You are Asking the Wrong Questions. Valentin Radu from Omniconvert Talks About the Right Questions.
The Profit Forecast: The eComm CEO's Podcast
Episode #15: Valentin Radu of Omniconvert
Find it here:
Ben Tregoe: [00:00:00] Valentin, welcome to the BA Bridgepodcast.
Valentin Radu: Hithere, Ben. And hello everyone. I'm really excited to be here with you and toshare some insights from my path so far.
Ben Tregoe: Nice.Let's start with how you're the founder and CEO of Omni Convert. That's right.You have a ton of experience in this.
It'd be, I think, really helpful to, to give a little bit ofyour journey. How you started Omnicon Convert, why you started it, and thenreading your history page on the site. It's pretty impressive. All the pivotsand the twists and turns. Obviously we don't need to go into every detail, butyou guys certainly learned a lot along the way, so I think that would behelpful for people to get.
Valentin Radu: Yeah,sure. So I'm a former eCommerce entrepreneur. We made the largest online carinsurance player here in Romania. And out of the struggle, because I Idiscovered how to run eCommerce by digging into data. I've discovered that. Webuilt our own technology and I was having some fights with my former partnerbecause he bought a business without [00:01:00]asking me.
And due to that conflict, I decided, you know what? I'm gonnabuild another company. You stay with this one. And that's how I built OmniConvert. We initially started as a website optimization platform for e-commercecompanies. AB testing, conversion rate optimization, web personalization, Andthen we've made a lot of experiments like adding overlay, adding surveys,building a CRO platform.
And back in 2019, we've realized that we are right in themiddle of Red Ocean. And the market is not is not that good anymore for usbecause there were plenty of tools and not enough knowledge. And then we'vepivoted the. Building a customer value optimization category.
And basically that was due to the research that we made withour customers, and we realized that many commerce companies need to increasetheir customer lifetime value, but they don't know how. They don't know andthey don't have the tools to do it. And then basically, thanks to thatexperiment, side gig, basically because I've built it with two, with twodevelopers.
Yeah. We, and [00:02:00] thatturned out to be our our main driver of growth right now. So we discovered thatthis is a very lucrative niche because to be honest, there are lots of retail,lots of retailers and e-commerce companies, which simply don't get how toincrease customer lifetime value. And we are there.
So nowadays we have this set of tools to help omnichannelretailers, not only online retailers, to increase their customer lifetime valueand understand their customers. We have the CVO Academy, which is helpingpeople get the methodology, how to analyze the data, how to build the process,how to.
To do customer research. So basically we've gathered a lot ofbright minds in the area of retail, customer experience, data mining, dataanalysis, acquisition, email, whatever. And basically the last thing that weare doing is that we are training agencies to build this type of new endeavor.And our vision is that in five to 10 years from now, This CVO category is goingto be a category in itself, like CRO is a category to optimize the website.
We [00:03:00] think that CVO isgoing to be a category in itself. Companies must optimize for customer lifetimevalue. That's the North star metric, at least in retail. That should be theNorth Star metric because if you increase this, the whole company is going tothrive.
Ben Tregoe: Wow.Alright, so this is, that's a good start.
you said something that there's a lot of tools but not enoughknowledge, and that struck me and in our previous conversation you made thatpoint, around the importance of education. You talked about it again, in thetraining of the agencies. What did you guys notice and what do you see in themarket, around the lack of knowledge of how to use data?
Valentin Radu: So let'slook at how big companies are being governed, let's say. So we have some wehave the leaders, yeah. The ceo, cfo, cto, whatever those leaders are. If it'sa large retailer, they are usually coming from the bricks and mortar. Andthey've they are not even aware about [00:04:00]what technology can help them do.
So they are still in the model of increasing the revenue, whichis a great metric, but it shouldn't be the metric to guide yourself by or not.Even the margin is not the metric. You need a dominant number to do this. Sothe leaders. On one end, we have the leaders, which are well intended. Theywanna grow the organization.
Let's not look at the edge cases where we have people whichhave super glue on their chairs and they just wanna get their salary everymonth. So we have organizations which are healthy, they are looking to grow. Wehave their leaders and they wanna grow their organizations. However, they arenot educated.
To understand that now you have a thing which is called thecustomer, and you can analyze the behavior of the customer and you can look atthe buying patterns and you can improve the whole organization by looking athow the best customers are behaving, how the best products are keeping, ormaking the customers go away from them.
So those things are. In their area of knowhow, they [00:05:00] simply don't know that they can do thesekind of things, and they are coming from this old analog world, not from thedigital native world. And that disconnection produces a lot of frictions becauseon one end we have retailers which are having their eCommerce departments.
