Startup Customer Personas & Long Game Marketing– E530

Jeremy Au explored the intricacies of understanding customer personas and the challenges of market research. He emphasized the importance of creating nuanced personas for effective marketing, distinguishing them from harmful stereotypes by grounding them in real customer behaviors and needs. He shared insights on the pitfalls of traditional survey methods, particularly how timing and context can lead to inaccurate data, as seen in an example where sober participants misrepresented their preferences for draft beer. Jeremy also analyzed the economic mechanics of customer lifetime value, citing a Southeast Asian SaaS company that generated $100,000 per customer lifetime by charging $1,000 monthly with a 75% margin and a 10-year average retention. Additionally, he discussed Disney's long-term marketing strategy to cultivate lifetime loyalty across generations, contrasting it with the scarcity-driven luxury branding of Hermès and its Birkin bags.

(00:00) Jeremy Au: You need to understand. The different types of archetypes they have. And even when you think about a single company, you normally have multiple cards. So when I was consulting for Heineken and beer, we would know our archetypes. We know who are the type of people who buy Heineken.

We will have cards, marketing cards, the personas for the type of people who will drink Tiger beer. And we also have to know the type of people who will buy Anker. And we also know the people who will drink Rattler, right? And so these are different personas that we are targeting. And we will also know our competitors personas that they're going after as well.

What does all these different alcohols go after? Again, you must be able to understand this archetype and make a convincing person that generalizes this because you need to understand what else goes on in their life. You need to understand what their needs, expectations, what other kind of products they buy that they have as well.

(00:48) Jeremy Au: the kind of questions that you may ask, for example, what is does your typical day look like?

Some people are buying Mac laptops, but actually some people are using tablets so foldables or tablets.

So they are actually a little bit different from some other (01:00) people. So the kind of questions I would ask in my head. For example, would be, like, if you use a touch screen, would be, are you an artist? What do you do for your hobby? Are you an artist? Do you illustrate? You know what I mean? Because, unfortunately, for some reason, godforsaken reason, Macs don't allow you to touch screen.

At least PCs still can let you do that. But if I see you using a tablet as your primary model, I have a very In my head, I have a suspicion in my head are you somebody who draws or illustrates, for example, right? So you need to ask all the questions about who they are, what do they value, but you have to understand other things.

And what I often like to ask is hey what are your hopes, what are your dreams? And your, I think your best marketing hooks actually come from here, right? For example, if you look at Apple ads, they have an issue with tablets and everything. I'm a true creative, I'm super powered creative you know, there's a hero creative that they have, right?

And then their ads are like inspirational painters and illustrators who are successful and heroes of the ad. So those are hooks. Those are very good hooks. But fear is also a very good (02:00) hook. For example, right? And we'll show you some of those ads in the future, but there are a lot of ads that use fear for fear, right?

Does it make sense? And that maybe in insurance, for example. Of course, it's not so direct, but I think they will I'll show you some ads, but they also show you some of those aspects. There's a lot of fear based safety features in a car. They're often fear based, in a sense, because you wouldn't buy safety if you're not fearful of a car accident.

So yeah, be thoughtful about that. And so one thing I want to make sure you're clear is that when you're building a persona is a goal, right? Is the goal is to quickly understand an intuitive level a simple way. It's a tool oriented. It's utility. I'm trying to understand my customer. But of course, sometimes when you write personas, they can come across as stereotypes, right?

Which is boo bad. And I would say that they're bad in two ways, right? First of all, it's Yeah, when we're looking at beer drinkers, there are certain characterizations of people who like football and drink Heineken at certain occasions and so forth. Understandable. So that's a persona. Does it make sense?

But of (03:00) course, when I'm using them in a negative way, I'm trying to shit on them or, thumb them down, etc. They'll come across as a stereotype, right? So the key thing differentiation is. Stereotypes are not used for utility, i. e. making money. Personas are used to make money. And and as a result, I often find that if you use a stereotype, they often are inaccurate personas, because they are actually too vague and too flat.

