Podcast 07: Tripwire Marketing Case Study – 15% in sales virtually overnight

Everybody, this is Drew and I want to do a quick study here on some of the Tripwire Marketing we’re doing at an 8-figure client. I think that this Tripwire Marketing has literally created $2-3 million in incremental revenue going forward over the next year and I want to show you why I think that and some of the tests we’ve run to produce that.

Without further ado, let’s go to the screen cast.

Here, you’ve got…

What is Tripwire marketing? Tripwire marketing is basically setting up Tripwires to identify deviations and customer behavior. We’ve got several typical customers that exhibit standard behavior. Tripwire marketing is about identifying deviations from that behavior and then spending your marketing dollars and effort at the point where those deviations occur.

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For example, customers order every 30 days and then stop. That would be a Tripwire. I go to get my latte every morning from my coffee shop and all of a sudden, I’ve stopped going for three days. That is a red flag to the coffee shop that I’ve stopped buying. Customers never email the help desk and now all of a sudden, you get a lot of emails to the help desks, so that’s another Tripwire. It’s just changes in typical behavior that really represent marketing opportunities.

I said that that’s a very effective way to market and the reason why is because we all have limited resources. Every business has limited resources and you want to spend at the point of the greatest impact. Say, hypothetical example, we have a thousand dollars to spend on retention marketing every month and we get a thousand customers, then we have the option of: number one, you could spend a dollar per customer for marketing that month, or option two would be you spend ten dollars on the hundred customers that are about to defect, they’re about to never buy from us again.

Study after study and example after example shows that it’s much higher ROI to spend up on the customers that are about to leave as opposed to spend generically across all of your customer base.

Second advantage of Tripwire marketing is once you model out this customer behavior, it’s really easy to automate using email marketing and other SAS applications which just is great. I mean, you can set and forget these marketing programs and … I don’t know if you guys have heard the term “Lifetime Value”, but what I’m talking about here is really called the “LifeCycle”. A customer exhibiting standard behavior is a standard life cycle, whereas lifetime value is a much more esoteric calculation of the profit that a customer throws off over his or her lifetime and life cycles are much more actionable.

If you know standard behavior and what to expect from a customer and when they deviate from that behavior, that’s much more actionable to me as a marketer than knowing lifetime value.

That’s the ‘what’ and the ‘why’ of Tripwire marketing. As for the ‘how’, what I want to do is spend some time identifying typical patterns and typical life cycles for our customers. I then set the Tripwires and test a number of different promotions to send out when people “trip the wire” and … Now, I delve into exactly what that means.

Step one, is determining key  Tripwires. These are four examples here of very common Tripwires used in marketing. For example, number one, these second purchase happen within how many days of the first. That’s an average usually that is pretty consistent across all of our customers, at least in certain product categories over time. New subscribers to our lists order within how many days. That would be another key Tripwire by now. How many days is it from a visitor’s first visit to the site to the point where they purchase? Another very common Tripwire. And the last one, how many minutes on-site before a purchase occurs?

Knowing that these were four great places to start, you then want to move from … you want to get answers to those questions and you also want to move to testing out offers. Once you identify the core Tripwire, what you want to do is come up with … divide anybody who’s tripping that wire so we know that every customer orders within 30 days. If it’s gotten to be 40 days and a customer has not ordered again, then I’m going to take 90% of those customers and I’m going to test offers to them and see if I can encourage a second purchase. I’ll then take 10% of those customers and I won’t send them anything. They’re my control group and what I want to do to measure the efficacy of these marketing promotions is just to measure the lift from the control group to the group that gets the promotion.

Let’s go through some of the results that we’ve achieved over the last couple of months.