But eCommerce, you know what? It was good in pandemic, but nowit's still under 10%, 15%, 20% maximum. It's not that important. So in thegreater scale of things, companies are not measuring the actual impact of theeCommerce and the of the online. They are not seeing the contribution to thetotal revenue and the total margin by eCommerce.
And we have. Tech savvy, data driven technology lovers fromeCommerce that are not having enough power within the organization to leveragethose things. And on the other hand, we have the leaders, which they don't haveways to understand the data. So they need translation services from theirpeople.
But they're data geeks. They're data scientists. [00:06:00] They throw some reports at them, and thennothing happens because they don't have a cross-functional growth team, growthorganization, and they're not measuring what matters and that needs education.So at the end of the day, We need to educate the market leaders, we need toeducate the eCommerce, the retail leaders, and we need to build bridges betweenthem because at some, at this moment, they don't have a common language.
And we have this frustration between the marketing team and theeCommerce team. The e-commerce doesn't have the access to all the budgetbecause the marketing team is wasting money on. TV campaigns because that's theway it goes and whatever, right? That's what's going on. And we need educatedleaders in order to change the organizations.
It's all about the decisions that the decision makers aredoing.
Ben Tregoe: You'veobviously talked with a ton of CEOs and founders and leaders, so what are someof the red flags that they need? Education. [00:07:00]
Valentin Radu: Yeahthe first red flag is that they are not gaining market share, or they arebecause it's clear any progress is preceded by some struggle.
You need some pain even in your life as an individual. If youthink about it then, until you are really frustrated about the fact that thisfreaking iPhone. Has the battery until 4:00 PM and then you can't reach yourkids. You're not changing this freaking phone, yeah. Change in progress. Ispreceded by frustration, by struggle. One, one red flag is that theorganizations are not acquiring market share. And we are seeing this, forinstance, in the grocery retail industry. We have the big retailers, at leasthere in Europe. There are a lot of big grocery retailers, which are endangeredto become some huge warehouses from where the quick commerce players, the thosefast.
Technological customer centric apps are getting their productsfrom, so [00:08:00] they will, their risk is tobecome some huge warehouses that are collecting products from a lot of brands.And then there are the scooters and the delivery guys from all these appscoming to, to get products to the last mile, to the.
And guess what? The consumers, we, and that's another thingwhich is happening. The consumers will blame the warehouse, which is thegrocery retailer for everything that's not going going right. And they willappreciate the fact that the delivery app is doing their job. They are bringingme fresh Grocery 90 meetings,
Ben Tregoe: but okay,so they're not gaining market share, but when they come to you, Is that howthey express the, the pain or the right.
Ben Tregoe: yousaying Hey, we're not getting market share. And then you're like, aha, I knowwhat to
Valentin Radu: do.Okay. Yeah. So they are not reaching their goals. They are losing customers andthey have internal frustrations. We usually work with with a special [00:09:00] kind of of client, which is the internalchampion within the organization is the game changer, is the inspired.
Growth oriented leader, which has some kind of decision makingpower, which is extracting the insights and then they can throw some real datain the eyes of the marketing teams. What we've acquired. 200,000 customers thisyear, and guess what? We've lost 145,000. Yeah. And what going to come backstatistically and when they see that, when the co, the CFO sees that, theystart to, to scratch their heads and to think about ways to fix that.
Ben Tregoe: Do whattitle does that champion typically have inside these
Valentin Radu:organiz? Yeah, it's it's either the cmo, it's either the cdo, chief, deputychief Data Officer if or it's either the cto, which is which is a. Techoriented [00:10:00] leader, which is fed upwith building on demand of the stakeholders and they are looking around forsolutions.
Maybe someone built that already, maybe, yeah maybe it'salready there. And our time to market is one month, not one year, and Ishouldn't be using my resources to to build something which is already done.And it. .
Ben Tregoe: Yeah. Itsounds like you're describing bigger companies and that are, were retail first.
Is that the only companies you work with or do you work withlike e-com first that are going
Valentin Radu:omnichannel and, yeah, we work with pure players, pure e-commerce players. Wework with E-com, D two C, which is migrating to the bricks and mortar, and wealso work with big retailers. We are very successful with the big retail.
Because their their data structure is a mess. They haveheritage data systems all over the place. They have, so they need us. It's uh,it's like really need us. There are also the eCommerce players, which are usingonly their data from Shopify or Google Analytics, which is not enough. Visitor [00:11:00] data is fantastic, but it's only for thetop of the funnel.
