The Shopify Retention Math Nobody Runs

Jay Myers: [00:00:00] Hey everyone, welcome to another episode of the Shopify 1% Podcast, and before we get started today, I just wanna say a huge thank you to all of our listeners. Last week, I was in Kansas City for SubSummit, and I know this episode might be coming out in a couple weeks, so that might be about four weeks ago by the time you're listening to this.

But I was at SubSummit last week, and I had so many people coming up to me. Actually, one guy pulled out his phone and opened Spotify, and the Shopify 1% Podcast was the top on his Spotify playlist. I had another guy come up to me and say, "I listen to your episodes every time I- I'm at the gym. I've listened to every single one."

And then a, a husband and wife came up who are running a store. Actually, I'll give a shout-out to them. It's called Love Me Gluten Free. You guys are probably listening right now. They both came up, and it was really funny. He said, "I always listen to you at 1.5 speed, so now it's interesting hearing your regular speed of voice."

But it was really encouraging hearing how many people are committed to this 1% journey and [00:01:00] improving your stores 1% every episode. So thanks for, so much for being a part of this journey. Today's episode is absolutely going to make your Shopify store 1% better, probably a lot more than that, because I have the director of retention himself here with me, all the way from Greece.

It's late in the evening over there. I got him to stay up. Thomas Lalas, he's... Man, he's written the book on retention. He's worked with, I think, the largest supplement brand in North America, I wanna say. He can correct me if I'm wrong on that, but massive nine-figure brands, and many of them. I think it's safe to say that nobody knows retention and thinks about retention the same way as Thomas, because for him, it's a lot about economics and actually how that retention turns into real, sustainable revenue that turns into growth for your store, and retention being at the bottom of that.

So Thomas, first of all, welcome to the show. Thank you so much for coming on. I appreciate it.

Thomas: Thank you for the wonderful intro, and [00:02:00] amazing to finally chat with you. We've connected so many times off the podcast. It's great to be chatting officially and record stuff as well

Jay Myers: Yes. Long overdue, and I think we had to reschedule this twice. I'm not sure, but that's... You know what? That's the nature of every- everyone's busy, but I'm glad we finally made it, so. I wanna start with you've analyzed data from over 2,000 e-commerce brands. Probably more now, this stat might even be a little bit older, but I wanna start with that.

You, you have what you call the billion-dollar question because if a ma- if a merchant answers it, I wanna, I don't wanna say nothing else matters, but it really puts everything else in a light that it doesn't matter as much. So you say the billion-dollar question in e-commerce is: how do I get a customer from order number one to order number two?

Why is that the billion-dollar question?

Thomas: Well, first of all, i-it is a billion-dollar question because overall, imagine if you're running a brand, think about your own brand right now, whoever is listening, what would an additional order per customer do to your business? [00:03:00] I think that puts everything in perspective. If you had one more order per customer, everything would be much different.

First of all, when we're talking about payback periods and with meta and CAC overall increasing over and over, every single month, a lot of brands, especially subscription brands, they lose money in the first order. So second order is, for many brands, the path to profitability. You know you can turn a profit by having somebody purchase second time, and you can break even on the first order.

And for many brands, the first order is where everything stands still. My data shows that if somebody buys without a subscription, they are 90 or 95% of them are likely to not buy again a second time, meaning there is a retention of 10, 5 per-- more or less. Meaning most customers are set up for failure.

They buy once, whatever product they've purchased, [00:04:00] likely they will not purchase again and likely they will forget about the product. They will not create a habit. They will not use the product again. It's not gonna become a part of their lifestyle, and eventually it's gonna fade into their memory just like everything else they've bought and they forgot about.

So the second order put e- puts everything into perspective. It becomes a tangible thing that people now remember. Because the first order can be a random thing, an impulse purchase, but a second order, unless you've gained basically the subscription so people don't know they're subscribed, what I call the accidental renewal, the second order makes things more legitimate.

The person, if they wanted to buy a second time, they have chosen to, meaning now you are way more likely to get a third, a fourth, an Nth order than just being stuck on the first order.

Jay Myers: And is this, when you work with brands, do you do any work on the first order at all? Are you primarily just focused on, okay, I-- 'Cause I do know acquisition matters as well, too. If you're acquiring the right type of [00:05:00] customer, they're more likely to buy a second time because but do you kind of just focus on once they order, how do I get them second, or do you start earlier than that?

Thomas: Typically, I work with brands that have unlocked acquisition in a scalable way, meaning they acquire the right customer, and they can do this at scale. Usually, the brands I'm working with are eight or nine figures per year, and usually what I'm needed for is to come in and create systems to increase LTV, increase retention, get people from order one to order two to order Nth.

But with certain brands in a consulting capacity, I'm also helping understand what kind of acquisition drives champions, veterans, the best customers, and what kind of ac-acquisition drives dormant buyers, people that buy once and then they don't buy for a year, meaning they are long forgotten, unprofitable, and if you look at the RFM analysis on Shopify, all the way to the bottom left, down there with, in the abyss with [00:06:00] everybody else accumulating, dust and just basically never turning a profit.

So there is a capacity where I consult on this, but usually it's working with brands that have figured this out and helping them maximize retention down the line.

Jay Myers: Now, what about brands that don't have a clear replenishable product? Is there... Obviously, it sounds like it's gonna be a lot harder, but there's... what's your thoughts on brands maybe in the clothing space or f- or home goods, furniture, stuff like that? How should they think about it?

Thomas: Yeah when I'm getting asked a question like this, I'm always being honest. I am not a true expert in non-replenishable pro- products. I don't plan to work with brands that sell shoes or mattresses or, home equipment or anything like this because the, the approach to retention is much different and the sales cycle is way longer if there is any sales cycle.

With [00:07:00] mattresses, you might buy one every decade, or something till it gets destroyed. But with something replenishable, there is a natural fit, a natural cadence, and the goal is to get the customer to basically keep ordering the product to maximize the value they're getting from the product.

It's a different story. I'm not gonna try to give you bogus advice on things that I haven't built true expertise in, and I'm pretty sure there are other people that are better than this than me. But yeah, I'd rather focus on CPG, and this is the only clients that I'm accepting as well.

Jay Myers: Well, I re- I respect that you are upfront about that. I think for anyone listening that is in that space, I mean, only thing I would say is find a replenishable product that can go along with your with your

Thomas: there is something interesting. There is a platform that I've tried, I've referred business to. They're called Subscribefy. Essentially, they're turning non-subscription brands into memberships. I can't really vouch [00:08:00] for it in terms of LTV. I'm always looking into LTV. Whatever people are saying, I'm asking: What is the LTV?

Has this actually improved LTV or just the metric you try to optimize for your little microcosm? So I can't really tell you what the LTV looks like, but if there is a non-repl- replenishable brand, they can look into Subscribefy and see if a membership could be of interest to turn it into a monthly subscription, basically

Jay Myers: Yeah, I mean, we have a subscriptions platform and we see a lot of brands that... I would say this has actually become a bigger trend in the last couple years, is not traditional subscription brands like clothing, apparel. Actually, the shirt I'm wearing right now is a True Classic T-shirt, and I have a subscription for a membership not for the-- I don't get the T-shirts every month.

I have to buy them, but I pay, I think it's a $20 -a-year membership. I can't remember what it is. And then I get a credit every month. But the there's actually been a lot of data. Do you-- Are you familiar with [00:09:00] Restoration Hardware? Is that big o-over there, or is that more just a North American furniture?

