How to ACCURATELY Predict Customer LTV

How to ACCURATELY Predict Customer LTV Speaker 3: I would imagine you're able to understand or predict what someone's LTV may be. Speaker 1: One of the biggest indicators we've seen is two purchases within a short period of time with no refund. Indicators like that are going to be unique for your brand, but it really depends on your natural purchase frequency and then your gross margins, what tools you have available to encourage that. Similarly, when we see a customer cross channels, then that customer correlates with a much higher LTV. I think it's like 5X higher than a typical customer. And this is across the entire customer base of Smile, which is hundreds of millions of customers. When we think about LTV, a lot of people think just hammer customers with email and get them to purchase on the other end. It's actually like how do you set a customer up for like those initial actions which create high LTV customers. Speaker 3: Welcome back to another episode of Chew on This, which is powered by Smile. I am joined again by Mike. Thank you again for being here. Speaker 1: Thanks for having me. Speaker 3: And we have a new face here today, Roger, who is the co-founder and CEO of a company called Novel. Thank you for being here today. Speaker 2: Thanks for having me. Speaker 3: We're going to get into the psychology of loyalty and what actually attracts a customer to come back and shop from your brand again, whether it be DTC, retail, et cetera, et cetera. But for those of you who may not know, Roger would love for you to give a little bit of a background because I know you have some history in different places, whether it was in finance and then going to SaaS. So we'd love for you to just give them a little background on where you came from and what you're up to. Speaker 2: Sure, yeah, yeah. So, yes, I first had a career in finance, then transitioned to tech. I got really into Microsoft Excel. And eventually, sort of, you know, one way, one thing led to another, became a programmer. And yeah, and then became an entrepreneur. My first company was a business called Smarter in the subscription space. They're recently sold. I'm now an advisor to the CEO of ReCharge and I've also founded Sculpey Novel that we're here to talk about today. And a quick plug for that is it's we are the omni-channel connection to your customer and we power that with Apple and Google wall passes. Speaker 3: Love that. I mean, going from finance to a subscription and then novel, which, I mean, you're in this like retention field a little bit, right? So walk me through kind of why that side of the business, right? I feel like the sexy side of DTC is always acquisition, right? It's like, oh, how do we acquire customers? How do we get cacked down, et cetera, et cetera. But the real money is made on the retention side, right? So curious, how did you get into that side of the business? Speaker 2: Yeah, yeah. Well, so I think that the thing that, you know, my career in finance and then programming as well sort of have in common with retention is complexity. Acquisition is kind of, I mean, not really for SaaS companies, but for DTC brands is kind of this playbook, right? People even hire performance marketing agencies, right? They're willing to outsource it because it's sort of viewed as this sort of solved problem to some degree. Retention, on the other hand, is kind of this You know, this thing that each brand has to figure out for themselves with a suite of tools, right? And it literally determines, like all the biggest brands nail retention, but they kind of have to nail it a different way. And so building tools that help them do that, I just found that to be a lot more interesting. Speaker 3: Right. Interesting. From our end, right, it's like every day we're thinking about how can we, how can we decrease CAC, right? How can we increase first order profitability? And then I would say like 15, 20% of our time is like, how do we extend LTV, right? So with that being said, I mean, we have multiple ways of doing this, right? You know, Smile, you know, being a platform that is rewarding customers and even on the previous episode when we chatted, it's not just You know, redeeming points for cashback. There's a lot of different ways that you can think about, you know, rewarding customers. And then novel as well, right? Even being able to get a little bit closer to your customer and offering, you know, direct communication, right? With like push notifications and even offering everything that the brand has, right? Like, you know, obviously on novel and Our wallet passes, you can access our app, you can access our community, you can access store locator, everything all in one. And I feel like those are the things that are underutilized because it's like, well, you're spending all this time trying to communicate with somebody who doesn't know you and you're not spending enough time actually communicating with the people that are your customers. So curious, where do you feel brands are struggling that they should be focusing a little bit more, at least on the retention side? Speaker 2: Yeah, totally. And one thing to just drop and tease is we're going to be launching coupons on our wall of houses as well. Speaker 3: Love that. Speaker 2: We're going to be launching that with Avi in Walmart. We've actually already got it piloting with a few brands now, so that's a really exciting thing. And the really exciting thing about that too is when people talk about retail, there's actually two kinds of retail. There's owned retail, like you have your own stores, and then there's what they call, at least in Europe, they call it concession retail, like you're selling through Walmart or Sprouts or you know another or Target. And the same thing kind of exists online, like owned is like your website and then concession is like selling through Amazon, right? And the really exciting thing