The Complete Guide To Improving LTV In Your DTC Business transcript

what if there's a way to drive a whole bunch of Revenue in your e-commerce business that had absolutely nothing to do with ad spend and therefore it was extremely high margin Revenue in your business high value Revenue in your business and much much more of it created contribution margin that trickled to the bottom line of your business that is what is possible when you have a high LTV business I've talked about this before in plenty of places but LTV is magical in e-commerce it's one of the things that makes e-commerce a great business model when customers come back and buy from you over and over particularly when they can buy a product in a way where it makes a huge amount of sense to just like have it sent to their house all the time they don't need to go to a store the delivery mechanism of e-commerce I.E shipping straight to a customer's house is a good way to deliver your product and it's convenient for the customer it's a good experience for them when those things are true in an e-commerce business when you start driving LTV it is possible to create an extremely good e-commerce business and I would say actually the very best e-commerce businesses that I look at and by best I mean um fastest growing and most profitable and most upside I mean really just most valuable businesses to anybody even if you just sort of put it in terms of Enterprise Value they are all H they many of them have not all of them but many of them have massive LTV now there are exceptions to this uh for sure you look at the simple moderns of the world some LTV you look at Ridge you look at um you know Loop earplugs some those some of those really large really impressive businesses I'm not sure any of those businesses have great LTV if much at all simple modern maybe has the most of the group I said there I'm not sure I don't have access to all their numbers but they're not traditional LTV powerhouses right um and I I should just clarify really fast by LTV I mean returning customer Revenue right so multiple purchases from a customer when you acquire a customer they come back and buy more so when I think about those Brands like it's definitely possible to build a very good e-commerce business apart from that but it is just a cheat code if customer are worth a lot more to you it's that simple right if customer if you buy a customer on the internet on meta ads and that's really what you're trying to do right customer acquisition cost that's what we talk about buying a customer if you do that and that customer is worth a lot of money to you it creates uh more value in your business that's a really simple idea but it's really helpful so what I want to do right now is walk through for you I mean you probably know that right you know that that's true but what I want to do for you right now is walk through for you how to go about driving return ear customer Revenue driving LTV in your business and really thinking about LTV in your business because it is so powerful all right so I'm going to give you six core elements of thinking about and driving more LTV in your business so you can get your head around it okay so six core elements so number one most like the starting place for all of this is you need to start tracking it directly I simply almost never look at a Shopify dashboard at this point that reports Revenue because I am not interested in just Revenue I am interested in uh in uh the difference between new and returning customer Revenue I want to know whether or not the revenue I'm getting is from new customers driven primarily by my ads or if it is returning customer Revenue uh and how and that way I can think about both of them differently because they are so different in your business the way you create that Revenue generate that Revenue in your business is really different so you need to start breaking down your business that way um thinking about your business that way and I would just say make it so that your native dashboard like the number one dashboard you're looking at in Shopify or whatever tool you're using I don't care splits out new and returning customer Revenue so you see it learn it and start getting your head around how much is being driven in your business you need to understand it uh even if you don't even even if you don't do anything with it quite yet the first step to increasing it right is to measuring it right and you manage what you measure that phrase is really true you manage what you measure so um so start measuring it start thinking that way stop stop looking at your native Shopify dashboard instead pull up I just have I just have this bookmark for all of my clients I just have a link to a new and returning customer revenue report so that every day when I look at the revenue that my customer my clients are getting I'm looking at the new and the returning customer Revenue separately so start there and then go the next step okay once you've got your head around it and this is part of the management of your LTV forecast it forast your business using a cohort-based forecast splitting out new and returning customer Revenue this will help you in every possible way to think about what is really happening in your business now this is a big job doing running a cohort forecast took me a little while to get my head around it's not that easy it's going to take you some time and some effort there's a couple resources that I'm going to tell you right now that are going to help you to do this but it's really necessary because if you can start um thinking about how an ad today or a customer today a new customer today creates value over the long term of your business you can think so much better about optimizing lots of the things you're doing that includes thinking about your Opex think about where to put your energy thinking