We’re Expanding the Prophit System…

[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 Common Threat Collective. And I'm joined as I always am, of course, by Common Threat Collective CEO, Taylor Holliday. Taylor, what's what's going on over there? How are the headphones treating you?

[00:00:13] Taylor: well, doing well, Richard.

[00:00:17] Richard Gaffin: I'm so glad to hear it. 

All right, folks. Well, look, we got something to talk about today. Which is if, if you've been a, an avid listener of this podcast for the last little while, you will be familiar with the profit system, which is essentially the at least thus far, it's been the sort of financial and growth strategy planning.

Service that we provide that essentially builds a growth plan for you based on certain inputs that doesn't include a service aspect of our business, right? So it's, you build the profit system and then from the profit system, perhaps you go to us as an agency to execute it. But the point is we're expanding the profit system into something called profit plus.

And what I'm here today to find out, Taylor, what is profit plus what can people expect from it? And why are we building this?

[00:01:02] Taylor: Okay. So I, my 40th birthday, you know, was recently, you didn't make it down, Richard. I think you had a previous commitment. But one of the things I received as a gift was this,

[00:01:14] Richard Gaffin: Oh, wow.

[00:01:15] Taylor: a,

[00:01:16] Richard Gaffin: Framed spreadsheet, the frame growth

[00:01:18] Taylor: It's a, it's a framed spreadsheet. Okay. And it is a view of what we called our growth map, which was the origination of what is now the profit system.

And it was given to me as a gift, partially as a joke of like, this is your life's work, here you go on your 40th birthday, you can hang it on a wall. And really though, it's indicative of a thing that we are after, which is sort of The Holy Grail culmination. Of all of our years of providing this idea of growth to our customers, which is a way of being a way of working that everyone can step into.

And like a beautiful orchestra have clarity of the notes that each team member is supposed to play every day to produce those sweet sounds of profit. And that is what I think we are every day trying to create. Is a broadly applicable system that allows for the nuance and novelty of each business to be dealt with.

But with enough structure that you can consistently improve the system and consistently produce effective results across a myriad of different customer types. And we are continuing to evolve this. So if you go back to the end of last year, we have like a six part series where we talk about the different phases of the profit system that goes from a journey all the way from.

The shareholders defining their desires and expectations for the business from a very philosophical and emotional point of view, all the way down to how a media buyer behaves. And that workflow, that illustration of the deepest philosophical idea down to the most practical daily execution is really what has to occur here to bring this thing to life.

And so we are continuing to evolve this. And so today is just. Another step in that evolution. And so why should you care? Well, I think that the opportunity is whether you think about using our specific system or not. I think there's a ton to be gleaned from these structural ideas to be implemented for yourself.

Richard, you just came out of a webinar that was. An example of extracting a portion of this system and teaching it to people for their own individual application. So why I encourage you to stay with us and listen to this episode is one to put the system to scrutiny, to see if it's something you'd be interested in for yourself of using our specific workflow, but also because I guarantee there's some portion of this that you can extract and.

Apply to how your organization works in pursuit of growth.

[00:04:05] Richard Gaffin: So maybe let's then, if we're putting that question to people, let's double back and ask ourselves or rather recap for us, maybe Taylor, what the profit system is as it already exists. And then we'll talk about what's maybe being added on top. And also is that Thor's hammer? Is that another. 40th anniversary, anniversary, birthday gift.

[00:04:22] Taylor: Yeah, I actually don't know why I have this, but it was just on my desk. Oh, I know why I was Our VP of Paid media, Tony Chop over here. I gave it to him as a gift because I was helping him to embrace a little bit more conflict in his leadership. And so this was like sort of a symbolic representation of that idea.

Anyways okay, what is a profit system? It is the idea or no, it's not even the idea, it's the practical process of creating a financial plan. So, often referred to as FPNA in our world, financing fund, financial planning and analysis, where you get to a financial budget that the business can build its cashflow and expectation around that's connected to marketing.

And it's the, the, the bridge between those two worlds is what a profit system is. So we participate in helping brands build a more data driven financial model that includes modeling their existing customer cohorts, as well as deciding the budget that they should set for their media dollars using a spend an AMER model.

So it's a data driven financial model. Financial plan that then allows for specific tactical executionary plans to be plugged into it such that you get to an end output, which is a daily set of metrics across every business function that everyone can measure action and optimize against. All throughout the month, working cohesively to achieve that financial goal.

That's what the system is. It's a, it's a way of working towards a clear financial goal as a marketing department inside of an e commerce business.

[00:05:52] Richard Gaffin: Gotcha. So, I mean, it sounds like if it touches every single business objective or rather business unit, how could it possibly expand?

