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 had a 30% uplift of their customer retention rate
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, Cristian, 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 Cristian 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!
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!
Using REVEAL to focus on customer value and retention rate
Reveal is first eCommerce tool 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 and using REVEAL 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.
[VIDEO] Client Interviews documenting the entire project
Watch our video interviews with Cristi and Valentin showcasing each of the 10 steps we carried out to reach our goal.
Episode #1 - Why focus on customer retention?
Having a data-driven mindset determined Cristi Movila to take a step further and see what’s happening with their customers after the 1st order.
Some of the preliminary insights got after implementing the retention strategy were:
- A very small number of customers is responsible for the biggest chunk of revenue;
- You don’t have to drive more traffic to your website until you know your customer retention rate;
- Traffic acquisition is just a part of the whole mix;
- It’s more effective to target customers that you already have.
Episode #2 - What did you discover during our collaboration?
We kicked off the collaboration with looking at the following retention KPIs:
- customer lifetime value, CAC, retention rate;
- revenue generated by the customers who placed x orders lifetime;
- monthly cohorts of new customers to see who comes back and during which months;
- RFM segmentation to create customer groups and detect buying patterns.
The most surprising facts discovered were:
- Although a significant amount of traffic and orders are generated, only 30% of the customers come back and place another order;
- Markets are limited. After a certain point, you reach a ceiling. So you need to turn to the existing customers and nurture the relationships you already started;
- Not targeting the right customers, at the right time with the right products and messages is a counterproductive process which leads to loses;
Episode #3 - Customer segmentation. Why do it?
Because customers expect you to know them and treat them according to their needs.
What Cristi advises is to pull your customers from the big bucket, create targeted customer segments and adjust your communication and marketing efforts.
One of the most important milestones in our customer retention strategy was customer segmentation done based on RFM:
- the Recency of their latest order (number of days since last order);
- the Frequency (number of orders placed in total);
- the Monetary value ($ spent until now).
What we did with Otter was to group customers based on RFM and personalize their web experience to match their needs.
Episode #4 - Customer segmentation. AHA moments?
When comparing different RFM customer segments among themselves, we realized these were quite different in terms of value for the company. So we realized that:
- Customers should be treated differently. Our customer retention strategy showed that there are very big differences between customer groups in terms of margin and revenue. As an eCommerce you should use your energy and resources wisely;
- 1 “True Lover”* customer equals in revenue as much as 398 newly acquired customers;
- Knowing these insights allowed Cristi to coordinate with the Call Center, Marketing, and Loyalty teams and come up with a holistic approach for the True [Otter] Lovers (and not only;
*A True Lover customer is one that has the highest score in terms of Recency, Frequency, Monetary when compared to all the other customers of that store. So a True Lover is anyone with an RFM score of 555 where:
- 5 in Recency – means this customer placed an order within the last 30 days;
- 5 in Frequency – means this customer is in the top 5% in terms of orders placed;
- 5 in Monetary – means this customer is in the top 5% in terms of money spent with the store.
Episode #5 - Ideal Customer Profile. Before and after insights?
Once the customer segments have been created and analyzed, Cristi and his team decided to launch a series of online surveys to understand who are the people behind the orders.
What came out of those online surveys were really “brain opening” insights:
- Before the segmentation, there was a common understanding that the ideal customer profile was : male, 40 y.o+
- The reality showed that the ideal customer profile is actually: women, 42 y.o+
Episode #6 - How is knowing your persona changing your strategy?
Knowing your ideal customer profile is women 42 y.o + made a big impact on several levels in the company.
Here is what changed for Cristi and his team:
- Changes in communication. Adjust the communication to this segment and come up with messages relevant for women, 42 y.o+;
- Changes in the buying process. Bring more products that are preferred by this segment;
- Changes in customer service. Train the Call Center team to carry out a discussion which is more suitable for this audience.
Episode #7 - Next steps in your eCommerce growth
The silver lining is there.
The next step for Cristi and his team is to “convert” as many “Newcomer” customers into “True [Otter] Lovers”.
And the effects are already showing. Just do a quick “Otter” search on Facebook in posts and you will see the amazing personalized campaign that they put in place for Black Friday!
Episode #8 - Omniconvert + Otter = ❤️
We don’t want to brag but we got a pretty good feedback after implementing the eCommerce customer retention strategy.
In fact, it was AMAZING! 🙂
What Cristi and his team got from our collaboration were:
- Actionable insights and a hands-on approach. The 2 teams got together and started putting in practice what they discovered by looking into the data.
- A “career path” created for the Newcomer customers to become “True [Otter] Lovers” which includes:
- website personalization (look and feel, the tone of voice, product positioning, putting the products in context, pushing the reviews)
- online surveys;
- changes in packaging.
Episode #9 - What changed after you analyzed the data?
What other things changed after we analyzed the data? I know we talked about change before but we wanted to give this one a special chapter.
Another big AHA moment which led to some changes was linked to localization: product and marketing localization.
It’s one thing to sell in rural areas and a completely different thing to sell in urban areas. The buying powers are completely different.
But it’s not only about buying power. It’s about climate and weather as well and adjusting the products based on these external factors.
Episode #10 - What can you get from your Ex-Lovers?
Ah, the Ex-Lovers. These are the customers who placed their last order with you more than 1 year ago. When looking carefully at their orders, we realized that, when they used to buy, they would place a significant amount of orders of significant values.
What did Cristi learn from surveying Ex-Lovers?
Can REVEAL help you as well?
Reveal is ideal for webshops with more than 10.000 customers, and the integration to 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.