The $0 CAC Flywheel

Last week we had Alonzo Nieves on the podcast, and he got talking about something that really resonates with me — and should also resonate with all operators today.

It’s UGC. Not influencer-driven, advertorial style UGC. But real, authentic UGC from real customers and real fans of your brand.

We all know what it’s like out there. Sustainable growth has never been more important. And an acquisition strategy built around UGC fits today’s landscape perfectly.

While your competitors are throwing money into the fire, you could be sitting back and letting your customers market your products for you.

Sounds nice. But of course, it’s not that easy. If it was, every brand would be doing it.

But that’s where your edge comes from. That’s why brands who are able to extract authentic UGC from their customers have such a big competitive advantage.

Let’s dive deeper.

Why UGC and WoM are the ultimate marketing unlocks

UGC (and we’re including Word of Mouth — WoM — in this, because they’re essentially the same thing) is one of the most powerful channels/assets there is.

Here’s why:

• Low cost, high upside. Organic WoM is $0 CAC with full-margin returns. Even when incentivized, UGC tends to be cheap and can scale reach quickly.

• People trust people. 8 in 10 consumers say UGC plays a significant part in their shopping journey. In a world of polished ads and declining trust in brands, real voices cut through.

• It drives both acquisition and conversions. Good UGC is content marketing and CRO in one. It gets your product in front of new eyes and helps close the sale when they land on your site.

• It's a feedback loop. The more people talk about your brand, the more they identify with it. Posting reinforces loyalty and can increase customer LTV.

• It's future-proof. As AI search and product recommendations take off, the brands being mentioned by real people are more likely to surface. Word of mouth will be visibility fuel.

I want you to remember the last point in particular, because this is going to become more and more important as AI shopping becomes mainstream.

I posted about this recently (and last week’s newsletter centered on the topic of AI commerce — I recommend checking it out if you care about your brand’s organic visibility).

Soon, we’re all going to get our product recommendations from AI. And how does AI decide which products to recommend?

They scour the internet to find which products are generating the most buzz.

More people posting about your brand = more surface area for AI = more visibility in what will soon be the most important acquisition channel.

The catch with UGC

There is, of course, a catch (multiple catches, actually).

It’s not like paid ads where you just funnel money into the channel and scale as much as you want. It’s not like organic search, or email, where you basically have full control over the channel.

It’s not as easy as just “turning on” UGC and watching the recommendations flood social media.

Here are a few of the biggest blockers to get past.

The ego barrier

You can ask and incentivize your customers to post about your product all you want, but getting people to pump up your brand is not easy.

Alonzo talked about this on the podcast. He had a great term for it — the “ego barrier”.

The last thing any of us want, especially on our social media feeds, is to be seen as inauthentic.

That’s why you don’t get regular people sharing a referral link or coupon code on their story.

Of course, everyone has a price. And I’m sure if you offered customers a thousand dollars to post a link, most would do it in seconds.

But that makes the post much less genuine, less effective… and on top of that, now it’s not cost-effective anymore.

The bottom line: getting people to post real, genuine UGC is hard. It’s not a push-button channel.

Influencer fatigue is real

The moment you start paying for people to post UGC, it starts to become less effective.

This is why I want to make the distinction between UGC and influencer marketing.

Influencer marketing can be effective, sure. It has its place. But where influencer shoutouts once felt like organic recommendations, they now feel like display ads.

Again, this has its place. It drives visibility in front of engaged audiences. But we’re starting to block out product recommendations from big influencers.

Example: Arnold Schwarzenegger has a newsletter. It’s a good read — but the ads in the middle (often promoting brands like HexClad, David Protein, Momentous) kinda stand out. They’re written like personal recommendations, but they don’t feel that way.

We’re just too conditioned to influencer marketing now.

Not that there isn’t value in these placements. But again, you’ve got to start comparing big influencer placements to Google ads, rather than organic UGC.

It’s hard to measure

Authentic UGC and word of mouth referrals are a black box.

