2024 Was About Surviving – 2025 Is About Winning

[00:00:00] Richard Gaffin: Hey folks, welcome to the Ecommerce Playbook Podcast. I'm your host, Richard Gaffin, Director of Digital Product Strategy here at Common Thread Collective. And I'm joined this week by our VP of Ecommerce Strategy, Mr. Luke Austin, our war reporter coming in from the front lines with, with by the way, the front lines beard.

He's got, he's got the look going to sort of bring his thoughts basically on the, on the state of the industry here in 2025, what he's seeing from clients and how that can be applied to your businesses. So, first off, Luke, what's going on, man? How are you?

[00:00:29] Luke Austin: I'm, I'm doing well. I'm in some, some sort of a a, an early midlife crisis potentially is part of where the is, coming through. At least that's, that's the joke. Recently took up mountain biking in tandem with growing out this beard. got our second kid on the way in, in a little under two months.

So I think that's the, to give some context on on the look, that's where, that's where it's coming from. There's, there's something I'm sorting through and this

[00:00:55] Richard Gaffin: Yeah, there you go.

[00:00:58] Luke Austin: just be, be forewarned for this conversation.

[00:01:00] Richard Gaffin: Honestly, probably a good idea to get your midlife crisis out of the way early.

[00:01:04] Luke Austin: That's 

[00:01:05] Richard Gaffin: Exactly. Rather than when you're like 50 or whatever.

[00:01:07] Luke Austin: yeah, for sure. Or it just means I'll have multiple, it's like a, you know, every five

[00:01:12] Richard Gaffin: Oh, there you go. There you go.

[00:01:14] Luke Austin: I'm here for it. It's a, it's a fun time.

[00:01:16] Richard Gaffin: There you go. All right. Well, speaking of Sort of midlife crisis in a sense. I guess that could be a segue for us. I, one of the things that we talked about before we hit record was about the differences between 2024 and 2025 and what to expect in 2025 based on those differences and one sort of, I mean, midlife crisis ask thing that a lot of brands are going through right now is that last year was about kind of getting back to the basics, figuring out how to make sure you were tracking all your numbers properly, making sure your costs were managed, making sure, you know, I don't know, things like OpEx percentage and you understood, you understood what your AMER was and all these types of things.

Right. And so I think we're in a place where a lot of brands have gotten to the point where the basics have been sort of taken care of. And now what everybody's trying to understand is now that the model has been built, how can the model be broken? How do we actually start to grow beyond expectation?

How do we push into sort of, I don't know, new frontiers in terms of thinking about how we market this product and so on and so forth. So why don't you give me a little bit more context around that sort of 2024 was the year of making the model 2025 is the year of breaking the model.

[00:02:28] Luke Austin: Yeah. So when we talk about this model language, we're, we're talking about something very specific that sits within the profit system. So a key component of the profit system, what we're building is a P and L level forecast down to the yearly, monthly, and then daily level for core business metrics, all the way from contribution margin to revenue to new versus returning cohort metrics, and then the platform targets as well.

Each of those on a yearly, monthly, daily level, sort of the core output of the profit system along with some other components, a key piece of what powers that forward looking forecast are the custom models that we build which there's two separate custom models. One is the spend AMER or new customer model, which projects what we can expect in terms of, in terms of new customer revenue, AMER efficiency at various spend levels and the trade off and contribution margin immediately.

And over. A lifetime value constraint. And then the second model is the returning customer model, which predicts the contribution from our returning customer cohort, right? All the customers we currently have. And then the repeat. Behavior expected from the future cohorts that we're going to go out and acquire in these coming months based on the new customer models output.

So they're, they're connected in that way, beating them beating the model is actually a very specific metric or it's actually an input that we've built into the spend Amy, our model to quantify whether a brand is Over or under pacing its current business to direct trajectory and to what specific percentage.

