A Systematic Approach to Driving Customer Lifetime Value: Analytic Insights from Matthew Barnes

Join Matthew Barnes, Founder and CEO of Proteus Digital Lab, as we explore the best steps and tactics for sustaining long-term eCommerce growth.

Matthew Barnes
Founder and CEO, @Proteus Digital Lab

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Let's be honest: it's hard to trust that all our website data from giants like Google or Meta is entirely accurate. We choose to rely on these platforms out of their convenience, respect, and widespread use. 

However, Matthew Barnes takes a different approach. With a background in mechanical engineering and a relentless passion for problem-solving, Matthew founded Proteus Digital Lab. The company specializes in scaling DTC brands, particularly those generating over $10 million annually, by focusing on eCommerce development, analytics, and conversion rate optimization. Proteus Digital Lab is renowned for its unique data analysis and optimization methods, which set it apart in the industry.

Understanding how to leverage your website's data effectively can be the key to shifting from stagnation to exponential growth. We sat down with Matthew to tap into his vast experience scaling influential brands like Kizik, Earth Breeze, Redbull, and Coterie. In this expert guide, we will cover: 

  • The Power of Customer Analysis and Segmentation
  • Optimizing Paid and Organic Traffic
  • Growth Tactics For Large and Small stores
  • Reaching a Wider Demographic

The Power of Customer Analysis and Segmentation

The rise of big data enables brands to engage with their target customers in highly personalized and effective ways. At Proteus, Matthew and his team begin with a detailed analysis for new clients, forming the foundation of their segmentation strategy. Here are the steps Matthew recommends for creating meaningful user journeys that lead to conversions:

Comprehensive Analysis

  1. Concentration Risk

Start by evaluating the concentration risk in your customer acquisition channels. Assess how dependent your business is on specific channels and identify potential vulnerabilities. The goal is to maintain a balanced and diverse customer base, mitigating the risks associated with over-reliance on any single channel.

  1. Buying Modalities & Product Spread

The next step is to examine the various buying modalities and the distribution of products within your business. This analysis helps you better understand your customers' purchasing behaviors and preferences. Determine whether customers prefer one-time purchases or subscriptions and identify which products are frequently bought together. This insight enables strategic adjustments in marketing and product offerings.

  1. Lifetime Margin

A thorough evaluation of the lifetime margin is needed to identify opportunities for enhancing customer value over time. This involves analyzing customers' profitability over their entire relationship with your brand rather than focusing solely on initial sales. In Matthew's experience, optimizing for lifetime margin is one of the most productive strategies for maximizing long-term profitability.

  1. Find the Smaller Businesses within the Business

At Proteus, a typical and effective growth practice is targeted scaling. This involves identifying smaller, distinct segments within the larger business. Finding and nurturing niche segments that may be overlooked but have significant growth potential can allocate resources more efficiently, and new marketing strategies can be developed.

Advanced Segmentation

  1. Histogram Analysis

Once you’ve collected your data, it's time to put it to use. According to Matthew, histograms are great for breaking down and analyzing blended numbers across different channels and product types. This visual approach helps to separate data peaks, revealing distinct patterns and customer behaviors.

  1. Channel-Specific Demographics

Use your histogram to identify clear distinctions between demographics across all your channels. For example, you might notice an older demographic on Facebook compared to a younger audience on TikTok.

  1. Customized Site Experience

Leveraging these insights, customize the site experience based on the customer's entry point and specific value propositions. Matthew once worked with a bracelet company and discovered two distinct customer preferences, which he used to great advantage:

Artisanal Emphasis: Customers entering through ads focused on artisanal craftsmanship are directed to pages highlighting this story.

Feature-Specific Entry: Customers attracted by unique product features, such as customizable options, are taken directly to product configurator pages.

By conducting a similar analysis and segmentation strategy for your website, you can ensure that each customer enjoys a personalized and relevant experience, setting up successful expectations before they arrive on the site.

Optimizing Paid and Organic Traffic 

Not all traffic is created equal, and Matthew uses this to his advantage. By deploying strategies customized to the source of entry, he helps brands refine the user journey to maximize conversions. Let's explore some of Matthew’s most effective tactics for converting visitors into customers, whether they arrive through paid advertisements or organic searches. 

Paid Traffic 

Paid traffic typically brings in new visitors less familiar with your brand, requiring some warming up before they feel confident enough to make a purchase. To help with this, Matthew shares several strategies brands can implement to engage these customers:

Need for Education: New visitors often require additional information to understand your product’s value proposition. To bridge this gap, incorporate educational components into your product pages or overall site, such as detailed product descriptions, the story behind your product, and videos demonstrating its use.

