How Small Changes in Customer Journeys Can Explode Revenue with Lilo Social's Zac Fromson

Speaker A: Hello everyone and welcome back to Retention Chronicles. I am so stoked for today's episode. Zach, thank you so much for joining me. It is a pleasure to have you on today. I always like to give our listeners a little bit of background about how we met and it was quite recently, um, probably like two months ago. But I feel like very quickly I have learned your expertise and I can't wait to dive into retention with you today. Um, super excited to be here.

Speaker B: Um, I'm a co founder of Lilo Social. We're a full funnel, uh, direct to consumer agency. We have two departments. We have an acquisition department. So do paid social, creative, uh, paid search landing pages in ugc and we also have a retention department. Um, that is my focus, which I oversee. We're a Klavi elite agency, so we're one of their top 30 partners in the ecosystem. Um, so doing everything from email, SMS to campaigns flows, list, health list growth, subscription loyalty, um, from strategy through implementation. So, um, full service in nature, really trying to help brands drive new customers and keep them here. Uh, so focus on CAC, AOV. LTV is our big focus. Um, team's about 80 members today, uh, and growing. I've been on a pretty fast trajectory here at the agency over the past few years. So um, yeah, got a pretty good breadth of what's happening. Working across about 75 brands right now as well. So, uh, have quite a portfolio and um, kind of talk about quite a few different verticals, strategies and have a pretty good data set to kind of see what's working across the industry.

Speaker A: We're definitely going to focus on Klaviyo and the retention side of things because I think it's awesome that we can like sit here today and obviously talk strategy. But to have you with like the Klaviyo Elite status and really build up your agency through the years is going to be awesome knowledge for our listeners. So uh, why did you want to get into this space? Did you kind of just like fall into this space? Give us a little bit more of like your personal story, why this area interests you, like why you like working with brands and then we'll dive into like the operational side of things.

Speaker B: Yeah, I went to school at a small college in Connecticut and it just kind of so happened that uh, a few pretty big agencies kind of got built just out of, out of basements in Hampden, Connecticut. Um, so I kind of met a couple people that were 10 years old than me, five years old than me, that were all doing really well. And um, you Know, at that time, um, you just need a laptop and some WI fi to kind of get in the game. So I spent the first kind of couple years in iterations of Lelo. We're a little bit different, um, to kind of get here. So I would say, yeah, we did kind of just fall into this ecom DTC space, um, a little bit early, um, before kind of ecom boom and during COVID But um, yeah, we had started specializing in probably late 2017, early 2018. We were doing a lot of WordPress and um, some snap and a few other things that were, um, you know, more prominent, you know, years and years ago. Um, but we kind of uh, had realized that like we really wanted to do something that was tied back to an accountability metric. We didn't want to run a creative campaign that garnered impressions or got a couple PR pieces because it got picked up. We, uh, really wanted to have something that was tied back to like, hey, we are actually growing business tied back to revenue, um, some sort of cac, um, goal or something of that nature, which kind of um, got us in the game. We had started just doing paid social, hence lilo social. But we're, we've become so much more than that over the years. Um, so yeah, I think, you know, we were kind of right place, right time, we're going well. And then kind of during COVID is when we kind of hit the springboard and haven't kind of stopped since. So yeah, kind of fell in by accident. Just got exposed to agencies pretty early on in my life. And um, yeah, it was something interesting for, for me, um, always kind of learning. I think the um, the landscape is always changing. So I think, you know, for someone who's pretty fast paced and kind of all over the place like myself, that it kind of gives me something new to learn by the month, by the year. And I think that that keeps me excited and interested.

Speaker A: Yeah, I think a lot of our entrepreneurs in the audience will relate to that of just like one step at a, at a time. And then you find yourself, uh, in a certain industry, in a certain area and you're like, oh wait, I have a whole business around this. I think that's very relatable and not uncommon on this show to get um, founders who are just like, yeah, I, I kind of like was tipped off by something and then got into the space or had an idea. I just like started working on it and you know, little over. Things over time really add up. So that's really cool.

