How to Grow Your E-Commerce Store With Data: Justin Butlion

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‍Adam: Welcome to "E-commerce on Fire," episode three. We're live on LinkedIn, and I'm thrilled to be doing a double-header this week. Joining me is Justin Butlion, the founder of Project BI and a data and analytics specialist. Justin, welcome to the show. I'm really excited to dive deep into data, something I personally need to learn a lot about. To kick things off, could you give our audience an insight into your background, where you come from, and what you're currently working on?

Justin: Thank you, Adam, for having me. It's great to finally connect face-to-face like this after our many chats on LinkedIn. I was born and raised in South Africa, and at the age of 19, my family and I immigrated to Israel. Being Jewish, it was quite an easy transition for us. I spent 14 years in Israel, where I completed my undergraduate studies in Marketing and Business.

Right after university, I entered the high-tech world, working at various companies and startups. I was very fortunate to join Yotpo early on, a well-known name in the e-commerce space. Starting in marketing, I witnessed the company's transition into hyper-growth mode after achieving product-market fit.

Over four and a half years, my role evolved, and I eventually became the Director of Business Performance, leading the internal analytics and business intelligence operations. I left Yotpo at the end of 2017 to explore freelancing, seeing a lot of opportunity to leverage my skills with other startups.

About six months after leaving Yotpo, I embraced the digital nomad lifestyle and have been living out of a suitcase for the last three years, currently stationed in Vietnam. My travels have taken me to Thailand, Hungary, Colombia, Costa Rica, and other great locations, enjoying the benefits of geo-arbitrage and managing to save a substantial amount of money while maintaining a decent annual income as a freelancer.

Today, I'm working on a new venture aimed at providing an all-inclusive business intelligence solution for Shopify store owners. Initially focusing on Shopify, the vision is to expand into other platforms later. With over six years of experience in analytics, I'm bringing a service model to the e-commerce space that I call "Analytics-as-a-Service."

This subscription-based model covers everything from infrastructure to reporting and business analytics, offering store owners a hassle-free experience with a 30-day satisfaction guarantee. Utilizing tools like Tableau for custom dashboard creation, the service is a hybrid between traditional agency services and SaaS, promising to help stores grow through the power of data.

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Adam: We're about to dive deep into how principles from your strong SaaS background can be applied to e-commerce. It's fascinating how data intelligence, though quite niche in e-commerce, is not so in SaaS. There's a growing market among e-commerce stores, especially those scaling quickly, who are eager to understand where their revenue is coming from, identify their data inefficiencies, and clarify attribution.

But before we get into that, let's touch on the Israeli startup scene. It's remarkable how many successful companies, both in SaaS and e-commerce, originate from Israel. What do you think contributes to this vibrant ecosystem?

Justin: It's a great question, Adam. I'd recommend a book called "Startup Nation" to anyone interested in understanding how Israel, despite its challenges, has become a beacon of innovation and entrepreneurship. The book, written by two American university professors, explores how a country with no natural resources, a history of conflict, and limited trade with its neighbors has managed to become a global leader in venture capital investments and innovation.

Factors include cultural aspects, governmental support, and the unique role of the military in nurturing tech talent. Many Israelis, after completing advanced training in intelligence units, enter the civilian market with skills far beyond their peers globally. This military experience, combined with a cultural mindset of 'chutzpah' or bold audacity, fosters an incredible entrepreneurial spirit.

The ratio of startups to the population is staggering, with one startup for every 1,500 or 2,000 citizens, which is unparalleled anywhere else in the world. This entrepreneurial culture, coupled with a 'can-do' attitude prevalent in Israeli and Jewish culture, sets a unique foundation for business success.

Adam: That's truly fascinating. The Israeli model is a testament to how challenges can be converted into opportunities. Now, shifting gears back to e-commerce, you've mentioned that being a data analyst is quite a niche in this sector. Can you share some principles from the SaaS business model that could be effectively carried over to e-commerce?

Justin: A crucial aspect is truly understanding the customer, their buying cycle, and focusing on metrics like repeat purchase rates and retention. It's about identifying the core segment of your customer base that remains loyal over the long term.

