Episode 29: Retention marketing: The key to sustainable growth

Brian Weinstein: Welcome everybody to Sippin’ & Shippin’. I’m your host, Brian Weinstein. We’ll be kicking it here every other Friday, quenching your thirst for an insider’s take to enhance your customer experience. So, grab your drink of choice, kick back, it’s Sippin’ & Shippin’ time. All right, welcome everybody to another episode of Sippin’ & Shippin’. I’m your host, Brian Weinstein, and I’m here, as I am every other week, with Caitlin Postel.

Caitlin Postel: Hey Brian, how are you?

Brian Weinstein: I’m doing well, and we’ve got our guest today from Malomo, Noah Rahimzadeh. I said it wrong again. I believe.

Noah Rahimzadeh: You’re killing it, you’re killing it.

Brian Weinstein: All right, fantastic. I went into that with very little confidence, by the way. Awesome. Noah, I really appreciate you coming on this week and we’re looking forward to really having a good conversation today. But why don’t you tee it up for everybody and give them a little bit of background on yourself?

Noah Rahimzadeh: Yeah, for sure. Thanks for having me. It’s been a long time coming, Caitlin and Brian. So, I’m super stoked to finally be here. We’ve had to reschedule on each other a few times, so I feel like that’s been balanced though, nobody’s been the aggressor in this situation.

Caitlin Postel: As long as it’s a seesaw, we’re good. We’re all good.

Brian Weinstein: Yeah, no, I think it was mostly me, but I appreciate you taking a little bit… Falling a little bit on your own sword for that. But no, I appreciate it, of course.

Noah Rahimzadeh: So background, I actually really get excited telling this story because it’s cool how everything come full circle. So, I started a health IT company out of college, co-founded it. Neither me nor my co-founder were technical in any way. So, we had to go outsource development of our app and platform and we landed on an agency called Sticks and Leaves who helped us with some, not only wire-framing and mockups of what the app could look like, but also some early market validation. They went on some sales calls with us. We were selling just for a little bit of added context. Basically if you had a grandma in a nursing home, for example, you could download the safekeeping app and get daily updates on her health and lifestyle.

So super timely, obviously given everything that’s happened in the last couple years and that business is still running today. My co-founder’s still there, working hard every day and obviously wish them nothing but the best. But long story short, I left that company after three years, did a few enterprise marketing technology gigs at Return Path, then Airship, which is a mobile messaging company, and last before Malomo was Movable Ink, before I finally came to Malomo and how this all ties together is the Malomo guys were running the dev shop that we worked with out of college and built our wire frames. So, I’ve known them going all the way back-

Brian Weinstein: Oh, that’s awesome.

Noah Rahimzadeh: … to [inaudible 00:02:59] and the startup that I ran and they tried to get me to come over when they first launched the company. They tried to get me to come over in between every job that I’ve had since leaving Safekeeping and finally, the timing was really right and we were able to make it happen about eight months ago now.

So, pretty new to the eCommerce space, like I said before, was enterprise MarTech. So we were working with the United Healthcares, and the Marriotts, and the Deltas of the world. And now being in the Shopify ecosystem, it’s definitely a change, but a lot of the same principles apply and I think that it moves a lot faster. I consider eCommerce the Wild Wild West compared to what I came from, which is-

Caitlin Postel: It is, yep.

Noah Rahimzadeh: … more structured and red tape, and I absolutely love it. Always knew that I wanted to get back to startup grind and couldn’t imagine a better team, one that I know well, to do that with, take that punch with.

Brian Weinstein: Yeah, it’s a different world. So we were acquired by Ryder, Whiplash was acquired by Ryder and we’re doing that and Ryder plays in a much more big institutional type company world. I mean they’re fantastic. They’ve really connected with some fantastic partners, but the approach to the marketplace for the different aspects of the business, whether it’s dedicated transportation, or supply chain, or whatever, is different than what we have, which we’re targeting more of the entrepreneurs. And so, when you’re coming out of a United … when you’re dealing with United Healthcares of the world versus where you are now, it’s a much different environment.

Noah Rahimzadeh: It totally is. I’m curious, first question I’m going to lob over to you.