[00:06:01] Taylor: Well, I would say that there are an expanding set of services here at CDC. So one of the things when we think about this model is that we would Build visuals or expectations of certain portions of the business. Like let's say retention as an example, where we would say, okay, in this period of time, the expectation and therefore the obligation of the team responsible for driving existing customer revenue growth is to produce this many orders at this value in this time period, based on this email plan, and we'd say.

You give us the plan and we'll map it against that expectation. Show you where any gaps are to let you go fix it. CTC has stepped through that door now. And we're actually able to say, okay, we have a way of planning email and SMS that connects very directly into this system and brings forth some of the common ideas, which are.

Daily expectations of every email and sent daily measurement, that of every result for every campaign and flow, and then corresponding responses and actions against them, as well as communication associated with it. So that's a new plugin. Additionally, we've added SEO where now the idea of. Organic traffic from channels like organic search and shopping is now another element block that we can plug into this system and go, okay, every day, there's an expectation of how much traffic and therefore revenue we're getting from organic search from which corresponding pages, and we can action against improving those numbers every single day with plans and expectations for the future that all connect back up to that financial plan.

And then the third thing I think that we're enriching is more on the creative front is continuing to think about what we call volume enablement or improvements to the system that allow us to be more effective at connecting in particular the creative and media plan to the inventory and product demand plan.

And that's where the bulk of this work is happening for us and is going to be evolving now and into the future.

[00:07:56] Richard Gaffin: So obviously that's very exciting. I think like one thing that you, you mentioned before we hit record and you kind of alluded to it earlier. Well, it sounded a little bit like turning 40 had made you a little bit philosophical about thinking about what this particular system means to you and talking about it as a way of being.

And one thing that you said is that the goal of the profit system is not just to develop a financial plan or not just to build a series of goals or whatever the goal of the of the profit system is. essentially to act like the score of a symphony where every single person who's playing in the orchestra or whatever knows what note to hit and when maybe expand on that a little bit and and maybe it's kind of obvious how this starts to bring that to life a little bit more but I think that's maybe expand on how that is the goal of the profit system and how that's something we can provide people.

[00:08:44] Taylor: If anyone's ever heard of. EOS it is a system called operator or entrepreneurs operating system. Okay. And it was a, based on a book called traction that was written and what it attempts to do is to build organizational workflow from goal setting to planning, to execution, such that business owners have a way of working that they can lean on.

That's been proven to be a great way to structure your organization. What kind of meetings should you have? When should you have them? What should your goals be? What should leaders goals be? How do those ladder up to an organizational goal? And it's a way of working that I've watched. What, what, what sort of always fascinated me is the way that people talked about it.

It was like someone gave them. It'd be like, if you didn't, had never learned about food, and then all of a sudden someone gave you a diet and said, this is a way to eat that will make you healthier. And what kind of freedom that would give you from what I watch entrepreneurs go through, which is like utter confusion about what to do all the time.

And this constant insecurity that you're doing it wrong. And if I could think of any. Sort of core experience that I've watched all of the customers that come to us have it's how do I develop the confidence that I'm doing the right thing, that I'm making the right decision at the right time and not just running about in this constant state of insecurity and anxiety about the next action I'm supposed to take and what to prioritize and when it's overwhelming all the time.

And I watched EOS sort of do this thing, which is like, it's always spoken about in this really glowing, appreciative way for the people that use it. And I have sort of dreamed of a system similar that we could sit and say, okay, e commerce growth is this very niche world we live in. We don't claim to understand how to solve running a dentistry or a restaurant or, but we've spent 12 years after this very specific problem of what does it look like to build a growth organization and how they should work?

I just don't think anybody has tried to do it more times than we have. Candidly, like we're in the, like the 0. 1, 1, 1, 1, 0, 0, 1 percent of the world who have tried to solve this problem this many times. So the idea that we could possibly build. Not a set of tactics. Cause I think this is the thing where people get off course is that there is no one way to do anything.

And that's sort of this like thing people say, and then they just use that to discard all ideas and say, everything's of equal merit. And I say, okay, no, no, no, forget the tactics for a second, but how would we get to deciding which tactics? How would we decide when to deploy them? How would we know if they are working or not?

Yeah. What would the trellis be on which we could make a bunch of decisions. And so I think that could be our sort of legacy gift to the world, so to speak, would be something that could be an applied, whether in house or agency in a way that gave people confidence every day that they were moving towards the goal that they have for themselves.

