BIOHM Health was found by Afif Ghannoum, a biotech lawyer and his father Dr. Mahmoud Ghannoum, a microbiome researcher. The duo wanted to combine their expertise to create a probiotic company that brought research from the academic world into the homes of consumers. In this episode of Shopify Masters, Afif shares BIOHM Health’s journey of building a 7-figures sales channel with an ambassador program, and how they increased customer lifetime value by 40%.
For the full transcript of this episode, click here.
- Store: Biohm Health
- Recommendations: Reveal (Shopify app), ReCharge (Shopify app), Klaviyo (Shopify app), Attentive (SMS Shopify app)
How this entrepreneur used law and research expertise to start a brand
Felix: Tell us more about you and your family's experience in the microbiome world.
Afif: I'm a biotech attorney by background, but my father is considered one of the leading microbiome researchers in the world. He's funded by the National Institute of Health here in the US for his research. In 2016, he did a clinical trial showing that Crohn's patients were developing these very aggressive biofilms in their gut, made of bacteria and fungi. It's interesting because no one has really developed products to address both bacteria and fungi in the gut. We've started to hear about probiotics, but really no one had looked at that digestive plaque–these biofilms growing against the lining of your guts. Based on his research we created BIOHM and developed probiotics among other supplements, as well as gut health test kits that resemble something like a 23andMe for your gut.
Felix: So you have the industry expertise. How did this translate into starting a business? I imagine there are quite a few intermediary steps between knowing the industry and starting a business in it.
Afif: What we saw was that there were specific organisms in the gut causing issues. It honestly wasn’t rocket science, we basically asked, “are there probiotic organisms or enzymes that can counter the bad guys that we were seeing in the gut?” We worked with different manufacturers and we came up with a formulation that would work. What was completely cool about the test was that my dad has been doing this type of testing at Western School of Medicine here in Cleveland for a long time. After his research got published, a woman in Europe wrote him a letter and basically said, my two kids are really not doing well with Crohn's, could you test their guts? He's doing all this academic research for the NIH, but didn’t have the resources for something as simple as testing their guts.
We thought, it doesn't make sense that this level of science exists, but a woman who wants to see what's going on in her children's guts couldn't easily test it. We said, let's do it ourselves. We created a gut testing kit and a software portal that will turn testing that we're doing in people's guts into actionable reports. It was a lot of reducing that heavy duty academic science into real products and tests in a way that consumers could understand, which is at the end of the day, very important. You can have something hugely innovative, but if people don't understand it, it really doesn't matter because they won't end up buying it.
Felix: Let's talk about the product development process. How did you go about finding the right manufacturer?
Afif: I had done a lot of work in the over the counter drug space, so I knew a lot of manufacturers, but I had never developed the supplement. Something that people oftentimes don't realize is that a lot of it comes down to just basic blocking and tackling. I started Googling and looking for people who had expertise manufacturing probiotics, that were able to help doing formulations. I ended up finding a manufacturer down in Georgia–that was our initial manufacturer. It was as simple as filling out a lead generation form on their site and saying, “Hey, this is what I'm looking for, can you help us out?”
Felix: Given the nature of the business, are there a lot of regulations and restrictions that you had to sort out?
Afif: As a general rule, first of all, I think entrepreneurs will often underestimate that, anytime you're marketing a product, you're subject to regulations. Whether it's the Federal Trade Commission or around the marketing claims you're making or the FDA. Dietary supplements are regulated by the FDA. That doesn't mean we don't actually have to get them approved by the FDA before we sell them, but you have to play within the rules of what's allowed with a dietary supplement. A general rule of thumb is, if you are making claims that your dietary supplement can solve a condition or address a disease, you're going to need a tremendous amount of science, and a lot of clinical trials. Otherwise you're going to run into FDA issues.
Manufacturers are subject to FDA regulations. You have to deal with manufacturers that are audited by the FDA, and follow good manufacturing practices. The nice thing about the supplement space–unlike a gadget–you can actually get up and go pretty cost-effectively, but take your time upfront and make sure whoever you're dealing with from a manufacturing standpoint really knows what they're doing. That they're audited by the FDA, they follow good manufacturing practices, and that they have good quality systems. That's going to be important, especially if you're trying to grow your business to ultimately sell it. That's also going to be very important, because investors want to know who's in your supply chain. Do you have legitimate partners? Honestly more and more for your consumer, it's a critical marketing differentiator that you can talk about the quality of your supply chain.
