PODCAST EP 9
What is Customer Lifetime Value & Why is Conversion Rate Important?
On Episode 9 of the Paper Planes Podcast Simon chats with Simon Bell about what Customer Lifetime Value is and why Conversion Rate is so important.Listen Now
You can connect with Anthony and Guy here:
Check out Oz Hair & Beauty website here.
If you think you have a great story for the podcast, contact our producer at [email protected]
Simon Dell: Welcome to the Cemoh Marketing Podcast, Guy and Anthony Nappa. The very first time I have had brothers on the show, so you are breaking my duck. It’s the right way to say it? Probably not the right way to say it, but welcome to the show, guys.
Anthony Nappa: Thanks for having us.
Guy Nappa: Thank you.
Simon Dell: Let’s start a little bit with the history of your company. You run an e-commerce website called Oz Hair & Beauty, that’s spelled O-Z in case anyone’s going to have a look at that. The two questions I’m interested in is: Number one, where did the idea come from? What was the background behind that, and how did it happen that you guys as brothers ended up working on this together?
Anthony Nappa: Okay. Yeah, so look, what happened was – our family business history, our family has been in hair. Parents have owned salons for 35 years now, and while I was at uni and I was working two jobs as a labourer and a waiter, and while I was uni, the labourer went away. So, I had no work.
I was at my dad’s warehouse and just thought of the idea of selling the products that I had access to from them on eBay. So, it generally started more as an eBay store at the start, and then from there, it took off.
Simon Dell: Where did you get involved with that, Guy? How did you come into the picture?
Guy Nappa: Well, during my school holidays, we got very traditional parents where during school holidays you were working. I was always working for my dad, back in the warehouse, packing boxes. And during school holidays, I kind of could see the growth that Anthony was happening, he was getting through eBay. So I just wanted to one day partner with him, and then it got to a stage where during school holidays, Anthony had to take me and tell my dad that I had to work for Anthony. And he was getting too busy.
When I finished school, I was doing journalism at university, and I didn’t like it. I got to my first assessment and didn’t know what to do, so I dropped it. I had 10 weeks before my next semester started, and I just worked full-time with Anthony. From there, I thought I could add a lot of value within the operation. So, I went to him and said, “Look, I think we should become partners because we can kind of focus on two different areas and both grow the business.”
Simon Dell: My brother lives on the other side of the world and probably for a very good reason. Are you the only brothers? Are there sisters or are there other brothers? Is it a big family or is it just you too?
Guy Nappa: So, we’ve got a younger brother as well. He’s 20 now. He’s running our men’s website called [Above The Colour 00:07:13]. So yeah, he’s in the business as well, so it’s a big family business we’re proud to say. We all work well together, and yeah, we’re having a bit of fun.
Simon Dell: Born out of the eBay store, what kind of made you want to make that transition to doing eBay to full e-commerce?
Anthony Nappa: What happened was we did end up having quite a shitty website during the eBay phase. So, the first three or four years, because eBay was doing so well and was so busy with that, we had no need to really start focusing on the website, and eBay was taking up all our time. I had no idea about SEO, no idea about PPC. I was just an eBay trader, and it was doing quite well. It was 90% of our revenue.
And it was – because I had good – it’s out of perfect timing, I had a conversation with one of my good mates who runs a website called Koch & Co, shout out to them. I had a meeting and sales decided to stagnate. It wasn’t growing as much, and suppliers weren’t happy with their brands being just on eBay. And he told me, he goes, “Mate, what you’re doing is great. You’re young, but at the end of the day, mate, you’re not building anything. You’re just an eBay store. Who’s Oz Hair & Beauty? That’s what people want to know. People got to come to you for Oz Hair & Beauty.”
And then from then, you know, he put me in contact with a digital agency and we invested in that side of it. They took over our website, made it more conversion-friendly. And from that, that’s when Oz Hair & Beauty really begun as the brand.
Simon Dell: You just mentioned suppliers there. Probably the one thing that stood out for me on your website versus other e-commerce clients and things that I’ve worked for in the past, is you’ve got a lot of – there’s a lot of suppliers. There’s a lot of brands there. How do you keep them all happy?
