Optimizing Customer Loyalty Program Launch Timing for E-commerce

[00:00:00]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 civ, you know, it's all going to fall out. If you 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 um fall out like a water does through a sie. 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.

[00:00:32]However, if you just do the basics, even if you're a 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, what whenever you want, at the lowest price with the highest variety. And the only way to combat that is if if they have a reason to come back to your site.

[00:00:55]So it's understanding how to differentiate uh the psychology of the price versus the value that you are getting by going to a brand.

[00:01:05]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, who's the CEO, co-founder of Smile.io here joining us and Nihar Kernney 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 uh a little bit about what you guys are are building today and a little bit about your background. So Nara let's start with you.

[00:01:45]All right thank you appreciate you having me on Ron course and uh Mike thank you for inviting me out. We've been a partner of Smiles for almost a decade now. So, you know, yeah, I'm dating myself, but it is what it is. Um, so yeah, my name is Nihar Karnney. For those of you who don't know me, I'm the managing director of Roswell NYC. We're a full-ervice 360deree e-commerce agency based out here in New York City. Uh, 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.

[00:02:16]Um, we're, as I mentioned, full service.

[00:02:19]So, we provide creative engineering and growth marketing services for over 70 brands, uh, creative on the lines of branding, UIUX design, logos, as well as content creation inclusive of 3D art now and AI art, uh, as well as, uh, systems integrations on the engineering side, uh, subscription commerce, basically fitting square pegs into round holes.

[00:02:39]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, uh, it originally was solely focused on retention marketing. Uh, but now we do full cycle full life cycle marketing.

[00:02:53]Uh, everything from your standard performance marketing, Google meta, Pinterest, Tik Tok, and app loving and the like, SEO, now AEO, which we may want to talk a little bit about, uh, along with affiliate marketing and then midfunnel retention marketing strategies inclusive of email, SMS, loyalty, reviews, customer experience, and subscription commerce.

[00:03:11]It's incredible. It's awesome. Thank you. Cool. Yeah, thanks for having me.

[00:03:15]Um, so I'm Mike, CEO at Smile. Um, we help brands launch amazing loyalty programs that, um, help customers come back, increase lifetime revenue. In the last episode, we talked about how the effective discount rate at brands um, can also be benefited by great loyalty programs, essentially um, displacing those sort of 25% off discounts with uh, great loyalty offers that are personalized for different customer segments. Um, we help over 80,000 Shopify brands to uh run amazing loyalty programs. And some of the cooler programs that we're seeing are are are along the lines of of Liquid Death, who you had on a previous episode, but they're they're programs where we see customers interacting with the brand in multiple different segments or mult sorry, multiple different uh channels.

[00:04:00]So, you have a customer first interacting with the brand in a retail location, then 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 with brands and what we're seeing some of the most innovative brands do today. It's incredible. I mean just between both of you the amount of of depth of knowledge that you guys are exposed to and and what you've seen evolve over the journey of of building both the agency and the platform at Smile. Um I'm really excited to get into it. So, I'm going to jump in with I think one piece that is is probably pressing for a lot of people, which is acquisition costs are through the roof.

[00:04:43]It's it's it's almost like get it gets to a point where it's like I'm just buying just to buy customers.

[00:04:49]Like, I have to survive somehow, right?

[00:04:51]And so then you start to see all right, you see that's being very expensive. So, you 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 taken 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 in years if if ever um I'd love to know from your guys' viewpoint like how what surge have you guys seen both from the agency side with you know working with 70 plus you know high high growth brands and from your end being able to probably see the full suite of 80,000 different brands probably focusing on 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 are part of you on this of like acquisition's hard retention loyalty matters more than ever? Are you seeing people feel that too? Yeah, we're we're seeing um the sophisticated high growth brand operators starting to think more like a private equity analyst would a few years ago and 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 uh 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 uh 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 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. um that's more important in in lower margin uh industries and it's more important with industries with uh 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?