Yeah. And if you're selling products with the Hyper Jfrequency, so when you need customer retention and customer lifetime value, youhave to look at your customers. You need to understand the best customers andtheir behavior in order to acquire more like those. Yeah, it's pretty simple.
Ben Tregoe: You knowwhat struck me?
What of what you just said is things that we run into here atBA Bridge where, you companies try to solve the data problem sometimes by oh,we need a data warehouse. So then they try to build this like all-encompassingdata system with every source of data flowing into it in a big data warehouse.
Looker on top of it and they're like, and then invariably itdoes, it takes five x the amount of time and five x the amount of cost oryou're describing at the other end, like the heritage big systems that they'relike, this is so fundamentally broken. Forget it. So [00:12:00]what HA is, do they need to build these like big systems or it sounds like youguys can drop in.
And just get access to the data and you're I don't care whatyour, whatever data is I just need these five sources, or four sources, orwhatever. How does it actually work with the data, all the available data,
Valentin Radu: Iguess is my question? Yeah. We don't care where that data sits. So we just careto have to have the crown jobs, which are doing their work at the pace that wewant.
And after that we do care about having someone Advocating forthe solution to be adopted within the organization. So we are seeing that weare building this type of fast and easy to read reports with actual insight,not with data because. There is this trap, when we have this these companieswhich are analyzing 245 metrics and they are not changing any of those.
It's just not happen in the past. That happened in the past.They're always struggling. Data is great.
Ben Tregoe: Amazing .[00:13:00] It's really good. Yeah. Picture
Valentin Radu: back.Yeah. It's really, that's. Sorry, go ahead. I cut you off. No, it, it's crazythat the mindset is, the mining and reporting mindset is not the insights andaction mindset, which is.
Kind of frustrating if you see how many resources are being arebeing thrown like in the fire, with the adpa, which is not aligned withacquiring the right customers whatever. So there, there are many resourceswhich are thrown out of on the window due to lack of.
Understanding about their the data without measuring whatmatters and without having context. There are still companies, big companies,and I'm I'm. You not like I'm frustrated, I'm disappointed, but I'm alsoexcited. And at the same time, because there is a huge opportunity for us wesee big companies which are still not knowing their unit economics, and theyhave siloed silos with their KPIs, which are sometimes they're conflicting, ifif one silo is doing their job [00:14:00]tremendously, it's affecting the other one.
But nobody cares about that because there's no. Holisticapproach. There is not an integrated approach from top to bottom around whatshould be measured and improved.
Ben Tregoe: How doyou combine the customer view across the channels? I Obviously online sale,easy. I don't know how, do you have a way to take in Amazon data and join itand say, we think it's the, Ben.
And then how do you do that in the retail environment? If Ijust walk in and pay cash, like how would
Valentin Radu: youknow that I made a purchase. Yeah. If you pay, if you paid cash and if youdon't have a customer loyalty card, that's it. It's okay. It's pretty muchnothing that we could do about it.
What we could do is that if you are not using a customerloyalty system, which I. To be honest, the main benefit for a company to have acustomer loyalty system is not that the customers will be more loyal because80% of the time they are not coming back for those perks, which are [00:15:00] not relevant for them, but it's the factthat they have.
Identifiable customers and they can see anomalies within theirbest customers, worst customers, what caused customers to, to churn, stuff likethat, and what we are doing. So the if they have a customer loyalty system inthe bricks and mortar, that's great. If they don't, we can use the last fourdigits of the credit cards.
Yeah. Because there, these are pretty unique. There are, thereis not such a huge overlap with those and we can. We can play with with those,and we can build some avatar around that customer, and then we can extract thistype of insights based on that.
Ben Tregoe: So thenit's like directionally correct.
It's, the goal shouldn't be like, Hey, it's perfect. I know Benall the way through, but I know. If 20% of my audience has the customer loyaltycard, they, the other 80% tend to act like the 20%. Is that valid or is the 20%kind of [00:16:00] self-selecting and
Valentin Radu:completely unique? It's yeah it's usually more than 20%.
So it's usually with the companies that we've worked, they'vepushed very hard their customer loyalty system, and we've, they've made, theiragenda was to migrate. Because that's the funnel. You have unknown strangers,you have identifiable customers, then you have loyal customers, then you haveevangelists.
That's the funnel, but you can't have one without the other. Soit all starts with turning unknown strangers to identifiable customers, andit's pretty much around 40 to 60%. And then it's Statistically significant.It's not that. Yeah. And you realize it's that high. Yeah. And it's also whenyou get this type of insights was the chance to place another order if in thefirst order, if the first order was made online or offline, or if it's fromthis category or that category.