That's something people are increasingly aware of and concerned about. It's actually something when I started manufacturing over the counter products, you did those things so that as a company, you knew you had a good process, but consumers weren't really that concerned about it. Now, they want to know what type of ingredients are in your product? Are they clean ingredients? Do you have artificial ingredients? These are all becoming very important to the consumer. That’s something that on day one, if you're starting from a blank piece of paper or you have an idea, you definitely want to work backwards and understand, “how can I actually use a great supply chain as a marketing advantage?”
Navigating red tape in a heavily regulated industry
Felix: In terms of marketing, I can see how making certain claims or assertions are helpful, but I can also see how that invites some scrutiny. How do you balance that?
Afif: As a rule of thumb, you just have to feel very comfortable with what you're doing. Sometimes when people get in trouble–and I hear this all the time–you'll hear people say, "I don't understand why I can't say this, I see these other guys over here making a similar claim." The reality is, dietary supplements, most over the counter products, and even cosmetics, are all regulated by the FDA.
You don't have to get pre-approval by the FDA. A lot of times people will make pretty wild claims, and they'll get away with it until they don't. You know what I mean? Anytime I'm talking to a young entrepreneur who's thinking about the space, I say, “Listen, push the envelope at your own risk, but it is a risk for two reasons. One, the FDA, but more importantly, if you are trying to ultimately sell your business, or you're trying to raise investor capital, that's an enormous turnoff to investors if they look at your claimsyou don't have the science to back this up.“ You're basically building a toxic business. From day one, I always say, do things properly. Before we even launched, I had a law firm opine on our claims so that we felt very comfortable if we went down a certain road with how we were trying to market the product that we felt was within the rules.
Felix: Do you have to have some sort of legal review whenever you’re implementing changes so you don’t run into a situation with the FDA?
Afif: Obviously, with my background as a biotech attorney, I was able to do a lot of that review internally. It really didn't slow us down, but I think a lot of it is common sense. I've seen people from big companies–and even smaller companies–have their regulatory review of the business slow things down. Honestly it doesn't have to. It truly is a balance between being reasonable in making sure you're not making wild claims and feeling comfortable.
We're still iterating ads on a daily basis, even though we're sometimes doing pretty quick regulatory reviews, just to make sure everybody feels comfortable. It doesn't have to be a drag. I look at it like, what are you trying to do? Are you trying to have a flash in the pan? Get something out there, make a quick buck and move on to the next thing? Or are you trying to build a sustainable business built on real marketing claims, science and technology? If you're trying to do that, it might take a little more time, but it's worth it.
Felix: What is the extent of testing that needs to take place to ensure that one, your claims won’t get disputed by the FDA, but also from a consumer standpoint you can feel confident in your assertions?
Afif: It depends on your marketing claim. For example, if you're making what's called “a therapeutic claim,” where you're saying something like, “because I adjust your microbiome, you will no longer, or have reduced bloating.” That's considered a therapeutic claim. In that you need a double blind, placebo control clinical trial. If you're trying to make a claim like, “it's non GMO,” you can usually just get paperwork from your manufacturer backing that up. It depends on the level. I honestly feel sorry for people trying to navigate this stuff, because it can get really tricky really fast.
An example is a lady I knew a number of years ago. She had a really cool technology that was basically a cream that would help eyebrows grow. If her marketing claim said, “enhances the appearance of thicker eyebrows,” it's a cosmetic claim–a lot less science. If you said, “makes your eyebrows thicker,” you have to do full clinical trials and go through FDA drug approval. Those two things: the appearance of thicker eyebrows versus it makes thicker eyebrows, sounds very similar, but even that little nuance is the difference between a little bit of science and a ton of science and a lot of money. That's where you can trip into some issues.
A lot of people have built some enormously successful businesses in this vertical, by just being reasonable. You know what I mean? A lot of times the other trick I'll tell you is that, you can go to manufacturers and say, Hey, listen, what ingredients do you already have that have clinical trial evidence behind them? You don't necessarily have to reinvent the wheel. A lot of times you can rely on other people's science, and be able to make a clinically proven claim or a science backed claim. There's different ways to get around it.
Felix: Do you face greater backlash when making claims that elicit scrutiny, now that you’ve scaled as a business?