In today's business environment, any company can start a subscription-based model, but the challenge is determining whether it's viable for your specific business. This requires a deep dive into the data. I've written several articles on customer retention and lifetime value on my site, Project BI, which is an educational resource for analysts. These principles are not only applicable but crucial across different sectors, and in my freelance work over the last three years, I've applied these concepts to a wide range of businesses and target markets.

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Adam: Let's shift the focus to attribution. Many e-commerce stores scale rapidly but struggle with managing and understanding their data, particularly in identifying which channels are driving revenue. What advice do you have for businesses overwhelmed by data and unsure of where their revenue is actually coming from?

Justin: Attribution is indeed one of the biggest challenges in marketing analytics. The market is flooded with solutions attempting to address multi-touch attribution because customers often visit a site multiple times from different sources before making a purchase. My advice is not to overcomplicate things.

Many businesses haven't mastered the basics of business analytics yet are trying to solve complex challenges like multi-touch attribution. Google Analytics, especially with enhanced e-commerce setup, can provide valuable insights into the final touchpoint for many businesses. It's crucial to understand your buyer's behavior, including repeat purchase rates.

For instance, one of the stores I'm working with has a 20% repeat customer rate within 30 days. Understanding these metrics, along with customer research and surveys, can provide deep insights into your customer's journey and preferences. Engaging directly with your most loyal customers through calls or surveys can reveal why they choose to buy from you, offering invaluable feedback for any business.

Adam: That's an interesting point. It seems like getting back to basics and directly engaging with customers to understand their preferences and reasons for loyalty is becoming a renewed focus for businesses. This direct feedback can uncover valuable insights that aren't always evident through data analysis alone.

Justin: Absolutely. At Yotpo, we saw how product reviews could offer a wealth of feedback. Although it's challenging to quantify the exact value of this feedback, it's undeniably rich in insights that can inform business strategies and improve customer satisfaction.

I almost always tell e-commerce stores, if they can afford it, to go with something like Yotpo. Not only do the reviews help boost conversion rates, but the automation to generate feedback is crucial. Many businesses operate on assumptions that are often wrong. Just talking to 20 customers over Skype can reveal so much. It's a very classic UX design and customer research approach.

I believe every entrepreneur should be talking to their customers all the time. It’s often the simplest advice that yields the highest returns. Switching your attention to repeat purchase rates, let's delve into customer lifetime value. It's a massive challenge and topic of discussion at the moment, especially as so many merchants are dependent on top-of-the-funnel paid ad spend on Google, Facebook, Instagram, TikTok, and other social giants. They're looking for profitable ways to ensure the data they purchase maximizes customer lifetime value.

Yes, the answer to increasing customer lifetime value isn't very sexy, but it's about really putting yourself in the customer's shoes. We often build something we like, but we don't wear the hat of the customer. Being obsessive with every pixel in your UX can help with conversion rates. If you break down customer lifetime value, it’s surprising how easy it is to manipulate once you can optimize other factors like your cart size and repeat purchase rate.

How do we get them to buy more? That's going to increase customer lifetime value. It boils down to conversion rate optimization, working on your website, and improving every little thing over time. The site's load time, the number of steps to get to payout, and being obsessive with UX are key. You need to become obsessive with UX if you're really focused on customer lifetime value. Wear the hat of the customer and experience it as if you're them.

Look at the emails you're going to receive as a customer. Are they friendly? Is it something you would want to receive from any business you did business with? Every little thing matters. Are all the emails optimized for mobile? Sit with a piece of paper or use something like Lucidchart online and start mapping out that journey, every single touch point. Then there's email and SMS to ping them at the right time to remind them, trying to stay top of mind.

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Adam: It's interesting to touch on the point about emails. A lot of clients we take onboard are very surprised, sometimes questioning our approach because we have a very strong content focus. We say a lot of the time, the way to sell more is to sell less. If you lead with value and often content, then you can maximize people's engagement over the long term, and they'll just buy from you as a byproduct of trust. It’s nice to hear a data scientist like you back up that holistic theory rather than saying it’s completely wrong. There is a lot of relevance, and it makes a big difference.

Justin: Yeah, it's amazing to me, and we all make this mistake. I can't really understand why it happens, but we forget when we start thinking about converting these visitors, this thing we can't see or touch into revenue, we forget we're dealing with human beings. The best thing is like, visit your own website if you're a store owner and say, “Would I want to buy from this store? Am I happy with this checkout page? Am I happy with this email?”

