[MUSIC PLAYING] DREW SANOCKI: Welcome to module 2, lesson 2, How to Engineer More Repeat Buyers. Retention has three ingredients, your merchandise, your customer experience, and your marketing. All three can influence customer retention. Let's review some examples of each. Merchandise is what your customer bought. If they bought an amazing product that fulfilled their needs, they're more likely to come back and buy again. Take HSN for example, quantitative analysis revealed that the company had two distinct retention cohorts.
The women who bought knits as their first product were thrilled and came back to buy again and again and again, conversely, the women who bought bras first never came back. Qualitative surveying revealed that the bras were an inferior product, so HSN redesigned the line and retention increased. When Bonobos examined lifetime value against first item purchase, they realized that the suits created their multi buyers.
Men love the suits. So that's what you see first thing whenever you go into a Bonobos store. The way you deploy your merchandise also impacts retention. Flash sites like Gilt or Kickstarter launch products on a set schedule. This trains customers to check the site regularly which in turn greatly reduces customer reacquisition costs. Customer experience-- the second ingredient-- details how your customers buy.
Here I think of customers that deliver delightful service like Zappos. That service wins longtime buyers regardless of how satisfied the customers are with any specific product they bought. Subscription and auto-replenishment models like those at Dollar Shave also lock in repeat buyers. And loyalty programs like Amazon Prime also increase the likelihood that a customer will return if the loyalty program's truly valuable.
The third ingredient for great retention is marketing. How you communicate to your customers. And the most powerful retention campaigns are customer lifecycle marketing campaigns. Those targeted to customer segments post-purchase. Think of order receipts, bounce-back communications, feedback communications, replenishment communications, VIP or loyalty programs, and anti-defection and win-back campaigns.
All these are ways to engage with current customers and drive them back to buy again. In this class our goal is to trigger growth within the first 100 days. It's usually not as easy to get retention wins out of merchandise or customer experience in that short time. Instead I want to focus on the marketing ingredient, the third one. That's what I'm going to talk about in the next lesson. Specifically, how we implemented some lifecycle campaigns at Karmaloop that ramped up retention.
To recap this lesson, there are three ways to increase retention, merchandise, customer experience, and marketing. The most effective over the short-run are lifecycle marketing campaigns. [MUSIC PLAYING]