Customer Equity Accelerator Podcast

Ep. 37 | Implementing a CLV strategy with Jordan Elkind of Custora Part 1

 

Who is driving growth through CLV strategy in the retail space? Hear three transformational stories about retailers Bonobos, Eloquii, and Crocs. Learn why CLV is the smartest predictive growth strategy and why this is the golden age for today’s CMO.  Host Allison Hartsoe chats with Jordan Elkind, Head of Product at Custora this week on the Customer Equity Accelerator.     

Please help me spread the word about building your business’ customer equity through effective customer analytics. Rate and review my podcast on Apple Podcast, Stitcher, Google Play, Alexa’s TuneIn, iHeartRadio or Spotify. And do tell me what you think by writing Allison at info@ambitiondata.com or ambitiondata.com. Thanks for listening! Tell a friend!

 

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Links:

3rd Annual Carma Conference NYC 10/4/2018

 

Key Concepts:  Customer Lifetime Value, Marketing, Digital Data, Customer Centricity, Long-Term Customer Value, Marketing Leaders, Analytics, Creativity, Product Development, Audience Research

 

Who Should Listen:  CAOs, CCOs, CSOs, CDOs, Digital Marketers, Business Analysts, C-suite professionals, Entrepreneurs, eCommerce, Data Scientists, Analysts, CMOs, Customer Insights Leaders, CX Analysts, Data Services Leaders, Data Insights Leaders, SVPs or VPs of Marketing or Digital Marketing, SVPs or VPs of Customer Success, Customer Advocates, Product Managers, Product Developers

 

Let's Calculate my CLV

 

Show Transcript

 

Allison Hartsoe - 00:01 - This is the Customer Equity Accelerator. If you are a marketing executive who wants to deliver bottom-line impact by identifying and connecting with revenue generating customers, then this is the show for you. I'm your host, Allison Hartsoe, CEO of Ambition Data. Each week I bring you the leaders behind the customer-centric revolution who share their expert advice. Are you ready to accelerate? Then let's go.

Welcome, everyone. Today's show is about implementing a CLV strategy, which is customer lifetime value. Of course sounds simple, but it's actually quite complicated and to help me discuss this topic is Jordan Elkind. Jordan is the head of product at Custora, a predictive customer analytics platform that sits on top of customer data to make insights more accessible for marketers.

 

Allison Hartsoe - 01:00 - Now, if you follow the show and you are familiar with things I talk about in general, I almost never invite software or product folks onto the show, so it is an incredibly exciting to have Jordan here and, and I'm very happy that he can be here because the things that we're gonna be talking about today are incredibly valuable, incredibly valuable for people who are trying to build customer equity. Jordan, welcome to the show.

 

Jordan Elkind - 01:31 - Thanks so much, Allison. It's great to be here.

 

Allison Hartsoe - 01:34 - Can you tell us a little bit more about your background and how you kind of drew the path from wherever you started into CLV strategy?

 

Jordan Elkind - 01:43 - Absolutely. Um, I have a rather nonlinear background. Uh, my first job out of college actually I was working for a performing arts organization doing marketing and yeah, I've come a long distance, um, but uh, during, uh, marketing and fundraising strategy, I like to think of this as kind of my first exposure to database marketing, um, because some of the principles that would later come to haunt me or keep me up at night related to customer equity, that the notion of customer Heterogeneity in lifetime value where their rights in the beginning when you're trying to figure out which supporters or donors to reach out to, um, to help keep the organization of flow and how to get the maximum return on a direct mail piece when your budget is like a 99 cents. It was, it was a really exciting, um, and, and volatile time for the organization.