about which products to focus on um thinking about sort of uh where what kind of profit and cash is likely to flow in your business just really hard to forecast your business well without doing these sorts of things otherwise you're just guessing too much so um so you you really should be forecasting your businesses way and the best businesses that I see actually live and die on their cohort forecast they they they understand and internalize it and they think about it and they measure it and on their weekly and monthly reporting and this is actually how I do my week monthly reporting with my clients we report separately new customer for revenue forecast uh versus new customer Revenue actual returning customer revenue forecast versus returning customer actual and that's built off of a cohort forecast I was actually talking with a brand recently that was launching from scratch and even from scratch with no returning customer Revenue we took a guess and looked at that look at uh looked together at uh how much returning customer Revenue we expected so that even from day one we had the beginning of a forecast of this so we could begin to understand actuals versus our expectations and plan the business in real time so that from the moment the business launches we're thinking about these separate so let me give you a couple resources that are going to help you think about forecasting uh your your Revenue based with a cohort forecast first go to my website AJF growth.com sign up on the email there there's a there's an email popup or you can just go to the footer that um references four essential e-commerce resources one of those is a link to a pre-built templated um including a guide uh cohort forecast that you can use you can split it off of there in a bunch of different ways but like um there's actually a walkthrough for how to use the sheet there it's it's from a venture capital firm um called light speeed Ventures that they built to help their um their brands forecast their revenue uh over time it's really really really helpful and it's totally free um and I will link out to that uh for you and there's a couple other really good resources in there as well for that matter so um a ajg.com sign up for my email list I'm not going to spam you um and go get access to that that a starting place for it because it's a massive beautiful Google sheet that you can build off of okay secondly sign up for admission I've talked about this before but admission from CTC every bit of how they are thinking about growing e-commerce businesses starts with a forecast and includes a cohort-based forecast they are thinking this way start taking their courses there's a bunch of different stuff in there about how to uh that sort of touches on cohort forecasting um I have a link to admissions an affiliate link um in the show notes of this of this uh video or this or this uh podcast where wherever wherever you're watching or listening to it um there's a link and that will actually if you sign up for admission that will actually give you also um a free coaching call you could actually use that coaching call probably to get some help with your cohort forecast um and that's really awesome so um there's all kinds of other great stuff in admission but if you want to begin to think this way about your business think the way I do about e-commerce businesses um admission is the place to go do it um there's also a 30-day money back guarantee for admission so if you go in there you can't find what you're looking for there's really no risk to you um so yeah the link for that is in the show notes use the affiliate link that way you get the free call with it all right okay so go do that learn to forecast your business that way it is a huge thing okay so once you have that once you're measuring returning customer Revenue separately once you're forecasting returning customer Revenue separately you start to notice all these little Dynamics in your business and what I'm going to share with you from numers two through six here are the ones that I have noticed over a long time of doing this okay um I've now run a lot of cohort forecasts and measured a lot of returning customer Revenue in a lot of different e-commerce businesses and so there's some themes that I see in terms of how to affect it and how to think about it both okay and so number two so number one is you need to measure and forecast it number two returning customer revenue is more durable than you think surprisingly durable okay um there is a rule in software uh um uh in software forecasting called um I think it's Andrew Chan right I'm just going to quote it it's called The Law of shitty cohorts okay um and and uh and the idea is that your early adopters for software um are much better quality customers than your later adopters your early adopters are the super fans they're much more durable and so you can forecast your LTV to be much higher on your earlier customers than your later ones and a lot of people in e-commerce have assumed that's also true and you know the classic version of this is like oh I don't know if we acquire customers with Facebook ads I bet they won't be as good of customers as our organic customers and what I'm here to tell you is that with rare exception that's actually not true um it is surprising how much LTV cohorts I mean at least in my experience up to $50 million in revenue for an e-commerce business like a pretty good siiz business um actually your your newer cohorts and your Facebook ads driven cohorts and those kinds of things even if you acquire them with some kind of a discount they are surprisingly durable cohorts um that is they they actually are more forecastable to be like your past cohorts than you think which is really good news for you you should still forecast the future relatively conservatively because it's always better to