When Should You Implement a Loyalty Program?

When Should You Implement a Loyalty Program? Speaker 1: When is the right time to integrate a loyalty program? I mean now. And the reason I say that is that if you're pouring water into a sieve, you know, it's all going to fall out. If you drive a ton of traffic to your site via Google Meta and et cetera, but you're not capturing email addresses, not capturing mobile numbers, not getting them into a loyalty program, you're never going to capture that critical data. It's all going to fall out like water does through a sieve. And then you're going to have to pay for the same set of eyes twice. So that customer acquisition cost that you had, doubles, triples every time you're trying to bring them back to the site. However, if you just do the basics, even if you're an enterprise brand or just starting out, you get your welcome series, your win back series and integrating it with a smile, which can be done very quickly. Your biggest competitor is probably Amazon and Amazon's the world's largest vending machine. You can get whatever you want, whenever you want, at the lowest price with the highest variety. And the only way to combat that is if they have a reason to come back to your site. So it's understanding how to differentiate the psychology of the price versus the value that you are getting by going to a brand. Speaker 2: Welcome back to another episode of Chew on This. Today's a special one brought to you by Smile.io, and we're going to be talking about a deeper look at retention, what you should be doing with your post-purchase marketing, and a lot of other great tactics that matter today more than ever. But before we got started, we have Mike Rossi, the CEO, co-founder of Smile.io here joining us, and Nihar Kulkarni, who is the Managing Director at Roswell New York Agency. And they're going to be sharing a lot of these incredible tactics. And before we jump in, for the few people that don't know both of you, can you both give a little bit of an intro, a little bit about what you guys are building today and a little bit about your background. So Neera, let's start with you. Speaker 1: Alright, thank you. I appreciate you having me on, Ron. Speaker 2: Of course. Speaker 1: And Mike, thank you for inviting me out. We've been a partner of Smiles for almost a decade now, so yeah, I'm dating myself, but it is what it is. So yeah, my name is Nihar Kulkarni. For those of you who don't know me, I'm the Managing Director of Roswell NYC. We're a full-service 360-degree e-commerce agency based out here in New York City. We are a Shopify Premier Partner, one of the original Plus Partners from back in 2016, one of the original Smile Partners from back in 2015 or 2016, a long time. We're, as I mentioned, full service, so we provide creative, engineering, and growth marketing services for over 70 brands. Creative on the lines of branding, UI, UX design, logos, as well as content creation, inclusive of 3D art now and AI art, as well as systems integrations on the engineering side, subscription commerce, basically fitting square pegs into round holes. What we love to say at Roswell is the only limitation is your imagination. If you can think it, we're going to build it. And on the growth marketing side, which is kind of where we evolved from, It originally was solely focused on retention marketing, but now we do full lifecycle marketing, everything from your standard performance marketing, Google Meta, Pinterest, TikTok, and AppLovin and the like, SEO, now AEO, which we may want to talk a little bit about, along with affiliate marketing and then mid-funnel retention marketing strategies inclusive of email, SMS, loyalty, reviews, customer experience, and subscription commerce. Speaker 2: That's incredible. It's awesome. Thank you. Cool. Speaker 3: Yeah. Thanks for having me. So I'm Mike, CEO at Smile. We help brands launch amazing loyalty programs that help customers come back, increase lifetime revenue. In the last episode, we talked about how the effective discount rate at brands can also be benefited by great loyalty programs, essentially displacing those sort of 25% off discounts with great loyalty offers that are personalized for different customer segments. We help over 80,000 Shopify brands to run amazing loyalty programs. And some of the cooler programs that we're seeing are along the lines of Liquid Death, who you had on a previous episode. But they're programs where we see customers interacting with the brand in multiple different channels. So you have a customer first interacting with the brand in a retail location. Then over email, then on the online store. And so we're seeing loyalty programs be the incentive for a customer to move across these different channels and really improve the customer lifetime over the long run. So excited to talk through all the stuff that we do with brands and what we're seeing some of the most innovative brands do today. Speaker 2: It's incredible. I mean, just between both of you, the amount of depth of knowledge that you guys are exposed to and what you've seen evolve over the journey of building both the agency and the platform at Smile, I'm really excited to get into it. So I'm going to jump in with I think one piece that is probably pressing for a lot of people, which is acquisition costs are through the roof. It's almost like it gets to a point where it's like, I'm just buying just to buy customers, like I have to survive somehow, right? And so then you start to see, all right, you see that's being very expensive. So you've seen this dramatic shift to where people are like, I have to care about retention. And before it was like, oh, like, yeah, I do retention, like email, SMS, it's taking care of loyalty, I handle it, like we have some loyalty program. And it was something just something like you had. And now you see like, I see people talking about retention, almost in the same breadth of acquisition. And I feel like that hasn't happened in in years if ever. I'd love to know from your guys's viewpoint, like, how what surge have you guys seen both from the agency side with you know, working with 70 plus, you know, high growth brands and from your end being able to probably see the full suite of 80,000 different brands Probably focusing on loyalty and beyond more than ever, I'd love to first just get that perspective of do you see that same sentiment that we're feeling with some of the people that are part of Chew on This? Acquisitions are hard. Retention, loyalty matters more than ever. Are you seeing people feel that too? Speaker 3: Yeah, we're seeing the sophisticated high growth brand operators