Growing Profitability featuring Cody Plofker of Jones Road Beauty

[00:00:00] Taylor Holiday: Welcome back to another episode of the e commerce playbook podcast, where we are dissecting the GQ giants. We are breaking down the genetic attributes of the brands that are growing predictably and profitably. And today we have a true outlier, Jones Road Beauty. We're joined today by Cody Plofker from the CRO of Jones Road Beauty and Jones Road.

Has a awesome GQ score generally, but they also have the single best score in one of the traits that we've ever seen. And that's a metric called spending power. Spending power measures a brand's ability to increase their spend without degrading efficiency. It's one of the core attributes of the spending AMER models that we build a common thread collective and Jones road has the highest.

Spending power I've ever seen. That means that their ability to increase spend without degrading efficiency is better than any brand we've ever measured. So if there's anybody we're going to take advice from on a thinking about how to power a new customer acquisition, it's this man today. And also in this episode, we're going to break down the project that we got to do alongside Jones Road Beauty.

So CTC spent the last month building a spend model as well as forecasting their business for the coming year. And in January we were able to build a model that predicted their revenue within 1%. We're going to dive into how. And break apart how Cody and team are driving such incredible acquisition.

[00:01:10] Taylor Holiday: All right. Welcome everyone. I am joined by Cody Plofker, the CM/RO, Chief Marketing and Revenue Officer of Jones Road Beauty. Another person bucking the trend of calling himself a growth leader and taking on the mantle of being responsible for marketing and revenue. Cody good to have you, man.

[00:01:26] Cody Plofker: Yeah, man. Thanks for having me. I appreciate it. Taylor, this is this is long overdue, but yeah, I actually, it's funny. I actually wanted to kind of call it chief growth officer as well, and I kind of brought it to the board and they were like, no, I actually think it should be revenue. And I didn't want it to be revenue 'cause I'm so focused on profit and contribution margin.

But guess it was the, the most similar title.

[00:01:43] Taylor Holiday: The endless battle. The board wants revenue and somebody else wants profit. You know, those, those hungry board members always after that top line growth. But, but awesome man. That's really cool. I'm excited for this episode. 'cause like you said, we've, we've had a longstanding relationship in the digital sphere and have traded tons of messages and you've been helpful to me in numerous ways in your candor and dialogue about stuff.

And you have, I think, what is important to acknowledge. So normally in these episodes, we're going through GQ score, right? And your brand, I think has some interesting underlying attributes that most people recognize are amazing. And then there's also some stuff that I think is maybe. Less than people would realize in terms of its impact, maybe on the LTV side and things like that.

But I wanna start with what is like your unique outlier attribute? So I'm a baseball guy. In baseball we rate things on a 20 to 80 scale for prospects. So there's like, you would look at someone's power and if they're an 80, it's like the best that you've ever seen. In GQ Universe we have this new metric we're getting ready to insert, and it's called spending power.

Okay? And this metric is intended to represent how much you can increase your spend before your CAC degrades at all. And one of the projects you and I just got to do together is we built you a spend in a MER model for Jones Road, and you have the highest. Spending power metric I've ever seen. In other words, you were able to spend the most money without your efficiency degrading.

The slope of that line was the flattest I've ever seen, and I think it's a testament to all of the work. So my question is, what has made you the greatest acquisition marketer in the history of the universe?

[00:03:14] Cody Plofker: I guess it's good genetics. I mean, it's a good family, family stuff. It's the, the exact reason I'm not, you know, in the NBA. But yeah, I mean obviously it's, you know, my mom is Bobby Brown and she is very well known in the space, so that is worth the considerable amount. So I, I have to obviously acknowledge that and have that be a, a huge factor.

I don't think it's everything because, you know, there are many celebrity brands and you've probably seen data to a lot of them that are struggling and are negative on acquisition. So I don't think it's just that, but obviously I would be very arrogant if I said it was just me being a great marketer.

So I think it's a lot of things. I think, you know, that's, that's number one. Obviously it's. All the basic stuff. Product is always important. But I, I, I do think we've been fortunate just to kind of, you know, find some things that have worked and been, you know, thoughtful about how we measure them and, and how we're able to scale those things up and trying to always find that balance between, you know, direct response performance as well as kind of building the brand.

So it's a, we're hopefully, you know, able to think about like a little longer term approach to growth.

[00:04:15] Taylor Holiday: Can I ask you something? 'cause I, I don't know if I've ever heard you get asked this, but when I took my first job, okay. I worked for my best friend and it was clear to a lot of the people that were there that I was there initially because we were friends that I didn't have any qualifications for the job that I took.

And what that gave me was actually this like relentless chimp on my shoulder that I'm going to prove to everyone that I. Deserve this position and I know more than everyone about my thing. And one of the things I get as a sense from you is that I see the critique, oh, this is a Bobby Brown da da da. But my watching you from the background though, it feels like you have a relentless pursuit of ensuring that the job that you're doing is earned and executed on in a way that deflects that criticism.

