The Importance Of The Customer Value Optimization w/ Valentin Radu - Ep - 414 - Lunch With Norm

One of my groups that I belong to, they were saying that just ask a question, you know, the overall experience, ask a single question and gauge that based on a seven and anything above a seven. Anything below a seven is a fail. Everything above a seven is. Is great. Hey everyone, it's Norm Farrar, AKA the beard guy here. And welcome to another lunch with Norm, the E Commerce and Amazon fba. Little cough there. Today we're going to be discussing the importance of customer value optimization or CVO methodology and the actual reason why E Commerce companies fail. How to increase the CVO and, and how to decrease and how to decrease customer acquisition costs in 2023. All right, welcome to another lunch with Norm, the E Commerce and Amazon FBA podcast. Perfect. As mentioned, we're going to be talking about CVO and the importance of the CVO methodology. Our guest is CEO and founder of OmniConvert. He has gone through various jobs, companies and entrepreneurial ventures before identifying customers, real needs and defining the perfect go to marketing strategy. He is now a customer value optimization evangelist and international speaker, defining a new category and assisting retailers in their growth. Welcome today, Valentin Radu. And before we go to Valentin, let's have a word from our sponsor. I want to give a quick shout out to an incredible group of sponsors today to help keep this podcast running. The Lunch with Norm podcast would not be possible without the support of the following sponsors, Post Purchase, Pro, Clear Ads, Jeff Schick, Law Rebate.com, honu Worldwide, Digital Blacksmiths, Netfluence, Extreme Power and Startup Club. Now back to the show. Welcome, Valentin.

Hi there. Hello there, Norman. Thanks a lot for having me today.

Hey, you're welcome. Yeah, you know what? I just hit me. I'm just wondering because usually we have a bunch of people that are having comments and I thought it's prosper. Everybody's waking up in Las Vegas right about now or they went out last night. So this just limits the chances of people who are going to win the giveaway. But on that note, this topic today is probably going to be a very popular topic for people to listen to on a podcast or in our social media. So if you're not live today, you missed out on it, right? But I think it's going to be a very well received podcast. So why don't we just get into it a bit first? I'm kind of curious, like I read your bio and, you know, understand what you're doing, but how did you even get into something like this?

Well, it's. I got into something like This, a long time ago when I, when I was doing this type of sales, direct sales, I was selling chef cookbooks, right? So the, I was having this temp job, I was 17 years old. And I've started to adapt my message so that I can persuade customers into buying this freaking cookbook because I wanted to, I wanted to go on the, at the seaside with my girlfriend. And I've made this type of ongoing optimization of my messaging and whatever. So at some point I realized that it's some customers are more important than others because the chances to sell to someone are way higher if you calibrate your messaging to the target. For instance, I was selling these cookbooks to old ladies trapped in the bus station with their nephews. And that was the first time when I understood the power of focusing on the right customers. Now, joke aside, after that I've built four companies and my third one turned out to become the largest online car insurance. Here in, in Romania we had 250,000 customers and I've made it thanks to the data analysis. So I've understood who are our best customers and what makes them come back to buy again over and over again. And thanks to this type of knowledge, I've built OmniConvert and now we are focusing on customer value optimization. We help more than 3,000 companies already to understand their best customers, apply the segmentation method and of course decrease their customer acquisition cost as their customers come back to buy again more often.

Well, I'm kind of curious, why don't we just jump right into this? So how do you increase customer lifetime value in e commerce? Like using, using the cvo?

Yeah, yeah. So the first thing norm is that we need to understand what, it's what customer value optimization means. I mean the pillars CVO are free ones, right? So do you. We have. In order to increase lifetime value, we need to focus on what you sell as a company. So means the products, the products can improve customer lifetime value or decrease customer lifetime value. The second is what you say, which is the marketing. If you set the right expectations and if you have the right messaging throughout the customer journey, then you can increase lifetime value as well. And fourth, last but not the least is what you do, which means customer experience. So how you treat your customers increases their chances to come back and buy again or not. So basically, in order to increase lifetime value, we need to understand where is the problem of customers that don't come back to buy again. Is it a product problem, is it a marketing problem that we are not persuasive enough and we are not letting them know about the fact that they might need another hand cream or whatever we are selling. And fourth is, are we treating them in the right way? And once we know that, in order to know that, the first step is always to ask the customers. Because data, the quantitative part of the data is showing just one side of the story. Having enough responses from customers that are getting through all the barriers that you put in front of them consciously or unconsciously. And once we know what made them stop buying or what made them continue to buy, will allow us to understand how to calibrate the customer journey and increase lifetime value. And that's of course just the overview. We are just scratching the surface of CVO with this, let's say overview.

I think this is one of the most important topics out there and there's not a lot out there about this. So let's, let's go back and talk about at the very beginning, you've brought up a few points there. How do we even start getting into this?

