Is Anyone Making Enough Creative?

[00:00:00] Tony Chopp: Here's a hot take. I'm a media person. I've done this my whole life. and I think it would be easy for for somebody like myself to be like, well. I get on this podcast and tell people not to touch the media accounts and for that to be like a scary thing. But I, I don't think that's what it is at all.

I, I feel like the opportunity for myself and for anybody else out there in the, in the media team, in the media world is, is to actually think about how we get ourselves more closely connected to finance and follow the thread all the way through. , Wiring all this data together is the only way. 

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[00:01:08] Richard Gaffin: Hey folks, welcome to the DTC Hotline. This is your direct connection to Hot Takes, cold Truths, and real ecomm advice from some of the best in the business. 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, ask whatever's on your mind. DTC-wise. Our operators are standing by and speaking of operators. Let introduce him to you right now. Coming in live from beautiful Newport Beach, California. We have Mr. Tony Chopp, the Chopper, our VP of Paid Media here at Common Thread.

Ready to answer your questions. Tony, what's going on, man?

[00:01:43] Tony Chopp: Oh, let's see what's going on today, Richard. Well, you know, we were chatting about the choppers going through a, a move and I think 

[00:01:50] Richard Gaffin: Yeah.

[00:01:50] Tony Chopp: peak, peak chaos. We're on the downswing now. Things are starting to get, get put together, so good. 

[00:01:57] Richard Gaffin: That's great. Chopper chopping up the house, I guess. Doing a Reno, right? Yeah, exactly. 

[00:02:01] Tony Chopp: we did. We did tear it apart. Yeah. it's,

[00:02:03] Richard Gaffin: Yeah. There you go. 

[00:02:03] Tony Chopp: back together. 

[00:02:04] Richard Gaffin: One damn thing after another. All right. And of course joining me is Mr. Luke Austin, the weatherman here, who's our VP of ecommerce strategy here at CTC. Luke. What's going on, man? 

[00:02:16] Luke Austin: Oh, doing all right. Got a little sickness running through the fam. A 

[00:02:20] Richard Gaffin: Of course. 

[00:02:20] Luke Austin: school, just that time of year. But, I've had some epiphanies this week as I've been reflecting on this call, so I'm, I'm, I'm excited for this conversation. I think some things have been, been settling, so 

[00:02:33] Richard Gaffin: That's right. Okay. Well, good, good to hear. Nothing heals a cold like a hot take.

Alright, let's let's jump to our first question here.

Hey guys, I've heard really great things about the DJC hotline, so I wanted to try it out myself. My question is around creative and obviously scaling creative production is a huge issue for pretty much everyone right now. Do you have any tips to making that happen? Are brand really struggling to produce enough differentiated creative?

And I'd appreciate any help here. Looking forward to your feedback and any insights they have. Thanks.

[00:03:05] Richard Gaffin: All right. Who's taking this one?

[00:03:07] Tony Chopp: Nano banana. No, just kidding. 

[00:03:11] Richard Gaffin: Nano. 

[00:03:12] Luke Austin: I think we've, I think we've seen, like, I think we have two to three examples of brands that are doing this really well. 

[00:03:21] Richard Gaffin: Hmm. 

[00:03:21] Luke Austin: of the 

[00:03:22] Richard Gaffin: Hundreds. 

[00:03:24] Luke Austin: that we. 

[00:03:24] Tony Chopp: the last, what, 10, 10 years or so? 

[00:03:26] Richard Gaffin: Yeah. 

[00:03:27] Luke Austin: Who, who we, who we actually would point to for ourselves and say, this is, this is the standard and this is what it looks like. And, and there are ones that we've, that we've mentioned in conversations before.

I think a good specific example is loop earplugs. And if you go into their ad library, they have. 2000, between two and 3000 active ads live, they have diversity of creative format. In the midst of that very high volume, they have specific landing page destinations and messaging on site relative to each of those funnels.

It's, it's sort of the thing that we talk about. We all talk about, we all see as, oh, this. Yeah, that's that's what the standard looks like. Now how that gets achieved is is a really challenging thing to the, to the question that we just had called in. And, we haven't. Seeing a very specific structure of, okay, to achieve the sort of volume of creative output that we all believe is necessary in the standard, which is like, which is like a thousand new ads, right?

Not like I'm gonna launch 50 or even a hundred. And then to do that with a diversity of formats, 

[00:04:36] Mediaboard_sounds: great 

About the 

[00:04:37] Luke Austin: It 

[00:04:37] Mediaboard_sounds: hotline, so I wanted to try 

[00:04:39] Luke Austin: So we haven't seen a very,

[00:04:40] Mediaboard_sounds: My

[00:04:40] Luke Austin: Streamlined, like yeah, the, the people who do this, have they built out in-house teams. Here's the three pods of the teams, here's the structure and here's the most efficient way to do it we, we've seen a myriad of, of approaches. 

[00:04:50] Mediaboard_sounds: Really struggling

[00:04:51] Luke Austin: but I, I would say that the most consistent thing

[00:04:54] Mediaboard_sounds: here.

[00:04:55] Luke Austin: that we see is that

[00:04:56] Mediaboard_sounds: and

[00:04:56] Luke Austin: to enable.

[00:04:57] Mediaboard_sounds: have. Thanks.

[00:04:59] Luke Austin: Diversity and high volume of creative output, you're going to need diversity of creative production or creative sourcing. It that's, that's consistent, which is there are multiple teams and vendors and agencies providing creative.

