WHAT the Data?!

Juliana Jackson - What have you missed when calculating your CLV? (#14)

January 27, 2021 Lior Barak and Juliana Jackson Season 2 Episode 2
WHAT the Data?!
Juliana Jackson - What have you missed when calculating your CLV? (#14)
Chapters
1:09
Making first-party data hot again
6:10
What should a shopify owner know?
WHAT the Data?!
Juliana Jackson - What have you missed when calculating your CLV? (#14)
Jan 27, 2021 Season 2 Episode 2
Lior Barak and Juliana Jackson

Juliana Jackson, also known as the CLV lady, is a serial intrapreneur. she has been working with Sales, Marketing, and Product teams for the last ten years helping them approach Customer Centricity as a mission rather than just a growth strategy. She loved E-Commerce, and her focus is to help merchants (re)discover the power of analyzing, understanding and using first-party data. 
In this episode, we talked about
What is first-party data?
What KPIs you need to understand your retention?
What is the actually calculation of CLV

And much more, we hope you going to enjoy this one.

Show Notes Transcript Chapter Markers

Juliana Jackson, also known as the CLV lady, is a serial intrapreneur. she has been working with Sales, Marketing, and Product teams for the last ten years helping them approach Customer Centricity as a mission rather than just a growth strategy. She loved E-Commerce, and her focus is to help merchants (re)discover the power of analyzing, understanding and using first-party data. 
In this episode, we talked about
What is first-party data?
What KPIs you need to understand your retention?
What is the actually calculation of CLV

And much more, we hope you going to enjoy this one.

 Intro: (00:08)
Welcome to the what the data podcast with your hosts, and Leo, 

Lior: (00:17)
Hello, to all the data lovers. This is another episode of WHAT the data podcast. And today we have Juliana with us. Hello, Juliana

Lior: (00:25)
Hey, or how are you doing good. Good. I'm glad to be here December daily or for the last three or four days, but then it started raining. All the streets are filled with whoever is in the winter. But other than that, I'm not hoping for me because I haven't been through this year and it's almost lunchtime. So I'm excited. Yeah. 

Lior: (01:11)
Juliana is making first party data hot again. What does it mean? 

Juliana: (01:18)
Well, basically all the time in the last seven, eight years first-party data moved to the background, because it's a very big culture, in my opinion, the marketing function that promotes an acquisition centric mindset. And you know, this companies that sell databases thought that they just pile out from different spots and use it for advertising. So I believe the PPC agencies aren't being done today, and I'm just trying to bring it back to people's attention and make them understand that, you know, I know I can see there is the digital gold of their data to bring people back because they aren't having already collected from other places that are sitting on it and they can use it to grow their life. They can use it to spend less on acquisitions. They can use it to communicate better with customers and customer journey. So that's why my, uh, I'm trying to at least, 

Lior: (02:47)
so let me ask you that when we talking about first party data, are we talking about the user action on the website? Are we talking about the user scrolling? Are we, what is it, what Is it actually containing first party data? 

Juliana: (03:03)
So basically first party data is all the information that accompany. That's why it's called first party. So usually the data is sourced from different, I guess, direct customers, transactional behavior across the more, a feedback and surveys, uh, app usage or, um, I don't know, subscription-based emails that they collect. So this is like the first part gave all the customers that the company, there are more types of data is the second party data too, which is, uh, how can I pull it to psycho regurgitate that formal first part, we made that, which give you a good example is let's say a company does a conference, right? They do a conference and they have some sponsors. The company is going to collect information from all the Berkeley students in the conference. And then if they have a partnership agreement with the sponsor, they will give that data to the sponsor, but because it's transferred to another second hand data and then you have the third party data, which is basically, uh, data that's collected and compiled by different organizations, but they don't have direct the subject of the data, right? So it was just sold between organizations and, you know, cookies that people are giving up on their legitmate interest or not. So that's why Facebook and Google follow the same path. 

Lior: (05:09)
So when we're talking about first party data, after we starting to collect it, do we use third party tools for that? Do we need to, can we do it ourselves? 

