The Product Probe: Klaviyo

This was written in 2020.

Are you one of the people that thinks email marketing doesn’t work?

If you’re in e-commerce, you would’ve heard of Klaviyo. If you’re not, chances are you haven’t. Klaviyo is one of the most powerful email marketing (and more) tools in the space, and has attracted a loyal, and significant, following. I’ll dive into it below, but a couple of terms for you to know if you haven’t heard them before:

• Owned marketing In e-commerce, and owned marketing list is one that you’ve acquired as a business. For example, you’ve got a pop-up on your website, a person goes onto your site and enters their email address. You now own that email address, until they (hopefully never) unsubscribe.

Klaviyo’s mission and the business

Their mission is “to help businesses grow by owning their brand and their relationships with their customers. Every business we work with has dreams — our job is to build the technology and experiences to achieve them.” You can think of them as a leading customer data and marketing automation platform.

There are email marketing platforms-galore out there. Having done a project for a client on researching alternatives to Klaviyo for cold-emailing, there were actually too many to find. My head nearly exploded trying to differentiate between them as well. Klaviyo’s success has really come from an inexorable focus on the e-commerce market. In fact, they didn’t even start as an email play, it was a focus on how to capture and use all the e-comm data that was going to businesses’ sites.

Through a whole bunch of ‘if this, then that’ type functionality, you can be surprisingly creepy in personalising your emails. And being creepy can pay off handsomely. While there are a lot of platforms trying to catch up, and offering many of the same features, Klaviyo has a loyal customer base who are happy to pay overs for the product.

What problems does Klaviyo solve?

Klaviyo helps any e-commerce brand improve their conversion rate, by capturing data from the customer in an unobtrusive fashion, and then enabling the brand to message these customers in a clever, and simple way.

Before Klaviyo, you may not have known how many times someone was coming to your site, or what happened to that person that purchased 4 times in 5 days, and then never came back. And this is what Klaviyo set out to fix.

Key insight

The interesting thing is, they aren’t necessarily an email marketing tool. Capturing and using the database of customers’ behaviour is the heart of the business. But given the email marketing process is so antiquated, it’s become an enormous problem to solve within the business.

This focus on the e-commerce segment is what has built its business. ‘If you see a brand sending through Mailchimp or Constant Contact, they’re not a real brand’ is a mantra you’d hear often.

Why now?

This is an interesting question, because there doesn’t appear to be any particular why this technology became apparent at this time. Actually, to me, I think we have seen technology recently that will impact the next e-commerce data play, and I’m not convinced it will be Klaviyo.

A little history lesson first: Email has developed slowly as a technology. It started as text-only pre 2001, basically a replacement for the phone book, or writing a letter. Then people realised with HTML you could design nice emails, and all the providers went hard at being able to design the best email. But running in parallel with this, was a plethora of new email services like Gmail, and they were focused on removing spam from inboxes. So while a lot of businesses were sending incredibly delightful emails to look at, no one was seeing them because they landed in the spam.

Klaviyo’s focus on the customer data allowed them to get a leg-up on this front. Once the market came around to the fact that people seeing the emails was more important than it looking oil-painting like, Klaviyo had its position. And an important fact to note is that building out the ability to design nice emails, is much, much easier than trying to build out the deliverability features necessary.

The typical users, and use cases

So I hope it’s pretty obvious by now that e-commerce clients are the A-grade number one client here. And with an explosion in theses small businesses launching, what an area to play in. E-comm was valued at $9T in 2019, and is tipped to grow at nearly 15% a year over the next 10 years. That’s what we call, a monstrous market. But in this market, Klaviyo really satisfies a number of use cases. With conversion rates higher than any paid media channel, and costing a pittance on the dollar of these channels, every single e-commerce store should set up email marketing. But here are the use cases at the lowest end, and highest end of the spectrum:

1. A local store that’s started designing their own t-shirts, and set up a Shopify store in the past week. They want to up their sales, and more importantly, repeat sales.
2. A billion dollar brand that sells worldwide and wants a system to understand and target the most likely customers to purchase.

Market and trends

Although they focus on the data side of brands’ customers, and the product does SMS marketing quite well, I’ll look at email marketing as the core market. While I hear a lot of you mumbling to yourself, ‘email marketing doesn’t work,’ let me tell you flat out, it does. And if you’re thinking in terms of the Lindy Effect – which says that the longer something has been around, the more likely it is to stay around – it won’t be going anywhere soon.

Remember, there are 4 billion email users, and the dopamine effect of social networks, that still works with email too. It’s actually been estimated that for every $1 spent on email marketing, $42 comes in return. A 4200% return…think of it that way, and if you’re not doing it already, stop reading now and set up a Klaviyo account.

The global email marketing market was valued at $7.5B worldwide in 2020, and is projected to more than double by 2027. That’s significant.

Value creation for society

Klaviyo are amplifying the returns that any business, from one-person shop to huge, can earn, and you’d say they are creating value there. They allow businesses to understand their customers more, build better relationships and personalise any sales message to them. Some might see this tactic as underhanded, preying on a customer at their weakest point. But as a previous e-commerce owner, I think this communication allows you to build a better community, know your customer better and in turn, build better products for them.

Boosting the ability for people to start their own side venture, or scale up a small business is a huge positive for society in my opinion.

Value capture

This value is well and truly captured by their revenue model (which is relatively expensive compared to competitors, incredibly cheap when you look at the potential ROI). You can even get started on the free plan if you’re a brand new business, and that will satisfy everything you need. The price grows though, as your contact list grows – which makes sense for everyone.

The bigger your contact list -> the more customers you can monetise -> the more you pay. As long as point 2 grows at more than point 3 (which it really, really should if you do it even semi-well), you’re onto a winner – and so are Klaviyo.

What would I do to improve it?

Well after all my praise for the product, there are so many things I’d like to do to the product. Some are small and sound superficial, but I think the next turn in email marketing software is about to hit us. All email marketing tools take some time to pick up and learn, and a majority of e-commerce owners I know outsource this. The trends with products becoming easier to pick up and use (think Notion), and the use of AI copywriting in various marketing tools (look at copy.ai), I think email marketing platforms can now be built for the e-commerce owner who wants control of this function, and not wasting their entire day.

• The analytics side of the platform is incredibly unintuitive. While all the necessary data is there, somewhere, it takes hundreds of swings and misses before you actually have the right report. Please put together the 10 most important reports based on usage by your customers, and use that as a starting point.
• The designer is buggy and really not intuitive. I know I explained above how not prioritising this was a good call 5 years ago, but I think it needs to be fixed now.
• Even worse, the workflow for setting up flows, automations and campaigns is diabolical. The amount of clicks you have to go through to design an email, set that template up in a flow and then make it live is incredibly frustrating.
• The A/B split testing of pop-ups needs to be more intuitive.
• (Also, why does every image start with a border of 9px off the left and right side??)

The amount of clicks between various steps is infuriating and makes it very difficult to get in flow while working on these. With the new technology over the past 5 years, I’d recommend Klaviyo change it up, before someone else does it.