Each of those partners provide creative in a different. Format and type. So that gets you at the diversity, right? Because one's really good at creator content and the production There one's really good at branded still in motion graphics one's really good at whitelisting and meme style creative.

And you go down the line. And so you get the diversity by working in those different avenues. And then that also enables high, high volume that also enables high volume output because you have just a lot of different sources that you're working with it. And then the third piece I'd add in is the structure.

Typically at that high of a volume, some sort of incentive-based structure where it's percentage of span against the creatives and ability to scale up against it is the incentive that allow, that aligns both sides on, on, on what they're, what they're after. So that's, that's what we're, trying to build out on our side to be able to enable our partners with.

That's what we see as being important is you have multiple sort of teams or sourcing for different creative production types so that we have that through our creator content and our core creative offering and our, and our AI creative. And then in terms of the structure, moving to more variable performance base where we're only gonna get paid on the creative.

If it gets spin in your account against your mineral asset cost cap target, say that incentivizes both sides to, to produce. Much creative volume as possible. So diversity of production sources, diversity of creative sourcing is important to, to be able to enable that. In terms of what we've seen of the brands that have set the standard in that, in that category, I.

[00:06:42] Richard Gaffin: Yeah, totally. And this is a, this is a point we've made a couple times maybe on some of our other podcasts as well, is that like basically if you try to rely on one team or one sort of core creative group to. Build your creative. Not only are you obviously not gonna get the volume you need, but also the same creators tend to produce the same types of things, like no matter sort of how hard they try to make two very, very different stills or what, like maybe they may be able to do that on kind of a small scale.

But generally speaking, most creators have like a voice. No matter how flexible they are. And so it ends up being kind of similar. So if you want kind of a diversity of even the same types of creative, like the stills or UGC or whatever the case may be, finding more creators to do it is the kind of the key here.

So, Tony, what are your thoughts here?

[00:07:26] Tony Chopp: Yeah, I, I think at the end of the day, I think this represents like a, like a resourcing question and like how, how you're allocating your, your investment and it, it just, I think it strike, it me as interesting and it has for some time, with. You know, more smaller brands, much money they're willing to shovel over to Mr.

Zuckerberg, you know, on a daily or monthly basis without really any concern necessarily other than their, the ROAS and the return versus like, how much. Money or resources or energy they're willing to invest in, in the fuel that, that enables that whole thing. So, and, and I really think this is a function of like. Performance, the history of performance media, like in general and the sort of archetype of the, you know, the media buyer as the, the, the enabler of this, this whole system. 

[00:08:38] Richard Gaffin: Mm-hmm.

[00:08:39] Tony Chopp: And I think we're seeing it change. Like, I, I honestly see, think we're seeing it, the landscape like shift under, underneath our feet.

[00:08:45] Richard Gaffin: Yeah.

[00:08:46] Tony Chopp: the, the sort of tactical, you know, media buying, do this in the account, do that in the account. Like it, it just keeps getting chipped away by, by automation and, and technology. And, I think it's honestly for the best, really, like, especially when you think about how we approach the problem. Like when we, we approach the problem of, what do we do in a media account?

Like, well, fundamentally we get smarter. The media, media account's like the end node of the system and they get really smart about. The unit economics of the business, what they're, what they're trying to achieve, and, and then you know, get, get smart about how incrementality and measurement and last piece of the puzzle is like what, what we do tactically in the account. So, to the caller's question, like my, my question back to her would be. You know, last month or last year, whatever, much money did you invest in media? Like how much money did you spend on meta ads and how much money did you invest in creative, creative production? Creative sourcing may, maybe money's the right, the right answer, right Question maybe time would be another way to frame it.

If it's a small, small brand and they're doing it, it's somebody that's doing it themselves. And my contention would be that the, their. Balance is probably not right and. 

[00:10:09] Richard Gaffin: Yeah.

[00:10:09] Tony Chopp: Make the things. So, and last point here, I know, I know I'm kind of hitting a bunch of 'em, but if, if you were to ask me today like how to, how to architect the media team or the performance team of today and tomorrow, the, the answer to that question would be several things that I, I feel like might not have been the answer a couple years ago. And number one is I'm, I'm gonna architect the team with. People that can actually generate content that can actually create things. 'Cause 

[00:10:40] Richard Gaffin: Yeah. 

[00:10:41] Tony Chopp: it's fundamental. So Yeah. 

[00:10:43] Richard Gaffin: That's interesting. Yeah. I was just thinking about like potentially an analogy for this is like media buying is a little bit like turning on an amp. And the creative is a little bit like playing the guitar. And I.

think that there's maybe been an overindexing right now on, we need people who know how to tweak the knobs on the amp and flip it on, rather than people who need to know how to play the guitar.

Right. Or something like that, right. Where there's just more emphasis on these sort of technical aspects that aren't actually the main thing. So beyond like just loop earplugs, what are other examples of. Just like characteristics. So like Luke, you had mentioned like the kind of one overriding thing is having a diverse, like set of creators, but in terms of like building out the system, like why, why have so few people cracked it?

Is it that difficult to find a lot of different creators or like what's, what's the bottling? 

[00:11:32] Tony Chopp: and 

[00:11:32] Richard Gaffin: Yeah.

[00:11:32] Tony Chopp: intensive. It's time, it's, it's very time intensive and it's very costly. 

[00:11:37] Luke Austin: Yeah, 

[00:11:38] Tony Chopp: that's why 

[00:11:39] Luke Austin: yeah, yeah. 

[00:11:39] Tony Chopp: I. 

