eCommerce stores are already dealing with sky-high CAC, inflationary pressures, and increases in COGS with imminent economic gloom on the way, which is affecting consumer purchase behaviour.
SaaS pricing increases, at times like these, are certainly most unwelcome.
But here's the reality: Klaviyo has a moat-like system that integrates a large portion of your tech stack under one roof in a way that other ESPs currently cannot do.
Viewed through this context, the cost of switching at this moment in time is unrealistic for most, given the lack of functionality other solutions provide as well as the labour involved in executing that switch correctly.
So what should you do?
1) Stop viewing Klaviyo solely through the lens of being an "email tool" - you're limiting the potential of the platform.
Use Klaviyo to improve acquisition efforts by sending audiences back to paid channels, bring your experimentation team into the strategy to leverage qualitative research, and utilise its custom properties more effectively to learn more about your customers.
I'd also shift your thinking of Klaviyo solely from email to a full-suite retention tool, encompassing SMS, direct mail, post-purchase shipping notifications, reviews and hopefully, push notifications at scale in the near future.
If you're working to develop these areas of your business under Klaviyo, you'll still find tremendous value in the platform.
2) You work to reduce the costs of your current setup. And that’s what we’re going to focus on today.
How to reduce the cost you’re paying for Klaviyo
Depending on the number of contacts you have inside your account and the total emails (and SMS) that you send, Klaviyo has become anywhere between 15-50% more expensive with these recent changes.
By any brand's measure, that’s a significant price hike once you layer production costs on top.
However, don’t panic: I guarantee that with some basic housekeeping, you can offset this cost almost instantaneously by understanding how Klaviyo currently bills your account.
Klaviyo charges you based on “Active Profiles”
Unlike some ESPs which charge based on total storage (even unsubscribed/suppressed contacts), one of the fair benefits of Klaviyo is that they have always charged solely based on what is classified as an ‘Active Profile’ inside your account.
That means if somebody unsubscribes or you manually suppress them, they won’t contribute to your overall cost.
Klaviyo defines an active email profile as the following:
“Any profile that can be emailed through Klaviyo is considered an active email profile. There are two main categories of active profiles:
Subscribers have filled out a signup form or otherwise explicitly consented to receive email marketing.
- Profiles added by general engagement
It is possible for someone to share their email with you without explicitly consenting to ongoing email marketing. For example, someone who placed an order or abandoned a checkout on your site may have added their email address during the checkout process, but never explicitly opted in.
Ecommerce integrations like Shopify and WooCommerce can add both types of active profiles to Klaviyo, depending on the actions a visitor takes while on your site.”
Based on this definition, it’s clear to see that the fastest way to reduce your cost of Klaviyo is by condensing down the size of your database’s Active Profiles.
“But Adam, won’t I lose out on the ability to target people if I suppress them?”.
No - this is a common misconception about how Klaviyo defines an ‘Active Profile’.
Just because somebody is ‘active’, doesn’t mean they are worth emailing. You may have somebody that subscribed to a signup form or through a sweepstake and has received over 20 emails from you, been on the database for 3 years, and never returned to your site. Unless they manually unsubscribe or the email hard bounces, they’ll stay as an active profile within Klaviyo.
You need to suppress people like this as it’s adding significant bloat to your total costs and adversely impacting your deliverability to keep emailing them.
With that being said, follow this 4-step guide to immediately reduce the cost you’re paying for Klaviyo while providing a significant bump to your sender reputation in the process (double-win).
1: Create a Sunset Segment
The first thing you’ll want to do is define general criteria for suppressing accounts within your database.
There are a lot of opinions on the best way to do this, but for the sake of simplicity, I’d recommend defining the segment as follows:
NOTE: what about suppressing customers who have placed orders historically over time but are disengaged?
Admittedly, this is a tricky one as you don’t want to suppress people who have bought from you previously, in the hopes that they will one day come back.
In this scenario, I’d recommend setting up a separate segment/sunset flow for these historical customers, using wider disengagement criteria (i.e. received at least 30 emails over all time and hasn’t engaged/clicked in the last year, not placed an order in the last 2 years, etc).
How you set this up will depend on a lot of factors, primarily the frequency of your communication with customers as well as the nature of your products (consumable VS one-off purchases, for example).
I will leave this to you to define.
2: Create a Sunset Flow
The next step is to create a Sunset Flow. I have an old tutorial on this which still works today:
Here’s the framework for how it may look inside your account, utilising the custom property at the end of the flow to create the following Suppression Segment that needs to be suppressed manually:
3: Create a Suppression Segment
Based on the updated profile property that gets attributed to all recipients who pass through the Sunset Flow, you’ll want to set up a separate Sunset Segment like this to ensure you have your final suppression list on autopilot:
4: Set up a Quarterly Recurring Calendar Task
If you use Google Calendar or a project management software like ClickUp, your next step is to set up a recurring quarterly task (every 3 months) to manually suppress the profiles inside Klaviyo.
You can go with a more aggressive frequency if required, but quarterly to twice-yearly is a sufficient time period for most accounts to save significant costs without making the task too arduous.
5: Suppress Inactive Profiles
You now need to manually suppress the contacts inside Klaviyo by following this guide.
Simply export a .CSV file of your Suppression Segment and then reupload them to the Suppressed People link on the Klaviyo page.
And that’s it. By following this simple 5-step process alone, we’ve been able to save brands thousands of $ off their email bill each month.
If you haven’t yet done this, I recommend starting now. It’s a massive cost-saving you can implement within a day. What other tasks do you have that will save you or your clients around $10,000 that’s a better use of time?
6: Bonus Strategy: Start an SMS Bidding War
I’m going to let you in on a dirty little secret.
Klaviyo, Postscript, and Attentive are all aggressively vying for your business.
And the main competitive strategy they have in the marketplace currently is undercutting each other.
Therefore, if you use any of the aforementioned solutions, you should absolutely shop around and get quotations from an alternative SMS provider and then go back to who you’re currently using to see if they can match (or beat) the price you’ve been quoted.
They won’t be happy, but that’s just the cost of doing business.
And, if they’re going to raise prices in times like these, let’s be candid: we need all the help we can get.
7: Advanced Bonus Strategy: Holdout Testing
This is not an easy experiment to conduct, but for sophisticated email marketers, it’s one of the most transformative levers you can pull in a business to reduce operational costs and gauge a better understanding of your ROI from email.
Holdout Testing is used to find the optimal email frequency to increase revenue and CLV from your customers.
Most brands I’ve worked with fall into one or two categories: they either email too much or too little.
However, most email too much, expediting churn and increasing resource costs in the business from the creative and strategic team that could be better invested elsewhere.
If you truly want to measure the lift your email marketing strategy provides, then conduct Holdout Testing over a period of 3-6 months on campaigns and see whether you’re currently overspending on the email allowance you currently pay for.
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