This webinar will draw on RJMetrics’ industry research and Shopify Plus’ extensive experience working with hundreds of successful ecommerce companies, from early days through joining the ranks of best-in-class growth.
Anita: Hello, everybody. Here we are getting started right on time. Thank you so much for joining us today to talk about how we might be able to help you find your path to $10 million in annual revenue. I'm excited to introduce you to my co-host in just a second. In fact, I've had the chance to chat with him for a little bit in preparing for this webinar just now. And I'm super excited about the ideas he just shared with me over the past few minutes. I can't wait to see what he has to say over the course of this webinar. Before we do that, I just want to run through a few housekeeping details.
So, first I'm going to lead a Q&A at the end of the presentation. If you have any questions during this event, which we hope you have a lots of, please ask them via the interface on your screen. We'll address them during the Q&A. But we're also going to be taking questions via Twitter. So, if you have a question and you put it and post it their Twitter. Well, please be sure to tag it with #to10mil, so that's to10mil. So that's. T-O-1-0-M-I-L.
Anyone who tweets on this hash tag will be entered to win a dozen cupcakes. And we'll announce the winner right after the Q&A wrapped up, and believe me you don't want to pass up these cupcakes. This even is being recorded today and we'll have that all out to you before the weekend. So to remember, to tweet your questions also to T-O-1-0-M-I-L. All right. So now to my co-host chair.
Let me introduce myself my name is Anita Andrews. I'm the VP of Customer Success here at RJMetrics where I get to work with hundreds of e-commerce companies telling them and helping them understand how to use data to improve their business. And now, let me introduce my co-presenter who's Tommy Walker from Shopify. I'm sorry from Shopify Plus. Tommy, can you introduce yourself and tell us just a bit about Shopify?
Tommy: Sure thing. I'm the editor in chief of the Shopify Plus blog and Shopify, if you don't know, is the division of Shopify that focuses specifically on high volume merchants. So some customers in our profile right now are The Economist, Radio Shack, Playboy, Mondelez International which is the parent brand for Oreo, Procter & Gamble, Red Bull, GE, the list goes on.
Really what we're trying to do is make commerce and e-commerce simpler for everyone including people in the enterprise space. And that's really what we do. Now, I have a question before we go onto the rest presentation. Is there a way that I can participate in the dozen cupcake challenge? I would really like to have some cupcakes myself.
Anita: I'm pretty sure my team knows to filter you out. So I suppose you could create a new profile and do all of that. But just feels a little disingenuous. Monkeying with the data, if you will.
Tommy: Right, right, right, all right, fine.
Anita: Okay. Cool. So, let me take a couple of seconds here to tell you guys RJMetrics. So, here in RJMetrics, we build data infrastructure and analytic software for online businesses. Many of them are e-commerce companies just like what we see from the folks that are joining us at webinar. Here at RJ, we're lucky to work with a broad range of e-commerce businesses from all over the world, and quite a variety of categories.
Those companies are at the start up and making less than a million in annual revenue to some of the fastest growing brands in the IRCE 500. The cool thing about this is they all use our RJMetrics to get insights on their customers from data. By getting the work with this broad range of e-commerce businesses, a really great side benefit of that is that we have access to a huge data set on how e-commerce businesses perform.
We're able to understand performance beyond just any one of those stores and get a sense for what's happening across the industry. So over the past year, that's what we have been doing, analyzing this data across the entire e-commerce space. But also slicing and dicing it based on kind of what vertical within e-commerce these companies participate in. By doing that we've been able to release four reports today on this data set, and we're currently working on our set.
We've learned so much from this research. We've identified the growth patterns of today's fastest growing companies, identify the ideal window to re market to customers, and we've been able to benchmark e-commerce KPIs like customer lifetime value, average order value, and repeat purchase rate. And that's been great for us because one of the number one questions we often get from our customers is, "How do I compare? How good is my business really doing? Where do I stand against other customers, other sort of businesses in the space?”
And by being able to benchmark this data, we're able to really not only help our customers, but today also be able to help the folks on this webinar. Today, I'm going to be showing what we've learned quantitatively about the growth drivers in getting to $10 million in annual revenue. And we'll be sharing data around the top performers in e-commerce. Tommy is going to be talking about the qualitative side of this. Sharing what he's seen with Shopify Plus’s the fastest-growing client. Tommy has want Shopify Plus stores open their doors and observe the growth strategies they've employed. And as he mentioned, these are some of the biggest businesses out there on the internet.
So I think you're going to learn a lot for from him. On my end, I've had the privilege of seeing the same thing unfold here watching new companies take off and turn into major players. So that's what we're going to be talking more about today. Our presentation is focused on answering five questions that will matter to any e-commerce company that has either recently launched or is trying to figure out how to get to 10 million in annual revenue once they've launched. So let's go ahead and get started.
So the first thing really is about getting to this $10 million in annual revenue. Let's face it. Growth is hard. As the slide says and it's true. You don't need me to tell you about that. But what I want you to kind of understand in the course of looking at this chart is how growth rates vary based on company size. You see that in that really exciting period, as you get to your first million dollars in annual revenue and are and are experiencing 125% growth rate, you can get very excited.
But honestly it gets harder and harder on the path to 5 million and by the time you're heading to 10 million, growth has slowed to 26%, which isn't bad mind you. But it's certainly not as exciting as 125% growth. And I know some of you on this webinar today are thinking about, “Hey, I'd like to just get to that one million. Let alone the 10 million.” But part of what you do in planning for the 1 million and the 5 million is how you get that 10 million and we'll talk about that some more.
