Listen Now

In this episode of The Ecommerce Playbook Podcast, Richard Gaffin and Taylor Holiday dig deeper into the Spending Power Model … breaking down why the next dollar you spend doesn’t always produce the same return.

They explore concepts like the marginal frontier (the moment your next dollar becomes unprofitable), spending power, and how to balance short-term profitability with long-term growth. Taylor shows how to evaluate whether to optimize for revenue, contribution margin, or lifetime contribution, and why these decisions always tie back to your financial goals.

You’ll learn:

  • What the “marginal frontier” really means for your ad spend
  • Why not all dollars in create the same dollars out
  • How to use spending power as a scale metric for your brand
  • The tradeoffs between maximizing revenue vs. profitability
  • How this framework helps align boardroom strategy with media buying decisions
Show Notes:

Watch on YouTube

[00:00:00] Taylor Holiday: I want to say that one of the questions that I get a lot is I would like to stop spending at the moment, my next dollar becomes unprofitable. Okay? The moment my next dollar becomes unprofitable, that's where I'd like to stop. That's what the max contribution margin point is.

It's the moment in which the next dollar becomes unprofitable. And you can see this, right? So if we say, I wanna maximize month one, contribution margin 80,147. The second I increase spend at a 1 5 7, I've deteriorated contribution dollars.

[00:00:36] Richard Gaffin: Hmm. Yeah.

[00:00:37] Taylor Holiday: I have two. Okay? So, so this is that line that is what is often referred to as your marginal frontier.

That's it right there. So when you hear this phrase, and I I, one of the things that would be cool to do is even like kind of put a visual line here that's like your marginal frontier is here. This is that when you tip over this line, you've now chosen to start deteriorating your month one profit in the name of some longer term gain.

[00:01:03] Richard Gaffin: This episode of the Ecommerce Playbook is brought to you by Yotpo. Whether you wanna build trust, drive, retention, or both, Yotpo makes it easy to start and impossible to ignore. Yotpo reviews help shoppers say yes faster with AI powered summaries and filters that answer their questions before they bounce.

Perellis saw a 25% jump in onsite conversions. That's not a feature. That's revenue Yotpo loyalty keeps them coming back with rewards that feel personal perks they actually care about and smart segmentation that drives real behavior. RMS Beauty boosted repeat purchase rate by 66%. Third, love saw 56% lift in revenue per user.

If you're interested in learning more Yotpo is offering 10% off annual reviews and loyalty plans through September. Just mention Common Thread Collective on your demo to redeem this offer.

[00:01:50] Richard Gaffin: Hey folks. Welcome to the Ecommerce Playbook Podcast. I'm your host, Richard Gaffin, Director of Digital Product Strategy here at Common Thread Collective, and I'm joined once again by Mr. Taylor Holiday, our CEO here at CTC Taylor. What's going on today?

[00:02:03] Taylor Holiday: Nothing, man. Just got done with our, uh, it's the first Wednesday of the month, so we're doing our little client updates. So we do a, like a webinar with all our clients explaining all the things that are coming in the month ahead. So, got some exciting stuff. You podcast listeners will get it a few weeks from now.

Gotta give it to the paying people first. But, uh, so yeah, it's exciting to kind of look at all the things that we've got coming down the pipeline and be able to share it with people.

[00:02:23] Richard Gaffin: Awesome. Yeah. Um,

[00:02:25] Taylor Holiday: So

[00:02:26] Richard Gaffin: I think what we wanna talk about today is similar or rather the same

[00:02:30] Taylor Holiday: same topic.

[00:02:30] Richard Gaffin: talking about over the last few weeks, um, which is why we're good. It's good that we're cooking up something new so we can switch topics at some point, but

[00:02:36] Taylor Holiday: Yeah. Well, look, the reason we're gonna keep talking about the spending power model is a few things. One is. It is generating a lot of interest. Like I think it's clear that people have, um, a need for this. They want to better understand the decisions they're making about what their budgets are and why, like, that's just like, and, and so, and two is that this moment in particular is like the highest value realization of that idea, right?