Speaker B: If you're not in the game, you, you can't really get lucky or figure it out. So I think the biggest thing is just like starting somewhere and like we've had different iterations and it led us here until we kind of found something that clicked. But if you're, you know, always just thinking about something or waiting for the perfect idea, you'll probably never get there because you're just, just you're not in the game. You're, you're not, um, you're not learning, you're not in position to, to do so. So I think as you're willing or ready to kind of take a jump, like that first iteration might not work, but if you stick around long enough, you'll probably find something that will click.

Speaker A: So let's lean into retention. How you define retention, what, what levers do you look at when you're looking to obviously help the brands that you work with maximize, um, LTV or really like focus in on their retention efforts?

Speaker B: Yeah, I think that when we talk to a lot of brands or people come to the table, like, you know, a couple years ago, like table stakes was like percentage of revenue coming into Klaviyo, which sometimes was inflated based on opens and clicks or returning versus new customer. Um, so I think like for us and kind of like where we started to build out the retention department was CAC used to be super easy to come by. Creative wasn't that impactful. CPMs were quite low. Competition. Competition was not this aggressive. So retention wasn't as uh, important in 2018. Um, I think for us as like we were starting to feel the pain of rising cacs, like harder scaling, uh, to come by, like we need to find a way to help our brands kind of come, come back to, to that. So I think as we kind of think about retention holistically and like how we go about it, sure, percentage of revenue from Klaviyo matters, but we really want to parse this out a new burst returning and look at those cohorts separately. And then I think the other piece is just by channel. I think is one thing that's typically ignored. Especially um, today where like people are like, hey, our CAC on TikTok is awesome. But we see a lot of brands where it's probably their worst AOV and probably like the poorest retention. So I think for us they're trying to understand, like, hey, how can we use our retention funnel to help inform paid on understanding? Here's where you actually should be scaling based on ltv, give the paid teams a little bit more Breathing room to be able to say hey, we can't actually operate at a sub, uh, optimal CAC or roas given LTV is really strong coming from these cohorts from these channels, whether it's um, search, social, specific social platforms, um, to be able to kind of drive that metric for us there. So um, those are a couple things we think about in general um, on m. Kind of like trying to set the floor and the foundation of uh, kind of what we do do.

Speaker A: I really like that viewpoint of by channel. Like that's a great call out to see like okay, social in your example, right. Like of TikTok, if you, if you have certain really, really, really strong acquisition uh metrics but then the LTV side is not strong, then like you have to look at that forecast of what that does for your business and the revenue in the long term. Um, can you give a little bit more detail now about like how does that translate into the strategy? Right. I think it's it really great to use like use cases or example cases. So say someone comes to you or is listening right now and they're like wait a minute, that's exactly me. Like my TikTok is really, really great CAC, but then really low LTV. Where do you even start to like parse out the strategy?

Speaker B: Yes, I think you know, uh, with the North Star really driving for us as ltv, I mean some people want to look at revenue per recipient, which is important. But I also think as we kind of look at specific channel cohorts on an LTV basis, like what do we need to do to get to break even? You know, first off. And then what are those paths? I kind of see there's, there's like a few different I guess paths here. Like there's subscription brands that are working with replenishment. Right. So there it's a supplement, um, a greens powder, whatever it may be today. Right. That those are on some 30, 60, 90 day subscription cycle. How can we build those programs and nurture that? The second is kind of uh, things that will like burn out over time. Uh, like durables for example. Uh, could be like air filters or water filters or just something that has a specific lifespan and runs out. It's not necessarily uh, a consumable, but you might be able to consume it in different periods over time. Um, and the last piece here is like one time. So things that could be like fashion or home goods, things that like you might not be buying, um, you know, a new set of hands every single month or every single year. But like, what are, like what are those journeys? I think depending on like what bucket you fall in within the space, that strategy kind of needs to be built out a bit differently. It's like, what is the entry offer or product by channel? What category do you fall in? And then how are we building that nurture? So uh, if you're a subscription brand, right, like what's, what's our first touch? And then like, what does that workflow look like for you? So I think for us, as we're kind of trying to build out that journey mapping, we need to understand the context of like what your brand is and what re. Rebuy looks uh, like for them. Like what are the cycles, what are the type of product? And that will help inform the journey that we can build for a specific brand, how we're going to kind of, um, benchmark that, roadmap that and like what needs to be done. I think like too much, um, one size fits all is happening. And I also think too many people build a journey that doesn't make sense for the first, second, third or fourth, fourth purchase. So like subscription reminders are the same, um, for each touch and it's like they should be different. Like they're, they're, they're creating churn or when someone does churn, like, are you just saying, hey, like here's 15% off, don't churn, like, hey, should the first thing be change your timing? And then if it's not timing, can you upsell or cross sell them a different product? And if you can't do that, then get them an offer, Right? So I think like, what are the, what are the journeys from start through finish and then like churn avoidance that can be put in place based on the type of product that you're running and managing approach.

