Maximising the Lifetime Value of a Customer

welcome to the ecommerce podcast with matt edmondson a show that brings you regular interviews tips and tools for
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hi and welcome to the ecommerce podcast with me your host matt edmondson all of this week's notes and links can
be found at ecommercepodcast.net forward slash and you really are going to want them
this week as in today's show you are going to learn how to increase the lifetime value of your customers
most people focus on getting new customers but if you can maximize the value of each customer you'll be able to
grow your business a heck of a lot faster so stay tuned and we'll show you how it's done
hey there are you a business owner here at oregon digital we know firsthand that running an ecommerce business can be
really hard work as the online space gets more competitive it is becoming even more
challenging to stay ahead of the curve we totally get it so we want to help you succeed by offering a wide range of
services from fulfillment marketing customer service and even coaching and consulting just so that you can do what
matters most save yourself the time and the money and let us handle the day-to-day tasks this way you can run
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thanks for joining us on the ecommerce podcast it's great that you're here now whether you are just starting out or if like me you have been around for a while
uh our goal on this show is simple it's to help you grow your e-commerce and digital business and to do that
every week we bring you great show sponsors who are going to help you but we also bring you amazing guests experts
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us grow and adapt and learn online it's kind of like the coffee table conversations and so
now if you listen to last week's show you'll may remember
that i said we would have john horn talking to us this week about facebook ads versus google ads and we are still
going to do that interview but my interview with john we've decided to move back until next week and the reason
we've done that is because recently i recorded today's interview with valentin who happens to live
in romania near the ukrainian border and so it made sense to play this interview
sooner rather than later given the atrocities that are happening currently in the ukraine
and valentin gives us some real and practical insight into how we can help
and how you know maybe some of the things that we can do and and we talk about that
uh before we we then jump into this whole conversation about customer lifetime value so real helpful stuff
hence the reason we wanted to play it sooner rather than later so let me tell you about this week's guest he is such
a great guy such a nice guy top bloke as we would say in the uk i really enjoyed actually this interview
with valentin valentin radu is the founder and ceo of omni convert a growth enabled a growth
enabler should i say for mid-size dc e-commerce and retail companies that
are looking to increase customer lifetime value and decrease customer
acquisition costs interestingly enough we will be talking about all the insights he has on customer lifetime
value and let me tell you they're really great valentin is also the founder and instructor of the cvo academy where he
coaches and teaches e-commerce businesses just like you just like me how to scale our brands profitably and
sustainably and when he's not busy uh scaling businesses and shaking up the e-commerce world valentin can be found
spending time with his wife his kids and baby oh yeah fur baby it says here so
uh anyway he you're gonna love it you're gonna love this interview i hope you'll love it
anyway i certainly enjoyed it and it's such a timely conversation uh he's a top bloke so without further ado here's my
conversation with valentin whereabouts in the world are you based in bucharest in romania right near the
border with ukraine oh mate yeah
how how's it going over there it's uh it's everyone very nervous yeah it's uh
at the beginning they were frightened we were frightened i mean everyone the news were not helping at all they were using
all sorts of imagery from i don't know the the syrian crisis or whatever and
then we thought that this is a scam made by the televisions there were all sorts of
voices around here that this is not for real then they realized that it's for real
and the the tv stations were not fast enough to send people over there so
that they can broadcast and now we are helping mainly we have around more than
people that we managed to accommodate in the last five to six days
i also helped the family to to get here in bucharest from from through
to moldova and uh yeah we're doing all everything we can i have a few friends
of mine that are running businesses and they've changed completely their businesses now they are doing uh
raising funds for the refugees that's all they do people calling you know cold calling other
romanian companies to to help with them because there are a lot of people you can imagine i mean
people anyways there is uh this is serious but the silver lining is
that i'm pretty excited to be able to help people you know there are
almost all of them are women with little kids i mean we have to do something for for them
it's and it's really important yeah no thank you for doing that i mean it's um
you know i'm well i'm i'm obviously watching it through the lens of the television uh
and the news um england uh whilst we have very strong opinions about what is going on uh we are not
neighboring with the country and so um it's great you know that people like you are doing things so
good on you yeah i think that i think it needs to happen of course anyways despite all the
political whatever chess that they are playing there are people out there which are suffering and
it's you can't you can't say that they don't exist you know it's like no matter what caused
this conflict to occur no matter what nato russia ukraine zelinski anything what happened through them fact is that
people are suffering and we have to help them yeah absolutely totally agree how would
um how would how could people from the west help i
mean that's one of the big questions i think everybody has um what is the best way for us to sort
of actually help we watch the news we can go to protests and all that sort of thing but um
i mean there are a lot of charities doing good stuff but from your point of view what what do you think i think one uh