[00:07:14]It's it's creating a chatbt project and starting to talk through unit economics of your brand um in a in a single conversation or a single project and keeping that going over time and getting more sophisticated on that front.

[00:07:26]Yeah, I couldn't agree more. I mean um as as long as I've been doing this in the studies I've been um researching and whatnot, LTV to CAC needs to be a 3:1 ratio and uh it's you know if CAC's going through the roof, how do you get there? Right? And so I think um 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 um finally waking up 10 years too late in my opinion right and understanding that um 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 inhouse because they realize how important it is and then leveraging agencies like Roswell for the heavy lifting. When when we first started uh down this path um uh you know the the thing I loved about Smile and Claio and everything is how all these systems automatically talk to each other. And instead of um focusing on discount, discount, discount, it was about understanding how can you bring a customer back to the site without some sort of discount. And in a lot of ways, loyalty and leveraging the Smile platform made sense because if if all you're doing is offering discounts to get um people to come to your site and buy, you're a you're going to become a discount brand, b your margins are going to get destroyed, and c uh your 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 taring mechanisms and um really embracing the brand, you're you're creating that sense of loyalty, which is uh the the heart and soul of what retention is. Um which is uh um something that is foundational that we explain to a lot of brands.

[00:09:09]Awesome. I appreciate those insights and I think um I think you guys raise the right concerns of like how people are thinking about things. I'm I'm curious, right? So now we obviously are talking about something that you're seeing more often than not. Um let let's start to navigate through how to identify, you know, where you should start because I think the the 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? Um so I I think it'd be really great to know from your guys' lens, right? Um and 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 on on your maybe your Claio 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 on on it or is it different cohorts of people that are actually, you know, caring about points? Is it the same people?"

[00:10:14]you know, I can go and work on maybe my push notifications can be better.

[00:10:17]There's so many places to even start, right? Um but maybe just thematically, what's what's your guys' advice both from platform to agency?

[00:10:25]Yeah, sure. Um if I could start, I we look at the data first ultimately. Um we have a data driven, data first, data informed approach at Roswell. We we um anytime a brand reaches out to us about uh a retention marketing um strategy or an execution strategy of that sort. Uh we we 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 uh access to their analytics whether it's triple whale um G4 Northbeam whatever the case may be um and along with their current email and SMS stack. We want to look and understand um 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. Uh are you getting um uh 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. Uh and then take it in a step further understanding that if your acquisition strategy is strong enough um and your offers and your incentives are strong enough, you should be roughly increasing your email list or SMS list by uh four to 6% of your unique users that are coming to your site on a monthly basis. Out of that, roughly 3 to 5% of those customers that sign up for your email and SMS list should be converting through your welcome series.

[00:11:54]So if you think about it from that angle, you can reverse engineer what the value could be by uh kicking off a very basic and foundational retention marketing strategy. Then you hypercharge it by integrating Smile, hypercharge it by integrating a reviews platform and 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 uh embraces the customer in terms of what they're looking for and helps them to come back.

[00:12:28]Yeah.

[00:12:28]Yeah. And we're we're seeing brands operate leaner than like ever before. So we're seeing like 10 million 20 million $30 million topline a year brands with less than 10 people operating them. And and so totally so when that's the case, you have to be hyperfocused 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 uh 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. Um, we do we do benchmarking at Smile, but if you 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 you sell shoes, but you notice your gross margins aren't as high, you might be overdiscounting. If you notice your per 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, that gives 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 and and then you can 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 um yeah, totally agree. Starting with the data first gives you a good idea of what ti tactics to do. And I I I always think it's 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.

[00:14:35]I agree with Mike. You should definitely hire an agency in Roswell.