And we, and when you have enough data, You can [00:17:00] see the hidden gems, you can see theproducts that you wanna push or you wanna, you can see the categories. And youcan also build a loyalty system, which is relevant because it's don't give mediscounted Pampers or whatever diapers if my kids are 14 and 16 and they areeating me alive
Ben Tregoe: Doprevious purchases, predict future purchases? What I mean by that is like if abrand can get somebody to purchase, once or twice, do they, is that causal ingetting a third or is it just like it just happens that the person lives nearbythe store and they like, it's convenient.
Valentin Radu: Yeah.Yeah that's a great that's a great question. When you have enough profiles, youcan determine this. So it's all about the statistical significance. So in when,if you don't have enough data, you can't rely on those. However, if you see,let's say that a certain new beer brand, the non-alcoholic healthy [00:18:00] kombucha beer is, sounds terrible, but,okay.
yeah. Whatever. There are all these new green alternatives toeverything right now. So it's a vegan letter. Vegan wine, vegan beer, vegan .You know it Not in my refrigerator. . Yeah. So if you have this new product onthe, What's happening and how is this affecting the NPS score, the customerlifetime value and the churn prediction for the customers which are buying.
If you have only 100 customers, it's not that good. But if you have10,000 customers, then you're onto something and the impact should be neutral,positive, or negative. Or in conclusion, because you don't have enough enoughdata if you have. So mainly it's all a matter of the volume of data that, thatyou're getting.
But what we're talking here is is something that is the luxuryof the large retailers, which are having that all Yeah. 50,000 SKUs. 4 millioncustomers, [00:19:00] right? Known customers.And if you have that it's like a playground. It's exciting to look at this kindof data. However, for smaller retailers, for our audience to understand, it'snot like only this type of advanced use cases are out there.
You can still do a lot of things by looking at your customerprofiles. Without having millions of customers, you can have only 40,000,50,000. You can still apply rfm. Recency frequency and monetary score. You canlook at their anomalies and you can extract. Insights based on your most stickycustomers.
Yeah. Every customer out there every company out there has thistype of anomalies and we have this debate about, from Byron Sharp around howbrands grow and they, he's stating that around 20% of the customers generatearound 50% of the revenue, which is correct if we are also looking at consumer.
Packaged goods. But if we look at retailers that's not reallyout there like this, because we should not look only at the revenue. We should [00:20:00] look at the margin. Yeah. Yeah. Becausethat's what any company should want if it's not Amazon. And if it's not 90 99and they are, keep on persuading the investors to, to pour money into theirgrowth without having a penny as a profit. Then you are in the other arena. Youare in the, you are among the brands which are looking to grow by beingprofitable and having margin. So if you're after margin, you have a cluster ofcustomers which are really profitable, and you wanna know who they are, youwanna know what they are buying, and you can do this even if.
Your brand is not that big, if you don't have such a hugenumber of customers already.
Ben Tregoe: Is that,what do you, when you say customer value or customer value optimization orcustomer lifetime value, what specifically are you talking about?
Valentin Radu: Yeah,I'm talking about the net present value of a customer looking at.
Ben Tregoe: Seriouslyyou're applying a discount rate to that. Okay. You've gone next level [00:21:00] on for people, but I'm sorry. I wasexcited to hear you say that, but keep
Valentin Radu: going.. Yeah. So when we are looking at at these metrics, we are looking basically atthe future, so CLV must be a predictive metric because the.
The world is full of lag indicators that happened. Thathappened. But in order to predict the future, we need to rely on the past, butwe should be also applying this type of predictive models. So that's why I'm abig fan of focusing on the net present value of a customer by looking at theirgross margins.
So we are not looking at revenue because that could bemisleading and we are not looking at the net margin because that can also bemisleading. Maybe why is that mislead? The network, it is misleading becausedepending on how the financials, and now we are getting into the bridge betweenmarketing and financials and data, which is a very appealing area for me.
There are some companies which are investing in stock, let'ssay, and they are not putting those costs [00:22:00]in the future. So you can have this surprise of thinking, what our CV is isdown and why is down, because the company invested into some passives which arenow not depreciated, so they are not depreciated throughout the time.
And also there are some campaigns which are happening, likemaybe the company had the huge awareness campaign, which has nothing to do withthe customer behavior, and they've, they wanted to launch a new line. And theywanna invest it in the get. This is a long term investing investment and that'sgoing to affect your net margin, and that's why I think the best would be tolook at the gross margin, but of course to keep an eye on the net margin aswell.