Anthony Nappa: That’s the $20 million question. No, well, when you’re organizing marketing activities and promotions, the ones that treat you the best, the ones you want to keep more involved in that. We see our brands as partners, not really just suppliers. So, we have great relationships with them. The best thing about this is, we’re dealing with suppliers that – my dad’s had relationships with some of them for 30 years in his salon, and now we’re dealing with that supplier’s kids. We’re taking it into the e-commerce world, and these suppliers are now realizing they’ve got to focus on the online channel too.
It’s just really looking at them as partners and seeing how we can work together to grow their brand together.
Simon Dell: I know you probably can’t tell me this. If you say you can’t tell me, I’ll just move straight on, but what’s your favourite brand on the website?
Anthony Nappa: My favourite brand… you know what? There’s too many brands…
Simon Dell: Mate, that’s the most diplomatic answer you could’ve made.
Anthony Nappa: The one that sells the most and the most margin.
Simon Dell: I guess my other question then is: If you’ve got people out there who want to get listed on your website or who want to become a supplier to you and want to make an impact with your target market, what’s the best way for them to do that? What are some of the things that really help you guys as a business when the suppliers come to you and go: “Look, we’re going to do this, this, this.”
What are the things that can make them really stand out on your site?
Anthony Nappa: What really makes a difference is we’ve got Oz Hair & Beauty, we’ve got our audience. The brands got their audience, and it’s all about merging our audiences together and merging their marketing materials with our marketing materials, and creating something special in terms of a partnership: giving us content, giving us their ambassadors that they’re using, giving us exclusive launches for 1 month. We’re doing all the marketing, and we know for that 1 month, you can only get it for Oz Hair & Beauty. Little stuff like that that are different – doing different things that they’re doing to the other websites that they supply.
Simon Dell: A couple of technical questions, nerdy questions here if you want to call them that. I want to understand the stack behind the website. First question is: What’s the website built on? Is it a WordPress website? Is it Magento? What’s that built on?
Anthony Nappa: We’re on a Shopify Plus website.
Simon Dell: Cool, okay, nice. How are you finding that?
Anthony Nappa: For us, it’s really good. It’s just so easy to use. It’s so easy to make changes on it too. Everyone in our team really likes it. It’s just so user-friendly.
Simon Dell: Okay. Are you using a special piece of software that does your automations and things like that? Is there a database management or is that something that’s built into Shopify Plus?
Anthony Nappa: We use Emarsys. We’ve changed from Klaviyo to Emarsys.
Simon Dell: I know a few people that use Klaviyo. What was the reason for the move into Emarsys?
Anthony Nappa: With Emarsys, they had not just email marketing, which is very powerful, which we think is probably a bit more powerful than Klaviyo anyway, but they’ve got personalization, they’ve got loyalty, and it’s all in one place. If I wanted to do personalization and loyalty, I would have to have Klaviyo, and then let’s say Nosto, and another – I’m doing three, if I’ve got it all in one space, it’s just easier to manage.
Simon Dell: They look like they’ve also got a fairly few big names obviously as well as you guys, like City Beach, PrettyLittleThing, Samsonite… They seem to be kicking some gold with that. Bizarre, I’ve never heard of them.
Anthony Nappa: I think they’re possibly European.
Simon Dell: I actually think, yeah, now you’ve just said that, I think they’re UK.
Anthony Nappa: They recently got bought out by SAP.
Simon Dell: Right. That would explain the pop-up that came out when I went into their website that says… Yeah.
Anthony Nappa: It’s alright, yeah.
Simon Dell: The other one I was going to ask you about was Preezie. Explain to me what that does.
Anthony Nappa: It’s essentially a virtual online shopper. It’s a shopping assistant. We did a survey – more people come to our website because they want to know – they don’t know the product they want, so they’re looking through our website. They’re looking through our tabs to making sure that we can recommend them something. Based off that research, it just makes sense to provide a virtual shopper where they answer a few questions and we recommend a product based on their answers.
Simon Dell: I guess that’s probably quite a big challenge for you guys. Because when you’ve got such a volume of brands that you’re working with and such a volume of stock that you’re dealing with, I guess there’s a potential that customers could get lost in your sight and that kind of too much choice eventually immobilizes them and they don’t buy anything.
Anthony Nappa: I agree, because of that, we’ve had in the past two years to change the taxonomy of our website twice just to keep up with the increase of products. So, when you provide easy-to-use web descriptions and sub-categories, you really want to make sure that everything’s in its place and is detailed as possible so the customer has that easy experience.
