How do you create a retention marketing strategy for a single SKU store? An extremely difficult but not impossible task that requires improvisation and resetting expectations. Let’s dive into it.
Retention for Single SKU Stores
Once upon a time, as many of you know, I worked in the sports supplement industry.
I worked with a lot of brands during this period that were built off the back of single SKUs (testosterone boosters, fat burners, pro-hormones, etc).
Many of these niche brands were incredibly successful but there were two primary reasons they were able to achieve this success:
- Market conditions were completely different back then: we had less competition, lower CPAs and more organic reach, enabling strong profits on first purchase
- The product had favourable purchase latency: people got results and repurchased the product
Today, the landscape for #1 is completely different and not every single-SKU store has #2 in its favour (think mattresses, sofas, etc).
When you’re faced with these challenges, how do you create an effective retention marketing strategy?
Here’s how I approach things today for most of these brands.
1: Maximise profits on first order
Although this isn’t tied into retention, it’s related to Lifetime Value and therefore needs to be at the forefront of your strategy.
For a lot of email marketers, the first port of call is to set up a pop-up and incentivise customers to make their first purchase with a discount.
This is not a well considered strategy for single SKU stores.
For these brands, that contribution margin on their first sale is absolutely critical to maximise. Eroding that with a discount can be the difference between staying in business or going bust, depending on how much you’re paying to acquire a customer.
What’s the solution?
Price experimentation (or rather, optimisation) needs to be the highest priority. Although it’s not directly correlated to email, there is the possibility that you can run signup forms alongside the CRO team working alongside whoever is responsible for that department and assist with testing pop-ups on its impact on conversion.
There is also qualitative research you should be conducting in abandoned carts and the welcome flow to find out why customers don’t convert, and this feedback is absolutely critical to send back to the acquisition team as well as CRO department to ensure they’re tweaking the messaging to overcome these objections in everything from ad copy to product description pages.
Email and SMS is unlikely to ever contribute the brainless “30% of total revenue” platitude for these stores, but that doesn’t downplay its importance or the value it can bring when the right strategy is executed.
2: Build an Incredible Post-Purchase Journey
This is something that all brands should be doing, but for single-SKU stores, it’s inexcusable not to go all out here to leave a lasting impression.
While I’ve written extensively about optimising post-purchase flows in the past, there are a few things I think single-SKU stores need to be ruthlessly optimising I should emphasise here.
The goal of these strategies are to build Word of Mouth advocacy, as the only way to sustainably scale a brand like this will be to offset CAC by using existing customers to bring in new revenue.
- Unboxing Experience: it’s absolutely critical that you nail the unboxing experience to leave a lasting impression on the consumer. Apple is the main titan that springs to mind, but also look into Snug Sofa and the level of thought they put into their unboxing experience. Feey is another phenomenal brand that personalises every single order with bespoke handwritten notes and has an incredible amount of referrals through their level of attentiveness to customer care!
- Habit formation: if the customer doesn’t use the product and get results, it’s unlikely that they’ll ever talk about you in the streets. Be creative here and ensure the product is adopted by setting your customers a challenge - here are some examples of how to execute this. Also check out Waterdrop’s “Drink more water” challenge here for a practical example.
3: Create a Powerful Referral Program
Most referral programs suck as they’re not generous enough with the offering or because there is too much friction to get benefits.
For single SKU stores, you really need to nail the referral program as it’s another critical lifeline to battle soaring ad costs and continuing to grow.
I worked with a brand once that gave out £20 of store credit if you were able to bring in 5 new customers. Nobody has that level of motivation.
Instead, make the offer simple and easy to understand while compelling. The Cheese Geek and Wild both have clear, easy-to-understand offers that are an instant win-win.
If you work out how much you’re paying Facebook or Google for a first-time customer, I’d highly recommend going close to this with your referral program to build traction with it.
It never ceases to amaze me that people will pay $50 for a new customer on Meta but don’t want to give away more than $10 to an existing customer that is likely to bring in a friend with a probably high-LTV due to the potency of referrals. Be generous with your offering if you want to make the program a success (and you really need to, let’s be honest).
But what if the product is never going to be purchased again so the incentive for the original buyer is even lower? This brings us onto my final (and favourite) strategy…
4: Release Complimentary Products
There comes a time for most single-SKU stores where eventually, they need to face the potential reality of having already advertised to their Total Addressable Market (TAM). At this stage, further advertising isn’t necessarily the answer, but neither is it always creating an extensive product catalogue and expecting retention to magically explode.
The strategic release of complimentary products, in these circumstances, is my preferred route. Executed correctly, they’ll lead to “upticking revenue cohorts” which can dramatically increase profits in an eCommerce company over time:
Source: thanks to my good friend Christian for this awesome chart!
It is important not to just release any generic product and expect to achieve this effect. Conduct qualitative research to de-risk your launch by surveying your existing customer database, doing efficient market research and identifying which complimentary products your audience will actually want. You can use your email database to conduct this research or any type of community you have including social media (think of polls on IG & FB groups).
Mattress store? Pillows and bedsheets may be your next logical move.
A squat rack? Perhaps it’s time to release exercise bands of dumbbells.
You get the picture: create a hypothesis and do rigorous research with your existing database to determine if you’ll be able to achieve this effect.
Focus on one goal at a time for Retention
To wrap things up, it’s important to stay focused when it comes to moving the needle on retention and master 1 channel or operation at a time.
While it’s tempting to optimise all of these simultaneously, I’d encourage you to be diligent with tracking the effectiveness of each strategy first and working really hard to master it before moving onto the next, unless you have significant resources in-house.
It’s extremely difficult for a single-store SKU to be a highly profitable eCommerce business these days, but not impossible. Follow the strategies outlined in this article and you’ll be well on your way to success.
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