But to understand a little bit about what top performance means. It doesn't mean the same thing for every customer or for every business. So what we did is we looked at all a bunch of e-commerce businesses and basically, divided them into four quartile. And when we did that, based on performance and based on total revenue, and when we did that we found an enormous amounts of variance and how those companies got to the first $10 million. Here we're looking at cumulative revenue. But let's look at another view of the same data.
On this slide, we're looking at how looking at when these top quartile companies hit 10 million in annual revenue. The when a super important. And you can see that they hit this in their second year of business. About six months into their second year of business to be exact. The point here isn't to make you feel bad about the performance of your own company. Look, if you're on this webinar, you want to make your company grow. And we're here to help you do that.
Instead what we're going to do is use their exceptional performance to understand what other companies could do to accelerate their growth. So let me say again. Most E-commerce companies do not grow this fast. Our goal today is to give you ideas on how to ask and answer quantitative and qualitative questions about your business that will help you find your path to 10 million in annual revenue. Throughout this presentation, when I talk about top performers or top performance, this is what I'm talking about. I'm talking about the top quartile that is able to produce these kinds of results.
So that first question. How can I get in front of real people? It's at the very top of your marketing funnel. How do you get your business in front of, not just your friends and family, but real people who are going to form the base of your customers as you grow? How do you simply get more customers in the door? So let's look at the data. Let's look at how our top performers do on the customer acquisition front.
This is just incredible when I saw this data for the first time. You can see that by month two in business, they're breaking way out in front of the pack acquiring three times the number of new customers in month two as the next closest quartile. And to clarify, when we did this research, we checked to see if industry was a factor here and it wasn't. Because I know some of you were thinking what does it matter based on what kind of e-commerce business it is or that that really is only true for sort of fashion or kind of consumer goods whatever those things are.
And the reality was that this kind of growth and growth differential more so, actually happened across categories. So, we thought this was so fascinating, we talked to a lot of people about this research. We talked to e-commerce practitioners, investors, industry experts. Basically, everybody we talk to here with respect to this data said that this kind of rapid customer acquisition indicates a terrific product market fit.
It is not just about the tactics that you are executing in your marketing strategy. It's really about having a great definition of your market and understanding of your product and understanding where those two fit together. You're not going to experience this kind of out-of-the-gate growth if you're not selling something that a large number of people want. Well, so besides sitting back and waiting for the data to reveal your fate. What can you do to get in front of real people that would be interested in your product and actually find out if they want it? To help us better understand that, I'm going to hand it over to Tommy to talk about how to do that.
Tommy: Fantastic. So, here's the thing. You got to get comfortable with five things when it comes to this. The first thing is researching people with reach. This can be influencers. This can be blogs. This can be a number of people who have reach available to them. And when I'm talking about reach, I'm talking about not just a few hundred people. I'm talking about thousands, hundreds of thousands. Even 50,000 people that have access to a much larger audience than you do and there are tons of people out there that do that, are a few who have that available to them.
The second thing is reaching out in figuring out a way to work together. So this could be something as simple as, “Hey, can I pay you some money and you post a picture of my product on Instagram?” To, “Let's do a competition together, where your companies are working together.” In my case with RJMetrics, we're working together to do this webinar. Right? Figuring out a way to reach out and work together.
The third thing is you have to get comfortable with hearing “no.” It's going to happen over and over and over again. And even worse than that, you have to get comfortable with being ignored. And then worse than that, figuring out a way to dust yourself off and going back to one. In researching more people would reach.
Now, I want to go back to slide for a second here and talk about what happens when you do this. Right. If you look at this very first month, you see that everybody, is like the people in the top quartile are still way ahead of the pack, and they really only break out even further in month two. And what we find is that when a company does, it spends time finding this reach and doing the research ahead of time to find people with reach.
What they're doing 9 times out of 10 is building a prelaunch list. And you might see this in the form of the Facebook ad, where you're sent to a landing page says, “We're looking to put together the best site for whatever types of products. Sign up now and get 15% off when we launch,” right, something of that nature. What happens when you look at the data over here, is that right out of the gate, first month, month one, they're launching two actual customers.
And what you're not seeing in the data, is that in between the time when you signed people up for the prelaunch list and you actually launched the store, you're able to work with this existing people, a group of people who say, "Hey, I'm interested to really find that product market fit.” And if you're if you're launching to nobody in the first place, you don't find that out until way further on down the road. But if you're working with a group of people and you're building up that customer list ahead of time, you can really work with that group of people, and quantify or qualify your ideas. “Hey, would you be interested in this? Would you be interested in that? Is this something you might be interested in buying? Would you pre-order something like of this nature?
And then by the time you launch, you already have a very good idea of who your market is and who they're not, which is more important I think so you can focus your communication strategies. And then once you have that, you're able to move on. All right. So let's take a look at some ways you can do this. First one's Google search. Right. Very simple You do a Google search. But what I recommend with Google search is not look for people who sell things that you also sell, but rather things that are tangentially related to the thing that you sell.
So for example I gave this presentation at a workshop in Brooklyn. And one of the guys there, one of the merchants there he sold high end men's socks, $50 socks, very expensive product. And I said, “Well, don't go to Google and look for men's socks. Go to Google and look for men's watches, men's dress shirts. Other things that a person who might be interested in buying $50 socks may also be buying. And I said, “Instead of looking at the first 10 results of Google, go to page 50. Look for the people who are further back in the search results there, and see if there are ways that you can partner up with these other companies.”
And this might be anything from, “Lets your cross promotion together to doing a competition where you can give somebody the perfect outfit. Anything of that nature. Do a Google search and find people who are selling things that are tangentially related to what you're selling, and build up this partner network. Another thing you can do to find these people with reach is go to Facebook. Facebook groups, very simple. Some Facebook groups can have anywhere between 10 to 50,000 members.
