When managing your business, there are a lot of aspects that go into it. They guys discuss how to not get caught up in the secondary numbers and focus on the 3 KPIs that are CRUCIAL to your business long term. They guys discuss how to take these 3 KPIs, apply them to your business, and make sure they work!
Text us! Legit … just text us… say hey, ask us a question, tell us your favorite episode, recommend a topic or guest, text us anything! (844) 643-0745
This is a direct transcript. Please forgive any grammar or spelling errors.
Kevin: It’s difficult to get someone to take their wallet out that maybe just met you for the first time and actually buy something from you.
Jason: Just with that alone. You’ve now changed a failing campaign into a campaign that is not profitable just by knowing a few numbers.
Kevin: It’s not going to be overnight or even the first week that you’re going to sell the person that joins your list today.
Jen: You’re listening to eCommerce Uncensored with Kevin Monell and Jason Caruso
Kevin: Thank you for joining us. On another episode of eCommerce Uncensored. My name is Kevin Monell and I’m here with
Jason: Jason Caruso.
Kevin: Today, we’re going to be talking about some key metrics or the key KPIs, the main KPIs you should be focusing on for. And we were talking before we got on whether it was paid ads or if it was, you know, your marketing campaigns at a whole.
And I think it’s, as we’ve talked about in the past, like these, all these things work together, but if you understand these key metrics, you really can’t go wrong.
Jason: Well, I mean, These metrics are really the only ones that matter. I know that a lot of people, you know, kind of get caught up in the numbers, um, which is fine.
That’s kind of like secondary stuff you don’t have as I’m, you know, I never really finished the thought, like, you know, that’s like a thing with me, but as I’m talking, I’m like we haven’t fought on a podcast. It has to be a year or two. Yeah.
Kevin: Maybe that’s why our audience,
Jason: maybe that’s why we’re boring these days.
Kevin: Do you have a bone to pick with me? Is that why he brought that up? No,
Jason: we just, all, we, we obviously used to fight. Remember I used to be fun, but anyway,
Kevin: I can do something and we could fight about it next time. I’m sure you will. Uh, you know what I got. I’ll get like, do I have access to your, uh, Jason Crusoe ads, Facebook ads. I’ll go and do a few things, change a few things around
Jason: then. I’ll definitely get in a fight.
Kevin: What’s that landing page. I’ll go mess with it a little bit.
Jason: Uh, how about jasoncaruso.com Anyway, um, these three metrics are, you know, when it comes down to it, if you’re making sales, And you’re paying for advertising, or maybe you’re not paying for advertising.
Um, you need to know these three and if you could figure these three out, I think you can get, uh, you know, you can create a business, uh, you know, literally without that doesn’t have any, you know, like that the sky’s sort of the
Kevin: limit. And when you look at all the metrics that all these platforms give you like Facebook and Google ads, and even like Klaviyo, It can get a little bit overwhelming.
Like if you just look at, say ROAS on Facebook, what everyone tells you to focus on it, doesn’t really give you the whole picture. Right? I mean, if you’re getting a 0.5 or something like that, you might think that’s bad. But when you, when you, when you look at some of these key metrics, it might make a lot of whole sense, big picture wise.
Like if you’re trying to make it rich using Facebook ads or email marketing,
Kevin: you’re trying to make it rich.
Jason: You said we’re, if you’re trying to make it rich,
Kevin: is that not a saying, make it rich or get rich if you’re trying to get rich on Facebook or an e-commerce store in the next month, uh, you know, this isn’t for you because this is a more long-term approach that you have to think with.
Jason: Yeah. And you’ve got to have some action. You got to have some data for this, but let’s talk about the first thing of, and I think this. This first thing. Well, let’s me make sure it’s the first thing on your list too. What is the first thing you have on your
Kevin: list? There might have cost of acquisition on my list here, Jason.
Jason: So cost of acquisition is, you know, it’s funny, it’s a number that I think that people don’t pay attention to enough and I’ll tell you why.