But that's not the job of the data person. That's all that.That should be the job. Of the cfo and that, that's another area where we don'twanna get into because there are few CFOs which are having a customer centricforecasting model. [00:23:00] Most of them arecoming up with the, I don't know, trends, year over year growth trends.
And that also misleading from my perspective.
Ben Tregoe: So itwhat about the contribution margin? If you could get, net margin, I assumeyou're, you mean like net income? What's, yeah. Okay. So if you could get tothe contribution margin, would that be a good indicator? Like for what? The wayI would describe contribution margin as the, what's left over after you'vefulfilled to the customer.
It's like your full
Valentin Radu:variable of. Yeah. So you've got rid of the fulfillment, you've got rid of thecustomer acquisition cost and the cost and good. That's how, all right, so weare on the same page. The the contribution margin can work for sure. What we'veseen in our experience here in Europe and it's about the more about theaccounting system than about the principle behind it.
It's hard to extract the contribution contribution. As it isnot as they want it to be because we have past, what's happening [00:24:00] here is that the accounting is being madeafterwards. So basically when we wanna see what was the contribution margin, weare not going to see what the contribution margin.
We're going to see it at the end of the month when they aresending these financial reports to the state institutions, to the fiscalinstitutions. And that means we are always behind and that's why.
Ben Tregoe: Allright. And then you said net present value, which like, For, people that aren'tfamiliar with the concept, it's you take the cash flows in the future Yeah.
And you basically apply a discount rate to them to create avalue of those forward cash flows.
Valentin Radu:Exactly. The key to that, if you can, sorry, say that again. And you alsodeduct the inflation, take the inflation out of it as well.
Ben Tregoe: Yeah.What discount rate should somebody apply to those forward cash flows?
Valentin Radu: It, itdepends on their business model. And because this is heavily [00:25:00] reliant on the reli Yeah, it's heavilyreliant on their business model because if you have slow moving consumer goods,It's a difference than if you're selling coffee or tea, which are fast moving.So the discount should also take into account the the cock payback that you'rehaving.
So maybe your cock payback is happening in 60 days or in 20days, and that's how you discount for it. So at the end of the day, what's themain usage of the customer? Lifetime value. It's showing the actual. Of theorganization going forward. So if you can continue like this, you can rely onthe fact that the margin that you're going to get from any new customer thatyou're acquiring is going to be like this.
But you can't disregard inflation. You can't disregard how muchmoney do you have in your account right now, and you can't easily have the factthat you usually pay back for a newly acquired customers [00:26:00] after two. Which are usually happening in60 days. And when you look it like this, that's how you need to go to, to pilotyour business.
Ben Tregoe: Yeah.Interesting. So you're omni convert is arming the chief data officer or thisinternal champion to, and then there. Sounds like a conversation that has happenswith the CFO or the head of finance around how to apply this, these learningsso that they make better decisions. Would that be
Valentin Radu: fairsummary?
Yeah, it's, there are so many. What I found out is that thestruggles are pretty much the. , but the drivers of change and of growth withinthe organizations can have different titles. So in some organizations, the cfo,it's a bright guy. He knows he's tough and it's great to work with if he, ifthe cfo, by [00:27:00] the way, that's the bestcase scenario for us because he.
He's heavily influencing the organization. If it's themarketing, if it's the commercial officer. If it's the data officer, then wehave to align everyone. And this is usually happening in a workshop and is,sorry. So basically we, how it works is like this, we grab the data.
Together with the internal champion to do a proof of conceptand to understand what are some. Opportunities or threats by looking at theirreal data, their trends. If you, I don't know if you acquire less customersthan you are churning with the model stating that, I dunno, a churn customerinto non, into a non contractual environment is churning.
If the chances to place another order are less than 5%, let'ssay those are churn customers, right? And you can look at this by Two RFM andaverage days between a transaction. So the recency is pretty much the bestindicator of churn. So[00:28:00] We build thistype of models and then together with the internal champion, we look at thedata.
We have a lot of ahas and we do some forecast like if wecontinue like this, that's going to happen and we validate the model by lookingat how would be the present. If we look at six months before and we model forthe career, and if the deviation, it's less than 5%, we are there and it's wethen go to a workshop with the other.
People within the organization and we let them know about howthe future will look for them. And if they see how grim the reality can get,then they adopt this this customer value based model. Yeah.
Ben Tregoe:Interesting. So you're, you, it's a big wake up call for a lot of people.
Valentin Radu: It'snot . Yeah. And it's all it's all a matter of arming having the rightammunition because they all have opinions, but when you show them. The realdata when they see their cohort of newly acquired customers [00:29:00] shrinking like this throughout the timeand when they see how much effort should be put in acquiring new customers justto compensate for the ones that they are losing, then they get real, they,yeah.
