What do six-packs, successful pilots and 2020 have in common? No, it’s not a drinking game. We’re talking data here people! Do you know your data…like really know your data? Do you have a feel for it? Do you look at the right numbers daily?
Let’s talk pilots for just a second. If you’ve ever seen a cockpit, it looks kinda like most eCommerce dashboards - an overwhelming amount of buttons, data, dials, and meters. But pilots actually focus mostly on just a few key instruments. The rest is there to help if there’s trouble. The same should be true for the dashboards you use to run your business.
I absolutely loved this interview with Dan LeBlanc at Daasity. We cover some really important topics to help you really get a handle on managing your business. Here’s a quick rundown:
- Is your data accurate? Seems like an easy question. Not always an easy answer.
- Do you know what your metrics mean? It's all in the definition. If you don’t have the right definition, you can’t make good decisions.
- How you should look at your Lifetime Value (LTV) and why Cohorts matter
- Why contribution margin is super important plus an easy way to calculate it
- Knowing your RFM - Recency, frequency, and monetary value. Here’s how to look at this and why it matters.
Mentioned in this episode:
Dan LeBlanc - Co-Founder and CEO at Daasity
Daasity - D2C eCommerce Analytics
Episode Transcript:
Brett:
Well, hello and welcome to another edition of the eCommerce Evolution Podcast. I'm your host, Brett Curry CEO of OMG Commerce. And today we're going to talk about how to make your data actionable, how to get better visibility, how to really know your numbers so you can make better decisions. And so you can grow and so you can hit profitability targets. And so you can help agencies like ours know how to better market or help your internal team know how to market. And so this was one of my favorite topics. I think this is a super, super important. I think it's one of those topics that all of you would agree is important as well, but you're maybe not giving this the time and attention it needs.
Brett:
Hey, Brett Curry here, I've got an important question for you. Where will your next big idea come from? Where will your next big breakthrough come from? Or where will your next little tweak or little improvement come from? Have a suggestion, check out our guides and resources at OMGCommerce.com. Are you looking to enhance your YouTube ads game? We have two of the best YouTube ad resources that are completely free. Our YouTube ad examples and templates guide and our guide to getting authentic video customer testimonials, but it doesn't stop there. We also have guides on how to maximize sponsored brand video on Amazon and Amazon DSP and Google shopping and a variety of other things. So get these free guides, give them to your team, even share them with your agency, just to take advantage of these resources and up your game. Let OMG Commerce help. And now back to the show.
Brett:
I am bringing you on and I'm delighted to welcome to the show, the CEO and co-founder of Daasity, and he is a wizard of data and analytics, and they've got an amazing tool and platform they built to help with data and analytics as well. And so with that, Dan, welcome to the show, man, how are you doing?
Dan:
I'm doing great, Brett. Thanks very much for having us on board. We're super excited to be part of the podcast.
Brett:
Yeah. Really excited to have you here. I got to meet one of your other team members, Jeremy, who was actually on the podcast as well. And after I saw a little bit about what you guys are doing, I was blown away. And so then that led to you and I chatting and they were like, "Hey, let's kick out about data. Let's do a podcast." And so we will nerd out a little bit on this podcast. We'll also make sure this is actionable and useful and practical. So if you are one of those people that hate numbers, make you squeamish, maybe you did not like math in school. I think he liked the numbers as it pertains to your money. And so we'll make this very useful.
Brett:
So, Dan, give us a quick background, let's say background on you. How did you get to this place in your career? And then let's talk a little bit about what Daasity is, we'll we'll circle back to that later as well, and then we'll dig into some topics here.
Dan:
Yeah, absolutely Brett. So I started off, working in financial services and then made a jump into e-commerce in the mid 2000s working for a really large gifting brand called ProFlowers, helping them with their customer analytics. And they got bought by a company called FTD. And what was interesting is I had a lot of friends that ended up leaving and they went to some really cool brands, like Movement Watches and Kopari and they-
Brett:
..all those companies?
Dan:
And they were all on this platform at the time. I hadn't heard of Shopify, which we all know now, which is a great platform to be on if you're an e-commerce brand. And one of the challenges they had was just getting access to their data. And so they said, "Hey Dan, can you help me? Can you help me get rich data like what we had a Pro Flowers to make really good business decisions." And, so started cobbling together a couple of things, realized that I kept redoing the same thing. Some of the tools that we were using didn't really work that well. And so that's how Daasity was founded. So launched the business really to help these brands and a lot more brands today, whether you're small. So we power brands that are over a billion, we power brands that are less than a million just help them get access to all this data and make really smart, faster decisions.
