Powerful Data Insights Most Amazon Sellers Ignore w/ Rael Cline – #20

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The Brand Builder Show
Powerful Data Insights Most Amazon Sellers Ignore w/ Rael Cline – #20
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Welcome to this week’s episode of the Brand Builder Show where we are joined by Rael Cline. Rael is the founder of Nozzle – a tool that helps Amazon sellers understand the journey of their customers in order to be able to reduce acquisition cost and increase customer lifetime value.

Key Topics:

  • Why understanding customer acquisition cost is becoming more and more important on Amazon
  • How the lifetime value of a customer impacts our marketing efforts on Amazon
  • How Amazon aggregators are viewing customer metrics when making acquisitions

Explore Nozzle:

>> Nozzle website

Connect with Us:

Useful Resources:

If you got this far, there’s a chance you enjoyed the episode… if so, please consider leaving a review – we really appreciate it!

Talking Points:

00:00 Ben talks about Rael Cline

01:56 Rael talks about himself

06:50 Understanding your customer’s purchasing behavior

10:01 Why Rael chose Amazon

15:40 Biggest challenges for sellers in accessing customer data on Amazon

22:57 What is the primary use case for Nozzle?

24:31 How much can I pay to acquire a new customer on Amazon?

25:40 Profitability vs. Growth

34:54 Increasing the customer lifetime value

39:41 How do you adjust your customer acquisition cost?

43:15 Future plans for Nozzle

Ben Donovan 
Well, welcome back for another great episode of The Brand Builder show today I’m joined by Rael Cline, he is the founder of nozzle is a tool that helps Amazon sellers understand their customer journey, understand the lifetime value of a customer acquisition cost of a customer. All topics that traditionally Amazon sellers haven’t really been taught about haven’t learned about haven’t spoken about because we just sell products on Amazon. But as you go to really want to try and build a legitimate business, a real brand. Things like customer acquisition and customer lifetime value, they do become much more important. And as competition grows on the platform, again, they become much more significant metrics to look at. And so this for me, it was a fascinating conversation with Rael, I’d love to hear your thoughts on what you think not only about the tool, but also about the topic, customer acquisition. Some of this more mainstream direct consumer, ecommerce mindset and strategies. Check it out. See what you think. And let me know. I’d love to hear your thoughts. Let’s get into this episode with Rael. Awesome. Well, welcome to another episode of the brand new builders show. Great to have rail here. Hopefully I’m saying your name right Rael, you can correct me if I’m wrong in a minute. Absolutely right from from a nozzle. Another great name. Really excited to learn all about what you’re doing in the Amazon space. And thanks for coming on the show.
 
Rael Cline 
Well, thank you so much for having me. It’s great to be here
 
Ben Donovan 
a fella. I want to say a brief. It sounds like you’re from your accent. You’re not a Brit. You’re living in the UK right now. Right?
 
Rael Cline 
Indeed, I’ve been here. Gosh, close to sort of what is it now nine years or so? But yeah, I’m South African, originally, so we can get into that little backstory if you want.
 
Ben Donovan 
Yeah, let’s do it. Tell us a bit about yourself? What kind of brought you to the UK? And yeah, give us a little bit of a background on your journey into online business.
 
