Coldsmoke Founder Series: Dylan Whitman of Inveterate

We are happy to share with you the highlights from our founder series guest, Dylan Whitman, CEO of Inveterate.

Inveterate is reinventing customer loyalty by giving sellers the power to deploy paid memberships on their storefronts. They’ve built an unrivaled engine that drives a membership-driven, experience-based loyalty program that's turnkey to implement.

Hello. Hey, Dylan. How are you? 

Dylan: Good, Mark. How's it going? 

Mark: It's going great. 

Thanks so much for, for joining us here. and thanks for everyone out there for joining us for our monthly Coldsmoke founder series. 

Our goal with these is to share the successes, the flops, the challenges, the fears, and the learnings of starting and growing your own business.

If you're a founder, a CEO. A marketing leader and e commerce director. This is for you. 

Before we jump into it, before we get started, throw a comment in the chat where you're from, pop in your LinkedIn profile so we can all network with each other. and if you have any questions, during this, feel free to pop them in and , make sure to answer them.

So without further ado, I'm really excited to welcome Dylan Whitman.

For those of you, well, actually, for those of you who don't know me, my name is Mark Shesser. I'm the founder of Coldsmoke Creative we're a Shopify plus development agency. and now I'm really excited to welcome Dylan Whitman, today's guest.

and I'll let Dylan, I'll let you introduce yourself, but I'll just do like a few quick highlights you know, of your background and why everyone who's watching or listening should pay close attention. So. Dylan started his career as a officer in the U S Navy. Thank you for your service. After five to six years, then joined up at BVA where he was the CEO were you the co founder of BVA as well?

Dylan: Yeah. Yep. So yeah, with my partner, Kyle Woodrick. 

Mark: With, with his partner, Kyle and proceeded to lead them. and through 2018, helping clients like movement watches, Kylie cosmetics, mizzen in Maine. Rebecca Minkoff, Red Bull, Fleshlight, and more achieved billions with a B of online revenue and helped lead that team which was through growth, which resulted in a private equity acquisition through the team from zero to 125 plus eight figures of annual revenue.

Which most importantly, 80 percent of that was recurring revenue. and as an agency owner all of the above everything I just mentioned, very cool, very admirable. Since leaving BVA you've gone on to invest in some of the top companies in this, in the e commerce ecosystem, like Gorgias, Grin, Impact Digital, and many others.

And most recently have gone on to found Inveterate. Which is creating a new category of loyalty program software for merchants to empower their most committed customers. So that's a lot. and I'm excited to hear it, you know, sort of in your words, but Dylan, can you just tell us a little bit about yourself, your background, if there's anything I didn't highlight or just share your path in your own words?

Dylan: Yeah, happy to. Thanks. Again, for asking me to do this, always fun to talk with other talented founders who are doing cool stuff. So I appreciate the opportunity. So, yeah, I was in the military and got out of the military and kind of decided, what do I want to get into? and I actually got into the mortgage industry first and did telephone mortgage sales for years.

So literally calling hundreds of people a day and convincing them to give me their social security number over the phone. So I could like run a credit reports and really sell a commodity, which was money at a fixed price. and so that was a really, really great and impactful experience for me long term because it taught me how to sell and I think.

As a founder, one of the most important skills you have to have is being a great salesperson. It's not to say you can't you know, be successful without that, but it's really helpful if you're good at it. and so what happened was I actually started trying to find ways to use the internet to get more mortgage leads.

and I started being successful with like running online ads to land ing page. This is back in like 2007. Yeah. So it started getting successful with that. and I realized that I, I didn't, I was doing well with the mortgages, but I didn't really like it, but I really liked this whole like online piece.

So I actually met this guy at a wedding who was friends with this other guy that owned this nightclub in San Diego at the time called Stingery. and I was like, I need to just pick another business outside of mortgage and see if I can help them. So I got him to introduce me and said, like, let me help you use the internet to get more bottle service bookings for your, like, nightclub.

and so I started doing that and he's like, look, this guy is like a serial entrepreneur. He's gone on to found Suja Juice which he sold for 350 million to Coke, Kopari Beauty, which is like a beauty brand and a few others. So he, he went on to found us. But before all that, he was like. If you can actually do this Like, let's start a business.

