How to Increase Customer Lifetime Value with Discovery and Trust Engines

What's going on everybody? Welcome to the First Class Founders podcast. My name is Yong-Soo Chung, and I'm the Founder of Urban EDC, an e-commerce brand serving the everyday carry community, and GrowthJet, a Climate Neutral Certified third-party logistics company. For the past 7 years, I built 3 companies in e-commerce and now my goal is to help you unlock the hidden growth levers in your business. 

Having an audience doesn't necessarily translate into building your business. So how do you find your audience, then nurture them into paying customers? What about enhancing your offers to your existing customers to increase customer lifetime value? Today, we're talking about your your discovery engine, your trust engine, and last but not least, your offer value ladder: what it is, why it's so important, and how you can segment your customers with offers they simply can't refuse.

By the end of this episode, you'll have a much better understanding of how to attract, nurture, and increase the lifetime value of your customers.

Let's dive right in.

Let's start from the beginning. When you first launch your business, it's important to join the communities you'll be serving and add value first. You need to build up your reputation. You need to attract your tribe of supporters. This phase of your business is all about experimentation. Start by talking to your potential customers first, not the product.

There is a misconception in the startup world where you spend years building your product first. Then, you discover that nobody wants your product in the first place. You want to avoid this common mistake that can cost you both time and money.

So, become a thought leader in your community by providing tons of value. Then, build a solution to a problem that your community has. 

Okay, so now let's say you found the communities where your potential audience hangs out.

There are two main systems you need prior to making that first sale with your customers: discovery and trust.

I like to call them the discovery engine and the trust engine because these two parts will drive the growth in your business.

Let me explain.

So when you first launch your new venture, nobody will know who you are. And that's where everybody starts. From zero. You're bringing a new creation into the world.

It takes time to get your products infront of people, let alone the right people who could be your potential customers.

So you need a strong discovery engine to get noticed.

Discovery engines are simply places where your customers will find out about you. Discovery platforms can be anything including real-life meetups.

However, these days, social networks are fantastic platforms for your discovery engine because there's built-in virality through their algorithms. When you post great content, these platforms reward you by putting your content infront of more people. And those people will consume your content and follow you.

Your discovery engine could have multiple distribution channels. For example, you could be posting your content on both Twitter and LinkedIn. You could also repurpose your content into short-form videos to post on TikTok and YouTube.

If you're just starting out, I recommend focusing in on just one platform first and mastering its full potential before moving onto the next one. If you're trying to figure out too many platforms at once, you will burn out before you see any results.

When I first started on my creator journey last November, I started posting on Twitter, then LinkedIn, then created a TikTok account, and then a YouTube channel. It was way too much for me all at once.

So I paired it down to just Twitter, and only recently branched off to LinkedIn because I felt that my target audience for First Class Founders was also on LinkedIn.

Plus, I re-purpose my content on Twitter to LinkedIn so it didn't take up too much extra time.

So let's dig further into a real world example of a discovery engine from my own company, Urban EDC, an e-commerce brand selling everyday carry tools like flashlights, pens, and pocket knives.

When I launched Urban EDC in 2015, I started with Instagram because that's where the everyday carry community was hanging out.

Just to give you an idea into the culture of everyday carry, people love posting the gear they carry on a daily basis. It's fascinating to take a look into the pockets of people all around the world and see what they carry with them every single day.

So if you're a mechanic, you might be carrying a few multi-tools, a knife, flashlight, maybe even a pen.

If you're a student, you might be carrying a notebook, pen, some earbuds, sunglasses, and maybe a keychain tool like a bottle opener.

If you're an Emergency Medical Technician, a pocket knife is a must in case you need to free someone from tangled seat belts or any other objects.

You get the idea. 

So since this is visual content, Instagram is where the community ended up sharing their pocket gear.

In the early days, Urban EDC's Instagram account was just a re-post account. So I would personally comb through hundreds of photos of people posting their gear and only re-post the photos that were high quality and featured interesting gear that I was curious about.

So, in the beginning, I was a curator of EDC gear photos on Instagram.

When I tagged the original poster on these re-posts, they saw my account and actually thanked me for re-posting their photo. Often times, they followed me back.

For four months, I leveraged Instagram to build an audience of over 10,000 followers who also live and breathe everyday carry gear.

Then, as I was preparing to launch the e-commerce shop, I put a link to a newsletter sign-up page and encouraged people to sign up to be notified when we launched.

We'll talk more about newsletters next as a core component to your trust engine, but the important thing to note here is that I was leveraging Instagram's algorithm as a discovery platform to drive potential customers into my newsletter.

Now, obviously, Urban EDC's Instagram account is no longer a re-post account. We post our own products that we sell in the shop.

Even though we expanded into other social networks like YouTube and TikTok, we use Instagram as our primary discovery engine even today.

So the job of your discovery engine is to get people to notice you.

And don't forget to optimize your profile. You want a strong brand. Provide a clear description of what value they'll receive by following you. And of course, don't forget to include your link in your bio so they can find out more about your work.

So if your discovery engine is working well, then your work should be getting noticed in public. People should start following your work and maybe even joining your newsletter.

