Grow Your Business with Customer Lifetime Value - Valentin Radu

We need to take into account customer lifetime value not only from a theoretical aspect but also from a practical aspect like which are the best customers that I have, which get the maximum value from me and that provide the maximum value. Because if you do this type of simple analysis, you'll be able to understand who are your best customers. So that means your messaging, your sales pitch, everything will change because you understand what the heck you are selling.

Plug into the mind of the world's cutting edge innovators, visionaries and thought leaders who are rewriting the rules of sales and success. It's your time to make an impact. I am your host Jason Mark Campbell and this is the Selling with Love podcast. Welcome back everybody to Selling With Love podcast. Very excited to have everyone here where we're going to discuss an essential tool that you can start doing along lot more with to be able to improve the profitability of your business, to be able to care more and make a bigger impact to your clients. Because you start looking at a metric you may have heard before but possibly not have went in depth into understanding its significance and when you do it can absolutely change how you approach business, how you treat clients and how you can scale your business powerfully. I'm talking about customer lifetime value, Client lifetime value and the author of the CLV Revolution Transform your E commerce with value Val Customer value Optimization. We have Valentin Radu who is here. He is the founder of OmniConvert, a digital experimentation tool used by more than 20,000 website work with companies such as Orange Temper, Avon, Whirlpool and many many more. He has had a chance through his academy of impacting more than 2,000 students who are curious about learning more on how to maximize customer value. He's an industry leader, he has spoken to over hundreds of thousands of people at over 500 event and he is here on our platform to be able to share a more around understanding clv what can be done, why it's so critical to pay attention to this so that you operate from a better place of making an impact and not wasting money in the process. Valentin, welcome to the platform.

Thanks a lot for having me Jason, it's really great to be here, looking forward to a great conversation and thanks everyone for listening to us. I promise that I give all my best shortcuts towards having a profitable business.

Well, I warned you before we hit record I was like oh my God, CLV. You know I think about this and my first assumptions are like that's what like Fortune 500 companies do. You know that I need to have like a massive database. And my audience here is like sitting here trying to get their first sales or they're building their basic business. I was afraid that this could be a little overwhelming to them. And I'd be curious to know, when people usually approach you and they're, you know, curious about customer lifetime value, is this a valid assumption or is this some sort of illusion that we need to break break today?

Yeah, I think it's an illusion. Because if we begin with the end in mind, which is the method which any creator, any entrepreneur should be having, I mean, we must envision a bright future, a better future, and then we need to craft that future through our efforts and focus. But customer lifetime value is why we exist, right? If we don't provide the value to our customers, then we will not be able to extract the value from our customers. So we need to begin with the end in mind. Even though we are just starting out, we need to understand what kind of progress am I helping my customers to make and then which are the ideal customers which can extract most of the value from my services or products or whatever am I selling? And if you have this type of questions answered from the very beginning, then you will avoid going into a maze, you know, getting lost and trying to get some money from here and there and trying to survive, because that is the trap. I'm an entrepreneur myself. I've built four companies so far. And I know that you can get lost pretty easy. You know, I mean, instead of going towards a better future, you run from the worst future. So you run from getting bankrupt and whatever. But if you focus on the value that you provide and if you understand that we have this, let's say, oblique way towards prosperity, towards love, right? So we need to provide the things that we want in life. So if we provide the value, we'll extract value. If we give love, we'll get love. That's why we need to take into account customer lifetime value, not only from a theoretical aspect, but also from a practical aspect, like which are the best customers that I have, which get the maximum value from me and that provide the maximum value. Because if you do this type of simple analysis, you'll be able to understand who are your best customers. So that means your messaging, your sales pitch, everything will change because you understand what the heck you are selling.

