The Secret to Turning One - Time Buyers into Lifelong Customers in Ecommerce with Thomas Lalas

Andy Splichal:

Welcome to another episode of the Make Each Click Count podcast. Today we are diving into one of the biggest challenges in E commerce. How to turn one time buyers into lifelong customers. With rising acquisition costs and increased competition, brands that don't focus on retention are leaving money on the table. Our guest today, Thomas Lalas. He is a fractional CMO working with multiple e commerce brands, including several nine figure powerhouses to help them drive sustainable long term growth through retention and referral marketing. If you are tired of spending a fortune on new customers only to watch them disappear, this episode is packed with insights you won't want to miss. Thomas, welcome to the show.

Thomas Lalas:

Hello Andy. Thanks for having me. Wonderful to be here and this is a very timely topic. As you said, costs are rising, so it's about time we tap into retention.

Andy Splichal:

Yeah, you know, I mean acquisition costs, they get higher and higher. And with that said, why is it so important for retention marketing? I mean, where, where should people be focusing on?

Thomas Lalas:

Yeah, So a bit of context. I was analyzing one of my clients and I was analyzing the, the CAC and LTV ratio of the last two years and there is an upward trend of CAC increasing. So they keep crushing it. They're one of the best brands I've ever worked with. But margins are being eaten up by rising acquisition costs. And this is true for every platform, for, for every brand I've worked with. Right? So inflation is real for, for everyone in every area. So the, the way that most brands make their money back and start turning profit is by investing in retention.

Thomas Lalas:

So imagine that you have, let's say, I'm going to use imagine imaginary numbers, right? Let's say you have $100 cac for the first time customer and you lose money. You lose let's say $40 right? After that you, if you include also costs of goods then you've made, you've lost even more money. So now the goal is to break even and potentially For a brand with good retention, they can break even by month three on the third purchase. So now the goal is to unlock that profitability by month three by increasing AOV and by getting subscribers or one time purchases to purchase again. That's why retention is important. It gets you close to profitability as fast as possible. I don't see many brands breaking even by purchase, you know, by the initial purchase. So I think it's really important.

Thomas Lalas:

So basically if you don't want to keep paying for customers that lose your money, retention is the way to start becoming profitable now after the breaking even period, the rest is basically profit, right? So when you look at ltv, you have to, to remove any profit eaten up by cogs, by, by the CAC and by any additional marketing expenses. So eventually retention will make you profitable. And the cool thing about retention and why a lot of brands are investing in now, it's like a hot topic, is that if you want to scale faster, making money through retention will help you reinvest back into growth and that will fuel acquisition and you can grow faster. So it's, it's vital. I would say.

Andy Splichal:

Yeah, you know, lifetime value is, is essential that businesses look at. I mean especially with their marketing. Everybody is really concerned about the first order. But I guess I, you know, the way I like to learn, I always like to look at stuff backwards and so I mean it's great if you get people to come back, but I guess what are some of the biggest mistakes that make a customer not return to place another order?

Thomas Lalas:

It's about understanding how customers think and what makes them afraid or not willing to purchase again. So it's a question of trust, it's a question of understanding the value for money. Ultimately it's a question of helping your first time buyer. I understand that this is worth keep buying, you know, making it a part of your lifestyle. Because basically every solution we offer nowadays, any product, any benefit we claim already has a competitor. The customer is already using something else to solve that problem. I don't think there are many totally untapped problems that we're the first to tap into. And all of a sudden there is a huge market that nobody's catering for.

Thomas Lalas:

The goal is to replace their existing solution. So now all these people, they might try something for the first time, they might give it a try just to see what the buzz is all about, or even see if the claims are true. But at the end of the day you need to convince them that they need to remove what they were using already to solve the problem and substitute it with your solution and then make it a part of their lifestyle and turn them into fast. It's quite difficult. So I would say the, the top pillars is trust, value for money, which can be done through education and making sure that they, they can safely assume that they can replace their existing solution with what you're suggesting. It's quite difficult. It's not easy when there is so many options, a plethora of options for you to actually change something in your life. Right.

Thomas Lalas:

So it's pretty daunting as a task.

Andy Splichal:

I mean, it is, it sounds daunting. Where, where would someone start with their company in analyzing this and implementing some strategies.

Thomas Lalas:

I can't say what everyone should do, I will say what I am doing. And I'm pretty sure there are different ways of approaching retention, but this is my, my truth. First, I would understand the, the value of the product because if you don't have a product that people really want, that people can see themselves using again and again, then you, you can't really build a retention system that actually works. You know, as I told somebody recently, a shitty product cannot out market the, a bad initial transaction. Right. So sorry, a retention system cannot out market a shitty first transaction. So if you, if you have a product that doesn't really work, it doesn't matter what you do really. It's.