Miss with more money than with less money and so I I like I like to beat my returning customer Revenue by 5 to 10% every week every month um that to me is like the sort of Ideal outcome rather than even hitting it directly because that means that I'm forecasted in a way where if anything went wrong um I wouldn't get caught with my pants down on the business right so um so to speak so that that's like a a really um really helpful and encouraging thing but over and over when I talk to eCommerce operators they're all really nervous that like that you know okay great we're going to go set an EC we're going to go set a CA Target based off of this LTV but what if our future LTV is worse than our past LTV and again with rare exception uh that's mostly not the case the exceptions that I have seen are when the earliest batch of customers for a brand come through a deep relationship with an influencer who started the brand okay so if an influencer started the brand specifically a thought leader if a thought leader started the brand and their very first group of customers came from their organic channels like let's say that thought leader has a podcast or you know a Twitter feed or an Instagram Channel or whatever that has bunch of devotees you know a Blog people who have whove read and paid attention to their content for a long time those customers sometimes actually are better than your other ones but P once you that's like a very small group ultimately that's typically like your first few months of customers and that's it pretty much past that your future customers in my experience are like your past customers in most cases okay assuming you're advertising the same product you've got the same setup Etc in fact if you do some of the things I say in this episode it's possible that your future customers will be better than your past customers because you will'll do the work of optimizing that again now I'm not going to forecast that but it's worth noting that it's definitely possible to do okay okay so number two so it's more durable than you think your your your customers are more durable more reliable than you think number three something that I think almost everybody underrates about LTV is that it lasts longer than you think in e-commerce we have a way of talking about 60-day LTV 90day LTV 3-month LTV or oneyear LTV but nobody ever talks past that that one-year LTV you should be sending the best quality data from your website back to your meta ads account and you can do that with the thirdparty pixel 100% server sidetracking using using the conversions API at Billy b. a billy is incredible software um first of all if you currently have your Facebook ads pixel installed on your website on your Shopify store with a native Shopify integration go stop right now go to billy. sign up for $1 for the first 30 days and uh and make sure that you change it out so that you are using Billy instead of the Shopify native integration to do that installation I guarantee you and I know this because I have tested it across multiple stores Billy is what I use for all almost all of my clients uh to to do their Facebook ad tracking on their Shopify store their purchase tracking Etc all their event tracking I've run split tests on my Facebook ads accounts to see that Billy drastically outperforms uh the native Shopify integration at the level of uh roas at the level of purchases all those things uh it just works better and it is validated by a much higher event match quality score uh in events manager every time I do this so that pixel just works better it tracks more and better data according to Facebook itself according to the data that you have there um it's also incredibly easy to install and that's really nice it's like a one-click install basically you can also use it to install G4 Google ads and they're actually even adding in like an attribution kind of element of the software that's basically would just be tacked on for free it's pretty crazy so um if you're running Twitter ads if you're running any other um Tik Tok ads all any other uh ad platform like that Billy can also install with them basically One-Stop shop replacement for Google tag manager it's really slick really awesome go to b. and start getting more conversions today it's more affordable than the other Solutions on the market as well just really great go to Billy install it the thing is if your business is going to be here in two or three years then that longer tale of LTV actually matters like it really does like those customers are going to be bankable Revenue now I'm not saying that that means that you should um create a timeline where you don't get your money back on the customers that you acquire uh until year two or whatever but like I'll see something where like let's say a brand has 100% LTV in a year which should be really good for a lot of Brands okay by by which I mean uh if a customer spends a dollar today they spend another dollar over the course of the course of that first year very often that customer is now going to spend another 50 cents in year two and maybe another 25 cents in year three and sometimes I've even seen it seen it be more durable than that and the larger that initial batch of LTV is right that 100% number that I reference like if it's actually 300% because you have a subscription supplement brand or 400% or whatever the the larger the effect of that longtail of LTV is over the over the future years and the more value it's going to drive in the long term and what that really is is an argument to air on the side of aggressiveness if you have serious LTV in your business now serious LTV businesses by air on the side of a aggressiveness I mean on your ad spend it means you probably have a better argument all other things being equal cash concerns notwithstanding Etc like to to go acquire customers because if