starting to think more like a private equity analyst would a few years ago. And when they're looking at their business, they're starting to think in terms of unit economics, as well as like their story and their audience. But We had a lot of, early on in Smile, we had a lot of brand operators that were great technically, they were great with their product and they were great at setting up their e-commerce store and that was enough. Like then they could go buy ads and maybe be first purchase profitable and sort of operate really with not much thought on the unit economics in terms of average order value, discount rate or lifetime value and everything just worked, like the cash flow worked. Now we're starting to see the brand have to think through as like a private equity analyst in terms of like the unit economics. And what I mean by that is the lifetime value needs to justify all the input costs. And all the acquisition costs. And so you're probably seeing similar where you have these brands being more and more financially sophisticated over time, and that's the biggest trend. That's more important in lower margin industries, and it's more important with industries with purchase frequencies that are more spread apart. But overall, we're seeing more sophistication across brands. And so if you're wondering like, okay, what can you do? How can you get Sort of more competitive on that front. It's creating a ChatGPT project and starting to talk through unit economics of your brand in a single conversation or a single project and keeping that going over time and getting more sophisticated on that front. Speaker 1: Yeah, I couldn't agree more. I mean, as long as I've been doing this in the studies I've been researching and whatnot, LTV to CAC needs to be a three to one ratio. And it's, you know, if CAC's going through the roof, how do you get there, right? And so I think a lot of brands are understanding that customer acquisition costs while high, you can increase lifetime value further through retention marketing strategies. And, you know, as an agency, Right now we're seeing a lot of brands finally waking up 10 years too late in my opinion, right? And understanding that either they leverage an agency like Roswell or they bring it in-house. So we're actually seeing a lot of brands Starting to bring retention in-house because they realize how important it is and then leveraging agencies like Roswell for the heavy lifting. When we first started down this path, you know, the thing I loved about Smile and Klaviyo and everything is how all these systems automatically talk to each other and instead of Focusing on discount, discount, discount, it was about understanding how can you bring a customer back to the site without some sort of discount. In a lot of ways, loyalty and leveraging the Smile platform made sense because if all you're doing is offering discounts to get people to come to your site and buy, A, you're going to become a discount brand, B, your margins are going to get destroyed. And C, your path to profitability is going to be that much more diminished. But if you're bringing customers back and they're racking up points and getting into the tiering mechanisms and really embracing the brand, you're creating that sense of loyalty, which is the heart and soul of what retention is, which is something that is foundational that we explain to a lot of brands. Speaker 2: I appreciate those insights and I think you guys raise the right concerns of how people are thinking about things. I'm curious, right, so now we obviously are talking about something that you're seeing more often than not. Let's start to navigate through how to identify where you should start because I think the other piece in conversation that comes up a lot is I know costs are high, I know I need to focus on the other side of the business, But I don't know where to start or I don't know what to look at, right? So I think it'd be really great to know from your guys's lens, right? And whether we take a scenario of a brand or you guys want to give some examples, but where is the right place to start, right? Because you have so many different things. You can go and say, let me go work on my flows on your maybe your Clavio account. Or let me make my campaigns more intentional and more personalized. Or let me go and make my loyalty program to see if people are actually, you know, building up on it or is it different cohorts of people that are actually, you know, caring about points for the same people. You know, I can go and work on maybe my push notifications can be better. There's so many places to even start, right? But maybe just thematically, what's your guys' advice both from platform to agency? Speaker 1: Yeah, sure. If I could start. Speaker 3: Go ahead. Speaker 1: We look at the data first. Ultimately, we have a data-driven, data-first, data-informed approach at Roswell. Anytime a brand reaches out to us about a retention marketing strategy or an execution strategy of that sort, we're not the type of agency just to pull it off the shelf and say, welcome series, abandon checkout and win back, right? Here you go. Here's $5,000. Good to go. Not at all. What we want to do is we ask for access to their analytics, whether it's TripleWhale, GA4, Northbeam, whatever the case may be, along with their current email and SMS stack. We want to look and understand. Are you getting 30% returning users to the site? Not necessarily returning customers and people need to understand the difference between returning users and returning customers. Are you getting 25% to 30% returning users? Are they converting at double the overall conversion rate? If they're not, You can reverse engineer that math to let them know exactly what a retention marketing strategy can yield and then take it a step further, understanding that if your acquisition strategy is strong enough and your offers and your incentives are strong enough, you should be roughly increasing your email list or SMS list by 4-6% of your unique users that are coming to your site on a monthly basis. Out of that, roughly 3-5% of those customers that sign up for your email and SMS list should be converting through your welcome series. So if you think about it from that angle, you can reverse engineer what the value could be by Kicking off a very basic and foundational retention marketing strategy, then you hypercharge it by integrating Smile, hypercharge it by integrating a reviews platform, a customer experience platforms, but make sure everything talks to each other because retention is not silos of email, of SMS, of loyalty, of reviews. It's a holistic approach that