Thomas Lalas:

I would say fix your problem first. Number two, I would look into the brand experience because when there are so many solutions, you need to stand out and you need to make your brand quite pleasant. We had some interesting insights conducted by one of my clients and we tested our product without any branding. So people would just take the product for a while, they've not been told what brand it is, and they would evaluate the results based on the results themselves, the health benefits themselves. And then another, this, this would be the control group. And then another group would take the same product in the same cadence as a part of the study, but understanding what the brand is and having the whole branding, packaging, the whole experience. And we saw when people blindly mentioned that the benefits would be rated between 6.5 and 7 out of 10. So a good product, when people knew what the brand was and they were affected by the beautiful effects of branding, then they rose to eight and a half, up to nine, which is a big jump in a favorable rating, which shows that branding actually does work.

Thomas Lalas:

It creates the placebo effect that the product is worth more than it actually is. With a blind study. And this is very interesting. So I would invest in the whole experience when somebody buys on the website, when they receive the package, when they see the brand of the colors, when they receive communications afterwards, social media, how does it make them feel? So this is very important. I would also invest time looking into customer service. How fast do they respond? How happy are people? What's the sentiment overall in the transactions? I've worked with brands before that they hired me to, to fix their retention. But when I went backstage and I saw what's happening with customer service, I saw a lot of people actually mentioning the word scam in there. So basically the brand is legit, obviously, but they didn't really do a good job communicating any sudden changes in the product or delivery times or even they would discontinue a product without letting anyone know.

Thomas Lalas:

So that created a lot of friction in the customer service inbox. And nobody knows that, just the brand. Nobody knows what everybody else is thinking. But there were a lot of individual instances where people were calling the brand a scam in their customer service inbox. So I would also recommend in a perfect, you know, in a perfect customer service experience. So this is like the baseline, what any brand should look like and feel like before even investing in a retention program. So I will take a step back just so you know, I can hear from you if this makes sense and if you want me to add any more context to this.

Andy Splichal:

Yeah, no, I mean, I, I think that makes sense. I mean, for sure you want to be offering a product that solves a problem. You want to offer good, great customer service. What is, what is a retention program? You keep saying, you know, and before a company invested in a retention program, what does a, you know, I guess let's start with, to first implement a basic retention program. What does that look like?

Thomas Lalas:

Sure. So the biggest insight that I got working with 11, now 11, eight or nine figure brands at a big scale is that most churn, meaning people cancel the subscription or they don't plan to come back again. If it's an old one time purchase is the first 14 days. So the first two weeks after their initial purchase there is a, there is a, you know, an initial period where people feel that they might have regretted their purchase, it was an impulse purchase, maybe looked too good and they purchased, but then they regretted it and then it starts slowing down. But after day 14 and day 15, things start, you know, slowing down even more till their rebuild period if it's a subscription brand. But the first 14 days are very important. So I would invest right there and see what a lot of brands are doing or what Even agencies are suggesting on LinkedIn, you know, where they share swipe files of what they've done, etc. It's the same old cookie cutter approach where they would send maybe a message from the founder at some point, they would send a check in maybe in a couple of weeks, they would send an upsell email and an educational email and that's it.

Thomas Lalas:

Like Basically the bare minimum, like four emails in the first 14 days. I don't do that at all. I think this is wrong and this is a disservice for the brand. So I'm offering a book right now on the subject and one of my shortest chapters basically says it out as it is that your first two weeks post purchase are an extension of your product. If you don't dial in these first 14 days, then your product will lose value in the mind of the customer because there are so many issues they still have with the product in their mind and you need to tackle them. But also make them feel enthusiastic enough to share that they purchased this new thing and they're excited to give it a try. How do you do that? First of all, I would invest in the pre delivery time. So let's say the brand knows that on average they deliver the the package after five days.

Thomas Lalas:

Right. So it's good to know that you, let's say you have an email on the day of the purchase and then four or five more emails. What would you add in these five or four emails, including sms? Sometimes I would include, I do include survey, a survey to understand the deep motivations of the buyer. And I have clients that have collected tens of thousands or even more than a hundred thousand responses. But usually we cut off the responses after 20,000 and then we analyze all the feedback and start understanding the Personas that we've attracted. So have even questions like tell us about yourself. You know like when people are asked to talk about themselves, they love it, they open up. So this is always the first question.

Thomas Lalas:

So collecting this data is very important and it comes usually from the founder. My approach is text based or plain text only because it increases deliverability but also makes the communication feel personal. I always make sure that the communication of my brand feels like somebody wrote that email for them. And it doesn't feel like a marketing email, it's not a promotion folder worthy email, it's a primary folder where the email. So let's say you have a brand, people want to hear from you, they want to hear how you feel about them, they don't want to hear about your story, just for the sake of hearing your story, they want to feel how your story as a founder connects to their needs. We're selfish people. We. We put ourselves first, and that's a good thing.