I hadn't really thought about like starting an agency. So let's start a business to do this together. and I was like, okay, great. So he kind of brought me in under his wing. That was the first time I ever had a business that raised capital or really understood any of that was working with this guy.

and we ended up starting a business. called Cheap Sally, which was like a promo code website, kind of like RetailMeNot. and we got to a point we were doing pretty well. But then one night we got hit with a Google algorithm update. It was the Penguin update. This is back now, like 2000, and I don't know, 12 or something.

and literally the, the business went from a million a year in revenue to zero overnight, like that was it. So had to wind that down, let go of everybody. and then I was back to square one. Like, all right, what am I going to do now? I had a lead investor in that business. That was a really successful kind of billionaire entrepreneur fashion guy out of New York and Kyle ran his investments at his family office. Kyle was my main point of contact when we were like as the investor. and Kyle said, like, let's start an agency together. and I really wasn't into it. I didn't want to do that. The other business had started as an agency and had moved away from that into the product.

and so I was really against it, but then Bottom line is a client kind of fell into our laps. Media BVA started as a media buying agency. and so the client kind of fell into our laps and they paid us a lot of money and I was like, fuck, I guess we're starting an agency. So we did, and that started as BVA.

My wife at the time worked at Blue Acorn which is now part of Infosys. This is now around like 2013 or so, let's call it. and my wife works at Blue Acorn, and they were doing a lot of Magento builds. We were doing a media buy in at BVA, but we had a customer that was on Shopify. and I was hearing her kind of come home and talk about the challenges, you know, they had, which was like, okay, running a test on Magento would cost like 20, 000.

As a cost to like that, they'd have to pitch that to a customer. Right. and like, it takes a long time and it's an expensive and like, that became the real issue with having this conversion optimization practice. and I was over here on Shopify and I'm like, dude, I can do this stuff in like an hour that it's taken them thousand s of dollars and nothing against them.

Cause they're one of the greatest agencies and became my muse and inspiration for how we built BVA. Was off of Blue Acorn but I just realized that immediately I was like, Shopify is the truth and it's the truth because it reduces the friction and what happened is you had this whole like generation of technologists that came into e commerce and kind of some things we were talking about earlier, they want to like.

They want to make it their art, their technical code art project, right? Like make it the best, coolest, most robust thing. and Shopify is coming in and saying, that's not the thing. The thing is the customer at the end. and like, what we're going to do is help you to do most of the stuff you want to do, but not everything, but it's going to be done at a fraction of the time and cost.

That's really the ultimate beauty of Shopify is the TCO. I think it's funny right now we talk with like you talk with customers on brands now and they get pissed off at like the price of apps or, you know, retainers for agencies. and I'm like, you don't even, you don't realize this, how cheap it is now.

It's actually people like, you know, they're, they've gotten like a little bit jaded by actually how cheap and easy this stuff. Anyways, that was the, so that's how we started BVA. and then I was like, all right, I want to build. This I want to build what Blue Acorn's done with Magento. I want to build that with Shopify because like the other thing Blue Acorn did really well was they Were really big on their channel partnership program and I learned from watching that right?

Nobody had done that in the Shopify ecosystem It was too early. There were some really strong good agencies there, but not maybe not as professionalized and mature in the way that their go to market was working. So I emailed, so I found some people at leadership at Shopify. I think it was Harley was the first person I emailed.

I found his email and I said, I want to start the biggest Shopify agency in the world. Like I want to build this and do a big thing. How do we work together?

The team there said, look, we only actually have one us based employee for you to meet with. and he lives in Charleston, South Carolina. I had just moved to Charleston, like just moved there.

So that ended up being Jamie Sutton. Who was like the first guy on Shopify plus we worked together closely before Shopify plus even existed and really worked to bring that to market as a partner. and you know, the rest is kind of history. After that, we just like kept our heads down, had our model of like what was working and our goal from day one was to build and sell within five years.

That was like the goal we set and we did it. So all right. I rambled a long time there, so. 

Mark: no, no, no. It's so interesting. So how much of the Shopify partner program do we have you to thank for? 

Dylan: I mean, none. I just had the first, I had the first agency Shopify partner program in the ecosystem. 