basically creates a customer experience that embraces the customer in terms of what they're looking for and helps them to come back. Speaker 3: Yeah, we're seeing brands operate leaner than like ever before so we're seeing like 10 million, 20 million, 30 million dollar top line a year brands with less than 10 people operating them. And so totally so when that's the case, you have to be hyper focused on what you're doing and you can't just like try all the tactics. And so starting with the data is absolutely critical. One thing I recommend to brands is sort of benchmark themselves against other brands in their category. So if you're a collagen brand or if you're a luxury brand or apparel or shoes, Try and compare yourself through whatever means possible. We do benchmarking at Smile, but if you start to look at your gross margins and your average purchase frequency, that gives you a good idea of what your profile is as a brand. If you compare yourself to another, let's say you're a shoe company and you sell shoes, But you notice your gross margins aren't as high? You might be over-discounting. If you notice your average purchase frequency isn't as high, that means you probably need to work on your flows. And so by benchmarking just on those two things, gross margins and purchase frequency, and then benchmarking against other companies in your category, that gives you an idea of where to start in terms of tactics. And so your lean team of 5, 10, 20 people Knows where to focus as opposed to throwing a ton of stuff at it. And then you can work with an agency to get that kicked off. If you want to hire that in-house, great. I always recommend starting with an agency if you're doing a dedicated hire as well, because then you can actually get that person onboarded with like best in class stuff as opposed to just starting from nothing. But yeah, I totally agree. Starting with the data first gives you a good idea of what tactics to do. And I always think it's a mistake to just Start everything and turn everything on because then you don't have an idea of what you're trying to improve or like whether it's improving stuff. And maybe you see good results, but maybe you don't. And, and it's going to be tough to diagnose what went well or what didn't, if you, if you just throw everything at it sort of thing. Speaker 1: I agree with Mike, you should definitely hire an agency and Roswell is available. Speaker 2: I love it. No, first of all, super tactical. I really appreciate that. I want to, you know, you mentioned something which was as you're working on even your email program, the way you supercharge it is, you know, coming in and maybe even adding smile or coming in and adding other parts to it. So, I want to kind of touch into the topic of like when is the right time to know you need certain Superchargers or jetpacks, right? Or however you look at it. Because, and I'll paint the scenario here, okay? I was talking to, you know, through MentorPass, I was talking to a brand. And it's a new brand, it's a chocolate protein brand. And, you know, they're venture backed, so their growth is going to be pretty considerable because they're going to lose a lot of money to acquire a lot of customers. But one place they were reluctant to invest into right out of the gate was loyalty. And what was really interesting here was the conversation that the back and forth that I had, right, which was I was like, hey, at the baseline, I think you should have it because you're going to be able to use it not just as a place where you identify your top customers, but also identify the reverse of that, right? Because you can also segment in the reverse way, which is like, who isn't falling into these buckets, into these cohorts? And the argument on the flip side was, when a brand is too young, we don't even know what products are going to work, what's going to sell, what not. And I'm just very curious, right? Is there a certain time for some of these things, such as let's say loyalty, or is it more so there are certain things that you just have to have on the foundation? And I'd love to know your viewpoint because again, you've seen so many different brands do it in so many different ways. But I'm curious on your thoughts on how you would talk to someone who is thinking about it that way. Speaker 3: Yeah, like if you look at all the... I don't know how many Shopify apps there are. There's probably like 15,000 to 20,000 Shopify apps at this point. There's certain apps that are great for brands just getting started, like Importer Tools or AI Generation for product descriptions. And then there's apps in the Shopify app store that are really great for large brands. And then it gets tough to know like, okay, where are you going to actually focus on your tech stack in terms of like what you're using at what stage? I think for loyalty, you need a critical mass of customers in order to have a substantial like impact on the overall sort of metrics of your business. But I get with venture backed companies, it's actually really tough to focus on the bottom line. Because you don't get rewarded on bottom line growth. Speaker 2: That's a good point. Speaker 3: With a venture backed company, you get rewarded on top line growth. And so I can see with brands like that, they're probably like, I don't know this brand, but they're probably focusing on all the AI ad tools they can get their hands on. Speaker 2: Yes. Speaker 3: Yeah. To try and scale to ad buying as much as they possibly can. And so that bites you if you can't raise your next round. And then now you need to turn on the profitability and you'll quickly You'll quickly switch into focusing on all the tools that work on LTV or AOV or reducing discounting, but that's an uphill battle and it's hard to turn on profitability fast. And so I think for a brand like that, my advice would be think about your optionality and if that next round doesn't come from the VCs or you don't get as many term sheets as you thought, What's your optionality to turn on profitability? There's a great sort of Paul Graham essay on this. It's default alive versus default dead. And thinking through like how quickly can you switch to profitability is something that loyalty gives you a good optionality for. And so I don't think for a brand like that it's going to be critical overnight. It's going to be critical Later on for optionality purposes, or they just keep growing on a venture track until they get acquired and awesome for them. But that's for 99% of brands, that's not going to be the case. And so they need to think through optionality over time. And that involves like LTV thinking and all that