When you're looking at these groups, don't just look at it is an opportunity to go, “Hey, let's post my stuff inside this group and see what happens.” But rather look for the influential people within the group, the people who drive the conversation. Sometimes these are admins. Sometimes these are just other members of the group who are giving advice and style tips. And what you'll find in a lot of these groups depending on your vertical, is that there are other professionals that work very hands on with some of the products.
So for example, I worked for the cosmetics retailer at one point. And what we found was that in some of the groups that we were analyzing, they were makeup artists who did this on a full-time basis. And what we ended up doing was sponsoring the makeup artists highlighting their work. And having them use our products in their Instagram and YouTube videos. This gave us some more brand awareness in that front. And it was, we were able to build up a little bit of a buzz around that particular audience. And then that translates into sales.
And then other thing that you can do is reditt.com. If you were to go to Reddit, a little known trick on Reddit if you go to reddit.com/domain/whichever URL you want to enter. So, every vertical has the very influential blogs that are in there. What you can do is type in the URL of that blog. At the very end of reddit.com/domain and that will show you all of the different subreddits that have shared content from that domain. I don't have a slide here to show what that looks like. But you basically get to see once you do that, you're able to see all of the different subreddits that share a content from there. And then, when you dig into that, you can see real conversation happening in each one of these places.
These people are your market. These are the real conversations that are happening on a daily basis, and the more market research you do, the more you look at these conversations that are happening. The more you’re able to use that to find product market fit as well as influential people who will be able to help you spread your reach. What I recommend doing though, is not just saying, “Hey, let's find all of these places and in sort of have this massive of information that we look at.” But track them in a spreadsheet. You start a spreadsheet. You find the domain name the contact info. If you end up working together, do they refer traffic and we offer that you put together.
So this is what this might look like here. And basically, you're just looking to build up this list to include about 50 or so different outlets. That way we're able to really put together a list where we can say, "I know this is about how much reach I'm going to have when I work on this list." Let's see. Let's move forward here. So, the idea is once you have this contact list, if you start working you start finding ways where you can work together with all of the different people who are on this list .And the more research you do on certain groups, the better off you're going to be.
You can position yourself in a way that is beneficial to the market as opposed to just sending blind outreaching all that say, "Hey. Let's work together will use all my stuff for me." You want to get a sense for the different communities dynamics. And really get a sense of who your customer is within that group and more importantly, like I was saying earlier who your customer is not. When you're able to understand who your anti-customer is, you're able to create messaging that will repel that first and a repel that market as well as attract your ideal market.
What's a good example of this? You see banks do this a lot where some banks position themselves as sort of the every-man type of bank and other banks will position themselves as banks where people with tons of money. You're able to sort of build that messaging around who you want to attract. And the only thing, is I want to…
Anita: Hey, Tommy. The word anti-customer, is that something that Shopify has made up or I never heard that before?
Tommy: Oh, no. I've heard that in a few different places. HubSpot actually wrote this really great article on who your anti-market was a while back. So, if you want to take a look for that. It's a HubSpot anti-customer you Google that and find out. But it's really important greatly. We all talk about in the marketing spaces, in the marketing circles we talk about, "Oh, find your ideal customer. Find your ideal customer." Sometimes it's easier to just know who you don't want to attract.
Anita: Well, and I love that. I love that because so often some of the, especially the more sort of startup businesses that we talk to, they want to get everybody. Our thinking that their product is actually a fit for everybody or that it resonates with so many people. And the problem with that is it really dilutes your marketing and going back to what we talked about a couple minutes ago in terms of product market fit. You can really not achieve that by getting to dilute on your notion. Now be really clear about who is not just fit for you. So I’m so glad you brought that up.
Tommy: Yeah. It was really important about the sewage in Jeffrey Bruce [SP] is saying The Anti-customer is Real, is you want to understand who your anti-customer is because if you're if you're unknowingly attracting this person, what's going to happen further down the road is they're going to clog up your customer support. They're going to be the ones most likely return stuff. It's not good. And you want to make sure you're identifying who that person is. So you cannot bring him into your funnel as much as possible.
And the other thing is. And I see this a lot especially with just new businesses in general is, you try to position yourself. As like, “Oh, we're the best tasting or of the best highest fashion or whatever.” Position yourself as the best. Honesty works. And especially if you're trying to get to that 10 million spot, honesty really works. So be honest about where your business is that or where you're out of there as a business.
At Shopify, we have something called Hack Days. Once a quarter, we get everybody together within the company and say, "Hey, build whatever you want. Spend the next 48 hours building whatever you want and push it as far as you can go.” In my division on the content side, we had said, “We talk about all of this. We talk about advice. We give advice all the time about how to build a business know this other stuff. Let's see how far we can play. What if we took our own advice and started a store? And how far can we push it in the span of a couple day?”
So we built the store called Hello Matcha. We sell Matcha and that was it. Just a single ten of Matcha. And we ended up getting it listed in a handful of places. I did the friends and family approach. And fortunately, I have through some of the relationship building stuff with through Facebook groups and everything else. I managed to build a contact relationship with somebody who's a moderator at Product Hunt.
And I asked them, “Hey, I'm going to list this on the website. Is there a way that you can help me get this out or moderation? She said, "Sure. Absolutely." So, a good deal of our sales ended up, we got listed on Product Hunt. A good deal of our sales came in through there. And someone asked straight up like, "What's the difference between your Matcha and everybody else's Matcha? Why would I spend money on you?" I said, "Hey, I could have gone. We're great tasting Matcha. We're a thousand times healthier than the other Matcha alternatives out there." I couldn't come up with any number of like answers in the market or inside if we wanted to. I'm not going to lie.