Yeah, you know, you're talking a lot about the customer, understanding who they are. You're talking about value exchange, where I'm thinking about customer lifetime value, I'm thinking spreadsheets, I'm thinking of things that they're like done in a data science lab. But it sounds like you have a very human understanding of why we need to treat people a certain way, what it even means to be maximizing customer lifetime value. It sounds like it's all about focusing on the individuals that resonate the most with your business, that spend the most with your business, and kind of adjusting yourself towards that. Am I understanding that correctly?

Yeah, for sure. Of course you need math. I mean, it's part of the universe, right? So everything has an order and we need to respect that. But it's also about providing that warmth because at the end of the day, what we are selling, all of us, we're selling a better future, right? So we want to extract more value, more value from what we are paying, you know, so if we take that into account and if we also get this qualitative aspect from our customers, like how they are verbalizing the decisions that they've made, what makes our best customers the best customers, you know, what made them get into the buying habit. You know, if you look at the customer lifetime value, there are simple ways. I mean, if you look at the formula is like, who are your most profitable customers? The ones that are buy the most and the most often. So if you see that in order to get the habit of buying over and over again, maybe you provide something that the other ones are not providing. So you need to understand what makes you unique in their eyes so that they choose you over their alternatives. So that's how I see things. And on the math side of things, it's in order to be profitable, you know, the last unit are the customers and their decision making systems. You want to improve their behavior towards buying from you. So to improve that behavior, you need to Understand out of 50 customers, 10 customers, 100,000 customers, there is always a cluster of customers which are, despite all the obstacles that we put in front of them, consciously or unconsciously, they keep on buying from us. We can identify those customers and then we can replicate and we can use their way to explain to the world why they've bought from you. And if we don't do that, and if we don't even verify that they are happy with what we've sold, then we blast products or services to the universe and we hope that something valuable will come back. But I think it's all about the connection first. So we need to connect with our customers, even though we have 10 or 100,000 of them in the sense of having that small type of connection, you know, to understand what's all about in these relationships. And I think we have to be more humble as entrepreneurs because the progress requires for us to be humble, requires us to be aware that maybe we don't know everything about what we do.

I'm getting flashbacks here. Valentin is like, when I used to work for a company and I remember one of the senior leaders was just like, we don't need to survey the audience. I know what they want. And we've had some launches that we had done where we took the time to truly assess, plan, gain the feedback, and saw the effectiveness be a multiply. And I love how you speak in terms of value value extraction, where for some people, they're like, what do you mean? Extract value? Are we taking from people? But you, you mentioned how it's like if you're solving a value exchange happens, and if no value exchange is happening, that means you're probably not really solving a good problem that's worth paying for. And I think when you start focusing on the people that want what you solve, that pay for what you solve, you're having a profitable business. Now there's this whole philosophy, right, which is build it and they will come, which is not very true today. You have to build what they want and perhaps they will come. And I'd be curious to know because you provide a lot of data like we talked about, how if you get the data, you can start making better decisions. So what I'd love to ask you is when someone starts working with you using your tools, are there typical like. Yep, these three things that people typically find out as soon as they start measuring that they might have been doing wrong the whole time.

