Merged Marketing Podcast

183 – Using First and Zero-Party Data to Improve Customer Lifetime Value with Valentin Radu

Using First and Zero-Party Data to Improve Customer Lifetime Value

How can you use first and zero-party data to improve customer lifetime value? Our guest expert today is Valentin Radu, a seasoned entrepreneur who particularly likes customer value. Valentin Radu is the Founder and CEO of Omniconvert, a growth enabler for mid-size DTC eCommerce and retail companies looking to increase customer lifetime value and decrease customer acquisition costs.

Valentin’s career journey – He has been an entrepreneur for a long time, working with four companies in Romania. In time, he has gained valuable experience crafting better digital journeys and improving conversion rates and customer lifetime value. Nowadays, his company serves hundreds of companies by gathering zero and first-timer party data to improve customer lifetime value. (Way too many marketers rely on paid media and acquisition rather than full lifecycle marketing).

Role of customer trust in customer lifetime value – A business often has a longer value when the customer knows, likes, and trusts them. A business can lower its customer acquisition cost by leveraging first and zero-party data.

What is zero and first-party data – Our guest expert defines zero-party as any data that a customer willingly shares with the business. These include feedback on surveys or ratings to quizzes. On its part, first-party data relates to information emanating from the customer’s transactions. By converging zero- and first-party data, businesses can be more relevant because they rely on fourth-party data.

Examples of a success story with zero and first-party data – They applied the “Jobs to be done” methodology on the UK outfit Tumeric Core to gain insight on customer purchase decisions. By leveraging first-party data, they could hold in-depth interviews with their most loyal customers on their decisions to purchase the turmeric product. On its part, zero-party data through surveys helped to understand why clients visited the company’s website. As a result, the company was able to craft different email marketing sequences for clients and convert more customers from the more relevant marketing and landing pages.

 The 90-minute Jobs-To-Be-Done Method – Initially, they seek to determine the context of the interviews, which informs their decisions to purchase a product/service. The initial 20-30 minutes of feedback is often for happy customers. To validate the jobs to be done that are economically viable, they use quantitative data from large-scale surveys. It directs how to angle the messaging by building on user-generated content.

Paid ad top-of-the-funnel testing –This type of customer research allows for better ad testing because customers craft the ads for you. It is an effective strategy for understanding the consumer’s mindset before purchasing.

How research can increase customer lifetime value – Understanding the kind of customer lifetime value you can attain helps budget appropriately and increase the acquisition. The jobs to be done enable you to craft a different, better customer journey and experience, improve your marketing and design a different product. Generally, understanding the potential customer lifetime value allows a business to outbid its competition. (You can’t improve what you are not measuring).

The recommended time frame for evaluating zero and first-party data – Valentin says that you need to focus on the purchase frequency of your business. He suggests that you apply RFM segmentation to two free average purchase cycles. Evaluating this grace period helps to determine the most recent scores of the customer over the first four months. Then it would help if you took action to convince your customers in the bottom tier from churning.

How has artificial intelligence impacted customer lifetime value – Our guest expert says that they leverage AI in their customer experience category (NBS). They gather data to develop working NLB margins that indicate customers’ main areas of concern. Also, they are exploring building segmentation using AI based on zero and first-party data. (Only fools rush in, that’s why you need customer lifetime value).

Key Time Codes

  • (1:24) Valentin’s career journey –
  • (3:00) Role of customer trust in customer lifetime value 
  • (4:03) What is zero and first-party data 
  • (05:30) Examples of a success story with zero and first-party data 
  • (08:43) The 90-minute Jobs-To-Be-Done Method 
  • (12:37) Paid ad top-of-the-funnel testing 
  • (14:23) How research can increase the customer’s lifetime value 
  • (19:33) Recommended time frame for evaluating zero and first-party data 
  • (20:55) How has artificial intelligence impacted customer lifetime value 
  • (22:45) Valentin’s contact information
  • (23:10) Valentin’s choice of brand representative

