Listen Now

Last week, Taylor sat down with Sean Frank from Ridge and Tomer Tagrin of Yotpo to discuss the future of ecommerce SaaS companies. This week, Taylor joins Richard to clarify an important point from that discussion — brand equity is still the difference maker for both SaaS and DTC businesses. 

Show Notes:

Watch on YouTube

[00:00:00] Richard Gaffin: Hey folks. Welcome to the e commerce playbook podcast. I'm your host, Richard Gaffin, director of digital product strategy here at CTC, and I'm joined today by Taylor our CEO here at Common Thread. Taylor, what's going on today, man?

[00:00:11] Taylor: Not much, man. Just another week back at it. Little league playoffs this week. So trying to stay focused on the work, got a coach's thread going, brainstorming it up, but

[00:00:20] Richard Gaffin: Oh yeah.

[00:00:21] Taylor: fun.

[00:00:22] Richard Gaffin: Nice, man. Cool. Well, I think like, so one of the reasons we wanted to jump on the mic, I mean, I guess we do it every week, but particularly this week. So for those of you who obviously listen to the podcast last week, we dropped an episode about SAS pricing and, and essentially my understanding anyway, is that the, the central debate was, is is SAS pricing going to zero essentially was like, let's say one side of the debate and on the other was Taylor saying, well, of course this is not going to happen.

And so.

[00:00:48] Taylor: started more as is Yopo evil. That was probably the more the general topic.

[00:00:52] Richard Gaffin: Right. Oh,

[00:00:53] Taylor: evil with your pricing? But and I got

[00:00:56] Richard Gaffin: Yeah. No, it's a wide ranging conversation about the, is capitalism evil or not? We really, it really got big, but I think particularly like Taylor, what you wanted to talk about today was. Maybe reinforcing a little bit of your side of the coin or, or rather talking a little bit more about the role of brand within the SAS field.

So maybe just for those of us who missed last week's pod, sort of recap the context and the background of this particular discussion.

[00:01:22] Taylor: Yeah. And I think this was worth following up on because it got as much engagement, I think, as any. Content we put out recently, they obviously clearly an industry topic that people are interested in. And part of that was because I think it was a really candid, authentic conversation between people who had been a confrontational passively, maybe on Twitter in the past.

And so I think people appreciated that. But the idea was just that there are a series of products, particularly in the SAS world that Have overtime and it, and Tomer, I think addressed this really well, which was like, as they've run into TAM issues, in other words, they've got about as much of the market as they can get.

The way they've tried to grow is by growing the billable or increasing price, which makes sense. You have to continue to find revenue growth somewhere. And there aren't new costs. If there aren't new customers to be had, then you have to try and extract more from the customers you do have. And so price is one lever to do that.

And so I think some people have found to be an exploitive practice. And I think in some cases, sales teams have gotten a little predatory and overaggressive and really working hard to try and coerce people. Maybe they feel like sometimes into contracts that don't benefit them. And so I think at the heart of that was just a question about how should software should, Be priced and it kind of brought it into a conversation about is software for e commerce, a good business model.

Are these things all going to be commoditized? Is this sort of the inherent flaw of software is that it just is, is open source in some way and anybody can replicate it really quick. And so what's, why would you ever pay? Why would you ever choose any option, but the cheapest one? And it was a wide ranging conversation that I think was interesting.

And for me, like my position in it, we don't run a software business very intentionally because I do think there's some flaws in the business model, but But what it allowed us to, to my position was, is to try and insert a little bit of my perception of how people buy these tools. And I think this relates to our business as well on the service side, which is what goes into a purchase decision.

And I think Sean's opinion was very utilitarian, just in the sense that like, it's this very logical decision between price and value. And my experience of it is it's much more than that. There's a lot more that goes into that decision. And I think I also have been out at events recently and sort of contemplating why do I go to events?

What's the point there? And I think it relates to a similar idea, which is that the perception of the thing matters and human relationship affects perception. And this industry is fairly small and you can actually influence it pretty dramatically by getting the right people saying the right things about you.

[00:03:42] Richard Gaffin: okay. So maybe let's, let's unpack that element of I'm trying to think maybe how to, how to frame this, but, but maybe it's just like, this is part of a larger discussion about brand. As sort of a inherent value of a product that you buy. So let's talk about that.

