Diversify Now: The 6-Week Q4 Window Closing Fast

[00:00:00] Richard: Hey, folks. Welcome to the Ecommerce Playbook podcast. I'm your host, Richard Gaffan, director of digital product strategy here at Common Thread Collective. And I'm joined today and, and what I wanna start out is, is redressing some wrongs. I'm w- I'm joined today by our president here at Common Thread Collective, Mr.

[00:00:15] Luke Austin. And I believe last time he was on the pod, I referred to him as our senior VP of ecommerce growth or whatever job you used to have. And, um, so I wanna correct the record. Uh, I missed the first like five minutes of the meeting where they announced the promotion, but Luke is, uh, president here at CTC now.

[00:00:34] And let's quickly say, Luke, how does that feel?

[00:00:39] Luke: No different.

[00:00:40] Richard: Yeah,

[00:00:41] Luke: is kind of the idea. Like, you, uh, id- ideally, I think we all sort of step into the areas that we see as being impactful and start to solve problems that are necessary problems to solve on behalf of our customers and, and the business. And over time, you sort of look around and, okay, here's the-- this is the, uh, the void to be filled or this is the job, job to be done.

[00:01:04] So yeah, show, show up, normal day. Got my, uh, kids this morning, got the workout this afternoon, got a bunch of problems to solve. Um, but yeah, I, uh, I appreciate the recant too, Richard. I was distraught. I was distraught.

[00:01:19] Richard: Yeah, yeah. Totally. Well, that's the attitude we like to see in a leader, so-- But anyway, I just wanted to acknowledge that. So our president, Luke Austin, is joining us today, and what we're gonna talk about today is, uh, obviously it's almost September here, which means Q4 is right around the corner, which means holiday is right around the corner, which means prep should have started yesterday.

[00:01:38] And a little bit, what we're, we wanna talk about today is diversification and in a couple of different, um, kind of couple different strands of conversation around that. Um, we can frame it up maybe by in the past, uh, on this podcast and elsewhere in our content, we've talked a lot about channel divers- channel diversification specifically being sort of unnecessary or maybe not, like, the right next move, uh, before you sort of nail down Meta and Google.

[00:02:07] But a lot of the game has changed in terms of our ability to measure, our ability to understand the actual incremental im- impact of those platforms. So we've changed our tune a little bit on that, so that's part of what we'll talk about today. And then we have a couple of other diversification topics.

[00:02:21] But I think the point we wanna frame this as is that diversification in these various ways is not simply a growth initiative in terms of like, "Hey, here's a long-term plan for how we grow." This is actually a way to sort of manage risk as you go into Q4. So Luke, why don't you talk to us a little bit about the various forms of divers- diversification we're gonna talk about today and, and the way we've maybe changed our thinking on them?

[00:02:45] Luke: Yeah. So specifically what we wanna talk about is how we define channel diversification and creative diversification and what we see as being helpful pursuits in, in, in each of those categories. I think in those, those two things specifically, channel and creative and then diversification, the-- it can be defined in so many different ways by so many different people, and then pursued in a lot of different ways as a result of that definition.

[00:03:09] That can be-- what we've seen can be, uh, some of those pursuits can be more helpful than others in terms of our vantage point and the, and the brands that we, that we see within our, within our dataset. Um, so what does helpful, useful diversification of channel and creative look like for e- e-commerce brands and what we see across our dataset that, that lends itself to producing, uh, effective contribution margin growth for the brands that are, that are doing it?

[00:03:36] Um, let's, let's start with channel diversification. So this, this topic, um, I think there's, uh, as has been any topic in the D2C, uh, D2C world over any number of months or years, um, has, has, uh, what our pr- our sort of- Approach and perspective on it has changed, um, over, over the years as a result of a number of things.

[00:03:59] Um, which is for, for many brands like Meta, Meta is still king. Meta and Google are the core of the stack, occupying a large percentage of the media budget. Um, and still, like across our dataset, Apple Oven is one of the fastest-growing channels, you know, 250% year-over-year growth in terms of-- But it's still low, low single-digit percentage points in aggregate of the media spend, right?

[00:04:19] It's-- So it's just like relative to Meta and Google and the amount of spend, uh, and the amount of impact that you can have in terms of the focus on those channels, um, it's, uh, it, it's just such a small piece of the pie, and you can sort of extrapolate that down to YouTube, Snapchat, uh, Pinterest, TikTok, X ads, CTV, and sort of on down the line from there, right?