They're not a useful persona. They actually tend to underperform. Whenever you see something that looks very much like a stereotype and a persona, you should do the extra work. Just to be like, maybe this person doesn't really exist. Because I find that stereotypes tend to be more of a function of what I'm trying to accuse you of, rather than the ground reality of who they are.

Because the niche that you need to have for persona is quite important. So as a result I want to talk about the, some of the research piece about it. So it's really important that when you think about marketing, that you walk through the stages, right?

So you have awareness, consideration, purchase, (04:00) service, and loyalty. And each of these have multiple touch points with it. So for example, awareness, it might be, I heard about it on the news. I opened a newspaper, I saw the news, I saw a web PR. Then I heard it on TV, I saw a radio ad. I saw it in a news magazine and after that I was hanging out and after that I heard about it from my friend who you heard his friend used it.

So now I'm like, okay, it takes about seven mentions to be like, okay, I heard of this brand, right? After that, maybe after you heard that thing, you Google it or whatever it is, then the targeting and retargeting starts to tackle you, right? The online ads, the email, the digital billboards that are following you around, your search engine listings, but these are trying to make you Move beyond, oh, I'm aware of this brand to maybe I can use and buy this product, right?

And then eventually you go into consideration, third party sales, direct mail, then eventually push you to go to a store. So for example have grown up as a kid, right? And then you heard that of the word Tiffany's because people seem to buy (05:00) Tiffany's as jewelry But you never would buy jewelry as a kid!

about Tiffany's, but as you get older, you have your first love, blah, blah, blah. You watch an ad that tells you Tiffany's is the best for love is important, and eventually you see some ads because you like this person and they're suddenly following you around, and then you walk by a store.

You're like, you know what, I don't have enough money, but I'm happy to walk into the store just to check it out because I like my significant other, whoever it is. So I check out the store, and then after that it's a call center, but maybe I eventually make the purchase. And then after that, I may get service, I may get, okay, they tell me, okay, this ring is going to arrive in a certain amount of time.

They provide, some service to make sure that it's true. And after that, they may come and retarget me, right? They ask me to come back. They may give me a repeat purchase. They'll ask me to do servicing of the ring because it get tarnished over time, et cetera. So for example, Tiffany's is actually considered to be a brand that targets.

New relationships, right? So they're very famous for their engagement rings, right? (06:00) So a lot of women will be like, Oh, Tiffany's is a good engagement ring. A lot of men will start to be like, So as you work your way up, then all the guys are like, Wow, I've heard of Tiffany's for the past 10 years of my life since I was 12.

And now that I'm thinking about maybe proposing at the age of 23, 24, 25, whatever it is. Or if it is, I'm like, Oh, I want to show my love. I made a bad mistake and I need to recover my relationship. Then I start to go to Tiffany's to search it out. But there's like a long game of marketing that's happening for quite some time.

And then when you have that ground game, then the question is, if you are buying an engagement ring, it's either Tiffany or something else. Does it make sense? So Tiffany becomes the default type of jewelry that you would buy for this category, right? And that's the trick of marketing, is the marketing is very loud at you and very disruptive, you want a marketing that's very good, it's the kind of you grew up as a kid playing Pokemon and you love Pokemon. You start playing Pokemon at university, but one day you're gonna have kids, (07:00) and then your kid starts watching Pikachu, and you're like, Okay, they can watch Pikachu, it's not that bad, right?

And so I watched Pikachu recently with my kids. And I was like, okay, so they're consuming, does it make sense? More Pokémon. But if you think about Marvel, a lot of people are watching comics and reading comics for a long time. And there's movies, new movies. So the marketing can be actually be quite a long period of time.

So what's really important about customer research as a result is that I really challenge you that you have to understand the customer at that point of time. So And I've mentioned this in the past, but this is actually a really key mistake. For example, the key thing that we had was, if you drink alcohol, what is important for you picking the brand of the alcohol that you have? In Ego Team, We did a survey, right? And we did a survey, blah, blah, blah. But what we turned out was that, turns out that, we asked, is drinking draft important to you, like draft beer?

