Email Marketing: Transactional Behavior Segmentation to grow your Customer Lifetime Value w/Juliana

Juliana, how are you today? I'm doing fine Chase, thank you for having me. Yeah, I'm excited. Would you mind starting kind of with some background about yourself as it pertains to email marketing kind of your career? Okay, cool. So I'm the Chief Evangelist for OmniConvert, specifically for the reveal product. And I'm also basically the architect of the customer value optimization category. So what I do is I work with e-commerce brands and help them use transactional behavior data to create high converting flows and campaigns for their email marketing because our main focus is to increase lifetime value and help brands become more profitable and obviously more loved by their customers. So yeah, that's in a few, that's the less fancy presentation. Sweet, no, I appreciate that. I know you were just kind of running me briefly through the presentation you have. So I'm excited to jump in. Do you mind kind of getting started and going through it? Definitely, so this is a short presentation that can give you a good idea of what the transactional behavior segmentation is. So just the agenda, we're gonna go a bit from the classic e-commerce growth formula to what is the actual e-commerce growth formula and how to actually do this segmentation to grow your lifetime value. So Jay Abraham said that there's only two ways to grow a business. One is acquiring more customers and the other one is getting customers to buy from you more and often. So let's focus on getting the customer to buy from you more and often because that's the thing that moves profitability. So the common growth e-commerce formula for most brands is focused a lot on conversion and traffic and average order value. And brands usually and agencies have been living until recent times with the impression that everything that matters happens on the website and not via email or post-purchase. But the thing is that you cannot think about e-commerce growth if you don't take into calculation what happens post-purchase. So the healthiest way for a brand to look at growth is also taking consideration a very important aspect which is the ratio between the customer lifetime value and the acquisition cost. Just to give you an idea, this ratio gives you an answer to the question to what extent is it worth for me as a brand to invest in bringing customers based on how much they will spend with me over their lifetime. So if you are focused on growing your brand, you have to make sure that your lifetime value is always higher than your acquisition cost. And make sure you do, you really, really calculate the acquisition cost because it's not only your ad spend, it's only always more things like salaries, like overhead, like your tools, like your agencies and so on. So this is the updated and the actual growth e-commerce formula that you should be taking into consideration. And just one more thing on the ratio, just know that the CLV and CAG ratio is very much influenced by transactional behavior like the RFM segmentation, by your margins, by the customer experience, the customer effort score and the net promoter score. But let's just dive in a bit in all of these aspects. So we know that acquiring customers is more expensive than ever. And look at the CPMs right throughout 2020, they have exploded. So right now, with what's happening in the market with the Facebook and Apple beef, with the third party data extinction, right now, the only way that you can move the needle long term is to move over the email. So even, oh, this is just like a brief from the Shopify report for the future of e-commerce, they're showing how much the spend has grown from 2019 to 2020. So again, even Shopify themselves are encouraging merchants to go ahead and focus on email. So just to get started with defining how you should approach your email marketing from a customer lifetime value perspective, you must make sure that you don't miss, you confuse growth with growth generating factors. So I have a quick example for you guys here. I hope it doesn't hit home for too many brands. But this brand, BeFashion right here, used to have a big annual revenue. They used to be in 11 countries and had 90 employees in 2015. But behind the scene, even if the revenue was high, their customer retention was low. Their year-over-year growth was lowering and their MPS score was low. So MPS means Net Promoter Score and it's an indicator of customer loyalty. We'll get back to that. As you can see, four years later, the same company had 20% less revenue and they were represented in just one country and had under 10 employees. And guess why this happened? Because things like retention and customer satisfaction were ignored and the only focus that the brand had was on revenue. So revenue does not mean profitability. Revenue is just a vanity metric. So before we dive in in the customer segmentation a bit, just know that not all your customers are the same. Some are better than others. So the best ones, we call them ICPs, which is also Ideal Customer Profile. So we did a bit of research on the 1,000 plus brands that are using our software reveal at the moment and we found out that one ICP, which is your VIP customer or soulmate, as you know, depends on how you're naming them, are generating margin as much as 376 low-value customers. So clearly it's not smart to treat everybody the same. So how to use this transactional behavior segmentation to grow your lifetime value? So let's talk about RFM. You probably have started hearing RFM here and there in the market and I am very guilty of that because this is something I have been promoting for the last few years. So just like a super short intro, RFM is an acronym. It stands for Recency, Frequency, and Monetary Value. So how recent people buy from you, how frequent, and how much money they invest in purchasing from you. So looking at recency, frequency, and monetary value, you are able to determine different patterns of behavior in your customer database. And this will show you that not all the customers