Thomas: really. I guess it's an

Jay Myers: Okay, it might be a North Amer- So, hey they're a large kind of high-end furniture company in North America, and they're publicly traded, and they were one of the first brands in 2016, they launched a recurring membership program for furniture. And you pay $125 a year, and it gives you access to whenever they run a sale, only members get the sales.

You can now get access to a design consultant and bunch of other perks and benefits. But because they're publicly traded, their numbers are available every, every quarter, and so they've been quite open about it. But the biggest thing that stood out to me on that for them was paid members versus the free loyalty members spend 400% more than the non-paid, 'cause there's that sunk cost, right?

And actually we pay for it, and because we pay for it, every time we're looking for a person, "Well, we might as well check there 'cause we paid for the membership," right? So, [00:10:00] so I think there is a model, but it's outside kind of how you work with brands specifically.

Thomas: Yeah. I mean, it's a small world. You can't really specialize in every single thing. It's I was trying to be 1% better every day myself at what I do, and I ended up, being pretty good at the CPG space especially subscriptions. There is a non-traditional CPG brand that we work with, and they're doing exceptionally well.

They're pacing towards nine figures, and they are selling perfume, but not in the typical sense where you just go in a shop, you just buy some perfume, and then you forget about it till it's done. They're selling a membership, a mystery perfume club, where you get smaller samples of perfume so you can diversify your taste, you can get to experience new fragra- fragrances.

And also it is be-- it's tailored to your own taste. You take a quiz, so it's getting quite interesting, and it's working really well with subscriptions. But overall, if you have a known... [00:11:00] n-not a typical subscription brand, thinking of ways to add recurring value to the customers can make your brand become a subscription brand eventually.

But my advice is don't force it if there is no way that this business model makes sense for you. Because it is a business model. It needs to make sense for you. Otherwise, you're just forcing people, maybe you're gaming the system, maybe you're making them... You're hiding the fact that it's a subscription so you can maximize revenue.

These are all gray or dark a-areas of e-commerce, and I wouldn't recommend anyone to do that.

Jay Myers: Yeah. So of these brands, these 2,000 brands that you analyzed, what, what's the most common pattern you saw, the thing that where they look, I think you've talked about this, where they're profitable on paper but broke in the bank, and it looks like healthy, but really they're not, and then they end up struggling soon after?

What's some of the most common patterns you saw of brands that had that struggle had in [00:12:00] common?

Thomas: So, so many patterns. I mean, when you analyze thousands of brands and I've worked with with tens of brands that are in the eight and nine-figure caliber, a lot of things that are, a lot of patterns emerge. My favorite one I would say is the, The accidental renewal that which I mentioned earlier, which a lot of brands you can see that they're doing pretty well in the second order, around 60, 70, 80%, some impressive numbers of people buy a second time.

But then you see a big drop the following month. Whenever I see this, I can totally tell that either people were convinced in the first 30 days to give this product another try, but they didn't quite like it the first time, or they didn't even know that it was a subscription, and when they got billed, they just started canceling right away.

Actually, the histogram of cancellations, when you put all the cancellations in order, how many days after the initial subscription did people cancel? You will see there are three spikes. The first spike, the biggest one by far, is the day of [00:13:00] rebilling. People get rebilled, they realize that they don't want this, and they cancel right away.

The second one is obviously the billing reminder. People receive an email and SMS that you're about to get charged, and usually it's just positioned the wrong way. Instead of providing value or saying, "Here's the next freebie arriving in three days," or, "This is the best part of the month, you're getting more of your favorite product.

Here are all the benefits. You're here in the timeline of benefits," or something like this, people are saying, "Hey, you're gonna be charged again. Here's how much you're gonna pay us in three days." And people just click whatever button is available, delay, manage, cancel, skip, whatever is available.

So this is the second big drop big spike. And then the third one is, again, makes sense, it's the same day of purchasing the subscription. It's the zero day churn. People, they either don't really want a subscription, but there's no other option, or they don't want a subscription, but they want to get the discounts or the freebies or things like that.

So they just get the [00:14:00] subscription versus one-time purchase, and then they cancel right away because they don't really have the intent. And as you see brands putting a l- a lot of money into the wrong kind of audiences, you will see a lot of people looking for discounts. They will see the subscription, and they will think of it as a great way to save money by getting a cheaper product.

Usually, there's a discount on subscription, especially a bigger one up front, and then they will cancel right away. And if you see in your brand something like this, that means that you're likely attracting the wrong audience or/and your offer is not really structured in a proper way to attract the right subscriber.

And it's the paradox of having too many gifts in the first order and no gifts in the upcoming orders, meaning a lot of people are like, "Oh, amazing. Cool. I'm just gonna buy it once, then I'm gonna cancel. I'm gonna get maximum value with a lower price, and then I'm gonna be on my way and see if I like it."

And people, once they cancel, they likely never come back. The re- the reactivation numbers the first 90 days of [00:15:00] cancellation are really poor. So- Yeah, this is like the thing that sticks out to me every time I analyze a brand. I will try to understand the way they've structured subscriptions.

Did they just slap a subscription model on a product but they haven't really embraced the business model? Or have they actually optimized everything around the subscription, meaning they're there for the long run and they're there for the LTV and the retention curve shows that, there is a smooth churn.

Eventually, the, the retention curve becomes like a parallel line to the X-axis, and eventually churn slows down that much be- below 10% per month and you can see it's like a little flat line. So just by looking at the retention lines of all these brands, I can roughly understand what is going on, and this is the power of having too much data.

You get to diagnose the situation way faster

Jay Myers: Yeah. Okay, what does a perfect flow look like? These are some [00:16:00] of the mistakes, and I see it too. I agree 100% with you. What exactly does it look like from purchase to day one through to the first reorder, second reorder? What's... What does perfect look like?

Thomas: I will actually take a step back and I'll start with the ads themselves. So the ads themselves, overall, I'm not an ads expert, but there is one thing that I always look into, which is the promise. What did the ad promise? Did it promise fast results when the results actually take time? Did it promise a cheaper price when actually potency or the product itself is the hero, not the price itself?

Meaning they attract bargain seekers and things like that. So what is the angle? What drives people in to, to make a decision and try the product today? The, the second thing is do pe- do... does the, the ad send people to a product page or to an advertorial or to a quiz? Because brands that have quizzes [00:17:00] that basically tailor your plan for the product, they tend to have way higher retention because also you have the zero party data.

Say it's a, a dog supplement brand. You need to ask how many dogs, how what's their weight, how old are they, do you have any allergies? So all the things that will help you, will help the brand tailor the subscription to the dog or the dogs themselves. Because the dog is the end consumer, not the, the person that buys the subscription.

So you need to make sure you understand who you're dealing with. Same thing with kids. Your kid needs to have the perfect supplement, the per-perfect vitamin, whatever you're selling. You need to understand the kids first. Now, if there's an advertorial, the advantage is that there is additional education.

You're pre-qualifying buyers. You might get fewer people to buy, but you're getting stickier subscribers because these people will likely understand deeper what they're gonna buy versus somebody that landed on an ad with a great hook. They didn't even see [00:18:00] the full ad, with all the promises and all the benefits.

They just saw the hook, and they immediately slap the add to cart button because it was an impulse purchase, right? So the intent matters a lot. Before they buy, they're, they also see an offer, and there is a big theory about, what the perfect offer looks like. For me, and I posted about this recently, it's all about three dimensions aligning.