that I see as like the future is like wallet passes are this great way to kind of like have a connection to your customer across all of these channels and then tie that together with your loyalty program, Such a Smile, which we integrate with and are a proud partner of. And, um, yeah, and, you know, kind of just have this like unified connection to your customer under like just like one, um, platform. Right. Um, and use that as a communication channel to, to drive them, you know, back to, to purchase again. Uh, and then the, the other important thing to mention that is like key to our integration with Smile, uh, is removing friction from data collection from in-store purchases, uh, for that owned retail case. I was talking to the VP of Marketing at Levi's. She said that omni-channel customers, if they can convert a customer to shopping across multiple channels, that customer is worth three times as much. And so that's really a role that we play with Smile in-store is basically collecting customer information via a QR code on the wall where they install a wallet pass. They feel like they're getting something while they may be giving you their email. That ties to your CRM. And then you're able to retarget them across channel. Speaker 1: When we think through the LTV to CAC ratio, as you're thinking about the sustainability of a brand, especially in the absence of cheap debt or venture capital, that LTV to CAC ratio is super important. A lot of brands, as you mentioned, focusing on the CAC side. When we think about the LTV side, Yeah, thinking through all the channels that your brand is and then what's the consumer incentive to sort of venture into a new channel? Like go from concession retail or wholesale or Target or Walmart to your website or to one of your own retail locations. Like what's the incentive for them to like make that leap? Like we work with a great Canadian merchant in Toronto area called ECS Coffee and they actually Reward customers 2x the points to go shop in person at their retail locations versus online. It can just be that simple. They've identified the conversion that they want is they want people going from online where they pay for ads to get people into the online store. They want those people going in and experiencing the in-person location because it's a coffee shop that has really knowledgeable associates and and lots of coffee machinery and basically they can they can increase the LTV of a customer by getting someone to visit the retail location. So thinking through like for your brand What channels are you strong in right now and what channels are you weak in? And think about tools like a great loyalty program or a wallet pass as how can you just increase the sort of incentives or lower the friction for someone to traverse from one channel to another. And that may not be a natural thing to do because if you've scaled your brand to To the point where you're at 10, 20, 30, 50 million dollars top line, you're probably really strong in one or maybe two channels. And starting to think through, if you want to scale to that next level, you really need to think through What's the incentive for a customer to traverse to the new channel? You can't just go acquire new customers in a new channel. And so I think that we're seeing really innovative merchants think about how they can provide the incentives for the customers to make that leap into the new channels that you're exploring. Speaker 3: So when we talk about incentives, right, I would imagine the audience immediately goes to, well, either a discount or a cashback or you know, double X points or whatever it is. It seems very transactional, right? And I think, Roger, your point on this may be different from Mike's where it's like, well, rewards can actually decrease loyalty, right, if you're making it super transactional. So I would love to hear your take on this and why you think That might be the case. Speaker 2: Oh boy. Are you setting up a showdown? A little showdown. Yeah. It's a debate. Well, I actually think I generally, you know, I agree with what Mike was saying. I think that it's more like those are all, I think that the thing that a brand can maybe get wrong because, you know, at the end of the day, this is offering like some sort of incentive, which is a discount or, you know, to purchase. I think that the way to think about it, it's more of a mindset shift. What you are doing is removing friction from behaviors that build brand. That is the right way to think about it, right? Because it's easy to sort of just focus on getting that customer to come by again, right? But basically, I think the risk is that you essentially are just, you know, essentially just becoming the cheapest product and trying to win that way. And, you know, you will always lose to Amazon if you are a brand that is trying to just compete on the lowest price point. Right. So you have to build brand like you have no other option or else Amazon Basics will win. Speaker 3: So then what is the alternative? How can you make Something like, you know, a wallet pass or a rewards program actually build loyalty. Speaker 2: Totally. So I should talk about wallet pass for a minute. There's kind of a product that's like a bit of like, but wait, there's more. And that's sort of what it was like for us building it. First it was like, okay, there's push notifications and they're automatically opted into when a customer installs a wallet pass. The psychology of the customer is kind of like they're getting something, whereas when a customer downloads an app, it sort of feels like you're giving up space on your phone. And so customers install them at a much higher rate, like around three times as the rate that they install apps. And they uninstall them at around like 10% of the rate that they uninstall apps. It's like some stuff that's like 50% of apps are uninstalled within like three months. And the average number of installs, like