How Customer Value Optimization (CVO) Is Revolutionizing the eCommerce Industry With Valentin Radu

Valentin Radu is the Founder and CEO of Omniconvert, a technology company helping D2C e-commerce and retail companies scale their businesses. Upon realizing his passion for creating systems to improve business processes, Valentin launched his first startup. Understanding the principles of conversion rate optimization and recognizing the value of lifetime customers has led him to craft a new e-commerce category: customer value optimization (CVO). Valentin also founded Omniconvert’s CVO Academy to educate e-commerce professionals on improving the customer lifetime experience.

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Here’s a glimpse of what you’ll learn:

  • Why Valentin Radu is passionate about CLV (customer lifetime value)
  • The formula you should use to calculate your company’s CLV — and how to apply it
  • Factors to consider when deciding LTV (lifetime value) intervals
  • Valentin offers solutions to frequent issues surrounding the customer experience
  • How acquisition and retention work together to maintain CVO (customer value optimization)
  • Valentin shares how his circumstances influenced his perspective on life
  • The habits Valentin incorporates into his daily routine

In this episode…

Without recurring customers purchasing your company’s product, your business would lose profit. Scaling your business requires optimizing the customer experience and maintaining those customers over time. In the e-commerce industry, understanding what your customer values is pivotal to your bottom line.

Valentin Radu recognizes companies are missing the opportunity to leverage the customer experience and increase their profit margin. While acquisition and retention rates are valuable, these metrics are void if your customer lifetime value (CLV) is not a priority. With his experience in the e-commerce industry, Valentin believes customer value optimization offers insight into repeat purchases.

On this episode of the Up Arrow Podcast, William Harris welcomes Valentin Radu, Founder and CEO of Omniconvert, to discuss why businesses should prioritize CLV. Valentin also shares the CLV formula, offers solutions to frequent customer experience issues, and explains how acquisition and retention rates maintain CVO.

Resources Mentioned in this episode

Sponsor for this episode...

This episode is brought to you by Elumynt. Eluymnt is a performance driven e-commerce marketing agency focused on finding the best opportunities for you to grow and scale your business.

Our paid search, social, and programmatic services have proven to increase traffic and ROAS, allowing you to make more money efficiently.

To learn more, visit www.elumynt.com

Episode Transcript

Intro  0:03  

Welcome to the Up Arrow Podcast with William Harris, featuring top business leaders sharing strategies and resources to get to the next level. Now, let's get started with the show.

William Harris  0:15  

Hey everybody, William Harris here. I'm the founder and CEO of Elumynt and the host of this podcast where I'm going to bring you a lot of the best minds out there from the DTC space to help you improve your business. And on the show today, I have Valentin Radu, as a former ecommerce entrepreneur Valentin Radu helps hundreds of e-commerce companies to improve their business and become customer centric. As the founder of the CVO Academy and Omniconvert. He is helping ecommerce companies and agencies improve customer lifetime value by evangelizing customer value optimization as a new category, about which he wrote the first book, the CLV Revolution. I'm really excited to dig into that a little bit with him here today. But first, I do want to make sure that I mentioned the sponsorship This episode is brought to you by Elumynt. Elumynt is a performance driven e-commerce marketing agency that's focused on finding the best opportunities for you to grow and scale your business. Our paid search social and programmatic services have proven increased traffic and row as allowing you to make more money efficiently. And with that, I want to dig in Valentin, thank you very much for coming on the show here today.

Valentin Radu  1:22  

Hello there, William. And hello, everyone. I'm really excited to making it happen.

William Harris  1:26  

Yeah, so CLV Revolution, and I remember you actually hosted, I got to be one of the guests on your CLV Revolution show that we did earlier in the year here. What started this, why did you decide that this needed to not just be a topic but a revolution? Why are you so passionate about this?