Afif: You don't want to find out, because it can be as bad as a Federal Trade Commission fine that invites class action lawsuits that end your company. Sometimes there's also personal liability. That's obviously one extreme, all the way to an FDA warning letter, which is the FDA saying, we don't really love that claim. What I've found is that the regulators are pretty reasonable. Their main thing is, they will not put up with a product if they don't think it's safe. If your claims are aggressive, they're going to tell you, you need to stop. A lot of the time if you're reasonable with them and they don't think you're what they call a bad actor, they're pretty reasonable.
The FDA does common inspections of manufacturing facilities. We had a product where we had bought the ingredient product from another company, and instead of saying water in the ingredient, it said Aqua. That FDA said, Hey, can you change Aqua to water? I said, "No problem. Do you mind if I do it on my next manufacturing run of the boxes?" They weren't looking to cause us huge problems. They're like, Hey, listen, this is something you need to adjust. It all comes down to, are you being reasonable? Are you trying to do things in good faith?
It's very tempting. You'll see these huge businesses being built. Sometimes you see claims that are absolutely wild. You just have to be like, “you know what? That's not what we're trying to be.” You have to have that discipline. It sounds boring, but we're trying to build something that has real longstanding value over time.
Why you should pitch your brand story, not just your product
Felix: One thing you mentioned is how supplements are cost effective compared to other products or gadgets. Why is that?
Afif: We call them specialty chemical businesses. Anything that's a liquid that you can squeeze out of a tube, or lotion is very cheap to make. A shockingly expensive supplement to the manufacturer will be in the $10 range, but most you can make for a couple dollars. If you take your time, you can usually find a manufacturer that will make a couple 1000 unit initial run. With your initial investment, you can get up and go for a couple $1000. That's what we'll often do, if we're introducing a new product, we'll do a test run.
We'll buy 5,000 units, which for us at this point is a very small run. We'll see if it worked. Then we'll order a much bigger run of product. It’s not easy to do that with gadgets. You have everything from molds you have to buy, to the engineering that goes into it. The sheer cost of the manufacturing can be hundreds of thousands if not millions of dollars to even just get in the market. I always love specialty chemicals and supplements, because the margins are extremely high. It's a strong margin profile, and you can get started with a thousand bottles.
Felix: What was the first product in that production run?
Afif: We had a probiotic capsule, we had a prebiotic capsule.
Felix: Once the production run was finished, how did you go about creating demand for the product?
Afif: The second I knew we were going to launch. We knew it would take us about six months by the time we got our Shopify site up, manufacturing done. I had a little bit of time, so I did a couple things. This is what I always tell people to do. Sometimes people want to feel like this is harder than it actually has to get a little bit of traction, and sometimes it's really about getting a hustle. For me, I wanted to build a PR buzz around what we were doing. I went to Upwork and I hired someone outside the US, and said, “find me a list of all the editors at the top 100 business magazines in the US.”
I cranked out email after email to all the major magazines like Entrepreneur and Forbes. I said, "Hey, I'm going to be launching this. I'm taking high science, I'm turning it into a consumer product. I want to take your readers on a journey." I got Forbes to buy in. They brought me on as a contributor. Pre-launch–before we even launched–I had done maybe five or six articles for Forbes detailing the journey, and it built a lot of buzz. The first article about BIOHM on our launch day was by Goop, who did a big article, and that generated a ton of sales. I went out there to proactively start that conversation. It all came from me spending 50 bucks to get someone to put a list of editors together. It turned into all these amazing, social proof articles about what we were doing. We still use them in ads.
Felix: So you weren’t saying “let me tell you about this product.” It was more from the stance of, “let me tell you about my journey to creating this business.”
Afif: Exactly. Zero magazines and media outlets want to talk about a product. They want to talk about a story. My story was, my dad was this famous scientist, I'm an attorney. I'm going to turn his world class science out of academic ivory tower into a product you can see, and I want to take your readers on that journey. Your readers love entrepreneurial stories. I explained to Forbes how I was going to create value for them and their audience. I also told them I'm going to run ads to these articles like, “I'm already developing an email list, I'm going to be sending this out to people.” I was showing Forbes, “Hey, it's not all about me, I'm going to build value for you as well.”
