The Shopify Retention Math Nobody Runs

26:36Think about it like a mobile video game. They're amazing for that and get a lot of inspiration outside of e-com. Because mobile games, there are so many of them and they have a little window to actually get you hooked. So what do they do? They provide a very easy win right away, maybe a tutorial, but then a second one that is a bit harder, just a bit harder, but you start accumulating a lot of wins quite fast. And then when it gets a bit more difficult, now you already spent like 20 minutes in. So you have this Veloza version, like I've spent all this time, I'd rather, actually it's called Sun Cost Fallacy.

27:08Sun Cost Fallacy. I spent all this time, let me spend a bit more just to unlock this next level, it looks exciting. And then two hours later, tell you like, what did I do? You got hooked in. So the same way, but spread out in the first few days, because we don't want to get people addicted. We want to get people to the right paths to build the right habits with the right products. So I provide people quick wins early on, two minutes in, congratulations at the end. And this way people start feeling that actually doing some progress while the actual results of the product are arriving a few weeks down the line.

27:40So you need to bridge the gap of where am I now? What do I expect? And how fast do I get results? Right? Most people don't sell painkillers where you take the pill and then 30 minutes later, you're good. Usually it takes time to accumulate the whatever ingredients are in the product. And eventually you need to bridge that gap so people don't cancel. Because for me, a cancellation, it's not even you lost the customer, you know, a single production. You lost all the potential LTV down the line because if somebody buys a second time, they're way more likely to buy a third time, a fourth time. That means the LTV compounds.

28:16You don't just lose a single transaction, you lose potentially hundreds of dollars worth of profit. So it's very important that you get the first 30 days right or whatever the billing cadence is till the second renewal and onboarding, dispelling myths, mentioning the, in a visual way, the value of cadence, what kind of ingredients are inside, how their lifestyle affects the results, all these things that a brand needs, they need to be front-loaded. And also with a visual timeline, hey, this is where you are, this is what's going to happen in three months. If you stick around, 96 % of people, they claim that they got the full results of the product.

28:53Like just stick around and there's no way you can lose, right? That's why a lot of brands are moving to a 90-day cadence. You see Fatih 15, in IAM8, even brands that start us 28 days or 30 days, like gurus, they're moving to, because this is where the profit is. So very interesting model. And once you get the onboarding done, I love to close that phase with a check-in, looking into how people feel after a week of using the product or 10 days of using the product. Because people are not going to feel any different, likely, but if you've done the right things, they will feel they're doing the right thing.

29:28like for example i don't know probably you can see you know shading like i'm getting some persistent belly going on here as a dad i don't like it and i started walking right and i started doing this for like a few weeks now i've been walking almost daily and obviously the bell is still there unfortunately but when people ask me hey how do you feel since you've started walking i'm like yeah i feel great i know i'm doing the right thing my mood has improved and overall i know i'm doing the right thing i feel the benefits i'm not going to stop walking right the same thing with the product. If you frame everything, you increase the perceived value, you show them they're doing the right thing, what the timeline is, people will start future-pacing themselves, feeling like the results that they're going to get in the future.

30:10So once I ask people a week, a week and a half later after the delivery, have you felt any early benefits? If they say yes, my mood has improved or any placebo effect or whatever, these people are way more likely to stay also in the long run, right? And if people say, hey, you know, I need more time to evaluate, that's fine. Some of these people will actually stay. It doesn't mean that they're going to cancel. But overall, in this check-in, I always make sure I seek for objections. Because say, like, again, here with these pills, I might not actually like the taste, but I know I'm doing the right thing.

30:44Like AG1, for example, people say they don't like the taste, but they know they need AG1 to achieve their health goals, right? Because they replace a lot of greens into one a simple shake. So overall, they might bypass the taste. But taste is very important. Likely, if somebody doesn't like the taste, they will likely cancel, statistically speaking. So if you know they don't like the taste, what are you going to do about it? If like with the coffee brands I've worked with, offering a free creamer is the next, you know, best thing. Bring recipes that you can customize your drink, right? So knowing in advance what objections might lead to a cancellation and knowing about them and doing something once you have the data is very in the first 30 days right i know brands they're sending like a postcard to everyone it's like very expensive just randomly set postcards or you know a lot of sms etc but if you know you're sending the right message write a postcard write an sms and push notification to the right person you know you can maximize roi in a very short window because your goal is the second order and once people start feeling the benefits of the product, retention is going to be way more likely.

31:50They actually feel the benefits, you know, why would they want to leave if they are a part of a community, they love the brand, they see some benefits now, right? Like their value for money is there. They will stop feeling that they want to keep going, right? So overall, this is very important. The first 14 days, very important. And then finally, speeding through the billing reminder phase where a lot of people are going to be reminded that they're going to have to pay in a few days or they're repositioning from money lost to value gained, maybe with a freebie, maybe with a reminder of how far they are in their journey, you know, that the benefits they're getting and that they're just a couple of orders away from becoming a VIP.