Rael Cline 
Yeah, sure. So I grew up, I spent the first I don’t know, 20 or 20, something years in South Africa. I came to the UK in 2010. But my career really was actually in, in Finance. So I studied finance, I worked in finance. I did a whole bunch of spreadsheets with fine heads, things and all that. And I came to the UK in 2010, to study a master’s in finance at Cambridge, Cambridge University. And when I graduated, I got out of finance altogether. So it’s kind of an expensive way to learn what you don’t want to do. It’s, but I just, I mean, there’s still the best decision I guess I’ve ever made. But in retrospect, but I, you know, companies kind of mostly exist in spreadsheets, you know, anything sort of advisory, there’s nothing wrong with that. It’s just not what I want to do. That, you know, you building models, and you know, all these sorts of things. And all models are wrong. It’s just a question. Some of them are useful, some aren’t. So I wanted to get something much more sort of tangible. So in 2000, what was it 2013? That’s kind of why, I guess first of all, first foray into into the online world, and I co founded a company called Media gamma in London. And media gamma was kind of niche, I’d say, it was focused on online advertising, but what’s called programmatic advertising. So this is the world where someone arrives on a, on a web page, there’s a live auction to show somebody a display ad, you have 100 milliseconds to submit a bid a winner is chosen when his ad gets shown to you. So this whole thing is like 100 milliseconds. And so we were involved in writing custom algorithms for to submit bids in these in these auctions, right. So we were doing for the buyers. So let’s say a games company, they want to get you to download their app or, you know, big sort of grocery companies, whatever it is, we will do these these custom algorithms, and we will work on the other side. So if you’re a publisher that’s hosting the ad, you of course, want to get the highest possible but so we were involved in the algorithmic component, and it was spun out of a university, a computer science departments at University College, London, UCL. And so we, we built that business and sold it close to about three years ago now to one of our longtime customers called the beeswax in New York. And that, but that obviously just taught me so much, right? I mean, what to do, what not to do. We can talk I mean, I could talk for ages on machine learning and algorithms and the value and all that kind of stuff. But I guess one of the key lessons and this is why, why it will it’s relevant for this conversation. One of the key lessons for me is that if I look back and look at it For the customers that really, really benefit and did really well, it was those customers that were interested in stitching together the entire journey of a customer. And what do I mean by that? So a games company is interested in not just somebody, let’s say, downloading the app, but they’re interested in what happens afterwards, right? They’re interested in, when does someone make their first purchase? What happens after three days, 10 days, six months. And so they were always mapping that entire journey, and then working backwards to the advertising and saying, okay, given that, on average, I know this about my customers, right? After three days, the profit per customer is worth X. And after 10 days, and after six months, it’s worth all that and how many of them still stick around after you know, three days or six months, then I can then let’s discuss the advertising, then let’s discuss how much I can submit in a bid in one of these auctions, because I’ve got all these numbers to back it up. And so a lot of the gaming companies were really successful, our partnerships were great. And so when we sold media gamma, you know, really looking to leverage this idea, right? Like, where else can we apply the same sort of thinking, and you quickly land on Amazon, really, because for a number of like, quite unique reasons. Number one, Amazon is got the datasets, right, the both the advertising side, and obviously what happens after the purchase? Number two, they have API’s for that. So if you’re a third party tool provider, you can access this information automatically, right, you put some sort of software development together, and you can do this programmatically and scale it. And number three, of course, Amazon is just massively growing in all sorts of ways. This is even pre COVID. Both the advertising side and of course, just the marketplace itself. And so we thought this is a tremendous opportunity to really understand your customers. And the more I looked into the Amazon ecosystem, the more I realized that actually understanding your customers is just a sort of black box within Amazon, right? Some of its deliberate, some of it isn’t, but it’s really, really hard to understand. Yeah, who are the people that are buying furniture from you? And I don’t mean necessarily mean, you know, it’s been and it’s this individual, it’s not so much that it’s just, what is the behavior of your customers? What are your top? You know, how are your top 10% of customers different to your bottom? 10? What, you know, what are they doing differently? Are they buying more regularly? Are they buying different products? Are they all those sorts of questions? And again, informing back on back on the advertising what you should do about that? So I know, that’s a sort of very long answer to your question. But that’s kind of my journey from from financing to into the programmatic advertising sort of algorithmic piece. And then and then it’s a nozzle. What it does today.
 
Ben Donovan 
Yeah, it’s good. I mean, yeah, you wanted to kind of like my next four questions. Sounds good. But I got plenty more or less.
 
Rael Cline 
So we can go into a lot more detail on all these.
 
Ben Donovan 
Plenty more questions, because the metrics and the, you know, the strategies that you’re talking about aren’t traditionally, they’re not really talked about much by, you know, Amazon sellers, quote, unquote, this wave of sort of Amazon sellers that just want to sell products on the platform. But I think it’s really such an essential conversation, because, you know, real businesses, real brands, they talk about customer acquisition, lifetime value, all of this stuff we’re going to get into, and I think is really key for Amazon sellers, if they want to grow into building a real brand, a substantial size business is understanding this stuff. And you’re right, you know, one of the big challenges is kind of accessing that data. But before we do get into that, I would love to hear about that, because you kind of one of the questions I wanted to ask was, well, why Amazon? For the software tool? Right. But yeah, you kind of answered that. But were there ever any other industries that you were looking at that you were kind of like close to? Or is it always dead? So Amazon?
 
Rael Cline 
Yeah, I mean, we’re certainly looking at just general econ. So what can we do on Shopify? Or just, you know, non sort of gated ecosystem, shall we say, right. But really, the two biggest candidates in ecom three years ago, you’re kind of looking at, but either Shopify or Amazon. Shopify has got amazing. API is like a developer’s dream. Whereas Amazon, honestly is on the opposite end of the spectrum there. It’s a bit of a nightmare. But yeah, I mean, we just, I guess, place the bet that on Shopify, there’s, I guess, a lot more competition for people like you could be doing this stuff and a lot of a lot of DTC. Businesses are already doing this sort of thing. Whereas Amazon native businesses, this is now this is all new, really. And that’s good. And it’s bad, right? It’s good because clearly, it’s an opportunity. But what’s been tricky for us, particularly like in the very beginning, is what people weren’t what we would call problem aware, right? Like this is a very, very new way of thinking and the concepts of you know, profit because smell or customer lifetime value, customer acquisition got all these sorts of things and how that changes what you like how you think about your business. And it’s quite a fundamental change that I think was quite a challenge. And still is a challenge, frankly, to, to convince people or to educate people on why this way of doing things is valuable in the first place. So, you know, it’s good, and it’s bad. But Amazon, I think, is just uniquely, much more so than than Google and Facebook uniquely positioned on both sides. On the datasets side, right. I mean, if you’re doing Shopify, you would still need to connect, you know, Facebook, Google or whatever, you’re, wherever you’re driving your traffic from on the paid side, to Shopify, and it is doable. It’s just, I guess, more, you know, more competition, and maybe a little less clear what our value prop would be compared to the the Amazon space. So that’s why we landed on, on Amazon,
 
Ben Donovan 
good stuff. And how does the company look, you’re leaving things if you’ve got developers, and you’re coding stuff yourself?
 
