Most Important Retention Lesson from Shark Tank Season 2

I am sure most of you have seen Shark Tank Season 2, some very interesting conversations that give all of us some good directional learnings. If you realized a few of the most common questions asked by most of the Sharks was around Net profit which is obvious, followed by: “What is your repeat purchase rate?” Most of them were averaging around 20-30% as their repeat purchase.?

?Also, if some of you observed one answer that got most of the Sharks worried was monthly burn. The majority of this burn rate was due to high spends on acquisition to run behind fast growth.?

?Not that I am against high growth but if you get 70-80% of your growth from a new buyer even I as a Shark would say – “I am out since CAC reduce karne main na mujhe interest hain na meri expertise hai.” (Neither am I interested in reducing CAC nor do I have the expertise)

?This gets me to the most important learning from Shark Tank:?

?Focussing on Repeat Purchase Rate –?It’s a metric even more important than revenue, conversions, and CAC. It has a direct correlation to the profitability of the business and higher customer lifetime value. (CLTV)

?Here is a simple way to calculate Repeat Purchase in a specific duration, below image shows details for the month of October 2022:

Let’s take an example of a healthy snack brand since that’s the flavor of the season and see all the different ways in which you can analyze repeat purchases.

Brand name -?BeHealthy

Here is how BeHealthy can calculate its Repeat Purchase

If you observe their repeat purchase seems to be dropping from December 2022, possibly the month from which they seem to have scaled some of the performance marketing campaigns and have crossed 2k+ purchases a month.?

?If you want to now dive deeper, BeHealthy can use Cohorts to analyze repeat purchases from a specific segment of users, let’s say a segment of users acquired in October 2022 from paid campaigns on Facebook/Instagram.??

The cohort analysis shows only a 7.7% Month 1 retention rate for users acquired in October 2022 which is way too low compared to BeHealthy’s average retention rate of 21%. Ideally, they should stop these paid campaigns and figure out a way to optimize them further and acquire the right audience.?

How much ever we focus on optimizing our performance marketing campaigns, having a focus on organic traffic from Day 1 is important. Organic audience that comes through word of mouth and content will always give you the lowest cost of acquisition and highest retention. Exactly what Maisha Bags and founder of Nish Hair Parul Gulati did and surely got a lot of respect and a good valuation.?

Another way to also look at data is to see your repeat purchase based on specific SKUs. Representation could look something like this:?

If you see the table?Ragi biscuits?tend to have the highest repeat purchase followed by?Oat cookies. The other products seem to be lagging way behind and which also means for your new users you should ideally push them to buy Ragi biscuits or Oat cookies while you work on improving the numbers for others.?

If you are delivering across multiple geographies it would be important for you to see the above SKU analysis basis country/city you might have completely different findings.?

Bottom line is that making repeat purchase a part of your daily tracking & working towards improvising with every passing day is the only way to building a profitable business. In the next article we will talk about ways in which we can improve repeat purchase and how some brands have been doing it successfully.

Would also love to hear from some of you on newer ideas executed to improve retention and repeat purchase. Please do share your thoughts in the comments below.