🧠 CHAPTER 5: The Modern Buyer Brain: WHY MARKETING MUST CHANGE

0:00OmniSend just shipped something that I've always wanted. You can now connect OmniSend to ChatGPT or Claude and just say, where can my email and SMS campaigns be making more money? And it actually figures it out. It reads your store data, all your campaign details, your store history, and it tells you and the insights are legit good. And even better, you can then say, okay, let's fix that or build that campaign. And it actually does it right from your chat. It's wild. Now, if you're one of our listeners, you can get 30 % off for three months on OmniSend. Just go to the show notes. There's a link there.

0:31Or you can just use the code J30, J-A-Y-3-0 when you sign up. Now, if you're using another email and SMS platform and you want to switch to OmniSend, which is a great idea, they will do the migration for you. Just give them five days and then you show up with everything set, ready to go. Now, they've migrated thousands of stores from Klaviyo. And on average, they're saving 35 % on their email and SMS bills. If you're listening to this show, you clearly care about your Shopify business. If your store isn't backed up and protected, it could all be for nothing. That's why I tell every store owner I know who cares about their business, you 100 % need Rewind installed.

1:07It's a non-negotiable for me. One bad CSV import, one app that edits your store the wrong way, which has happened to basically everyone I know. One bulk edit gone wrong, and now AI making changes for you. Listen, Shopify does not have an undo button. Rewind is the undo button. Go to shopify1percent.com slash rewind for 30 days free on us. Links in the show notes too. Okay, chapter five in our series here. If you haven't listened to the previous ones, I highly encourage you to. We're doing a 10 part series deep dive on the modern buyer brain and what brands need to do in the next five to 10 years to win.

1:52Now, this chapter is called why marketing must change. And if there is one chapter in this entire series that might ruffle some feathers, it's this one. Because we're going to talk about something that almost every brand gets wrong. Marketing. Not marketing the way it's taught. Not marketing the way it's budgeted. Marketing the way it actually works in 2025. Now, which this might even be coming out in 2026. I'm recording this in December 2025. But this is very applicable, I guarantee, for the next 5-10 years. So let me give you the classic structure of a retail marketing budget. On average, most companies spend 70 to 80 % on acquisition.

2:35Now that means that's your ad spend, your people, you have an acquisition team, like your people, resources, and time. 5 to 15 % is spent on churn reduction, mostly last minute cancellation tactics or specialists. So, you know, you go to cancel your cell phone plan. Someone's going to try to save you. That's time and money. They might have an offer. There's some costs there, but five to 15 % and maybe three to 5%. Usually it's a lot less than that on member marketing. And this is actually completely backwards. Acquisition gets the biggest seat at the table. Retention is getting a folding chair.

3:21and the member marketing gets a little sticky note on the fridge. But here's the crazy part. The biggest leverage in not just a subscription business, but any business, but it's the only leverage that compounds. But here's the crazy part. The biggest leverage in an e-commerce business, especially in a subscription business, in fact, the only leverage that compounds is the piece brands invest in the least. And this isn't my opinion. This is math. This is everything the data has been screaming for the past five years. Here's the economic reality. Retention is the multiplier. A 5 % increase in retention, there's been, Bain & Co did a study on this, leads to a 25 to 95 % increase in profit.

4:11Not impressions, not clicks, not conversions, revenue, profit, real money. So show me another marketing lever that you can move by 5 % to see a 95 % return. There simply isn't one. And you can go into the detail on that study, why it works. But a lot of it's because increasing retention, they spend more, they cost less to market to, they refer more people. There's a compounding effect on it. There's no better ads that you can spend this money to get. There's no TikTok virality, except maybe like that one in a million post, not your ad account, super structure that your media buyer swears to in their secret life.

4:51Retention is the multiplier. It always has been, but brands treat it like it's a side quest. And marketing teams are generally built backwards. Here's how marketing teams are usually structured. A big team for acquisition, ads, influencers, funnels, small team for customer experience, and zero people, if any, dedicated to member marketing, like referral marketing. Member marketing is the thing that actually drives LTV. Referrals, community, expansion, revenue, brand advocacy. It isn't a job title in most companies. Now, imagine if airlines did this. Imagine if they spent all their energy getting you on the plane and absolutely none on making sure you ever flew with them again.

5:35Oh, you want a good seat? Good luck. You want a pillow? That's a different division. Oh, you want your miles to work? listen, go talk to Kyle over there. No wonder most loyalty programs don't actually create loyalty. So here's an interview or a line from the interview that I, that really, I think sums it up. Treating how you market to your members is more important than any other aspect of marketing. And I stand by this a thousand percent because once you acquire a customer, everything that follows is a compounding engine. Member marketing is the only marketing that it cuts CAC, it grows LTV, it strengthens referrals, it builds community, it increases your brand resilience.

6:20It literally trains buying behavior. Acquisition is how you get customers. Member marketing is how you build a business. Now the subscription death curve, which I've mentioned before, it's most subscription brands hit this exact same wall. And I've seen it thousands of times of stores like subscription brands using our subscription software. You know, month one, they see good acquisition. Month two to six, solid growth. Month seven, growth starts to slow. That's where most brands, customers start hitting subscription fatigue. Month 10, that growth is almost completely flatlined. Month 14, churn equals acquisition.