[00:11:40] Luke Austin: So a specific example of that is in, so take one microcosm, which is creator content, lo-fi video assets. So that's what our creator content offer is focused around. So that's, and that's one sub format type of like, you know, 50 different types of creative they get. That's one. So within that, have a team of folks here at CTC that interact with our customers, identify the opportunities for creator content, fits in, report on the performance of those ads, identify net new ads that need to be created based on the different angles and funnels. Then we have. A then we have a network of content creators, which are the folks that Are actually being shown in any, in each of those ads.

That's like a a hundred x times the amount of people. It's not that much. It's like, it's like 20, 30 x times the amount of people we have internally, right? That represents that network of folks that we need to, based on the brand and the demographic and the content type then need to. Reach out to those individuals, get the content from them, source the product to them, et cetera.

So there's just a lot of, there's a lot of people in that process. And that's to create lofi creator content, specifically video format, one of, you know, 50 different creative types and the, the. The sort of resource and people intensity isn't the same between all the formats for sure, but to Tony's point, that is, that is a big dynamic of it, which is have someone that can, that has experience creating a.

VO ads that work for, you know, personal care DTC brands where you have where you have certain claims that you have to skirt around and, and things like that as well. Like, that's a, that's a very specific skillset to be able to produce that at this point in time. And if there's, there's, we haven't seen.

One individual where they can produce all 50 types of creative?

format in a really diverse way at a high volume. Right. It's just a, there's just a lot of labor there And there's a lot of nuance in terms of the, the perspective and output needed. Needed to be able to go that way. The other thing I'll add is at different rates of size and growth for brands, there's always the tension of in-house versus agencies versus other partners.

And so what that does is it makes it, there's not like a point in time where it's like, oh, great, like. Let's build this all in-house now so we can go and, and build out a 30 person content team full with content creators and designers and AI experts. And like, you just like have everyone like that takes a very long time and there's usually some sort of gradual process and in the midst of that you're like, okay, I think we've got like our branded.

Evergreen in-house, content handled, but these other creative formats, we don't. So we're gonna outsource those. And so it's more Frankenstein over time than anything. That's why, that's why people just have really different resourcing structures is because it's not a clear, like, you're this size, here's your creative resource structure, you're this size.

It's like a gradual sort of flowing thing. Every, everyone ends up with sort of like a Frankenstein mon, the monster of Frankenstein, 

[00:14:30] Richard Gaffin: Of course. 

[00:14:31] Luke Austin: the boy. It ends, ends up with that as the, as a creative. sort of output engine that then is the thing to contend with and try to work around. and and the monster Frankenstein is, is interesting. There's, there's a lot of cool things that come out of it, but pretty unpredictable. 

[00:14:47] Richard Gaffin: Yeah. Yeah, 

[00:14:47] Luke Austin: so that's the parallel.

[00:14:48] Richard Gaffin: exactly. Tony, anything to.

[00:14:51] Tony Chopp: No, I'm, I'm still stuck on this same idea in my head. Like for the caller, like, how much money did you give to meta last year or last whatever, and, and Google ads and how much money did you in, how, how much time and money did you invest in sourcing of the fuel for those things? 

[00:15:11] Richard Gaffin: Yeah.

[00:15:11] Tony Chopp: you're like 80 20, you're out of balance. 

[00:15:15] Richard Gaffin: Yeah. What does the balance look like? 50 50.

[00:15:17] Tony Chopp: I think it's shifting. think it's shifting significantly. And I think the, the work that we're doing with our like creative demand module and understanding like analytically the, the volume of creative that's required is in a lot of cases. Luke, I'd be curious if you, if you agree or disagree with the sentiment.

It's, it's sort of like startling, like, oh, how much we need. It's, it's, it's a lot. And I just don't think people are being honest with themselves about what. In a lot of cases, like what of resourcing or energy is required to actually get there. And I think to, to add to that, I think this. Here's another thing that's like a truism. Almost every ad account I've ever looked at over however many years is like an 80 20 principle where like the majority of the results are happening from 20% of the ads that have ever been in the account. 

[00:16:06] Luke Austin: Yep.

[00:16:06] Tony Chopp: So it's like, it's almost like you're getting lucky 

[00:16:09] Richard Gaffin: Mm-hmm. 

[00:16:09] Tony Chopp: and sometimes you get lucky, sometimes you don't. What, what we're basically framing out for our brands is like, Hey, if you don't want to just like do this as a crap shoot, this is actually what it would take from a creative volume standpoint. And sometimes people look at us and they're like, Yeah. right. But 

[00:16:26] Luke Austin: Yeah. 

[00:16:26] Tony Chopp: yeah, 

[00:16:27] Luke Austin: we don't, we don't have, we don't have creative offerings that are gonna, that are gonna be able to supply every creative need for every, every customer. We have a couple that, that are really effective. 

[00:16:37] Tony Chopp: help. 

[00:16:38] Luke Austin: they help and but what we do have. is the tools to be able to give clarity on what that demand needs to be.

And so, like Tony was mentioning, the creative demand, like we can see this across our clients of how much ad spending you're trying to get to. What is the creative net new ads that you need to create against that? And like if you take, we can look at every example for every brand, it's different. The amount of creative that you need to be able to get to the spin target because your degradation of efficiency is different.

The amount of evergreen ads that you have running the metrics that we look at in the models. But as an example for a brand spending, let's call it $300,000 a month in ad spend, that needs 200. 200 new ads created for that month, then that's 30,000. Then you just sort of apply a production cost against that.

