What is the Best Offer for BCFM This Year?

[00:00:00] Luke Austin: There's more and more brands that should be less and less worried about exclusions in their accounts. Pa past customer exclusions on meta past purchase or exclusions, and then brand versus non-brand on meta. And it, it depends on if the product lends to a natural repeat behavior or not. If it doesn't, once you acquire a customer , Tony says this all the time, they're not your customer to keep 

[00:00:30] Richard Gaffin: All right. Welcome folks to the DTC Hotline. This is your direct connection to hot takes, cold truths, and real ecomm advice from the best in the biz. I'm your host Richard, “The Professor,” Gaffin. Call or text, 866-DTC-2263. Get your burning ecomm questions answered. that's 866-382-2263.

Leave a voicemail, shoot us a text asking whatever's on your mind. DTC-wise. 

[00:00:57] Richard Gaffin: Our operators are standing by it. And of course by operators I mean of course, Tony, “The Chopper,” Chopp and Mr. Luke, “The Weatherman,” Austin. What's going on guys? 

[00:01:07] Tony Chopp: Doing good, 

[00:01:07] Richard Gaffin: Good. 

[00:01:08] Tony Chopp: Richard. It's

[00:01:08] Richard Gaffin: it's hot here in Orange County, so I think we've. 

[00:01:10] Tony Chopp: are ready to deliver some hot takes for y'all. 

[00:01:13] Richard Gaffin: That's great. That's beautiful. 

[00:01:15] Luke Austin: We're 

[00:01:15] Richard Gaffin: recording. We're recording two in one week. 

[00:01:17] Luke Austin: that, No 

[00:01:17] Richard Gaffin: No one's really gonna realize. Mm-hmm. 

[00:01:19] Luke Austin: to sort of shift some things around so We 

[00:01:21] Richard Gaffin: We didn't have. 

[00:01:22] Luke Austin: recorded last week. 

[00:01:23] Richard Gaffin: Mm-hmm. And I was going through some, 

[00:01:24] Luke Austin: hotline withdrawals. I'll, I'll be 

[00:01:26] Richard Gaffin: yeah.

[00:01:26] Luke Austin: like it, it was too long without this sort of a conversation. 

[00:01:30] Richard Gaffin: No, it's, it's a, it's a very grounding experience for sure. 

[00:01:33] Luke Austin: Yeah. 

[00:01:33] Richard Gaffin: I was gonna say, the weather's turning here in Portland, Oregon. This fall is on its way, but my shirt is gonna stay, it's gonna stay Southern California the whole time. For sure. Alright folks, well let's let's get into our questions for this week.

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[00:02:19] Richard Gaffin: We got a few voicemails here. Let's get hot taken here. I only play the first one. 

[00:02:24] Caller: Hey guys, longtime fan of the DTC Hotline, and I had a question for you guys as we shift gears to Q4 planning. wrestling with how to structure holiday offers in a way that's compelling to customers, but still maintains profitability 

while 

[00:02:40] Richard Gaffin: also. 

[00:02:40] Tony Chopp: feels like 

[00:02:41] Caller: being. The needle in a haystack 

[00:02:43] Tony Chopp: going to the source, 

[00:02:43] Richard Gaffin: So what we know is 

[00:02:45] Caller: is like, we know 

[00:02:45] Tony Chopp: which I know you're doing. 

[00:02:47] Caller: but we don't wanna erode our margin. So that's where we're kind of at a standstill. 

[00:02:51] Richard Gaffin: I'd to get 

[00:02:51] Caller: to get your advice on framing Q4 offers. So they balance that customer appeal with financial health for our business. So I'd love to hear your response.

Let me know.

Thanks. 

[00:03:02] Richard Gaffin: So there you go. How do you do a good Black Friday offer? Basically? Who wants to start? I'll, I'll jump in. Okay. 

[00:03:07] Luke Austin: I've got a couple So 

[00:03:10] Richard Gaffin: there's layers to this 

[00:03:12] Luke Austin: that should be approached sequentially 

[00:03:14] Richard Gaffin: part as such.

[00:03:15] Luke Austin: The 

[00:03:15] Richard Gaffin: starting point for us, this top of, 

[00:03:17] Luke Austin: because 

[00:03:18] Richard Gaffin: right now we're building.

[00:03:20] Luke Austin: Spend a ER models free spend a ER models for potential customers that we see the potential to work with in the future.

So we've been building.

out new spend a ER models for new clients, having fresh conversations around budget allocation And how to think about that.

[00:03:31] Richard Gaffin: And 

[00:03:32] Luke Austin: the 

[00:03:33] Richard Gaffin: spin 

[00:03:33] Luke Austin: model 

[00:03:34] Richard Gaffin: bottle looks, historical spend, degradation, 

[00:03:37] Luke Austin: the spend. Seasonality takes into account cost of goods, cost of

[00:03:42] Richard Gaffin: goods, cost

[00:03:43] Luke Austin: different 

[00:03:43] Richard Gaffin: delivery, and different

[00:03:44] Luke Austin: as well as the return rate expected. And what? 