one thing that we can do is to raise the level of awareness for the russian people to to understand what's going on
in their country from what what i know from people which are actually living there is that they
are all frightened there are thousands of people which have been arrested and the the
the civic society is not uh it's very weak out there however they need to raise up because it's
is their message their leaders so at the end of the day they should be fixing fixing that
another way to help is to simply support the ukrainian
charities the polish ones the hungarian ones the romanian ones which are helping with the refugees the red cross is doing
a very good job they've been there from the very beginning at the board at the border and uh so financial help another way to
help i think is to uh to do something about the the companies
which are uh in ukraine we we have to to provide to vendors from the from from
ukraine and we we keep our contracts with them even though they are affected that we we got some
services which weren't as good as they were but it's all at least that's what we can do
to sustain them or to to contract them because you can imagine over there there are a lot of
individuals that simply can't continue working for ukrainian companies because everything is shut down so if we can
hire someone from there if we can contract we can if we can work with the freelancer from the ukraine that means
more money in the country for them and they can sustain their family members one of them for instance i had a chat
with them they there there's a guy which is doing seo and they he needs to support right now five other members of
his family including two kids and his parents and he's the only one that can bring one more
uh penny in the uh in the family as everything is has has stopped over there
well you should definitely give us their details because we could we can tell people to contact them that
are used you know should if people listening to the show want to help with seo yeah i like that you know one of the
things you can do is reach out to ukrainian companies that are you know would ordinarily do a good job that actually could do with all the help yeah
and this is one way that we could help them just be prepared for a little bit of disruption so there's a list which is being a pretty
comprehensive list with a few hundreds of freelancers or companies which are looking to
to to get hired and i can provide that that list it's a it's a work in progress
it's like a google sheet which is getting bigger and bigger as people uh hear about it
oh no that's fantastic let's do that and we'll um let's get the word out because i think that's going to be really important um
well well thank you for that and like i say thank you again for for taking some action and
it's um it's just remarkable times isn't it uh that we're living in and yeah it looks like every march you know march
every two years uh it's happening something that there's a lot of memes going around the
internet where um uh i i saw one i think a simpsons one where
uh i think homer was in the bath you know and it said um first normal summer since
you know referring to the pandemic and there was bart behind him ready to smack him in the head with a tray
and it's underneath that it said vladimir putin which i thought was quite fascinating and so yeah every march
something happens um and let's hope let's hope this one resolves quicker than the pandemic yeah
although it's it's looking unlikely but you know um let's hope so i'm you know
pray for peace and all that sort of yeah it's quite grim but the the what i think i mean if we look at the the what
what can we get out of this crisis i mean maybe not us but the future of generations is if they would be around
not if this crazy putin is not going to hit the red button uh what we can learn
is that so much power in the hands of a single person it's it's not okay and no
matter what kind of uh political systems we have we need to have i don't know a council which is actually
working like like a council because the the matters of our planet are too
sophisticated and so much power in the hands of a single person is not it's not okay to to to happen
and uh another thing is that we we should be let's say uh
working on what kind of models we are using to interpret reality because we've been so
stubborn to to for economic growth and we we've been looking at as nations you know we are we are guiding ourselves by
the gdp growth and like that but then this this happens and we ask ask ourselves where
where was that coming from but it's coming from i don't know for years we know that we we we don't have to be
dependent on the energy from other countries especially if they have this autocratic
systems but still we have these dependencies from to countries like that and i guess this
crisis has uh is not it's just the tip of the iceberg you
know you know i mean we we could have seen this and our authorities our politicians and i bet that is the same
everywhere they are posing to the tv stations as the rulers and as the
leaders they fight between themselves you know to to earn a few percentage in the
uh in the elections but at the end of the day they are not for seeing what's what should
happen and countries should work more united i mean and that's another silver lining that we've seen that europe is is
really united and yeah it's sort of awakened it hasn't it the whole europe seems to have come out of it slumber a
little bit actually more so than with the pandemic um and so i think you're right i i think
too much power in the hands of one person just we we should have learned this dude i mean we should have learned this from
years ago it's not this is not rocket science um and
i can't disagree uh too reliant on different people for different energy resources and it's
and actually those energy resources are depletion they're depleting they're not renewable energy sources and so we have
to you know maybe accelerate certain programs and i yeah yeah green energy
stuff like that and also nuclear power what what happens with these nuclear weapons man i mean why those are
existing if we do know for a fact that they could kill us the human species and whatever it's
alive on this planet why do we accept those to exist yes it's like if we're a family
if this species is a single family and we do know for a fact that we have something that can kill everything how
do we accept that how is this acceptable in yeah now i'm with you it doesn't make