[00:11:34] Richard Gaffin: Well, just, yeah, even cause, cause you know, the thing that comes to mind, of course, is that like nothing will ever go your way. So it's impossible to know if you're making the right choice or not. Ultimately. However, having any kind of indicator that you're moving in any sort of direction at all, it feels to me like it's, it's, Relatively unique in the space.

Like, the, the example that comes to mind is like in, in for soldiers, for instance, they go through all this very specific training and what everyone will tell you is that as soon as a battle happens, all of that goes out the window, but the training has to be in place first, the training has to exist to go out the window at all.

Otherwise you're just running around like a chicken with your head cut off. Right. And so it's, it just feels like in the world of marketing in e commerce, there hasn't been that sort of system or structure up to this point. I don't know.

[00:12:21] Taylor: Yeah. And again, we've spent so much time trying to think about. Think about how to teach people how to think, right? And I think in some ways, that's what this does. It creates a hierarchy of information. It gives you a sort of single source of knowledge. Constant access to data that you know where to go to look for answers, the sequential steps when you discover a problem, but then inevitably, yeah, you're right on any given Thursday, all hell could break loose and the sets of corresponding behaviors may be disassociated from that system in that short period of time, but it always gives you a place to come back to.

To reevaluate the success of your actions and then to decide again, what to do. And I've just watched our output and our ability to onboard people into our own work, go up so dramatically as we say, Hey, yeah, you come in and we work in this way on this system and these tabs, and this is your sets of responsibilities.

And here's where you interact and where they interact and where your job ends and there begins. And those kinds of lines just. Make the world able to be navigated with so much more clarity.

[00:13:21] Richard Gaffin: Now I was thinking of that even as doing the creative webinar earlier and just have as a former creative strategist, how incredible it feels to come across like a system, a structured way to think about problems to solve problems essentially is what it is. Whereas like the, the sort of previous iteration of this was just again, to throw whatever at the, at the wall and see what sticks and hope that you have a hit, so to speak, but to have this sort of system to take these kind of abstract ideas, like creative and turn them and say like, Hey, these are very specific restrictions that we're giving you so that your output is always in the right direction, even if it isn't actually like a winner, ultimately.

[00:13:58] Taylor: And I think when you, when it comes to answering questions One of the things that's really important to get closer to answers is to have a way in which you have a question that needs to be answered. So I'll give you an example of what I mean, like how many ads should I make in creative every month?

Okay. Well, before you can get to the right answer, you have to have an answer that you can explore the results of trying to behave within the context of that consistently and repeatedly in an attempt to answer it, and then you have to evaluate the results and then you can refine from there.

And try again. And so by creating a consistent set of behaviors, you actually get a broader set of responses with which to evaluate the actions and evolve them. And so our, our system and process is not a fixed thing. It's a thing that can change. And we're developing even more ways in which we have some machine learning components to ask, like, which metrics are we predicting most accurately, most often, and where are we wrong?

And what would we do in light of that? And, but that set of cohesive behaviors gives you a clearer thing to measure. Whereas in an agency. If everybody's doing something different, it's very hard to figure out what's working and what's not because everything is anecdotal and singular and it's, it's response.

So the collective action actually breeds faster evolution in ways that I think is also useful for a system to have

[00:15:19] Richard Gaffin: that makes sense. Maybe let's talk a little bit, like speaking of the ways things evolve or the way that the group comes together and changes things maybe like, would it make sense to dive a little bit into, I know we talked with Travis already about SEO, so we've covered that. Let's talk maybe a little bit about email.

We've talked somewhat about like how we hold each email accountable to. Profit or to revenue rather, but maybe let's unpack a little bit, how we're been a paid organization you know, our entire lifetime, how, what is it, what's different about expanding into organic and thinking about that in this context?

[00:15:53] Taylor: in many cases, the shortest distance between a business and immediate money. Is in access to the customers that already has a relationship with. Okay. So this is really important in that there are, there are times where you need revenue now and times where you're sort of planting seeds for revenue in the future and businesses need to be taking both of these kinds of actions all the time, but relative to your present need, one action can be superior to the other.

And as you progress through a plan. Sometimes you're way ahead of the present revenue. And so you need to sow seeds for the future. And sometimes you're behind on that plan and you need to realize revenue today. I just did this tweet about the idea of a contingency sale. You're reaching the end of the month and you're behind on your revenue expectation.

And you need to squeeze the sponge, so to speak, to realize revenue today. Well, having control over that lever gives us more optionality to ultimately solve the riddle, which is the monthly expectation of financial result. When you can only control one lever in that system, you have less control over the realization of the ultimate goal.

So paid media is one thing, but paid media has real limitations in its ability to Create spike revenue today in an efficiency level. It can, you can do it at a marginal cost, but you can't really do it at a marginal gain. So the shortest lever to marginal gain is usually email SMS, where you come up with some way to speak to people for free and capture or squeeze.