The consumption habit example, have here like pills. These are gut health pills. I can only take one a day, right? So if they were selling a little bottle that had two pills a day and they would replenish every thirty days, that would mean I couldn't take all the pills before the next billing, right?

So first of all, how much do you have inside the box, the bottle, the bag? Number two how much can a person actually take every day, right? So matching these two things and then finally, what's the billing cadence? So in this case, I can only take one a day, and if I have thirty pills in a box, the billing cadence needs to be thirty days.[00:19:00]

If it's coffee, for example, right? You can drink more cups of coffee a day. So you can actually sell more doses a day for the thirty days of billing. But if you couldn't and you wanted to offer different options, it would be thirty pills in one box for thirty days, or sixty pills in one box for sixty days, or ninety pills for ninety days, right?

So you would match the cadence of consumption, the content inside, and the billing cadence. These three need to match. I've seen a lot of brands, they offer too much product up front, and then they charge every thirty days. But when I ask the brands, "All right, how much can somebody physically consume or should they consume in a month?"

And they're like, "Up to two." "Okay, how much are you selling right now in, in thirty days?" "Five." So they can consume up to two, but you're selling five. Do you see that people are gonna cancel? They're gonna see that they got charged every thirty days. They have too much left. They're gonna cancel, and I bet that your number one cancellation reason is [00:20:00] too much product.

Not I didn't get the benefits or too expensive, but too much product. Because literally, you set people up for failure. Or if they have too little product, people will not have enough to use every day when they're supposed to use it every day to for the-- to see the full results. So this is the offer. Again, the consumption cadence, the content inside the box, the bottle, whatever, and the billing r- cadence need to match.

Jay Myers: うん。

Thomas: congratulations, people have purchased. They went through the ad with a promise, through the advertorial or to the product page or to the quiz. They saw a perfect offer and they pushed the button and they purchased. The first five days, I would say, till the product arrives, usually takes around five days, are very crucial because people bought, but it doesn't mean they're loyal, or it doesn't mean that they have full intent to stay.

So you need to earn their belief, their reduce their skepticism and increase perceived value. They have all these questions like, "Is this right for me? Did I overpay? What are the other [00:21:00] options available? Can I believe these actual claims over there that look too good to be true?" All these questions are asking w-with their skepticism.

So I always advise brands to definitely send where is my order transaction emails. "Hey, your order has, was picked up. It's on its way. It's gonna get delivered tomorrow." Just basically make people feel safe that this is not a scam Obviously, if you ship it from China and it takes three weeks, things are not in your favor because it takes too much time, it creates a bad experience, and you cannot out-market a bad customer experience.

But at the same time, I front-load my brands with a lot of value because you pay X amount, maybe you get, you're getting gifts, feature the gifts. Maybe you're getting a free community, feature the community. An SMS club that is providing additional benefits and education, feature it. Just bombard people with a lot of additional value so you can increase the perceived value of what they paid for.

This way they feel safe, like I've done the right thing. It was a great choice, right? [00:22:00] It feels safe. It's on its way. Also, I'm getting all these additional things. Look at me. Actually, it wasn't that expensive now that I'm thinking about it, right? So this is what happens during the pre-delivery phase. And then once the product has been delivered, it's all about onboarding because if people fail to start using the product and they don't turn it into a habit fast enough, eventually it gets forgotten, eventually people, they don't want to renew because they have too much of it, or they don't get the benefits fast enough because they haven't used the product in the first place.

So if they don't use the product, your churn is going to increase. And that's why I've invented what I call bite-sized premium masterclasses. Instead of just dropping a blog post that nobody's gonna read or a huge video that nobody's going to watch, just the whole goal is turn education, onboarding into a bite-sized masterclass that is maximum two minutes long, slides, something you can browse quite fast, and you can feel that you actually learn something.

Think about it like a mobile video game. [00:23:00] They're amazing for that. I get a lot of inspiration outside of ecom because mobile games, they, there are so many of them, and they have a little window to actually get you hooked. So what do they do? They provide a very easy win right away, maybe a tutorial, but then a second one that is a bit harder, just a bit harder, but you start accumulating a lot of wins quite fast.

And then when it gets a bit more difficult, now you're already spent twenty minutes in, so you have this, The loss aversion, like I've spent all this time, I'd rather... Actually, it's called sunk cost

Jay Myers: Sunk cost fallacy,

Thomas: this time, let me spend a bit more just to unlock this next level. It looks exciting.

And then two hours later, you're like, "What did I do?" You got hooked in. So the same way, but spread out in the first few days because we don't wanna get people addicted. We wanna get people to the right path to build the right habits with the right products. So I provide people quick wins early on, two minutes in, congratulations at the end.

And this way people start feeling they're actually doing some progress while the actual [00:24:00] results of the product are arriving a few weeks down the line, right? So you need to bridge the gap of where am I now, what do I expect, and how fast do I get results,

Jay Myers: Mm-hmm.

Thomas: most people don't sell painkillers where you take the pill and then 30 minutes later you're good.

Usually, it takes time to accumulate the whatever ingredients are in the product, and eventually you need to bridge that gap so people don't cancel. Because for me, a cancellation is not even you lost a customer, a single transaction. You lost all the potential LTV down the line, because if somebody buys a second time, they're way more likely to buy a third time, a fourth time.

That means the LTV compounds. You don't just lose a single transaction, you lose potentially hundreds of dollars worth of profit. So it's very important that you get the first 30 days right, or whatever the billing cadence is, till the second renewal, and onboarding, dispelling myths, mentioning the, in a visual way, the value of cadence, what kind of [00:25:00] ingredients are inside, how their lifestyle affects the results.

All these things that a brand needs, they need to be front-loaded and also with a visual timeline. "Hey, this is where you are. This is what's gonna happen in three months. If you stick around, 96% of people, they claim that they got the full results of the product. Just stick around and there's no way you can lose."

Right? That's why a lot of brands are moving to a 90-day cadence. You see Fatto fifteen, IM8 even brands that start as 28 days or 30 days, like Guruuns, they're moving towards an upgrade every 90 days because this is where the profit is. So very interesting model, and once you get the onboarding done, I love to close that phase with a check-in, looking into how people feel after a week of using the product or 10 days of using the product.

Because people are not gonna feel any different likely, but if you've done the right things, they will feel they're doing the right thing. Like for example, I don't know, probably you can see, shading like I'm getting some persistent belly [00:26:00] going on here as a dad, and I don't like it. And I started walking, right?

And I've started doing this for a few weeks now. I've been walking almost daily, and obviously the belly's still there, unfortunately. But when people ask me, "Hey, how do you feel since you've started walking?" I'm like, "Yeah, I feel great. I know I'm doing the right thing. My mood has improved, and overall, I'm, I know I'm doing the right thing.

I feel the benefits. I'm not gonna stop walking." Right? The same thing for the product. If you frame everything, you increase the perceived value, you show them they're doing the right thing, the, what the timeline is, people will start future pacing themselves, feeling like the results that they're gonna get in the future.

So once I ask people a week and a half later after the delivery, "Have you felt any early benefits?" If they say yes, my mood has improved or any placebo effect or whatever, these people are way more likely to stay also in the long run, right? And if people say, "Hey, I need more time to evaluate," that's fine.

Some of these people will actually stay. It doesn't mean that they're gonna cancel. But overall, in [00:27:00] this check-in, I always make sure I seek for objections. Because say again, here with these pills, I might not actually like the taste, but I know I'm doing the right thing. Like AG1, for example, people say they don't like the taste, but they know they need AG1 to achieve their health goals, right?