Does that, does that actually factor into your behavior at all?

[00:04:58] Cody Plofker: A hundred percent. That's a hundred percent right. Yeah. More, more, more than you could even even know. It's always, you know, I always feel like it's a question in people's minds that, yeah, it's like that's why he's got this job and that's why he's, you know, that, that they're successful. And again, I'll be the first to acknowledge it's a giant part of it.

But I also think that, you know, I've been able to add some value and, and help grow the business a little bit as well.

[00:05:19] Taylor Holiday: Yeah, and and I, and I think.

[00:05:21] Cody Plofker: me, drives

[00:05:22] Taylor Holiday: Yeah, and I think that acknowledgements

[00:05:23] Cody Plofker: always in a positive way too, by

[00:05:25] Taylor Holiday: totally, I, and I, I think there's probably so many things in the pot there emotionally, but dude, it's, it's clear that. You have this sort of relentless curiosity to solving the problem. And you're right that I can tell you we, we run this on a lot of influencer brands and there's not, this is not a built-in reality for every influencer brand.

And so I'm curious what other things, so let's set aside the organic demand that gets created, the authority and trust in the space, those things that are critically important. But talk to me about some of the other things that you've seen be hyper effective in helping you to produce. Large volumes of efficient new customer acquisition.

'cause I think there's creative test stuff there. There's tactical execution and media, there's all sorts of stuff in the pop. But what, what are some inflection points that have created various moments where you've been able to really stair step up the volume? I.

[00:06:10] Cody Plofker: Hmm, definitely. A few of the star set moments have been like obviously there's like TikTok virality in some of that and just kind of creating a moment that can definitely help just, you know, amplify brand awareness and kind of just like, keep the brand momentum really, really strong. So those have definitely been some really big moments.

Um. You know, so kind of whatever we want to call it. In the past it was going viral on TikTok and having a ton of organic demand that then, you know, just has, has correlated well with good ad performance. Part of it has been, you know, with the launch of TV ads that has really accelerated our growth as well. You know, a lot of, we always joke when we do the product calendar for next year, that like next year we'll settle it down and we'll have like four launches a year, which is standard, like we launch something every month. Usually it's someone just looking at our calendar up here. Often it's two things a month and it's not always a brand new product.

There are kits and things like that that we're trying to have on site. Just so you know, those are great acquisition products with the higher a OV more products. But we've always got something that we're trying to do. So there's a lot of newness there that I think has helped us a lot. And then, yeah, I think we've been, you know, very thoughtful about our strategy.

Like we've tested a lot of things on landing pages, run everything through a quiz, just really being thoughtful about ongoing. Testing how we structure our, our ad account, you know, everything, everything to there. And then now getting it into a lot of like incrementality testing just to make sure like we're really caring about bottom line and being really thoughtful about our spend.

[00:07:36] Taylor Holiday: I've heard Sean and Connor talk about this too, which is that a big inflection point for them was the sort of product development process and. Merchandising and being able to have novelty in your ad account, like newness of story is such a powerful mechanism for delivery. So are you responsible for that two launches a month?

Like what is the relationship between the product team and you and the marketing side? How do you guys work together?

[00:08:00] Cody Plofker: We have a really interesting org structure our current org structure. I guess when we, when we launched, we had a general manager, you know, we quickly outgrew our org structure. And then we had a COO. We've never had a CEO and you know, part of ways is with the COO and now our org structure. So Bobby is chief creative officer and founder, but she's, you know, she's very involved in product. Development. Very involved in creative, not very involved in, you know, the strategy or number side. So I'm marketing and revenue, and then we have a chief product and operations officer. That's one person. So originally, originally her background is product development and then had like demand planning underneath her and anything supply chain related now has, like logistics and warehousing, so all ops and then people ops. and I have marketing, which is brand and growth marketing creative. And then we, we split finance have, have various involvement in finance. So we kind of are the, the two people are running day to day. They work on the product development from, you know, the, the concept phase testing. But there's definitely a good amount of involvement from the marketing side based on both on sharing customer feedback.

Here are the shades people are looking for, or here is we, we launched this limited edition shade. Here's what people are saying about it, as well as like. For example, our kits that we are launching, our bundles that we're gonna have on site that's, that's equally driven by, you know, revenue acquisition considerations.

What can we, you know, acquire customers on what would give us the right margins, right demand, as well as obviously what would make sense with Bobby and product development on a, you know, cosmetic standpoint.

[00:09:28] Taylor Holiday: Yeah, that's, that's really cool. I think that layout and the, it sounds like the intimacy of the working relationship between the two of you is like. It is the magic that whenever I see an organization that is doing this effectively, there's some relationship that exists where you have a really informed product development process that's connected to, and I even like the idea of sharing finance.