[00:03:48] Richard Gaffin: what?

[00:03:49] Luke Austin: it 

[00:03:49] Richard Gaffin: It does. 

[00:03:50] Luke Austin: show us clearly that in November round black Friday, Saturday, Monday, so November into December, a MER expectations are higher than any other point 

[00:03:59] Tony Chopp: Yeah, 

[00:04:00] Luke Austin: So 

[00:04:01] Tony Chopp: I.

[00:04:01] Luke Austin: may be like, oh yeah, of course. What I'll say is the specific level to which the A MER efficiency efficiency should be higher or lower, is the thing that takes the work, right.

And why we built the spin A MER sort of back into, but your acquisition efficiency is going to be higher during BFCM. Do not. If you run into one eight a ER in August, don't run into a one A A ER in November, December, most likely. 'cause your discount rate's gonna be higher. You're gonna have less margin to play with. That is starting point. One. And the way to back into what that number looks like is gonna be distinct for each brand based on the cost of goods, based on your expected discount rate, based on the historical spend and, and what something like the spin MUR model is going to highlight. But your acquisition efficiency should be higher to allow 

[00:04:45] Tony Chopp: Hour

[00:04:45] Luke Austin: the margin that you're trading off in order to obtain the 

[00:04:49] Tony Chopp: needs to 

[00:04:49] Luke Austin: that's the first thing 

[00:04:50] Tony Chopp: change.

[00:04:51] Luke Austin: I will say to consider in this thought experiment. 

[00:04:56] Richard Gaffin: Alright, we'll throw it to you, Tony. 

[00:04:59] Tony Chopp: Yeah, 

[00:04:59] Richard Gaffin: Yeah, I, yeah, 

[00:05:01] Tony Chopp: totally cheaper 

[00:05:04] Richard Gaffin: Cheaper sales, 

[00:05:05] Tony Chopp: higher 

[00:05:06] Richard Gaffin: margin requirement as a result. I, 

[00:05:09] Tony Chopp: I think 

[00:05:09] Richard Gaffin: I think it's interesting, Luke, at 

[00:05:11] Tony Chopp: maybe 

[00:05:11] Richard Gaffin: maybe we have this conversation here, like 

[00:05:13] Tony Chopp: in the, 

[00:05:13] Richard Gaffin: in the towns where about, 

[00:05:17] Tony Chopp: there's 

[00:05:17] Richard Gaffin: there's a risk 

[00:05:18] Tony Chopp: of. 

[00:05:19] Richard Gaffin: of. 

[00:05:20] Tony Chopp: Attempting to 

[00:05:21] Richard Gaffin: to hold 

[00:05:22] Tony Chopp: a higher efficiency standard the beginning of the month and even on the day of in the days 

[00:05:32] Richard Gaffin: of in the weeks of, and 

[00:05:35] Tony Chopp: is leaving 

[00:05:36] Richard Gaffin: the risk is leaving 

[00:05:36] Tony Chopp: volume on the table because of things like a seven day click attribution window, or Google's really funky backfill attribution window.

So yeah. I think this is like a really, really tricky puzzle when we think about how to, how to load up before Black Friday and Cyber Monday and how we think about evaluating it. So that's like one piece of the puzzle. So Luke's perspective on like, if you're discounting your product, it changes your marginal profile.

So you need a different efficiency metric. A hundred percent, yes. I think the other consideration is to think about how how many new eyeballs can you get in front of. Prior to this like key buying moment. But I, I actually wanted to swing back to the question too, because the question was about specifically around designing discounts.

And I think Luke, what, what was this two years ago that we did our, our analysis of like our whole portfolio and the types of discounts that they did the, the sort of average across the portfolio is like a 30% discount. The store. I, I think generally speaking, my, my favorite type of discount is gift with purchase.

For, for a bunch of reasons, but number one, because it can help you actually raise your a OV. Number two, you can play a little bit of the margin game when, when you're giving something away that you have a super low cost on. So Luke, I'm thinking of one of our, our shoe brands that's, that's done this with a, a pair of lower margin shoes or lower cost shoes that they've included.

So I think for, for the purpose of like considering your, your offer design for Black Friday, cyber Monday, a, a couple things. A percentage discount, it's gonna be. Sort of what the market expects during those two days, those two key days deals leading up to Black Friday, cyber Monday are becoming more and more popular and that the timeline is extending every year.

And I would strongly encourage everyone to, to examine gift with purchase options to play with.

[00:07:35] Luke Austin: Yeah. 

[00:07:36] Richard Gaffin: I'll add on one other thing.

[00:07:37] Luke Austin: Tony brought up, which is the perceived value of the offer is the most important thing. 

to the consumer.

[00:07:43] Tony Chopp: When is your next

[00:07:44] Luke Austin: gonna be a relationship between the perceived 

[00:07:46] Richard Gaffin: Value. 

[00:07:46] Luke Austin: of the offer that's being. Given to the customer and how much it hurts you from a margin standpoint.

