Hello and welcome to an episode the Winning Shop 5 podcast.
If you haven't tuned in before, grab a cup of tea.
It's time for Tuesday tea break talks.
I did an episode a few weeks ago where I spoke about branding and
a few of you guys said I got my whole marketing team in.
I had three emails about this, got my whole marketing team in
the room and said right listen to this and played it to them.
Which is quite scary in a way. Sometimes I forget how much
advice I'm giving and how many changes businesses make, but it
is based on nearly 20 years worth of expertise that I've
done in the industry. So I hope today is useful as
well. Following on that thread today
I'm going to talk about a metric nobody talks about and most
marketing teams I talk to don't have a goal for this or a
measurement before. For that, I'm going to get up on
the screen in front of me. We have a webinar coming up with
the lovely folk at Tatcloud and also the guys from Saguno.
There's going to be a webinar on the 26th of February.
It is at 4:00 PM London time. I will be hosting it, which will
be, let's check on Google quickly. 4:00 PM London in New
York is Dun Dun, Dun Dun Dun. It will be 11 AM New York time
and for those in LA time to get up early gang.
It's going to be at 8 Amla time. How exciting the webinar.
It's all about the hidden threats that might be costing
you big again. I'll be hosting and these guys
are going to do some amazing talks.
It is free to sign up. We will put a link in the
description below. It'll probably be on lots of our
newsletters. Shameless plug go join the
newsletter, and now I can kick off today's episode.
How exciting is going to be a good webinar though make sure
you guys do come along, but we are going to be talking about
the thing that nobody talks about.
So these are some of the metrics the brands talk about all the
time. And you, if you haven't heard of
all of these, you might not heard of the last one, You
haven't heard of the first four. Where on earth have you been?
You must be new to this. So first one is profit, gross
and net profit. Businesses want to make profit.
The second one is ROI, sometimes known as ROAS, which is
basically I'm putting money into advertising.
How much money am I getting back?
ROI is return on investments. That could apply to anything
you're spending money on. I'm investing some money.
What is the return? How much money am I making back?
Am I making again? Back to first one, profit row as
a specific return on ad spend some spending money on adverts.
How many sales am I making on my Shopify store?
The third one is just revenue. We want the revenue to grow.
Some companies set revenue targets.
I think they're silly, but that's fine.
We'll just talk about that quickly.
I can't just brush over that. So the reason I think they're
silly is because, and I used to do this, I used to make these
big elaborate business plans and I'd spend most of December
making a business plan. And then I got this guy, Sean,
who's an advisor to me, who has been there and done it for many,
many years. Mr. Sean Varga, he's an
absolutely legend. He's basically retired, but so
experienced in the agency game. And he was like, we did that for
him and he was like to have a plan.
And he said, surely the plan is get as much as possible.
And actually the way we do plans now are not annual, they're just
whenever we need them. It's like, is what we doing
right now working, is it not? And let's pivot the plan.
And then the plan normally, normally is more tactical and
strategic than just we want to double our revenue or go up 10%
revenue this year or whatever, whatever that might be.
So how exciting? So revenue is 1 you could be
looking at another one could be conversion rate we're driving,
there's traffic insights, increased conversion rate, not a
bad thing. And the final one, I'm going to
quick tip a tee, see if you can read out out loud what this is.
EBITDA. This is normally reference when
you're selling a business. And, and I should say I've got a
stinking cold. I don't know if I said that
star, my brain's not really braining this morning.
Yeah, I've got a stinking cold. So I'll be drinking a lot of
tea. And if I start sneezing, it's
because I've got a stinking cold.
The UK, we export a lot of things and one thing we export
in massive great quantities is the common cold.
I am going abroad later this week just for a day to go and
see a client, which would be really fun.
Anyway. EBITDA, earnings before
interest, tax, depreciation, amortization and rent or
restructuring costs. It's kind of how they value a
business sort of multiple of that per year.
So that sounds like a really good list, Nick, by running
businesses for decades, what is missing from this?
I'll tell you what's missing and a chat Leant over to me and said
this at a dinner I hosted last week.