Like that's an interesting concept. So I'd be curious like the exercise, so everybody knows full disclosure. Cody and I have worked on together as a, we helped them with some modeling for spend and a ER as well as playing around with the forecasting exercise through our profit system. And we're gonna talk about some of that in a second.

'cause the first results were pretty cool, but where does. Traditionally, like which one of you is responsible for the forecast? Who actually decides this? Is the number? Is that your responsibility as marketing and revenue? And then she orders inventory on the basis of that? Or like, how does the actual planning process work?

And who decides the number you're going after?

[00:10:17] Cody Plofker: Yeah, that so how we used to do it is when the COO was here, we, our demand planner would come up with a, you know, demand planner and here's what, you know, we think we might do based on historicals, and usually it's a little bit higher, and then he would just take, you know, a percentage off of that. And to me that was not the best way to do it.

So I taught my, I was like, I think there's something else there. So I taught myself and, and learned from you and Dave Ricco and a bunch of other people, cohort based forecasting. And so now I'm using, you know, what, what I would consider an, a of both your and Dave Ry cook's models. But it's very, you know, similar in principle to, to what you guys have done for us. And so that, that sets revenue expectations that kind of builds out into a very, very summarized version of a, of a p and L. And then I give that to finance. I, first, we work very closely with our demand planning team just to ensure that. of checks and balances. Hopefully they have it higher, especially because we are trying to err on the side of having more inventory, but we kind of use it as checks and checks and balances.

If everything checks out, then, you know, our, our director of finance will take that into building like a proper p and l. But in terms of the revenue and, you know, at least marketing and variable cost side of it, like, starting with

[00:11:25] Taylor Holiday: So marketers hear that. This is a marketer that takes control of the expectation of the financial outcome of the business. This is like, this is the hope that with the Bridges series and the other thing we're doing, this is a responsibility should that should only sit in marketing because the data that's required to answer this question does not exist in operations.

It's not about the available inventory, it's about the efficiency of the acquisition combined with the amount of existing customer revenue. And I also love that you guys do this sort of check in on each other. Two people bring a forecast and an expectation and you go, okay, what am I seeing and what are you seeing?

And I think that's a good setup for even how we just did a rep together in this forecasting exercise, which is we present and this is our role at CTC, A view of what we believe is likely to occur. And you say, Ooh, here's why I think this input's too high, this input's too low. And what you're doing is you're sort of.

Honing in on expectation by providing multiple viewpoints and angles to get to the best expectation you can. So that's, I think, a great illustration and it'd be fun. Like I, we should do an episode sometime maybe for Bridges instead of this, that is you and that product officer talking through that process.

Like, because I think the, the other thing that's interesting, and I'd be curious how this shows up in your ad account is once the inventory is purchased. How do you think about the allocation of your media dollars against that inventory plan versus just the financial outcome? Because so often it's easy to just chase the best roas, but you have to sell specific things, so how do you hold that throughout the month?

[00:12:44] Cody Plofker: That's a great question. Fortunately on the, on the Evergreen stuff, we don't necessarily have to, we will make considerations and we will not always, but we will, you know, merchandise our ad account differently. If we need to ensure spend or limit spend on, on a certain thing we try to consolidate where it makes sense.

But if we have a business reason for doing so, then we will, we'll do that. We might give it a different bid cap or have a different, you know, campaign or ad set so that we can control spend differently. For example, like uk we're in UK and Ireland. We've got a separate campaign for those. 'cause we want to ensure that we can control spend if, you know, we are forecasted a little differently on that, we will. And then same thing. If we've got like a, like a holiday or an exclusive thing, we'll often give that its own budget so that we can either scale that up or pull it back in accordance with it. So yeah, we're, we're I think it's taken us a while to get there, but, you know, working very closely with the planning team. Just to ensure pacing and understand, you know, that our our budget is being efficiently spent and we're not, you know, putting us out of stock quicker than we need to.

[00:13:43] Taylor Holiday: That's great. So I wanna talk a little bit about the model that we built and the outcome of the first month of forecasting from CTC. And because when you saw our model initially your first reaction was you thought it was too aggressive. In other words, it was recommending too much spend at too high of an efficiency.

So I'm gonna give us a little recap of the first month knowing that there's some other things just in terms of the outcome. Okay. So CTCs forecasted model. Revenue within 1% of target spend, 3.2% of Target AOV Exactly. Right. Orders within 1% of target efficiency, aMER 3.3% above target returning revenue, 2.4% and new customer revenue.

Exactly right. Like I mean, within tens of dollars.

[00:14:29] Cody Plofker: actually didn't know that because I haven't been, I haven't been looking at at that sheet,

[00:14:32] Taylor Holiday: I'm gonna, I'm gonna send you this screenshot right now. It's, it's wild. The, the level. And this is a brand y'all, like, y'all know Cody shared more than nine figures. A accuracy at this level is, is a big, is a big initiative. So it was like incredibly accurate. And the spend and a ER model, I went and looked at the, recommended max contribution margin number.