So you can just figure, like, I’m trying to, I’m trying to figure out how to say this, but everybody does. What we used to do is like you turn on a Facebook ad and like you spend a hundred dollars and you didn’t make a sale. You’re like, oh, I’ve got to turn these off. Oh, these Facebook ads got to go off.
But if you just took the approach and said, look, this is a business I’m going to spend money. Let me see what my budget is. Maybe it’s $500. Maybe it’s a thousand dollars. Let me take a thousand dollars and let me just spend it recklessly. Don’t pay much attention to it and just see what it costs you to co to acquire a customer period.
That’s it spend a thousand dollars. See how many customers you get. Now. I would not recommend a thousand dollars. It really depends on your budget, but you should know, you should probably. Get a sale, depending on your price point. That’s a whole nother thing. Like your price point is going to play a big factor in this.
If you have a higher price point, it’s going to take a longer time to acquire a customer, but. I think you could figure that out, like you should probably get a sale within the first hundred dollars or first 300.
Kevin: Let’s just say, yeah. I mean, if you, if you haven’t gotten one at that point, then you have other issues at play, you know?
Jason: Right. But that’s the point right? At that stage, you’re just trying to see what it costs you to acquire one customer.
Kevin: Right. And we just had this, we just had this conversation yesterday with one of our partners, you know, it’s about like we’re spending money on Facebook ads right now to collect email addresses and.
It’s almost like you feel like you’re spending money aimlessly, like you said, like don’t even think about it, just spend it and then see what it takes because it’s not going to be overnight or even the first week that you’re going to sell the person that joins your list today. You just got to, and you said this you’re like, uh, let’s just see what it takes to get one person to buy our product.
Jason: Yeah. And I think. You know, it’s funny because I think that that’s like, that makes the difference between like an amateur marketer and a professional marketer. Right? So like an amateur marketer is trying to strike Facebook gold. Um, and they think that they’re going to just run these ads and make, you know, millions of millions of dollars from Facebook without.
Knowing your numbers, right. Without knowing or understanding how it, how it all works. Right. So what an amateur may do is spend $500 and get one of. And let’s say they lost a hundred dollars on that. So they have a product that’s 3 99, cost them $500 to acquire customers where they lost $101. Now there are two types.
There’s two ways to look at that. Right. And an amateur marketer may say something like, ah, man, Facebook is too expensive. I can’t do Facebook ads, but a more seasoned professional will say like, okay, wait, let me take a step back. I’m going to lose a hundred dollars. Every single time I acquire a customer, I have two options, three options.
I can either try to get my product for cheaper or produce it cheaper. I could try to get more money from them. So if you sell a $399 product, maybe you have an upsell to get them. Now, just with that alone, you’ve now changed a failing campaign into a campaign that is now profitable just by knowing a few numbers.
And that’s really all it is like, okay, I’m losing a hundred dollars. How do I acquire? Or how do I get a hundred dollars more or $200 more out of people? So that’s your second option. So your first option, um, try to get cheaper products. Second option is try to get more money. And the customer and the third option is to try to tweak what you’re doing, right?
Your landing page or sales page, or, or whatever, whatever you’re using to acquire a customer. You can try to figure out, um, like those numbers and kind of go from there. So now you got three different metrics that you can use to sort of. Combat losing that a hundred dollars
Kevin: or your, your point. There is actually our, our second metric, right?
It’s it’s the average order value, you know, increasing that number. And it’s, it’s funny as you were talking, you know, my head was running Jason as the, all the situations we came into with clients with, uh, I just say clients that came to us and they were like, I have this wonderful product and I want to strike Facebook gold, just like you said.
And so many times, how many times have we in our office, when we used to go to the office, been really super psyched about a Facebook ad that we’ve had, that’s building a brand, that’s building an e-commerce store. And then for the client to be like, yeah, this isn’t working because they weren’t making, you know, a fortune from Facebook ads.