Yeah, we have a plethora of solutions. Let's say we have a survey tool for them to talk, you know, to communicate, to get knowledge from their visitors, if it's an E commerce, or from their customers. We have a tool to do a B testing and to test out which message is the most impactful. You know, we have a tool to do customer segmentation to identify, according to Pareto, which is not Pareto anymore, so 20 80, like 80% of your results come from 20% of your customers. I think it's even worse than that. In some business models, you know, it can be like 1090 or 595. So with these tools that we have, what we've understood from our customers is that they have some mental structures. You know, there are some customers, like, obsessed with customer centricity. You know, they want their NPS, let's say net promoter score they want to be 90. We have a customer that started with 68 and he lost a few important customers. He realized that their customer journey was crap, you know, because it wasn't about the product, but also how you sell those products. It's the customer experience in itself. Sometime you go for a lower quality product, but the service is incredible and you do this kind of trade off. So what we understood from our customers after all these years, we are 11 years in atomic convert, is that we have different narratives. Entrepreneurs, business leaders, they have different narratives in their heads. And the most lucrative from my perspective, is the one which is allowing customers to sit at the board table. You know what they are saying, what? What do they want? I mean, what kind of problem they are trying to solve, what kind of progress they are trying to make. And when you understand that, then your culture changes, you know, the tactics, the strategies, the messaging, everything changes. When you understand that the pattern is this. Let me give you an example of some of our customers which decided that they need to shift. So they were selling turmeric shots, like small shots of turmeric, and they thought that their customers are young people willing to have more immunity, to be more energetic and so on. But guess what? Through the research, after we work with them, we interviewed a person. He was a firefighter, a former firefighter, retired, and he used to be active, but now he had joint problems. And guess what? Turmeric is very clear, good for joint problems, and it doesn't have the side effects of the ibuprofen, you know, those medicines that they solve something and they get other things worse. Then we interviewed other customers which were among the best when we looked at the customer lifetime value. So we got out there, we interviewed them and it was another person that used to be a fitness teacher and now he was over 70 and he had the same problems and he couldn't have a normal life anymore. So after this we've seen maybe there is a pattern. And then we did the quantitative surveying of their database and we understood that their best customers were actually over 55 years old. And they weren't after immunity and energy. They were after a normal life, which those turmeric shots, because they were really well made, had no side effects and they kept on buying them, which means for the last three years, that company has messaged the wrong message to the wrong audience, you know, and that was transformative for them.

Oh my God. Tell me more. This is exactly why I love conversations like this. Because some people are thinking like, oh, it's about like you do Some testing, and you'll change a color of a button from blue to red and you'll get improvement. Not to diminish the fact that you can get some marginal improvements from there, but it's these big stories of interviewing people, understanding people, caring for people that comes through data that make you radically shift how you operate. So I'd be curious to know, like, they've probably had to redo their branding, they've probably had to change the messaging, and they've probably had massive results doing that.

Exactly, yeah. So their customer retention went from 40% to 60% just by focusing on acquiring the right customers with the right message. Because improving customer lifetime value, as I wrote in the book as well, is not about fixing something for all the customers you acquire. So it's not like an afterthought. You begin with the end in mind. You begin with the right message to the customers that extract most of the value from your products and services. And then that allows you to have customers that keep on buying more. It was that thing from Desmond Tutu. It's a nice saying, we need to stop saving people from drowning. We need to go upstream and see why they fall in the river in the first place.

Oh my God, that's so true. I feel like using this drowning analogy, it seems like for a lot of entrepreneurs that are just like operating the business, you're spending money to acquire customers, you're doing promotions, you're paying to acquire customers, you're getting a few customers and it's like you're helping them from drowning. And you get into a cycle where the company kind of like operates with little profit margin. You can generate revenue, but the profit doesn't seem to be able to unlock because the more you grow, the less the profit. And like, there seems to be a bottleneck where you're talking about saving people from drowning. But it seems like in the process of scaling your business, if you're not paying attention to this, you're the one who's getting caught in the waves now and you drown yourself and trying to out compete and to figure out what to do. And you know, I started this conversation thinking that, wow, people with really small businesses must have a really hard time with customer lifetime values. But it sounds like it's more for mid market and larger organization that get lost in the noise of data as opposed to those who are directly connected with who they sell to.

