All customers are not created equal, says American Apparel CDO

american-apparel

One of the most valuable sets, according to American Apparel’s Thoryn Stephens?Each individual customer’s lifetime value, something that can actually be measured.

American Apparel’s chief digital officer (CDO) Thoryn Stephens has had an interesting career path. He went from aspiring rock star to biologist to data-driven marketer.

During his ClickZ Live New York session, “Driving Customer Centricity in an Omnichannel World,” Stephens told the crowd that the seemingly disparate careers have more in common than one might think.

“A lot of people wonder how I went from synthesizing molecules to optimizing booty shorts,” said Stephens.

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Both, he argues, are essentially about strategic testing and knowing what data is valuable.

“Oftentimes in digital analytics, we get caught up in fake metrics that don’t focus on retention and driving engagement” said Stephens. “But you don’t have a customer unless they come back more than once.”

Measuring the lifetime value of a customer is key to determining which loyal followers are driving the wealth of the company, and Stephens measures that value on what he calls a data maturation curve.

The customer who drives the greatest value within the organization is who you should focus on. Stephens recommends measuring current customer value (CCV), customer lifetime value (CLV), and net promoter score. You can determine value with a mathematical equation: Revenue – Cost = CCV.

“All customers are not created equal,” said Stephens, adding that when he worked for a Los Angeles-based clothing startup, he found that thousands of the brand’s millions of users had a negative value.

That negative value was caused by serial returners who exploited the brand’s return policies to rack up hundreds, perhaps even thousands, in returns. The abuse was crushing the business. By applying the CCV equation to the brand’s customer base, Stephens was able to effectively change the store’s return policy and eventually raise over 40 million in startup funding.

To determine a customer’s lifetime value, Stephens simply multiplies the customer’s current value by their retention rate and discount to determine CLV, a tactic he believes that Starbucks has mastered.


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“Starbucks has a 21 percent margin and a 75 percent retention rate with 20-year lifespan average revenue,” Stephens said. “Their average lifetime value is 14,000. That helps drive [Starbucks’] acquisition strategy. How much are we willing to pay for that customer, and ultimately what are we doing to retain them?”

Starbucks has responded to its loyal following by creating one of the most successful mobile rewards and payments systems in the business, generating 6 million transactions a week. Apple, on the other hand, is one of the best brands around at calculating and measuring net promoter score (NPS).

“NPS measures the loyalty that exists between a provider and consumer,” explained Stephens. “With every product it sells, Apple asks if you’re willing to recommend it to a friend on a scale 10-0. Every tenth of a point of NPS can generate lifetime value.”

Stephens uses all of this data when creating actionable omnichannel solutions for American Apparel. For example, the brand recently partnered with delivery startup Postmates to provide within-the-hour delivery of basics like hoodies and leggings, a move that caused quite a stir in the industry.

Riding on the heels of the Postmates success, American Apparel has started experimenting with near-field communication (NFC) and beacon technology. The brand partnered with mobile app Kik to offer customers in and near stores product information and other communication, as well as the option to buy products online.

But the goal of all this testing, Stephens insisted, is not data for data’s sake but for customer retention.

“Customer acquisition and retention are generated via digital,” said Stephens. “Twenty percent of the customers are driving 80 percent of the wealth. There’s no shortage of data, but there’s a shortage of people like us to drive data forward.”

Emily Alford is a freelance journalist and contributor to ClickZ.

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