Customer Equity Accelerator Podcast

Ep. 19 | The Customer as the Asset with Anthony Choe

There is no such thing as an average customer. While it’s easy to say the customer is the most important asset, few have spent time quantifying what that truly means.  Anthony Choe is one of those few. As Founder at Provenance, a progressive consumer private equity firm, Anthony uses Customer Lifetime Value as the primary lens for evaluating businesses. He explains how predictive CLV provides precision and allows both the investor and company to have a singular focus on the customer among all the data noise. With the amount of data and marketing tools available ever increasing, he believes CLV principles are timeless. Optimizing around CLV will always be the best answer, regardless of channel, regardless of the marketing message, regardless of shifting landscapes.

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Interested in learning more about private investing and CLV? Anthony Choe will be at the Customer Centricity Conference, May 17-18,2018 Wharton School San Francisco.

 

 

Key Concepts:  Customer Lifetime Value, Private Equity,  Customer Loyalty, CLV for Investors, Relationship Development, Internal Adoption

Who Should Listen:  CAOs, Digital Marketers, Business analysts, C-suite professionals, Entrepreneurs, Ecommerce, Data scientists, Analysts, Sales, CMO, Investors

 

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Show Transcript

Allison Hartsoe - 00:01 - This is the Customer Equity Accelerator, a weekly show for marketing executives who need to accelerate customer-centric thinking and digital maturity. I'm your host, Allison Hartsoe of Ambition Data. This show features innovative guests who share quick wins on how to improve your bottom line while creating happier, more valuable customers. Ready to accelerate? Let's go!

Welcome, everyone. Today's show designed to shift your thinking to understand how customers are really assets. Now we often think about buildings or cash as assets, but the root of all of that is really your customer. So to help me discuss this topic is Anthony Choe. Anthony is the founder and managing member of Provenance Digital, which is a private equity firm and frankly one of the most progressive investors I have ever met. Anthony, welcome to the show.

Anthony Choe - 01:07 - Thank you, Allison. I'm excited to be here.

Allison Hartsoe - 01:10 - Thank you. So tell us a little bit more about your background and how you were drawn to this. Um, this topic around customer equity. It's not something we usually walk around talking about.

Anthony Choe - 01:22 - Yeah. So it's been a circuitous route to get here, but I'm super thrilled that I get to be doing what I do. So in many ways, it feels like my whole life has been kind of pointing me towards retail in one way, shape or form. So I really lost my father when I was growing up. It was kind of a bootstrapped entrepreneur who would, by failing retail businesses in the 80s, turned them around and sold on the. And so I kind of watched what was happening and what he would do too, to make an impact on the businesses. Really just kind of day to day blocking and tackling. And somehow I found my way to college and with my roommates, ended up opening up a small on-campus eatery and learned a little bit about how tough the restaurant businesses. And so we've been in and around the consumer.

Anthony Choe - 02:14 - When I first started working, I got into investment banking in the mid-nineties at a place called DLJ and is a fantastic environment. The hotbed for financing for private equity firms back before they were called private equity firms when they were called buyout shops. And so I kind of caught the bug for private equity there and while it was the DLJ I got a call, didn't get my desk from Brentwood Associates, which was an LA-based private equity firm that had its heritage originally as a venture capital firm. So I was excited. I joined them in '96, and at that point, it wasn't really a consumer focus firm, but by hook or crook, we began focusing more and more on consumer and by 2001 when we decided that we're to focus exclusively on the consumer.

Allison Hartsoe - 03:01 - That was a good time. Yeah.

Anthony Choe - 03:02 - Yeah. It was good. It was a really good time to do that. And you know, back then there was a lot of change that was happening in the industry. It wasn't that everybody was talking about Amazon was actually, everybody was talking about Walmart, believe it or not, or Walmart was going to be the dominant retailer on the planet. So everything to everyone control every brand. So it's kind of ironic now that the roles have reversed a little bit. Now it's Amazon that everybody's worried about, but Amazon was on the rise at that point, and it was also clear by 2000, one we were coming off the bursting of the.com bubble, but it was clear that e-commerce was here to stay and it was changing how brands could interact with consumers, and in many ways it was the most democratizing events in the history of brands that we've ever seen. So by 2005, we became the first private equity investor to focus on brands selling direct to consumer in a multichannel fashion.