any kind of sense but like you say one of the things that i i am greatly
encouraged by is the the the spirit of humanity um
and you know that i think people who have definitely sort of risen up uh
and said you know this is not right this is not fair this is not just uh and we're gonna you know and
everyone's doing what they can to help somebody else out and i i love to see that spirit um because i think for for a
while now we've had a spirit of um this is not a political show by the way
but it's an interesting conversation um you know we've had this sort of spirit of division for a polarization you know
the council culture and it's like actually no every all that has been it seems to be being put aside which is
good and everyone is uniting you know in the in solidarity here which is which is actually very good to see so
um yeah tough one though tough one and so
well thank you for your uh thoughts valentin on that thank you for your insight and we will definitely share out
like i say that list um and we'll get into that and we will continue to pray in uh for peace in
ukraine and continue to hope for that and continue to support all the different works that are getting done which is great
but um shall we shall we get into e-commerce a little bit it might seem a little bit tried
actually but um i think you know it's good in the face of danger to to
it's very british very british things carry on as normal uh you know have a cup of tea and carry on as normal that's
what we like to do and so you know let's help businesses make lots of money and maybe they could
donate some of those profits to the to you know to the cause so let's do a little bit
so the title of today's podcast um is maximizing the lifetime value of a
customer now this is um one of those things valentin where i i
cannot begin to understand why why it's such a difficult concept for people
to grasp but the lifetime value of a customer for me is one of the most essential things for an e-commerce business
so what do you mean when we talk about lifetime value of a customer let's first start there and
define that mm-hmm yeah so the customer lifetime value of a cust
of a customer is it's what the business will keep in terms of
margin usually it's gross margin throughout the entire lifespan of that
of that customer it's uh there are all sorts of formulas to define it but in a nutshell from from
from a bird view it's it's just that how much margin can you expect to get from a customer looking at the past data and
usually the formula takes into account a few things i'll try not to get too deep into that but it's the the first
thing is how many orders are placing the customers in on average
which is the purchase frequency or orders per customer let's say a customer is placing orders right we have
orders made by customers for per the analyze period
another term which is important is the customer retention so how many of the customers are placing their second order
which is giving us the lifespan yeah yes based on the customer retention if you expect that uh
of the customers to place the second order that means we we have one out of
five customers uh placing an order yeah and then we have the aov how much they are spending
the average order value and we have the gross margin so basically these are the terms that
should be taken into account to calculate the customer lifetime value
basically we do have uh so all sorts of interpretations of the customer lifetime
value which takes into account only the revenue which i don't think it's uh okay because you can have
different type of uh costs of goods sold costs and that means you should ponder
in at least the gross margin if you want to be very very specific you could
uh rely on the net margin but that's very complicated because yeah a lot more complicated to calculate yeah
last month maybe you you you invested a lot into into stock or whatever and that means
your cfo should be a a really valid cfo to help you if with that so
mainly i suggest to use calculation which takes into account the
gross margin with those terms mainly there are ways to calculate it like one time to do it just to see how
was your e-commerce in the last three years or three months or you can use technologies to to
calculate this for you and i think this is one of the reasons why customer lifetime value is not
as popular as should be because this is the this is essential in any commerce
company more important of course for companies which are relying for on
a better custom lifetime value and a higher purchase frequency let's say if you sell
mattresses is not that impactful as it is if you sell coffee or tea or groceries
yeah no i totally totally get that and it's interesting um you talk about uh
maybe people don't use a customer lifetime value because it's not actually straightforward to sort of think about or define and there's
there are a lot of moving parts but um in a lot of respects it's better to do
something than do nothing and even being slightly wrong on customer lifetime value is better than not actually understanding any figure of customer
lifetime value uh and so yeah and you know just these things evolve and work as you go through but i think
for us we have an e-commerce business that sells health supplements
vitamins yeah and so customer lifetime value is essential because it's a there's a lot of repeat purchase
and so um it's essential because it helps me understand that if i'm using say paid
media to bring a customer into the business um and on that first order
i make i break even or make a slight loss it's not too much of a problem if that customer that i'm bringing in has a
higher customer lifetime value than just that single order right that's right um and so this is why it's good to
understand it beyond the first purchase it's like okay i can now make better planning and provision in my uh in my
ads so one thing sorry sorry about to interrupt you one one thing that it's uh
not acknowledged enough is that i've been a uh i'm a former e-commerce
entrepreneur and i've been looking to to break even from the first order as well
that was my mantra i know why why lose money from the first purchase but then
competition occurred and they raised the customer acquisition cost and they've been playing a
different game than i was uh acquainted with and that's why you need to look into the customer lifetime value
so that you can calibrate your acquisition efforts with uh how much you are getting from