Simon Dell: Cool. Yeah I was going to say, I guess that – would you be doing stuff on sort of conversion rate optimization? Do you study how people are moving through the sites? Are there people that do that for you? Is that something that the agency has a look at?
Anthony Nappa: We monitor everything, every change that we implement. We make sure it doesn’t have a drastic effect to the conversion, because sometimes, you think it’s better or you love it and you’re so so dedicated to the cause of the change, but you’d be surprised that sometimes after, that the data tells you that it’s completely wrong and it’s not what your customer wants. So at the end of the day, we just go back to the data and make sure we’re making decisions on what our customers want, and what they say.
Simon Dell: When you guys spend money on marketing, what’s the best channel for you? What drives the most growth for you guys over the last few years?
Anthony Nappa: 100% performance-based marketing. Google AdWords is… And that’s one of the things that really changed our business. When we started… I told you at the start it was eBay. I was doing my own Google AdWords to that old shitty website and it wasn’t going anywhere. But when we got that agency and then we realized that our ROI was really high, one month we put $2,000, the next month $4,000. We kept on just doubling down on what works and tripling down. Now, we spend like $300,000 sometimes a month on Google AdWords. Just doing what works and doubling down on what works.
Simon Dell: And I guess if you got a clear ROI, if you’re saying, “Well, $300,000 is turning into whatever it’s turning into” and you guys are understanding the margins behind your cost of acquisition and so on and so forth, I guess it makes complete sense that you just keep spending more money.
Anthony Nappa: Yes, yeah, of course.
Simon Dell: And it’s just as long as someone is monitoring that. There’s obviously times of the year… Do you have that seasonal business? Is it sort of busy the last 6 weeks or is it pretty much every day?
Anthony Nappa: It is. Like November is – that’s like the grand final of e-commerce. That’s go time. Everyone’s in the trenches, head torch on, pickaxing in, we’re all working November. But this year with COVID, things are so bloody unpredictable that it’s so hard to forecast: Is it going to go down when things go back to normal? Is it going to go to a new normal? It’s so hard to predict. But generally, November’s a peak. It drops a little bit in December and then it drops in January.
Simon Dell: You mentioned pay-per-click, I imagine certainly because of the content that you produce and search engine optimization, and getting high in the organic rank is probably quite important. We’ll talk about content in a second. What about the social pay-per-click stuff? Is there any channels that are working better for you guys in that area: Facebook ads, Instagram ads, any other channels that work?
Anthony Nappa: Facebook Ads works, but we all know Facebook likes to inflate the revenue. In Facebook, it makes sense to put all your money into Facebook ads. We’ve got a great agency that really tries to help us attribute what the real Facebook return on ad spend is. So, Facebook does do… It’s probably our second biggest, but next year, we want to obviously have that goal of doing more on Facebook and relying less on Google.
Simon Dell: I guess the organic side of things is pretty good. I imagine a lot of people are searching for some of the brands that are listed on your website, and they’re – with a view that they’re potentially finding the brand’s website, but they might find your website instead.
Anthony Nappa: Yeah. That’s the benefit of why Google works so good. Because they’ll, like you said, type in a brand, and then we come up next to the brand and then they search for the other brands that they like. The average order value is bigger when they go on our website.
Simon Dell: And again, you don’t have to tell me this because I know this data is sort of sensitive information: But generally, when I work with e-commerce businesses, one of the truisms that I find across all e-commerce business is that irrespective of what they sell, the average cart tends to ran about be the same, and it’s normally ran about $100. Is that sort of the same for you guys? Do you find that people are happy to spend that kind of money?
And again, I understand it’s sensitive information. You don’t have to tell me, but what’s the sort of amount of money that people are transacting with you guys?
Anthony Nappa: We’re on the money. We’re about $100 is the average order value. This time of the year, because it’s gifting, all the hair appliances that are like $200-300, probably goes up $120 this time of the year. But yeah, we’re pretty on par with the average e-commerce order value.
Simon Dell: Mate, it’s weird. There’s something about a shopper’s mentality online, that $100 seems to be a point where they’re going… There’s something that triggers them to then buy extra things and get it up to $100. I think one of my things with people is to say, “Well, if that’s the average value, what we ought to be doing is trying to get people to spend $110.” Just trying to push every little order out, value up just a little bit more.