Anthony Choe - 04:00 - And that that it wasn't really well understood what the heck all that stuff meant. So I wrote a 120-page white paper to or investors explaining why this was a permanent shift in the landscape and

Allison Hartsoe - 04:14 - Jerry Maguire. Did you run in, and I have this picture in my head, it's very clear based on the movie, you know, you run in, you've got your manuscript, and everybody stops and looks at you, and you said, no, we've got to focus on the customer.

Anthony Choe - 04:28 - Yeah. It was actually a little bit like that. I wouldn't say there was one singular Aha moment, but there were a series of Aha moment between 2000, one in 2005 where it all kind of became obvious and so I guess it's obvious in hindsight it wasn't obvious at the time, but yeah, we thought because we were fortunate enough to have some specialty retail investments and some catalog investments that really were two legs of the three-legged stool that kind of gave us some visibility as to what was going on in e-commerce. It was very clear that e-commerce was kinda gonna be the unifying channel is going to tie all the other channels together. It's eventually going to become primary channel by which brands will getting launched, and so we're pretty currently onto the game, and so I can't say I started my career with some grand vision to do private consumer equity, but I was very, very fortunate that all those fortunate happenstances happened and through all that is really where we started to hone our understanding of customer life time value.

Allison Hartsoe - 05:35 - Now tell us a little bit more about how you use that today and why provenance and perhaps a little different than other private equity firms?

Anthony Choe - 05:43 - Yeah, absolutely. Yeah. Just to finish up on that story, you know the good news that that strategy worked really well for the last ten years and so our investors were willing to give us a lot of money and have the challenge that is being presented today in the consumer landscape. Is that because of what's going on with direct consumer and brands being digital first? The most interesting brand activity that's happening is at an earlier stage, not a bigger later stage, and so as Bretton Woods was getting bigger and fun size, my opinion was that was going to put us further and further away from the sweet spot of where I thought all the interesting brand activity was. So I decided to leave prevalent informed Provenance to be able to pursue slightly earlier stage investments, and we're designed from the ground up. This specifically targets an entire generation of brands that are beginning their lives digitally but are ultimately destined to become Omni channel.

Anthony Choe - 06:42 - Whether it's, you know, through the retail catalog, wholesale, whatever channel makes sense for a particular brand, the supplement. It's early journey online. Those are the kinds of companies are going to be interesting to us.

Allison Hartsoe - 06:55 - Right? Imagine that whole area is really a high growth area, right?

Anthony Choe - 06:59 - Yeah. It is high growth, but it's high growth in a slightly different way. So what's different about consumer now, at least from what I've seen is that because brands are starting their lives digitally first, in many ways, the shape of the growth curve is different. So in the old days when you were starting a catalog, or you're starting a specialty retailer or whatever the case might be, you have to slog it out for a good ten years. Sometimes as an entrepreneur, not really having much capital available, bootstrapping yourself to eventually kind of prove that you had a brand and then once he had something, then you could start to step on the accelerator a little bit with Econ as the first channel that most brands are really starting with. The shape of the growth is different. You can come out of the blocks screaming with a very high growth rate, being relatively efficient. You can outsource a lot of the key functions of the company early on and eventually bring them in-house over time.

