The Strategy That Dramatically Increased Tenzo Tea's LTV by 50%

Steve O'Dell is the Co-founder and CEO of Tenzo Tea, a DTC organic matcha tea company. Available in thousands of stores and featured in Entrepreneur, CBS, and People, Tenzo Tea provides healthy energy through organically sourced and sustainable ingredients. Steve's roots are deeply entrenched in entrepreneurship, and he is an investor in multiple startups, including Jibby Coffee. He also co-founded The Odd Job Brothers, KOTU Inc., Iliad Tech, ACCESS, and Ad Valorum. Steve attended UCLA briefly before deciding to leave to explore entrepreneurial opportunities.

Here’s a glimpse of what you’ll learn:

• Steve O’Dell shares Tenzo Tea’s blueprint for increasing LTV by over 50%
• Optimizing product bundles and post-purchase experiences
• Why should you address customers’ objections head-on?
• How pricing strategy impacts LTV
• Leveraging expedited shipping to boost conversions
• What would Steve change if he had to do it all again?

In this episode…

In the digital world of ecommerce, where customer satisfaction reigns supreme, increasing lifetime value (LTV) isn’t a choice — it's a necessity. What can you learn from brands that have leveraged this metric to accelerate business growth?  

Steve O'Dell, a seasoned ecommerce growth expert, highlights the importance of providing a better customer experience to retain customers longer. Focusing on existing customers can boost ROI, so understanding and applying LTV metrics is essential. LTV measures the aggregate value of all customers, and increasing LTV impacts marketing strategies, profitability, budget allocation, and customer service expenditures. To boost LTV, Steve's company uses a variety of strategies. As a startup, Steve quickly addressed objections, tracked them through surveys, and then experimented with bundles, subscriptions, and product iterations to modify or improve products. By analyzing LTV, they were able to make adjustments and increase sales, which led the brand to increase its LTV by 50% within two years.

Join host Raphael Paulin-Daigle in this episode of the Minds of Ecommerce Podcast as he interviews Steve O'Dell, the Co-founder and CEO of Tenzo Tea, on the impact of lifetime value on ecommerce growth. Steve shares Tenzo’s blueprint that increased LTV by 50%, his ecommerce journey, and how to address objections head-on. This insightful conversation provides valuable takeaways for anyone looking to refine their ecommerce growth blueprint.

Resources Mentioned in this episode

• Raphael Paulin-Daigle on LinkedIn | X (Twitter)
• SplitBase
• Steve O'Dell on LinkedIn | Instagram
• Tenzo Tea
• “How a DTC Cookware Brand Leveraged Product Bundling To Accelerate Growth” with Jordan Nathan on the Minds of Ecommerce Podcast
• “The Partnership-Building Strategy That Positioned Eight Sleep as a Market Leader” with Alexandra Zatarain on the Minds of Ecommerce Podcast

Sponsor for this episode…

This episode is brought to you by SplitBase.

At SplitBase, we design, test, and manage high-converting landing pages and on-site experiences for fashion, luxury, and lifestyle e-commerce brands. Our optimization program pinpoints exactly where your store is losing money most, and then we help you fix that.

The result? Increased conversions and profits for our clients.

With our team of conversion optimization specialists, performance marketers, and conversion-focused designers, we've got your back when it comes to testing and optimization.

Request a proposal on SplitBase.com today, and learn how we can help you get the most out of your marketing spend.

You can find us on LinkedIn, Twitter, and Facebook. Don’t miss out on our exclusive podcasts at Mind of Ecommerce.

Episode Transcript

Raphael Paulin-Daigle  0:06  

Welcome to the Minds of Ecommerce podcast, where you'll learn one key strategy that made leading ecommerce companies grow exponentially. We cut the bullshit and keep the meat in a 15-minute episode, founders and executives take us through a deep dive of a strategy so you'll get to learn and grow your online sales. In the last episode, you heard from Jordan Nathan from Caraway, who shared how they've used sets and bundles as the backbone of their ecommerce strategy. Today, on episode number 30. Get ready. Steve Odell is the co-founder and CEO of Tenzo Tea, a direct consumer organic Matcha Tea company, and will talk about strategies that allowed them to increase LTV by over 50% in the last couple of years. I'm your host, Raphael Paulin Daigle, and I'm the founder of SplitBase. This is Minds of Ecommerce. Now this episode is brought to you by SplitBase. At SplitBase, we help leading DTC brands such as Dr. Squatch, Hyper Ice, and Mica, a B test design, build, and manage high-converting landing pages and on-site experiences. Our optimization program pinpoints exactly where your store is losing money most. And then, while we help you fix it. The result, increased conversions, and of course, improved marketing efficiency with our team of conversion optimization specialists, performance marketers, and conversion-focused designers. We've got your back when it comes to testing and optimization. Request a proposal on SplitBase.com today to learn how we can help you get the most out of your marketing spend. All right, Steve, welcome to the show. Thanks for being here.

