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Hey it’s Opossum here! Welcome to my free monthly Q/A Roundup. Today’s post is on some of the best questions in the last month. Each week I write about a new topic or analyze a new digital business. If you’re not a subscriber, catch up on this month’s Shopify series. Part 1. Part 2. Part 3. Part 4.
First, thank you. I love seeing this project grow and help people.
Secondly, I feel like many of you are missing some context about this Substack and Twitter account. It is not designed like a normal newsletter. I’m not going to send out emails just to send out emails. It was designed to be read from the beginning similar to a course.
Every new subscriber should read that post to catch up on why this Substack exists. Don’t skip it. If you’ve been a subscriber, go read it before you do anything else.
What’s the biggest lesson you’ve learned with regards to improving customer retention?
There’s 1000 customer retention strategies and a lot of them are good and worthwhile endeavors that you should do. The #1 lesson that I’ve learned though. Is that
You Have To Retain Your Customers. Period.
Non negotiable. Not up for debate.
If you want to really grow, you can’t do that through churning and burning customers. The customer acquisition costs and reputational damage are just too high. Some businesses will top out at $10M a year in a $20B market because none of their customers stick with them. Then when new customers come into the businesses funnel, many realize that they want no part when they find out the business’s reputation…raising their customer acquisition cost even higher…
Which leads me to my next point.
Get brand advocates.
Some people call this Net Promoter Score or some other metric. I hate that metric because it’s derived from asking people how likely they are to recommend. People lie…
Since “brand advocate” is such a vague/nebulous term, I’m going to define it like this.
A customer that comes back to buy from you multiple times and tells people in their circle to buy your product.
Lets start with a hypothetical example.
You acquire 1000 new customers a month. Each month you retain 30% of the total customer base from the previous month. Each month, each current customer tells 1.1 people about your product and they buy also.
You’ll top out at about 2500 orders a month 6 months in. The only way to increase your revenue in this situation is to constantly throw more and more money at ads.
Same example as above with acquiring 1000 new customers a month. This time you have a 40% retention rate and each customer tells 1.2 people per month.
10% higher retention rate and .1 extra people per person per month doesn’t seem like a lot but it’s huge. You surpass the previous example in month 3 and at 20 months, you’re over 3 times the size.
Same ad spend the whole time.
Sooo…about those brand advocates…how do you get them?
It’s really going to be specific to your niche, product, and brand but here’s a few tips.
Create a great product. Or at least a product that most of your customers think is really great.
Position the product and brand to make people think they’re in the “in group”. They’re buying something special or they know the secret that the rest of the world doesn’t. If your product is good enough, this by default is true.
Customer service is way more important than you realize. You’re not just losing one purchase. You’re losing their future purchases and the future purchases of everyone that they tell or don’t tell. And on and on and on in the referral cycle.
The little things. There’s a lot and I won’t go through every scenario here. Some could really matter to your customer base and some won’t and will feel like wasted money. Could be packaging for beauty brands or could be something like Chewy did below.
If you don’t know much about Chewy, it’s worth it to at least read the first few paragraphs on Wikipedia.
I bought an affiliate marketing site that’s doing well but looking for a good website developer that could take it to the next level. Do you know anyone?
No. No I don’t.
I mean I do but there’s a few things wrong here. First, never buy a business if you’ve never operated one unless you’re at a scale that you can hire operators. (Millions in revenue)
Second, if you’re not in the above group, you don’t need a developer. No affiliate site making below a few hundred thousand dollars a year needs a developer unless you’re running ad funnels. It won’t help anything of meaningful magnitude.
You need to learn how to do almost everything yourself in the beginning or you’re destined for failure.
Go all in on a business or don’t go in at all. No half assing it.
(This does not mean quit your job. It means mentally)
If someone wants to make $3k -10k per month. Ready to put all his time, effort and money to learn. What would you recommend?
Me: A service business on an actual skill that you have.
Do you think it can be done with content writing, copywriting, etc. without selling courses?
Social media users have been seriously brainwashed by get rich quick influencers on social media. Lets make the ridiculous assumption that the only service businesses in the world are digital agencies since that seems to be everyone’s go to.