[00:03:58] Taylor: that's right. And I think that's a good place to go with this. Cause if we think about trying to bring value here to listeners who may be running consumer brands or agencies or. Software businesses for that matter. Here's what I would encourage you to consider. Is that what people say about you in the intimate communities that you're a part of actually affects the value of your product.

That that's what I mean is that we think of value often very strictly in financial terms. But there is absolutely valuable for people experientially in the relationships that they. Participated in business is that you will pay more to be alongside people that you'd like that reinforce positive things about your own identity.

These are all realities that actually affect purchase decisions. If someone is a. Shitty asshole, pardon my language. And they, but their product has great value. People will opt out of that. It's not, it often can't be overcome if the experience of it all, or if like, I think another great example is like we're watching something really interesting play out right now, where on Twitter this week, there was a debate between Moiz Ali and Andrew Dudham, who was Andrew Dudham's the founder of hymns, and he made a.

Statement on Twitter that was sort of, addressing Israel's behavior as genocide of the in Palestine. And Moise responded and clearly that the political disposition of an organization affected people's buying decisions. You had people on each side saying that they were going to. Unsubscribe or subscribe on the basis of these opinions.

And that to me is just this illustration that your product is more than its ability to create economic impact for its users. It's, it's bigger than that. And we could think about this on a consumer product software or services level that it really matters how people feel about using your thing.

[00:05:48] Richard Gaffin: So let's talk about then maybe, because what strikes me is like, there's a difference here between, you know, like the famous experiment or whatever, it's like you put two buck Chuck into two different bottles. And one of the bottles of wine, you know, says clodo, whatever. It's like really nice. And then the other bottle is just like, obviously two buck Chuck.

People will try both. They'll swear that the one in the nice bottle tastes better. Right. So there's that one element of, of brand perception may be taken to, to an extreme, but then with a product like, or with a SAS product, Where it feels to me like there's more scrutiny on the ROI of this product as compared to like, let's say DTC, like a consumer good.

What do you think the inflection point is where people start where the cost consideration is great enough to overcome any objection or rather any sort of attraction to the brand? Let's say because of those things, those

[00:06:42] Taylor: That's a, that's a great, there, there are products that in, in, in and of themselves are so fantastic that like the human component is diminished and they are, they can stand on the merits of their own feature set. Now, I think what we're dealing with in our world is that that's not true of email.

That's not true of SMS. Like you can't create a product that's that differentiated. And so in that case, brand, and in particular, I'd say the, the managed service component of the product. Who are the people that I interact with? How helpful are they? Are they kind? Are they available? Those things begin to round out the perception of the business in entirety.

And you begin to ascribe value to things beyond the feature set of the product. And I see this all the time as it relates to how people interact with agencies a lot too. There's this sense by which you have a relationship in some cases with the people involved. And that Has an effect of how you see the experience of the service.

And the classic example is like, I just think that like. I'll use BG and I, why do CTC and Igloo and now Skullcandy have such a productive relationship as a service provider and vendor? Well, I think it's rooted very much in mine and Brian's relationship with each other, where we care about each other and if there's issues, we're candid with each other and we solve it.

And so, All the downstream work sort of is born out of that foundation where we both trust the people we hire, et cetera, et cetera, et cetera. So rooted in that is like, is CTC service functionally different between CTC and skull candy than it is between CTC and other vendors? Well, maybe at the fringes with different people in different.

It's stuff, but at the heart of it, no, it's not. So why is it so productive? Well, because it's rooted in something more than that. And I think that you could sort of replicate that idea. Why do people love send lane all the time? Well, they see Jimmy working his ass off to go build relationship and caring about people and showing up and appreciating them like in a way that's different than.

Is the email UI of the interface better than it's that's not how people are thinking about that.

[00:08:45] Richard Gaffin: So in an environment where there's no like. I guess like the ROI difference between one platform and another is sort of negligible, perhaps it's like, they all do functionally do the same thing that the, actually the only differentiation here, just kind of like in any other glutted market is brand customer service.

Really? It

[00:09:01] Taylor: Yeah. And I would say that that's like, that's, it's more true in those industries, but I, I think it's true in every industry, which is just to say that a product is more than it's technical features. A business is more than it's technical features. It is the sales organization. This is the thing I think about again for CDC is that I am so proud that people's first touch point into our business is Peter and Matt, like as human beings, right?