Juliana: (05:20)
I mean, for, for like a basic, you know, response to that is you have first party data in your CRM, right? Because it's the data you collect about your customers. So if you have depends on the business model, so if you're a SAS company, you already have a CRM, you have a HubSpot, you have other types of information and you can use those to be able to do different email flows in communication with the customer. And so on. It's a bit different, a SAAS model because any ecommerce, transactional behavior, it's much more complex. It includes much more metrics. So for everyone, you know, that there is doing e-commerce, they need a customer data platform or a business analytics platform or business intelligence or customer intelligence platform to be able to, or not the link, the data, to be able to gain insights from the data. If you're using shopping right there in your batch, anytime you don't know what to do with it. So you need the software that can take you through that data, compile it for me. Micro might not want to hear about it. 

Lior: (06:44)
So if we're talking about Shopify, shop owners, what data should they collect to actually start understanding their users? What is the most important part of it? 

Lior: (06:55)
So if you talk about, are you talking about first party data or metrics that you know, you should, uh, 

Lior: (07:04)
We can start with first party and then do the general one. 

Juliana: (07:08)
So my favorite, my favorite then mean my point of view, there's two ways of looking at your e-commerce from a data perspective, but let's assume everyone wants to know. I think the most important ones are the cost per acquisition, the CPA, the acquisition, the cop, the average order value. The average days between transactions DBT, obviously the most important one is the customer lifetime value. But at the same time you have the customer retention rate, the repeat customer rate return rate, the churn rate, the net promoters. I would probably think like 30 minutes to, uh, you know, go through all of them, but you start a shopping, shopping dashboard. You'll see a lot of data about yourself. You will see your average order value margins, and you'll sell out of things, but you won't be able to see things like acquisition. A lot of people confuse per acquisition and acquisition cost, acquisition cost Cumulus of different, different types of, you know, metrics and cost per acquisition is basically how much you spend on a customer versus, you know what that's bringing back. It's a lot of misconception on how to calculate the cost per acquisition and acquisition cost. But definitely my top five would be definitely customer lifetime value. That's the bread and butter of their store. Then you have to look at your retention rate. Then you have to move at your churn rate, which is super important. How many I have three, then you have to look at your average order value. The reason why I'm choosing this five ones is because knowing your average order value, average days between transaction customer lifetime retention rate, then you're able, you started a smart brand before. So you have a theme that, you know, a data team or a marketing analytics team. By looking at these metrics, you are able to understand how to further optimize your customer journey because the answer is always in the data, but everyone has their own way. They're printed. That was actually subjective in their objective. But for someone that, you know, I, when I do these types of podcasts and I talk about data, I try to drop the whole corporate lingo. And I'm just trying to speak to people to understand the best, you know, understanding best. And Mike, my whole point is this. You have all this data in your shopify. Let's say you connect with the softer data and you start to get insights like lifetime value, average days between transactions, the best way to understand how you can improve your lifetime value. And you do the acquisition cost. So not the cost per acquisition, the acquisition I'm going to do that. 

Lior: (10:43)
I'm fine with. 