Anthony Choe - 08:00 - And so growth is happening faster earlier, which is why I think it's become an interesting area to invest in because there is the potential for attractive growth. I think when we're targeting is kind of the next stage after that. So early stage VC likes to see high growth, private equity typically likes to see high cash flow and all these brands are eventually gonna more in between go from high growth to high cashflow if they've got a real brand and the right kind of assets. But if there's no real capital that's targeting that intermediate stage. So that's what we're trying to do is we're not a series A investor or a seed stage investor, but we're typically targeting and investments greater than 15 million. So if you had to put a label on us, we'd be series B or series C. We don't really think regarding those labels, but we want to be the last round of capital a company has to raise before it influx into profitability and become self-sustaining. So if you had to make a school analogy, we're not elementary school, and we're not college, but we're kind of junior high or high school in a company's life stage,

Allison Hartsoe - 09:09 - so that's kind of a big leap and I personally think 15 million is actually a small amount to raise before you get to profitability. I can see where some people might feel like 15 million isn't quite enough. How does your firm make that work for a company? How do you give them an advantage?

Anthony Choe - 09:27 - Yeah, so by the time we're investing money, $15 million is typically enough. I think for brands if you raise too much money is actually going to be difficult to have an attractive exit. So you know, my fundamental view is that with brand fragmentation, with all the advances and the democratization happening with the e-commerce, yeah. What are the trade-offs with that is that brands are ultimately going to be a little bit smaller than they used to be and you have a smaller end stage? They're going to have a smaller exit value and so over capitalizing a business with too much in the effort to get there too quickly. I think it severely hamper your exit alternatives and your flexibility to be able to do something, so that puts a really high imperative on brands to grow fast enough to hit the market opportunity and the brand resonance while it's there, but be highly efficient along the way and that's where I think customer lifetime value principles become extraordinarily important to be precise so that you're not wasting capital.

Anthony Choe - 10:33 - You're not growing for growth's sake. It's all with an end goal in mind because you can't have too little capital and you can't have too much. It's a pretty narrow path that you have to navigate, and so that's why we like to do customer lifetime value analytics early in our diligence process because we can try to figure out relatively quickly whether a brand is and the efficient vehicle to be able to get you there.

Allison Hartsoe - 10:59 - Nice. So, I can see where customer lifetime value is one of those critical pieces, and we often talk to companies about the need to really grow or pivot by customer lifetime value, but maybe you can make the connection for us about coming back to customers as the asset. Why should I care about my customers as an asset and how does that connect into customer lifetime value?

Anthony Choe - 11:23 - So ultimately I think this is all about precision for me as an investor and precision for the company. Then making it's optimization decisions. So when I think about being an investor, my personal view is that investment alpha, if you want to describe it that way, is always determined by to some extent the amount and quality of information available. And importantly, you know, Alpha is created by those that are to separate signal from noise. And I think we've seen in the hedge fund space, for example, the quantitative approaches totally reshaped the hedge fund industry and leading-edge firms that were early on and were able to, hardest algorithmic approaches have had been able to navigate a pretty big sea of constantly changing real-time data, and in many ways private equity investing methods haven't changed in 30 years. Much of the decision making is still done by spreadsheet and five-year projection models. Things that are a little bit, they're still necessary but somewhat antiquated relative to how much data is available now.

Allison Hartsoe - 12:32 - We don't think of that industry as being antiquated at all. We think about that as being more cutting edge. That's fascinating.

Anthony Choe - 12:38 - Well, I think people are cutting edge regarding thinking about traditional tools that are available. So whether it's leadership training, how to create an optimal board, how to really engineer your capital structure and minimize the cost of capital over time. I think people have their engineered all those processes that are not necessarily data intensive and come from a lot of history and experience. But what you have in direct to consumer business is an explosion of data that's available because when you're selling to individual customers, you're sitting on a treasure trove of data. And what we found is that neither investors in our companies or fully tapping into all that and so when we were designing ourselves, we wanted to be able to do that from the ground up. And so, you know, if you're a student of longterm fundamental investing, you know, going all the way back to Benjamin Graham, sound investment decisions are always a function of value that you're investing in relative to the asset that you're buying.

Allison Hartsoe - 13:44 - Now, you sound like a prophet.