Like it's, it's really critical. I think about our marketing collateral, this podcast, like I'm proud of the sequence of events that lead to the actual technical experience of the product. And so. I think all of it matters. And there is that, and that's why you can build big businesses off a brand.

That's why I actually believe that Yotpo and what Tomer is doing will reconstruct their image in a way that more often, more people will say more positive things about them. And the tidal wave of that is a just reduced friction in the sales process and the continuity of use that can offset a few hundred dollars a month, or even maybe a thousand dollars a month.

Yeah. There is real value assigned in that kind of interaction.

[00:10:08] Richard Gaffin: reason that maybe this came to mind in this discussion, does that have something to do with the fact that like, or my understanding anyway, of like the basis of the discussion is it's like, is the way that like, say some of these SaaS platforms are raising their prices. Or getting revenue or whatever, unethical in some way.

And as part of what we're saying here is that like charging more for the brand gap is totally a reasonable thing to do. Or like, how does, how does this, that aspect of it play into the more ethical part of it or the ethical 

[00:10:40] Taylor: so I think there was sort of tiers of initially we sort of established that. The idea of it being evil was sort of a joke and that what, what Sean does believe is evil is deceptive pricing, right? Like if I lead you to believe that I'm creating value, so he brought up Rev shares from apps like tap cart was the one that was pointed out a lot where.

We're going to take a percentage of revenue that we generate, but that revenue generation is really sort of just like an attribution, like accounting fugazi. Like that feels really deceptive in a way that attempts to misrepresent the value creation. And I think that's like, that's fair. Now, I would push back that.

Like, I don't know. I think there's probably a genuine argument on the other side that there is value being created and you'd have to really suss that out in every case. I don't know. It's truly an attempt to deceive, but in the event that somebody was attempting to deceive someone on the basis of price, yeah, that feels into a category of like unethical.

Right. So we sort of like drew that line. And then there was just like, Is this too expensive? Are you charging too much and you're going to be undercut by a cheaper option? And should somebody just always take the cheapest commoditized? If the layer is truly commoditized, do you just accept the cheapest option?

And this is where like, I would be really cautious of that as an idea, because I think that sometimes the gap between the cheapest option and the next level up. Assuming that next level up is because there's an investment in the care that's required to interact with the customers, that it may be worth it.

Even though the feature set and therefore the economic result of the business is the same. Now I think about this a lot with how people interact with. Meta or Google reps, where I'm willing to bet that there are a lot of people that would pay additional money, higher CPMs, even potentially in the event that they got a hands on rep dedicated and available to them in the event that anything were to break ever.

So there is just a reality that both customer service as well as just do I like getting on the zoom call with you is worth some amount of money. That's not directly quantifiable in the tech specs.

[00:12:47] Richard Gaffin: Yeah, definitely. Well, I mean, I think, you know, it's in, it's in the name service. Right. And I think that there's, there's like a huge opportunity to create a gap there. Like the idea that there could ever be true parody with on the service side. That just seems like ridiculous to me. Like the idea that like, there's always an opportunity to do better in terms of what the customer experience is

[00:13:08] Taylor: I mean, I think. I, like, I think a lot about like Chick fil A and In N Out, right? As fast food restaurants with like, you could argue till your head blew in the face about whether the food is actually different food, but there are tomatoes and lettuce and meat and bread. But in both cases, what you have is an intentional effort to front, move front forward, a disposition of the people that interact with you to be positive, appreciative, grateful, and energetic.

And like, that's worth money. It just is. And so, so I think that in, if I'm running a software business, part of the playbook of how I get to getting more value for my business is I offer you experiential value, not just economic value. And I, you gotta do both, no doubt about it. But there's a lot to be said for, and, and in the human survey, if you run a marketing agency, it's probably even more important is that.

You know what sucks? Getting on a phone call every week for hours with people you don't like. Like that sucks. Like that is a draining of your life force. Like nobody wants to give away time to people that they just find to be. Antagonizing, like, it's just not something you'll do. And so, there's just a real value in that piece of it.

And, and, and also that, so that's like experiential customer service. There's also like identity here, which is just to say that we all believe something about ourselves. And if you can make it really clear what you as a business represent, Maybe that's a political ideology, like representing some side of a global conflict, or maybe it's like, we are a profit first organization.