They get into a point where they it's urgent. You. To takeaction. And those actions are different. And getting into the the action partbecause we are also fans of not looking at, not only looking at data. Yeah, I'ma fan of hygiene. They having the data hygiene there, having reliant, reliablemodels.
But afterwards it's about taking action. And usually these typeof actions are around three pillar. One is the product. Yeah. What products arewe selling? How if there are suboptimal or shitty products, part of mylanguage, let's get rid of those, the second pillar is the customer experience,and that's happening by having NPS throughout the entire organization.
So imagine that we, our technology now allows them to see nps.Location [00:30:00] by category, by Brent, butalso by role. So for an eCommerce for instance, we found out that two pickersthrough the night shift were getting the NPS down for the entire organizationbecause they were simply drunk. It's so beautiful.
No wait. So
Ben Tregoe: you couldtrack the orders that were picked by the night shift. Yeah and put that againstthe NPS scores, and it was like, oh, the reason you're dropping is becausethese two.
Valentin Radu: That'scrazy. That's awesome. . That's how it works. Yeah. Because you can't leaveanything to chance right now, yeah. Those more tweaks that you can do, thosecan mean a lot of, a lot because if you look at they have a, they had anegative nps, so they're, the average NPS was 60 and they were having minus 20.So what's going on? And they started to investigate. They look at their ordersand they've seen that their return, the return rates were something like 80%.
So 80 or 100 customers by that picker return their goodsbecause they had different sizes. They were [00:31:00]a shoe. And it was there. Data can tell you this, but you just need to do theright setup. Yeah. And basically when you blend customer qualitative data withthe quantitative data you have a shortcut, like you are the CEO of thatcompany.
You have a shortcut directly to all the customers, and you can,you, you can see where is the mess, where is the mess throughout the customerjourney, or maybe you have some stores which are not doing their job. Maybe youhave a certain shop in a certain city, which is not doing their job.
So that's how you see what's going on by using the data, whichis there, and. And the third one to take action. Sorry, Ben, just to finish thehuge thought that I had is marketing. So you can influence clp, buy through theproducts that you're selling, through the customer experience that you'reoffering, and through the messaging, the marketing.
But when you have a first time customer, is the marketing. Whenyou have a second time customer is the product and customer experience. Thereare few moments when, oh, I [00:32:00] justforgot about you, and thanks to your email campaigns. I got back and I boughtagain from you. But these are not happening.
Usually, usually you go back to buy again due to the quality ofthe product and the quality of the services.
Ben Tregoe: Do youthink that the brands really build. Can build loyalty or, I mean that, I guessthe answer's obviously yes, but there is a, sometimes it feels like brandslike, oh, I acquired a customer, therefore they're my customer.
And it's every time you make a purchase, you're alwaysdeciding, do I want this brand of shoe against this brand of shoes? It feelsrare that you are actually already predecided to choose from a single brand. Iguess that happens every or maybe it happens more frequently, but what do youthink about that?
Are people overestimating their ability to retain customers anddrive
Valentin Radu:purchase? For sure. Yeah. It's I think brand, it's brand itself. It's a lie.It's a lie because we all see that we have this aspirational brands like [00:33:00] Tesla or Google or whatever. If Googlewill not deliver the right search results, guess.
Screw Google, let's go to whatever it is, duck or whateveralternative. So it's not the brand which is driving me, driving my, my, myhabit. It's the value that I'm getting from that brand. And to be honest,Google is not some crazy aspirational brand when you think about the namingright. It's Google.
It's just that it has memorability. But and that's one thing.So I think the brand, it's overestimated and companies which are which areoverestimating the brand's value are doing it due to the an old school ofthought around marketing. They are, they're, they think that people are coming.For the brand, but people are coming for the value because nobody's stupidenough to get shoes, which are not fit for them just because they are Gucci orDolce Gaana or whatever.
Wait a second.
Ben Tregoe: Wait asecond. [00:34:00] Valentine you're making abig claim here, Yeah. Does it really matter that the Gucci shoes fit well or isit just the fact that you
Valentin Radu: showthat you have good kids? Yeah, if they, if these are not functional, It doesn'tmatter the social and the emotional aspect.
That's what I'm saying. Okay. So at the end of the day, if. Ifyou sell products which are not doing their job, it doesn't matter what's thebrand you put on the brand. There are of course products that you are buyingand people are buying luxury brands only for the social status. Okay? But doyou imagine that someone which has their feet hurt will buy those shoes?
10 times in a row they're going to buy. Yes, I do. I do.Imagine .