Brian Weinstein: Oh geez.

Noah Rahimzadeh: What would you say some of the biggest differences are that you see on the logistics side? From where you sit, what are some of the big differences between an enterprise company and a SMB Shopify brand, from a logistics standpoint?

Brian Weinstein: Well, you are flipping this podcast on its head right now.

Caitlin Postel: I like it. Brian, go ahead, answer.

Brian Weinstein: No, it’s different. I think from a Ryder’s perspective, when you have these significant enterprise customers, they come with significant procurement logistics, supply chain teams. Whereas on our side, our customers are saying to us, “Hey, Ryder e-commerce by Whiplash, we don’t know what we don’t know and we would love for you to teach us,” and really almost act in a much more consultative way that I think is expected from a large enterprise brand

Noah Rahimzadeh: Almost acting as an agency or a consultant on top of the core service that you’re providing, right? Absolutely. Correct. Caitlin, you look like you want to add something to that?

Caitlin Postel: No, no. I think it’s just the more or less taking that … being an extension of the business and truly partnering, versus keeping those cards close to vest and think of it more as a transaction, customer vendor relationship, which is something that we touched on in our partnerships podcast as well. Just treating the relationship a little bit different.

Noah Rahimzadeh: 100%.

Brian Weinstein: Yeah, we’ve talked a lot about that internally with the broader Ryder team. It’s interesting because everybody gets it. Neither approach is right or wrong. It’s right for the business that we’re pursuing-

Noah Rahimzadeh: And the customers that you’re serving, right, absolutely.

Brian Weinstein: … and the customers that you have. Exactly right.

Caitlin Postel: Ding, ding, ding, in unison there.

Noah Rahimzadeh: We have a very similar approach, which surprises me, because when you think about enterprise technology, the other things that I’ve sold and worked with in the past on the enterprise side, are far more complicated from a technical standpoint than Malomo is, frankly. However, the teams are so under resource that we’re serving compared to the enterprise brands who, to your point, have full teams that can work inside these tools and spend time actually learning how to get the most out of them, that we are more hands on now with a brand doing 4,000 orders a month than we were for Nike, you know what I mean? Who’s doing hundreds of millions, if not billions of dollars a year. So I get that, it’s an interesting dichotomy.

Brian Weinstein: And I’m sure you guys also have your customer success team that really goes out and works on strategy.

Noah Rahimzadeh: Absolutely.

Brian Weinstein: With the customers because they need that. They need someone … They need us and I’m sure it’s the same way at Malomo, to be an extension of their company, as if there’s nothing, there’s no lines. Everybody’s enmeshed and that’s the way they’re going to be successful, for sure.

Noah Rahimzadeh: Right, the technology is only as good as it’s implemented and then supported. I think that’s where a lot of Shopify apps fall flat, is it really is just that app. And if it doesn’t get supported properly from the get go, brand’s never going to get the true value out of it. So, that’s something we think about and talk about a lot, internally and externally.

Caitlin Postel: I think that seamlessness really feeds into the overall experience or just when we talk about the overall evolution of consumer behavior, there’s always been, whether companies big, small in between, even before people were wondering and repeatedly asking, “Where is my order?” There’s always been transactions, way back in history. So what evolutions have you seen going from that first, someone chiseling a stone saying, “Hey, I didn’t love our bartering of the celery for the carrots. Those carrots were shit. Now what are you going to do about it?” And then it went to a letter, someone writing a letter and then picking up a phone. So, now of course, technology plays into this. What other evolutions are you seeing, Noah on that side?

Noah Rahimzadeh: Oh, that’s such an awesome question and I love the framing of it too. So, what’s really interesting, and this is part of the reason why I love to tell the story of how I got here to Malomo. Like I said, the Malomo founders, Yaw and Anthony, were running an agency at the time. So on top of working with people like me who had app ideas and they’re building out wire frames and MVPs for apps, they were also working with Shopify merchants. So, they were a Shopify agency.