[00:14:39]I love it. Um no, this first of all, super tactical. I I really appreciate that. I I want to um you know you mentioned something which was as you're working on even your email program u the way you supercharge it is you know uh coming in and maybe even adding smile or or coming in and adding other parts to it. So, I want to I want to kind of touch into uh the topic of like when is the right time to know you need certain um superchargers or jetpacks, right? Or or however you look at it because and I'll I'll paint the scenario here. Okay.

[00:15:10]Uh I was talking to, you know, through Mentor Pass, I was talking to a brand and it's a new brand. It's a chocolate protein brand. Um and um you know, they're they're venturebacked. So like their growth is going to be pretty considerable because they're going to, you know, lose a lot of money to acquire a lot of customers. Um, but one place they were reluctant to invest into right out of the gate was loyalty.

[00:15:32]And what was really interesting here was a 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. Um 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.

[00:16:05]Um, and uh, I'm just very curious, right? Like is there a certain time for some of these things um, such as let's say loyalty? Um, or is it more so uh, there are certain things that you just have to have on the foundation? Um, and I'd love to know your viewpoint because again I'm you've seen so many different brands do in so many different ways, but I'm curious on your thoughts on on how you would um, uh, talk to someone who is thinking about it that way.

[00:16:30]Yeah, like if you look at all the I I don't know how many Shopify apps there are. There's probably like 15 to 20,000 Shopify apps at this point.

[00:16:37]There's certain apps that are great for brands just getting started like importer tools or AI generation for product descriptions. Um, and then there's there's product there's apps in the Shopify app store that are really great for large brands and and then it gets tough to know like okay where are you going to actually focus on your on your tech stack in terms of like what you're using at what stage. Um, I think for loyalty, you need a critical mass of customers in order to have a substantial like impact on on the overall sort of metrics of your business. But I I 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. That's a good point.

[00:17:18]With with a with a venturebacked company, you get rewarded on topline growth. And so I can see with brands like that, they're probably like I I don't know this brand, but they're probably focusing on all the AI ad tools they can get their hands on.

[00:17:31]Yeah. To to to try and scale uh to ad buying as as much as they possibly can.

[00:17:36]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 like switch into you'll quickly switch into focusing on all the tools that work on LTV or AOV or or reducing discounting. Um but that's an uphill battle and it's hard to turn on profitability fast. And so, so I think for a brand like that, my my advice would be think about your optionality and like if that next round doesn't come from the VCs and or you don't get as many term sheets as you thought, what's your optionality to turn on profitability? Um, there's a great sort of Paul Graham essay on on this. It's default alive versus default dead. And and thinking through like how quickly can you sh 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.

[00:18:41]And so they need to think through optionality over time and that involves like LTB thinking and all all that sort of stuff.

[00:18:47]100%. I mean, I think um uh you said it um you said it uh you saw you annunciated that incredibly like and I think um when we're talking to brands, whether they're new or whether they're established and whatnot, um when is the right time to, you know, integrate a uh loyalty program? I mean, now, and the reason I say that is that if you're pouring water into a civ, you know, it's all going to fall out. So, if you're um the metaphor I'm saying is that if you um drive a ton of traffic to your site via Google Meta and etc. Um, but you're not capturing email addresses, not capturing mobile numbers, not getting them into a loyalty program. Um, you're you're you're never going to capture that critical data. It's all going to um fall out like a a water does through a civ. Um, and then you're going to have to pay for the same set of eyes twice.

[00:19:34]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 a enterprise brand or just starting out, um you get your welcome series, your win back series, your um your maybe not even win back initially, but at least your abandoned um series uh with a and integrating it with a smile um which can be done very quickly. If you want more advanced um 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 your loyalty program off and in and the middle of October, you're too late because they're not going to be able to cash in on any of that, right? And you know, the the reason it's so critical is that your brands, I hope they realize now, your your biggest competitor is probably Amazon. And Amazon's the world's largest vending machine. you can get whatever you want what whenever you want at the lowest price with the highest variety and the only way to combat that is if if they have a reason to come back to your site. I fly American um all the time and Delta second just because of 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? Um but and I will be happy to pay an extra $50 to $100 for a flight if I'm going to get those points and that's really what matters.