that customer otherwise you're shooting in the dark and there are at this moment the competition is so
fierce that there are for for sure there are teams over there from your competitors
which are modeling their businesses based on how much they can afford and that's why they
are bidding higher and higher and at some point you you stop and they acquire market share they raise money they
acquire talented people and then there you go you have a company which used to be the market leader or very
very well established and they they are wiping you off jeff bezos said this uh
fantastically is that whoever can spend more to acquire a customer is going to win that market
so it's it's not a mark a matter of only becoming profitable but profitable but
also to to thriving in the in the future
because it's clv versus is customer acquisition versus customer lifetime value this is the
this is the ratio that you should be monitoring however few ceos few e-commerce managers are actually aware
about this ratio and they don't simply don't know it and they solely rely on things like rawas which is a skewed
metric because if it's reported by the facebook business manager or whatever it's almost like a waste of time now isn't it that
number yeah it it it's definitely waste time and in fact we've now we don't just have one row as
actually on our advertising we have um different pillars and we understand the cost of
acquisitions for new customers very different say the custom acquisition for a returning customer um now that's
really fascinating in the old days valentin uh you may not remember these but i certainly do remember the old days
when the you know pre-internet as they say yeah and supermarkets used to have
what they called lost leaders and so they would have products which they would deliberately sell at a loss
they would they would lose money every time they sold it but they knew that would draw you into the store and then
that would cause you to buy you know while you're there you're going to pick up half a dozen to a dozen i
don't know other groceries way there which they are making profits on and so this whole idea of the lost
leader was born i was very good friends with a supermarket a guy who owned a chain of supermarkets and for him this was sort of the how it worked you had to
choose a good product have it as a lost leader and it drew people in but again he understood um the customer lifetime
value and he although he didn't phrase it like that back then but it's the same principle you know and this is sort of
carried on with time okay so we have understood why customer lifetime
value is important don't go anywhere because when we get back after the break we're going to look at this a whole lot
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[Music] hey there are you a business owner here at orion digital we know firsthand that
running an ecommerce business can be really hard work as the online space gets more competitive it is becoming even more
challenging to stay ahead of the curve we totally get it so we want to help you succeed by offering a wide range of
services from fulfillment marketing customer service and even coaching and consulting just so that you can do what
matters most save yourself the time and the money and let us handle the day-to-day tasks this way you can run
your business without having to worry about the boring stuff so what do you say are we a good fit for each other
come check us out at oriondigital.com and let us know what you think
so i'm back with valentin we are talking about customer lifetime value and how to maximize it we understood before the
sponsors the amazing sponsors do check them out by the way um why uh lifetime value is important so
we've gotta we've got our ideas uh valentin how do we start to go about maximizing then our lifetime value what
what are some of the things that we can do and i remember in our pre-call um you talked about the three pillars of
customer value optimization and what are those and and how is it going to help us
yes the the transition that we are seeing right now is from acquisition marketing to
life cycle marketing so we need to take into account the whole lifespan of the customers so in order to
retain more customers you need to acquire the right customers and that means that the first pillar of
customer value optimization is acquisition so are you acquiring the right customers with the right products
or not then the second pillar is conversion yeah are you converting your traffic into
uh customers and then the third pillar is customer retention there were all sorts
of debate which i think were simply useless about is acquisition more
important than uh retention is conversion more it doesn't matter so it's the
is the whole in order to have a a working customer journey you need to focus on all of those three aspects if
you absolutely keep on pouring uh traffic into a website which is not converting then you're not doing the
right thing if you keep acquiring customers that never come back you're you're wrong unless you are selling i
don't know wedding rings and the divorce rate is almost zero
yeah all my addresses yeah or mattresses yeah uh however even if you're selling mattresses you can you
can upsell we have a customer from the uk actually which is selling uh blankets
and all sorts of things like pillows so you can still increase the clv but the
the most the most significant part is in the first purchase indeed so these are the three pillars of customer
value optimization in order to improve customer lifetime value you you have to
know who's your customer and that that is one of the most ignored disciplines in marketing because almost all of the
companies that i've worked with have been focusing most of their resources in
acquisition and in campaigns in tweaking out the messaging without doing customer
research so the customer research is the first and foremost important because if you have the customer research then you
will affect all of those free faces right you will affect acquisition because you will know why the customers
are buying if you do for instance research you can find out how the
customers are articulating the why behind their purchase intent why they've
bought how they are saying it not how we are saying it as marketeers because that's that's another problem we we keep
on throwing features and discounts at people without knowing if they actually
need the i don't know a screwdriver or if they are using if they are