 

Jordan Elkind - 02:42 - And eventually I went to business school to develop a more robust foundation and in some of this data-driven marketing. And that was where I crossed paths with peak fader and named that. I assume it's familiar to regular listeners of the podcast. Really the luminary of customer lifetime value modeling. Um, and he got me really excited about the potential for businesses to use CLV to organize around the principle of customer lifetime value and use that for competitive differentiation. Um, after business school I, um, made a misstep, wishes that I thought that I would find that good a CLV vibe working in consumer finance, a predictive modeling for Citi Cards, the credit card division of Citi Group, uh, which was very, very quantitative and very much involved in customer lifetime value, but also rather soulless,

 

Jordan Elkind - 03:41 - Um, and a lot of the joy of marketing decision making and discovery, I just felt like I didn't, I didn't connect with the, at that organization and that was when I was approached by coursework, which was a fledgling company at that point that, um, was working to bring some of a professor Fader's, research on a customer lifetime value modeling into the mainstream of marketing at the time they were very young company and they had these Pesky people who kept writing them checks every month, and they needed somebody to work with them. So I actually joined to lead our client success team. Okay. And, uh, it, it was my responsibility in the early days to kind of span the gap between the problems and challenges that our customers were describing and what our software was able to do, but really did not internalize the language of retail marketing, understand the practical applications of CLV in the real world and just as importantly, the constraints or obstacles that get in the way of applying them at scale.

 

Jordan Elkind - 04:49 - So to run the business and overtime is we began maturing as a software company. We built up all kinds of great processes around account management and success. But the one passion that really got me out of bed in the morning was I'm bringing those insights about real-life use cases and real-life challenges to our product design. Like how do we architect software that actually makes it possible for massive global matrix organizations to align around high-value customers? And it's a really tough problem. And uh, I was actually given the opportunity by the executive team at historic said, um, create a, a new organization that product management team and our team is responsible for guiding the vision and strategy. And the roadmap of our software and so that's what I've been doing for the past three and a half years.

 

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Allison Hartsoe - 05:41 - It's definitely a lot that you've accomplished in that time period. I love how you flag that. There are certain jobs that might be quantitatively intensive but don't really seem to connect to the customer even though it might be a customer modeling or CLV modeling. And that's one of the things I really love about the way a lot of retailers are using or, or starting to use CLV strategies is they're starting to connect to customers. Can you tell us a little bit more about, you know, maybe that's what you see too, but you know, why should people care about the CLV strategy? I mean there's customer experience strategy, there are martech strategies, there's, you know, 50 other types of strategies out there. Why CLV?

 

Jordan Elkind - 06:34 - I hate to you to off on a negative note, but I'm being immersed in the retail world as we are. We hear a lot about the retail apocalypse. I'm not sure if that's a phrase that has been foisted on your listeners before, but it's the idea of right or wrong. The ground is shifting underneath our feet and retail in the world we live in today is very different than the 1, ten years ago. No customer engagement patterns are changing. Customers now, if you look at the path to purchase, there's engagement across more touchpoints, devices, and channels than ever before. Customers have an essentially limitless choice, thanks to Amazon and ultimate price transparency and customer attitudes and expectations about how a brand treats them and engages with that murdered her changing right? That maintaining a transactional relationship with your customers is no longer enough to drive longterm loyalty at.

 

Jordan Elkind - 07:27 - The reason that we hear this called the retail apocalypse is that there are winners and unfortunately very well publicized losers, well known global brands that have had just shuttered their doors or declared bankruptcy because they can't adapt quickly enough to the realities of-of the new age. Now, why do I think CLV is important? Well, we've actually spent a lot of time looking at the golden age of retail. It's kind of buried under the headline of the retail apocalypse like there are companies that are killing it, that are posting regular growth numbers and growth numbers that you wouldn't believe it either. Retailers, that we're all familiar with, right? Zara, Nike, Amazon, um, but the companies that have managed to buck the trend or adapt to it in creative ways. And when we look at that, the common thread that connects all of their growth strategies, what we see as one that is powered by insights about customer lifetime value, specifically a fanatical, zealous focus on who the best customers are and organizing the entire company around a catering to them, delivering value to them.

 

Jordan Elkind - 08:31 - And I don't mean just, you know, marketing to your high-value customers through a direct mail catalog and everything from understanding what products to build, what marketing channels, how to architect your supply chain were to construct store locations. The companies that are really pulling apart from the pack or the ones that realized the only sustainable way to win against Amazon is to know you're better and build a sustainable machine for growing customer equity. That story is kind of mission statement. Or elevator pitch for, for white here. So very much with CLV.

