Bonus: The iOS14 Kaboomski, Testing Frameworks, and Inventory Management During a Supply Chain Crisis with Chris Johnson of CTC

[MUSIC] If you were following Twitter in the early days, it was just like, e-commerce apocalypse or the best thing ever for e-commerce. It was like not clear and marked like what was going to happen. [MUSIC] >> Kind of want to just like dump this on people and be like, just listen to this and take notes. [MUSIC] >> Welcome to the Zadowork's PPC pondering's podcast, where we discussed the philosophy of PPC and ponder everything related to digital marketing. Today's show is a bonus episode of our full interview with the director of strategy, a common thread collective, Chris Johnson. In this episode, Chris shares his expansive knowledge on running great tests, iOS 14, and he even has some great thoughts on the supply chain crisis. If you haven't heard Chris on our fourth official PPC pondering's podcast episode about the supply chain crisis, go give it a listen. Otherwise, please enjoy our behind-the-scenes conversation with Chris. >> Yeah, can you give us your name title and where you work? >> Yeah, so my name is Chris Johnson, part of the most common name on the planet. >> [LAUGH] >> And the director of growth strategy at Common thread collective, more than agency that originally we were based in Orange County. Now we're all over the nation, we're a fully remote company, about 150 people, primarily focused on direct to consumer e-commerce, and really focused on the paid media site. So saying how do we continue to push growth through multiple paid media channels? And then we also have an arm around retention and creative as well. >> How long have you been with Common thread? >> So I've been there almost five years, which in e-commerce marketing years, feels like 50 years. So I kind of self-proclaimed on the dinosaur of CTC. >> Cool. >> So I was pretty early. I think I was the second strategist that they had brought on to build out their team after Andrew. So I've been there for a pretty long time. >> That's really cool. >> Yeah. >> I think I first started. I'm trying to remember if it was from following Aaron Orndorf on Twitter, or if I first connected with Taylor. But at some point in the last few years, you know, started it like see, "Hey, these Common thread collective people, these CTC people, they're like everywhere, right?" >> Yeah, it is incredible. Like I kind of look up and it's like, I remember the early days, I was where this little tiny office in Orange County, there's like 15 of us all how to run this little table. With the worst chair, like the worst chairs you could find. They're these stadium seats because it was like all sports themed. And Taylor would just have this white board and just like be sketching out the formula. And so it's definitely grown from like that day to like now we have, I mean, some incredible people that are all over Twitter. Obviously, I feel like if you just kind of look on Twitter on Taylor's following. Well, those are the CTC alumni who have gone on to start brands or work on brands, work at agencies or current CTC employees. >> Yeah, I'm always very impressed by like business trajectories like that. Because like I've done, I mean, we're pretty small. We have five people, we utilize freelancers, so six of us, right? >> Yeah. >> And even just that, just the admin side, the other, the things that come into your brain as the founder/management, that sort of thing that you have to think through with just a few more people. I can't even imagine having to navigate all of that change as well. >> Yeah. >> And then over the last couple of years, so that's pretty cool. It's not just everyone there. >> It's a rocket ship. It's like, I think e-commerce by itself is so fast. I mean, it's changing every day and then you put it in COVID and jumps forward a decade almost in terms of its development. And then you're in an agency that's doubling every year. So it's just, it has been a ride to my wife. Like, I don't think it's going to slow down ever. But we have grown. And so a lot of it has been around, how do we service growing e-commerce brands that have started off early and have grown with us to, how do we scale our strategy team from just a few strategies to we're going to be probably around, you know, 15 to 16 teams soon. So just the question of scale is everywhere for brands, agency side people. So it's a fun place to be. >> You know, as we look at e-commerce, especially the last couple years, one of the reasons why I wanted to talk to you, you know, you representing CTC is just, I know also you all have your own brands as well. >> Yeah. >> Kind of have some experience there with both sides, basically, at the same company. So in that sense too, as we go through some of these feel free to kind of speak to if you'd like just the team at CTC or, you know, clients or industry, e-commerce industry that you were seeing in the whole right. So let's start with, so January, February, March, 2020. >> We just talk us through a little bit of what that was like for you all, what was happening in the team, clients, kind of the start of everything. What were some of your emotions? >> Yeah. I mean, for all of us, we were, I mean, no one had planned on a giant global pandemic. And so I was planning to go on vacation, actually, I was like, hey, Q4 was always busy. I usually took like Q1 to go like takes in vacation time. And so I had a plan to go on a cruise to China, Korea, and Japan. So clearly that did not happen. And so, personally, I was kind of like thrown into, we're not going and we need to really figure out what this means for our brands. At the same time, we were all in office. So we had just consolidated all of our offices across SoCal into one main office. But everyone in one room, which was amazing. It was so fun. We had room to scale out our teams. And so we have this news is throwing a kind of a waken around. Hey, this is this thing happening. And we're seeing Apple shut down and Microsoft shut down their offices. So we're as a team saying, what should we do? And we have clients as well. We're kind of getting a sense for them. Like, what are they going to do? Because so much of, again, supply chain is dependent on people being in the actual warehouses. And the office we're at shared of wall with another VP out that we have some ownership stake in. We were already seeing, how are we going to move product if there's no one there to actually pick them back and label? And so it was kind of a crazy moment. So our CEO made the call to, I think many people, let's go work from home. Let's see how it goes. I was a huge advocate before for the work of home. I was like, hey, can we do this? And it was kind of like, no, let's really think about the culture, which was important. I told him to understand our culture is like what makes it different. About three weeks in our CEO said, we're going full of remote. And it was one of the best things for our company. And I think a lot of other brands were doing the same. And so it was a huge shift. And the big question is, how do we service econ brands when we know what's going on? And we're completely changing our model of how we work. And we're now scaling faster than ever. So we did not slow down as an agency. We doubled head count. And so it was incredible. And so what we learned in the first few weeks is the best thing we can do is be a partner and be really honest about how we're processing as our own company and with other brands as well. So saying, hey, here's what we're seeing. This is what we're noticing. And then data became so important because