So within the new customer spin, Amy, our model, we have an input for percentage over model. And when we build the forecast, we're going to start with building it at 0 percent over model, which is the best reflection at a high confidence level of what is your business outcome likely going to be. At your current trajectory, if nothing,

meaningful

changes in terms of your business strategy, in terms of your product mix, in terms of your, optimization and your media mix, et cetera, what is the likely scenario for your new customer returning customer revenue percentage over model at zero is the representation of that.

And in 2024, A lot of the conversations and work that we did were around right sizing the business structure in terms of the media mix, the acquisition efficiency targets, as well as the organizational structure et cetera, around 0 percent over model more so what is likely to happen. And let's make sure the business is set up in a way that we can still succeed.

In the scenario that the current trajectory sustain itself, right? We're going to try all these new things, but we're not sure what impact those are going to have. So expecting the likely scenario, let's get the business in a place that it can withstand that. And it's, that's connected to what we talked, what we've talked about in terms of duckweed brands and being brands that can survive in all sorts of circumstances, right?

You want to be able to set in a way where you're not over your skis and you need a model breaking moment in order to, you Survive. So that was sort of the 2024 movement. I think for a lot of our conversations, a lot of the brands and spaces, let's get, let's get back to the business structure that allows for predictable, profitable growth, a solid foundation that we can now build on that's building, building the model language.

So moving to 2025. What we're getting into is a lot more conversations. And I think for a lot of us, it's, it's much more in the forefront of our minds around breaking the model. Okay. How do we change that business trajectory? We don't, we don't like the likely outcome of what's going to happen. Each one of us wants to outperform the baseline expectation of the business.

So how do we go and break the model? And that is what we're starting to do more and more now is Using that percentage over model input within the spend a mere model to set goals around levels at which we're going to break the model over the course of the year.

[00:06:31] Richard Gaffin: Gotcha. So maybe unpack a little bit more about what, and of course it's very early in the year, but what breaking the model would look like in practicality. So, I mean, it's one thing obviously to tweak the numbers in our MER report statless or whatever, to give you a sense of maybe what a 20 percent over.

Model over baseline outcome would look like or 10 percent or whatever the case may be. But in terms of actually putting, putting the pieces in place to make that happen, what, what does that look like so far? What do you think it's going to look like in the future?

[00:07:02] Luke Austin: Yeah. So it's good. It's good. Gets at a great point because what all of us are thinking about right now and working for on the brands that we're engaged in is, you know, What are the net new initiatives or things that we're going to try in the coming quarter and coming year to try and improve the business trajectory.

Right. And we can kind of go down the list new product categories that we're launching new products that are skews within existing categories, influencer partnerships brand collaborations, PR new ad channels. We're going to expand into. A large investment into creative volume to fuel our current acquisition efforts.

And those are all great, but the, the challenge with the challenge with each of those is that you, there needs to be a way to quantify at what level is this over underperforming the model expectation, right? So let's say you engage in one of those, one of those examples I gave in terms model breaking activities or net new initiatives.

 Don't know how that changed the business trajectory against the existing baseline of it, right? We can set some goals around, okay, we'd like to see this amount of month over month, year over year growth from this, but. What we're really focused on in terms of the breaking the model is setting an expectation for percentage over model and then being able to measure each of these activities and exactly where they land us over model.

So I'll give a much more specific example. Let's say the baseline forecast, we build a 0 percent overmodel for the profit system. Then what we do is we build on top of that, a goal forecast. The goal forecast, what that has us doing is, as an example, in Q1, 10 percent overmodel performance. In Q2, 15 percent overmodel performance.

In Q3, 10%. 20 percent Q4 25 percent overmodel performance, right? Some ramp up of continuing to beat the model and stacking these net new initiatives. That's what we said is the goal of what we're going to do. So in February, we are going against 10 percent overmodel performance for the business. And what we have planned for February is a collaboration with a high profile influencer as well as some content that we'll be getting from that influencer to use in our in our ad accounts and fuel our current acquisition effort.