Valentin Radu  1:46  

Yeah, so first of all, William, it's, it's all about growing sustainably. And I think there are a lot of voices, which are, let's say misleading. The e-commerce entrepreneurs like I've been as well. The words, spending a lot of money on acquisition, and they they've signed the mantra of acquisition without customer retention for decades now. And I've discovered the power of customer lifetime value back in the days I it was 2011. And I was struggling as an e-commerce entrepreneur, we were making a lot of money. But we weren't making money at all. So the paradox was that our revenue was around 14 million, and our profit were around $15,000. And it was really, really frustrating after one year of work and being paying ourselves as founders so bad to wait for a year and then to look behind and see that you've made Google richer. So that moment, I realized that maybe were missing the point, maybe we're not looking at the right metrics, maybe the formula is on incomplete. And guess what it was incomplete because we we've been acquainted with this e-commerce growth formula which is still in in the top of the head. It's top of mind for many e-commerce leaders with traffic multiplied by the conversion rate multiplied by the ARV. But if you disregard customer lifetime value and customer acquisition costs, then you end up not being profitable. And now we're seeing this shift from growth at all costs to being profitable. So that's why I think customer lifetime value is the Cinderella right in the in the commerce arena. And that makes me makes me aware that I have this mission, let's say of making more and more companies thrive. Because after I've been shifting my after I've shifted shifted my attention towards customer lifetime value. I've made my own company profitable, and we've managed to do a beautiful exit. And that's why I've built Omniconvert that's why we're I've built the CVO Academy. That's why I'm focusing on customer value optimization. And I think it's just a matter of time, until companies will wake up to this new reality that they need more happy customers in order to thrive. And it's not about the one nightstand, right? It's not about the first transaction. It's about building sustainable and authentic relationships with their customers. And pretty much that's the way to go in the in the future. And we're seeing right now that many e-commerce companies are struggling. And that's because they are not taking into account the unit economics and CLV should be the Northstar metric for those.

William Harris  4:29  

You started a can of worms here that I'm excited to dig into with you because this is something that obviously, you know, I'm very passionate about as well. At our agency Elumynt We focus significantly on profit, and and we actually drive ads towards profitability EBIT. A lot of our customers share their actual p&l with us and we make sure that we're optimizing towards, you know, their bottom line, not the top line. And so you mentioned first of all, one thing that you said was the formula was wrong and I appreciate it. You use the formula that you know, I've seen out there a lot as well that It has irritated me for years as well. What's the right formula, then, is there like a mathematical way of saying this is what we should be focused on?

Valentin Radu  5:09  

Yeah, it's pretty simple. It's number of customers, multiplied by the customer lifetime value over customer acquisition cost. So if this metric is going up, that means you have more customers, and you're paying. And you have a sustainable ratio between how much you're getting down the line, which is customer lifetime value, and how much you are paying to acquire those, those customers. Unfortunately, few are the companies that are even aware about their debt ratio, lifetime value over customer acquisition cost, and the period that they are either overspending to acquire customers, either under spending, and they are not getting the market share that they could with considering the cash flow that they have. And now I think lifetime value is the bridge between the finance world and the marketing world, this if you, if you have companies, which are nailing lifetime value, you have the CFO and the CMO, or for sure friends, because eventually they are looking at the same way to to progress in their company.

William Harris  6:13

So Google actually came up with a really good article about this, I want to say it was just last year about the need for the CMO and CFO to work together. And it reminds me of a story because we're very much the same way where most of the time, when we bring on a business, we actually meet with the finance team as well saying we can't bring you on unless the finance team is on board with whatever we're about to do. And the good example that I have with this, there was a company that came to us and at the time, I don't remember the exact amounts, but let's just say for easy numbers, they were spending $10,000 a month with their agency that's running their ads. And maybe the first month with us, they ended up getting a bill for 15,000 20,000, something like that, right? Whatever, whatever that number was, it was more than what they were used to paying their agency. And typically, as the marketing team, we're dealing with their, their marketing manager or something along those lines. And I remember getting an email from him, our team got an email, you know, he's kind of like freaking out about this. He's like, Man, I'm gonna get in trouble for this. That's a lot more than what we were used to paying. And I remember talking to him and just saying, wait a minute, though, we were able to within one month of taking over their account to spend maybe another two and $1,000 profitably for them. And as a result, it was like, Well, let's take your your revenue minus your cost of goods sold, minus the agency fee minus the ad spend minus the returns minus everything, right minus your overhead. And I think they made about $800,000 more profit that month. And it's like, is it worth it to your CFO to spend $5,000 more on an agency that can drive $800,000 more profit? And he goes, Well, yeah, I guess when you put it like that, that's an okay thing, right. But there was there was this disconnect between the CFO and the CMO for a long time, and I think we're starting to see that push back. And I like your formula for this. What are practical ways then that people can start applying this formula that you've talked about in their business?

