Freebird

Erin Whyte is the director of retention and lifecycle at Freebird, where she focuses on driving repeat revenue, increasing customer lifetime value and improving profitability. She combines strategic leadership with hands-on execution, leveraging data, experimentation and personalization to strengthen customer relationships and deliver sustainable business growth. Why we should measure success by contribution margin over time

For years, ecommerce growth has focused heavily on acquisition. We spend a ton of time thinking about CAC, ROAS, conversion rates, creative testing and first order revenue.

But acquiring a customer is only the beginning.

As acquiring customers gets more expensive and competition continues to grow, what happens after the first purchase matters more than ever. The brands that come out ahead won't just be great at bringing in new customers, they'll be great at turning those customers into long-term, valuable relationships.

Retention is Where the Real Work Begins

A successful first purchase only tells us that we convinced someone to buy. It doesn't tell us whether they'll buy again, stay engaged with our brand or ultimately become a valuable long-term customer.

A customer who costs 70 dollars to acquire and buys once may be less valuable than a customer who costs 90 dollars to acquire and buys five times. Yet many brands still optimize acquisition as if the first order tells us which customer was better.

This is why acquisition and retention need to work together. Instead of just asking, “How efficiently did we acquire this customer?” we should be asking, “How much value did that customer generate from their first order and every order after?”

Great Retention Starts with Understanding Customer Behavior

Once someone makes their first purchase, the real work begins. Lifecycle channels give us the opportunity to shape the customer experience after the first order and influence what they do next.

Early in the journey, that might mean helping them get the most out of the product through onboarding emails, helpful texts or education included right in the package. As their next order approaches, we can remind them what's coming, introduce other products they might like, reinforce the value of their subscription or make it easy to skip if the timing isn't right. And if they do cancel, lifecycle gives us a way to stay connected and hopefully bring them back.

“A customer's first purchase tells only part of the story. Their behavior over time reveals their true value.”

Retention gets a lot more interesting and fun when we stop treating every customer the same. Customers buy different products, come in through different ads and offers, have different needs and all of these influence what they will do after that first order.

If we only look at the overall repeat rate or churn rate, we’ll miss those differences. To really understand retention, we need to dig deeper.

• Which products have the highest repeat rates?

• Which acquisition channels and offers bring in customers who are still purchasing six months later?

• Where in the subscription journey are we losing customers?

Once we start answering those questions, we can build personalized lifecycle experiences around what customers are actually doing and what they need next.

Personalization isn't simply putting someone's first name in an email. It's understanding where they are in their journey, what they need next and how we can keep them happy, engaged and coming back.

We Need to Measure More than Lifecycle Revenue

Email and SMS revenue are useful metrics. So are conversion rates, repeat rates, churn rates and subscription retention. But none of those metrics alone really answer the most important question:

Did this customer ultimately generate a profit?

When testing a retention strategy, I want to know what happens to the customer cohort over time. At six weeks, twelve weeks, six months and eventually a year, is the test group behaving differently than the control?

Are they purchasing more frequently? Staying subscribed longer? Has their lifetime value increased? And after considering discounts, incentives, product costs and other expenses, did we actually create more contribution margin?

A test can increase conversion today and still fail to create more value in the long run. On the flip side, a small improvement can become extremely valuable as it compounds across future weeks and months. I’ve seen this while testing gifts with purchase. On the first order, a gift looks like pure cost. But when it brings customers back, the contribution margin from those repeat orders can more than pay for it.

Retention Data Should Inform Acquisition

The biggest opportunity is closing the loop between acquisition and retention.

Imagine discovering that customers acquired through one offer convert at a lower rate initially but deliver significantly greater long-term value. Or that buyers of a particular product are more likely to make repeat purchases. Or that one audience costs more to acquire but ultimately generates higher contribution margins.

Those aren't just retention insights. They're acquisition insights too.

These insights should influence which audiences receive the most ad spend, which products and offers are scaled and even how much we're willing to pay to acquire different types of customers.

CAC tells us what it costs to acquire a customer. Contribution margin tells us what that customer becomes worth over the long run. The real growth opportunity comes from connecting the two.

Acquisition determines who joins the brand as a new customer. Retention influences what those customers ultimately become worth over time. What we learn after the first purchase should help inform how we acquire the next customer.

The first purchase is only the beginning. The real value comes from what happens next.