Email: Not Just a Retention Play

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[00:01:15] Richard Gaffin: Hey folks. Welcome to the e-Commerce Playbook podcast. I'm your host, Richard Gaffin, director of Digital Product Strategy here at Common Thread Collective, and I'm joined today as I always am, and here I am doing my exact same intro again, but I am joined today by …

[00:01:28] Taylor Holiday: Supposed to be mixing it up. 

[00:01:30] Richard Gaffin: I've thought about giving you a new nickname every week.

So I think I've tried the Sultan of Scale, but I'm joined by the Sultan of Scale, Common Thread Collective, CEO, Taylor Holiday. Taylor, what's going on, man?

[00:01:40] Taylor Holiday: Well, today we're gonna be talking about a channel that you don't hear us harping on that much email and SMS, but I'm

excited because I think we are really starting to hone in on how there's a novel angle to be taken with what is sort of a played out strategy.

[00:01:53] Richard Gaffin: Yeah, exactly. Okay, so let's get right into it then. So I mean, part of the, the impetus behind us putting this on, on the list of topics for our, for the podcast was that we're actually relaunching, as you kind of mentioned, we we're relaunching re our retention services, our email and SMS services. And there's this key difference though, at least in the way that we're framing it.

So, Taylor, why don't you talk through the way that we're framing email and SMS differently.

[00:02:17] Taylor Holiday: So one of the big novel changes to the way that we're selling, almost everything we do at CTC, is the sequence by which you get to the tactical execution. A lot of the conversations historically would be brands coming to us and saying, we need someone to manage our email, or We need someone to manage paid social, or We need someone to make seven ads. And what we found is that. That process is a lot like showing up to the car dealership and telling them specifically how to fix the car that you're driving while they're the experts in the car, and that there's an opportunity to say, hold on, maybe that symptom might be emblematic. Of an actual deeper problem that could be solved in a different way.

And so I think just like everything that we're doing, email and SMS, which we're trying to reframe away from the idea that those things are retention, I think retention is a much bigger word than the

channel. And the channel can support both new customer acquisition and existing customer revenue. Is a part of a plan that has to drive back to your financial objective as an organization. Then you can decide how important, how much resource and how to execute in this specific medium. And so for us, email and SMS flows out of the system. You hear us talk about this a lot, the profit system, which is to say that you need to have a clear expectation of the return that this channel needs to generate in order to com accomplish your financial objective. And only then once you have that clarity, I. Can you decide on the strategy that you need to execute in order to accomplish it?

And so for us, a lot of the work we're trying to do is take a step back with our partners and go, let's look at the model of expectation of the business. Let's then think about how much revenue comes from this channel. Let's talk about whether your business is gonna be one that depends on existing customer revenue or is all about new customer acquisition. And then in light of that, how should we use these tools to accomplish your goals?

[00:04:17] Richard Gaffin: Gotcha. So let's, let's dig into that last point then a little bit because we were talking before we hit record here about how or you were mentioning that a lot of the conversation around email and SMS and around retention in general. Is too tactical. In other words, it's like, Hey, do you have these five flows on?

Or just like specifics around, Hey, these are the best practices for email. But I think what you're actually saying is that there's a step back that you need to take to understand what email is supposed to accomplish or needs to accomplish for your business. So your point was there are certain brands that are just not high LTV, therefore retention becomes a completely different conversation.

That doesn't mean you don't need to be sending emails. So maybe let's unpack that a little bit like 

[00:04:54] Taylor Holiday: Yeah, so you brought up a great example. You'll hear a lot of people lead with, like, you need to have these

flows. And I would just say that for some brands, this is like a, people would be shocked to see how little revenue email flows generate for

some brands, if you have. Not great LTV in your high A OV product.

Your post-purchase flow is going to produce so little value for you. In the grand scheme of things that a bunch of money spent on it is a misallocation of resources. Alternatively, it might be critically important that your email capture on site. And the flow that comes off of that in support of new customer acquisition or even running lead gen campaigns associated with your ad ad strategy makes email and SMSA critical part of new customer acquisition. But until you understand, okay, what kind of business is this? Does it generate the bulk of its revenue from existing customers? Does it generate the bulk of its revenue from new customer acquisition? And therefore, what role do these channels play in both of those processes? And I think that's why it goes back to how much revenue do you need from your email and SMS, and is that gonna come from new people that aren't there yet there?

Or is this a strategy about extracting value out of existing customers? Once we answer, answer that question, then we can get to, okay, do we approach this from campaigns? Do we approach this from flows? But I even there, I would say it's intermediated by this question around the marketing calendar and what is the actual business plan that you have for messaging, which should inform how every channel behaves.

[00:06:26] Richard Gaffin: Gotcha. So we talked a little bit too before we hit record, about maybe some specific examples for a couple of different scenarios, maybe where email and SMS gets deployed differently, whether it's in a retention capacity or more of an acquisition capacity. So is there anything we can dig into there in terms of examples?

