The CLV Revolution: Transform Your E-Commerce with Customer Value Optimization

Introduction

What I remember most from my two hours as a butcher is the smell, still very ripe in my mind many years later. I was barely sixteen years old. I had no desire to be a butcher. My mother had dragged me from the soccer field, taken me to the butcher shop, and told me it was time to make something of my life. In her eyes, I was wasting time on the soccer field, and had no chance of becoming a professional footballer. Her thinking was right, even if her method was not. In Romania in the mid 1990s, money was scarce for many families, including ours. As far as my mother was concerned, my job was to get a job.

Once she left, the two men who ran the shop sized me up. They were both much bigger than me, their smocks covered in blood. I was small, not very strong in their eyes. After a moment of critique, one of them said, Okay kid, we’ll help you make something of yourself. Then they laughed, led me to a far dank corner, and put me to work making meatballs: scooping, rolling, patting, rolling again, scooping, repeating, repeating, repeating until my arms were red up to the elbows. I had to breathe through my mouth because every breath through my nostrils made me want to gag. There was a clock on the wall, and I kept looking at it, which only made things go slower. An hour passed, and just as the second hour was almost through, the two butchers walked outside to smoke. I tossed my smock on the floor and ran as fast as I could back to the football field, still covered in blood.

Very rarely do our lives move in straight lines, especially our professional lives. Mine has been a zig zag with plenty of false starts, abrupt stops, and wild turns. After seventeen jobs, and building four very distinct companies, what I have found is that the number one job to do, above all else, is to create value for others.

With that in mind, The CLV Revolution is not about making meatballs, or producing a product or service. It’s about helping you create value for your customers: aligning what you sell and how you sell with what they actually need across their customer lifetime.

Two Ways to Grow a Company

To grow your company, you can focus the bulk of your energy on 1) trying to acquire new customers (acquisition) or 2) by nurturing existing customers across their customer journey, and applying what you learn about acquiring better customers toward creating and improving the messaging behind better products (lifecycle).

Perhaps you know this by now, but I want to be very clear: Acquisition marketing alone does not work long term for all business models. If what you sell gets bought multiple times, it may work for short bursts, but in the long run, it’s called churn and burn for a reason—you will burn yourself out.

Right now, you might be struggling to reach your company’s goals. Perhaps the process of acquisition marketing that you’ve been relying on is no longer working. The market has changed. The COVID-19 pandemic has forced traditional retailers to grow the e-commerce side of their businesses, and will continue to impact the way we will all do business for years to come. There is more competition than ever, and the internet and social media are changing as well.

Cookies are dying, customers can opt-out of app tracking, and the era of influencer marketing has shifted the way people buy. Even if you’ve noticed an uptick in revenue, you’ve most likely seen acquisition costs go up in the process.

I know this from experience because I’ve been there myself. The target we are all aiming at is constantly moving. As e-commerce professionals, it is time to shift and expand our focus toward acquiring and keeping customers in order to create consistent, long-term growth. This book shows you how, including an introduction to a tested methodology called Customer Value Optimization (CVO)—the blueprint for amplifying customer lifetime value (CLV), and up-leveling your e-commerce game.

The Importance of Creating Value

The night after my first and last day as a butcher, I realized something that still guides me: I needed to do something with my life, but not in the way my mother envisioned. She equated doing something with getting a job and providing for our family. I saw my purpose in a different way: I wanted to create value for other people. If I did not actually create value in my work, I knew that I would never be happy. Every job would become just another butcher shop I was trying to escape.

After my unsuccessful stint as a butcher, I sold books, became an optometrist, brought the internet to an entire neighborhood in Bucharest, founded a marketing and digital agency company, and sold auto insurance, to name just a few of my endeavors. At one point in my journey, I was making 85 euros a month. Three years later, my first small company was making more than $40K in monthly revenue. Then I lost it all and wound up moving back in with my parents. And things have continued to ebb and flow ever since.

At times, I was convinced I had conquered the world. At other times, the more I made, the more costs I had to deal with. In fact, as revenue grew, I watched profits flatten again and again.

Since 2013, I have built Omniconvert, a firm that focuses on web conversions and optimization for clients throughout Europe and the world. Today, we are a team of fifty people with hundreds of clients using our tools, including well-known global brands like Decathlon, Avon, Culture Kings, and Auchan. Every day I remain on the hunt to create value for others and to help companies do the same for their customers.

That’s one of the most important lessons that I have gained in my professional life: You have to prioritize the goal of creating value for others, and not just making money. If you provide enough value, the money will chase you instead of you chasing it—like a shadow that finds you on a sunny day.

Here’s another way to say it: You can’t avoid making money if you provide value to the world. This principle is something that many successful startup companies understand and respect. However, things change as companies grow. Once a company is established, they hire and place highly specialized people at the top of the organization. From there, things begin to revolve around revenue targets, or earnings before interests, taxes, depreciation, and amortization (EBITDA) etc. Before long, these companies only care about the value that they extract from their customers, while leaders prioritize their decisions based on how much profit they will create. In your lifetime, I am sure you have seen how this type of narrow thinking has played out for companies like Nokia, Kodak, Blackberry, and Blockbuster Video, to name a few. What happened to them? In a word, they became self-centric, and stopped being customer-centric.

Nowadays, many companies continue to struggle to measure what matters to them and their customers. Often, these struggles come from chaotic reporting, which leads to disconnected departments and random acts of marketing. In addition, many KPIs focus on what the company gets, rather than what the company gives.