But like, it wasn't as if we did something that was like. You know really creative or new to the world. I just saw something that was working in an adjacent space that was obviously working and just did the same thing in a space where other people weren't doing it yet. 

Mark: Well, it's good. I mean, it's, you're acting like it's nothing, but it's great pattern recognition.

and I think that's probably something that's been useful in your career as you've now moved in a way. So, you know, you sell BVA, you hit your five year timeline. What came next? Did you just, did you immediately start angel investing? 

Dylan: I did. I, my first investment that I did was like right before we sold.

Which was in Gorgias which is fucking awesome because that one is doing really well. Shout out to that whole team, they've just killed it. and even the people that aren't there now, like Philippe, that's over at NorthBeat now. Those guys just, I knew Gorgias was gonna blow up, like for sure.

But started then, and then, you know, I dabbled in some different things. I was like messing around with a few little direct to consumer stores, had another like little Shopify app, but nothing that I like put myself full time into and Which was actually a mistake. What I should have done was just straight up taking off like a year, like maybe still do the investing but like not even dip my toe in the waters with anything because what happened was I just like wasn't, I wasn't committed enough to some of the little projects I was working on.

They were just like things to fill my time with. But then last year before last now, September of what 2021. Yeah, around that timeframe. Yeah. Like I had like a few different thoughts that hit me at once, which then I was like, Oh, I want to build this new platform and better it. and I want to I want to really fully immerse myself in this and like, this is going to be my next thing that I'm like, really going for.

and then that puts a lot of pressure, right? Because like I feel a lot of pressure to succeed because actually I was talking with Kyle the other day about this and I'm like, there's Like when we were building BVA, if we had failed, no one would have cared or noticed or ever heard about us again.

But like now there's eyeballs on it. So like I have to fucking make it 

Mark: Eyeballs and investors,

Dylan: Eyeballs and investors and investors for sure. Don't get me wrong. Like I never want to let down an investor, but I'm just saying there's just a lot of different pressure. I'm sure it'd be successful. 

Mark: So you know fall of of 2021, you have a bunch of different ideas. I think I'm so curious as to how Inveterate. Became the one that you decided to double down on because you have this unique perspective from your experience at BVA. You know, all the partnerships, you know, the platforms, you know, the tech side and , you know, you have that pattern recognition, knowing what merchants need to do to be successful.

What tools they use to be successful. You know, like the different swim lanes that people are playing in. So how, well, you know, what's the story behind. How Inveterate. Became the one that you decided to run with and what were some of the other Ideas if you recall or if you feel comfortable sharing that you didn't end up pursuing.

Dylan: Yeah, I'm happy to share those I like I have so many ideas every day that like I I wouldn't even know where to start with the ones I didn't pursue Yeah 

I can tell you kind of the things that drove me to like make this the thing and a lot of my investing at that time like the investment in grin Was a similar part of the thesis, which was that the old way of doing things in DSE is dead.

There's like a new epoch of like, we're moving into the next era. and the things that got people where they, they were then weren't going to work anymore, iOS issues, right?

You're not going to just like slap up a website, start running some Facebook ads, and , you know, make a hundred million dollar company.

Like there was a period where you could do that, but that wasn't it. So I knew people needed something more. The second thing was, I just saw like, people can argue about the data, the whatever all day long, but I saw time and time again, over and over that every merchant I worked with the BVA at the largest companies were investing in loyalty programs and literally never did they come to me and say, this is really driving our business.

and I'm really excited about this. I'm not trying to hate on like, this was the thing everybody did. It wasn't like a bad choice. I'm not trying to hate on the other platforms or anything like that, but it just didn't fucking work.

So I thought to myself, wow, here's like a market where there's a whole group of people, a massive percentage of them that are all investing into something because they want it to work for their brand and their continue to pay for things that they aren't like actually finding driving value in their business.

Sounds to me like a market that needs to be kind of disrupted. and we'd had a customer at BVA where we had built this like custom program, this memberships program for them. We had to put together a Yotpo and recharge and like a non elegant way. Like it was innovative. It was cool at the time, but it was just not an elegant solution.

and nonetheless, when we build it, it was really successful for that merchant. They got like 10, 000 members paying 10 a month in 90 days. and so that was really successful. I went to look around on the market and said, is there still like no off the rack solution to do this in a meaningful way?