But if you know honestly. Not much. We sell a single, great tasting product. And that's it. What we're looking to do though is building audience and build a customer base where we're able to work on the product together. This might include anything from recipe guides to subscription Matcha, to finding products that are related to the Matcha experience. But really, right now, it's just a single product and we're looking to build out the rest of it together with our customer base. She was like, “All right. Thanks great.”
And that person ended up buying up three times more than anybody else. Because he's like, “I appreciate the honesty. Thanks. Thanks for letting me know.” And that to me was like the most telling aspect of like just being honest with the market and with your partners. Because if I had said, if I had given any other line. It would have just read as a line and then that would have been it. Yeah. That's really what I've got there. Let's move on.
Anita: Okay. And I do know. Well, listen and we we've got several more questions to go and I want to make sure that we that we do get through the slides but also save time for the all-important Q&A which was already there's been some chatter on the on the chat. So I want us to keep pressing for it, so let's jump right into it. We talk now about getting initial customers. And so the next question of course comes into everyone's mind is, how do we get them to come back a second time?
When we look at those exponential growth numbers from the top performers that, at that top quartile, we can be sure that that didn't happen from just new customers alone. A lot of it be about retention and repeat customer behavior. So let's look at some data around there. What we found from our samples that, of all of our customers. I do know that I saw some feedback that the charts aren't necessarily the easiest thing to read over webinars. Don't worry, they are going to come through in the SlideShare. After the webinar, I'll try to do a better job of speaking to some of the data points. But I think the points are also just hopefully going to be clear in what we're saying about them.
So look, when we were talking about revenue from repeat customers, here's what we found in the data. This chart here on the left side is what it's showing is the percentage of revenue from new versus repeat customers, the news and blue on the repeat is in well, looks like an orangish reddish color. Okay. And it's for the top quartile. And the chart on the right is showing the same bright breakdown for the remaining three quartile. The bottom three quartile. And here's what we can see, already in that first month, top performing companies are getting 20% of their revenue from repeat customers the first month. That is almost boggles the mind and what you can see is that the rest of the companies are only getting about 10% of their revenue from repeat in month one.
So basically, there's like a double performance there on the on the top quartile side. And I know, Tommy, before we started the webinar, we were also talking about how you basically have 30 days to kind of get that repeat customer the best performance out of the repeat purchase behavior really comes in those 30 days. And so what we're seeing here, is that that's backed up in the data. By seeing that even just in month one, this top quartile is performing better from a repeat customer perspective.
So then, let's look at it from another perspective. At some point, top performance get as high as nearly 60% of the revenue from return customers. They're doing great on the new side. But they're also doing great on the return side. Now, no one optimizes a business base on what percentage of revenue is coming from repeats. But it would easy to stop thinking about acquiring new customers and inflate that number, that percentage of revenue from repeat customers.
But we do know is that top performers are acquiring new customers at incredible rate. So this revenue breakdown is really incredible. We saw that in the first section. They're doing great at new customers. What we're seeing here is that also actually doing really great at repeat customers. It's almost that wealth on both fronts.
And so that's sounds like great, that might be limited to that quartile but I think it's really important to take in what this means. Being able to achieve this kind of repeat purchase behavior is especially impressive when we look at how hard it is to get a customer back. Only 32% of e-commerce customers will place a second purchase within that store. This is a really hard challenge. Especially in the early days of your business, it's very easy to focus on the acquisition number. You just want to grow, grow, grow.
You want those email addresses in your database and it feels good the more people that sign up. But you need a retention plan from day one. I mean one of my mantras around here especially as we get a little bit closer to holiday season planning is that you need to be not just planning your holiday strategy. You need to be planning your retention marketing strategy for that exact same time period for those newly acquired customers.
And here's why. We don't need to build a leaky bucket. If you don't have a retention plan, you're building a leaky bucket. It means you're losing customers as fast as you're acquiring them are just way too fast, and you can't build that high growth business with a leaky bucket. I'm just going to make sure I say what I said earlier here. The goal is not to make you guys feel bad about your own retention numbers or even motivate you to compare yourself to these companies.
What I want you to work away from these numbers is that this analysis can reveal a lot about the growth dynamics of your business. I want you to do this analysis. Before you can even decide what to do, you've got to do this analysis to understand where new versus repeat of coming from what the time series looks like as to when those dynamics are changing.
And it's going to help you figure out whether you should be investing more in acquisitions, or honestly spending more time on retention because what's the point of acquiring all these customers? They're either not the right customers, or you're not servicing them in the right way in order to get the repeat transaction. So now, I'm going to hand it back over to Tommy to talk about how to set up your retention strategy.
Tommy: Sure. I want you to think about this for a second to the email marketing strategy. Now, I'm going to read to the bullet points here. You can be looking at upsells, cross-sells, logical second purchases, and flash sales. So, let's break this down. If I am selling a pair of $50 dollar socks, what's a good upsell from there? A second set of socks, maybe. If I was working with a partner, maybe cross-selling a watch, that goes along with that. Logical second purchase is that’s the same idea. Maybe color guard as a good second purchase. Maybe sock garters, I don't know. Something like that. And then a flash sale.
Now, I'm not a big fan of putting out a flash for the sake of just having discounted products. But if you were to offer a flash sale for a limited time right after the first purchase is made, for brand new buyers. Somebody who buys from you the first time you say, “Hey, for the next five minutes, we have this particular set of products on sale just because you're a new customer. You can get to that second purchase a lot faster.”