sort of stuff. Speaker 1: A hundred percent. I mean, I think you said it, I saw you annunciated that incredibly. And I think when we're talking to brands, whether they're new or whether they're established and whatnot, when is the right time to integrate a loyalty program? I mean, now. And the reason I say that is that if you're pouring water into a sieve, it's all going to fall out. So the metaphor I'm saying is that if you I drive a ton of traffic to your site via Google Meta and etc., but you're not capturing email addresses, not capturing mobile numbers, not getting them into a loyalty program. You're never going to capture that critical data. It's all going to fall out like water does to a sieve. And then you're going to have to pay for the same set of eyes twice, so that customer acquisition cost that you had doubles, triples every time you're trying to bring them back to the site. However, if you just do the basics, even if you're an enterprise brand or just starting out, you get your welcome series, your win-back series, maybe not even win-back initially, but at least your abandoned series, integrating it with a smile, which can be done Very quickly, if you want more advanced elements of a loyalty program, you could do that too, but at least start because ultimately, if you're targeting Black Friday, Cyber Monday, and you're kicking your loyalty program off in the middle of October, you're too late because they're not going to be able to cash in on any of that, right? The reason it's so critical is that your brands I hope they realize now your biggest competitor is probably Amazon and Amazon's the world's largest vending machine. You can get whatever you want, whenever you want, at the lowest price with the highest variety. And the only way to combat that is if they have a reason to come back to your site. I fly American all the time in Delta Second just because of the points that I get and the rewards that I get in the long run. I fly a lot so it matters to me, right? And I will be happy to pay an extra $50 to $100 for a flight if I'm gonna get those points and that's really what matters. So it's understanding how to differentiate the psychology of the price versus the value that you are getting by going to a brand. Speaker 2: You guys are already hinting at it, but I want to get into some of the fun stuff around what are some of those great tactics that you've seen of even turning on loyalty for brands that are pretty large. I think one of my favorite ones personally and selfishly was when an apparel brand called Kith, K-I-T-H, when they came out with their loyalty programs about two years ago. And they've been around for, you know, 15 plus years. People spend thousands of dollars there. Typically, if you're a kid fan, you're going to, in your lifetime, at least spend $1,000. What they did was, when they rolled it out, was anybody who has spent any money up until the date of when they rolled out the loyalty program, they caught up everyone on what their loyalty would be. Speaker 1: Genius. Speaker 2: I thought it was genius and it was like, Instant flocking to people going to that program including myself and like I was already at the second tier instead of starting at the bottom. And now, of course, their program is incredible. They give you stuff like, hey, you can cut the line when you come to our stores in person. Anyway, my point here is people do a lot of cool things when it comes to loyalty. And I'd love to know whether it's really cool flows or really cool segmenting ideas or just really cool ways to build loyalty programs. I would love to, from both your guys' lenses, see some unique ones and give some of those examples. Speaker 3: Yeah, there's a couple of cool tactics that come to mind. One thing for larger brands that we recommend is kind of a soft launch. So launch the loyalty program, actually don't announce it. Just kind of put it on the site, let people discover it and see what behaviors it changes. And then do sort of the airdrop, big launch. So when I mean airdrop is like, It's kind of like a crypto term, but essentially you're dropping points into people's accounts or dropping VIP status into their accounts. And you don't have to completely backdate them to the beginning of your brand. We work with some brands that are 20, 30 years old. So that'd be a tough sort of data challenge, but you can kind of approximate this or say, hey, here's a thousand points for your loyalty in the past. And people aren't expecting like you sort of backdate all of their purchases. But we see huge, huge launch campaigns that are really, really successful with those initial airdrops of points. So then you're getting a double benefit because you launch the program, you have an idea of what actually impacts conversion rates, and you're not sort of guessing as to what will succeed in terms of the program. But then you roll out the airdrop of points and you get a huge sales boost. And a lot of these people aren't actually interested in discounting Their next purchase, they're interested in the big long-term benefits of getting to the highest VIP tier or getting the sort of free product that's exclusive to the points program. And doing all this exclusive stuff as part of a great loyalty program like Kith, they offer on the higher tiers or the higher points amounts. For us, those are the two key things that we like to see with a launch. It's like a soft launch, it's for larger brands, a soft launch to give you confidence that the program is going to perform. Speaker 2: That's a great point. Speaker 3: And then the import of backdated points or an amount of points or VIP status that makes people feel like they're appreciated for past performance. It gives a bit of a sour taste in people's mouth if a big brand rolls out a loyalty program and then Let's imagine just last week you made a big purchase. You're like, oh, what's going on here? Speaker 2: Yeah, yeah, exactly. Speaker 3: So and then in terms of flows, I'm sure you've seen a ton of flows that work. Like with our Klaviyo integration, we actually have a huge library of flows that are already set up for brands that we know are really, really well tested across the tens of thousands of brands who we have using the Smile and Klaviyo integration. But then they can be customized and made sort of more effective over time, and you can add to them over time. But flows are sort of the sort of follow-up to those two tactics. I'm sure you have a ton of other tactics as well. Speaker 1: I mean, from, you know, LTV is key, of course, everybody understands that. We, one of our philosophies at Roswell is, again, data-driven, data-informed, data-fueled