And if for 200 ads, your average cost of production is $150 per ad, which may seem high, but if that's a true mix of, you know, video creative creator content, white listing articles and publishing statics motions, like a, a true blend of those things, then some are, you know, a hundred, $150 in asset, maybe like you're.

That's 20 to $30,000 a month in, in creative costs against your, your, against your ad spend. So 10% of your ad spend that what the budget is that go into the creative cost. Now that's just one example, a sort of rough heuristic, but that's sort of why, like the percentage of spin structures as well, where if, to do this at 10 percentage of spending, get unlimited creative, you know, or like a much higher volume of creative or seven or 8% of ad spin and and then you're under this sort of 10% threshold like that, this is what's necessary. Typically what we see is this will be all over the place, but it tends to lean the other direction of like, oh yeah, we'll make here like 50 new ads is, you know, we spend 10 grand on creative production this month, that's, that's pretty good.

Right? Well, it depends on the budget, but in this case, no, that's, that's a third of what. You need to allocate.

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[00:18:57] Richard Gaffin: Right. So just to, just to tie a bow on this conversation then, I mean, it sounds like basically what, like the, the overall suggestion for our caller and others is, is this is about reprioritizing creative production. Basically, and, and like really actually embracing the idea that getting creative production and creative diversity is actually the most important thing.

The other thing that you're spending, things that you're spending out your time on are maybe not quite like, particularly by, by which I mean like making little tweaks in the account or whatever. Like those things are just not priorities in the same way, but it seems like it's just sort of maybe psychologically difficult for people to figure out how to get to that place or something, you know?

[00:19:37] Tony Chopp: yeah. Think like, think about it, like let's just, let's play it out practically. Let's say, let's just say it's a small brand, smallish brand. Spend 20, maybe, let's say $30,000 a month on meta, right? Happily. Cool. Here you go. Mark, $30,000. My goodness. It's a lot of money, but, but then psychology of, it's so interesting. 

[00:19:56] Richard Gaffin: Yeah.

[00:19:56] Tony Chopp: it's great because you look at it all roas. You know, 

[00:20:00] Richard Gaffin: Mm-hmm.

[00:20:00] Tony Chopp: and, and frankly, sales for your business. But what I'm, what I'm suggesting is like literally figure out, you know, $30,000 a month. This, this is a brand that's not super big. You shouldn't have like crazy opex. Hopefully you don't have a really expensive office, like a bunch of like payroll and ad account and everything else.

Hopefully you're pretty lean and sharp instead of giving. $30,000 to Facebook next month, give them 15,000 and go put 15,000 into how into net new creative production. And then just keep going. Put the energy over there, move it. Now you're gonna get back to $30,000 a month, and you're gonna get past that, which you're gonna do in that process as you're gonna build the muscle that creates the fuel that gets you from 30 to 40, to 50 to 60 to et cetera. 

[00:20:44] Richard Gaffin: All right. All right, cool. Let's let's, let's shift gears here and jump to our next call. Here we go.

Hey, y'all love all the information that, that you've been dropping. So I'd really like some insight into this. I have a client who has been asking about incrementality and I, oas. I've been trying to explain it to them. I know a decent amount about it because I've had extensive training into it, but I can't seem to get the point across to them on the importance.

How would you, what would the simplest way, in your opinion be to explain to a client the importance of incrementality and ias and why they should keep this in consideration when when we run their account?

[00:21:32] Tony Chopp: All right, I got one. 

[00:21:33] Richard Gaffin: Go for it.

[00:21:34] Tony Chopp: I would float in all these different metaphors for how to, how to do this, try this one on for size. Okay. So, the media platforms, they all have measurement, right? like aas or output. They say this. is what you're getting. They all have it. Picture. Use for measurement.

Let's use the metaphor of a scale. You step on a scale and you, you weigh yourself. Right? when you step on a scale, like, you know a scale like. it, can be like a little tweaky, right? So picture the scale, but it's at, it's at McDonald's. Okay. And the scale is at McDonald's and they're like dialing the scale back a little bit.

Like, yeah, it's cool. It's cool. Have another Big Mac. So. And my, my other way of saying this, which hasn't been as popular as the media platforms, all lie

[00:22:26] Richard Gaffin: Yeah. Yeah.

[00:22:27] Tony Chopp: anyway, the point is it's not like a super familiar idea to have, like, to have this idea of a measurement, but then to have like distrust in the

[00:22:36] Richard Gaffin: Mm-hmm.

[00:22:36] Tony Chopp: and that's fundamentally what, what exists.

There's this distrust, right? Scales at McDonald's. They're, they got their finger on the scale because whatever anyway. The, the core idea of incrementality is, is really, really simple.

[00:22:54] Mediaboard_sounds: that,

[00:22:54] Tony Chopp: We just take their scale out of the equation. We just measure the impact on revenue. We run media in one area. We withhold it from another area.

We measure revenue. The revenue that hits your Shopify store hits your bank accounts. We'd take that outta the equation, the,

[00:23:09] Mediaboard_sounds: decent

[00:23:10] Tony Chopp: media platform's measurement.

[00:23:11] Mediaboard_sounds: extensive

[00:23:12] Tony Chopp: Then when we do this measurement of How the revenue moves based on running media, withholding media, or whatever else we get, 

[00:23:20] Mediaboard_sounds: in your opinion 

[00:23:21] Tony Chopp: what we believe to be is a a true or a more representative measurement. 