Valentin Radu  8:11

Yeah, a practical way would be to simply come up with a different way to define success. So basically, that's that's what this formula is all about. It's about if you have more customers, if you're paying, if you're getting more down the line than what you're paying to acquire them, then that means the company is is thriving is going very well. If on the contrary, if you look at the trends, right, because it's the beauty of any metric is that it has the context, if you stay stay away from any kind of metric, which doesn't have the context, you know, because if you have, let's say your conversion rate is 2%. Or let's say your AOV is $200. What does it mean? You don't know how, how was the conversion rate last year, or how was the conversion rate in the last month or what was the ARV, because once you see the trend, then you see where the company is going. And if you can see an upward trend, then that means the company is doing well. So to let's say, to put this to work, you start by leveraging those type of numbers, monitoring what that number is, were based on the number of customers or multiply with the lifetime value over the customer acquisition cost, you get this number, right. So if you see the trend, and if you see that this is going well, that's great. If it's not, then you should be looking, putting the customers under the microscope. And I didn't understand where what was going wrong. And at some point, you need to understand these dominant numbers in e-commerce and I keep on singing the gospel of dominant numbers in e-commerce or unit economics because many companies are struggling these days, because they've been relying on our OS, which is just a metric you know, is not showing you pretty much anything about it. So you could have maybe ROA is great, but what if you're selling with goods that are not having the same gross margin, or they have a much lower gross margin than the other one, so the company's doing worse than it, it can do worse with the higher ROI than it has been doing last month with the lower Roa. So that means you need to look at these dominant numbers. And the shallow companies are shallow. eCommerce, people are looking at traffic, conversion rate to v, then some of them, they look at the gross margin and they realize you know what we need the gross margin, you need to look at this. And some others are looking at things like customer lifetime value, customer acquisition cost, and customer retention rate. So these type of metrics, and of course, some metrics are more important than others, depending on the business model. For instance, if you're selling mattresses, then the purchase cycle is so long that you simply can disregard the lifetime value because it takes eight years to get people to come back to buy again. However, if you sell cosmetics, or fashion or beauty or food or nutrition or wherever, where the purchase cycles is way more faster than you should, you can't thrive in this economic context. Because the competition is incredibly high. These days, we have a lot of companies attacking, you know, addressing the same number of eyeballs out there.

William Harris  11:31  

Yeah, so there's two things there unit economics that I want to come to in the the length of the LTV that we're looking at. So on the unit economics side of things, one of our favorite customers that we like to work with, is a customer that has, you know, 100,000 products, because there's usually significant room to improve their profitability, based on just changing up the way that they're running their ads, without even changing top line revenue. And a good example, kind of to what you were just talking about, that I like to use is, let's say somebody has a product that's $200. And let's say that the margin on that is $50. Okay. And let's say that you have another product that's $100 retail value, but the margin on that one is $75. If you look in your platform, and you spend $50, to acquire a purchase of product A and A $50, to acquire a purchase of product B, the return on adspend the row as then on that first product is going to be a four to one and you're gonna think we did really good on that, but you paid $50. To acquire it, you only got $50 margin, you washed completely flat on that one. On product B though you paid $50 to acquire your RO s for that $100 divided by $50 your row as is to a two to one. So that's half the return on adspend half the row as but because the margin was $75 on that you actually have a $25 profit on that product. And so that's a significantly better move for the business. And so we optimized people's catalogs around driving the most profitable sales for them. I think that makes a big difference. The other thing, though, that you brought up that I liked, though, where you go with this is the length of the LTV that you're looking at and what you're considering. And there's sometimes it doesn't make sense to look at, you know, a true full LTV, especially a company that has years and years and decades worth of data. You have to start to figure out like well, how, how aggressive can you be within a certain context. And a lot of times what we look at is maybe like a 90 day LTV or 180 Day LTV and trying to figure out like what's the right amount based on your your your cash flow and burn rate, which I think right now is incredibly important because of just the overall macroeconomic factors that we're running into with the economy not being what it was, um, what do you what do you think? Is there a sweet spot that you look at when you're looking at figuring out what companies should say to decide? Well, how long should I look at the 90 days? 180 days? Four years?