Rael Cline 
No. And this again, I’m happy to take a bit of a tangent on this. But no, so this is the second I guess, tech company that that I founded, I don’t code. And I unashamedly don’t code. And what is super important is to surround yourself with knowledgeable, knowledgeable people who can take care of those things. I mean, any business, really, you need to have complementary skills, right? Like someone to do, perhaps sort of product or commercial type stuff, somebody else on the technical side. And clearly, it’s very important for me to know, to ask what the right to ask the right questions, right? If you want to build something where you know, where the risks in this, how do we scale this thing? What are the trade offs between what’s called technical debt? So if you take a shortcut, now, you’re going to pay, you’re gonna pay for that at some point in the future, and that compounds over time. So let’s understand those trade offs. What are the bottlenecks, like, learn to ask the right questions, but to actually sit down, you know, in an IDE, or a terminal and start coding is not a good use of my time, right? It’s just, you know, most, even if I learned that, I would never trust myself to put anything near production. And so it’s just a case of finding the right people ultimately, to get the right collective skill set for the business. So we’re up to about, you know, what is it now about 13-15? People? And, yeah, I mean, it’s, it’s obviously, a very heavy emphasis on, on product and in a to provide a context, that’s a lot of software developers. So what we call the back end, on the API side, and the front end, which is how the users interact with, with, with our tool, product managers, you know, all that sort of stuff. And I guess one of the things that also that I’ve learned is, if you might have ambitions I guess, to start off, where it’s very, I guess, low touch from nozzle. So it’s a some sort of tool. And, you know, it’s very obvious that you can just log in or try or do a free trial and very hands off from like, nozzle. But ultimately, in the early days, it’s pretty much the exact opposite. You want to kind of over emphasize or over index on. Get speaking to your customers early on, right, and not just customer support, just what we call customer development. Like, are we even solving the right problem in the right way? Yeah, maybe we’re missing something else. And so it’s not just like fully tech loaded with no sort of customer facing people, particularly in the early days where you need to actually validate that you’re building the right thing for the right reason.
 
Ben Donovan 
Yeah, that’s good. That’s good. Well, let’s talk about that problem you’re solving then which the first port of call of that, of course, is collecting data on Amazon, which is notoriously hard. It’s getting harder, how long?
 
Rael Cline 
How long do you have to go on about that?
 
Ben Donovan 
Exactly, exactly. It’s getting harder. And it will continue to I’m sure. So, you know, can you for anybody that’s maybe new to the game, or, you know, doesn’t fully understand it? What are the biggest challenges for sellers when trying to access customer data on Amazon?
 
Rael Cline 
Yeah, well, there are problems that are related to just accessing like, general problems with Amazon’s data, I would say. And then there’s surely, of course, stuff around around specifically customer stuff. So starting out at a more general level, there’s Amazon’s actually in the middle of a transition of their API, so they bought their original API suite, the M dub that’s called M, Ws. That is, Gosh, 12 years old, something even not even longer than that. I’m even older than that. And really, the use cases that they built it for, are just not use cases that it’s used for today, right? It was kind of built if it was built almost as if were that with no tool providers in mind. It was bought as if a brand itself was going to be using those API’s. And so, you know, there’s some some very big limitations on scaling, and how much data the speed at which you can actually draw down data from Amazon’s API’s. And what That means in a very sort of, to bring it back to the customer. That means is, it can literally take days, and I’m talking like three, four days. And for very big accounts, it can, it can actually take a week for us to draw down all the data from your account. So, you know, one of the most important metrics as a tool provider is something more we called time to value, right? somebody signs up to nozzle, they’re super excited, awesome. And then we’re like, see you in a few days, right? It’s just that it’s just the biggest lead up. And so this new API, selling partners API is just a lot better, obviously, scales a lot better, all those sorts of things. And the old API, I believe, they they’re phasing it out their various kind of times. July, I think, is kind of one of the big ones. But anyway, the new API will take will take care of a lot of like the actual throughput and how quickly you can draw down data all that. The other big problem you have on Amazon’s API’s is actually understanding the definitions of the data. There are a lot of reasons to like Amazon. But one of the reasons to not like Amazon is the documentation for a developer, it’s actually quite difficult to understand what it means a particular what is the definition of this, of this field, or this metric? Or any of these sorts of things is, does it include mobile data, or you know, all those all those kinds of things, and it’s not necessarily matching up to what the definition on Seller Central is, for instance. So it’s not, it’s not always not always sort of parity there. So that’s another challenge. Amazon itself is a very siloed organization, right? So you’ve got like the advertising datasets, you’ve got all the retail data sets. And at least on the API side, probably on the commercial side, too. But on the API side, those teams don’t really talk to each other, all that much, right. And so like understanding, especially if you want to try join those datasets, and you know, all that kind of stuff, actually trying to understand how to do that, and what the data means and how it behaves. And all that is a big challenge. I mean, we spent over a year speaking to the different teams within Amazon trying to, like actually understand, you know, is it? Can we even join them in the first place? Here’s the fundamental question, it doesn’t make sense to do that, like is on both sets of data at the right level of granularity that you can actually do that. I mean, all these sorts of things. So it’s a very big job to, to actually understand. Understand that. So yeah, I mean, those are, I guess, the general challenges around working with Amazon’s API’s they are I mean, I know I’ve criticized I guess quite a lot. But, you know, the selling partners API is is a huge step. And, you know, they’re investing a hell of a lot in those API’s as well,
 
Ben Donovan 
is that so you say it’s rolling out at the moment.
 