Brett:
I love it. And I think this really comes down to one getting accurate data. Understanding what you're looking at, having that clear visibility, but then also focusing on the right things. So you can take action and do things that will actually move the needle and make an improvement. And so I'm really excited to dive in. We have several topics that are super important. I'm going to give like an offline example real quick to maybe frame this. It's going to seem weird, but I think it totally relates. So we're building a new deck at our house, so it's a good sized deck. It's got steel columns and brick and cedar, and it's about 800 square feet. It's pretty large. And so anyway having fun with this project, I'm not doing any of it, I'm hiring it all out. So that's why it's structurally sound because I'm not a handyman or a builder.
Brett:
But I was in my basement about a week ago doing a workout. And I was laying down on a mat doing abs and kind of hating life. But from that perspective, I could see through the window, up on the bottom of the deck and I noticed something, I noticed there was something stuck and needed to be fixed. So anyway, we took care of it. It was not a big deal. It was just one of those reminders of if I'd just been going about my business and walking around, I never would have seen this, but because I had this unique perspective and unique angle, I clearly saw a problem and we fixed it. And so that was not... didn't have a huge bearing on my life, but it was a great reminder that you got to get the right visibility. And if you're just kind of walking around doing your thing, handling the day to day without the right visibility, you're missing things and you're potentially missing really important things.
Brett:
And so, I'm excited to dive into this topic. Let's maybe talk first about making sure your data is reporting correctly. Because you have visibility, but you have visibility of the wrong data or you're taking action on the wrong data then that's a problem. So how do we make sure that our reporting is accurate?
Dan:
Yeah. That's a great question, Brett. When brands are starting, there's a couple of basics that everybody does. You have your e-commerce platform and it's pretty hard to mess up things on your e-commerce platform, but then you have these other things that you're maybe doing, like setting up Google Analytics, setting up your Facebook, setting up your Google Ads. Those are kind of the core for most of us. And one of the first and foremost ones that I have to talk about is just Google Analytics. I have yet to come across a merchant that properly set up their Google Analytics on day one. And it's just because when you think of Google, they give you the base default is set up for any website, whether you're a WordPress site or on Shopify or whatever.
Dan:
So if you actually go look at things like, "What is my channel mapping? You're probably spending money on Facebook. And if you actually looked at Facebook, they call them UTM parameters. So go learn about UTMs. You'll see that a lot of Facebook goes to other, and yet you're probably spending money because a lot of Facebook traffic is actually people posting and sharing with each other and then there's this ad part.
Dan:
And so it's really important to go in and sort of number one thing I say is, go look at your Google Analytics, have you set up your channel mapping correctly? Have you set up your referral? The other piece that we see a lot is, now especially in the Shopify ecosystem, they've got that cool Shop App while you're seeing people with referral saying, "My conversion on referral is like 80%." Yeah, because they got sent to Shop where they paid for it and then it came back. And so it thinks that this traffic is coming from the Shop App within Shopify and you're killing it. And in reality, you just messed up your data.
Brett:
Yeah. We see that a lot with PayPal too. And PayPal has been around a long time, but if things are not set up properly, if you don't have referral exclusions in place, you could look at a report in Google Analytics and be thinking, Oh, well, PayPal is the number one driver of traffic that converse to our site. Oh, no, they're just processing the transaction, but because someone logs into PayPal, so they leave during check on them and they come back. If things aren't set up properly, Google's going to count as a traffic source. But it's not, it's just part of the checkout process.
Dan:
Exactly. So number one thing I'd say to everybody, just go make sure your Google Analytics are set. Because that's the one place where if you're a brand new store, that's just starting out, you got to get comfortable with that to understand what's going on with your business.
Brett:
Yeah. And so look at things like a referral exclusions, turn on enhanced e-commerce, some of those basic functionalities in Google Analytics, because it is exceptionally important. But I think people are either under utilizing it or they're not looking at it enough to notice if there are discrepancies and issues and things like that. So, let's talk about another topic that we talked about as we were prepping. Should we use the session data or user data and why? And probably would be good if you explain the difference between the two as we converse.
Dan:
Yeah. I'm a big proponent of looking at sessions and if you're ever... And even for those more advanced merchants out there that are starting to think about building a model that might... or a forecast, that's going to say, this is the amount of traffic that I think I'm going to get is to always look at sessions. The difference between a user and a session, a session is a single visit within a 30 minute time period. So if you leave the site, 30 minutes later you come back to the site, it gets tagged as another session. That's kind of the default Google Analytics. You can go and adjust that if you want. A user is like a specific device. How you report gets really ..
Brett:
And that's a really interesting distinction because most people think of user as an individual person, but it can't be that because Google doesn't really know, right?
Dan:
Exactly. So it's your device. So if I'm on my phone and I click on a Facebook ad and I open up and it opens up and say, Google and I go to the website, that's going to be one user in one session. And then let's say I close my browser. I get in the car and go to work, whatever, get there. Then I open up my browser and it's like, "Oh yeah, I wanted to go buy that thing." So I go back to the site again. So that first one I would have come in from Facebook, that second one, I would have been direct. Now, if I go in and look at my data, I had two sessions and it was Dan is the same person, the same device.