Steve O'Dell 1:40  

Thanks. Yeah. Thanks for having me. Excited to chat. Yes.

Raphael Paulin-Daigle  1:45  

So as you know, this podcast is all about going deep and dissecting one key growth strategy. So our listeners can get as much value as possible in you know, 1520 minutes. And right before we started recording this, you said that one of the key things that you guys have done? Well, there's a couple of things. But you've done a couple of things in the past couple of years to really increase your lifetime value. And you've increased it by over 50% in the past couple of years. Now, I wanted to drill down into that. But just for context, or how long have you been working on 10 00 or seven years and amazing seven years in? And you've done a lot of great things over time. So let's talk about that. Let's talk about strategies to increase LTV, and walk us through maybe a couple of highlights.

Steve O'Dell  2:36  

Yeah, so I think a good background point is like, why is this? Why is this important? Right. And in a world where media buying has gotten tougher and tougher, it's critical to have the highest LTV possible for two reasons. One is it really boosts your revenue. And also contribution profit TOS it allows for a higher allowable CAC. And so once you start spending 100 $200,000 a month on ads, there's this like fallacy that Oh, as you spend more your CAC goes down, but 99% of brands, it actually goes up. And even if you know you're optimizing all these things, so one of the things was as we started to spend more each month, we really needed to figure it out. You want to keep that going, how do we allow higher CAC, and fundamentally, you know, your allowable CAC is based on your contribution margin, you know, for acquiring customer over a period of time. And so if we can increase our LTV by a large percentage, then we can spend more money on ads, and or be more profitable. That's point one. And then the first kind of really big win was fundamentally just changing the unit economics. And we did that by altering the pack size. So before we are charging, we were selling like 30 grams of margin for 25 bucks. And I know that margin after shipping was like, I don't know, 15 bucks. So you got a $15 CAC on first purchase? Yeah, that's not really going to work on Facebook these days. This was in 2011. So what we did was we immediately switched to, we doubled that and we started doing 60 grams of Moto for $50. And despite doubling the cost, the CAC did not double in line with that. So the CAC went from, you know, 14 to 30. And that is, you know, it's a recurring purchase. So every month, you're making that same margin and your allowable CAC goes up significantly, even with you know, turn. It's still really healthy. Now, that was a super basic one. But yeah, tell me how you're gonna do rattle off another one. Yeah.

Raphael Paulin-Daigle  4:39  

Well, I have I actually have a couple of questions on this. So I know there's a lot of brands that are looking to do something similar. They want increase the quantities that people are getting, but I think they're also afraid of killing their conversion rate as they're gonna go about it. How did you guys approach that? Because you're going from 25 to 50 you're effectively doubling the kind of the minimum order for these products, you're a little more than doubling the quantity. Did you? Did you test it? What type of rollout did you do?

Steve O'Dell 5:11  

Yeah, so this was, this is when we were like really young, like prior to this test, we had no experience in E commerce and they weren't really tested super well. But yeah, so during this period, and this kind of like deep dive into retention, we built out a Data Studio, just pretty unconventional. And the analytics tools at the time, were very good. There's some better ones now. But we're in so deep on the status of the lake doesn't make any sense. But yes, we built out a really simple LTV dashboard that you know, puts in marketing spend and all the revenue based on a cohort. And then, like fully loads all the costs. And then you can see like, contribution margin, you know, and like gross margin and pretty much all the baseline like simple p&l metrics. And that's how we were tracking it. So just looked at the LTV over specific months, and then looked at, you know, what's the CAC? What's the payback period? That kind of thing? Awesome.

Raphael Paulin-Daigle  6:01  

And how did you decide on the quantity and the price? Because I'm sure, you know, you probably thought, hey, maybe we should try 60 bucks instead of 15. It used to try 45, right. And I'm sure that when you look at your contribution margin, while there is a minimum that you know, you need to hit for the numbers to actually make sense over time. So you could also shoot straight for that, but what was your thinking process, when it came to finding out what to go with?