Anthony Choe - 13:48 - Consumer brands though, you know, you hear everybody talk about in general terms, but never with any specificity that the customer is the most important asset in the business. And we all know that, but nobody has really spent time quantifying what that means, what that is and what that means. But now with the help of predictive CLV techniques, we can literally define the shape of the customer asset depreciation curve. And to me, that's a pretty profound insight that nobody is taking advantage of. If you have a heavy asset business and the customer is very asset heavy, consumer brands are very asset heavy in the customer, well if you're doing that, you should have a pretty good idea of what it is. The asset is that you're actually buying, so

Allison Hartsoe - 14:38 - That's incredibly important. I just really want to underscore that because not only are we defining what the value of the customer asset is, but what you said that so interesting is it's predictive CLV, and you're about looking at a depreciation curve. In other words, I'm not always assuming that my customers are going to perform at the same level just because they bought once or that my high-value customers are going to continue being my high-value customers. So the fact that there are some dynamics built in that it's flexing and flowing is an incredibly important concept, and I think it's amazing. We can model that.

Anthony Choe - 15:14 - Yeah, exactly. I mean, what if you're a car rental company or an oil and gas company drilling a well, whatever the case might be, you had these assets, and you probably know what their useful lives are and you probably know. Yeah. How much value you're likely to extract out of it over a given period. That all seems very fundamental and natural. And how could you look at these businesses any other way? Well, guess what, the customer asset is the same, and now we have the tools to be able to quantify it. So that's what we're super excited about from the investing perspective. But equally, these insights are always as good as the implementation of what happens in real life once you invest.

Allison Hartsoe - 15:59 - Isn't that the truth?

Anthony Choe - 16:00 - And so yeah, what we're super excited about is, you know, we're, we're helping companies, uh, see their businesses in certain ways that they had never seen before and uh, when you have the opportunity to impact behavior, and you know, how companies are optimizing their decision making with a very efficient process, staff was most impactful to us. Um, because, you know, private equity, you're not able to trade in and out of investments, uh, like you on the public market. So you're really making longterm bets and being able to move the needle on some of the operating decisions and how you're doing stuff more efficiently. At the business is where the rubber really starts to meet the road.

Allison Hartsoe - 16:47 - Got it, got it. So when you were helping these companies, what kinds of things are you helping them think through? Are you thinking more on the marketing side? Is that the starting place? Were you thinking more in another avenue?

Anthony Choe - 17:00 - Gosh, it's actually hard to think of areas where customer lifetime value as the primary lens doesn't help you get back to business. Marketing is certainly one, believe it or not, retail site selection, if you know how to apply certain tools also becomes very lifetime value driven merchandising decisions, uh, ad creative, how you're optimizing those. Everything can be looked at through this lens, and it's, it's the right lens to look at everything through in the long run. So giving you a maybe a concrete example, the certainly on the marketing side, we recently invested in a custom men's wear business based in New York called Nonstandard. And while the company is on the small side for us, we saw that it built an exceptionally loyal customer base with customer repeat rates that you would definitely see like a beauty brand. Not An apparel brand, and so the result of this is that they have super high customer lifetime value measured in the several thousand, not several hundred

Allison Hartsoe - 18:04 - per customer.

Anthony Choe - 18:05 - Yeah. For a customer with various, yeah, per customer with very attractive gross margins. So when you look at the marketing send, the ROI was closer to 10 x on that marketing dollar than two x, which is more typical of what we say. So that's a case where we said, well, it's not because their marketing is so sophisticated, would it means is they're actually under investing in marketing. They shouldn't be doing more, they could be doing more, and it's screaming for more capital to apply to that effort because of the ROI is so hot. So that's one easy way that we see it from a marketing and investment perspective. You know the contrast it with certain other businesses that we've seen that are highly transactional in nature. Often we see this in the home category, so let's certain furniture businesses that are the pretty high ticket, you may not see a customer repeat over a long period of time. So when you're looking at customer lifetime value, that lifetime is basically the first transaction.