the average consumer, or no, the median number of installs for new apps, like the median number of apps that you as a consumer install a month is zero. Yeah, like most people do not install an app in a month, right? Um, so, so anyways, there's this really low friction way to get access to being able to send transactional and marketing push notifications as well as geo, geofenced push notifications that are like location triggered. Right. Um, so that was a really exciting thing that got us, you know, as soon as I learned that it was like, okay, this is an exciting thing, you know, an exciting new channel. Right. But then we realized, okay, this is also the easiest way for you to refer your friends, right? You know, when you're talking about a product with your friends, right, you're not going to be on the website for that brand at that time. Like you go on the website when you want to buy something, right? And so most of the time the referral link is like on the website, right? And so we found just putting that in the QR code that's on the wallet pass It removes enough friction that people tend to refer a lot more. A lot of times, brands, we will be their first referral ever because no one has ever bothered to go to log in two times and then scroll to the bottom of the page and copy and paste the link. And the crazy thing about that, just to hit on referrals for a moment, which we offer through Smile as well, every brand, if they really want to grow fast, like the fastest growth moment really in any startup, right? This is like a Sam Altman quote from back before he was super famous. Yeah, basically, if you have a product that customers tell their friends about, then you have won. And so word of mouth is this extremely important thing that is hard to crack and so therefore most brands don't even try. But at the same time, if you do crack it, that is a goldmine. That is the thing that You know, makes your brand grow like wildfire. Your, you know, CAC shoots down, right? So anyways, so continuing on the, but wait, there's more. Then we realized, okay, this QR code that's on this wallet pass can also be used to identify this customer in store. You can also make it so that this wallet pass can be installed with a QR code on the wall, like in the store. So instead of trying to collect the customer's email and identity at checkout while there's a bunch of people behind you in line, the customers can just scan while they're waiting in line and get 10% off or whatever incentive you were going to offer to collect their email for installing your wallet pass and then scanning that at the register. So we see a ton of brands adopting that for their flow with owned retail. And that's really where our integration with Smile comes in, too, because then they're automatically a part of the loyalty program and they're automatically converted to being an e-com customer in your CRM. And we will automatically, we automatically have these flows to remind them about their balance that they have with Smile to nudge them to come back and spend that, right? And there's some cooler flows around that too where it's like, all right, you can make the points expire and then it's like, all right, you know, use it or lose it and you play on like the psychology of loss aversion and so we see that work really well. Speaker 1: There's some interesting ways to think about the programs overall when it comes to how transactional or not they are. And I think where we see a lot of retailers Potentially fall into a bit of a trap is thinking too transactional in terms of their program. So thinking like, hey, I want to offer 5% back and communicating it to their customers as a 5% back program. And that doesn't really change behavior in much more of a different way than offering a 5% off coupon would. So if you think about world-class programs, they create changes in behavior because they're offering dynamic rewards Rewards that are much more valuable to the customer than what they cost the retailer. In the last episode, we talked about one of our brands using a Zoom call with the CEO of the brand as one of the things that you can redeem points for. There's no dollar amount associated with that, but that's a reward that, especially for a fashion brand or a skincare brand, a consult with the CEO or founder of this brand is super valuable. You can't do that if you're just offering a simple transactional program. If you think about the ways you can elevate these programs beyond just the transactional lattice that they start in, that's where we see great programs emerge from fast-moving retailers. And then you can layer on referrals and then you can reduce the friction between channels. But they need to start with this mentality of Yes, you're going to provide something that provides incentives over time and increased loyalty gets rewarded with benefits, but those benefits need to dynamically match the brand in a way that isn't just like dollars back. It needs to expand beyond that over time. Otherwise, it does get reduced to just sort of here's the percentage back that I'm giving you and that's how customers are smart. It's the same thing with like a paid membership. If you ask customers to be paying $50 a year, they're gonna look at that $50 and say, am I going to get $50 back? And it reduces to a very transactional experience over the course of the lifetime of the customer. Speaker 2: One thing I feel like would be worth hitting on here too is the power of tiers, because I think as an aspect of human nature, which you could view as a dark aspect of human nature, is that we are all You know, some of us more than others. And yeah, you know, so basically giving that exclusivity, you know, that is something that is powerful. Because I think at the end of the day, like what makes a customer actually tell their friends about a brand, you have to ask the question, like, what will it say about me as a consumer if I