Because they replace a lot of greens into one simple shake. So overall, they might bypass the taste, but taste is very important. Likely, if somebody doesn't like the taste, they will likely cancel, statistically speaking. So if you know they don't like the taste, what are you gonna do about it? If, like with the coffee brands I've worked with, offering a free creamer is the next, best thing, offering recipes that you can customize your drink, right?

So knowing in advance what objections might lead to a cancellation and knowing about them and doing something once you have the data is very important in the first 30 days, right? I know brands, they're sending like a postcard to everyone. It's like very expensive to just randomly send postcards or, a lot of SMS, et cetera.

But if you know you're [00:28:00] sending the right message via postcard, via an SMS, a push notification to the right person, you know you can maximize ROI in a very short window. Because your goal is the second order, and once people start feeling the benefits of the product, the retention is gonna be way more likely.

They actually feel the benefits, why would they wanna leave if they are a part of a community? They love the brand. They see some benefits now, right? Like their value for money is there. They will start feeling that they wanna keep going, right? So overall, this is very important, the first 14 days, very important.

And then finally, speed speeding through the billing reminder phase where a lot of people are gonna be reminded that they're gonna have to pay in a few days or where they are repositioning from money lost to value gained, maybe with a freebie, maybe with a reminder of how far they are in their journey, about the benefits they're getting and that they're just a couple of orders away from becoming a VIP.

If you have a VIP tier or something like this, it's gonna get people [00:29:00] closer to the graduation of the first three months. Because statistically speaking, that is a big insight that I got from my analysis. The first 90 days is where most of the churn happens

Jay Myers: Mm-hmm.

Thomas: of brands are losing up to 80% of the customers in the first 90 days.

The best brands are losing 50% to 60% of the customers, meaning even if you're doing every- everything perfectly, you will lose more than half of your customers in the first 90 days. But after that, churn slows down, sometimes below 10% every month. So my goal for my clients has become to optimize as hell the first 90 days and make sure people graduate from that big churn drop.

So after that, they're way more likely to have experienced the benefits, to love the product, to make it a part of their life, to be part of a community, to enjoy themselves being a person that is healthy or whatever the product is promoting, and they don't see the product as something external. It's a part of their life.

But to get to that point, you [00:30:00] need to optimize the first 90 days. I'm gonna take a step back. I've talked a lot

Jay Myers: You gave a masterclass there in the, in that, well, all the way from acquisition to 90 days. It's interesting. I had a whole bunch of thoughts where you're saying that, but two, one, one, I absolutely think everyone should, if you are not a gamer, play a video game because there's-- We, we actually at Bold, we try to model how...

So the thing about a video game is they don't even send instructions anymore. Like it used to be, I remember when I got a Nintendo game when I was a kid, there was an instruction book. You don't. You get a card, most of it you just download. There's zero instructions, but the game, the complexity reveals itself as you play it, right?

And it's, it teaches you, instructs you, and you're right, you solve little things. And a lot to be learned from the gaming industry. Like they have mastered that, and I think commerce brands are way far behind in what could be done compared to the gaming industry. The second thing is I so [00:31:00] much believe that education and knowledge is value.

And you just to re-emphasize a little bit of what you said I have a greens subscription as well. I actually d- it's funny I think I missed probably my last six days of taking it. And just this weekend, I was watching a show on Netflix, and I can't remember the title of it. It's a documentary a- where they take twins, and they study the effects of different diets on twins, 'cause twins are very much the same, as close to the same as you can get genetically.

And so if you give one twin a certain type of a diet and another twin a different diet, and it has difference effects, you can largely assume it's the diet impacting it generally. There is some other outside facts, but it's as close as we can get. Anyways, one of the things that they test before they start giving the different diet is they test brain function, cognitive, they t- lean body mass, they...

respiratory, heart. They test everything for benchmarks and, oh microbiome, your gut microbiome. And in the show, they were talking about how when you're, [00:32:00] when you have an unhealthy microbiome and you don't have enough vegetables there's a lining in your gut. It's like a mucus lining that if you don't have enough healthy vegetables in your diet, that wears down, and your microbiome can actually start eating away at the wall of your gut.

And I-- and it's funny, I watched this yesterday, and today I had my greens. And I didn't even, I didn't even connect that until now, but I, I've-- You val- When... I mean, the placebo effect is they've done studies where they've told people about vitamins that aren't actually vitamins, and people feel results.

And s- and they'll actually tell you that they feel better, they feel healthier. So, even whatever you sell, the n- the knowledge and of... I would even say this applies for everything, not just subscriptions. But if you sell a, a couch or a shirt, telling them about how it's made, how the material is sourced, how the leather is farmed or treated.

Understanding it is so important. It's like the only [00:33:00] reason A $10 bottle of wine is different from a $50 bottle of wine is just knowledge, right? Like I could look at them on the shelf, you could blindfold me, and I'm... probably couldn't tell you that much difference. But once I know about the farms they came from and this, I just appreciate it more.

It's, it's-- that's where the value is. And so I think I'd love to get your thoughts on this. I often tell brands there's this like half-life of excitement from the-- when the second someone clicks checkout, there's a half... Like they've done studies where that's where like the brain, the firing of endorphins, it's the biggest dopamine hit of a shop-shopping journey is the second they click checkout, and I've talked about this on the show before.

Like sometimes me and my wife have bought something big and we're like, "Okay, should we click checkout? Should we click checkout? Let's do it together." And then we both click checkout. It's like this like moment of excitement. And then usually, like you just, you get an order confirmation email after.

But we're so excited about like that new whatever we just bought, and I could probably get an email from the brand that [00:34:00] moment, probably an hour later, probably three hours later, and I'm not gonna be upset. I'm not gonna feel like, oh, this brand is overwhelming me, but they're teaching me about what I just bought, telling me what to expect.

This is what you can start expecting after you start taking whatever it is, or the health journey's begun, and here's some examples of other people and their stories. 'Cause I'm so excited, that's when I'm gonna wanna be reading it. But if you ignore that period and then you start emailing them later, you've lost them.

People are gonna just go, "Oh, this company emails me too much. I'm gonna just unsubscribe." But they don't take advantage of that window of the first 12 hours, and I think that's the golden opportunity. What's your thoughts on that? And do you have a

Thomas: Yeah,

Jay Myers: for that-

Thomas: actually, I kind of disagree on sending too many emails, too many SMS, too many messages overall. Most people when they say so, I've dug deeper, and what they actually mean is that they're sending the wrong message to the wrong person at the wrong

Jay Myers: Right. It's the wrong time,

Thomas: if right after you've purchased, you go to [00:35:00] the thank you page where there's 100% open rate.

There's 100% open rate on the thank you page once you've purchased, and 100% open rate when you open the box, literally the box when you receive it. So if you have the right messages over there, people will see it, and you will maximize the exposure and the compliance. Meaning, say the thank you page, you're asking people, "All right, why did you buy this today?"

Say there is a, a s- you have a different survey based on the hero product they bought. So they say, "I bought this for energy," or, "I bought this for my gut health," or, "I bought this to sleep better," whatever. It could be a product with different benefits. So if you know why they bought it, what their goal is, now you can tailor the communications down the line.