approach. You need to analyze how many, and people forget this oftentimes, it's nuts, but you need to understand how many points should you award per action. Because if you are awarding too many points per action, you can actually be cannibalizing your AOV and revenue over time. So the LTV can actually go the opposite direction if you're offering too much. And going back to what I said earlier, the airlines miles programs don't Even question it. They are doing it to make money, you know, and understanding how you can scientifically and analyze the data to be able to say, okay, a like on Instagram is this many points, a purchase is this many points, referring a friend is this many points, and you look at all that and based on the aggregate behavior of what that does to your AOV, which is of course one of the critical factors of LTV, Is what's gonna really help to supercharge your loyalty and retention marketing strategy. And that's something I think we do at Roswell very well, that a lot of brands don't realize. It's not just one for one. Oh, a dollar for every, a point for every dollar you spend. You know, it doesn't always work like that. It depends on if you're selling, you know, average order value is $800, you're gonna give away 800 points per, well, then what are the tiers that you have and so on and so forth? And what makes sense? So you really have to look at it from A psychological standpoint, not just a utilitarian standpoint. Speaker 3: A cool fact about the airlines too is the market cap of a lot of the airlines is based on the loyalty program. During COVID, a lot of the airline stocks dropped quite a bit, but the value that they retained was due to their loyalty program and all the points balances. Speaker 2: It's almost future potential spend. Speaker 3: A bit of a meme in the airline industry is like the airlines are just sort of like a vehicle for the loyalty program. And like these loyalty programs are absolutely best in class. They have like dozens of analysts on each of them and they are dialed to dial in performance. So if you see, and this is one of our philosophies at Smile, is like pay attention to the world-class loyalty programs and then we want to make that available to the up-and-coming brands. Like the fastest growing brands we want to Take those tactics that data analysts are figuring out at airlines or Starbucks or Sephora. And make those available to the up-and-coming, fast-growing brands so that they can do it in a super lean way. But take inspiration from those airline programs. Those are best-in-class. As you were alluding to, they dynamically change the value of points depending on what actions are valuable or what they want you to redeem for as well. And so this just brings me to one of the final tactics that I wanted to mention is It's dynamically sort of offering points bonuses as well. Adjust the points balance or adjust the value of points to move product. So instead of doing sales and devaluing your product, you can actually run points campaigns on specific categories, which is super valuable because it discounts future orders, not the current one. Speaker 1: And if you are using a tiering system, make sure that there is a stark and a definite difference between each level. I can say that I'm platinum on American, but that means something, you know what I mean? Because it's like, I know what I'm getting. But if you're just graduating people to points, oh, now you're gold, so what? What does it matter? You need to basically make sure that there is a value proposition for getting to that next level so that they continue to want to buy from you. Just being gold doesn't matter anymore unless there's a real value there. Speaker 3: Your goal should be someone making a TikTok video about getting gold. Speaker 1: Exactly. Speaker 3: They feel appreciated enough to brag about it. Speaker 1: And showing what they're getting for being gold or platinum or whatever. Speaker 2: You guys are on fire. That's awesome. Now, you guys are talking about comparing and understanding some of the best programs out there, right? I look at something like JetBlue with their Mosaic or even Amex, Platinum with their Points. Some of the perks, right, that I feel are advantageous to like an Amex is they get to allow the users to use their points for things outside of like Amex, right? It's like, oh, go spend it on a hotel, go spend it on a flight, go buy stuff or, you know, use it on balance of your things. So I think the least way it's used is to put it towards the balance of something you spend on, right? And so that triggers me to ask like, So many of the loyalty programs are built to get people in the same ecosystem, spending more, rewarding more, now use the points to buy more and save more. Have you seen people go above and beyond and say, hey, like, we're going to create a loyalty program that will reward you and allow you to use this in other places or in other creative ways, because it doesn't just have to be in the same ecosystem of, again, buy, get points, buy more, save more, etc. Have you seen anything that any brands have done? Speaker 3: Yeah, yeah. So we've had a bunch of, like over the years, we've had a bunch of programs where you can actually sort of create liquidity for the customer outside of the brand's own ecosystem. It comes back to like earlier in this conversation we were talking about like thinking about your brand as like a private equity analyst. The math needs to work out. So if you're gonna offer sort of $100 visa gift cards or something like that, that is probably 80-90 dollars of spend that you can buy that for if you're buying in bulk and the math just needs to work. And so I would encourage brands to think about like How they can potentially offer things that are perceived as really valuable that maybe you can either buy a bulk at a discount or sort of provide as a service. So one of the coolest things I've seen is there's a Midwestern apparel brand that does a video call consult with the CEO founder of the brand as like one of the things you can redeem points for. That doesn't cost the brand anything other than obviously the time to do that. Providing liquidity in the loyalty program needs to extend beyond just like, hey, $5 off, $10 off, $20 off. It needs to become something that the customer can experience. At a frequency that's valuable for them. And so this is really important for brands where the purchase frequency is more spread apart. So if your average customer will buy every 6 or 12 months, you need to start thinking about how you can create more liquidity in the points program or the status program. If