So like CTC right now, I would say is finding itself in dispositional harmony with a very specific subset of customers. You don't come to CTC as a customer. If you're like, you know what we want to do growth at all costs, ramp it up and lose money in the process. Like, We're not going to be the client vendor for you, but if you show up and you have a preference for profitability and you really want to understand contribution margin, all these things like that ideological shared ground actually matters because that's part of your identity and working with CTC reinforces that disposition.

So you want to give people something that says something about themselves when they use it. It's why like. Sent from iPhone or sent from superhuman are really empowerful brand statements that get built into products. Because me using superhuman says something about me as the kind of person I want to present myself as in the way I work.

[00:15:35] Richard Gaffin: Yeah. Okay. So I want to dive back into this discussion of brand a little bit deeper, just as it, particularly as it relates to, let's say DTC brands, because that's most of our listenership. And I think it's interesting that we're having this discussion today. Cause just a few days ago, I watched Just an interview with Scott Galloway, the NYU marketing prof, who's I mean, he's a, he's a haver of hot takes for sure.

But one of this is probably from a few months ago. But one of his hot takes is that the era of brand is dead. The idea that you can create parody for a product or, or rather not parody, but rather create differentiation for a product because it's because of brand rather than because of product. Those days have have been over for a while now.

It's not the sixties anymore, whatever. But obviously like the claim that you're making is in some ways feels like the polar opposite of that. And then in some ways, maybe potentially there's a golden age of brand that could, or that maybe needs to happen as products become or product parity becomes more common.

So maybe speak to that a little bit. Like what,

[00:16:29] Taylor: so here's I Like, there's some really obvious, like we work with liquid death. And like, I don't know that there's a better example in the world right now of a brand that just said like, we will just be a brand and like the product will all be secondary to this idea of who we are as a brand.

They sell water. Like I don't, another category I think about a lot is, you know, you've seen people do this, like, taste tests where it's like underneath here is like five, I did it with my kids, like five sports fruit drinks. And in that box, like they're going to taste them all and they're going to try and guess which is which, and they can't do it because the product's actually truly indistinguishable.

And I think prime is a great example of this right now, where you watched. As like that brand almost like ebbs and flows relative to the perception of Logan Paul and the interaction of it in entirety, like, but the sports drink is not the product at all. So there are probably categories and Scott Galloway probably lives a little bit more in the tech world where that certainly does matter.

But I think a little bit more in terms of the functionality. And if you were, you know, going to I don't know, some, Very tech forward obligation to you better make sure the product works. Like I think about my car, like a car actually has to do the things it says it does, but even that, like, it's just really like, I don't believe for a second that the ideas in my head about why, for some reason right now, I'm interested in the Rivian SUV has anything to do at all with the product features.

Like, like, I don't know the first thing about cars, but there's something about the way it's been presented to me. Who has it, what it's like, it's cool. This, that, that makes me want it for some reason. And I think that's entirely.

[00:18:21] Richard Gaffin: okay. So let's, let's maybe dive into some thinking about something like maybe practical applications of this, like particularly for a DTC brand, because think that the opportunities for. The sort of customer service or experiential thing that you're talking about with it, say a SAS product or with an agency like commentary collective, there's, there are fewer opportunities to do that in such a, a literal way, maybe.

So talk about like, what, what does brand building look like in 2024 for a DTC brand and how it can sort of apply some of these

[00:18:49] Taylor: So, so I actually think that there is a massively underrated component. Building, especially in the early days, that is really, really human. And it has a lot to do with events and communities, right? So I'll use Kayla as an example, and then I'll talk about one of our customers. So Kayla in the early days We did a lot of events and one of the events that we did early on was anything related to The firefighter games or the police, any police officer events.

Like we would go to these, be very present to the point that by like year three, one of the founders, Ted at one of these events, they, they, and I forget the circumstance of why this occurred, but they were doing weddings and he was like the officiant of like 50 firefighter weddings at this thing where he had become a part of the community by being there.

And what happens is a very small group of people who have wildly positive things to say about you inside of a tight knit community where word of mouth travels very, like with very little friction. Can have a massive corresponding effect. I think about this right now with born primitive. It's a client of ours.

