6 Actionable Ways To Drive More LTV In Your Business transcript

it is just a cheat code if customers are worth a lot more to you it's that simple right 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 if you do that and that customer is worth a lot of money to you it creates more value in your business that's a really simple idea but it's really [Music] 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 returning 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 don't you measure so um so start measuring it start thinking that way 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 forecast 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 then I'm going to tell you right now they're 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 thinking 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 weekly and 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 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 for 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 speed Ventures that they built to help their um their brands uh 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 how much better would Ecommerce business work if you had cheaper cogs faster lead times lower mqs and better payment terms that is possible for you by working with my friends at move supply chain the philippines-based supply chain expert agency that will help you go track down the best manufacturing options for your business I worked with move recently on a business that uh where Mo talk to 50 manufacturers in a week and then another 30 packaging manufacturers like two weeks after that they're incredible they bring deep expertise they know what to do to bring value to your supply chain which I'm convinced is the most under optimized part of your business and it has outsize impact on your success go to mov Supply chain.com to see what they can do for you it's also affordable go do it right now AJF growth.com sign up for my email list I'm not going to spam you um and go get access to that that is 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 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 for 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 number 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 Ecommerce 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 are 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 ad 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 goor 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 in 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 talked to e-commerce operators they're all really nervous that like that you know okay great we're gonna go set an econ we're gonna 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 ear EST 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 a 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 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 three-month LTV or Oney year LTV but nobody ever talks past that that one-year LTV [Music]