There is one north star metric that can capture the essence of a company’s health: Customer Lifetime Value.

Customer Lifetime Value at a Glance

One way to define Customer Lifetime Value (CLV) is as the Monetary value across the lifetime of a customer relationship, based on the present value of the projected future cash flows that comes from that customer. Yes, it’s a bit of a mouthful. To put things simpler, CLV shows you the predicted profit, over time, that a customer will bring you. With this in mind, CLV is the best way to align your entire organization around your customers, and to follow the shortest, smartest path to profitability.

Even though CLV has been around for decades, few companies have completely adopted it into their strategy. It remains a KPI that data professionals or marketing teams use to adjust budgets, or to represent the upper limit on spending to acquire new customers.

This is shortsighted. CLV is actually the ideal KPI to monitor and improve an entire organization’s performance. It affects and impacts almost every department, not just marketing, which must work together like an orchestra. What’s more, the actions your company takes will affect CLV as a core metric: your products, pricing policy, fulfillment, the customer experience, marketing, customer service and more.

Adding everything together, CLV is a way to monitor performance at every level, starting with the CEO’s. With the help of CLV, stakeholders can effectively evaluate how well a company’s leadership team is doing its job.

And now for a big reveal: Everything changed for my e-commerce business when I began focusing on CLV. After a pivotal a-ha moment, I realized that to improve CLV, my company, and all companies for that matter, must have three solid pillars:

•What they sell (the product)

•What they do (the customer experience)

•What they say (their marketing)

From there, I created the Customer Value Optimization (CVO) methodology, which you are about to discover and start to leverage as you read this book. What you will find is that CVO is the path toward amplifying customer lifetime value.

What Does Value Mean to Your Customers?

The CLV Revolution paints a picture of what value is, why it matters, and how to create it within the context of your business—and, more importantly, in the eyes and minds of your customers. It doesn’t stop there. It also gives you direct access to the tools you’ll need to use CVO in your business right away.

Here are two truths I’d like to share with you. The first is about the e-commerce landscape and today’s businesses. Companies can no longer rely on their old ways. We need an actual revolution—one that begins with a transformed mindset. Congratulations—holding this book is a clear sign that you’re on the right path!

Here is the second truth about your customers. They don’t buy your product just because of the product. They buy it because they believe your product will make their lives better. They buy it for the job it will perform. They want to improve an aspect of their lives, and something about your product helps them take action.

One reason why an acquisition-only approach will fail is because it doesn’t have your customers’ unique journeys in mind, or how the way they define value changes over time. The acquisition-only approach is too busy bombarding people with a stream of buy-now messages, offering specials and discounts they might not care about. Plus, the costs of acquisition marketing continue to go up, and you arrive at a sure-to-fail process that all too many e-commerce professionals continue to buy into.

To succeed with a new mindset that moves beyond acquisition only and fills in the e-commerce gaps with lifetime-value marketing, you must become even more customer-centric than before. Across every industry, the shift from acquisition-only marketing to lifecycle marketing is already happening. However, even for e-commerce companies that understand the importance of CLV, they’re not sure how to achieve it. That’s where Customer Value Optimization comes in.

The CVO methodology is a working process that helps e-commerce professionals and businesses deliver value across every stage of the customer’s journey: acquisition, onboarding, retention (prevention), and reactivation. CVO helps you understand what this value means to your customers and how your products and services help fulfill their needs again and again, even when those needs change. With this insight, you can begin to deliver greater value via your products, services, and customer support.

Get to Know Your Ideal Customers

I can’t tell you all the times I used to think that I already knew my ideal customer before I actually did, or that I’d done all of the work I could possibly do to get to know them. I was wrong. If you assume that you’ve figured your customers out, but haven’t gathered the data to back up your assumption, the e-commerce world will punch you in the nose. CVO is your chance to go much deeper than just gathering a shallow interpretation of your customers and their needs. With this new insight, you can begin delivering greater value via your messaging and customer support.

To help you gain this insight and put it to use, The CLV Revolution unfolds in three parts:

•Part 1 helps you start to fill in the gaps related to acquisition-only marketing, including a deep look at the numbers that drive e-commerce revenue and success. You’ll discover that the equation profits = revenue minus costs is merely the start, not the end. You will understand why chaotic reporting is the shortest path to disconnected siloes. You’ll also see why data hygiene is incredibly important, but is far from enough for a thriving data-driven organization. At the end of part 1 , you will see different ways your actions can impact CLV, and will understand why it is the north star metric to rely on in retail.

•Part 2 expands the CLV message by diving deeper into CVO, and providing a practical guide to optimization. You’ll learn about customer research, and how to move away from fictional buyer personas, to real customer expectations. You’ll also see how to segment your customers by using RFM, and how to take action with the help of real examples from companies that I have worked with. Part 2 reinforces the fact that your customers are at the center of everything. By the end of part 2 , you’ll be well on your way to getting to know them, understanding why they bought from you the first time, why some continue to buy, and why others have disappeared.

•Part 3 explores six campaign initiatives you can leverage right now, with the help of customer data and insights that CVO will help you gain. You may even be tempted to dive into part 3 right away. You can certainly do that, but if you haven’t shifted your thinking toward CLV, even the best initiative will fail to deliver the results you want. Sadly, this