Speaker A: Do you have any idea of like how many brands are sitting in that category where they could optimize for their specific business?

Speaker B: I don't have a specific metric on, um, hand of like how many business are far from where they need to be with their retention programs. But I'd say it's more than not. Uh, I very infrequently hop into an audit or even have conversations with like team in house teams on brand side that are as built out and as thoughtful of like what that journey should be. I think a lot of people, um, as they have conversation with them, kind of like come up with new ideas and get a bit enlightened, um, yeah, I think there's always work to be done there and um, I think a lot of brands are missing a lot of things altogether and, or are just like very linear in what's happening and they're trying to make changes to that linear path rather than thinking about journey mapping and branching and like what actually makes logical sense there. So I'd say some people are trying to optimize their flow but aren't thinking about and realizing that they need to, to build a bit more on, on the branches of, of these journeys. So I'd say there's a lot of brands that may be doing a lot better out there.

Speaker A: Yeah. And I'm sure a lot of, a lot of founders will be um, sitting here going yep, yep, I, I know I need to and I have not yet. Do you have kind of one of those um, maybe like gut feelings or your instinctual response to what is the reason behind doing that? Do you think it's like capacity on team? Think it's a limited knowledge of say klaviyo or what you can do in uh, different ESPs. What's like kind of your read on why that's the majority of brands today?

Speaker B: To be honest with you, I think a lot of it like capacity is always a problem. Everyone's being asked to do more with less, but I think it's a lack of education and knowledge. There isn't too much of this conversation truly happening in the marketplace. A lot of people are focused on like sending campaigns, building out the traditional flows and I don't think anyone is thinking about these journey mapping pieces. I don't think the ESPs are building out education. I don't know if enough people on um, socials are talking about these things. I don't know if there's enough content out there that's really breaking this down. I've definitely seen a bit more of an emergence of some uh, subscription focused agencies which didn't really exist. Um, a few of them are popping up and it's making sense. I think even the traditional agency is so stuck in business as usual that they're so focused on X, Y and Z of just doing pop up testing, sending out business as usual campaigns like standing up tens of the standard flows that they're not building the branching. Um, so I think that a lot of it is just lack of knowledge, lack of education that these things should be being done and the logical paths are still being built but they're not being built out as granular as they should be. And I think it's just a little bit of a lack of knowledge and probably a little bit of capacity in time, but I'd say a little bit less of um, the understanding of what the true journey looks like. And I think everyone's kind of been taught this linear journey. So everyone's running that playbook. Um, and the playbook was fine again a few years ago when things were moving so quickly and so well that um, now that things are in such a tougher spot, you have to be better. You can't get away with the linear path that you once could. And I think a lot of people are starting to kind of realize that um, things need to be done. And you know, for a lot of the tests we have run, like the lift is, is mind blowing. I think some people are shocked at how well some of these very small moves um, really change the game.

Speaker A: We talked through an example of what further customization could look like for subscription brands. Obviously you have that baked in um, like repeatable touch point that is natural right of, of when someone's next order is coming up. You can touch like touch in with them, let them know, kind of have like more customization there. I would love to hear how you and your team think about that for the other two um, examples that you gave around like durables or first time purchases because there's more potential for customization or creativity, um, or just like having to think a little bit harder about what that touch point could look like.