That's how I got an initial shot on goal. The articles did well. They were very in depth, and I was very honest. I laid everything out in these articles of the challenges and this and that. It went really well. That led to another podcast reaching out to me. Getting a relationship with Goop. We ultimately ended up hiring a PR firm that will leverage all this pre-launched stuff I had done into other opportunities. The thing I always tell people, all these media outlets have an insatiable thirst for content. They need good stories. If you have something interesting, if you have a cool angle, if you have a cool personal story, you can get medium.
"All these media outlets have an insatiable thirst for content. They need good stories. If you have something interesting, if you have a cool angle, if you have a cool personal story, you can get medium."
Felix: You’re saying create a story that people would want to hear of, not necessarily, “here’s a product.” How did you realize that it was the story that would be valuable to publications?
Afif: I knew going into this space that there are already massive probiotic players coming out. The one thing I always thought about was the Dyson vacuum. I remember the ads with James Dyson and I said, dad, no one is going to have a Dr. Ghannoum, we're the only ones that have you. That's going to be our story.
For example, at first we thought, “oh, biofilm is going to be really interesting to people.” What we found was people appreciated it, but it was such high science, it was sometimes confusing. We were like, “listen, you should trust us because this guy has published over 490 papers. His work's been cited by over 27,000 scientists. So you may not know much about probiotics, but…” What we found is, customers didn't really understand probiotics, but what they understood is this guy is an NIH funded scientist that knows what he is talking about, I bet his product is good.
Creating relevant, digestible content to explain complex information to your audience
Felix: You mentioned that a big part of the journey was taking this very high level scientific information, and transforming it into digestible content the consumer would understand. What was that process like?
Afif: 100%. We realized early on, this was going to be complex. If we stayed in high science, their eyes would start to glaze over. We reduced it to a very, very simple promise, which was, “your gut has bacteria and fungus, your probiotic should too.” We harped on this idea that, if you weren't getting both bacteria and fungi, you were only addressing half the issue. You may not even understand why you have bacteria and fungus in your gut, but that simple positioning is very logical. It's what I call YouTube logic. They may not understand quite why it's an important step, but they see it.
I made the connection: Did you know you have bacteria and fungus in your gut? Okay. I didn't know that. Did you know most probiotics only deal with bacteria? Yeah. We're all aware of Activia and all these products that have been around forever talking about good bacteria. Did you know that BIOHM has bacteria and fungus in it's probiotics? Don't you think you need both? That was enough of a hook to get people to say, “oh, okay, that's interesting.” I didn't know there was fungus in my gut. Then they'd start to explore. Through email, through the middle of the funnel ads, we start explaining the science a little more deeply. That's how we broke down this very sophisticated probiotic approach: Did you know there's bacteria and fungus in your gut? Don't you think your probiotics should have bacteria and fungus?
Felix: What are some of the ways that you connect with your prospective customer to bring them further along the funnel?
Afif: One of the most valuable resources and assets we built as a business was an Ambassador Program. Up to now, we have thousands of them. Even just that channel is a seven figure channel. What I always tell people is that, the most valuable part of our ambassador program is the way they've taught us how to talk about biohm, because they are experts at positioning a product to their audience explaining the complex science. That was such an invaluable tool because a lot of times we realize, wow, they're way better at explaining this than we are. We approached it by, one, after a while we had so much of this User Generated Content, that we would use that in a top of the funnel ad. Then on retargeting, we would have a blog post talking about, what's up with fungus in the gut?
"One of the most valuable resources and assets we built as a business was an Ambassador Program. We have thousands of them. That channel is a seven figure channel."
We got articles in places like mindbodygreen, Muscle & Fitness. They are even more simplified like the buzzy new probiotic that's got this secret ingredient. Or like, is your probiotic missing this key ingredient? They would use these little phrases. From the top of the funnel to middle to the bottom of the funnel, we would slowly drip out more information. Then we did things like, we built a Microbiome Podcast. That's downloaded maybe like 3000 times an episode, which for a topic like the microbiome is not bad, but we knew some of the audience wanted in depth interviews with experts. Other people just wanted to understand who the scientist behind it was, and that was good enough for them. Most people are in the middle, they want a little bit of it, but they don't want to get overwhelmed.
Felix: How did you build out the Ambassador program? Where did that start and how did you expand it?