So, we talked about SEO. I guess one of the other things I want to talk about with you guys, because I have this question from a current client of mine at the moment: influencers. Influencers are one of those things that people have a real opinion on, whether they’re good or bad. Have you used them? Does it work for you?
Anthony Nappa: Look, the first time I used the influencer, I just managed it myself. I think it was like $8,000, and I organized it myself. And honestly, I would’ve been better to get that $8,000 and chuck it off the roof. Because someone else would’ve picked that up.
Simon Dell: Eight thousand.
Anthony Nappa: Yeah, or it’ll make some people happy. When I was first doing it, I just did it really blindly. I’ve got an influencer. I’m not going to mention their name, got an influencer, booked her in, and then I realized that I was like the fifth brand that she was doing that day and it was just like – she was like a Time Square billboard. Now, I’ve got a PR and social media manager that works for us, and she’s very skilled in that area, and we track everything. And now, we do it with a strategy behind it, and we track it. We UTM it. Whatever the one that works, we then double down on them and that’s what we’re actually doing. We actually signed up an ambassador from an influencer that has worked the best out of all of the ones that we used.
Simon Dell: If people were going out there and looking at using influencers, is that your sort of top piece of advice there, is to be tracking everything that they’re doing? What’s the number one piece of advice when it comes to influencers for you guys?
Anthony Nappa: Obviously, there’s an element of brand awareness that is hard to be tracked. But when you’re doing it, just make sure you’re getting the best value for money and make sure the person’s on your brand. She’s not pouring herself or himself out to other brands. And where you can track it with UTM links and follows… Just try and track as much as possible so you know when to use them again or when not to use them again.
Simon Dell: I’ll float this question to Guy. Often, when people build e-commerce websites like you guys, the next step within the evolution of the business is to start creating your own brands. If you look at ASOS and people like that, the basis of their business was that they had other people’s brands and then they started creating their own brands. Is that something you guys have done or is that something that you’re thinking of doing in the future? Does that fit in with the brand?
Guy Nappa: Yeah. I’d be lying if I said that me and Anthony haven’t had this discussion before, but it’s just not in our foreseeable future. We really respect the brands that we’re working with. Like Anthony said, we’re partnering with these brands, and for us, it’d be going against that relationship. It’s working really good. We are doubling down and we’re tripling down on what we do well. I think it’d be a distraction if we had to go – it’s a whole separate new business that requires a lot more new people and a lot more money behind it, and it’s a very saturated market. So, if you’re not doing it well, it’s going to be very very hard to get in. So for us, we see the lowest hanging fruit is just doubling down on what we’re doing well.
Simon Dell: Is there an option for you guys? Obviously, you’re Oz Hair & Beauty. You’ve got an Australian name, but when you look at the website, you could literally run this e-commerce website anywhere in the world. Is that an option for you guys? Is there demand coming from overseas to potentially be rolling this out in other markets?
Guy Nappa: Yeah. We recently launched our New Zealand website. That’s still called Oz Hair & Beauty because we still the branding in itself, the name shouldn’t be changing. And I think the next step for international is going to New Zealand anyway and trying out there just because of the cost of shipping. I think some of the brands we do sell are international brands, so there’s demand everywhere.
Simon Dell: Talk to me about Amazon as well. Is that something that’s sort of on your radar? I know these other third-party brands or partner brands, however you want to call them, but is there an option for you to look at Amazon around the world, or is that something that’s on your radar?
Guy Nappa: Yeah. I think Amazon is… People have been thinking about Amazon for the last three years. They’re coming to Australia… Like, to say they’re not going to affect the market would be just ridiculous. They’re going to come in, have a crack, and they’ll go into new world like they’ve done in every other country. So, you’ve got to just differentiation yourself. We’re not an Amazon. We sell hair and beauty products. We sell hair and beauty services. Our staff are highly-trained and they’re hairdressers, beauticians. When you call up or when you email, you’re getting expert advice. We are the professionals. So, you’re not going to call up Amazon for hair and beauty advice because you’re not going to get it. That’s our differentiation.
Simon Dell: Last question for you, a couple of wind-up questions here. Aside from the $8,000 on an influencer that you should’ve thrown off the roof, what’s the biggest mistake you guys have made in this journey? What’s one thing you look back and think, “Fuck.” You go back and tell your previous self not to do that again?
