You’re probably not focusing on this metric
How to the improve 1st to 2nd order rate
Hi there,
How many customers come back after they first try your product?
20%? 25%
RetentionX analysed 500 D2C brands and the average was only 30%... far too low. That’s only one in three users choosing to return. The best in class fared at around 45%, which was basically 50% higher than the average.
Now this would be an impressive achievement.
Imagine you are getting 2,000 new customers per month at an AOV of £50.
Getting that rate from 30% to 45% means an extra £15,000 in revenue from those new customers. Not only that, but there is an increase in 3rd, 4th and 5th orders.
Your actual increase is more like:
(New customers x % increase 2nd order x AOV) + (New customers x % increase 2nd order x 2nd to 3rd order rate x AOV) + (New customers x % increase 2nd order x 2nd to 3rd order rate x 3rd to 4th order rate x AOV)
I appreciate that is a long formula, so for the non-calculator minds out there, keep the following in mind:
You are not only getting another order in, but multiple, as that customer may stick with you not just for a second order but a third, fourth and more.
The cost of those extra sales is far less than new customers.
You are increasing your overall lifetime value, which helps profitability.
It also allows you to work with a higher cost of acquisition to scale your new customer acquisition.
Do you know why I rave about this metric? I’m actually raving about focusing on retention and improving customer lifetime value, but often this is a key metric that D2C brands lag on.
So let’s get practical. How do you work out what is causing your 1st to 2nd order to lag?
Detective retention on the case
In my alternative life, I’d be a detective; I love a good murder mystery. Luckily I get to be a detective in growth too, minus all the blood and gore (I could never have handled that part anyway). Instead of Murder on the Orient Express, it’s Death by the Second Order.
You need to rule out suspects for why your 1st to 2nd order is down. Here are common suspects and the order in which I like to integrate them to get down to the bottom of the churn mystery:
Suspect #1: Product-Market Fit
If people aren’t getting the value out of your product, they aren’t going to come back. So complete my Product-Market Fit check. Lower than 40%? Work out the causes and start working on those (I’ve outlined how to do this).
Product-Market Fit has an alibi, so let’s move on to Suspect #2.
Suspect #2: Where they are coming from
I don’t believe any traffic source is intricately bad, but some are less of a match for your brand than others. Compare retention per source and if you have enough data campaigns/ad. I use TripleWhale for this, but you can also use other tools depending on your platform (Lifetimely is another good one for Shopify).
If you see a source with a far lower LTV and 1st to 2nd order, try to understand why: maybe your pre/post messaging doesn’t match up, maybe they are buying it because they trust the influencer’s recommendation but didn’t actually have a high need.
If this lead isn’t panning out, it’s time to turn your detective eyes onto the next suspect.
If you want to learn about 3 more potential suspects, read the full article here.
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I promise if you spend a bit of time investigating, you’ll find one or multiple perpetrators impacting your 1st to 2nd repeat rate. This was the work of a group of highly skilled suspects. It isn’t a quick fix to catch them all; depending on the time to re-order rate, it may take months for most brands to see the increase.
But it’s a gift that keeps on giving, as you saw with the initial calculation, and you’ll see the results and overall impact long-term of improving it.
So start investigating, I’m curious to see your findings, fellow detectives!
Daphne
P.S. I run the Women in Experimentation Slack with Lucia van de Brink and Marcella Sullivan. We are very passionate about supporting women growing in the space and have had so much great support from women and men over time. While the community is women-only, I’m excited to share that we are starting a newsletter open for all so you can hear about what the incredible women in the space are up to and support the community. The first edition just dropped! Sign up here for free.
“Death by the Second Order” this is awesome!