Speaker B: Um, yeah, so talking about like durables, I think some of that it's like you can't, you can predict the cadence but it's tough to tell. Um, so I think like in all the brands like within Klaviyo specifically they have like expected to purchase data kind of through like their RFM analysis. So trying out some of those things are certainly predictable. But I think having more conversation with your customer is probably where you can really close the gap at least in the durable space. Like um, if you have a mobile app for your air filter, like is it telling you how much life is left? Right? Like maybe the speed of your fan is burning through the filter faster. Right. So how are those time cadences happening? And I think being conversational, um, through agents or throughout through um, different pieces, whether it's sms to try to get that information, to help them time things properly is super important. So there's a little bit of like customer service that, that can be done there um, in that place, in that space and problem people like hey, like your subscription is coming up, like let's take a look if you actually need this and let's get you on the right time cadence. So you're not having three filters in your closet. Then you, you end up churning and getting frustrated because of that, um, fashion, uh, it's just the easy one that you know, typically can't end up on subscription. That's really some sort of like fashion subscription box. That one's interesting. Um, enough and I think again it still leads back to some level of customer engagement. Um, I was just sitting at a roundtable, uh, just this week at a Klaviyo event with um, an athletic brand, um, and they were talking about some stuff that they're doing to drive their second purchase and they were actually building some surveys out of like asking first time buyers like, hey, like we're in the boardroom right now, like cooking up some new colors, some new styles they have like some pretty ridiculous colors, things like that that they're sending, that they might even end up producing. And it's a survey just asking people like, which color should we make, uh, make next. And like transparently they actually kind of told me that like they send the same campaign out to everyone. They're not actually ever going to make any of these colors, but it gets people excited and makes them feel a little bit more a part of the journey. And they actually saw repurchase rate come in faster and more people rebuy just through some of those like conversational engagement pieces. Um, personally I think it would be awesome if they actually executed on something like that or like used it a little bit more directionally to like use that, um, that type of data to inform what you can recommend next or get a little bit more strategical with it. Again, they're kind of taking that linear path that doesn't necessarily have an X grouping, but it was a quick, easy way to try to drive some sort of different engagement instead of just being like, get 20% off your next pair of shorts, um, or waiting for someone to get in the promo. Like they're building engagement and really relationship. So the theory is there, I think they could do more with it and build on it. But I think like trying to get someone involved in the brand is kind of making that relationship deep. So um, yeah, I think those ones are the trickier ones really. Subscription brands, it's, it's a little easier.

Speaker A: Yeah. And of course there's always the caveat of like, yeah, maybe subscription is easier for this, but it's harder for that or whatever. Right. It's always things flip all over the place. But I think that example is such a good example here because I see This a lot, especially with newer brands where I'm using that customer feedback to inform the next colorways that I'm using. But to think I'm, I'm assuming that this brand is, is a bigger, probably enterprise brand, um, to be applying that same strategy that I'm seeing on social for all of these, you know, newer founders that are like, no, no, tell me like this is exactly the fabric that. These are the three samples I've gotten. This is the color, the three colorways or whatever that I'm exploring. Um, it is that like investment piece. And I think it's really interesting that they're using that playbook from probably like earlier stage, uh, brands and applying that to their, their strategy, even if they're like you said, is really, really relevant.

Speaker B: It's a whole interesting playbook. But I hear you. And that's like early brands where it's like, let's survey customers like, what do you want next? Like to drive product development? So um, yeah, I think people just like want to feel like they're invested and involved and I think as you build that they feel more ingrained in your brand and like want to, to lean in.

Speaker A: Yeah, for sure. So once you kind of build out those like the customer journey and you're really mapping out every touch point that is specific and custom for the brands that you're working with, how are then you tying that back into showing the value, like what should they be looking at of actually pulling um, like data for to prove this process is working? Like how are you all doing that with the brands you work with?