Right. There's like, there's the equivalence of like a Mailchimp. Right. But I wanted to see like, is there a Klaviyo to do this? and there wasn't. and so, you know, that's when I started, I went on a process to raise money and a couple of weeks later because it was a really good time to raise money.

We had the round done and you know, got building and then launched this past May. 

Mark: Awesome. What does, what does product market fit look like for inveterate? Do you feel like you found it and how did you, once you started building, you had the round close. Like, how did you test and learn into it?

and, if you're not there yet, like what are you doing to continue to refine into it? 

Dylan: Well first I think product market fit is like a very relative term I've got really large brands signing contracts to pay real money for it so in that term then like it is to a degree but You know, obviously we want to scale a lot more and get a lot more customers.

We're still early So I think for me there's definitely been learning and improvements being made but I think with the team I brought together We had, we've already gone through this. We went through it like the gal who's leading up customer success led the account at BVA where we built a custom program.

Right. So we've like, I knew there was a real problem. I knew for a fact it was going to work for merchants. I knew for a fact it was so like there was no question and then it was like how do we build the best user experience around doing this because I already know it works. So we were able to run into it pretty quickly.

The biggest challenge so far has really been that we're the first ones taking this to market in this way. and so, you know, in this ecosystem, people don't like to be first to do things. So we had to really find some innovators to join us in these kind of first six months since we launched. We were willing to like try something that they hadn't seen really validated and proven out with competitors.

and it's worked out really well for them. Like if you talk to the, you know, of the kind of like ICP merchants we're working with, like FreshCleanThreads or Lashify. Or, you know, some of these other brands all doing significant revenues among the largest brands on Shopify, the programs are crushing for them.

Like we knew we would, but but we had to really get those innovators willing to take a risk. and that's been the biggest challenge, who.

Mark: Prior to starting Inveterate. You know, you mentioned that you had that one custom loyalty program that you built at BVA besides that was, is there anyone? Or was there anyone who you modeled the loyalty program after that was doing it?

Maybe they had their own custom solution, or maybe it was your custom solution that you did previously, like who was or is doing loyalty? Well, and what do those programs look like versus, you know, some of the point based loyalty programs? 

Dylan: So I think first of all, there's a lot more than people realize that are already out there.

Like Barnes and Noble has a program with 430, 000 members. I think it is. Restoration hardware has a massive program, 97 percent of their revenue driven by members adore me, which just sold for 400 and something million. Look at the most recent interview with the, with the CMO. He said, most of their business is driven by members and also just, so there's a lot of examples out there that weren't on Shopify because it's a, it was a huge, difficult pain in the ass to build it on Shopify.

Like it's actually much more, people think that it's an easy thing. We had a customer that's a large 40 million GMV Shopify plus merchant that came to us last week and they're already onboarding. They said, we thought we were just going to go use one of the subscription tools and build our own like memberships.

and like, then as they get in there, they start realizing, well, what about this little nuance? What about this little, like, there's a lot of things that you only learn over implementing with large merchants. Even for us, like that's been another focus on these hundred million plus merchants. Because we're seeing those challenges quickly and solving for them at scale with really large customers where the challenges are more pronounced, right?

and they come up a lot quicker. So those other brands I mentioned, I think are doing it really well. The big issue in my opinion, and of course, like, there's going to be people who would have a counter opinion and say, I don't know what I'm talking about. My opinion is this. I don't think points programs drive incremental revenue because.

They don't have the immediacy needed for it. So like if I joined the loyalty program for a denim company, I like arbitrary example, like, okay, if I'm, if I earn five points or 20 points on a purchase and it's going to take me 500 points to earn something, am I really thinking every time? Like, I'm going to go back to that so I can get a couple more points.

Sure. There's going to be people that are already obsessed with the brand . and , and they're going to argue, like they're already going to make a purchase anyways. But I don't even think that's it. I think there is like selection bias there, but it's not really gamified in a way that really drives purchase behavior.

