When we started working with Otter, the profit of their online shop was stagnating and their retention rate was lower than the industry benchmarks.
Despite acquiring new customers through discount-based marketing campaigns, they were not growing anymore.
To help them reduce their CAC and increase their retention rate, we’ve analyzed their customer base, identified their most profitable segments and developed an insight-driven retention strategy.
As their team was small, we narrowed down the scope to a single, most promising segment.
- Our client gained a clear understanding of which clients were worth acquiring.
- The team shifted their mindset from targeting everyone to focusing their efforts on the segments that could move the needle.
- 6 months into our collaboration, Otter’s shoe webshop was retaining 6% more customers.
The background story and our first goal: understand what’s blocking the growth
Otter challenge will sound familiar to many e-commerce managers. Their webshop’s profit wasn’t growing anymore, and they weren’t sure what the root cause was.
Their marketing campaigns, successful in acquiring new clients, were mostly driven by discounts. As a result, the AOV of the new customers wasn’t high enough to support sustainable growth.
We dived into the data and were not surprised to see that 70% of their customers weren’t returning after placing one order.
For Otter, the numbers were shocking! They had expanded and grew continuously for so many years!
Despite seeming profitable, their business was heading towards the dreaded acquisition shock, as their market, although wide enough, was limited.
We knew that the only option for this business to see healthy growth again was to tap into their existing customer base and find the triggers for repeat orders.
The first step towards a better retention rate: an in-depth LTV & CR audit
After the initial assessment, Otter’s e-commerce Director, Cristi, had some specific requirements:
- help him understand his most profitable segments,
- help the team make sense of all the data and extract actionable insights,
- develop a data-driven customer retention strategy that’s easy to implement and scale up,
- increase the AOV by encouraging repeat orders from existing customers,
- increase the retention rate and customer lifetime value
We discovered early in the journey that although a significant amount of traffic and orders were generated, only 30% of the customers were coming back and placing new orders.
Moreover, a very small number of customers was responsible for the biggest chunk of revenue.
We asked Cristi who their most profitable customers were, and the ideal persona seemed to be men over 40 years old, who were familiar with the brand.
However, the data showed that they were targeting the wrong customers! Their most profitable and engaged clients were, in fact, women over 42 years old.
As we continued to discuss with our client, we realized that the collected data wasn’t helping Otter in making informed marketing or business decisions. They were just looking at numbers without seeing the big picture.
Knowing who their ideal client is changed the game for Otter, and made them rethink their strategy and messaging.
Our framework: from RFM segments & NPS scores to actionable insights
We used our lifetime optimization tool, Reveal, to connect customer, order and product data and segment the client base into RFM segments.
Our RFM analysis showed the team:
- how often and how much their customers were spending,
- who was coming back and how valuable those segments were,
- how their marketing campaigns were influencing the cohorts,
- which customers were about to dump them
In Otter’s case, the numbers were fascinating! For this webshop, one true Lover was more valuable than 398 newly acquired customers!
This was the AHA moment for our client, and the most important part of the process.
By diving deeper into the data, we were able to understand which products were the most profitable for each segment and region, as well as the factors causing break-ups.
We could see which promotions had a positive impact on customer satisfaction and retention rate, and which activities weren’t contributing to the long-term goals.
The team understood that in order to improve the customer lifetime value, they needed to shift their focus on the existing, profitable customers. And we made it easy to spot those clients!
Our tool: Reveal focuses on customer value and retention rate
Reveal is first tool on the market that focuses on improving the customer retention rate and optimizing the customer lifetime value, and it’s ideal for medium and large e-commerce platforms.
Most analytics tools on the market compile reports for you and create dashboards that are overwhelming and hard to navigate through.
Thus, instead of getting useful, actionable bits of information, you end up with more data and more reports to analyze!
We simplify this process by segmenting your customer base into RFM segments that are easy to make sense of. Then, we couple this information with NPS scores to show you the full picture.
Reveal uses machine learning algorithms to find patterns in your clients’ behavior and to identify the ideal segments.
The dashboard shows you which of your customers are Lovers, which ones are Soulmates, and which ones are About to dump you. You get insights into their recency, frequency and monetary value scores.
The philosophy behind Reveal is that it’s more effective to target the customers that you already have. But to do it efficiently, you need to understand who they are, when and how they buy, and what makes them come back.
What happens during a full customer retention audit?
During a full LTV and retention audit, we go further than just creating a report and telling you to focus your marketing campaigns on a specific group of clients. An audit includes:
- A full analytics health check,
- UI/UX analysis to find conversion blockers,
- Quantitative and qualitative research
- Technical analysis of your platform
This helps you understand how your brand and assortment is perceived by customers, what products and brands are more profitable and which campaigns are not relevant for your client base.
Also, it shows you which parts of your website need to be optimized to increase your conversions and retain more customers.
How Otter adjusted their retention strategy
Otter’s team understood during our collaboration that although each customer is unique, their challenges and desires aren’t.
Their segments had similar reasons to buy, and at the end of our analysis, the webshop decided to focus on their true Lovers.
This involved two action streams:
- the first one gave their recurrent customers more reasons to come back,
- the second strategy line focused on delivering ongoing personalization to the other segments, to convert them into Lovers.
Reveal helped Otter structure their customer categories and approach them with new offers that actually fitted their interests. We created a retention paths meant to turn the non-profitable customers into Lovers.
Otter launched new loyalty and customer retention campaigns and adjusted their customer support approach without being afraid that they might lose a client.
They realized that spending too much time talking to the wrong customer costs them thousands of euro in the long run. Again, this was counter-intuitive!
The look and feel of the website, the tone of voice, product positioning and even the packaging changed after our collaboration, to appeal more to their ideal customer profile.
Our customer retention audit helped Otter get the birds’ eye view without investing hours into compiling data manually. By analyzing the dashboard, they could easily decide on their next steps.
Is Reveal suitable for your online shop?
Reveal is ideal for webshops with more than 10.000 customers, and the integration in Shopify stores takes less than 5 minutes.
However, we’ve built this tool to accommodate virtually any e-commerce platform.
We encourage you to give it a try if you’re facing challenges similar to the ones of Otter, and you’re searching for a tool that can help you:
- Get clarity on what is happening in your store,
- See the big picture by analyzing order, product and customer data together,
- Make sense of your data,
- Understand your segments and their behavior,
- See correlations between segments, products and NPS scores,
- Create cohorts automatically and easily analyze their reaction to your campaigns,
- Understand customer loyalty triggers,
- Make informed marketing plans and adjust your product assortment in a data-driven manner,
- Understand the impact of key activities on customer retention.