[00:20:48]So it's understanding how to differentiate uh the psychology of the price versus the value that you are getting by going to a brand.

[00:20:58]I'm uh you know you guys are already hinting at it, but I want to get into some of the fun stuff around you know what are some of those great tactics that you've seen um of even turning on loyalty for brands that are pretty large, right? I I think one of my favorite ones personally and selfishly was when um a apparel brand called Kit K, right? Um when they came out with their loyalty program, it was about two years ago.

[00:21:24]Um and they've been around for you know 15 plus years. Um and people spend thousands of dollars there. Um typically if you're a Kith fan, you're you're going to in your lifetime at least spend $1,000. Yeah. What they did was when they rolled it out was um anybody who has spent any money up until the date of when they rolled out the loyalty program, they um caught up everyone on what their loyalty would be.

[00:21:47]Genius.

[00:21:48]Um I thought it was genius. And it was like instant flocking to people going to that program uh including myself. And like I was already at the second tier um instead of starting at the bottom. And now like of course their program is incredible. like they give you stuff like, "Hey, you can cut the line when you come to our our stores in person."

[00:22:06]Anyway, my point here is is there's a there's people do a lot of cool things when it comes to loyalty. Um, and uh I'd love to know some of some of the whether it's it's it's really cool flows or really cool segmenting ideas or or just really cool ways to build loyalty programs. Uh would love to to uh from both your guys' lenses uh see some unique ones and and and give some of those examples.

[00:22:28]Yeah, there there's a couple cool tactics that come to mind. Um, one thing for larger brands that we 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 uh it's it's kind of like a crypto term, but essentially you're you're dropping points into uh 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 would be that'd be a tough sort of data challenge, but you can kind of approximate this or say, "Hey, here's a thousand a,000 points for your loyalty in the past." And people aren't expecting like you you you sort of backdate all of their purchases. But we see huge huge launch campaigns that are really really successful with those initial air drops of points. So then you're 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 the airdrop of of points and you get a huge sales boost. Um, and a lot of these people aren't actually interested in discounting their their next purchase. They're interested in the big long-term benefits of getting to the highest VIP tier or getting the the sort of free product that's exclusive to the points program and doing all this exclusive stuff. Um, as part of a great loyalty program like like Kith, they offer on the the higher tiers or the higher points amounts. So, for for us, those are the two key things that we like to see with a launch is is like a soft launch is for larger brands, a soft launch to give you confidence that the program is going to perform.

[00:24:10]That's a great point. And then and then the im the the import of of backdated points or or an amount of points or VIP status that that makes people feel like they're appreciated for for past performance. If it gives a bit of a sour taste in people's mouth if 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 h what's going on here?

[00:24:32]Probably does it counter it's like counterintuitive almost like absolutely.

[00:24:35]Yeah. Exactly. So, um, and then in terms of flows, I'm sure you've seen a ton of of flows that that that work. Um, we have like with our Clavio integration, we actually have a huge library of flows that are already set up for brands that we we know are really really well tested across the the the tens of thousands of brands who we have using the the Smile and Clavio integration, but then they can be customized and and made sort of more effective over time and you can add to them o over time. But um flows are sort of the the the sort of followup to to those two tactics. I'm sure you have a ton of other tactics as well.

[00:25:10]I mean uh from you know LTV is key of course everybody understands that um we uh one of our philosophies at Roswell is again data driven data informed data um fueled approach. Um, 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 uh the the 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 um understanding how you can scientifically and and analyze the data to be able to say okay uh a like on Instagram is this many points uh a purchase is this many points uh 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 um is is uh what's going to um really help to supercharge your 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.

[00:26:25]It's not just one for one. Oh, a dollar for every um a point for every dollar you spend. You know, it doesn't always work like that. It depends on on if you're if you're selling, you know, um uh average order value is $800. You're going to 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.