Yep.

[00:06:43] Taylor Holiday: Yeah, I'll, I'll use an example of our own brand BA that's easy to to think about, and then how the sequence here flows from a forecast that includes models of existing and new customer revenue to a marketing calendar. Across every channel to then how you execute in channel and how that's subject to change relative to your performance as you go.

'cause one of the keys here is that your channel strategy is variable relative to your performance expectations and the needs of that channel. Okay? 'cause I want you to think about your existing customers as a finite resource that you can extract value from only a certain amount of times. It's not like this infinite well that you go to and extract value from.

So. With Bamboo Earth each month we have an expectation of new customer acquisition at a certain level of efficiency that produces a certain amount of new customer contribution margin. In addition to that, we have an expectation of existing customer revenue and an email and SMS strategy that supports that, that's connected to the flow of communication across every channel.

So we have a new product launch, we have a promotion, we have whatever it might be throughout the month. You are going to design a certain number of emails that are going to produce an expectation of a certain amount of revenue. Okay? So that's the initial plan. A plan gets built down to each email having an expectation of revenue each time it's sent, every flow, having an expectation so that I can see every day where I'm at relative to that expectation. So when I send my first email on the first day of the month, I know if I'm ahead or behind of expectation relative to that target. So that's the, the, the foundation. But here's why it's so critical to connect these ideas. Let's imagine that in the first half of the month, my new customer acquisition efficiency is behind. I'm not able to generate as much value as I thought, or the inefficient, the efficiency is lower than I thought, such that I'm at risk of missing my overall business contribution margin goal. Okay, well, because this is a team game, this e-commerce growth thing, my existing customer revenue. It might be the moment to extract more value out of that group presently in order to support the overall profitability of the business that I need. And so we would set up every month a contingency sale that would be exclusive to

existing customers where we would take a subset of users, let's say customers who bought. Product A, but had never brought anything else in the portfolio. And we're gonna run a sale on some additional product exclusively to that group, but we're only gonna run it in the event that we're lagging on our new customer acquisition. And so it's there as a resource to ensure we do not miss the overall contribution margin goal. And it may not be necessary at all.

Now take the alternative of that. Let's say new customer acquisition efficiency is smashing and we are actually getting more new customer contribution margin out of our new group than we anticipated. Well then that is not the moment to squeeze the sponge and extract value out of my existing customers. I allow that value to be latently sort of built up to be utilized as a resource at a later date. Now, this is why, again, if you don't have someone sitting in the middle of

this from a growth strategy standpoint, orchestrating the relationship between these things, you are going to be squeezing and pulling in ways that are not connected and will sort of force you to have a much more volatile revenue period

versus somebody who's allowing you to hold onto both of those things at the same time.

[00:10:11] Richard Gaffin: Yeah, I was gonna say, like, I could see an, an initial objection maybe to what you've been saying here. The idea that like, email is, email's free, it's free to send. So we are, we can afford to be a little bit more willy-nilly with the way that we build it out, or just be, I don't know, lazy enough. I.

Or, or rather just send specific flows or follow best practices and not actually think through it. So complexly. But I think your point here is that like email is such a valuable tool that it needs to be incorporated in the whole into the holistic system. And the fact that it's free to send is actually not, it's kind of, sort of immaterial to that conversation 

[00:10:45] Taylor Holiday: Well, yeah. One, it's not free to send, right? Like

there's actually is a cost associated with it. And as your list grows in size, if you aren't clear about cleaning that and make sure the, the cost can actually grow a lot. Same thing with

SMS, right? There actually is a percent price here to consider, but I think the point that you're making that, like people treat it as this thing that I can just go pull from.

As needed. It, it, it's a finite resource. It, I want you to imagine it as a pool of money that you can pull towards yourself, but once you do something ha like there's a decrease on the other side.

Like, it, it doesn't just keep going. And this is why, again, I wanna be thoughtful about when I need to extract that value out of the existing customer set,

right? And there's this sort of tension all the time between how good am I doing at the new customer side versus the existing customer side. Now this also ties to what I see happen when you don't model the relationships between these things. And you just look at, like, one of the most common forecasting tactics is like channel revenue forecasting, like trend channel forecasting, where you look at like, how much am I getting from organic search, organic social paid search, paid social, direct traffic, email, SMS, et cetera, et cetera.

And one of the big limitations with that is that oftentimes, let's say email is down. Year over year in comparison to itself. But the reality is, the reason for that is it's a lagging indication of a, a reduction in new customer acquisition from the

previous year. And so people will say, but my email list is larger.