Juliana: (10:47)
it took me some time to be able to pronounce the acronym. That's why I hate using acronyms. But yeah, so let's say you have one year, you have 5,000 customers right now, and let's say you have a million bucks. Let's say this is I have, I have a lot of people. So let's go back. So you have 5,000 customers, $1 million in revenue and you have one year right now, you see in your customers, there's 5,000 of them. So it's easy for you to graph 5,000. Brendan, Jim sharp would be more Nike or whatever. So you said this 5,000 and you ask yourself, you'll have one revenue. I don't know, 100,000 mostly when we're talking about the new store, there's an attitude towards acquisition because you have to do acquisitions when you just start with a store. And there's only two ways. You either new customers or you either make the customers that you have purchased from you again. But in the beginning, you are not able to do that as you are a new store, because not all the commerce owners are, you know, knowledgeable about data. We're about marketing. They're just people with awesome ideas that have a great drive and they just go out there hustling. But then, you know, they stop in to say, okay, I'm here. I have this customer, they have this revenue. My margin is not great because the most, you know, the bad thing about the margin is that highly dependable on how much you spend to acquire customers, right? So as a brand, you want to grow, you don't want to stay on the steady flow over, you know, having cost per acquisition, customer lifetime value ratio. That's like one to one, because that means you're not making money or you're just breaking even. And that's a lot, that's a common scenario. So what can you do? You have to look at your data and you have to do it in a way that's not complicated. There's a lot of people get scared when they hear all. It's not that complicated. If you just look at this five five metrice I mentioned before that I mentioned before, so let's talk a bit about average order value and the average days between transaction. So why do I choose this one? I want you, you are the store, right? That I was mentioning to you before. I'm a new client. I saw your app on Facebook and I say, Oh my God, I want to buy it. I like, I like, hummus, you know, I've been to Israel once I had it. So I go to your website and I see that behind, beside your books, let's say you have mugs. And t-shirts where you have more products, but I just buy. I bought your book, and you know, I got it. Okay. So I want you to class. The more your scope as an e-commerce shop is to give customers. But at the same time, your main point right now is to make me buy another product, buy a plane, buy a t-shirt buy something. So the biggest mistake people do after acquiring the new cost in the same week, who messaged him to buy a new product. Now, big alert brackets. This is the worst thing you can do. This is the worst thnk to do, why you should not as an e-commerce brand, try to sell again for newly acquired costumer. You measure the success of that first order, the how you measure success, the best way to do it is to do NPS score and NPS is done net promoter score. Mostly everyone that listens will recognize it. By he question you asked to recommend this brand to someone else. That's the. I don't have that smart pre and post. And why do we do, do we need to do that? Because there's a very big gap between the first word there, or the first time when you order in you're on the website, I'm on your website. You where I sold this book, I'm hungry. I'm homeless right now. I'm excited. You, aren't asking you, how was my experience? I put this down for you as an owner of the shop. You received this NPS, but let's say you send me, I get the product. I see the book. The book is good, but let's say I decided I don't like homeless anymore. And I say, it, this product. Or let's say, every company messes that up. Let's say your customer support is not good enough. When I had the problem. Let's say the product came after this, but you don't ask me that. Instead, you send me a message to sell me your plate, but you don't measure how I feel about after. So I hope I'm easy to follow, right? The best way to do the second order, you know, the worst way to stimulate second part is to measure the experience after that first border. That's why you need to send an MPS. After your short, the customer that purchased your product, received the product, and you ask them, how was your experience with the product? How was your experience with the delivery? How was your experience with our services is very important that a brand does not jump the horses of selling instantly after the first war. That without Knology how good they did in that word. And a lot of you would say, Oh, but that's hard to sell to people of your plate, especially that message you sent them, the person didn't even get your first product. And I still didn't receive the product, but then they were asking me to buy something complimentary, but I'm like, what the you knew? I didn't even get the first one. I'm like, whatever, you know, obviously you're not going to buy because everything's between transaction once the past purchases for the first time, let's say, you know, the average days between transaction can fluctuate between a business to business. So you might have 30 days, 60 days or 90 days, which is the power frame of a customer, right? So let's say you have on average day of transactions of 30 days, which means that once you acquire the new customer, you have 30 days at your hand to make sure to practice, understand the experience of what that new customer would do, your services and your product, and for you to be able to purchase again, because looking at your data and your AOV and the ADPD average order value in every transaction, you can forecast, right? You can forecast what are the chances for a customer to buy from you again, because you already have that historical data. So there's this metric, please. The next order we have it in review, and it's looking at your transactional history. So based on this, you can see how big is the drop after the first order. How big is the drop after the second order? And where do you fall in terms of when is the best time to intervene in the user journey, plus the person buy from you again? So my wife used to go through your Shopify dashboard. You won't be able to do obviously in shopping, but you can, you can Google how to calculate that. But look at the timeframe from a the first order to a second, or they're based on your historical data based on your transactional behavior and see where you can intervene. So instead of jumping the horses to sell to the new customers immediately take time to understand if that customer is happy. A lot of times happens that let's say black Friday happens and you acquire mostly older customers. I want to say, I don't care. Mostly 70% of the customers are quite for black Friday or seven Mondays are shipped everyone right now, calculating how much should customers they got, because these are not loyal customers. This is not a normal spectrum of business for black Friday. People just are trying to, you know, get some cheap, buy it, you know, do it. They're not going to come back to you again because they look at you as a way of getting stuff all back about black Friday. 