[00:26:49]Yeah.

[00:26:49]Yeah. A cool a cool fact about the airlines too is um the market cap of a lot of the airlines is based on the loyalty program.

[00:26:57]Wow.

[00:26:58]Um like the during during co a lot of the the airline stocks dropped quite a bit but the value that they retained was due to their loyalty program uh and and all the all the points balances all the sort of it's almost future potential spend like Yeah. Yeah. And and there's a sort of a bit of a a meme in the airline industry is like that the airlines are just sort of like a vehicle for the loyalty program and and like these loyalty programs are absolutely best-in-class.

[00:27:26]They have like dozens of analysts on on each of them and they are dialed to to to dial in performance. So if you see, and this is one of our our philosophies at Smile is like pay attention to the worldass loyalty programs and then we want to make that available to the up and cominging 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 upand cominging fast growing brands so that they can do it in a super lean way. But like take inspiration from those airline programs like those are best-in-class.

[00:28:00]They dynamic as as you were alluding to like 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 um this just brings me to one of the the final tactics that I I wanted to mention is um is dynamically sort of offering points bonuses as well. Adjust the points balance or adjust the the value of points to to move product. So instead of doing sales and devaluing your product, you can actually run points campaigns on specific categories, which is which is super valuable because it discounts future orders, not the current one.

[00:28:35]And if you are using a taring system, make sure that there is a stark and a definite difference between each level.

[00:28:42]Um I can say that I'm, you know, 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 if you're just graduating people to points, oh, now you're gold, now you're so what? like 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.

[00:29:02]Just being gold doesn't matter um anymore if unless there's a real value there.

[00:29:07]Yeah. Your your goal should be someone making a TikTok video about getting gold. Exactly.

[00:29:12]Like they they feel appreciated enough to like brag and showing what they're getting for being gold, you know, or platinum or whatever.

[00:29:17]Yeah, you guys are on fire. Uh that's awesome. Uh now you guys are talking about comparing and and understanding some of the best programs out there, right? I look at something like um you know JetBlue with you know their mosaic or like even Amex right 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 on balance of your thing. So, I think 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 gotten anything for?"

[00:30:33]Yeah. Yeah. So, so we've we've had a bunch of like over the years, we've had a bunch of uh programs where you can actually sort of create liquidity for the customer outside of the own 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. It the math needs to work out.

[00:30:52]So, if you if you're going to offer sort of a $100 Visa gift cards or something like that, that that is probably $80 of spend that you can buy that for um 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 at bulk at a discount or um or sort of provide as a service.

[00:31:20]So, what one of the coolest things I I've seen is is there's a uh Midwestern apparel brand that does a uh 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. But providing liquidity in the in the loyalty program needs to extend beyond just like, hey, $5 off, $10 off, $20 off. like it needs to become something that the customer can um experience at a frequency that's valuable for them. And so this is really important for brands where the the purchase frequency is more spread apart. So if you're 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 or the status program. Um 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.

[00:32:19]Um, so it really depends on the brand.

[00:32:22]And then when you think about airlines, like you have a lot of business buyers, too. And like that's the other profile that's different. Ammex is is 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 as it is to say, and I'm I'm sure you cringe as a business owner hearing this as well, is like a lot of employees don't care about saving their employer money. They they care about getting benefits for themselves on top of that. And 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 on Smile, like where essentially the buyer is a business, the discounts and rewards need to be uh like they need to be non-discountbased. They need to be like, hey, you got free movie tickets or you got a gift card here um at 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.

