This blog post comes from a Facebook Live I did recently with my good friend Drew Sanocki. Drew is a marketing and ecommerce wizard, and CEO at Nerd Marketing.
We hopped online to discuss something really important: The role of customer retention when building and sustaining a business.
Drew serves as Chief Strategist for a private equity firm. This firm buys up struggling ecommerce businesses, and then brings in Drew to help turn them around. (And sometimes Drew brings me in to consult—it’s a lot of fun!)
These are huge businesses, doing 9- to 10-figures—but when we look at their business models we noticed something surprising: The same fundamental principles apply to these businesses as ones doing $1,000 or $1 million a month.
How to craft an offer, how to amplify that offer, how to do follow-up marketing—it’s all the same. These principles don’t suddenly change when you reach that size; in fact, these principles work even better at this scale.
Drew’s most recent project involved a company that was previously worth $3 billion, but its value had plummeted. With Drew’s help, the firm was able to buy this company for $10 million and then resell it for $20 million within ten months—far exceeding expectations.
So what was the secret that this formerly-$3 billion company was missing?
There was no secret. They just weren’t leveraging the fundamental principles that apply to all businesses.
Most surprisingly, they had an email list of 5 million people but were barely sending any emails. Their thought was, “We need more traffic! If only we had more traffic, then we could make more sales.”
And this approach was misguided. A lot of businesses think this way, but you have to remember that there are three ways to grow a business:
1. Get more customers
2. Get customers to buy more from you per transaction
3. Get customers to buy from you more often
People love to focus on number 1 because traffic and conversion are buzzwords in this industry, but there are two other possibilities. Number 3—customer retention—is especially important.
In ecommerce, the cost of acquiring that first sale is usually very high. That’s why business owners have to focus on repeat business if they’re going to make a profit.
So how do you get repeat business?
It begins with delivering on your initial promise. Make the customer’s buying experience a pleasurable one, provide a quality product, and follow through with top-notch customer support.
Then it’s about keeping them interested through follow-up marketing. This is how to create intimacy and build a relationship with your customers.
And the best way to do this is by leveraging content, particularly video content. This is how you continue to add value to your customers’ lives. Eventually, you make additional offers that lead to additional sales.
Want an example? Look no further than this video! This is a piece of content that covers a topic relevant to my community (growing your business), and all I had to do was hop on Facebook Live to create it. And it doesn’t hurt to have someone as amazing as Drew to help out!
Video Highlights:
0:47 Average adult consumes media on at least 2 devices
3:02 Drew Sanocki from Nerdmarketing.com
4:32 Direct response principles work across all business models
5:40 Ecommerce basic principles
7:33 The life cycle side
8:17 Focus on conversion and retention
8:52 The keys to successful ventures
9:32 Customer acquisition costs
10:47 3 ways to grow your business
11:17 Engage customers and prospects with content
Click Here For Video Transcript
Ezra: We are live on Facebook. Actually this may be the first time ever that we’ve been live on two devices. We have one live stream going on the fan page, one live stream going on the personal profile. So we’ve got two…we’re double devicing here, Drew.
Drew: We’ve got the deuce.
Ezra: This is Drew Sanocki of Nerdmarketing.com, in case you don’t know him. Welcome to the party.
Drew: Hello, everybody. You’re speaking to your audience, I guess, now…
Ezra: Yeah.
Drew: …through your Facebook page?
Ezra: Well, Nerd will see this too.
Drew: All right.
Ezra: I’ll share this to your fan page. Right now, this is live to my group, my subscribers.
Drew: Okay. If I go on Facebook right now, will I be able to see it?
Ezra: We should be able to see. It’s a good idea. Now it’s interesting that we are multi-devicing, because new data shows that the average adult in America has at least two devices that they use on a regular basis to consume media online, make purchase decisions, as well as 60 percent of those people have three devices. So people are watching TV on their…and using their phone at the same time. Purchases and consumption is happening. Oh, look, there we are. We’re live, across multiple devices.
Drew: There we go. Very cool.
Ezra: Can you see that? So that’s going down. I’ve got my purple laptop case. I got this thing last night. I’m really excited about it, because I keep spilling coffee on my laptop. If you’re in Traffic MBA, which is one of my training programs, I was ready…
Drew: I’m taking it. I love it.
Ezra: I was ready for this webinar, right? I was getting ready for it, super pumped, like week six. It was like we were going to go over email sequences, which is something I want to talk to you about because you’re an email guy. And like right before, I dumped a whole cup of coffee on my laptop, burns it out. I’ve got like 150 people waiting live. Luckily I carry a backup laptop because I’m used to just destroying my…
Drew: You do?
Ezra: Yeah, always, man because you can destroy these things.
Drew: Like everywhere?
Ezra: Yeah, when I’m traveling. These things are…
Drew: Two laptops?
Ezra: They’re fragile. Two laptops, both Airs. Jared Thompson was in my Blue Ribbon Mastermind.
Drew: Two laptops.