And it turns out that most people in the survey said no, they don't care about it being on tap. Which was very confusing because (08:00) with our own eyes, We knew that most people, when they walk into any bar, would be like, what's on tap? But all the people in the survey were saying they, they don't care about whether it's on tap or not.

So it's very weird. But a key realization, I think we set out as a team to discuss, was that at the day was, the problem is, we are surveying people. When they're sober, right? They're taking this survey at home, on a computer survey, at 3 p. m. They're not in the bar at 7. 30 p. m. after Hawker Center dinner.

Does it make sense? You're now at a bar. Yeah, you're not in the moment. You're not researching them at the right time. Because I can tell you right now, that the gap between a real human versus the human that people pretend to be is very large. Because if you ask everybody about marriage, everybody promises that they'll be married forever and they won't cheat and they won't get divorced.

And yet, 50 percent of marriages in America end up in divorce. So there's a big gap between (09:00) profession of intention. versus actual execution, right? People lie to other people all the time, especially if you're a researcher, and people lie to themselves all the time, right? So how many, so you have to be thoughtful about when you are capturing that market research.

You have to intercept them at a point of purchase to really understand who they are. And so as a result, the market research failure points that people often have is that arm's length, you outsource the research. It's electronic, so you don't talk to the customer. And this very hap happens a lot.

Okay, people complain oh, these people are in their ivory tower, at the top of leadership, they don't understand the arm's length. They're delegating it to the VP to re who delegates it to the manager, who delegates it to the junior associate, which is you guys, to do this research. And then you do a really shitty survey, because Chat GPT told you that's the way it works.

And then they get bad data, right? So it happens a lot. So you have to be very (10:00) careful about being arm's length. You have to be in person. And one of the things that we often see, for example, is a lot of Singaporeans are like, I understand the Indonesian customer. And I'm like, do you? Your average GDP per capita is 70, 000.

The average Indonesian GDP per capita is 7, 000, right? So it's a 10x difference. So you think you understand them, but do you really understand them? So people have to be self aware, and that self awareness can be difficult. So you have to be thoughtful about that. Then leading questions. So people, when you write a survey, you're doing exactly, a lot of people will ask certain questions like, do you like us or not?

And then everyone's yeah, if you do like us or not, I better say I like you, right? Who's gonna write I like you not? Especially if you're paying me for the survey, right? So you have to be thoughtful about the leading questions that happen. It happens a lot. Then, obviously, opinion, not dollars.

A lot of you when you do research be like, do you like my razor? Do you like my laptop? Do you like my whatever? You have to ask them how much would they sacrifice for your product. Does it make sense? So do you like Tiffany's? Yes, everybody likes (11:00) Tiffany's. If I gave you all a Tiffany's earring, all of you would be very happy and you would take it.

Why would you not take a Tiffany's? But how many of you would pay 1, 000 for a Tiffany's earrings for your anniversary relationship, right? So I think you'd be thoughtful about your opinion, not the dollars. You ask them how much they will pay, how much would they sacrifice for a product, rather than whether they will.

And So a lot of you will be in meetings that are very large, bloated, confusing, and a giant waste of time. We have death by committee. And you will see that more and more. So you'll see answers and you'll see actually that a lot of people will try to be politically correct as well.

So they'll say something like, and politically correct could be politically correct by society standards. It could be politically correct by. Your company culture standards. It could be politically correct within your in group circle because you're trying to make your boss feel good or whatever it is.

But I think what I'm trying to say here is when you have a lot of people, you get cancelled. Does it make sense? So why are people getting cancelled in today's world, in work culture, et cetera? It's because there's nothing you say today that will not (12:00) be cancelled if five billion people read that statement.

Does it make sense? If you said, men are amazing, and you said it to your bro. We're amazing. Soldiers are amazing. Yeah, actually, you're in army, you're both in the jungle, you're both soldiers, and you both say to each other, it's like, Wow, being a soldier is amazing. The two of you could be quite garang, could be quite enthusiastic.