why they need the product that we're selling so the why behind the purchase is crucial because that's the job to be
done so we've made the whole cvo methodology which starts with the customer research because
that means you understand why what you're buying peter drucker used to say beautifully that most companies don't even know what they
are selling [Laughter] and it's fantastic but it's true i mean
we we are not selling objects we are selling solutions to problems that if and if we don't know the real problem
that we are solving for our customers we can't differentiate and that's why ads should be and the creatives should
be uh let's say in in correlated with the needs and the emotions that the
customers have that's why the the best ads out there are triggering some emotions and some frustrations some
struggling moments when you say yes that's what i need and you you yeah you insert your card details because you
remember that frustration that you had when you couldn't whatever you couldn't reach out for your
wife because your battery is down again and you're cursing apple for that so
that's the struggling moment that's why you are buying right so we start and the first thing is to start
with the customer research to understand why they are buying and who are your best customers and for that
uh a thing that i've been drawing my mouth to to to promote is called rfm segmentation
which in retail the the biggest retailers in the world are using it it's a way to understand who are your best
customers who are the customers rfm segmentation yeah rfm stands for recency
frequency and monetary value instead of looking at all the customers like they are the same
you group them based on how recently they've bought how frequently they've bought and what's their customer
lifetime value so it's not only the ones that have bought the most that are important but the ones that have bought
the most have bought in the last purchase cycle let's say you're selling cosmetics and the purchase cycle is
every three weeks so the ones that bought times from your store they bought a lot and they've been active in
the last three weeks those are your super consumers we call them the soul mates right the customers that are in love
with your brand so by knowing who the soul mates are you can do research on their buying behavior
you can understand who they are why they've bought how they are articulating the reasons why they are buying and then
you can transform your whole positioning so let me give you an example matt from from a
a company in the us they've been selling uh they are selling weighted blankets and they thought that
it's called hash blankets they they thought that they are selling the
cuddling feeling all their ads were around the cuddling feeling the cuddling effect feeling warm and cozy staying in
front of the tv with a weighted blanket so that's what was their positioning
i've been doing two years ago i've been running these jobs to be done interviews on their best customers the ones that bought not only
once but actually twice or even three times we realized that the ones that they were
buying weighted blankets were actually having a medical condition so they were
sleep deprived they had insomnia they had to either get sleeping pills or find
another solution they they they weren't open to buy sleeping pills because they were knocked out and they
had to take care about their relatives maybe they had kids or they had an elderly elderly person that they need to
take it take care about so that's why they were buying the weighted blanket after we were looking at the revenue
distribution from everything that they've bought we realized that percent of everything that they've bought was around this job to be done
like help me get a normal life help me get some sleep not don't give me the cuddling effect
because i'm having serious problems right yeah and thanks to that realization they
managed to understand that they also had the job to be done which was around cuddling effect but that was not that
important because those people which were sleep deprived also became ambassadors and they've they've been so
happy about that that they started to give it as a gift to the dear ones to somebody some to
their kids or to their parents or whatever so they were brand ambassadors and they were the soul mates so that
ended up with another positioning for the company and with another life cycle uh email marketing campaign
because they knew that uh if you are happy about it then you will promote it to a friend and
they've started to incentivize them into doing exactly that so basically that's how it works that's why you need rfm
segmentation and that's why you need customer research because you can transform your whole company if you apply it correctly
wow that's incredible that's a great story uh i remember the cuddles factor uh that that'll stick with me
um i mean uh valentin this all sounds great right and i can just i imagine people sort of listen i go i get it i
understand it i need to you know understand why people are buying my actual products and dive into that a
little bit more maybe that leads to more differentiation maybe that leads to different opportunities i guess the first question that's going to come to
everyone's head is how you know how do i do this where do i start how do i you know if i'm if i'm a
solopreneur maybe rather than a company with unlimited resources but where's a good place to start with something like
this yeah i i would start with learning more about it so uh i i think that's the
the one of the main jobs of an entrepreneur is to learn about the business that they are in and you can't
outsource knowledge to someone else you know you can't hire someone to be the smart one in your in
your company you should become smart enough to hire other smart people but the essentials of your business should
be nailed by by yourself so we have this uh academy it's called the cvo academy
where we got harvard business school professor bob
maresta which is teaching about the jobs to be done we have a facebook
ad campaign expert i'm i'm refraining from saying guru or
whatever so it's dennis you which is a fantastic uh expert in facebook
then we have email marketing uh experts we we are all we have all teamed up
so that we teach this type of methodology customer value optimization methodology and uh i
i suggest to start with the learning then it's it's all a matter of uh
looking uh diving into your your own data because the the data is there it's just that few