tell my friend about this? Right like me telling my friend about true classic like what does that say about me? You know me telling my friend about liquid death that says that I'm funny, right? You know like right like these are you know, like I want to tell my friend about You know liquid deaths like Travis Barker enema of the state You know, like ad campaign, right? Because that makes me look funny, right? And I think that that's one way to do it, right? You know, status and exclusivity is another, but that's what it fundamentally comes down to is What does it say about me if I tell my friend about this? Yeah, and that's a lot of what brand building I think is. By the way, just to mention, Liquid Death, shared customer, smile a novel. Speaker 3: No, I like that you brought up this status and the different milestones that you can achieve, whether it's a loyalty program, which then gets shown on a novel where it's like, hey, you're gold status. And I feel like a lot of this comes from these bigger companies, right? Where airline status is so important to so many people. It's like, well, I have to get the credit card for this. I gotta do this just to make sure that I'm... Speaker 2: Look at this Chase Sapphire card, right? Why did they make this metal and heavy and shiny, right? It's so that when I take it out, I can impress you or something. Speaker 3: You feel great. So you drop off the metal. I'm super impressed. Speaker 2: I hope you guys are feeling this way. Speaker 3: I can't wait for you to take us out for dinner. But the whole basis of this is like the psychological like feeling of, okay, well, it doesn't matter how many points I actually have. It's just like, I'm a gold, gold status at Avi or, you know, I, you know, anytime I, I want to go and shop at a Walmart, I have a points balance that I'm racking up. Right. So I guess, you know, for, for to hit Mike's point, which is like moving away from this like transactional, like, Oh, you know, here's a discount, here's points, whatever it is. I mean, you take a look at some of these like massive brands that have built cult-like followings, right? Like an Apple or a Nike. These guys aren't, they don't run discounts, right? They don't run anything. It's all about like status. It's all about, you know, being integrated and being in this ecosystem. So I'm curious, like from your guys' perspective, how should brands be learning from some of these bigger legacy brands And what they're doing to maintain customer loyalty. Speaker 1: Yeah, I think once you get to the margins of an Apple, the tools available to you are very different. I think great loyalty strategies from the fastest growing brands that we work with, they focus a lot on exclusivity. So they focus a lot on sort of being very clear and upfront that if you are loyal over an extended period of time, you will get more benefits. And those benefits resonate with the customer. They're not just the stock out-of-the-box ones that come if you set up Smile. The brand starts to think creatively about what they can offer. So that could be early access, that could be exclusive events, that could be sort of exclusive discounts. Thinking about what is going to resonate and what's sort of braggable on a TikTok video, that is sort of how brands can actually use tiers to create this exclusivity. And like, the exclusivity is super, super important for that very loyal tier of customers. So your top 1-2% of customers, because they're going to be the ones who do the majority of the word of mouth marketing, the majority of the sort of organic influencer videos. are going to come from that tier of customer and making sure that they feel exclusive is really important. It gets overlooked by so many brands. Not doing a good job of that top VIP tier and making that exclusive enough and providing non-financial benefits to that group that they can really feel brag about, be seen with, or just feel appreciated by. Again, we talked about this in the last episode and touched on it then as well, but the airlines do a world-class job of this, giving people bag tags that say 50k miles or something like that. There's better bag tags available, right? Like there's leather ones or whatever, but instead people put this 50k one on there because they want to be treated better and they want to brag about it and they want to be seen. Similarly, if you're in a brand that's pretty much like non-vice category, You want to think about how you can create similar exclusivity. If you're geo-focused or you have specific concentrations of customers and cities, one of the best ways we've seen this done is with brands that do events for their top VIP tier. You can only get in potentially with just a wallet pass that allows you to access it. You run these exclusive events and then you do a lot of content marketing from those events and then you then market that back to the entire customer base and say, this is how we treat you if you continue to be loyal with us over time. So you plant the seed early that, hey, if you stick with this brand in the long run, we're not discounting our products today, but you will get treated really well in the long run. You create a very different relationship with customers ...than starting off with a 10% thanks for your email type of relationship, which immediately shows your value is 90% of your product. So it's a very different way of starting the relationship, but we recommend seeding that exclusivity and showing that you will create exclusivity if you are loyal to us, or you will receive exclusivity if you're loyal to us over time. But just thinking about how you can sort of seed that with the customer, and that gets tougher as you get into the concession retail or Targets or Walmarts. It gets tougher to do that, but if you can create that cross-channel sort of motion, Then you can start bringing customers closer towards that exclusivity over time. Speaker 2: Just to hit on