Afif: It's really not that complicated. The complicated part is the consistency. What we did is, we reached out to hundreds and hundreds and hundreds of people every week. We had an intern at first doing it. The premise was pretty simple like, “Hey, we have this new product, we see you're into fitness and health, we'd love to send you a sample.” We didn't ask them for anything. I think that's where a lot of people make mistakes. They're very aggressive on the first outreach. It's a turnoff. It's all about, how are you helping them? We'd say, your audience is really into wellness. You talk about gut health. We wanted to share the science behind our probiotic and send you a sample to see what you think.
We're helping them. Looked into seeing that they actually care about this topic. Their audience is going to care about this topic. What we found is that it really resonated. If we saw they would post and we'd say, Hey, thanks for posting, did you know we have an Ambassador Program and we'll pay you a commission if anybody buys through you? Slowly but surely we built that up. We have people that make 20, 30 bucks a month all the way to tens of thousands of dollars a month. To this day, we do individual reach out and manage it all on a spreadsheet. It's really not complicated. The hardest part is the consistency, seeing who's posting.
How to scale up your ambassador programs
Felix: You mentioned that you learned a lot about how to market to your audience from your ambassadors. Were there any eye openers or surprises that came to light with the program?
Afif: I'll give you a great example. Initially when we launched, we just had capsule products. We saw a lot of ambassadors who were parents who were opening up the capsule, and asking us, “can I put the powder in my kids' yogurt?” We're like, sure. Why do you want to do that? The kids won't eat a capsule, but if I mix it in, they'll take it. It actually ended up turning us onto the idea that we should create powdered versions of our products. We ended up producing Super Greens and Super Reds from seeing that all these ambassadors were trying to food hack stuff for their kids and for themselves. In a protein shake or that sort of thing. The Greens and the Reds are now our number one and number two products–all from seeing this insight of an ambassador opening the capsule so they could show a yogurt hack to their audience.
Felix: Not just learning about how to talk about it, but also what products to develop based on how they were using the different use cases for your product.
Afif: We always talk about internally, like “ego is who's right, truth is what's right.” We didn't care where the idea came from. When we saw it, we're like, that is a great idea, there's a product there. We're seeing their boots on the ground, this is how they're actually using the product. It's important to keep your eyes open for ideas, wherever they come from.
Felix: It’s interesting that the most complicated part is the human psychology aspect of it. How do you keep the ambassadors consistent and engaged?
Afif: We do a couple things. One, we run the entire program with two people. This is important, because especially when the iOS changes happened, everybody saw their cost of acquisition go up. Our cost of acquisition for an ambassador sale, one, was a much stickier customer, because someone was buying from a trusted ambassador, but two, it was 10X lower cost of acquisition compared to our paid advertising channels. It’s an incredibly valuable channel for us. The way we encourage them is, we do a number of things. We look at this as like, how would I want to be reached out to? Everything is done over these digital channels now, but these are people. Ambassadors that were starting to get some traction, our team would reach out to them, send them a quick email like, Hey, happy to jump on a quick call.
One of the things that really was important is, we created all sorts of lifestyle photos–recipes with photos. We basically did a big Dropbox folder and we said, “Listen, grab whatever you want from this, so that we're making your life easier to post about buying.” If every time they want to do a really nice photo featuring the product for their audience, that's a lot of work. We're basically like, we're going to create the assets to help you do that. The other thing we did is, we would do contests. The problem is, you're going to have some ambassadors that are the giant producers, and then you're going to have some people that they just try, but they don't have a big audience and they really don't produce a lot of money.
We would do contests based on sales, but then we would do other contests based on the best piece of content produced. Whether you had 500 followers or you 500,000, the person with 500 followers could win that contest if they produced a really killer video. A lot of those videos we would end up using in ads or testimonials. I look at this as a cost of the acquisition situation. We would give them cash prizes. A lot of times people get very finicky about money. But it costs money to make money. Reward these people. People will do things if they're being rewarded. Then also plain old recognition. We do emails. We have a private Facebook group and we do email lists to recognize ambassadors.
We've had top performing ambassadors on our podcast to talk about their gut health journey. We send their story out to tens of thousands of our subscribers. That's awesome for them. We really put them up on a pedestal. It makes them feel like they're an important part of the business, not just a commission generator.
Felix: One thing I realized from the ambassador program is that acquisition was important, but retention is critical. Can you expand more on this?
