketing skills, you may be interested in signing up for one of the options below:

1. Learn branded direct response copywriting and how to create high converting cold traffic funnels here.

2. Learn how to write advertorials here.

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