But they won't go look at a really important metric, which is the active customer file, meaning customers that have not yet lapsed and that has actually shrunk. And so there's another part of this service, which is the consideration of the size of your active customer file. Which we would define as the number of customers who are still in a window that is within the 80th percentile of time between purchases. Let me restate that 'cause that can be a little confusing. If someone buys on day zero, what is the average time between their purchases? That would be the 50th percentile. We wanna go all the way out to the 80th percentile to where we're saying like, Hey, if that's 180 days, then any customer who is still within 180 days is considered active.

Once they move outside of the period, they're considered lapsed or churned,

and they are likely not coming back. So you shouldn't include them. In counting the size of your customer file, because those people are dead. They ain't coming back.

[00:13:04] Richard Gaffin: Let's talk quickly about what is maybe unfortunately sort of like a novel part of this conversation, which is the idea of email as a new customer acquisition tool. Now, obviously, like everybody has like a welcome flow and a popup that shows up and, you know, to capture email or whatever. So that's always been part of the conversation, but I'm curious to, to talk through maybe about how we approach the idea of acqui of email as an acquisition channel.

[00:13:28] Taylor Holiday: Yeah, so for, is especially true for brands with larger a v or larger consideration timeline is that we have had success running. Lead gen offer funnels that leads that start with a contest entry or you know, a chance for some, you know, be first to notify about an upcoming thing, X, Y, Z, right? Where you actually use ads to drive to that.

And then have an email flow that's specifically designed off the back of that mechanism where you are literally saying, we are going to price out the value of an email and we are going to try to get emails cheaper than that price and we're gonna. Sort of constantly analyze is are those emails backing out to the value that we anticipate, et cetera, et cetera. And that can be a strategy that for a brand with low LTV high a OV could be really critical to the strategy of the business. Right?

There's also then the just sort of constant consideration of how we're handling onsite popups and our ability to capture new customer or the percentage of the site visitors that we grab into that portion of the flow.

So you have a large growing set of. Email subscribers, not yet. Customers that you're then activating against in a novel, specific way. And for some brands that is like 85% of the battle

of email, and SMS should be that part of the business because their LTV is never gonna be a huge portion of what they do. And campaigns that they have designed, generally speaking, accomplish the goal of achieving that result.

[00:14:52] Richard Gaffin: Is there anything else you wanna hit on this?

[00:14:54] Taylor Holiday: Yeah. I think the other thing I wanna say is that it's really important to know that when it comes to email and SMS, the vast majority of the value of this process comes from campaign sense.

Like I. in in almost every case there are, sure, there are exceptions where there are flows that are generating tons of revenue off of large businesses with lots of LTV, lots of SKUs, et cetera, et cetera.

But for the most part. The simplest way to make a difference in your email. And SMS, this is a, this is a channel that is about discipline and execution way more than it is about trying to come up with the next novel ad to

accomplish X, Y, and Z. Like, don't get me wrong, you wanna write good headlines, you wanna make sure you're keeping an eye on your click through rate.

You wanna try and improve those things, but I. If you do this next month, today's January 22nd, here's what I'm gonna leave you with. If you do this, I promise you, you will improve your existing, your email SMS revenue in February. Plan out every send that you have for the month of February on a spreadsheet, okay?

Down the line. February 1st, February 2nd, February 3rd. Am I sending, if so, what am I sending? Look back at your historical email performance against similar types of sends. Assign an expected revenue value against everything that you have planned. Sum up that number. Is that number growing or shrinking your email revenue?

And does that number get you to where you want to be on an existing customer revenue basis? If not design different emails to send or send more.

And if you do just that, you create an expectation with clarity to make sure you are getting to your revenue expectation. And then with discipline on the day one, when you send it, you go, was I a header behind of my expectation? Was I a header behind of my expectation? And you adjust your plan. And the only rule is we don't miss the projection, we don't miss the forecast, and you execute against that. I promise you will continue to grow your email revenue because what will that? That is the constraint that will drive the tactical ideation.

To accomplish the goal, don't start with the tactical ideation. Start with the plan, the expectation, and the measurement against that expectation. And that will drive your team to coming up with the tactics to accomplish the objective. And that to me is where we are like creating a foundational difference. And this goes back to the idea that that forecasting is not an exercise in modeling. It's an exercise in execution,

is that you have to have that expectation of every send. Otherwise you're like. That Monday email, was it good? Yeah, it was pretty good. Like, I don't know. Did, did. All right.

But where does it fit within the expectation of the overall revenue for the month?

You have to have an answer. Go make that right now for February, and you will do better in that channel. And if you haven't done that, call us and we'll help you.

[00:17:24] Richard Gaffin: Right on. Cool. All right folks. Well, thanks for joining us and like Taylor mentioned, if you wanna talk to us more about retention and acquisition via email and SMS, just hit us up@commentaryco.com. Click hire us. We'd love to have a conversation with you guys. Alright folks, we'll see everybody next week.

Take care.