The Exchanges

Q That's a fantastic explanation. Thank you. So you take this information, you say, okay, I have a customer. I understand how much their value is to me over the lifetime of our relationship. How can you increase that value?

A Yeah, that's an excellent question. So we oftentimes stratify it into four different quadrants. A customer is a high value customer, sometimes we call them platinums, people who are very profitable, they come back again and again. On the other end of the spectrum, you have low value customers, or sometimes we call them lead customers, who could be costing the company money every time you deal with them, but generally, they're a large group of customers that Maybe bought once and you haven't seen them again. In between, we have these two areas of medium, low and medium high. And the common misconception is to look at the quantity of customers and say, oh, I've got a high volume of low value customers. I've got smaller numbers of middle tier and higher customers. It actually comes out almost like the eight to 20 rule where 20% of the customers are generating 80% of the business, but the quantity problem is people commonly assume that they can just lift a small number of those lead or low value customers and then generate a whole lot in revenue or the reverse of that. They can sell even more to their high value customers who are already buying at a pretty frantic Now in some cases you can sell more to high value customers, but the sweet spot is the middle. The medium highs, which we sometimes call gold, And the medium lows, which we sometimes call iron. Those two tiers are where p…

AI assessment note: “So gold and iron is the middle tiers. Are exactly the right place to push”

Q So this campaign code is like embedded inside of Mailchimp or something? Like how, how do you create a code?

A It's an analytics tracking technique. So most companies who are in the growth phase would be using say Google analytics for tracking. And in Google analytics, you can set up a campaign code structure. You don't set it up inside Google analytics, but you say, okay, every time we send an email and we use specific links that we set, We're going to code the UTM source medium in certain ways and the campaign name in certain ways that allow us to say these things always group together. So maybe I want to separate my paid social from my organic social. Um, that could be an easier thing to do through your campaign codes coming through, and then you can split all the information again, going backwards through that back matching. It basically gives you all these little tendrils that you can pull on for analysis. Does that make sense?

AI assessment note: “We're going to code the UTM source medium in certain ways and the campaign name”

Q That's fantastic. Can you really quickly explain what UTM means?

A It actually comes from Urchin. So many, many, many years ago, before Google Analytics, what is this, 2004? Google acquired a company called Urchin Technologies, and Urchin became Google Analytics. And UTM simply refers to the Urchin Technology code that they were using prior. Now, as Google changes and goes forward, they're changing into Google Analytics four, which is a different system. It's designed to pick up more data, more information, respect PII. It's a whole different system, which I would be hard pressed to go into exhaustive details on. The old system for campaign tracking is still available. It's still there and still avidly used by many people who know how to push value into your data systems. And it is a common way to glue information across Across multiple sources.

AI assessment note: “It actually comes from Urchin... UTM simply refers to the Urchin Technology code”

Q Yeah. So I have seen the words UTM in a URL before when I shared a, an article from businessinsider.com to one of my friends. So you saying that the UTM is where this code exists?

A So you put it in the link manually. So let's say my link is www.welivetobuild.com If I'm going to put a query string parameter behind it, then I'll add a question mark, which tells the servers that I'm picking up a piece of information, but it is not the URL. It's not a destination. For the purposes of loading a page, the information is passed into the tracking system after the question mark, but everything before the question mark is the address you would be sending someone to. So if you were sending them to a specific landing page, you might say, www.welivedtobuild.com slash landing page and then slash question mark and then UTM equals source and then the source value UTM equals medium, medium value UTM equals campaign name and then the campaign value. So these are the different things that you can add to your link whenever you're creating a link. Now this becomes a real bearer if you're trying to do paid search with that. Nobody in their right mind wants to label Paid search. So this can, so Google and the other tools have auto tracking and they will automatically encode different pieces of your campaign name and your keywords. So I don't recommend it for paid search or anything that's high volume. I do recommend it for your strategic campaigns, like an influencer campaign or anything that has to do with something you're trying out and you want to see how it works.

AI assessment note: “So you put it in the link manually. So let's say my link is”

Q Let's assume for the audience sake, they don't know what lifetime value means. Can you explain that real fast?

A Every company has a slightly different definition of customer lifetime value, but you can assume that it's basically projecting forward what the value of the base is. And if you really wanted to dig into the formula, Then you could understand it through the measure of time. How much time do your customers spend purchasing from your company? The cadence between purchases and what is the margin on your products? What is the value of the dollar and how does the value of the dollar change over time? It's a little bit of a complicated formula, but by the time you pull in all the features that matter, you end up with An outcome that basically says, am I pulling in customers that are increasing in value, or am I pulling in customers that are not increasing in value? That's a natural way of thinking about retention. If I'm bringing customers back again and again, and they are automatically increasing their purchase cycle, increasing the Amount of money that they spend with me. Then every time I increase that cadence, I'm increasing my customer lifetime value. When you grab all that data and you project it forward, you come up with a number called customer equity that says, here's how much the value of your customer base is worth. If you take that number and you apply it to how much you spend in customer acquisition. Then you can start to understand things like CAC to CLV ratio, which i…

AI assessment note: “you can assume that it's basically projecting forward what the value of the base is”

Q You also had mentioned referrals as a way to help people get up the chain. So do you have any specific strategies for referrals?

