Retention Science CEO on Data-driven Ecommerce

The co-founder of Retention Science, Jerry Jao, is an expert on using data, lots of data, to grow ecommerce revenues. Beyond that, he’s a gifted Taiwanese-born entrepreneur who proves what intelligence, hard work, and perseverance can accomplish.

He recently spoke with Practical Ecommerce’s Kerry Murdock on the merits of data-driven ecommerce businesses, among other topics.

Practical Ecommerce: We are here to talk about the use of data for ecommerce businesses and the broad topic of using data to make decisions. Your company, Retention Science, uses data to help merchants and shoppers. Tell us about that, please.

Jerry Jao: We think of Retention Science as a data aggregator. We collect data directly from the businesses that we work with, and we leverage that data, and combine it with third party data sources, whether it’s U.S. Census Bureau data on demography information, as well as other third party sources, like Rapleaf, Datalogics, or CrowdScore, which measures social influence as well as other data sources.

We consolidate all of those different data sources to help businesses understand what their customers actually look like and what their interest might be, what’s their propensity to purchase. Then we build a recommendation engine around the data that we collected. Then we help businesses figure out the best way to reengage customers.

PEC: What if a visitor to a site is not an existing customer?

Jao: We assume that the visitors have opted into some communication with the business. It doesn’t necessarily mean that they are already customers. They can be subscribers of the company’s email newsletter, for example, or they’ve opted to receive mobile push notifications on their iPhones. That doesn’t mean they have already purchased something.

Our goal is to actually help businesses figure out if they [the visitors] haven’t converted, what’s the best way to convert them and what are those interests that align with the products and the services that a business sells. If a visitor has never converted, what’s the roadblock?

PEC: Does your platform work for smaller companies?

Jao: We do tend to work with larger business enterprises. Most of our models in machine learning algorithms and most of prior technology that we have developed require a lot of volume to make the certain assumptions and to make accurate predictions. The more data that comes through our platform, the better and the more predictive our models can be.

PEC: Say I own an ecommerce company with $5 million in annual revenue and 2,500 SKUs. Say the company sells cooking supplies. As merchant for that size, what are some general uses of data that I should be using?

Jao: The $5 million mark is definitely a lot of opportunity to continue to grow the revenue and 2,500 SKUs is not too terribly small. The idea is to collect the right data in terms of where most of your traffic is coming from. What do most of your routine customers look like? Are they between the age of 25 to 35 and most of them live on the East Coast versus West Coast?

The key oftentimes is to make sure you don’t bombard shoppers with too much information. If you can somehow figure out truly what your shoppers are looking for or what they are thinking about, that’s the key.

Having been in the industry for long time, having founding my own ecommerce company, I think about how people now talk about Big Data. It is really nothing new other than now there’s just greater access to all the data that we’ve been sitting on for a decade.

Now, there’s greater focus on it. There’s easier access and easier ways to collect those data for marketers like us. As a result, if you want to grow your business in the most possible way and in a way that’s measurable that you can forecast, it’s really, really important to start tracking the right data points to drive certain meaningful positions.

When we say actionable insights, it’s about taking those data points and figuring out what to do with them. Oftentimes, merchants start with being able to segment their customer database. Creating different types of cohorts is often a first step. Using your cooking supplies example, you could segment, let’s say, customers that only purchase barbecue utensils and things that are more for outdoors.

Then, you could potentially identify that certain customers have historically purchased bigger items versus others that always purchase smaller ticket items. Then, having that insight, you can create different kinds of cohorts based on the average order value, based on their routine purchase rate, based on their interest in outdoor cooking supplies versus indoor, based on geography like the Midwest versus the coast, based on some of the more basic information like demographic or gender. There’s a lot of things that we can think about to create a much more engaging customer journey and leveraging data to segment your customer database into a couple of cohorts. That’s oftentimes the first starting point.

Once you understand what those customers’ cohorts look like, you now can figure out how to speak to them. One shopper could be 35 and typically cooks in-house and purchases smaller items. Another shopper could be over 50, barbecue a lot, and purchase bigger items. Thus, you should be talking to these two shoppers in a very different fashion.

PEC: Moving on, you’re a contributor to Practical Ecommerce. Your personal story is moving and inspiring. Could you tell us about of your childhood of coming to America, and your successes to date prior to starting Retention Science?

Jao: This goes back to about 20 years ago. I was around at the age of 14. I grew up in a single family, just my mom and me. The very first business venture I started was when I around 8. I learned that I could go from classroom to classroom and collect, and recycle plastic bottles. I would able to make equivalent like $2 U.S. a day.

I guess my childhood contributed to me being ultra motivated because growing up we had very limited resources. I was always thinking that there’s something bigger out there. If I put my heart to it I can get it done. I was very fortunate that I did well at school. I had an opportunity to come over to America at the age of 14 by myself without my parents and family. I didn’t know a word of English. I ended up at a boarding home with a couple who became my legal guardians. They would take me to school. I didn’t know much English nor did I have many friends.

This is back in 1998 when eBay had just became really, really big. I start selling random things on eBay, from DVDs to Game Boy games and now I’m dating myself a little bit. I was that nerdy kid that loved Game Boy. I started selling Game Boy consoles, anything that I could find that I could get at a lower price that I know that if I put it on eBay, I might be able to make $5 more.

Then, I stated my second company called incentiBox, which stands for a box of incentives. That was a social media referral-marketing program. I learned the challenge is certainly around retaining customers — otherwise all the early investments of driving traffic to acquire customers goes to waste. This challenge ultimately led to the concept of Retention Science.

We started Retention Science back in 2012. That was the era in which data became much more accessible. All of the experience and all the background I’ve had then the idea was born out of there.

PEC: There are merchants reading this that have started a business, an ecommerce business. They may be struggling. What’s your advice to them?

Jao: I would share with fellow merchants and entrepreneurs that, if you believe in it and if you feel passionate about it, don’t give up. I think it’s a lot easier to say than do.

This [Retention Science] is my third company now and I wouldn’t say that I have had a lot of success to get to where I am today. It certainly took a lot of failures and a lot of learning, a lot of struggles, a lot of maxing out my credit card to get my last inventory in and then trying to figure how to sell it. I think many of us — if not 99 percent of us — have all been there.

The key to success is really finding something that you feel passionate about. Understand that there’s a true market opportunity, meaning that you know that this is not something Amazon or Walmart or any one of the big guys are investing in.

As long as you feel that you’ve done enough competitive analysis and you really understand that there’s a true business opportunity, then I say go for it.