Valentin Radu  13:53  

Yeah, that's that's a great question. And I want to tackle something which I think is misleading nowadays, because there are more and more people focusing on customer lifetime value. And they are considering that lifetime value is the historical amount of the revenue that a company gets from a customer in the first 3060 or 90 days, which this is not the lifetime value lifetime value is the predictive margin that's going to come to the company from from a customer down the line. So that means if it's a predictive measure, then you should be taking into account things like the purchase frequency and things like the churn and things like the inflation right so you should be also looking at the discounts as well. So basically, if you want to be data driven, you can just look at this simplistic way of seeing okay in the first 3060 90 days, we are getting this amount. So that means and in order to understand how how to To slice the time intervals, you need to look at the those things called a DBT. For instance, in our technology, we have this automatically being calculated, which a DBT stands for average days between the transactions. So that means after how many days the customers are coming back on average, yeah, and when the chances for the customers to come back are dropping to around 20%. So that means you need to understand the purchase cycles of your customers, which is way harder if you're selling. For instance, if you're a marketplace, and you sell, I don't know, toys, and but you also sell furniture, and you also sell cosmetics and whatever. So that's why you need to look at the blended lifetime value. And you also look need to look at the the hybrid customers versus the specialized customers, the ones that are there on your marketplace to buy only this type of animal, they are there for cosmetics. So the model is getting a bit more complicated when you when you look at the different business models. However, to answer your questions, to your question regarding the how to look at the time intervals, you look at the purchase cycles, and you define the lifetime value, so you slice the lifetime value, according to when the chances are dropping below 50%. So basically, if if your purchase cycle is let's say 46 days, that means in the first 46 days, 50% of the repeat customers are buying again and you say okay, this is the first time interval, that's one way to do it. The second way to do it, you look, you slice it, according to your financial exercise, you say, You know what? I'm paying people every month. So I want to see what's the lifetime value in the first 30 days? What's the lifetime value, despite the purchase cycle? Yeah, I'm ignoring that. But I'm looking at this measure, which if it's, let's say, not as accurate as it can be. However, the inaccuracy is consistent throughout the time, because if you're measuring, and that's the beauty of data, right? If you're wrong, be wrong on the entire time interval, you know, because basically, that figure is going to show you how much you've got predictive lifetime value throughout the in the last 12 months, let's say in the first 30 days, and how that figure was varying throughout the time. And of course, if that's going up, that means you've done the right way. Now, once you have that, you also need something which is called the CAC payback, and I'm getting into the math here CAC. Payback means how many days do you need to get back the money that you've paid to acquire a customer, right, so the CAC payback interval or time interval means after how many days you are breaking given by after acquiring the customer according to your lifetime value? Yeah, so that means if you are paying, let's say your CAC is $100. And your CAC payback interval is 20 days, that means in 20 days, you are getting back from a customer $100 back and after that is pure profit or margin. So once you look at things this way, then you can connect with the financial model, because maybe you are leaving money on the table. But if you don't have the money to support it, so if your CAC payback is six months, then you can't invest like this, right. And that's where you need to connect the finance with the marketing world. Because you're coming with a lot of data driven solutions when maybe you need finance, outside capital, maybe you need to raise money. But having a customer centric model allows you to make decisions, which are based on pure reality based on your reality of your own business is not based on shooting in the dark, because at this moment, if you're an e-commerce leader, and you're relying on our OLS to make your decisions, you're shooting in the dark for sure. Because you don't know if you're under investing or over investing.

William Harris  19:03

And you're usually doing one or the other. It's almost a guarantee that you're either over or under investing, you're not investing correctly.

Valentin Radu  19:11  

And other things that story to share here, William, if you allow me Go for it. We were back in 2015. I was working with the with the fashion fashion brand. It was one of the fastest growing brands here in Europe. And they were they were making a lot of investments. So at some it's a moment they were investing something like $50,000 on Facebook ads and it was 2015 and it was Europe right the they basically they were present in Greece, Bulgaria, Romania, the Czech Republic and they were going going west right that was their their dream. They got outside capital and they were from an outside perspective. They were doing great. I met up I met these guys they were they The the intrapreneurs, behind this company, they were x stockbrokers, they came from the US with a lot of money. They invested in the into this e-commerce. And from from an external perspective they were they were doing great now, I dived into their data. So I got access to their data because they want it to their investors. Guess what, who, who needs lifetime value? Right? The the investors wanted to see what the ratio between lifetime value and customer acquisition cost because they wanted to raise another round of capital. So when we were looking at the data, I've said, You know what, guys, maybe from the revenue, they were doubling year of Oreos, so the revenue was doubled. But the lifetime value was 20%. Lower year over year. Yeah. So basically, that was a red flag for me. Then I looked at their customer retention rate, I've started to extract the Net Promoter Score to see what the NPS and their NPS was below 40, which was very bad. And once you once we got to that moment, when I realized that you know what, these guys are not not that they are not making money, they are going to do, they're about to go out of business in the based on the predictive model that I built for them. So thanks to this, let's say, aha moment, they've, they shifted the company. And they've realized that their product was the problem, because we've CVO with this methodology that I've developed over and over again, since that moment, with this methodology, you identify what's the issue, then you could have only three types of issues that are harming the lifetime value, it's either the product, which is the worst to have, it's either the customer experience, which is fixable in the sense of adjusting the customer journey and making sure that you're offering the right expectations, and you're a bit above those. Or you can also have a marketing problem, maybe you are not, let's say persuasive enough, or you're not nudging the customers at the right time with the next purchase. And they had the product problem. So mainly that company, unfortunately, they got out of business, due to the fact that they weren't focusing on, on on lifetime value, prior to investing so much into into acquisition. So basically, that's why you need this type of customer centric model.