Right? So there's gonna be sort of a trade off and and pain there, but it's not always gonna be directly, it's not always gonna be a direct relationship to where okay, if the proceed value to the customer, 

[00:08:03] Tony Chopp: ahead.

[00:08:03] Luke Austin: gonna give X percent or X dollars off, then I'm going to eat that same amount of dollars. Gift with purchase helps to get around that by saying, we're gonna give you $120 item that only costs us $20 to make, for example, right? So that's like. That's an illustration of how the perceived value can increase there. Another reason why bundles gift sets and just pushing up the a OV in general for the holiday offers, and then offering a, a larger proceed value against that is another really helpful lever to pull outside of the straight discount or even discount thresholds against higher AOVs.

But really bundles, bundles gift sets and ways to combine multiple products into one where. You can offer a much higher perceived value for less marginal pain than if you just gave 30% off whatever order that it might be. And it's just one-to-one, one-to-one in that way. So, be, be creative in thinking about how you do that with your a OV threshold, which, what products you're adding or giving as a part of the order. And the last thing 

[00:09:01] Tony Chopp: Help. 

[00:09:01] Luke Austin: you're going. You're going to need to stair step your offers in as sending order culminating in Cyber Monday. Typically so your early bird offer November up to your Black Friday offer up to your Cyber Monday is there, there's going to have to be something unique in those offers in the communicated to keep customers interested and around, and then they're gonna, it's gonna have to stair step in terms of at least the proceed value over that time period and get more and more attractive to the end customer.

[00:09:27] Richard Gaffin: So I, I think that this would also maybe be a good point if I could do a shameless plug for our Black Friday Cyber Monday offer database, which should be dropping next week by the time that you hear this. Which basically is a compendium of all. We take about 700 e-com

[00:09:42] Luke Austin: I'm scared.

[00:09:42] Richard Gaffin: From last Black Friday.

We screenshotted all of their their web pages on the days Black Friday through Cyber Weekend and then created a database so you can get a sense of. what everybody's doing. It's great for like inspo for your offers. You can see the actual creative that people used and then also could just get a sense of what percentage of brands, I dunno, discounted, what percentage of brands that gift with purchase, that type of thing.

So look out for that. One thing that I wanted to ask as sort of like a jumping off or, or a follow up question to, to this or caller's question here is, do you think is going to be unique. If anything about this Black Friday in terms of how you approach it, and maybe another way to say is like, how is our sort of general strategic approach shifting in 2025?

[00:10:26] Tony Chopp: Oh, I mean, I think, you know, it wouldn't be a podcast if we didn't talk about incrementality. So you know, and I think. I, I love incrementality, Luke. I mean, ask, ask Luke. I, it's first thing when he walks in the office this morning, every day I'm like, Hey, do you wanna talk about incrementality some more?

And anyway it's awesome. But, you know, there's like all sorts of with the, know, way of approaching it. It's a point in time measurement. It. You know, it's just the best that we, it's the best that we have. It's

[00:11:04] Richard Gaffin: Yeah.

[00:11:04] Tony Chopp: So I think one of the things that I hope to actually gather more of this Black Friday, cyber Monday is an understanding of the incremental contribution of media during a, during a really peak moment like this.

Because I think it's a little bit of a I don't know, it just represents an, an area of opportunity for, for me personally that I'd like to know more about.

[00:11:27] Richard Gaffin: about you, Luke?

[00:11:33] Luke Austin: I think it's going to require the most creativity of any, of, any year for, for brands in terms of their marketing calendar and offer structure and how they think through the previous question that we were, that we were talking through, because there's, right now inventory is not created equal in terms of what shows up on it shows up for the brand.

So we're in the midst of the, we're, we're sort of stair stepping the tariff impact and what, what inventory has, what impact associated with it. There's there are brands that need to move a large, a large amount of inventory to produce cash to be able to set themselves up for next year. In a way that's, that's really unique as well.

And then. There is the additional cash that needs to be created based on the impact of the, of the recent months. That is gonna be, that's gonna be another factor. And I think outside of that, like what, where we are focused on trying to equip our brands with is understanding one. Optimal budget allocation point through spin, MER model because that will help to understand what, what should the budget allocation be.

And many times it illustrates maybe we didn't need to spend as much as we were planning to for a very similar outcome. Slightly less top line, but a lot more contribution margin as a result. Not all always the case. If you have really strong LTV, there's, there's ways that it plays out differently, but what it illustrates is, what additional dollars we can feel comfortable with allocating away from direct response conversion media into new tactics to produce a different sort of outcome, which is, which is a really challenging question of we all know there's an opportunity cost if, if I take this $50,000 away from my media budget over the course of this time period and allocate it to a new publisher, white listing campaign campaign or influencer, white listing campaign or creator content, or test out some VO ads and some new AI creative, whatever it might be.

How much top line am I giving up and is that going to be worth it in terms of the net new outcome that this generates? And so I think what we're trying to do is help to. Quantify what that impact is to enable budget allocation or investment into creativity, specifically around creative units and channel expansion.