Jason: quite understand what working means with Facebook. Right. You know, this is something that I have to give Russell Brunson a shout out about because he actually is where I learned this from. And he basically said that he’s, that actually said two things. One thing actually was in band Kennedy where he said that the company who can spend the most money to acquire a customer wins.
Right. And that’s kind of like the ideas, like. Figure out how you can spend more money, figure out how you can spend that $500 every single day or whatever. Um, but he also said like, look, if you spend a dollar and you can get back a dollar, right? You don’t have a marketing budget at that point, it’s free.
Right. You could spend, if you spend a million dollars and you get back a million dollars back, or you get a million dollars back, you have. Yeah, your marketing budget zero. Now there’s a little caveat to that. You know, Facebook ads are so volatile that today you may get, spend a dollar and get a dollar back, and then tomorrow you spend a dollar and.
Kevin: Minus money. You may, you may not be able to look at the numbers and Facebook either because you’re not tracking, it’s not tracking as much as it used to either. Yeah, it’s definitely a little more challenging. So, so to your point, so, so your three-year $300, your 3 99 product, that’s costing you $500 to actually for someone to buy it.
Right. If you’re consistently getting that, you’re kind of at a loss and you’re kind of wondering what you need to do to get to. You know, a break even point and to your point, it’s that average order value. So if you have a 3 99 average order value, what can you do at that point of purchase to get that, um, average order up to that $500 point, that initial sale.
And like you said, there’s a several different options. There’s the order bumps, there’s the upsells, there’s, you know, all those different things that will help you increase that value. So you can think of that. Shit. I’m losing money. I’m losing a hundred bucks every time, but you’re actually getting someone to buy something from you, which is like, I can’t tell you, we’ve been doing this for a long time.
It’s difficult to get someone to take their wallet out that maybe just met you for the first time and actually buy something from you. So cherish that, like, think about that. It’s really not an easy thing to do so. And if you have that opportunity where someone’s actually going to buy. How do you get them to buy other things at that point
Jason: Yeah. You know, I heard an analogy once that it’s interesting because. Ever since the internet, we kind of, us marketers are online. Marketers who got into, I got into marketing pretty much when the internet came into like, you know, whatever 95, whatever, whatever it was.
It’s kind of like, actually I probably got into it like more like 99, 99, maybe a little later. Um, but the point is, is that. Us online marketers don’t realize that all the things that we do online are just copying what businesses have been doing for hundreds of years offline. For example, if you go to a scuba gear store and you buy goggles, and someone said, the guy in the store says, Hey, what are you doing?
Oh, I’m going. I’m going scuba diving, um, tomorrow, and I don’t have any gear. And, uh, I was told that I need to get these, um, I’m going to, I was told I should get these special goggles. And he says, well, not only do you need those goggles, but the water at this time of year is pretty cold. So you should probably also get a wet.
And, you know, while you’re at it with the wetsuit, don’t forget, you gotta get the gloves too, because your hands, you know, are going to be cold as well. And, um, there are sharks in the water, so you’re probably gonna want to get some like, really good fins, right? So that guy came in for the mask, but he was sold all these products.
And the truth is, man, if we’re honest with ourselves, like you don’t even realize it’s happening. A lot of the times. Yeah. Because, because they’re only giving you things that you need, so you don’t look at it like, oh, he’s just upselling me. You’re like, oh shit, he’s being nice.
Kevin: I think, I think one of the biggest examples of that Jason is, is the mattress industry.
And when you’re talking about offline stuff, that’s crazy example is like all these mattress stores that go up in the middle of these really high traffic areas, they’re standalone the mattress firm. You know what I’m talking about? Jason mattress for one yet, they put those standalone buildings in the middle of these parking lots.
And every time I go to Walmart or the, you know, the strip mall that it’s right next to, there’s no one in there. And every time I think to myself, how is that place a day? That piece of property, they’re probably spending what, $10,000 a month to have that piece of property or whatever it may be. And there’s all, there’s always like one sales guy in there, maybe one customer, if any.