your business is going to be here next year then you should that value matters it counts that Val the customer the longtail of value is real value in your business and it will keep creating that and the more customers you acquire who are going to produce that over more time the more money you are going to make so again there's a danger here right but if number two and number three that the danger is overspending on customers who don't pan out but if number two if those customers are more durable than you think then if that's true too and I think I think they are right then there actually is an argument to be fairly aggressive for particularly High LTV Brands to go and acquire customers at real scale because because you're spending that money today and you need to make sure you're tracking your Revenue you know over the next three months this is why a cohort forecast is so helpful you should not do what I am saying right now if you are not good at forecasting your Revenue with a cohort forecast you absolutely should not do that um you uh you also um shouldn't do it if you don't have a cash flow forecast in place if you don't have a clear sense of how cash is moving through your business like you got to be a good operator here there's a lot of details of this but if that's real there is an argument to say more aggressive and to keep building um a a better larger group of customers because that LTV does go for longer than you think this is particularly true like I said in higher LTV businesses like subscription the other type of businesses that I've seen this be the case in is apparel businesses where sometimes appar apparel businesses have really sticky customers and I think it's because the way apparel businesses grow Revenue I'll talk more about this in a second uh with returning customers is they they add product drops right so um if I buy a shirt from your business and I like it um that's great like if I like your close there's a good chance I'm going to buy from you consistently without even much degradation of my buying pattern sometimes with an even increase in my buying patterns right over a long time I've been buying my same born primitive workout shorts for a really really long time because I love them um same with their underwear like their their boxer briefs I think they're the greatest boxer briefs in the game so I'm going to buy them for forever and it's and when my last pair runs out or whatever probably not last pair I'll buy it before that but like you know you see what I'm saying right when you get a brand whose clothes you love you will keep buying from them for a really long time plus again if you are as a brand uh if you are as a brand an apparel brand getting better and this is often true with growing apparel brands uh apparel Brands as they grow often get better at releasing more products more often getting sort of more professional about their product development process um releasing products across uh more different parts of a of a customer's potential wardrobe you know born Prim is a good example of this over the last year they last couple years they released shoes and they had been working on that for a long time well guess what a lot of customers already loved you know they're female customers they sold a lot of sports bras and leggings ahead of time and they're male customers they sold a lot of workout shorts and shirts over that time well if you love those and you love that brand I you know like you buy some shoes um and so I the only reason I don't own a pair yet is because they were sold out when I looked right they were doing so well and so that actually increases that value over time those customers are worth a lot so apparel businesses in particular have this dynamic in play I think where um the more that you have that and there really any brand that has like a reason to do consist consistent product releases over a long period of time that's the way you create that value for in in a category where where customers have a reason to keep coming back okay um okay so uh just to recap again number one forecast manage it and forecast it measure excuse me measure it and forecast it number two it's more durable than you think number three it lasts for longer than you think number four here's the other thing it's less changeable than you think and what I mean by that is it is hard very hard to make a major impact on your LTV now I'm going to tell you how to do that um but at least it is hard to do that with tactics okay so it actually is very possible to make a very large imp on your LTV but it's not by um typically getting people to um change their behavior in relationship to their product like here's a classic one that people try to do um with tactics they say like we're going to acquire a customer on product a and then we'll convince them to go over to product B like that's not impossible um and again in certain categories like apparel like I just mentioned um it's much more possible because that's sort of part of what it means for a customer to buy that product but beyond that it's actually extremely hard to cross sell to past customers the vast majority of the LTV you're going to create is going to be people reing the product they initially bought in a lot of different categories okay again there's exceptions to this probably depends on your category a little bit apparel is the obvious exception here um but people mostly are going to Reby the the product they already have so you can you know people will say this you know we'll acquire customers on this product which doesn't have very good LTV but that's because we're doing a bad job of selling them the other product you know so product a bad LTV product but easy customer acquisition product we'll sell them product B which is a much better LTV product and will do that after selling them product a with