are bringing you the same value because the most important part about customer lifetime value is to understand customer value, right? So the RFM segmentation is the best, most important step that you need to do in order to determine lifetime value. So as I told you earlier, recency, frequency, and monetary value. So let's say you do the RFM segmentation. These are some types of groups, these are customer segments that you have in your database. As you can see, the names are pretty self-explanatory, right? You will have customers that are very dedicated to purchase from you, very loyal, have high order values, and spent a lot of money in your store, but then it's the ones that stop spending that much money. They churn, the people that just come and go, the one-night standers, as I call them. So it's a lot of gold that you're probably sleeping on right now in your database. But segmentation is not everything. The analysis of the data behind the segment is where the money is at because it's always good to segment customers based on a name. And you say, oh, okay, I'm gonna email these people differently, but that's not enough. If you wanna go and put a step further, you should look at the analysis. So all of these numbers here are just standing for RFM. So five here is for recency, five here is for frequency, and five is for monetary value. And the same thing goes for all these numbers. So each of them is an equal to the acronym RFM. So I'm just gonna give you an example of the soulmates, your power customers, the ones that keep your lights on, right? So these people have a recency of five, a frequency of five, and a monetary value of five. This means that they have just purchased from you, their frequency is high, and the monetary value is high. So you might want to identify these people in your database and give them the best possible treatment ever. Along with them, it's also the lovers, if you create personalized flows and try to onboard these people differently and communicate with them differently, you are gonna be able to transform them into VIP customers or soulmates. So takeaways from here, RFM segments are great. RFM analysis is what moved the needle because in each of these groups, you will have, as you can see here, different micro segments of people. So it's not smart just to do the RFM segmentation based on the segment name. Go deeper, go deeper, and go and create flows to tailor based on these people's behavior. So as I was telling you earlier, your soulmates is where the money is. Your main goal as a brand is to transform as many of these groups that you have and scores into soulmates because these are the people that are generating you the most margin. So as you can see here, this is a distribution of revenue versus margin based on RFM group. And obviously, the soulmates, even if it's the smallest group, as you can see here, it's between zero and 5%. These are the group that brings you the most margin. So you should be very, very focused on having these people in a safe spot. Don't try to upset them and under-promise and over-deliver. That's the mantra that you should have as a brand in general. But as you can see here, all these groups have very, very different dynamics between revenue and margin. So just like a short example, the ex-lover group here, as you can see, they have a big share of margin. The number of customers is not that big, but the ex-lover, unfortunately, are the ones that used to be your soulmates and left your brand because you sent the same email to the whole database that you have. And you should never do that. You should talk to Chase and stop sending the same email to the whole database. Cool. So I'm gonna stop at the group that everyone is gonna like here. This is my favorite group from the RFM segmentation because this is your moneymaker for Black Fridays and holiday sales. So the new passion group is customers that you recently have acquired, right? You did a campaign, you crushed it, you got a lot of customers. But what are you gonna do with them after? Please don't send them boring transactional emails and ask them to buy from you. This is a group of customers that you should onboard differently. This is a group of customers that you should nurture and farm. And when Black Friday comes, or all the holiday sales, this is when you should go to action. So these people have high monetary values. This is a group that if treated right, it can become your VIPs, your future VIPs. So never treat the new customers with high order values as you would treat people that buy from you on discounts or buy from you with low order values. It's a time and place for everything in the world, but there is no time to waste on pushing these people away. Cool, so this is different examples of groups. The main idea that I wanna give here is that all these groups need a different type of approach. So whatever you do in email marketing, please make sure that your message is tailored based on these people's needs. So just to show you the dynamic between the revenue product and FEM group, as you can see here, the revenue and margin are always coming from the soulmates, the VIPs, and the new passion, the ones that I was talking about earlier. So this is people that you need to address differently. I hope I said that enough times in this chase. So the customer lifetime value for this group clearly is gonna be higher for the soulmates and for the new passions because these are the people that, again, are keeping your lights on. So make sure that you understand that the only way to increase customer lifetime value is to take action on the value that you find about your customers and don't stop at doing boring, lazy marketing. Please, don't do that. So, okay, we know this. Oh, sorry. So we know this, right? Don't cut this chase. It's fine. I do this a lot. So how to improve your customer lifetime value? Let's say you made sense of the RFM segmentation. Good. Great job, Juliana. But what do I do with this information? You have to change your mentality. Your mentality as a brand owner, it's your biggest enemy. It can be your biggest