The Single Most Powerful Framework for Growing Your Ecommerce Business

This is going to change how you think about ecommerce marketing.  

So many brands think: “I need to acquire X more customers to hit this revenue goal or to double my business.” 

Wrong. 

A small fraction of your customers can—and will—drive an outsized amount of revenue.

You’ve probably heard of the 80/20 rule (the Pareto Principle). In many situations, 20% of causes will create 80% of outcomes. You’ll wear 20% of your clothes 80% of the time. About 20% of the population will own 80% of a country’s wealth.

And 20% of your customers are probably generating 80% of your sales.

How do you use that knowledge as a lever? In this article we’ll explain how to 80/20 the heck out of your ecommerce brand. We call this framework “whales and minnows.” It's the quickest single way to grow your business—profitably.

WTH Is a Whale? 

All customers are not created equal. 

Some of your customers are really good. They place large orders, purchase frequently, and stick around for a long time. They require very little attention from customer service. 

Those customers are your whales. 

On the other end of the spectrum, you have your crummy customers. 

They come in, buy a low-value product and never come back again. Chances are, they sucked up some customer service bandwidth along the way. 

These people are your minnows. 

Let’s compare a whale segment to a minnow segment for a real-life nine-figure men's apparel brand.

You can see that with the whales, the average order value (AOV) of their first purchase is $13,000 to $14,000. 

They then go on to spend about twice that in their first year. They order pants, denim, suits, knits, shoes. It’s like, I just got my big bonus and I'm going to replace my whole wardrobe. 

Then you have…the minnows. 

They roll in and order one item in an entire year. It costs $37. It's a swimsuit.

We've seen this at one nine-figure brands after another. 

Want to see it in your own brand? Go into your web analytics and create a simple segment that shows everyone who has ordered at twice your AOV. Then look at their behavior on your site. 

Why You Need to Care About the Whales 

OK, so what? Some of your customers are better and some are worse. No shock there. 

Here’s a big reason why it matters: Usually, it costs the same amount to acquire a whale as it does a minnow. 

Is there a light bulb going on in your head? 

Let’s walk through how this plays out. 

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How can this apparel retailer get another $50 million in revenue?

They can do it by acquiring 9,000 whales. Or, they can acquire 315,000 minnows—the ones who are going to spend $37 apiece. 

If we assume that the cost of acquisition for each of these customers is $1, you're talking about spending $9,000 versus $315,000 to get an additional $50 million in revenue.

This should bring you so much clarity. 

A customer isn’t just a customer. It’s a lot more nuanced than that. 

How to Hunt Whales

Once you realize that all customers are not the same, it should change your acquisition efforts.

Growth is a heck of a lot easier when you focus on catching whales. 

And there are really only three ways to do it. 

1. Acquire more of them.
2. Retain them. 
3. Turn minnows into whales. 
   

Acquiring More Whales

The first step is to look at your acquisition channels.

This could be your channel report in Google Analytics or your source medium report or your ad groups or your keywords or your Facebook ad groups.

No matter the acquisition source, it should reveal patterns. Get in there and start looking for the channels that are driving a disproportionately high percentage of whales.

In this chart, I'm essentially comparing two different acquisition sources, source A and source B.  A has a higher percentage of minnows. Source B brings in more whales.

You're not just looking at conversion rates off of these sources, but the type of customer you're acquiring.

If the cost of acquisition is the same for a minnow and a whale, why wouldn’t you put your marginal dollars toward acquiring more whales?

I've heard so many people talk about this without even realizing it. 

Like someone asks, “How's TikTok performing?”

And they say, “Oh, I'm acquiring a bunch of customers, but then I track them over time and realize that they're all one-and-done.”

Here’s a pull from Google Analytics. It's essentially my source medium report.

In this case, Google CPC is driving a lot more revenue, proportionately, from whales.

This brand should lean into CPC and figure out which campaigns are doing the heavy work.

Find what bait is working for your whales, and invest in it. 

When I was CEO at AutoAnything, we put a lot of work into building out models to tie lifetime value back to ad spend, ad campaigns, promos and products purchased—all those different cohorts. We saw huge disparities among our customers.

You had people coming in and buying a floor mat for $50 bucks and then disappearing. Then you had customers who had just bought a new truck. They wanted tonneau covers and running boards and everything else. They’d spend, like $3,000.

That informed how we messaged people. It shaped the types of ad campaigns we were running and the search terms we were bidding on. You can really tailor your marketing and messaging around attracting more of your whales.

Herding the Whales You’ve Caught

The second way to get more whales in your business is by retaining them.

We're gonna call it whale herding.

If you keep your current whales around longer, that will result in more total whales—and sales. (You acquire new ones, and increase retention on the old ones.)

A lot of businesses have some version of this bell curve. Customers engage with a brand, start buying, increase their purchases over time, then eventually taper off and stop being a customer. 