you're a coffee brand though, I would not recommend Allowing points to be redeemed outside of the store. You need to get customers back 12 times a year. So it really depends on the brand. And then when you think about airlines, you have a lot of business buyers too. And that's the other profile that's different. Amex is similar. You have a lot of business buyers and so they don't value a discount the same way a consumer would. Because saving, as bad as it is to say, and I'm sure you cringe as a business owner hearing this as well, A lot of employees don't care about saving their employer money. They care about getting benefits for themselves on top of that. So you need to think through who the consumer is. And if it's a business buyer, and we see a lot of B2B programs on Smile, like where essentially the buyer is a business, the discounts and rewards need to be They need to be non-discount based. They need to be like, hey, you got free movie tickets or you got a gift card here at an external site. And so you need to think through who the persona is as well. If it's a business buyer, absolutely. If it's not a business buyer and the purchase frequency is high, definitely keep those rewards inside your ecosystem. Speaker 1: I agree. And I think Amex is in the business of swipes. Every time a swipe happens, they make money. And so it is in their best interest to make sure that the perks and the value of the points they're able to redeem in a very diverse ecosystem because that means they're going to go swipe their Amex somewhere else. And so that's what they're trying to encourage. But I think in the realm of brands, brands need to ensure that customers are coming back to their site, back to their brick and mortar store and so on. Because that's how they're actually making money. So essentially doing collabs and offering points off site and other locations may not make the most sense for brands because they're not going to be getting value out of that unless the collab or the level is that powerful where they say, I want to go buy over there, but first I have to buy over here in order to be able to get the points so that I can take advantage of that whole ecosystem. Speaker 2: I want to touch a little bit more on personalization and what that really means today. I think we live in again a time where, I forget who I was talking to, but I think it was actually Adam Robinson at retention.com. And he had said that if you had the power to email everyone individually for a campaign or a flow, based on what they bought, what you knew about them, even just being able to say something personal about them, would you do it? And I was like, yeah, but it's not possible. And so he's like, it's crazy how large of a gap we have though, because you want to personally email everyone. But usually you can segment down to a few hundred people. And he's like, that's how large of a gap personalization still has to fill. Which I think is a true point. At the same time, I think personalization has come a long way for allowing us to do a lot of different things. I'd love to again hear, you guys have been killing it with like examples and tactics. Give us a little bit more on what you're seeing some brands do on the personalization end that is maybe helping fill that void of what eventually I think with AI we will be able to get to is be able to individually email people per what they bought and what they need to get by next. Speaker 1: I think the days of batch and blast are over. If you're still doing batch and blast, you're not doing it right. You might as well go back 10 years. Personalization 10 years ago was just about using ML before AI became prevalent to be able to optimize your product feed so that the likelihood of that purchase in terms of what the customer is seeing is optimized. Personalization has gone way further beyond that. Advanced segmentation using Klaviyo's KDP or any other CDP out there to be able to hyper-target and understand what is that cohort, what is that group of customers really wanting. Leveraging AI to do individual communications, whether it's through email and SMS that are based on Not just the tone of the brand, but the actual individual offer, the customer's name, what they recently purchased, as much as you can get into it into having a personal conversation with them as if you were a sales agent and knowing what their history was. And also the timing of the message, personalizing the amount of a discount that's available. You want to leverage personalization tools to offer just enough of a discount to increase that propensity to buy to the point of conversion. Just doing a blanket 25% sale You're leaving a lot of money on the table, so I think personalization has definitely evolved to understand the entire customer experience journey and how to activate those touch points in every step of the way rather than just focusing on what are they seeing on the site and personalizing it to, oh, this is a male or this is a female, so let me change the site. Leveraging also Identity resolution tools out there. Orita to filter out your Clavio lists and make them as powerful and optimized as possible. Other identity resolutions tools that allow you to understand who's coming to the site and what are they looking at, what do they want, and being able to leverage that now to be able to create a one-to-one connection with that customer rather than, oh, I was just part of a group and I got a mass email. Speaker 3: Yeah, I think when I think through, okay, yeah, would you email every customer? It's like, yes, for sure you would. At some point, if you pursue that path, you get to diminishing returns, though. And I think for brand operators, the tough call is how far down this sort of AI route do you go before you get to diminishing returns? And you need to think through... In the future, it's going to be like Minority Report. You're just going to see a personalized website. You're going to have a personalized experience. It's going to be one-to-one just for you. I think as a brand operator, if you focus too much on that, you will end up in sort of paralysis because there's just new AI tools every month. You're going to be going down this path and get to diminishing returns. And I think the sweet spot is sort of being like riding the wave, but not being too far on the cutting edge and obviously using a ton of the tools that are available. Deciding when is good enough is a tough thing for brands because that's going to be changing on an ongoing basis and maybe like let's say you're a brand doing 10 million or 20 million a year, maybe your segments get down to a few hundred customers