Contextual Pages: Instead of leading paid traffic to a generic landing page, Matthew advises directing them to a “contextual shop all” page. This page highlights product features, tells the brand’s story, and showcases a variety of products, creating a more engaging and informative shopping experience.

Subscription Focus: Consider the saying, "You miss every shot you don't take." Applying this mindset, Matthew suggests prioritizing subscription options for paid traffic while simplifying or suppressing one-time purchase options. This approach can significantly increase the likelihood of converting a one-time visitor into a recurring one.

Organic Traffic

Organic traffic typically consists of visitors who are already somewhat familiar with your brand. These visitors might have come across your site through search engines, social media, or word-of-mouth recommendations. Since they often have a higher level of brand awareness, the approach to converting these visitors can be more direct. Here’s how:

Direct Purchase Path: Since these users are often ready to purchase, direct them straight to product pages without the need for extensive educational content. This allows a streamlined experience that satisfies both the user and your quotas. 

Optimized Buying Modalities: For organic traffic, offer various buying modalities tailored to the preferences and behaviors of the returning visitor, such as offering exclusive subscription options or promotional bundles. This approach can increase Average Order Value (AOV) and maximize lifetime value.

Growth Tactics for Big and Small Brands

While Matthew and his team primarily partner with brands generating over $10 million annually, he offers valuable advice for businesses of all sizes. Regardless of your brand's current size or stage, you can leverage its unique situation to drive growth. 

Big Brands

More prominent brands often possess numerous smaller levers within their business that they might not even be aware of. Understanding these diverse sub-segments within the customer base can enable detailed segmentation and tailored marketing strategies. Let’s review:

Leveraging Scale: The larger the business, the more data you have access to. Leveraging this vast amount of data is crucial for identifying distinct customer segments. 

Channel-Specific Strategies: This advice is relevant for brands of all sizes but is especially crucial for large brands with diverse customer bases. Customizing user experiences based on acquisition channels is essential, as different channels attract varied demographics with distinct expectations.

For example, Instagram users prefer visually rich content and influencer endorsements, while LinkedIn users value detailed product information and professional testimonials. By understanding and adjusting for these differences, brands can create more engaging customer experiences.

Fungibility Testing: Unlocking the potential of product interchangeability can revolutionize your inventory and promotional strategies. Fungibility testing reveals how easily customers switch between products. For example, if a footwear brand finds that customers view different shoe models as interchangeable, it can promote overstocked items without affecting sales. If products aren't fungible, the brand can focus on promoting complementary items. This insight aids in making informed decisions about promotions, inventory clearance, and new product launches.

Small Brands

The smaller the brand, the bigger the swing should be. With fewer resources and data points, small brands must focus on larger, more impactful changes to drive growth. Let’s review Matthew’s advice:

Macro Hypotheses Testing: Concentrate on testing big ideas that can provide clear, actionable insights for your brand. Instead of minor tweaks, these tests should revolve around fundamental questions, such as whether to emphasize product features or brand values. For example, a startup skincare brand might test a homepage highlighting the science behind its products against one focusing on customer testimonials and brand ethos. Such tests can help determine the most effective approach for driving engagement and conversions.

Simplified Segmentation: Small brands can tailor their marketing messages and improve targeting using high-level segmentation based on key metrics. Even with limited data, brands can segment their audience by basic criteria such as age, location, or purchasing behavior. This allows for more personalized marketing efforts that resonate with different customer groups. 

Reaching a Wider Demographic

No matter what or who you're selling to, there is one simple solution to reaching a wider demographic: site speed. While the importance of site speed is universal, Matthew specifically highlights its critical role in consumer goods.

Consumers expect fast, seamless shopping experiences and any delay can lead to frustration and lost sales. Moreover, ensuring your site loads quickly is vital for reaching customers in areas with unreliable internet. A fast site can make all the difference in attracting and retaining new customers, even in locations with shaky connections.

Matthew Barnes' systematic approach to leveraging analytics and segmentation offers powerful strategies for driving substantial growth in big and small brands. Brands can significantly improve their conversion rates and maximize customer lifetime value by concentrating on detailed customer analysis, optimizing traffic sources, and enhancing site speed. 

If you're ready to take your growth initiatives to the next level, let Nostra guide you on this journey. Book a demo today to discover how our solutions can support your brand's success.

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