William Harris  22:29

I think we're seeing, unfortunately, I think we're seeing a lot of that take place right now as well. So economic downturn, a lot of companies that were focused on ro s for the last couple of years. And it's kind of it's hit them in a really tough spot as they're no longer able to acquire customers the way that they were. And so they're trying to bank on lifetime value, they hadn't focused there. And so I think that that's really starting to hurt them. So let's see. Okay, so there's the three types of problems that somebody can run into product, customer experience, or what was the lifetime value? Or? Market? Yeah, okay, so. So, identifying the problem is, is arguably the most important thing. And I feel like a lot of people, they're trying to use a lot of other ways to identify what this problem is. But let's say that we identify the problem. Let's say we figure out whether it's a product problem, a customer journey problem or a marketing problem. Do you have any tips or solutions to address any one of these? Are there things that you've seen pop up over and over again, where you're like, it's very often this type of problem? And here's a couple of recommendations on how to fix that.

Valentin Radu  23:39  

Yeah, so the first thing that I recommend to companies in order to find out the problem is to do the segmentation. So to understand that, not all your customers are your best customers, of course, not all the customers are there to keep you know, because some customers, you you simply get them in order to get to break even right. So even if you are and by the way, just to share a metric with you, on average, 25% of the customers, you are losing money on them. So any Commerce on this planet, they are losing money on 25% of the customer. And that means those 25% of the customer is not like yeah, let's stop acquiring those type of customers is not about that. It's about focusing on the right customers and making sure that you end up being profitable for those 25% of them, because those we call them the bargain hunters or the breakups or whatever. Yeah, so those are customers that are low value, because they are there for the discount. But most companies are treating everyone the same. So if you want to get rid of the old stock, you blast your entire database, why in all your customers will get this product products with the 40% discount, let's say but what if you could focus on the low value customers with the products that are at the discount so you can In this stock the products that you have in your, in your warehouse, to those breakups. So mainly, that's the first thing that I, that I suggest, learn about your customers by segmenting them based on the RFM. And with the RFM, which stands for recency, frequency, and monetary, you end up seeing, those are my best customers, those are the ones that I'm after. And that's that those are the brands or products or locations from where they are coming from. And knowing that will allow you to steer your marketing towards them. Let me share another story from another brand. shoe retailer, one of the largest shoe retailers here in Central and Eastern Europe. They they thought that their best customers were ladies in their 20s, so 20 to 25, because they've seen this in their demographics in Google Analytics. And they thought, okay, that's our audience. And they've made the assumption that if Google Analytics is showing me this, I better trust that data. But once we apply the RFM segmentation, and once we've ran this qualitative research, and validated statistically on their best customers, we understood that their best customers were actually ladies, but they were in their 40s. And they weren't from large cities, but they were from smaller cities where they haven't got these shopping malls. So they ended up buying online from their store, because they haven't got any other alternatives. The competition's will were was lower in those more low than lower than 50,000 inhabitants in their in those kinds of cities. And once they've realized that, and that's a good story, not like the other one, once they realize that they've shifted their acquisition focus, so they've built it differently on those smaller cities. So basically, they've over invested in those cities, because the lifetime value was 85%, higher on those cities, then in the larger cities, where guests were, the competition was even higher. So it was like, a double win for them in this in this respect. So maybe that's what I suggest to these companies, once once they have the segmentation being done, then they can fix a lot of other things. Because I understanding why your best customers and your worst customers, what kind of products are making your customers sticky, will allow you to shift the entire organization and to fix was broken.