companies are leveraging it we there are all sorts of tools we are selling a tool which is doing that but it's not about
the tool even though i'm a vendor it's not about the tool because it's uh
if you don't know how to use it then you you will not extract the value that you have in your in your database so it's
all starting with the knowledge about the solution that you are looking to to to establish over there so there are
tools that allows you to do rfm segmentation then there are tools that allows you to trigger different campaigns via email ads sms website yet
so because it's all a matter of being relevant it's not about giving the best solution but it's about giving a
relevant solution to the customers and most companies are just throwing discounts
right after the first order here's another story for you there was a company which was selling
they were selling uh vitamins and they they had this email i'm not gonna
name it of course they were selling vitamins it was the first purchase then
right after the first week they've been triggering a discount hey here's
by this this or the other after we've been looking in the in their data there's a thing called average days
between the transactions which is the purchase cycle right we were looking when are the customers which are
actually buying the second time when they are placing their next order it was after days on average so mainly
imagine that you're buying vitamins and it's common sense eventually you're buying vitamins you can't see it on your
own body if these are having any kind of effect and you get a call from because
an email is like a touch point right you get a call from the shop hey here's for you buy again from us it's
crazy right because the consumption precedes buying right if you are not consuming a
product and if you are not getting the value out of that product how come you are
trying to to sell that product again to that individual so basically that's uh that's
what's happening yeah that's really interesting that's really interesting and so um
if i can circle back a little bit uh valentin one of the things that you talked about in your three pillars
um was acquisition but you were really careful with the language that you used i noticed you said acquisition of the
right customer as opposed to just acquisition of any old customer uh
why do you differentiate that and and um what's the reasoning there yeah with the
rfm segmentation you can find that you have the ideal customers so
for the context from our benchmark from stores which are buying all sorts
of stuff we've realized that one single icp one single ideal customer profile is
as valuable as low value customers let's say
and why is that happening because let's presume you're selling vitamins and you have a customer that bought times
from you you paid the customer acquisition cost at the beginning you've been paying some remarketing and email
whatever to nurture that customer and you have those multiple uh
orders from that customer and that's your gross margin then you have a low value customer that you acquired in a
discount campaign you've paid for the ads you haven't even broke even at the first purchase and
they are not buying again from you and that's what's happening and with the rfm we call those the breakups right
customers that are not uh buying again from a store and those
breakups are let's say it's toxic to acquire them let's say that yeah and they are buying
some sort of products they are buying it for different reasons than the icps and
with the research you will identify which are the breakups and that's how you inform the acquisition
based on which are the products that are making our customers stick around and buy again which are the products that
are making the customers happier than the other ones right because you have all sorts of
levels of satisfaction and that's why with the research you will be able not
only to use a different positioning and messaging but you you can push different
products from your product assortment that's really powerful so one you call them icp the idea
customer the ideal customer profile right um one of those has a value of odd
sort of poor value customers and i mean obviously that's going to different be different for different businesses yeah of course you should take some time and
understand what that is for your business but that's really incredible when you look i mean you've taken that figure from looking at what two and a
half thousand stores you said so i mean if that's an average i mean that's an incredible figure and
so this um understanding who your good customers are your ideal customers and
pursuing no's rather than just any old customer this is um
this again comes back to your whole thinking on research doesn't it and taking the time to do this and do the research
um is not something i think entrepreneurs are notorious for because we're an impatient bunch yeah and we
just want to get going right it's just like stop and now let's get going let's run uh at this
full steam ahead and um and and taking the time to look at it is an interesting one where would you go i guess or what
tools are out there to help you start to get some of this insight from the data i mean is it a case of just importing all
your orders into excel and just going through them and figuring it out or is there are there some tools out there that can help us yeah
that's a great question most of our customers that are coming to us have been trying this on their own with the
sqls and queries and whatever so one thing that you can do if you're
really advanced you can use this kind of queries or tableau or click view or bi
tools which are kind of expensive or bigquery from google you can build it
so it's like you you can build some models the problem is that it's going to be a mess to actually take
a different uh messaging to all those customer groups so from an
analysis point of view you can do it with the data analyst we are we have built this technology in
the last nine years from onwards we focused completely on customer value
optimization because we realized that it's uh it's a blue ocean and it's something
that companies really need and now that the acquisition costs are surging we are seeing a high demand on the technology
and the solutions that we are we are offering so i would start you can simply download your database
use excel do this type of rfm segmentation another alternative you're if you're uh