Rael Cline 
It has been for, gosh, over a year, year and a half, something like that, like we’ve known about this migration. They’ve had to extend the deadline a few times, because they keep saying, you know, the old ones going to stop working at this date. And then there’s so many issues, kind of with the new one, this one is one, they’re like, actually, it’s not as dated six months later. But what I mean, as I say, Amazon is investing in these API’s. And, yeah, I mean, some of the stuff is a bit rough around the edges, etc. But you know, that there’ll be a good state, and there’ll be able to do far more than the old API’s as well. Right? So like, we’re already seeing stuff that the old API’s would never do, like, we can, we can do, like, you know, a plus content, stuff, but via API’s, right? Like, I mean, we haven’t, we haven’t, you haven’t invested in that. But for instance, you can create an edit your A plus content, without having to log into Seller Central, if you’re prepared to build your own interface around that, and etc, etc. So, like, all those kinds of things, is just making the selling partners API have a lot better. So yeah, significant, I guess, historical challenges, some existing ones, but you know, it’ll get a lot better over time. They’re committed to it, they’re investing in it. And I think there’ll be really beneficial for whole, a whole bunch of the whole the whole ecosystem, ultimately.
 
Rael Cline 
Then you get to the second part of it’s on the customer side, the customer data side in particular. So that’s what he’s been, that’s always been a challenge. Because I mean, in a legal sense, of course, you will never ever own the customer relationship. And that’s kind of the big difference with Amazon versus the the CEO in many other places. So there’s no ambiguity around the legal side of it. It’s just there’s never going to happen. The on the data side, you in the new API’s, there are a lot more. What’s the word? A lot more vetting that takes place around if you’re going to access more sensitive information. So if you want something like hashed email addresses or whatever, you have to go through an entire process where there audits your whole tech team, your whole organization, frankly, hours and hours and hours worth of of work to get through the vetting and to approve the use cases right I mean, the MSS T’s and C’s are pretty clear around hate using it for tax purposes. or printing shipping labels and stuff like that. But if you have unique other sort of use cases in mind, you can make a case to do that, which we’ve done successfully. So it just, it’s a hell of a lot of effort to do this. So they’re really tightening up. And that’s just the wider regulatory environment worldwide, right? Just more sensitive around PII, personally identifiable information. And so they’re really being super, super careful, rightly so. around all of that sort of stuff to stop any abuse or bad actors or sloppy security practices, or any data leakage or that sort of thing. So I fully support that. I think that’s, that’s absolutely the right thing, the right thing to do, but it just, you know, obviously raises the sort of barrier around accessing the sort of information and the use cases associated with it. So yeah, there’s definitely challenges. But as I say, if you’re if you’re a good actor, you’ve know what the best practices are. And you put in a lot of effort, as I said, it took us a whole engineering team hours and hours and hours to prepare for the, you know, the whole vetting process. And then obviously, on the use cases as well, yeah.
 
Ben Donovan 
Yeah. I mean, I think I agree with you, in terms of all the privacy, I think that’s, that’s great. I think they’re just a challenge, like you say, is that barrier that it creates for being able to, you know, primarily communicate with customers, that’s obviously a big thing. Yeah. And to be able to have a, you know, a customer service to Amazon and making it more and more protected from their end. You know, when I started seeing what you guys do, I was surprised at the depth of data that we can do to provide, you know, because, yeah, front end sellers don’t realize to be honest, that there’s actually that much data in the system. So what you’re doing, yeah,
 
Rael Cline 
it’s an extraordinarily rich data set that you can do these things for them, you can do all these sorts of things. I mean, I guess, I guess, the concern. So I agree, I totally agree with your principle of you need to be super cautious around who handles these sensitive datasets. I totally agree with the principle the the issue I guess, I would have with it is, you know, how much are Amazon hiding behind that terrorist to just restrict the commercialism and some of it, right, they’re using it being overbearing, deliberately, too overbearing as an excuse to, you know, just sort of keep more of a sort of arm’s length, distance from sellers and the customers that are buying from them? So sure, I mean, I think, you know, that’s, that’s up for debate, and how much ultimately, are they hurting innovation, by just making those barriers too high. And a lot of, you know, tool providers that want to enter the space can’t do so? Because they’re just never going to have have the resources to do that. I mean, I think it might be quite difficult. If you’re, you know, just one or two people looking to get started, you know, you want to do something quite quickly to see whether it’s got traction, to wait, like, you know, I don’t know, months and and to go through this whole vetting process is probably not going to be viable. So how much are they hurting innovation? How much? Are they just using it as kind of a lever to just more place more distance between the sellers and the customers that are buying from them? that’s up for debate?
 
Ben Donovan 
Yeah, definitely. Definitely. Now, fascinating, though, and I’d love to hear a bit more about I’m sure the audience would love to hear a bit more about, you know, how the platform works, what kind of data? What’s the most valuable data that you’re not only accessing, but presenting, you know, what’s like the primary use case for nozzle?
 