Justin: And if you're not fully invested in your store, how can you expect others to be? It's often the simple, unglamorous tasks that are overlooked, yet these are the low-hanging fruit. Everyone is looking for that secret sauce, but improving your site's appeal can make a significant difference.

Customer lifetime value has always been an obsession, especially in the SaaS world, due to reliance on paid ads. For e-commerce businesses, while ads might work wonderfully, relying too heavily on a single marketing channel can be dangerous. Excelling in SEO and content marketing can significantly lower your customer acquisition cost (CAC), making the obsession with customer lifetime value less critical.

Building a legacy business requires moving beyond a sole reliance on ads, aiming for a strong, diversified marketing strategy to lower CAC and sleep better at night. This approach is more scalable and sustainable in the long run.

Adam: It seems commerce is often caught in the trap of immediate gratification, contrasting with brick-and-mortar businesses that focus on long-term customer relationships. Treating customers well leads to repeat visits and loyalty, principles that seem to have been forgotten in the rush for quick sales.

Focusing on the customer journey, making it as frictionless and pleasant as possible, is key to increasing customer lifetime value over the long term, rather than the incessant chase for immediate sales.

Justin: Absolutely, Adam. Leveraging tools like Klaviyo offers tremendous opportunities to gain a competitive edge by utilizing the data you have on your customers to do something unique. Today, anyone can start an e-commerce business in minutes, but differentiating your brand becomes increasingly difficult as the market saturates.

Humanizing your brand and making personal connections, as Gary Vaynerchuk advocates, can set you apart. He once shared a story where, instead of sending a regular gift card to a loyal customer, he sent a football jersey to a fan, creating a personal and memorable experience.

It's challenging to scale such personal gestures, but with segmentation tools like Klaviyo, it's possible to tailor your approach to different customer segments. I plan to integrate tools within my dashboard for creating smart lists based on purchase history, enabling even more personalized marketing strategies.

For instance, recognizing a segment of customers in Asia and acknowledging the Tet holiday can create a unique and thoughtful engagement opportunity. Personalizing experiences in this way not only enhances customer loyalty but also distinguishes your brand in a crowded market.

You don't have to only focus on Christmas; there are people in the rest of the world that don't celebrate Christmas. You just have to be innovative, or rather creative, and think a bit out of the box. Also, take advantage of the assets you have, like your data and what you know about your customers. It comes down to talking with them and personalizing effectively.

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Adam: I like it. It's nice to see we completely align on this. Like I said before, the holistic side of the customer journey is backed up by the actual science and the data. I want to give two quick tips actually to anyone watching. I know we talked a lot about content and more holistic sides.

Two things that I've found very effective for increasing lifetime value, and you could probably even say average order value, are:

1. When someone buys, we tend to find that they're very hot and likely to buy again. So, having a strategically placed cross-sell or an upsell in the first email in the post-purchase journey, even if you get a one percent increase in conversion rates, over time that compounds massively.
2. If you have a hundred customers a day and one person buys this extra item for a hundred dollars and gets twenty dollars off for the next 24 hours, that one percent can make a huge difference if it compounds at the end of the year. That has been very effective for us, and we have had instances where we've got that up to 2.5 to 3 percent, which makes a huge difference.
3. The second one is for repeat consumable items, just going in around the replenishment time with a very subtle reminder and saying, "Is it time to stock up again on what you bought?" You don't need to throw people a discount, just remind them that they purchased this one, for example, 30 days ago, and ask them if they'd like to stock up again. It works very well.

Justin: Yeah, I mean, those small percentages add up. If you think over a year, right, it's one extra percent every other day, it adds a lot to the bottom line. And then, especially if you've got a strong product, right, and you're putting more product in the hands of these customers.

If you're really a good business, it will compound because now you have more repeat purchases, you have more word of mouth, and that flywheel just gets stronger and stronger over time.

Adam: Absolutely agree. Turning our attention to data again, so I think we did talk about this a little bit before, like being overwhelmed by attribution. Where, let's say, for example, I'm an e-commerce seller and I've scaled up, tripled the revenue from 200k to 600k in two to three months, and I start to get overwhelmed by the attribution channels. Where would you suggest that I first look to find out where this revenue is coming from? What would be your advice?

