Good Morning Operators! I hope everyone had a great weekend and is excited to get a fast start to their week! It looks like Taylor Swift & her beloved Chiefs are headed to the Super Bowl - I am very curious to see if she makes a surprise halftime appearance. Today’s content focuses on the intersection between Retention & Growth as core drivers of success for consumer focused businesses. I’m fired up about this because lots of businesses silo these teams and doing so makes harder for each to be successful. Similarly to how CMO’s & CFO’s should work more closely together, these teams have a lot more in common than most operators may think. But before we jump into today’s content, we’re going to start with a quick work from our sponsor, Nostra.

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2 Teams, 1 Car: Who’s Driving? 

Lots of brands separate growth & retention teams and give them separate goals that contribute to the topline goal of the businesses. For example, a brand that has a subscription (e.g. Hims) might tell their head of growth “We need to increase topline revenue by 25%, acquire 25% more subscribers and hit a $100 CAC across all acquisition channels” while telling their head of retention “We need you to increase our revenue per subscriber by 15% and grow our multi-30 day subscribers by 20%”.

Growth POV: More $$, More Customers, More Problems.

If a Head of Growth is tasked with growing revenue 25%, they might consider the following:

1) What are my highest-opportunity acquisition channels? This is a volume consideration - where am I going to get the most volume? Where can I find the “low hanging fruit” ?

-Where is demand growing the fastest? Which channel shows the most significant growth in my category?

-Where can I efficiently generate demand (I.e. where can I cheaply reach net new potential customers who I can efficiently convert ?)

2) Where do my most profitable customers come from? This is where one might consider the channels and strategies that help counter-balance any lack of efficiency from trying to achieve a certain level of volume in customer acquisition.

-What channel are we seeing the highest AoV from? How about the highest CVR? Lowest CAC?

-What does the customer journey look like for the top 10% of our highest AoV customers? What touchpoints do they have with us before they make their 1st purchase? Which channels consistently come up in the early, middle, and later parts of the purchase journey?

3) What creative / messaging seems to resonate the most?

-Is there a tangible difference in performance of the same creative across different paid media channels? Testimonials might work well on short form video, but do they work on CTV?

-What messaging tends to work best on organic/owned channels?

-Based on what we know about our customers from our paid & owned channels, how can we personalize our messaging & creative to different audiences in order to get them to convert more efficiently?

Lastly, they’ll use the above inputs to build a media plan and growth projections based on the above goals and these inputs. Creative is a hard variable to incorporate into forecasting so it’ll mostly be based on channel projections from paid media performance.

Retention POV: Turning Time into $$

If a Head of Retention is tasked with increasing LTV & $$ per customer, they might consider the following:

1) LTV and behavior of customers in different cohorts:

-What are the customers with the top 10% of LTVs buying? How long do they stay with us? When they churn, why do they churn?

-What are the customers within the middle 30% of LTVs buying? How long do they stay with us? When they churn, why do they churn?

-What channels do these different cohorts transact from most frequently? Is there a different between the channel the top 10% uses to transact with us vs the middle 30%?

2) Loyalty: How can we incentivize our customers to transact with us more frequently and stay with us for longer?

-How does the top 10% LTV cohort respond to different offers & experiences? How can we curate better experiences for that group in order to incentivize increased transaction volume? Case Study: Curtis from Aviator Nation recently mentioned during the DTC Experts Summit in Sept ‘23 that their approach involves offering substantially elevated experiences to their most loyal customers. “We prioritize sending orders faster to our most local customers” and “people who are really high value customers get a lot of personalization”.

3) Personalization:  Based on what we know about our customers and what gets them to transact with us, how can we personalize offers and experiences at scale for different customer cohorts?

-What would a “personalized experience” or offer look like for our VIP customers?

-What do we know about our customers that would inform a “personalized” offer or experience? E.g. If you know that your top 10% LTV customers enjoy luxury travel, like to shop at Sephora, and watch Succession, you might try to tailor your messaging around this or offer them an “exclusive” product drop, just for them.

Intersections: Growth 🤝 Retention

1) Personalization: Because retention teams have such rich data on different customer segments, they absolutely should share LTV data & customer data with growth teams to help inform acquisition strategy.

• Deploying Personalization in Acquisition: Let’s hypothetically say as a head of growth at ButcherBox, your head of retention shares the following about your customers with you:

  • Our customers who have an monthly subscription order value of ~$130 - $150 (middle 30%) tend to stay 8 months before churning, while customers with a monthly subscription order value of >$200 tend to stay for 12 months before churning (top 10% of customers)

  • Our top 10% of customers enjoy high end dining experiences shop at Williams-Sonoma, and enjoy traveling to Spain & Italy

  • When our middle 30% customers churn, it tends to be because they don’t feel there is enough value in their subscription box, whereas when our top 10% customers churn, it’s because of lack of variety in the cuts of meat we offer.

• Conclusions from a Head of Growth PoV:

  • Winning the middle 30%: My creative needs to more effectively communicate the brand story and the quality of grass & raised meats.

  • Acquiring more of the top 10%: My creative needs to communicate the fine dining experience that is made possible by excellent food. It may be worth exploring different brand collaborations to help tell this story.

2) Customer Acquisition Strategy: Retention data can inform the true impact and effectiveness of different acquisition channels. For example, if a growth team understands that customers acquired through CTV have a 2.5x higher LTV than customers acquired through social media, this can help inform how the team allocates budget across different paid media channels in order to acquire more high LTV customers. Additionally, if a retention team understands that a certain subset of customers that came through via a specific channel share characteristics & behaviors with customers in a specific LTV cohorts, then it may be worthwhile to test out giving them specific experiences that align with what you deliver to those cohorts.

Brands that foster close collaboration across growth & retention teams have a disproportionate advantage over brands that build silos.

Thanks for tuning in today, talk next week!

Zach