Anthony Choe - 19:03 - And so we've seen lots of companies with high AOVs and good margins know scale that $50, million dollars with very little outside capital and that is a big accomplishment. I don't want to downplay that, you know, growing business to in $50 million in three or four years with no outside capital. That's a pretty impressive feat. But for us, when we look at, if we say, well the company is forever going to be on an acquisition treadmill because there's no downstream customer spend. And so the customer assets a very leaky bucket and well as it. So while it's impressive, it's not necessarily the right fit for us. So

Allison Hartsoe - 19:44 - For customer assets, let me push on that for just a minute because there's a fundamental assumption in the first example you gave about not standard that I can get more and more loyal customers. It's almost like the initial customers that came in are really good and there's an assumption that there are hundreds, thousands, maybe millions more just like them. Is that indeed true? Or in either case, are you still always on an acquisition treadmill? Just in the first case, you're on an acquisition treadmill for really good, right customers of which there may be a limited supply to corner the market on.

Anthony Choe - 20:24 - Yeah, well there's always going to be a wide variety of customers that you're going to be attracting. Some are always going to be a higher value than others. What's important for our purposes is to have a deep understanding of who it is those loyal customers are, what they look like, what they'd behave like demographically, psychographically. So you can be more efficient about hunting for more than in the future. So it's a little bit like you're going to have to cast that net and when you're fishing, and you know you'd like to catch nothing but whales, but there's gonna be a lot of minnows in there that get caught up as a, as a byproduct, but you're. Still, you're still casting a net, and so there's always going to be heterogeneity in the variety of customers that you get. So I think what we've seen in our conversations with the companies that we talked to is the simple fact that we're saying that there is no such thing as an average customer is it's kind of a lightening thing for the company.

Anthony Choe - 21:26 - So e-commerce companies are typically very good at doing some basic level of cohort analysis, so tracking a group of customers that were maybe acquired in a certain quarter in a certain year and tracking their behavior over time, but time is one dimension that you need to look at the data over. Most people haven't looked at the spread of what comprises the average, and so people are actually surprised when we show them that typically 20% of customers are creating 65% of the value and the average is really comprised of the kind of a barbell. So you have a lot of one time customers who were interested in what you're doing. They've made a purchase. They may never make a purchase again, and that's the probably the majority of your customer base. On the other end, you've got a tail of customers who absolutely love what you're doing by from you, time and time again, tell all their friends about what you're doing, and they're super high value.

Anthony Choe - 22:31 - And so the average sits in between the two ends of the barbell and so when you're optimizing your business, and you're using average customer metrics, you're actually optimizing to where almost none of your customers are or at least were none of the value is. So, you have to be able to make money on some of the lower value customers. You're not trying to fire all of them, but you're trying to minimize the losses or maximize whatever little gains you're making out of those customers while at the same time really taking care of the super loyalists and making sure that they continue to buy from you at a high rate because they're the ones that are really buttering the bread in the long run.

Allison Hartsoe - 23:11 - Yeah. I think a lot of people understand the value of loyal customers over time. That makes sense, but I think where people tend to lose perspective is the fact that those loyal customers have a very specific profile. As you dig into more about why they're doing what they do, that you can adjust your products and services and even your retail location around that group. There's another side to this principle which is that you can't take a low-value customer and grow them into a high-value customer and I've heard a lot of contradiction on this. Some people believe you can. Some people believe you can't. What is your opinion?

Anthony Choe - 23:51 - Well, I think you can, but you just have to be efficient with the resources that you're willing to spend to try to test to see if you can do it. So I don't think it's that you shouldn't try, but I don't think you can afford to bend over backward to try to make somebody into something that they're not. So there is a lot of incremental value that we see to doing retention marketing and using certain principles to welcome all of your initial customers into the fold, into the brand to try to stimulate their interest and demand over time. The key is not to spend too much to try to entice that next purchase. Whether it's severe discounting, over-communicating, certain customers are never going to convert to that second purchase. You just can't. You can't pry too hard or apply to many resources or do too much discounting.