Yeah. After building those four companies, I feel like I've been lucky without knowing what I know right now to be so open to feedback from Our customers. And I think that what saved me from going bankrupt many times, you know, that's an incredible ability, the ability to listen truly lesson and not marketing, not market to the audience. Because companies must do the same thing as human beings. We have two ears and one mouth to listen twice. Then we talk. But most companies keep on talking, you know, keep on blasting their audiences with messages, sales pitch, whatever. Even in, in an, in a B2B environment, you have to first lessen how they verbalize the problems that your prospects have before coming out with your sales pitch around the extraordinary features or success stories that you have. Because again, even though we use a lot of words in order to resonate between two individuals, between a company and thousands of customers, we have so little time to be impactful. And that message should be simple because people are not wasting energy on deciphering complicated things. They have a pain. And you need to articulate the fact that that pain, it can be solved. You have that solution, but you start with the pain. So when you do marketing, when you do sales, you have to start with the struggle that the customers have. Because if they say yes, that's who am I? That's the problem that I have. If they recognize you as you becoming aware about their pain, they instantly, instantly identify with the solution provider as well. Your sale is done already when you do that.

So what is it? Express the problem for your clients better than they understand it themselves and you will be ready with this person that's ready to make a transaction with you. And so I'd be curious to know because I look at the software you have and it seems very enterprisey. And when I look at a lot of like tech platforms, and I'll take one that I feel might have been a student of yours in some capacity, I'm thinking about SurveyMonkey and I want to be very clear. I do not like SurveyMonkey. I really hate it. Okay. And it's not them, it's me, right? I feel like SurveyMonkey has been a tool that I've signed up to and they had a lot of complexity, complicated billing cycles. I wanted to just use some low tier stuff. But it seems like what they've designed was for these enterprise customers. And I was like, oh, I'm not really happy with this platform, but I wasn't spending that much with this platform. And it almost seems like they've made the decision. They were like, yeah, the guys like Jason that's using us just a little bit, they don't make a lot of money. So even if I'm not a happy customer. It's okay because they're probably making so much more from an enterprise company that's using the full capacity of what they provide. And the reason I share that story is because I've often seen getting drowned in trying to listen to outliers who are very loud but are not giving you a lot of money. And it makes you do some business decisions that start to optimize for people that aren't even giving you money and maybe even alienating your high value clients. And so is this a common theme for companies at various cycles?

Yeah, yeah. I think there are companies placing their bets elsewhere. So you have these decisions to make. But when everything gets corporate and everything becomes only about EBITDA and profit and whatever, the former customers that maybe contributed to the growth of the company are getting left out. They get ignored. And at the end of the day, Jason, we have to empathize with the fact that we don't know what's behind. Maybe there are some political corporate fights there, maybe the founders have lost control of the company, maybe the investment banker stepped in. We don't know. And what we do know is that we have to provide our best. And I think it's an important aspect here which often gets neglected. It's a principle that we can't ignore. There is so much competition out there. There is such a crowded market. You have so many solutions to your problems. There are so many competitors, direct competitors or indirect competitors. Like take us for instance, we sell a lot of products. We sell an ENT NPS product, we sell an A B testing product. There are plenty of alternatives. However, there are customers that choose us over them even though we are not the cheapest on the market. And we're seeing this happening. And that's basically the idea behind the chance that you have when you have a prospect, when you turn that prospect into your customer. You need to understand that you have to check if that new client is a happy client. Because if it's a happy client, you have higher lifetime value from him. And there is a residual customer lifetime value as well, which happens because that customer can become a promoter, which means free advertising, like the most effective and the cheapest form of advertising is word of mouth. That's again an underrated technique because people are fluting to pay their tribute to Google Ads, to Meta and to TikTok or whatever ads ad platforms they have.

We laugh sometimes in an organization that I'm part of which is like, well, the biggest winner of all this business is Zuckerberg.

Yeah, exactly.

I'm curious to know from you just because, well, maybe there's some people are going to relate. But how would you define. Because you've done the research, you've built your platform. So with the knowledge you have and you think of your best type of clients that bring the highest customer lifetime value, how do you describe them? Who is your client?