Thomas Lalas:

If you're not well with yourself, then how can you be, you know, looking outwardly in a positive way? So we always prioritize ourselves, and that's the right thing to do. And that's what I always do. Any communication that the brand sends out, it's all about the customer and how their needs can be met. And then I start chipping away their objections and providing overwhelming value even before they receive the package. So now, by the time of the delivery, they're excited. They're actually enthusiastic.

Andy Splichal:

So you're. I'm sorry to interrupt. So you're starting the process of communicating even before the package is delivered?

Thomas Lalas:

Absolutely, absolutely. It's an extension of the product. The buyer is not sure yet that what they got is what they need. They're giving it a try. They're taking a risk. So by the time the product has arrived, they're excited if you do it the right way. And then always the call to action is share this in the community. If it's a Facebook community or any other community, or even, even more important, share it in an ad that has a lot of traction to start accumulating social proof.

Thomas Lalas:

So imagine the people that are very excited about the product they just got being directed to an ad that has thousands of comments. I just got mine as well. I'm really excited to give it a try. And imagine how fast this ad can scale.

Andy Splichal:

Now you're talking about directing them to a Facebook ad.

Thomas Lalas:

Yeah, Facebook ad or. Yeah, any kind of ad that has a lot of traction. So this is something that we've seen. We've done it quite a few times, and the ad scales very fast.

Andy Splichal:

That's very interesting. How. How are you directing them to a. To a sponsored or to. To a Facebook post?

Thomas Lalas:

I don't quite know how to get the actual link, but my. The meta team always gets the link for me, and I include it as the call to action. You know, go there and share your enthusiasm with the community. And the more comments that keep rolling in, the more, you know, people feel inclined to do the same. Because we. We want to copy what everybody else does. It's safe.

Andy Splichal:

Yeah, no, that's. That's a great idea. So you're sending. You send a survey, a note from the founder. You. It said five communications in the first 14 days.

Thomas Lalas:

Yes. You know, anything that can provide a lot of value, whether it's physical or digital. You add it there in a way that makes sense, you know, and builds up their enthusiasm. So it's a matter of understanding the biggest objections of the. The customer through customer service, through surveys etc, and then chipping it away, making them feel safe that they've done the right thing. Now, you mentioned it's all a matter of.

Andy Splichal:

Yeah, well, no, you, you mentioned a book. What, what is your book?

Thomas Lalas:

Yes, it's. It's. My consultancy is called the Art of Ecom and the book is going to be called the Art of E Com Customer retention. So it felt scary to author a book that encapsulates everything I've learned in the ecom world in the last seven years. But here I am. I've. I finished it a couple of days ago and now it's all about editing and getting it out in the world. Feel scary, you know? Yeah.

Andy Splichal:

When is your book going to be released?

Thomas Lalas:

I don't quite know. Hopefully sometime Q2 this year.

Andy Splichal:

You know, I know another question that, that always comes up is, you know, you're sending email or trying to get brand loyalty, but how do you do that without discounting too much offering? You know, you're. You're trying to send communications to your customer base but without always having to offer them a special discount or incentive. What are your recommendations as far as that?

Thomas Lalas:

Sure, I'm not a big fan of discounts either. I think they just eat up the margins of the brand and who wants that? So I don't even understand why a brand would focus on sending discounts post purchase. I mean, I do send discounts, but in the form of a bundle. So if you, let's say you have 30 servings of whatever product you've just purchased, when it makes sense to be offered an upgrade, then you upgrade to 60 servings. If the product allows for more, you know, use. And then you get a discount by paying more, you know, by locking yourself in a higher bundle, you know, a longer period of time or more servings of the same product in the same period of time. This is when discounts make sense, when commitment is also increased because you really want the product to do the marketing for you. The product, whether it's a health based product or any kind of product, it does include benefits.

Thomas Lalas:

You, you hire the product to get the benefits and solve a problem in your life. So basically the more you use the product, the more you make it a part of your life, the more you feel connected to the product and more loyal. So an upsell would actually make sense by bringing the person closer to understanding that the product does work and the need to keep having in their life. So this is when I would add a discount. Bundling. That's the only time, no blind discounts. I think they just eat up the margins. But again, when do you bundle? When you, when do you upgrade a customer? When's the right time? For me what I found is there, there are two key timings to do that.

Thomas Lalas:

Number one, once they've received the product and they started consuming it, the goal is to educate them. And usually a lot of agencies or freelancers will just create a simple how to email and expect that this is doing the thing. Or even worse, send a blog post that is like written back in 2022 or even the CEO delivering a lecture and sending a one hour video expecting that people will actually consume it. Nobody does. What I do instead is I follow the way that people learn, which is bite sized premium master classes. I chop down the information that already exists in the brand's vaults into small bite sized masterclasses that feel premium. So you feel that you have consume something for free that should be worth money. And eventually there is a graduation because it's a master class.