Let’s start with this core Tripwire, the Second Purchase Latency. Second Purchase Latency is just a fancy way of saying, the number of days between a first and second purchase. That’s the latency. And retailer to retailer, this tends to be an average and it is true more than it is not true for an average customer. The first thing I did was figure out what that second purchase latency was for us, like what’s the Tripwire and we pull them up. The way I do that is exporting transactional data in running, it’s called a histogram, that shows me the standard latencies for the first purchase, second purchase and third purchase.

And really, the big takeaway from this chart is that, here’s months along the x-axis, is that within the first month, certainly within the first two months, we’re getting 90% of our reorders or initial orders for that matter.

That tells me, let’s say 30 days is a good Tripwire. If a customer has gone 30 days, maybe 40 days or 45 days without ordering twice their second order, then they have busted through the Tripwire and I should market to them. You maybe asking why not market to them or send them a promotion before they get to that 30 days and that’s because before the 30 days are up, there’s still a likelihood that that customer is going to buy again so why would I give a promotion? Why would I try to incentivize something that’s already going to happen, give away margin dollars?

In this case, for my second purchase latency, I tested several offers, a 10% offer, if they busted the Tripwire, 20% off, gift certificates sent out at 60 days in this case and then I had the control group. Here’s a new example of just a standard 20% off, “We miss you. You haven’t been here in 45 days.” Take 20% off on your next order. This is basically what I tested.

The results after these test was that one offer in particular, the 20% offer, got me over a 2,000% return on my marketing investment. I’ll show you how I calculated that. This first table here represents gift certificates, so I did test gift certificates against a control, in other words, a $50 and a $75 dollar gift certificate went out to a certain sample size of customers and I measured the activity over time, so again, these are customers that are busting through the 40-day Tripwire. They haven’t ordered twice in 40 days, I’m trying to win them back. And I go down here, I see the response rate to this offer, how much the offer costs me in terms of the discount coupons and at the end of the day, I have a miserable ROI, a negative … I lost money on these tests of giving away dollars, giving away gift certificate.

What fared much better were 10 and the 20% off offers. Much bigger sample sizes here, so these are again customers busting through the 40-day Tripwire without having ordered twice. In one case, I gave one group … I gave the control nothing. I gave roughly half 10% off, roughly another half 20% off and you can see the response rates here. I netted out the cost of the discount and I’m seeing in this case over 2000% return on my marketing dollars for the 10% off coupon. Not too shabby for 20% off coupon here but I would rather make more than make less, so 10% one is the one I want to go with. I lock that … once I’ve done my initial testing, I lock it into my email software.

At 30 days after purchase, if someone has placed an order and has not placed an order since 30 days, they get this 10% Off Your Next Purchase offer and then I’ve actually laddered it which makes it more effective. It’s 6o days off. They’re going to get 15% off and [inaudible 00:10:09] they’re going to get 20% off. This has been doing amazingly well for us. Every week, we get a couple orders off this Tripwire promo, this Second Purchase Latency promo, and again, it’s automated in Klaviyo so I don’t have to do anything with after the initial testing.

The second Tripwire test was I determined by looking at email data that most new subscribers to our email list will order within seven days. They haven’t order within seven days, they’re not going to order, so I set seven days as my Tripwire. That tells me I’m not going to send any promotions to these customers before the seven days but after they hit that seven days and they’re likely to not order from us, that’s when I can go promotional. And what promotions here, I tested things like a Welcome series. I blew out the number of emails that customers receive over that first seven days, encouraging them to purchase.

I also tested a 20% off kicker. After they bust through the threshold, the Tripwire of seven day, they’re going to get a 20% off their first order but not before, and if they order within the first seven days, they’re not going to see that offer. That’s how it works.

The result here have been really impressive. I’m going to show you the 20% off offer. Here’s our Welcome Flow that I automated in Klaviyo so immediately, customers are going to get this welcome email, “Welcome to Our Company.” After a day, they start to see our top categories. After three days, they get introduced to our social channels. After five days, they check out … a call to action to check out plunder. After eight days, here’s one of our favorite products and what I’m hoping for here is like, at this point, I really have encouraged, as you can see, people are purchasing through these first week, and if they purchase, that’s great, because they don’t get the ultimate offer. But if they don’t purchase and they bust through the Tripwire, boom! I hit them with this 20% off offer. And that’s a one-time off offer. This is just in the last seven days, I’ve got about $500 worth of incremental sales through that kicker offer.