And usually it's just bringing revenue forward. So it's just, it's a temporary solution, but it's, it's a lever nonetheless. Similarly, If we don't control any of the long term levers, that is the sowing of future seeds. This can be from brand awareness, level media, or it can be from SEO type actions or longstanding influencer that we are constantly dependent on the most volatile version.

Of media create or revenue creation, which is paid media. So all of these are just like tools in the tool belt of winning the game. And the more of them that you're able to control, the more optionality you have to solve the problem.

[00:18:10] Richard Gaffin: Gotcha. So what what do you feel like the next frontier is for the profit system? Let's say,

[00:18:15] Taylor: I know, I know. I I'm very clear on this. It is the connection between the media plan.

[00:18:22] Richard Gaffin: Yeah.

[00:18:23] Taylor: Creative media and inventory. Okay. So I'll give you an example. So, we have our concept log is the central media, our creative planning section of the profit system. And in the concept log, when you design a campaign, you select an offer, an audience, and an angle.

We've talked about these things before right now, offer. Is just a thing you write into a cell. Okay. But here's the problem. An offer is a reference to what you are selling. It has to actually be connected to product in some structural way. And so we have. Taken and gone really deep now on product data structure and data hierarchy.

So this is, this is like a little bit nerdy, but this is actually really important and it's why I care so much about the underlying data structure of e commerce is that in Shopify, as an example, there are all these different categorization. All this different categorization and syntax that you can apply to a product.

So what I mean, there's product name. So let's imagine it's the crusher ANC to headphone. Okay. That's the name. There's the variant. This is black. Okay. So that's a color. It's often size that's variant. Then there's category. Okay. This could be, you know, the category for school candy might be headphones is the category.

There are other collections that it could go in, like maybe this is new releases or bestsellers. These are collection level attributes, right? Then there's type is another data structure. So there's all these different ways that. Product gets organized into this matrix of data structure. And the most common ones, like if you go look on any website on Shopify in particular, the two most common in the URL structure are collection and product name.

So it's usually collection forward slash collection, name forward slash product forward slash product name. Okay. So when you run an ad. You're actually running to some landing page associated with some set of products. And so those media dollars need to be assigned in the plan against that set of products, which have some inventory position and then expectation of future sale and whether or not you should be running that offer at that lever has to be in some way connected to the availability of that inventory.

So at, at, at the media planning level, what we're building in is In the process of planning a campaign, when you select offer, you're now selecting from an existing structure of product data that has a reference to the available inventory, as well as the future demand plan. So what that means is we always ensure that we're selling product that's available.

And available at the level consistent with the amount of spend that we have planned on it. And two, if we can get this media plan built out far enough such that we know which, how many dollars we plan to spend three, four or five, six months from now. Now we can actually use it to inform our purchasing of inventory, which is sort of the key And dream of this is that the media plan informs the demand plan informs buying inventory.

And that's really where this all comes to life in the most beautiful fashion.

[00:21:37] Richard Gaffin: I can't wait. CFO, CMO and COO all, all together in one, right? All

[00:21:43] Taylor: my dream is that I, as an agency want to impact the largest financial decisions you make. I think it's where I can create the largest value. There is no bigger check written inside of an e commerce business than the one to purchase inventory. So if I want to create the most value possible as a service provider, I have to make that decision more financially accretive to you.

And if we can do that, then we're going to be the most valuable partner in the market period.

[00:22:09] Richard Gaffin: right. Well, keep an eye on the space. Taylor, any other, anything else you want to hit on this?

[00:22:14] Taylor: I would just say like, Come and get a demo of this. Like there's a whole thing that involves a combination of software spreadsheets, human planning connection, where at the very end of getting the profit system, what I love about it is that you don't have to work with CTC is that you can actually run this for your own team.

So if you're an entrepreneur or a CMO or somebody who's like, man, I would love to figure out a way for my growth team to function. That would be have the tools built in and we're, we're building measurements into this incrementality into this. Like there's every component of what you need exists here.

And I would love to get you, walk you through it. I'd love to get feedback. I love talking to marketers about how they work. This is part of why I love doing this podcast. So this is a thing we're spending every waking moment to constantly iterate on. And we'd love for you to come check it

[00:23:00] Richard Gaffin: That's right. Yep. Hit us up on Twitter, email podcast, the commentary code. com or just check out commentary code. com and hit the high risk button and let us know that you're interested in the profit system. And we'd love to talk to you. All right, folks, appreciate the time and we will see you all next week.

Goodbye.