And it’s just because the reason they can do that is because they figured out that what they need to make one sale. To make it worth their while to be in that spot. And while that person is there, they get the pillows, they get the, you know, the mattress protector, they understand the process. And if you don’t understand that process, that customer process the numbers behind it, it can make it very like, cause every time I go there, like Def there’s no, how are they instilling business?
I don’t, it doesn’t make sense to me.
Jason: Yeah. I mean, I, I, it’s funny because, uh, I, I sometimes like, think the same thing where I’m like, how does a business if ever make any money, but it’s really like, they just figured out, like you set the numbers and when you know the numbers, the rest of it just kind of works.
And like you said, like they know what it costs. And maybe that maybe even if they make, they sell a mattress as $10,000 or whatever, they’re not making that. So maybe they need to. Right. You know, whatever. But yeah, I mean, you know, those accessories that you buy, buy a Mac or you buy a bed, then you need a mattress, then you need a mattress cover and then your dog’s going to poop on it.
So you need like a waterproof cover and you need all these things. And it just, it just kind of adds up and you’re not really looking at it like they’re selling you. You’re like, oh man, I really need this stuff. Here’s another example. I don’t want to forget. I took my pen out to write it down and I forgot it during that time.
So I, when I’m buying something new on Amazon and I don’t know if I’m missing anything, I always looked at the people who bought this have also purchased that or whatever, because like it often times. Be products that you didn’t know that you needed. Right? Like I just bought like a golf or I was looking at a golf net so that I can hit golf balls in my garage.
Well, sometimes like the descriptions aren’t clear. So I looked at the bottom at what people also bought with this net. And it was those, those, um, rock. Clips, whatever the hell they’re called Mainers. Yeah. Whatever it was those. And I’m like, oh, I didn’t even think about that. Okay, good. I’m going to need those too.
So that’s how you increase your order value. That’s how you get people to buy things. You know, if you, if you’re selling cell phones, then you just tell people a screen protector and a, an a case it’s just that simple. And usually the more natural you can make that process. The better off you’ll do. But the point is, if you get a sale off of Facebook and then you get another sale and another sale, and each of those sales are costing you $500 each to acquire, don’t just run away and say, Facebook’s not working.
Use some of these things to make it work.
Kevin: Yeah. And Amazon you right. Does a really good job at that. I always get caught up in that and that’s like customers also purchased right. Um, and then the, you know, they kind of curate like a bundle for you, like right under the product and be like, you buy this, is that what you’re talking about?
That same thing. And like, you hit a button and it just adds all, all of them to your car. You’re like, and you’re right. It’s like, you didn’t even think about that other product when you were trying to buy this other thing. So that’s a perfect, a perfect strategy for that. And the last and like, so we’ve talked about the cost of acquisition and the average order value.
All right. So if you can get those things kind of at, you know, your breakeven point or your, um, close to your one row as you’re in pretty good shape, the last one is lifetime value. And if you end up finding out what your lifetime value and obviously lifetime value. Time a customer’s lifetime journey, whatever that may be, or however long that may be, if you have the lifetime value of your customer cost of acquisition and your average order value, you can almost work backwards and just back engineer, the whole process that you’ve created
Jason: or reverse engineer. Yeah. So my son said back engineer,
Kevin: you’re correcting me a lot today and I don’t appreciate it well, too bad. And I think you need to, like, what do you need? Some Gingko biloba or something, because you just forgot that thing that you’re writing on your pad. And twice, today you called me and I called you back within five minutes and you forgot what you called me about.
Jason: So I’ve been fasting for the last. Like 30 hours or 35 hours and it may have something to do with it. Really.
Kevin: You haven’t you been fasting for 35 hours? I didn’t realize.
Jason: Yeah. Lost. Um, I lost yeah, three, three pounds in, in, in like a day
Kevin: and a half. Are you starving?
Jason: No, I actually, I actually ate because, um, The super bowl, I’m having a super bowl party and I just really wanted to do it just to see if I could do it again.