that further, yeah, Liquid Death actually has a partnership with Live Nation where they have basically stands at their events that are for this exclusive member and you do have to show your wallet pass in order to get in. But yeah, that's just one example of that. Speaker 3: Either the beginning of this year or late last year, you guys threw an event and to get into the event you had to have a wallet pass. Speaker 2: That's right. That was with Nick Sharma. We got another one coming up. Speaker 3: Yeah, I mean that was really cool because it's like, hey, you can't even get in unless you have this on your phone. Speaker 2: Yeah, yeah. Speaker 3: And so it's like, all right, well, how do I get this? Like, where do I got to go and stuff, right? So it's just the psychology of it of like, all right, well, You know, you walk up to the front of the line and you show something and it's like, all right, well, I can just get in, right? Which is why, again, to your point, like the airline status, it's like if you fly business, they have like a business tag on it and you probably won't ever take that off just because you want people to see that. Apple, right? Never run discounts, ever. But the blue bubble that's on your phone, it's like a status symbol. It's like, well, I don't have an Android, right? It's like, if you don't have a blue bubble, don't talk to me, right? So I think all these different things can actually create the loyalty and it just forces brands to start thinking about how do you How do you move away from just more transactional side of stuff and just actually build something that people want to be loyal to? Speaker 1: Yeah, and another example of like how you can sort of create this experience post-purchase is funneling VIP status and points balance into support systems as well and making sure that your team knows to treat People of like the highest VIP status or lots of purchases within a short period of time, to treat them with exclusivity, maybe they get priority support, maybe they get faster responses. But thinking through that on the support side, I think is something that's really underrated too. As companies scale, it's usually like, especially right now, people are thinking, how do I automate more of the support? If anything, it should be how do you get, if you are freeing up your team, it should be like how do you now spend more time with your top 1-5% of customers. Speaker 2: Yeah, one thing that, you know, I've been meaning to hit on it at some point in this, but I feel like it makes sense to bring up is like that brand building and, you know, actual like, you know, not the like term loyalty program, but actual loyalty to a brand operates kind of on the subconscious level. And I think that's one thing that makes it, because you asked earlier, why do brands maybe under focus on retention? And I think because it sort of requires this dissection of the subconscious, right? It's like the notification button on Facebook, right? Like the little notification red circle, right? That was sort of this brilliant discovery where it's like, okay, if there's this notification thing with a number, I'm going to click it. I need to clear that out. Like on LinkedIn, right? I don't read half my messages, but I click through every single one because I need to clear out that number, right? And that's not something that I necessarily even normally think about. I mean, I sort of do because I'm in this world of e-com tech. Like I would have never thought about that normally, right? But it does drive my behavior, right? And I think that, you know, actual brand building and retention. Another example is like, I guess first of all, but it's like, you know, if you ask me like why I think my wife is beautiful. Right. Like I could not tell you, you know, oh, you know, it's because, you know, like the exact proportion of her like, you know, cheekbone to like, like the width of her chin, you know, right. And it's like, you know, realistically that's probably like, you know, plays a role here. Right. It's like, you know, like you're sort of, but you just sort of like, you know, I look at my wife and think she's beautiful, but I can't take that apart, you know? And, and so, Yeah, I think that, you know, like real brand is built through like sort of a thousand little interactions and emails and notifications. And incentives, you know, but you sort of like you, if you were to say like, why do I like Nike, right? Like it's actually hard for you to really know the answer, you know, and even the answer you say, like might not be what actually led to you thinking that, you know? So it's like this, like, I think really good marketers are like a master of the subconscious. Speaker 3: Yeah. And it brings up a topic where it's like, especially with novel, right? If, and we love this feature just at Avi, which is like you go near a Walmart and then you get the pop up and it's like, Hey, like you're near Walmart. Like check, you know, make sure you stock up. And so it's like, You're not necessarily thinking about it as you're going grocery shopping. You're going there, you have your weekly list of whatever you need for the week, and then it's like, oh, just a quick reminder, like, hey, we're here. Speaker 2: Yeah, yeah, yeah. And just in-store discovery. Like, it's like, hey, we're here in aisle A7. Yeah. Right. Speaker 3: Exactly. Speaker 2: Yeah. Speaker 3: Exactly where you got to go and go and check it out. Right. But it is like these little moments that just keep you top of mind that Don't require much effort to do and it's not as intrusive. It's not like you're spamming text messages or emails and saying like, oh, discount, discount, discount. It's just like, hey, we're here. Want to come check it out? Come check it out. And I do think that those light touches are very important. Speaker 1: Yeah, like if you think through the CAC to LTV playbook a few years ago, the playbook that's now