Yeah, so the first thing is that we need Net Promoter Score. I'm a big fan of Net Promoter Score, but not of the average nps. So every, every company out there is asking their, their customers what are the chances to another order from us? Unfortunately on Amazon you can't do this, but there are some workarounds as well. So you can do like package inserts with some QR codes so that you can build your own email list. So you can still do a few things out there as well. But on a normal E commerce, let's say on a company that has a direct to consumer channel, you can trigger this type of emails on two important moments, pre delivery, which means on the thank you page. Because when someone is buying from your company, they are not buying the product. They are buying the promise of a better future with your product. So you need to know first if your website did the right job or not. And then is the post delivery NPS which you are triggering after the customers got the product in their hands and they've used it or consumed it for the first time. Because knowing the, the, the differences between the pre delivery NPS and post delivery NPS will allow you to understand what is the expectations gap. Right? Which means in, in plain English, you know, if you've did you, you've done your job or not. So basically it's allowing you to see that you've set the expectations of 85 and you've delivered of 61 and that's bad, right? So if, if this Delta NPS is so low, it's clear that this is really bad. Now once you have this NPS in place, you will also have the follow up question which means you will know which are the main issues that the customers are facing. And also based on this type of feedback, you will know if you have a product problem, if you have a marketing problem or if you have a customer experience problem. Of course you can have all of them, but the product problem is the most painful because it's the hardest to fix. Right. It all starts with the right product. If you don't have a product that delivers enough value to your customers to make them come back, then you should go back to square one and to find the products or to fix the products that you're selling.

Very good. There's so many little things now you mentioned like for Amazon, okay, so the inserts and there's a few different things that you can do and how it could be different. So let's say you're direct to consumer. So your D2C on Amazon, does this change if you're a wholesaler selling into retail?

Yeah, there is a, there is a difference between if you're a wholesaler selling into retail chains or it. There are still some things that you can do so you can promise something on, I don't know, on the package of the product. There are some, for instance, there are some things that some companies are doing. They attach those little stickers, you know, that are detachable on their product because you want customer feedback. So you want to know what is the feedback from your customers in order to improve. If you're on Amazon, you can do these package inserts or if, and if you're a direct to consumer that sells on your own channel, on your own E Commerce, that's way better because you have multiple touch points. You can use sms, you can use email, you can use, I don't know, even direct mail to get in touch of your customers and to find out if they are happy about your product. Because that's the growth flywheel. You invest money, you acquire customers for the first time, then if they are happy, they advocate for you, they become your brand evangelists and your customer acquisition cost is going down because you've achieved the network effect. That's the wet dream of any E commerce leader out there, right?

Yeah, and I can see that. However, I don't know if this has ever happened to you. So you buy a product and you now either you've scanned the QR code and the product or the company now hits you With a customer survey and you start answering the customer survey, they don't tell you how far along in this customer survey that you're going. But now you're getting into five, 10 questions plus. And I've seen many that have gone over 10 questions. That is a huge turnoff for me. Like I'm okay, I love the product, I love the customer experience. You're asking me for my opinion.

Sure.

And then it's what did I get myself into? So, you know. Yeah, I think you really have to be careful on that. In fact, one of my groups that I belong to, they were saying that just ask a question, you know, the overall experience, ask a single question and gauge that based on a seven and anything above a seven. Anything below a seven is a fail. Everything above a seven is, is great, but just base it on that. And I thought, wow, that's, you know, that's really kind of a cool idea. And then the other thing, one of the things to, to increase that customer experience on delivery is and get that overall customer is the add on. So either you're putting something special into the package or when they finish that questionnaire now you can send them off something that they never expected. You're not saying, oh, here's a 10 off coupon. But you know, here is a something that goes along with your product. So for me I sell soap, here's a soap dish. And then it just comes and it's wow, you know. So I don't know if you want to expand on that for a bit.

Yeah. So the, the, when you are doing surveys as you've, as you've addressed it, Norm, it's very important to not to become a burden, an extra burden holders of your customers. So because otherwise your response rate is going to be low. Even though maybe you will have some crazy customers that will respond to all the questions and spend 25 minutes on that. But the whole idea is to make it very easy for them to respond. And that's why with the NPS you simply have the scale from 0 to 10. What are the chances to recommend us? And then an open ended question which is the key here. Yeah, if they don't want to fill in anything there, they simply send the, the survey and you can do other follow up questions once you understand which are the main themes that you, you want us, you want feedback from. But don't go more than five, six questions. At least from my opinion you can have. We have Companies that have a 65 response rate from the all of their customers and we also have companies that have only 5, 6% from all of their customers. Of course, the more responses the better because that gives you an accurate overview over the how customers are perceiving your. Your company in the entire customer journey.

What do you think about sending out a question? So the first question is now you have their email address and then you send out a second question a little later on and a third question so you can start building a profile. How's that? What do you think about that?