You're gonna spend more money over the next 90 days than you will probably the rest of the year. So being clear on that decision is worth more now. Than it is in any time. So the fact that we're offering a free version of this model is like insane value. That's like, why would you not get a free.

Spending model, like what? What is, what would be the reason not to take it is kind of the idea here. So I wanna continue to show you angles of value that it can be used to bring. If you go back and listen to the last three episodes, we've gone through a number of them. We've got two more that we're gonna go through.

One of which today is this idea of the incremental value of the next dollar of spend, and how to sort of wrap your mind around that not all dollars in produce the same dollars out.

[00:03:34] Richard Gaffin: That's right. So, um, just to and clarify then, like, obviously Taylor just mentioned the offer, but in case this is the first time you're tuning into this, um, we're offering free spending power models spend in a MER models to select eight and nine figure brands. Uh, over the next little while. Um, this is, like Taylor said, there's no reason not to do this.

If you're a brand that qualifies, this is going to give you a. Added layer of clarity to what's going to happen over the next few months that I think is absolutely critical, uh, for this Q4. So let's kind of jump into what we

[00:04:04] Taylor Holiday: Yeah, and it's just really cool to see like, like again, it is like no, no risk to be having someone do a bunch of cool data science for you and check it

[00:04:11] Richard Gaffin: Exactly. At the very least, you're going to learn something genuinely new about your business.

[00:04:15] Taylor Holiday: That's right. That's right.

[00:04:16] Richard Gaffin: okay, so let's just

[00:04:17] Taylor Holiday: Because there's.

[00:04:18] Richard Gaffin: this is a,

[00:04:19] Taylor Holiday: Things we talked about yesterday,

[00:04:20] Richard Gaffin: on, I think last time you spoke about this, which is the

[00:04:22] Taylor Holiday: client

[00:04:23] Richard Gaffin: uh, or the incremental,

[00:04:24] Taylor Holiday: direct reports.

[00:04:26] Richard Gaffin: this spending power model reveals that to you.

And the idea

[00:04:28] Taylor Holiday: How does that actually,

[00:04:29] Richard Gaffin: dollar you

[00:04:30] Taylor Holiday: that in

[00:04:30] Richard Gaffin: hundred

[00:04:31] Taylor Holiday: clearly she does.

[00:04:32] Richard Gaffin: will not be worth the same to you. So Taylor, let's, let's break down exactly what that means.

[00:04:37] Taylor Holiday: Yeah. So I'm gonna share my screen and if you're following along at home, uh, on the, in the car, I'll do my best to verbalize what I'm looking at. But if you're on YouTube bonus, you're getting, you're getting some cool visuals today. They're gonna help me explain this. Okay. So with the spending power model.

We've been talking a lot about this idea of understanding the individual budget number that you want, so the total budget. So I wanna spend $107,000 at a 3.5 A MER. That's my goal for the month. But I think sometimes what gets lost in understanding this idea is that dollar one that you spend in advertising and dollar 100,000 do not produce the same yield.

So all the other phrase for the spend, an A MER model is a yield curve. It's this idea that every dollar in is a, is going to degrade in return at some level of efficiency. Now, it's not necessarily going to be perfect in this way. In reality, it might be, uh, a little bit more jagged in its realization of value.

All these scatter points represent individual months of spend on the X access and a MR or new customer revenue divided by spend on the Y axis. So you can see this sort of plot and there's a seasonality component to it. Uh, and then if I highlight the yellow, you get a modeled level of return.

For that. Now in this case, someone went in and uh, was looking at what it would be like 25% over model, which is a cool feature of the tool is that I can actually say like, if I want to outperform the model, I can just adjust that line. So we're gonna go back to zero. The actual base case for the model, you'll see there much closer to the actual dots.