Like Tony mentioned, net new creative units around those creative formats and types that I just talked, talked about. And then channel expansion through incrementality into the app ovens, the YouTubes, the Snapchats, the tiktoks net new channels that can produce a net new outcome and change the. The trajectory of where brands are currently at.

Because there's, there's just such unique dynamics and in many ways there's more constraints than ever. And constraints force creativity, as we all know. And so I think that's why there's gonna be, it's gonna be one of, it's gonna be a time period that's just gonna force a large amount of creativity and investment into new things to produce a different outcome than the trajectory that many brands are currently on.

[00:14:24] Richard Gaffin: Yeah, makes

[00:14:27] Tony Chopp: I, I just, I think it's called back to the previous question as Luke mentioned, like thinking about your offer design for Black Friday and Cyber Monday, and related relationship to your inventory position in relationship to what you have to sell now and what you believe you're gonna have to sell in the future.

It, it's all just part of one big, one big happy cycle really.

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[00:15:15] Richard Gaffin: Right on. Okay. cool. All right, let's let's jump into our next question then. And speaking of incrementality, this is also touches on incrementality. a little bit of a technical question, or at least it feels that way to me. So I'll throw it to Tony first, 'cause this is your bread and butter.

And then we'll see if you have anything to add here, Luke. All right.

[00:15:33] Caller: Hey guys, long time listener. First time caller, have a question about incrementality for you. Could you talk a little bit about if you feel like incrementality is the same or different at different levels of spend? And what is your threshold of spend change? Is it 20%, 30%, 50% needed to, tudy incrementality? Hope that makes sense. Thanks.

[00:15:58] Richard Gaffin: All right. Well, I love how many longtime listeners first time callers we have at this point in our tenure here, but, all right. Well, I'll throw this to you.

[00:16:06] Tony Chopp: Yeah. Yeah. For the short answer is yes. I mentioned earlier about like, incrementality is not some sort of magic bullet that solves all questions permanently. It's, a journey. I think what's most exciting about this right now, I'm gonna go back to the question specifically, but I think what's, what I'm most excited about is, as always, some of the, the tooling that we're building at CTC and. What's the best way to describe it? Right. Right now we're, we're taking the, the bands of the incrementality percentage that we see for any given channel. Some of the channels are pretty narrow in the bands that we see. Some of the channels are really wide. We're. Taking that relationship, smashing it up with how much media investment is happening in, in those channels. And the combination of those two things is yielding a Luke, I forget what, what, what's the name we have for this? The uncertainty principle. The uncertainty matrix,

[00:17:20] Luke Austin: Yes,

[00:17:21] Tony Chopp: It's,

[00:17:22] Luke Austin: uncertainty. We're currently, we're currently branding to make it to make missed opportunity.

[00:17:28] Tony Chopp: Yeah. Fomo. Fomo. Fear of missing Media. Anyway, so we're doing some math. 'cause see, we love math, right? So we're taking the, the bands of the uncertainty for any given channel, smashing that up with how much you're investing in that channel. And we're, we're working to sort of stack rank how you should approach your incrementality roadmap based on impact

[00:17:48] Richard Gaffin: Mm-hmm.

[00:17:49] Tony Chopp: backed by math.

Okay? So I, I think that's. v one of this well, we're past V one, but that's the current iteration that, that we're going down is, is should I do an incrementality test in Google brand search or acquisition or whatever. Well, gonna be based on how wide that, that gap is that we're measuring and how much you're investing.

And the, the answer is gonna be different for every brand that we work

[00:18:14] Richard Gaffin: Yeah. To clarify, you mention you're talking about bands, like, is essentially what you're talking about is what's the gap between the, the incrementality like. the incrementality test returns or the IROs or whatever, and then what the platform's reporting or like what, how are you defining that?

[00:18:28] Tony Chopp: yeah,

[00:18:29] Richard Gaffin: Okay.

[00:18:29] Tony Chopp: the wideness of that.

[00:18:30] Richard Gaffin: Yep.

[00:18:31] Tony Chopp: gonna, I'm gonna use YouTube as, for example, 'cause YouTube's one where we get some pretty wide bands. So on the low end we'll see like to one or pretty close to say the platform is, is, reporting representatively, I don't like to use the word accurately.

Representatively

[00:18:48] Richard Gaffin: Yeah.

[00:18:50] Tony Chopp: versus 3, 4, 5 x to one. Okay. So it's a really wide band. There's a lot of uncertainty there in what YouTube's impact is for, for any given business, as a result. But YouTube's also like pretty small investment. at least when, when we start, so we can get it right, but then we'd have to scale up the media quite a bit.

And then to the caller's question, we'd have to go run another test. I think Google Brand Search is another one where the band's a little bit tighter, but the revenue, usually there's more investment there, so it's likely, it's likely higher up on the priority list. Now, all of this to say that that's where we're at right now, the caller's question about does incrementality.