And it was like within 1% of what actually occurred, like it was wild how close it actually was relative to the expectation.

[00:14:59] Cody Plofker: I wish I knew this ahead of time. I should have looked, 'cause like my main debate on why I, I thought it was too aggressive was because we had our best month ever, not counting November and at least at like halfway through the month or like through, through the month, we were like 15% below forecast.

Like whatever Luke said to me, it was like below. And I'm like, why are we having our best month ever below? But I guess we, we caught up.

[00:15:20] Taylor Holiday: It's interesting, this is like a lot of people's story in January is that the first two weeks of January versus the last few weeks were very different. But yeah, you did the back half of the month. You guys were really, really strong. And so I'm curious when. We showed you this model. So what our model does is it gives you three recommended spend points.

One is max first order contribution margin for that month. So how much should you spend at that efficient. Second is max lifetime contribution, and we're gonna circle back to your and Andrew's conversation about that because he's wildly active. Wrong on this and we gotta, we gotta put it to bed. But max lifetime contribution some time period.

And then the third is max new customer revenue. So if you wanted each of those so you guys drive towards max first order contribution, because the reality is in the beauty space, and I don't think people always know this, unlike maybe skincare, which I think is a different category where people are using a same thing every single day.

Beauty doesn't have as good LTV and almost this is true. Ilia beauty we talked about last week, has a similar idea. Your guys' LTV is solid. It's not astronomical. So first order contribution really matters. I'm curious, what informed the idea that you thought it was too aggressive? Why did you think we were recommending too high a spend and too high of an efficiency?

[00:16:23] Cody Plofker: The. A MER that, you know, it spit out was obviously using historical data and like our A MER while it's still, you know, pretty healthy, has degraded a bunch from, you know, January over time. And so, you know, it had not that much lower of an A OV. Of an A MER year over year, but with like, drastically different spend. And I just feel, maybe I'm gonna say the word feel, but that, you know, our business is different. We haven't had those same efficiencies. I, whether it's due to the curve, whether it's due to macro economic stuff or whatever it is. So it, it, to me, just based on recent historical data was too aggressive.

[00:17:02] Taylor Holiday: And I look, I, I appreciate you saying that, and this is where this is so important is that my experience time and time again is every time I build this model for a new brand, there is some component of it that flies in the face of the expectation of the person on the other side. And that's actually why it's so important.

It's not, that doesn't make you bad or wrong, it makes you human, and it makes us very subject to recency. Analysis of some experience that we had on some, whatever it might be. And usually it's the other way around. Like candidly, it's very rare that we're saying you should spend more. In almost every case we're telling somebody to spend less.

So I think it, you, you are really in tune with driving to profitability, which is abnormal for a lot of the conversations we have. So I think you probably, if anything, find yourself on the conservative side of that. And so I, I'd even be curious 'cause I know that Luke was pushing you on the meta spend in particular is an area where we're like.

Hey, Cody. I think there's more. I think there's more. And you're, you're hooked on the TV thing right now, which look, I think these things are contributing to each other, but do you think you were too conservative? Do you think you left meat on the bone in January?

[00:18:09] Cody Plofker: No. So I guess, let me, lemme go back just a second. I think you know this, but for like, people listening, so we always, before we optimized to MER, like we had a, a certain MER that gave us the, you know, EBITDA margin that we wanted and we were always looking at you know, first of all, I think it was a margin that is, was, was very healthy and I think. We never really had to choose between margin and and growth. We have been fortunate enough to, to not have to, I think as we grow, growth will get a little bit more difficult eventually at some point. And I think, you know, we want to be able to grow. that might need a little bit more investment in it, but we don't want to grow at the expense of profitability.

We don't want to grow top line up, you know? And so I actually, before working with this, I presented two different models to the board that had pretty different growth trajectories, but actually pretty similar ebitda. And their question was like, well, why would we do the, the higher growth one? And like, I didn't have a great answer and it hit me that really we should just. for max profitability, meaning total dollars, not percentages. And to do that, assuming fixed costs are truly fixed, it's just about maximizing contribution. so I don't know if you saw, like Sean Frank tweeted out this like like kind of like little calculator that he built, understanding like what your business and profitability looks like at like different spending and mers. So I started playing around with that and I thought that was really cool, but like I was just inputting numbers that I thought makes sense, but I was like. I, we don't actually know. We don't have a data science team of what our curve looks like. So that's really what brought me to you guys really to help. out what is, how are we gonna maximize our contribution margin? So, long story short we always in the past were kind of constrained by MER or A MER. If we were more efficient, we'd spend more. If not, we'd pull back. This was the first month where contribution margin was our, our North Star. And so we actually missed MERA little bit. But contra, but because volume is so much higher, contribution margin was actually significantly up. I think. Some of the, the, the numbers that we have in our forecast are like estimates rather than real numbers. So I think I just wanted to be a little bit on the conservative side so that way we could get actual financial data in a, a month end and then be able to decide from there. And also because we were of, at least compared to our presented forecasting budget, we are so, we are significantly up. I felt pretty good about it. Like I was okay to leave a little bit of meat on that bone.

