% of returning customers is misleading 🤯
Hello ECOM growth folks,
JK here. What’s up? ✌️ I hope you are doing great and your results are steadily growing.
I’ve had an exciting discussion with the founder of one of the 7-figure ECOM brands I work with about this money, and I want to share some takeaways with you.
But before we dive deep into that, I want to remind you about last week’s topic that I shared with you:
TOP creative concepts for ads
You learned all about:
🧠 Evergreen concepts every brand can use
🧠 Real examples from each of the concept
🧠 My breakdown to understand why it works
You can read the blog post HERE if you still need to check it out.
Now, let’s move to the topic of this week.
Why % of returning customers is misleading
So often, we think, talk, and listen about how retention is the name of the game for profitability in 2024 when building a profitable ECOM business.
It is, but what should be analyzed to understand the impact?
The most common answers you will hear are:
> % of returning customers
> LTV
> % of returning customer’s revenue
% of returning customers is the most frequent, especially for the Shopify stores, because this is one of the team’s main metrics.
My 7-figure client was the same; when we discussed retention, he showed me this and talked about how successful they are.
As you can see, he has a 28,24% returning customer rate this year.
Which is solid.
The old rule was that if 25-40% of revenue came from returning customers, you had a healthy business and still room to grow. 45-55% is a red alert that you are not as efficient with acquiring new customers, and it’s time for some advanced tactics for acquisition, launching new products, or thinking about expanding to new sales channels or markets.
But in reality, it’s misleading, and you need to dive into the data to understand the impact of your retention.
What do I mean by that?
In reality, it often happens that % of returning customers goes up because:
> We are not efficient with acquiring customers
> We decreased the budget on our main acquisition channels
> We had an extensive email or sms push addressing the existing customers
> We had a product launch that did the majority of the sales on returning customers
> Out of our primary season, the chances of existing customers buying are much higher than new ones
These are just a few.
So I claim that measuring only the MoM trend of % of returning customers is HIGHLY misleading 🙉
Agree?
And when I explained this to the founder, he started thinking about what else he needed to look at.
WHAT TO DO 💡
I gave him some core ideas on what to analyze to understand retention success better:
> MoM revenue growth from the returning customers
> MoM returning customer’s AOV trend
> MoM customer list growth
> MoM growth of revenue per customer on the list
> LTV 60, 90, and 180 days
> Most important = Cohorts 🏆
What is Cohort, and how can it be used? 🤔
By Shopify definition
The Customer cohort analysis report displays data about your customer acquisition and retention. A cohort is defined as a group of customers that have similar characteristics. Customers are grouped into cohorts for the Customer cohort analysis report based on the date they placed their first order.
The cohort analysis table displays data about repeat purchases by customers based on when they made their first purchase. Each row represents a cohort of customers who made their first purchase in the same period.
Read more here
Below, you can find an example from Customer cohort analysis from another client, that is a hair beauty brand that started their business this year in March👇👇👇
The example above shows us the retention rate based on the months of the first order, how many customers bought within the same, and the following months.
This gives us a clearer picture of the frequency of buying.
For more precise analysis, you need also to break down these two 👀
So, to sum up this week’s newsletter, here is the primary learning:
The majority of the brands analyze their returning customer rate.
Best brands that are scaling understand their:
🏆 Cohorts
🏆 LTV
🏆 Revenue and profitability coming from the returning customers
🏆 Returning customer’s journey
If your brand is doing +50K € in monthly revenue and you want me to help you profitably grow to 7 & 8 figures, reach out to me (Via form or LinkedIn), and let’s do something great together!
QUOTE OF THE WEEK:
Building a profitable business is the new black.
And that’s a wrap for today’s ECOM growth community!
If you have any questions or you want to break some of this further, reply to this email or DM me on LinkedIn
If you are interested in working together, submit this form.
If this email was forwarded to you and you aren’t subscribed yet to my newsletter, make sure to subscribe.
Talk soon and as always …
Happy scaling! 🚀
BESTS,
Jure (JK) Knehtl
Founder @ JK GROWTH
TOP creative concepts for ads
Hello ECOM growth folks,
JK here ✌️
How is it going? The first month of Q3 is surfing through, and a lot of people are taking some time off while others are preparing their businesses for Q4 scaling 🏷️
To get your ads ready to scale high, I prepared something special for you this week.
Let’s start…
Last week, I shared with you:
The most important creative performance metric
You learned all about:
🧠 Attention metrics
🧠 Checkout metrics
🧠 The one performance metric to rule them all
🧠 Practical tips on how to use it
You can read the blog post HERE if you still need to check it out.
Now, let’s move to the topic of this week.