Steve O'Dell  6:28  

You know, pricing, in my opinion, is, you know, for the most part shooting from the hip, and if people buy it, they buy it. And like, for us in this example, it was okay, like did the CAC double the answer was no. And then I was like, alright, let's let's roll with this. Yeah. And really the next, like, big test we did is we sell organic module, like you mentioned. And then we also have this, these supplementary items, you know, we call them march aware. So it's like, yeah, handmade was given electric mascot with shaker bottle and glass, tumbler, you know, Japanese ball, you know. And what we did next was we made a set of bundles. So we like one bundle had the electric mixer, one bundle had the bandwidth, one bundle had the shaker bottle, one bundle had the last topic. And we ran about 100,000 hours and spent two each cohort each bucket bundle. And then we looked at CAC and LTV for both for each stat. And then the one that you know is the clear winner on a contribution margin basis was in LTV was this electric mixer. And that became like the starter kit on our website. And so yeah, that was like another huge optimization. And then we pretty much went all in on this one bundle after that. Amazing.

Raphael Paulin-Daigle  7:44

I love that. You're saying that. Because just last week, the podcast episode with Jordan of caraway home, we talked about, you know, creating bundles and set and they actually started just with bundles and sets. And we're looking at, you know, hundreds of dollars for the minimum product. And then when I kind of look as well at all the brands that we've worked out over the past six, seven years, and ran like hundreds of tests with bundles and sets, I think people tend to underestimate how much they can push bundles and set as like their hero product. For customer acquisition. A lot of people just start with their individual products and turns out look like you could probably double, you know that number that first ao V just by just just by creating a set and making that the product you're sending money to

Steve O'Dell  8:34

right? Totally couldn't be more. I mean, there's like a funny note about that. Did you see that Costco started selling pallets of like every kitchen utensil pot pans you ever need. I did not see that he got it delivered to your door for $5,000. Oh my God, that's like that's like the ultimate bundle the flash a OB booster. I

Raphael Paulin-Daigle  8:54  

said, get it all. Amazing. Now, I know you have a couple other things that you guys have done as well, that's helped with increasing lifetime value. What are some of those other strategies that you guys have employed over the years? Yeah, a really simple one.

Steve O'Dell  9:09  

That's frankly, just not done. I feel like super well, and when I subscribe to things is confronting objections, like right away. So as the brand skills, you pretty much know what what are the objections? Why is someone gonna have a bad experience? Or, you know, can you change that about the product? And can you iterate it? If yes, then do it. But for us, like one of the big things with mantras is that it's a powder tea. It's like literally a pattern to it. And it's non soluble so it doesn't dissolve in water. So people get these clumps and they're like, oh, what what's going on? It's so bumpy. It's not supposed to dissolve. Right? Well Susan actually it doesn't dissolve and that's totally okay if you want mix it up a little more. Otherwise, just think it's not going to kill you. So yeah, like that's just one really, really simple one that it's like you build out these really good post purchase was an upfront load all those messages so that people, you know, they already are aware of them before they're like, Oh, this is a bad experience at all. What is some training?

Raphael Paulin-Daigle  10:11  

Yeah. How did you identify those objections?

Steve O'Dell  10:14  

Yeah, great question surveys. So like, you gotta run surveys constantly make sure that you know this. Yeah, like, like day 24 of our post purchase, but you got like an NPS survey, which is like how much you do? Like, yeah, what can we do better? You know, all that good stuff. And then you iterate and optimize there. This is kind of a nice segue into my next one, which is product iterations. So like I mentioned, we have all those modules used earlier. And then we have like, our core, tin and pouch. And we did. We're like, basically, Bootstrap, who has a very tiny amount for friends and family. Like, if you were to say, I want to put a 10k attended, I bet. Yeah, sure. But no, no institution like, so we didn't really have a lot of money to like buy and make like really nice products. And we were just getting started. So what we did is we each time we were going to order new hardware or new tins or the you know, packaging, we would do an iteration on it. And then we would label that like, instead of SKU 123, we had like, SKU 123 A and then SKU 123 B and SKU 123 C, and we mapped all those to LTV, all of those things. Not Not every single one was in that perfect land. But we started getting up to the critical mass of improving product leads to higher LTV better contribution margin. That's a pretty standard one. But that's so important. I feel like a lot of founders just like make the product and then think it's fucking perfect. And everyone's gonna love it till the end of time. But in actuality, you can keep making it better and better and better and better. Like a lot of other parts of your business, like your website and your customers flows. So, gotta iterate on that as well.

Raphael Paulin-Daigle  11:52  

And I think it's so simple, like the way that you're explaining it, right, you just kind of change the skews. And then obviously, like, it's pretty easy to track at that point. And I think from what I've seen, it's either people are not doing it at all, which is probably the majority of the time, like you said, or they're overcomplicated overcomplicating it and, you know, are looking for a bunch of fancy tools and software to help find out and at the end of the day, you can still be pretty scrappy, and get the data you need in a way that's probably easier than installing a bunch of tools and software. That's not even gonna get you that answer.