Um, just to see if I had the, like the mental strength to do it. Um, so I basically, I didn’t eat anything for almost two days. And like I said, I was down like
Kevin: three pounds. So you’re losing weight. You’re losing other functions of your brain. No.
Jason: I mean, I don’t know. I don’t know if that has something to do with it.
I’m just saying, usually people say you get more clarity, but
Kevin: it is true. It just feels better. I feel like, dude, let me tell you something,
Jason: man. I actually ate today at like two o’clock because, um, I, like I said, super bowl is coming and I’m going
to be eating like crap. Anyway. It doesn’t really make sense.
I just want it to try it, to see what it would be like again. Um, You could feel three pounds like you don’t realize, and it’s only waterway at this point. Like the first 10 pounds is usually like Waterweight, but like, you don’t realize it looks like my t-shirts just are a little bit looser. My pants are just a little bit looser.
I feel a little bit. It just that three pounds, it might even be like three and a half pounds, but it’s like, you feel that. Yeah.
Kevin: And that one guy, that one guy used to watch too about fasting, like the one thing he used to say that that always stuck with me was like, when you fast, when you. And I feel like we’re obviously getting off track here, but he always used to say like, if you stop eating and you stop your digestion and you’re not eating all the time, your body can do all kinds of other things that it doesn’t usually have to do burning fat.
I always feel like when I’m sick, when I’m sick, I’ll just like a fast for awhile. My body can just focus on being sick or whatever it is. And I swear it works. It does. And it makes, it makes a lot of. Kind of like reset and then when you eat again, you feel like shit, he talks. Yeah.
Jason: And that’s kind of how I’m feeling right now.
Like I eat and I, my stomach’s a little bit bloated. I could feel it, but he actually talks about like curing cancer with his stuff. Or you want to check this guy out? It’s um, it’s the snake. It’s called snake diet. It’s on YouTube. He’s on YouTube and Facebook and it’s probably everywhere else. Uh, his name is Cole something or other, but Andrew.
Yeah, where were we kept? Do you
Kevin: remember lifetime value? The final metric that’s, that’s really super important and really puts, ties everything together because it gives you a better understanding of where you are as a business and how much you can spend in your business.
Jason: Yeah. You know, it’s an interesting number because it’s really, uh, you know, for our business as a subscription business, uh, it’s really been.
A lifesaver, really our lifetime value, because like, there’s been some low points in the business and we have these recurring orders coming in. So, you know, we can really figure out pretty like, like this year, I think we had like a half a million dollars just in renewals. I mean, that’s, that’s a nice headstart, you know,
Kevin: Yeah. And then once you have that, it kind of alleviate some pressure too. Cause I remember our first year running ads, you know, like we just said in the first two metrics, the, uh, the cost of acquisition and the average order value, like we always wanted to be close to the one mark or a little bit over one to feel comfortable.
But now that we understand that, you know, our customer is worth, you know, three, $400 in their whole customer journey, we can run an ad and acquire customers. You know, 0.7 row as 0.6 and be okay with that because we know it’s going to come back around. And that happens a lot too, with some of our clients that have consumable products, you know, we know, you know, if you get them hooked on the product, they’re going to come back and they’re going to want more.
Jason: Yeah. I mean, and then it kind of helps that first one that we did. So if you know that it costs you $500 to acquire someone, a customer. And that person, you know, is worth $800 or a thousand dollars to, I heard some crazy metric that like a Starbucks, like, does it make money until like you go there like three or four times or something?
Um, but then they get like, I think in a lifetime, like $10,000 from people like everybody. For 5,000. I don’t remember the number, but it was like a crazy number, like over the lifetime of a, of a customer it’s like $5,000 or $10,000, whatever.
Kevin: Yeah. All those big brands think all those big brands think about it.
