Bounce-Back Email Campaigns: Strategy and Timing
The math didn’t lie.
The company, with its low average order size (AOV) and high paid search costs, was losing money on almost every order.
Thousands of orders a day, too. The more orders we took, the bigger the hole we had to dig ourselves out of.
It was our third month running Karmaloop. Started out of a basement in Boston in 2000, the company had grown into a 9-figure force in streetwear apparel.
But this is what happens when acquisition costs spiral out of control. Cash flow went negative and the company went bankrupt.
I was part of the team that brought the business out of bankruptcy and was trying to reinvent it.
Our job was to get it from losing a half million dollars a month to profitable.
We were able to do that within a year.
In this post, I lay out one of the core marketing tactics we used: the bounce-back email campaign. It ultimately produced more than a half million dollars in additional revenue — and almost that much in profits.
Why should you care about this? Because these campaigns can literally unlock hidden profits for you overnight.
What is a “bounce-back”?
Brick and mortar retailers invented the bounce-back.
It’s an offer given to customers immediately upon purchase designed to “bounce that customer back” to the store at a future date.
They aren’t used as much in online retail, but they should be. Why? Because they help solve for the one-time buyer problem.
The one-time buyer problem
The one-time buyer problem has two parts:
1. most retail businesses have a large percentage of one-time buyers, and
2. one-time buyers are often unprofitable.
One-time buyers: there are too many of them!
The 80/20 rule tells us that most non-subscription online retail businesses will have 80% one-time buyers, 20% multi-buyers.
It’s not always 80%, but over fifteen years I’ve yet to see a business where it isn’t the vast majority.
In database marketing parlance, these are “F1” buyers, meaning they have an order frequency (“F”) equal to one.
This wide swath of F1 customers typically comes to a website, buys a low AOV product, takes up a fair amount of customer service time, and never comes back again.
Thank you very much, right?
Find your one-time buyer percentage in Klaviyo
You can calculate your own one-time buyer percentage in Klaviyo. Just create two segments. The first should be for all your F1s:
The second segment should be for all your customers:
Once you’ve created these, just calculate your one-time buyer percentage.
At Karmaloop, this number was well over 80%.
One-time buyers: they’re unprofitable
Having many one-time buyers would be fine — if these were also profitable customers.
But for most businesses, they are not.
Customer acquisition costs are too high. Karmaloop was finding new customers on paid channels like Facebook or Google, targeting a 3X return on ad spend.
That means the ad costs were typically 1/3 of the sale price.
Then add to that all the incentives designed to convert that customer (“25% off your first purchase!,” free shipping on all orders, etc.), the customer service costs, COGS, and return costs…and yes, those first (and only) orders were often money-losers.
Unless you are lucky enough to have lower acquisition costs or massive margins, you probably face the same challenge.
Your multi-buyers generate the (most) profits
So where do you make money? Subsequent purchases from a customer:
- First, you acquire an F1 and dig yourself a hole.
- Then you get that customer to come back and buy again off of a cheaper marketing program like email or remarketing. These are now profitable transactions.
- Eventually you claw your way out of that hole.
The fine folks over at ProfitWell have a nice simple graph depicting this process:
A business acquires a new customer over on the left hand side. Because the business had to pay to acquire that customer, that transaction is often unprofitable.
That’s the red.
As the business then gets subsequent more profitable orders from the same customer, it eventually “pays off” the acquisition debt and is in the green.
Works great, right? Well this approach falls apart when 80% of your customers are one-time buyers. You can never dig out of that red “hole.”
It’s a problem—but also an opportunity. Think about it: you probably have a massive amount of F1s. One of the quickest ways to add positive cash flow to your business is to figure out how to turn more of them into F2s.
This is exactly what a bounce-back can do.
How to set up a bounce-back flow
There are two steps to creating an effective bounce-back email flow:
1. Set up your flow in Klaviyo, then
2. Insert your email offer.
Step 1: Set up your flow
The beauty of a bounce-back offer is that it is set-it-and-forget-it.
Automate it in Klaviyo, and it should generate incremental profits for you forever.
The more recent the better
Bounce-backs work because they play off of recency (R).
Recency is one of the top predictors of future behavior. The more recently a customer has purchased from you, the more likely she is to buy again.
An F1 that bought a day ago (i.e., an R1, F1) is more likely to buy from you again than the F1 who last purchased from you a year ago (an R365, F1).
Well, recency also predicts how likely a customer is to respond to an offer. The sooner you make an offer to an F1, the more likely they are to take that offer.
This is why you want to trigger your Klaviyo flow immediately at checkout:
Think about this in brick and mortar terms: it’s the classic McDonald’s “You want fries with that?” cross-sell. They don’t ask you if you want the fries a month later; they ask you at checkout.
Target your F1s
You also want to target this offer only to your one-time buyers.
Your Klaviyo flow filter should reflect this. Set Placed Order equal to “1” over all time.