[00:23:25] Mediaboard_sounds: incrementality 

[00:23:26] Tony Chopp: Then we do a bunch of fancy math to like relate the two 

[00:23:29] Mediaboard_sounds: this in 

[00:23:29] Tony Chopp: and say, 

[00:23:30] Mediaboard_sounds: when, 

[00:23:31] Tony Chopp: of get like, all right, well the McDonald's scale example, we, we, we tested it, we went to the doctor. Okay. The doctor scale said I was 200. The McDonald's scale says I was one 50. when we go and read, when we go and stand on the scale at McDonald's, we know we gotta add 50 pounds to it.

'cause they're, they're, you know, 

[00:23:50] Richard Gaffin: Right. Get the finger on the scale. 

[00:23:51] Tony Chopp: don't 

[00:23:52] Richard Gaffin: Yeah, yeah. No, it's good. Well, 

[00:23:53] Tony Chopp: idea. I'm trying 

[00:23:54] Richard Gaffin: yeah, 

[00:23:54] Tony Chopp: things. 

[00:23:54] Richard Gaffin: the anal, the analogy that comes to mind is like the one of like, you buy meat at the butcher and they sort of like behind, like put the finger on the scale a little bit so they can get away with giving you a pound, but say, oh, you know, 1.15 or something like that.

And that's, that's what we're talking about here is that fundamentally the algorithm and the people at these platforms are incentivized to over report. And that's sort of what the incrementality measurement or, and in some cases under report as well, 

[00:24:20] Tony Chopp: Yeah, I. 

[00:24:20] Richard Gaffin: the case may be. So maybe it's a little bit more complex than just they're being dishonest, but it, it is like their, their scales are weighted, aren't set up to measure what's actually happening for your business maybe. 

[00:24:34] Luke Austin: Another, another way we've been thinking about it too is. Which we actually are, we've we'll have a tool soon in stats that, that helps to show this for brands. Is risk that exists in your current media mix currently, the risk of what to the, to the upside and the downside of the investment in, in your dollars.

And so how we think about that is. platform is saying, this much revenue is attributed against this much spend, and each of the platforms does that right here. Here's how much being attributed. We know that the true incremental revenue after the post geo hold test is gonna be different than that to the upside or downside, and there's a pretty wide margin of error.

And so what we're doing with this tool showing based on our incrementality tests, what is the highest incrementality that te that channel could live at? That's the upside that exists and what's the lowest incrementality. And then your platform attributed revenue is probably somewhere in between the, those numbers in terms of the, the incremental impact.

So if, if your Google non-brand. Functions at the highest level of the highest test we've ever seen. If you're at the hundredth percentile, then this could be the revenue outcome. If you're the lowest incremental of any test we seen, you could be at this outcome, and we look at that for every channel and then quantify that amount to say.

If all your channels are the most incremental we've ever seen in, our test, you could be actually getting this much incremental revenue. This is the risk if you were to turn off this channel or aggregate channels. if you're on the lower end of the incrementality, this is, this is this is how much revenue you're actually driving from these channels against your spend, which likely is getting close to the place where it's uncomfortable from a profitability standpoint.

To then use as a way to help better answer this question because I think that's, I think that's the tension is sort of like, okay, what's the, what's the impact of getting clarity on this? What's the impact of investing in these tests? So our media, media investment risk tool will be out at some point, which, which helps to, which helps to do this.

But like, I guess the simplest way that I, that I would put it is if, if you are, you don't know Efficiency your, your media channels are actually performing at. so you don't know where the next best dollar is to be allocated. That lack of clarity is costing risk right now to the business, to the upside or the downside that we, that we need to get clarity on to make it, to make an investment decision.

[00:27:03] Richard Gaffin: Right.

[00:27:05] Tony Chopp: Side, side note, people have been doing this forever, for the, since the history of advertising. So, and, and I'm pretty sure this is what Amazon just did when they pulled out of Google shopping. Wholesale across the US for a month. 

[00:27:19] Richard Gaffin: Mm-hmm.

[00:27:20] Tony Chopp: it was actually pretty clean. It was almost like exactly a month that they just stopped running Google shopping ads. And this is, this is, that is an incrementality test. That's that now it's pretty extreme. 

[00:27:31] Richard Gaffin: Yeah.

[00:27:32] Tony Chopp: Sort of Amazon, Amazon style. But that's what it is. So they're trying to understand the impact of that investment. And one of the ways that they, that you can do that is you can. making it. And that's, That's all incrementality testing is.

[00:27:45] Richard Gaffin: That's interesting actually. Yeah. That's, that's not a bad point in terms of helping people understand this because like that's, that is what they used to do with magazine advertising in the sixties or whatever, like, 

[00:27:55] Tony Chopp: forever. We 

[00:27:55] Richard Gaffin: yeah, 

[00:27:56] Tony Chopp: like, now we call it incrementality 

[00:27:57] Richard Gaffin: yeah, yeah. Right. But.

[00:27:59] Tony Chopp: do a thing, try to figure out the, the impact of it or don't do a thing and try to figure out the impact of that. 

[00:28:06] Richard Gaffin: Yeah. Yeah, that makes sense. Luke, you wanna take a crack at a metaphor? Tony, Tony's head is shot. 

[00:28:12] Luke Austin: I don't know. I don't 

[00:28:13] Richard Gaffin: No. 

[00:28:13] Luke Austin: I'd follow either of those metaphors up. I think we got, I think we got enough

[00:28:16] Richard Gaffin: Alright, great. That's enough metaphors.

We're we're very literal people here at CTC. All right. Let's go. Let's go to our next one.