there's so much conjecture. If you were following Twitter in the early days, it was just like econ apocalypse or the best thing ever. And clearly, if you look back in time and look at Shopify, stop price, it clearly was at the time, incredible rise. I don't know today how it's shoppized during, but that's really the answer. It's kind of, you know, we were still being honest and open about our own transformations of company. And also with the brands, how we could best service them. And we really focused on how do we collect data and share that with them in a way that they can make better decisions using not just what's seeing, you know, happening in social, but really within the broad econ ecosystem to make those decisions from. So when everything is starting to hit, you know, mid March, especially in doing the US and doing all the research in that March 11th was kind of that key date. Yeah. And most people are kind of like, okay, March 11th. And then you start talking like that's when like the, the, the jazz game, you know, the Utah jazz game shut down. All of a sudden, the NBA shuts down. All of a sudden, the WHO is like, hey, by the way, this is a global pandemic. And then President Trump made that announcement that night. Next day, stock market crash, single biggest crash since I think 80s. So especially around those two days, like you said, everyone is kind of really a little unsure of what's going to happen. How initially were you seeing a lot of your clients reacting, what sort of communication were you having with, with them? Talk us through some of that. Yeah, absolutely. I think a lot of clients, you know, at the time, I was hoping a lot of people would be a lot on the sales side as well. And so we're talking to clients who they wanted to slow down because they weren't sure about how cash was going to look, right? So the idea is like, this is really new. We don't know what's going to happen. We don't know if there's going to be customers buying. And remember, a lot of these brands were at the time trying to do some retail and they're expanding to wholesale. Like, so that's really scary for them because they have a bunch of inventory sitting that are supposed to go to stores and none of the stores are open. So they're pulling back initially. They're pulling back on their spends, right? So not trying to spend as much. And they're going to be scared initially. And I get it. I think it's easy and retrospective. But like, that was a dumb decision. But like, in the moment, what other information do you have? You have no idea how bad this is going to get. We don't even know like how far this is going to go. We were thinking it's three weeks or so of a lockdown. Not almost two-plus years of massive change. So we were also thinking short term, oh, this is going to be a kind of like a blip, how to take advantage of it, how to see opportunities, but also get clients to continue to spend. Not just so we get paid, but because it's, it was an important moment. The thing about the year. for e-commerce, Q4 is massive. So everyone's, you know, spending, you have that Q1, if you're like a healthcare brand, my March is a moment that sits up your summer. Like that is an important time to spend into summer moments to really what we call Philip the Spongebob, bring in more volume of customers, really think about how do I begin a message and position my brand so that when there's a moment of a sale, it's not the first time they're seeing it. And so we're really encouraging brands, you need to consider keep spending in these moments. It's better to have some momentum than to go full stop and try to start up again. Some people were convinced and we were not, I'm gonna be honest, some people were like, nope, we're gonna pull back completely in a year, it goes. But a lot of our best brands were like, let's push into this. And then it became really apparent very quickly in March, what kind of products people were looking into, work from home, you think about some of those components. We have some athletic brands, so we think athletic wear. So swap pants through the roof, right? And so that was, those are, we could already see some early signs that there may be some categories that may be insulated from this, let's continue to put a push into those. The last one I'll give a story. This was later in the pandemic, but one of the brands have had a good thread that will come kind of in this is a brand called Born Primitive. It's one of the brands we love working with. They're in a cross for athletic space, really focused on sports bras, but I've expanded. And they're one of our earliest clients. They did a program called Back the Gems, 'cause think the gyms close down. So early on, a lot of cost of gyms were not open. And they were really hurting. And so part of this was a question that came up, how do we help our brands beyond this ad spend? How do you think about moments and creating moments? And that was one that came out of it of having Born Primitive. Think about how do we take our sales and the momentum we're seeing in our category that's not really hurting, it's actually going up and support the industry that we're in, that we need to be, like, and needs to survive for our brand to be able to thrive. And so backing the gyms, taking a portion of sales, and then giving them back into the cross for the ecosystem, became a massive moment for them. And they invented almost a new space in what should be a down moment for their brand. It was the kind of, you all that pushed them in 2020. So those are kind of those moments that we were seeing early on. We weren't that for thinking until about probably a little bit after March, but we were starting to get the sense of, this feels like an opportunity, even though it's scary, where can we push in? - Were there any, and if so, what were some inventory challenges during, maybe like the first six months or so, because then obviously, then we'll shift into the bigger conversation of, like, supply chain. So. - Yeah, so this is the biggest challenge coming into early 2020, which was, we didn't have the supply chain issue yet, right? It was kind of, like, early. So no one knew that was going to be a big issue. Like, again, we looked back, we were like, clearly that would make sense, right? If you have everyone stopping and then starting at the same time, it's like traffic in LA. It's like, everyone wants to be in the four or five at the same time, of course, it's going to be slow. But in the moment, you don't think about that. So brands pull back their spend, delayed their buys, and sort of to kind of run them on some main inventory. So of course, they need to restock. And so there was kind of two issues. Some brands were great. They were like, let's keep pushing into this. We have the efficiencies and we have the setup within RFPPLs and our manufacturing to afford it, which we can talk about, like, what are the specific paid windows and that terms we have, in terms of how do we have, more cash on advance up? Those are different things brands were working with that could order inventory not be so hurt. The brands that were struggling had kind of overextended themselves, right? They were running really thin already. And so they needed to make a really critical decision about wind to buy inventory, and they may be pushed back too late. And so they paid a premium later. So what we found was initially, it wasn't that there wasn't any supply chain issues initially. It was later because people delayed that cause a bunch of issues for them. So one of the examples is we had a brand, this is more recent, we're talking to them, where in 