So now you're sending the right message to the right person, and then the last thing is the right time. And I found that if you send daily messages that make sense in a structure, actually people don't slow down with opens, with clicks, with [00:36:00] engagement, and that increases retention. So it's all about finding the perfect system for your brand to maximize this engagement because people usually tune you out when you start sending blasting messages, screaming at people like an obnoxious person at a party trying to make it all about themselves, screaming about random benefits that you're no- you don't even care about.

Jay Myers: Right

Thomas: you bought something for energy specifically, imagine if they just se- send stuff about energy and how to achieve your energy levels goal. Now you're all about this. You actually care. It's talking to you. It's there is a person you're having a conversation with, right? So now people are way more likely to be engaged, to click on that stuff, to comply, to take part in whatever you're sending them, and eventually to give you zero-party data, so you can try to save that churn of potential objections.

So I'm asking for zero-party data on the thank you page, on the first email, which you get sent [00:37:00] 30 minutes after the first purchase. During the transactional where is my order messages, and then finally when you open the box inside, there is a final call to action, so you can take the next step, declare why you bought the product, and then all this data feeds back into the same system that personalized the communication afterwards.

There's always a fallback version if you don't have this data. There's always gonna be people that never submit this data, no matter what you do. But there's gonna be a fallback version, and some of these people are gonna stay, some of them are gonna churn anyway, some of them it's gonna be a coin toss.

And additional interesting education that is generic enough but feels personalized in a smart way can do the trick. But overall, I've seen that if there is one point of personalization, it has to be not, all these too many complex flows that have 50 people per branch or something, but ask them, "What is your goal?

Why did you buy the product today? What's your motivation?" If you have this information, you can meaningfully personalize the communication [00:38:00] afterwards in the first 30 days or 60 days, whatever the cadence is.

Jay Myers: Yeah. And just to put that into practical terms for people listening, if... So you're segmenting them based off of when you ask a question, survey, postpa- post or thank you. I think you can even I would say you could go as early as the email collection tool you're using at the beginning.

If it's like, at that what it what's your, why are you interested in this product or what are you trying to

Thomas: Yeah, the letter pop up before you purchase.

Jay Myers: Yeah. And then you're putting them in a different audience segment in whichever email tool you're using.

Thomas: Yeah, exactly. Yeah. So just making sure that all the information is actually streamlined, so when somebody clicks on the thank you page widget versus the scan in the box versus the email with the survey, just make sure the data you're collecting is actually feeding into the right segments, because each one might have a different way of communi-communicating the data, structuring the data.

Make sure you know who these [00:39:00] people are that prefer gut health over energy, and you send the right message accordingly.

Jay Myers: Yeah. I had this written down 'cause I think you've talked about this a lot. Your you call it the belief engineering in the post-purchase window. You've got the five unspoken objections, which I think we've talked a little bit a- about most of them right here, but I just wanna make sure we cover them all.

It's, you have fit, worth, believability, trust, and alternatives. That's the five unspoken objections. Do you have any specific strategies, or can you speak to each one of those, of strategies you use that you've seen work well?

Thomas: Yeah. I don't tackle them per email, per message. I usually embed clues that these things are, how to tackle these things in different messages. For example, when I add social proof or testimonial or numbers of how many people have enjoyed it in the last month or something, that is believ-- not believability, it's social proof.

It shows that people are trusting this, it's [00:40:00] something that you can actually trust. When there is, say, scientific studies, that increases believability that what you're claiming is actually happening because it's been blind tested, there is a study, there are many studies,

Jay Myers: Mm-hmm.

Thomas: that's how science is used as marketing.

You back up your claims with something that is official, that people can trust. And overall I don't really mention the competitors because usually it's free marketing. I've tried it in the past. But I will usually think or investigate what solution people have to fire so they can use your solution, is the jobs to be done framework Right now they're solving the problem in one way or another, usually badly.

They have objections, and they want to fire that solution so they can do it in a better way, more tasty way, faster way, more affordable way, whatever the reason is. So if you know what they were using before, or if you ask them and find a way to fit your solution in it, [00:41:00] then that is going to make things much faster.

But I'd usually don't advertise the competitors because it will open up their eyes. And I've seen very often people-- Like, there, there are so many brands right now that are launching and expanding the markets of these spaces. When GRUNS launched, for example, they competed against AG1 initially, but then they opened up a new market, the affluent older ladies market that prefer something that is healthy but also fun.

So that's why they got acquired very fast because they didn't just steal customers from AG1. They opened up a new market. So you will be surprised if you ask your customers, "Did you purchase from any other brand in this space before this one?" Likely they will say no, right? Like the, the vast majority, they say no.

So that's why if you advertise the competitor, you will usually do more harm than not. But also quite the opposite as well. If you know that a competitor is bad at something, you can attack them via ads. I've seen this [00:42:00] happen in the past. When these ads were running, the majority of the new customers were coming from a competitor because they were switching, because the competitor opened up the market, educated the market about the product, and then a brand came with a better product and stole these, these customers to a superior product.

So overall, I would say sprinkle things. Don't try-- You don't have enough time to basically go and teach people, hard teach people. It's getting boring as well. But keep things exciting by sprinkling your truth and not tackling all these objections in a way that people don't feel like they're being sold to.

Jay Myers: Yeah. And I mean, your-- the Gruens example is a great one because you're in the messaging, they're not... They, they-- You don't even have to say you're competing against AG1 or any other greens. You're competing against maybe bad flavor, bad taste. Like maybe greens don't inherently taste good, and you're competing against that with like gummy greens that, that do taste good.

So that's what you're c-competing against. The, the job is, that's being done is you [00:43:00] want better flavor. It's not directly the company. So you can say it without saying the brand name and giving away that free exposure. You've said lifting 30-day repurchase rate, and tell me if I'm quoting this wrong, but lifting 30-day repurchase rate by 15 points can equal seven and a half X more profit over two years.

I wanna dive into that a little bit. How the math on... Well, let's do that first before I ask the next question. H-how, how does that work? Fif- a 15% increase in my repurchase rate can equal seven and a half X, seven and a half times more profit over two years

Thomas: Yeah. So I've developed a lot of different tools to measure how-- what is the fastest way for you to increase your LTV? And one of these tools was a simulator where I would change different variables, and it would calculate profit with certain assumptions that you have a contribution margin of sixty percent, for example, a, a CAC that [00:44:00] increases slightly every month, to account for inflation, all these real-life phenomena.

And then I would change a few things to see which one drives the bigger lift in actual profitability. And the reason I wrote the book, Retention Economics, is because brands can have a lot of revenue, but they, especially when the tariffs started appearing last year, they started realizing that they are a bad month away from not being able to buy more product to pay their

Jay Myers: Handwrytten

Thomas: pay themselves a salary, right?

And everything was way more fragile. So overall, I developed these simulators to find the best way to increase LTV, AKA cash flow. And what I found is that improving the retention rate in the first thirty days was the fastest way. And I ran different numbers. I played with different size of brands, and eventually I landed into this kind of compound effect on profitability.

Again, I can perhaps show like the actual calculator. I don't have it ready in front of me, but I was running all these kind of simulations to identify, how things affect each [00:45:00] other and I landed into these numbers. And eventually, I even developed a tool called Atlas for the book, which whoever buys the book, they can access this tool and play with the numbers themselves and see, "Hey I negotiate five percent cheaper price on ingredients.

How will this affect my profitability?" I get more upsells and increases my top-line revenue by ten percent. How does this affect overall my cash flow in the next month? How can I make sure I can buy, I can pay in advance for next month's growth? What do I need to change? And then you play with the numbers, and eventually you see what combination drives the best results, and then you focus on that.