Transcription

[00:00:03.440] – intro

You’re listening to the Merged Marketing podcast with me, Jason Hart. The mission with this show is to discuss all things marketing, sales, and mindset. It’s my hope for entrepreneurs like you to get the most from your efforts so that you can focus on what you do best. Let’s go. You’re listening to Episode 183 of the Merged Marketing podcast. In this episode, we’re going to talk about using first and zero party data to improve your customer lifetime value. My guest on this episode is Valentin Radu. Valentine is the founder and CEO of Omnicomvert, a growth enabler for midsize D2C e-commerce and retail companies looking to increase customer lifetime value and decrease customer acquisition costs. We dive into defining what first party and zero party data is and how you can increase customer lifetime value for your business while at the same time decreasing your customer acquisition costs. There’s a recurring theme in a lot of these podcast episodes and that’s understanding the mindset of that customer prior to them purchasing your product or service. We’re going to learn more about this in this episode today. Without further ado, let’s kick it on my chat with Valentin Radu

 

[00:01:14.170] – Jason

Valentin, welcome to the show.

 

[00:01:15.960] – Valentin

Hi there, and thanks a lot for having me today, Jason.

 

[00:01:18.690] – Jason

We’re here to talk about zero party data and first party data. But before we get into that, Balencian, maybe give us a bit of background on your journey to get to where you are today.

 

[00:01:27.930] – Valentin

Yeah. So basically I’m a former ex poor kid from Bucharest, Romania. Poverty allowed me to jump straight into the entrepreneurship. I’ve built four companies so far. And basically, the first company was an e-commerce company. We became the largest online car insurance player here in Romania, made the exit, learned a lot about how to craft better digital journeys and to improve things like conversion rate and customer lifetime value. And then I’ve decided to go on the global arena and to build a software as a service company called Omnicomvert. We initially started as a conversion rate optimization tool to help people run A B testing and do website personalization and surveys. And then we decided to focus on customer lifetime value and collecting the zero party data and first party data to improve customer lifetime value. Nowadays, we have hundreds of companies using our technologies from all over the world. I’m writing a book about it, about customer lifetime value, because I’m obsessed with it. I think way too many marketers are relying on paid media and on acquisition rather on relying on a full lifecycle marketing.

 

[00:02:36.670] – Jason

It’s interesting. I think customer lifetime value is definitely something that is ignored by a lot of marketers because it doesn’t have that immediate, tangible value. But it’s super important. I find that if you can really understand customer lifetime value, then you can reverse engineer. You do your paid ads to generate that customer. Would you agree?

 

[00:02:55.920] – Valentin

Yeah, of course. If you are not leveraging customer lifetime value, you’re either open over spending or under spending. So you are shooting in the dark because you don’t know how much money you will get down the line from a newly acquired customer. So that means you are focusing on converting from the first transaction, which means that there are a lot of untapped market sectorsthat you are not addressing properly.

 

[00:03:17.240] – Jason

100 %. I find a lot of new customers that come to our agency or new clients that come to our agency from that first touch point typically do not have a long lifespan because their leash is very short. And I think this is relevant to any business out there, right? But if that client knows, likes and trusts you before they decide to sign that dotted line, you have a much longer leash with them and a much longer lifespan with that client.

 

[00:03:40.940] – Valentin

Yeah, you have a lot of bandwidth once you have transactions down the line. And what it’s a pity, Jason, is that we are not using this data. I mean, on a theoretical level, everyone talks about lifetime value, but when it comes to applying those principles, when it comes to leveraging the data that you collect about the customers, few are the companies that are doing their job properly here. That’s an untapped opportunity, taking into account that there is a jungle out there in the customer acquisition class right now.

 

[00:04:10.560] – Jason

Let’s first define what you mean by first party data and zero party data.