It was a lovely dinner and we had the lovely Mamas and Papas.
One of our clients, the very well known here in the UK had
lovely Sammy from Mamas and Papas joining us and she was
brilliant little talk and stuff. And someone went over and said,
Nick, do you know what's missing?
Most businesses, they don't seem to set a goal or metric for drum
roll, please, lifetime value. Like it's not probably not a new
metric to you, but lifetime value.
I don't actually think I've ever heard a team say we have a goal
of increasing lifetime value by X per quarter, per half year,
per year or in five years. We need our lifetime value to go
up by double or triple or whatever the, the metric might
be. Which got me thinking, it's a
very, very good point. I've never heard anyone actually
talk about that. But then let's, let's pull this
apart. And, and the reason I might not
have heard this and the reason what I say I might have is I
don't hear marketing teams talk about this at all.
But one of the reasons might be that I work in acquisition.
So we run SEOPPC for businesses. We spend millions every month on
it on Google and Meta and Bing and lots of other places.
So maybe we just don't get access to that because because
we're on the customer acquisition side.
But then that's not true because I look at GA 4 and Shopify
Analytics and I can see that the work we do on SEMPPC for
businesses drives minimum 50% through those two channels, the
whole business, some businesses over 90%.
So clearly if even if there is an LTV goal, it's not being
achieved because it needs to go up, say lifetime value, LTV is
what we're going to call it. So statistically it's the, and
I've made lots of notes on this, it is often the cheapest thing
to influence. Marketing teams should get this.
And sorry if I've thrown one under the bus, especially in my
own clients with this, but we'll break this down a little bit.
I think marketing teams actually should be judged on this.
So the acquisition point is really cool and it's important
we've got to acquire new customers, but actually we
should be judging marketing and probably products as well and
some of the other areas, maybe packaging on lifetime value.
There's acquisition and there's lifetime value.
You should have two targets for each of them.
So we normally have an ROI of like here's our entire marketing
budget. What's the business turnover?
Actually, we should split that business turnover, what was
recurring business and what is net new business and the ROI and
ROI is again, I'm saying a lot of scary things today.
So it's going to make my job harder as well.
If any of my clients are listening, which I know some of
you are, because then you say, hey, Nick mentioned this, my
team are like, did he? And it causes, causes a good
challenge, always a good challenge.
But I think that the, yeah, I think one of the one of the
things we need to think about here is actually what is the
target for lifetime value. So I'm going to break this down
statistically. And if you've noticed as well,
it was so dark a minute ago when I hit record and now the sun's
come out. So it's all suddenly got really,
really light in this room. And welcome to British weather
folks in February. How exciting.
Let's do some maths. So a business has, well, Shopify
store has an average order value.
You can write it down if you want an average order value of
$100. So write that down.
Average order value $100. And LTVI didn't even look at
what stats people might track LTV in, but I've used a decimal
place so I've said imagine the LTV of this business, $100
average order value and the lifetime value is 1.2.
So that means we get 1.2 sales per customer.
Some people then wrongly, wrongly I think, look at this
and go, oh, so 20% of our customers buy a second time.
And it's like, no, because some people buy 3 * 4 * 5 times.
But on average, every time we get a sale, we get 20% more
revenue than that from later sales from those customers.
Again, some of them might buy 10 times, some of them might buy
just once. And so that means you could say
if the AOV is $100, the lifetime value is 1.2, we're making
$120.00 per customer lifetime. Or it might be another way to
look at this, maybe is annual, and annual could be a good way
to look at that. But let's just go lifetime at
this stage. The lifetime value of a customer
is $120.00. And then we generally never,
never see or hear from them again.
So second bit of data then. So we got $100 AOV 1.2 lifetime
value. Every customer's worth $120.00.
Let's say we've got 10,000 transactions a year.
Deliberately chose something. It starts with A1 and then just
has zeros. Keep it simple.
So let's say we've got 10,000 transactions a year.
That means if you do the extra $20, we're getting $20 times by
200. Sorry, sorry, times by 110,000.
I think I've got a cold start that again.