Brett:
Same device, yeah. Dan's device.
Dan:
Dan's device. If I go look at how many users did I have and how many sessions did I have with no channel mapping and Google Analytics. It's going to tell me there are two sessions and one user. But now if I go and bring in the dimension of, I want to know how many users and sessions by channel, I came to that site, those two sessions came from different channels. So it's going to tell me one session and one user for Facebook and one session, one user for direct. So I'm going to think that I had two users if I summed that all up and I didn't. And so the problem with users is that user number is going to change depending upon how you're slicing and dicing that data. Whereas the session data will always add up, the sums are always going to be the same.
Dan:
And one of the biggest challenges that I see across many merchants is, well, who's data is right? Well, I pulled this and know my numbers right. We got this many users yesterday and Brett's telling me we had this many users yesterday and then we get into an argument about whose number of users was right. And it's because we pulled the data differently. And so you want to find those metrics that are consistent. And that's for me, why I always say, use sessions no matter how you slice and dice it, the number of sessions doesn't change, but everything else does.
Brett:
Yeah. And I love that because the data only becomes meaningful and actionable if you slice and dice it. If you look at it by channel or by source medium or whatever. And so I would agree with you that session data is most important there. And one of the things that I think is important to understand about data is, we're talking about getting accurate data and this data's wrong or that data's right, or whatever. I think what's also really important to understand and discuss is, there's not necessarily right or wrong data. It's just understanding what is the data, what's the definition of this metric. Because I think a lot of times people say, "Oh, that's wrong." Well, it's not wrong, it's just you don't understand how that's being measured, what that metric actually is. And so I think that's important too, to understand what's being measured.
Brett:
That leads me into the next point pretty well, is looking at cost per order versus cost per acquisition and how those are defined and how thinking about that differently might be important. So you want to speak to that a little bit.
Dan:
Yeah. You're so right about, it's the definition and it is something where we take it on here at Daasity, something that we need to do, which is how do we educate people around this specific definition of a metric? And because it's very scary to me. And this one is one that I'm super passionate about is how an entire industry can get something wrong. So everybody talks about Facebook CPAs, and they talk about it as cost per acquisition. For me, one of the greatest ways of helping educate everybody the wrong value, because they cost per acquisition should be the cost to acquire a customer. And that is the first order. So it's the first order because when you think about cost per acquisition, you're trying to understand what did it cost for me to acquire a customer. And then I usually about it as lifetime value.
Dan:
Well, Facebook says is cost per orders. They have no idea, a cost per acquisition. There it's really a definition for them around cost to acquire an order. It's really what I would call a cost per order or a CPO. And that's because Facebook has no idea if the order that they're counting was the first order, the fifth order or the 10th order. So what they've done is, we all knew that, "Oh, we've got to really think about the CPA cost. And we want to keep that low when we combine that with our lifetime value to understand how profitable our customers are." And they went and kind of hijacked the term and said, "Well, every order is going to be a cost to acquire a customer because you should be so thankful that we've helped you to acquire a customer." And so, yes. So for me, you have to be clear around when you're talking about a cost per acquisition, it's the first order. When you're talking about all orders, it's a cost per order. And those can be wildly different and you probably want them to be wildly different.
Brett:
You want them to be different. Yeah, you should. Especially if you're in a business where there are repeat orders and where there's substantial lifetime value, you're going to probably attribute a different value to that true cost per acquisition, the cost to acquire a new customer versus the cost for a repeat sale. And sophisticated marketers will typically look at, "Hey, here's my top of funnel. I'll just use CPA because .. the CPA. So forgive me then. But here's our CPA for top of funnel. Here's the CPA or CPO for remarketing or for reorders." And those numbers should be different because you've already paid to get that customer once. So not that you shouldn't have to pay to get them to order again, but you should probably pay a different rate.
Dan:
Absolutely. I love looking at what my channel makes on first order versus repeat, because you've already bought the customer now, hopefully they're coming in through your email or your SMS or other stuff because they've learned about you versus you paying to acquire, to pay that second order coming through something like this.
Brett:
Yeah. Because it can be a real bummer. And we do a lot with YouTube and YouTube is largely top of funnel just like Facebook is. And so yeah, maybe we're willing to pay 50 or a 100 bucks to get a new customer depending on what the business is, but I probably want to pay a 100 bucks to get them to buy again. I'd rather just hit them up with email or text or a low cost remarketing ad or something. And that's where we can really make the numbers make sense.
Brett:
And so let's talk a little bit about LTV. So lifetime value, and this is one of those numbers where I remember when I first heard about this, I think I was listening to like a Jay Abraham, training way back when I was in college. I was like, "Oh, this is brilliant. This is easy. This is the metric." And then I started talking to business owners and at this time it was a brick and mortar stores, but nobody knew. Nobody knew, they get guests, but no one really knew their lifetime value. And now in the e-commerce world and I'm talking to some pretty sophisticated marketers and some great brands and people sort of know, but not really it's... And I think a lot of people have different definitions too. So talk about how you look at LTV, how you calculate it and any advice around LTV.