Allison Hartsoe - 24:44 - Yeah, I love that point about severe discounting. I think that's, you know, when you're considering the value of the performance of customers as an asset against that asset, you have to push liabilities and discounting them becomes a liability that weighs down the performance of that asset. So I could see were severe discounting. I mean in addition to being not a great tool to acquire really good long-term customers is actually weighing down the performance of your company.

Anthony Choe - 25:12 - Absolutely. Absolutely. Yeah. I think the other interesting area that we see a lot of mistakes being made around what the average customer looks like is we typically see companies do some amount of survey work or demographic, psychographic work to try to get a picture of what the quote-unquote average customer is. And going back to our conversation earlier. Our view of Provenance is very much the marketplace for any given vertical or category is going to be a lot more fragmented over time. And what we're seeing is that the fragmentation is happening around certain tribes for, for lack of a better word, and you have to be pretty precise about who your tribe is. And the mistake that we see a lot of companies making is they either falsely believe that a majority of their customers are millennials or in some cases even when they're right that a majority of the customers are millennials. It's not necessarily true that the majority of value creation is coming from millennials.

Anthony Choe - 26:15 - So I won't name any names, but look at a company were. They were firmly convinced that 55 percent of their customers were millennial and it all. Looking at it, it was true when we applied customer lifetime value to each customer, it was very clear that a majority of the value creation was coming from gen x and baby boomers and you know, they kind of had this sunken expression on their face, and they were kind of bummed out. They thought they weren't as cool as they thought they were, but I told them, guys, don't be disappointed by this. You should be ecstatic because you have a three-generation span of appeal as a brand and you're highly relevant to millennials, but just give them time because they haven't entered the sweet spot of their earnings or wealth curve like Gen X-ers, and boomers have, so they can't afford to be more loyal to you than they currently are, but they love what you're doing. So the good news is is your brand has a future because it's highly relevant to the next generation of high disposable incomes. Vendors, like many brands. But the value doesn't all have to be coming from millennials today.

Allison Hartsoe - 27:23 - Right? What a great way to think about the business and you know what a great rescue too as they're sitting there going, oh my gosh, we're not cool anymore, and then all of a sudden it's not so much about coolness, it's about value creation is part of that coolness. I want to circle back to what you said a minute ago about tribes, you know, as part of that coolness, understanding the right tribe and how has it tribe different than what we might think of as the gen X-er persona or the other types of personas.

Anthony Choe - 27:52 - Yeah. So here's where things have to get a lot more specific today. So I think it has a lot more to do with psychographics than it does with demographics. So if you look at niche brands and a particular direct to consumer brands, this is something that I've seen for 15 years. That's true. All of them are targeting typically consumers and the top 20 to 25% of the income brackets regardless of age. That's not perfectly true. But as a, as a vast majority of instances, that's true. So it's age and income are, you know, it's already a self-selected universe of people that you're targeting. Age and income aren't really helping you be more specific. So it really comes down to more psychographics. What are the predilections of people's choices that have nothing to do with age or income sort of your beliefs, your philosophies, your attitudes?

Anthony Choe - 28:49 - And that's where it feels like the brand selection is happening a lot more by tribe because people are differentiating that way and much more so than they used to. It's almost like the criteria for selecting brands isn't around well is this a good price value equation for me because at this point the competitive bar is so high for price value that if you don't have a good price value proposition, you're not even in the game. Yeah. You're not going to be around for a while long enough to even think about these questions. So

Allison Hartsoe - 29:22 - So, a part of that might be, you know, it's, it's good for the earth would be the value and the price point happens to match a particular person in that bracket. Is that a fair assessment?

Anthony Choe - 29:34 - Well, it's just, you know, if you're shopping for. I don't know, pick any category

Allison Hartsoe - 29:39 - Cosmetics, sneakers. Okay.