And the problem that they initially encountered, that they solved ad hoc for a couple of their clients, was simply that the order tracking, transactional messaging, and updates process was extremely antiquated, totally off brand. And not only that, it was resulting in significant customer churn. So, the initial problem that they’ve set out, which has since obviously evolved into basically a new revenue channel, and I can get more into that in a little bit, is simply the idea that we need to provide a more proactive and branded experience in the post-purchase rather than sending that experience off of our site and out of our control, simply so we can retain these customers. Because what they found over time is almost, I think it’s 84% of customers, will not return after just one bad shipping experience.

Caitlin Postel: We know that statistic all too well, yep.

Noah Rahimzadeh: Exactly. Yeah, it’s why we’re gearing up for a big partnership launch with you all, because we both are after that same goal of providing seamless, post-purchase experiences that surprise and delight customers. So, that was the initial problem. And since then, Caitlin, to your point, it’s evolved into, okay, now not only are we able to retain a ton more of these customers, for example, we reduce Wizmo tickets by 50%. That’s on average. Not only are we able to cut down on support tickets, retain more customers, we’re actually able to use this new channel that once again, used to go to FedEx or UPS, and bring them back, bring customers back to a site where we’re able to grow LTV.

Brian Weinstein: Hey, Noah, I’m sorry to interrupt you. Just for people who might not know what Wizmo is, could you just explain that to them?

Noah Rahimzadeh: Oh yeah, sorry.

Caitlin Postel: They know it. They just don’t know they know it.

Brian Weinstein: Right, exactly.

Noah Rahimzadeh: Wizmo, fun fact, actually this is in a blog that I’m writing for Whiplash right now, actually.

Brian Weinstein: Nice.

Caitlin Postel: Putting you to work.

Noah Rahimzadeh: I came across a stat, Gorgeous claims that Wizmo is the number one question asked by customers to brands. And that is, “Where is my order?” So, if you think about it, that’s a ton of customer anxiety around waiting for their package. It’s not shopping in the store where you pick something out. Everything is personalized and branded to you. You’ve got somebody talking to you through the whole sales process. On an online experience, everything might be personalized and everything’s branded and it does a great job of getting you excited. But as soon as you purchase something, normally brands are losing full control. There’s very little, if not no, accurate communication. Everything is reactive rather than proactive. And it just causes a ton of anxiety, which is what goes into the concept, that this is the number one question asked to eCommerce brands by customers.

Brian Weinstein: Yeah, yeah, I would imagine. And not giving anything in the experience, and this is what we hear from our customers all the time. And it could be lack of responsiveness from the CX team by the brand, it could be a shipping error, it could be losing visibility to tracking. All of those are severely impacting the experience which … 84% you said?

Noah Rahimzadeh: 84%, yeah.

Caitlin Postel: And that churn is like … that will make or break your brand. And so, to go out to the opposite, what do you do different? Because you said anxiety. The second that you press purchase, you shouldn’t have anxiety, you should have excitement. So, what are these brands doing to create that and making me as a consumer say, anytime I’m shopping for that product, I’m coming back to you every time, whether … because you created that experience, where it’s not anxiety ridden and I’m not in question just wondering.

I think it’s interesting to see, especially now with such social platforms, how companies react. I love that. It’s almost like grab your popcorn and see what they’re going to say back, or not so witty, or crash burn, and you’re like, “What are you doing in the comments?” Stop it. And I love that. I love having visibility into that, but it’s so important to avoid that churn.

Noah Rahimzadeh: It totally is, yeah. And I think to your point, Caitlin, the idea of brands interacting on social platforms is in a way very similar to what we’re trying to do, which is provide a more in-person like experience where, like I said, the shopper historically has picked something out in a store and carried it out and there is no anxiety or friction in between the time that they purchase something and the time that it’s in their possession. Today, obviously that’s very different with the rise of e-commerce.

So, what can we do to make the entire end-to-end, from the time somebody lands on the site to the time that package arrives at their door and even after that, feel as though they had that humanistic personalized experience that they would get in shopping in-person? I think that that’s exacerbated by the fact that brands need to focus on that now more than ever, given that people are going back in-person. So if you’re an online retailer strictly, now you’re competing again with in-store shopping and you really have to be intentional about making sure that customers get a similar experience as they would get in an in-person experience on your online store. Not just up until the time they purchase, but up until that package arrives at their door.