You could both feel that it's good. But if you say that to five million people around the world, there'll be all kinds of people complaining, right? Everybody will be like, Wow, You have a good experience, but I had a horrible experience. Think about all the people who have bad soldier experience.

Then think about, wow, soldier experience, you're learning two years of my son's time. And then after that, it's you are murderers of people, and then, this is an overly masculine thing that won't, there's nothing you can say. that is true and accepted by 5 billion people.

You got 5 billion people, you got 5 billion opinions, right? Does it make sense? So the interesting part about the internet today is that all our opinions are exposed to the whole globe, in a sense. So a lot of people will naturally get cancelled because anything (13:00) you say, and I think a lot of people will start to self censor, right?

So start using disappearing messages, telegrams, signal, WhatsApp, but, they lower that because they feel like they can be more truthful about something. And you may not be truthful in the sense of oh, super enlightened, that takes into account a super nuanced perspective of the whole world's thing.

It is true to you now. I am angry about her. I hate the government, right? All these things can be true that are true to you in this moment, but cannot be true in a group of five billion people. And this as a result is what in committee level, is that you see a death by committee as well. And And so what we want to do as a result is then as a result, talk about some of the economics that are associated with that.

So we talked about customer lifetime value. Customers have a choice around lifetime value. So the price times the margins, times the lifetime, times the upsell. So there's four major components to (14:00) it. So most of it are pretty obvious and we'll go through slide by slide. But price but what you're trying to say here is that the key thing you must understand is.

If you are selling peanuts at a checkout counter, you probably don't have a lot of loyalty. You're probably not gonna buy a ton of peanuts over the course of your lifetime. Doesn't make sense you're not loyal to it. But many of you are already loyal to a lot of products. You may be already loyal to your Apple product, or your Lenovo laptop, or whatever it is, over this course of time.

And so you'll buy multiple devices of this brand over the next 10 years. Or 20 years, or 30 years, or 40 years, or 50 years, right? So The price of the product times the margins, the profitability times, how long you can be loyal to this product times what you can upsell them. Can you buy more products over time?

So to give an example is that there are tree waste of pricing. There's cost base, value based and competitor pricing. Okay. some schools have loyalty, right?

Lifetime loyalty, etc, right? Actually, I (15:00) was in a Zoom call recently, and then the guy was giving some example, and he was like, Yeah, blah blah blah, and I'm an ACS guy, and I was like, dude, you're like 50 years old You can't use ACS example the point is, there's a lot of school loyalty in ACS.

There's a high lifetime value, and a lot of ACS people want to send their kids. Back to ACS, right? So and so forth. So a lot of schools have school loyalty, for example. But, anyway, the point I'm trying to say is that for pricing, there's three ways to think about it. It's cost, plus, value based, and competitive.

So cost plus is relatively straightforward. It cost me 10 cents to make this cup. So I want to make a 20 percent margin. I'm going to sell it for 12 cents. Okay? That's cost plus. Which is, I think, the most common way for some of the folks who are data or supply chain, you probably will look at that from a fundamental basis.

The second thing that you think about, which is probably the Harder one is the value base. What is the value to you at this point of time? This cup says coffee bot and dot my. Call me when you need coffee bot. Okay, anyway, so not very, (16:00) but the thing is if this had coffee in it and you were sleep deprived and you hadn't slept for two days, this cup of coffee would be much more available to you.

Does it make sense? Versus if you already had three cups of coffee today, and it's now 8 p. m. I bring you this cup of coffee. The value of this coffee is much lower to you now. Does it make sense? In the morning, if you haven't slept for two days, I'll be like, I'll happily pay ten bucks for this cup of coffee.

If it's at 8pm, I will be like, you have to pay me ten bucks. For me to drink this coffee, so the value to the customer at that point of time is very important, okay? And the third thing is competitive base. What is my competitor charging? What is Coke charging? What is Pepsi charging?