Dan:
Yeah. And so LTV, it's complicated. And it's mostly because it's just really hard to get the data around LTV. It's not something that most e-comm platforms give you at a box. You have to download all your orders, all your order data at the order level. So it starts to become a mess in trying to do in a spreadsheet. And you need to link the order data to a customer, really the definition of lifetime value is your gross margin. You either do it on a gross margin or contribution margin. We'll kind of come back to those in a sec, but you take that and you divide it by the number of customers. And that's your lifetime value.
Dan:
What's really important though, you can't take it on everybody, your idea of a lifetime values, you need to do it by what's called a cohort. And a cohort is just a group of customers. So a lot of times what people will do is they'll want to take a quarter or a year, how do my 2017 customers perform to my 2018 customers? And the other really important thing is you can't just do it as a straight up number. When you're thinking about things like a time period, what you need to do is essentially plot it over, take it months. Like how many customers did I acquire in 2017? What was their revenue in their first month? What was their revenue in their second month of being a customer? And that's really important because working with a current merchant today, it's like we're comparing their 2018 to 2019.
Dan:
Well, if you're a 2019 customer that I was acquired in January, there's nobody in that group in August that isn't now being in it just finished August of 2020. So the oldest customer has only been around for 20 months. So my 2018 revenue for somebody that was generated in January of 2018, they've been around for 20 plus 12, 32 months. And so I need to make sure that I only compare through month 20 to make it an apples to apples comparison. So you've got to kind of basically go take those numbers. You take your sales numbers by month, you take your total number of customers in that cohort and you basically make that division and then you just add it up. And you draw a graph, you just draw a graph and you'll get a curve and you'll get to see how your revenue over time is changing.
Brett:
And then that's what you'd like to look at is usually a cohort by year, as an example, to look at how our customer base is spending and how valuable they are on a year basis?
Dan:
Yeah. So for me, I generally look at it in two ways. I look at quarter by quarter. So I like to look at quarter and that's just a personal preference because that's a smaller group. I can see the comparisons. And I know that for most of us, we know like holiday buyers are generally not as good as buyers at the rest of the year because they're coming in on promo. They're maybe buying as a gift, they're doing that kind of thing. So I like to isolate those groups. And so I like to see how does holiday over holiday perform because those customers are really important. Am I doing a good job of getting those people return? And then I look at everybody else.
Dan:
The other way that I look at it is, I love to look at it by channel. So where can I invest? And it goes back to the CPA is where can I invest more? Because customers that come in from this channel actually perform better over time and so I should be willing to invest more into that channel to acquire those customers. So those for me are the most two is, do I look at it at the time period? Hopefully I'm getting better. As time goes on, I'm developing better product and my marketing's getting better. I'm doing better on a retention side. So hopefully year after year, my lifetime value is improving. That curve is getting better. And then secondarily, I look at it by channel to really help me make better decisions around where I want to go and adjust my marketing spend.
Brett:
Yeah. And we have so few clients that we work with that do a breakdown of LTV based on the cohort of the traffic source. So most of the... We talked to a lot of really smart marketers and really successful brands and businesses, but a lot of them are still looking at, "Okay, to acquire a new customer, regardless of the channel, we're willing to pay X. For repeat purchase. We're willing to pay Y." But what I think most people don't know is okay, a lead from Facebook is that worth the same as a lead from YouTube? And is that worth the same as a lead from Google Shopping? Don't know, you'd have to look at the numbers. There may be one channel that LTV is 10 to 20% higher than other channels. And if you knew that, then you would bump your CPA targets by 10 or 20%, you would spend more, you could be more aggressive and then more successful on that channel. But most people don't see that.
Brett:
And also I love that distinction you made. I think that's really important too, yeah, for some businesses, especially if you're a giftable product, which not all products are giftable, but then separating out that holiday traffic, that holiday shopper, because you may find their LTV is lower, which is fine. Holiday is going to be important no matter what, but looking at it and being able to make those decisions based on the real value is so important.
Brett:
Yeah. Awesome. You mentioned contribution margin, I want to talk about that real quick because there... Actually a recommendation, everybody listening, go back and listen to the episode I did with my buddy Bill D'Alessandro and Bill is with Elements Brands. I think six or so different e-commerce brands, brilliant marketer. He talks about contribution margin. He says it's the metric to rule all metrics. And then you don't want to argue with Bill, he's a smart guy, but Dan, talk about contribution margin. What is it and why is it so important?