Brian Weinstein: Yeah, I think the number one goal of every brand needs to be not … Well obviously, it’s client acquisition, but the retention, that repeated sale to that customer, is so significant in driving down your cost of acquisition, your lifetime value is just … it’s so important to a brand’s ultimate success.

Noah Rahimzadeh: I think that I would maybe even push back on that.

Brian Weinstein: Go ahead.

Noah Rahimzadeh: And say that the only thing more important than the first purchase is the second. And the reason for that is … I’m giving away some stats that I use in the blog, but the reason for that is in … Let me try to get this right. In 2013, the average eCommerce brand lost $9 per new customer order. So this is a brand new customer, I’m buying from a brand for the first time. A brand is losing on average $9 on me in 2013. Likely could get to … If they’re not getting to first purchase profitable, which most weren’t on average even back then, the second time I buy, in most case is unprofitable. In 2022, that cost has risen to $29. So brands are losing today 3.2 times more money on average, for every new customer that they acquire. If you’re not thinking about second purchase before you acquire, you’re literally losing money and you might as well not even acquire that first purchaser.

Brian Weinstein: Wow.

Noah Rahimzadeh: It’s a pretty staggering statistic. Over the same time period, repeat customers, average order of repeat purchasers has increased 36%. So, profitability for repeat purchasers is up significantly while first time purchasers’ profitability is down negative significantly more. So, that’s why I say the second purchase is just as, if not more, important than the first.

Brian Weinstein: Yeah, and it’s interesting too, especially right now, we are heading into some headwinds, for sure.

Noah Rahimzadeh: Absolutely.

Brian Weinstein: So, we’re in a position where hopefully, knock on wood, it will be shallow, but I think it seems like a recession is inevitable and so, the marketing and the retention is going to be so critical.

Noah Rahimzadeh: Yeah, I mean, we were just coming up with a list of all of those headwinds beyond just the overall recession, which I agree. Think about iOS privacy changes, GDPR, increased competition, e-commerce is just exploding right now. What you guys know very well, supply chain disruptions. And then like I said earlier, I think too, a big factor is return of in-person shopping. So, eCommerce brands are up against it right now. eCommerce tech and vendors are up against it right now. And what can we really do to, on the merchant side, like I said, surprise and delight and create cohesive end-to-end experiences for our customers? And on the vendor side, really make our merchants stick out from the pack.

Caitlin Postel: Yeah, aside from just really delivering promises and making commitments that they can keep, what other tactics are you seeing from brands to drive that retention beyond thinking about the second purchase?

Noah Rahimzadeh: Well, we know because we often are pushing subscription signups in the post-purchase experience because if you think about it, once a customer buys, they’re likely pretty excited about your brand. If you can offer some sort of incentive to get them to subscribe to your subscription program, we know that’s one of the number one things that you can do to increase retention and LTV over time. So, we like to promote those and consult, like we’ve talked about our brands, to promote their subscription programs in the post-purchase experience.

I would also say taking subscription one step further, I’m an adamant believer that almost any eCommerce merchant can be a subscription program, can have some sort of subscription component to their business. We’ve seen examples of … I think one of our agency partners, Brandon at Electric, was talking about one of his brands is … literally sells pools. And they came up with a model that subscription, and I think it was a cleaner pool service or something like that. Similar for a bed company, they figured out something that they could sell on subscription, some sort of consumable that they could sell on subscription. So, I think that that’s something the branch should absolutely consider.

I think, thinking about how you can turn retention into an acquisition channel, is also super interesting. So, another example there is-

Brian Weinstein: Yeah, I was going to ask you that. What’s an example of that?

Noah Rahimzadeh: So, let’s say that I’m already a subscriber. Well, we don’t want to end the post-purchase experience, push me to subscribe, I’m already there. But we do know since I’m a subscriber and I just purchased something, that I’m a loyal fan. So let’s make sure that we’re promoting our refer friend program there, where now we’re turning your loyal fans into your active evangelists who are driving new customer acquisition.

Caitlin Postel: Nice, yeah. Makes sense. And I think it goes back to another theme that typically comes up on our podcast, which is community, creating a sense of community, a place of existence of being inclusivity, to make people think about not just their pool, but now they want to check in with you once a month. If a pool company can do it, you can do it too. Try it out.