great email and SMS thing is it's just extremely hard to do that customers just don't actually do that nearly as much as you would think so you can don't get me wrong this can work some but it's just a less viable thing at scale than you think it is harder to do uh at a lot of volume than you think mostly customers are going to re the product they already bought in many many categories okay um sending um better segments email sending better designed email up updating your um changing your packaging right this is another thing people do they'll say like what we can create a better experience by having better packaging and whatever all of those things may add little bits on the margin to your business and you should do everything you can you should bend over backwards to create great customer experiences and great customer funnels you should communicate about it as well as you possibly can yes yes yes yes yes right at the same time it is just much more of a genetic element uh LTV is much more of a genetic element of your company and of your product than you think except for a few key things okay and let me get into them now so so the the actually the first warning there is this whatever your past LTV is when you forecast it this is another way of putting it you should expect your future until you can prove otherwise to look a lot like your past don't go and say like and and forecast your future LT LTV with like a giant uptick in the amount of customers who come back in the future because you're going to go do all this tactical stuff to fix it I've talked about a brand I worked with um for a while that had like 20 5% LTV in a year and we hammered away at all this different stuff we tried to introduce subscription we tried to like you know we tried to um uh what was I say we tried to introduce subscription we tried to do send more email we tried to come up with all you know whatever it just we could not really bump it it just it just was at 25% and I don't know maybe we got it to 27% or something like that but it just it didn't really make a meaningful material difference in the business especially relative to the effort it required and that's because LTV is Prim primarily a function of your customer's relationship to the product it is not something else it is your your customer's relationship to the product okay and so U because of that because of the way you're C in that case that was definitely the case right the the brand I just talked about the example this I use all the time actually it's FC Goods wallets made out of vintage baseball gloves right like we were never going to be able to sell people more wallets once they had bought their first wallet you know some customers who bought gifts said they were going to buy as a gift for somebody else and they probably did got a little bit of LTV off that um so they you know they bought the same gift for multiple people great but like once somebody bought a wallet there was there was actually One customer who bought a bunch of wallets from us who really loved them right but like that was one customer okay I I still remember I talked to him about what he was doing like it was just like a hobby it became a hobby for him he just liked it so yeah that's like that's the way to think about this that's an extreme example but it's just it is about the way your customer relates to the product first and foremost and therefore it's really really hard to change with tactics okay all right so if you can't change it how can you do it and there are there are some things to mention here they're just not quite the thing that people think of tactically it's not like media buying in that respect where it can make a really big difference okay so let's talk about number five ways to change and ways to impact I should say your LTV okay okay so I'm going to go through a few of them here we're all going to put them in this subcategory and then we're going to split one out separately okay first send more email and SMS and I want to be clear about what I just said send more email and SMS not more targeted email and SMS not more segmented email and us the number one way to use email to drive more Revenue than you're driving right now is to send more email uh people are not annoyed by your emails they may unsubscribe a little bit but it's not going to really create a serious problem in your business um if they were unsubscribing sometimes it's actually good churn they weren't going to buy from you anyway U send more send more send more okay if you're sending two emails a week right now start working right now on getting it to four um now again if you have very little to talk about in your business because you have the same couple of products there's isn't much to say fair enough but send more email and SMS for most businesses is the way to use that channel to drive more returning customer Revenue that simple again probably not going to overhaul your business completely uh your LTV completely but may make some difference at least on the edges and sometimes if you have a wide enough um group of products and a wide enough product catalog you you can actually create a more meaningful amount of value here okay but it's really hard uh mostly just send more email ons okay uh number two um this is the thing that almost everybody um thinks about wrong with LTV and it's that the way you generate LTV is not by getting a customer to um is not by getting a customer to relate differently to the product that they already bought but it is to um is to release more products uh and have more sales okay um so more sales is dangerous because you can sometimes just cannibalize your own Revenue so we're going to leave that aside um what you'll see pretty much every year at Black Friday is that there's a big bump in your cooh value at Black Friday and this is sort of the indication of what