So the $20 you're getting on the post first purchase, the $20 by
customer average times that, by the 10,000 transactions that
we're getting, on average, we get, well, 10,000.
Sorry, in new customer transactions, we're getting
around £200,000 a year from second or or more orders from
customers, from repeat purchases.
Therefore, this is where the genius bit comes in.
If I said that 1.2 lifetime value, we need to increase from
1.2 to 1.3, you might go, all right, we'll send, we'll send
one better e-mail every month, one better e-mail and we can
increase it to 1.3. Your revenue's just gone up by
100 KA year. You're now getting 10% more
revenue per oh, sorry, sorry. That's basically the average
order value. But you're getting at this point
just under 10% more revenue per customer.
So you see suddenly it's like that 200 K we're getting from
from second or third or fourth orders that 200 grand from
recurring orders or a a future order from existing customer.
Suddenly it's gone up to 300 K and we've only increased the LTV
from 1.2 to 1.3. So advertising for a new
customer could cost you $3050, even more than that to get that
£100 average order value per customer.
So 2nd order, it's got to be cheaper, right?
We, we got to look at this thing.
So I think the homework here, and I'm going to comment on some
of the ways we can do this. The homework has got to be we
need to set our marketing teams or set our business AKPI, that
is lifetime value increase. We need to work out how we're
going to measure it and we need to start increasing that and
then work out what our channels are going to be.
I'm just going to have a quick sip of tea and then talk about
some of the ways, tactics and strategies you could use to do
this. Such a sore throat.
So how do we do it? Big question, how are we going
to increase that lifetime value from 1.2 to one point 31.41.5?
The first thing is check out a thing in Shopify called the
customer cohort analysis. It is one of my favorite graphs
in Shopify and I do have quite a few.
Thanks for asking. But check out the customer
cohort analysis. It's blue and it shows you
everyone who's done a first sale and then it has months all the
way across and months down. So it will tell you that in
September, everyone who bought in September, I'll tell you what
percentage people bought again in September, how many people
bought one month later, two months later, three months
later, four months later, etcetera, etcetera, etcetera.
And what you tend to find is this diagonal dark blue patch.
It's got this blue conditional formatting, conditional
colouring on it and darker. The more sales you had that in
that period and or that point for that from that month that it
happened. Customer cohort analysis, it'll
make sense when you look at it. But you find this kind of
diagonal dark blue when it comes to peak.
So when you hit sort of November, December time, there's
this diagonal dark blue through the whole chart saying people
that bought in January bought again in air November, December
because there was a discount and that kind of thing.
So customer code analysis will give you a bit of an idea.
And what you can also do is you can create a report in Shopify
and this Shopify's a place to do it because you need it done at
customer customer level. Do it in Shopify where you
create a report that is how many sales and how much revenue have
we made per customer. Nice and simple.
I got five ways that I again looking at existing customers
and asking existing clients of us and asking them of the last
few days, how do you increase lifetime value or how have you
done it at your current brand, previous brands you've worked at
etcetera, etcetera. The first one is creating a post
purchase e-mail flow. This won't sound dramatic when I
say it, but when I tell you that over 80% of brands that I've
bought from in the last 12 months, because I checked this
before this call, 80% of brands I've bought from did not have a
post purchase flow at all. I was just on their normal
newsletter. There was no sort of you've
bought this product, has it arrived?
Can you leave us a review and then can you do this?
And then you want to have a look at this and you want to watch
our brand video and have you followed us on socials yet?
Only 20% of them had any kind of follow up.
I mean a lot of them, again, I've got newsletters, but most
of them didn't have a follow up relating at all to the purchase
I made. The data around the purchase I
made is invaluable and it probably cost you lots of money
to get me to buy in the 1st place.
And that's the point here around the acquisition cost versus
getting that repeat order or getting that second order or,
or, or or or something else. Every e-mail in this post
purchase flow, in my opinion, should have at least two
versions. So you should be AB testing
every single e-mail that goes out.
And if you're not getting any sales from any of them, start
off with the clicks. This one's getting people
clicking through and engaging with the website as a result of
seeing that e-mail. Build a flow, make it work, see
which works best, and always be testing those emails #2 offer
AI. Love this one.