What is tea charging? So and so forth. What is my competitor charging? Am I premium to them? Am I cheaper than them? Those are the three ways, when you think about pricing, that you're always thinking about. Value base. Cost plus, and competitor. And when you think about margins, there are three ways to think about those margins.

You think about it from SaaS versus direct to consumer versus take rate. What I'm trying to tell you is (17:00) that when you're looking at your Lean Canvas and you're discussing the groups that you have, is that some of you will be targeting SaaS companies. So these are primarily digital services and products, that the cost is primarily engineers, there are fixed costs, but there's a high profit margin.

Because if I was selling you

notion. You are using Notion, and if you use Notion as well, the incremental cost to serve you is negligible, right? Because it's only the power of the AWS server, either for you to both run Notion. But, if I do direct a consumer, if I bring this cup of coffee here, And if you consume a cup of coffee, in order for him to consume another cup of coffee, he needs another cup.

Does that make sense? So the cost to him is 10 cents here and 10 cents here, right? Versus meaning of the cost, if this was software, is it'll cost me negligible cents. There's a high fixed cost, but it's a negligible cost to serve him, and to serve him is a negligible cost to add this additional person. So the profit margin is different for a SaaS versus a direct consumer.(18:00)

And lastly, there's take rate. So a lot of you are in, crypto or finance or whatever it is. So you're taking a spread of the transaction. Does that make sense? So when DBS says, you want to transfer money to the Philippines and Jeremy, you'll be charged 25 flat fee for no whatever quantum you have. I was like, oh my God.

And I recently had to learn how to use Instagram, et cetera. Because I was like, how can you charge me, 25 on a 1, 000 transaction that's effectively. I'm losing my mind right now, but anyway, 2. 5%, right? So you're taking a spread of that, right? So you're a middleman of it. Take rate is really important, because you need to understand what is the profitability of this company, right?

So these are the margins that you have. Now, of course, it's lifetime. If you're buying peanuts for the first time, or whatever it is, you need to be at a checkout counter, because I'm not loyal. I'm just on my way out. Camel. Okay, whatever. I don't care. So this is a one time person. But there are some people, maybe camel peanuts is a lifetime thing.

Your grandma grew up on camel peanuts and cashew nuts. She's a lifetime customer. She'll never buy another type of (19:00) nut. No fancy nuts, no chocolate nuts, I just want this, whatever it is. So she could be a lifetime customer, right? 60 years. So you gotta be thoughtful about one time versus six months, versus six years, versus 60 years.

And when you have a long lifetime, then you can do some amazing things, right? So for example, is when you have lifetime loyalty, then you can get people to do things that are hard to do, right? So for example, I'm part of the Harvard Alumni, Harvard Business School Alumni thing, and I volunteer for them. So I'm being paid hundreds of dollars per hour, and I volunteer, I they don't pay me anything, I volunteer to organize community events for the community.

Can you imagine? The camel peanut company. Jeremy, hey Jeremy you ate peanuts. You're a loyal customer. Organize events for peanuts. I'll be like, no, right? So I think we need to be thoughtful about the lifetime, our ability to hold the loyalty of the customer. And of course, the ability of upsell. Can you sell more over time versus is this (20:00) something that you pay less over time?

So this is actually quite important. So many of you, when Apple gave you that student discount, For 10 or 20 percent. Yeah, they knew that they're making less money on you now. But the thing is that once we lock you into the Apple ecosystem, then you're gonna buy an Apple iPhone. Then eventually you buy an Apple watch.

Then now they have Apple Vision Pro that is pretty expensive, but it will make it cheaper in about five years time, it'll get cheaper and cheaper, and at some point it'll get good enough, and then maybe you'll buy it. There, from that perspective, is you are buying a 1, 000 PC, I'm sorry, a MacBook, to a phone, to whatever, but it can upsell, it can make you pay more and more over time, right?