So you can see for the period of month I've selected, there is the selected mo uh, moment. There's the modeled line. If I just look at it itself, there was last year's performance. This is the historical set of dots. And then here's the point that I currently have selected for this month. Now, what I wanna illustrate is that we can pick lots of different points along this line, right?

And we've talked about this before. I could pick, show me the point on the line that maximizes my revenue. New customer revenue at break even. So $0 of contribution margin. And you'll see down here that's 244,000 outta 1 5 5 generating $380,000 in revenue at. Basically $100 of contribution margin, basically total breakeven.

The, the point beyond this is where you would go negative, right? Um, I could also look at the sort of opposite of that, which is like, what's the maximum contribution margin on, uh, it that I could generate in this first month on this spend. So that would be $80,000 of ad spend at a 3.0 6:00 AM ER. So a lot less revenue, but a lot more contribution dollars.

Okay. Now the third option is to optimize for lifetime contribution margin. And you can see that this brand has a really good LTVA 3.5 multiplier on 105 A OV. Um, so $360 of lifetime value. So you're gonna get your max lifetime contribution margin being much closer to your max revenue number, right? That makes sense, right?

The bigger your LTV is, the more it's gonna make sense to spend all the way up to break even or even past it potentially for a business.

[00:07:48] Richard Gaffin: Right.

[00:07:49] Taylor Holiday: But what I wanna focus on today, 'cause we've covered some of that, is this column right here, incremental, A MER, incremental cac. And what this is showing is basically the slope of the line.

It's the next dot down the line, basically. And so it shows you, as you move up this $2,000 of spend, what is the incremental change in efficiency? From this point to this point, from this point to this point, and what that means is that you can imagine that this tranche of spend is blending down your overall or the incremental efficiency.

So if the overall efficiency of this tranche of 103,000 is 2 7 1, and that 180 drops to 2 6 4, that means that this $5,000 was spent at a 1.17. So you see how that's, that's answering this question of the next tranche of spend. What is the efficiency of that spend? Right? So does that make sense? So you can see that the, the $5,000, this is what happens to the blended average.

This is the return on that specific tranche of spend.

[00:09:01] Richard Gaffin: Right. That

[00:09:01] Taylor Holiday: So yeah, I think, I think

[00:09:03] Richard Gaffin: basically.

[00:09:04] Taylor Holiday: uh,

[00:09:04] Richard Gaffin: breakeven at this point.

[00:09:06] Taylor Holiday: well worse, right? Because if, if break even is way down here at a 1 5 5. If I'm spending at a 1 1 7, I am generating negative contribution margin in the name of more revenue, in the name of more lifetime contribution, but at the cost, and you can even see it of first month's contribution.

So from 80 down to 76. Right, so I'm actually deteriorating contribution margin in month one. Increasing on the other side here, contribution margin in the lifetime because the number of orders is going up as well. So my, I'm increasing my customers, I'm increasing my revenue, I'm decreasing my short-term profitability.

I'm increasing my long-term profitability. Make sense?

[00:09:52] Richard Gaffin: Yeah, so this gives clarity. Then of course on, unlike what we've been talking about in terms of each tranche of spend has its own efficiency that degrades as you kind of grows. then we also, what you're pointing out is we have sort of three options, or three lenses through which to view that.

One is, uh, max revenue. One is

[00:10:09] Taylor Holiday: Uh, totally. Yeah.

[00:10:10] Richard Gaffin: is

[00:10:11] Taylor Holiday: I

[00:10:11] Richard Gaffin: lifetime contribution margin.

[00:10:12] Taylor Holiday: Right.

[00:10:13] Richard Gaffin: I'd like to take that and

[00:10:14] Taylor Holiday: Yeah, I'm,

[00:10:15] Richard Gaffin: The sort

[00:10:16] Taylor Holiday: Everything, if

[00:10:17] Richard Gaffin: one of

[00:10:17] Taylor Holiday: we're aligned, that's right.