32:32If you have a VIP to you or something like this, it's going to get people closer to the graduation of the first three months. Because statistically speaking, That is a big insight that I got from my analysis. The first 90 days is where most of the churn happens. A lot of brands are losing up to 80 % of the customers in the first 90 days. The best brands are losing 50 % to 60 % of the customers. Meaning, even if you're doing everything perfectly, you will lose more than half of your customers in the first 90 days. But after that, the churn slows down, sometimes below 10 % every month. So my goal for my clients has become to optimize as hell the first 90 days and make sure people graduate from that big churn drop.

33:16So after that, they way more likely have experienced the benefits, to love the product, to make it a part of their life, to be part of the community, to enjoy themselves being a person. When the product is promoting and they don't see the product as something external, it's a part of their life. But to get to that point, you need to optimize the first 90 days. I'm going to take a step back. I've talked a lot. At the beginning of the show, I told you why everyone serious about their Shopify business should have their store backed up and protected with Rewind. There is no excuse not to. There literally is no undo button for Shopify.

33:52Shopify's own terms actually say that your data is 100 % your responsibility. Your products, your theme, your customizations, your settings, everything. They don't back up any of it. And no, a CSV export does not cover it. With CSV exports, there's no images, no metafields, no themes, settings, etc. Nothing. I was talking to the people at Rewind about a brand where one team member actually ran a bulk update and accidentally overwrote 11 ,000 products. Orders, customers, contacts, all of it gone in a single action. Luckily though, with Rewind, it was a simple one-click rollback. It could be anything.

34:31A bad CSV import, a random app you just installed that messes everything up, or all of these AI tools that everyone's using to manage their store now. I have heard so many horror stories. Rewind just gives you peace of mind no matter what. If you don't have Rewind installed, you absolutely should have it. Go now and get it. Shopify 1 % dot com slash rewind. You'll get an exclusive 30 days free on me. The link is also in the show notes.

35:02you give a masterclass there and the, and the, well, all the way from acquisition to 90 days. It's interesting. I had a whole bunch of thoughts where you're saying that, but two, one, one, I absolutely think everyone should, if you are not a gamer, play a video game. The thing about a video game is they don't even send instructions anymore. Like it used to be, I remember when I got a Nintendo game, when I was a kid, there was instruction book. You don't, you get a card. Most of it, you just download. There's zero instructions, but the game, the complexity reveals itself as you play it right and it teaches you instructs you and you're right you solve little things and there's a lot to be learned from the gaming industry like they have mastered that and i think commerce brands are way far behind in like what could be done compared to the gaming industry the second thing is i so much believe that education and like knowledge is value And you like just to reemphasize a little bit of what you said, I have a Greens subscription as well.

36:02I actually did. It's funny. I think I missed probably like my last six days of taking it. And just this weekend, I was watching a show on Netflix and I can't remember the title of it. It's a documentary up where they take twins and they study the effects of different diets on twins because twins are very much the same as close to the same as you can get genetically. And so if you give one twin a certain type of a diet and another twin a different diet and it has different effects, you can largely assume it's the diet impacting it generally. There are some other outside facts, but it's as close as we can get.

36:36Anyways, one of the things that they test before they start giving the different diet is they test brain function, cognitive, lean body mass, respiratory, heart. You test everything for benchmarks and microbiome, your gut microbiome. And in the show, they were talking about how when you have an unhealthy microbiome and you don't have enough vegetables, there's a lining in your gut. It's like a mucus lining that if you don't have enough healthy vegetables in your diet, that wears down and your microbiome can actually start eating away at the wall of your gut. And it's funny, I watched this yesterday and today I had my greens.

37:13And I didn't even I didn't even connect to that until now. But I've you've out when I mean, the placebo effect is they've done studies where they've like told people about vitamins that aren't actually vitamins and people feel results and they'll actually tell you that they feel better. They feel healthier. So, you know, even whatever you sell, the knowledge and of, I would even say this applies for everything, not just subscriptions, but like if you sell a couch or a shirt, telling them about how it's made, how the material is sourced, how the leather is farmed or treated, like understanding it is so important.

37:51It's like the only reason a$10 bottle of wine is different from a$50 bottle of wine is just knowledge. I could look at them on the shelf. You could blindfold me and I probably couldn't tell you that much difference. But once I know about the farms they came from and this, I just appreciate it more. That's where the value is. And so I think I'd love to get your thoughts on this. I often tell brands there's this like half-life of excitement. from the, when the second someone clicks checkout, there's a half, like they've done studies where that's where like the brain, the firing of endorphins, it's the biggest dopamine hit of a shopping journey is the second they click checkout.

38:29And I've talked about this on the show before, like sometimes me and my wife have bought something big and we're like, okay, should we click checkout? Should we click checkout? Let's do it together. And then we both click checkout. It's like this like moment of excitement. And then usually like you just, you get an order confirmation email laughter. But we're so excited about like that new whatever we just bought. And I could probably get an email from the brand that moment, probably an hour later, probably three hours later. And I'm not going to be upset. You know, I'm not going to feel like, oh, this brand is overwhelming me.