William Harris  27:27  

I love that you called out the discount shoppers to there used to be a targeting option. I don't even know if it's there anymore, because I think it's the dumbest targeting option for the most part. But there was a targeting option in Facebook for like, people who like coupons, or something like that. And I was like, why would you want to necessarily go after them in the first place, it's not the ideal customer to necessarily intentionally target usually. But to your point, one of the things that I look at when we look at customer segmentation for a lot of customers is when you get to the customer lifetime value, the lifetime value of somebody that entered your funnel because of a 30% off coupon as their first purchase is almost always significantly lower than lifetime value of somebody that came in and bought full price on the first time. And so I don't understand that I don't get frustrated, sometimes by the people that over optimized towards discounts on a first time purchase, I understand getting somebody in the door, there's some value to that too, right. Like if you never get them into their funnel, you have no chance of getting any value from them. But I think that we oftentimes over emphasize those discounts on those first time purchases, instead of just actually showing what the value of the product is that's being sold and actually trying to get the right customers through that. And I liked that you called out not necessarily saying hey, we're not going to acquire those customers, we're not going to not acquire those customers, I should say, we're still going to acquire those customers. Because it reminds me of like a lottery ticket. And if you knew that one out of every 10 lottery tickets you you purchased was going to be you know, for you know, $10,000 or something, but you would just buy as many 10 packs of lottery tickets as you could knowing that nine of them are going to suck, but one of them is going to be really good. And it's the same thing with going after customers, you can't guarantee that you're only going to get your ideal customer. And just because that ideal customer profile is the 40 year old ladies or whatever that was there. That doesn't mean that you know, a 20 year old man isn't also going to be a very good customer. And you don't necessarily know that going in, you're just saying statistically speaking, but you're still going to acquire those customers. And you can say, hey, we're gonna go after these customer segments on purpose, we're going to acquire some of these other customers that might not necessarily always be the perfect ideal customer. This is the idea of broad audiences or things like that, knowing that maybe maybe nine out of 10 are not your ideal customer or eight out of 10 or whatever that is, but you'll get those two or three or four that are your perfect customer. And it goes from there. It's just I like the idea of like the math that's behind this. It's just a statistics thing.

Valentin Radu  29:45  

Yeah. One One aspect that it's also neglected William in in this game of acquisition and optimization is the fact that there are these extremes like we should be focusing on acquisition or We should be focusing on retention. If these are part of the same thing you know, and customer value optimization means that you're starting with retention in the sense of making sure that you have product market fit. So if you're a new brand, or if you've sold, or if you're an established brand, which developed your digital channels, you chances are that you're a start up there because you don't have all your customer journey sorted out, right? Even though you are 50 years old retailer. But if you are, if you have a one year old, digital e-commerce, DVD, then that's a startup for you. So first, you make sure that you have product market fit in the sense of validating, what's your customer retention, for the product that you're selling against other brands, or the purchase frequency, right, let's say you're selling cosmetics, and you we have this benchmark. So if you're selling cosmetics, the chances are that you're if you're not around one point 75. So that means if a customer is placing one point 75 orders in their own average, you are below the average and being below the average and putting money into acquisition is not the right thing to do. Because there are way more cheaper ways to lose money, which means to go there to find out what stops those customers to buy again, maybe you have a product issue, maybe ever packaging issue, maybe you ever follow up on boarding issue, maybe you are not instructing your your customers on how to use those freaking creams on their skin, right. So maybe you have other issues, then putting more money into into ads, which is amazing to do. If you have a purchase frequency, which is above the average, let's say you are at 2.4, then invest in acquisition, because it's clear that you have sticky products, which are making your customers happy. So mainly CVO, this activity of customer value optimization, allows brands to fix the entire customer journey is not only about let's retain all the customers No, it's about, let's make sure that we have customers that are coming back, let's understand why they are coming back or why they are not coming back. And then let's acquire with the right messaging and with the right product, because for instance, there are also some products which are making the customers more sticky than other products. And we've we've seen this app, sorry, at another brand, they were selling digital cameras. And they realize that with this analysis, looking at the lifetime value by the first both SKU, they realized that, hey, we have these two different products, they have the pretty much the same way of it was like $300. And one of the products were actually lights for the VFA for the photo studios. And the other product was was was Justin, a lens, you know about the ARV was the same. However, the lifetime value was four times higher for customers that started to buy from their store with those lights, because they needed other things to to buy the equipment for their photo studio. And once they've seen that, guess what they could beat differently on those products against the other one, as being only based on the ARV is misleading, you could leave a lot of money on the table, and you can afford to pay more even more to acquire a way more profitable customer down the line.

William Harris  33:28  

That is yeah, I completely agree. And that's something that I think that we've seen with a lot of our customers that we've literally helped them recognize that they're under bidding. And when you think about the fact that your competitors out there might already be on to these ways, if you're not willing to be as aggressive as they are, they're going to beat you. They're going to outbid you, and they're going to capture your customers. Valentin, you think about this in a way that I think is very different from a lot of people. And I speak to a lot of people in the industry here and I'm unimpressed with a lot of the ways that people are thinking and I really appreciate the way that you've approached this. I like to get in inside look at the man behind the curtain if you would, and understand a little bit of like, what makes you tick and why are you the way you are? Is there something in your childhood that stands out to you that says like this is a part of why you have become successful.