Anthony Choe - 29:40 - You know, it's, if you're not getting a good product if you don't have a good product at a reasonable value, you're not even in the game to communicate with customers. So how people are choosing their various sneaker brands has more to do with what they think fits their personality profile more so than, hey, is this a better sneaker for the dollar than um, uh, than the other brand that I could consider it. It's almost like the brand is a reflection of how you would pick your friends. And a lot of that is I could graphically drive not income and age driven because you're already kind of in a self-selected universe most likely of age and income even among your friends.

Allison Hartsoe - 30:24 - That's fascinating. That makes sense. Okay, so let's say that I really liked this idea of valuing my customer base better. You know, what would I do? How would I take the next steps to be more active with customer evaluation or customer equity?

Anthony Choe - 30:44 - Yeah. Well, I say if you're looking for investment and sounds like we could be a good fit, then call us. And we can help you out, and we'll do that for free, but if not, then we found that you know, Custora is a good platform that implemented some of Pete Fader's principles, so we think very highly of beaten. We internally here called him the godfather of predictive CLV.

Allison Hartsoe - 31:08 - That's great. I'm going to have that title on here.

Anthony Choe - 31:12 - I don't think he likes that label, but that's the way we affectionately refer to them here. So they've taken some of those principles and created nice dashboards for marketers to easily be able to do some basic cohort analysis and segmentation that allows you to use these principles in a real-time way and make actionable decisions relatively quickly. So I think that's a good place to start for a lot of companies who've never seen or had the chance to implement CLV to get started that way.

Allison Hartsoe - 31:42 - Kind of get a signature of what's in the base.

Anthony Choe - 31:45 - Yeah, I think that's right. Once you get used to some of these principles though, my personal opinion is that I always think that a company shouldn't entirely rely on an outside provider, so every company should be able to do some of the analytics internally themselves. Whether it's cohort tracking, value-based segmentation, and even if you're doing it on a historical basis and not a predictive one, I feel like a company should always be experimenting with the data that they're sitting on and being able to manipulate some stuff yourself is always a good thing, but I think Custora will be educational for a lot of companies that get started.

Allison Hartsoe - 32:24 - Yeah. I'm going to echo what you said there because I see this all the time when we're running analytics is the company has to have a perspective. They have to have strategic leadership behind the data, so it's not enough just to say I have this value in the customer base. You have to have this sense of how do we go to market with that customer base. How do we make choices about what's important and where we want to spend and where we don't want to spend and what we want to do across the board? Instead. A lot of companies leave it. They don't have that strong perspective. They leave it to the tactical folks to figure out and what you end up with is a lot of or is not necessarily rowing in the right direction, so I think I just want to underscore your point about the need for leadership to own the analytics, to run some of it internally, to really understand it, to get that comprehensive strategy together.

Anthony Choe - 33:18 - Yes. I could not agree with you any more than that and every brand in every different category that we saw. Everybody has some customized needs, and so yeah, I think certain off the shelf solutions like the store is good for getting 80 percent of the way there with 20 percent of the effort, but if you really want to start to hone in on stuff yet to take control of what's most highly relevant for your business once you've got there, so totally agree with you.

Allison Hartsoe - 33:46 - Yeah. Yeah. That's fantastic. The Anthony, this has been really good. If people want to get in touch with you, what's the best way for them too. And, and of course, I'm going to call out here that they shouldn't be getting in touch with you for basic marketing tactics. You can always call it data for that stuff, but they want to get in touch with you for private equity, or they feel like they're from is a really good target for what we've talked about. What's the best way for them to reach you?

Anthony Choe - 34:10 - Yeah, you can either find me on Linkedin, or you want to send me an email. My email is anthony@provenance.digital, and we can start the conversation from there.

