Ep. 31 | Inside the CEA Podcast

Did you know there is a way to cleanly connect marketing to revenue? It is customer equity and these principles are the primary driver behind the Customer Equity Accelerator podcast. This week host Allison Hartsoe recaps the fundamental drivers of customer equity, how it relates to CLV, and then highlights several high-impact guests who have appeared on the show from the first 6 months. If you are looking for a good starting place, or wondering what difference this podcast can make for you, then this episode is for you.

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Allison Hartsoe – 00:01 – This is the Customer Equity Accelerator, a weekly show for marketing executives who need to accelerate customer-centric thinking at digital maturity. I’m your host, Allison Hartsoe of Ambition Data. This show features innovative guests who share quick wins on how to improve your bottom line while creating happier, more valuable customers. Ready to accelerate? Let’s go!

Welcome everybody today. This show is a great place to start or restart listening to Customer Equity Accelerator podcast because I am going to summarize the methodology behind this podcast. What does customer equity need? What does it matter? Why should you care, and how does that connect to CLV marketing? I’ll explain this and more in the first part of our show today, and then I’ll include references to previous guests, have the customer equity accelerator who have shared the ways that they have supported and benefited from this strategy.

Allison Hartsoe – 01:13 – Had some very generous gas I could tell you, and finally I’ll let you in on the theme that I have planned for you. Next. So let’s go. Let’s begin with a brief summary of the core beliefs behind this podcast of the main idea is that your customers are more empowered than ever before and that has a direct financial impact on your business. Generally speaking, your business is blind to this, and the opportunities abound everywhere to increase your business performance, to reduce your spending, to increase innovation. Uh, in general, we see numbers from seven to a hundred and 40 x the spend. In other words, if it costs $100,000, you might get $700,000 return.

Allison Hartsoe – 02:13 – These are actual numbers cited by people who have been on the show. So more on this in a minute. Now, to clarify by the customer, I actually mean anyone who transacts with you. So it could be a business or consumer that means B to B or B to C or even B to B to C internally, you may call them customers or players or fans or healthcare providers or patients. We use the generic term customer to cover them all. And you can have more than one set of customers who transact within your company. So for example, a hospital might have healthcare providers and patients, and they’re thinking about them in two different ways. Now by transact, I mean the actions that they take to generate revenue for your company. That doesn’t always mean it’s an online purchase. Going back to our hospital example, doctors who refer cases to a hospital are a source of non-E-Commerce revenue.

Allison Hartsoe – 03:21 – Now, believe it or not, there are some situations where understanding the future value of each customer and their transaction, their desire or ability to transact with you doesn’t actually matter. Here are a couple of reasons why this might not be the right show for you. One, you have only a few customers. These customers you haven’t known very long, you don’t have much information about them. You don’t have much depth, and you’re just happy as a clam with those customers, fine. This probably not the show for you. Number two, if your business is brand spanking new, you may be in the same case where you only have a few customers by all means listen and learn and they. These may be strategies that you can employ and a year or two, but they probably won’t be strategies if you are brand new in that case, you want to look at customer acquisition cost as your primary metric, and everything else around it will be growing towards customer lifetime value.

Allison Hartsoe – 04:27 – If your business is all about the price. So this is kind of a Walmart example. Uh, you know, first and foremost, everybody picks you because you have the lowest price out there. I’m not going to get as much bang for the customer lifetime value buck as you would if you’re not all about the price. It’s not that price doesn’t have an effect, it just means that if your sole unique selling point is we have a lower price than anybody else out there, then this might not be the right strategy. Last, if your business is a monopoly, then the ability to execute customer lifetime value, customer-centric strategies will be helpful. But if you’re a monopoly in the first place, it’s really just a great way to defend your position a lot. Amazon, it’s not necessarily a way to, um, grow against the competition, which you’ve already squashed if you’re a monopoly. So primarily this podcast is aimed toward people who are in competitive spaces.

Allison Hartsoe – 05:37 – So if your company fits one of these categories, it’s okay, you can stop now. I might be generating a whole lot of hope that results in frustration for you, but if you are a person who works at one of the thousands of competitive businesses and retail or technology, finance, Fintech, healthcare, insurance, many, many, many more then my hope is this show will accelerate your career alongside the performance of your company. So with that, let me go a little bit deeper. When I say customer equity, I’m talking about knowing individual customers who represent a certain amount of future value to your business. So an example might be, um, the customers who have transacted with you represent a future value of 7,100, $500,000,000 and you know that this is locked up and the customer pays.

Allison Hartsoe – 06:49 – But the question is how do you get it out? So the goal is to draw a bright line between the many touch points of customer interaction across your company and starting with marketing and the ability to unlock that value. Now imagine for a minute that you walk into a retail store. Let’s take REI for example, and I am thinking particularly about REI because I’m getting ready to go on a backpacking trip. I don’t have any backpacking gear. So typically what happens when I walk into REI is I’m greeted by a lot of friendly, often very knowledgeable salespeople who tried to guide me to whatever it is it seems that I want, and the same philosophy often occurs online, one site for all, lots of different ways to route you to what you want, but it’s basically a product-centric view of the world.