Valentin Radu  34:27

Poverty men. In a nutshell, I was so poor so I'm an ex poor kid from Bucharest, Romania. I lived my first almost 10 years in communism. I was instead of sandwiches imagine that I was using the Diovan just to have slices of bread getting darker, you know. And so basically I was burning one one face of the slice of the bread to pretend that I'm eating a sandwich so that poverty thank God made me very hungry and made me aware that you need to fall To provide you need to first give in order to expect something. So this, the this value creation mantra is in my head because I've understood that nobody is giving a damn about you, if you are not delivering a valuable experience or a better future reality to them. And back in the days, I remember my first job, for instance, I've been a butcher for for two hours, and I was 14 years old I was, I was playing football all day long. And my mom took me in the in, in the summer, summer holiday, she took me there in the market, she handed me to those big fat guys. And they promised we're going to make a man out of him, ma'am. So my mother left and I was there with those Mel, you know that raw meat and garlic. And I was doing this Romanian thing called military, which are like some meatballs, but they're like, longer, you know, some cylinder. And when they got out to smoke I ran and that was my first job for two hours. But I learned a lot from that experience, I realized, man, this is for real, I mean, I have to do something valuable, because otherwise I'll end up here in this speaking in one of those freaking places. So I think it has to do with this, this law of under promise and over deliver providing giving first and then expecting to, to get an at least that's part of my, my past and my and thankfully, now I can see how it is to respect this law of value creation.

William Harris  36:44

And I'm sorry that you grew up in that environment. But I also appreciate that you called out that there's a mindset that you had that said, you know, despite the circumstances, you use that as a catalyst. And a lot of times I think that we can use difficult circumstances to push us to do better, or we can use it to push us to give up. And you know, we see we see that happen on both sides of the extreme here and you use it as a catalyst for change for the better. Is there is there some kind of like a daily habit that you have that helps you stay focused on being able to have that kind of a mindset, because inevitably, there are tough things that happen as an entrepreneur, and I'm sure that we run I run into it. I know that others that are listening this run into those days where it's like, boy, today's The kind of day that I wouldn't mind giving up right are the days that kind of day that it just sucks. I'm just gonna go to bed or whatever that might be. But it's like, what is it that you do on a daily basis that helps you stay focused?

Valentin Radu  37:44

Yeah, I want to share something with you, William and with the audience today. So back in 2016, I got through a burnout, I almost got divorced. So I dodged it, thank god beautifully. And in order to fix my, my life, I realized that a I was working too much I was identified with the role of being an entrepreneur, I disregarding my family life, and I ended up being a boss at my or pretending them that I'm the boss at my home in while I was I wasn't there you we and I got into this meditation retreat. So basically, I stayed there for 10 days. And I meditated. So why I wasn't allowed to take notes, I wasn't allowed to use any kind of technology, I was only there. It was a vipassana retreat, right. And as a silent retreat, I spent there the four days were like held because my mind was going producing all the negative scenarios that you could imagine. So it's if you haven't done this, I consider this like, the first time when I made shower, you know, in my head, you know it like a like I was cleaning up my mind by contemplating all the the bad foods that my mind is producing. And there are this research that 98% of the things that the bad things that you imagine will never happen or stuff like that. So I I've started to meditate, I've looked at how am I interpreting the reality and I realized that it's in my control, to interpret the reality in a different manner, and then decide what to do next. Because spending 14 hours a day meditating for 10 days allowed me to do to observe that and I got into this beautiful state of being at peace with myself that after that, I kept this habit of meditating and also journaling because I call this like the mind optimization thing. You know, I mean, I mean to optimization so you can't have an external reality which is better if your internal reality is not better, and it all starts In your mind, because any object out here, it's, it was an idea at first. So it all starts in, in your head right in how you're modeling the world and how you're modeling the, the future reality in your life. So I've deconstructed my, my life as a character. And I've consciously decided I want to get into entrepreneurship, I want to build this company, I want to sell this company, I want to, I want to write a book, I want to build a category around customer value optimization, I want to do this type of podcast, I want to meet a lot of people from the entire world. And guess what I'm doing this, I'm leaving it, but it was first in my mind. So the habit that I'm doing, almost daily, I do have some cheat days, Friday, for instance, but I'm reading my journal, I'm looking at the faults that I have. And I started to realize that I have these patterns, I have these anomalies. And, and I can spot myself putting myself down while it happens. So basically, it's not like normal, like super Jedi in my mind. But I can see that this is part of me putting myself down, like, and I've seen this movie and I found it hilarious. We've stood, you know, starts this, this guy, this this movie from Netflix, with the, with Jonah Hill with the psychotherapist, and he called it the part x. Part X is like the bad environment, those, those those thoughts that you have, that are putting you putting you down. So basically what I suggest and what I want to share with the world is that it's all in your mind. And if you if you can train your mind, to focus on a better future reality, you will have a better life than focusing on the worst scenario that could happen. So training your mind and taming your mind towards building a better future reality is the habit that we should all be into.