Allison Hartsoe - 34:22 - Great. Great. So let me summarize a little bit, and you can correct me if I've missed anything important here. We started out talking about why should I think of my customers as an asset, and we talked a lot about this, and really it comes down to the fundamental focus of customer CLV and how predictive CLV is really about precision. We talked about two different perspectives here. One, the investor perspective that the customer asset is really the single most important asset in the business and nobody in the investment world has really spent a lot of time outside of providence that we've seen trying to quantify that, but yet it's really how the leaders are starting to operate singular, focus in all that data noise and then from the company's perspective that predictive CLV becomes the Focus KPI that governs all your optimization decisions, whether it's marketing or product or services.

Allison Hartsoe - 35:22 - And I'll call out here that I know electronic arts who spoke at our customer centricity conference last year had a great presentation about how they took a year to snap to the grid of what metrics were important to them and then align everything into a lifetime value. It's not an easy process, but it's incredibly important and one that has to be done because there is no such thing as an average customer. Right?

Anthony Choe - 35:46 - That's exactly right. Just to add one thing, what I love about CLV principle is that they're timeless. The amount of data that's going to be available to people is going to be constantly increasing. There's always going to be new marketing methods, but regardless of all those environmental changes that are happening, optimizing around CLV is always going to be the best answer regardless of channel marketing message.

Allison Hartsoe - 36:14 - That's fantastic. I'm so glad you added that. We talked a little bit more about the kind of impact that comes through. There were some great examples that you shared with us, but again, no average customer and the contrast when you're deeply truly trying to understand who's driving your business, the contrast between a transactional business where you don't get a whole lot of additional signal versus a loyalty business that is designed to continually engage your relationship with the customer is stark between the two, so if you're trying to create value from your customers and you're thinking about them as an asset, you need to have that ongoing loyalty in order to understand not just when are they going to buy and are they on pace or off pace, but the psychographics behind that value creation. It's not just demographics and age and income anymore. Hey, great. Anything else that I missed there? Anything you want to add on the impact?

Anthony Choe - 37:15 - No, I think you summed it up pretty nicely there, Allison.

Allison Hartsoe - 37:17 - Okay. Okay, so finally you can always get in touch with Anthony for questions about private equity, customer evaluation, and certainly investment decisions and customer as another tool to look at to think about getting an initial take on your customer base and how you might be looking at lifetime value to position everything around them. So as always, everything we discussed is at ambitiondata.com/podcast. Anthony, thank you so much for joining us today. I just, I love your investor perspective. It's one we often don't hear in the marketing side. I always feel like we're woefully devoid of financial information.

Anthony Choe - 37:58 - Yeah. Allison, this is my pleasure. I love talking about this, and I love the fact that you're focused on it as well from a marketer's perspective because I'll tell ya, there's a lot of companies that need help getting up the CLV curve. It's not as difficult as it might sound once you start doing it, but a lot of folks need some help. I'm glad you're out there doing that

Allison Hartsoe - 38:19 - And you're going to be speaking at our conference coming up in the May 17th and 18th at Wharton. You're going to be part of the Wall Street panels. Yeah.

Anthony Choe - 38:26 - I'm looking forward to it, Allison. I think it's going to be a ton of fun.

Allison Hartsoe - 38:30 - Excellent, excellent. Remember everyone, when you use your data effectively, you customer equity. It's not magic. It's just a very specific journey that you can follow to get results. Thank you for joining today's show. This is Allison. Just a few things before you head out. Every Friday I put together a short bulleted list of three to five things I've seen that represent customer equity signal, not noise, and believe me, there's a lot of noise out there. I actually call this email the signal things I include could be smart tools. I've run across articles, I've shared cool statistics or people and companies I think are doing amazing work, building customer equity. If you'd like to receive this nugget of goodness each week, you can sign up at ambitiondata.com, and you'll get the very next one. I hope you enjoy The Signal. See you next week on the Customer Equity Accelerator.

Ep. 20 | AI with Ash Dhupar, Chief Analytics Officer at Publishers Clearing House Ep. 18 | Driving Value Through CLV with Neil Hoyne, Head of Customer Analytics, Google
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