 

[00:04:15.750] – Valentin

Zero party data means any data that it’s intentionally shared with you by the customer. So it can be an answer on a survey, or it can be a rating on a quiz. So basically based on what the customers are willing to share with you. The first party data is things that you captured about the customers based on their transactions, for instance. So zero party data can be something like I have a cat or a dog, and first party data can be something like I have a customer that bought five times and the total lifetime value is $300, something like that. And blending those type of data, this type of data allows you to be way more relevant. So one thing that you need to understand is that third party data is almost gone. I mean, you have only 75 % of the customers here in Europe are allowing to be tracked. And then you have this problem with iOS 15 and whatever. So mainly zero and first party data is the way to go because you are not relying on all sorts of third party companies to share this data with you. So third party data means data that you can get from Facebook, for instance.

 

[00:05:30.960] – Jason

Can you give a tangible example of where you have leveraged zero party data and first party data to bring success to a client?

 

[00:05:38.200] – Valentin

Yeah, I have a lot of examples. For instance, we help through the jobs to be done methodology. So mainly what the audience needs to know, Jason, is that I’m completely obsessed about customer lifetime value. I’ve made a thing called the CBO Academy here. So we are teaching these things. I teamed up with a lot of heavy hitters from the e-commerce and email marketing arenas, and we built the program. And we had a client, one of our first clients, we apply the thing called the jobs to be done method to understand what’s causing customers to buy. Because it’s one thing to look at them at the microscope and see things like quantitative data and looking at the web analytics. And it’s another thing to have your best customers being interrogated for one and a half hours each and to find out why they are buying what they are buying. And we have one of our first customers from the UK, a company called the Tumerik Co. They are selling tumeric shots and they thought that their customers are buying this for more energy because they are into sports and they are young people. With the jobs to be done method apply to their best customers, which we found through the first party data, like through the RFM segmentation, which stands for recency, frequency, monetary value.

 

[00:06:47.570] – Valentin

So you look at the best customers that they have, the ones that are loyal and buy over and over again. We’ve made these in-depth interviews and we realized that 65 % of their recurring revenue was coming from customers which were actually elder people that were experiencing joint pains and they wanted the turmeric shots not to be able to have more energy and whatever. They were there because that was a pain reliever for them without the side effects of iburofent. Based on this type of insight, we collect this zero party data with surveys to understand what’s causing you to be on the website today. And they add these options like, I want to get rid of the pain, I want to have more energy, immunity, and whatever. Based on that, they’ve crafted different email marketing sequences based on that because you can convert more customers because you are more relevant with the remarketing and with the landing pages. And also you can onboard the customers better telling them, Hey, in order to get rid of the pain, you need to take the shots for at least six weeks. And your follow up emails and the package inserts are way more relevant if you take into account zero and first party data.

 

[00:08:00.430] – Valentin

That’s one of the stories. Of course, we have plenty of stories with plenty of customers.

 

[00:08:05.280] – Jason

I love that example. I think it’s a great example because a lot of people think they know their customers for the journey that they’re on when they really have no idea. Case in point right there. Like giving them that information totally rejuvenated their entire process for getting that top of funnel client in the door. My question is, because I’m very curious on that 90 minute interrogation that you have with these clients to get this information. Tell us a bit about that process.

 

[00:08:37.540] – Valentin

Yeah. So the jobs to be done method has been developed by Klaytn Christians and the innovators dilemma and the Bob Meista, which is one of our instructors in the CBO Academy and the best selling author. If you haven’t heard about his book, The Demand Side Sales, you better take a note of that. So with the jobs to be done method, you start by asking the people which you are interviewing the initial questions regarding the context that they were in when they started to… When they bought this product, because it’s very important. The context is creating meaning for them. And then what you are doing is the first 20 to 30 minutes are just happy customers that are willing to share the fact that you are great and they just want to sing praises your way. But after that, after you understand if you get a trip on the memory lane to understand their buying timeline, then you understand that it wasn’t like an impulse buyer. People are not buying products, they are buying the progress that they are doing. The products are like bridges from a not so cool reality to a better future reality.