I'm talking about it will be incremental to some degree having a promotion especially for products and categories where customers might want to Reby at some point well-considered promotions can definitely create additional Revenue um but the point of this is that you create LTV in moments not by improving your Evergreen processes like here's the thing that people go down the road of that is just like a waste of their time they decide that the way they're going to improve LTV is by building really careful flows post um in their email uh post purchase for customers and they're going to let those run in the background and make it so that every customer is more valuable after they buy that's like sort of the Evergreen LTV approach where you're what you're trying to do is make it so that like like you know somewhere in the background is just kind of working for you right that's not how LTV Works actually the way it works is by releasing more um new products that are going to be interesting to customers that make sense now in some categories again this is going to be a very small needle mover I think about person care here a lot of personal care Brands try to do this where it's like you know the core product is a skincare product let's say and all that and then they'll release on the side a body wash product and you know the body wash may get a little Revenue bump but it's not going to be a crazy needle mover um the the categories where this makes more sense actually um is something like and I Ed this example earlier when you hear Sean Frank talk about what they do at Ridge you hear him reference this when they were just selling wallets they were never going to have much LTV but at some point they add backpacks and rings and whatever else they're doing EDC stuff like like um and that is the way when that they have been able to generate more money by doing enough of that over enough time and really transforming from being a wallet brand to a um a brand that has more uh products across I don't even know what you would call the category anymore okay um so that I think is a more possible way to do it but it typically is a slow build over time because mostly one single additional product release is not going to move the needle that much you have to do it over time over a lot of time and create moment after moment after moment to where people start to relate to your brand as more than just a single product brand um and that's really really hard work again the exception to this is apparel where brand where customers already relate to Apparel in this way and so they D you drive LTV um by just increasing the volume of apparel of products that you put out more product releases and perhaps more sales there often end of season sales can work really really well um for this but you um you start driving uh you start driving more product releases there you can make a huge impact on the LTV in your business in that kind of category it's much harder like I said in categories where where you really are kind of perceived as a single product uh business uh from the customer okay but product releases and sales if you have the right business for it can make a big difference number three retention ads this is something that has surprised me again for um this is especially true in products like in categories like apparel where um you're releasing new stuff all the time and no one is going to pay attention to all of your emails so I have for every one of my clients some amount of money and it's usually a small amount allocated in my Facebook ad account to retention Revenue right so reaching past customers uh so driving Revenue with past customers is is uh is possible driving incremental Revenue with past customers is possible with ads and I've watched this happen where um where like you you just set up an ad account I typically like if I'm running the the main ad account at a 2:1 I'm going to run my retention ads at like a 5:1 because I don't want to just cannibalize email or whatever and I do think your past customers probably have um you know you know ads are not going to be the only thing that's going to drive Revenue some of those ads are probably less incremental than others so I want to run them at a higher Rass than others but it really will add incremental returning customer Revenue to your business by setting up some retention spend right sometime and typically I'm auto bidding this like a hundred bucks a day for the brand or depending on how much their spend is you know maybe 500 bucks a day if they have a larger spend where I'm just setting aside some Revenue um targeting exclusively returning customers and running at a really high Ros you will see additional returning customer Revenue by doing that and that's simply because people are just not going to pay attention to every email you send many of them are going to end up in their promotions folder they're not going to pay attention they're not on your SMS list whatever they just forget about you lose sight of you even if they like your brand and it's a good way to just drive some additional value in business okay um again the more products you have the more that makes sense because they're going to have a really hard time staying up with all the things that you're doing all right and number four and this is the thing if what I said earlier is true about um about how the the LTV in your business is mostly a genetic uh genetic element of a customer's relationship to the product I.E it's very hard to get somebody to interact with a product differently at the level of LTV than they than they do naturally right they don't if they don't need to refill your product they're not going to buy it faster right if they have plenty of your product even if they use it every day there's no reason for them to buy more of it right I subscribe for example to my coffee