having something like shopify or magento or vtex for instance we have these
implement integrations with them so you can use a tool such as ours it's a days
trial you have all the data that you can imagine over there and you're being a better position to realize what's going
on in your in your e-commerce without messing up with the data but that's the first step again i'm telling you that uh
knowing what the problem is is not fixing the problem and it's uh it's as good as having an x-ray that says okay
you have a broken bone and that's it that that's with the analysis actually and it's a difference between
uh knowing about the problem and fixing it and in order to fix it you you have to get into this type of uh let's say
journey to start with the customer research you realize what's going on and then changing the messaging and
nurturing the customers down the line with all all the email marketing campaigns should be taking into account
the rfm segment but because that's how you are relevant otherwise you're broadcasting to everyone the same
thing and seeing what sticks yeah that's very very good very important
um i've i'm intrigued to sort of uh
understand um where
where the biggest um i guess uh where the biggest market
you've seen this have massive impact which i mean you've given us examples for example of the blanket
and the vitamin company but where else have you seen this work sort of super well for e-commerce businesses yeah it's
um an important and easy to do thing is to to do acquisition based on look-alike
audiences that are like your best customers so we have a thing called the audience builder
because changing the behavior is very hard not so what we've noticed is that many companies are using our
software they realize what's going on and then they go back to doing some facebook ads because that's
what they are doing you know acquisition marketing and we we have seen good results on building look-alike audiences
based on the rfm segments of the best customers right and then doing custom audiences on them because you have we
call them another rfm segment for instance it's called the new passions these are customers that have placed
recently a single order but that order placed them among the best customers in
terms of the monetary value so they are customers with very high potential and very fresh
for them you can do email marketing campaigns differently you can do
nurturing campaigns via ads differently because you know that they have a high potential to spend from your from your
store and looking at what they have been buying and pushing products which are relevant
to them allows them to get into the buying habit because it's all a matter of changing customer behavior that's all
we want to do actually all the marketing is around influencing and changing behavior so in order to change that you
can you can use this type of approach and it's very easy to run campaigns
because you already do campaigns it's just that you can you you
now do it with the with a twist right knowing that you have better customers out there so you can
inform the facebook algorithm which is heavily affected about the cookie and ios
by pushing the list of your best customers so mainly you uh you help the
algorithm by saying okay this customers we do know for a fact that they look
alike yeah and then find others that look like these ones because you already know them you have the their profiles
and that's how it worked with we've been seeing fantastic results for instance even for a company which is selling furniture
uh we were surprised as well because the purchase cycle in when you buy uh
furniture is not that high but what they have been doing they've been reactivating the customers which were
slipping away right the the about to dump you customers and that was really
fantastic because that uh led to a increase in the conversion rate for
those ads compared to the normal uh remarketing ads that's incredible
so you i mean i find again this fascinating valentine it leads to a whole bunch of more questions if i'm honestly um
so uh you've got you've talked about different profiles
and marketing differently it's different profiles so yeah i've noted so far we've talked about the ideal customer profile the icp we've
talked about the rubbish customer profile um that is breakup you should just let go yeah the breakups um
you talked just then about um the first time customer so their monetary value is
high obviously um their recency is high on the rfm model they purchased recently
and it's high value but the the frequency is low because it's maybe the first time they've purchased
so i've got those different profiles are there any other profiles and that sort
of spring to mind that i should look out for yeah that's there's an in very important profile which we call the
ex lovers those are customers that used to be soul mates no they are good
so yeah okay we're using using this labeling system and it it kind of works because people can relate to that so
there used to be soulmates and now for an ear they they haven't done anything so
usually what marketers are doing for with them they are doing uh something which is called reactivation
campaigns which i think most of them are crappy because they don't work because you can't revive the
the long gun customers what we you can do though which we've seen it worked
with the company from australia selling fashion goods they they've disguised
a reactivation campaign into a research campaign so instead of pushing hey here's a discount long time no see
they push something like let us understand why it was something like that what happened or why why was that
happen what happened between us it was something among this line that was the subject for the the email and they've also run ad
campaigns on that so the the results were fantastic from two perspectives one that because they they
had customers which were pissed off and it was the first time when they actually asked them what happened
and they got a lot of insights to fix their customer journey like different measures to their clothes or stuff like
that that they weren't aware of and another way thing was that at the end they justified giving them a discount
code because they've answered to it and if you think about it it was like uh like i deserve it now you know i've
answered it to the survey and i earned this discount it was uh something like uh
if you bought more than but many of them used it just because
they they they had this uh bias and uh that yeah they've earned their right to