Dan:
Yeah. So contribution margin. So a lot of people... You should be able to know your gross margin, which is really just basically what are your net sales. So you include returns and you basically take out the product costs. And that's a great benchmark because if you think of big publicly traded companies that sell consumer products, if you're not above a 60% gross margin, they are telling you, you have a problem with your business. So you think of that as a great benchmark. If you don't have that, if you're not above that from a gross margin and you can put skew costs into Shopify now, so it can help you with that, figure out what that gross-
Brett:
.. sales price, less cogs, less cost of good sold should be-
Dan:
Cost of goods sold.
Brett:
Yeah.
Dan:
Should be greater than 60%. And that's a great benchmark. Your contribution margin now takes at that fulfillment marketing cost. And so that's really important because the only thing left is going to be your overhead. What you're paying for maybe space, for salaries that are not very flexible, but you have the ability to adjust what that marketing cost is going to be. And that's why that contribution margin is so important is, you're going to decide like generally your cogs are fixed, generally your salaries and that kind of stuff is fixed. And so this is the margin that you can play with to decide, do I need to be driving growth or do I need to be focusing on profitability? And that's when you're... I can't tell you what the right answer is. Actually..
Brett:
Right, because the answer is not the same for everybody.
Dan:
Exactly. Yeah, because it's not the same for everybody. And I've had discussions with some CFOs of larger companies where my argument is been, when you're in a emerging sort of space or you're a younger brand and you think there is market opportunity, you should be willing to almost go to zero on a contribution margin perspective, because your goal is to acquire as many customers as you can and you need to track that lifetime value in conjunction with it to make sure that they're coming back and they're returning, but you want to go capture land. And then as your business maybe matures, you're going to start to think about, "Well, how do I reduce that marketing cost?" Your repeat customers should be hopefully coming into channels that you own. So that marketing cost starts to go down for you to be able to... Maybe you won't grow as fast, but you're now really going to ramp up that profitability. And that's how I think about that contribution margin.
Dan:
The hard part is, it's really fricking difficult to calculate. Because even lifetime values, we were talking about that lifetime value and being able to do it by channel. So I can go into my e-commerce platform, I can get my orders, but I don't know where the orders came from. So then I have to go figure out how do I go tie an order to my transaction, to what channel that transaction. That data is available in Google, but only through the APIs or you're going to be able to get it. So how many of you up there have your small e-commerce stores know how to program for an API? And then we start getting into contribution margin, which is, well, how much did I spend on Facebook yesterday? And what orders do I attribute to it? My Google Ads, you're trying to get all this marketing costs. And so if I was trying to do this in a spreadsheet, I'm out. I'm going to walk away on it. It's just, "My brain hurts. It's just too, too complicated." And it's-
Brett:
Your three cups of coffee and you're scratching your head, you're eventually just closing Excel and moving on.
Dan:
So that's for us, that's where we come in. That's where Daasity sort of comes in. But it's really around... Okay. So maybe you don't get to that level of detail, but at least be able to make a guesstimate. So what I can do is instead of knowing exactly, I can say, "Okay, I have this sales, I'm going to guess that on average my gross margin is 30%." And then say I'm selling something for a $100. The product cost is on average 30 bucks, I got $70. And then I just go in and maybe instead of doing it by channel and being very specific, I just go, "What did I spend yesterday? And how many orders did I get?" That gives me a number.
Brett:
Does that get you way closer than not doing it at all, right?
Dan:
Exactly. It's not perfect, but it's better to have at least that basic number than having nothing at all, because it's going to help you understand, am I on the right track or not? Because that's the scary part is, if you're not doing that, then you come back and go, you have this kind of, uh-oh, Uh-oh moment a couple of months in like, "What happened? I wasn't keeping track of what's going on," and you're trying to unravel. And so these are these things where just do that every day, just build your spreadsheet, start simple and just go from there.
Brett:
I love that because occasionally we run into people that we... I was talking to an accountant this morning, actually that works with e-commerce businesses and this came up, where we were talking about, "Hey there's a group of businesses that are out there that if you were to ask them today, are you on track to be profitable?" They'd be like, "Well, we'll wait until tax season." They wouldn't say that, but that would be the truth. They don't know. They don't know if they're profitable right now. They'll only know when they file their tax return, which is a really scary thing. So this was the type of reporting that let's you know, are we headed in the right direction? Are our marketing costs under control? Is everything lining up? Are we looking profitable right now? And that's of paramount importance obviously.
Brett:
So, let's talk about another concept and this is a concept I think I first heard from my friend Drew Sanocki with Nerd Marketing, very, very bright e-commerce entrepreneur and marketer and that's recency, frequency and monetary value and creating segments around that. You want to talk about that? How do you... First of all, what is that? And then how do you use it?
Dan:
Yeah. I love the concept of RFM, what they call RFM, recency, frequency, monetary, and I'm starting to see resurgence of people thinking about it. It was really big in the direct mail days and so this dates me, so I'm a little bit older, but you go back to the 90s, when everything was mailed. Before this e-commerce really took off, I worked for a company called Capital One. And at that time we were 1% of the total mail volume in the US, we sent so many credit card to the stations.