friend, but it's also your biggest enemy. So there are two types of customers. The customer-centric companies, the product-centric companies. These are my customers, right? Every day on review. The product-centric companies is the ones that have a status quo problem because they think that their biggest needle movers are features, price, discounts, and so on. So they only define success looking at traffic and cost per click and revenue. The customer-centric companies are the ones that take Chase's course and then go ahead and focus on improving every touchpoint of the customer journey because you cannot sleep on email marketing. A lot of people use that email marketing is dead because they send the same message to everyone, right? So what should you do? You should monitor what matters. So look at the acquisition costs, look at the net promoter score, the margin, the retention, the average days between transaction. And I wrote especially here two times on purpose, customer life and value because this is your north star. So yeah, I mean, it's a lot that are involved in the way you look at our segmentation, but the biggest takeaway from you today is to stop, you know, stop hustling backwards. That's how I like to call it. Stop hustling backwards. You have to focus on your existing customers. You have to understand what is their behavior. Customers provide is the product. This is what you are left. So customers is the product. Products are secondary. So the experience that you give via email marketing is gonna change the way your brand is gonna evolve. So everyone is in this business to be profitable, right? I don't know, Chase, was it okay? I wanna go into deep, but this is more, it's more, you know, regarding chances to place an order in the custom. Well, Jenny, if you think it's relevant, share this a bit too. It's kind of a gold nugget as well, let me know. Yeah, this is great. Is there more or did you, are we finished? This is a bit unrelated to our account. It's related to the customer journey. So it depends on you. Yeah, if you wanna keep going, I mean, this is fascinating. I think the content's really good. So if you wanna keep going, let's keep going. Cool. Okay, but then you cut it and place it together, right? To be honest, everyone's gonna be listening, watch this. I'm just gonna throw this right into YouTube right after we hop off. So they're listening to us right now. Okay, so people that are watching this, that are watching this on YouTube, I wanted to talk to you today about direct segmentation, but I see that Chase is fascinated by my presentation. So I'm just gonna go a step further and I'm gonna help you change, you know, the perception you have when it comes to retention. Because a lot of people don't wanna invest in retention because it doesn't retain the client. And it won't, it really, really won't. Retention is some strategy that only that brand's gonna play the long-term game are doing your business. So if you want to play the long-term game, continue watching this video. If not, it's okay. But don't unsubscribe from Chase's list. So chances to place the next order. Let's talk about customer journey for one minute. So I have brought here data from 151 stores in review. So just as a small, small note, we work from six to nine figures e-commerce brands. So what I'm gonna tell you is this. Because of shitty email marketing, sorry Chase, because of shitty email marketing, the biggest drop for the new customers is after the first order. So unfortunately, because you don't invest in improving the way you communicate with your customers, if a new customer comes to your store, usually it's from 16 to 25% chance based on our historical data from our brand that the same customer is gonna purchase from you again. If you look at the second order, the chances are doubling. So this proves the fact that between the first and the second order is a huge gap in your customer journey, which means that after the first order, you're probably strangling that person with promotional email. And it's bad. It's not gonna work long-term, and you will just end up, as you can see here, annoying people. So the more you work on the touch points of your customer journey via email, the more you're gonna help these people purchase from you again. It's not only about sales. It's about delivering value to your audiences. So the most important thing, again, is to look and research your customers. Because you will not know what they need. You cannot guess what they need. No one can, only they know. So just ask them, right? The biggest and most important thing for you is to understand that by doing research via email, you'll be able to gather insights about your product issues, about your services issues, and about the emotions behind purchasing of a customer. You'll understand what were their struggles. What is the job that they hire your product for? What are their triggers for purchasing? And what are the forces that make them purchase from you today? So it's very important that you have a strategy behind email marketing, because email marketing is not just sales. It's also a very big layer of quality of research. So it's great to have numbers and data, but data doesn't mean anything without context, right? So to get the context of your customer's journey, you have to use email. I cannot stress this enough. So how you can improve the customer experience? We did a research, and we found out that the biggest reason customers leave companies is because they know the brand doesn't care about them. And it's true, they don't. It's a very little number of brands that really, really care about their customers, right? So what you need to do, and this is, I don't know if you're gonna agree with this, Chase, but this is a good question that I'm gonna ask you because you're the expert here. So the Net Promoter Score is that question that you ask people on a scale of one to nine, how would you rate this product, or how would you recommend this to your friends and family? I take it a bit further. So it's essential for you as a brand to monitor the user experience