Lior: (21:02)
Ohh black Friday I have a lot to say about that

Juliana: (21:06)
Oh yeah. Let's talk about that right now. So yeah. So my main, my main thing is to be able to determine value and the value of, uh, you know, of how much you should invest into a customer is to do that research immediately after the first purchase, looking at the average order value, looking at the average days between transaction and understand when to intervene common case, is that someone purchases from me or you don't understand if they are happy or not with the product or experience or the services that you have. And then you go ahead and ask them for reviews, or you ask them to buy from you that person's mad a lot of them. And then when you ask them to give you a review on Trustpilot very bad review, are you happy? So it's something very easy to implement. This is something you should implement right now as a brand, after the first order measure, how good was the experience with you, your product and your services, including delivery and everything else. Don't jump to the next purchase without knowing this. Then I have the other three metrics that I told you I love is the churn rate, the customer lifetime value and the customer retention. And you'll know me pretty well by now and understand that in my opinion, customer lifetime value is the Holy grail of e-commerce..

Lior: (22:41)
I am with you!

Juliana: (22:41)
 I'm glad you are because you cannot talk about customer lifetime value without introducing again, the acquisition cost. And I'm going to tell you why this acquisition costs and lifetime value, two very fundamental questions, any commerce, how much does it cost in your costs and how much is the customer worth? Very big difference. So when you combine these questions, you will say, what is the true value of a customer business you need to understand? And that's exactly what I was kindly gently leading into earlier. When I was saying that understanding the ratio between the CLV and the acquisition cost is what, you know, what you should be focused on because that's the ratio that it's telling you, how healthy is your business. What's the true value of customers to your business. So this ratio is super easy to calculate. It's just a simple division. What you need to know your cov, and you need to know your acquisition cost. What the problem with customer retention and churn I'm here with my SpongeBob. The problem is that people do not know how to calculate acquisition cost. A lot of people think that, and I told you a lot of people confuse acquisition, cost the cost per acquisition. And the thing is that people it's a myth, right? In reality, they're super metrics and understanding the difference between the cost per acquisition and acquisition cost is super important because customer acquisition costs specifically measures how to acquire a customer, right? The cost of acquiring a customer, but the cost per acquisition measures the cost to acquire something. That's not for example and user or trial. So they're super different because usually the cost per acquisition, um, is used to measure the cost of these that are leaving that position. So you cannot talk about lifetime value without knowing. So the biggest mistakes that I see people doing when calculating acquisition cost, and I have to make these parentheses before talking about lifetime value, because you cannot play with the formula of a lifetime value this. So when you calculate your acquisition cost CAC include salary, and I see so many people not thinking about this and this doesn't think individual contributors, you know, whatever it's, everyone was spends time working in marketing and sales has to have, has to have their salaries. 

Lior: (25:54)
and Logistics.

Juliana: (25:54)
cannot not be, yeah, that's the second mistake you don't include your overhead. So the similar mistake to not including salaries, logistics, equipment rent, people mentioned above that they're working on your marketing and sales and the acquisition cost is not including the money spent on your Mark tech stack because the marketing and sales team do not function without, right? So are you using like, I don't know, seven, 10 plus, but this the cost of the schools. So going back to the customer lifetime value, you cannot fully understand customer lifetime value until you look at the ratio between a lifetime value in your, uh, in your acquisition acquisition. So once you figure it out, calculate this, and there's a lot of Google that you can read through, understand how to calculate your acquisition cost. One thing I want you to know about the ratio, right? Between the CLV in the CAC. So having mind is that there's not a magic number, right? For the biz ratio. A lot of people, I was talking about this before in a podcast. So I did a bit of research and the market says that, I mean, a lot of, you know, all my resources like common thread and you know, other voices in the market are seeing that the 3.1 is the best number for, you know, for a ratio. And the thing is that, you know, what I want to say is if your ratio is too high is not that good. And I'm going to tell you why. 