Yeah, our ideal customers are open minded ones. So they need to want to change their ways because change is what we're selling, right? We change the way they handle their customers, we change the way that they present their offer on their websites. We are about change. So our customers are usually the ones looking for solutions, solution towards change. So they are either going for customer experience because they know this thing that I've just said about residual customer lifetime value from your promoters, or there are customers into experimentation. So they pay a lot of money into ads, into doing lead generation and whatever and they realize that hey, my website can be changed, can be adjusted and we can generate a higher conversion rate. Our best customers, they have at least 50,000 visits per month when it comes to the A B testing tool. And when it comes to the NPS, there is no threshold because even if you have 100 clients or 20 customers, you have to check their customer experience. You have to get feedback from them.

You've mentioned NPS a few times. We've actually talked a lot about NPS in some past episodes. The Net Promoter score. The standard question is on a scale of 1 to 10, how likely are you to recommend this product or service to friends and family? That gives you a really good indication if you're generating raving fans and promoters or an army of disgruntled clients. Are you still seeing this as one of the main indicators to optimize around, to ask questions about, to help you identify who are the people that bring the highest customer lifetime value?

Yeah, for sure. We have large clients, for instance, which have thousands of customer feedback. We've added a new feature around the natural language processing to get direct responses and to understand what they are selling, what their customers are saying. Because now what's happening is that you need a shortcut as business leader. Let's say you have 10 employees, 20, 200, whatever. You lose the connection between yourself and your customers. And with these type of tools with NPS you can aggregate that feedback, but you also can track the main issues that they are reporting so you can get what's wrong within the company and what harms the relationship with so many customers. So NPS is an amazing tool as Long as it's not taking only as an average that needs to be tracked. You have to fix what's broken. If you don't fix what's broken, you even worsen the relationship with your customers. Because imagine, Jason, that you've bought something from me. I'm asking you how was your experience from 0 to 10, whatever it was 2. And you tell a lot of stories there about why it's 2 out of 10 and then nothing. No response from my end. And many companies do this, I mean, they ask for feedback and they have unhappy customers and they keep on not saying anything, which is worse.

I feel like this is the equivalent of like coming home asking your spouse, just being like, hey honey, how was your day? And she's like, oh, I've had a tough day. And you're like, sounds good.

And you walk away.

That would make you a terrible partner. Okay, I want to unpack one part of this because what you're saying so far, I'm hoping for people, what you're taking away from here is like we talk about customer lifetime value. It is looking at data, but it's looking at the right data to make you have better human to human connections with the people that are worth listening to because they truly get value from what you provide to them. And what I want to dissect from that because I find the most intimidating part of anybody who's speaking of this metric is a lifetime. Like lifetime value is like, how am I even supposed to measure that estimate that particular. If I'm in the early stages, it seems like a metric that's so over, like projected into so many different assumptions that I would decide to just ignore it. And I'd love to hear what would you typically prescribe or suggest if somebody's feeling that kind of like, well, lifetime value. I'm just trying to make my first sale and build my initial business.

Yeah. Let's say, Jason, that you've made your first sale and your first sale is like a one time product. That's it, that's the customer lifetime value. Yeah. From that product you extracted some margin. So all you have, it's one customer. So you can't deduct what the customer lifetime value will be. But once you have 10 customers, once you have five customers that bought different services with a different purchase frequency, then patterns start to show up. So you can project that down the line. The more customers, the more orders they place, the more data you have, the more data you have and the more you can look at the margin, not at the revenue because customer lifetime value takes into account either the gross margin, either the net contribution margin. But I'm not getting into that. The idea is that you can forecast this based on the purchase frequency and based on the number of customers that placed another order, which is the customer retention rate. So knowing this, you can extrapolate and you can say, well, throughout an entire year, our customers placed on average 1.4 orders. So we have 100 customers that placed 140 orders. And the margin is like this. So knowing this also gives you the, let's say, lifespan. So how much, if you have X customers being churned every month or every year, you can forecast when the company will run out of customers. Right. And when the customers will disappear. Because that's how much they've been spending with you. And knowing that allows you to understand how much you can pay to acquire a customer, how to price your products. You know, because it's math, again, it's the balance between customer lifetime value and customer acquisition cost. And knowing that allows you to basically adjust and strategize properly instead of shooting in the dark. I bet that 8 out of 10 entrepreneurs don't know that. They don't know how much they could be spending. So they are either underspending because they want to be profitable from the first transaction, from the first customer. And I get that because they don't have the cash flow to justify that. But some of them are overspending, so they spend too much because media, whatever, and they don't know when they will be getting this money back. It's, again, it's pure math, is not that complicated as you think it is. You can put it in an Excel file. 10 customers. This is the total revenue so far in a period of three months, six months. So basically, with this type of projections, I do believe in intuition, but I'm also very analytical. So I think both of them should work hand in hand.