and that's good enough. If you go past that and you get down to tens of customers, you probably get a small extra percentage of conversion on the campaigns, but it wasn't worth the extra effort it took to get there. And so I think that's the ever-changing line that we're going to be seeing brands have to navigate. And that comes down to a loyalty strategy as well. How personalized do you want to make this program over time for all the different segments? Uh, the different VIP tiers. I think for brands, you have to just stay on your toes. Like you have to be pragmatically thinking like, okay, I, I, I don't need to get to one-to-one personalization, but I definitely am not at batch and thinking of just through where you are on that spectrum and how you get closer to one-to-one over time without going overboard in terms of like the effort that you're putting into this, because ultimately a customer, when they receive their communication, their customer experience, they don't know how personalized You made things, unless there's creepy details about me in the email. But all that matters is it's timely, it's relevant, and if they were part of a list of 100 customers, awesome. Speaker 1: You don't need to get down to 50 or 20 or 10. I think today in New York City, they're voting for mayor, right? It's the election day today. If you're running, and I'm not gonna get political, so don't worry, but taking a step back, if you're running for office and whatnot, would you rather address an entire crowd or would you rather speak to each individual person in that crowd of 50,000 One at a time. Now that's not logistically possible, but with technology in terms of e-commerce, if you understand the metaphor, you can actually do that. You can talk to each one of those 50,000 people and make a convincing argument to them individually that really powers the snowball down the hill, rather than just basically trying to speak to all 50,000 people with the same message, which isn't gonna work because you're not gonna get full consensus. Speaker 2: I think the one piece that I will say for Obvi, right, that's been really interesting is We have predominantly had weight loss based customers come to our brand, right? Even though we sell collagen, our collagen with weight loss product is 85% of our sales. Speaker 1: You look great by the way. Speaker 2: Thank you. It's all the collagen. But you know, I will say one thing that I've learned is the reason people come in even within weight loss, like I think it's so easy to say like they're coming to lose weight. But why they want to lose weight has been probably the largest thing we've understood in the last 18 months, and we've been going for six years. It was almost like we bucketed based on this reason people were buying, but the true reason why they even have that reason is are like, there's millions of reasons, you know? It's like, there's stories about like, hey, there's a woman who is not intimate with her husband anymore because she's put on too much weight after her third kid, okay? And you're like, damn, me telling you about the fact that your skin's gonna glow, that's not kidding you, right? You need a personalization to another level versus people who are like, hey, I'm getting married in six months And I have this fupa that is seven pounds and I need to break that down otherwise I'm not ready and I'm thinking of pushing off my wedding. And you're just like, holy shit, like none of my overarching marketing is really hitting you because I'm not even talking to you for the reason you're here. Speaker 1: Tip of the iceberg mentality. I mean, you just see the tip, but 9% of what's actually happening is unknown. Speaker 2: Exactly, exactly. So again, I loved your point of like, you know, Also, don't get to a point where you're diminishing return because you're like, if I attack that point and I talk about it once or twice with you, I can't keep coming to you every week and being like, hey, let's address the elephant in the room of what's going on here with you. You also need to be able to have the right composition of it. So I think that was a great point. Speaker 3: Yeah, I think you end up in paralysis if you try to get hyper-personalized. And I think AI will help that over time, but it's just going to be so rapidly changing. So it's going to be very dynamic. Speaker 2: Listen, I'd go on for hours with you guys because these are incredible, but I want to wrap up with some few fun moments. So I'm going to ask some kind of fast questions, some that you can break down. Let's start with you, Mike. What's one thing you're extremely proud about with Smile? Speaker 3: I think at Smile, we help brands to be healthier and more sustainable over time. And I think when we look at the aggregate data of merchants before and after Smile, we see the repeat purchases increase in that six months before, six months after. And that's been the thing we've always been targeting. It's like, let's help businesses be more sustainable and bring light to the fact that Most businesses, especially in the era when we first launched, which was the 2015, I don't want to call it easy money era, but it was a lot easier to raise money as a venture-backed DTC company. It was really easy to get loans. It was really easy to buy ads. Brands needed to sort of focus on profitability a lot less and we've helped a lot of brands make that transition from sort of Focused on top line to focused on bottom line and we've seen businesses stay around much longer and really thrive over time. So just the scale of businesses that we've been able to really help has been awesome. And interacting with the ecosystem at large. I think we've seen the Shopify DTC ecosystem evolve into this really friendly help-each-other ecosystem, whereas I think earlier on it was a little cagier because everyone wasn't really sure what they should be sharing. Speaker 2: 2019 you couldn't even like talk to each other. Speaker 3: Yeah, exactly. And I think everyone's sort of woken up to the fact that if you share more, you'll learn more and you'll really benefit from that. So it's been really cool to see the evolution of the e-comm space overall. You guys have been a big part of that too. Speaker 2: No, I appreciate it. And again, I love everything you guys are doing for the ecosystem. Yaron, for you, hardest lesson you had to learn while helping to build an agency in public? Speaker 1: Oh, wow. Okay. Hardest lesson I've ever had to learn while running an agency and? Speaker 2: In public. You've been very vocal about how you've been building. Speaker 1: For sure. I think the hardest lesson I had to understand is that