39:01But they're teaching me about what I just bought, telling me what to expect. This is what you can start expecting after you start taking whatever it is or the health journey has begun and here's some examples of other people and their stories because I'm so excited. That's when I'm going to want to be reading it. But if you ignore that period and then you start emailing them later, you've lost them. People are going to just go, oh, this company emails me too much. I'm going to just unsubscribe. But they don't take advantage of that window of the first 12 hours. And I think that's the golden opportunity.

39:32What's your thoughts on that? And do you have a strategy? Actually, I kind of disagree on sending too many emails, too many SMS, too many messages. overall. Most people, when they say so, I've dug deeper and what they actually mean is that they're sending the wrong message to the wrong person at the wrong time. Imagine if right after you've purchased, you go to the thank you page where there's a hundred percent open rate. You know, there's a hundred percent open rate on the thank you page once you've purchased and a hundred percent open rate when you open the box, literally the button you receive it.

40:03So if you have the right messages over there, people will see it and you will maximize the exposure and the compliance. Meaning, say the thank you page, you're asking people, all right, why did you buy this today? Say there is a, you have a different survey based on the hero product they bought. So they say about this for energy or about this for my gut health or about this to sleep better, whatever. It could be a product with different benefits. So if you know why they bought it, what the goal is, now you can tailor the communications down the line. So now you're sending the right message to the right person.

40:40And then the last thing is the right time. And I found that if you send daily messages that make sense in a structure, actually people don't slow down with opens, with clicks, with engagement, and that increases retention. So it's all about finding the perfect system for your brand to maximize this engagement, because people usually tune you out when you start sending blasting messages screaming at people like an obnoxious person at a party trying to make it all about themselves screaming about random benefits that you don't even care about right but if you bought something for energy specifically imagine if they just said send stuff about energy and how to achieve your energy levels goal now you're all about this you actually care you it's there is a person you're having a conversation with now people are way more likely to be engaged, to click on that stuff, to comply, to take part in whatever you're sending them, and eventually to give you zero-party data so you can try to save that churn of potential objections.

41:43So, I'm asking for zero-party data on the thank you page, on the first email, which you get sent 30 minutes after the first purchase, during the transactional, where is my order? And then finally, when you open the box inside, there is a final call to action so you can take the next step, declare why you bought the product. And then all these data feeds back into the same system that personalize the communication afterwards. There's always a fallback version. If you don't have this data, there's always going to be people that never submit this data no matter what you do. But there's going to be a fallback version.

42:17And some of these people are going to stay. Some of them are going to churn anyway. Some of them are going to be a coin toss. And additional interesting education that is generic enough, but feels personalized in a smart way, can do the trick. But overall, I've seen that if there is one point of personalization, it has to be not, you know, all these too many complex flows that have 50 people per branch or something. But ask them, what is your goal? Why did you buy the product today? What's your motivation? If you have this information, you can meaningfully personalize the communication afterwards in the first 30 days or 60 days, whatever the cadence is.

42:52Yeah. And just to put that into practical terms for people listening. if so you're segmenting them based off of when you ask a question, survey, post, post, or thank you. I think you can even like, I would say you could go as early as like the email collection tool you're using at the beginning. If it's like at that, like what's your, why are you interested in this product or what are you trying to do? Yeah, let it pop up before you purchase. Yeah. And then you're putting a different audience segment in whichever email tool you're using. Yeah, exactly. Yeah. So just making sure that all the information is actually streamlined.

43:28So when somebody clicks on the thank you page widget versus the scan in the box versus the email with the survey, just make sure the data you're collecting is actually feeding into the right segments because each one might have a different way of communicating the data, you know, structuring the data. Make sure you know who these people are that prefer gut health over energy. And you send the right message accordingly. Yeah. I had this written down because I think you've talked about this a lot. You call it the belief engineering in the post-purchase window. You've got the five unspoken objections, which I think we've talked a little bit about most of it right here.

44:08But I just want to make sure we cover them all. It's you have fit, worth, believability, trust, and alternatives. That's the five unspoken objections. Do you have any specific strategies or can you speak to each one of those strategies you use that you've seen work well? Yeah, I don't tackle them per email, per message. I usually embed clues that these things are, you know, how to tackle these things in different messages. For example, when I add social proof or testimonial or numbers of how many people have enjoyed it in the last month or something, that is believability, not believability, it's social proof.

44:47It shows that people are trusting this. You know, it's something that you actually trust. When there is, say, scientific studies, that increases believability that what you're claiming is actually happening because it's been blind tested. There is a study, you know, there are many studies. And usually that's how science is used as marketing. You back up your claims with something that is official, that people can trust. And overall, I don't really mention the competitors because usually it's free marketing. I've tried in the past, but I will usually think or investigate what solution people have to fire so they can use your solution.

45:26It's the jobs to be done framework. Right now they're solving the problem in one way or another. Usually badly, they have objections and they want to fire that solution so they can do it in a better way, more tasty way, faster way, more affordable way, whatever the reason is. So if you know what they were using before, or if you ask them and find a way to fit your solution in it, then that is going to make things much faster. But I usually don't advertise the competitors because it will open up their eyes. And I've seen very often people like there are so many brands right now that are launching and expanding the markets of these spaces.