Speaker B: Yeah, um, so I think a couple different things, like one just understanding like time to repurchase is like what your actual churn rate is. Um, those are the, in like AOV as a window. Right? So I think like understanding like what your AOV per cohort looks like, what your time to repurchase rate is, um, is that able to be sped up? Um, in certain situations if someone's getting a 30 day replenishment, then you're probably on a little tighter cadence. But sometimes people, even in those spaces, like, you know, some people forget to take their supplement like two days a week, right? So like is there a way to help keep them on track and things like that? And are some of these communications doing that? Um, so I think those are some of the key metrics there. And like is there a lift in AOV? Is there a lift in a 90, 30, 90 day AOV windows? Like what is that actually looking like? So I think it's it's really easy uh, from a measurable perspective, you know, know you probably there's a couple tools out there you can use or even just a couple hours in a spreadsheet and a couple updates on a monthly basis on a couple polls from Shopify, uh, can get you there really really quickly.

Speaker A: It is changing customer behavior like your, your product if especially a subscription like you gave the example of some people forget to take them or like whatnot if it's really top of mind for someone to use your product. And so it's like how can you bake that in? And that's where other touch points outside of email and sms right? Like okay, how can you motivate someone to follow you on social so that when they're scrolling and looking and friends they're also seeing your brand and like staying top of mind, changing consumer habits. It is not an easy thing to do especially when you're trying to do so at mass, mass scale. If you're at that size like enterprise, um, brand um I would love to talk about SMS because I think email we've been, we've been focusing there a lot of like email is more natural, it's less scary for brands. But sms I know time and time again I've seen that brands are like oh I don't want to um like risk churning or having them unsubscribe from sms and there's just a lot more volatility in that space I think like both from brand sentiment and actual metrics. So I would love to get your thoughts on how you parlay that with email and kind of walk through like retention strategy there.

Speaker B: Yeah, I think for like uh SMS trying to use that uh a little bit more strategically. 1 It's substantially more expensive so you need to do it thoughtfully. Um but outside of that like using it for more meaningful conversation um or like more meaningful opportunities. So if you're thinking about like the omnichannel experience, if someone's not opening an email like good opportunity to put them in a cohort to try to reach out to them via sms. If you're not seeing open or click engagement like they're not seeing you, not hearing you, how can you maybe try to cut through the noise if they are there um and try to understand like where do they engage best? So I think those things can be done in Klaviyo today and trying to be able to meet people where they want to engage with you is terrific. Um, good two way text like for um subscription um understanding replenishment, um making it easier to manage subscriptions is another great way to use that. Right. Sometimes like logging into the portal, going to your computer, trying to get and not everyone has your mobile app, if you even have one, or trying to log in to your account on your iPhone, it's just like you get frustrated and annoyed. So I think like being able to quickly be able to have some of those conversations there is a great thing. Um, I think the biggest thing for me right now that we're starting to lean a little bit heavier m heavier into is uh, rcs. Um, I think that is really going to be an absolutely awesome opportunity that no one has really engaged with before. Klaviyo, um, and Google are investing heavily within there. There's a little bit of a wait period to get approved and signed up but being able to now track opens in an SMS is a game changer. Understanding that like MMS probably are not printing what they used to and people are more just trying to stick to 160 characters now you can get more value for your three credits. Be the look, shop, have a branded logo, understand opens and clicks. Um, it's just going to be a very granular experience and I think a lot of people have not started it yet. It's just still so new that I think when a consumer opens it and can have a in app, uh, like intact shoppable experience, I think people are going to be quite intrigued and probably even just being like, you know, I think as marketers things don't always seem as cool but I think like when someone who's a consumer that doesn't really even understand what this is, they're gonna be like holy crap, like what is this? Like I've never seen this before. Like there's a cool branded logo here. Like this is immersive. I can swipe and scroll and shop right from my text message. Like this is quite interesting. So I think you're gonna get better data, uh, you're going to be able to build out better SMS segments because you're going to be able to track open. So I think right now a lot of people are doing like an engaged SMS segment of people who've clicked in a period window or bought within a period window. There's so many people opening and like we don't know why they aren't opening or why they're not buying if they are opening. So I think it's going to expand segmentation data and be able to have um, better segments of people who've opened but haven't clicked clicked but haven't bought our high propensity to buy through SMS based on like past data. I think you're gonna be able to get a lot more granular there and I think at least having the opportunity to mix a few of those in with your standard 160 characters will be helpful just for your segmentation, expansion and just a, just a whole new experience. And I think when SMS came out, if you were an early shaker, like you were sending out way too many and people were cool with it and now there's so much saturation, people are frustrated. So I do think like the early window of this is an amazing opportunity. So I think it's something that we're getting a lot of brands signed up for. Uh, still trying to build out some data sets, um, some case studies. It's still so early. It's only been out for uh, a couple months now here. But, uh, that's probably what I'm most excited about. Just within, uh, mobile.