But something I also want to encourage businesses to think about is the experience, the overall buying experience from the moment somebody clicks checkouts to when the product arrives at their doorstep. From what I've seen in just any of my buying experiences, but the funnel usually goes. You click add to cart, you click checkout. You get an order confirmation email. You get a shipping confirmation email. You wait for a significant period of time. And then you receive the product on your doorstep.
There's a big gap in between when you receive order confirmation or shipping confirmation email and when the product arrives. There are plenty of touch points there especially if you're shipping takes anywhere between five days to two weeks. Where you can kind of reinsert yourself into the conversation here and build up rapport with your brand new customer. Really think about what that looks like. And then furthermore, really think about what that unboxing experience looks like once the product shows up.
There are there have been plenty of times where I'm like really excited about buying something. For example, I just got a new bike recently. And I bought all sorts of stuff to go on along with it including like leg guard so I didn't get grease from my chain on the pants and everything else. And when I when I received some of these products, they just show up in the same standard brown packages of everything else. I opened it up. There's no care or attention to detail. And what eventually happens is that you forget about the brand. You forget all about the company that you bought it from. And then there's no reason to ever go back.
However there have been a handful of companies that I've bought from where they really paid attention to that communication sequence. In between the shipping confirmation email and when the product arrives at my doorstep that by the time the product gets there, I'm ready to refer friends. I'm ready to go back to the website and I'm invested in the brand because they've invested into my experience as a customer.
So, that's something I want you to think about more. When you guide your upsells, cross-sells and second purchases and things like that is really think about that experience that first run customer experience, and really build that out. To make it so it's you're something that's unique. And then something else you can do. During this process too is ask people just question, “Hey, what don't you like about other providers? What about you? What else made you not buy from me?”
Anita: Tommy, what I love about that is that it's about asking these hard questions, these things that may not feel like, they're almost counterintuitive.
Tommy: Yeah. Well yeah. And the thing is, we talk about product market fit. And then it seems as if when we find product market fit, that’s kind of it, and you move forward. But the thing it is is product market fit is a continuously evolving process. If Amazon did the same thing it did just a couple years ago and had only those same offerings, they wouldn't continue to grow. But if you're always asking these types of questions, “What don't you like but your current provider?” A hard question that's not here is, “Was that your first choice?”
So often with e-commerce retailers we only see the numbers that show, “Hey, this person bought from you but we don't know if we were the second, third, or fourth choice in their entire buying experience. And that stuff matters, that matter so you're top of funnel, strategies and it matters to you how you retain your customers and how you focus your offer moving forward. I mean just work with your existing customers to develop your offer. And then let's move forward.
And once you have all of this, of course, you can be looking at refer friend programs, encourage them to connect over social channels. We'll talk about this a little bit more in a second, and ask them for feedback on a content strategy. Now, something I want to talk about when it comes to encouraging people to connect your social channels. There's a great company called freepeople.com. They're not one of our merchants but I think they're doing phenomenal job anyways.
Something they do after somebody buys from them is they don't go, “Hey, check us out on all of our social channels.” They don't go like, “Hey, look at our Instagram and Twitter and all of this,” which is what most of us do. Instead they send out. They slowly drip Emails to you about like, “Hey, check out what are what our customers are doing on Instagram.” And later on they might say in a separate email, five or six emails down the sequence, “Here, get styling tips on our YouTube channel.”
By building out this slow and gradual strategy to get people connected to all of your different social channels, you're able to get into the peripheral provision. Eventually, what happens is that they see you on Facebook, they see you on YouTube, they see you on Instagram. And now, you're everywhere to them. And you've been able to build that up slowly but surely over time. And that increases the more shareable content that you create. If you're working with them on things that they would like, the more their friends are going to be able to see your stuff and move forward.
The big lie in social media is that someone buys your product. And then they share it with their friends and their friends buy and then it's just this continual cycle. That’s a fallacy, right? It doesn't exist. But if you're able to define these gaps in what they want to content, then you're able to build that out a little bit more. So, I'm going to kind of wind that back, slide this back over to you, I think.
Anita: Yeah. Thanks, Tommy. And I'm going to move through these quickly so that we have time for Q&A. And Tommy, I may need you to shorten up your examples as well although we love them so that we have time at the end. So I'm going to do my best to breathe through these, guys. So, I want to add to this email marketing strategy and how far that is to retention. What we found in in the data is that the majority of a customer’s first share revenue with their business comes in the first 30 days. The majority of that first year of revenue. First 30 days, people.
You should do this analysis for your own business and find the exact timeframe that is what you're seeing in your data. But if you don't have enough data or access to the data, this is a pretty good proxy to start with and don't be afraid to remark it again very, very soon after a customer makes their first purchase. Time is of the essence.
So, now that was a question three. How do I get that customer to purchase not just the second time, you’ve got that taken care of, but the third and fourth time? And ,look, after the second time, things get easier. After a customer makes their second purchase, you see from here. That's the first part is the probability from the second purchase of third purchase and so on so forth then you see that that curve starts to flatten out, meaning that it gets easier.
What we see here is that while only 32% of first purchases will make a second purchase, 53% of customers that make a second purchase will make a third. And with each successive purchase, the likelihood of them coming back increases. So really the hard work is getting from purchase one. And not saying that it's a piece the cake afterwards, but it sure does get a lot easier.
So let's check in on the top performers. Well, we just saw that the average customer value for the first year with a business is about $150 for top performers. That number hits $250 when we get to that to say that the number hits about $250 for the top quartile. What we're seeing is these companies are really good at getting customers back in the door.