For some brands, this life cycle might be 60 days. For others, it might be three years.

Can you extend that life cycle to be longer? If your whales tend to leave after 60 days, can we push that to 90 days? 

Often the answer is yes. 

There are generally three ways to improve customer retention.

1. Sell the right merchandise.
2. Have the right shopping experience.
3. Have the right promotions and promotional strategy.
   

Selling the Right Merchandise

This is the most powerful way to retain customers. 

Let’s go back to that nine-figure clothing brand. 

The whales who come in and spend $14,000, they're spending it in a number of different categories. 

The minnows are only buying swimwear.

Right there, you should start to think like a merchandiser. Is there something going on with the merchandise?

It could be, for example, that swimsuits have a bad customer experience. People don’t like the swimsuits. The customers who buy them don’t stick around. 

This is more analysis from the same brand.

On this chart, you can see that whales buy men’s blazers. The minnows don't.

Blazers are a harpoon product. 

Now that we know whales buy blazers, I will feature blazers as a harpoon product in my email, on my site and in my store.

That's what this brand did, by the way.

Think about how that might inform your ad strategy. You can put any product in your ads. Why wouldn't you choose the ones that are going to attract the best type of customer?

Most brands think in terms of conversion rates. They’ll put swimwear in their ads because it converts customers more often than a suit. 

But it’s not actually helping your business. When you sell a suit, you're acquiring a whale customer who will stick around a lot longer. 

The Right Shopping Experience

Have you heard of Shoe Dazzle? 

They sell shoes online. And back around 2010, they decided to implement a subscription plan. Since many women like to buy shoes, they figured they’d turn that into a consistent revenue stream. 

They were probably one of the first companies to do it. And it almost killed them. 

Their whales were buying five or 10 pairs of shoes a month. Then they rolled out a subscription plan for one pair of shoes a month. 

Their whales signed up for the plan, and ended up buying less than they did before. 

It’s essential to have the right shopping experience to retain your whales. 

Promotional Strategies

The last way to increase retention is near and dear to my heart: Lining up a promotional strategy that encourages whale customers to buy for longer.

This gets to the highest ROI thing you can do as a CMO. You can have your CFO doing backflips. 

That's winning back your defecting whales.

Back when I was running my first business, Design Public, I made a quarter of a million dollars in a single afternoon. 

I did it with winbacks. 

At the time, our brand was just doing spray and pray every day, sending the same offer to our entire marketing list.

Instead, I did an analysis and looked at what's called intra-purchase latency.

This is the intra-purchase latency report for a haircare brand. It shows that the average whale customer goes 75 days between the 1st and 2nd purchase.

The lag between second and the third purchase is 64 days and the third to the fourth is 56 days.

This is gold. It tells you where to set the triggers to win these types of customers back.

Whale customers typically come back 75 days after their first purchase. If she doesn’t return after 90 days, there’s a good chance I’m going to lose her. 

I go into Omnisend. I go into Klaviyo. I go into PostPilot.

I target these segments with campaigns designed to keep them around. 

Not just any campaigns. Not just any discounts. 

Most brands discount too much. 

If you give customers 20% off just for showing up on a website, you’re giving away promotional dollars. You need to have a strategy behind your discount cadence. 

Look at your standard whale behavior and then deploy your promotional dollars to correct deviations from that behavior.

If your average whale buys every 50 days, you want to offer a discount on day 60.

Not before, because the customer is likely to come back and buy at full price. 

At day 60, you might offer 10% off. If she hasn’t bought by day 90, offer 15% off. Increase the discount—on day 100 go up to 20%.

A discount ladder is an intelligent way to deploy your promotional dollars.

Run some tests on discount levels, timing, and various segments. See the response rate for each level. You take that all the way through to the net profit.

These kinds of campaigns are insanely profitable for businesses.

Then you want to automate them. It's probably the highest ROI use of your time.

Turn Minnows Into Whales

The third way to create more whales is to grow them from minnows. 

GMO those shoppers. Turn the customer who spends $37 on a pair of swim trunks into the whale who spends $14,000 across all your categories. 

It can be done.

Take bras, for instance. 

My mentor cut his teeth at Home Shopping Network. They figured out if minnows came in and bought a certain bra, they would come in and buy something from, say, knits. 

Bras were a gateway drug. 

They realized that what they needed to do is put bras in front of every shopper. Minnows needed to see the bras to become whales. 

So they worked bras into their ads, their emails, whatever. 

Database marketing teaches us that good customers are typically born, not bred. And it’s true that it’s hard to take a crappy customer and turn him or her into a good customer. 

It can also be worth the effort, especially as part of a cohesive whale-collecting strategy. Put all the pieces together, and you’re going to see an impact on your sales. 

Want more brilliant marketing insights gathered over 20 years of running successful ecommerce businesses? Subscribe to the Nerd Marketing podcast.

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