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 create content that resonates with your audience? Start a podcast, interview your ideal clients and let them choose the topic of the interview, because if your ideal clients care about the topic, there's a good chance the rest of your audience will care about it too. Learn more at sweet fish Mediacom. You're listening to the be tob growth show, a podcast dedicated to helping be to be executives achieve 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 growth show. Today we are joined by Boback, a Zod. Boback is the founder of round two partners and a performance marketing expert. Boback, welcome to the show. Thank you glad to be here. It's great to have you here. We're going to be talking today...

...about how to use the customer lifetime value model to identify the key levers in your business, but before we get into that, maybe you can tell our listeners a little about what you've been up to and what you in the round two partners have been up too lately. Sure. Yeah. So, just by way of context and background and how I kind of got here, just very briefly, I spent eight years and 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 oversaw finance and analytics and then the last few years managed custom media and customer acquisition. So I left a couple of years ago and been working on a round two partners. Essentially we work with brands that are trying to scale their performance marketing campaigns and and so it's customer acquisition, retention analytics, basically paying a bit of a virtual CMO role. And you know it. Work with folks as big as stitch fix and in...

...wantable in the apparel subscription space and butcher box and and most recently taste made. So that's or handful of the folks that we work with, really helping them scale their performance marketing campaigns. Well, that's fantastic. I mean it. You know obviously sort of beach body rather. I mean definitely big time everyone. Everyone has seen the commercials, everyone knows what what it is at your time out. I do have to ask now, in working with them, did you ever, you know, how did? Were you also working on your beach body? Did you ever 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 any program is consistency, is opening the box and or turning it on and then 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 you know, I wrote crew in college. I've biked, done trough on things like that. So it's by yeah, my life. First, my first few months there, I did PDX. I needed to prove to myself that the programs were in fact. Yeah,...

...so, yeah, now that's they're they're awesome. Just got to follow them. Just got out, just has got to keep doing it. Well, that's great, putting your putting your money where your mouth is. So today we're going to be talking, like I said, about the the customer lifetime value model, and so let's let's kind of start with what it is and what it is and what's what is this model made up of? Right? The whole point of the model is to 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 reven of the lifetime revenues you you get from a customer and what are all the costs associated with it? And the reason for this is one if you're running paid media, you need to know essentially how much you're making on a customer to figure out how much you can afford to spend to acquire them. And then the second part, which I think a lot of people underestimate, is to understand the key levers in the business. And so, whether it's a product business or services business, the concept is the same, which is what are all the revenues and whether, depending...

...on your business constraints and cash constraints and goals, you may only look thirty days, sixty days out and maybe you look out two years, but essentially trying to capture essentially gross margin so that you can figure out how much can you actually afford to acquire the customer for 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, you know, servicing a customer, whether it's software, technology, personnel. And then it really it's about putting people to be accountable for increasing your the revenues or the cost, while at the same time really making sure to be building the brand. Yeah, yeah, absolutely. So in your mind, the real value of this kind of model is twofold. Yeah, absolutely, and yeah, it is, because you know first if you're going to spend money to Acqui our customer. And I come from a paid media world, whether it's in the BBC or bdb world.