Brett:
That is crazy. And 1% sounds like a tiny number, but to think that one organization is responsible for 1% of all of mail. Holy crap.
Dan:
It was unbelievable. And we use this concept of recency frequency, monetary a ton. And so the idea is recency, when was the last time you bought something? When was the last time you bought something? Frequencies, how many times has this customer bought something? And monetary is... There's two ways you can think about monetary. I like to think of it as on average, what is the order value? What is your average order value? Some people do it as your total spend. I like it as more of that average because that helps you to bucket the value of that customer.And those are really interesting metrics because what they do is... You can get extremely complicated and create segmentation systems, but at the end of the day, you can take each of them and think about them in very sort of simple ways.
Dan:
The first one is let's talk about recency. People that buy more that are more recent are more likely to buy again. Somebody that bought last week is way more likely to purchase again than somebody that bought a year ago. And so, depending upon your business, you should just be thinking about things around an active group and a lapsed group. We call them lapsed. Usually for most people it's, "Did I buy within the last 12 months? Or is it more than 12 months ago?" You may have adjustments on the type of product. Great example is, let's say you're in the beauty industry. Makeup has a certain shelf life. So when somebody bought that makeup, so your active should be people that their product hasn't expired and those are longer. And by the way, I only learned a couple of months ago that actually beauty products have a shelf life. I didn't know.
Brett:
Isn't that funny? Yeah. I wouldn't have really thought a whole-
Dan:
I wouldn't have known that.
Brett:
Lot about that.
Dan:
It was really interesting. And so then you start thinking about, well, how do I sort of market to these groups as your product is coming to an expiration, you might go it's time to rebuy for those that have lapsed, well, they missed it. So now you start thinking about, how do I get them to come back? Maybe it's... I need to re-engage with them because they had gone to a competitor product versus early on it's about how do I re-engage with my brand. So you're thinking about this recency, really should help you segment how you're talking to the customer. Then on the frequency side, how many times have they bought? It is way harder to get somebody who's bought three or four times from you, they're bought in, they love your brand.
Brett:
Unless you really screw it up. They're probably good. Not that you shouldn't still conduct good email marketing and text messaging and take care of all the little details. But if they've purchased three or four times, they're likely in.
Dan:
Yeah. They like your product. So the biggest challenge is how do you get somebody from a one to two? How do you get somebody to make that second purchase? So that's another great way of thinking about my segmentation is, take somebody who's only purchased once. And there's probably a big difference between how you want to think about, now you start combining that recency and frequency. How do I take somebody that's bought once in the last three months versus once in the last... it's been three to six months and do I want to do something a little bit different?
Dan:
And then I think about that monetary side. So people that spend a lot on your product versus those that don't. Do you think about offering special promos or discounts? We all talk about the concept of surprise and delight. You want to give your valuable customers these special things and that's a great way to sort of think about it is, the frequency and the monetary, your high spenders, high shoppers. And I mean high spenders on average, not overall, those are great. Those are your super loyal. So how do you think about them differently? So what's great about RFM is it gives you an easy way to start grouping your customers and making simple segments about how do you communicate with them differently instead of treating everybody the same?
Brett:
I love that. If you think about the, the 80-20 rule, the Pareto principle, it really applies in so many things. And if you were to look at the monetary value, you'll probably find that 80% of your total revenue is coming from a group of 20% of your customers. And so you should maybe speak to them differently. You should maybe make them different offers. You should do something special for them. You're going to launch a new program or new something, mention that to them first. So understanding monetary value, very, very important. I love that. So RFM, you need to know it. You need to be thinking about it, segment your customers and then market and communicate accordingly.
Brett:
Let's talk about making data actionable. Because if we don't take action on the data, then who cares? Then it's just an academic exercise. So how do we get our data in an actionable place and and ensure that we are able to make a decisions.
Dan:
Yeah. So I love thinking about... What's interesting about an e-commerce businesses or even a direct consumer business, at the end of the day, it's crazy that it's a simplistic thing. You either get a new customer or you get a customer to buy again, that's it. Those are basically the only options that you have. And yet the details behind that are so complicated and what I love... And so I think about is like flying a plane. I love kind of planes and space.
Brett:
Me too.
Dan:
I haven't gotten on a plane in a while, but when you're walking on the plane and you look into the cockpit and you see all these instruments all over the place, and you're just thinking of yourself-
Brett:
Thousands of little knobs and tiles on the ceiling and on the... everywhere.