So we want to know how this impacts the model expectation. We run with that and that influence collaboration. After the month of February, what we see is that that led to 18 percent overmodel performance for the month of February. So not only have we beaten our baseline expectation, we've actually beat the goal of getting to 10 percent overmodel for February.

And we've set a new foundation, new, new yeah. New foundation of what's possible for the business moving forward, where we know, okay, we've actually already gotten to 18 percent overmodel performance with this marketing activity. Let's build on that and use that as a new baseline to then beat that over and over again.

So we're stair stepping with each of these marketing activities setting. Here's the goal for the percentage overmodel performance. Let's engage in this marketing activity or new, new initiative. Let's see where it lands us actualizes in terms of percentage overmodel. Cool. And then from there, we can continue to stair step each of these activities and measure clearly where they are landing us in terms of over or under model performance for the baseline of the business.

[00:10:20] Richard Gaffin: Yeah. So that example that you give around particularly like, let's say this influence push that's happening in February for this particular brand. Maybe my question is what comes first, the marketing calendar or the prediction of. Or rather the over baseline model, right? So to some extent, like the fact, the idea that you might be able to expect 18 percent over model or whatever comes from the fact that this influencer collaboration is happening.

There's some marketing thing on the calendar that might bring that about. So how do you incorporate that into? The, the sort of the forecasting piece of this, I guess.

[00:10:53] Luke Austin: Yeah,

so the three. Three steps to it. One is build the baseline expectation. The most likely scenario of what is likely to happen if we change nothing in, in the current business structure or strategy. So that's 0 percent over model or close to it. Then layering on the marketing activities at least generally with time periods throughout the year, right?

Because we need, we need to know what things we're trying to engage in. Okay. At different times in the year to then know when it's gonna, gonna impact the model. If we're not launching the influencer collaboration until March instead of February, then, and we don't really have anything new going on for February, then going against 10, 15 percent over model performance, that's gonna be unrealistic.

Like there's, there's nothing that's, we're actually engaging in leading to that. So getting on the timing of these key marketing initiatives, product launches, or at least what, what we're planning for from them. then from there we can get to step three, which is. Okay, here's the cadence of each of these net new initiatives throughout the year and when they're happening.

And then for each of those time periods, we're going to build the model for some over model percentage expectation throughout the course of the year. And and layer that in. Then, then what happens is we land on that, which is, okay, now we have the marketing moments, we've adjusted up the percentage over model expectation.

And. Now, here is your updated goal forecast for the year, right? This is where this would get us. If those marketing moments happened in that time period and they result in this percentage over model performance, is this a success for the brand this year? If we achieve this, does this look like success? If so, great.

Now we have clarity around what we need to go and execute to get there. Get there. If not, then we need to think about layering in new marketing moments or net new initiatives, right? It basically tells us that's, that's not enough. We need to think about more new things to try and layer on through the year, at least to give us a shot at getting closer to what the goal is for the brand.

And that's, that's what it comes down to is it gives us clarity on far are we from the business goal and where you would like to be. Thank you. And then what are the things we need to layer in to get closer to that and building the strategy, and then we're able to measure it in real time that, you know, the influencer launch, we were expecting to have 15 percent over model performance, it actually resulted in 8%.

So we're going to need to adjust that strategy in the future. We're going to need to add in new marketing moments to be able to, impact the model in a different way, moving forward, et cetera.

So 

[00:13:26] Richard Gaffin: to, or maybe, maybe the way I want to phrase this is how do you connect that 15 percent of our model number to this particular influencer push, because to some extent we're talking about creating an expectation for something that's never happened before. So what, how does that, how does the math of that work out?

[00:13:42] Luke Austin: yeah. It is an educated yes.

[00:13:45] Richard Gaffin: Yeah.