So I created this P&L calculator/simulator so you can find the best levers for your own brand as well.

Jay Myers: And I mean, the way I think about it simply, I don't know if this-- but y- if you are paying to acquire a customer for on the first purchase, you might make hardly much at all. Like you might have a $60 [00:46:00] product and you pay $40. That would be a great CAC. If you can get a $40 CAC through Instagram or TikTok or wherever you're running your ads, and you've got $20 in there, just making easy numbers.

I know there's costs and everything else, but now if I get them to purchase a second time and it's a $60, well, I've three X'd my profit. This is not the right math because there is a ton of other expenses, but rough numbers, you would think it, it's not just doubling it, that would actually be three X-ing.

And actually, realistically, my order on that first product is probably only like $5 or almost nothing. So now my next order is actually 10 X-ing the profit because it's-- I'm not paying CAC essentially on that first one, you're spreading it out. Plus there's all the benefits of customers who order more, they are higher refer-referrers.

They refer more other customers. They're likely to stay around and they're likely exist... if you show cross sells and up sells, we know that existing customers are up to 25 times more likely to [00:47:00] accept an offer than a new customer. So you've got this kind of right buy-in. It's I think if you-- I know you're just looking at the retention side, but if you expanded that out of the impact on the referral side, cross sell and upsell offers and other-- like it's probably actually more than seven and a half times

Thomas: Yeah. And I took into account the common pattern of brands having a payback period of three months. Because a lot of brands that don't make money up front, especially if you are subscription first, it just makes sense that you pay more up front for the right subscriber that will stay longer. There are brands that are breaking even on month five or month six because they know by month 12 or by month 18, they've made way more than spending less money up front and being profitable right away.

It's quite rare nowadays a brand to actually be profitable in the first order and attract the right customer. It's quite rare.

Brands out there, but [00:48:00] usually we don't advocate for this. There is the competition. If the market is sophisticated, the market is ripe, usually spending more makes more sense because you attract the customers that usually others cannot attract, right?

So you create a new market, and they're more affluent, they're also more sticky, and eventually you get longer retention. And every time somebody buys a second time, a third time, there is also a waterfall effect because not all, not only there are more people available to buy a second time, but these people, because they were onboarded, they were educated, they're stickier, and they stay also longer, right?

So you have this waterfall effect that eventually drives this way more superior profitability down the line. So even if you lose money up front, you can make much more down the line by increasing the retention the first three months. Now, if you pair this with the retention the first 90 days when most churn happens, everything becomes golden.

So yes, overall the takeaway here is that improving onboarding, improving the first 30 [00:49:00] days, getting people to purchase a second time from order one to order two, maximizing that number and people knowing they're in a subscription, not the accidental renewal, this will have the strongest waterfall effect across profitability a year down the line, which is where the golden, the pot of gold is.

Jay Myers: Yeah. So then one, one point on that is you also wrote that in a lot of the stores that you saw customers who had to contact support in the first 30 days churned up to s- I think it was 60% more than other customers. Like to-- which is brutal.

Thomas: It is

Jay Myers: what should, what... I just wanna ask you about this because it's interesting.

This is a s- this is a metric that we look at Bold. We look at when someone installs one of our apps, if they do contact support or if they don't contact support, and then we look at the effects on, we call it activation. So activation would be they keep it past trial. We don't consider someone a customer if they're on trial, and once they're off trial then they're activated.

We actually see the exact opposite. So we see that when [00:50:00] someone reaches out to support, they're-- I think it's over double the, the odds are that they're activating. But we're-- we-- it could be different types of support, but we're very... We take it very serious about how we help the customer, and we turn it, we try to turn it into an opportunity to guide them, help them, onboard them, teach them, so when we get an opportunity to talk to someone, it's like gold. And I'm assuming when I read that stat that these are supports for other things, and they're, a lot of brands are missing the opportunity here. Is that what you're seeing,

Thomas: No, exactly. You're spot on. Actually, this correlation with support tickets and churn is for negative experiences. So when you're reaching out to support being frustrated, or when you're reaching out for a common question but y- it doesn't get answered, or when you see that the customer service is not up to par, this negative experience drives more churn.

So overall, it's not just like anyone reaching out to anything, let's say you're sending a love letter, to the brand. This is a positive support ticket. But if [00:51:00] you're reaching out because you have a question or because something went wrong and then customer service goes way beyond, what they should do and they get you delighted, this does have a positive correlation.

I'm talking about a negative experience. Overall, brands cannot really measure this properly but they can feel it. The customers can feel it. The overall customer experience. How does the product feel? Do, do people like what they see in terms of branding before they purchase the product? Do they feel this a cheap knockoff or do they feel that actually this might be the solution to what I'm looking for?

Is there any endorsement in advance? Do they get a box that looks beautiful and they enjoy the experience, or do they get something sloppy in a dirty bag, that they have to cut through and then everything is spilled already?

Jay Myers: Mm-hmm.

Thomas: Does it take too long for the product to arrive? When they reach out to support, do people come back to them with great answers and accommodating their requests?

All these things, they add up. So it's not just customer support, it's the overall customer [00:52:00] experience. And if you disappoint somebody initially, it doesn't mean that they will eventually cancel, but it just accumulates. Negative experiences over negative experiences make people eventually feel cheated.

They feel scammed sometimes. I've worked with some amazing brands that happen to look extremely good in the public eye. But when I work with them, I saw that the back end was a mess. Customer service would not reply. They would discontinue products without letting anyone know. If you bought three products and two of them were available, but one of them was out of stock, they would not ship the full order.

Just wait for the other thing to come in stock instead of shipping the two products available, right? Eventually, people would call them a scam on customer support and even on Trustpilot, et cetera. This cannot be outmarketed. You cannot outmarket a bad customer experience. You can only hold on for so long. But a customer experience that creates positive feelings has a [00:53:00] positive effect because in- it increases the perceived value of the product. So it's not just customer support. Overall, make sure you have a great brand

Jay Myers: And I would also say those brands have not empowered their support team to properly solve and delight the customer. Because have you ever had an experience where something has gone wrong, and then you've talked to a support person, and they've owned the mistake, and they say, "You know what? We screwed up.

I'm gonna send you another one and do-- go out of my way to solve this." And then you end up kind of becoming a bit of a fan and a, a- an advocate for the company. But had you just got your order and there was no interaction and nothing you'd be happy, but you wouldn't be raving about them.

But because they fixed the problem, it almost... You can actually take someone who's angry and turn them into a fan, but the support team needs to be empowered, and I think that's a big miss for a lot of brands too, is they... I was talking to someone on a recent episode, and they actually were [00:54:00] thinking about engineering in a mistake.

So, so, so hypot-- So imagine, you said earlier, okay, the average product comes in five days, let's just say. And so if someone clicks on shipping and they it doesn't-- the shipping doesn't get updated for the first day or two days or something along those lines, but then an automatic email went out from one of the people in support and said, "Hey, Thomas, I noticed your order accidentally sat on our warehouse shelf for an extra day.

It should have gone out yesterday. I take full responsibility. I'm upgrading this to overnight for you, and we're gonna get it out tomorrow, and I threw in a little gift in there for you on the house. Thank you so much." Now, you might have already been gonna-- You were maybe already gonna ship it express anyway.