 

[00:09:46.620] – Valentin

And with these type of interviews, you will feel when was the first thought and what struggling moments because there’s always a struggle. So nobody’s buying something because they have a desire. Even the vitamins are being perceived as painkillers for some of the customers. So for some people, they are so afraid about getting sick or whatever that they buy the vitamins because they had this struggle, maybe, and they want to avoid that. So with this identifying the struggling moment is the crucial component on this interview. And it’s by the book. If you’re familiar with the Chris Voss interview method, you basically guide the customers through your questions so that they don’t tell you what you want to hear. They tell you when was for them that they decided that they don’t want a solution. For instance, we had another customer from Canada, they are selling weighted blankets. With them, we’ve made these jobs to be done interviews. They were feeling, thinking that they are selling the cuddling effect and nice Christmas gifts with their weighted blankets. And through the surveys, we realized that men… So there was a lady, I still remember that. So she was suffering from insomia and she was getting sleeping pills and she got knocked out.

 

[00:11:01.860] – Valentin

But her husband was sick so she couldn’t afford to be knocked out during the night because maybe her husband was needing her attention and she was only waking up at 8 AM if she got the pills. So she needed a solution to be able to sleep, but to be able also to wake up if something happened around her. So the weighted blanket was something that it was allowing her to make this progress. So that’s how you do this type of interviews. And eventually, you validate the jobs to be done with the quantitative data by doing this type of largescale surveys to validate which of the jobs to be done because a product can have multiple jobs. Which of those jobs to be done are the most economically viable. And then you know how much to bid on certain messaging angles, and you know how to build the creativist user generated content and so on.

 

[00:11:57.610] – Jason

Yeah, this is top of mind. You’re getting me thinking right now now because I was in Staples yesterday just browsing around for actually I was buying envelopes but I passed by the travel bag section because I need a new laptop bag. I didn’t actually really need one but I was thinking about it. What I was doing as I was searching at that and looking at that bag, I was visualizing myself. Are these compart convenient for me? I have visualized myself in the airport with this bag but I think a lot of marketers go to that degree of investigating to understand that mindset of that consumer prior to them purchasing. I’m wondering, can this be done through various paid ad top of funnel testing?

 

[00:12:34.830] – Valentin

What do you think? That’s the whole idea. With this type of customer research, which is one of the most underrated marketing activities, you end up coming up with better ideas to test your ads and to see this type of engagement. Because with this type of customer interviews, you have customers actually literally writing the ads for you. Because for instance, it was a fireman, a guy which was retired. He was a fireman and he was after this turmeric shot. He said something like, I want to have a normal life. I can’t rely on my dear ones to get groceries. B asically, beat that ad. You know is like, do you want a normal life? Are you done on relying on your dear ones to even do your groceries? The turmeric shots are for you. So that’s the ad, right? How can you beat that as a marketer?

 

[00:13:29.840] – Jason

The this, for me personally, this is the funnest part of marketing is trying to figure this out and dissecting those psychological points that people make before purchasing. Don’t spend enough time on it, like you’re living in this space, but definitely it’s an important space to be in. If there’s one thing I swear by, it’s this. To be as effective as you possibly can be, you got to focus on one thing, just the one thing. This is why I merged my social media agency with an SEO company to be so we could become more versatile in the digital marketing space. If you’re in the business and you’re dealing with multiple contacts for all of your digital assets and taking up a whole ton of your time, that doesn’t need to happen. Contact Merged Media and we’ll send you set up a call and see if there’s a fit. We’re going over to Merged. Ca, M E R GED. Ca. So maybe talk about how you can attribute this type of research and investigation to increasing that customer lifetime value.