And again, when there are communities that are sort of already networked with one another, physical presence can be really impactful. So they, there was this issue related to a flag that was hanging at a fire station and born primitive committed to sending flags to a bunch of fire stations. And they, they did this digitally.

So it wasn't this, but the object was physically present. And in reality, it's only going to affect a small number of people. In like, if you think about, if you measure things on like a reach basis or a total impression basis, but inside of this really loyal community of people, the value that gets associated and assigned to the business is a lot.

Right. And I think in the early days of a brand finding those communities where we used to call them like digitally identifiable, where there, there are attributes that people put their hand up and say, I am this. And they aggregate in groups with other people who do that. Right? So if you think about, go look at what Facebook groups exist and have large followings of them where people, I create an identity statement and then aggregate around it.

If you are physically present amongst those groups of people that are networked well, and events is a really good way to do this. And this is why I think we've made an extra effort to be present at events this year in our industry. Cause I think our industry is like this, you can get disproportionate reward and value.

In goodwill assigned to your business in a way that won't be immediately obvious in like your Facebook Ross on day one, but it will till up a soil in a way that I think really matters into the future but it's just, again, it's very human. It's like we used to do this thing. I'll give you another example at Kalo that we did is that when we identified a community like CrossFit.

One of the things that we'd looked at were who were the most influential companies in the space. So which brands already had made traction and had authority in the space. And we would send product to all their executives because often the executives at those companies. They traverse those spaces with authority and credibility.

And so if they are advocates of yours, you sort of get brought in alongside And so there's just this way in which you build a relationship map of if my brand could have relationship with humans in the space of my category, which humans would I want to say good things about me? And how do I go build human relationship with them?

And by doing that with. 20 to 30 to 40 people, you can make a massive impact on the, the, the end outcome of your business.

[00:22:39] Richard Gaffin: One thing that, that we used to talk about a lot when I was doing brand work was the idea that, like, what you're trying to replicate is the experience of, like, when you, when you live in a small town and everybody knows, oh yeah, this is the lady who runs the jewelry store around here. This is the guy who runs the, I don't know, he, The sporting goods franchise or whatever it happens to be.

But you have a personal relationship with them. You see them around town, you have a human relationship with them. Right. And what you're trying to do with brand is to replicate that personal. Not like, how do you create a vibe around your brand such that it feels almost like a person that people are interacting with that they trust and that they can, they can themselves have a relationship with, and you know, there's ways that whatever logo and.

Colorways and brand in that sense, play into that as well. But obviously the easiest way to do that would be just to go be a human around other people in person at these types of events. But

[00:23:30] Taylor: think, I think if you watch, just watch our industry play out. And I think what you'll see right now, especially in the SAS world is that the people that get the most praise relative to their behavior. I think Aaron's trying to do this right in joining the, the team at Fermat, like you're trying to take people who the industry views positively, and you're just trying to go out and build goodwill by caring about them.

And like, none of that has anything to do with the technical aspects of the product. Like, of course, at the end of the day, that has to matter too. So this is not an either or, but I do think in the conversation that we had last week, so much of the narrow focus was just on like price product. And if that were the case, like our consumption, if that was the thing that mattered to us more than anything else as consumers, our purchasing behavior would be very, very different.

In in the way that we actually buy things.

[00:24:26] Richard Gaffin: right on. Cool. All right. Is any, anything else you want to hit on this?

[00:24:30] Taylor: No, I think, I think it is a part of this, that when you think about the price of your product and the gross margin, okay, this is, this is the last thing I'll leave you with is that if you don't have great margin right now, a lot of times we think about solving that problem primarily through trying to reduce your cost of goods, go back and negotiate more with your manufacturer, do something, but maybe, maybe There's a way to increase the value of your brand and therefore create more margin in the product by building more goodwill and doing it through service.

Like maybe that's, that could be another thing to consider is that maybe my thing could become more valuable. If the experience of interacting with me became even more delightful. And so that's another way to think about creating value that really like brand, I think a lot of times is just the gap between what something costs and what you can charge from it.

And so I think that if you don't create some level of brand, that will get driven down to the root, hard cost. And if the only way to maintain that, I think is what we're talking about. And it has a lot to do with that idea of brand.

[00:25:35] Richard Gaffin: That's right. All right, folks. Go out, go out and be a human. That's the the moral of the story here. All right, everyone. Thanks for joining us and we'll see you all next week. Take care.