Lior: (27:57)
you're not efficient, basically, 

Juliana: (27:59)
exactly. Like you have your lifetime value better. I mean, it's better to gain more money than you're investing right. To acquire customers. But at the same time when you are in that, uh, when you're, uh, or, or if you aren't in that way, you know, it's often that you are not spending enough based on how much your customers are worth. So simply put, if your customers mean a lot for your business, they are worth a lot of money. You have to invest more in their experience because those people, even if they bring a lot of money, if you don't invest your money into creating experiences for them and designing complex and personalized user journeys, to keep them happy, those people have got into a churn because the same lifetime value that they have with you, they can have it with your competitors. You know? So if you are not, we invest your money guarantee that they're going to leave you for the next person. So there's people that want you remind you when you feel don't get the idea that you need to invest to keep them there. And that's what happens. There's thousands. 

Lior: (29:14)
It reminds me of a story from Amazon actually. So I don't know if you heard it, but the first days of Jeff boss, it's when he started his business and customers, weren't happy. He used to send them boxes of chocolate and flowers to say, sorry, I up. 

Juliana: (29:30)
Yeah. But did you know that Amazon functions with COE as their main engine of growth, Amazon Cascto, all these big, big retail companies are functioning because they're may generator for growth. And they put the experience like people don't buy from Amazon. Cause they like Jeff because you know, they like Amazon very convenient service.

Lior: (29:59)
I am totally with you about it.

Juliana: (29:59)
 It's very convenient. So they're using the money that they have to create a convenient environment for the person. We have the same stuff here in Romania. And it's like with the Romanian, Amazon, no with their prices. I don't like a lot of stuff on there, but it's still convenient order from them and to get the product next day. And they have a nice return policy. It's convenient, but they use their resources into making people buy an undeniable experience. So I take here with the CLV is that you cannot survive as an e-commerce. If you don't have a non-denial product in an undeniable experience and you cannot have just one of them because you might have the best product in the world. But if your experience is, you have great experience, but they are still, you know, you're still gonna fail. So the secret is always to have a nice balance between how much you spend on customers and how much they are willing to spend with you. And I'm sorry, I don't even know if I answered your question, but yeah, 

Lior: (31:24)
Anyway I think we got quite a good material out of it. 

Juliana: (31:30)
Yeah. Just to get a super excited about the lifetime value. And for me, it mostly like, I don't want to like talk about, um, you know, the, you know, like hype lifetime value or propaganda. This, I usually do. I like to tell people of the things that they might miss in calculating their lifetime value. So that's why I decided to use the acquisition costs. 

Lior: (31:56)
I completely agree on that. So as we getting to the end of the episode, let me ask you about the crazy data experience you had and that drove you crazy. 

Juliana: (32:10)
So I was, I was thinking, you know, when I, uh, when I started working with product, I was looking at the, you know, the analytics that we have in the dashboard. And one day I was thinking about how, you know, like looking at data and sometimes you, you are trying to find out how you can apply this. So I don't know if it's crazy or not, but for me it was like, it changed a lot. In my perspective, it's exactly what I was talking to you about third year. Looking at data can be much more revealing than the ones that if you look on Google, so I'm a very big fan of post sale data. I like looking at behavior. So I was, I was checking out the hour. Um, we have an RFM Sydney innovation pool, and we knew, you know, our opinion stands for recency frequency and monetary value. So based on how frequent and how much money a customer spends in your store, you can understand more their buying behavior and you can then place their people together in different groups. And then you can segment and talk to these groups differently based on how they works. So I was looking at our fingertips and I was looking at this drop that first board there's and then is what I understood that, you know, you need to talk to these new people that you're bringing. I just feel like we are so obsessed about growth. That growth has became like, I don't know how to say it. It has became a big deceiving for me. You know, I love growth, but like when people say grow big, just put a lot of stuff in that category. And they, they tend to have the impression that the more people you bring in your company, the more you grow, oftentimes that's wrong because sometimes that can be your, a financial goal, you know? And that was the craziest thing to discover this, how people behave after that first purchase, what are the drivers that make them do that second purchase and understand what are their forces of progress and the moments of struggle that made them purchase from you the first time and make them come back again. And that has helped me understand how to look at the customer journey in general, because after the, after COVID happened and know our lives has changed our lives to shoes right now, I don't know a lot of people are doing it well, I don't, I don't do well, but people have a lot in this seat. This is my crazy, this is the crazy daytime experience. I'm looking at the data about transactional behavior and the behavior change. You have people that purchased online for the first time. You have people that are starting to purchase more because online shopping, it's not, it's not like they're going to the shop. It's something you do. It's how you survive. This pandemic cannot live without things for them. This is how it is. So for me, it's crazy to look how much the data has changed and how I'm looking at data. Because I, you know, it took time for me to get this customer centric mentality that I have right now. I think, you know, it's part of the maturity of every person that works e-commerce to go from acquisition centric to product centric. And then to costumer centric look at user behavior, consumer behavior, and kind of be very exciting from my point of view. And that'd be a very big differentiator on how people will choose the brands that they're going to shop with. 