2020, they sold through their best seller. They were a dog product and kind of focused in the pet space. And one of their best sellers was kind of, it's like a chew toy kind of thing. So they pivoted to another product, and that product sold like pockets. It was amazing, mainly because they didn't have their best seller though. So the question comes, what do we buy next? Is this just because we didn't have our best seller, or is this the product we should continue to focus on? And it's way harder now because now the cost of the shipping container has gone up by nearly a double triple. You have as well, like the margin style, like in terms of the general cost of the actual product, being made, the cost of deliveries going up, not down. So that decision, do I invest on this category, moving forward is a massive decision. Before it would be like, let's just head to our bets, let's do both. They don't have that option, right? They even choose which one they think they're going to scale. Buy two little, they're going to miss out an opportunity, and there's not enough time, right? To get it back here to sell more. Buy two much, you're sitting with an inventory, and it really constrains the cash flow for all the other things you want to do this year. So it becomes really, really complicated. And so it forces us as an agency to be very, very clear about forecasting, which is what we spent a lot of time in 2020 during because of supply chain issues. Saying we need to be very, very clear on what is going to be the forecast model we're using, be open with that with our clients, communicate how that plays into demand planning, and partner with them in those conversations. Some brands got ahead of it, and it was amazing for them because they took a risk and a paid offer them, right? They bought the arbitrage of the cost was lower because they took a risk. Some brands, they were already doing thin weighted, 'cause they were not having as much cash on hand, and didn't have the right term set up, and so then they bought late and they paid a premium for it, and made it really, really tough from the scale around Q4, and 2021. We see that kind of slow down, but people were like really, really struggling. Especially with iOS changes, which we're probably talking about. - So did you notice specific consumer purchasing shifts around things like stimulus, and that key times, was that also part of it, or was that not as evident for you all? - Absolutely, absolutely. I think like if I could kind of draw a line, if like our baby's a spend and stimulus checks, I feel like they're very correlated. Now, the category shifted through time, right? If you think about like, then if you looked at the kind of timelines, it wasn't the toilet paper, like that thought are focused, but mainly think about gym equipment, right? And gym and sports when the gym shut down, big moment early and continued on, but not as high as a high spike kind of continues on. You think about supplements and CPG brands, we have those were kind of bigger as we get a little bit later to the years, people think, maybe I shouldn't have like, just at home, and like ate all this food and then had terrible health, and I wanna be the focus of health. I think in terms of the consumer buying, the same thing happened though in the same moment, it just was amplified. So if you think in a C-commerce year, Q4 were still Q4, it's still a massive amount of revenue for our clients, there's just amplified in a way that I think honestly, like we kind of anticipated. One thing that was counter to a lot of people talking about the year was, hey, people were gonna buy early 'cause of the supply chain issues. We didn't really see that actually. We didn't really see demand being pulled forward too much on the consumer side. We could, you know, brands pushed sales earlier and that maybe helped with some of the existing customers, but the general demand curve was not necessarily much earlier. We saw still in the same windows of time 'cause that behavior cycle is still pretty locked in for people, right? I've kind of bi-run block Friday's Cyber Monday and that let the opportunity I wanna buy at. We'll talk about 2020 versus 2021. 2021 obviously the limitation was even how many skis did it pick from. So prices went up, but generally speaking, those moments were still those moments. They weren't like, hey, all the demand went up two weeks and so the block Friday was smaller. Like, no. People still acted as if, you know, in 2020 and 2021 the same way. I'm gonna buy in block Fridays of Monday 'cause that's just the cultural rhythm of purchase that we have in the comments today. There was obviously in the agencies that we experienced brands trying to figure out cost cuttings because of the inventory issues. So some brands were trying to in-house pretty quickly and trying to find that talent. So we saw that happen a lot, which we understand like, again, we're in the space of saying, we need to think about what makes sense if you've profit and loss statement. But like, in terms of some of the brands, they realized like in order for us to capitalize, we need to outsource more. We need to bring on more partners. And so we didn't see a heavy demand coming in during kind of similar stimulus check, not the same thing, not B2B. I'm not really saying that the business loans were a big contributor for that. We saw a lot more demand though, saying, hey, we wanna scale into these moments. We need a partner who understands that right away. And it's gonna take us too long to build the capabilities. Let's focus on bringing in CDC. So that helped us in our growth as well. We saw that correspond to our head count going up with also demand for our services go up as well. - Let's switch gears. And I'd like to, at some point we'll hit the supply chain stuff, but that probably is a big part of the conversation. You brought up iOS 14, which is great. Can we talk a little bit about that? What is iOS 14 thing that you're talking about? And then how did you see that impact brands? - Yeah, I think the mega trend we're seeing any commerce and just in general on advertising is the consumer is very savvy and has choices and options. And when it comes to privacy in terms of privacy, like, like their demand is really, they wanna have more control over their information and data. We know that. Like, that's better trend that's clear. I think Apple and iOS 14, what was happening is that, what the release of the new update for iOS 14 is the update on the operating system. What's going to put in a prompt, That would say would you like these apps to track you these ways? It wasn't saying that they would default not track you They just asked you would you want them to track or not most people at the time Facebook was projecting Now meta Let's figure out timelines at the time of their Facebook now meta Meta was projecting hey, we're thinking about probably half of those people will be opting in 30% to half it was closer like 60 to 70 percent it was like much higher than their forecast of projection So what was happening? At the time everyone would once it rolled out Across iOS devices have got pushed back a bit, but it rolled out We were seeing really really poor return on on Facebook on Facebook Instagram Facebook all meta products We were seeing that so here was the question that we had to ask as a team Is this that the performance is bad meaning like the actual auctions or more expensive? We're losing those auctions people are not purchasing on site or is that we don't have the data to confirm that A lot of people were pulling their spend because they said Facebook is