Thomas Lalas:

It's a series of master classes. So you graduate and then this is where you receive as a part of your graduation, the exclusive opportunity within a set window to actually upgrade and get a discount. And a lot of people do. I've seen up to 33% of people that participate in these masterclasses upgrade in one way or another. The second best time is around the the week two and three mark around that time when the brand checks in to see if everything's all right. I noticed that if you ask them the question, have you felt any early benefits? No matter what the product is, people that have felt early benefits within the first couple of weeks they stay way more loyal than anybody else. So up to month five, I've noticed that their retention rate can be double. So the goal basically is pretty clear.

Thomas Lalas:

Influence their perception of the benefits and help them unlock them and notice them as early as possible because this creates loyal fats. But also it's the right time to ask them what are the problems they might be having that the brand can solve. So you don't ask them, hey, we have this product, how do you feel about buying it? You ask them which of the three or four options actually resonate with you. And if they say oh, I just got this product around focus, but I also feel I'm struggling with sleep, then It's a cue for you to, if you have a sleep related product to cross sell next, you know, and use their own words to it and cross sell this sleep related product. So now it's something that a lot of people will take up because they just told you I'm struggling with this. So it's another perfect timing.

Andy Splichal:

Now all this is great if you've sold your product on Shopify or you know, your own website, but so many people are selling their products on Amazon. What if the order has taken place on Amazon? How is, I mean what do, do you have clients that are working with that or I mean how, you know, how does customer retention work?

Thomas Lalas:

Great, great question. The, the downside of Amazon, the upside is obviously it has a lot of traffic, it's a leading platform and you can get a lot of high qualified buyers there. The downside is that they have a strict policy and it's quite difficult to move people from Amazon to a subscription on your own website without breaking the rules. Actually my brands never do this, never try to move people from Amazon to their own platform. So if we advertise on Amazon, we keep building the Amazon audience as a standalone audience. There might be some freebies coming their way, but usually we treat Amazon as the fast solution. If you run out of product and you want something like the next day you get something from Amazon. But usually Amazon is more expensive and the offer on the E.

Thomas Lalas:

Com website on Shopify, as you said, is more enticing. You might have freebies and it has a subscription element to it that adds additional value that people cannot get on Amazon. So usually Amazon is for the halo effect when there is a big promotion, a TikTok video going viral. There's also halo effect on Amazon and there are a lot of organic sales because people look it up. But we don't try to entice people to buy from Amazon instead of the Ecom website. Usually the Ecom website is always the priority where we can curate the actual experience. And again, as I said, if you're looking for something like the very next day because you've run out of product, then you can buy from Amazon. But usually we don't prioritize it.

Andy Splichal:

So about your experience. So you work right now you're a CMO for multiple E commerce companies?

Thomas Lalas:

Yes, that's correct. So I fairly recently switched to that model. I used to be full time with brands and building and optimizing, you know, their subscription and retention programs and loyalty for years. But now I'm transitioning into, you know, working with brands that are really cool and I can deliver impact based work instead of time based work. So this is my recent transition.

Andy Splichal:

Great. And so if somebody is interested in learning more about you or potentially working with you, how would they, how would they contact you?

Thomas Lalas:

They can go to my LinkedIn usually this is where I'm most active and I have a book a call button there if they want to chat with me. Or they can, you know, come to my DMs and let me know what they're thinking. And I'm always happy to help. Even if I don't work with somebody. I always try to provide value because we in the ecom world, we do need to be helpful to each other. That's how the whole ecosystem is being raised to a new level.

Andy Splichal:

Well, this has been great, Thomas. Is there anything else you'd like to add before we wrap it up today?

Thomas Lalas:

No, it's been. The questions are great. By the way, you're a great host and yeah, it was a great conversation overall. If I were to say one final thing is for our listeners to think of these two mantras. The first two weeks of your post purchase experience are an extension of your product, so don't take them lightly and most churn happens within the first 14 days post purchase. That's when you lose the most customers. So be smart about it and make sure they have a perfect experience.

Andy Splichal:

Great. Well, thank you for joining us today Thomas.

Thomas Lalas:

Cheers Andy for listeners.

Andy Splichal:

Remember, if you like this episode, please go to Apple Podcasts and leave us an honest review. And if you're looking for more information on connecting to Thomas, you'll find link to his LinkedIn contact in the show Notes below. In addition, if you're looking for more information on growing your business, check out our Podcast Resource center available at podcast.makeclickcount.com we have compiled all of our different past guests by show topic and included each of the contact information in case you would like more information. Any services discussed during previous episodes. Well, that's it for today. Remember to stay safe, keep healthy and happy marketing and I'll talk to you in the next episode.