46:04Like when Groons launched, for example, they competed against AG1 initially, but then they opened up a new market. the affluent older ladies market that prove something that is healthy but also fun so that they got acquired very fast because they didn't just steal customers from age one they opened up a new market so you will be surprised if you ask your customers did you purchase from any other brand in this space before this one likely they will say no right the vast majority they say no so that's why if you advertise the competitor you will usually do more hard than a knot but also quite the opposite as well.

46:41If you know that a competitor is bad at something, you can attack them via ads. I've seen this happen in the past. When these ads were running, the majority of the new customers were coming from a competitor because they were switching, because the competitor opened up the market, educated the market about the product, and then a brand came with a better product and stole these customers to a superior product. So overall, I would say sprinkle things. You don't have enough time to basically go and teach people, hard teach people. It's getting boring as well. But keep things exciting by sprinkling your truth and tackling all these objections in a way that people don't feel like they're being sold to.

47:19Yeah. Right? And I mean, the Gruen's example is a great one because you're in the messaging. They're not even have to say you're competing against AG1 or any other Greens. You're competing against maybe bad flavor, bad taste. Like maybe greens don't inherently taste good. And you're competing against that with like gummy greens that do taste good. So that's what you're competing against. The job is that's being done is you want better flavor. It's not directly the company. So you can say it without saying the brand name and giving away that pre-exposure. You've said lifting 30-day repurchase rate.

47:57Tell me if I'm quoting this wrong, but lifting 30 day repurchase rate by 15 points can equal seven and a half X more profit over two years. I want to dive into that a little bit. How the math on. Well, let's do that first before I ask the next question. How does that work? A 15 percent increase in my repurchase rate can equal seven and a half X, seven and a half times more profit over two years. Yeah. So I've developed a lot of different tools to measure what is the fastest way for you to increase your LTV. And one of these tools was a simulator where I would change different variables and it would calculate profit with certain assumptions that you have a contribution margin of 60%, for example, a CAC that increases slightly every month to account for inflation, all these real life phenomena.

48:47And then I would change a few things to see which one drives the big lift in actual profitability. And the reason I wrote the book, Retention Economics, is because brands can have a lot of revenue, but they, especially when the tariffs started appearing last year, they started realizing that they are a bad month away from not being able to buy more product, to pay themselves a salary, right? And everything was way more fragile. So, overall, I developed these simulators to find the best way to increase LTV, aka cash flow. And what I found is that improving the retention rate in the first 30 days was the fastest way.

49:22And I run different numbers. I played with different sides of brands. And eventually I landed into this kind of compound effect on profitability. Again, I can perhaps show like the actual calculator. I don't have it ready in front of me. But I was running all these kinds of simulations to identify, you know, how things affect each other. And I landed into these numbers. And eventually I even developed a tool called Atlas for the book, which whoever buys the book, they can access this tool and play with the numbers themselves and see, hey, I negotiate 5 % cheaper price on ingredients. How will this affect my profitability?

49:59You know, I get more upsells and increases my top line revenue by 10%. How does this affect overall my cash flow in the next month? You know, how can I make sure I can buy, I can pay in advance for next month's growth? What do I need to change? And then you play with the numbers and eventually you see what combination drives the best results. And then you focus on that. So I created this P &M calculator slash simulator so you can find the best levers for your own brand as well. And I mean, the way I think about it simply, I don't know if this, but if you are paying to acquire a customer for on the first purchase, you might make hardly much at all.

50:41Like you might have a$60 product and you pay$40. That would be a great CAC. You can get a$40 CAC through Instagram or TikTok or wherever you're running your ads. You've got$20 in there. Just make it easy numbers. I know there's costs and everything else. But now if I get them to purchase a second time and it's a$60, well, I've 3X'd my profit. This is not the right math because there is a ton of other expenses, but rough numbers, you would think it's not just doubling it. That would actually be 3Xing. And actually, realistically, my order on that first product is probably only like$5 or almost nothing.

51:17So now my next order is actually like 10Xing the profit because I'm not paying CAC, essentially, on that first one, you're spreading it out. Plus, there's all the benefits of customers who order more, they are higher referrers. They refer more other customers. They're likely to stay around. they're likely exist. If you show cross-sells and upsells, we know that existing customers are up to 25 times more likely to accept an offer than a new customer. So you've got this kind of right body. And it's like, I think if you, I know you're just looking at the retention side, but if you expanded that out of the impact on the referral side, cross-sell and upsell offers and other, like it's probably actually more than seven and a half times.

52:01Yeah. And I took into account the common pattern of brands having a payback period of three months. Because a lot of brands that don't make money upfront, especially if you are subscription first, it just makes sense that you pay more upfront for the right subscriber that will stay longer. There are brands that are breaking even on month five or month six, because they know by month 12 or by month 18, they've made way more than spending less money upfront and being profitable right away. It's quite rare nowadays for a brand to actually be profitable in the first order and attract the right customer.

