I'm Jonathan Smalley. I'm the Founder and CEO at Yaguara.
On Understanding Customer Lifecycles
Across companies of all sizes and stages, one of the biggest things that we think about internally and look to empower customers around is just that; around customers. A big piece that often is missed out on is kind of this holistic customer lifecycle piece.
So top of the funnel - what is our traffic like? How are we generating that? Where is that coming from? How is that traffic converting? What is not only conversion rate like, but what items are driving purchase? What areas and demographics are driving purchase? And then, into basically how many times is this lifecycle repeat? What are the leading indicators for an excellent customer?
How do we think about not just optimizing first purchase and optimizing, you know, new customer acquisition, but how do we think about building a brand and a product experience that drives high-value, engaged and thoughtful, ultimately high-value customers?
On Customer Lifecycle Metrics
Obviously, the first thing that comes to mind is an LTV to CAC ratio. What we've seen is that it's important to think about both of these numbers holistically. The first being, again CAC. Not just based on the initial acquisition of that customer, but understanding CAC blended across each order from that customer. So, what is our cost not only to initially acquire that customer, but what is our cost for each additional purchase on top of that?
From there, understanding the lifetime value comes down to understanding our average order value across customers. How much are they paying us each time? A great indicator of that is our units per order. Are we adding multiple different SKUs and products to each basket? And then finally, what is the cycle by which each customer is repurchasing. If it's a recurring business model like a subscription, we might want to consider something like churn, but if we're one-off purchases, then it's really important to understand what drives that repurchase behavior. It's incredibly important when considering our assumptions around LTV that we truly understand the customer and their buying cycles.
Common Mistakes Made When Measuring the Customer Lifecycle
Making assumptions around LTV and then justifying growth, budget, CAC numbers based on assumed LTV. So one of the best things that you can do there is optimizing each for profitability - around each order and each purchase.
What's our acquisition, costs per order per customer and informing? Not, just how we're thinking about our customer lifetime assumptions, but around our customer value assumptions? And how that might be related to costs over time, not just costs upfront.