Rael Cline 
Yeah, absolutely. So, how to use us, it’s like many other tool providers in the Amazon ecosystem, you go to a website, you sign up, you connect your Amazon accounts, and we draw down all the data and show you, you know, all the all their very useful information, and tell you what to do with it, right. Most importantly, it’s not just here’s a bunch of numbers, figure out like, you know, what you should do? So in terms of, I guess, the core use case, the one that we started off with, and got really good early traction, is this idea of customer lifetime value, and comparing that to your customer acquisition cost. And just to kind of put plain English around all that. It’s this idea of how profitable is a customer to me, right? Not just on the first purchase, because that’s kind of your breakeven, a cost calculation, for instance, but how profitable is somebody after three, you know, two months, three months? Six months, two years, whatever it is? And how does that change over time? Right? Like, the, you know, the jump in profit per customer, from the first purchase to three months can be huge.
 
Rael Cline 
And the flip side of that is, that answers a really, really fundamental question that every seller should know the answer to, which is, how much can I afford to pay to acquire a customer on Amazon? Yeah, like that is the fundamental question. And that is the fundamental problem that we’re solving for. At least, we’ve expanded into different use cases, but like originally, this is the main thing. How much can I pay to acquire a new customer on Amazon? Well, that depends on how profitable your customers are at And it depends on the timeframe that you’re looking at. If you’re looking to be profitable on the first purchase, that’s a break even, you know, a cost calculation, we’re probably not going to add much value that you can do that on your own. But if you’re selling products that lend themselves to repeat orders, anything in, you know, groceries and pets and health and beauty or cleaning supplies, supplements, I mean, all sorts of things, anything that has a repeat order, right? Decent repeat order, right? You’re completely missing a trick there by just thinking about that first purchase, because that’s just not the case. And so we surface this data for sellers to say to them to help them make like real business decisions around. Okay, if I’m prepared to wait three months to break even, or to put, let’s say, two purchases to break even, which typically take three months or 60 days, or whatever it is, then what does this mean? What does this mean for my customer acquisition? I can now spend, I don’t know double what I thought to acquire a new customer. As long as I’m prepared to wait three months to break even, let’s say, and, okay, that’s great. But what about what, okay, I can spend double, but what do I do with it? What’s the best way to do that? Right? Does that mean now? I’m investing in more expensive, higher CPC category terms on sponsored products? Does it mean I’m now doing sponsored brand video? Does it mean, I’m doing DSP, or all these sorts of things around how to more top of funnel things? So yeah, I mean, that really speaks to the entire strategy, based off of these numbers. And, you know, we’ve seen transformational results, we all know, CPCs are just skyrocketing on Amazon, and it’s getting much, much more much, much more difficult to break even on that first purchase.
 
Rael Cline 
Right in the DTC world. This has been known for a very long time, but actually, it’s very few businesses will break even on that first purchase, right. And so they’ve all got strategies around trying to get you to buy again, whether it’s abandoned cart and emailed Klaviyo, sort of tools, and you know, that doesn’t really exist on Amazon. But what we’re saying is like, hey, for the first time, we can actually give you the data to start, start comparing those two things, and joining the whole journey together. So yeah, that’s that’s kind of the fundamental use case. For us, what we’re also very, very interested in is breaking down your customer base, into how many are just, you know, new brand, or one off buyers, versus repeats, right. And so, to take two very different cases, I mean, ultimately, what we’re optimizing for in people’s businesses, there kind of is a spectrum, right? There’s, there are people that are very profitability focused. And there are people that, let’s say, are very growth focused.
 
Rael Cline 
And growth, focus means you invest a lot today, you might might suck up, some of your cash will soak up a lot of your cash flow, but it’s going to pay off in whatever it is six months, 12 months beyond that profitability focus is I want to just make sure that I’m my preserve my cash flow, or grow my cash flow. And I’m optimizing more for today. And so these could be sellers that are perhaps wanting to sell in six months or a year’s time, and you’re gearing up for those sorts of things, or just generally, it’s just a healthier business, if you can prove out profit and all that kind of stuff. So most sellers will be on sort of a spectrum, how far they want to go. And then we would look at, to kind of main things to figure out, like where you can grow, we would do things like for every for every asin, how much of the sales from this asin are coming from one of buyers versus repeat buyers. And if there’s a very large percentage of that 50% or more, that are coming from repeat buyers, while your strategy for the season needs to be very new to brand focused, right? Like your product just has really good attributes naturally, that people are going to buy it again and again, over 50% of your sales already just from repeat. It could be subscribed sales, or whatever it may be. But you need to be new to brand focus. Yeah, so think about, you know, going after those more expensive search terms, non branded search terms, or higher up the funnel to introduce people to the brand, like you know, all those sorts of things. On the other hand, if you’ve super profitability focused, and then you want to be thinking about retention rates, strategies, so you want to be remarketing to people that have bought wants to try get them to buy again, you know, all those all of those sort of things and growing that repeat customer base. Right, and subscribing saves and all those sorts of things. I mean, as I say, it’s, it’s more nuanced than that. It’s kind of a combination of those things. But, but that’s how we would look at and break down the essence. And what’s the gap? What’s the gap between your lifetime value and your customer acquisition cost? Yeah, right. Like if there’s, if there’s a very big gap between those two things. We’re gonna say, you’ve got a huge opportunity to grow this asin here, right what you thought you could spend to acquire a customer for this for this asin it turns out, it’s a hell of a lot more. So if you think that this niche you know, it’s got growth potential and you know, the competitive landscape looks kind of favorable for you. You should seriously think about doing that.
 