Ben Tregoe: I can't.
Valentin Radu: I thinkthis is just just per, I'm
Ben Tregoe: kidding.I think there's outliers where people will do anything [00:35:00]to buy it.
Valentin Radu:Whether it's really, but these are extremes, for sure. Yeah. So to get back toyour question around how brands are creating loyalty and if they are, if theycan create create loyalty for sure.
Yeah. So for sure it's an emotional aspect, not only thefunctional aspect. What I'm saying though is that when you are winning at thecategory for instance, so if we look at if we look in the economy we havecategories which are being dominated. Buy a few brands. Yeah. So we haveCoca-Cola, is this the best product on the market?
Is this the most healthy product for the human beings? For surenot. I've seen those ads when, on the TV when they've shown these glass halffull with sugar, and they showed it. So mainly the product has some. Componentson it. There are brands which are creating loyalty for sure, but when we arenot looking at the category creators or the category kings, because you [00:36:00] can create a category and not be the kingof it.
I don't know the former Windows pads, the iPad wasn't the firsttablet, but they've won the market. So when we look at these type ofcategories, they've won the, their customers. And then they've put a brand onit. Yeah. So they, it is not because something is named like this, that I'mbuying it, I'm buying it for the intrinsic value and emotion that is producingme about how I feel about myself when I buy that brand.
And at some point it's becoming unconscious. So when you go my,my son for instance he's 14. He's in. I've tried to persuade him for years toeat healthy, and at some point he got in love and guess what? He's looking atthe calories on a certain yogurt. He's analyzing everything like crazy.
He's doing sport for two hours a day and when he's buying aproduct right now, once he made up his mind that this [00:37:00]yogurt product is the one for me, he's always getting it because he needs lessthan 1%. And around 10% protein. That's it. And he analyzed the market and nowhe's going like a robot in the supermarket.
He's not even considering to buy another yogurt for him. Yeah.Why? Because that name that yogurt was named the noi. No, it was, yeah. Aboutthe job to be done, yeah. His job to be done is to be fit so that he's he'sconquering that girl. That's it.
Ben Tregoe: So is thecustomer lifetime value, a measure
Valentin Radu: ofbrand?
The customer lifetime value can be a can also show how strongthe brand is for sure. Yeah. And you can affect the customer lifetime valuethrough branding. You can you, because it's the framing bias. We all know aboutthe framing bias that, that that experiment made that university of Columbia byDaniel Canman.
The, it's the same thing, but it's how you frame it. You canframe it differently. And of course, [00:38:00]brand can affect behavior. I'm not stating that. What I'm saying though is thatthe brand should be backed by a product, which is. Product is more importantthan the brand itself. So the what's job, what's the job to be done by theproduct?
Yeah. It's making me feel better about myself. It's making mefeel like I'm more superstar, like I'm admired, like I'm powerful, like I'm,whatever components do I have. Yeah. And that's how it goes.
Ben Tregoe: Goingback to the when you guys do all this analysis and then there's the like ahamoments and people are like, oh boy, this is not going the way we want.
It reminded me of something we had talked about earlier in theweek about, you'd said companies aren't asking the right questions, so you knowit. How does somebody know if they're not asking the right questions? , you'dsaid it's, they're not gaining market share, but, are there other indicatorsinside these companies?
If you were a [00:39:00]founder or a leader inside a company and you're listening to this do you justinherently know that you're not asking the right questions? Or are there signslike, we're talking about this,
Valentin Radu: but weshould be talking about that. Yeah, so it's usually about how much of myrevenue is coming from the returning customer.
what are my forecast model? How reliable are my, my, mypredictive models at this moment? How can I know, how can I get away fromuncertainty, which is happening? We are all living in this freaking uncertainenvironment Yesterday, the mid size from Poland. Joe Biden saved the daystating that this might not be from Russian.
Everyone was relieved about it, but for hours we all thoughtthat. Yeah. Third World War is. There, great. So everything is very uncertain.So when a CEO is asking, and of course those are not something that we cansolve, but let's say in the economic environment, in this [00:40:00] oasis.
Yeah. Where we are looking at, so if a CEO is not reliant or aceo, a cv, a cfo, and an executive, if he or she can't rely on their.Predictive models, then they can go to the common denominator because growth isnot an accident. It's a consciously made strategy around delivering outstandingvalue to enough customers that pay for your products.
Yeah. So the customer is the unit. It should be in the focus inthe, under the microscope, you. The customer behavior should be getting you theinsight. So you should go there and do market research, customer research, andthose type of questions are the ones that are revealing, you know what we needto track C.