underperforming that was a narrative and we need to move our dollars So we said look let's just Look at it first continue course and see what happens and what we found is that when we did the data We have a tool called statless that we use across our clients We pull in their data and make an anonymous and aggregate the trends The true we haven't report for every brand on their data versus the trend across our 200 plus brands within stylist It was on a performance loss. It was a pullback of spend and a loss of data reporting So iOS 14 goes out and Removes the reporting of this convergence, but the consumer behavior was the same people were so buying on the ads that people were saying Meta just couldn't tell you that they were What happened is it's kind of like is it the chicken in the a what what was the result of this performance did go down for brands But it wasn't because meta was underperforming. It was because brands pull back their spend by a significant amount of money sometimes 30 40 50% of their spend they pull back and That was their engine of growth and so they felt that in October later They felt that in November where they don't have the audiences that they used to have and so they have to spend a premium during the highest Moment of cost to drive the same growth and volume that hurt their performance later As a team we're trying to be very careful about the assumptions we're making about what's happening And we're trying to be very slow about actually saying this is what is happening until we have the data the back that up And so the summary for most brands is that facial performance wasn't underperforming at the time And just didn't have that data to show you it was performing what we used to figure that out just to give a kind of sense was We use a term called MER or market efficiency rating or ratio depending on who you talk to and that is a Taking your total revenue Divided by your spec right or if you have the inverse we call it a cost of advertising cost of sale You just do a rate of percentage right so MER is kind of our like central source of truth of like are we making money on the first purchase or Generally the total Revenue of the company a variation that we call it a MER acquisition MER so all of our acquisition efforts is that profitable We were trending that line both MER total revenue against total spend versus as well as acquisition new customer and a new customer Apposition and we saw that performance line stay pretty steady for brands that continue spending It got worse to people who pull back and try to ramp it back up again And so are kind of take away the so what for brands is that when these moments happen it is usually not changing consumer behavior Which is what you really want to focus on the reporting is going to change dramatically We're going to see those changes happen across the board Google's delayed on their end right they haven't rolled out their changes But that's going to happen on search soon and so that's going to affect the data that we're getting on low-ass on platform But it does not change the behavior of the consumer and what you really are looking at is the total revenue Guess you're total spent as your governor of are we winning here or not? And then we have some nuances that we talk about about Our fragile we commerce and all that to help do that, but I was 14 was a pivot point for us to be to be very clear about our role in this industry That we need to be very clear on communicating What are we seeing across the data set before we just jump on the bandwagon of here's what Twitter saying about it's the end of you know Of iOS and you know face books ability to drive sales not yet just harder to see So did you actually see then brands shift spend from Facebook to other channels if so where where typically were they going with that money? So a lot of brands got very scared quickly and of course the the trigger response is Facebook's not working for me. I still need to spend I know I need to grow I'm gonna move the money now And so a lot of brands obviously TikTok snapchat with two major channels for them Google was probably the biggest shift for people so moving more money from You know meta products into Google was a big shift for majority of our clients that they wanted to try and test We'd already been telling brands to increase their spend on Google anyway Because it's the product is just significantly better than it was previous years. It's just improved over time That was more of an increase your spend in general if you can afford it will help you show you if you can afford this But don't pull back on meta just because you're scared You know you're wanted to move money to grow because there's opportunity there as well as on meta So that's a complicated answer for most brands. It's not as clean cut as like yep, everyone does this but a lot of brands did Some of it was a mistake they lost demand right they didn't drive demand So they looked at the row as on platform and associated that for the best opportunity for growth Which was not it was in a sense robbing the opportunity to grow net new customers So you saw amir that acquisition amir Go straight through you know script in a sense go down or the a cost go up the the amount at Turk to drive the volume Got way out of control And so they tried to because they pulled all of the demand gen out and put it right into the bottom of funnel when that's gone Now the same activity isn't working And it's getting really really expensive Brands who were more cautious right saying hey, let's actually continue with meta We understand there's some data loss what is the average Facebook released information pretty late Sorry meta really super late, but told us is 30% so we could apply that metric 30% on average data loss and say okay Well, let's apply that to your current row as here's what it really looks like in reality And let's compare that to emir and we found that brands were fine like meta was fine If you just add a 30% back you're actually winning with scale more here So it took not can stop where everyone is asking right now in 2022. What are I spending my money? Because there's a different challenge with with meta today around um their actual product which is inventory So that's a separate thing than 2021 But 2022 is their inventory is less and so we can see that by daily active users So they're poor on this and they're earning call and you can see the stock price is not like that And so what does that mean or founder? You know Taylor has a great threat about this, but basically it means the way this works is if I have less inventory there It's going to get more expensive for me to do anything It's not just competition. It's saying for every single person I need to reach there's less of them That means it's more expensive to scale And so we are seeing brands trying to move into other more social kind of visual platforms like TikTok and Instagram To drive demand jet right remember a lot of times Google's kind of demand capture still now They don't like when I say that because it is more than demand capture I do know that but for many of our brands their ability to kind of leverage all of the products isn't quite up to speed yet So we want to say how do we best take advantage of this moment and develop a plan against Google to do some more demand generation On some of their other products that we can talk about And so we're testing there aggressively, but it's it's hit or miss right with any new platform Just think like Or the days of Instagram or think about Instagram stories I remember Instagram stories was brand new when I started to