How Web3 brands can Scale Growth using Amazon-esque Flywheel Retention Model
A Decentralised Flywheel Model can generate massive growth for Web3 Brands.
Have you ever wondered why brands fuss about having a high retention rate or why brands invest so much into retention marketing?
Well, the answer is simple. It’s Customer Life Time Value (CLTV).
That’s because CLTV encapsulates the total revenue a customer is expected to generate during their relationship with the brand.
So a higher retention rate means customers remain loyal to your brand for longer, leading to more revenue over time.
Since the cost of selling to an existing customer is significantly less than the cost of acquiring a new one, a high customer retention rate directly contributes to increased profitability and growth.
And so, brands go crazy when their retention rates drop.
But asides from CLTV, there are two more reasons why brands invest millions into retention strategies, funnels and channels.
These reasons are Word of Mouth Marketing and Data-Driven Insights and Personalization. Let me explain why this is so …
Customers that stay loyal over extended periods are more likely to recommend the brand to others, extending the brand’s reach organically.
This can generate a positive feedback loop, simultaneously increasing customer acquisition and higher retention rates. The Outcome of this is a Viral Loop (Virality).
But it doesn’t stop there with these long-term customers …
They also provide a wealth of data, helping brands comprehensively understand customer behaviour and preferences.
These insights can shape more effective marketing strategies and facilitate personalized experiences, enhancing customer satisfaction and loyalty.
Not sure you noticed this, but these two reasons I mentioned are a direct result of a high Customer Life Time Value: A result of a high retention rate.
Now you see why top brands, even brands like Amazon, pay huge attention to the retention rates of their customers.
Literally, Amazon lives and breathes on high retention rates, and they have successfully mastered how to get retention rates high and sustained.
We will uncover how they did it, the strategy, Mindset and processes they implemented in this article.
Most importantly, these are important for web3 brands looking to increase Growth.
Amazon’s Retention Strategy Using their Flywheel Retention Model
Imagine this, you fill up a bucket with water so you can take it back door, but as soon as you take the first five steps, the bucket is empty.
You go back and fill it up, then take the next five steps, and it empties again, only to notice that there’s a hole beneath the bucket.
That’s how it is when acquisition strategies and channels drive traffic into your product or community, but as soon as they get to your product, they leave.
You’d notice that, at best, you won’t take more than five steps while you keep filling the bucket up.
It’s the same thing with a brand with a retention problem. They can’t grow.
That’s why retention strategies and channels are important for brands, not just Web3 brands.
However, Amazon has figured this out and has enjoyed so much growth; it’ll be difficult to deny that.
Their retention marketing strategy has evolved, but it has always focused on keeping customers engaged and returning to the platform for future purchases.
They did this by implementing a Flywheel system that continuously Spins, causing a viral loop and massive growth for the brand.
Amazon’s Flywheel Marketing Model is a strategy that revolves around a virtuous cycle of growth driven by customer experience, a wide selection and lower cost.
Jim Collins originally introduced the vicious cycle concept in his book “Good to Great”. One of the best Growth Marketing books I’ve read
And Amazon applied the concept to create a self-sustaining growth model.
What does this flywheel entail, how does it work, and how can Web3 brands leverage this to create self-sustaining growth?
It is built on these three points:
Customer Experience:
Amazon strives to provide an exceptional customer experience regarding service, selection, and convenience.
This includes aspects such as easy ordering, quick delivery, a wide range of products, and reliable customer service.
Lower Prices:
A great customer experience leads to more site traffic.
Higher traffic leads to more sales and attracts third-party sellers to Amazon’s marketplace.
As sales volume increases, Amazon can afford to cut prices, thanks to economies of scale.
And this leads to a better customer experience and causes higher traffic, leading to more sales and attracting more third-party sellers to Amazon’s marketplace.
Increased Traffic:
Lower prices and a broad selection attract more customers, increasing site traffic. This increased traffic and sales volume attracts even more third-party sellers.
This cycle spins, creating a self-reinforcing loop that fuels growth and customer retention.
On and On the wheel flies. Now, how does this model help Amazon increase retention?
Better Customer Experience
Amazon’s exceptional customer experience creates satisfied customers more likely to return.
Features like one-click ordering, a vast selection, personalized recommendations, and quick and reliable delivery all contribute to a superior customer experience, which promotes customer loyalty.
Cost-effectiveness
As Amazon manages to cut costs and provide lower prices through its flywheel model, customers find it cost-effective to continue shopping from Amazon instead of switching to other retailers.