Justin: It's a good question. I know for a lot of people, especially those who haven't worked a lot with data, it can be very overwhelming. What I'd recommend is, the last thing you want to do is just jump into Google Analytics and start clicking around because you'll just get lost, and you're not going to help yourself.

Take a step back, sit with a pen and paper, a cup of coffee, and what I always say—and this is the same for e-commerce businesses, B2B, or a SaaS company—is you want to think top-down. Start with what would be the top three most important metrics for you. It's probably something like sales, maybe something like average order value, something like repeat purchase rate. Maybe write three or four numbers out. It could also be something like your backlog, especially if you're selling like crazy right now.

Maybe it's more important to understand how many orders have been pending fulfillment for more than seven days. That's something I'm also planning on tackling with my dashboard, by the way, just to plug that in there. But start with a pen and paper, write that down, and then what I would do is go into Google Analytics. If you haven't got Google Analytics set up to be optimized for e-commerce, get that done ASAP. Work with an expert if needed.

There's a very good site that I've been part of in the past called MeasureMatch. It's a UK-based site that connects businesses with analytics and business operations specialists. You'll find someone there in no time that can help you with this. Assuming it's already set up because I know most e-commerce businesses will invest time early on to get that set up, go in there and be very focused.

Say to yourself, "Okay, I want to just know top down how many sales in the last 30 days?" And then start breaking it down bit by bit: which countries, which channels, and start building a picture for yourself. Try to think you're looking at a puzzle, and you want to start adding pieces to the puzzle.

Something else I've always said to my clients is, "My job is to turn on the lights." You know, you're walking in this dark room, bumping into the table; I want to come and turn on the lights. Once again, I don't want to overplug my solution, but the first dashboard I really wanted to focus on is called the War Room, where I take all the main KPIs and put them in one dashboard because I know it's super difficult to go and find these numbers in different places.

I just want to give you one place. I'll give you green and red indicators to show you the change for whatever time period you want to look at, and that's where you can start your day, like, "Where do we want to focus?"

The next thing I'd say is it's going to be overwhelming however you look at it. I wouldn't overstress about it. You should know at this stage, especially if you've been doing this for a year or two, or even longer, what is important to the business. Learn Google Analytics, so at least from the marketing side, you understand where the traffic is coming from, what are the conversion rates per channel.

I'd say do some experimentation if you can, if you've got the resources. Make certain changes, monitor the analytics, see if that makes any difference. There's a common thing as well, double down on what works. So, if you see a high conversion rate from referral traffic, then maybe you want to hire a PR company or bring in someone that can write some guest posts because people are writing about you, and when people come to you from their sites, they're converting very well.

Adam: That actually leads nicely to the last question, which is, which metric should I focus on? It sounds obvious, right, but obviously, there's a lot to consider, summarizing everything we've discussed with attribution, profitability, and so many moving parts. What are the key metrics an e-commerce business should be focused on if it's looking to grow sustainably?

Justin: You made the right point about sustainability because if you're doing ads as your main marketing channel, obviously looking at your cost per click, your cost per acquisition, your ROAS, your return on ad spend, those are going to be key if this is your main driver.

I've seen from working with my analytics design partners, we've observed huge shifts, which can make the e-commerce landscape very unpredictable at times. It's crucial to keep a close eye on these shifts. I've adopted the concept of revenue per session in my dashboard, which aims to quantify the value of all traffic to the website by determining how much money is being made from these sessions.

This metric encourages us to focus on bringing in more valuable traffic over time, rather than just aiming for quantity. It's a simplified metric that combines your e-commerce conversion rate and revenue, essentially calculating revenue divided by sessions to figure out how much a visitor to your site is worth. The goal is to at least keep this value flat while hoping that traffic increases. If you're doing a good job, this number should go up, indicating that you're making more money on average and the quality of your traffic is improving.

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Adam: Regarding traffic from non-paid sources, how important do you think that is?

Justin: I'm a big proponent of a multi-channel approach and lowering risk in the business. I strongly believe in the power of SEO and content marketing. In my reports, you'll be able to filter metrics by various sources like email, organic search, and direct traffic, and monitor them. It can get very granular, but achieving this level of detail is possible and should be a goal eventually.