[00:04:41] So, um, there, there's a trade-off in, i-in, uh, sort of focusing meaningful attention and resourcing to things that occupy, in aggregate on the dataset, a very small percentage of the overall pie, right? Which is like, okay, these, uh, uh, these additional channels you're trying to diversify in, could you be the outlier to where that channel becomes 10% of your media mix, 15%, and it actually occupies a meaningful portion of the pie?

[00:05:11] Yes. We, we've seen that. But in aggregate, and for the most case, no. Like that channel's gonna, like you go up to 2% of your overall media mix, 3%, where like you can just get so much more impact out of the 97% going to Meta and Google. Um, and so the trade-off becomes, uh, becomes twofold. It becomes a resourcing constraint, and it becomes a measure-measurement constraint around these channels being worthwhile pursuits in terms of, uh, uh, pursuing diversification meaningfully.

[00:05:40] Which is, okay, we wanna launch on net new channel A. Um, what we are going to need to do is, uh, is devote resources in the f- in the form of meetings and conversations and individual people to be able to manage those channels and build out the ads and, uh, and, uh, optimize and the platforms, et cetera. So we're gonna have to dedicate the resources.

[00:05:59] And then two, we're going to need to, uh, have a measurement, uh, framework and, and do some measurement work to really understand the true impact of this channel. Because as we all see, the incrementality factors of every channel is, is widely disparate, and so we have to get clarity on that piece as well.

[00:06:15] To where, again, like if that channel is in aggregate Maybe becomes 2, 3, 4, 5% of your media mix. Like, is that trade-off worth it relative to dedicate the resources and the, the focus on these core channels that can produce a lot more? And, and for a lot of brands, the answer is still no. Like it's, it, it, it potentially isn't, potentially isn't worth it.

[00:06:34] What's changed though? So what's changed is we've devoted a lot of our, uh, tech and resourcing as it relates to Statlas into automa- automation around the, the media buying and building on these platforms. So we have push to build, built in Statlas, connected to the ad log, which connects to, um, the DAM, the digital asset management sort of system for all of our brands.

[00:06:52] So we can take-- We're, we're literally launching thousands of ads a month per b- uh, uh, per individual brands in, in many cases, um, through this system. Um, and the tech is enabling this workflow in a way that it was, that was not enabled before. And we're, we're-- we built that around Meta, and now it's expanding to now push those same exact assets to TikTok and YouTube Shorts and all the other 9 by 16 vertical placements, right?

[00:07:14] So the resourcing constraint is just becoming less and less of an issue in the, in the wake of n- the platforms and, and how consolidated they're becoming and automated, and then the, the tech that enables pushing them that way. And then the second piece is measurement. Um, historically, to get a really good measurement read on a channel, uh, uh, working with a, a high-level measurement tool, um, could cost you on the low side, $5,000 a month to most likely $10,000 plus a month to do incrementality, geo holdout testing, like get a really good stat sig experimental- experimentally driven read on net new channels and the impact.

[00:07:53] And so you're like, "Okay, I'm gonna spend 10 grand on the measurement solution and the resourcing and spend on the channels. Is that worth it?" Well, that's not a constraint anymore either because we've built our geo holdout, um, uh, solution and the data team supporting it internally here at CTC as a part of our core workflow in the profit engine, where it, it's, it's, uh, the resourcing and the, uh, cost constraint on, on both sides and with the measurement is just not as-- it's not a, a, a big barrier anymore.

[00:08:20] It's much lower cost. It's much more streamlined. The tech is enabling so much more of the workflow that to launch AppLovin and say, "Maybe we get $15,000, $20,000 a month of spend on this channel," it, it pencils. It actually makes sense in terms of a pursuit relative to the resourcing and measurement solutions available.

[00:08:38] Where previously, again, uh, we're gonna get the $20,000 in spend, but 10 of that we're gonna spend on a measurement solution and resourcing. Then after COGS, like you're, you're losing money on that pursuit relative to like what the upside impact is. So those are the things that have changed as it relates to channel diversification and what that enables.

[00:08:54] And I think it's really important to sort of tee up, um, what historically has been more of a barrier from our perspective and what is enabled now to make that less so the case.

[00:09:03] Richard: Yeah. So yeah, just then to recap, like there's specific types of tooling that you need to have in place in order to make channel diversification make sense, at least at a smaller level. So that's something that we-- we're tooled for now. But obviously, as you're alluding to, there's another type of diversification that is, if anything, more critical moving into, um, moving into Q4.

[00:09:26] And so we, we had talked a little bit before hitting record here that it's like it's creative diversification in a sense, but it's not the way you think. So talk to us a little bit about what-- how, how to approach diversification in creative here.