Afif: The way I look at it is that the ambassadors, their job in the funnel is the acquisition piece. When they bring a customer in, they're very warm. We do a survey after people purchase like, how did you hear about us? Even though we spend a lot of money on paid acquisition, the number one way people hear about us is through an ambassador. The reason they purchase is because they trust what they're hearing from this person. They're very important. On the retention side, it really comes down to understanding who your customer is. We do a lot of what's called RFM segment patients, where we're looking at the recency. How recently have they bought the frequency? How often are they buying and how much are they actually spending with us? It was really eye opening to us when we did that analysis.
We had great insights. I'm just making this up, but like 25% of our customers are soulmates. These people love us. Guess what? They're worth 20 times this other group of people that are most of our customers. What we found is they're really just bargain shoppers. They don't care about the BIOHM story. We were just the probiotic on sale when they came into our world. Once we started understanding through our data who our best customers were, then we started going to like actually picking up the phone and talking to them, why do you love BIOHM? What was it that brought you? What were you struggling with? What we found was, they really trusted our science. These were people buying products from some of the biggest companies in the world where it's just an impersonal, giant brand. Your dad, I trust him to the fact that he's a real scientist, that makes me feel good about the product.
"By understanding our customers, we were able to really optimize our retention. We saw our customer lifetime value double and then some over 12 months when we started paying attention to retention."
That allowed us to tighten our messaging, because we saw these are the things people actually care about. It's funny, we had thought initially that a lot of our customers would be crossfitters, fitness enthusiasts, optimizers–it turns out they're like 5% of our customers. Most of our customers are people that are dealing with pretty serious digestive issues and they are looking for something that makes them feel better. By understanding our customers, we were able to really optimize our retention. We saw our customer lifetime value double and then some over 12 months when we started paying attention to retention.
“RFM” analysis: The secret to BIOHM’s success
Felix: You mentioned this a couple times, RFM analysis, what is that?
Afif: It's basically kicking your customers and bucketing them based on three things, R, F and M. “R” is “recency.” How recently have they bought a product? Have they bought within the last 30 days or has it been six months? Obviously the more recent they've bought, the more valuable they are. “Frequency” is, how often do they buy? Do they buy on average two times or 12 times? Frequency is the number one factor in building your customer lifetime value. That was a critical one for us to look at. That's R, and the F. The “M” is monetization. How much are they actually spending? The most valuable customers have a high “R,” high “F,” and high “M.” We call them soulmates.On the other side of the equation, people that haven't bought recently, don't buy frequently and don't spend a lot are your worst customers.
Ironically, a lot of times, those are your biggest pilot customers. You ran a giant sale at some point, they came in Black Friday or something like that, but you’re not really making a lot of money off of them, and you're still spending a lot to acquire it. RFM analysis helps you figure out which customer segments should I really be concentrating on and going after finding more of those people. That analysis we were actually doing by hand–we have a data scientist, and it was laborious. We ended up finding a great Shopify app called Reveal that does it all automatically. From that, we're able to see, okay, these people are most valuable, we got to find more of them. These guys are less valuable, let's put them off to the side. It's been just eye opening and game changing for business.
Felix: Is there a certain point where you're trying to just get as many customers as possible regardless of their likelihood to become a soulmate?
Afif: When you're starting off, that's what you have to do. You have to figure it out, because the last thing you should be doing–and we're all guilty of it–is you walk into a business a lot of times thinking you know who is going to love your product. A lot of times you don't know until someone takes their wallet out. I don't care about customer research, any of that stuff. Unless someone takes their wallet out and buys from you, you don't know anything. At first you have to sell to whoever you think makes the most sense, but over time you start to have enough of a base that you can predict and anticipate. To your point about the soulmates, it's really doing a couple things.
"At first you have to sell to whoever you think makes the most sense, but over time you start to have enough of a base that you can predict and anticipate."
One–I'm not kidding–we literally picked up the phone, sent emails and said, “Hey, listen, thank you. You're a great customer to BIOHM. We'd love to get on the phone with you for 30, 45 minutes–happy to give you a Starbucks gift card or free product or whatever you'd like, and we'd love to learn why you love BIOHM.” We found out so much, what are the jobs that BIOHM is doing? We found a number of jobs that we were helping people accomplish like feeling better, feeling like they were doing the best they could for themselves. That allowed us to hone in on our messaging, but also to find more people like that. We found a vast majority of our customer set are older, they're dealing with digestive issues, and frankly we weren't targeting them.