Ben Donovan 
Yeah, yeah. It’s honestly, it’s fascinating to me, because, like you say, in the DTC space, it’s been talked about forever, you know, customer acquisition and knowing what you can pay for customer acquisition on the front end, because you, then we’ll recoup it on the back end it that’s not particularly new to DC, but to Amazon sellers. Oh, just completely new world.
 
Louis Smith 
And it’s a whole mindset shift.
 
Ben Donovan 
Yeah, sure. So it’s interesting seeing these kind of two worlds come together. But I think that my concern, and you know, as a point you alluded to, is that it is very much in the favor of repeat purchase potential products. Do you see like, Would you say there is a line or a point where you would say, you know, for some sellers, this just completely isn’t worth your focus? Or should it be part of everyone’s strategy to some degree?
 
Rael Cline 
Yeah, I mean, I think more. I mean, everyone should be thinking about how they can get someone to buy again, right, let’s just good business practice. So you don’t have to reacquire someone if they’re just going to naturally by themselves. Or if even if it’s just sort of a remarketing or I don’t know, whatever it is, it’s just cheaper than trying to acquire a new customer or getting someone to buy again, is, is a lot cheaper than trying to acquire someone that’s, that’s brand new. The trouble is much easier said than done for, like most products in the world, let’s face it, right? Like what we’re focusing on, really comes down to, we’re super strong in like, seven sort of categories, right, as I sort of mentioned earlier, things around anything grocery related, you know, there’s, there’s, there’s pets, and there’s supplements, and there’s health and beauty, and there’s cleaning products, like all those things. Sure. Just but if but, obviously, they are brilliant, phenomenal, massive businesses that are selling things that people just buy one. So it’s not a criticism, it’s just a different. It’s a different different thing.
 
Rael Cline 
Right. So, I mean, for us, we totally get that. And definitely we will turn down will turn down a lot of a lot of customers saying like, you know, we don’t think there’s going to have enough repeat purchases to justify any of these things. And a lot of people will come to us, I guess, in the early days, will come to us and say I think I’ve got like quite a lot of repeat purchases. We sell toys, or we sell educational, children’s educational sort of products and things like that. And it turns out, they don’t, right, and they don’t have enough repeat purchase to do that. So I think for us, like, we were also kind of searching for, like, what are the one of our like, main sort of categories and things like that. And so we learned by trial and error, which ones which ones would soon so? Yeah, I mean, if you if you were like starting out brand, brand new, and you were thinking of, you know, what could I sell on Amazon, then? Yeah, I would strongly suggest try pick something that if it does, well just has a natural repeat order, right, or good repeat order, right, and a customer retention rate? That’s certainly going to help you as your business massively. But yeah, I mean, obviously, if you’re selling something already, it’s difficult. I mean, you could do things another, as I said, that’s kind of our core use case of the things we’re doing now also will include things like cross selling, or upselling. So do people want we do something that’s called? Like a purchase journey? Right? So if someone first buys product A, when they buy from you again, is it Product A again, or is it product POC, and so that can measure the impact of someone buying a 30 day supplements, and then actually upgrading to the 60, or the 90 day supplement? It could do things like trial conversions, I just want to give people a trial version of my product. How many of them actually go buy the full version afterwards? And so gives you this gives you a new way to kind of experiment actually on Amazon, because you can now measure these sorts of things. Or we have a cup of coffee customer that sells a bundle of you know, 10 flavors. And they want to measure what the the most popular follow up purchases are or even the least popular. Right? Yeah. Well, those sorts of things. So yeah, we’ve moved into kind of those those kinds of use cases there as well.
 
Ben Donovan 
Yeah, I have imagined it would just absolutely crush or replenish balls, supplements, Subscribe and Save. So yeah, he’s a good yeah. And
 
Rael Cline 
I mean, what’s what’s interesting now is like, we’re at a point also where we can we know what good numbers look like, we know what bad numbers look like, right? We’ve got enough data to kind of say, to someone, you know, this is the benchmark. And you know, this is what the average vitamin B, I don’t know, whatever it is product customer retention rate looks like and you’re above or below it, or you know, whatever it is that kind of thing. So I mean, then it’s becoming super interesting as well as being able to, because the most the most common follow up question we always get is cool the status It’s great. I understand how I use it. That’s really good. But like, yeah, am I like, Am I any good? Is it any good?
 
Ben Donovan 
Yeah. Well, how does someone the average salary increase the customer lifetime value? Or what are the kind of the tips you’re given?
 