Anthony Nappa: My one was not taking away customer service quick enough. I was answering emails still four years in, and that was just me being young and not knowing how to delegate. I regret not hiring someone earlier because that would’ve freed my time to really learn more about feeding the hamster wheel besides being in the hamster wheel. That was probably my biggest regret.
Simon Dell: What about you, Guy?
Guy Nappa: To mirror Anthony, he took the words out of my mouth: better hire qualified people a lot sooner rather than try and do everything yourself. I think you spread yourself too thin. Again, it’s obviously draining. But also, if you hire someone who’s an expert in the field who’s got the experience, they’re going to add a lot more value as well.
Simon Dell: Isn’t that quite a scary thing though? Because when you hire an expert, you’ve got to pay for an expert as well you know. You’re paying for a high salary, all of a sudden things like cash flow become a bit more stressful. How do you tackle that?
Guy Nappa: It’s like a marriage. You’re signing a contract. You’ve got someone in. They’ve got to perform. You’ve got to like them. You’re going to work every day, so if you don’t like the people you’re working with, why are you working? We try and make it a really fun environment. It’s scary because we have a really good culture, and every time we hire, we need to make sure: Is this person going to come in and disrupt the culture? Are they going to add value? Are they weighing each other out? There’s so many questions. And when it comes to hiring, like you said, it’s scary because it’s a very big commitment that has a lot of flow-in effects.
Anthony Nappa: I’ve got another mistake.
Simon Dell: Go for it.
Anthony Nappa: Probably three years ago, I tried doing a loss leader tactic with certain works and didn’t work, lost money that month.
Simon Dell: Tell us about that. What was the lost leader? What did you do?
Anthony Nappa: A certain hair appliance that I don’t want to mention the name, associate the brand as a loss leader, but a certain hair appliance. I thought you know, I’ll do a little bit of a loss leader. Woolworths do it, Coles do it. And then when that loss leader becomes 30% of your sales, you realize… There’s the money.
Simon Dell: Yeah. I can imagine that hurt. Alright, cool. Look, last question for both of you: What’s the next steps? You’ve talked about New Zealand. You’ve talked about doubling down on what you’re doing. Where do you see this in sort of 5 years’ time? What’s the long-term goal here?
Anthony Nappa: Our next steps is to… Like I said, we’ve historically only done mainly performance-based marketing. Next steps is 2021, we’re going to be doing a lot of brand-based marketing. We’ll get our Oz Hair & Beauty brands out there and become a name for ourselves, not just supplier of hair care brands, and actually become the authority in hair and beauty.
Simon Dell: Will we be seeing Oz Hair & Beauty TV ads?
Anthony Nappa: Maybe not next year. Hopefully, see how it goes, and then maybe doing pretty good.
Simon Dell: What about you, Guy? Next steps? You obviously focus on the operational side of the business. Where are you heading with that?
Guy Nappa: I think we need to… The business itself, we need to keep growing. We need to keep doubling down. There might be more key hires to allow us to grow quicker. I think that’s probably going onto a necessity if we really want to keep the rate that we are at. But just to mirror the branding side of things, we’ve really got… 2020, we’ve gained a lot of traction and momentum. And in 2021 and 2022, we really want to keep building on that. We really want to be the first name people think of when it comes to hair and beauty.
Simon Dell: Awesome, awesome. Look, I guess my last question is: When you get together at Christmas, do the three brothers now earn more money than the parents do? Is that a bone of contention at Christmas dinner?
Anthony Nappa: You know what? It’s all a big family business, and without them, we’re not here. We’re all a happy family.
Simon Dell: That’s good to hear. Look mate, we’re super impressed with what you guys have been doing. And I think probably one of the benchmarks that I look at, if people can see if a business is doing well, all you got to do is go onto Google. You guys have got 4,240 reviews, which is insane, and you’re averaging 97% positive feedback. If anybody wants to just take one little snapshot and judge a business, I look at that kind of thing and just go, “These guys are absolutely killing it.” So look, thank you both for being on the show today. I really appreciate your insights, and we wish you both the best for 2021.
Simon Dell: Thanks a lot.
Guy Nappa: Thank you very much.
PODCAST EP 9
On Episode 9 of the Paper Planes Podcast Simon chats with Simon Bell about what Customer Lifetime Value is and why Conversion Rate is so important.Listen Now