Ezra: Jared Thompson was a gardener. He had this picture on his Facebook page holding a snake…
Drew: Right.
Ezra: …like a badass. I’m simply terrified of snakes personally but he says he’s digging our lavender laptop here.
If you’ve got questions, comments, anything that you want to hear us talk about, questions for Drew, let me know in the comment feed. I won’t be able to see them all in real time, but I will get to them, because we’re not looking at the phones, we’re looking at the computer. It’s a little bit of a delay.
So Drew, you recently…are you paying attention?
Drew: I am. I’m paying attention to us, yes.
Ezra: Are you? Okay.
Drew: I’m looking at us on the screen here. I’m intrigued. You’ve got it going on like your personal Facebook page. You’ve got it going on…
Ezra: Yeah, on the fan page.
Drew: On the fan page.
Ezra: Well, here’s the interesting thing about my personal Facebook page is it has turned into a business page. It’s like I got 5,000 subscribers on there. I only know a couple hundred personally, so it’s…
Drew: Sure.
Ezra: …now for business. So…
Drew: So Meet Ezra and Ezra Firestone…
Ezra: Are both for business. So you recently did something pretty incredible in our world, which is you came into a company. Tell me what happened. Tell me kind of the gist of it.
Drew: Yeah, for those of you who don’t know me, my name is Drew Sanocki and I am…
Ezra: Nerdmarketing.com.
Drew: …Nerdmarketing.com, so I am an e-commerce veteran, I have my own retailer.
Ezra: A nerd by description.
Drew: I am a nerd. So I had my own drop ship retailer ten years ago, sold it and then I started working more for private equity, which are companies that buy sort of bigger companies, as opposed to venture capital. That’s in a start-up. A private equity company or fund…
Ezra: So they kind of pay you to sit on their board and when they are going to do a deal, when they’re going to purchase an e-commerce business, you come in and make sure it’s cool?
Drew: I come off the bench.
Ezra: Come of the bench?
Drew: Yeah.
Ezra: You’re benched.
Drew: Yeah, I’m sitting on the bench. Put me in, coach. They find or I find a company that might be distressed or might be…
Ezra: Or maybe could see some growth.
Drew: …mismanaged or for some reason, they’re not living up to their capability.
Ezra: Yeah.
Drew: Maybe they need growth capital. The fund buys the company, or makes an investment in the company. I come off the bench, I might take an operational role. And at this company in particular, it was a hundred million dollar company, had gone bankrupt…
Ezra: Before you get into that, I want to hear…I want to…I’m going to interrupt you for a second.
Drew: Go ahead.
Ezra: So this is something that we’ve kind of been geeking out on for the last couple years, because I live in the seven to eight-figure kind of e-commerce world, e-commerce business owners. My business is eight figures, and I deal with a lot of business owners in my Blue Ribbon Mastermind, which you are a part of, seven-figure e-commerce business owners, and what has fascinated me about the world that you play in, which is nine-figure retailers, people doing literally hundreds of millions of dollars a year, is that the same direct response principles that we apply to our small businesses work on these bigger companies, and in fact they work better, because there’s just more to…
Drew: Yeah.
Ezra: You know?
Drew: That was one of the most eye-opening things is that the same kind of SEO, the same kind of traffic generation you’d use on a startup e-commerce site, you can use on a hundred million dollar retailer…
Ezra: Business principles…
Drew: …with very similar results.
Ezra: …the fundamentals of how you go about successfully crafting an offer, making an offer, doing follow-up marketing, it all works the same. So back to your story.
Drew: And these guys aren’t doing it.
Ezra: Yeah.
Drew: Like you kind of figure, okay, they’re big, so they must be doing everything state of the art, and they aren’t.
Ezra: So one of the things that we’ve been doing together is sort of consulting for these bigger companies. Like we just did a deal for what was formerly a three billion dollar company, I think, and then they dropped down and then hired
Drew: Again, yeah, I don’t know if they went bankrupt, but they went to zero. And a bunch of guys bought the brand, and are now trying to reinvent the brand. At one point, this was like a three billion dollar company.
Ezra: Brought us in to kind of give them a growth plan. So we sat down, we looked at their stuff, and we were like, “Dude, how are you guys not doing like the basic stuff? What is going on here?”
Drew: These are companies that had maybe a million people or five million people on their email list, and never sent email.
Ezra: It’s crazy.
Drew: Or only send once a month, and “Maybe we should be emailing more.”
Ezra: Martin Maybrook, who’s a old-school veteran, been in the game for a while, says, “Drew’s last podcast about Google Analytics RFM was awesome, but how do we learn more about it from him?” Go to Nerdmarketing.com, get on his email list. And he’s got audits and all kinds of cool stuff you can engage with him about.
Drew: Yeah, Nerdmarketing.com/start-here that’s where you can opt in to my list, and I share everything I’m working on there.
Ezra: That’s a good URL. It’s very just…sort of…
Drew: Start here.
Ezra: Start here. This is where, if you want to get in the game, this is where you get started. So back to the story that kind of inspired this live cast here. You recently did something that was really cool. I want to hear a little bit about it.
