510: How to Use the CLTV Model to Identify the Key Levers in Your Business w/ Babak Azad

ABOUT THIS EPISODE

In this episode we talk to Babak Azad, Founder of Round Two Partners.

Looking for a guaranteed way to createcontent that resonates with your audience? Start a podcast, interview your ideal clientsand let them choose the topic of the interview, because if your ideal clientscare about the topic, there's a good chance the rest of your audience willcare about it too. Learn more at sweet fish Mediacom. You're listening tothe be tob growth show, a podcast dedicated to helping be to be executivesachieve explosive growth. Whether you're looking for techniques and strategies or tools and resources, you've come to the right place. I'm Jonathan Green and I'm James Carberry. Let's get it into the show. Welcome back to the BE TOB growthshow. Today we are joined by Boback, a Zod. Boback is the founderof round two partners and a performance marketing expert. Boback, welcome tothe show. Thank you glad to be here. It's great to have youhere. We're going to be talking today...

...about how to use the customer lifetimevalue model to identify the key levers in your business, but before we getinto that, maybe you can tell our listeners a little about what you've beenup to and what you in the round two partners have been up too lately. Sure. Yeah. So, just by way of context and background andhow I kind of got here, just very briefly, I spent eight yearsand really that's where I learned performance marketing. A direct response was that beach body. So I spent I was there from a hundred million to a billion. So beach body is Pindx and sanity, all those informmercial products and chacology oversawfinance and analytics and then the last few years managed custom media and customeracquisition. So I left a couple of years ago and been working on around two partners. Essentially we work with brands that are trying to scale theirperformance marketing campaigns and and so it's customer acquisition, retention analytics, basically payinga bit of a virtual CMO role. And you know it. Work withfolks as big as stitch fix and in...

...wantable in the apparel subscription space andbutcher box and and most recently taste made. So that's or handful of the folksthat we work with, really helping them scale their performance marketing campaigns.Well, that's fantastic. I mean it. You know obviously sort of beach bodyrather. I mean definitely big time everyone. Everyone has seen the commercials, everyone knows what what it is at your time out. I do haveto ask now, in working with them, did you ever, you know,how did? Were you also working on your beach body? Did youever do the PX? Did you ever take advantage of any of the products? Yeah, absolutely, I mean I think that one thing. You know, certainly all the products are very legit. The biggest challenge everyone has with anyprogram is consistency, is opening the box and or turning it on andthen doing it and showing up every day. Yeah, you know, but yeah, I mean I've always been trying to be fairly active and and youknow, I wrote crew in college. I've biked, done trough on thingslike that. So it's by yeah, my life. First, my firstfew months there, I did PDX. I needed to prove to myself thatthe programs were in fact. Yeah,...

...so, yeah, now that's they'rethey're awesome. Just got to follow them. Just got out, just has gotto keep doing it. Well, that's great, putting your putting yourmoney where your mouth is. So today we're going to be talking, likeI said, about the the customer lifetime value model, and so let's let'skind of start with what it is and what it is and what's what isthis model made up of? Right? The whole point of the model isto capture. It's some people call it customer Lifetime Value Model, unit economics, a margin model. The whole point is to capture what are the revenof the lifetime revenues you you get from a customer and what are all thecosts associated with it? And the reason for this is one if you're runningpaid media, you need to know essentially how much you're making on a customerto figure out how much you can afford to spend to acquire them. Andthen the second part, which I think a lot of people underestimate, isto understand the key levers in the business. And so, whether it's a productbusiness or services business, the concept is the same, which is whatare all the revenues and whether, depending...

...on your business constraints and cash constraintsand goals, you may only look thirty days, sixty days out and maybeyou look out two years, but essentially trying to capture essentially gross margin sothat you can figure out how much can you actually afford to acquire the customerfor and then really then to hone in on each of the line items.Again, a product business is going to have product cost, shipping and fulfillment. The services business, that may be personnel, marginal cost of, youknow, servicing a customer, whether it's software, technology, personnel. Andthen it really it's about putting people to be accountable for increasing your the revenuesor the cost, while at the same time really making sure to be buildingthe brand. Yeah, yeah, absolutely. So in your mind, the realvalue of this kind of model is twofold. Yeah, absolutely, andyeah, it is, because you know first if you're going to spend moneyto Acqui our customer. And I come from a paid media world, whetherit's in the BBC or bdb world.

Either way, I believe in paidmedia. I think it's just generally more predictable and controllable and I think ifyou're going to do that, I don't know how you can run paid mediawithout understanding what the value of customers. So is ten dollars good to acquirecustomer is Fiftyzero, depends on your business. But if you don't know how mucha customers worth, and as obvious as this sounds, I think peopleunderestimate and just really have the just doing a limit of the work to getsome of these things in place. But part of the benefit is the processof going through building this model and it's it's not just an excel model.It's understanding when you get a customer, how much do you generate from themone day, zero again, whether product or service, what are your what'syour base, if you want to call it that? What's your upsell?And then how long do customer stick around and over what lifetime do you generatethat kind of those those revenues, and then really, what are the costsassociate with it? And you kind of essentially you build a mini key andL for your business. And then it really forces you to say, howdo we get better at each one of these things? And so there's thepain, there's the understand the target cost...

...proquisition, the target CPA side,and then there's the we've got to continue to optimize and every business has toall, I believe, has to always be in a mindset about testing anoptimization. Okay, so so I mean kind of these the two benefits determiningwhat that cost per acquisition is and the other benefit, meaning that you canstart to understand and identify these these key levers right in your business. That'swhat that's kind of what you're talking about. Yeah, exactly, and I thinkthat second part two in particular. Well, both sides they're always submetrics, you know. And again, like this is not like it's a bitof math, but it is not rocket science math. You know, it'sreally about just start tracking and, wherever you are, put benchmarks in placeand and and start to kind of identify what are all the submetrics? Youknow, for example, on the cost side, and it, let's sayit's a physical product business, you know you may have like a shipping costthat you have per box or per order, but there may be all these,you know, submetrics like SLA's,...