[00:20:33] Taylor Holiday: And look. 

[00:20:34] Cody Plofker: a very long

[00:20:35] Taylor Holiday: No, but, but it's so important. I think what you're describing is like the maturity of a long-term vision of a leader and as a brand. One of the things that I think is a plague in e-commerce is this idea that the second I'm achieving a financial outcome, I want, I throttle up super aggressively in this way that actually causes all sorts of inefficiency and indigestion.

And this is something you said on Andrew's podcast too, which I liked, which is the idea that sudden change in velocity or scale. Comes with increased costs that are harder to predict, right? So one, if inventory has to suddenly be rushed in delivery or if I have to scale up very fast, hiring, like fast hiring tends to be more expensive.

Hiring because you have to use a recruiter or you have to rush a process and they like, there's all these hidden ways in which. Sudden scale creates degradation of efficiency. Like e-commerce is a business that margin outcomes are predicated on predictable execution against a specific timeline at a specific price and a specific margin.

And here's another thing that I see brands do. What someone who's buying a business wants is a pattern of consistent growth. And if you spike a month and all of a sudden you can't replicate that, and you do now do three months in a row of downtrend. It's actually really, that's a way worse story than if you had gone 10% compounding.

And so I think that's a, that constraint is actually really important. I think it's the right decision for you ultimately.

[00:21:56] Cody Plofker: I appreciate that. And then, yeah, I, so I know that you say that a forecast is not what you want to happen, but it's what you think is gonna happen. And I think that is maybe a little bit of the divergence. 'cause you know, we, we are using our forecast for, obviously pretty much everything but communicating the goals to our team, to our marketing team, you know, spend numbers, things like that.

And in the past, what other leadership has done is had very lofty forecasts. Like technically we grew 70% year over year. We missed our original forecast by, by quite a bit. So like to me it's like, why would you do that? So we. Growing that fast as, as you alluded to, like that puts a lot of strain on the system, right?

There's a lot of things, you know, I'm working 80 hour weeks, like we've gotta build up the team in a bunch of ways. Obviously there's, there can be a lot of other things. So we did decide at the board meeting, like, what do we want to do? Not, not, I, I think that's an important thing. It's not just what do you think is gonna happen, but also what do you want to do? And, you know, we decided, you know, low end, we'd be, we'd be okay with 25%. We'd obviously be okay with higher than 50%, but. We're not gonna aim for that, if that makes sense. I do think your forecast, and now I'm running a similar scenario in the background, is important to run of like maybe, probably what's most likely to happen so that we can obviously go track towards that if we want to, if we have the resources to make it happen, but also to make sure we have the, you know, the inventory as well, but that's like a little bit of the

[00:23:13] Taylor Holiday: Well, so the I, so if you go listen to the sequence that I think brand owners different than my role, my role as your partner is to provide you the likely scenario based on data. Your job as the team of leaders is to start with what you want to occur. What we tell people is that you bring what you would like to happen.

We bring what is likely to happen, and we work together to close the delta. So if you want 50% growth, and my model says 30%, what we then do together is say what would need to be true in order to accomplish that goal? Right, but that doesn't mean that we can behave the same way we've been behaving and get to that outcome.

And so it's important to say, okay, which, which inputs would we need to change? And then what strategic actions do we take to do it? And I'd be curious about this. So like when we do this, when my own forecasting at CTC. I have three levels of responsibility that I have. I have a bank that I have covenants that I have to provide a, that's my most conservative view.

I give them the absolute bottom of the barrel expectation that they'll accept relative to the covenants, to over deliver on that expectation. Then I have a board that has authority over my job that actually could hire or fire me on the basis of my own performance. So I wanna make sure that's a number I believe in.

Right. And then I have the company goals that I'm going to bonus people on the bases of, and that is a stretch to the expectations that I set in the other places. Right. And Orchid Burleson, who our COO, she's, she's given me a lot of counsel of how the CEO of Nestle would behave. So she reported directly to the CEO of Nestle in at, at her last role.

And she said that one of the things that he was masterful at was holding that tension between the market expectation on a public basis and. The stretch goals that she would hold, that he would hold the internal leadership to. Because what, what the stretch does is it creates novelty of problem solving.

Like it forces people to think of new ways to expand the idea. So I'm curious, like, do you create a delta between what you showed the board and what you show your team or what you like? Is there a gap there in any way?