Let's build the CLV model. Let's look at our, let's segment ourcustomers. Who are our best customers? And by the way, the CLV itself is not enoughbecause it's showing you, it's like [00:41:00]an average, it's the trap of the average, right? But it's indicative. And ifyou break down, if you segment it by region, location, store category.
And if you look at their the trends of it, if you look at in,in Contrast creates meaning, the CVS $300, but it was 292 yesterday.Outstanding. What have we done so good, so well that this grew like this andit, it's also moving very slow and that's why you don't need only the cv, youneed CLV for the cohort of the last 40 days acquired customers, the CLV for the60 days.
So you, you need the model, which is making sense for your ownbusiness and that's why yeah, they are migrating to this. And the otherquestions that they are asking is, what is our revenue done? And that this, andeveryone is raising their shoulders, oh, it's double economic environment,whatever, right?
But with the c d, you can actually go there and see, oh, so wehave a CV drop in from this [00:42:00] channel,in this category for that vertical. And people are not buying wine anymore.What? What happened? And you go there and see, by the way, I dunno if you knowthat, but in Japan, the wine. Sales have dropped by 50%.
It looks like the new generations are not drinking wineanymore. So the state is interesting actively investing into wine consumptionto, to save the industry. But it's, if it's government, Yeah, that's
Ben Tregoe: awesome.Gotta save those wine businesses. We have a couple
Valentin Radu: in theUS man, . Sorry, say that again.
I've said that the state saves the banks in the US right? Yeah.
Ben Tregoe: Yeah.Wine, whatever. Banks are like, oh, we better get in on that .
Valentin Radu: So getme. Yeah, I've seen that. It's not like the bank are the best the bestcompanies to save out there. No,
Ben Tregoe: I don'tthink so either. What's gonna happen in 2023?
Valentin Radu: We'regonna [00:43:00] see a lot of failures. So weare going to see companies dying more than this year. I think because we areleaving this accelerated. It looks like the consumption is not going to be likeit used to. So people are reluctant to doing rage buying like they've done.
We are going to see companies investing more into data,hopefully, because it's. Their only chance. The roi, it's huge. If you compareit to let's throw more money on TikTok because maybe, yeah. Customers will comeback. What else? I think there are there are this need, this struggle.
I, I have this this perspective that. Any progress is precededby the struggle, right? So we, this struggle will lead to new companies, whichwill win markets. We will see niche players which are going to differentiatethemselves, and they will win markets. We will see direct to consumer brandsgoing even more into the into the bricks and mortar [00:44:00]because they need more channels to survive and their products are there, buttheir distribution.
Purely online because the consumer behavior is not online only.And we've seen how Nike did it, through their direct to consumer channel. It'snot like they have a pure online play, but I've seen that something like morethan 50% of their revenues coming from their direct channel. So we are alsogoing to see brands pushing the pedal into their their direct to.
And pretty much that's going to happen in the market as I seeit from a marketing data perspective. I think sentiment analysis is going to bea big thing. We're also hopefully invest into this direction to, to extractautomatically insights from your customers and from social media around what'sgoing on so that you can fix what's broken.
We're going to see customer journeys, which are more let's sayRelevant, let's say, because companies will invest more into customer journeyacross those those channels. , data is [00:45:00]going to be a big thing again, due to the disproportionate returns that theywill they will be having.
And yeah, pretty much it's going to be an exciting year. I I'mlooking forward. It's exciting because that's going to pave the way to a newway of doing business as the customer is more powerful than ever, and the powerof the customer is going to be even higher next year because the money are theconsumption is going to be so scarce and we as from the role of a customer.
It's like we will have all these options with our fingers. Weare gonna swap to another, to, to another. App and that's it. Goodbye, brand X.See you later. So that means companies will need to deliver not only goodexperiences, great products, but outstanding messaging, outstanding experiencewrapping the product that they are selling, because the same product, you canget it.
200 vendors besides [00:46:00]Amazon, which is stating the setting the benchmark on how the CX should be
Ben Tregoe:Valentine. Thank you. This was a lot of fun. I really appreciate your insights.
Valentin Radu: Thankyou, Ben, for having me. It was it was great. And yeah, all the best from fromBucharest. You can find me on LinkedIn if you think there are things that areworry from what I, how I see the world.
You can you can find me on LinkedIn and you can check out ourown CVO Academy, by the way, which is I. Together with mathematics professors,with economics, with cx email, and acquisition experts. We've built thismethodology around customer value optimization. So check it out if you want,also at free courses available for everyone there.
Ben Tregoe: That's atomni convert.com?
Valentin Radu: Yeah,exactly. Awesome.