I don't believe. Versus, you can raise your hand as a customer, you can say, let me give you an example of Fresh Clean Threads. 20 a year, you're getting 20 percent off, you're getting free shipping, you're getting a variety of other benefits. If you're, if you really love that brand , A, you're gonna, you're gonna pay that.

You're gonna raise your hand , you're gonna pay that, B, and go in there. But then as you go to purchase in the future, You're going to be less swayed to go purchase with a competitor because you're already getting those benefits that you've invested in, right? It's not, I don't want to shop at this other one because in six months, I'm going to earn enough points for a t shirt.

It's like, no, I'm only shopping here because I paid my 20 bucks. I get 20 percent off. I don't feel like trying out another brand . and that's what we're seeing. and we're seeing that, you know, we have another customer we're seeing that like They're finding that people, once they join the membership program, become twice as valuable as the non member cohort.

Again, some people might say, well, of course they are. Except that they're purchasing now more frequently than they even were and they're purchasing more so that's where I think that's what we're trying to focus on is how we drive incremental contribution margin over that lifetime of that customer and incremental profitability and that's and and by the way delight the customer make them happier The customers spoke like people are stoked to be a part of these membership programs so 

Mark: that was a lot there.

No, I mean, it sounds not dissimilar from, and maybe this is reducing it too much or making a bad analogy, but it's, it's like enabling all of these brands to build their own PRIME-like 

Dylan: memberships. A hundred percent. and that was actually one of the other Genesis was like, so what happened was last summer or that September, I was sitting there thinking, okay, first of all, like.

I want to do something in loyalty. Then I was like, all right, well, what do I think is actually a good loyalty program? Obviously Amazon prime came to mind. I started researching premium loyalty, which is kind of the, the term the industry's coined for paid loyalty programs and started seeing, wow, these are incredibly successful.

Kohl's had one bed, bath and beyond all highly successful programs for them. and I started thinking, wow, this is like really actually working in prime was one of the first was like the first thing I thought of. and then that's what made me think of that customer we had built. That program for then I was like, hmm, is it still hard to do that?

Yes, it is Now all that to say this is like our wedge in for a much bigger product that we're building But we think there's a massive market for this one. 

Mark: Yeah, absolutely What how at in inveterate? How do you or just you personally like how do you define? loyalty because I think that's kind of the like unique insight in the sense that like, yeah, nobody really cares about points, like true loyalty is, is the way that I think I'm hearing you describe it as like something that's actually going to influence purchase behavior

Dylan: That's right. That's 100 percent right. and that's the thing. It's not just rewarding. Points are great for some customers. It's a rewards program. But it's not really driving behavior in my experience. Again, people will say like, Oh, these customers are worth, you know, they're spending more.

Well, obviously, because they were already doing it, they're going to take their reward. But Are you getting those same customers to purchase even more than they were? You know, we have features we have, like we do a store credit as a reward. That store credit expires, but it's immediate credits that go into your account towards your next purchase, not like make 10 more purchases and then it'll turn into something.

Mark: Right. Yeah. There's immediate benefit, immediate, actual, like tangible benefit. 

Dylan: That's right. and then they want to go spend that. I was talking with somebody from one of the largest e commerce sites. They said that the number one performing email they had. Ever across all their flows was expiring store credit,

you know, but you got it. You don't want to just give that to everybody. Then it becomes a huge liability on your books and all that type of stuff, just like points, right? Because now you've got 95 percent of the people, you know, maybe signing up are, aren't redeeming their points in a year in a lot of cases.

So 80 percent you're lucky if, or you're lucky if 20 percent of them do redeem like on most of them, right? So now you got all these points out there on your books that are a liability from an accounting perspective We're not really your core customer But people that just signed up so that they could get a discount in the short term Versus like people who have gone in paid a membership fee love your brand have invested in it This is who you want to focus your rewards on and then give them a reason again to keep coming back to you.

and that's loyalty too. To me, loyalty is when I have an easy choice to try to choose between two compelling products. I'm going to choose this one over here because I have a loyalty to that brand over the other. I'm going to purchase even more than Yeah. 

Mark: and it becomes even less of a decision, like the decision's already made.