[00:09:38] Luke: Yeah. So creative vers- diversification. We, um, creative volume, uh, if you were to sort of put us on, in like a, the, a spectrum line of like diversity versus volume in CTC, like probably we get indexed more towards the like volume side of things. Okay, why do, why do we, why, why do we do that? Well, di- diversification of creative as a pursuit in and of itself is, um, is a really challenging, and we'd argue because of the subjector- subjective nature of it, is like a setting that out as your pursuit.

[00:10:12] Like I want to have increased the diversification of my creative, um, by making more creative assets from this source. Like that's a, that's a, uh, that's a faulty premise to start out at. Um, because like what does that even mean? How are you measure, how are you measuring it? Um, Meta's getting better at, at showing us, um, how they track, uh, the entity IDs on their side, and so more of that will become transparent.

[00:10:35] But, um, what, what gets challenging is that the volume-- These things are not disconnected. Like you need increased volume to be able to, uh, to be able to have increased diversification. But if you are consolidated in terms of your sources of that creative volume, you will not have the diversification necessary.

[00:10:54] So, so our perspective on what i- what does helpful diversification as it relates to creative look like for e-commerce brands is that you have diversification of production sources producing a high volume of assets. You have at least three different sources of creative in terms of people, vendors, platforms that you're getting creative from.

[00:11:18] That is how you get, uh, diversification from those assets because you have varying producers, um, that lend to different creative types and different creative styles and all, all the different things that come from that versus like, "Here's our creative resource. They're gonna make 500 ads this month, and we're gonna ask them to make diverse creatives.

[00:11:38] Okay, what do, what do, what does that mean, right? Like, how, how are we, how are we defining that as it relates to this one source versus we have, um, this platform, this agency, this, these internal folks, et cetera, um, that each service dis- different production f- production forces and are ramping up volume from each of these sources while also continuing to expand out the amount of, uh, sources that are, that we have available to us.

[00:11:59] And what we all see happening with this in the wake of TikTok Shop, Tribe, um, Yuka, um, has, uh, they just r- released-- They've historically been sort of more TikTok Shop-focused platform. They've, uh, recently released, like, their sort of Tribe equivalent. Grow is doing something similar. So all, all these platforms that are creator, creator marketplace-oriented, what we've seen is like, like, the, the, the way to achieve the highest volume and the largest diversification of the creative is, like, if you're using these platforms and these affiliate networks effectively via Tribe, TikTok Shop, Yuka, et cetera, you can be getting 1,000 ads a month, and they can be coming from 300 different production sources, right?

[00:12:41] Like 300 different creators each, each making three ads each, you know, the 3.3 ads you have, whatever the math. So like, but, but that's how you get to a place where you're like, you're making thousands of ads a month, and the brands that are growing effectively, that's what we're, that's what's happening.

[00:12:53] Instead of a year ago is you're creating 100, 200 net new ads a month in the ad account. It's like, "Oh, that's pretty solid business. You know, they're doing, doing this well." Now, brands are creating 1,000, 2,000 net new ads a month in their ad account. Um, and those are coming from production sources that are, like, in the hundreds, right?

[00:13:10] Because you have this network of creators, plus you have static imagery coming from this source, plus you have your internal team doing this, and you have, uh, s- a wide variety of how your brand is being commu- how your brand and product is being communicated and perceived in the various channels because it's coming from so many different perspectives and sources that that is how you solve for diversification.

[00:13:32] You don't solve it, solve for it in a, like, grid format. Let's get of our 1,000 ads, let's get i- this many images, this many videos. Let's go for these five personas, and then let's try to do these different hooks, and, like, now we're gonna get a diverse source. Like, the production source needs to be completely different to achieve the level of diversification at the level of volume necessary for the business.

[00:13:55] Richard: Yeah. No, I mean, yeah, it's a good point because what you're avoiding is a situation where you have like, say, a creative strategist, like one creative strategist in a seat trying to come up with a bunch of different angles or put on a bunch of different hats and be a bunch of different people or whatever, which is essentially what you're asking them to do, and instead just ask, actually find 300 different sources who are going to have different perspectives and different ability or different, um, kind of methods of creation and that sort of thing.

[00:14:20] So, um, talk to us a little bit about, and you've already alluded to some of it, but what the typical... Like, what a typical, like, healthy creative diversification stack looks like in terms of like what sources are these people pulling from?

[00:14:35] Luke: So, uh, so I think most recently what we've oriented around is that brands who have three to four distinct production sources for their creative, that's like a helpful starting point to get to, which is, one, you need an understanding of how many ads you need to create every month. We've created the creative demand model on our side to get an assess- uh, an, an idea of what that, what that looks like.