...timing, transit, things like that. If your service persons, you may have those similar kinds of concepts,but they just they apply differently and they maybe just they meet. They maynot be a shipping but it may be how you deliver. What's the what'sthe turnaround time? What are your SLA's things like that. But it's aboutstart with some core metro in some core core things and then you're clearly goingto have some submetrics and each person, there should be specific people who haveaccountability for, you know, in delivering performance results improvements. And it really, you know, it's the whole thing of what you report on gets betterand what you don't report on oftentimes won't. And I've just found it is,I don't like say magical, but it's amazing that when you start reportingand tracking things, they just get better because they're in front of people's faces. Yeah, yeah, well, and so and and that's kind of understanding, seems like, on the cost side. But it's also about sort of understandingon the revenue side as well. Correct yeah, absolutely, and again, whether a product or service, you...

...know that what happens on day zero, whatever your funnel is. It may be on the phone and the salesrep, it may be online. You know what happens on day zero.What are people signing up for at that point? And then let's assume youhave a it's a subscription or a continuity or it's a SASS business and there'srecurring revenues. How long are people sticking around? And then you know,what are you doing to improve that? And so and certainly part of thatis then looking seeing when people stop using your service or they cancel, whateverit is, what are the core reasons? Typically, I mean a lot ofpeople have the same things. Price value, not using it, don'tsee the benefit, and so then it should then that should trigger a courseof action. So it's not just reporting, it's not just an examle model.It should lead to a specific of AD actions based on some of theinformation you see from it and from some of the follow on metrics or submetrics that you're looking at. But at the end of the day, everythingfor me is always grounded in action. So it's not just a nice tohave. It should be. It should...

...trigger. How do we get betterand what are the reasons that, let's say, people are canceling? Let'sstart identifying and seeing which ones can we chip away at and start making improvementson. And then we got to track and measure, test, and youjust iterate on that. Right. I'm not trying to oversimplify. I'm notsorry to say it's easy, but in certain ways it is simple. Andthen it's just the execution that that's you know, that's where you put yourtime and you know you gotta you got to bring some smarts to those areas. Yeah, yeah, well, and and one of the one of thepoints that you had made sort of before we started recording was that, youknow, it is a matter of deploying resources. You had mentioned putting accountabilityonto specific people as you're sort of tinkering and testing and working to make improvements. Yeah, absolutely, and I think there are two big points in theirone is whether you're a million dollar or a hundred thousand dollar your business ora billion dollar business, everyone is resource constraint. Everyone thinks bigger folks haveit better, and the reality is everyone has a reason has a constraint,and so it's a question of how do...

...you prioritize resources, how do youdeploy them, and whether that's time, people, money, whatever it is. You have to figure out how do you prioritize and part of this modelhelps to do that, or should be at least a trigger point forward whenin the things to come out of it, because you should. I mean Icome from again from a place that information, quantitative and qualitative, shouldinform decisions. It shouldn't just be hey, this feels good. It can bequant or qualitative. What are some key points that you can look atsay this is how we're going to prioritize. And then the second part is accountability. And again, like I'm a big basics and fundamentals guy. Youknow, for me, sexiness comes from results in cash as opposed to necessarilythe shiny bright object but you know, again, I think most people havefound that when they've done this, that when you have a single person who'saccountable, doesn't mean they're the only person doing the work. But there's gotto be a buck stops here and there's got to be a person who isleading the charge and has that accountability and then other people may have subaccountabilities withthat. But whatever it is you're trying to prove, you got to havea single point to say what are you doing or what are the key areas? What are you testing? And they...

...again, they may work with ifit's a one person shop, it's them, or they may work with a varietyof teams. But having accountability and being very clear about that. Ithink we've all been other bigger, small meetings. We've come out of meetingsand not be clear on what's supposed to be done and who's going to doit. You know, it's those kinds of things were like, Hey,these are very clear next steps, this is who's going to take the lead. That kind of stuff again, not rocket science, nothing, that's notentirely new, but I found that eighty to ninety percent of the winds andjust success comes from focusing on these basics and fundamentals, and certainly accountability isone of those. That's fantastic. Yeah, that's I think that's okay. Ithink that's a really strong takeaway. Now, now, boback, Iknow that sort of you you breathe and live this kind of stuff. Wecould probably sit here and sort of go down the rabbit hole even further.But if anyone on our listeners are interested in reaching out and connecting with you, finding out more about today's episode, finding out more about round two partners, what's the best way for them to...

...go about doing that? Sure,I think they're too quick. Easy places. Ones of the site. It's roundtwo Partnerscom, all, Lord, all loveercase, doesn't matter, butit's all letters, so all the way through. And then my blog,were a lot of my content is. I actually have a model. Justit's all. It's all available there. It's at bobackzadcom. The ABAKA zadcomthat the business side and then my blog were a lot of my contents.It's perfect. We will make sure to include the the link to the blogand the show notes. Boback, thank you so much again for your time. As a pleasure having you on the show today. Absolutely appreciate being here. Thank you. If you've been getting valued from this podcast, you canhelp us reach more people by reviewing the show on itunes. Here's how youcan leave a review in less than a minute. Open your podcast APP andtap the search icon in the bottom right corner. Type in fee toob growth, then select our show. Once you're there, tap the reviews tab andtell us what you think of the show.

These reviews help us out of time. Thank you so much for listening. Until next time.

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