That allowed us to do better targeting. All you're trying to do with increasing customer lifetime value is four things. You're trying to acquire better customers. For us, it was trying to acquire more people that were soulmates. Once you have those people in your world, you have to do everything you can to make their onboarding and their experience great. You should be able to help them, you have to make them feel like a VIP because they're going to spend a lot of money. Then this seems obvious, but I think a lot of people ignore this, you have to do everything you possibly can to keep them. In our customer portal, we use recharge. We were seeing that our subscription rate a couple years ago was actually pretty high. When we reached out, we would ask, why are you canceling?
I have too much product, it's more expensive. We redesigned our portal and we made it super easy to skip a subscription month, or if someone was struggling, because it was a little too expensive, we would apply a 20% discount. We saw our cancellation rate dramatically drop. We saw everything from our loyalty revenue jump, our subscriber numbers jumped. All because we took the time to understand what's this pain point for them? The last thing we really work on is trying to reactivate customers that have become disengaged. What does that mean? Soulmates are not motivated by promotions–they love your product. We hear people tell us, I would pay if it was double the cost, because we solve a real problem for them.
Your bargain shoppers gave you money too, but they're really motivated by promotions. So even though they're not your ideal customer, they're still in your world, maybe you can reactivate them with a rock solid promotional offer or a bundling or something like that. The more you take the time to understand who your actual customer is, you can really improve that retention that customer lifetime value. Especially now with how bad people have seen the cost of acquisition going out because of all the iOS changes. I personally believe retention is going to be one of the critical marketing channels moving forward.
How identifying and targeting “soulmate” customers should be your brands primary focus
Felix: It’s important to note here that you shouldn’t stop at the RFM analysis, because once you have that data, the soulmates might have other valuable insights to share. You need to dig a little bit deeper.
Afif: You absolutely nailed it. That's where people get mistaken. Data won't do anything for you. It's really three phases, one, doing this RFM analysis, doing other retention analysis, and really understanding your numbers about your customer. How often are they buying? RFM analysis, what's the days? What are the chances of them buying a second time from you? Once you understand step one, the data, then step two is, really understanding who are these best customers? You do that two ways, qualitatively–you pick up the phone and you talk to these people. Either they feel they're above that, or we're too big. I'm talking about like 20 people, not hundreds, just to get a sense of who these people are.
You do qualitative, you send surveys out and try to understand who these people are? As I said with RFM analysis, really breaking down who they are just by the numbers. The last is the action items. Once we heard that people were canceling because they didn't know they could skip, when we fixed that, then it's about a better onboarding process. Is your customer service team helping you sell? Do they know about all the promotions that you have going on? Do they have strong ethic cues? It's really that third part where the magic is made and takes a little bit of time, is really improving that user experience, the type of promotions you're doing by segment of customer, and then these other things regarding all UX.
Felix: When you solve a problem for a soulmate, does that typically trickle down to the lower scoring RFM customers, or is it typically the opposite, where you’re solving a pain point for the most valuable customers at the expense of the lower value customers?
Afif: That's a great question. Overall, if it's good for the soulmates, it's going to be good for the entire process, but the main point is that, over time you really want your business directed towards those soulmates. Those are the people you should be trying to serve. It's really wild when you do the analysis, we've seen that some customer buckets are worth 50 times less than a soulmate, but we're spending the same amount of money to acquire them. Isn't our time better spent acquiring less soulmates, but way, way more ideal person for our business? It can take six to 12 months to really see those metrics start to move. What's wild is when you do the analysis to look at what happens if our retention rate goes up like 5%, it's an exponential difference to your revenue and your profit, because they're already in your world.
"Over time you really want your business directed towards those soulmates. Those are the people you should be trying to serve."
Felix: Any other apps that you recommend others checkout that you've used to help run the business?
Afif: There's the classic ones like Klaviyo. We really have loved Attentive for our SMS. A lot of these apps from like the popups to things on site, there's a lot of great options out there. Like just UNO can be great, especially when you're starting off. Now we run popups through Attentive. Those are the mega driver apps that we use; Reveal, Klaviyo, and Attentive are huge for us. UNO early on was really good.
Felix: What would you say is the main focus for you over the next year?
Afif: The main focus is continuing to really hone in on who our best customers are. We're so focused on building amazing products based on cutting edge science that we have probably a dozen new products coming out over the next year.