Change at different spend levels? The answer's a hundred percent, certainly yes. And I, the, the way forward for us is gonna be to roll that same question into this, this bigger picture framework, because the answer might be, or in some cases the answer certainly is gonna be, get a better understanding of the incrementality in the current channels that you have now. then go start working your way on increasing the immediate investment. Is it 20%? Is it 50%? Is it a hundred percent? I think it's gonna be pretty different for, for every brand, but for sure it's going to change. And it's not just spend level either. It's like tactical approach, right? If we went from running let's just say hypothetically we went from running a media account on all seven day click to all seven and one or like, let's go crazy and go all like highest volume.

So if there's big tactical changes with how we run the, the, setup, that's gonna affect incrementality too. So I just don't want anybody to think about, I just don't want anybody to hear me say like, oh, we have the magic bullet, because that's not what it is. It's a journey, not a destination.

[00:20:26] Richard Gaffin: Mm-hmm. I, let me just quickly make sure that. I'm totally clar clear on this. Rather I can clarify for the audience, particularly if this requires a little bit of translation. Essentially what the caller's asking here is at 20% lift, or what she's asking essentially is like at a 20% lift in spend. Is that the point where it triggers a re study of incrementality at a 30% increase in spend? that trigger a restudy of incrementality just because the incrementality percentage or whatever that band that you're talking about will have probably have changed based on the amount of spend? Is that

[00:21:00] Tony Chopp: Yeah.

[00:21:01] Richard Gaffin: Okay.

[00:21:01] Tony Chopp: That that is, that is correct. That is the question. What the, the answer is, spend increases or decreases change, will change the incrementality at what interval? It's, it's difficult to say, and it's gonna be difficult for us to say for any, particular brand. But I think that's like the stage two of the, the incrementality roadmap that we're working on deciding.

[00:21:26] Richard Gaffin: Right. Cool. Luke, anything you wanna add?

[00:21:30] Luke Austin: No. Yeah. E except we, yeah. The way you do it is, is stair step it up. So you have your current base of media that you've run an inverse holdout on, and then you want to see what the impact is of increasing the media spend to a higher level. So. Existing media. That's for example's sake. If you're running in all 50 states in the, in the US you take five or seven of those states, a subset of the, of the DMAs, a subset of the regions increase, spend 30, 50, whatever the, whatever the idea is within that subset, measure the impact and then stair step all the rest after that.

So stair step to small holdout, then then bring up the, the rest of the regions up to, up to that level being the sort of main course of action. And the other thing I'll add is like. Going into this time of year, it's, it gets real interesting around promo periods high, high demand promo periods that are, you know, you really get with one time a year.

And there are many brands out there that do most brands will do 40% of their revenue, right? These, this in this last quarter, mi. There's many brands who will do 60% of their revenue, 70% of their revenue, their, the business is made in November and December. That's, that's all where all the money is.

And we were just having a conversation today with, with Juan. And we're setting up incrementality tests throughout this month and then leading into October and then into November even as well to understand the impact of the media spending these core channels around promo periods and how to scale it up.

Yes, there's, there, there is a. There, there's an opportunity cost with, with any of these decisions, but there's an opportunity cost on the other side of not knowing where to invest your dollars to create the incremental business outcome. So fascinating time period we're going into, around scaling up budgets and measurement of them, and then also understanding incremental impact during a promo and high demand period.

Like we were heading into.

[00:23:08] Richard Gaffin: Yeah. So just to clarify then, and I think you touched on this in the previous question, Tony, but like this is the kind of the first holiday period that we're really. Incre in a robust way. Is that fair? Or did we do last year? Is there anything like we can sort of

[00:23:24] Luke Austin: Yeah, we have, we,

[00:23:25] Richard Gaffin: or.

[00:23:25] Luke Austin: we have, we have historically and and many of the brands that we work with over the, over the past years have, have we've either had conversations around running incre mortality in this time period or or run it. One, one notable result from last year was a, an apparel brand with pretty, pretty strong LTV relative to its category.

Ran an incrementality test on retention media in. Meta so me MetaMedia oriented around past purchasers and e either reactivating or re-engaging those folks through MetaMedia. Well, we'd all seem to be pretty, pretty low in terms of incrementality, the incrementality of the retention media and meta during.

An early November sale was higher than the incrementality of that same retention media in a non promo period prior. Which I think for many of us might be counterintuitive 'cause we might think, well, this is a promo period. You're sending a lot more emails, you're doing a lot more SMS, so your retention media like is, is getting a less incremental, there's just so much noise.

Indexing as the other channels, what it, what this indicated was, no, the retention media is actually more incremental. It's actually more necessary in this time period relative to another time period because of the amount of noise and offers and other messaging that consumers are getting inundated with that there's higher incrementality associated with it.

So a lot of fun, a lot of fun explorations like that one.

[00:24:46] Richard Gaffin: Interesting. Cool. Let's let's move on to let's do one more here. So this is this is another ish question, but we'll hit it.

[00:24:54] Caller: Hey, I'd just love to hear how you think about a and ER with brands who revenue is predominantly driven by return revenue. So I have a brand we do about 75% of our revenue comes from returning customers. That cohort. And I just feel like we're continually limiting our customer growth and our ability to push spend based off an A MER target. Especially with how audiences are broken out and how there's less visibility into where spend is going. Would love to just your take in regards to how A MER plays in to businesses like mine.