lead strategy with some of my teams Instagram stories was like what Facebook was pushing and it was great. It was super low cost I remember it was like a third of the cost for traffic, but the conversion rate was like terrible at the time Right, it was just new people were the people who were using that product were more about the social than about the shopping And so I just wasn't that great and we're seeing some of that on some of these other platforms It's hit or miss some brands are killing it social shopping kind of format brands cosmetics Awesome. Sometimes though like some other brands and more hard goods maybe struggle here higher a.o.v. products Maybe struggle here on those channels. So we say let's look at the landscape. We can try it But let's not just rip out the engine to try and pursue. That's really risky Let's think about running this on a platform. We know has great supply right now. It is declining, but it's not dead And the sort trying on these other channels But there is a precursor which is can you afford to on all the other components of your business Is your cost to delivery your actual cost of goods Would be maintained as it going up We're looking at things like you know in terms of your op-x right and this is how deep we get Are you just adding a bunch of headcount and causing way more weight to the business in a moment where All your supplies getting more expensive right all that squeezes margin and squeezes ability to spend an opportunity So we ask these questions first before we even talk about channels right Can your business sustain a loss on that channel completely if we don't make a single dime on that channel Can you still sustain that if not it's not the time we got to focus on the rest of the business before you can even afford to test there If every dollar matters to So dramatically, it's not fair to routine to be like, "Get me great return." Well, also testing and guarantee return on this new channel that's not proven. And so we tell brands, let's be very clear about the priority. Right now, for many brands, it's not the time. They need to really tighten up on some of the business operations side. Really think about creating the right kind of content base to support those channels. And then slowly test to the place where they can tolerate losing that amount of money on Snapchat and TikTok. And then when they win, it's icing on the cake, right? It's amazing growth for them. And it's diversifying their account. We love that. But not at the deficit of profitability that will kill them if they overspend, because they're just scared that Facebook today is slightly down, but it's not completely gone. So. - That's fantastic. Yeah, you alluded to this. So we just do PPC, right? Just Google ads, Microsoft, that sort of thing. But obviously we'll work with either in-house teams or other agencies on the social side, right? It is funny how, for the brands who had the issues and struggles and concerns as you brought up with Facebook tanking, to then shift it, if they didn't fully understand exactly what you had noted, which is you're moving from primarily a dimension platform. So especially if they were, let's just say they were taking that and like, well, let's pump more into Google shopping. Google shopping is by its very nature for the most part. Now, admittedly, they're starting to play more in like YouTube and display in that too. So you are starting to actually get some element of that. But for the most part, especially when it's search-based, it's kind of simple in how it works into being demand capture. And that's basically you need someone to think of their need for something and therefore search for it. Like that's what search is. It is just extremely different philosophically from Facebook, from social media. And that's exactly what you noted. And we've seen that as well. It wasn't just enough to say, hey, we want to shift dollars to see where we can get our row as. If they were shifting their funding from primarily that demand gin to demand capture, they really were going to get into trouble at some point. So yeah, it's not immediate, right? That's the thing. It's like, it's kind of a good drug. It's all right. If we're a marketing manager today working on e-commerce, near boss, like my role as is down, give me better role as I'm important to the board next week. We can push the volume up on that shopping campaign through the roof. We could do that on the brand side. We can push more volume through Google. And at the expense right, pulling spend from the place you're generating all that demand, especially if you're leading a category, right? And inventing kind of the demand for the category on Facebook, yeah, you don't see that tomorrow. You're to see better return. As an agency, we think in one year horizons, we don't think in like one month. We forecast an entire year together, because we hope that you stick with us. And so for us, though, it's like, that's not going to help me get to new customers, because you have boss like me who's looking at net new customer growth, saying, great, your return is fantastic, but your number and new customers is down by 30%. You will die if you continue this process. And that's a challenge for brands, because it is so easy. It's a drug to focus on a singular metric, a singular number to drive their business, which it doesn't exist. There is not a single number to drive your business, but it's a combination. It is a constellation of numbers. You have to keep an eye on that makes health. It's like a person. Health is a series of components that lead into that ultimate result. And so a lot since I am sitting on calls with a head of growth or a VP of marketing, or you name the person, trying to remind them that the goal is growth. The goal is not immediate return all the time, that they hire us, generally speaking, to scale their growth. And there are times where that is a painful investment that pays off, and we are partnered with them, and that we're as complicated in that way. And so it's hard. It's really hard, though, if you're really under pressure and you're under tight situations for someone agency to tell you, you know, invest on something that is declining in terms of users, but it's the best bet fee right now, because it feels like the boat is leaving, and I'm not getting on it, because everyone's on that boat. When really, it's just a lot of people on Twitter saying, this is really cool, and it drives engagement, but it's not actually driving the business growth from the majority of the brand we work with. And we will get there, right? It's not probably today. And a lot of times, too, it's the sexy thing to do, because the other stuff is not very sexy. Driving who are getting a growth through SEO is not very sexy. Content development that really focuses on solving problems. Pulling from your customer service reps, what they're asking and developing content, not sexy at all, and no one's going to be like, let's retweet that. Let's make a thread about that on Twitter. Like, that's not happening. But it's essential. I popped out of the brand yesterday. She was really, really passionate thinking on her growth team levels or platinum product. It's our top level strategist and all those components. And she wants to start, and I said, look, I understand, and I would love to take your money, but this is my responsibility. It's kind of a deep share of e-commerce. Your e-commerce help is not here yet. We will crush you just by the weight of our cost if you don't get these other things up. We will start. We will hit everything we're trying to do, and your engine will stall. You