Hey, B2C hotline. I'm really excited to be calling in, hopefully having my question, question answered today. So I'm curious how you'd approach forecasting and operating a brand that has a longer time to purchase. For example, if the ad dollars I spend today don't influence revenue until two months from now.

I'm just curious how you guys would handle forecasting a business like that, as well as operating just day to day optimizations in the ad platforms. Thanks.

[00:28:50] Richard Gaffin: So this is a little similar to a question we had last week, which is around A MER and how you think about it relative to like a higher LTV brand or whatever. But let's talk about the specifics of this caller's question, which is around forecasting and like day-to-day operation of the ad platform. 

[00:29:07] Luke Austin: Yeah, so this, the simplest answer is get clarity on what your initial order value is. And then get clarity on what the LTV is against that in whatever timeframe you're trying to capture. The trying to capture the value. So if it's, we're trying to capture value within 60 days and we're willing to extend our media investment up until that time period, then initial order value day one, the LTV is over a 60 day period, multiply that by that, and then now you know what the, what the value's gonna be and be able to back into the media budget based on, based on the profitability.

Because there's like, you, you could look at what the value of a customer is in 12 months, but most people, like the cashflow doesn't allow for extending that far. Right. So it, it really is a question of like, you have an initial value and then you have the 30, 60 and like, maybe the 90 day, like you're willing to extend out there.

So get cleared in each one of those. Now it's, it can feel different if you have like. Let's give two examples. You have a supplements brand that is $30 a OV, and then within 90 days they have a, you know, 35% increase in LTV. So you're like, okay, great. I got, I have my a OV of 30 bucks, and then I, I have 1.3 x that over the course of 90 days, so that customer's worth $41 and 57 cents or whatever the number is.

Okay, now I know.

[00:30:25] Mediaboard_sounds: I'm

[00:30:25] Luke Austin: What that is. I'm willing to go break even in 90 days, and that's my ROAS target. 

[00:30:29] Mediaboard_sounds: that has 

Time to

[00:30:30] Luke Austin: it can seem more convoluted and it does get a little more challenging if you have brand where you have.

[00:30:35] Mediaboard_sounds: months from 

[00:30:36] Luke Austin: longer lead time to an actual purchase. So that would be like high a OV where you're doing samples out sending samples out to customers.

So whether this be furniture or home goods or much larger ticket purchase items where there's actually multiple steps in the consideration cycle before getting getting the purchase, the, that, that full order value. But the mechanics of it should work the same, which is okay, we have. A sample costs X much.

Maybe the customer pays five bucks For shipping to get the free sample or whatever. So the, that's the value of that order to me within the first month. And then of all the sample orders, this is the conversion rate expected from sample to purchase. And this is the a OV of those customers. And then it happens within this timeframe.

And the math is, the math is pretty similar to. A OV supplement brand, LTVA 90 day period of sample to then what's the average order value? Just taking one step back in the step back in the equation, really the thing you're needing to get to is what's the conversion rate of sample two orders within 60 days or 90 days or whatever.

Whatever you're willing to extend out to. And then. You can math back into, great, here's, here's what the media investment should be, and here's what my target is to be able to go pay for a new sample, new initial order against, against that. And then drive, drive the volume as much as possible from, from that point.

[00:32:03] Tony Chopp: Yeah, I think. So like if we're talking about like long conversion window or long consideration window, let, let's use an example of like high a OV, like Luke mentioned furniture. We, we've had other clients with, you know, multi-thousand dollar AOVs. They get to the caller's question about like, day-to-day media sort of tactics. It, it puts even more onus on. Not doing that. And having, back to what Luke was talking about, having a, a high level of confidence in the, the understanding of the math on how you arrived at the, the targets that you wanna run on, on any given channel. But, but all the more reason why I, if you're, if you're attempting to evaluate like your meta spend, for, You know, anything less than a seven day click window especially in a high a OV situation like you are, you are looking at noise, not signal 120000000%. And it gets even, even more challenging on the Google side, I think, with, you know, the default out of the box, like 30 day click attribution window.

So my, my advice if I was gonna be really practical about this, for, for a brand that's like really high a OV. Do what Luke said, the, the unit economic mass to get to the targets. potentially consider running looking at longer attribution windows in your media platforms, but you're gonna have to understand the incrementality of doing that. And then. I would consider you to work in some sort of rhythm as far as how you approach tactical changes in the media buying account. So, for example, gonna, we're gonna make these changes on Monday. gonna come back next Monday and evaluate and potentially make some changes again tactically at that point. 

if you're in there tweaking and twiddling in between those two points in times, you're just chasing your tail. 

[00:34:13] Richard Gaffin: Yeah. Well that, that was gonna be my next question, just to like zero in on this caller's. Particularly phrasing, which was around day-to-day optimizations. And it sounds like in, in some sense, generally speaking, like maybe that's not generally recommended, even if you are like or even if you're not one of these long tail brands.

But 

[00:34:31] Tony Chopp: Well 

[00:34:31] Richard Gaffin: so 

[00:34:31] Tony Chopp: goes, 

[00:34:32] Richard Gaffin: Go ahead. Yeah.

[00:34:33] Tony Chopp: the previous conversation we just had. touching the media account. 

[00:34:38] Richard Gaffin: Yeah.

[00:34:39] Tony Chopp: Go. Figure out, new creative. Stop it. 

[00:34:45] Richard Gaffin: Yeah, exactly. Right. And if there's just like less, less pressure maybe to like make the sale today, so to speak, maybe that gives you like a little bit of leeway to actually spend your time thinking more long term. 