It's so simple and I'm going to give you some again, some
numbers on how to work this one out.
So offer a time sensitive offer. So you got to buy this in the
next 7 days or thanks for buying from us.
You've now got 30 days to use your buy again discount code.
We found out from Saguno last year from a massive project.
They did a massive number crunch.
If you sun's probably come out now, how exciting you see how
distracted I am today. But Saguno did an enormous
report that outlines that if you use customized or bespoke or
unique discount codes to the customer or to the offer, you're
much more likely to get a conversion.
If you just say like repeat 10 and give them 10% off or $10 off
or something, you're going to get way less people buying from
you. Then if you use a better code,
which is like my name's Nick, put Nick in the code, you know,
Nick 10 March saying it's going to end in March or even put my
name and the date the code runs out.
And now that post purchase e-mail flow I mentioned in the
first point, you've now got some content to put in that.
But the maths, it's cheaper than running ads to send an e-mail.
If you double the amount of emails you were doing right now
and double the amount of sales you're getting on e-mail, how
much more would that cost you? Probably next to nothing,
certainly compared to the traffic cost of paying what, a
dollar, $2.00? Five dollars, $10 per click.
We have some clients that literally pay over 50 lbs, which
would be about $65 per click. That's how much money they're
making. That sounds like an expensive
click, but it's really cheap when you look at the economics.
So if you give a customer 10% off and their average order,
your average order value is $100, using go back to those
metrics, it's costing you $10 to get a sale.
It's a 12:50 ROI on that second order.
If that then builds a habit and they come back and buy two or
three more times without you having to really nudge it too
much, they're just in a habit now buying from you, then the
ROI is infinite. If they buy three times after
that one e-mail, you've got 30 to one ROI on giving them $10
off Genius. It's so and it's so simple.
It's so simple. But again, it's the creative on
the e-mail. It's going to be the complicated
bit. So #2 is offer a time sensitive
offer or notification #3 love this one.
Clearly, and this is what I didn't get from 80% of those
people I bought from clearly outline the complementary
products that they need. Let's think of a product I've
bought recently. Say I got a new car last year,
which I'm very, very proud of. And I love my new car.
It's excellent. And for my new car, I wanted to
get an umbrella for the car. And so I bought an umbrella for
the car. And then I started getting
notifications saying would I like to buy some wellies as
well? And then I got asked to post
purchase survey. So I did it and they said where,
what's this umbrella for? And I said to put it in my car.
And then they started sending me phone holders and other
accessories at the same brand sold for the car.
And I thought it was really smart that as soon as I told
them I bought it for my car, they started sending me that
different stuff or different offers and different products
they're recommending. And I did actually go back and
buy a phone holder from them as well because I told them that
the umbrella was for my car. But you wouldn't have known if
you didn't ask. So again, part of that post
purchase e-mail flow could be a purchase survey and using AI now
as well. You don't need to ask multiple
choice questions to get good data.
Just say to them, please write in this box where you use this
product, where you store it and what's it for And then use AI to
go ask AI based on all of the answers to this question, what
are the most common places people use this product?
And then you can create some AI within your e-mail platform
probably that says, anyone who says any of these words, start
recommending products or find products that use some of those
keywords from our site, start recommending those.
But then there's a question, isn't there?
So 3B is what happens if we just sell one product and once you've
got it, you kind of got it. Now, this is a very, very smart
idea, I think. And it's something lots of my
clients have done. The best and smartest ideas were
not mine. Say, this is one I've nicked
from many, many clients that have done it loads before.
Do a collaboration with the brands that do sell a
complimentary product. And most importantly, don't sell
your product. Sorry, having a lot of sip of
tea, very dry throat. So find a brand that sell a
complementary product to yours and do an e-mail swap.
Swap e-mail databases with them. Or rather than swapping emails
because of GDPR and other stuff, which I'm going to talk about
loads in a few weeks. I should have told you about
that very, very exciting episode, coming up with a very
special guest and recording it next week.
How exciting. And we're going to be quoting it
a lot. But find another brand.