Noah Rahimzadeh: 100%.

Brian Weinstein: Yeah, you took the words right out of my mouth, Caitlin. I was just thinking between community and really, it’s the brand’s obligation to figure out what else and what other ways they can touch and assist and support their community of buyers, the clients that they’ve acquired, what else can they do that’s going to add value? I mean, we talked about it before, from our own perspective of our customers, how do we add value? But you’re really, as a brand, you’re doing the same thing.

How can I be more valuable to my end consumer? And is it a subscription channel? Is it visibility post-purchase? What else can I offer there, that’s going to bring value to them to make them say, “This is somewhere I have to be, this is where I have to shop.” Because there might be other things outside the shopping experience that are being communicated, whatever, that brings a value to that end consumer.

Noah Rahimzadeh: I would put community up there, I think, with subscription in terms of one of the top things you can do to build LTB and Brian, to your point, bring value back to your customers beyond just the products that they’re purchasing.

And again, I’m going to talk about post-purchase a lot because that’s what we’re focused on. But it’s another great place to drive community-driven engagements and events. Because you know that this person is going to have a product, that is often discussed and talked about and ideated on in your community or communities, so why not promote whatever community that you’re building while customers waiting for their package? Whether they’re a first time customer or a hundredth time customer, they’re going to want to be able to get the most out of the offering and the most bang for their buck for what they just purchased from you. And community’s a great way to drive up the value that they get out of your brand overall.

Brian Weinstein: I think as we continue to transition, and you’ve got a millennial group that comes in, that’s very tech savvy, but then you get a Gen Z that comes in that’s very tech dependent. So, everything revolves around the experience that they have online. I think that that holds very, very true to the brands that they’re loyal to.

Caitlin Postel: I love that saying, I ki I’m not even a Gen Zer, I felt kind of attacked. I was like, “Ooh, tech dependent.” Addicts. But you’re right, it’s crazy. It really is wild. And from that, even from that time, and we know, we’re in this space, we know when you press by and they give you the tracking number, you know there’s nothing behind that tracking number. Stop pressing it. What are you doing? Definitely not the way to become a brand ambassador, by checking in every 30 seconds.

Brian Weinstein: Right, exactly. Exactly right. All right, Caitlin, did we miss anything? Because I think this has been fantastic.

Caitlin Postel: No, no, this was great, Noah. Thank you so much for joining us today.

Noah Rahimzadeh: I want to call something out real quick, that I found. I don’t know if this is going in the blog or not, but it’s one of the reasons that I’m super excited about our partnership. We have some data where we’re able to aggregate what we see in certain cohorts of order tracking. So, from the time a customer purchases, to the time it arrives at the door, where are the problems in the supply chain? Where are we seeing issues? So, we pulled some data about Whiplash, our joint whiplash customers, compared to all of our customers and the time in fulfillment. And the time in fulfillment for Whiplash was 2.2 times faster than the time in fulfillment for all of our other customers. So, that is the reason that I am super, super pumped about this partnership. There’s no productize integration right off the bat, but the fact that we’re just so hyper-focused on providing these seamless post-purchase experiences, it’s a match made in heaven, I say.

Brian Weinstein: Well, I know Caitlin and I are both laughing behind our microphones right now because we always talk about the … We don’t include shameless plugs on the podcast, but since you said it about us, I don’t think it counts as a plug.

Caitlin Postel: I was literally thinking of that. I guess we’re off the hook. He said it not us.

Brian Weinstein: He said it, not us.

Noah Rahimzadeh: I got to hype you guys up. I really appreciate you all and I’m super pumped to blow it out in 2023.

Brian Weinstein: Yeah, no, we are as well. Appreciate it. Noah from Malomo, everybody. Caitlin, you want to take us out?

Caitlin Postel: Sure. Thank you, Noah. And thank you everyone for tuning in today. Check us out in two weeks on your favorite podcast platform. We look forward to seeing you back. Thanks everybody.

Noah Rahimzadeh: Thanks everyone.

Brian Weinstein: Peace. Thanks.

Caitlin Postel: All right.