Dan:
Crazy. You're like, "How did they do this?" Well, it turns out that when you're flying a plane, there's only six that you look at and they call them the six pack. And they're right in the center of right behind the wheel. And that's what the pilot looks at 99% of the time. And the only time they use all the other ones is when they go figure out that something is wrong. When one of those ones is off and it's things like, how fast are you going? What's your altitude? Are you going up or down? Some basics. If you're cruising along, there's no need to worry about all the other thousand dials, but when you're not suddenly those other thousand dials become really important. So that's how I think about... That's how you need to run your business.
Dan:
And so when you're a small or really for any size, it's about what are the key measures that are the equivalent to that six pack? And I think about a couple, traffic, knowing how many people are coming to your site and we talked about it, don't use users, use sessions. Sales, average order value, units per transaction and then pick which one you want to do, either a cost per acquisition, a cost per order, or a.. I'm fine with any of those. And maybe your total marketing spend, that's all you need to track.
Dan:
And what I really say to smaller brands is, spend 15 minutes, you're going to go into your e-commerce site. You're going to go into your marketing platforms. You're going to go into your Google Analytics, just copy and paste those numbers into a spreadsheet and do those calculations and track those every day. As you get more sophisticated you want to make your life a little bit simpler and we'll talk about that in a sec, but you capture those. And why it's really important to do it on a daily basis, you're going to get a really good feel for your business. And so, because while we know some days are better than other days than e-commerce, it's like retail. Nobody goes to the mall... Not that tons of people are going to the mall right now, but it's like Fridays and Saturdays and Sundays, we're really busy at the mall and Tuesday's not so much. If you track it every day, you'll start to understand the natural consumer behavior.
Dan:
So you'll know that Wednesdays are always slow for me, for whatever reason, maybe because you send an email on Tuesdays and on Thursdays. And so you'll get a feeling for how your business. And so when you go and then that one day copy and paste something, and you're going to see something and it's going to jump out at you immediately, like, "Whoa, wait a minute." There's something wrong and it's... Okay, hold on. I got to go look at something and I've got to go look at all those other dials because something happened yesterday and that's when you go find out like, oh, it turns out that our sightseeing right of inventory and our best selling product. Oops.
Dan:
Stuff like that, where you want to capture it that say that next day to know versus letting it run on for days and you're having that uh-oh moment a couple of days later going, "Wait a minute, why don't we hit our monthly sales targets? And you should be able to do that in 10, 15 minutes. So you wake up, you do 10, 15 minutes to do that and then move on. Everything's great. Move on, go work on other stuff, if not, now you've got to dig in because that's the most important thing to keep your business running.
Brett:
I love that. So if I heard you correctly, then the key to success as an e-commerce entrepreneur, the key to success as a pilot is a good six pack. It's all about the six pack.
Dan:
Yeah.
Brett:
And I would say that a lot of people probably think that's the key to success in 2020, I need a six pack to help me through the craziness of 2020. So I fully agree with you. I think this is awesome, getting those key metrics because sometimes the minutia, like the little bitty details, you only need that if there's a problem. Otherwise you need those key metrics like you're talking about. What's interesting and we talked to a lot of people that know their numbers inside and out. Occasionally though I will be on a conversation with somebody trying to help them with their marketing. And I'll say, "So what's your average order value?" And they'll say something like, "Oh, it just depends. It's kind of here there." And I'm like, "Well, I know that it depends, but then you need to have an average. How are you calculating your average, have any idea?" And so that's just an indication that someone doesn't know their numbers. And if you don't know the numbers, you don't know those core, the core six pack of your numbers, then you won't know when something's off.
Brett:
But yeah, I totally agree with you if you're looking at those every day and it doesn't take a lot of time, you'll get the feel for it. And you'll sense when something is off and then you'll be able to respond quicker, take action quicker, be able to dig deeper into those with the other layers of metrics and then make the right decision. So that's awesome.
Brett:
I want to transition a bit and talk about Daasity, your company. And if you have other points you want to throw into what we just talked about, feel free to do that along the way. But the company is super cool. I want you to first explain the name to people because that's kind of clever as well. And then talk about why you guys formed Daasity and what does Daasity do?
Dan:
Yeah, so Daasity, it stands for data as a service. So we thought of ourselves-
Brett:
Data as a service.
Dan:
Exactly. So we thought of ourselves, one of the things going back to how the company was really formed based on working with a couple of brands that were having these data problems, it was really clear that as e-commerce and direct consumers proliferated this whole digital piece, and even with Amazon more and more people selling their product on Amazon, it's just really hard to get all the data from all these different places, put them together and make decisions. And so I think about one of the merchants that we worked with where, he was spending two hours every day on nine different Amazon sites. Because if you're around the world, you are in a couple of Amazon's like they don't talk to each other. So you got to go.... Even if you're selling in the US, it's like you got to go into your US one, your Canada one, your Mexico one, and download all the data separately. And he's spending a couple hours every day in the spreadsheets trying to put together his six pack.