[00:13:46] Luke Austin: At, yeah, at the end of the day, we, we don't know, what this is going to perform now, what we have done and what we're building more of in the beginning of this year to help answer that question is a model breaking menu of sorts, which is different examples from from brands within our portfolio and that we work with.

Of moments that these brands engaged in that led to a percentage over model outcome. For two reasons, one that gives us more specifics in terms of what a model breaking moment looks like, right? We can sort of use this to inform idea ideation and think through the new initiatives that we can slide into the marketing calendar.

And then two, what it also does is. Gives us a, an expectation of what that sort of a moment can do in terms of percentage overmodel performance or said another way, what

haven't

getting to 80 percent overmodel not a normal thing or a, or a likely thing to happen, what we have seen is with a really successful model breaking moment, getting to 30 percent overmodel performance is a great expectation.

Right. And so I think that helps to set like. In the context of the business goal, high, middle and low tier performing model model breaking moments and then how they impact the percentage over model expectation for that time period. and so I could, I could walk through a few of those now for us as well.

I think it could be helpful as we all think about, cause the work here comes in we set the targets, we set the expectation. It's great. We need to have clarity of the expectation, but. So for breaking the model, what we need to do is we need to think of net new marketing moments and then go and execute against them and see how they actually impact the business.

Right? So we can walk through a few of those examples from from that menu that we've been building out and the, and what it is, but going back to your question, the setting the percentage over model expectation, how we're approaching that is here's what some other moments other brands have engaged in.

Here's the percentage over model it led to for them. That gives us a range, right? can expect 15 to 30 percent overmodel for a moment like this. We're not going to be expecting 75 percent overmodel. We have not seen that for for an activity like this gives us a much tighter range to expect that's what we're building the goal forecast around to be able to give a clear picture of these moments can take the business.

[00:16:12] Richard Gaffin: Yeah, and maybe this is a good point to sort of, bring up something that we've talked about, or I've talked with Taylor on the podcast before, which is that a model is not necessarily a prediction, so to speak, as much as it is a guideline to the types of behaviors you yourself should take. So the baseline 0 percent model is actually maybe a little closer to predicting the weather or something.

There's obviously going to be some fluctuation, but it's sort of, it's more a prediction of what will happen, whereas the breaking the model. Or the sort of percentage over model is about giving you basically expectations for the types of behaviors that you need to take, as opposed to saying like, hey, we're going to predict, we'll definitely get 15 percent over if this happens, it's more like, let's work towards the 15 percent and then see what actually happens and go from there.

But

[00:16:58] Luke Austin: yes.

[00:17:00] Richard Gaffin: cool. All right. Well, then let's like, so you mentioned some examples. So let's, let's dig into those a little bit.

[00:17:04] Luke Austin: Yeah, let's do it. So, one of one that I was talking to more generally, which I'll speak to more specifically now. So we have a brand that, that we've worked with for a while. They sell personal care, beauty products specifically. And influencer. Influencer is a core part of their strategy, partnering with content creators for them to post on their socials and then getting the content running through a whitelisted ads and running through branded ads within their own meta accounts as well.

They partnered with a much high, much more high profile influencer in December and had a very, it's the exact same sort of Discount structure and referral structure that they'd have with other content content creators too. I think it was a 20 percent off offer that they tend to do with most of their content creators of this vein.

But decided to take a bigger swing with this influencer that had broader reach had better content as well. Wanted to see how, how it would pay off, right? Cause there's a much larger investment associated with this. So. They engage in that influencer partner strategy. What that resulted in is their December performed overmodel by 39% which is really, really significant and led to really healthy, healthy year over year growth in terms of rep top line revenue and profitability for the brand as well.

I think the, the, the big insight here is especially with influencer strategy. It's so challenging when. There's a large volume of influencers and content creators already going on with the brand. And then you want to take some bigger swings, but then measuring the impact of those bigger swings amidst all the other things is challenging.