don't have enough organic. You're overly capitalized within adspan. You don't have organic social driving this. There's nothing here to support the weight that I'm asking you to increase on. And it's a hard conversation for brands, but it is the right conversation. You want to be ready for growth. You can't just do it because you want to. You have to be at the place where you can supply it. And I just not sexy at all. And what we've seen is one of the places that they'll turn-- you know that it's like a drug. And it really is that kind of that demand capture type side and the problem is the more you focus and pour into it, there's-- it's a limited resource's type of a situation. There tends to be, unless you're building demand and literally creating searches, right? There's a cap to the number of people who even, let's say, searching for this. It starts to become inefficient. The more you invest and invest, the at least that we've found. And so I totally agree. If you're not also focused on building that demand, then the more you focus on more of those like mid-bottom funnel searches, it's getting more expensive, it's getting more inefficient. You start in a struggle. They're kind of at that point. And all of a sudden, they're looking around saying, hey, this must be someone's fault. Agency just can't bring us the results they used to be able to, right? It's like, well, no, it's because you're trying to dip too heavily into this pool. So anyways-- Yeah, what they're going to add is obviously the test side is still important. It's just coming in with an intentionality around how you're testing. What I find if people are honest is they're coupling, I have to get performance from this test, which is not a test. That's not a fair test. You're saying to this opportunity, I don't-- this is not about me winning on this one opportunity. It's for me to learn if this is going to work. Now, I don't believe that you should have your entire spend be testing. Like, that's bad. Basically, it doesn't-- a meta doesn't agree with that. Google doesn't love that either. But you should have a set side of it. And the idea is, where are we aligning our intention with this? And it's not fair to change your mind, right? It's like, well, I'm going to punish the marketer. I'm going to punish the performance growth marketer within the PALS and the agency, because that test didn't yield us 6x results from a current basis. You should actually plan for it not to. In most cases, the average, the kind of bell curve is what the majority are doing. And that's working. It's a bell curve for a reason. Most people are spending that way, because it's generating results. When you're testing, you're pushing out to the edges of that. And that's OK. But that's good. One of the things I love about Search-A-Tell Brands is it's a treasure trope of intelligence for you. You do PPC. If you do Pay Google Ads, you're getting way more intelligence than from Search Console. Search Console is going to give you some senses of, hey, here's what the Search Organic generated for you. But you don't get what exactly they look for, which I love. Whenever an income is in, and I want to know about their customers, I'm looking at their Search-Trend report within their searches to see what are they looking for. And so many times, the category that their search even most for is not the main objective that they set their account for. It's an opportunity right there. Now, that's why I'm shopping. I have a love hate with what's not shopping. I love the engine it creates. I just don't like that. I don't like to see those with that intelligence. And that's just because I'm a strategist. My job is to provide intelligence to brands on what they should do. So it's a double-edged sword. This is going to get your results. You're going to lose out on some of that information. But the testing to get intelligence is worth it. You can. You can totally set up separate campaigns just to understand what is-- people's kind of intention here. What are they looking for? What long-tail opportunities can be maximized in a more competitive search space? Because what's going to happen is search is going to get way more competitive now as people move all their money there. What's going to happen to all those options? So much more expensive. And so I tell brands, like, let's get out of that expensive red ocean into something blue, which is more focused on, more long tail, thinking more about use case comparison. [BLANK_AUDIO] really good opportunities for YouTube ads. Like, there's so much that you can do there. You have to just give it space though to mature and become an opportunity for you. If you treat it as if it needs to be the lifeline for your business, you're never gonna give it the chance to really succeed. - Love it. Okay, so don't wanna take up too much more of your time. Few minutes left. Let's talk, maybe some supply chain stuff. So I really like that we got some great OS for iOS 14 stuff, but maybe talk us through in terms of client-based stuff. What maybe were specific ways you had supply chain challenges? Kind of take it where you want. I think if you wanna talk through a little bit of story of things that you saw or maybe specific challenges, specific little insights, stories about this, that or the other container prices, whatever it might be. - So my favorite thing was brand saying, hey, we're out of our best seller, but we want you to perform at the same rate as you did before. And so that makes it hard, but it's a partner to be like, well look, we both know that both these things are related, right? It's not, again, I always bring it back to consumer psychology, like their behavior. If they like the black legging, and that's your best seller, and it's gone, you're trying to convince them to change their mind, right, on like, you don't really want black, you want pink, or you want navy, right? And so that's going to take more energy, and more cost, and more testing, and it's just gonna get more expensive. And so that's one thing where, for us in RN, where we're driving the volume, if you remember, kind of in our place, but we're kind of at the front end, we're trying to drive customers, new customers. We do have the retention side, which has been huge for us, and that's counteracted to the cost side, which we talked about. But specifically, what I've noticed with brands is, what, like, just the material cost has gone up. So that affects everything on the road. So if your costs to make the product, or if just the materials have gone up, let alone the shipping, and the timelines for that shipping. What it's doing is it's crunching those cash flow windows, like those cash payback windows. And so you have then, between the time, if you don't have the right setup, where now you're saying, okay, we're gonna make this giant PO, and I have X dollars in the bank. And as a strategist, something pops up, it's amazing, we're seeing sales, I want double the spend, they can't, like they cannot. And so what are some specific examples? Oh yeah. So we work with a large, like, cooler company. And, you know, for them, what we've noticed is, specifically, this same issue, whether it be supply constraints around some of their best products. So it means we think it really, really creative on surfacing other kind of products. That puts more constraints on us than the agency to create new advertising creative ads, around not best sellers, which means it's pushing into testing and it pushes into poor performance sometimes. That's really tough, right? What's like, hey, this is the thing they want. You know, have it. We gotta navigate