Either way, I believe in paid media. I think it's just generally more predictable and controllable and I think if you're going to do that, I don't know how you can run paid media without understanding what the value of customers. So is ten dollars good to acquire customer is Fiftyzero, depends on your business. But if you don't know how much a customers worth, and as obvious as this sounds, I think people underestimate and just really have the just doing a limit of the work to get some of these things in place. But part of the benefit is the process of 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 them one day, zero again, whether product or service, what are your what's your 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 generate that kind of those those revenues, and then really, what are the costs associate with it? And you kind of essentially you build a mini key and L for your business. And then it really forces you to say, how do we get better at each one of these things? And so there's the pain, 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 to all, I believe, has to always be in a mindset about testing an optimization. Okay, so so I mean kind of these the two benefits determining what that cost per acquisition is and the other benefit, meaning that you can start to understand and identify these these key levers right in your business. That's what that's kind of what you're talking about. Yeah, exactly, and I think that second part two in particular. Well, both sides they're always submetrics, you know. And again, like this is not like it's a bit of math, but it is not rocket science math. You know, it's really about just start tracking and, wherever you are, put benchmarks in place and and and start to kind of identify what are all the submetrics? You know, for example, on the cost side, and it, let's say it's a physical product business, you know you may have like a shipping cost that 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 may not be a shipping but it may be how you deliver. What's the what's the turnaround time? What are your SLA's things like that. But it's about start with some core metro in some core core things and then you're clearly going to have some submetrics and each person, there should be specific people who have accountability for, you know, in delivering performance results improvements. And it really, you know, it's the whole thing of what you report on gets better and 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 reporting and 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 understanding on 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 sales rep, 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 you have a it's a subscription or a continuity or it's a SASS business and there's recurring revenues. How long are people sticking around? And then you know, what are you doing to improve that? And so and certainly part of that is then looking seeing when people stop using your service or they cancel, whatever it is, what are the core reasons? Typically, I mean a lot of people have the same things. Price value, not using it, don't see the benefit, and so then it should then that should trigger a course of 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 the information you see from it and from some of the follow on metrics or sub metrics that you're looking at. But at the end of the day, everything for me is always grounded in action. So it's not just a nice to have. It should be. It should...

...trigger. How do we get better and what are the reasons that, let's say, people are canceling? Let's start identifying and seeing which ones can we chip away at and start making improvements on. And then we got to track and measure, test, and you just iterate on that. Right. I'm not trying to oversimplify. I'm not sorry to say it's easy, but in certain ways it is simple. And then it's just the execution that that's you know, that's where you put your time and you know you gotta you got to bring some smarts to those areas. Yeah, yeah, well, and and one of the one of the points that you had made sort of before we started recording was that, you know, it is a matter of deploying resources. You had mentioned putting accountability onto 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 their one is whether you're a million dollar or a hundred thousand dollar your business or a billion dollar business, everyone is resource constraint. Everyone thinks bigger folks have it 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 you deploy them, and whether that's time, people, money, whatever it is. You have to figure out how do you prioritize and part of this model helps to do that, or should be at least a trigger point forward when in the things to come out of it, because you should. I mean I come from again from a place that information, quantitative and qualitative, should inform decisions. It shouldn't just be hey, this feels good. It can be quant or qualitative. What are some key points that you can look at say 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. You know, for me, sexiness comes from results in cash as opposed to necessarily the shiny bright object but you know, again, I think most people have found that when they've done this, that when you have a single person who's accountable, doesn't mean they're the only person doing the work. But there's got to be a buck stops here and there's got to be a person who is leading the charge and has that accountability and then other people may have subaccountabilities with that. But whatever it is you're trying to prove, you got to have a 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 if it's a one person shop, it's them, or they may work with a variety of teams. But having accountability and being very clear about that. I think we've all been other bigger, small meetings. We've come out of meetings and not be clear on what's supposed to be done and who's going to do it. 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 not entirely new, but I found that eighty to ninety percent of the winds and just success comes from focusing on these basics and fundamentals, and certainly accountability is one of those. That's fantastic. Yeah, that's I think that's okay. I think that's a really strong takeaway. Now, now, boback, I know that sort of you you breathe and live this kind of stuff. We could 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 round two Partnerscom, all, Lord, all loveercase, doesn't matter, but it's all letters, so all the way through. And then my blog, were a lot of my content is. I actually have a model. Just it's all. It's all available there. It's at bobackzadcom. The ABAKA zadcom that 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 blog and 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 can help us reach more people by reviewing the show on itunes. Here's how you can leave a review in less than a minute. Open your podcast APP and tap 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 and tell 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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