And this is something that is there, versus some companies actually may ask you to pay less over time, right? It's a commodity, it's a service that is very competitive, like Xenia said. There's a lot of price differentiation. People pay less over time, so you have to be thoughtful about that. For example, a real company I've seen, and this was founded by somebody in Southeast Asia, started building a software as a (21:00) service, so what they have is that their lifetime value is about 100, 000.

So the way they look at it is they serve companies that have about 200 employees each. Each employee is charged about 5 each, so the company pays for that. So as a result, they collect about 1, 000 every month from this company's software, right? Then, because it's similar to Notion or whatever it is, it's a SAS margin, the margin's about 75%, right?

They make 75 percent profit on every dollar. Then, Companies will stay on this product for at least 10 years, right? Once you install Google Drive or Notion, it can be a 10 year product. Does it make sense? And then, after that, this company, what they're noticing was that these companies tend to grow over time.

These companies will grow by about 5 percent employee headcount on average over time, because they're hiring new people and so forth. But also, they're willing to, as they get bigger, they're willing to pay for more features. And so they're able to raise prices as well. So for this company that had, was charging effectively 1, 000 a month times 75 percent margin times 10 year lifetime times 110 percent (22:00) upsell, the range of calculation can be between about 90, 000 to about 150, 000.

So there's a real company. And now I'm going to give you an example of, as a result is that when you are making decisions, about doing marketing and so forth is some of you will be asked to do pricing first strategy. And some of you will be asked to do a lifetime value first strategy. In fact, I had this exact same argument at work this week, right?

So what I mean by that is pricing first is I want to charge you if you think that this customer is 5 a month, then the amount that you can market is what? 2? 3? Maximum 5, right? The cost of that subscription is 5. The maximum you can do is 5. And a lot of you will be in marketing departments that will think like this.

We need to be cost efficient of our marketing. But if you can find a product that's sticky, that has a lot of loyalty, then you can start doing some crazy things with that thing, right? Which (23:00) is that, for Disney, they know that if you as a kid watch a Disney movie and cartoons, that one day you're going to go to Disneyland and ask your parents to go to Disneyland, and one day you're going to become a parent that will introduce your kids to Disney, and then one day you as a parent will bring your pay for your kids to go to Disney, right?

They can do a lot of stuff. They can buy Star Wars, they can buy Marvel, they can buy recently they bought X Men, right? So So a lot of stuff they can buy because it's worth it because they know that they have a lifelong customer. It's okay to lose money now because I believe that there is a loyalty that will happen over time.

And in fact, one of the issues that Disney has now is that they are starting to lose because they are losing the ability to fight for young children because young children are watching Cocomelon. and other YouTube channels like influencers, unboxing stuff, and so it's not as captivating as Cinderella, right?

But there's something that we'll talk about for different marketing strategies. (24:00) And so what we want to talk about is that there are, and this is a good way to think about it, is there's mainstream marketing that many of you have learned, and there will also be luxury marketing rules. And they are actually the same, but they are different because the way that you're taught about it makes very contrarian sense.

So what I mean by that is that

in luxury, there's all kinds of weird things that happen, right? For example, is if more people want to buy my product, I don't care. I don't produce more, right? Isn't that weird? Because when you're trained in marketing, when you're trained in business, you're trained in finance, you say, if there's increasing demand, We should supply more, correct?

But we don't do that in luxury. We say, there is only a thousand Birkin bags of this model. Good luck, have fun, try to find this. There's only a certain number of Phantom cars, blah blah blah that are being built every year. We don't build (25:00) more. Luxury marketing is a way to create that value, right? Don't respond to rising demand.

We make it difficult for customers to buy. My wife said, I want to check out the Hermes store. And I saw this Store, giant, beautiful store. And there was a line of 30 people outside the Hermès store. I said to her, I said, What? I think we have to wait 3 hours to get into this store.

And she's but Jeremy, that's why we have to be in line to get into this store. I said, this makes no sense. You know what I mean? Why are we making it difficult for customers to buy? Because we're creating scarcity. We're showing that we have value. Because, If it's hard to get, therefore it must be valuable.