Lower prices and a superior customer experience make for a compelling reason for customers to stay with Amazon.
Selection and Convenience
The vast selection of products and the convenience of finding almost everything in one place also increase customer retention.
The more third-party sellers Amazon attracts, the wider the selection.
This breadth and depth of selection, combined with convenience, keep customers returning.
Personalization
Amazon’s flywheel model also includes gathering and utilizing customer data to enhance personalization.
By recommending products based on previous purchases and browsing history, Amazon makes the shopping experience more relevant and engaging for each customer, strengthening customer loyalty and retention.
The Amazon Flywheel Marketing Model creates a self-sustaining cycle of growth. One that supports customer retention by constantly improving customer experience.
And Web3 Brands can create or adopt this strategy to increase retention by improving customer (Community member or Holder) experience.
How Web3 brands can Increase Growth Using Flywheel Retention Models
Like Amazon, Web3 brands need to take that bucket with holes underneath and then cover the holes using retention loops.
When we do that, we can fetch water, take more than 5 steps and get to where we need the water without any leaks.
There's a dire need to get the water into the bucket. But it’s also important to ensure the water stays in the bucket.
Web3 is often associated with blockchain and decentralization, fundamentally changing how brands interact with customers.
Web3 brands can adapt the Flywheel model to build and sustain growth by focusing on community and improving token holder experiences. Here’s how:
Step 1: Improve Token Holder Experience
Just like Amazon focuses on customer experience, Web3 brands should put community members and token holder experience at the centre of their plans.
This can be achieved by ensuring secure transactions and transparent processes and offering valuable, utility-rich tokens, custom perks, exclusive access to valuable items and experiences, etc.
The smoother the experience and the greater the perceived token value, the more holders you’re likely to attract.
Step 2: Broaden the Ecosystem & Develop Community Engagement
Leveraging network effects is critical for Web3 brands. Just as Amazon broadened its selection by bringing more third-party sellers, Web3 brands should strive to broaden their ecosystems.
This could mean attracting more developers, users and partners to create a richer ecosystem of services, solutions and interactions.
Simultaneously, Web3 brands should invest in community engagement.
This can be done through regular communication, community voting rights, governance tokens, or token rewards for participation.
A loyal and engaged community can help drive organic growth through word-of-mouth and provide valuable insights for development.
Step 3: Increase Value Proposition through Token Economics
Lower prices attract Amazon’s customers. In a similar vein, attractive tokenomics can draw more token holders.
This could mean devising strategies such as staking, liquidity mining, burn mechanisms, and stacking the attached value to products could increase token scarcity and, potentially, its value.
The greater the financial incentive, the more appealing the token becomes.
Step 4: Drive Community Growth
More token holders and a vibrant ecosystem increase the overall value of the platform, attracting more users and token holders, just like increased traffic invites more sellers on Amazon.
Fostering an active, thriving community drives the flywheel’s momentum, creating a virtuous cycle of growth and retention.
Retention Channels to Implement the Flywheel Retention Model and Scale Growth for Web3 Brands
Looking at how important the flywheel model can be for web3 brands, the potential it has to help web3 brands sustainably grow and increase viral loops.
One question comes to mind, How can we exactly leverage this solution?
The secret lies in the structure and retention channels, as I have explained in the previous subtitle.
With both at play, this could be achievable, scalable and replicable for many web3 brands.
Let's see how retention channels help Web3 brands.
Gamification:
It’s important to introduce gamification elements that incentivize community participation.
Elements like tokens or valuable rewards for content creation, community service, or referring new members.
DAOs:
Implement decentralized autonomous organizations (DAOs) to give token holders a sense of ownership and control.
This encourages community participation in decision-making processes, promoting a more active and engaged community.
Personalization:
Use data analytics to offer personalized experiences or opportunities to token holders based on their interests, behaviours, and previous interactions.
Educational Content:
Offer educational content to your community about your platform, the value proposition of your tokens, and the benefits of participating in the ecosystem.
Regular Communication:
Engage with your community regularly through various channels like Discord, Twitter, or Telegram.
Regular updates, AMAs (Ask Me Anything sessions), and direct responses to community inquiries can significantly enhance community engagement and retention.
The key to implementing the flywheel model for a Web3 brand lies in understanding the dynamics of your specific ecosystem and the needs of your token holders.
When you understand these specifics, you build a hub that fosters retention, allowing members to co-create with the brand based on their preferences.
The model should be continually adjusted and refined based on community feedback and changing market dynamics.
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