[00:34:57] Tony Chopp: Well, you 

Screwed. 

[00:34:58] Richard Gaffin: yeah. 

[00:34:58] Tony Chopp: say you're already screwed, but if you're, if you're already in the spot where you're like. Today, I need this thing to happen. You're, you're already in such a reactive state that you're, you're, you're, you're like missing the force for the trees.

You're, you're missing what Luke's talking about around getting clearer targets. You're missing what I'm saying around you can't treat the media platforms that way on a, on a high a OV long consideration cycle, seven day click window setup. Like you, you, you've already, you've already missed. So take take your L okay and get, and get yourself settled into a rhythm and a routine.

Trust your math. Set your targets. Go make creative. 

[00:35:37] Richard Gaffin: Yeah. All right. Well, I think that that feels like a, a nice segue into our kind of final segment of the day. Now, we tried this last week and I think we're gonna do it again, which is a quick visit to Hot Take Corner. So I'm gonna throw it to you first, Tony. Or maybe, well, who feels like they have a hot take first? I'll throw it out there. Something Vernon. 

[00:35:57] Luke Austin: share, I'll share my, the 

[00:35:58] Richard Gaffin: Okay. 

[00:35:58] Luke Austin: that I, 

[00:35:59] Richard Gaffin: Okay. Oh yeah, of course. Of course. 

[00:36:01] Luke Austin: and, what this is. It's,

I think there's no, I, I, so I'll just say, which is. Without a system that directly connects the financial outcome that businesses are after to the day-to-day marketing activities, I really, I really don't know what, how, how people are able to function effectively. And it's a very, it's a very self-serving comment because that's our, that's our whole thing, right?

And. Trust me, there's, there's weeks when it when it hasn't felt that way, where, where we, where we see opportunities to push more into the growth and new creative offerings and marketing moments and things that we wish we could sort of, play more in those spaces. And we're building, we're building things to be able to sort of engage in a more helpful way there, hopefully.

But as it relates to bridging marketing and finance and giving clarity on what that looks like I, I do think. What we have is what we have built and are continuing to build is a, is a necessary function. I'll give, I'll give two quick examples. One is, we, we were just having a conversation with a brand who coming into September had a specific revenue and contribution margin expectation in mind for their business.

And so we set out in the conversations the contribution margin was going to be one of, if not their highest contribution margin outcome of the year in September. And sort of build up that way quickly into the month. What we saw what the brand started, experienced some some challenges related to cash flow inventory pur purchasing ahead of Q4.

And without, without the ability to be able to look at how our contribution margin was pacing the goal, how would the revenues pacing and the, and the total sales volume, we, we wouldn't be able to identify how much we should be spending on. Meta and Google tomorrow, and at what target and what creative to deliver that outcome.

Because to be clear. Each of the different scenarios that we had discussed and aligned on would've been good scenarios, 300 a, you know, a higher contribution margin than any, than any month in the year. But the problem was the main business objective to set us up for Q4 was to produce more cash flow, to purchase inventory, et cetera, which actually was a trade off in lower contribution margin this month.

For higher cash flow. That then has a direct function on. Now we're gonna have a lower A MER target. We take our incre fatality against that, and we have our media channels that, we have the budget set to and the targets. And we're actually pushing more volume into Google non-brand campaigns as a result.

And we're investing more into creative output to scale up meta totally different actions that we're heading into today and into the weekend. Then we would've, if it's. We wanna prioritize a higher contribution margin this month that has massive downstream impacts to, to the business. Yeah, I'll, I'll stay with just that one example.

I ca I give a couple others, but all the way from the cash flow, the business outcome, business goal, what we're after to cash flow considerations, along with the profitability considerations too. Okay, what should the budget allocation be? What should each of the daily targets be? And what should we be doing in terms of creative investment and what, how should we be investing in the ad accounts on a daily basis?

It's all so connected and without a system to unify those things that what you're doing in your media channels, which are driving a a large chunk of your revenue could be completely disassociated with. What you actually need for your business outcome in a crucial time like September, where it's, it's challenging and things tend to be tighter.

We're ramping up prior to Q4. There are inventory considerations, et cetera. So, they need to be connected, 

[00:39:21] Richard Gaffin: Yeah. 

[00:39:22] Luke Austin: I I, guess, I guess that is the, that is the summary marketing and finance and the connection between them two is, is crucial or these things gets get missed.

[00:39:32] Richard Gaffin: Yeah. So real quick, I I feel I need to ask, so obviously this is something we've talked about for a while. What was it, what was the epi or like why did the this trigger an epiphany, this particular, or recently?

[00:39:43] Luke Austin: I am trying to think of a, I'm trying to think of a metaphor that drives it.

[00:39:48] Richard Gaffin: I. 

[00:39:51] Luke Austin: It is like when you're, it's like when you're just so deep in something, like you're like 10 levels deep into it. Right? And then you like. Take a step back out and like when you're, when you're 10 levels deep and we're working on we're working on a prioritization tool for incrementality platform to help with your measurement roadmap and prioritizing which channels to test based on the incremental marginal return.

You know, we're like, that's where we're at in a lot of conversations of the things we're doing that sometimes it's necessary to sort of like. that, I think that's what it, that's what where the epiphany came from, right? Is like, yes, all these tools the system and our team serving the business outcome of the businesses that we're working with and when it's, when it comes together so clearly there where it's a new, a new customer that we haven't worked with prior where we're just starting out and we see the connection of.