If it's hard to get into McKinsey, it must be valuable. If it's hard to get into private equity, it's very selective, of course it must be a good job, right? So humans can code. In general, good things in life tend to be scarce, but not all scarce things are good. But marketers can (26:00) understand that because we think good things are scarce, They can code and slide in that marketing message to you such that you believe that it is a prestigious job.

Now, The other part of luxury is that they make it such that you feel it's value. Even though I'm paying for this MacBook that is 1, 000 more expensive than my PC, I feel like it's more worth it. The value of my MacBook is way surpasses the 1, 000 price difference. In other words, luxury is about saying that I'm, instead of trying to think about, it's not about increasing the cost, although, of course, MacBooks, sorry, I want to say this, MacBooks.

On average, in terms of range, are a bit more expensive in cost, in terms of whatever. But, if you think about it, there are lots of MacBooks that have a lower cost than the premium PCs that are out there, right? But the brand is trying to persuade you that a MacBook is more premium. Does that make sense?

Now, (27:00) of course, for luxury, is they keep raising prices. Because they say, you don't understand the value, so we're gonna raise the price. And when you see a price rise, you know that it's valuable. Of course, they also try to be unique. You don't see the luxury bag on Lazada or Shopee. You can't compare them against 100 different products. Right? They can only be viewed in person. There is no comparison. In fact, the bags don't even have price tags on them. You have to ask because they don't even want you to compare the bags. within the collection, right?

Does it make sense? So you have to be thoughtful about it. It's like, every bag is unique. You know, I say this for luxury in terms of women, but there's all kinds of, guys have that as well. Your Rolex watches, your Philippe Patek, right? Your you know, there's a whole bunch of luxury rules, especially your secret lab chairs.

What is, is secret lab chair better than any chair? Seriously? It's not. But you see, how many guys have been like, you know, I've, I saw the secret lab. And I was like, everyone's like, what's so good about secret lab chair? There's Herman Miller, (28:00) there's so many other good chairs that are there. But what's so special about secret lab?

And I said to myself, it's so obvious. The most important part is that secret lab is the first chair they put. The fucking brand on the headrest. So that when you do your zoom, you know it's a secret lab chair. That's the only thing they did. Think about it. Have you seen those chairs? I mean, if you didn't have the lab, you wouldn't know it's a secret lab chair.

It's just a chair. Right? In fact, in all the previous chairs in the previous generation, always put the, the brand on the back of the chair. On the side of the chair. OSIM chair, whatever it is. Correct? So the key innovation the secret lab had was, let's take a chair that's made in China, in Vietnam, and we're going to put the logo on the front, because everyone's going on zoom.

And then And then a guy slides, you know, like, Hey, is that a Secret Lab chair? Yeah, it's a Secret Lab chair. Is it comfortable? Yeah, it's good. You know, it's the same luxury shit, right? It's like, is there, is that Rolex? Is it good? Yeah, yeah, yeah. It's the same luxury rule, right? So it's about showing off, right?

It's like, this is, I got a Secret Lab (29:00) chair. I can afford a thousand bucks or 500 bucks, whatever it is. Is it a better chair? No, right? So but it became important because now that we all came on Zoom. Now our chairs at home all become obvious, right? The backgrounds and so forth, okay? And of course, one of the things that luxury NT rules they do is like, they don't sell.

They don't sell to you. They come to me. It's like, you know, it's like, I don't try to sell you. Oh, you don't want a Secret Lab chair? Okay, continue to be a loser. You know, shitty chair, you know? Your shitty IKEA executive chair that's made of full leather and it's half the price. But you know, if you're not a Secret Lab kind of guy, you're not a Secret Lab kind of guy.

So, what I'm trying to say is that they don't really try to sell. They try to create that value to attract people. Of course they're selling, but then they try to be like, selling is a mark of low class. I'm a bank financial consultant trying to get customers in the MRT. That's, I'm too obviously selling, right?