Well, I'm hoping from this conversation that a lot of listeners here, which are typically more intuitive inclined, are going to make sure that they are also doing a validation with the analytics that are possible. And again, I want to encourage everybody tuning in here, if this is something that is resonating with you, you are seeing that perhaps you need to bring a bit more data into your business to make the decision so you're not listening in the wrong direction to change your business in a way that's not aligned to who recognizes and values your value the most. Which makes you more profitable, makes you more revenue, makes you attract more of the people you enjoy working with then I really want to encourage you to pick up the CLV Revolution. Transform your e commerce with customer value optimization. As Valentin shared today, yes, the data is there but it doesn't need to be over complicated. It's really about human to human listening to the right people and taking the appropriate steps to see what kind of major changes you can do in your business if necessary that will actually make you stop from drowning and trying to get new customers and listening and taking chances everywhere but truly focusing on what matters and making the actions necessary to scale the business to the next level. I'm very, very curious to explore a lot more about your tool. And so for those who are feeling compelled to look at OmniConvert, it's an amazing e commerce store. As we talked about NPS score survey and a B testing and so much more. So we're going to put a link to that into the show notes so you can go and explore more. Valentin, I'm not letting you go. Before I ask the question, I ask all my guests who do come on the show and I have to ask you, you're on the Selling with Love podcast. What does selling with love mean to you?

Wow. So selling with love means selling being aware that the other person could be someone you love. And that means providing something that truly helps them make progress in their lives. Because I have this memento mori, you know, and I realized that when I'll be very old and I look back, I will remember and I will be aware about how many people I loved, I helped and what was my impact in this life. Because you can't take anything with you. And at the end of the day, I think we're all fighting the same wars, we have the same problems. And selling with love means making sure that those customers will make progress thanks to the services or products that you're selling. And by the way, that's why we don't serve companies which are selling guns, which are selling adult products, stuff like that. So basically we have some industries that we don't work with because we don't align with them when it comes to the values. So I think we should be not fooling ourselves into this illusion that we are making progress by smoking, by getting dependent on some harmful things. But we should be a force for good in the lives of others. And that's why I think we should be reconsidering our, let's say, careers or businesses if we don't truly help those customers of ours become better.

Valentin, you are amongst a good tribe here. Thank you for all the amazing work you've done. I know you've had so much success in big organizations and when you keep that, that value in heart, we know that you're allowing entrepreneurs and businesses that are forced for good to use your product and maximize their impact. Just so you know, the whole selling with Love premise is the fact that for me, what I want to do is give the good people with good businesses that do good in the world with the tools to sell and market effectively so that there is no marketplace for douchebags who take advantage of people. And so it sounds like we are cut from a similar cloth. And I'm happy to hear about your stance on the negative industry. It was an absolute pleasure having a conversation with you. I hope for everybody listening you're going to be able to take away again. Biggest thing here. Listen more. Do what's right for the right people will allow you to optimize your business. Pick up the CLV Revolution. You'll be able to learn so much more on the math behind it and make sure that all of your gut predictions can be validated and the decisions actually work. Thank you once again for being on the show.

Thank you as well, Jason.

I am your host, Jason Mark Campbell, and this is the Selling with Love podcast.

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