Yeah, that's great. It's called progressive profiling through zero party data. You can do it. For instance, we have companies which are using this type of technique. It's a pet shop from Australia. They are building this through different surveys throughout the orders and throughout the touch points that they have on the, on the website. For instance, do you have a cat or a dog? What's the name of the dog? Is it sterilized? How old is the your dog? And based on that, you have a lot of data points that will make you extremely relevant. I mean imagine that you have an email from a company with your dog's name.

Yeah.

Asking something that is Merlin, which happens to be my dog. Still misbehaving because you know, what are the issues? We know your dog's name and then you have the perfect food or treats for the bad behavior of your of your dog. So it's a fantastic way to have relevant relationship with your prospects and with your customers.

So today if you joined us a little bit later, we're talking about customer value optimization. It's such a key importance to, you know, building up a strong customer relationship. So just like Valentine was talking about. Valentine. Is it Valentin or Valentine? I should ask at the beginning.

Valentine.

So I said it right the first time. So Xnay Kelsey, the editing on the last one. Anyways, as you're saying like this progressive profile, I love it. Because if you can like you said about the dog. Well, you know certain dogs. So my son has a mini Aussie which acts completely different than my dumb dog, which is a golden retriever. And you can now like you said, I didn't even think about that until you said it. Work on personality traits. Is your dog doing this or how to solve this problem. And as you're doing it, you're continually building and segmenting a perfect list for these types of dogs and these types of dog owners. So what other type. If I'm thinking about customer value optimization techniques, could you give for towards a D2C business?

Yeah, sure. One important aspect is to understand the power of Lifetime value. Yeah, because if you know how much you can get from a customer throughout the entire lifespan, you also know how much you can spend to acquire that customers that that type of customer. But the beauty is that you can look slice the data and you can look at lifetime value by channel or lifetime value by segment of the customer or lifetime value by the category of the first bought product. For instance, if I'm buying the first time, this particular sku, what's going to be the lifetime value? Looking at my own data. So knowing these type of aspects will allow you to calibrate your marketing budget and your merchandising according to that. So for instance, let's look at the lifetime value by RFM segment. Yeah. RFM stands for recency, frequency and monetary value. It's one of the best ways to segment your customers in retail. The beauty of RFM is that it's not only showing you what is the lifetime value by segment, but it's also showing you what is the lifetime. That what? Which are the customers that have a high lifetime value and they are still active or some customers which are about to dump you, as we call them, or ex lovers. Right, Customers with a high lifetime value but low recency score. So these are customers that used to buy from you over and over again and now they are gone. And for last but not the least, the Don Juan's right, one night standards as we call them, they bought once high lifetime value, but one year after they are still not buying from you. So knowing this type of clusters, this type of segments and looking at their lifetime value will allow you to calibrate your marketing messaging according to the relationship that they have with your company. So instead of one size fits all discount, everyone come back, you can understand and send messages which are relevant to them. Right? Because you know also how much you can spend with your incentives if you want to use commercial incentives to, to, to get them back. And that's only by slicing the lifetime value by the RFM segment. Yeah, that's one way to, to do it. Of course.

Is there.

Yeah, please, Norm. Sorry.

Oh, sorry. Is there a simple formula to find your lifetime value?

Well, there is a formula. It's not that simple, but I can share it. Of course we, we are doing this automatically with our software, but if you want to do it manually, it goes like this. So first of all you need the gross margin, then you need the lifespan of the customer. To find the lifespan of the customer, you need to know the customer retention rate and the churn. So usually the lifespan of the customer is one over one minus the customer churn. Right. So one one over one minus the, the customer retention. Yeah. So you have these terms gross margin, lifespan of the customer, purchase frequency. Yeah. So once you know all of those things, you will be able to calculate that. The alternative of course, is to have software which is doing this automatically. We are one of those companies hypnotized about lifetime value in retail. There are others as well. The, the idea is to understand which are the levers that you can pull to increase lifetime value. So you can either increase gross margin and which means the AOV selling other products, pushing other type of SKUs. You can either increase the purchase frequency, which means doing different onboarding initiatives. Right. To, to, to persuade your customers after the first product that has bought to understand what kind of progress they are trying to make and to come up either with the same product at the moment when they need to replenish either with ancillary products that are relevant for the job to be done by their products. And last but not the least, you can increase lifetime value by coming up with better marketing messages. Right. As I've told you earlier, there are these type of steps on the customer journey. So when you feel, when you are sure that the customers is in the danger zone thanks to the RFM segmentation boom, you come up with a prevention campaign or when the customers are already gone, you don't let them churn, but you come up with this type of ideas like reactivation campaigns once they are in the gun phase, let's say.