If you're just starting out, focus on whether your sales are growing month over month or quarter over quarter. For example, one of my clients is content with their growth quarter over quarter and doesn't really care much about other metrics. However, I encourage them to become more granular in their analysis, as it's not enough to just grow quarter over quarter. We should aim to grow more aggressively.

Adam: It seems these issues stem from when a business is almost ready to take the next leap. It goes back to whether these metrics can work in their favor in the long run, considering the differences between a business doing 100k and one doing a million a month, logistically, operationally, and in terms of additional costs and sustainability.

Justin: It's a catch-22 because if you don't start investing now in sustainable marketing channels, like starting a blog today, you're not going to see much traffic for the first year, and most businesses don't want to invest for a year without seeing results.

However, if you're doing it well, year two can be super profitable because your CAC is now ridiculously low due to all this organic traffic coming through. It's about having the long-term mindset and being willing to invest. Many people get caught up in the success of ads and think it will last forever, but there are many stories of businesses that have failed because of that approach.

On metrics, email is a big one. Your open rates and click-through rates are crucial to optimize, especially if you're not leveraging email marketing, which is arguably the most profitable channel. Acquiring a new customer is more expensive than retaining an existing one, and email is effective for repeat purchases.

I could talk for an hour about this topic alone, but what I always tell every client is to visualize their business in terms of a funnel, what I call the core funnel. For an e-commerce business, this funnel is consistent: visit, add to cart, checkout, transaction, and then repeat purchase. Understand your numbers at each major step of this funnel, using Google Analytics and Shopify data. Tracking these numbers, even manually at first, monthly, is a good start to becoming more data-driven and identifying where improvements can be made, whether it's in driving more traffic, improving conversion rates, or both.

Adam: Breaking things down to the fundamentals and thinking top-down is key. Your advice on becoming more data-driven through direct analytics and strategic thinking offers a clear path forward for e-commerce businesses aiming for sustainable growth.

So, focusing on those key metrics within the funnel, we have traffic and articles at the top of the funnel, which would include sessions or page views, depending on which metric you prefer. Google Analytics offers a shopping stages report that details the percentage of sessions reaching each major point, like add to cart, and the corresponding drop-offs. This provides a clear view of the funnel: session viewed product page, add to cart, checkout, and transaction. Google Analytics can give you this breakdown if it's set up correctly.

Justin: Exactly, and what Google Analytics doesn't do, which my solution offers, is the ability to easily split this by different channels. You'll immediately notice that email, for example, has incredibly high conversion rates all the way through compared to other channels like organic, referral, or ads, mainly because it's targeting repeat customers, allowing for more personalized messaging to drive repeat sales.

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Adam: It's fascinating how e-commerce has so many moving parts. We've discussed CRO and UX extensively. These areas, while known to be crucial, often seem neglected or don't receive as much focus as they should, perhaps because they require a long-term investment in contrast to the allure of instant gratification.

Justin: Time and again, case studies have shown that the most significant shifts in metrics come after a store redesign. It's a recurring theme where a redesign leads to substantial boosts in conversion rates, which can't be achieved by mere tweaks. Rebecca West, whom you're connected with on LinkedIn, showcases the impact of store redesigns well. The comparison is like walking into a store; an attractive, well-branded store immediately builds trust and invites customers to explore the products.

Adam: Managing everything in e-commerce can be daunting. Justin, it's been great having you. As we close, could you share how people can learn more about your project and contact you for work?

Justin: The best way to reach me is through LinkedIn. You can find me, Justin Bullion, and send a direct message for a demo or to learn more about my solution. More information is also available at projectbi.net/ecom, where you'll find the latest version of the dashboard and screenshots. I also write about analytics at projectbi.net, where those interested in becoming more data-driven can subscribe. Although I'm on Twitter as @justin_blacklion, I'm most active on LinkedIn, which is the best platform to contact me.

Adam: We'll make sure to tag you in this post. It's been enlightening with many great insights shared. If anyone has questions after the stream, feel free to post them in the comments, and either Justin or I will respond. Justin, thank you for your time, and we'll catch up soon.

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