[00:33:23]I agree. And I think um you know, AMX, you know, is in the business of of swipes. You know, every time a swipe happens, they make money. And so it is in their best interest to make sure that the the perks and the value of the points are they're able to redeem in a a very diverse ecosystem because that means they're going to go swipe their MX somewhere else. And so that's what they're trying to encourage. But I think in the realm of brands, uh brands need uh to ensure that customers are coming back to their site, back to their brick-andmortar store and so on because that's how they're actually making money. So essentially, um doing collabs and offering points uh off site um and other locations may not make the most sense for brands because they're not going to be uh getting value out of that unless the the the collab or the level is is that powerful where they say, "I want to go buy over there." But but first I have to buy over here in order to be able to get the point so that I can take advantage of that whole ecosystem. Um I want to touch a little bit more on personalization and what that really means today. Um, I think we we live in again a time where um 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 do if you had the power to email everyone individually, right, for a campaign or a flow, um, based on what they bought, what you knew about them, even just being able to say, you know, something personal about them, would you do it? And I was like, yeah, but I don't, it's not possible. like it's it's you know 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 right um which I think is a true point right but 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 u you guys have been killing it with like examples and tactics give just a little bit more on 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 I think the days of batch and blast are over if you're still doing batch and blast like you're not doing it right I mean you might as well go back 10 years personalization you know 10 years ago was just about using ML uh before AI became prevalent to be able to um optimize your product feed so that uh the the likelihood of that purchase in terms of what the customer is seeing is is optimized right um personalization's gone way further beyond that um advanced segmentation using you know uh Clavio's KDP or any other CDP out there uh to be able to hyperarget and understand what is that cohort what is that group of customers really wanting um you leveraging AI to do individual uh individual communications whether through email and SMS that are based on not just the the tone of the of the brand, but um 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, the uh personalizing the amount of the discount that's available. um you know you you want to um you know you want to leverage personalization tools to offer just enough of a discount to increase that propensity to buy to the point of conversion. um just doing a blanket 20 25% sale, you're leaving a lot of money on the table. And so I think personalization is definitely evolved to understand the entire customer experience journey and how to um uh 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 a male or this is a female so let me change the site. leveraging also identity resolution tools out there um arita um to you know filter out your your Claio lists and make them as powerful and optimized as possible um other identity resolutions tools that allow you to understand who's coming to the site and and what are they looking at what do they want and being able to leverage that now to be able to um create a onetoone connection with that customer rather than oh I was just part of a group and I got a mass email. Yeah, I think like when I think through okay yeah would you would you email every customer it's like yes for sure you would at some point if you if you pursue that path you get to diminishing returns though and I I think for brand operators like the tough call is like how far down this sort of AI route do you go u before you get to diminishing returns and you need to think through like in the future where it's going to be like Minority Report you're you're you're just going to see a personalized website you're going to have a personalized experience.

[00:38:15]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 cuz there's just new AI tools every month. You're you're you're going to be going down this path um and get to diminishing returns. And I I think the the sweet spot is sort of being like riding the wave, but not being too far on the on the cutting edge. And obviously using a ton of the tools that are available, but deciding when is good enough is is is a tough thing for brands cuz 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 your your segments get down to a few hundred customers and that's good enough. And if you go past that and you get down to tens of customers, you probably get like a small extra percentage of of of conversion on on on uh on the campaigns, but it wasn't worth the extra effort it took to get there.

[00:39:09]And so I I think that's the the everchanging line that we're going to be uh seeing brands have to have to navigate. And that comes down to a a loyalty strategy as well. like 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 I don't need to get to onetoone personalization but I definitely am not at batch and thinking just through where you are on that spectrum and how you get closer to onetoone 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 it there's creepy details about my about me in the email. Um, but all that matters is like it's timely, it's relevant. Um, and if if they were part of a list of of a 100 customers, awesome. Um, you don't need to get down to 50 or 20 or 10 or something.

[00:40:10]Yeah. I think like, you know, today in New York City, they're voting for mayor, right? It's the election day today. Uh, if you're running, and I'm I I'm not going to get political, so don't worry.