uh shout out sweet Bloom roaster in Colorado the greatest craft coffee that I know of they are amazing um I've had a subscription there forever I bet I'm one of their highest LTV customers of all time right um and the only reason I buy more coffee from them is because I am out of coffee or if I have guests staying at my house where I'm making more coffee than I usually would when it's just coffee for me and my wife in the morning like you just can't sell me more coffee uh because I just don't need it I just don't I drink a one cup every morning occasionally occasionally occasionally have a second cup during the day but that's pretty rare and so there's no reason for me to buy more like that's happening with your skincare that's happening with your deodorant um that's even happening with clothes to some degree depending on your category not always of course some people are just buying clothes all the time you know there's there's just some there's just some elements um where that's going to be really hard to overcome which means which means sometimes the way to drive additional LTV in your business is actually just focus on a different product and this is a really underrated thing the thing I see happen a lot here is that Brands um find that they start acquiring customers in their Facebook ads account on product a all right and product a is their customer acquisition product and so they because the ads work for that they start making more ads for that product but what they don't realize that's not really the best product to acquire customers on because the LTV isn't that good and what they really need to do is put more effort into selling product B to their customers um because that's higher LTV now it's hard to do it uh because product a is where you maybe you had um the least friction in terms of advertising the customers but if you can start if you can either release product B or C or whatever um or you can start finding ways to acquire customers on a product that you were not acquiring customers before that's where you can materially change the LTV in your business because you're materially changing the kind of customer and the kind of product relationship that you're getting right so again if the LTV of a customer is primarily related to their natural relationship to their product right then the way to generate more LTV in your business is to acquire a different kind of customer and a different kind of product that's the way to do it um and so so think about that in your business right this was something that we tried to do at FC Goods I mentioned earlier the wallets made out of baseball gloves because we thought about like okay we're never going to get out from under this what happens if we could find other product categories that related to similar customers made sense for the brand but that had better LTV now we never cracked that we didn't have the business for long enough to really do it but we were starting to think that way and um when we were running that brand and I and I have this conversation all the time with clients you start looking through lifetim Le you start looking through the Shopify cohort report whatever it is and you realize like oh my gosh you sort by first product purchased and you start doing that like that's ways to do that right go install life Ely or go just look in the Shopify cohort report and start looking at um LTV by first product purchase you can do this fairly easily okay um again actually it's in shopy you don't have to install thirdparty software to to begin to see some of this information go to that cohort report and go look and and sort by first product purchase and see how do customers relate differently LTV wise with different products and and start thinking about how do you acquire the best kind of customers or how do you think about your product development pipeline so that you can acquire better customers as well okay so focus on different products all right there's a fifth one and we're going to give it its own category all right and so I'm going to walk back through where we've been so far one more time and then we're going to jump to the last excuse me um to this last way to change your LTV and you probably know what it is if you're thinking about this but it's still really important to focus on okay um so number one you need to measure and forecast LTV in your business number two LTV is more durable than you think number three uh LTV lasts for longer than you think number four LTV is less changeable than you think on a given product and number five that means the ways to change it are sending more email and SMS having more product releases and sales running retention focused ads and focusing on different products and general okay there's a fifth one on that list on number five so 5.5 here sorry if this is getting confusing and it's this subscription has outsized value the only way I know of to seriously change a customer's relationship to your product okay and and to where this the the uh two different customers well let's say it like this the same customer with the same product can have a massive change to their LTV is by getting them to subscribe to it just by reducing friction and and again like people are busy they're not thinking about things even if they like your product they may just forget to reorder it or something changes like go back to my coffee example okay my in my coffee example that I mentioned earlier if I didn't subscribe to that product if I had to go online and buy my coffee every time at some some point I would just forget even if I prefer it even if I like the the product more right even if it's my favorite coffee in the world at some point I'd be like ah I just forgot I'll just go to the store and get some other coffee or go to my local coffee shop and get some other coffee now I don't want to do that