 

Allison Hartsoe - 09:05 - That's exactly where we're aligned. I oftentimes don't hear marketers talk or even resonate with the idea of customer equity, but when you have a venture-backed companies where you have companies that have heavy investors, they all understand the idea of equity because it basically means how much am I, how much value am I generating, particularly when we're talking about CLV, how much future value is locked up in that customer base? And I think you've hit on something really interesting here about the golden age that might be buried underneath the retail apocalypse where it's really driven by perhaps tribes or perhaps, um, the customers who are giving you the signals that they really love your brand, they really love your company and they want you to do more for them. I sometimes say it's; it's like being of service to the customer as opposed to product pushing. You're looking for ways to ingratiate yourselves into your customers' lives.

 

Jordan Elkind - 10:11 - Uh, it's a great way of putting it.

 

Allison Hartsoe - 10:13 - Now what I thought was interesting that you mentioned too with the customer as the focus is we're not just talking about marketing and w. We are going to focus mostly on the marketing here, but you also alluded to the fact that CLV is really broadly applicable outside of marketing. Do you see marketers becoming more influential because they can influence or because their knowledge of the customer becomes so powerful?

 

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Jordan Elkind - 10:41 - Oh, absolutely. And here I'll give a little tip of the hat to one of our investor's foundation capital, which is invested a lot of research time and energy into publicizing what they call the age of the CMO and their thesis, right? To say from you were to track the evolution of corporate culture over the ages. You know, back in the 80s, right? It was that the age of the CFO, financial mergers and acquisitions, financial wheeling, dealing. That was what drove company value, and in the 90s it was the age of the COO right? It was all about operational efficiency, but we live in a time where there's just unprecedented access to customer data, and the marketing team is, is right at the forefront of that and the marketing teams that are doing things right are actually able to connect the dots across all of the, the ways that their customers are engaging with them to create incredibly rich profile of who their customers are. The ability to understand what makes your best customers tick and over deliver to them.

 

Jordan Elkind - 11:41 - That is going to be the difference between life and death for many of the retailers that we work with today, and the marketing team is uniquely poised to help lead that revolution. So we've seen many examples of the marketing team driving strategic decisions that extend far beyond, you know, decisions on ad placements are creative and fundamentally influenced your merchandising supply chain and. Okay.

 

Allison Hartsoe - 12:03 - Oh, I love that. That's exactly what we like to see too. Let's talk about some of those examples. So how do you see a or, or maybe you can give us an example of a, a company that started off with more traditional thinking and how they changed to more modern marketing, customer-centric, CLV driven thinking

 

Jordan Elkind - 12:27 - For sure. It's funny to characterize traditional going to modern, but one of the first companies that I had the pleasure of working with when I joined sorta was the um, clothing, e-commerce concept that has been just wildly successful and in a way when we started working with them, they were traditional in so far as they were following the playbook for like an e-commerce startup, meaning that they didn't invest very much in traditional marketing or distribution channels. A traditional marketing channel being like direct mail, a distribution channel being like brick and mortar, right at the time they work here, play e-commerce. They were heavily relying on word of mouth scanning, search and so forth to, to source their customer base. Now what was really interesting, um, with Bonobos is that at a certain point they really started taking off and achieving hockey stick growth. And then it began to stagnate a little bit, and it was tough for them to keep acquiring customers, much less high-value customers at the same rate that they had previously.

 

Jordan Elkind - 13:32 - And so they started looking outside the box for potential ways to grow their business. Now a big part of that, of course, was it had this amazing customer base. How could they further engage their best customers to drive repeat purchases, but they knew that they needed like a killer new acquisition vehicle, something that would increase awareness and bring really high-value customers in the door. And so after batting around some wacky ideas for awhile, they actually came up with like the craziest idea of all which was imagine a pure-play e-commerce retailer, right? Totally distinct cumbered from all of the burdens of running the real estate, actually opening a physical store, much less in New York, the most expensive rent in the country. And this was just an absolutely wild gamble for them. But their hypothesis was if customers had especially their target segment, who are men who may not have an extensive interest or familiarity with e-commerce fashion previously.