Scalable creative concepts every brand should test
If you are like most brands out there, you are constantly chasing new scalable creatives, iterating on the winners, and testing new concepts.
I often get asked:
“JK, which are the evergreen creative concepts almost every brand should use in their creative mix?”
Great and IMPORTANT question 🙋
Especially for the brands that are just starting off and are looking to make the next big leap or open new markets.
That’s why I created a list of TOP creative concepts for Meta ads, and further down, I will give you an example for each + break it down with the explanation.
So you can get the most value out of this one 🧐🧐🧐
JK’s list of EVERGREEN creative concepts (almost)every brand should use:
- US vs. THEM
- Problem-solution
- Features/Benefits
- Media/Press
- Question
- Testimonial
- USPs
- Social Proof
- X reasons why
- Offer/Promotion
- Unboxing
- Announcement
Let’s now break down every one of them.
#1 US vs. THEM
Direct comparison with “other brands” is a great way to showcase what kind of improvement you made on the products and what the core benefits are for the customer.
Definitely highly recommended, especially when you are early on the market and you want to find the first scalable concept 📈
#2 Problem-solution
Quickly displaying what were the problems customers had before trying the product.
Showcasing the usage and, last but not least, quick and visible results.
As you saw in the SpoiledChild example, you will see many before-and-afters and people talking about their problems.
#3 Features/Benefits
An example from Ridge, one of the best distributors in the DTC, says it all.
A great visually displayed product with the five main features of the product with icons and nice attention-grabbing colors.
You will mainly find this concept with statics or motion graphics showing the product or a close-up of the person using/wearing the product.
#4 Media/Press
Displaying the 3rd party social proof from a well-known international or local magazine is always a smart move.
That’s how Buffy did it, as well.
#5 Question
They say that creative is your targeting, and it’s true. The creative style, model, concept, hook and other elements define who is going to engage with the ad.
One of the best ways to target the right people is with a question ad; just see the ad above that clearly defines that the people who can relate to the problem of hair loss are more likely to engage with the ad.
Great targeting hims 🎯
#6 Testimonial
You can see many of these, especially at the bottom of the funnel.
However, the best brands also find a way to use them in cold traffic.
See the Magic Spoon that uses it with the question of high-protein breakfast and customer testimonials that highlight the usage of the product to boost AOV and LTV as well.
#7 USPs
Huel is one of the brands that really master statics, and that’s why I wanted to share their examples on the USP static ad with you.
Hand holding the bottle showcases the desire to have it.
If you scroll through their ad library, you will find multiple variations of this concept, but I love the arrows and icons with the combo of price breakdown, Trustpilot reviews, and bold claim at the top 😍
#8 Social Proof
UGC video mashups are the way to build social proof and show it to potential and existing customers across the funnel.
The Australian fast-growing superstar did a great job here displaying different users, patterns, and their AFL collaboration 🏈
#9(X) / 3 reasons why
Almost nothing is as scalable as a great 3 reasons why video.
In this example above, you will see the great intro talking about the problem-solution before jumping into the 3 reasons why.
100% done by the creator, native to the platform, and ready to sell – great job Blendjet 🍹
#10 Offer/Promotion
Most of us already saw this one on our feed, right? 😁
It’s one of the longest-running ads from AG1 by Athletic Greens, with a clear offer to attract new customers at scale.
The product is shown in most of the image and has a clear offer. For pushing sales, this is how you do it, especially for the lower part of the funnel when attracting new customers or during the promotion periods.
#11 Unboxing
This unboxing POV ad from Harry’s is a great example of how you can work with a creator who doesn’t have to speak to the camera.
Because it’s a POV video, customers can relate to how it will look when they receive the package and see their product for the first time.
With a close-up, it also explains the features of the product.
I can imagine this one working across the whole funnel as it clearly shows the unboxing experience of the trail kit.
#12 Announcement
This ad from Glamnetic clearly states that this is a popular product they sell as they claim it has already been sold 10x, which also includes the scarcity of stock that it will run out of soon.
Clearly, states are back in stock, and the majority of the image is taken by the user’s hand so the person can imagine how they use the product.
Back in stock, bestseller alert, and new arrivals are some of my favorite concepts to use while scaling the ads,
Great job 👏
And that’s a wrap for today’s ECOM growth community!
If you have any questions or you want to break some of this further, DM me on LinkedIn
If you are interested in working together, submit this form.
If this email was forwarded to you and you aren’t subscribed yet to my newsletter, make sure to subscribe.
Talk soon and as always …
Happy scaling! 🚀
BESTS,
Jure (JK) Knehtl
Founder @ JK GROWTH