Low class. You know, you come to me, right? So I don't sell. So, We talk about (30:00) customer lifetime value and then I'll quickly go into customer acquisition costs and wrap this up. And so acquisition costs is like marketing, sales, onboarding, and attrition, okay? So these are the four major components of customer acquisition costs.

So marketing is the one that's most obvious. The paid ads that we look at the billboards, those are the marketing, the stuff that's trying to get awareness. But the sales cost, a lot of you in this class are financial consultants. So you are salespeople being paid for and trust me, somebody in a mothership at AIA, etc, is saying like, my marketing cost is this and my sales cost, the commission I pay to them to close that deal, is a percentage or whatever, is part of my cost.

For every policy holder who comes through the system, I have to pay 5, 000 of marketing broadly, then I pay 3, 000 of commission. And then so so forth, okay? Now, of course, there's the onboarding cost. When you join a process, there's often customer support, right? So there's onboarding cost that happens. So your You know, they have to train you, they (31:00) have to set up, or you don't know how to assemble your secret lab chair, and you have to go figure it out on customer support.

There's an onboarding cost. And of course, the last cost is attrition. So for example, if your cost to do marketing for secret lab, then do the sales at the store, then to make sure there's customer support, let's say all of that costs you about 100, let's just say. But let's just say that after you buy the secret lab chair, half of you say, I don't like the secret chair anymore, and return the chair.

Then guess what? Then the Secret Lab chair is, the acquisition cost is not 100, right? It's now 200. Because half of the people return it, correct? So the cost to acquire a successful user is doubled if the attrition is half. Of course, the trick that they do for all of them is they tell you stuff like, 10 year guarantee, life guarantee.

All you have to do is ship a secret lab chair back to me. Have you ever tried to ship a chair back? Pain in the ass. Or a mattress, the free mattresses they have as well. You also cannot ship that mattress (32:00) back. So marketing is three types. Organic versus paid versus referral. So organic is basically saying with people just heard about me, they ran into me, so forth.

Paid is I use performance marketing, I use an ad on Instagram, I pay for it. And referral is basically saying one for one. When you referred him, you both got 20 for referring a Notion user on, right? As a coupon for whatever referral code. So there are three types. of marketing that you should think about the buckets of.

Then sales is a bunch of humans and software. Humans, so start them, you're starting them young. But these humans are cheap because at university, you give them 3, 000, fantastic, party for your commission, right? So humans are there. But then also, there's software as well.

So you have ChatGPT, you have bots who are becoming. Sales like, right? So they're starting to have the initial sales directions to get it going. Obviously, it's onboarding in terms of customer support and training. Then there's churn. So, actually, do (33:00) clients stay on board or do they leave? And so, again, we talked about that company earlier.

And so, the company we saw had 100, 000 of value. So this is the real numbers they had. So they spent 5, 000 marketing to every company. So a number of companies they had, they spent about 5, 000 to acquire. Then they spent about 1, 200 having that sales time. So imagine that the salesperson is being paid about 100 per hour.

So you can imagine there's about 12 hours of sales effort. needed in order to close that contract. Then, they spent about, again, about 11 hours, not 11 hours, 22 hours, because they're being paid cheaper here in onboarding, customer support 50 an hour, to onboard a customer. And then after that, but most of them never quit.

So as a result, their acquisition cost was about only 7, 300 for that. So let's do the math. You have about 100, 000 of lifetime value for a customer. You're only spending 7, 000 to acquire that customer. That means that to acquire a customer you're going to make 12 to (34:00) 20x of that acquisition cost over the course of their lifetime.

And so, as a result, they are able to earn back the money within 12 months, and on a cash basis they get paid back in 3 months. And so, if you do this, from their perspective, if you invest 1 in this company and want to do this deal, you're going to get 15 back. And, as a result, if you're able to do that, you can scale the company a lot faster, and, as a result, You can invest 10, 000, 000 and you'll get 150, 000, 000 back.