There are a few agencies doing $10B in digital, advertising, and PR services per year globally. Omnicom Group, Dentsu, Publicis Groupe, etc. are all doing $10B+ per year while not selling courses. Markets are absolutely huge in the real world when you log off of Twitter. Lets go through a few market sizes in the US alone. (Numbers will vary a lot on which source you use and how you define these)
Accounting services -$150B
Digital agencies -$55B
Flooring installation -$30B
Pet grooming -$5B
Yeah there's millions of businesses and tens if not hundreds of thousands of niches to go into. The business world is much bigger than Twitter. You don’t have to sell courses. You don’t have to do what all these get rich quick schemes are telling you.
If you’re living in a town with more than 50k people in it, there’s almost no niche or service that you can’t easily get to $10k a month if you’d just look at the real world.
I have been running a side business of [redacted] for ~18 months. I am running up against scalability issues, still feels like I am trading time for money, which is better than nothing but it does not feel like it's got room to run. Should I try to pivot out into trying to run Ads for companies and take a % of ad spend or double down on the non-dev side to marketing with my digital analytics background?
I took out some parts to hide what this person is doing but let’s just say he is working with a multitude of companies on a small scale. It’s a great place to be in to scale.
Because of all of these small jobs, he now has access to 100+ companies that trust him. At this point, he needs to start adding on services/partnerships/referrals. Use his low cost, time for money service as a lead gen.
Here’s what a lot of agencies do to drastically increase revenue in a situation like this.
Add on a complimentary service that’s less time for money. This could be ads, SEO, rev share partnerships, etc.
Build a one time complimentary product that can sold (customized) for each client. This could be Google Data Studio/Tableau dashboarding or the like.
Act as an affiliate to pass clients off to other businesses. Don’t want to learn SEO? Fine. Strike a deal with an SEO agency where each client that you pass, you get 20% of revenue share for the first 12-18 months. Tons of opportunities here with other service businesses.
Act as an affiliate or partner for SaaS companies. Can be very lucrative. Got a client that needs SEMRush? Well you have a coupon code that will save them X% on the first month. Client larger than that and thinking of going to Shopify? Be the one to make the introduction and receive 20% of their plus fees recurring.
The beauty here is once this person builds out his extended offerings, he can then contact his past clients (and they’ll take the call) to see if they need any more help in any domain.
What does "incremental ROAS" actually mean?
This is the least well understood concept in marketing while also being one of the most important. You will set money ablaze as you scale if you don’t fully understand it.
ROAS - Return on ad spend. The sales you get from the ad spend. Also called attachment ROAS. ROAS = Revenue/Ad Spend
Attachment ROAS - In measuring your return, ad platforms like Meta and Google have to make some assumptions. If someone saw an ad and bought within the attribution window (1, 7, 30 days), the sale is assigned or attached to that ad. Doesn't matter whether the ad caused the user to buy or not. The only thing that matters is whether the ad platform can track the click or view of the ad and attach it to the sale. Every ad platform takes "credit" for as many sales as possible. Why? If they can make their ROAS look better than it is, and you don’t understand this concept, you'll spend more money with them.
Incremental ROAS - This is the actual sales *caused by* the ad. Just because an ad appeared on someone's screen, that doesn't mean that that's what caused them to buy. You should only care about incremental ROAS and not regular ROAS. You should only care what drives revenue, not that it's attached.
Example Let's say that your customer base comes back every 30 days to buy your product religiously. If you accidentally target one of your recurring customers in your ad set, that ad set is going to take credit for that sale during their next buying cycle. Meta or Google tells you that they caused the sale and put the sale into the Revenue line in ROAS. This makes the revenue line and ROAS in general larger.
Making you think that you're getting a good return on your ad spend. The truth of the matter is that that customer would have bought anyways. Meaning it's not incremental and you're not allocating your ad dollars appropriately because you're not measuring what your actual (incremental) return is.
IE setting money on fire.
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Your boss and company, no matter how nice, doesn’t care about your future. Nobody outside of a few family members and select friends care about your growth and your future.
You are the only one that can save yourself and make your life what you want it.
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Disclaimer: Nothing written here should be construed as legal for financial advice of any kind. These are opinions and observations, written by an anonymous cartoon Opossum, built up over years working in e-commerce & affiliate marketing.