[00:25:31] Richard Gaffin: All right. He wants to jump in on this one,

[00:25:35] Tony Chopp: I got. I gotta go. I gotta go. so curious too. So when I think about these, like, so I think about, as the most conservative way to assess the impact of your media. And that's good, and it's really good to have that lens, but it's really hyper dialed in to new customers and, and to the caller's point, like. Are your meta acquisition campaigns a hundred percent new customers? No. Keep trying. They're not. Are your Google brand campaigns a hundred percent existing customers? No, they're not. can keep trying, but they're not so, so there's bleed. There's bleed that happens in all these spaces. So A MER, super conservative, really, really important. Metric to anchor into, but it's not the only metric. It's, it's a really sharp and focused one opposite end of the scale. MER. Super, super general wide open, leaves, lots of room for wrongness, leaves lots of room to potentially overinvest in talking to your existing customer file, right? So as, as is most things in life, it's not that one of these is wrong, it's that these are different tools to approach the assessment of your business and different, different lenses to look at. And so. If you have a business that has a large portion of its revenue from existing customers you need to do a couple things in my opinion. Number one, you need to have an understanding of your spend to your A MER because you, you run the risk of really easily overinvesting. You run the risk of burning cash.

So you have to have an understanding of this. At the same time, I, I believe you need to take swings on your media investment and you need to pay attention to your overall MER and what's happening to your returning customer file as well at the same time, because a MER is going to get held to, it's gonna, it's going to be. Potentially limiting in how much investment that you can make. And ultimately what we're after here is to increase our profitable investment every month to help grow a business. Specifically one that has a really big existing customer file because potentially hiding some damaging things in your existing customer file. But I'm super curious to hear what Luke s say. 'cause I feel like it's gonna be fun.

[00:28:14] Richard Gaffin: All right.

[00:28:20] Luke Austin: There's more and more brands that should be less and less worried about exclusions in their accounts. Pa past customer exclusions on meta past purchase or exclusions, and then brand versus non-brand on meta. And it, it depends on if the product lends to a natural repeat behavior or not. If it doesn't, once you acquire a customer they, Tony says this all the time, they're not your customer to keep yet.

They're, you don't have a right to that customer. And, and so when they buy your pair of sneakers or they buy your clothing or they buy, your mattress, the next time they're in market for that thing, they have all options that they're going to be considering. Again, will they have a, a propensity to, to your product?

It to some degree. But there's also the competitive and categorical space changes so much all the time. Like you can just see this. Every month they auction. And what your, what your, how your brand shows up in the, in the serp and Google and Google shopping is different than it did the month prior.

There's new people out there, there's retailers that are offering at discounts. There are new competitors in the space. There are recommendations from the customer's, friends. They, they need to be convinced again. And because of that, what we're seeing, what we're seeing is that the brand and non-brand.

Difference. For many brands that don't have significant LTV is not, is not, there's not a big difference there between brand and non-brand terms, depending on what depending on what the brand, brand name is. And then on meta, in terms of the exclusions, we gave the example earlier of meta retention being more incremental than even an evergreen period during the promo period.

There's a lot of leakage in the exclusions where it just gets really challenging to even isolate these things. And when you. Even in trying to isolate them, when you measure them, you realize that there's there's a lot of there's, there's plenty of incrementality to be had within each, each customer cohort.

So this is all sort of a way of saying, what I'm most interested in is my meta program as a whole for many brands, my meta program as a whole, and then my Google program as a whole. Getting an understanding of those, the incrementality of those channels and aggregate, and then pushing as much volume as possible.

Then yes, I am going to measure a meta retention specific campaign. Then I am going to measure a YouTube demand engine campaign, and I am gonna go from there. But from the onset, I'm not going to, I'm most likely not going to meta acquisition, meta remarketing, meta retention, Google non-brand, Google brand, YouTube, segment out seven, and then spend seven months testing all of them just to get the insight like.

What's the meta meta program like, what's the Google brand? Like? Great. Now I know, now I know how much volume I can push and go from there and then work backwards from there in terms of the granularity. Now your brain was substantial. LTV leads itself to repeat purchase subscription. It there, there's there's a clear dynamic there of where you'd want to have more control over.

What that behavior looks like and where you're investing media dollars along that customer's journey. But for most brands that don't have substantial LTV, you get the customer if they don't buy from you within the first 30 to 60 days. Again, that's kind of it, like you've, you've, you've lost it. That's when the majority of the LTV is made up between day zero and day 30, maybe up to day 60 after that.

Go acquire that customer again. They're a new customer, in which case get it, get clarity on the program as a whole, get confidence, and then invest media dollars in the highest ROI spot rather than waiting months and months and months to get very granular insight into incrementality. That's just gonna change as you scale up and down media anyway.

[00:32:05] Richard Gaffin: Yeah, that makes sense. Tony, you'd mentioned in your response like the, let's say like the returning customer tranche or whatever, hiding some dangerous things. you unpack that a little bit?