Drew: Yeah, so we found this formerly hundred million dollar retailer that is now, or like last summer, had gone bankrupt. Revenue had fallen, maybe got cut in half. We bought them out of bankruptcy, and then within ten months, brought them from losing, I want to say, a half million a month, to marginal profitability, and we just sold them. So we sold them…we bought them, I want to say all in for about ten million, and sold them for 20.
Ezra: Amazing.
Drew: And inside of 10 months, which was much more aggressive and quicker than we could’ve imagined going into the deal.
Ezra: And we had a lot of conversations about that deal throughout, from the beginning through to the end. You kind of played this role of chief strategist in that process and what was it that was, that allowed you to take…we talked a lot about what my specialty…direct response, customer acquisition and that what that played a role, but I think what was even more important in that deal was what you did on the life cycle side.
Drew: Sure. This was an interesting case, because these guys had just tons of latent assets. We talked about the company that might have five million people on the email list and isn’t emailing. Well, this was that company. So a million people visiting the site a month and five million…is that my coffee or your coffee?
Ezra: This is your coffee, but it just looked delicious. I had to take…this is your second cup. You’ve got to share.
Drew: Yeah, I got it going right now. Five million people on the list, and so I go in there, and the company’s screaming, “We just need more traffic, more traffic to grow, more traffic.”
Ezra: And hold on. This is a common mistake that companies make. They think that all they need to focus on is getting new customers, but actually…
Drew: They didn’t need more traffic.
Ezra: Yeah.
Drew: All you need to do is take that…all the focus that’s on acquisition and put it on conversion and retention, and I feel like I know retention and database marketing super well. Ezra really helped me out with the conversion, and just getting some of that traffic to convert, getting them on the email list and then just working our list, so doing a lot of lifecycle marketing, getting people to buy again. There were a lot of one and done buyers.
Ezra: And that’s sort of the hidden secret to a successful venture of any kind. Let’s just step outside of our realm of e-commerce, and let’s just talk about successful ventures. Successful ventures know, number one, how to get people to know they exist. That’s the first step. People gotta know you’re, know who you are, know you exist, and there’s a whole bunch of ways to do that.
Number two, you have to then get them to say yes to whatever you’re offering. Okay, so this company had that down. They had some people knowing about them. They had people saying yes, and that’s traffic and conversion, and those are buzzwords in our community, and those are great things. But if you don’t deliver value…you drinking my coffee?
Drew: Yes.
Ezra: If you don’t deliver value, engage in a conversation, build a relationship, and make additional offers to create repeat business, you’ve got nothing.
Drew: Yeah, and that’s just sort of like…the trouble with e-commerce is that customer acquisition cost is usually high, especially on that first order.
Ezra: For sure.
Drew: If you want profits, you’ve got to get a second order. The bulk of the profits are on the second, third, fourth order. And most e-commerce companies just think about that first order…
Ezra: That first customer.
Drew: …and it’s really hard to make money just with one and done customers.
Ezra: We’ve got Rob Ongo from Oahu, says aloha. Raobu is on, but wants a link to, I guess, your website.
Drew: Share the link. I’m not sure what link.
Ezra: You keep talking about it.
Drew: I’ll come up with some links and I’ll put them in the comments.
Ezra: Yeah, the live feed is not sort of synced with the desktop, so we’re probably missing some questions here. My old buddy Josh Hood is making fun of me. This guy was in an improv class with one of my first online business mentors back in like 2004, this Australian guy, and Josh is an old-school veteran of the game.
Anything else related to e-commerce we want to talk about real quick while we’re live here?
Drew: I think…well, big emphasis on retention. If you’re not thinking about retention, you’re leaving profits on the table. That would be the biggest thing. I like to think that there are three ways to grow any company. Usually, it’s increase AOV, increase…
Ezra: Average order value.
Drew: Average order value, increase the frequency of purchase, so the number of purchases per customer, and then traffic, more customers. And all too often, everybody focuses on number three, and there’s opportunity on one and two.
Ezra: And I think that when it comes to making that repeat sale, and when it comes to having a business today, engaging with your prospects and customers, people who may become customers and people who are already customers, in a conversation around content like this, what this is right now, just as a…let’s take a step back and look at what we are doing here. This is a piece of content that we’re producing live, right now, that is related to a topic or conversation or problem that my group of subscribers has, which is how to grow their business, that has people be interested in relating with me and then looking at whatever offers I have beyond that.
So this is sort of a microcosm of how to do this process on the back end. You want to engage every business. But it’s not just customers or prospects. It’s a group of people who are interested in something, or have a problem they want solved. So if you can build a relationship, create some intimacy with those folks, you have a much better chance at getting that initial sale, and producing a second sale on the back end. So I think content is a really big part of how you do this well.
So Ezra Firestone from Smartmarketer.com, Drew Sanocki from Nerdmarketing.com. You like that?
Drew: I like it.
Ezra: Yeah, so thanks for joining us live. We’ll see you on the next one.