[00:25:07] Cody Plofker: Yeah. Yeah. And, and, yeah, that's, to me, that's like fascinating. And I think that's like where I'm trying to figure out, and it's gonna be a lot of, you know, learning, learning and mistakes made there. We, we did the opposite, which is last year we gave them a really high one and they were not very pleased with that, you know, so they, they want to know something very realistic. So we give them, we either call it the budget or the plan. That's January one. That's, that's locked. That's what we're making a lot of personnel decisions based on it. Kind of more on the fixed cost side. And then we have a forecast and, you know, forecast and demand plan and that will be much more variable that we'll adjust monthly. We have a forecast that we communicate to the team for targets. We're not necessarily doing bonuses and KPIs based on that. We, you know, ours are more discretionary. And, and so, you know, I've decided to be more real realistic. We'd rather beat them, but then we also have a demand plan, and then what we would call like a 90th percentile forecast, running in the background, to ensure that we have, you know, an idea of what could happen and have the inventory plus any other needs, you know, resource behind that.

[00:26:09] Taylor Holiday: Yeah, I, I think it, I think what oftentimes people who are responsible for this exercise don't realize is that you undermine your credibility as much by exceeding the target by 50% as you do by missing it. Which is to say that like in the event that you substantially overdeliver, the question I would be asking is like, what didn't, you know, like, what, what are you unaware of?

That's true. And so I think. We always, what we teach our people is plus or minus 10% to target is success in forecasting. If you can get to plus or minus 10% to target, and that's what we try and set up to partners, is like, that's what our people are KPI on. That's what we're aiming for is that's a, that's a level of executionary excellence as well as modeling excellence that says, okay, I helped a business plan to a number and deliver on that number in a way that doesn't force sudden dramatic change in their own internal systems.

[00:26:54] Cody Plofker: I got nothing to say. That's good feedback. I

think you're right and I probably have overcorrected I prefer that over the opposite that

[00:27:01] Taylor Holiday: For sure. 

[00:27:01] Cody Plofker: but probably overcorrected, but I. I think we can live with it as long as we prepare, you know, the other forecasts and, and make sure that like we know any of the downsides of if we are gonna overdeliver on forecast by that much is do we have, can we run a cashflow model, you know, cashflow forecast on the increased growth?

Do we have the customer service support that we need? Because that's, you know, functions a little bit more variably do we have the inventory

and so we are doing that in the background, but I, I

[00:27:28] Taylor Holiday: I, I think, I think the other thing though, man, is that your experience is so normal for. What I coming outta Covid, what I watched so many, many people do, which is, you know what's really hard is this emotional experience where we're experiencing such sudden change in demand in these really variable ways where, like you said, there was a forecast last year that was more aggressive and there's a delta.

So this year the correction is to make, and the reason again, and this is not, I. Just to keep trumpeting us as a partner. But one of the beautiful things about bringing in an ex, an external point of view is I don't carry any of that legacy suffering, you know, like I didn't miss last year by a bunch. So I, I'm not worried about that.

And again, you should, and this is what I think I have a lot of respect that you do, is that I. You don't take anybody's opinion. You process the information and you make your own decision. And that's, that's what it's there for. It's like, here's a resource that doesn't carry the, the fear of missing. Like we, you know, we're inside of a, a large public company right now that's gone through a lot of public challenge relating to missing forecast.

And we were brought in very recently, and the first thing we were able to do is say like, Hey, the plan you have is wrong. Like, it's just not gonna happen. And there's no consequence. 'cause like as a marketer, if you wrote that plan like you're. Standing up and saying that is really risky, right? Like, but we get to kind of play that role in a way that helps the organization to reset or challenge or push in a way that I think is fun.

So, so what do you do going forward? What does February look like? Are you ramping yourself up, or what are you thinking?

[00:28:50] Cody Plofker: We've, we've definitely revised above January. I am actually curious to, to look after this of how, you know, what we have can kind of compares to where you have us at. But definitely looking at how previous Februarys have done, obviously we are able to layer on, you know, the increased number of new customers from January and seeing how that, you know, adds to, to revenue for the rest of the year and ultimately February.

And yeah, I think we're definitely getting. Definitely getting closer. We still want it to be a number that we can hit over 50% of time, so it's probably slightly more conservative that than you have, but definitely definitely higher. 'cause it, you know, that gives us a total spend and then we break that down between channels.

So I think it'll be more effective for us if we are closer to that

[00:29:28] Taylor Holiday: So I'm gonna tell you, Corey, bleep this out when I say it. And then Cody, you're just gonna respond to, I'm gonna tell you what the max, what I have for spend number for max contribution margin. You tell me what your budget is for the month and let's see. See where we are. You ready?

[00:29:40] Cody Plofker: All right. Lemme just pull up my forecast. Yeah.

[00:29:42] Taylor Holiday: so I have, and it's, it's interesting because, and this is very normal for brands in your space, January is like a uniquely good acquisition month, usually in any skincare, beauty, healthcare product.

So like, it doesn't surprise me, but I have, I have 2.3 million at a 2.5 5:00 AM ER. 