Wait a second. The, if that's your state of business goal, the plan for meta and Google this much should be, could, should be completely different 

[00:40:47] Richard Gaffin: Mm-hmm. 

[00:40:47] Luke Austin: than what you're currently planning when it comes together. So crisply like that, and I think new, new, new customer relationships especially are, is when it, when it tends to come to light because we're working through a lot of these higher level conversations together.

So. 

[00:41:02] Richard Gaffin: Yeah. 

[00:41:02] Luke Austin: that's the reason. Maybe it's I've been, you know, sick at home with the kids some days this week and it was just like, 

[00:41:07] Richard Gaffin: Yeah. Yeah. Having fever drinks. 

[00:41:09] Luke Austin: in and Yeah, yeah, 

[00:41:10] Richard Gaffin: exactly.

Totally. All right. Cool. All right. So Luke's, Luke's hot take to distill it down is connect, marketing and finance. Your business will basically not be able to function. Now let's let's pop over to Tony. Tony, what's your hot take? 

[00:41:21] Luke Austin: Can't be, can't be hotter than That 

[00:41:23] Richard Gaffin: Yeah. 

[00:41:23] Luke Austin: be the most, most lukewarm take of this whole thing.

[00:41:26] Tony Chopp: I, I don't know how hot this is gonna be. It might be super hot.

[00:41:31] Richard Gaffin: That's what we're looking for. 

[00:41:34] Tony Chopp: no, but it's like, it's like a parlay from what Luke's saying, which is like, we're, we're watching this, we're watching this, this thing collapse and not collapse in a bad way, but collapse in a good way. And this idea that. I don't know how much we can, we're talking about this in public yet, but this idea of a, of a profit engineer or a person at CTC, that, that is that is wrapped in this exoskeleton, if you will, of this, this tooling, this sta the models and the forecasting and, luke's newest brain, brilliant brain child around this incrementality. What the hell are we calling it? Media model or whatever it is. Like we, Luke's, Luke's the guy who named stuff around here. Anyway, we're seeing it collapse into this, person augmented by this tooling. what I mean by the word collapse is that the, the closer. Your relationship is to, to all of these things, all the way up to the, the p and l at the business, the forecasting and modeling and planning of, and the distribution of the media through the MMM, the way down to the tactical execution in the media channel. The, the relationship is the, the more a single individual has a view on that whole thing. The more, the more effective we believe it's going to going to be, and we're already seeing it. And to, to Luke's point about this thing, like you can't know what to do in the media channel, or you may be doing the totally wrong thing without this. Contextual knowledge of what the business is trying to do and why they're trying to do it. So I think the future feels like, listen, here's a hot take. I'm a media person. I've done this my whole life. and I think it would be easy for for somebody like myself to be like, well. I get on this podcast and tell people not to touch the media accounts and for that to be like a scary thing. But I, I don't think that's what it is at all.

I, I feel like the opportunity for myself and for anybody else out there in the, in the media team, in the media world is, is to actually think about how we get ourselves more closely connected to finance and follow the thread all the way through. And, and, and I think, you know, it's a bumpy road, but I think the pathway that, that we're on at ctc, like wiring all this data together is is the only way. 

[00:44:12] Richard Gaffin: Yeah. 

[00:44:13] Tony Chopp: don't know if that's a hot take or not, but that's what I believe. 

[00:44:15] Richard Gaffin: Well, I mean the idea that. Ecosystem. Maybe, maybe we could just sell into this Tony's hot take. Being that like the, the media ecosystem or the ecommerce ecosystem as it's existed for the last five, 10 years, whatever is starting to radically and fundamentally transform and collapse, as you say, into this other thing completely.

And you kind of have to get on the boat or you're gonna get left behind. Yeah.

[00:44:42] Tony Chopp: Yeah. I mean, yeah, I, I think there's, I think there's really cool, there's really cool opportunities to, to I, to, again, back to Luke's point before, I can't imagine how you would do this, do this thing like. Without wrapped in the exoskeleton or the system that, that we're building, like I have no idea how you would, it would be impossible.

But with the, the, the super suit, we can't, we've been calling it something else here internally, but we can't say it. We'll get sued, 

[00:45:11] Richard Gaffin: Ah. 

[00:45:11] Tony Chopp: with the, the profit engineer in the suit that sits around them. We, we believe that we're, gonna be in the best position to connect the, connect the line all the way through.

[00:45:22] Richard Gaffin: Yeah, there you go. All well, hot. Take join CTC or otherwise you're gonna get left beyond. I think that's sort of What.

we're saying here. Well is the C TC Podcast. What can we say? Alright folks. Well, if you want to. Learn more about that and kind of some of the service things That are coming down the pike for us.

Common thread code.com hit the high risk button. We would love to chat with you if you're in eight, nine figure business. Now I think it'd be remiss. We talked a little bit about this last week after we finished recording, but I should contribute a hot take as well. Not that I necessarily, 'cause I'm not in the work in the same way as you guys are.

Not necessarily that I necessarily have an ecom take, but I can do a random hot. take to fill out hot take corner. And so I'll say this new metal is the best workout music. It's rap, it's rock. What's not to like, folks? Alright, that's gonna do it for this week's episode.

[00:46:07] Luke Austin: That

[00:46:07] Richard Gaffin: Remember, if you want your questions answered on the pod call and leave us a voicemail, 8 6 6 DTC 2 2 6 3.

Send us a text there. We might read your question on a subsequent episode. So until then, for Tony, the chopper Chopp, and Luke the weatherman. Austin, I am Richard, the Professor Gaffen. Y'all have a good one. See?