outdated is simplistically thinking about the ads and then I'm going to hammer them with this three email series and that's it. And we're just going to pump that sort of thing. I think now we need to think through on the LTV side, like what are the 10, 20 interactions that this customer is going to have that are all sort of In a positive light because it really just takes one negative interaction to throw the LTV into the region where it doesn't make sense based on the CAC. So basically, I think it's a good point. It's like you want to extend the number of touchpoints you can have with customers. So thinking through the ways that you can have all these touchpoints because they may not buy on that time when they get that notification. You need to do that in a light touch way without overwhelming them, without getting marked as spam, without getting uninstalled as a wall pass. The best brands are figuring out light ways to stay in touch with customers in between the natural purchase frequency times. If you're one of the lucky brands that has a purchase frequency every month, awesome. But if it's every three months or every six months, you need to be really creative how you can stay in touch and stay top of mind in a not annoying way. So the reason why a lot of brands turn to loyalty programs is it gives you reasons. It gives you light touch ways. If you say, hey, we're having a double points weekend this weekend, That's not annoying. That's not margin eroding. It's not annoying. It feels more value-add than saying like, hey, you haven't bought in a while, like 25% off this week. It's just a very different interaction with the customer and puts you in the category of, hey, why don't I just shop on Amazon for this? I think we're seeing the best brands sort of extend the ways that they can stay in touch with a customer and sort of giving themselves more reasons, more excuses, more sort of exclusive things that they can talk about. And it really helps on the LTV side of that equation. Speaker 3: Yeah. One thing that you mentioned was like purchase frequency being a core metric for marketers to understand, okay, well, is our funnel even working, right? And so when you look at just, here's my acquisition cost, here's what my LTV looks like in three months, six months down the line, you're hoping that you actually get value out of this customer in six months, right? But I mean, you have so many programs under Smile that you can I would imagine you're able to understand or predict what someone's LTV may be just based off of behavior and how they're interacting with the brand, which may not necessarily mean that they're making a purchase, but how they're interacting with the program or You know, even downloading a wallet pass just to say like, all right, I'm, I'm about this brand. I don't necessarily need to buy right now, but I like it. I'm involved. Can those things like predict future LTV? Speaker 1: Yeah. And I think we're, we're getting smarter about how we can identify early indicators of long-term loyalty because then that can justify better benefits, right? If you, if you were to like, Super accelerate someone into or like fast-track someone into a top VIP tier. One of the biggest indicators we've seen is two purchases within a short period of time with no refund on either of them. Like no return, no refund on either of them. Let's say your average purchase frequency for loyal customers is every three, four months, and someone places an order one month apart, two orders one month apart. That is an indicator that that customer is going to be long-term, and this is across all small merchants, but that is a long-term loyalty indicator, especially if those orders are not discounted. Indicators like that are going to be unique for your brand, but it really depends on your natural purchase frequency and then your gross margins, what tools you have available to encourage that. So if you're looking to get more of those like half purchase frequency to rapid purchases early on in a customer's lifetime, That gives you a good goal to push towards because you know that correlates with a high LTV customer. You may not create it, that's a different sort of argument, but at least you now know, hey, I have an idea of what the benefits are that lead to higher LTV. Similarly, when we see a customer cross-channels, and I know cross-channel has been, or omni-channel has been overused quite a bit over the past few years, but We do see when a customer places an order in two different channels and obviously if we can identify them they're probably part of the loyalty program as well, then that customer correlates with a much higher LTV. I think it's like 5x higher than a typical customer and this is across the entire customer We're seeing these really interesting trends and over time we'll make it easier for loyalty programs to do this out of the box, but the best brands are the most curious. They start picking up on these patterns even before we do at Smile and they know, hey, it's really important for our customer to make two purchases within the first three months. It's like, okay, cool. Now you know that as a goal, And you know those purchases need to be not discounted purchases. You get really creative with what your messaging is and how you're positioning your product and how you're thinking about the messaging you're using on your website or in-store or on your packaging in order to create whatever that LTV goal is. So when we think about LTV, a lot of people think just hammer customers with email and get them to purchase on the other end. It's actually how do you set a customer up for those initial actions which create high LTV customers. Speaker 3: I think, Roger, on your end, have you seen any data points that say, hey, when a customer actually downloads a wallet pass, their LTV actually is higher than those that don't. Is there data that supports that? Speaker 2: Absolutely, yes. Yeah, I