52:40It's quite rare. There are brands out there, but usually we don't advocate for this. There is a competition. If the market is sophisticated, the market is ripe, usually spending more makes more sense because you attract the customers that usually others cannot attract. Right. So you create a new market and they're more affluent. They're also more sticky. and eventually you get longer retention. And every time somebody buys a second time or third time, there is also a waterfall effect because not only there are more people available to buy a second time, but these people, because they were onboarded, they were educated, they're stickier and they stay also longer, right?

53:18So you have this waterfall effect that eventually drives this way more superior profitability down the line. So even if you lose money upfront, you can make much more down the line by increasing the retention of the first three months. Now, if you pair this with a retention of the first 90 days, when most of the time happens, everything becomes golden. So yes, overall, the takeaway here is that improving onboarding, improving the first 30 days, getting people to purchase a second time from order one to order two, maximizing that number and people knowing they're on a subscription, not the accidental renewal, this will have the strongest waterfall effect across profitability a year down the line, which is where the golden, the pot of gold is.

54:03Yeah. So then one point on that is you also wrote that in a lot of the stores that you saw, customers who had to contact support in the first 30 days turned up to, I think it was 60 % more than other customers, which is brutal. It is brutal, yes. I just want to ask you about this because it's interesting. This is a metric that we look at bold. we look at when someone installs one of our apps if they do contact support or if they don't contact support and then we look at the effects on, we call it activation so activation would be they keep it past trial. We don't consider someone a customer if they're on trial and once they're off trial and then they're activated.

54:40We actually see the exact opposite. So we see that when someone reaches out to support I think it's over double the odds are that they're activating but it could be different types of support but we're very, we take it very serious about like how we help the customer and we turn it, we try to turn it into an opportunity to guide them, help them, onboard them, teach them, you know. So like when we get an opportunity to talk to someone, it's like gold. And I'm assuming when I read that stat that these are supports for other things and a lot of brands are missing the opportunity here. Is that what you're seeing?

55:16No, exactly. You're spot on. Actually, this correlation with support tickets and churn is for negative experiences. So when you're reaching out for support being frustrated or when you're reaching out for a common question, but it doesn't get answered. Or when you see that the customer service is not up to par, this negative experience drives more churn. So overall, it's not just like anyone reaching out to anything, you know. Let's say you're sending a love letter, you know, to the brand. This is a positive support ticket. But if you're reaching out because they have a question or because something went wrong and then customer service goes away beyond what they should do and they get you delighted, this does have a positive correlation.

55:56I'm talking about a negative experience. Overall, brands cannot really measure this properly, but they can feel it. The customers can feel it. The overall customer experience. How does the product feel? Do people like what they see in terms of branding before they purchase the product? Do they feel this is a cheap knockoff or do they feel that actually this might be the solution to what I'm looking for? Is there any endorsement in advance? Do they get a box that looks beautiful and they enjoy the experience? Or do they get something sloppy in a dirty bag, you know, that they have to cut through and then everything is spilled already?

56:30Does it take too long for the product to arrive? When they reach out to support, do people come back to them with great answers and accommodating their requests? All these things, they add up. So it's not just custom support. It's the overall customer experience. And if you disappoint somebody initially, it doesn't mean that it will eventually cancel, but it just accumulates. Negative experiences over negative experiences make people eventually feel cheated. They feel scammed sometimes. I've worked with some amazing brands that happen to look extremely good in the public eye. But when I work with them, I saw that the backend was a mess.

57:09Customer service would not reply. that would discontinue products without letting anyone know. If you bought three products and two of them were available, but one of them was out of stock, they would not ship the full order, just wait for the other thing to come on stock instead of shipping the two products available. Eventually, people would call them a scam on customer support and even on Trustpilot, et cetera. This cannot be out-marketed. You cannot out-market a bad customer experience. You can only hold on for so long a customer experience that creates positive feelings has a positive effect because it increases the perceived value of the product.

57:46So it's not just custom support. Overall, make sure we have a great brand. At the top of the show I mentioned, OmniSend can now talk to ChatGPT and Claude. And I want to tell you why that's even bigger than it sounds. So if you missed it, quick catch up. OmniSend is what I use for email and SMS on every Shopify store I work with, plus for this show as well. And you can now connect your AI, Claude ChatGPT, straight to your OmniSend account. Your data, your campaigns, your flows, everything. You open a chat and you ask, what should I focus on this week to make more money? And it will come back with real answers about your store, which flow is underperforming, which automation needs improvement, which customers are going quiet, what's missing, everything.

58:29My favorite part though is AI segments. I used to build these by hand, clicking through filters forever. Now I just type something like customers who bought twice, but ignored my last campaign and it just builds it. And anything it writes already sounds exactly like your brand because it pulls from all your previous emails, from your website, your logo, your color, your voice, everything. I've been doing this for 15 years and this is the closest I've ever felt to having a full-time marketer sitting right beside me. I have a link for you in the show notes that will give you 30 % off for your first three months or you can just use code J30 when you sign up, J-A-Y-3-0.

59:05If you're ready to migrate from Klaviyo to Omnisend like thousands of others, they will do everything for you. You just show up and all your campaigns and automations from Klaviyo will be set up and running in OmniSend, ready to go. And usually at 35 % less what you were paying Klaviyo.