6:56And you have flatlined. No matter how hard you market, you're stuck. because eventually your acquisition will equal your churn. It might, you know, because a percentage, whether you're acquiring a thousand customers a month or a million customers a month, if you're churning 10%, you'll just acquire, you might flatline it at a thousand or a million, but you're still gonna flatline. And this is called the subscription death curve. And the brand is technically growing, but the curve is flattened because churn equals acquisitions. And unless you do something drastic to change, it actually never recovers.

7:30Reducing churn doesn't fix it. Reducing churn actually just moves the flatline a little bit further out. Increasing spend to acquire more just moves the flatline up, like meaning at a higher subscriber account. The only way out of this is referral based growth. Referral is escape velocity. And this is where the data actually gets crazy. So if the average customer refers just 1.1 customers, your business enters exponential growth. It's that hockey stick curve that is getting growing faster and faster. So it's called the viral coefficient. Now, if your customers refer 0.9, so that means like some customers might refer to some might refer one.

8:15But like if on average, it's 0.9, you will eventually flatline. It's so critical that you're above one. You don't have to be, have the average customer referring 10. As long as it's above one, you'll have that hockey stick growth because it compounds. Literally just above one. And if your average customer only refers five or 0.5 or 0.8, the growth will, it'll compound and you'll hit the flatline because like I mentioned, reducing churn pushes that flatline out. Increasing acquisition raises the curve, but it's still flatlines. referrals are the cheat code, but most brands think referrals mean share 10, get 10, give five, get five.

8:57Here's a link. No one cares about. If you say to most brands, do you have a referral program? They would say, yes. Does it work? Absolutely not. I did this talk actually at SubSummit and the subscription death curve, which you definitely need to watch. I'll put it in the show notes. I remember asking before the talk, Hey, everyone, tell me what your most important subscription metric is. And some people put up their hand and they said LTV, churn, customer acquisition cost, you know, all these different things. Not one person mentioned anything related to a referral metric. Nobody even knew it.

9:31Not one person, you know, those, so all these referral programs, like if you, but if you ask someone, do you have a referral program? They'll say, yeah, but it's these give 10, get 10, give five, get five, but they do nothing. In fact, they just attract the same low quality referrals as Groupon did, which eventually, as you know, what happened to Groupon. So there is an example in the last few years that is an awesome example of this. And that was Clubhouse during the pandemic. They actually had the best referral engine of the last decade. It was a glitchy app. They had zero brand identity. It came out of nowhere.

10:07They weren't even on Android, but what it did was you needed an invite. And when you joined, you only got five of them, which seems backwards because you would think, well, wouldn't something where I could invite as many friends as, as I could or share it as much as possible. Wouldn't that be better? But it's actually backwards because we do that. They don't feel valuable. And so what it did was it made people think about who they were using their invites on and they were finding the ideal customer for that app. And customers also felt slightly indebted to the person who shared it with them. And they were, people were proud to receive one.

10:47They, I remember when I got it and people reached out, someone reached out to me like, Hey, I saw you got, you got in, can I get your invite? I was like, are you actually going to use it? So there was scarcity. It created this desire and they felt indebted when I shared it with them. And it was something that I actually shared. Everything I sign up for, I get a link, give 10 % off to a friend. I don't think I've ever shared one. I can't even, I honestly don't think I ever have, but I remember when I had those five invites to share, I used them. If Clubhouse had offered 10 % off your first month or one free room, cause they were like these talking rooms when you join.

11:22I don't think that app would have been what it is. I think it would have died in a few, in a week, but I think it was their referral program that actually built it. That, that, that private, you couldn't just install it. You had to get invited. So what's the lesson from all this? Referrals work when the invitation feels like a privilege, not a coupon. Like that single insight should redefine how you think about member marketing and why marketing must change. Marketing has to evolve because the customer's evolved. Customers are overwhelmed. They're overloaded. They're so skeptical of ads. They're numb to discounts.

11:57They're immune to all these urgency timers on every single site. They're tired of being acquired like cattle. They want relevance, personalization, recognition, access. They want community. They want exclusivity, identity, and they want to belong to something. Traditional marketing doesn't deliver that. Member marketing does. This is the future. Member marketing driven by retention, not impressions. Growth driven by referrals. In fact, I was talking to someone the other day and they said, if you were to start a subscription brand today, how would you do it? And I think I would make it 100 % invite only.

12:41I would maybe consider allowing the first thousand subscribers to sign up, something along those lines. I would promote it. I would have, I would say the first, this is going to be a member only subscription. We are opening it to 100, sorry, 1000 subscribers. and then we are locking it up and that's it. After that, you can't get in. And then every single person that subscribed, I would give them three codes or three links that they could invite someone in. And I can guarantee you that subscription would grow like crazy because it's growth by referrals and it's growth by your existing customers.