I come from the music industry and I worked in music for about 13 years and flipped into tech in 2014. When I came to Roswell, my best friend founded the agency as a development shop. It was four developers and me in a room smaller than this that looked and smelled like a dorm room. It was tiny, right? And understanding that your service is time. And that you have to really try to understand how valuable that is, that every second, every minute matters. And then slowly shifting that mentality to understand that you need to bill for value. Because at a certain point, you get to a point where you shouldn't be billing for your hands, you should be billing for your brains. Because ultimately a brand is hiring you to deliver value. I have a metaphor I like to use oftentimes is that there's a factory that's broken and they call in a consultant to go in and figure out what's going on and he goes to this belt and replaces the screw and then hands the foreman of the factory a bill for $50,000. And the guy's like, what, $50,000 to change a screw? He's like, no, a dollar for the screw, $49,999 to know which screw to change. And when you have that mentality, that's who you have to approach an agency. from when you're working with a brand is that you're building for the value. If they tell you that, well, why does that take four hours? That should only take a half hour. Did you have four years of computer science engineering this morning that I don't know about? You know what I mean? So understanding the value as an agency and being able to present that in a non-condescending but in a positive manner to a brand was one of the most difficult things I had to learn. Speaker 2: It's amazing. Great, great answers. Three rapid fire questions now and then we'll wrap. And I'll ask both of you, dumbest thing you spent money on? Speaker 3: Can I do a top 10 list? So I think early on at Smile we went to a lot of conferences and I feel like there's a big Difference between like going to conferences and spending money and actually talking to your customers. And I think we probably could have spent a lot more of that money and time actually just going and visiting our customers. And that was a big wake up moment for us when we went from like, Let's go sponsor or attend this big fancy conference. Let's actually just go visit this brand, see what they're struggling with and really talk to them one-on-one. I think that was the biggest thing for us. It was like these big events, let's just cut those. Speaker 2: That answer comes a lot, which is booths and conferences. Speaker 3: I can't guarantee that's number one, but that's on the top of that list. Speaker 1: Personally, the dumbest purchase I've ever made is probably a curved TV. I mean, I got caught up in the hype back in 2018. Where are those now? Oh my God, it's hopefully at the bottom of the Staten Island Dump, you know what I mean? That's a great answer. I got caught up in that. Professionally, signing an office in July of 2019, you know, for a five-year lease, you know, not knowing what was going to happen less than six, seven months later. Speaker 2: Oh man, that was great. What do you get roasted by your team for the most? Speaker 3: I often wear shorts when I'm working at home and I feel like, yeah, it's not a problem for most people, but there's been times, I also have plants in the back of my background and people often get thrown off when I go stand behind the plants and I'm in shorts and people are like, whoa, Super professional guy on video calls is actually just sitting at home in gym shorts. So the shorts, even though I have kind of got roast to the point where I don't even wear shorts most days because I'm worried I'm going to stand up, go do something in the background and then get made fun of, it's the gym shorts for sure. So everyone just thinks I'm wearing gym shorts all the time now. Speaker 2: That's awesome. Speaker 1: I think mine is an adherence to Slack protocols at work. I'm just used to using Slack like a messaging machine, back and forth, back and forth, but then because in my role as managing director, I'm talking to our department heads or division heads, finance, operations, everything like that. Instead of just concisely putting everything that I want to talk about into one thing, I'll just do it into 17 different Slacks all at once because I'm just thinking out loud. And then people ping me back like, listen man, just put it together and send it to me in one go because otherwise you hear, I don't think about it, they're hearing the ding, ding, ding on their machine and that might be in a conference call or something like that. So yeah, trying to adhere to Slack protocols. Speaker 2: That is awesome. You guys are extremely vulnerable, so appreciate it. Last thing to wrap up, you guys have provided an incredible amount of value today. And I know this is gonna be tough to do, but if you had one thing to leave our guests with, one thing to chew on, one thing for them to digest and act on today on their business, and we can start with you, what is that one thing you'd leave for people? Speaker 1: I think understanding the evolving landscape with AI is not to be afraid of, but to embrace. AI is not going to take jobs away from people who use AI. It's going to take jobs away from people who don't use AI. So if you're a brand and you're trying to figure out how to navigate the AI space, do it now. Ultimately, you need to embrace it because it's not about elimination, it's about augmentation of what you can do with AI. Speaker 3: Yeah, I think that's a great point about AI. I love that quote. So for us, The biggest piece of advice would be try and pick a brand that you think is two, three years ahead of you and use them for inspiration. There's a lot of hard lessons learned in this space that can be shortcut if you just pay attention to what those who have done it before. And there's a risk in looking too far ahead. So a brand five years ahead of you, they grew up in a different world than you. And so I think there's a sweet spot of a brand that's sort of one, two, three years ahead. Look at the lessons that they, ideally they can one-to-one mentor you, but that's not always the case. Even just looking at the ads that they're buying, the tactics that they're doing, the loyalty program that they're running, those are great things for you to pay attention to as a brand and so pick that brand that's sort of like the hero brand for you and learn from them. Speaker 2: Chew on that. Unknown Speaker: If you want more from us, follow us on Twitter, follow us on Instagram, follow us on TikTok and check out the website ChewOnThis.io.