[00:29:59] Cody Plofker: Okay. We've got forecasted spend of. 2.9 out of 2.4,

[00:30:05] Taylor Holiday: so fairly close. So I, I would say a little bit less spend at slightly higher efficiency. So it's now we suddenly went the opposite, right? Like now, now, which is interesting. And I think that's the beauty of the seasonality of it, is that like there are periods where it's very different in terms of that efficiency.

So that, that's cool. That's cool to see that, that we both see February as like less acquisition efficient. Is that normal for you guys? Is that pretty standard to history?

[00:30:27] Cody Plofker: Yeah, January's have been, have been pretty, pretty strong. But we do have, you know, one of the things that does take a little bit more like human intervention is launches and if you're doing something different on your marketing calendar, trying to take that into effect. So we have like a pretty big launch halfway through the month, which is kind

[00:30:42] Taylor Holiday: That you didn't have last year that was different.

[00:30:44] Cody Plofker: Yeah. Yeah.

[00:30:45] Taylor Holiday: So that's that qualitative adjustment that, that like, we would go in and say, okay, maybe let's bump the model up. Like if I bump it up 10%, let's see, then I get to two four outta two eight. So that's really close to where you're at. So if, like we say, we're 10% improvement, so that's pretty dang close to where you guys are at.

That's super cool. The, the other thing that you said which is a way that people have started playing with this model, which I think is really interesting because. Almost everybody works on a calendar year, right? Like, so we think about maximizing EBITDA at the end of 12 months. And so you started saying how you would go in at, at January and set your optimization to 12 months, and then in February set it to 11 and then March set it to 10.

So you're sort of maximizing the contribution margin for the year. And what's really interesting, especially for a brand where. January is such a good month. Like we had this recently with an apparel brand in, in a fitness space. So it's a similar idea where like, I think there's a real argument that a real disproportionate amount of the budget should be spent in January, like weighted more.

1. Then they think about that. Like do you think that there's a chance that that might be true for you guys? That like in the future, January might be even like bigger and then you throttle back and realize a lot of that value capture, but that might move you off of linear compounding growth and more to a little bit more of a spike in January?

Like do you think that that could possibly be true?

[00:32:02] Cody Plofker: Yeah, I, I think so. Definitely. I think as we grow, there's probably like. of optimization that can get, you know, be important. Like what ours for this year, our biggest one was, you know, optimizing contribution margin instead of MER. And I think we were able to kind of, uh, with just that level of increased sophistication, which is not much can kind of, you know, get us to our goals and, and surpass that.

But I do think as we continue to grow and need to like find those levers yeah, I just think it requires which is important, but requires, you know, buy-in from the board and leadership that, you know, you're okay with that and, and you have that built into the plan. But yeah, I think that makes sense.

[00:32:37] Taylor Holiday: And this is where like, I think one of the things I've tried to put out in the market a lot is a lot of people get stuck into this idea that like the solution to your ad account is just more creative. And it's like, yes, I agree and I love. Your post about the creative ops of trying to launch every day, and I, that's certainly an important, but the market is not the same every day, like the available ad inventory and the efficiency of the inventory on how the consumer behaves on a macro level is not actually yours to just define all the time.

And so capital allocation across the calendar as a strategic way to improve your business. In your ad account is the part that's like, there's a strategy layer here that before we get to creative execution, we have to think about that piece of it. And that's one of the things this model helps to do is to reveal the moments where the market yields better results for you and to allocate more dollars into those spaces.

And so I think for January, it's like, I see this a lot for brands that have this, is that they would be. Better served allocating a significant, greater percentage of their budget into that month. Like just you guys, it's a 50% or it's like a 40% increase in available efficiency or available volume at a higher efficiency in January versus February.

That's crazy. Like that's a pretty big delta.

[00:33:41] Cody Plofker: Yeah, I, I, I think you're right about that. That's one thing I've gotten from Sean Frank, that he is talked a lot about, is like, when you spend is, is super important and it should, shouldn't be close to even throughout the year.

[00:33:50] Taylor Holiday: Not at all. Last thing I wanna talk touch on is the creative ops side. 'cause this is, this is a drum. I'm being pretty heavily right now. And you, you talked about, I don't know who it was, maybe you can share who said that they launched creative every single day in their ad account. But how do you guys think about the system of production and how much.

Creative you need to support the outcomes we're talking about, like how do you connect number of ad units to amount of spend inside of your organization to execute.

[00:34:16] Cody Plofker: I don't have a good answer. I, I can't share the brand, but it was a pretty, pretty big brand in, you know, the, the supplement space. I. Pretty, pretty sophisticated, you know, at, at what they do. And yeah, I, I thought that was alarming to me in a good way. You know, I, I think it might be a little overkill, but I have some thoughts about it, but I, I, I still think it fired me up.