 

[00:14:30.000] – Valentin

Yeah, of course. Once you know these type of things, you improve the acquisition. So you end up, for instance, the lifetime value per job to be done is way different. So for instance, you have three jobs to be done. One of them is giving you the impulse buyers, let’s say the one time buyers which are there just to test out your solution for the energy and immunity side of things. And you also have the long term customers. So if you understand what lifetime value you can expect from a customer, then you budget accordingly. So you place your bets accordingly and you can outbid your competitors on some messaging angles because you can afford doing that. And that means you acquire more quality customers rather than average customers. So that’s one thing that you can do. Another thing that you can do is to remarket them differently because knowing why they are buying, what’s causing them to say, Today is the day that I’m going to buy again this product, will allow you to do this relevant following up. So for instance, in the CBO methodology for customer value optimization, it’s what you say, what you do, what you sell.

 

[00:15:36.660] – Valentin

These are the three pillars. So knowing this allows you to craft a different customer journey, so different customer experience, allows you to improve the marketing and maybe to craft different products or to source different products or to create different products around the main jobs to be done. So that’s how you improve the lifetime value. And of course, we haven’t got into the data and research and stuff like reporting lifetime value because basically it all starts with that. You can’t improve what you don’t measure. So it’s all starting with measuring lifetime value, but just measuring the average lifetime value is not enough. You need this type of customer research to understand who are your best customers by channel, by the job to be done, by the messaging angle, by the things like location or the products or the categories that they are buying.

 

[00:16:23.780] – Jason

This goes hand in hand with decreasing customer acquisition costs as well, doesn’t it?

 

[00:16:29.380] – Valentin

Yeah, of course. It’s all a matter of looking at the balance, looking at the ratio between CLV and customer acquisition costs. So while you can do this type of a has, where you end up being way more economically efficient in acquiring customers, and maybe you pay more on the customer acquisition cost, but if the CLV justifies it, then you can afford to outb it everyone because it’s the good old Jeff Bezos that said that the one which is winning a market is the one that can afford to pay the most to acquire a customer. So mainly that’s how it works to focus on this type of research.

 

[00:17:07.020] – Jason

Valentine, explain a bit what you mean for those beginner marketers out there, entrepreneurs that don’t understand what you’re talking about when you say bidding. Obviously, when it comes to programmatic media buying, even Facebook ad platforms, there’s bidding everywhere when it comes to advertising. Can you explain that a bit?

 

[00:17:21.300] – Valentin

Yeah. B y bidding, I mean by investing. So how much you pay on a different channel, on a different channel, on a different channel, on a certain creative or a certain messaging angle, because it’s all about how much do you afford? Can you afford to invest? And another important aspect is the customer acquisition cost payback. We talk a lot about it because the marketing is not like it’s not in vacuum. You need the finance. And the first rule in business is never run out of money. And this all sounds great, Valentine, but what can we do if the cash flow doesn’t allow us to wait for six months to get the whole lifetime value back, to get the money back after we invested the $20 and the customers are paying only $15 and 25 in six months. We are breaking even only in six months. Customer acquisition cost payback is also important because you need to juggle with a lot of components at the same time. And as the market is way more competitive, we need to bridge marketing with finance. And we need to understand both of those concepts. And simply governing your company only through the P&L is not enough anymore.

 

[00:18:33.260] – Valentin

That’s why you need this type of marketing and customer centric models to play your game properly, the e-commerce game properly, or the business game properly because it’s applying in any business model in your lifetime.

 

[00:18:47.640] – Jason

Who’s doing your social media? Is anybody doing your social media? Why aren’t we doing your social media? Since 2016, my agency has been managing communities, creating content, and managing our clients’ social media platforms to keep them top of mind with their customers along with their prospects. Social media is probably somewhere on your priority list as a busy business owner, but it’s never going to be near the top. For us at Merged Media, we ensure your social media is at the top of our list, making sure you’re staying top of mind with those clients and prospects. If you want a creative and professional agency working on your social media, then go on over to merged. Ca and book a call today. That’s M E R GED. Ca. Is there a duration of time that you recommend to have a sufficient duration of time to really look at the data and get a good idea as to where the opportunities lie?