 

Jordan Elkind - 14:30 - If there were some kind of physical showcase for them to try products on, not anything to buy them because the stores don't sell any products, but essentially a physical store window and a place to feel comfortable that it would deepen their engagement with the brand over time. Now I can't overemphasize enough that in order for this crazy gamble to work, the lifetime valued customers acquired through this channel would have to be like an order of magnitude higher than their regular

 

Allison Hartsoe - 14:59 - Do you mean in order of magnitude as in 10 x or five x or

 

Jordan Elkind - 15:03 - Perhaps four or five x when you factored in the so halfway in order of magnitude higher but very, very significantly higher than their traditional e-commerce customer. You know, because of the huge investment that they were making, the physical retail location. And so they kind of on the edge of their seat begin rolling out this concept in New York. And the results were astonishing, and we had the pleasure of working with them at the time. So we were like watching the data role in day by day. Looking at how the restore predictions. We're reading for that segment of customers tracking the actual repeat rate of cohorts that had been acquired through that channel and the lifetime value of the customers who had had an initial touch point prior to their first purchase with the brand in one of their guide shops in kitchens. Was it easily sword beyond that kind of break-even mark? It was very, very significantly higher than the pure-play e-commerce customers, so part of it was the self-selection.

 

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Jordan Elkind - 16:00 - Perhaps these are older, thicker wallet, a gentlemen who wouldn't have gravitated to and e-commerce shop, but it's not something on the street, but I think they touched on something really powerful when they said like there is something experiential about the engagement that you have when you walk into a guide shop. You get to know the brand in a way that you don't just sober, you know, e-commerce transaction and that leads to this fanatical brand love that just keeps those customers coming back time and time again. Anyway. If this were just an isolated incident of like one gimmicky pop up shop, I wouldn't be telling this story, but that actually became a major engine of growth for them over the ensuing years to the point where they expanded their guide shops strategy to a number of locations throughout the US, and I don't know how many there are now, maybe eight or 10. Um, but what gave them the confidence to pursue an aggressive, you know, real estate growth expansion strategy really was understanding how this formational customer experience early in the lifecycle leads to greater customer equity longterm.

 

Allison Hartsoe - 17:02 - I love that thinking because oftentimes we hear all of this noise about we're going to create a wonderful customer experience and every time I hear a retailer talk about that, when the customer is an aggregate, that as if every type of customer would like the same type of retail experience. It drives me crazy because there's no value behind it. There's no strategy behind it. But what you've laid out here was a very specific strategy. They knew who not just who they wanted to attract in the guide shops, but they had a really measurable hypothesis behind it. They knew what that return value needed to be and it wasn't just, you know, an x person is going to make, um, you know, future dollar purchases of why it was our high-value customers look like this, and this is what we think they want. So it was really driven by the thinking or by the perhaps by the characterization of who those high-value customers were as well as the place they're operating in the life cycle. That's what's driving the experience. Am I getting that right?

 

Jordan Elkind - 18:10 - Yeah, absolutely. And you know, I could talk all day about amazing turnaround stories that we've seen in the retail world. But what I find equally inspiring is that in some cases the leadership team doesn't necessarily know what they're looking for ahead of time. They just know that following the CLV trail will help give them a breakthrough insight. And an example of a retailer that I think exemplifies that CLV first mindset is fast fashion plus sized e-commerce superstar called Eloquii. Eloquii is just an amazing brand that like Bonobos has achieved fanatical levels of brand love and in a very loyal following and the leadership team, so com, Mariah Chase, VP of marketing, it goes dead. These would definitely go in like the CLV all stars hall of fame. They're people who had listened to the voice of the customer, not figuratively, but literally. They spend a lot of time out there talking to their best customers, understanding what makes them tick and looking for ways to deliver value to more parts of their life.