and the customer experience because it's a very big gap between purchasing a product and receiving the product. The biggest mistake that brands do is they don't allow people to experience their product. They are so fast on asking for that review post-purchase that they don't allow people to understand what is that product gonna do for them. And this happens because it's a bad communication between marketing and fulfillment. This happens because of bad automation. Before you start creating this automation, make sure you measure the experience pre- and post-delivery of a customer before you assign them to any flows. It's not healthy for your brand to just assign random people to your flows. And the example is this. You can see a T-shirt on the website, you love it, you buy it, you're excited. Then you receive the T-shirt, the T-shirt is fresh. You don't like it. But then the brand doesn't ask you if you don't like it and they start selling you via email and sending you more T-shirts like the shitty one that you have because why wouldn't they? They don't ask you, they don't know. And then of course you're gonna get mad as a customer, you're gonna go on Facebook and give them a bad review. Or you're gonna unsubscribe or you're gonna tell your friends because word of mouth is real. And I mean, look how the internet is closing Wall Street. You think people are gonna be afraid to speak their minds about a T-shirt. So it's very important for you. Again, over-deliver and under-promise. I cannot stress this enough. So the NPS, the Net Promoter Score should be measured pre- and post-delivery for you to understand if the expectations your marketing is creating are met in the customer eyes. Measure the experience before assigning customers to a flow. This is exactly what I was saying to you earlier. Also, this can help your customer service team because if you know the customer voice and what people think about your product, your services, you'll be able to help your customer support team do a better job. So very important for you, don't skip the Net Promoter Score. Make sure you measure it pre- and post-delivery and depending on what you're selling, allow people to have time to experiment your product. Because if you're selling a mattress that takes three days to get big enough to be able to use it and you see results after seven days, don't send them a review after a day. Also, don't send people to review your product before they receive the product. This happens incredibly often and it's ridiculous. Cool, and how can you optimize this customer journey? You might be asking or not, if you're still watching. You have to understand every touch point of it. You have to nail it down, write everything. You know what, as a brand owner, go ahead and purchase from your brand and see how shitty or unshitty is your experience with your own website. You have to make sure that you deliver value at every touch point of your customer's journey, be it via website, via ads, and most importantly, via email. Email is still the most important channel that you should be focusing on. Again, I cannot stress this enough. And this is how you can take yourself to the next level in your customer journey. Instead of this, which this is 85% of the e-commerce industry is just demand generation, someone places an order, you send the order confirmation, the order is delivered, blam, remarketing, email discounts, buy this, buy this, buy this. But you know what, the reality is that only 21% of people actually buy it like this, if this is your journey. 80% of them, they won't. And you know what, they're gonna go for the next person that offers them a better experience. So instead of this, which is pretty, pretty basic, this is how you should look at your customer journey. Create demand, have people place your orders. Clearly, confirm the order, deliver the order, but then you have to track the satisfaction of the people. Treat objections that might appear, and only after then enroll them in your flows and automation, personalize their experience via advertising, email, website. And then your chances for that same customer to purchase again will be increased to 50%. And this is based on real data of all the brands that we are working with. Only a 1% increase in your retention rate can bring you at least 20 to 30% in revenue, only 1%. So I'm sure whoever is a brand owner and watches can do a 1%. So just to finalize, this is how you should look at your customer journey. Measure the right stuff, segment your customers based on their buying behavior, gather insights via email about your customers, do qualitative research via email to understand what are their problems, what are their frictions, why did they choose you, or most importantly, why they did not choose you. And then deal with all those objections and frictions and fix them, and based on what you gather from that information, build your ideal customer profile, understand their buying behavior and their buying patterns, and then you will be able to create better emails and ads, better customer service, better product assortment, and better website targeting. And if you map your journey and you focus on retention, the personalization is gonna be on autopilot afterwards. And that's me at 1.5, going through our FMR segmentation. But if you wanna get in touch with me, I'm Juliana Jack. You can find me on LinkedIn, and I'm mostly paying real estate on LinkedIn because I'm there all day. Well, thank you. Thank you so much. I will link your LinkedIn, because I know you've got a lot of content. Yeah, I just wanted to say, thank you so much for giving this all away for free. I think you could have easily charged a lot of money for this so thank you for delivering so much free value. I'm obviously a big fan of you and kind of your team and what you guys are building and doing. So for anyone that's still watching, please go follow Juliana and her company and see what they're up to. Thank you so much for coming on. I'm gonna go get this video live and I'm gonna send it out. So I hope you have a great rest of your evening. Thank you. Bye.