In case you're wondering. This isn't just because they're just selling a more expensive product. We're not talking about people FedEx [SP] selling wedding rings and whatnot. In this slide, we're looking at COV as a function of average order value and the number of orders. So you can see that a AOV is higher for those top performers. AOV, meaning average order value. But they're also outperforming a number of orders. So, at this point actually Tommy, I'm going to ask if you can talk to us a bit, just about how you see Shopify Plus clients getting customers to that third, fourth, and fifth purchase.
Tommy: Sure. So big point is that, you see this a lot with referral programs. And what we find in the data is that when somebody puts together the referral program, they're asking people that were really working with their initial customers on what it is that would make for a good referral program. So it's not just enough to say have a referral program but to find that core that people really enjoy about you, and then design that program with them. And I think we'll see this in a slide later on.
What will normally happen is they will work with their top 1% of customers who are doing either continual...who are buying more or buying more frequently to survey that group, and find out, “Hey, what is it that would make it so you would want to share this with your friends?” And then the other thing that we see, and this is I think a mutual friend of ours actually is event, local events. Chubbies is a great one. They go out every summer. And they just have these great events they put on a really good show.
And what they find is that, anybody who shows up to their events. They end up buying both at the event, but also they have a much longer customer lifetime value over the course of time. We've experienced this at Shopify too with our own events that we've run where the retention of customers who show up at our local events that we put on. They retain a lot longer and they feel like they're more connected to the brand.
Popup shops are another great way to do this, where people that you give this 3D experience of your brand and let people know, “Hey. This is what we're all about.” It's much easier connect with person face to face. So, I'm going to hands back over to you, Anita.
Anita: Great. All right. So now, we're beyond the second purchase and getting them to the third purchase. After the fourth purchase, we're in the long tail of customers. And while normally, long tail means, and when we think about it from an SEO perspective, it means kind of a lot of fragmentation. It's not something for you to ignore because while you won't have a ton of these customers. They're going to represent an enormous amount of value for your business and we're going to look at the data around that.
All right. So in this chart, we're looking at customers by percentile. Over here on the right. you can see just how valuable your best customers can be. The top 10% of e-commerce customers are worth six times the industry average customer lifetime value of $154. Guess what? The top 1% is worth 18 times more. So, while any one of us might not have a huge base of these customers, they represent so much value. Not just in terms of money, but also as a growth lever for your business. I'm going to hand it back over to Tommy to talk a bit more about how you can use these VIP customers to fuel your acquisition strategies.
Tommy: Absolutely. So, the idea is always still to be working with your existing customers to find out what's going to be useful to their friends and family. So, that includes messaging, that includes the actual offer itself. So somebody in here, somebody in the chat. Let's see, Isabel said, “How do I get repeat clients if my product is starting in a niche? We offer breast feeding clothing. And of course, moms don't breastfeed for a long time. Products can be worn during pregnancy too. And I'm targeting pregnant women.”
This is great. Great, right? You know that there is a sort of a lifespan of what your product is going to be like here. So the question is. How do you build that relationship with that customer? Over the time that they're buying your product, and after that first purchase to do that. And that mostly comes down to communication strategy. I'm not really going to be able to answer the question very well here because it really comes down to the individual business. But this one right here you see, get $20 for free again and again. You make the reward juicy enough to make it so people want to buy. From a tactical standpoint, what you're looking at is just we're referring people are reminding people to go about it.
Company that does this really well Loopcrate. They build up that experience between that purchase and when the product shows up. And they continuously in that process between when you get when we ordered it sent out, they’ll continuously remind you of the referral program that they have. And that always, if you look at the revenue that will show, “Hey, this is working overtime.” Because they're looking for the little micro moments.
Another thing you can do is be targeting strategies. Somebody buys from you, you do a retargeting strategy. Use retargeting ads to bring people to your referral program. Because you already know that they've bought from you. So the next step is to make that revenue go further.
Anita: Yeah. I mean I think to put a final point on Isabel’s question, just because your product, with any particular consumer may not have a very long life cycle, there's two things I'd say to that. One, that's okay because you can basically use their time with you to act as a customer acquisition vehicle. And also, just because your product doesn't have a long life cycle, let's say in the context of breastfeeding we're talking you know roughly a year or so. Let's remember the data also tells us a customers don’t stick around with brands for years and years and years on average anyway. So, one year is the time they usually maximizing value out of the customer not worrying about whether your product has value to a customer beyond that year or not.
Tommy: Right. Exactly. And another thing that I like to do is I really like talk to you about asking for feedback. We're talking about this before, [inaudible 00:43:58] does a great job of this where they get your feedback right out of right after the first purchase or right after the purchase. And you are able to take a survey and take that feedback in just continuously reinvest that the pack over and over again.
Something that's important about this and I see businesses do this all the time. They collect the data. And then they don't do anything with it. Actually, make actions on your data. Take this qualitative feedback that you get from the survey but also look at the quantitative stuff that you find in the metrics and try to triangulate the truth. You're going to see this with social media, you see this was a survey data, you'll see this an unsolicited reviews happening in the Facebook groups and everything else that you're monitoring. Triangulate the truth out of this. And really try to develop strategies that take this and take it a step further.
You can do conduct AB tests and split test your offers and try new funnels out. As a result of this, don't just collect the data and go like, “Oh, yeah, cool. We did it.” And then don't do anything with it which so many businesses do. So yeah, and Anita, I'm going to throw this back over to you.