13:21And then those existing customers would feel more connected to me as a brand. And they would be acquiring my ICP, my ideal customer profile. They'd be acquiring the customers that I want. So these ecosystems are more important than funnels and memberships are more important than transactions. Belonging is more important than blasting ads. This is a new skillset. This is something that brands don't have, but I think you should consider having a member marketing component, not just a component. I think it should be the largest part of your marketing team, a new budget, a new role, a new title. It's a new marketing era.

13:56Like this is how you market today. And man, with AI, we're all learning how hard I guarantee everyone listening to this, their search traffic has gone down. It's getting tougher to get found because AI is eating up all of the, the way that people are finding you. And if you're not in those results, you're basically invisible. Every single customer that you get is like a hundred times more important than they were a year ago when you were showing up in all the search results. So brands that make this switch now, they're going to win big and brands that don't, they won't. It's as simple as that.

14:32So at the end of each of these chapters, I'm giving a challenge and here's my challenge for this one. Rebuild your marketing team for the membership era. I don't care if you're a subscription, not subscription. Remember membership is not a subscription. So here's what you're going to do. Number one, I'm going to give five tips here. You're going to create a member marketing line item on your budget and come up with an amount that you can contribute to it. A member marketing line item, not customer experience. This is not your, your customer service team. This is empowering your customers, turning them into members, turning them into advocates, a real budget, like a real budget, like five to 10 % minimum of your total marketing spend.

15:17You're going to assign a line item to member marketing. That's it. That's one. Number two, appoint someone as your head of member marketing. Now, even if it's a part-time role for them to start, but maybe it's someone who's doing some other stuff, but they are also the head of member marketing. Just like someone needs to own it. Ownership is important. If you just say you're going to do it, but no one owns it, it doesn't get done. So that role is like to design experiences for existing customers to surprise and delight, to make them feel part of your brand, your community that we talked about.

15:56Go back to chapter one, where we talked about badges and member tiers. It's building referral programs, nothing to do with acquisition funnels. This person, this role has nothing to do with getting people in. It's building them out once they are a customer, making them feel part of your brand, upgrade, have a tier system, a badge system, part of your community, have someone who's head of member marketing. Number three, build a referral system that's worth sharing. So not get 10 % off, not none of those. Try, I would recommend like limited invites. So you get three, like if it's skincare that you sell, when someone subscribes, they should get three links or three coupon codes.

16:42And actually you can do this so easy. You can create, you can bulk create coupon codes and you can merge these into a spreadsheet and email them to your subscribers. I would give each subscriber the ability to give three, three month free offers to someone they know and love who's maybe struggling with a skincare problem. Let's just say whatever this could apply to anything. But as a member, I can give three, three months free to someone. It's very valuable and it's limited. So now it's has enough value that I'm going to take out my phone and text someone to see if they're interested in it. That's how, you know, you have a good offer.

17:23If I buy something from you and I get a link that's like, share this with your friend and they'll get 10 % off. I promise you, I'm not going to take out my phone and go through and go, Oh, who could use 10 % off. That is such an amazing offer. Who, who can I bless with 10 % off? Like I guarantee you, I'm not going to, but if it's something to the extent of like, we want to give you three exclusive links to give three months free to someone, we would love to give you more, but we unfortunately can't. I'm going to go to my phone and think who I can give them to. Now, remember you only need 1.1 referrals per person for you to have viral growth.

18:06So that's why three works because some people will do zero, but some people will do three. And as long as it's over one, you have that hockey stick growth. So these can be some kind of exclusive access that your members can give, um, like product drops, giftable months that we just talked about, like anything, but something very, very valuable. So it gets shared. Number four, identify your top 10 engaged members. These are your, your power, your power refers and interview them, talk to them and actually do something special for them, reward them and build with them. They are the foundation of your business.

18:47Like they, every great business is built on super fans, like your most loyal customers. And so you should know them intimately. It's really easy to do this in Shopify too. You can just go into customers, go into segments and ask side sidekick to create a segment for you based on who's purchased the most times or engaged with your store the most or spent the most and identify the top 10 % of your most engaged customers and ask if you can talk to them. But say you're one of our top customers. I'd love to get 15 minutes with you and see how you're using the product. you might find out that there's something unique across all those super engaged customers that they're using the product a different way than anyone else's.

19:31And that's why they're so engaged, but you need to know that be engaged with them. Last thing, create one member only moment this month, a moment. Okay. So this could be a live event, an event, or just do a Q and a, a live Q and a. Uh, you can do this on zoom. You can do this in a Facebook group. You can do this on Slack, wherever you communicate with your customers. A member-only product. Do you have anything dropping this month? Do you have some product going live? Give it to your members first. Let them have three weeks, two weeks access to it before anyone else and let them know. Let them know they have access before anyone else.

20:09But just think of one member-only moment you can do this month. So once you start marketing to your members, remember this is not just for new customers. This is for your members. Everything in your business becomes easier. Acquisition becomes cheaper. Retention becomes natural. Referrals become automatic. And growth, well, you know what? It becomes exponential if you hit 1.1 or higher. And this is why marketing needs to change. Going back to the very beginning, why it's backwards. If your brand can flip that, you can escape that flatline forever. That's it for this chapter. Thanks so much for listening.

20:47We'll see you on the next one, chapter six. Thanks, everyone.