And at the core of it, there's this question of like, who is the right influencer with a big enough audience that's engaged and who can make good, authentic content in line with the brand ethos, et cetera. But also that exists within a price range that works for us. Right? Like what's the balance between each of those things?

And so this this outcome for December for this brand landing 39 percent over model with this influencer partnership was really substantial and gave a, gave a signal that this was this, this influencer, this content creator. Sits in sort of that sweet spot for them and it was a really worthwhile investment for the brand, especially in the context of some of their, some of their other businesses that they, that they work with.

[00:19:25] Richard Gaffin: , in December it was the same influencer as is being used in February, is essentially what you're saying, right?

[00:19:30] Luke Austin: And so in December, there is a new, a new influencer that they hadn't used prior

[00:19:36] Richard Gaffin: Right, okay,

[00:19:37] Luke Austin: a, a more high profile influencer than they typically use. So they're, they're kind of normal influencer content, content, creative strategy is more grassroots products, seating, et cetera. It's more high profile influencer they engage with, and that was unique to December for them.

[00:19:56] Richard Gaffin: gotcha, I see what you're saying, okay. So, alright, let's then, let's unpack another, another example here.

[00:20:01] Luke Austin: Yeah. This is another, it's another good one, I think. Which is for a for a new customer influencer giveaway. So this is a purchase entry and entrance giveaway for a brand that sells music accessories, guitar, strings, et cetera. And so the giveaway was for guitar at different times in, in throughout the month having people sign up for that and then doing different drops along the way.

So what this led to was a substantial in the year over year revenue growth, the AMR for the business over that time the percentage over model was not as substantial as as the last example with influencing giveaway. This was this was about 10, 12%. Over model, whereas the last one was 39%.

But. What this illustrates is these are really different things, right? Like we don't, we can't just do, okay, great. That influencer moment that worked well. Let's just duplicate that and keep doing that each month. There needs to be new things that we add in and slayed in and having a model, having a moment that gets you 10, 12 percent overmodel and then stacking that into a moment.

They could do 30 percent overmodel. That's the sort of thing that's just going to lead to the snowball effect throughout the year. So this is another example. It lives in sort of like the mid to lower impact tier of. Of activity, right? A purchase entry, give her what giveaway, in that new customers through that.

And then doing product drops along the way. But combined with some of these other moments is going to lead to really substantial outcomes.

[00:21:34] Richard Gaffin: Gotcha,

[00:21:35] Luke Austin: And then I, think what we could land with two is one that we've talked about a lot. I mean, I've dedicated some, some episodes to, which is the launch of the Savage One shoe with Born So, we're not going to share too much details there because we've, we've talked about this a lot. But that is the, that is the example of a high tier impact moment that, that leads to beating percent over model and changing the trajectory of the business growth over a long period of time. So Savage One is a new.

Category launch fully for born primitive. It was a, it was a shoe within their apparel lineup. And then not only was it a new product launch, there was a brand campaign. There was a cultural moment, that aligned with as well. And it stacked each of these pieces together in a way that made it very.

Very impactful. So as sort of a mental model, like these are three, three examples of how, how we can break the model at the top in terms of highest impact net new product launch for a new category aligned with a brand campaign and a cultural moment. High impact percentage over model, sort of middle mid tier is a higher profile influencer partnership, finding the right influencer that aligns with the brand that has the audience that also makes great content.

That first example that we walked through and then lower impact relative to the others. Is the product giveaway sort of lead generation campaign of that example that we walked through that sits lower on the tier. But all of these together, as you start to layer each one and think about brand collaborations and influencers and lead generation giveaways, et cetera, like these are all going to be things that stack to percentage over model growth throughout the year.