That's right. You have the same cost, not to mention also like the, the fierce loyalty to the brand because you've been made, you've been made satisfied and happy throughout that your experience with the 

Dylan: brand . and on top of it, you have a special access, right? and that's other things like special exclusive access to products, like different things like that.

Yeah, I think so. 

Mark: So when when you onboard a brand , what does that process look like going from like they've raised their hand ? They said, well, you, we want to sign up to launching their first membership program. and is, are there several different. Or is it all like, you know, the, the Amazon, the prime type set up like what, what does that look 

Dylan: like?

I mean, well, first and foremost, the process is totally different with brands. So we've had brands that like are live in a week, even a day in one case we've had brands that took us six months to go through like tons of layers of bureaucracy and approvals and all that type of stuff. Right. So you have different personas.

and then I think, you know, what we do is our customer success team will work with the brand and try to kind of think through what benefits work best for that brand . We do a surveying program where we're talking to their customers and seeing like what looks most exciting to you. and then using kind of just data we've seen across other brands of like what's working.

That being said, like, look, we've been around for what, eight, nine months live. So I think we're learning a lot still and learning with our customers that are, that are. Deciding to be innovators and come work with us. But certainly there's some pattern recognition you can see across. 

Mark: and how much is it like them coming and saying, Hey, this is the loyalty program that we want to create.

Can you enable that versus somebody's raising their hand and saying, Hey, I want, we know we need a loyalty program. We don't really know what it should be. 

Dylan: It's both on all of them. Like, I think people have inclinations of things. I think we, everybody's certainly open to feedback rarely as somebody saying, this is exactly what I want.

We're going to have some kind of like conversation about it. and again, like getting customer feedback is really important. But. I think that one of the cool things about this is that when you look at the points based programs, like, literally you could go to 27 different websites and it's all the fucking same thing.

Yeah. Right? Like, like our Facebook posts, like Go follow us on Twitter. It's like so lame, right? Versus what we're trying to do is we have a suite of benefits, experiences, access, pricing, pricing, cashback, all these different benefits. and the brands can start to create a more custom experience around what they think will work best for those customers.

So if you look at Lashify, it's a totally different experience than Fresh Clean Threads. Even though it's the same platform powering it. We really wanted to make something that was super flexible. and we even have an API for, like, custom benefits and , and custom, kind of, event driven, like you know, experiences.

Like, it could be, like, okay, if you went to this particular event somewhere, we're gonna upload a custom list that's gonna unlock exclusive access to this content. Or, you know, whatever it is. But, but we really tried to

Mark: What what other tools are, are there other tools and apps and services that integrate really well with inveterate? and are there some that you wish existed, but don't? 

Dylan: Yeah. So right now we've got, we're integrated with postscript and Klaviyo and somebody else I can't Gorgias I think. Yeah.

Postscript, Klaviyo and Gorgias. I will be adding a ton more integrations like there's things that we want to do for sure in the near term things like on review platforms, it should show you and flag reviews from people who are members versus non members because you know that those are credible customers who are spending a lot there and understand the product.

Things like that I think will be really cool and I think that's something where we really do work with the customers to find the use cases there. Right. Instead of like going, like we knew what we wanted the product itself to be like, but as far as the integrations, we're going to build those as we're being triggered by our customers to do so.

Mark: Yeah. In terms of like the timing of founding this company why? Is loyalty so important in 2023 and beyond? I have some thoughts like around cookie apocalypse and things like that. Like to your point earlier, you can't just throw up a brand , start running Facebook ads and build a hundred million dollar business, like he's loyalty.

The thing that. Is going to separate winners from losers. Like, why is it so important now? 

Dylan: Like in the past 10 years, let's okay. I started working with Shopify in 20, early 2013. So almost 10 years. and first it was really hard to grow brain. and then it got really easy as like these different ad platforms and different things made it easier.

and what happened is that people felt they were building businesses and brands bigger than what they actually were, because you had so many customers. That were just one or two time customers and never purchased again. But that, but the ads or the, the cost to acquire them was so cheap and the competition was so little that those brands thought that that was just going to happen forever, forever, fishing a barrel, a hundred percent.

It was just going to be a continuous cycle. and . The real issue with that is that it made them start believing their own hype on their average products and their average offering to their customers. Customers were saying, sure, if it's this cheap and easy, like I'll take this. It was new and novel, whatever the categories was, it's got a new.