[00:32:21] Tony Chopp: Well, I, with businesses that have like really big customer files and are well-known businesses, the, the problem, the challenge arises when you're using a lot of conversion focused media, cost cap minerals, et cetera, et cetera. The platforms are going to find those people, regardless of your exclusion, your audience exclusions, your pixels, whatever, the platform's gonna find those people. So I, I think the, the risk is the risk is in believing that your. Doing like true net new prospecting, advertising, reaching new eyeballs in in your campaigns that have exclusions, et cetera, et cetera. I'm, I'm, I'm coming to believe more so and more so that what it, what affects new versus returning eyeballs has more to do with bidding or

[00:33:25] Richard Gaffin: Hmm.

[00:33:26] Tony Chopp: type than it does with audiences.

Actually. Do you fire up a, you fire up, a campaign that's sort of more mid funnel bidding or even upper funnel bidding, and you're gonna get a bunch of new eyeballs. Makes sense? Logically, those people aren't gonna convert right. back to Luke's point about like sort of treating the retention versus acquisition or brand versus non-brand, like, like really differently.

I think what where we're evolving to is like this idea of return on invested capital for media specifically. Like here's, the return that we measure on meta for the invested capital and we need to, you know, run it through the incrementality and then, and then set the target accordingly. So sorry that that kind of got windy.

But the, the answer to the question is the returning customer exposure for, for large customers with big customer files, has a potential to become more and more of the pie we're not filling that sponge with other sources of new eyeballs.

[00:34:32] Richard Gaffin: and, and so you're saying because like a conversion campaign actually, like kind of teasing out what's actually, you know, what are actually new eyeballs and what are actually essentially returning customers because there's that issue with the conversion campaign. In order to do that, it's worthwhile to do these upper mid funnel bidding campaigns or what's, what's like the within that, what's the remedy I guess?

[00:34:57] Tony Chopp: Yeah. Yeah. I think depending on, depending on the size of the business, a, as you approach 40, 50, $60 million e-commerce business you, you have to have, part of your media mix has to include something that is not conversion only optimized. And,

[00:35:20] Richard Gaffin: Yeah.

[00:35:20] Tony Chopp: and we see it across our portfolio. We see, we see our our more mature brands investing five, six, 7% of their budget into opportunities for for, to get their brand in front of people, which is an expressly different

[00:35:38] Richard Gaffin: Yeah.

[00:35:38] Tony Chopp: than I'm trying to convert them right now. And the platforms are really good. They're really good. they'll give you exactly what you asked for. Okay? So if you ask for a conversion, that's what it's gonna go get you. you ask for if you optimize for add to carts you're gonna get a lot of people adding to cart. If you look for broader reach or distribution, you'll, you'll get that as well.

And these things are all different parts of the, of a recipe.

[00:36:05] Richard Gaffin: Right. look. Look, what is your stance on this?

[00:36:09] Luke Austin: Yeah. Well, I'll add another dimension to the conversation or, or, or a separate sort of point, which is with no need. How we think about this is. You have your active customers, you have at-risk customers, and you have churn customers. And we in stats break that down for every brand based on the distribution of orders between a certain number of days and when a customer en enters an at-risk customer versus when they become a churned customer.

And that is, that is the starting point to understand. Okay. Customers that are churned or said another way 80% of the time if someone were to rebuy, they would rebuy within X amount of days if they've passed that point. And we can align at around 80% of orders, 90% of orders. But whatever that point is that we align on, we need to go and get after those customers for sure in our, in our media channels.

And so in terms of the approaching the customers now. Depending on the business dynamics and what the challenges are and the priority of volume versus efficiency at that point in time, then we can get more aggressive around these things. But. Generally that's how we'd start. And then based on the business objective and the problem we're solving and how aggressive we can be, then go after these other things, which is, let's actually open up things wider.

Let's try opera funnel or mid funnel tactics to, to be able to to be able to get after those audiences in, in a new way. To then be able to, IM be able to have an impact on, on on the new customer base. But for most brands, the answer is understand where your churn threshold is, and then once the customer passes the churn threshold, go and get that customer back because that's that's, that's important.

And mo most brands like. Have a growing amount of at-risk customers, which are the folks between the active and the churn stay sort of right in the mid ground and going after the at-risk customer portfolio. And then your churn customers represents a lot of opportunity that isn't technically net new customers as they show up in Shopify.

But as we discussed, if 90% of customers who are gonna reorder from you do that within 75 days and everyone past that for the past five years for your brand is just sitting there. Go, go get those customers, even if they show up in your returning customer cohort and not the net new, right? Like it's not, that's not really the point.

So start there. Understand churn threshold. Then after that, go after you're at risk. Then after that, find ways to affect your active new customer cohort through additional creative output tactics on the media side, like Tony was talking about. And being as aggressive as you, as you can be based on the constraints around profitability and volume that you have in that given given time.

[00:38:37] Richard Gaffin: Love it. Alright, Tony, anything to add?