 

[00:19:44.080] – Valentin

Yes. So what’s important is to look at the purchase frequency. So let’s say you are selling coffee or tea. So here the purchase frequency is really fast. So the days between the transactions are pretty much in the range of one to two weeks because you always need to stash again. But when you are selling things like fashion or electronics or wedding rings, the divorce rate is not that high in your country. That means you should be waiting forever to have repetitive buyers. But joke aside, what it’s important is to have at least two free average purchase cycles that you give as a grace period. So in order to understand that the customer is gone forever, you need to apply this RFM segmentation and to look at their recency score. So if they are in the last percentile of, let’s say, 25 %, the last 25 % of your customers, and the last 25 % of the customers are buying only after four months, then that’s when you say a customer is churned. So you focus all your attention in the first four months to convince, to persuade your customers to come back and buy again.

 

[00:20:53.120] – Valentin

How has AI.

 

[00:20:55.050] – Jason

Had an impact on customer lifetime value? Are you using it in your business at all? How has that impacted your business?

 

[00:21:01.960] – Valentin

Yes. Right now, we are focusing on this in two ways. We have a component of our business called the customer experience, the NPS, because it’s the pillar of customer experience. So besides marketing and product, it’s also how the customers are feeling. And we collect this data and now we are about to release an NLP module because we are finding the main topics of concern and of frustration for the customers based on their feedback. And with this type of feedback, we get back to the companies and they know that they have an issue with the, I don’t know, delivery time for packaging sales or product quality for this category. So that’s one thing that we are doing. And another thing that we are now exploring in the product is to build these type of segments instantly based on AI because there are more data. The processing power of AI allowed us to do this real time segmentation on many other aspects besides the RFM. Now we are contemplating, what if we could deliver the right message at the right time, which is being generated automatically to the customer based on their zero and first party data?

 

[00:22:12.900] – Valentin

I think that’s where the market is going anyway, into this fully automated, real time generated content based on the previous gathered data.

 

[00:22:22.600] – Jason

Valentine, this has been an awesome conversation. I love talking about this topic.

 

[00:22:27.180] – Valentin

Super. I’m a LinkedIn person. If you want to get a hold of me, you can find me on LinkedIn. You can also go to theclvrevolution. Com because we’re about to launch this book pretty soon. So you can read the first chapter of it or you can pre order it and get a lot of insights and the tools that you can apply in your business from it.

 

[00:22:46.700] – Jason

Awesome. Valentine, we end every episode with the same question. That question is this, if you could choose one person, dead or alive, to represent your brand, who would it be and why?

 

[00:22:55.820] – Valentin

Oh, my God. So a person dead or alive. I guess it’s going to be Elvis Presley because he’s so persuasive, man, and he can rock the house pretty soon.

 

[00:23:07.040] – Jason

That’s so crazy. I don’t know how I knew you’re going to say that, but I knew you’re going to say that. I don’t know. Wow. Okay. Great minds think alike. All right. So, Valentine, thank you so much for being on the show. Appreciate you.

 

[00:23:20.820] – Valentin

Yeah. Only food is rushing, right? So that’s why you need lifetime value.

 

[00:23:25.430] – Jason

Real quick, guys. If you are active on Instagram or TikTok, I encourage you to go on over and give my personal profile a follow @jhunt official, J AY, HUNT, OFF, ICAAL. Over there on Instagram and TikTok, I’m posting my favorite highlights from the Merged Marketing podcast, along with some of the highlights from my speaking engagements overseas as well as locally. Ton of value. Go on over and check it out @jhuntofficial. I’d like to thank you for listening to the Merged Marketing podcast and I invite you to subscribe so you never miss an episode of the Merged Marketing podcast. One of the best ways to do that is to add us to your Instagram @mergedmedia. M E D M E D IA me. Go on over there, give Merged Media follow and subscribe and never miss an episode. Thank you so much for listening. We’ll talk to you soon.

 

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