William Harris  42:06

So I want to touch on that real quick here too, because there's a couple of things that I really appreciate about this. I love digging into science. And there's two interesting thoughts. There's, there's a study that was done at the Cleveland Clinic, I believe it was in 2008. For those who maybe sometimes think that, you know, thinking about things or visualizing or whatever, it's hogwash, it's not real, or whatever I want to point you to this study, Cleveland Clinic 2008, where they essentially took a group of people and had them just imagine themselves working out, they didn't actually work out, just imagine themselves working on there's these workout routines that they did. And I think it was maybe six weeks or eight weeks or something. And at the end of the six to eight weeks, whatever length of time, that was, the people in the group that imagined working out, were stronger, and it was like 24% stronger. And the particular exercise that they imagined working out in, it came from just neural synapses that connected to those who have more more activation of those particular muscles, not necessarily that they gained muscle mass. But the idea there is that it's like they were more capable at the thing that they were trying to imagine doing without actually having done the thing. And this is a very physical thing. And this is, you know, a really impressive thing that I think we can downplay that the importance of visualizing and writing down what it is that you want to do or to achieve or to accomplish that it's more than just, you know, some some mystical idea it is there's very real science behind this. And even recently, I believe that they have talked about how our brain potentially aligns itself in 11 dimensions. And so Michio Kaku, I really appreciate him as a mathematician, but it talks about, you know, the potential of 11 dimensions from mathematical standpoint. And, and, you know, we can hardly fathom what fourth dimension looks like, let alone on 11th dimension. But even if that's not entirely true, if you know, this is a theory, I suppose about that. But the idea of, well, we only know what our thoughts are capable when they're inside of our head. But what if our thoughts are not as inside of our head as what we think what if they are actually activating in 11 dimensions of space and time, and they are actually having some real contributions to what's going to take place in the future? I think it's an important way to think about this, that we do know that there are some very real practical benefits to aligning your brains. I appreciate that. What are some fun quirks about you? Is there anything that if I was sitting there in the office with you that I would learn about you that I can't tell when I'm on a video call with you?

Valentin Radu  44:42  

Well, I'm always taking these these notes, you know, I have these are for this week, for instance. So I'm always doing these type of things. You have lots of notes that I'm taking it helps me to map out because I'm a visual thinker. And yeah, I think that's that's the that's the thing that I'm doing. Doing very often. And it also allows me to re rewire to the things that we discussed, like with Jian airlines, two weeks ago, stuff like that.

William Harris  45:19  

Okay, last question that I have for you is, is more of just like a silly game. So I'm wanting to do some kind of like a little silly thing at the end of each one of these podcasts. And so, this segment, I'm just gonna call Can you do that? And it's gonna be some kind of a stupid human trick. Can you do this? Can you wiggle your ears? Okay, so here's, you know, both ears, left ear right here. Left, right, left, right, left, right. Can you wiggle your?

Valentin Radu  45:47  

I don't know if I can do this. But let's see why. No. Yes, I was talking then.

William Harris  45:56

Oh, that's okay. Well, do you have any other stupid human trick that you're like? Well, I can't wait 20 years, but I could do this.

Valentin Radu  46:01  

Well, I can do this. For instance, I can get this thumb. That's yeah, I think,

William Harris  46:11

oh, yeah, I definitely cannot get that there's a there's a quite a good gap there. That's pretty good. Okay, so if if people wanted to get to know you reach out to you, they want to buy your book is your book officially out, by the way,

Valentin Radu  46:28  

is not officially out, it will be but it's going to be available at preorder. However, if someone wants to read it, or to get into that list, they can go to the CLVrevolution.com and they can get the first chapter for free, and then they can be be announced about it. And if someone wants to get a hold of me, I'm on LinkedIn, you can always write to me, I'm always responding to all the direct messages, including the ones which are telling me hey, I have this amazing proposal as an e-commerce says, founder you might be on the lookout for XYZ.

William Harris  47:03

Yeah. Okay, so they can get to know you through email. LinkedIn is every social platform that you are on more often than others.

Valentin Radu  47:12  

Yeah, I'm on LinkedIn more than but I'm also on Twitter, but most most of the time I'm spending on LinkedIn.

William Harris  47:18

And he will teach you all about CLV revolution and how to contort your thumb to reach your wrist. Valentin, thanks so much for joining me today.

Valentin Radu  47:29  

Thanks a lot, William, for having me. And thanks, everyone, for listening to me today.

Outro  47:36  

Thanks for listening to the Up Arrow Podcast with William Harris. We'll see you again next time and be sure to click Subscribe to get future episodes.

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