Okay, so we're getting towards the bottom of the hour. First of all, I want to say hi to Luke. Christine, nice to see you back, Tony. And where is Claudia? I saw her up there earlier. But thank you so much for joining the podcast today. If you've had anybody else who's not commenting, who's listening right now, if you've had any of these experiences, what have you done to increase the lifetime value of your customers and retain them? Just kind of curious what you're doing or if you've never done it and why not. Now the other thing again, going to the bottom of the hour. It's time for at least to let you know about our giveaway today, which is awesome. It's a thousand dollar value and I, I'm going to let Valentin talk about it in a second, but hashtag wheel of Kelsey. So Luke. Yep, get it in there. Hashtag wheel of Kelsey. Tag two people and you'll get a second entry. So Valentin, why don't you talk about Your very generous giveaway today.

Sure. So, Norm, I've been in in e Commerce since 2005, and I've learned a lot of things. And at some point, my team needed training. My customers were asking a lot of things. Like you've asked. Right. What is the formula for lifetime value? How to do this, how to do that. And I've said to myself that this is the time to democratize the concept of customer lifetime value, because A, it saved my business, and B, it allowed us to scale dramatically. So after we've focused from conversion rate optimization, where we have a product which is already mature, we focused on customer value optimization. Our business doubled in only two years after that moment. So we've built an online academy called the CVO Academy. And there we have the main course, which is having a lot of knowledge not only from me, but also from other practitioners and professors in the field of customer experience, like Carl Gillis or. Or Jobs to be Done methodology from Bob Mesta. Bob Mesta, it's one of my mentors, an incredible human being, and one of the pioneers of the Jobs to Be Done methodology that helps people understand why customers are buying. Yeah. What is. What is causing them to buy? Not what they are buying. Yeah. What's the shallow understanding of why they are buying? And we also have their Val Geisler. She's the chief evangelist from Klaviyo, the. The email marketing system. Also, Dennis, you, which is a. An author in the acquisition. He's one of the best people I know in the acquisition space on Facebook ads and Tik Tok ads as. As well.

Sounds like a great lineup. So the giveaway is the course, and it's worth $1,000. So if you're interested in learning and expanding your horizons on cvo, check it out. Hashtag Wheel of Kelsey Tag. Two people get a second entry. Whoever gets this is going to get a master, I'm going to say a master class in really scaling and understanding your customers. So really excited about this. Okay, so now let's have a word from our sponsor and we'll be right back. I want to thank Jeff Schick Legal for sponsoring this episode of Lunch with Norm. You've probably heard on the podcast about Amazon suspensions. They're very real. It can happen at any time. And when it does happen, how do you get out of it? How does the little guy like you and me get out of these suspensions without paying an arm and a leg in legal fees? This is where Jeff Schick Legal is here to help for a very Low monthly retainer for only $89. Get access to Amazon attorney Jeff Schick. That's right. You can sit back, relax, enjoy that cup of coffee while listening to the Lunch with Norm podcast, knowing that you have an advocate and a partner in your business success. But wait, just mention Lunch with norm and receive 50% off the first two months. Get the protection you need and visit jeffshick.com today. That's J E F F S C h I c k.com now let's get back to the show. Okay, so I see Claudia just asked the question and that's what I was just going to say. If you have questions, get them in. This is, this should be something that there should be a ton of questions. This is so important. And again, it's not really a topic that we talk too much about. So get your questions in early enough. We're going to go up to the top of the hour and we'll be answering them at that point. Okay. So coming back, I'm going to ask kind of the opposite of what we were talking about before, but how do we decrease our customer acquisition costs nowadays?

Great question. So first of all, it's about becoming way more relevant. So the first thing is that I am going to suggest to our audience today is to understand their customers better because there is a thing which I call the holy Trinity of acquisition. So we have the product that we're selling, we have the creative that we're using. Right. Which means the message that we're using. And then we have the target on what channels? Who are we targeting with our message? Now, at this particular moment, most of the companies are tweaking their bids. They are focusing on the ad networks that they are using and they are disregarding the other two components, which means what are the products that we're selling and what kind of messages are we using? And in order to decrease the customer acquisition cost, the first step is to understand your customers. Bet. So customer research is that neglected part of marketing. And by the way, marketing is not advertising. Yeah, marketing means knowing your market. And to do that, you need to do a deep dive into your customer data and to go there and to do this type of interview. So I'm a big fan of the jobs to be done methodology because I've seen it work for us and for our customers as well. Let me give you an example. One of our customers, harsh blankets, they are selling weighted blankets. They thought that they are selling the cuddling feeling. They are selling this as a present for Christmas, like a blanket, which Is, I don't know, giving you this cuddling effect. After doing the jobs to be done research with their customers, they've understood that they are selling. It's a serious perceived alternative to insomnia. Yeah. So basically they are not competing with other nice cuddly feelings blankets. They are, they are competing with sleeping pills which have a very bad side effect, which means if you get the sleeping pills, you get knocked out. So once they've understood that their messaging was different. So could they understand this by tweaking the bids on Facebook ads, by coming up with all sorts of creative ideas? I bet not. So the idea to include, to decrease customer acquisition cost is to understand what are you really selling. And the jobs to be done method is showing you exactly that. And that's by the way, a part of the CVO academy, the whole module, which is being taught by, by Bob Mesta, which is one of the pioneers of this, of this method.