And you can see the lift…what the lift looks like here. This is October 19th, it’s when I instituted this welcome series, and really, every week we’re getting between five and ten incremental offers off the welcome series, $500 or more per week. All, by the way, are most at full margin if they don’t get to that 20% off kicker.

Working really well for us, that’s the second Tripwire marketing test I want to show you. And then the last would be Time to Purchase. Remember, I said, there’s a key Tripwire, if we can measure the number of seconds people are on the site before they buy, and then market to them if they bust through that Tripwire.

Fifty percent of purchasers through this site order within the first two minutes on site. Got that data from Google Analytics.

The third Tripwire, I looked at the third one I want to highlight in this case study, is the time to purchase. Remember, I said if you can identify the number of seconds it takes before an average customer purchases, then that’s a really key Tripwire because you can do all sorts of marketing after they bust through that Tripwire. In our case, 50% of our purchasers order within two minutes on the site. I got that from Google Analytics. You could see here over the past month, really, the bulk of the activity is occurring within the first two minutes. What that tells me as a marketer, is if somebody is on the site for more than two minutes, they’re less likely to buy, they’re probably not going to buy and I can go promotional with them.

I set that two minutes as a key Tripwire. I tested a couple things, I tested a pop-up that pop-ups with an offer immediately. I tested an exit intent pop-up that only pops-up when someone’s about to leave the site, I tested gift certificates, I tested offers like 20% off your order and of course, I carved out a control group. And the results here were that … I’m not sure if everybody remembers when I did the pop-up that sort of pop-ups initially but that actually hurt our conversions. And it hurt our conversions because it was interfering with the purchase process. The people were still likely to buy and then they were being hit with a pop-up. It was decreasing the conversions.

As soon as I changed that pop-up from an entrance pop-up to an exit pop-up, conversions went through the roof. Here’s the data for our pop-up and you can see here the number over time of assisted conversion and conversion on the same visit that it’s producing. The big take away here is 800 incremental conversions over the past 30 days, so that is not purchases unfortunately, but that is email opt-ins which we’re counting as a lesser conversion.

But you could just see over the past month how many assisted conversions are happening and total conversions are happening because of this pop-up that you see here. Revenue that we’ve assisted on the same visit and revenue on future visits. It’s not insignificant how well this pop-up is doing in terms of encouraging purchase because you got to think, if people bust through that two minutes and they haven’t purchased , they’re not likely to purchase, what are some things we can do to them? We can send them an offer to get them to purchase on that visit or we can get them to sign up for a mailing list and then they fall into that welcome series which encourages them to buy.

That was my logic there and it’s working. All in all, if you run the numbers here, this kind of Tripwire marketing has added 10-15% incremental revenue at really minimal cost to this client. Assume like a 30% run rate, that’s three million incremental dollars a year that just come from some of these marketing automation. As far as my next steps, what I want to do is take this same Tripwire approach and blow out more flows in Klaviyo, further test abandoned carts, welcomes series.

I think, if we dial the welcome series in and some of the Tripwire marketing by category and by brand, we’re going to get even better than we got with one broad series that sort of everybody falls into. Things like purchase latencies by category, if our average intra-purchase latency is 30 days, in other words, people order every 30 days, that’s an average. It’s going to be different for brands and it’s going to be different for categories, and the more we can dial that in, the higher our return is going to be.

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That’s where we’re going to go going forward with this but I wanted to give everybody a taste of some of the Tripwire marketing we are doing and why it is so effective. I’m really pleased with it and ask me any questions you have at any time. Thanks.