You maybe already were gonna have a gift in there anyway, but you engineered that experience, and you might feel like, "Wow, they really went out of the way," and you are gonna tell someone about it. So I don't know if I'm fully-- if I would engineer the mistake yet, but I do

think that [00:55:00] empowering your customer support team to at least have some range of what they can do to solve a problem, I think is a big part of that number.

Thomas: For sure. Th-that speaks volume about the customer culture-- the culture inside the brand, how much you empower your team to take accountability to do the right thing versus just blindly maximizing profit and looking at people as numbers, right? I'm not sure if I would go all the way to engineer this mistake.

I-imagine like people raving about it and then "Oh, I actually have the same thing. Oh, I have the same thing too." That would turn dark quite fast. But I really like this idea of potentially doing something that people can talk about and still not identify it as, as a mistake, so yeah I really like this and there is something that I...

It's not related to what you said, it's kind of indirectly related to it. When you ask people to claim things that they would get anyway in terms of freebies or a discount, actually people are more engaged. They [00:56:00] feel they've earned this reward and also they stay longer. We've tested this. We looked into 90-day retention.

People that... Say you offer 15% off every month to everyone. If you ask people to claim it in the first month or even in the first days something they would already get, people not only engage more, and imagine you ask them to claim their discount for the next order, and then you ask them for the reasons they bought the product, so now you can personalize.

You get more people to submit zero party data. But these people also tend to stay longer, not just for the next order, but also longer term. Now imagine you're giving freebies in the second order and you're asking people to claim the freebie they would get anyway. Again, this increases the retention, not just short term, but also long term.

And it goes without saying, adding freebies versus no freebies, it does increase retention. Freebies always increase retention. The question is: Does the cogs, additional cogs of the freebies get recouped because of your superior [00:57:00] retention and LTV, right? So this is what you need to look for. But always you will have a better retention with gifts.

Now, if you ask them to claim the gifts that they would already get, you'll get even better retention. So there are little hacks that I would say, white lies or engineered basically momentum that eventually go a long way.

Jay Myers: Do you have any thoughts on what are good gifts? 'Cause I've heard some brands say they really struggle with this. They can go on Alibaba and buy a whole bunch of some little cheap thing-a-ma, but then people just throw it away anyway.

You want

Thomas: I'll, tell you my advice is very specific. Look at your product and how people behave, the culture around the product. Whatever they would already buy by themselves and pay real money for, get this gift but brand it for your brand. So people will feel, "Oh, I was going to spend money on this anyway, and now I get this amazing thing."

And now they use it every day or quite often, and it reminds them of the brand. They talk about it like, "Oh, actually, what is this? Oh, this is something that I'm trying." Right? And I've seen [00:58:00] brands, they try expensive gifts or they try a towel or a bag or a hat, like little merch, right? These things can work, but overall, people will not really drink coffee and then, "Oh, I need a hat with this coffee," right?

So but a glass or a frother makes a lot of sense. When you have, say, I'm working with a brand that sells liquid shots for wellness. The-- Once you open it, once you open the bottle, you have to store it in the fridge. So it just makes a lot of sense to basically sponsor the fridge. When they open the fridge, it's stuff that you have provided, like containers and little trinkets, things that people would already use in their fridge.

So now you are on top of mind, you're everywhere. Or like a magnet on the fridge, which you have to open to get the bottle, right? So now the magnet is like a little contract and you can just monitor your streak, et cetera, or even scan the magnet and go somewhere in a loyalty page. So there are so many co-cool [00:59:00] things you can do.

But my advice is always: What would people use around your product anyway? So instead of them buying it, buy it for them, and you can get things in bulk. Or you can run a test run of a few thousand copies and see how it impacts retention and find the economics, and then double down on it. But overall, just give them something they would buy anyway, and they feel now they got way more value.

Jay Myers: You know what I'd be tempted to try? Do, Are you a coffee drinker?

Thomas: Oh, I I love my coffee. I'm pretty close to starting my own coffee brand as well

Jay Myers: Oh, okay. Well then maybe this apply to you. But well, if you have a retail, if I, if you go into Starbucks or somewhere, you... Like a l- a a number of coffee places, they'll often have a punch card. You buy 10 coffees, get your 10th one free.

And I always say there's one close by where I live and every 10th coffee's free. But when I get my free coffee, I'm not super excited. I'm just like, "Yeah, I earned it. I got my 10 coffees. I..." Whatever. But I was thinking recently, if I went into that coffee shop and if I didn't have a punch [01:00:00] card, but just after 10, the barista just said, "Hey, Jay, this one's on, this one's on the house.

You come here a lot. Thank you so much. This one's on us." I'd be like, "Wow that's amazing." I would probably post it on Instagram or tell people about it. And same coffee, same value, but one was unexpected and one was, one felt transactional and earned. And I think there's a world where both are important.

The gamification and earning and milestones, I think that's all super important. But I would be very really tempted to build in surprise gifts that feel truly like a gift, not like you're earning it. And to truly feel like a gift, it has to be not something that you've done to get it. And I don't know if this would work for all of them, but I do love the idea if you have a, a subscription and if you can figure out that, okay, you're at eight months is your average churn or something.

And I would actually even try to predict this a little bit. But anyways if you could reach out and say you've got a subscription for [01:01:00] $29 and whatever it is, I, I would try to see if I could bake this in. Where I say, "Hey Thomas," I would have an auto email that went from the founder, "This month's on me.

Thank you for seven months, and I just wanted to send you this month on the house, and we're super appreciative of you." And I'd probably also include some type of a referral link there as well too, if you know someone else that might benefit from it, 'cause I think there's something there for those surprise gifts, but I'd be tempted to play with that too.

Have you experimented with that at all?

Thomas: Yeah. This is just being a good business owner, and when you have a brick-and-mortar shop and people by name, you can do this more effectively. Digitally and doing it at scale, it's more difficult to feel random, right? Because usually there is an outcome, business outcome. You can't just send three free gifts to three people.

Yeah, I mean, they will talk about it. They... But usually you're trying to increase retention at scale and make it meaningful for the business as well. So it's what we call the surprise and delight when it's [01:02:00] truly a surprise. So yes, indeed you can look into you can see the first three months that have the biggest churn.

Obviously, that happens with every brand, and after that it slows down. We can start looking into the cadence between orders. This is my favorite metric. I calculate initially, say the subscriptions every 30 days, right? So the cadence between orders is gonna be 30 days. But then after that you're gonna have people pausing, skipping, canceling, coming back after a while.

So the number starts increasing. Say at some point you see there is a typical Two-day increase of the, the previous month, every month. And then at some point there is like a five-day increase, right? Say this is month eight. Okay, so this could be a sign that now people are delaying more and eventually maybe they're accumulating more product.

So you give them like a little gift to make sure people don't deviate from the desired behavior, which is to keep ordering the product. I would not offer more. I would not offer-- I would not make the problem of having too much product even bigger. I would [01:03:00] likely offer either a free product or a commitment offer.

Hey, actually, if you come in for the next three months, you get one month free, right? Like we don't do this for everyone, just for you. This works really well because you front load commitment and I've seen many cool things founders do when there is a community just engaging with people and asking them questions, asking for their opinion, polls and eventually even rewarding people with free product or gifts or, whatever freebies when people engage.

I've seen founders just being like, hey, tagging the, the, the community manager. Hey, send a free bite to this person. That was an amazing comment. Or if somebody creates something amazing that people can use in ads or other people are like commenting and "Wow, this is great. Where can I get one?"