I, I think that's is gonna be one of my big focuses. I think, you know, I've been focused on, you know, which has been insanely helpful to help us understand what's actually driving incremental dollars. Building some, some channels. 'cause I think, you know, we were too focused on meta for a while. And I, I think we, we have seen a lot of growth that we can quantify with other channels, whether that's YouTube, tv, things like that. Even like reach campaigns on meta, we've run, you know, we've run holdouts on all of them. And, and I, I really think that's been a big factor and has actually allowed us to spend more on meta. But I do think one of the things that we are, I'm now really focused on is kind of that creative diversification aspect and, you know, creative ops. So I think we have a lot that we can improve upon. We're gonna be resourcing up that, that team in that department. I definitely agree with you that it's or, or even third to, you know. the market timing, you know, any peaks that you're artificially creating with launches and things like that and, and offers. But it's, you know, still, still important and I think we can do a lot better job of there building that. So right now we launch weekly, actually we're getting to like twice a week launching weekly and, and trying to kind of figure out, you know, the best cadence from there.

But now I think we can do a lot. So what, what do you think?

[00:35:46] Taylor Holiday: Well, yeah, so we, we, I try to create a. Quantifiable way to answer the question because creative production is expensive, like human resources have a per unit cost, like their time is not infinite. If I have five designers, they can only make a certain number of ads. If I have three, they can only make a certain number of ads.

So I may need, like if I just think about January versus February as an example, if you're trying to spend 50% more money in January than February, you probably need a different resource pool to pull from, right? Like it requires. More work, but we, we would sort of say like, start with an understanding of how much spend per ad you're generating.

And then go from there. Like how many ads do you think you have live in your ad account right now? Do you know?

[00:36:25] Cody Plofker: Yeah, I don't know any of our metrics of like spend per app.

[00:36:27] Taylor Holiday: You have about 60 ads live in the ad account spending in the month of January. Okay? So 60 generates, you know, whatever the spend volume is that you have in that channel.

And obviously that's not evenly weighted, right? The the point is that there's a distribution of spread across all ads. They're not the same. And so as you go into. The interesting part to consider is like as you go into the month of February, you may actually have an existing set of ads that can carry the volume expectation that you have.

And so the delta to the new, to the spend given that it's coming down might be really small. And so the amount of creative production in the month of February might be really un less necessary than in previous months. And so there's always, it's a really variable. Amount relative to the need though. And I think that's, that's the hardest part.

Unless you're just gonna say like, I'm just gonna continue to just feed the beast regardless of spend volume. I think that can actually can have a derogatory effect if you have a bunch of high performing assets. But it just, it just depends. There's, there's no right answer. I'm always just curious how people at your spend level think about the, the amount of production required to get there.

'cause it's a, it's a complex problem.

[00:37:27] Cody Plofker: are under resourced. I just, at least from others I've talked to, I, I do think there's a, an ability to, you know, over to, to make it overkill. But I, I would imagine just from others I've talked to at least, that like, we're a little bit under resourced and we probably have more spend per ad. But I don't

[00:37:42] Taylor Holiday: Yeah, I, I think that there, the, the crazy part man is that there's more opportunity, like, and this is, this is again the testament to the job that you've done, I think is to say. You are relentlessly curious about trying every new angle to continue to provide the increased volume. And so the top of funnel stuff, like I think that if you listen, did you end up listening to my Top of Funnel podcast episode?

Okay, so, so

I think the, the circumstances in which I think someone should spend money in those channels is brought in distribution. You have. Investment available to do it, to breed future value. And that is the position you are in as a business. Like it is a perfect allocation of your funds at in the same way, you know, I use the personal investment metaphor, which is like, if I have excess cash, I don't want it to sit in the bank account, I wanna go build future cash.

And that kind of top of funnel action is tilling up future soil that you're going to realize demand on. So I think for you guys, it makes all the sense in the world. I still think you're underspending on meta, but it still makes all the sense in the world.

[00:38:37] Cody Plofker: Yeah, I, I think we're, we've gone too far that, that way. I think like last month was around 70% of spend on meta. You know, there were months last year we were 90. And so I think we've gone a little bit too far that way. And then we will definitely push it back up a little bit. I

[00:38:49] Taylor Holiday: Yeah, well look man, you're doing a, a killer job and I think of, again, it's fun to follow the 1% and I think that we all sort of aspire to those identities in some ways. I caution people to look at you guys too much because you are such a statistical outlier in so much of your performance that replicating your behavior is really hard.

But it is aspirational and something to, I know that at. Ba we look at it and inspire to be look at a lot of stuff you guys are doing. So congrats on all the success. Keep killing it, and I'm excited to keep learning from you.

[00:39:19] Cody Plofker: Yeah. Thank you Taylor. Likewise, and you've been super helpful along the way, so thank you for all of your help and and debates and looking forward to a lot more of

[00:39:26] Taylor Holiday: All right, let's see how close we can get to nailing February. All right.

[00:39:28] Cody Plofker: Yeah, thanks

[00:39:29] Taylor Holiday: See y'all.