Speaker A: Yeah, I love that you create the parallel of just being able to be first to the new like, iteration or new innovation, um, because of that novelty factor with the consumer. Right. Like we saw it with SMS, you called it out where if you subscribe to 10 brands but there's only one who is like regularly sending you a text message, you're like, oh yeah, sure, like that's very top of mind. Um, but now it's like, oh, if I'm a consumer and like I haven't gotten any of those shoppable texts, right. So it's like the first one I get, I'm going to remember it. And yes, because I'm a marketer in this space, I'm gonna like especially be excited for that, um, brand that I already am subscribed to their sms. But I think the brands that, even if it's a little bit, um, like novel or new for them, which it's going to be, the, uh, the experience for the consumer will really pay off and we'll have to have you back on the show to really talk through like that when it's like, okay, now the market's really oversaturated. Like everyone, you know, the conversion metrics stop because every consumers are tired of it. Right. Always a pendulum of like new things, huge wave and then slow down and then wave again and all that stuff. Um, one of the questions that I love to ask before wrapping up is what are you looking forward towards? Um, are there any like trends that you're seeing that we haven't talked about today?

Speaker B: Um, yeah, I, um, think like, the big thing taking up real estate in my mind right now is just, like, there's so much noise that's happening right now and there's space. And I think trying to just, like, keep everyone focused and really think about, like, what is meaningful. Um, obviously AI is just, like, the constant topic. And I think, like, perception versus reality is quite interesting, but I think, like, trying, like, what I'm most interested or thinking about most is, like, what are, like, better workflows for my team that AI can have? And it's not necessarily replacement of team members, which I think is like, you know, these jobs are not going to exist. And I'm not, uh, maybe it's different than what everyone's saying. I'm not fully sold on that at this point. Um, and I think we're still a long way away. Like, just through conversations. I think less people than more don't know what's going on, don't have the tool stack, the data infrastructure to do a lot of these things really well. Um, to me, I think I'm more excited about, like, how can we do more, faster with these tools rather than how do we, um, slash prices, slash salary, slash headcount to be, like, more efficient as an agency? And rather, how can we do more for our brand strategically with improved workflows, how can we report faster, how can we increase volume, how can we get better quality, um, in all those categories? I think, like, innovation of um, of SaaS in general, and just like, how we're leveraging AI as an agency, I think is probably what's most intriguing to me and probably what's most exciting to me that I'm, like, spending a lot of my free time, um, trying to figure things out and try, um, to just improve, um, delivery for our clients.

Speaker A: And obviously we are here. This podcast I do in my free time because I enjoy it and I think it's great to educate people. It's helped me a lot. So if someone is listening to this and it's like, oh, God, I need to talk to Zach and his team, where should they go? Where should they reach out to you?

Speaker B: Um, yeah, totally. Um, you can certainly add me on LinkedIn, um, or you can reach out to us on our website, Lelosocial.com I'm here in active, so ready to chat and help. Um, even if you're not a client, just happy to share some knowledge, ideas and push you in the right direction. Um, in terms of brands that we work with, um, we really are just in the Shopify klaviyo ecosystem for us, working mostly with mid enterprise level brands. Um, so really trying to help people improve with acquisition and retention or the full funnel. So really excited, pretty now, um, in terms of brands we work with. So, um, yeah, really excited for great teams that are looking to grow and how to kind of get you there.

Speaker A: Awesome. Well, thank you so much, Zach, for coming and sharing your expertise here on this show. Um, it was fun to dive into like email and sms specifically on the retention side. So thank you for making the time today.

Speaker B: Thanks so much for having me. This was great.