use it and now what can i do with it i have to yeah so that's how you can work with the uh ex
lovers and based on the insights it's crucial and we haven't touched the subject it's crucial to to fix customer
experience because now you have so many options to buy the same things from different vendors different
stores that you can simply do like an alt tab or swipe to to
change your provider of whatever you're buying so customer experience is becoming a differentiator because there
are many companies out there which are doing the standard job you know they they ship products from a to b but if
you add a bit of extra uh mile in your customer journey then you can uh
rip off the the rewards from from this action and that means simply asking if
customers are happy about it it's not fantastic it's not about giving them gifts or whatever these are nice to have
but the hygiene part is hey are your are the shoes fitting you
or not you know it's it's something that it you close the loop because many companies are broadcasting right they
are broadcasting and they are not listening and by using nps for instance
which i'm a really big fan of nps you find out if you've done your job as uh
as a company yeah now that's i like that i like that i like the
different names you give you different profiles as well the x lover the soul mate i i think that's um that's just
fantastic listen valentin this has been fantastic and i feel like we could talk much much
longer um but i'm aware of time how do people reach hold of you how do people connect with you if they want to do that
i'm i'm on linkedin i also have a newsletter out there every today actually i'm going to send
another newsletter i'm stubborn and i i'm now at number so for weeks now
half a year i'm doing this uh to to get in touch with
everyone and also you can message me on linkedin i'm always happy to to help you out
also if someone wants to get deep into this kind of things on the cvo academy we have two free courses one is about
customer behavior and why the customers are behaving and it's a it's a really valuable material over there and another
one it's like a mini course of the cvo methodology where they can learn what what they should do should do with their
their e-commerce fantastic and i assume if they're a couple of free courses you've got some
paid courses if people want to take a real deep dive yeah we're we're about to launch a new course with the chief
strategy uh measurement officer from uh uh google nilhoen she just launched his
book converted a really really cool guy and he's explaining how google
understood customer lifetime value and a lot of insights and case studies from from him so there are all sorts of paid
courses as well and the whole uh cvo academy with which has something like hours of content it's a really
serious endeavor but the feedback was fantastic out of the students that graduated and they
also get certified into uh doing cvo i think in the next few years the agencies
and the professionals from a uh from from let's say client side will differentiate themselves if
they understand the whole business so we can't be siloed anymore we need to understand the whole lifespan of the of
the customers yeah that's fantastic and sign me up for the for that course
uh with you know with the chat from google that would be that'll be fascinating i'd love to get involved in that um listen thank you so much for
being with us here on the ecommerce podcast it's been phenomenal to talk to you no doubt we will have you back on
again soon and thank you again valentin for all you're doing for your neighboring nation in the ukraine uh
it's great to hear those stories and um all power to you man bless you i appreciate you being here perfect thanks
a lot matt and thanks everyone for listening or watching us today
my thanks again to my very special guest valentin today what did you think
what did you think to what you said about customer lifetime value and is there any way that you can get involved and help with what's going on in the
ukraine i hope that was helpful uh the links that he mentioned his linkedin
link the link to the google sheet and all that sort of stuff will be in today's notes you can get those links
notes and transcripts for free on our website just head over to ecommercepodcast.net forward slash
and you'll get all of those um make sure you do yeah next week we will
actually have the conversation with john horn the one that we moved back so john thank you for your understanding uh but
we've got our conversation with john coming up about why you should ditch facebook ads
and use google as instead now i appreciate this is a slightly contentious title and i like that i like
the fact it's slightly polarizing um and if it sounds interesting and to wet your whistle here's an excerpt from next
week's show so i view google as a lower funnel
higher conversion rate channel so if we have people who are searching for what the client sells
typically i'm going to start with google and look to maxim out the the number of people searching for that getting that
traffic optimizing the conversion rate so forth and so on and then once i've been able to do that and also even
improve the model mc and do testing of okay what messaging is performing best what are people actually searching for
what are the pain points that they're typing in then i'll typically expand to a facebook instagram and so forth to capture
additional audience or to get people into my funnel yes i am looking forward to this one uh
if you've enjoyed uh this week's show if you've enjoyed uh conversations with
valentin then i'd appreciate it if you could give us a rating on itunes or wherever you get your podcast from and of course share it out so we can connect
with more people around the world which enables us to get the sponsors which enables us to keep delivering this
content to you it's kind of you know a win-win scenario and as i said at the
start all of the notes links and transcript to today's show are online and you can get them for free at ecommercepodcast.net
that's it from me thank you so much for listening do join us next week uh and uh
for our conversation with john make sure you subscribe and it will come to your inbox automagically yes it will uh
that's it from me thank you so much bye for now
you've been listening to the ecommerce podcast with matt edmondson join us next time for more interviews
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