You can track it with referral links or unique promo codes… but as we’ve established, this kills its effectiveness.

Trying to quantify everything strips away the authenticity that made it powerful in the first place.

And true word of mouth — like someone telling their friend about your brand at dinner — is barely trackable at all.

You can track it to some extent with post-purchase surveys (asking where the customer found out about you), but this is not super reliable, and it’s almost impossible to systematize and grow UGC as an acquisition channel this way.

Scalable UGC growth

These difficulties are why most brands fall into one of two categories:

• Over-engineered UGC campaigns (hashtags, referral links) which are expensive, ineffective, or both.

• “Spray and pray” campaigns which are not intentional and impossible to quantify.

So how can you start putting together a reliable, and scalable growth strategy centered around UGC?

I don’t have all the answers. Alonzo, and his company Flywheel, believe they’re on their way though.

They’re doing some interesting things to overcome the biggest barriers in the way of scaling UGC.

• Building campaigns that connect with your real customers (not mass influencers) and incentivize them to post UGC.

• Incentivizing these people with things they actually care about (not just the same old discounts/points — early access to products or content, donations to causes your customers care about, loyalty boosts or status unlocks).

• Building tech to unravel the black box of UGC and WoM tracking.

The last one is especially interesting. A reliable way to track WoM referrals, without clunky codes or links or UTM tags, could change everything.

I think we’re still pretty early in terms of what’s possible with systematized UGC. It’s still quite raw, and there’s a degree of “spray and pray” to it, which is tough to get around.

But I also think this is an area that’s going to grow in a major way.

You’ll want to get ahead by putting more energy, right now, into cultivating authentic UGC.

Here are some things you can start doing now:

• It starts with the ask. If you’re not already, encourage your customers to post about your brand.

• Reach out to your customers at the right moment (delivery, unboxing, satisfaction survey). Send the ask when your brand is already top of their mind.

• Showcase great UGC in your emails, ads, product pages. Create a loop where good content gets noticed, and make it feel like the norm to post about your brand online.

• If you want to incentivize customers to post more, do so with incentives aligned with the customer experience — not just standard loyalty points.

• Focus on nurturing the kind of customers who post UGC without being asked. Deliver a great customer experience, launch communities and mobile apps to further grow these customer segments.

My final takeaway is not to lump UGC together with influencer marketing.

Treat these as two distinct plays. UGC has to be authentic. Real customers posting real experiences.

Influencer marketing (including whitelisting Meta ads) is a different bucket altogether. Don’t try and pass it off as being the same thing (your customers know the difference).

Getting this real, genuine UGC out in the world is not easy. But that’s just why you’ll get ahead.

Want to check out the full discussion we had with Alonzo? It’s a good one — I definitely recommend finding half an hour in your day to give it a listen.

Watch it on YouTube below, or head to Spotify if that’s your preferred pod platform.

Quick Hits

There’s a lot of content out there. Here’s what you need to pay attention to.

Shopify Usage in Decline

This post caused a stir in the DTC community this week — a dip in Shopify’s usage rate stats for the first time in a long time.

It’s not just the fact that the number of live Shopify sites is in decline. The comments contains some interesting discussion on what it means for the DTC ecosystem.

Because the thing is, it’s not just Shopify. BigCommerce, WooCommerce, Magento, Squarespace, SFCC all are showing similar trends.

Experts have been saying for a while that the lower/middle end of ecommerce is starting to drop out. We’re seeing that play out now.

My prediction? It’s not going to be a long-term trend. It’s definitely a tough time for the market now, but people aren’t going to stop buying things online. Once market conditions start to normalize, I think you’re going to see ecom trending up again.

Read more →

Reminder for Brands Using SMS

A pretty significant change is coming with iOS 26 and SMS messaging. In short, messages to iPhone users from unknown senders are going to be automatically filtered into a separate inbox.

This is the SMS equivalent of the “promotions” folder in Gmail. Not quite as bad as the spam folder — but a fairly big hit for a channel that relies on high open rates and CVR to stay viable.