Anita: Yeah. We've got a few more a few more data points to share with our audience here today. So look, we kind of walk the whole gamete of acquiring customers to get into a repeat purchase to multiple purchases to those super loyal customers. A few things that we want to say on the acquisition strategy. And it's about that you know the quantitative side of things again. You definitely need to be using customer lifetime value to measure marketing ROI.
A lot of e-commerce companies start out measuring marketing performance based on that first touch, that first touch attributions, the source, and basically the first purchase. But this isn't going to reveal the campaign bringing in your really valuable customers. When you're calculating ROI, you want to look at the total lifetime purchases from customers acquired through that given campaign.
And that's the way to identify which channels are bringing in the VIP customers, not which ones are giving you the greatest first order value. Those ones that are bringing you those VIP customers, those are the campaigns you want to put your dollars behind. Tommy was using Chubbies as an example. And as he mentioned, they've been a customer of ours for years and have always measured their events this way.
It's not touchy feely brand stuff only. They know that in person events contribute to long-term customer loyalty. So finally, the last question. So the people always want to know what the advance things I should be thinking about. You might not be ready to execute him on them today. But it's helpful to have them in mind. You're acquiring customers, you're retaining them, and you're building that core group of loyal customers.
So let's just touch on briefly what some of those advanced strategies are. As we said, getting to that 10 million is not an easy road. You can see what that growth rate looks like and the growth gets harder and harder to achieve. But the one thing that I've seen again and again as I've watched our customers cross over the threshold is that growth is built on a foundation of those the VIP customers we were talking about. You cannot ignore that top 1%, that top that top 5%. Nasty Gal started out as a vintage clothing store and they had customers spending about 10 minutes on their website every day, purchasing multiple times. Because they have this core base of loyal customers, they were able to expand out from there, eventually creating their own lines. I think they most recently launched a line with Courtney Love. It's a long way from where they started.
And Bonobos also did this as well. I remember when they started with pants and then, that was it. I thought, “A whole company around pants.” But eventually they built out a full men’s line and Chubbies is obviously a great example of another one that does that. Short, shirts, and good golly, they've gone over into women's short. So I'm curious about all of that. So expanding your product line is one way to stay fresh and keep growing. But you can only take on that kind of expansion when you have that core group of customers, that not only love your product but also are going to recommend and refer your product. Tommy, what else have you seen work when it comes to more advanced growth strategies?
Tommy: So we have we've recently started seeing social media sales and social media commerce has started to unroll within last year. So Twitter buy buttons like you see here with Britten and Co. You see this with Facebook, Pinterest buy buttons as well. And what I found with companies that are focusing on these is that the ones that are working on channel exclusive merchandise. So for example, there's a Facebook shop and you can buy natively on Facebook. Instead of going let's list all of our products on Facebook, we have inspired by product lines that are related to something that's more into the Facebook ecosystem.
So, for example we know that Star Wars was a big trend that was happening at the end of the year. Companies that I saw one retailer. And I don't remember who it was off the top of my head do and inspired by Star Wars fashion line. And then they sold that natively in Facebook. And they were able to generate more revenue that way and show a different side to their brands personality.
Another thing that we see are companies that focus very exclusively on the checkout experience are able to drive more revenue from their existing traffic. So this is a company right here called Automatic. What they have is a dongle that plugs into your car's diagnostic sport. And that will then talk to your phone, your smartphone and spit out any of the car's diagnostics codes. They rolled out a new version of their app which allows you to do ride sharing and track mileage and things like that.
What they're doing in there checkout which you see here is, they answer any of the major objections that might come from buying their product. So, it shows you know compatible with the iPhone5 or newer. It's compatible with Android phones that works in most cars and 1996 a [inaudible 00:49:45] etc., etc. They're dressing all of those common concerns right at the final touch point where somebody might go, “Do I want to buy this thing or no?” And then something else that they do is they have a live chat that are directly into the checkout.
It's important. And I want to stress this right now. Is that you don't just take this and tactically apply it. Because it may or may not work for you, what you need to do is take a look at the survey data and all of qualitative stuff that we found before. And then try to use that information to address these types of concerns. One of my personal stories is I went to buy a pair of shoes from a shoe reseller when I was going to travel. They didn't say anywhere on the site that they had next day shipping, I didn't buy from them. Because I needed the shoes for the airport the next day. That was very, very important.
Anita: You have an airport shoes?
Tommy: I do because it's my luck. Here's the thing, it's my luck that every time I travel and I have a connecting flight, like connecting flight is always on the other side of the airport. So I need to make sure I have special airport shoes to make walking easier.
Anita: All right. On that note. We have come actually to the end of our content here, haven't we? So it's time for the Q&A. And we've actually got some great questions that have come in. And I love all the examples thank you so much, Tommy, for all these real life examples that we have and the super tactical tips to actually make changes in marketing strategies. So, we do have a few minutes for questions before we get to questions.
Well. I want to go ahead to the winner now and then and then get the questions which may not be what might he want to me to do here, but I'm going to do the cupcake part of because that’s the best part as well. So the winner is of the of the cupcake prize. Rey Olivia [SP], I hope I pronounced the name right. Rey Olivia, please email firstname.lastname@example.org to claim your prize.
Anita: We thank you for our part. Yeah, exactly. All right. So, as for Q&A. Here are some real questions. I'd put this first one to you, Tommy. Can you recommend a refer-a-friend approaching like a software that is good for that?
Anita: And I will also say, there was a similar one which are, what are good referral reward and loyalty platforms for e-commerce companies? They both seem a little bit related to each other.
Tommy: Sure. So, I hate to play favorites because we have quite a few very, very good referral programs on the Shopify platform. But two of my favorites are Friendbuy and Referral Candy, which keeps track of everything. Very simple, a very simple interface for you to be able to track all of that.