[00:40:19]Um, but um, taking a step back, if you're running for office and whatnot, um, would you rather address an entire crowd or would you rather speak to each individual people, a person in that crowd of 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 the snowball down the hill rather than just basically trying to speak to all 50,000 people with the same message which isn't going to work because you're not going to get full consensus. I I think the the one piece that I will say for avi right that's been really interesting is we have predominantly had weight lossbased customers come to um our brand right even though we sell collagen our collagen with weight loss um product is 85% of you look great by the way thank you it's it's all the collagen um but you know I will say one thing that I've I've learned is the reason people come in even within weight loss Like I I think it's so easy to say, oh, like they're coming to lose weight, but why they're losing why they want to lose weight um has been probably like the most like, you know, the probably the largest thing we've understood in the last 18 months and we've been going for six years. Um it was almost like we bucketed based on like this reason people were buying. Sure.

[00:41:43]But the true reason why they are even have that reason are like there's millions of reasons, you know? It's like there there was there's stories about like, hey, you know, 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. Like I me telling you about like the fact that your skin's going to glow, that's not that's not kidding you, right? Like you need you need a personalization to another level. Um, versus people who are like, "Hey, like I'm getting married in 6 months and I have this FAA that it is 7 lbs and I need to break that down otherwise I'm not ready and I'm thinking of pushing off my wedding."

[00:42:23]Mhm.

[00:42:24]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 the for the reason you're here.

[00:42:34]Tip of the iceberg mentality. I mean, you just see the tip, but the 90% of what's actually happening is unknown.

[00:42:39]Exactly. Exactly. So again, I love I loved you guys' 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 and 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. Like, you also need to be able to have the right composition of it. So, I think that was a great point.

[00:43:01]Yeah, I think you end up in paralysis if you try to get hyperpersonalized and and I think AI will help that over time, but um it's just going to be so rapidly changing. So, it's going to be very dynamic.

[00:43:13]Um listen, I I' I'd go on for hours with you guys because you guys are incredible, but I want to wrap up with some few fun moments.

[00:43:19]Um so, I'm going to ask some kind of fast questions, some some that you can break down.

[00:43:24]Let's start with um sorry, you make um what's one thing you're extremely proud about with Smile? I think uh at Smile we help brands to be healthier and more sustainable over time. And I I think like when we look at the aggregate data of of merchants before and after Smile, we see the repeat purchases increase in the 6 months before, 6 months after. And like that's been the thing we've we've always been targeting is 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 area era but like it was a lot easier to raise money as a venture uh backed uh DTOC 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 topline 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 to really help um has has been awesome. Um and interacting with the the ecosystem uh at large. I think we've seen the the Shopify DTOC ecosystem evolve into this really friendly help each other ecosystem whereas I think earlier on it was a little cierier cuz everyone wasn't really sure what they should you couldn't even like talk to each other exactly and and I think everyone's sort of woken up to the fact that if you share more you'll learn more and and you'll really benefit from that. So it's been really cool to see the the evolution of the ecom space overall.

[00:44:58]You you guys have been a big part of that too. So no appreciate it and again I love everything you guys are doing for for the ecosystem. Um, yeah. For you, hard hardest lesson you had to learn while keeping while helping to build an agency in public.

[00:45:11]Oh, wow. Okay. Hardest lesson I've ever had to learn while uh running an agency and in public like you, you know, you kind of you you've been very vocal about how you've been building for sure. Um I think uh the the hardest lesson I had to understand is that um your you know I come from the music industry and I worked in music for about 13 years and flipped into tech in 2014.

[00:45:35]Um when I came to Roswell it was uh 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 um understanding that your um your your service is is is time and and that you have to really try to understand how valuable that is that every second every minute matters. and then slowly shifting uh that mentality to understand that you need to bill for value because at a certain point um you 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. Um, you know, I I uh have a a metaphor I like to use often times is that, you know, um there's a factory that's broken and they call in a consultant to go in and and figure out what's what's going on. And he goes to the this belt and replaces the screw.