SMS isn’t dying. But you need to be more proactive in priming customers to receive your SMSes (and you should also consider exploring other channels, like push notifications to make up the slack).

Read more →

Meta’s War on Health & Wellness

This isn’t exactly new — but the DTC times did a good writeup that I wanted to share.

The key is not so much the dispute between Hims & pharma giant Novo, but Meta’s continued crackdown on health & wellness brands.

Tracking behavior that implies a customer has a specific medical condition is now leading to major account restrictions… and it affects not just pharmaceutical brands, but also supplements and other wellness-adjacent brands.

If you could get caught up in this in any way, it’s vital you understand what’s going on, and avoid anything that could end up getting your account throttled.

Read more →

MUD/WTR AI Ad

The capabilities of AI for creative work continues to astound.

Shane Heath, MUD/WTR’s CEO, created this one minute ad, almost entirely with AI, in just a couple of hours.

It’s not perfect. But it’s getting close. And for the investment, it’s really incredible.

Read more →

Thoughts on Over-Optimization

A lot of brand owners are drowning in tests and optimizations that feel productive, but in reality barely move the needle.

Preston Rutherford and Taylor Holiday argue for pulling back — focusing less on minor optimizations and more on bigger changes that actually drive growth.

(Eli Weiss wrote about a similar thing this week — looking at Gymshark’s simple playbook, and breaking down what’s worth testing and what not to worry about).

Read more →

Creating Better Brand Content

Want to start putting out better content?

Whether it’s for your brand, or yourself, the playbook really isn’t that complicated. Human-sounding content wins — and it’s going to keep winning, as more AI fluff floods the net.

Read more →

Dr Squatch Acquired

DTC giant Dr Squatch was recently acquired by CPG giant Unilever.

A lot’s been said about the state of the ecom market, but this shows there’s still demand out there for well-run brands with a unique image and voice.

This is around the same time Dude Wipes, another Gen-Z focused, virally successful brand, secured a new investment to drive growth.

Takeaway? Brand matters.

Read more →

How Dude Wipes Grew to 9 Figures

On that topic, Sean Riley (Dude Wipes’ CEO) joined the Chew on This podcast to talk about their growth arc to becoming a $200M brand. From viral social hacks, to “failed” expansion, to branding that breaks the rules, it’s a solid read/listen for any operators out there.

Read more →

Whitepaper: Agentic Commerce

We talked about this last week — and this is a great resource to continue the conversation.

I call it AI commerce. Grid Dynamics calls it Agentic commerce. But it’s all the same — a new reality where AI does the buying for you.

Our last newsletter looked at it from a birds-eye view, but this whitepaper takes a deeper look, including the technical details behind autonomous agents.

If you want to optimize your brand for AI-native shopping, this is a great resource to start with.

Read more →

Ecommerce App Benchmark Report

If you haven’t seen it already, I’d advise you to get our bumper 56-page report on mobile apps for ecommerce.

It’s got real revenue data, conversion benchmarks, performance insights, and market research that shows the value an app can have for your brand.

I don’t think there’s been a better time to look at apps, with the market more volatile than ever, and dependable repeat revenue crucial for brands to stay afloat.

Get it below (it’s free):

Read more →

That’s all for now.

I’ll be back in touch next week, with more on how successful brands are doing CX and retention right.

Remember to check out our podcast on Spotify and YouTube. We’ve got some great guests coming up, so go ahead and sub to be the first to get the latest episodes.

If there’s any topic you’d like to see us dive into, for either the newsletter or the podcast, just shoot me a message here.

We’ve also created a Subreddit, dedicated to deeper discussion on the same kind of topics we explore here — CX, retention and sustainable growth. Join up and join the discussion to link up with others on the same path as yours.

Until next time,

Pietro and The Retention Edge Team

PS: want to boost retention, revenue and profitability? If so, launching your own app could be the best move you make this year.

See how: go to our website to get a preview of your app for free, or shoot me a DM on LinkedIn to talk about it.