that. And so that's that's tough. I think in terms of, like, other brands, what we have seen is then a lot of competitors show up too, right, in terms of the same space. I used to work with two of the largest percussion therapy device products. So you can probably Google them and you'll find them. And they, you know, for them, it's a lot of their supply constraints, when we're complicated. At the time they've moved on, but I can see, like, in the wake of those products, way more competitors showing up at our door, who don't have the same level of efficiency in terms of scale, they don't have the same level of, like, really dropping the cost of the units, 'cause they have bought, you know, a million plus units. And so they're asking us to do the impossible, which is, observe the main 300 pound gorilla in the category, do it at a higher return, while also not having the ability to even navigate 'cause their costs are so high. And so that's in there I'm seeing, like, it's swashing competition too, where we're seeing brands that would typically would have more competition scale, but can't, like, just, it's removing those brands that don't have the value problem. You know, I think the other side too, it's sometimes the exhibition gets a little inflated, right? In terms of, like, what's happening, but what I've noticed more that's been interesting is wholesale, booming back to life and pulling D to C inventory. So one of the brands who worked with us in the food space in more of the kind of keto protein space, and they had allocation, satisfied for direct to consumer, like, good to go. There, what they found is that because health as an industry, that healthcare space is gone up, their whole foods orders, their, like, store orders, went through the roof. And so they have all these POs now that they were oversold. They anticipated not having to fulfill all those, 'cause most of the time the source cancel. And again, I'm not the wholesale guy. So if I'm, you know, messing up the language, sorry, I'm on the D to C side. But anyway, the way they explained it to me is, we now need to aggregate all of our D to C inventory into wholesale to fulfill the commitment we were made. That's hard because I'm like, I have a contractor that you need to stick around and work with us in this, but that was the thing that was happened too, is we're seeing wholesale, those, or that's a lot of money. If you're a CFO, you're like guaranteed sales versus spending money for maybe having a sale, where are you gonna put all your inventory? Put it all on wholesale, right? In short, cite it because you don't own the customer data, you're trusting the store that they're gonna keep doing that. So it says, I don't agree with that move, right? It's a sense that yeah, I understand why, but you want to own your customer. You really do in the future. That's what I'm moving to. But we see wholesale roaring back to life in a way that most brands are in forecast and they had already put those orders in and they're thinking, now they're gonna cancel while they did it. And now where is it inventory coming from? And they can't get more here, but they cannot get it in a boat to here in time. And so they have to make a difficult decision. In a sense, mess up the wholesale opportunity or in this case, which is easier, pull back and D to C and hope that they can do it later. Yeah, I like that. That is, I think that's the first I've really come across that even temptation and kind of thinking through that for some to liquidate their D to C inventory and the wholesale. That's really interesting. It's interesting and it's not surprising if you think about it. If your cash constrained, right? This is why I always bring them back to like economics of the business is that most of these decisions are tied to the finances of the mechanics of the business operation. It's really not even about as much I would love it to be a problem on the marketing side. It's like they're making decisions about their cash flow. And that is what we have pivoted all of our strategies to think in that same language. Like all of our teams now that we train the first conversation we have, so here's what a healthy e-commerce business from a cash perspective looks like. Our best strategies will take a profit and loss statement, break it into four quarters, four pieces, to isolate your CAC, cost delivery, op-ex and your profit. Because what we're talking about is trying to convince brands to think about profit and long-term growth. Over short-term, really short-sighted, short cash movements. And we're advising our brands our best ones, not to make that quick jump because it looks nice now. That drug looks so nice for me just to get that wholesome order and that's cash today. That Google spend shifting 80% of my budget there looks really nice today. But when it comes to the long-term, what I think brands we're going to see is probably a lot of brands who are going to be in a really tight position later in Q4, because they didn't set themselves up for success in this channel. And the wins have changed and the trend line and the arc of business is moving towards E-commerce being the dominant player. It's not today. We move forward really rapidly over the last four or five years. But think about how small it is compared to the global GDP and how much it's growing. It will become the dominant channel. So you not investing in the future. It's like you're not buying an Apple, well, by March and 2020, when it was at a discount, right? It's you not investing in the ability for you to be positioned well in this channel. When remember back in wholesale, those are going to constrain as well. Real estate will get more expensive over time. Those will be issues. You're competing for shelf space. Remember what D2C came from? This idea of efficiencies in me being able to go directly into my consumer and be able to pivot fast enough to respond to them instead of trusting the store's intention with my brand. And that's what we're kind of pleading with brands today. It's saying, I understand the diversification story. That's fine. But not at the deficit of the main way you talk to customers, consumers today. You really need to own that channel and be able to scale that. If not, it's going to be really hard to compete with Nike. It's going to be really hard to compete with all these other brands who have way better supply chain than you and can demand way better conditions than you could ever demand. Because they have a growing dollar. And you don't. So it's much better to try to do on this small pool than try to win globally in the space unless you really set up to be successful. And maybe it's an venture capital I don't know about. That's like incredible. But I don't know. Yep. I think it's hitting a lot of-- I think it's hitting a lot of those brands now. Yeah. Look, if the consumer is shifting towards a e-commerce first, I get to make it the way I want customization. None of those things lend themselves the wholesale. It's like, I get it. I really do. And I think it's a great marketing channel. If I was going to say, demand gen-- yeah, for sure. Think of it just like if I was doing TikTok, I'm going to use this driving general demand for my category. But I'm pretty bullish on D to C continuing to be a long-term payoff for people. Now, I am also-- so I'm focusing on growth. I mean, advertising, but I'm pro-wrestling. There's some growth and it doesn't always mean ramming ads spend to the moon, right? It's about a balance, right? It's about a balance and I wanna see 50/50 split of organic to, we talk about this last metaphor I'll give you is