Well, that sounds fantastic and it definitely, what a great example with, with Hush and you know, you could take that and it's understanding that, I mean if you don't understand that part of the, the business, you could be spending a lot of money, you could be wasting a lot of money. So where would somebody get, or how would you get started doing this? So I, I know that this is your company, but I'm an individual. So let's just take an example. Claudia. I see Claudia is listening today. She's got a product that she wants to bring to market. How does she get that kind of insight to understand what you were just talking about?

Yeah. So if Claudia has some competitors, let's say when, when you are selling a product, you, you are, you are sure having products that you, you could, you could be a replacement of. And knowing this type of, having this type of data is going to be much more easier to do this type of interviews with customers from your competitors. Right. So when someone is buying, I don't know, a hand cream or whatever, once you get in front of these customers, because you don't need like hundreds of responses, you only need 7 to 10 interviews in depth interviews with customers so that you understand the struggling moment. So when you do advertising, you need to advertise not for the gains but for the pains. Because when we change the behavior. So when we say, yeah, no more, I don't want this phone anymore, what we are really saying is that it's, we've had enough. There were many moments throughout our experience with this phone. For instance, in my case, when I've got it was 4pm and I was, my battery was done and I had to call the, to pick up the kids and I there, there was no way to, to get them because this freaking phone wasn't working. Yeah, so that's the struggling moment. You have one of that, you have another of that. And at some moment you've said you've turned, you are turning from passively looking for a phone to actively starting to look for phones that have more than 5,000 milliamperes batteries. So that's, that's the buying journey. So Claudia, what she can do, she can look at what kind of products am I selling? And then she can interview people which are buying this type of product in your own network. Right. So maybe you can have some people, friends or relatives or acquaintances that are buying the product that you are a replacement of. So once you know that, you go out there and you interview those customers to unpack when they've decided, yes, I'm buying a new cream, I'm changing my car, I'm changing my phone, I'm switching from a bad solution to this new solution. Because the products are basically bridges from a struggling moment to a desired outcome. So in order to sell this bridge, you need to know from where to where you are transporting your customers.

So interesting that you mentioned about, you know, talking to your customers. Yeah, talking to your customers. You're the second person in less than a week to say talk to your customers, to understand them, just give them a call or. Yeah, literally the, the last person that was on here was talking about picking up the phone and talking to them and having a set group of, you know, five to 10 questions. One of the things that we do with some of our clients is we have something called Marketplace Reviews. And this is a service that Rob Burns has. Anyways, this is where you go out with a set group of questions. You have your product with you, and these aren't customers, but you can go and have. It's almost like a focus group. They're walking along, they have no idea. They come in, they see the package. What are you expecting? What is the scent? Do you like this? And you can interview these people, these prospects of your product, and get a really good idea of, you know, these questions that you would be doing, reaching out to people who've already reached or bought your product. But that type of personal relationship is key. And if you miss out on that, and I don't know if you'll agree with me or not, but if, if you don't have that type of relationship with your Customers, you're missing out on something because like your example with the insomnia and hushed that would never have been figured out probably without some sort of focus group or going and talking and targeting that so very, very interesting that it's happened twice in less than seven days that two people are talking about reaching out. I know Sean Hart does this too. You know, you got to get out there. He said if, if you don't even just video, do a quick video thanking the person and asking them to give them feedback. There are lots of ways of doing it. But now I, I want to talk about consumers, consumer behavior and how that is different or yeah, probably how it's different. With E Commerce.

You're, you're asking about consumer consumers in retail. You, you mean versus yeah.

Based on like consumer behavior in retail. Can like so be you know, B2B or it could be consumer, not B2B but direct consumer through E Commerce.

Yeah.

So is there something difference between somebody buying on Amazon and the Walmart marketplace other than going to Neiman Marcus?

Yeah, I, I think one, one important aspect is when you make this decision, let's say you, you are, you're, you're an entrepreneur or you have your own brand and you, you want to consider going on Amazon or other retail chains. That's, that's a great decision. I, I strongly support it. What I, what I am, what I would be reluctant is to focus on the, on selling products on other marketplaces before having product market fee. And in order to reach product market fit, you need to understand if you have customers that have a purchase frequency which is higher than or at least in the average of the benchmark of what you're selling. So what I mean by that is let's say you're selling coffee. If the purchase frequency for coffee is that people are buying online on e commerce every five times and you have 2.4, then you are in trouble. So not expanding to other marketplaces is not the moment because your product is not good enough. And you need to know why is our product not good enough? Of course, if you have an established brand and you have made the direct to consumer work, the next step, the next valuable step is to expand through retail chains. I'm doing my, in my podcast last week, I've had the rancher which got his brand from $0 to 40 million in turnover in just four years. And he said that he is now at the plateau. So he just need to go on Walmart and that's why he's going to expand through Walmart. And Amazon from July and August this year. So the idea is that you, the marketplaces, the, the, the, the retail chains are a solution to level up your, your game. If you are just entering on Amazon and you don't, you don't, you haven't validated with your own direct to consumer, the chances are that you will pay a lot on Amazon ads to get in front of customers. That will not be good enough and you will not have the validation that your product is the problem or if your marketing is your problem or your price is the problem. So mainly that's how I see this debate over going through retail chains or not.