Allison Hartsoe – 07:45 – I have products, let me help you with them, but I don’t really know much about you personally. So the salesperson doesn’t know what I bought. They don’t know much about me. They don’t know what I need. They’re just trying to kind of guide me based on what I tell them to a specific product. Fine. But a customer-centric view of the world is, I want to be of service to you, and if I can help you, then you’ll become a good customer for me in the long run. Now again, REI and there is this time for a backpacking class, and I want to learn how to pack a backpack effectively in this process as I learned about how to pack a backpack, I will also learn that I need specific products like maybe multicolored bags to separate items within my backpack. Great. They happen to be here at REI.

Allison Hartsoe – 08:40 – Well, thank you for being of service to me. I’ve had a good experience. That’s a great way to go. And when everybody talks about customer experience online, they’re kind of imitating this idea, and they’re imitating the content first strategy and know they’re. They’re getting toward how can I be of service? That’s a great step, but let’s take it up a notch in order to include customer equity. Now imagine that when I walk in the store or appear on the site, REI already knows what I’ve bought, how much I’ve thought and how often and now it enables them to operate as a small business, but it’s scale and the salesperson says, hey Allison, how’s that backpack he bought last month working out for you? Do you want to think about that duck back to protect it in the rain where you out in that massive rainstorm that happened at the beginning of June?

Allison Hartsoe – 09:35 – Well, yes, in fact, I was, and yes, in fact, that’s exactly why I came in today. Now in real life, this raises privacy concerns because you have to recognize the person in that means facial recognition and that raises a whole bunch of privacy concerns. I’m not going to go there, but online it’s very possible, and it’s much easier to do so by using customer lifetime value. I can mimic that small town comfortable, personalized service without being too creepy. I can focus on people who frequently by and treat them differently from folks who haven’t been around in a long time. This affects acquisition, engagement, retention of customers, but most of all, it reduces the marketing ways that we all hate and increases innovation as well as revenue for the company, so it’s a win-win all the way around. So customer equity is about drawing that bright line between you as an individual customer and the actions that you take, how intense and how intelligently your company becomes a service to them.

Allison Hartsoe – 10:47 – Take specific actions to please both your customers and your shareholders. Now let’s move on to the core principles. To be a Customer Equity Accelerator, you first need two things. One, you need a data-connected view of the customer, and two, you need the ability to act on it. It sounds like one, a, one sounds like all I ever needed to know, I learned in kindergarten, right it, I’d love it if it were that easy, but it’s still a modern miracle when any company can get these parts to a line. Just picture a boat where everyone has an or, and they’re rowing in different directions. That is exactly the state of data in most companies and getting them rolling in the same direction is exactly what we’re trying to achieve. CLV, customer lifetime value is that shining beacon of light that we want everyone to the road toward.

Allison Hartsoe – 11:51 – Why? Because you have to get results. You have to show wins and companies that have done this see returns from seven acts to well over 100 x of what they spend. If you want to hear more about that, you can listen to previous episodes including Jose Murillo story. He’s the Chief Analytics Officer at a bank. Ash Dhupar story, who is the chief analytics officer at Publishers Clearing House. Zach Anderson story, who is the Chief Analytics Officer at Electronic Arts or Jeff Gardner from Staples who just went out on our podcast last week. We’re talking serious, super powers with this folks. The data connected view of the customer is really, as I said, it’s the first step, so the names I just gave you are all related to results. If you want to hear more about the challenges for getting that data connected view of the customer, then you should listen to the foundations of customer equity.

Allison Hartsoe – 12:58 – That’s an episode that Loren Hadley who works for Ambition Data and I recorded a. He talked about some of the best practices and challenges of digital tracking and governance and basically how to hear that customer signal in the digital noise. This is table stakes. You got to have this in order to get to the upper levels. You can also listen to Bob Page who is I think a great silicon valley legend, a lot of fun to talk to. He talked about empowering big data, and it’s based on his experience with Yahoo and eBay and Hortonworks where he talked about how things work. When you have to prove the Roi of large systems, and you face the challenges of innovation, so you get hold of the data. Now, what are you going to do with it? How are you going to prove that it has value? So one story he talks about is the effect of rolling out Ab tests and then finding out that the customer service folks could no longer help callers who were part of the tests.

Allison Hartsoe – 14:03 – A service agents didn’t know about the test, they couldn’t see what the color saw. These are scale problems, you know, so you finally get that holy grail of everybody rowing in the same direction and then, oops, we didn’t think about that. Another story he shares is about knowing the customer lifetime value of customers at eBay, but realizing that they just had to go so much further to get to the behaviors that drove those transactions. I let similar to what Joe Megibow talked about in his episode where we talked about academics versus reality. He talked about the challenges of uniting customer data when you have eight different databases which all had different definitions and different data views of the customer. And Joe has done because she was at Expedia ages ago and then he was at American Eagle. So he really knows his stuff when he’s talking about how to bring all this stuff down and how to.