[00:14:54] Like, do you need to be creating 200 new ads next month or 2,000 new ads a month, uh, based on your spend degradation, how you're performing against your efficiency targets, what your spend target is nex-next month? So all the things that are necessary to look at. So getting an understanding of the volume of, of, of the, uh, of what the job to be done is.

[00:15:11] And then from there, um, having three to four, uh, or more, uh, distinct production sources to be able to get to that plane of volume is a good place to start for anyone to think about. Okay, what is a source that is gonna create our lo-fi UGC video content? Okay, we're gonna start, we're gonna start there.

[00:15:29] What is our source that's going to create static, uh, branded imagery using existing assets that, that we have? Uh, what's the source that's gonna create motion graphics based on our existing library of assets? And then what's the source that's gonna be like our affiliate network of, uh, creators that we're, that we're reaching out to?

[00:15:46] Um, so that's a, that's a helpful starting point. But, um, and sort of inherent into that is one of the production sources, uh, should be Um, some version of, uh, creator, creator-led percentage of GMV, high volume, high diverse, you know, sort of network of, of creators that are coming through, um, that is gonna be achieved through a combination or focus on either TikTok shops, Tribe, Yuka, or one of these creator marketplaces where you're able to get 100 creators making, um, making a handful of ads each on behalf of your brand.

[00:16:22] That really is gonna get you to the place where you have 100 different production sources for your brands that are making 1,000-plus ads a month, right? Like, that's the, the building-- Thinking about it that way, I think it's the, uh, the stair-step approach sometimes is necessary for brands to think like, "Okay, we need to create 500 new ads a month based on, based on where we're at.

[00:16:43] We currently create 50. Could we get to 100 next month and add in one new production source?" Like, that's, that's helpful. Like, let's make progress towards a goal. But I think the exercise for, for most people is like, how, how do we get 1,000 new ads a month or more from 100 or more different production sources, being production, uh, again, vendors, uh, individuals on the team, or network, and/or network of creators, right?

[00:17:07] So 100 different sources, 1,000 ads in terms of the output. What is, what is gonna be necessary to be able to get there, I think is, it is an important exercise for any brand to think of, 'cause sooner or later, that's just, it's just, that is just a bar now of what, of what brands are doing and how they're show-showing up in, in social.

[00:17:25] Um, and it's why we've, we've leaned in pretty heavily on both TikTok shops, launching that division, as well as an affiliate management service where we're leveraging Tribe and Yuka and some of these platforms to be able to manage this workflow for brands so that we can help you get hundreds of ads a month from all these different production sources, 'cause it, it just is what the, what the bar is now in terms of what this l- what this looks like.

[00:17:49] Richard: So, um, and, and maybe this goes a little bit without saying, but obviously it's, it's almost September, as I said at the top of this episode, and Q4 is v- rapidly approaching. So talk about like the, the importance of kind of nailing this down in the next six to eight weeks, let's say, if you don't already.

[00:18:07] Um, obviously, like there's producing Black Friday creative, that's obviously part of it. You know, there's, there's a volume, um, an add- sort of an additional volume element there. But talk a bit, a little bit about like this particular part of Q3 and its importance for, for prep.

[00:18:25] Luke: So on creative, um, what we all know is that a good chunk of our top-performing ads over any marketing moment or holiday period are still gonna be your top evergreen ads, right? And it's gonna be a lot of this lo-fi UGC content that's driving, driving the outcome. So, um, that's the impetus to find this, find this right now because it's gonna take, it's gonna take a number of weeks to ramp up this workflow, get to the output volume necessary.

[00:18:48] Um, also that's gonna be very new customer acquisition-oriented over these next few months, and all those new customers are potential repeat buyers for you in, in Q4. So ramping up that production prior so that you have, uh, a lot of evergreen, high-performing evergreen content, a lot more new customers in the mix, uh, is, is important.

[00:19:05] The, the other piece of it as well is Um, over the course of a couple months, you're going to-- the, the, the math on creator-led content is the same as any o-other content, which is, uh, which is that, um, 3% of your ads are gonna account for 80%-plus of your spend, right? This, this outlier, this outlier idea, which is you're going to launch 100 creator ads and three to five of them are going to be the meaningful volume drivers for your account, like the standouts.

[00:19:39] Um, and so the, the important workflow over the first-- these first couple months is gonna be launching this high volume and then identifying, "Here's my top 20 to 30 creators that are, that are making content that's resonating with my customer, that's selling product, and that I can double down on to increase content from them specifically," um, potentially put them on retainer, negotiate structures with these folks so that we can lean into this a bit more.