[00:46:30]And um and then uh 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 how you have to approach an agency uh from when you're working with the brand is that you're building for the value. If they tell you um that well why does that why 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? And 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 a most one of the most difficult things I had to learn.

[00:47:08]It's amazing. Um great great answers.

[00:47:10]Uh, three rapid fire questions now and then we'll wrap. Um, then and I'll ask both of you. Dumbest thing you spent money on.

[00:47:22]There's Can I Can I do a top 10 list?

[00:47:25]Okay.

[00:47:26]So, so I I think early on uh at at at Smile, we we went to a lot of conferences. And I I feel like uh there's there's a big difference between like going to conferences and spending money and actually talking to your customers. And I think we 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 wakeup moment for us when when we went from like let's let's go sponsor or attend this this big fancy conference to like let's actually just go visit this brand see what they're struggling with and like and and really talk to them one-on-one.

[00:48:00]I think that was that was the biggest thing for us. It was like these big events like let's just cut those. Let's go visit.

[00:48:04]That that answer comes a lot which is boots and conferences.

[00:48:08]Yeah. I I can't guarantee that's number one but that's on the top 10 list.

[00:48:11]Great.

[00:48:11]Uh personally the dumbest purchase I've ever made is probably a curved TV. I mean, I I got caught up in the hype back in 2018.

[00:48:19]Where are those now?

[00:48:19]I Oh my god, it's hopefully at the bottom of Staten Island. You know what I mean? Like that was so I I got I got caught up in that, Nick. Um uh professionally um signing an office in July of 2019, you know, for a 5year lease, you know, didn't unknow not knowing what um was going to happen less than six, seven months later.

[00:48:39]Oh man, that was great. Um what do you get roasted by your team for the most?

[00:48:43]Uh, I often like wear shorts when I'm on on like when I'm working at home and I like I I feel like uh yeah, it's it's not a problem for most people, but there's there's been times like I also have plants in the back of my background and and people often like get thrown off when I go stand behind like the the the plants and I'm I'm in shorts and people are like, "Whoa, this like super professional guy on video calls is actually just sitting at home in gym shorts." So, so the the shorts, even though I like I have kind of got roasted to the point where like I don't even wear shorts most days cuz I'm worried I'm going to stand up, go do something in the background, and then get made fun of. It's the it's the gym shorts for sure. So, I everyone just thinks I'm wearing gym shorts all the time now.

[00:49:25]That's awesome.

[00:49:25]I think mine is uh inadherence to Slack uh protocols at work. Um like uh I'm just used to using Slack like a messaging machine back and forth, back and forth. Then because in my role as managing director, I'm talking to our department heads or division heads, you know, finance, operations, everything like that. And um instead of just, you know, 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 are ping me back like, "Listen, man, just put it together and send it to me in one go."

[00:49:55]Because otherwise you hear I 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.

[00:50:05]That is awesome. You guys are extremely vulnerable, so appreciate it. Um, last thing to wrap up. Uh, you guys have provided an incredible amount of value today and I know this is going to 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 to digest and act on today on their business. Um, and you know, we can start with you. What is that one thing you leave for people? I think um understanding the evolving landscape with AI uh is uh 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 to it now um ultimately you need to embrace it because it's not about elimination, it's about augmentation of what you can do with AI.

[00:50:51]Great.

[00:50:51]Yeah, I think it's a great point about about AI. I love that quote. Um so for us uh a the biggest piece of advice would be try and pick a brand that you think is 2 three years ahead of you and use them for inspiration. Um there's a lot of hard lessons learned in this space um that can be shortcut if you just pay attention to what those who have done it before um and and and there's a there's a a risk in looking too far ahead. So a brand five years ahead of you, uh they grew up in a different world than you. And so 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 uh ideally they can onetoone 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 pro 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 and learn from them. Oh, chew on that.

[00:51:46]If you want more from us, follow us on Twitter, follow us on Instagram, follow us on Tik Tok, and check out the website chew on this.io.

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