Label on it. That looks cooler than some, you know, outdated brand or whatever, but really it's the same like stuff. and so people started to think I am this like genius, like you saw it over and over. I'm a genius product brand builder. Like really thought they were something bigger than they were. and then what happened is.

It's gone back to, oh shit, all these new easy customers aren't so cheap, but that's not really the thing. Even the thing is that the focus now because of that as a consequence has to be on creating real brand relationships with your customers. Real product differentiation. Your product has to be the truth and your relationship with the customer has to be the truth of whatever your ethos is as a brand .

And you can't get away with the bullshit anymore and so where I go with all that to loyalty is I think that the way that you grow a big brand is by solving a problem for some cohort of unsatisfied customer really actually solving it, not masking it up in some shitty, you know, good packaging that looks pretty, but like everything about it is kind of half assed, right?

Like really delivering for that customer and then obsessing over the relationship with that customer so that you get them to purchase across your catalog, right? That's why, like, I think people focus too much. Like we've got our hero skew. Great. But your hero skew is only going to be your hero skew as long as that, whatever that thing is, is in favor.

Let me give you an example. Cosmetic brands, people, you know, love like getting things or beauty brands. People love to get people on subscription. It's important. It's an important, like I'm a big believer in subscription. It's an important part of the program. But the problem is if you've got a trend driven company, Whether it's fashion, cosmetics, whatever.

and then you've got people who are consistently buying last season's product. That's now what you are to them is last season's product. and so to me, it's, it's demonstrating excellence with that first product. It's getting them to trust you. Then it's selling them another product that you come through for them on for something that they're unsatisfied with.

and now you start to build a real brand relationship and then making them feel so special throughout that that they don't want to go somewhere else and try something new because everything you deliver works for them. Like you said, and they're getting the best relationship with you. So that's. 

Mark: Yeah, you have, I mean, you have to continue to deliver value, right?

Like you have to do what you say you're going to do and make them feel good doing it. 

Dylan: and by the way, it's not just good enough to deliver value on a product you've already done. You must continually innovate on that customer's behalf and really understand . Great. We've solved this problem for you.

What's your next problem? That I can solve for you and then genuinely come through on it. and that's where I think not enough brands think about that. They don't think about, they don't focus on customer penetration of catalog. Like how, what percent of my products am I really putting out there? That's solving something big for these customers.

and I think it's really important. 

Mark: Yeah, well, and to that end, I'm curious what you think, like for an e commerce business, what should their like top three or five KPIs really be? Because I, I think there are a lot of vanity metrics that people probably get too hung up on. What do you think the top ones should be and how can loyalty Like a well run loyalty program affect those 

Dylan: positively So I may even get some hate for this comment, but probably not perfect.

Especially, I think being data driven is really important. I invested in our data company gassity, right? I think that's an important part of the sophisticated e commerce merchants set of tools here comes a Yes, here's the but. But the problem is that many of these operators are too smart for their own good, and they think, yes, you follow the instruments, But they think that the instruments are going to somehow come up with the path of where to go.

and when I think about the most successful companies that I've seen on Shopify, most of them did not get there because they were really good at looking at data and KPIs. They were, they oftentimes, in the most successful cases, got there despite themselves. Because they came up with a problem to solve for customers in a way that nobody had.

and took some innovative approach to get in front of those customers, whether it be Facebook ads or other crazy different methods, there's no single path. I've also learned that like, there's no single path to being successful, right? I've seen like somebody be super successful, one thing over here and not over here doing the same thing or vice versa, like somebody's doing everything wrong and all of a sudden they're successful.

and a lot of times these most successful brands got there despite themselves. So my first thing is like qualitatively. Is your product objectively really solving a problem for a customer in a way no one else is, and are you consistently delivering that in a truthful way? Like that's the number one thing.

If you have that, if you truly have something to market that everybody is just going to be clamoring for, none of the other shit's going to matter. Best example of that is Kylie Jenner, right? Like they weren't like, they had a five person team when we worked with them. None of them, by the way, full time on the website.

Mark: and how big were they like dollar wise or. 