Allison Hartsoe – 15:02 – How to get results with it, if further stresses the impact of confounding factors where you might have two forces that drive the data in opposite directions, but without a little bit of customer’s voice that summarize number might look no different than before. So you have to actually talk to your customers to figure out what it is that is driving their behavior. And finally, when we think about thinking deeply, Brooks Bell emphasized the need to go deep in that hypothesis and think about the contributing behaviors when we do testing. Now when it comes to taking action on the data, testing is often a really great way to get that off the ground. Uh, Pete Fader mentioned that in his talk about great ways to roll out CLV within an organization. We talk about small wins and you know, the first steps of getting it stood up, getting it out the door.

Allison Hartsoe – 16:05 – You have to know what the number is. Then you have to start to take actions when those actions are basically tests, you know, we’re gonna, we’re gonna. Try it. We’re going to see what it says. And likewise, Brooks Bell, who did a whole episode on experimentation encourages us to think deeply when we do that testing. She talked about thinking through all those causes that might be contributing to behavior in order to form a deeper logical testing strategy. And it’s my belief that again, CLV helps you get very clear about what is important within the framework of any test, any experiment, any analysis or any report. Also in the vein of acting on the data, we had Bob Mckinney from Batteries Plus Bulbs who talked about how he pins it all together in order to arm the front lines and particularly how it helps to prioritize opportunities for his salesforce.

Allison Hartsoe – 17:09 – We had Laura Boden from Bain as well, stress the math and the magic that has to come together when we look at the completeness of the view. So from her session, we learned that when you’re taking action, it’s not just about the data and it’s not even just about the data plus the qualitative customer voice, that there’s a certain degree of creativity or innovation or magic that goes into the completeness of the customer view. And that kind of brings us back to the beginning of the philosophy. How can you be of service to the customer, what it that they really want or need from you, asking the right customers can be driven by CLV but knowing what to give them is part of the creativity in the magic but doesn’t necessarily appear in the data. Now, I have noticed that many analysts and many people who I interview on this show are digging deeply to get to fantastic insights and fantastic ways that they can use this information.

Allison Hartsoe – 18:23 – But the ones who do the digging are not always the ones who pull the trigger. And that means that the most important people on your team are two people. One is the factory foreman. Uh, this is the person who queues up the analysis factory. What’s going to happen first, second, third, which part of the organization are we going to respond to you in what order? And that’s a challenge that companies who are more mature, who have started to develop testing at scale and analysis at scale insights at scale, face the second most important person or perhaps most equally important is the one who communicates the insights and this is what we’re going to be talking about in August. You must have somebody on the team who can bridge the gap between all of those fantastic Ph.D.’s who are coming up the insights, but if you put them in front of an executive, would spew all kinds of p values and props and [inaudible] and things that executives don’t really care about because they don’t really tell the story.

Allison Hartsoe – 19:37 – Instead, you need communicators who are going to make that bridge. They understand what the data scientists are saying, but they can communicate it into the context of the business. And at the stage most companies are today. People haven’t grown up with an eye for data. They are still very much looking at information and making their own stories out of it. Sometimes loading in their own biases along the way. So we have a responsibility to put these people in place. Who can clarify what that data really means, what was that analysis designed to answer and even though it may talk about something else over on this other graph or chart that’s not really what the analysis was designed to say and therefore to take it out of context is not the right way to interpret it. You need this again and again and again across the organization to just be of service to your organization to provide that kid glove treatment, so I will go into more on that now because we’ve got some fantastic guests who are going to kick off this topic.

Allison Hartsoe – 20:49 – A first step is going to be Lea Pica, who talks about the visualization of data, and then we’re going to get some fantastic stories on data disasters right after that, so I’m really looking forward to that series coming up next. Now, I hope this has given you a taste of why you should tune into the Customer Equity Accelerator and what you might gain by listening. I’d love to get your feedback. I’d love to get your questions, so please feel free to reach out to me. I’m allison@ambitiondata.com, or you can check out the ambition data.com website. You can find me on LinkedIn. You can find me on twitter @ahartsoe, that’s @ an h an r t s o e, so thank you so much for tuning in today. As always, everything I’ve talked about, every reference will be on ambitiondata.com/podcast and remember when you use your data effectively, you can do this, you can build customer equity. It’s not magic. It’s just a very specific journey that you can follow to get results.

Allison Hartsoe – 22:00 – Thank you for joining today’s show. This is Allison. Just a few things before you head out. Every Friday I put together a short bulleted list of three to five things I’ve seen that represent customer equity signal, not noise, and believe me, there’s a lot of noise out there. I actually call this email the signal things I include could be smart tools. I’ve run across articles, I’ve shared cool statistics or people and companies I think are doing amazing work, building customer equity. If you’d like to receive this nugget of goodness each week, you can sign up at ambitiondata.com, and you’ll get the very next one. I hope you enjoy The Signal. See you next week on the Customer Equity Accelerator.