59:24And I would also say those brands have not empowered their support team to properly solve and delight the customer. Because have you ever had an experience where something has gone wrong and then you've talked to a support person and they've owned the mistake and they say, you know what? We screwed up. I'm going to send you another one and go out of my way to solve this. And then you end up kind of becoming a bit of a fan and an advocate for the company. But had you just got your order and there was no interaction and nothing, you'd be happy, but you wouldn't be raving about them. But because they fixed the problem, it almost, you can actually take someone who's angry and turn them into a fan.

1:00:07But the support team needs to be empowered. And I think that's a big miss for a lot of brands too, is they, you know, I was talking to someone on a recent episode and they actually were thinking about engineering in a mistake. So interesting. So imagine, you know, you said earlier, okay, the average product comes in five days, let's just say. And so if someone clicks on shipping and they, it doesn't, the shipping doesn't get updated for the first day or two days or something along those lines. But then an automatic email went out from one of the people in support and said, Hey, Thomas, I noticed your order accidentally sat on our warehouse shelf for an extra day.

1:00:47It should have gone out yesterday. I take full responsibility. I'm upgrading this to overnight for you and we're going to get it out tomorrow. And I threw in a little gift in there for you on the house. Thank you so much. Now, you might have already been going to, you were maybe already going to ship at Express anyway. You maybe already were going to have a gift in there anyway, but you engineered that experience and you might feel like, wow, they really went out of the way and you are going to tell someone about it. So I don't know if I'm fully, if I would engineer the mistake yet, but I do think empowering your customer support team to at least have some range of what they can do to solve a problem, I think is a big part of that number.

1:01:26for sure you know that speaks for you about the customer culture the culture inside the brand how much you empower your team to take accountability to do the right thing versus just blindly maximizing profit and looking at people as numbers right yeah i'm not sure if i would go all the way to engineer this mistake imagine like people raving about it and then like oh i actually have the same thing oh i had the same thing too fair enough that would turn dark quite fast. But I really like this idea of potentially doing something that people can talk about and still not identify it as a mistake, you know?

1:02:02So yeah, I really like this. And there is something that I, it's not related to what you said, it's kind of indirectly related to it. When you ask people to claim things that they would get anyway, in terms of freebies or a discount. Usually people are more engaged. They feel they've earned this reward and also they stay longer. We've tested this. We looked into 90 day retention. People that say you offer 15 % off every month to everyone. If you ask people to claim in the first month or even in the first days, something they would already get, people not only engage more and imagine you ask them to claim their discount for the next order and then you ask them for the reasons about the product so now you can personalize you get more people to submit zero-party data but these people also tend to stay longer not just for the next order but also longer term now imagine you're giving freebies in the second order and you have to claim the freebie they would get anyway again this increases the retention not just short term but also long term and it goes without saying adding freebies versus no freebies, it does increase retention.

1:03:09Freebies always increase retention. The question is, does the cogs, additional cogs of the freebies get recouped because of your superior retention and LTV, right? So this is what you need to look for. But always you will have a better retention with gifts. Now, if you ask them to claim the gifts that they will already get, you'll get even better retention. So there are little hacks that I would say, you know, white lies or like engineered, basically momentum that eventually go a long way. Do you have any thoughts on what are good gifts? Because I've heard some brands say they really struggle with this.

1:03:41Like they can go on Alibaba and buy a whole bunch of some little cheap thing to add in, but then people just throw it away anyway. I'll tell you, my advice is very specific. Look at your product and how people behave, the culture around the product. Whatever they would already buy by themselves and pay real money for, get this gift, but brand it for your brand. So people will feel, oh, I was going to spend money on this anyway. And now we get this amazing thing. And now they use it every day or quite often. And it reminds them of the brand. They talk about it like, oh, actually, what is this? Oh, this is something that I'm trying, right?

1:04:17And I've seen brands, they try expensive gifts or they try a towel or like a bag or like a hat, like little merch, right? These things can work, but overall, people will not really drink coffee and then, oh, I need a hat with this coffee, right? so but a glass or a frother makes a lot of sense when you have say i'm working with a brand that sells liquid shops for wellness that once you open it once you open the bottle you have to store it in the fridge so it just makes a lot of sense to basically sponsor the fridge when they open the fridge it's stuff that you have provided like containers and little trinkets you know things that people would already use in the fridge so now you are on top of mind you're everywhere or like a magnet on the fridge, which you have to open to get the bottle, right?

1:05:09So now the magnet is like a little contract and you can just monitor your streak, et cetera, or even scan the magnet and go somewhere in like a loyalty page. So there are so many cool things you can do. But my advice is always, what would people use around your product anyway? So instead of them buying it, buy it for them and you can get things in bulk or you can run a test run of a few thousand copies and see how it impacts retention and find the economics and then double down on it. But overall, just give them something they would buy anyway and they feel now they got way more value. You know what I'd be tempted to try?