And it really is. It really is a stair step, right? Because each of these moments bring in net new customers that are going to be returning customers that you can engage with some other marketing moment in the future. So it's about stair stepping these things up. And that's When we're building the forecast for and having conversations for breaking the model, that's typically what we're doing is we're stair stepping up, okay, February goal is to beat model by 5%, 7 percent through this net new activity, but then in August and September at that point, our goal is going to be that we're beating model by 25 to 30 percent because

[00:23:56] Richard Gaffin: mhm,

[00:23:57] Luke Austin: Several months of different marketing moments and new initiatives that are, that are going to be stair steps up to get to that point. And so each of them play a role in helping the brand get closer to the business objective and breaking the model. Even if they sit at different tiers of 40 percent overmodel or 20 percent overmodel or 5 percent overmodel.

[00:24:15] Richard Gaffin: right, that makes sense. Yeah, so it's like, like you're saying about, in some sense it's also about The number of reps or like the number of initiatives that you can stack at the same time in some ways as well. Like if you have something low tier and mid tier, and maybe you're building towards something high tier, like all of those things working together with each other are the types of things that will give you the chance to actually break the model in a meaningful way.

Rather than putting all of your eggs in one basket. I mean, I think that's, it's a little bit like creative in that You know, we sort of build creative with the understanding that like 75 percent is going to fail outright. And so maybe there's a sense in which like ultimately building the market and calendar is sort of a creative exercise anyway.

And you should think about it that way as well. 

[00:24:56] Luke Austin: Yeah, that's, that's exactly right. And the challenge with, in that example with launching a bunch of the new creative or engaging these new activities, the challenge in many cases can be. exactly how much this improved your business trajectory, right? was this, was this worth it? And, and and quantitatively, what was the impact on the state of the current business trajectory?

And the percentage over model without getting too much into the details, it's related to the brand's ability to scale up ad spend without their, the CAC efficiency diminishing at the same

rate percent over model is like, as you spend, your CAC is going to diminish at the same rate you've seen historically. 20 percent over model means you can spend. And your CAC is, is going to diminish at a slower rate than it would have otherwise, because you're improving your

to scale against it. and so it gives you a clear way to quantify this new thing. We did had a impact on our ability to scale new customer acquisition over time.

And as you stack those things, stack those things, you'll be able to. Understand one, what's in the realm of possibility for the brand, right? Like this new thing is probably not going to be a 50 percent over model. Let's, let's be clear eyed about the impact of these things on the business.

So that point, Richard, we can plan an idea as much as possible to fill in the gaps right throughout year. And then we can quantify the impact along the way of the actual impact of those moments against what the expectation is that we had said,

[00:26:30] Richard Gaffin: Makes sense. Okay, cool. So I think like, at this point, as I always like to say, if you want to talk to us about building this type of model building and model breaking system for you, obviously you can always find us at comfreycode. com. Smash that hire us button, drop us a note, we'd love to talk to you.

Luke, is there anything else that you want to hit on this? Any other observations, maybe about 2025?

[00:26:52] Luke Austin: nothing that comes to mind, I think I'll, I'll think I'll end with this. Every, every, at the end of every month, what we do is we actualize and update the models that we're building for the brands that we're working with. So you see, how do we perform? We update the coefficients in each of the models based on the actualized performance of the business. And that becomes the new baseline. So now that let's say we perform model by 12 percent of February and March 0 percent over model is going to be the new normal. That's the 12 percent over model. And that's how we're framing and thinking about growth in 2025 is great. We improved against the model.

That's the new baseline for expectation. Now we have to go beat that by 10 percent again and 10 percent again. That's how we're going to push for predictable and profitable growth in 2025. As we break the model is great. We're going to raise the floor of the expectation and we're going to measure if we're going to, if we're starting to fall behind. The expectation model performance that we will know it very quickly and then we'll be able to iterate on top of it. So, Every day, every week, every month for the year counts. That's how we approach setting targets and then measuring how the business is performing against it.

[00:28:01] Richard Gaffin: Awesome. All right, like, well, appreciate you joining us as always and appreciate your insights. And for everyone out there, appreciate you listening and we'll see you next week. Take care.