 

Jordan Elkind - 19:15 - Really becoming like a lifestyle brand, not just a clothing brand. There are two specific examples that come to mind for made that for me, just as an example of this type of thinking, the first ways, and Kelly told this story last year at Christmas Karma Conference. I'll say a word about that a little bit later, but one of the first things that Kelly did when she became the VP of marketing was begin to look for ways to systematically rescue high value customers who are downshifting, like slipping away, showing signs of fading off of their typical patterns because she knew that the average, like high lifetime value customer for Eloquii, was worth many times. Uh, you know, a more average customer off the street and that's great, right? It's, it's highly advisable in, in my view, for every retailer to have some sort of churn prevention or win back program in place. But would, she mentioned it went well beyond just a; we miss your email.

 

Jordan Elkind - 20:11 - They actually got on the phone and called their best customers who were beginning to show signs of fading away, and they asked them, hey, what's up three weeks ago when we predicted your lifetime value, you worth thousand dollars? Now you're only worth 100. What I tell us what's going on and what's changing and the insights that they were able to glean from those conversations were like jaw-droppingly, useful. They heard about the things that people liked, the content marketing that the brand name and they heard about things that they were not so hot on specifically for a plus size fast fashion retailer fit is everything. It's so, and they were missing the mark on the fit of a lot of their garments that their highest value customers gravitate towards and it was leading to really subpar customer experience and so like mobilizing to action.

 

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Jordan Elkind - 20:59 - Kelly and any executive team went right back to the drawing board, like to their design team into these conversations, got new fit models, re-engineered some of their most important garments, like the basics of their, their merchandise assortment from top to bottom in order to improve the fit and brought those right back on the market and they sound incredible uptake and engagement of their high-value customers as a result, when they were able to really tailor the product to meet the needs of their most valuable segments. The other funny story and I think Mariah; the CEO told this as maybe the previous Karma was they'd fanatically monitor the health of their, their high-value customers. Right, the customer equity, there are very, very data-driven company, customer equity, they view as the lifeblood of their business, and they saw an interesting anomaly which was that the rate of merchandise returns was spiking in their highest value customer subset and because they're a curious bunch and default to action, they like picked up the phone and immediately started calling customers and their concern was what I just described like, man, we have some kind of fit Florida defect in her garment.

 

Jordan Elkind - 22:02 - And what they learned astonished them, which was on the contrary it. There was no defect or flood and the garments. In fact, a curious thing was that the types of garments that were getting returned very frequently tended to be dresses and specifically white dresses. What they discovered talking to their highest value customers who were turning all this stuff was it they absolutely loved Eloquii, and they were having trouble finding legitimate wedding dresses that were flattering and fashionable for plus size bodies. And so they were actually buying Eloquii, like cocktail dresses in white to where did her wedding. And the reason they were returning so much was, you know, it's your wedding, you by 10 and you choose the one that works best in you return the other nine that this was an example of another like astonishing conceptual breakthrough for that because it got them thinking about why was there this whole new area of our best customers life that we're not catering to his big day and what if we were to create a bridal assortment or partner up with another vendor to offer kind of a bridal line. In any case, I.

 

Jordan Elkind - 23:01 - I love talking about liquid because they're a great team, but those to me are some of the great examples of how taking customer lifetime value, seriously viewing your best customers is the single most important investment that you have, can yield incredible insights to power product design, distribution channels, service delivery.

 

Allison Hartsoe - 23:21 - There's so much richness in that story. I want to call a couple of things out of what you just said a second ago was about empowering product design, and I think that is indeed what happens when, as you said, a company becomes fanatical about really understanding what drives their high-value customers. One of the first applications is to apply that knowledge into other aspects of the company product, an immediate place to turn, especially if there's a product, a piece that's missing. So I. I love that angle, but I wonder if you could talk a little bit more if you know more on the story here about the way that they call their customers. I oftentimes see this gap particularly with companies who are on their way to becoming data-driven. They, you know, they have a hard time getting survey off the ground. Men, it'd be the one they finally get survey off the ground. They don't connect it to customer lifetime value.