Dan:
And so, as I thought about that, as these businesses were growing, that's just a lot of time where you as a founder or the owner, or a key employee within the organization, you're doing a lot of stuff where it's just kind of make work. You're not really driving decisions, you're spending a lot of time just trying to put stuff together. And as your business grows and you add more channels, it becomes more complex. So if I just start off as I'm on Shopify and I do Facebook and Google Ads, like maybe it takes me 15 minutes. Now you start going, well, I'm going to be on Pinterest. And then I'm going to advertise on Snapchat. And it just blows up. Oh, and we're going to start selling on Amazon and-
Brett:
And start selling on Walmart. And Walmart..
Dan:
Exactly. I think that's super cool that Shopify is connecting to Walmart and it just becomes more and more complicated. And so at some point, either your spreadsheet breaks or you start taking too much time, and that's where-
Brett:
You break.
Dan:
That's where I think about is that... What we're doing is we're essentially taking that concept of that spreadsheet and putting it in a data warehouse, and then we're letting you connect... We're bringing all the different data, but more than that, we're combining it all. And so we've spent years kind of, how do you combine it all? How do I do something? It's not very useful for me to see... We all know if you're on Amazon, you've probably experienced the Amazon skews are never what you have elsewhere because they just don't like to give you the skew, the name that you want. And so now you have to do all this translation. If you're in the spreadsheet, well, we give you the capability to do that all in one. So you can see your Amazon sales and your Shopify sales, all in one slice and dice by skew. So I can see how many products you're selling on, of this product or how many units of this product are selling on Amazon versus Shopify?
Dan:
And that's really important because I've maybe got to decide, how much am I going to ship to Amazon for FBA versus how much do I keep in my warehouse for myself? And so I think about it, as your business becomes more complex, you need the ability to be able to centralize and have one place to view all this data and for you to get out of what I think of this spreadsheet hell. And that's our goal at Daasity is, to really do that because what that then does, is it lets you make decisions faster. So instead of spending hours, days, weeks trying to put together the analysis to figure it out, it's there and you're spending your time on decisions and execution not figuring out, did I pull the right information to make a decision or not?
Brett:
Yeah. Is there an error in the formula in this cell? Or did I copy and paste this correctly? Or just little things that take up too much brain power, save all of your energy and your brain power for the decision-making process. Let something else take care of the details if you can.
Dan:
Exactly. And I'll say the other piece is when you start going to being able to extract the data to these source systems, we actually end up having the capability of doing things that you could probably never do to do yourself. Going back to what we talked about, lifetime value. It would be really hard to go and be able to create the ability to go slice and dice lifetime value by not only your marketing channels, but when you acquire them. And that's something that we provide in our platform at a box because we're not limited by a million rows in a spreadsheet, we're unlimited. And so there's just things that we're going to be able to provide insight that you're just not going to have if you try and do it yourself.
Brett:
Yeah. That's awesome. I love it. I got to see a demo with Jeremy and it's a very impressive set of tools and functionality there. So I really, really like it. So Dan, if, if someone is listening to this and they're saying, "Okay, I love these concepts. I need to get better with my data and make it more actionable. And I want to check out Daasity a little bit more." How can they learn more? Get a demo, that type of thing.
Dan:
Yeah. So you can come check us out at www.daasity.com. That's D-A-A-S-I-T-Y.com. So data as a service or just send us a note at info@daasity.com. And we are happy to give you a demo . We're also in the Shopify store. So go look us up in the Shopify store for you guys that are on the Shopify system. We're super excited about what we built out, building out some new stuff in terms of giving people. So we're going to be doing a free product later this year, just to give people access to lifetime value because we noticed that it's really important. So yeah, go look for us in the Shopify store or reach out to us, visit our website. We're happy to chat. We love helping direct consumer brands, just absolutely love it. I'm passionate about this. I'm a data nerd, just like you've read, just love helping brands just become successful. It is the one thing I love about how the world has changed over the last couple of years.
Brett:
Yeah. Passion comes through for sure. And I like to know a lot out about data. You're next level though, man. So tip my hat to you. This has been extremely valuable. We'll definitely link to everything in the show notes when that free tool comes out, we'll also make sure people are aware of that, link that in the show notes, we kind of do an update at that point as well. And so really good stuff, Dan, I know people are going to leave this podcast smarter, hopefully energized, motivated to get out there and make their data better and make it more actual. So really appreciate you coming on and sharing your knowledge.
Dan:
Thanks Brett. Appreciate it as well.
Brett:
Yeah. Absolutely. As always, we'd love to hear from you, our listeners, what would you like to hear more off? Give us some show ideas. Let us know which thing about the show. If you've not done it already, we would love that five star review on iTunes. It makes my day. It also allows other people to discover the show and hey, share this episode. If you know someone that needs to get a better handle on their data or someone on your team that needs to listen to this, share this episode, I think it will be really, really useful. And with that until next time. Thank you for listening.
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