Dylan: I can't say the exact dollar, but I can tell you, I've never seen anything like it. Never seen anything like it. When they did a product drop, It was over like you couldn't even buy the product if you wanted to. I mean, we're talking like millions of people lining up to buy product on every drop and sure.

That's an extreme case. They have extreme fame or whatever, but she was bringing something. In a way that other people weren't bringing it and doing it. and serving an unsatisfied customer. They weren't getting what they wanted from other people. So they lined up to get it from her. and there's so many cases of that.

So anyways, that's the thing. The other thing I think though, is. Contribution margin, which is like basically at the end of the day, what are you actually making on a customer, both on that order and and in the overall lifetime value, like lifetime value of a customer doesn't mean anything. What are you actually making on that customer?

Over time, right? Put it this way. I'd much rather have a customer who I discount 20, 30 percent every single time, but is buying so frequently because of that, that they're greater or their overall lifetime value contribution margin is greater than that's what you care about. So it's optimizing that kind of pricing, purchase frequency, all of that to get the most.

Another example is like using tools like rebuy, right? That are gonna, people are like, oh, I don't want to hit my margin by doing two add ons at 30 percent off. Right? So. Yeah, except for like now you've made an incremental whatever amount more per dollar. and by the way, even speaking of that first time order contribution margin is something not enough people look at because that's what you care about at the end of the day is how can I get somebody in the door?

Let me get as many of my products on their hand s on that first purchase as possible. So that not only am I making more contribution margin on the first time purchase, allowing me to increase the CAC at which I can acquire a customer and reduce the payback period, reduce the payback period, or hopefully get a net like positive payback period.

Or on top of that, as long as you're not putting out shitty products and they're actually really good, every product you get in that cart, that first time is a chance for them to find something they love. and so you can do that while also benefiting your payback period, maybe making it net positive the first time.

That's what I would be obsessing over as a merchant right now. 

Mark: And do you think there are specific metrics that are being overlooked in favor of some of those more like column vanity metrics or something else? 

Dylan: I think AOV. Like AOV is good, but what you're really trying to get to with AOV is that's one lever of your contribution margin.

So like, cool. My AOV is up. Well, maybe your AOV, maybe if you did it with a different strategy, you could have more profit on the first order. Maybe you're not optimizing toward the right products or whatever, you know what I mean? Yeah, there's a lot of different levers 

Mark: I could I could ask you questions all day but you've been very, very, very generous with your time.

I'm just going to close it up with one final question, which is, if you were to build a course on how to build an ecommerce brand , what would like the main chapters or topics be?

Dylan: Finding a product people love.

Mark: That's it and the rest of it,

Dylan: That's it. Yeah. and I'll say that because we have this like weird psychosis in this industry where everybody wants to think there's a thing like, well, my conversion rate optimization service made your business profitable. My email campaign, my SMS came.

None of that matters. You've got like a maker who's making a product a curator and then the consumer that's buying it and every step in between We're all just arbitraging xomplexity we're like we're trying to solve this problem but none of that is the thing and by the way when you do find the thing that's that is is making you think that the arbitrage the two cheap facebook ads the whatever
The big problem there is that when that goes away you're done 

Mark: Right that'll end at some point.

Dylan:  That's right. So spend the energy Really, truly solving problems for your customers. Yes, use the smart tools, the apps, the platforms that are going to help reduce that friction for that customer, help you find new customers. I'm not saying don't do those things. I'm just saying none of them matter outside of actually having the best product.

Best product is a relative term. Doesn't mean always the highest quality. It could be people want a pretty good product for a lot cheaper, right?

There's an unmet consumer need out there, and that's the truth and if you find that, everything else falls in place. 

Mark: Great advice, words to live by, find the truth.

Well, thanks so much Dylan for, for coming on and sharing the truth from your end. A lot of really, really valuable insights there. and thanks everybody for tuning in. Where where can folks find you or learn a little bit more about Inveterate. If they're curious about loyalty?


They can also follow me on LinkedIn or Twitter and I'm happy to connect with anybody

Mark: Awesome. Great.  We'll drop, we'll drop some links in here as well. Thanks so much, Dylan. Have a great rest of your day and talk soon. 

Dylan: Yep. Thanks for having me.


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