Now, let's move onto nurturing your customers through your trust engine.

The job of your trust engine is to nurture relationships.

During the discovery engine phase, people have no idea who you are. They're scrolling through their feed and seeing your content for the first time. You may need to show up on their feed a couple more times before they decide to follow you.

Now, when they follow you, they've given you permission to talk to them. This is important.

The biggest difference between your discovery engine and your trust engine is that people are opting-in to your content. They know who you are already. You're no longer a stranger. They're familiar with your work. They've given you permission to talk to them.

While a follow on a social media network is great, an even stronger bond can be built through a medium like email or podcast.

So, ideally, you want your followers to either subscribe to your newsletter or your podcast.

Plus, you won't be at the mercy of algorithm changes or getting banned on these social networks. Since email and podcasts are decentralized, there is no single entity that can decide that you can no longer send out newsletters or publish a podcast episode.

Back in 2017, I was running a lot of ads on Facebook for Urban EDC. We were rolling in sales and had our best month ever in March 2017 breaking the $100k mark for the first time. This was a huge accomplishment for us at that time. I remember specifically celebrating this moment with Sandy, my wife and business partner. It was the evening of March 31st and we opened up a nice bottle of our favorite Pinot Noir and celebrated thinking that we had finally found some kind of magic formula to grow Urban EDC.

But then, Facebook banned us the following week because we were selling pocket knives in our shop. This was devastating for us. Our sales dropped 40% for the next two months and put us in a tight financial spot.

We learned our lesson the hard way. So make sure you get your audience off of these discovery platforms as soon as you can and into your trust engine.

In a perfect world, your discovery engine gets people subscribed to your newsletter or podcast so that you can build those relationships over time.

It's more difficult to build that trust if they're just following you just on social media because the type of content you'll be posting is more geared towards discovery.

For example, you have less than 5 seconds to hook a potential follower so your content needs to be catchy and appeal to a broad audience.

For building trust, on the other hand, you can go much deeper and nurture your relationships. You can build authority with your audience. Your content can be more specific and go deep, rather than wide.

I go in-depth into what type of content to post for both discovery and trust in episode 12 if you want to learn more.

Another great strategy for building trust is a webinar or an in-person live event. You can invite subscribers on your newsletter or podcast to join your webinar or live event as great tools for converting your audience into paying customers.

Speaking of newsletters, I just launched a newsletter called 'The Brief' and it's growing over 50% week over week. I'm building First Class Founders in public so I reveal all my podcast and newsletter metrics like downloads and subscriber numbers inside the newsletter. I also share weekly reflections on my journey as a creator. These are valuable lessons that I learned while experimenting with strategies on growing my podcast and newsletter. I don't hold anything back so if you enjoy behind-the-scenes stuff, you'll love my newsletter. Go ahead and sign up at FirstClassFounders.com/Newsletter. I'll see you there.

Now, let's take a sneak peek into my company Urban EDC's trust engine.

We have two primary distribution channels for building trust: email and trade shows.

Let's go over each one of these.

When a visitor lands on our website, our primary goal is to get their email address so that we can start building a relationship with them.

Yes, making a sale on a customer's first visit would be ideal.

But chances are, it's unlikely that they'll make that first purchase on their first interaction with our brand.

So we have an enticing pop-up that urges our visitors to enter their email by playing a game of spin the wheel.

When we collect their email address, we put them into a welcome series flow as part of our email marketing.

Each email in the welcome series is meant to build trust and familiarity with our brand.

The first email tells them what to expect from us in terms of email frequency, our weekly Gear Drops, and our community features in the newsletters.

The second email is more personal and talks about how I launched Urban EDC out of my one bedroom apartment in San Francisco.

The third email showcases reviews and testimonials from other customers who rave about us for social proofing.

The fourth email highlights our best-in-class customer service and our 30-Day Money Back Guarantee to reassure them that we've got our customers' backs.

You get the idea.

The goal of our welcome series in our email marketing is to nurture each relationship and build trust so that they feel comfortable buying from sus in the future.

Let's move onto trade shows. In the everyday carry community, in-person shows are a pretty big part of bringing the community together. 

A few times during the year, makers from all around the world bring their latest creations to trade shows. Likewise, gear enthusiasts travel from all different corners of the world to meet and buy gear directly from these product designers.

We attend these shows not only as an opportunity to network with up-and-coming makers, but to interact with our customers. Some of the best trust-building can be done face-to-face.

Okay, let's quickly review what we've learned today.

When you first start out, you have no audience. You need to find out which platforms your potential customers are hanging out, then build a reputation there by providing great value.

You need a strong discovery engine to build awareness around you and your brand. So put out content that's both catchy and relatable to more people. Get them to follow your work.

Then, encourage your followers to subscribe to your newsletter or podcast so that you can nurture those relationships.

A strong trust engine builds trust, familiarity, and authority.

People buy through their emotions. People buy through relationships. People buy through trust.

With a strong trust engine, you will begin to convert your audience into real paying customers.

This is where the real fun begins.

So let's talk about how to create your value ladder.

To design a proper value ladder, you need to understand two types of customers.