mean that varies from brand to brand, but that is certainly universally true. That is a strong signal. And often brands will offer an incentive to just do that. One thing, I mean, Mike said a lot of things that got me thinking, but yeah, I think a really underutilized, powerful tool The mic mentioned is accelerators, like in terms of like removing friction for a behavior that you want. Using an accelerator to saying like, okay, if you refer customers, like over the course of this next weekend, right, you'll get 2x or 3x. Maybe you offer even more to people that have referred before. Because, you know, right, like what does that get you, right? Like that gets you whatever that behavior is that you want. You know either a direct purchase or a referral and then you know that gets you something like in exchange they get you know points that can be used towards a subsequent like purchase later right. So yeah that's I think a really good tool in the toolbox as an alternative to a simple discount. Speaker 3: Love that. So just to clarify, it's the small moments that compound over time that can yield to way bigger connections between your customers and your brand, thus increasing LTV. Speaker 2: Yeah, but by the way, I have to give a shout out to Mike here, who I think is actually a student of what he's teaching because Smile has been around for like I think almost a decade and they have just focused relentlessly on the long-term and building LTV. And I think this is the first time, like one of Mike's own like first circuits on like podcasts and such. So yeah, he's kind of just focused on like that long-term building the best product. Speaker 3: I agree. Even the other episode we did together, it completely changed my perspective on what loyalty actually means and it's it's moving away from transactional more to experiences and moment yeah for sure like as. Speaker 1: Merchants used to be, I think about e-commerce as kind of in two phases. There was when it was hard to start a store, but if you did and you managed to host it on your own servers and get a Magento store set up, then you're probably one of the only merchants selling that. So we worked with tennis stores and stuff like that. If they managed to get set up, They were one of the only tennis stores online. So then you could buy ads for whatever you wanted and you could be first purchase profitable really easily. And then now there's like the current era, which is basically anyone can get started. Like if the three of us wanted to start a tennis store, we could get it started probably within an hour if we wanted to. And that means everyone's buying ads, everyone's competing. So then now it flips to, okay, how do you build a brand over a ton of touch points? How do you have an LTV? You're probably not going to be first purchase profitable if you're buying ads. So then you need to think in terms of like the long-term retention. And it's really like the early era and the current era. And really like we've taken Smile On its current journey because we saw early on that this was just in the cards. There was more and more merchants in every single category and then LTV was going to become more and more of a factor. And as we see more and more category competition, brands will either need to expand into other categories or work on LTV. So yeah, totally appreciate the shout out, but it's been because we've seen this with so many merchants over the years. Speaker 3: Love that. Alright, well, before we round out, I want to do a quick rapid fire with you guys. What is the worst startup advice you've ever gotten from anybody? Speaker 2: Alright, this is a bit of a cop-out, but I guess the thing that I think is just really true about advice, it's really wise words, I think, that actually came from O'Sheen, the ReCharge founder. And it's basically when someone's giving you advice, giving advice to you, they're often giving advice to themselves. Uh, and so what I mean is, uh, like they're saying what they would do if they were you, but they're not you. Right. Uh, and, um, so really like. what actually makes sense for you to do depends on so many circumstances specific to you and you know it's kind of like if you read that Henry Ford took naps and you're like all right I'll just take naps and I'll be like him you know it's like all right well you didn't fucking invent Model Ts you know like you also did that you know and so like I think that's the you just have to contextualize everything and and really factor that in with any advice. Speaker 1: So my take on this is the do things that don't scale advice. And I think the problem that people get into is like they forget that that advice is given by a venture capitalist giving advice to like a hundred companies and they need one to succeed. The usual outcome of that is you end up doing a bunch of stuff that is not scaling and you're not having fun supporting it after it didn't scale. So I think the do things that don't scale needs to be taken with like Many, many grains of salt. Because if you end up doing things that don't scale, you also get stuck maintaining those things that don't scale, and they may not scale in a really unfun way. Speaker 2: Fair enough. Speaker 3: Have you ever had to make a decision that no one liked? Speaker 2: You want to start with that one? Speaker 1: Yeah, so we used to be in person. We used to have an office in Waterloo, which is University of Waterloo, great talent pool out of there. Kind of has been hijacked by Silicon Valley now and I think there's a direct pipeline from University of Waterloo to the Bay Area now, but that's a different issue. But around the time before COVID, we had an office and it was pretty lively in the middle of downtown and During COVID, we started hiring people who were more and more decentralized or located in different places from our office. And eventually, we decided to go fully remote and discontinue our lease in