So one of the things that I would add to that is think of it. So we're all sellers, but put on the other hat and think of yourself as a consumer. So going down and walking through a retail store, you have to stand out some way. Whether it's placement, you know, or if it's packaging, you've got to do something to stand out, to really grab that attention. Then you've got a lot of marketing and advertising that backs that up. With Amazon, we don't have that same budget as larger brands. We're micro brands. And what I think might be a difference too is that you have to do a few things outside of listing optimization and, and ppc. But what do you, what do people do? So they go on to an Amazon site or a Walmart marketplace, they type in what they're looking for, they see the search results come up and I don't know about you, but I take a look at the top ones that come up, probably like everybody else, click on it and then go and see if I can find them on the Internet. So do they have social media? Do they have any like anything that builds authority? What does their website look like? So I think these are all things too that are different for a consumer than going into the retail store and already seeing the brands that have advertised and they have these bigger budgets that are on television for the most part. On television, maybe advertising on the Internet. Com. It's so different. So for me, going and buying, it's almost Valentine. You know how stupid this is? I was buying. You see these orange light bulbs behind me? I went on and I probably spent 20 minutes to a half hour finding orange light bulbs. And why I did that. It's so stupid. Like I'm in Amazon, it's are they the same? What's the best price? What's the best listing? And then I ended up paying a lot more than anybody else for the same light that I could have got for a lot less because the listing was well done. But that's the type of research that you do when you're on Amazon, you know, at least for me is I start doing that. I, that's something that's completely different in consumer behavior than when you go to a retail store. Like I wouldn't stand and check, you know, more than two minutes looking at different light bulbs if I was, you know, at Home Hardware or whatever. Home Hardware is a Canadian company, Home Depot, you know. Yeah. Anyways, that's just my thought on that.

You've had the job to be done, Norm, and basically you, you, you want it, you wanted to make it good from the very beginning and that's why you, maybe it paid off for you to make this research and not to come back to buy again or not to waste, waste the chance. So there is also a reason why you've spent so much on doing the research before buying.

That's, it's a three dollar light bulb. So anyway, anyway, it just like kind of, you know, when I sit back and I think about, I go, how crazy am I to do this? And you know what? I, I've done it for other things too.

But, and you did it, Norm, because the time you weren't aware. And that's, that's a very important thing. If you know there is a company called Restoration Hardware, right. They've, they've activated their loyalty program. So it's, it's a paid subscription program. You pay something like $100. I paid. Think, yeah, something like $100 to have all time 25, 20% or 25% throughout the year. But what they've discovered. So their profits went through the roof after launching this membership program due to the fact that consumers are very bad at analyzing what their time is value and how time will work for them. So you don't buy a sofa every year. You don't buy, you know, you, you, when you need furniture, you need it one time and then you, you are not going to pay anymore. But when you have that subscription that you've paid $100, a, you think that you are losing out if you're not using it and B, you end up paying even more than paying full price because you, the cadence, the purchase frequency is not that high. So as any consumer, I'm also doing this type of mistakes because I'm not analyzing what time means for you, me. And that's what you've did as well. You've spent half an hour to, to to, to pick the $3 light bump.

Right, right. You know, and I guess kind of going down that path kind of. I, I want to talk a little bit because we are, I want to get to some of the questions too but what are some of the reasons why E Commerce companies fail? And I know we've talked about some of these points already, but let's kind of go through them. Is there sort of a, a list that you can run through of why companies are failing?