[00:20:04] Uh, and then what you can do as a result of that then is around the Q4 timing or leading up into that, do content programs with those individuals oriented around your offer strategy, right? Like you have an early bird offer running and you have your top 20 creators and you're gonna work with them on creating, uh, on creating content specifically for your early bird offer in the back end of October or early November and then ramp you up to BFCM.

[00:20:28] So you're gonna have all this great top-performing evergreen content, uh, that you can continue to build on, but then you're gonna be able to hone in and sift through who are my top creators and then how do I create a strategy with them, um, where I'm able to get content from people that I know are top-performing that's actually focused around these m- these core marketing moments for us, in addition to mixing that into our, you know, static, uh, headline, uh, biggest sale of the year ads that we're gonna have running in the mix as well, right?

[00:20:55] So that, that's, that's important. On the creative, on the creative side of things, it's going to-- it's just going to pay, pay dividends for the brands that are engaged in this now or, or, um, dedicate, you know, these next two months to really ramping, ramping this up. And, and the same holds true for the channel diversification topic as well, which is, um, the channels-- there, there's a number of channels that we're, um, pretty interested in over the next couple months and, and helping brands push against.

[00:21:21] AppLovin is just con- gonna continue to be in the mix. TikTok, um, there's not a ton to be said there. I think it's for brands running on shops, running GMV Max is incredibly important. It's just as part of the-- it's just as part of the game. Um, and then the TikTok native ads platform as well is, uh, uh, is important.

[00:21:39] Um, but pr- uh, heading up into Q4 YouTube demand gen and then connected TV are two other, two other areas that we're indexing, uh, against with brands and putting together some pretty, um, interesting things. We've, we've, um, been working on, um, a deeper partnership with Mountain on the CTV side and then with the Google folks as well.

[00:21:58] They were, they were out here and we, we have, we have some, um, pretty interesting things that we've been testing with some brands over these recent months that we're putting together that is YouTube demand gen combi- combined with connected TV, geo holdout, incrementality testing for those channels over these coming weeks in Q3 to lead up to Q4, um, that we're, that we're excited about and that we've seen impact from.

[00:22:19] So like the, that's the, that's the reason to do any of this over the next couple months. It's kind of the, kind of the window to pursue the biggest, uh, highest impact opportunities you see on the channel diversification and the creative diversification sides.

[00:22:33] Richard: That's right. And as, uh, and as those things roll out, of course, we will tell you about them here. Um, but yeah, I think the, the overall point being that, like, these diversification init- initiatives have now become critical if you wanna kind of dig up all the opportunities you possibly can before, uh, Q4 actually hits.

[00:22:50] And I mean, it's hard to believe that we're in that season again, but a- a- as time goes on here, as we approach, we'll get more into the specifics that you mentioned, Luke, uh, kind of syncing with your creators on offer strategy and that type of thing. We'll definitely dig into that more and talk a little bit about what the flow of Q4 looks like as we approach it.

[00:23:06] But, um, cool. Yeah, Luke, anything else you wanna hit on this topic?

[00:23:11] Luke: No, I think it's, uh, the, yeah, the diversification word, um, is, uh, is one worth getting really specific and clear about and defining, um, because then the subsequent actions for you, your organization, the partners that you work with, that the action is gonna follow how you define this thing and, and what-- and the importance of it within the organization.

[00:23:34] So for us, creative diversification is diversification of production sources, uh, that, that gets you to the necessary volume of a- ad output to achieve your business goals. And then channel diversification is a, is a, is a math problem, right? Like, what is the necessary resources and then measurement, uh, solutions necessary to engage in this channel based on the aggregate data set?

[00:23:57] How much of our total spend do we think it could make up? Is that trade-off worth it relative to it? And the bar is getting, being lower and lower relative to the cost and sort of the barrier to entry, which is why we're doing, we're seeing doing more of this make sense, uh, in terms of the, in terms of the, uh, math, the math problem and the output on the other side.

[00:24:15] But that's how we think about it. That's how we think it's, uh, the most helpful to engage with this topic and these areas, especially as we head into the rest of Q3.

[00:24:23] Richard: That's right. Yep, and if, uh, you're looking for somebody to put this in place for you, somebody who's doing it already, somebody who has the tooling to make channel diversification and expansion and creative diversification make sense for you, you know who to call. Commonthreadco.com. Hit the Hire Us button.

[00:24:38] Let us know you're interested. We would love to talk to you, uh, particularly if you are an eight-figure brand, about building this system for you. So, um, but yeah, that's gonna do it for us, uh, for this time, and we're in Q3, almost to Q4, and there's gonna be a lot more on this topic as we go. So all right.

[00:24:54] Take care, everybody. Thanks for listening.