the office space. That was pretty unpopular with some people. And yeah, obviously ended up changing our company culture. In the long term for the better but there was definitely some disagreements had over that and some people who ended up leaving the company as well because they ended up wanting that in-person culture and I think it's really important early in your career for sure to be in an in-office environment. I think it was really rough for people for a few years but that was pretty unpopular at the time. We end up now having a pretty global talent base which is really important for us as a company that supports merchants all around the world. Speaker 3: You got one? Speaker 2: I do. I was thinking about it. I think probably the best example that honestly comes to mind was a decision that my investors really didn't like, which was, so when Novel began, we offered this Web3 product and, you know, I guess, which is like an embarrassing thing to talk about now because, you know, everyone thinks you were an idiot if you did that at the time. They thought you were brilliant. Speaker 1: Yeah. Speaker 2: But, yeah, and so, but, you know, I mean, it helped us get, you know, some of our biggest logos that we still have today, you know, like we got because we were offering that, like they were willing to talk to us because of that, right? If you don't make it through the short term, you don't get to the long term. Sometimes you have to do some things that make sense short term. When I decided to kill that off and pivot out of Web 3 completely, That was a very unpopular choice. That was the third quarter of 2022. And venture capital, like, you know, so when I said that, like, we needed to do that, because to me, it just, you know, it fundamentally didn't make much sense. We weren't getting newer, bigger customers from it. You know, this was after the crash had happened. But venture capitalists were still, you know, hot on it all in. It was before SBF. You know, in the FDX meltdown. And yeah, and I literally had a venture capitalist pull up a bar chart showing me how much investment had gone into the different categories. And Web3 had the biggest bar, like three times the biggest bar. And he was like, basically, you're a fucking moron. And I did it anyways. And then FDX happened a couple of weeks later. So, you know, I did not expect to get sort of, you know, have that opinion validated so quickly. But, yeah, yeah, yeah. You know, I've been told that, you know, you should strike I told you so from your vocabulary entirely. So, you know, I didn't collect on that, but yeah. Speaker 3: Love that. Listen, appreciate you guys for joining us today. One last, last piece of advice for the audience. Whether it be anything that they should focus on in terms of hitting the psychological aspects of programs or just general business advice, one thing you want the audience to go back and implement in their business starting today? Speaker 1: Yeah, I think for me, it's like we see every single brand we talk to is relatively really strong in one channel. And I think Brands would be really well off, most brands would be really well off, thinking about what's a channel you can double in the next, or another channel you can double in the next 12 months. And what are the incentives, what's the exclusivity you're going to make people feel in order to go make that switch or sort of make their next purchase in the other channel. This provides brands with a growth path but also provides you with resilience. So if you get hit with an ads update, if you get hit with sort of being taken off the shelf, you've created resilience by being in the other channel that you're not strong in. And I think using the incentives, using a great loyalty program, using wallet passes, these are all tools available to you to sort of Decrease the friction or better yet like increasing the exclusivity for the customers feel when they move across those channels. So I think brands will be really really well off if you think about Making your brand more resilient by expanding to the channel that you're next most strong in. Speaker 3: Love that. Speaker 2: Yeah. So similar, but maybe like a slightly different lens on what Mike was saying, is basically like, it's sort of an anti-narrative to what's very common today, which is consolidation of your tech stack. And I kind of get it because, you know, all right, like then your business becomes a bit simpler to think about. But what you can lose with that is diversification, which is kind of what Mike was talking about, where it's like, all right, like. You basically want to be sure that if, you know, if Facebook, you know, suddenly, I mean, we were talking about before this, right? Like suddenly, you know, the health and wellness space has been like damaged significantly with Facebook ads, right? And it's like, all right, like Obvi is diversified into retail, right? And has diverse, you know, like loyalty and retention methods, right? That make them robust to that, right? And obviously like when a brand is first starting or really when any company is first starting, you sort of depend on like one hack to kind of win and get ahead. But as soon as you've done that, it's similar to like a financial portfolio, right? Like, like every founder, like if they have a successful exit, right, is going to, you know, not invest 100% of what they just, you know, exited into a startup, you know, right? Like they're going to diversify as soon as they can, right, financially, because you want to basically be sure that, you know, like you're able to, to maintain, right? And so, So I think brand building kind of has to be the same way where it's like, all right, like you, like think of it as, you know, like how diversified are you? Um, and, uh, you know, that might involve like a bit more complexity, but, uh, but I think the, the trade, you know, for the, the health of your business is worth it.