 

Allison Hartsoe - 24:18 - But in general there's a giant disconnect between marketers sending information and the actual receivers of that information. Giving them feedback. But what else could did here was they tied that loop together. How did they do that? How did they actually just, you know, get people behind that activity and break that bubble.

 

Jordan Elkind - 24:39 - There's certainly the tactical question is how you reach customers, individual customers at, and I'll address that in just a second, but I think actually the secret weapon I wish were more common in more universal and the retailers that we work with is that they have leadership by example. Their CEO is literally on the phone. She gives herself a quota of individual customer calls. Her work week is not complete unless she has talked to 50 individual customers from their customer base and that fanatical culture of engaging with actual real people to understand what makes them tick and get their unvarnished feedback. You know, a lot of companies pay lip service to the voice of the customer, but it's hard to imagine a more concrete demonstration taking the voice of the customer seriously than the CEO picking up the phone and calling people. And that culture is permitted to all of her direct reports and really throughout the whole organization.

 

Jordan Elkind - 25:39 - So I think probably the only part of it that's real magic is having the leadership team actually lead by example. Now when it comes to isn't really scalable for a multibillion-dollar brand to call individual customers. We've seen different approaches across different companies. Some brands will engage the help of qualitative research firms to help him and conduct customer interviews. Some of them will run surveys, some of them will have a panel, um, in the wings ready to offer feedback on, on new products and stuff like that. I don't have a strong. Um, I think all of those approaches, by the way, have some sort of response bias. Like the people who feel the most strongly either positive or negatively are the voices that tend to get heard. The one word of caution or guidance that I would have for teams trying to understand how to actually absorb the voice of the customer better is to start with some hypothesis.

 

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Jordan Elkind - 26:36 - Something that you want to learn. In the case of the Eloquii team, they are fanatically focused on customer lifetime value. And I would go so far as to say that for most brands, starting with customer lifetime value is actually a great place to begin the journey, right? Rather than simply randomly contacting customers, all customers to understand the response to a new product or feedback on your mobile app started. They've really targeted subset of the customers who mattered, like the people who are predicted to drive the most value for your business in the future and prioritize getting feedback from those customers. That sounds perhaps simplistic, but quite often received qualitative research methods. I try to boil the ocean or pick up on every customer perspective from the customer base when in reality I think we learned the most and I'm the way is often made the clearest by understanding the attitudes and behaviors of our highest value customers.

 

Allison Hartsoe - 27:28 - Right? And I think that's such a brilliant way of providing clarity in what is generally a very muddy field. I can't tell you how many times I have seen a company that paid a lot of money to have attendees of an event, for example, surveyed. And then they put all the survey results together. But you can't slice and dice it; you can't connect it to anything. It's all anonymous. It's almost useless because what people say who are your low-value customers is dramatically different than what people say that are the high-value customers and it's not just in what they say, but it's what you alluded to a second ago in that they are the high-value customers are really holding up your business and if you have to do, if you had to choose between three things to do, doing what pleases the high-value customers is generally the right way to go first. So being CLV driven or CLV lead and your strategy seems to make the most sense out of the gate.

 

Jordan Elkind - 28:32 - Yeah, absolutely. That's certainly what we've sent.

 

Allison Hartsoe - 28:36 - This ends the first part of my interview with Jordan Elkind of Custora, and I hope you'll join us for the second part of this fantastic interview next week. Okay.

Thank you for joining today’s show. This is your host, Allison Hartsoe, and I have two gifts for you. First, I've written a guide for the customer-centric CMO, which contains some of the best ideas from this podcast, and you can receive it right now. Simply text, AmbitionData, one word to 31966, and after you get that white paper, you'll have the option for the second gift, which is to receive the Signal once a month. I put together a 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. Things I include could be smart tools. I've run across articles, I've shared cool statistics, or people and companies I think are making amazing progress as they build customer equity. I hope you enjoy the CMO guide and the Signal. See you next week on the Customer Equity Accelerator.

 

Ep. 38 | Implementing a CLV strategy with Jordan Elkind of Custora Part 2 Ep. 36 | Beyond the Obvious - Data Visualization Best Practices Summarized
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