How To Acquire The Right Type Of Customers

Good morning. Hope you’re ready for an amazing week. Last week was crazy; I spoke at DTCx, got interviewed by the Wall Street Journal, and announced we’re hiring the CX magician Eli Weiss at Jones Road and I couldn’t be more excited.

This feels like a great time to tell you that we’re hiring for a bunch of roles right now, including a full time videographer, junior graphic designer, video editor, TikTok content creator, project manager, and more. Feel free to email me or dm me if you know anyone interested.

One more thing before we get rolling. If this newsletter was forwarded to you, you can sign up here. If you can, please forward it to someone else you think would enjoy it.

Last week I gave a talk at DTCx about my somewhat controversial takes on retention with my talk Acquisition Rooted in Retention. The recording will be available in a few weeks, but I wanted to use this newsletter to summarize the talk.

My “big idea” is that common retention tactics like email and sms flows have much less of an effect on retention than the types of customers you acquire. Give me a poor customer cohort with great email and sms flows and even a great unboxing experience or a great customer cohort with mediocre retention tactics and I’ll take the latter ten times out of ten.

The Best Place To Get Ad Account Help

The retention tactics and strategies listed here are great, but they still need a proper ad account structure and media buying behind them. Contrary to popular belief, media buying is not dead. There's just so much misinformation out there, especially on Twitter. There's one place I turn to to set the record straight when I need some help from an expert media buyer, and it's the Foxwell Founder's Membership by Andrew Foxwell. It's a community of some of the best media buyers, agency owners, and operators. In addition to getting to rub elbows with some of the best marketers in the game and get their feedback any time, you also get a monthly ad account audit , discounts on top tier apps like Motion and Kno, and a whole lot more. Sign up here.

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Acquisition Rooted In Retention

All brands know they should be working on increasing LTV at this point. Unfortunately, and this was the controversial part, that many of the popular (and seemingly effective) acquisition tactics can be detrimental to LTV. Instead of trying to acquire as many customers as possible or acquire customers at the lowest CPA possible, we should be seeking to maximize the return on our invested capital and resources over the time period that makes sense for our business. If you can structure your business to delay this period, you have a significant advantage over your competitors who cannot do so. If you can raise your allowable CPA, you’ll be able to focus on acquiring the best possible customers, despite what the FB platform shows you.

To me this is another principle of brand first performance marketing, where I’m trying to use paid media to aquire customers whjile also building my brand. I’m trying to play the long game and aquire the right customers who will love my products and continue to come back while telling their friends. Those customers may not be the cheapest to find, but for good reason.

Remember that outside of your ad account, cheaper does not always mean better. Penny stocks are usually terrible investments. FAANG stocks are priced pretty high, but for good reason. Cheap real estate is often the worst type of investment. Even if you can make decent returns on a Class D building, you’re going to be stuck patching things up and dealing with terrible tenants. Same is true if you optimize for a cheap CPA at all costs.

(Please know that this is NOT investment advice. Just trying to show parallels to help you think.)

My friend and now colleague, Eli Weiss shared an excellent example of acquisition not rooted in retention on the latest You Are Not Your ROAS podcast hosted by Triple Whale.

Eli said “sometimes marketers sell something they product doesn’t actually do…and that leads to mismanaged expectations and unhappy customers.”

Growth marketers are excellent at building hype, but sometimes they WE forget that we also have to make sure that the sizzle is backed up by the steak.

Eli’s even found LTV differences between value props or main ideas used in ads and the LTV.

Since Eli and I originally spoke about some of our own findings months back, this is something I've been paying a lot of attention to. Below, I want to share 5 questions you should ask to go about finding the right customers for your business:

1. What Products Do Your Best Customers Come In On?

All customers are not created equal. We found that we were acquiring nearly all of our customers on one product, but it was not our best LTV product by far. So I dug into the LTV cohort data and ended up creating a customized set of our top 3 best selling products. Not only were these the best products to introduce a customer to our brand, they had great margins which pushed our allowable CPA up, but they also were products that we saw our customers came back more often if we led with them. It's been pretty big for us.

2. What Sources Do They Come In On?

Again, not all customers are created equal. A paid customer is often worth less than a referral or word-of-mouth customer. Word of mouth customers have social proof because they know their friends love it. That would certainly cause me to feel comfortable spending more. Conversely, if I saw a flashy ad but didn't know anything about the brand, I'd probably tip my toes in the water, and if anything went wrong with my experience I probably wouldn't give them a second chance. Make sure to know your LTV by source and factor that into your allowable CPA targets per channel. Then create strategies to acquire more customers from your best channels, even if the front end ROAS is not as good.

3. What Angles Do They Come In On?

Acquiring a customer who is buying because you say you're better and cheaper than a competitor might not be the same as a customer who sees you as the only solution and loves your founding story. Yes you can clearly get a lower CPA by offering a discount. But why would you want the customer that chooses you over another brand just because you're cheaper? Don't commoditize yourself. Use ad angles to position yourself as your customer's hero and the only, not best, solution to their problems and they'll be likely to return.

An Interesting Way To Improve LTV

One huge tenet of brand first performance marketing is education. We've seen time and time again that the best customers know more about us and our approach. The best customers are buying our story and the brand just as much as they're buying our products. One great way to do this is with a performance editorial approach. We've seen amazing results from running ads to sponsored editorials. In fact, it's going to be a big part of our strategy this year. But it can be expensive or hard to find a good partner. I saw a need, so a few months ago I launched my own performance publishing site to help brands get access to editorial partners at a very reasonable rate. It's called Premium Purveyor and we've got some amazing partners including Ritual and Sunday Lawn Care. We have 2 spots for new clients this month. DM me on Twitter if you'd like more info.

4. How Many Touchpoints Do Your Best Customers Take?

I always get some blowback when I share this. Unfortunately I can't share this data, but we find that more touchpoints is nearly always better. Customers who interacted with not only multiple ads, but multiple channels are nearly always worth more to us than customers who buy from the first interaction. My theory is that more education and storytelling allows customers to overcome certainty objections and build up some emotional connections to the brand, instead of just buying the products. I'm not saying that I don't optimize ads for conversions or want people to buy right away, but I know that forcing them to is not how humans naturally buy anything. Only 1-3% of people will be ready to buy right away, so I'll create systems to be ready when they are.

5. What Is Your Best Funnel Structure?

We're all used to looking at driving traffic to PDPS, homepage, a landing page, or an advertorial and looking at CPA, AOV, and ROAA. But have you ever compared the longer term impact from using different funnel structures? You might find almost no difference. However, I have found a decent difference. Using quizzes, advertorials, and third-party editorials has driven up LTV a but. Nothing crazy, but enough to make it worthwhile. My theory here is that they provide a more enjoyable experience, give more education and brand storytelling opportunities, and route people through the funnel at the appropriate pace. I love the Octane AI quiz for this specifically.

How To Find All Of This Data

In summary, not all customers are created equal. To me, thinking about things in terms of acquisition rooted in retention is one principle of brand first performance marketing. I'm trying to use paid media to acquire customers who will become loyal fans and brand advocates, instead of just optimizing for a low CAC at all costs.

I'd be remiss not to mention how you can answer all of these questions for yourself. When I first got into e-commerce you had to be an excel whiz and pull all of this manually. Luckily, platforms like Triple Whale exist that do all of this for you at a very reasonable fee. It's what we use, and it works like a charm. Not to mention the first-party pixel, which helps us on ur ad-buying decisions.

The good folks have hooked up my newsletter subscribers with a 15% discount. Just use code Cody15 for 15% off when you sign up.

Until next week,

Cody