Steve O'Dell 12:25

Right. Yeah, exactly, should install the least amount of software possible on their site.

Raphael Paulin-Daigle  12:32  

Yeah, I love that. So just kind of To recap for the audience, and everyone listening. So the first one is, bundles, bundles, and kids, just make sure that, you know, experiment with those and try to make sure that you're actually promoting bundles that will give you an advantage when it comes to acquiring your customers and not something that's going to make you work twice as hard. Number two is after people sign up, subscribe or purchase counter objections, because the goal here is for them to come back. And the sale doesn't happen after the sale, when it comes to subscriptions and actually increasing LTV, well, the sale is always going on, right, you need to sell people every single day, or you know, pretty frequently, encountering objections, especially by identifying them first through surveys, you know, was quite beneficial for you guys. And the last one is iterating on your products and understanding which variant of the actual product lead to the higher customer satisfaction just by being able to track the skews with the actual products. I think those are some three simple but really created an often neglected tactics. Anything else, Steve, that, you know, when it comes to LTV, you would recommend to founders that, you know, are running million dollar plus businesses.

Steve O'Dell 13:55

Yeah, if you have a subscription brand ship fast. That's my last little tip. It's another really interesting study we did, we mapped the shipping time of each first order to LTV and people that were under five days had a significantly higher LTV than people that were over five days. Super simple. It's also just really easy to do like you don't really need anything complicated. You just do a simple export, like I mentioned and then map that to, you know LTVs if you're filming centers on the West Coast, you have one on the East Coast just pull all the orders from each region. It's like it's not nothing crazy. Awesome.

Raphael Paulin-Daigle  14:31  

Love it. Super actionable. Steve, those are fantastic. Now you've been running the business for about seven years and so if you were to start this brand all over again, what would you do differently?

Steve O'Dell  14:43  

That is a very loaded question. What year Am I starting it in? Oh, today I have all my existing knowledge and network and money you do. I probably partner with like Naomi Osaka or coordinate Kardashian and and immediately sorted out celebrity partnership, huge audience right from the job. And then you know, dominate on e-comm. You get it Facebook ads will be so easy if you had one of those to deal with. But yeah, I feel like that's the key right now is getting so much difficult, so much harder, excuse me to do like, a lot of fundamental things that were very core to grow in e-comm brand. And if you're starting from scratch right now trying to just push on e-comm, like you better have an incredible product like, like their unique differentiated right from the jump. Like, if you were to launch another entrepreneur right now without like a serious ally, it'd be pretty tough.

Raphael Paulin-Daigle  15:36  

And for anyone listening to this, if you want to learn more about building partnerships with people, like Steve mentioned, listen to two episodes ago, my interview with Alexandra Zatarain of Eight Sleep where we talked about how they actually built great and successful partnerships with brands like f1, and Barry's Boot Camp, and a bunch of others. Now, Steve, we're pretty much at the end, we're pretty much out of time. But there's one question I would love to ask for entrepreneurs that have been in the space for a while and who have great businesses like yours, which is who do you look up to in this space? Who are some entrepreneurs and people running great ecommerce businesses that you know, yeah, you found are doing cool things?

Steve O'Dell 16:18  

I like Shawn, I've never met him. But if I'm on Twitter, the rich founder is really incredible. Yep. And I just like that they, you know, they're doing hundreds of millions of dollars a year. I think he thinks about things the right way. And they built a really good company. It's been cool to watch him from afar. Awesome.

Raphael Paulin-Daigle  16:38  

Sweet. Steve, thank you so much for being here. Now, if people want to learn more about you or Kenzo, where should they go?

Steve O'Dell 16:47

Yeah. tenzotea.co. Me personally, right. Hit me up on Twitter. Sweet.

Raphael Paulin-Daigle  16:55

Thank you so much to go. Thanks. All right. Well, that's it for today's episode. And thank you so much for tuning in. Now, if you like what you've heard, and you don't want to miss any of the new episodes that are about to come out, make sure you subscribe to the podcast. And well bonus points if you also leave a review in the iTunes Store, or wherever you're listening to this. Now, if you're working on an ecommerce Store that does over a million dollars in revenue, and you need help with conversion optimization or landing pages, well, I've got some good news because there's a pretty good chance we can help with that. Go to splitbase.com to learn more, or even to request a proposal. If you have any guest requests, questions, or comments, tweet me @PaulinDaigle and I'll be super happy to hear from you. And again, thanks again for listening. This is Minds of Ecommerce

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