A Referrals are really interesting. When you've identified The right kind of customer. Then the question becomes, where should I fish to get more of them? There's two different schools of thought. One says, I'm going to cast a broad net and I'll get some good fish and I'll get some fish that aren't so good. Well, the reason that's a problem for entrepreneurs is investors are commonly looking at how many people that came through the door stayed with your brand. A company that is Hot that people really love has a very high retention rate, you know, sometimes 90% or more. If you are casting a wide net, whether it's through referrals or through other marketing channels, then you may not be picking up the best fish, and that will hurt your valuation in the long run because it looks like you can't hold a customer. Instead, a referral should be a very targeted strategy Where you're looking at your gold or platinum customers, the ones who have already demonstrated that you are a fit. There's product market fit. They love your product. They're advocating for it. Things like that are worthy referrals, and you're much more likely to get power out of that group. Then you are out of just trying to get referrals from anybody who happened to, you know, click try. So I think it's very important to be strategic with the customer groups that you're looking at, how you think about referrals and whe…

AI assessment note: “a referral should be a very targeted strategy Where you're looking at your gold”

Q Okay. Go for it. What's the difference between retention and loyalty?

A People use the term loyalty all the time as one generic term. And a lot of times it brings to mind the idea of a punch card or You know, how can I get you to come back or join our VIP loyalty program? But loyalty should really be segmented from retention. And, and this is why when somebody comes in and they buy the first time, that is a wholly different path as a new customer than somebody who's buying the second time. But when they buy the second and the third time, they still have not necessarily decided that you are the company for them in that particular category. So it's not until they make additional transactions, uh, three plus that you start getting into the realm of loyalty and by breaking out retention activities, which is encouraging someone to make that second and third purchase from loyalty. We then can see a little bit of what strategies we might use for our loyal customers that could be wholly different From people who still have one eye on our competition.

AI assessment note: “retention activities, which is encouraging someone to make that second and third purchase from loyalty”

Q investors. Obviously you're talking a lot about customer data, even though we haven't really mentioned the term data. The only way to be able to understand the acquisition cost or the lifetime value or what, where they sit in the value chain in terms of different user segments. So how can you use data to identify the right channels to be promoting in order to get those highest value customers?

A There are a couple of ways to think about The collection of data in order to make your systems sing. So let me start with customer identification and then I'll, I'll give you a little bit of an insider tip about something else that really adds a lot of power. To your data systems in customer identification, the easiest and most direct is when somebody actually converts and they fill out all their transactional information, their name, address, and phone number. That is your clearest signal of who the customer is. You can use back matching techniques to take all of their digital trails, everything else that they did on your own sites. Beforehand and match that login ID with previous visitor ID in order to understand how did they move in different ways before they converted. So you can enhance some of your customer identification With back matching another way you can enhance customer identification is through the email or a campaign code. It's common on email. Like, let's say I come in and I sign up for a newsletter. Every email system actually has a customer ID system inside that email address. And sometimes you can surface that along with any other link data that you might put in the email. That again gives you the customer ID and the traction of what's happening with that ID over time. But ultimately all you need to calculate customer lifetime value is who is the customer and…

AI assessment note: “Now, when you try to get into, well, where should I fish?”

Q that you are educating people about your industry on top of educating about your product and your service so that they think you are the most trustworthy in the market. This is kind of a method to escape the rat race of Functions and feature differentiation. So what would be the most cost-effective way to create content in order to help convince these people to move up the value chain?

A So I'm not an expert in content creation, but in the examples that I've seen, I see a lot of video. And the reason I like video or even audio is the fact that you can play it at two X speed. You can get through it a whole lot faster than a one hour meeting. And a lot of times these questions are So I always think of that as really good content for just blocking and tackling. The other part of your question really gets to trust and generating trust, and that is not always something that comes across in a video. Sometimes it does, but I think that element is something that should not be underestimated by conveying the fact that there's a guarantee or Even the story behind why you're doing something the way you're doing it, you know, you, you felt a certain pain and therefore you're solving a problem and the benefit can be enjoyed by them as well. There are certain elements of storytelling that also help convey trust. And I think in the content creation side, which again, I'm not an expert in, I would tend to focus on the elements that are easily digestible by the audience, but also give a sense of Who the brand is? Almost like I'm relating to a person of which the CEO is oftentimes the chief brand conveyor. So if that means that your CEO is recording the videos instead of your customer service rep, then perhaps for a smaller company, that's a good way to go.

AI assessment note: “I'm not an expert in content creation, but in the examples that I've seen”