So instead of swapping e-mail addresses, maybe to send an
e-mail out to your database from you featuring their products and
again an offer from them and you do the same to their e-mail
database. I, I've seen some incredible
results off the back of this. And what you really doing long
term? You're getting a load of cheap
orders in. We're having to pay out, having
to pay the advertising cost. Just get them in the door, get
more products being sold, get more revenue in.
You can then use those customers to do more surveys, get more
reviews. That helps the bigger wider like
SEO machine and and PPC machine work harder #4 On our list of
five is the product consumable. This is where honestly I I see
so many brands getting this totally wrong.
A consumable product, coffee, healthcare supplements that
people sell, glucose gels is one of them.
Toothpaste, All this sort of stuff runs out right?
So obviously you need to offer a post purchase subscription if
they haven't subscribed and test when test what the right
creative on the e-mail is, like I said earlier, or SMS or
WhatsApp if you've got access to do that with your customers.
But also you need to test the timing of this thing.
When is the perfect time for somebody to buy one of these
products and then need another one?
So ask your customers. The more you talk to a customer,
the more they engage with, the more they're just going to go
and buy without you having to do any of the complicated stuff.
It's about building a relationship and the the more
you build that relationship, the more people will just come back
to your site and start purchasing.
All of the cables suddenly appeared by the screen.
How bizarre. There we go, we're back.
But anyway, so the, if your product is consumable, there's
such an opportunity to then talk about post purchase
subscriptions, refills, upgrades, and also if you
release a new model of whatever you've sold, whether it's
consumable or not, if you release a new model, there's a
whole story. Start talking to, about talking
to people about this. The other thing you could start
offering and even just start selling them on eBay yourself or
something is actually a recycle program.
So you could say to people, you can recycle your old device,
sell it to us and, and we'll give you a discount on your new
one. I, I know of AT shirt company
that does that and they very, very successful.
They give 5 lbs every time somebody sends AT shirt back in
and you can use that as credit on their website and they reuse
all the cotton which is amazing. Anyway, final point, loyalty, so
many brands have loyalty points and you get no emails about them
whatsoever. If you sent me an e-mail saying
hey, you got some loyalty points and if you spend £50 more you
can have, you'll have enough to buy a free product.
Well, that's two orders now that I'm going to be making and we're
trying to increase this LTV aren't we?
So you're going to get more orders from doing that.
Loyalty points on their first purchase, encourage them to
spend these or even earn more of them to then get a bigger
purchase later. Like that example I just gave.
I think something really. Interesting about loyalty points
that we've tested on a few clients as well as sometimes
it's better not to display the loyalty points on the products.
It's actually better just to go, you want to buy this product,
buy this product and people go and buy the product and
afterwards you say, hey, you've, you've earned 100 loyalty points
buying that product. They're worth £10 or $10.
And actually you can then go and spend those on your next
purchase. You can save them up.
And again, it's such a good talking point where instead of
just sending random newsletters out saying like, hey, these
green Gantt jumpers are on offer right now, which I'm wearing
today, actually, you can just say, well, you've bought that
product recently. You should buy this.
And actually, or almost like click here to get a customized
view of all the products on the website, taking into account how
much loyalty bonus you've got. I booked a hotel recently and I
was thinking these hotels are cheap.
This is amazing. And realised it automatically
applied my like loyalty bonus on the hotel booking site.
It already applied that loyalty. And I was like, great.
I didn't even know I had, oh, I knew I had something.
I didn't know it was that much. Yeah, If I go, if actually if I
go and stay at one of these hotels on this list, now I'm
going to get this discount, which is fantastic.
So those are five ways you can start to increase that LTV.
Get that 1.2 up to 1.41 point 8. Imagine, for example, if you got
three orders from every single customer now instead of just
one. That's four times, sorry, three
times as much revenue as you would have got if you didn't do
that at all. So much cheaper than
advertising. And there's so many businesses
to just rely on Google Ads all day, all day.
And don't get me wrong, Google Ads is what I do, is what I'm
doing for nearly 20 years. I love Google Ads.