1:05:44Are you a coffee drinker? Oh, I love my coffee. I'm pretty close to starting my own coffee brand as well. Oh, okay. Well, then maybe this apply to you. Well, if you have a retail, if you go into Starbucks or somewhere, like a number of coffee places, they'll often have like a punch card. You know, you buy, yeah, buy 10 coffees, get your 10th one free. and I always say there's one close by where I live and every 10th coffee is free. But like when I get my free coffee, I'm not super excited. I'm just like, yeah, I earned it. I got my 10 coffees. I, whatever. But I was thinking recently, if I went into that coffee shop and if I didn't have a punch card, but just after 10, the barista just said, hey Jay, this one's on the house.

1:06:24You come here a lot. Thank you. Thank you so much. This one's on us. I'd be like, wow, that's amazing. I would probably post it on Instagram or tell people about it. And same coffee, same value, but one was unexpected and one felt transactional and earned. And I think there's a world where both are important. The gamification and earning and milestones, I think that's all super important. But I would be really tempted to build in surprise gifts that feel truly like a gift, not like you're earning it. And to truly feel like a gift, it has to be not something that you've done to get it. And I don't know if this would work for all of them, but I do love the idea.

1:07:07If you have a subscription and if you can figure out that, okay, you're at eight months is your average turn or something. And I would actually even try to like predict this a little bit. But anyways, if you could reach out and say you've got a subscription for$29 and whatever it is, I would try to see if I could bake this in or say, hey, Thomas, I would have an auto email. that went from the founder. This month's on me. Thank you for seven months. And I just wanted to send you this month on the house. And we're super appreciative of you. And I'd probably also include some type of a referral link there as well too.

1:07:41If you know someone else that might benefit from it, because I think there's something there for those surprise gifts, but I'd be tempted to play with that too. Have you experimented with that at all? Yeah, this is just being a good business owner. And when you have a brick and mortar shop and you know people by name, you can do this more effectively digitally and doing it at scale. It's more difficult or random, right? Because usually there is an outcome, business outcome. You can't just send three free gifts to three people. Yeah, I mean, they will talk about it, but usually you're trying to increase retention at scale and make it meaningful for the business as well.

1:08:18So it's what we call the surprise and delight when it's truly a surprise. So yes, indeed, you can look into, like you can see the first three months that have the biggest churn, obviously every brand and after i slows down we can start looking into the cadence between orders this is my favorite trick i calculate initially say the script change every 30 days right so the cadence between orders is going to be 30 days but then after that you're going to have people pausing skipping canceling coming back after a while so the number starts increasing say at some point you see there is a typical two-day increase of the previous month you know every month and then at some point there is like a five-day increase right so this is month eight okay so this could be a sign that now people are delaying more and eventually they're accumulating more product so you give them like a little gift to make sure people don't deviate from the desired behavior which is to keep ordering the product i would not offer more i would not offer i would not make the problem of having too much product even bigger i would likely offer either a free product or a commitment offer.

1:09:24Hey, you know, actually, if you come in for the next three months, you get a one month free, right? Like we don't do this for everyone, just for you. This works really well because you front load commitment. And I've seen many cool things founders do when there is a community, just engaging with people and asking them questions, asking for their opinion, polls, and eventually even rewarding people with free product or gifts or, you know, whatever freebies when people engage. I've seen founders just being like, hey, you know, tagging the community manager. Hey, you know, send a free buy to this person.

1:09:58That was an amazing comment. Or if somebody creates something amazing that people can use in ads or other people like commenting and like, wow, this is great. Where can I get one? Like, yay, give this, you know, person three, three months or something like this. Basically rewarding people for doing the right thing, for engaging with the brand and for creating culture around something that is otherwise soulless. You know, there is a transaction, there is a product, there is a factory line, but then there is people. And if you empower people to do their thing, to express themselves, to spread the word, and you reward them for it, and what the book Hooked calls random rewards, you know, if people know that they're going to do this and they're going to get a reward, it doesn't matter as much, as you said, with a punch card.

1:10:43But if people get randomly rewarded, they don't know where the reward is going to come from, but they will do the right thing. They will engage, they will keep buying, and eventually they get rewarded. And this is, it drives, you know, better results, better reactions than just something that is predicted, something that is transactional. It's culture, it's humans. And as we go more into AI, I think humanity is going to play a more important role into any brand's culture, right? So I'm a big advocate of this. That's why I'm tempted once I retire from DTC to open my own coffee shop and just talk with people.

1:11:16If I make any money or not, it's not going to be a huge thing. But just to talk with people and see their delighted faces when I do something that is unexpected. So this is a big thing that I want to do when I get a bit older. Amazing. Thomas, tell me about your book before you wrap up. You published it. Tell me all about it. Tell me why you wrote it and what the purpose of it is. so i was full-time at a brand called everyday dose up to 2025 beginning of 2025 when it was about time for me to leave i thought i'm going to take a break i'm not going to work with clients right away but i'm going to start writing the book that i want to write for quite a bit of time and then president trump introduced the tariffs and people started posting right and left that actually we're way more fragile than we thought we don't have enough money to pay our staff or get ourselves a salary.