[00:38:46] Tony Chopp: Hot take.

[00:38:47] Richard Gaffin: right. Let's hear it.

[00:38:53] Tony Chopp: At some point, we are going to have less and less of these conversations about new versus returning. I, I think Luke's point about the, I was just thinking as Luke was talking, like, you know, the, the small percent of your, the people that you reach that become customers time. Now, businesses that have super strong LTV, different things, subscription models, different thing altogether, but those small percent of people that purchase from you and then are gonna go purchase again and again and again. Like we spend a lot of time trying to get them out of our. Out of our media stack. Yeah, I think I think the idea of understanding the return on your, return on your invested capital, on, on meta, letting the, letting the meta pixel help us understand how to reach more and more people is the way, is the way of the future and, and incrementality testing as we scale up to, to watch how that changes.

[00:39:56] Richard Gaffin: I love it. Well, 'cause my, my next question for your or my, I was gonna kind of put a button on this whole conversation with getting your hot takes of the week and so I think we got one from Tony Chop Hot Take of the week. This new versus returning thing the window. We're moving on. Luke, what's your hot take of the week?

[00:40:12] Luke Austin: Hmm.

I feel like I want the same, I feel like I want the same one.

[00:40:18] Richard Gaffin: You can't have it. You

[00:40:19] Luke Austin: Going back to the beginning of this conversation around the span, a MR model every brand has a substantial portion of their currently allocated media budget that is gonna be better served elsewhere, specifically into creative output or net new, net new initiatives around channel expansion. The, the quantity of that is going to vary for every brand, but there's a substantial amount of your currently allocated media budget for the back half of the year.

That reallocating a a, a level of those dollars is going to have very little impact to your top line or bottom line outcome by just removing it and then will allow you to take those dollars and them into new things and maybe one outta 10 of those new things really, really works for you. But the trade off was.

You got this very similar business outcome and you're a lot, you're able to try a lot of new things and identified a couple things to bring into the future with you which is what we're doing all the time, right? Testing, testing the new things for, for growth. So those, those marketing dollars exist.

And this year is going to specifically this year is gonna require creativity more, more than ever in terms of finding that new leverage to produce, produce the outcomes that we're all wanting for the back half of the year.

[00:41:27] Richard Gaffin: All right. I like that. Okay, so Luke's hot take then back, spend on Black Friday, or rather pull it back from where you thought it was gonna be. Take a hundred k, it towards creative, put it towards something besides like, let's just pour this into meta and see what comes out. Yeah,

[00:41:43] Luke Austin: Yes. Something, something along those lines.

[00:41:45] Richard Gaffin: lines.

[00:41:46] Luke Austin: Although the, although the spin may be coming out of Criteo or Rakuten,

[00:41:51] Richard Gaffin: Yeah.

[00:41:51] Luke Austin: but yes,

[00:41:52] Richard Gaffin: Huh?

[00:41:52] Luke Austin: yes.

[00:41:53] Richard Gaffin: There you go. Instead of a,

[00:41:54] Tony Chopp: him say pullback spin on Black Friday. By the way, just for the, just for the record, Richard,

[00:41:59] Richard Gaffin: all right. I was try.

[00:41:59] Tony Chopp: of a single Black Friday, cyber Monday that we haven't looked back on our, the entire portfolio and

[00:42:04] Richard Gaffin: Yeah. Yeah.

[00:42:05] Tony Chopp: there's ways we could, we could have pushed

[00:42:06] Richard Gaffin: We should have just spent more. Exactly. I'm just trying to turn the heat up on these takes and sometimes I crossed the line, so we'll pull it back.

[00:42:13] Tony Chopp: Take. We got, we got credit, we got app. You y'all know about App Loving, right? App

[00:42:18] Richard Gaffin: Yep.

[00:42:18] Tony Chopp: The, the was the cool it media platform last Black Friday, cyber Monday. So they're opening up the platform to self-serve. So we, we can actually run, run ads on behalf of our clients or you guys can do it yourselves. But you gotta get a referral code to get in. We got a hot, hot take.

[00:42:36] Richard Gaffin: I'll take this up for a referral code to AppLovin and for a free spend, an aMER model. Luke has mentioned this a couple of times. This is our forecasting model that covers the next 15 months. We're currently giving them away for free 2, 8, 9 figure brands that we wanna talk to. So I'm gonna shamelessly plug that here as well check it out.

That actually helps kind of open up the answers to some of these questions, like how much. Am I overspending is a big one that that this answers for a lot of brands as well. So check that out. Comment through co.com, hit the hire us button, check it out. So, I think it's gonna do it for this week's episode.

Now remember, if you want your questions answered on this very pod. Call us. Leave us a voicemail, 866-DTC-2263. Send us a text there. If you don't want to have your voice on a podcast or whatever, or played on a podcast, we can read your texts, uh uh instead. So shoot us a text there. We'll read your question on a subsequent episode.

So for Tony, the chopper, Chopp, and Luke, the weatherman, Austin, I'm Richard, the professor, Gaffin signing off. Take care, everybody.