"Yay, give this, person free for months," or something like this. Basically, re-rewarding people for doing the right thing, for engaging with the brand and for creating culture around something that is otherwise soulless. There is a transaction, there is [01:04:00] a product, there is a factory line, but then there is people.

And if you empower people to do their thing, to express themselves, to spread the word and you reward them for it and what the book Hooked calls random rewards. People don't-- If people know that they're gonna do this and they're gonna get a reward, it doesn't matter as much as you said with a punch card.

But if people get randomly rewarded, they don't know where the rewa-reward is gonna come from, but they will do the right thing. They will engage, they will keep buying, and eventually they get rewarded. And this is, it drives, better results, better reactions than just something that is predicted, something that is transactional.

It's culture, it's humans. And as we go more into AI, I think humanity is gonna play a more important role into any brand's culture, right? So I'm a big advocate of this. That's why I'm tempted once I retire from D2C to open my own coffee shop and just talk with people. If I make any money or not, it's not gonna, it's not gonna be a huge thing.

But just to talk with people and see their delighted faces when I do [01:05:00] something that is unexpected. So this is a, yeah, a big thing that I wanna do when I get a bit older.

Jay Myers: Amazing. Thomas, tell me about your book before we wrap up. You published it. T- tell me all about it. Tell me why you wrote it and what the purpose of it is

Thomas: So I was full-time at a brand called Everyday Dose up to 2025, beginning of 2025. When it was about time for me to leave, I thought, "I'm gonna take a break. I'm not gonna work with clients right away, but I'm gonna start writing the book that I want to write for quite a bit of time."

And then President Trump introduced the tariffs, and people started posting right and left that actually, we're way more fragile than we thought. We don't have enough money to pay our staff or get ourselves a salary. I'm like, "This is the perfect timing to write this book," to talk about the P&L, about the retention economics of running a business that...

and the impact of retention on your cash flow. And it took me six, seven, eight months, more or less. I wrote the first draft. I gave it to a few smart [01:06:00] people in the industry. They gave me their opinion. I made tweaks, and then eventually, I self-published it. And right now it has sold more than a thousand copies.

It's been endorsed by Recharge, by Postscript. They buy hundreds of copies for their clients, for their people working there. Many people have purchased themselves. Amazing brands have read it, amazing marketers, amazing tech platforms they bought. I'm surprised, by looking at all the cool logos of people that have read the book.

So, so far it looks like it's been a bestseller, although it doesn't have the Amazon bestseller badge, and I don't care about this. I care about the impact. And the impact the goal that I have for the book is to be sitting and revisited often on the desks of the biggest brands, marketers, and tech platforms in e-commerce.

I want this to be referenced again and again. I want it to be discussed. Just like Recharge, they discuss it on Fridays. They have a reading club, and they discuss the book, which is amazing. I didn't know they did it, and I felt very emotional when they [01:07:00] told me about it. My little book was studied by hundreds of people.

Overall, that's, that was the goal. That's why I'm not selling it digitally. I'm only selling it physically. It took me quite a few months, but it's been around for nine months now. It's doing super well, and it costs as much as much as it takes me to print it and ship it. I make zero profit from it. I just wanna make sure the right people are reading the book and getting the

Jay Myers: Amazing. Can you hold it up again? You have it in your hand there, right?

Thomas: Yes.

Jay Myers: This is the physical copy. And where is it

Thomas: this is the proo- the proof coffee as well. The proof copy as well. It's right there. This is the, the, the actual book. You can get it on Amazon by looking up Retention Economics, or you can get it directly through me. There is a link. It's gonna be somewhere,

Jay Myers: i'll put it in the show notes

Thomas: and this way you can get the book.

Again, it costs almost nothing to get it, so there's no excuse if you're really interested in reading about retention economics

Jay Myers: Yeah. I'll make sure to have a s- [01:08:00] link in the show notes. I think the thing that I l- like about it is all of your frameworks, they're timeless. Like some- sometimes a book is very timely and then it's outdated a few years later. All, you've got all these different frameworks for, and I do not have the names of all of them here.

We d- we didn't even, we s- hardly scratched the surface of what you talk about in the book, but formulas for how you figure out. You've got I had them all listed. I was gonna I thought we would get to them. You've got the R- the RCM pyramid. You've got the law of retention economics. That's, we talked about, touched on that one a little bit.

The, what'd you what do you call this one? The Vitruvian? The

Thomas: The Vitruvian, actually what explained the first 30 days, that's the Vitruvian, that's the

Jay Myers: Yeah, so we talked about that a bit. But all of these things are very much frameworks and principles that will never be outdated. And you can-- maybe some of the tools that you use to do some of the things will change, but the, the principles and the framework are timeless.

And so I love the approach you took to the book, so[01:09:00]

Thomas: Yeah. Thank you. I mean, it, it really means a lot because that was the intention, to write something that I don't need to change every year because it depends on technology. I write everything and I do all of my work based on first principles. And I even had a cool idea of writing my next book as a narrative in ancient lands, ancient Greece, ancient Arabia, where people were merchants and, you know, bartering and doing cool things, and eventually there's a scroll with all these principles that can be applied today with any

Jay Myers: Oh, I love that

Thomas: right?

So I was thinking about from this angle, if somebody said, to an ancient Greek, "Do this with your shop," would it apply? If yes, then it makes a lot of sense to, to put it in because it's timeless. So that was intentionally done, and I appreciate that you mentioned it

Jay Myers: I love that. I love that, the way you frame that. It's, it they're principles, laws that are timeless. Yeah, do it, write it. That's... I love

Thomas: Yeah, I shall.

Jay Myers: Easier [01:10:00] said than done, right?

Thomas: No, I enjoy writing. I, I really do. I didn't wanna write LinkedIn posts. Eventually ended up writing a lot of LinkedIn posts, but originally I was like, if I'm to write something, I'd rather put it in a book that is timeless. And then once I did it, I thought, okay, I'm gonna start writing on LinkedIn, and now I'm preparing a YouTube channel as well.

So just getting in the content machine because advocacy is also broadening the market. More brands understand the impact of retention. There is more work for my colleagues and myself obviously, but the whole goal is for brands to be more timeless, more solid, to not be so easily crumbling, upon a single tariff or things like that.

So retention is the answer to many problems of brands nowadays

Jay Myers: Well, here's what I'm gonna do for our listeners. The first five people that comment on... You can comment on Spotify. Apple Podcasts, you can't comment. If you leave a review and you mention this episode and something you learnt, so on YouTube, comment, [01:11:00] Spotify, or leave a review in- on Apple Podcasts, write just one thing you learnt.

"I loved this," or I love Thomas' point on this one thing." And then shoot me an email J-A-Y, @shopify1%.com. I'll send you Thomas' book. First five people that leave any type of a comment, the book is on me. I'll send it directly to you. So Thomas, thank you so much for coming on. Where do you wanna send people? I know you're active on LinkedIn.

You're... for sure. Is that the best place to engage with you?

Thomas: Yeah, that's the best place. I'm a- very active on LinkedIn. Actually, I publish a weekly free newsletter where I break down actual brands with their actual numbers out of the two, two and a f- two and a half thousand brands that I'm analyzing, and I do this every week. You can find it at artecomm.co/retentioneconomist.

You can find the link somewhere, I guess. But I publish it every week for free, and people are saying they're learning and so on.

Jay Myers: Amazing. Thomas, thank you so much

Thomas: Thank you for having me. That was an [01:12:00] amazing discussion