Ask anyone who owns a retail or an eCommerce store about what some of the challenges are maintaining the business. They will probably say something involving how to attain new, along with repeat, shoppers.
Custora Co-Founder and CEO Corey Pierson connected with us to talk about the history of the company, including how they came up with the idea for the platform and how its helping brands out. Pierson also shared a humorous story about how Paul Graham (Y Combinator Co-Founder) helped out with their current name.
Colin Barry [CB]: I’m a big fan of the phrase “origin story.” What are the origins behind Custora?
Corey Pierson [CP]: My cofounder Jon and I met as software developers at a small financial services software company called GoldTier. I left GoldTier to attend Wharton to receive my MBA. Jon and I kept in touch and started to work on side projects together. After building a few websites that didn’t turn out to be very profitable businesses, we knew we wanted our next “side project” to be something that had potential to grow into something larger.
Towards the end of my time at Wharton, I took some classes with Professor Pete Fader. He taught a couple of classes around the topic of “customer centricity.” One was a quantitative class where he taught some of the latest statistical methods to predict customer behavior and forecast things like customer lifetime value. The other was more managerial; focused on what it means for a business to truly orient itself around customers, rather than products and channels.
When I shared what I was learning with Jon, he immediately thought of his experience launching an eCommerce site in college. He had some challenges setting advertising budgets without knowledge of how often his customers would repeat. We thought there might be a play to build software that would give all businesses the ability to leverage the latest and greatest predictive models.
We approached a few companies who let us analyze their data for free, and having real data and real business users was a great way to validate the idea. We were pleased to see that the lifetime value analysis was really helpful for the initial beta customers. Moreover, they were eager to have the information on a regular basis. So we built a working website to automate the process of refreshing the data and model scores. We built a web interface to help business users get at the results they’d need to make better decisions.
With a couple paying customers on the first version of that website, we were accepted into Y Combinator in 2011, and that’s when we really got started.
CB: What are some of the challenges in your respective technology sector? How does Custora help alleviate these problems?
CP: At Custora, we work exclusively with retailers. There has been a lot of talk about the “retail apocalypse” in recent years, but the truth is that some brands are growing very well while others are falling behind. It’s true that the industry at large has new challenges. There is more competition, customers are less loyal, and customers have grown to expect promotions. When you combine these factors, the economics don’t look good. As a brand, it’s no more expensive to acquire customers and when you get those customers in the door, they don’t stick around for long so you don’t earn as much. That’s a death spiral.
Custora is a Customer Intelligence Platform that helps retailers grow lifetime value. The best way to counter all the above challenges it to build customer loyalty. Acquire customers who are more likely to turn into repeat buyers and nurture the customers you have. That sounds obvious, but measuring and optimizing customer metrics is actually really hard. Customer data is scattered across a variety of tools. Data scientists are required to make sense of the data. In theory, marketers would run campaigns and optimize for loyalty metrics, but all their channel marketing tools (like email) provide channel-focused metrics (like open rates). There is no easy place to measure how well you’re retention program is working. That’s what Custora is for.
CB: Now moving onto the software itself. How does the Custora platform work?
CP: First, Custora takes in a retailer’s customer data (online purchase data, in-store purchase data, email engagement data, web analytics data) and brings it all together. This gives us a full view of the customer, rather than just a view into a customer’s behavior in one channel. We then run a suite of predictive models on that data, such as customer lifetime value, likelihood to churn, product affinities, and promotional sensitivity to name a few.
We then give marketers the ability to point-and-click their way to learn about different customer segments, set and track goals for customer KPIs, and to push customer insights into all their disparate marketing tools.
CB: Who are some of the customers/clients of Custora? Would you be able to share any use cases that have stood out to you personally?
CP: We’re lucky to work with really great teams at some of the best names in retail—from established brands like Tiffany & Co. and Crocs to eCommerce-first brands like Eloquii and Bonobos. It’s been inspiring to see how retail executives are embracing a customer-centric mindset. We recently had the CEO of Lucky Brand (a Custora customer) speak at our annual conference about how the brand is putting customers at the forefront of every decision.
A use case that stands out to me is how our customers are using predictive customer analytics to make more efficient advertising decisions. Many of our customers are using Custora’s predictive lifetime value scores to create seed audiences for high-value prospecting campaigns on Facebook and in display advertising. Our customers are seeing an increase in lifetime value (and also an increase in their immediate metrics of ‘ return on ad spend.’
By focusing on customer lifetime value, putting predictive lifecycle marketing and predicted product affinity programs in place across marketing channels, brands are seeing their businesses grow. We have a ton of great case studies from companies like Kenneth Cole, Crocs, and Dermstore on our website that retailers should check out.
CB: Do you have any advice for startups who are getting involved with eCommerce?
CP: For sure. It’s been cool to see so many new direct-to-consumer eCommerce retailers pop up over the past few years.
The first thing I always recommend is to focus on customer lifetime value (CLV)—the total amount of revenue a customer will be worth to your business over the lifetime of their relationship with your brand. CLV should be a retailer’s north star, the metric that tells you how much value your customers are creating.
When deciding which paid marketing channels to invest in, look at the ratio of customer lifetime value to acquisition cost. One challenge we see again and again are “one and done” buyers. Retailers want to acquire customers who are going to keep coming back again and again.
CB: Would you be able to describe the company culture at Custora?
CP: Custora is a unique place to work in that the culture is front and center for many company decisions. In every interview, potential hires are given a copy of our values booklet. Values include more typical principles regarding respect, constructive thinking, and taking action but also focus on having fun, sharing interesting things, and being willing to experiment. Collaboration in work and play are encouraged throughout the company. Growing from a team of five to a team of 60 can often diminish a company’s culture. But through weekly all-hands meetings, happy hours, company activities, and day-to-day meetings in the kitchen for lunch have helped maintain some of the little behavioral norms that really add up to shape who we are.
CB: Every startup has a story tell about their name. Where did the team come up with the name “Custora”?
CP: We initially started with the name Rabbit Ears based on old television antennas that were used to hone in on a specific channel as a metaphor for retail branding honing in on their customers. When we were interviewing at Y Combinator, Paul Graham’s first words to us were, “Oh this is the Rabbi Tears dot com team.” We quickly realized the challenges with rabbitears.com and so we changed the name. The joke lives on, though -- when our new employees reach their first anniversary, Custorians recieve a small trophy of sorts that contains a vial of “rabbi tears.”
As far as the name Custora, we landed on it fairly quickly after playing with different combinations of “customer” and “radar” and “story” — and because the URL was still available.
Images courtesy of Custora