Imagine a sliding scale.

On one end, you have Joe.

Joe is a fresh college graduate looking to build his first business. He's on a tight budget but has a lot of time on his hands so doesn't mind hustling and doing the work himself if that means he can save a few hundred bucks.

Now, let's meet Mark.

Mark is already a successful entrepreneur. He's built a 7-figure business that's cash flowing. He's quite busy managing his business so he would rather pay for his results quicker than put in the time to do it himself. For Mark, time is more valuable than money.

Joe and Mark at two opposite ends of the sliding scale.

Joe values his money more than time.

Mark values his time more than money.

You need to offer a solution to both Joe and Mark to maximize the lifetime value of each customer.

For all the Joe-type entrepreneurs who are just getting started, money is more precious than time.

So you can provide Joe with digital products such as books or courses.

After you create your digital products, each sale doesn't take up any extra time on your side. So you can price these lower so entrepreneurs starting out like Joe can still access your knowledge without breaking the bank.

Eventually, Joe might work his way up to your higher-priced offers. But he still needs a place to start.

Now, Mark, on the other hand, values his time more than money. So instead of buying your book or your courses, Mark wants to go straight to you. He wants to discuss 1:1 with you to come up with custom solutions for his business. This is more expensive but time is money for Mark and he would rather cut straight into the strategies he can apply in his business rather than reading your books or going through your courses.

So, you can offer 1:1 consulting at a higher price for more experienced entrepreneurs like Mark.

You can also offer something inbetween like a group-based cohort.

While you won't get 100% of the attention as a 1:1, you still get most of the benefits for a fraction of the cost of a 1:1.

This is your value ladder. 

Offer something for each type of customer based on their price and time sensitivity.

An example of a value ladder is this podcast, First Class Founders.

I use Twitter and LinkedIn primilary as my discovery engine, then my newsletter and podcast, which are both free, make up my trust engine.

Then, I have a premium version of this podcast for $9 per month. You get a private, clean feed with no interruptions, an Ask Me Anything portal, early access to all episodes, and bonus extended guest interviews. This is the lower-priced offer if you're just starting out.

Then, we have a higher-priced offer if you want to work with me directly 1:1, which will get you results quicker.

So First Class Founders has a pretty simple value ladder of just two options. Now, in the future, I can adjust the prices on those offers but you get the idea.

By the way, if you're interested in joining us, head over to FirstClassFounders.com/join.

I would love to get to know you better and help you grow.

Okay, let's summarize today's lesson with a few action items.

There are two primary engines you need to grow your business: your discovery engine and your trust engine.

You need a strong discovery engine to build awareness around you and your brand.

You need a strong trust engine to build trust, familiarity, and authority.

What can you do to improve your discovery engine?

Perhaps you could double-down on a platform that's working well for you.

Or start investing into a different platform where your audience also hangs out.

What about your trust engine?

Could you add more to your email welcome sequence to nurture your relationships?

If you have the bandwidth, what about starting a podcast?

And finally, once you have these two systems in place, you need to implement a value ladder.

Consider both customers who are just starting out with lower priced options and those who are more experienced with higher priced, custom options.

Okay, now it's time for this week's Ask Me Anything.

This question was submitted by one of our First Class Founders Membership subscribers.

You've built a couple businesses in e-commerce now. What lessons (if any) have you applied to building an audience for your podcast?

This is an interesting question because audience building from a personal brand standpoint and selling e-commerce products are similar in some ways, but very different in other ways.

Let's break it down.

Both are similar in that you need to get your brand out there to get noticed. But the difference is that with e-commerce, you're selling a physical product. So the personal connection and trust building is far less compared to a personal brand.

In today's world, returning products are pretty common. If a product isn't what you expected, you simply return it.

With a personal brand, because what you're selling are results and not physical goods, it feels far more personal. 

If you work with someone directly and their lives change because of your work, this is far more impactful than any physical product.

So with e-commerce, we can entice our audience early on with offers. Perhaps a discount code or bundle deal.

But with a personal brand, if you have courses or offer 1:1 consulting, you need to build that trust for a lot longer.

So let's bring this back to the orignal question about building an audience for a podcast.

Podcasting is a great medium for building trust but not the best for converting that trust into paying customers.

It could take several months of consuming your podcast content before someone finally decides to support your work.

Whereas in e-commerce, if you come up with a great offer, chances are, a percentage of your audience will take you up on that offer.

All right, that wraps up today's show. If you want to ask me a question like this, you can sign up for our membership at FirstClassFounders.com/join.

In the next episode of First Class Founders, we're digging into the world of newsletters. I recently started a newsletter, which you can sign up for at FirstClassFounders.com/newsletter. I've learned a ton about how to start and grow a newsletter so I want to share with you some tactical tips on how I'm growing my newsletter.

If you're a newsletter operator, you don't want to miss out!

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If you're on Twitter, let's connect! You can follow me at @YongSooChung and let me know if you enjoyed this episode. I take feedback very seriously and would love to hear your thoughts on how to improve the show. All the links to the links to my social accounts will be in the show notes.

All right, I’ll see you in the next episode of First Class Founders!