Rael Cline 
Yeah, so so. So looking at the full equation, you’ve got the customer acquisition cost, and you’ve got the lifetime value, right? Those things kind of will always mention them in the same sentence, really. The, excuse me, the LTV side, the lifetime value side. on Amazon, it’s actually been quite difficult to move the needle on that because you know, you can’t you kind of email abandoned cart reminders. There’s no Klaviyo sequence, you can set up all the other sorts of things. So really what you to get to increase the LTV. Generally, it’s about getting people to buy more often than they do. It’s about increasing the ARV, or at least the margins on your products, the average order value or the margins of your products. I mean, those are all Yeah, I mean, or to get them to buy sort of more frequently. So really, definitely remarketing or retargeting campaigns have made an impact, right? Like, we’ve done quite a lot of experiments with sponsored display, and DSP, where, in fact, I mean, I can got done some research on this. In general, in general, the drop off from the first to the second purchase. So if 1000 People buy your product once about 150 as a as a very, very general number, but 150 will buy twice. So it’s 15% customer retention rate. But what we noticed that if you can get that 15% to 16%, literally just one percentage point more that can result in a 7% increase in your profits. Right. So that’s a 7x multiplier. And that’s basically going from 150 people, 260 people, assuming 1000 people in a butcher product once. So those 10 people, because out of those 10 people a decent number I’m gonna buy a third time and out of the third time of decent, I’m gonna buy a fourth time, right. So you’ve kind of got that that sort of chain effect that that happens. So a lot of our focus are on how to you know what to do with this data and how they implement it. And all that sort of stuff has to do with try as hard as you can to get people to buy that second time. Because from the second to the third purchase, the chances of someone buying again, double compared to the first of the second purchase. That’s right, so that for us, that’s kind of the main way on Amazon, at least right now, then that that one can increase that that lifetime. That lifetime value is kind of the remarketing use cases, or of course, you know, Terms of Service, compliance, packaging, sort of things that you can do to get people to buy twice. There’s something we’re watching some interesting developments on the customer engagement tool.
 
Rael Cline 
So this is kind of a thing that’s is it in beta? Or was it come out of bed, I can’t remember, but it’s this idea of being out for, you know, Amazon’s kind of broken a bit of a cardinal rule, which is you can email customers for the first time. Now, it’s an it’s an extremely restricted use case, right? It’s, you’ve got to be launching a new product, and it has to go to people who are already following your brand. Which is, you know that so again, trying to get people to buy again. But if they start expanding out the use cases, where you can start sending out emails to people that have previously bought a product and to nudge them if they start building out that sort of email capability. That is that is massive, right? That has massive LTV and amazing for us, because we’ve got all the data to quantify how successful these these things will be. So those I think are the main levers on the the LTV side, the lifetime value side, on the customer acquisition cost side on the CAC side, probably worth I guess, defining what we mean by by customer acquisition cost. So again, it’s one of those things you can ask five people and get five different answers, but in a simplified sense, it’s how much am I spending on advertising to acquire a new customer. So we’re adding up all the ad spend per month per person. And dividing that by the number of new brand customers you got in that month who first bought that Asin. So if I spend $10,000 on a particular Asin and 1000 new brand customers I got that month, then your customer acquisition cost is going to be $10. And so a sponsored brand sponsored display sponsored products, DSP, and eventually we haven’t quite done it yet but also the the attribution tool so you want to be capturing all your off Amazon traffic as well, because obviously that’s driving to Amazon listing. So that’s so comparing these two things, you know, I’m paying, you know, $10 to acquire someone in the month of February, and I know on average, someone’s going to be worth $10 to me in Three months time or something like that. So how do you? How do you manipulate? Or how do you adjust your customer acquisition cost? Yeah, I mean, there’s I mean, that’s just all the advertising decisions we were talking about earlier around. Do I invest more in more expensive terms? Or do I do sponsored brand video? Do I do DSP or those sorts of things?
 
Ben Donovan 
There’s so many use cases and so much you can do this. Yeah, Alexei really is fascinating. You mentioned to me off camera about doing some work with Amazon aggregators. How’s that? How’s that been?
 
Rael Cline 
Yes. Yeah, super interesting. It’s funny, because like, far wind kind of to the beginning, not quite to the beginning of it as well. But somewhere near the beginning, I guess. The there’s obviously a question we asked ourselves is like, Would it be interesting for us to become an aggregator and use all of this as kind of our secret sauce ultimately, right? Like, we will only look to buy businesses that have really good repeatable rates, we can quantify the value of all those sort of things. We decided not to, we decided to be a tool provider in the end, which I’m very happy about. But yes, we do work with a number of a number of aggregators, they actually two use cases with the aggregators for us, number one, is the same use case as every other sort of seller, which is, once you’ve bought the brand, what are the big growth levers, right? That I can have, for particular reasons here.
 
Rael Cline 
One of the nice things about aggregators is of course, they’ve got a really strong balance sheet. So they’ve got lots of lots of cash. And they can actually afford to take a longer term view, yeah, they can say, you know, I’m not under pressure to break even on the first purchase, or even after three months, I can wait 12 months, right. And so we can really sort of invest in in this particular case, and if, for instance, 80% of all the sales are coming from repeats already. And we think the market is going to be growing for this for this particular niche, and you know, that sort of things, then they can be pretty aggressive and say, Okay, we’re going to just break even in 12 months, this is what it means for you ad strategy and everything else. So that’s, that’s one use case, the other use case is actually on the due diligence site.
 