we have something called a layer cake where you think about ads spend and marketing stack. The boners are existing customers, LTV, which is the last piece about it. It's those existing customer cohorts, we talk about a ton, it's where we base our forecast on. Those existing customers are the most predictable, they're the cheapest to maintain and it's logic, right? If you have a customer today, it's a lot cheaper to keep them than to find a new one. And they are insulated from increased cost of the platforms. About that is organic, right? It's the general mix of earned media, so PR, think about some of the affiliate components, but it's also organic search, which is incredible space. That is not slowing down, right? With AI today and with Google's investing, search is not going away. And people are using it more than ever. And so organic is a great category to start investing in. The last piece is that paid media, the top of that cake. And if you think about like kind of a pyramid, the base needs to be big to stabilize the top. But most brands are upside down, right? The bottom, the top is on the bottom, that paid media is the biggest component of their spend, but it's the most unstable. And so you see brands that are shifting wildly because none of the bases stabilizing them. Well, we encourage them is saying we will own and really work on paid. We really want that. But the ability and the speed of which we can scale is directly determined on those bottom two pieces. Your existing customer cohort and your organic or earned media that's driving in that volume for much cheaper spend than any paid media is ever going to be. The best brands across the board in the shoe category that are incredible, like I can't say which one, but a really incredible brand that is worn by a bunch of people. Two then in terms of, I think about our lifestyle, fitness brands, all of these brands that have been the most efficient scalers have had high MERs. And where does that MER come from, that total efficiency come from? Incredible retention of their customers, right? 60 day window time, making 30% on that, right? Increases 30% of their revenue on that base. I'm existing customers and really strong organic. So it's actually not that they're the biggest spenders in scale. In comparison to the other channels, it's actually small, right? They may be spending a million dollars a month in a proctored gamble, C-P-G kind of brand. But in terms of like specifically the setup, it's really that basic existing customers, organic and then paid being the smallest piece. And that's the future, right? That is where brands are going to thrive. And that's where they're going to spend, double their spend every year is because they've grown in base to support it. The last note on LCB, just to note on it, it's really hot right now. It's like LTV to crack and like, you need that. We have some definitions that I think are helpful for people. Number one, we don't think about that lifetime. We think about one year LTV. How much does my percentage go up in one year? And I think in 60 days, so our team thinks in 60 day LTV. How much does the value go up from that initial purchase? And then within 60 days, how much is the value there? That's usually the window of time, 1690 days is that cash payback window for my spreads. So it doesn't help you to think like 10 years, our LTV is X, but some platforms will just spit that number out for you. It's not very helpful. You're not going to survive 10 years if they don't buy it again in 10 years. You need 60 day windows as a healthy window, which means that you can't just do everything on a monthly basis. You got to think quarterly. What am I doing quarterly? The drive up my LTV there. Email retention SMS, great, right? But yet I think about how does that work with the rest of my system? I can't just layer on SMS and hope that just drives my LTV up. We have to think about what is the natural cadence of purchasing these products and what is a window of time for my finances that I can support. And that blend, that's the magic of having a great base of the retention is it's enough time for me to make my money back so I can increase my spend as well. It's an acadence that's predictable. So I can forecast in advance to insulate from supply chain, if I know I have as many customers coming back, I already know how much money at minimum I'm going to get. So even if paid doesn't work or is in the red, I know generally where I'm starting with. And so if I'm thinking about that PO, I can think about that main forecast of my existing customers because it's not going to go up 30% with CPMs. It's going to stay pretty steady. That's super helpful for it. That's the intelligence people really want today. And I think I recommend it. And honestly, what I spend most of my time on is doing that forecast. Let's just do the forecast together. Look at your LTV and existing customers in that cohort. And let's then forecast demand off of this cohort. Not based on how much I can scale or spend yet. Do that later. Start off with existing customers. And then organic's next up. If you can do that with seasonality, those two are really solid. You really have a sense of how much you can spend and how much you need to buy. Cool. I'm glad you hopped in there because that was excellent. You're given us a master class on e-commerce as well. So we want to just dump this on people and be like, just listen to this and take notes. I hope it's helpful. But yeah, but this has been my conversation in the last six months, honestly, with our team. This is really these components that I've gone through. So hopefully it's helpful. People want to hear more from you or do you have a place that you're writing right now or speaking or social media? Where can people find you? Twitter, Chris, underscore commerce, raceable. So you can find me there. And then obviously, common thread collectives are common thread code.com is where most of our intelligence is there. I think if anyone wants access to some of the data that we have, happy to give out some code as well. So if you need that, I can give you-- we have a monthly data report from about the status that gives insights on those trends. So people can make decisions from their own sense of their business versus what we're seeing across those same trends. Our strategy is to use that same data set. So it's like, OK, for you, for us, same data. And our hope is that we just-- if I could say what will make me sleep well at night is people not making decisions because they read something on Twitter that can be deleted. But they thought about it against a data set and then made a confident decision. So if that is what they do, fabulous. But common thread code, my modeling Dan, Twitter, Chris, underscore commerce, and then my email is Chris.com and thread code.com. I love to respond to people with questions and connect. And then we have a last thing I'll give you is we have a group called admission. Admission is our community. So if you're not quite at the hyper growth stage of a company, you want to get started. All of this is in our admission. Your admission.co. It's another space that we-- I pre-contin there. We have a group on circle that kind of helps people navigate and they get access to our strategies. We jump in there and answer questions all the time. So this has been a bonus episode of the PPC Ponderings podcast. Keep checking back for more interviews and our next full episode. If you like what you hear, please consider sharing this with your network and leaving us a review on Apple podcasts. Until next time, may the auctions be ever in your favor.