Why Retention needs C-level Attention

What's the core of building a business? Value Creation? For founders, employees, investors?

How do you create value? Hype, or free cash flows.

How do you get free cash flows? With effective unit economics.

What's good Unit Economics? Positive Contribution Margin

Sale Price minus (Cost of Goods Sold+ Cost of Fulfilling the order + Cost of Marketing)

Cost of Marketing = (1 / blended RoAS). 3x RoAS = 33% of Revenue is spent on Advertising.

5x RoAS = 20% Spent on Ads - that's a 13% extra contribution margin

How do you improve RoAS? Optimize each channel + weight of channels.

Paid Channels give say 3x. Owned Channels ( Email / Push etc.) can give you 20x. Organic / Direct Traffic give you more, if you're able to scale them up.

So,

a. Optimise Paid Channels

1. Competition / Pressure to grow will mean you're always stretched on this front

b. Maximise Owned Channels

1. Maximise Data Collection - user data, activity data
2. Improve CTR of communications - Triggers / timing, Content personalisation
3. Improve Conversion Rates - Deeplinking, Landing Page personalisation, Personalised offers

b. Understand Cost of Direct Traffic ( Brand Advertising + Repeating Audience + Word of Mouth)

1. Putting up billboards / mainstream Ads can be expensive / inaccessible for several brands
2. Getting more people to talk about you / repeat = loyal customers - which is a build-able asset.

If you don't have repeats, you can keep scaling new customer acquisition but your active customer base will stop growing at some point, despite the spends. There's no way you'll generate meaningful contribution margins. The Hype based growth can support during the times of irrational exuberance, but like seasons of the year, these situations change.

So User Repeats isn't something to leave to a junior member to watch and figure out.

It will need C-level attention. Ignore at your own peril. Retention (or lack of it)is the silent killer. Read Brian Balfour on Reforge if you need more convincing.

More so because the actions needed when trying to move the needle - will have implications across Product, Category, Operations - all the teams. Retention is not a marketing problem.?But that's for another conversation.