Rael Cline 
So when they’re deciding to submit a bid for a particular business, they would ask us to help out on the due diligence, which is interesting, because we can, because I guess one of the main questions they want to be answering is, is this a brand is is this? Are they just selling products? Or is this actually sort of a brand? Yeah, at the end of the day? And then a whole bunch of ways to answer that question. But a really good sign is looking at how loyal your customers are, right? And we can tell that, right? We’ve got all the customer retention rates and all that. And then in a sort of metric sense, something we can do is to say, you know, if you if you submit a bid, I don’t know 10 million or something to go by this business, that effectively means you’re paying $200 per customer, right? And turns out your lifetime value is $100. After two years or something, so unless you think you can double the lifetime value after you’ve bought this business. It’s gonna be really difficult to justify paying that amount. Yeah. Yeah. So I’d be doing stuff on stuff on that side. On digital, I mean, the due diligence is not obviously that’s kind of just kind of a special case, I guess for, for the for the aggregators. But the core, the core thing is definitely once they’ve bought it, what are the major sort of growth levers? How long should I be waiting for? You know, all that kind of stuff?
 
Ben Donovan 
Yeah, it’s really good. Really good. And what are the future plans for nozzle? What are you ready see the tool? And you know, the market? And that sounds good?
 
Rael Cline 
Yeah, I mean, one of the big choices we have is, I guess, go wide or go deep, right. So like, there’s so much of what we do has implications for your customer acquisition cost, which in an Amazon world mostly is advertising right now? Excuse me. So there’s this? Do we build up and management tools, for instance, which kind of did that in the previous business and all the headaches involved in all that? Or, you know, there’s, again, the second most frequent question we get off to, is this, you know, are these numbers any good? Is, can you do this for Shopify? And so we’ve already started working with a number of our customers just trying to do multi channel ultimately become the go to place for understanding your customers cross channel. And is the behavior different for my Shopify customers than it is on my Amazon customers? I mean, the answer is yes. At least from the data we’ve seen on this, but yeah, I mean, just trying to understand there’s some of this trying to firstly trying to understand actually, what’s the overlap, right, like and from what we’ve seen, it’s less than you think. So this idea of like Amazon cannibalizing DDC, What I’ve seen so far is really not quite the case. And, and then I guess what’s the journey? Right? So people sort of first come to me, and then they got DC or vice versa and all that sort of stuff. You got to be super careful with that. Because obviously, your T’s and C’s, violations and all that kind of stuff. So you’ll be careful what what you can or can’t do around all of that, or trying to influence all that sort of stuff. But yeah, so for us, we look at ourselves as the go to platform for E commerce sellers, trying to understand their customers and their customer behavior.
 
Ben Donovan 
Yeah, that’s awesome. Really cool. Really cool. Well, I appreciate your time coming on. You know, we’ve been talking a while now I know you’re a busy man. So I don’t want to take up too much. It’s all good. I know, yeah, the listeners will get so much value out of it. If they do want to check out Nozzle, what’s the best place to send them to?
 
Rael Cline 
Yeah, I mean, the website has got a ton of content around all of this stuff. As I said, In the beginning, one of the big challenges is trying to articulate the reasons why you should be thinking of your business in this particular way. So there’s a ton of content on what is customer lifetime value? How do I use it, how to calculate it, like all that kind of stuff? So definitely, I think going to the website to try understand is the symmetric that that would work for your business. Obviously, reach out to me directly. LinkedIn is probably all email are probably the best places to do that. Even if it’s just again, trying to understand more about lifetime value, or Amazon or any other old or even the data on Amazon, if you’re having data struggles, you know, there’s a bit of a support group for that as well. So, yeah, LinkedIn email, very happy to chat around these topics.
 
Ben Donovan 
Awesome. And what was the website address?
 
Rael Cline 
Yeah, www.nozzle.ai
 
Ben Donovan 
nozzle.ai. We’ll leave that obviously, in the notes below. But just in case anybody wants to go type that in, check it out. He said, There’s a free trial.
 
Rael Cline 
Yes, there’s a 14 day free trial.
 
Ben Donovan 
Perfect. Sounds good. Well, I’m sure people would love to explore that. And there’s been great conversation. Well, I appreciate you coming on and chatting all things. customer lifetime value customer acquisition. Like I say, it’s quite a new topic for a lot of Amazon sellers. So yeah, sure, this would have been super informative.
 
Rael Cline 
Amazing. Thanks so much for having me, Ben.
 
Ben Donovan 
Well, there you go, guys, a conversation about a topic that’s not really talked about too much in the Amazon Seller space. I’d love to hear your thoughts. You know, for me, this is a fascinating idea, a fascinating tool. It’s very different to what’s out there. And I’m just wondering, What is your thought on it? What are your thoughts on this tool on this idea of focusing on customer acquisition, lifetime value on Amazon, I think it’s got a lot of legs. I think over the next few years, you’re going to see, Amazon sellers need to be more serious about building a real business building a real brand. I think this tool is going to help you I think these metrics are definitely going to help you do that. So it’s it’s gonna be really interesting to follow Rael and Nozzle’s journey already obviously doing an amazing job. And I think they’re going to become a big player in the space. So but you know, I’d love to hear your thoughts too, on that. So let us know get in touch. And if you’ve liked this episode, definitely hit like on YouTube, leave a comment about what you think about it below. If you’re listening on the podcast, do of course, subscribe and leave a review. We massively appreciate your support. Alright, I’ll see you in the next episode real soon.