1:12:05I'm like, this is the perfect timing to write this book, to talk about the P &L, about the retention economics of running a business and the impact of retention on your cash flow. It took me six, seven, eight months, more or less. I wrote the first draft. I gave it to a few smart people in the industry. They gave me their opinion. I made tweaks and eventually I self-published it. And right now it has sold more than a thousand copies. It's been endorsed buy Recharge, buy Postscript. They buy hundreds of copies for their clients, for their people working there. Many people have purchased themselves.

1:12:38Amazing brands have read it, amazing marketers, amazing tech platforms. They bought, I'm surprised, by looking at all the cool logos of people that have read the book. So, so far, it looks like it's been a bestseller, although it doesn't have the Amazon bestseller badge. And I don't care about this. I care about the impact. And the impact, the goal that I have for the book is to be sitting and revisited often on the desks of the biggest grants, marketers, and tech platforms in e-commerce. I want this to be referenced again and again. I want it to be discussed. Just like Recharge, they discuss it on Fridays.

1:13:13They have a reading club and they discuss the book, which is amazing. I didn't know they did it. And I felt very emotional when they told me about it. You know, my little book was studied by hundreds of people. Overall, that was the goal. That's why I'm not selling it digitally. I'm only selling it physically. It took me quite a while. It's been around for nine months now. It's doing super well. And it costs as much as it takes me to print it and ship it. I make zero profit from it. I just want to make sure the right people are reading it and getting the knowledge. Amazing. Can you hold it up again?

1:13:43You have it in your hand there, right? Yes. This is the physical copy. And where is it available? This is the proof copy as well. The proof copy as well. It's right there. This is the actual book. You can get it on Amazon by looking up retention economics, or you can get it directly through me. There is a link. It's going to be somewhere, I guess. I'll put it in the show notes. It's art.ecom.n.co slash book. And this way you can get the book. Again, it costs almost nothing to get it. So there's no excuse if you're really interested in reading about retention economics. Yeah, I'll make sure to have a link in the show notes.

1:14:19I think the thing that I like about it is all of your frameworks. They're timeless. Like sometimes a book is very timely and then it's outdated a few years later. You've got all these different frameworks for, and I have the names of all of them here. We didn't even, we hardly scratched the surface of what you talk about in the book, but formulas for how you figure out you've got them all listed. I was going to, I thought we would get to them. You've got the RCM pyramid. You've got the law of retention economics. We talked about, touched on that one a little bit. The, what do you call this one?

1:14:52The Vitruvian? The three-phase 30 days. Actually, what I explained the first 30 days, that's the Vitruvian, that's the system. Yeah, so we talked about that a bit. But all of these things are very much frameworks and principles that will never be outdated. And you can, maybe some of the tools that you use to do some of the things will change, but the principles and the framework are timeless. And so I love the approach you took to the book. So good job on that. I mean, it really means a lot because that was the intention to write something that I don't need to change every year because it depends on technology.

1:15:27I write everything and I do all of my work based on first principles. And I even had a cool idea of writing my next book as a narrative in ancient lands, ancient Greece, ancient Arabia, where people were merchants and bartering and doing cool things. And eventually there's a scroll with all these principles that can be applied today with any kind of technology. right so i was thinking about from this angle if somebody said you know to an ancient greek you know do this with your shop would it apply if yes then it makes a lot of sense to to put it in because it's timeless so that was intentionally done and i appreciate that you mentioned it i love that i love that the way you'd frame that it's the principles laws that are timeless like yeah do it write it i love it yeah i shall easier said than done right I enjoy writing.

1:16:21I really do. I didn't want to write LinkedIn posts. Eventually I ended up writing a lot of LinkedIn posts, but originally I was like, if I'm to write something, I'd rather put in a book that is timeless. And then once I did it, I thought, okay, I'm going to start writing on LinkedIn. And now I'm preparing a YouTube channel as well. So just getting in the content machine because advocacy is also broadening the market. More brands understand the impact of retention there is more work for my colleagues and myself obviously but the whole goal is for brands to be more timeless more solid to not be so easily crumbling you know upon a single tariff or things like that so retention is the answer to many problems of brands nowadays well here's what i'm going to do for our listeners the first five people that comment on you can comment on spotify Apple Podcasts, you can't comment.

1:17:12If you leave a review and you mention this episode and something you learned, so on YouTube, comment, Spotify, or leave a review on Apple Podcasts, right? Just one thing you learned. I love this, or I love Thomas's point on this one thing. And then shoot me an email, jay, jay at shopify1percent.com. I'll send you Thomas's book. First five people that leave any type of a comment, the book is on me. I'll send it directly to you. So Thomas, thank you so much for coming on. Where do you want to send people? I know you're active on LinkedIn. You're for sure. Is that the best place to engage with you?

1:17:46Yeah, that's the best place. I'm very active on LinkedIn. Actually, I publish a weekly free newsletter where I break down actual brands with their actual numbers out of the two, two and a half thousand brands that I'm analyzing. And I do this every week. You can find it at artecomdoublem.co slash retention economist. you can find the link somewhere, I guess. But I publish it every week for free and people are saying you're learning as well. Amazing. Thomas, thank you so much. Thank you for having me. That was an amazing discussion.