I know almost every single button there is to click in
Google Ads, but if brands are going to get LTV off the back of
that and get repeat orders, we can spend more on Google Ads.
Acquiring those guys makes you more competitive and it means
you can scale your business faster whilst making a profit.
Final thought from me, how do you really really start to win
on LTV? More than just the best e-mail,
the best loyalty bonus, or something simple and kind of
cheap and easy like that. How do you really start to win?
I would work backwards, almost do like reverse marketing and
go, OK, someone's just made their 10th order or 12th order,
They're ordering every month from us.
Let's work backwards now to then decide what our initial
advertising needs to say and do and how it needs to operate to
make that whole journey happen. But working backwards, going so
they're on a subscription, they've been on a subscription
for a year. How did that subscription start?
Is it going to be from the moment we meet them?
The moment we don't meet them, I want to give an example of a
collectible coin client we worked with years ago.
And these guys in terms of ROI, these guys absolutely crushed
it. And on Google Ads, we had a
negative ROI. We lost money running Google
Ads, one of the most profitable clients I've ever, ever worked
with. So these guys sold sold
collectible coins and the first coin would be solid silver or
gold plated and get this as a marketing campaign it was free.
You could buy a free solid silver coin worth 20-50 a 100
lbs and it was free. All you have to do is pay £2.50
for postage and packaging. These guys were producing so
many of these coins they were happy to give 2030% of them away
for free to sell the rest of them.
Really really smart. So you pay £2.50 as a customer
to keep postage and packaging. All their advertising said it's
a free coin, £2.50 postage packaging and it's made of solid
silver. For example, when the coin
arrives, it's in a set of 578 coins that you can collect and
obviously all the slots are empty apart from the one that
you've bought. Now their Tele sales call, call,
call team. The Tele sales team would phone
you up, told you to cold and my brains a bit mushy.
They'll phone you up and they'll say, hey, you've got the first
from the set. Do you want to subscribe?
And actually you can set up a weekly, fortnightly or monthly
subscription for 2030 lbs or whatever it costs per coin, and
we'll just send the rest of these coins out.
Once that set's finished, they call you and say, hey, you're
obviously a coin collector because we did our targeting
right in the 1st place and we hooked you in with this free
offer. And you're like, I'm a coin
collector, why would I not take this free coin?
And now like, yeah, actually now I can see the quality of
product. It's in this really cool holder.
And I have them and they're going to put me in a glass
cabinet on the wall. I'll put them with the rest of
my coins. Lots of coin collectors in the
world. And now you're finished that
first set. Would you like to keep the
direct debit going? And we'll just send the next one
out and it'll have two coins in skin.
First one's free or you can upgrade.
Instead of doing a silver set, you could do a gold set.
Or actually, do you want to talk about some of our like £10,000
Roman collectible coins? You know what kind of coin
collector are you? And they have a conversation on
the phone, they collect this information and it was called
silver. If we upgraded them to their
second set, it was called gold. If we upgrade them to 1/3 set
and if they became a coin collector, we called it
platinum. So we even use names internally
that reflected the product because the products are made of
silver, gold, platinum. Really, really cool.
I hope it's been useful. You guys need to get more sales
from recurring orders from existing customers.
So expensive to get them in the first place.
So you've got to get as much as you can from them.
Join our webinar in the next couple of weeks.
And yeah, hopefully I'm feeling better by the next episode,
which should be out on Friday. I don't know what's in the diary
this week. I haven't really got that far
yet, but we should have another episode out this Friday on the
show with a guest as well. So thanks for tuning in.
If you want to talk about any more of this stuff, drop us an
e-mail. Hello at winningwoodshopify.com.
And also someone asked me about this the other day and it's not.
I don't normally plug the agency too much, but if you do want
help with your SEO and PPC, do reach out to us.
It's spec SPEC dot digital, spec dot digital, reach out to us.
We can help with PPCSEO. We do have minimum spends and
minimum retainers. If you're a scaling brand and
you've hit a shelf, you're perfect.
We can really help you grow. Thanks, tuning in guys.
Back again on Friday. Hope you an amazing week.