And finally, we’ll want to do some trigger filtering. Unless you have an appetite for pain, you don’t want to send an offer on a product that the customer just purchased. Why? Because that’s a sure-fire way to upset your customers! (Ever get a coupon days after you bought something at full price?)
Step 2: Create your bounce-back offer
Once you have the flow configured, you are going to populate it with a single email featuring your bounce-back offer.
“Impulse buys” make the best offers
The ideal bounce-back offer is on a high-margin, low-priced, best-selling product.
Why high-margin? Because your goal with this campaign is profits. You want to turn that unprofitable F1 into a profitable F2, so you need to generate a fair amount of cash flow on this second purchase.
Why low-priced? Because you want a decent conversion rate. It wouldn’t make sense for Williams Sonoma to give me a bounce-back coupon on a fancy espresso machine when I’m in the store buying napkins. It’s too much of a leap.
Instead, offer a product priced at around 30% of your store-wide AOV. These are your “fries.”
At Karmaloop, our high-margin, low AOV product was a plain t-shirt. Everybody wants a t-shirt. We sold tons and the margin on a $12 shirt was over 80%.
There are a few more considerations when choosing an ideal product to feature in a bounce-back:
- Offer only one product. People are more likely to buy when presented with a simple yes or no decision. Don’t make your customers think.
- Make sure the item is always in stock. Your bounce-back campaign is going to be automated from now until eternity. The last thing you want to do is annoy customers by offering them an unavailable item.
- Consider a different product category than the product being purchased. Most ecommerce funnels are simple: paid ad to landing page to purchase. Therefore, most F1s don’t know the breadth of your product selection. Here’s your chance to show them.
Discount or not?
Once you have your product in mind, you need your incentive.
At Karmaloop I used a small discount incentive: $3 off a $12 t-shirt.
But remember your goal: profits. Don’t discount if you don’t have to.
Free gifts with purchase or buy-one-get-one offers also work well here. I’ve also seen simple “you might also like” bounce-backs that feature no monetary incentives at all.
If you have your shipping dialed in to batch same-day orders to the same customer, then your shipping costs should be lower on this second purchase too.
Design the email
Here’s the bounce-back I used at Karmaloop:
Any click on this email directed the customer to a landing page featuring the same three t-shirts.
This email has a few critical elements you will want to copy:
Urgency. Limited-time offers will encourage your recipients to act. I put a 60-minute expiration on my offer.
Limited options. Again, the fewer options a customer has, the more likely they are to make a decision.
Tracking. Be sure to enable Klaviyo’s default Google Analytics tracking in your email. Here, it allowed me to track customer behavior right through to Google Analytics.
What you can expect
Once you set up your bounce-back in Klaviyo, you can measure the results in both Klaviyo and Google Analytics.
Here were our results after the first 30 days in Klaviyo:
The first thing you notice here is the insanely high open rate: 42.8%. I defy you to get this open rate from any list-wide broadcast email.
The more recent the purchase, the higher the engagement.
What is more important, this campaign converted 127 F1s into F2s over this month. It generated over $12K in incremental revenue (we had the shortest attribution window setting possible).
And because this was from an 80% margin product, that revenue was almost all profit.
Once you have your own bounce-back installed, you should expand on it:
1. Calculate your ROI. If you want to give your CFO an ROI to justify email automation, run a control group test on your bounce-back. Hold some customers out of the offer to assess the true lift of the bounce-back. I explain how you might do this in Klaviyo in this article on control group testing. I think you’ll find the bounce-back campaign is one of the highest ROI campaigns you can run.
2. A/B test your offers. Your goal is profits. Some offers will be more profitable than others. Do you need to offer a discount? If so, how much? Use Klaviyo’s A/B testing functionality. Set up a test where half your F1s get 20% off and half get 10%. Which drove more profits?
3. Create different bounce-back campaigns. Above I created a t-shirt offer that went to any customer who didn’t buy a t-shirt. But what about people whose first orders included tees? I’d want a bounce-back flow unique to them too. As with most of these lifecycle flows, the more granular we get, the higher our customer lifetime values become. So dial it in. Build out a bounce-back just for high AOV buyers. Another for low AOV buyers. Maybe one for each category of initial purchase that exposes the F1 to a different-but-related category.
Iterative testing is what let us turn a $12K win into a $500K annual revenue generator.
Entrepreneurship is about leverage. Most of us lack the time and resources to do everything. We need to focus on the few things that matter.
For an online retail business, one of these things is turning a one-time buyer into a two-time buyer.
And one of the quickest and easiest ways to do this is with a post-purchase bounce-back flow.
So take an afternoon to build out one.
To help you move even faster, I’ve included a zip file here with a link to the Klaviyo bounce-back flow I used at Karmaloop, along with HTML of our t-shirt email. You can upload this straight into your Klaviyo account.