Lior: (36:34)
So as we arrive into the end of the episode, let me ask you any, any sum-up that somebody must take out of this conversation today. Lifetime value, 

Juliana: (36:48)
lifetime value, and don't sell new customers until you find out they weren't happy with that first order. Don't jump to the second order thing. Don't try to sell it to people so fast, take time to understand them. Take time, to look at their journey, take time to find out what are the reasons and emotions behind purchasing and do not send that second name email and tell them about your promotions for your new stock. Do you find out that he was happy with the first time? That's my message. 

Lior: (37:25)
Just to say my book is great. I don't care what you, it it's great.

Juliana: (37:34)
 I'm going to get you booked a lot of books, three books. So I'm going to buy your book. So definitely send me your link. I'll buy your book too, and I'll tell people I can send you one.

Lior: (37:49)
I can send you one.

Juliana: (37:49)
 Don't worry. You're going to send me later, but yeah. Yeah. I'm sure that. 

Lior: (38:07)
you don't want to know how tough it is. Actually, since I moved to Europe to find good hummus, it's really, really difficult. 

Juliana: (38:14)
because that's not the same. 

Lior: (38:17)
The weather is not the same. I know it doesn't taste the same. I know what you're saying. 

Lior: (38:22)
So I had was in London and it was, it was good. That was good. And tasted like real, real homeless. Then we have this guy shop the ones that actually there is a Israeli guy who's doing quite good from what I remember in Bucharest. What the name of the road, Joseph? I think it was Joseph Hada. 

Juliana: (39:02)
He's a very nice personality here. 

Lior: (39:09)
I arrived by mistake to his restaurant and I was, I couldn't stop laughing that there is a Joseph hadad restaurant. And I was like, okay. Yeah, that's a new, that's a new high for me that I found it in Bucharest and I entered it and I actually ordered, I think it was, but it wasn't the traditional hummus, but it was quite good. I must say it was quite good.

Juliana: (39:35)
I need to check to see, Oh God. And I mixed them together. And that's how I make it because I like, I like hummus with pepper paste. That's how I like to eat it. Yeah. That's Oh yeah. Pepper spicy. 

Lior: (40:13)
I didn't taste it. I don't think I had a chance to taste this one. 

Juliana: (40:17)
You might find it in Germany because I think, I think you might ha you might find, you know, my finance cause you have, I would, I would check for it. If not, you know, when flights are big, Bucharest is always on my list. So you have to come in your family and have our babies. 

Lior: (40:41)
Hopefully soon when COVID is over, we can go back to traveling. I'm actually missing it a little bit. 

Juliana: (40:46)
Oh yeah, me too. Me too. Definitely looking forward to great. 

Lior: (40:55)
So thank you very much for a time. I'm really excited. You came on. I think the subject is super important. And thank you for, I hope, I think we're going to come back with Cindy to talk about black Friday. I think black Friday has. 

Juliana: (41:18)
definitely not be an acquisition driven campaign. It should be a remarketing and retargeting campaign on black Friday. Stop looking for new customers and think those customers you acquired six months ago, six months ago is black Friday. This council, they can do that. Second. You're going on Facebook and spraying and praying on a top-notch for. 

Lior: (41:59)
black Friday. I completely with you on this. So until the next episode, thank you very much. Thank you for the listeners. Hit us on like subscribe and of course send us your questions, your feedback. We happy to hear it and until the next episode. Bye bye. 

Speaker 1: (42:30)
Thank you for listening to the, what the data podcast. 

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