because I prefer sweet Bloom to every other coffee in the world and I mean that I love it it's great once again if you're a third wave coffee snob go get some sweet Bloom get it delivered to your house it's delicious okay um but uh but but sometimes you just forget you get busy I have a 2-year-old and a four-year-old I can't stay up with everything in life subscription really really helps me I really like buying products that way because I don't have to think about it and and that is happening in your business all the time even for for customers who love your product there's just a lot going on in life and they forget about it and so subscription has a massive outsized value in your business and acquiring subscribers has a massive outsized value in your business it's very hard to convert a non-subscriber to a subscriber uh and so the way to actually generate subscriptions is to acquire subscribers in the first place and I am telling you I regularly look regularly look at cohort data that shows that subscribers are worth two to three times as much as non-subscribers especially when you do the very long tail these are the customers who are worth like 500% in increase in a year and then another 300% the next year and another 200% the year after that like they have an extremely long tale of value because like my coffee example I have been drinking that coffee now for a long time those subscriptions show up for a long time and so too many brands that I see that have a real meaningful way to generate subscription now don't do this if there's not a good way to actually subscribe like if subscription doesn't make sense in your business don't try to get subscribers but uh but if you try to uh if you can if subscription does make sense for your product you should be building funnels so that customers subscribe to your product you should be doing that because those customers are worth so much more and you should be willing to pay more for those customers even if you have to acquire them at loss they are often worth so much more that it is worth doing um and so so again I watch this happen sometimes where I've looked at agencies who are working with Brands and they are they are bending over backwards to try to acquire new customers with ads and they're not thinking strategically about the value of the customer to the business and they're not thinking strategically about wait a minute every moment of our effort should be spent on acquiring subscribers because they are so much more valuable and again people worry so much if you acquire subscribers with a big discount 30% off on your first subscription purchase or big gift with purchase or whatever it is that those customers are going to be less valuable because you acquired them with a big discount it's wrong it's wrong those customers are still really valuable there they they still wanted your product enough to be willing to subscribe the first time yes you'll get some Same Day cancels but it's not enough to um overturn the value that you create with subscribers so if there is a meaningful opportunity in your business to create subscribers and what I'm I'm not talking about an apparel business here trying to get people to subscribe to get a new product dropped once a quarter or whatever right this is why all the Box business business is like maybe they kind of work but I don't know I guess FB fit funds still out there working but like the subscription box thing seems to have gone away because it isn't actually a great way to relate to that to the product right but for for Brands where it actually makes sense for them to subscribe like you absolutely should be trying everything you can to build funnels like this is where fmat has been an incredible tool for one of my clients the tool that I the the client that I've used for M with right to build these funnels has been a subscription focused um client that's the client where we saw % increase in spend and the reason why it's so valuable is because we realized we needed to build as tight and good of a funnel as possible and offer test as fast and as much as possible so that we could drive more subscriptions and because of that we um and and because of that we actually able were able to do that and we want to keep hammering away at that offer in that funnel because every one of those customers are absolutely so valuable to us and so we bent over backwards to go find the right offer and to go find the right messaging to make it to the subscription sense and test elements on the page to make your subscription makes sense okay so um that's what you should be thinking about for this bu for your business you should be thinking about how to drive more subscribers if you have a chance if subscription is part of your business start thinking about how to drive more of that okay I'm not going to um go back through that whole list I hope this has been a helpful episode to you uh the reason I'm not going to go back through the whole list I've done it like four times in this episode you've got them all there don't forget go to AJF growth.com to get my forecast resources like I said go sign up for admission the link is there if you want some help thinking about your business this way thinking about cohort forecasting um again uh all of that is there um if you have questions for me about this please do send them to me podcast ajg.com or actually even better ask them to me publicly on Twitter by tagging Andrew J feris so that we can have the conversation in public where other people can get value out of it thanks so much for watching for listening make sure to subscribe wherever you're doing that and do follow up with my sponsors on this episode that's Billy in this case follow up with Billy who is amazing uh uh and go get better pixel tracking for your website at billy. thanks so much talk to you next time [Music]