Yeah. So I think the first, the first thing is that the entrepreneur is not fixing their mindset, his or her mindset. I think this is number one because if you have a strong mentality you will find a way. So if you are a long term on, on a long term marathon and if you are aware of that, you will find a way. But that, that reason number one, another one, they ran out, run out of money and that means chaotic reporting, not monitoring what matters. So that's reason number two. If you always know how much cash you have available, what is your cost to acquire customer? What is the lifetime value, what is the CAC payback period? So in how many days you are going to get your money back after acquiring a new customer if you know those type of data. So if you know the E Commerce growth formula, your chances to survive are going to be dramatically higher than shooting in the dark. Reason number three, I think it's related to the bad team. So you have an owner that gets all of that. He's a very sharp mind but he's unable to, to let's say have the courage and the inspiration to build a team and to fire himself from that position. So he still is the marketing manager, the head of customer service. He's doing the product, he's doing everything. You know, it's so, and that's pretty much a problem that is not only in E Commerce. For any company out there, if you are unable to fire yourself, you will fail. So you need to have people which are good enough on that position and your job is to earn enough to afford that person. Yeah. And that's, that's reason number three, not having the right people on the right seat due to the lack of let's say management or I think the root is due to the fear of hiring someone and not being able to, to, to pay that, that person. So that's reason number three. Reason number four, I think it's, you have those people but you are, you are doing this type of bad management. Right. So you have, you have a management team. The company is Doing well. And you, you are, you are lacking the, the, the vision, you know, to scale to the next phase. And that means you are disconnected from your customers. You have what you're doing, but the, the market is going this way and you're still going that way. So we, we've seen big companies failing due to that. I mean, I don't know, remember Blockbuster and other companies as well. You have to align your vision to where the market is going and in order to do so you need this type of customer feedback loop, you know, constant feedback from, from your customers commerce and I guess those are four reasons why e commerce companies fail. And maybe number five would be that you are hypnotized on the same growth channel, on the same channel. So you're not diversifying your channels. So you, I don't know, now it's tick tock. Now it's Facebook ads, now it's whatever. So you need to be aware about where your customers are spending their time so that you decrease the customer acquisition cost so that you can afford to pay even more than your competitors to, to, to acquire customers. So basically that's not reason number five. And I have only one left to go. Their products are not good enough. So basically they are not delivering enough value with their products. And that means you can grow artificially a brand because of your, I don't know, reputation and thanks to your, your, your let's say, impact in your social network. But after some moment you have to deliver with your, with your product. So and that means you have to deliver the right product. So to deliver undeniable value to your customers, you have to provide the right customer experience meaning good enough services, no shipment delays because the, the benchmark is being set by the big guys, so you need to be there. And last but not the least, you need to have the right marketing to acquire customers that do come back and you will fix your unit economics thanks to that.

That's awesome. So seven, so seven reasons why e commerce companies fail. All of them were great reasons. So thank you for that. Now from what I understand, and this is Kelsey pinging me. So I hear that you have a book being launched called the, the CVO Revolution you'll love. He just. I've. And I just got this information. The CVO resolution. If you love, love losing customers, you'll hate this book. You want to, you want to talk about that for a sec?

Yeah, of course. So thanks to my knowledge I've accumulated and again thanks to many people asking me how to do this, how to do that I've said, okay, let's, let's get the essence into a book. So since last year, about this time at the beginning of March last year, I've started to write this book. It was a very painful experience, but I'm really happy that I've made it. Made it Done so in May is going to be out there on Amazon and on other retail chains as well. It's addressing the CVO methodology. So it's for practitioners. It's not theory or whatever. It's based on what I've experienced with dozens of brands and with my own brand as well, with my own e commerce company. I want it to be like a manual for anyone which is willing to increase the customer lifetime value and to have a healthy e commerce business thanks to customer value optimization.

All right. Okay, Kelsey, why don't we get into some of these questions. I think there's three or four of them.

Yeah.

So we have a couple questions coming in. I do want to say that we do have the link for the first chapter of Valentin's book in the comment section. So check it out. And yeah, first question from Claudia. How do you know how much you should spend on incentives to try to get your customer to make the next purchase or next several purchases? Is it a percentage base or some other formula? Thanks.

Yeah, so Claudia, I've, I've wrestled with this for a long time, a lot of years ago and I've came up with the, with the formula to do that. So basically it requires the rule of three and it also requires knowing what is the lifetime value and what is the CAC payback period. So knowing those two things, you can come up with incentives. Let's say if your lifetime value is $100 and if the chances for customers to come back to buy again after the first purchase are 25%, how much can you afford on an incentive to make them come back? And the response is that you build these two free scenarios, let's say, and you come up with if I, if I don't pay anything on the incentive, that is what I'm doing, I can just tweak the messaging, right? No commercial incentive. Or if I pay $10 or if I pay $20, what is the best break even? So how many new customers should I convince to come back to buy again in order to break even? If I give a ten dollar incentive, you can find it in the CPU academy in the course. So it's a, it's a, it's a lesson exactly for that. And it's also there the the formula, the sheet, you know, the calculator, the Google sheet that you can use to, to find out this thing.

Okay, next question.

All right, next question is from Tony. What are the key takeaways from the Hush Success that I can try to replicate on a shoestring budget?

Yeah, the key takeaway would be that you need to build use cases, right? You need to know what is your product for. And on your website you need those type of use cases. You need ads in particular for those jobs to be done. Because those are the use cases cases, right? If you are here to buy a present, if you are here to get rid of sleeping problems, or if you are here to, I don't know, improve sleep or improve your performance based on that, you, you build landing pages. You, you have these use cases on your homepage and then you do remarketing ads based on that. So because the whole idea is to calibrate your message to the desired outcome that your customers have. So that, that was one key takeaway. Another thing is that you need to understand when to do the onboarding for those type of customers. So when, if they are buying because of X reason, you do this onboarding and you look at what is the moment to ask for referrals because, or to make them buy another product due to the fact that they are so excited about it that they want to give it as a gift. You know, you, they want to offer it as a gift. So there are these particular moments when you can leverage your, your customer base thanks to that.