There are a ton of really great programs out there and before you just take my word for it and say like, “I'll go with this one,” what I encourage people to do is think about what your needs are for your referral program and then find a vendor that's right for you because it's going to be a little bit different. They all have very good strengths and weaknesses.
Anita: Okay. Cool. And then, I have another question that came in here and I'm going to turn this one also over to you, Tommy. What about getting an influencer? Back to basically building your customer base before you even launch kind of idea. What you can influencer and having a commission agreement for your online store once they get involved? Any companies that sell like that?
Tommy: It depends. Oh, of course, of course. We see companies doing stuff like that all the time. I recommend that if you have a very good distribution plan. As an influencer myself which is kind of weird to come in terms with, I don't want to think that I'm doing all of the work for you. And I need to know that you're going to be doing your work to build the brand up so I don't look like a Looney Toon for referring your product.
So there's something too that works really well, and you can do it and you can try. But I would say the bigger the influencer goes, the better distribution plan you have to have to show that there's a really good fit between your product and market that they service. And in general, a better strategy, I think, for beginning brands and brands who are not quite at that 10 million mark yet is to look at unboxing videos. A lot of them will unbox your stuff for a fee. And if you really nail that unboxing experience, that's a great, great, great channel to get your stuff out there.
Anita: Great. Okay. So have another question and I'm going to take which is, do you see a lot of companies make the leap to the first quartile? And is the leap from the second quartile to the first typically the hardest to do? So, I mean I like this question because I know that's a question that a lot of people have in their mind, like this is even possible? And I'm not going to [inaudible 00:54:44] have to say that it's easy to get from quartile two, three, four into one. But I also just break the idea that that's even possible. Because remember that's looking, these quartiles are necessarily broken up based on how their performance was and in month one, month two, month three all the way from the beginning to the end or the present day.
So once you're in a particular quartile, you can jump into the next time. But what I think is the more relevant question here is is it possible to get to 10 million in annual revenue or to get those kinds of metrics? And the answer very much is yes. Your growth rate may look different. The way that you get there may look different and that's what we've been talking about on this webinar is how can you actually get that 10 million. And that's the end goal not necessarily being able to produce it in the time and pace that some of these different quartiles do. All right. So the next question. Tommy, do you recommend spending money on boosting Facebook ads or social media ads in general?
Tommy: Yes. There's going to be the qualifier there though of know what your customer, cost per customer acquisition is off the bat, so you aren't spending more money to acquire a customer than you would be the customer actually coming to you. And before you do that, I would recommend having a very good retention strategy in place because you could end up having a huge loss leader on those if you don't have your numbers worked out just right.
So the question you have to ask is how much money we're going to make off of this person initially? Or how much money can I make off of this person to repeat purchases, and then the second part is, how much am I willing to spend on them in order to acquire them?
Anita: Great. Okay. Now, here's another one that came in. I'm going to give this one to you, Tommy, which I think is also in the mind of a lot of e-commerce companies which is, instead of doing get 10% off or get 15% off your first purchase. What are other ways that you can get your potential customers contact info?
Tommy: Oh. That's a good one.
Anita: It's the dreaded, how do I avoid the discount question.
Tommy: Yeah. Partnerships. Work with partners. You can work with a partner to get access to the email list depending on how well they're willing to do it. And the other part is, and to me, discounting is lazy. And I say that because it’s the cheap easy way to go, but what ends up happening is you race with your competitors to the bottom on pricing who can have the better discounts. Instead of looking at your discount itself, think about the value proposition overall.
A lot of customers or a lot of companies will go, “Sign up for an account.” But then have no reason for me to sign up for an account. Really think about what that's like. What do I get? What's in it for me if I sign up for an account? Do I have early access to new product lines? Do I have some sort of say in what it is that you do do? I love freepeople.com because they're able to build up this sort of community around the products that they have. As a customer and as a member where you have my contact information, what do I get by being a part of this exclusive club? And it doesn't always have to be discounts, depending on your vertical. Really, I mean it just discounts are meaningless anyhow, 10% off is not a lot when you think about it.
Anita: Yeah. And then we typically see our customers kind of faking that into the customer acquisition cost, like not viewing it as…you have to have a floor on your discounting strategy. You can't be getting 50% off. But if you bake that into your customer acquisition modeling then, typically that's not a big deal. And honestly, customers do respond to them. It can sometimes tip it over the edge in terms of acquiring that customer. What customers of RJMetrics are able to do within the platform, and this some of the most interesting analysis that I see done in the platform is really trying to figure out whether you're creating a coupon culture, or whether your coupons are actually producing the right kinds of customer and customer behavior and in the long-term.
You kind of marry up your acquisition data with couponing strategy with your lifetime value and behavioral data of the customers in at least within RJMetrics but you guys get, any of our customers can do as long as you've got the data in your database. And you really start to see whether is 10% is actually getting you a customer that you want or is it just kind of like we like we say around here creating a coupon culture.
Tommy: Yeah, you don’t want tire kickers. And I don’t think anybody wants a tire kicker customer.
Anita: Yeah, yeah. Why spend money on those people, right? Like more often than not, it may not work. Okay. Well, it's 2:00, guys at least here on the East Coast. And I see that so many people are in so many places. We want to thank you so much for joining us today to talk about growing and getting yourself to 10 million, 20 million probably another webinar, 10 million in annual revenue.
If you'd like for us to get in touch with you about either Shopify or RJMetrics, let us know here. We have a poll up. We'll have the right person follow up with you after the show. I'm going to leave it up for a minute, and Tommy and I will be signing off. Thank you so much for joining us and have a great day.