Coke, you know, McDonald’s like, they’re not making any money when you go there and buy a cheeseburger. That’s your lifetime value. Yeah. Right, exactly. Yeah. Think about all the money they’re spending
Jason: really, really important metrics. If you can know if you know your numbers. You know, it really makes this game of marketing your business or this game of business a lot easier because you’re no longer just doing it, like on a whim.
You’re actually doing it by the numbers. And we talk about it all the time. Like you, you know, we’ll look at our numbers and we’re like, the numbers don’t lie. It’s just the, that’s just
Kevin: what they are. Yeah. And why do you think that’s like, when you go on shark tank, those are the questions that they ask.
How much does it cost you to get a customer? What’s your lifetime value? It’s always going to be one of the questions because that’s, that was an important thing.
Jason: Yeah. And, and, you know, you can play with the numbers too, you know, like the, the, um, the cost of goods number, you can play around with that. And that’s why companies are constantly trying to make their products cheaper and cheaper, because that helps like literally.
If your product is $4 to produce, and you can cut that in half, like, think about that, right? Like you, you can cut that in half. So instead of $4 is $2. Now you’ve just helped all those other KPIs. Right. Because they’re there now those all shift, right. Because like, oh, wow. So. No, I’m not losing a hundred dollars.
I’m losing $50. Okay. Now, how do I get that $50 back now, the other thing is it doesn’t necessarily have to be in your cart value. It could be through email, you send a few emails. You’re like, okay. It takes me three days to get back another $200.
Kevin: Right, right. I think that’s a, that’s a good point with the cost of goods too.
It’s like, I think I even got to a good point for people who may be just starting, you know, cause at the very beginning you’re buying less product. So it could just be more expensive just because of just pure volume. So if you keep that in your mind, be like, wow, I cost me, you know, $500 for me to sell this $400 product.
But you know, The guy that does that a manufacturer said he can make this part for cheaper if I buy this many more, you know, so all those kinds of things play into this.
Jason: I mean, yeah. That, and then, you know, um, you know, some of your, uh, like w like we were doing this for our, our, our, um, wildlife photography, um, uh, business that we basically, we base, we basically.
What the hell did we do? Oh,
Kevin: there you go. Got it, dude.
Jason: I forgot again, man. It’s like crazy, but, uh, we, we, oh, I know we did. So we ran, we were running Facebook ads and our customers, sorry, not our customers, but yeah, actually our customers or people that were already on our email list. So we were running this fate, we’re running this Facebook ad to download this PDF and on the thank you page, we’re selling.
And on that, thank you page. Uh, people are buying the journal at half the cost or half the price not having to cross. Right. What we were finding was that people that were on our email list were the ones buying already. So they kind of knew who we were. And at first we were like, we’re not panicked. We were like, oh shit, no, that kind of sucks because they’re already on our list.
But then we got to thinking about it, like, wait a minute, who cares? Who’s buying because they’re going to fund or pay for everybody else coming on the list. So, so what those people are on the list already, we just want to break even. It doesn’t matter how he break him. Even we just breaking even. And that’s all we really care about.
Right. So if we can, we can get a 1.1 X return. We’re making money. 1.2 X we’re making money. From that standpoint. Um, you know, it’s a, it’s another thing to think about, like, you can use your current customers to pay for, or your people who know you to pay for, you know, your Facebook ads. So there’s a lot of, a lot of like cool things you can do once you really know what’s going on or the numbers itself.
Kevin: Right? So look at those numbers, focus on those numbers, cost of acquisition, average order value and lifetime value. And from there you can really go anywhere.
Jason: You go anywhere and you can, you can spend more freely. You don’t have to worry so much cause you know exactly, you know, What you’re trying to get, you know, exactly where you’re trying to go.
So yeah. Really important to those numbers. Yeah.
Kevin: Cool. All right, man. Uh, thank you guys so much for listening. Make sure you guys subscribe, hit that subscribe button. So you don’t miss another episode as always. You can check us out at ecommerceuncensored.com and we’ll talk to you guys real soon
You can also check out the video of this podcast and see our beautiful faces on our YouTube channel. Click here to check that out and subscribe.