Okay.

All right. The next question is from Luke. Is there a good way to get this data from Amazon customers? I know inserts, but my products are already in Amazon warehouses. The next batch will have better inserts.

Yeah, unfortunately for Amazon, if you, if you can't get in touch to your customers there, there, there's nothing you can do. What I suggest though is to, to use a short link that can change. You know, it's a paid version from Bit Li, for instance. I'm using it in my book as well because maybe I want to change it in the future. So I'm, I'm using this short URLs and you can use these QR codes that you can change afterwards. So something like you can place the hook like you will be amazed about what you can earn from us. And they are curious. They go to your landing page that you can change afterwards and you can tweak so that you capture their email address and you, and B, you get their, their feedback and see, you can place the Seeds for them buying from your own channel or from referring new business to your way. But the whole idea is that you need to think it through from the very beginning. Now if you have your batch in Amazon warehouses, there's not too much that you can do.

Yeah. So when you're doing that QR code, just make sure it's not static, that it is a dynamic QR code. We do that as well. Just you know, it could change on the season or it can change on the holiday. So something to consider there, Luke.

Okay, and our last question is from Tony. Should we expand to Walmart usa? We don't sell much on Walmart Canada.

Depending on your effort. So I have, I'm always guiding my decisions based on, based on a thing which is called the Pecti framework. Right. So in CVO we have this framework to decide what to prioritize. That's an idea to, to grow your business. You have other ideas but if you can estimate the potential, that is the cost, the timing and the impact. Yeah, Pac T once you give this type of ratings you'll be in a position to consciously decide and evaluate if this is the, the way to go. So the whole idea is to, because you don't have fantastic resources like multinational companies, you should pick your battles. Yeah. And in order to pick your battles you need to prioritize them first and then decide over going on Walmart USA or I don't know, adding a new SKU or adding different, I don't know, building new campaigns or TikTok or improving the customer retention or onboarding your customers differently. So those are competing ideas because that's, these are your resources and all you have is 24 hours throughout the day, right?

Yeah. And Tony, you could send me over that listing too because I'd like to see you know if it's properly optimized or not. Walmart is completely different than Amazon. So just DM me with a listing, I'll take a look at it. But yeah, knowing your products, you should do really well in Walmart usa.

Okay, so that's it for the questions from my end.

Okay so I guess at this point this is last call if you are interested in receiving that thousand dollar course from Valentin. It's hashtag Wheel of Kelsey or tag two people and you'll get a second chance to win. So this is a one time giveaway. I think it's going to be awesome. There's a lot of questions here that Valentin scratched the surface but in the course he under like he provides a lot more information and there's a lot of really great people that are involved with it. So anyways, hashtag Willow, Kelsey and tag two people. You'll get a second entry. Let's have a word from our sponsor. We'll come back. Oh, maybe before that. Valentin, how do people get a hold of you?

You can find me on LinkedIn or you can go to the clvrevolution.com there we have all these materials, we are organizing events and and so on. So if you think I can be of help, find me on LinkedIn direct message. I am always responding.

Perfect. All right, Kels, let's go to a sponsor. Launching products isn't like it used to be. To successfully launch your product, you need to hit that algorithm from all sides. Driving external sales, boosting social signals and increasing product listing engagement are fundamental to success. Rebate is the first and only launch platform that delivers across this broad range. Get your product featured on Amazon live through Rebates influencer program. With this service, your product gets instant exposure to large audiences of shoppers and permanent placement on Amazon Influencer storefront which drives perpetual sales. Run a sweepstakes campaign on Rebate and connect with shoppers off Amazon. And lastly, drive external sales with tried and true Deals campaigns. Visit rebate.com today and get started with your 14 day free trial. Okay, so let's go to the Wheel of Kelsey.

All right, here we go.

It's time for the Wheel of Kelsey.

All right, so thank you everyone for entering today's Wheel of Kelsey. We do this every single podcast so make sure you come back on Wednesday as well to enter again. I'm gonna shuffle special day. Yes. So I'm gonna spin it. If you are the winner, please email me k@lunchwithnorm.com and Christine, congrats. Congratulations Christine, you know what to do. Email me k lunchwithnorm.com and we'll connect you with with your prize. So congratulations and thank you everyone else who entered. All right, Christine says congrats. All right.

And we, we did actually have a good turnout even though Prosper was going on. So glad to. Well, thank you to everybody that was that attended or listened to the podcast today. It was well worth it. This is going to be one that I think is going to be one of our better downloads. But anyways, first of all, Valentin, thank you for coming on today. It was really great talking to you about this. I want to know more about, you know, the CVO revolution and hopefully we can get you back on another time. But just once again, thank you. Want more? Great information. Don't forget to subscribe by clicking here. Also, if you want to check out our latest podcasts, click over here.