[00:10:18] Richard Gaffin: in what, what circumstance do you want to maximize one over the other?

[00:10:23] Taylor Holiday: Great question. Um, so first I, I want to say that one of the questions that I get a lot is I would like to stop spending at the moment, my next dollar becomes unprofitable. Okay? The moment my next dollar becomes unprofitable, that's where I'd like to stop. That's what the max contribution margin point is.

It's the moment in which the next dollar becomes unprofitable. And you can see this, right? So if we say, I wanna maximize month one, contribution margin 80,147. The second I increase spend at a 1 5 7, I've deteriorated contribution dollars.

[00:11:02] Richard Gaffin: Hmm. Yeah.

[00:11:02] Taylor Holiday: I have two. Okay? So, so this is that line that is what is often referred to as your marginal frontier.

That's it right there. So when you hear this phrase, and I I, one of the things that would be cool to do is even like kind of put a visual line here that's like your marginal frontier is here. This is that when you tip over this line, you've now chosen to start deteriorating your month one profit in the name of some longer term gain.

[00:11:28] Richard Gaffin: All right.

[00:11:29] Taylor Holiday: So why would you wanna do that? Okay. Well, um, there's a bunch of reasons. If, if you always invested under the purest thesis of capital allocation, then what you would do is you would always maximize. It's mostly the return on invested capital in the window at which you're creating an obligation for return.

So like let's say it's a year, then you would always maximize for lifetime contribution margin at a one year, you would go to one year. And you would maximize to that point. You would calculate this and you would say, alright, this is the highest and best use of my capital on a one year basis is to spend 138,000 to generate 228, 220 $2 of contribution margin, which is over a hundred percent return on invested capital.

Right? Like that's a really good use of money. Now, all of this depends on though, the reason people don't behave that way, they just don't always allocate to the purest, is because they have short-term cash needs, they have top line revenue goals. The calendar year defines a game that your EBITDA is measured in.

So in a, in other words, like as we get towards the end of this year, a lot of people don't want to trade November profitability for next year's. Margin, right? So a lot of times they're getting to the end of the year, they have some profit expectation that's in a budget that's under obligation, and so they're looking to, in particular in Q4, maximize the realization of value today, and that takes them to this max contribution margin number, which is much less spend than people realize.

In most cases,

[00:13:13] Richard Gaffin: Right.

[00:13:14] Speaker 2: Want more conversions, more repeat purchases. Of course you do. The trick is picking a provider that helps you do more with less yapo reviews help shoppers say yes faster with AI powered summaries and filters that answer their questions before they bounce. Driving real results like pers 25% jump in onsite conversions and yapo loyalty keeps those shoppers coming back with rewards that feel personal.

Perks they actually care about and smart segmentation that inspires action fueling outcomes like RMS Beauty's 66% boost in repeat purchase rate. And third, love's 56% lift in revenue per user Interested in learning more yacht PO is offering 10% off annual reviews and loyalty plans through September. Just mentioned common Thread Collective on your demo.

[00:14:01] Taylor Holiday: If brands are looking to maximize contribution margin, they're almost all in month one. They're almost always overspending Q4. So this just depends on what is your business strategy, and this is where we talk about all the time if you wanna execute a great marketing plan. And if you as a media buyer wanna do this, well, it starts in the boardroom.

It starts in the shareholder meeting where you're defining the financial realities of the business that then can flow down into this kind of decision making. And without those things being connected, you will have people wandering off to different places.

[00:14:30] Richard Gaffin: Right. Right. So, so basically like what you wanna do or a way we could simplify that is in the boardroom, you want an ans a simple answer to the question, which of these three things do we wanna maximize over what window of

[00:14:40] Taylor Holiday: Well, the way it's really gonna be framed is what's the financial goal for the year? That's just how business operates. It operates in these segments of 4 20, 25. We have some top line and bottom line goal that somebody's expecting you to hit. Bonuses are paid that way. Distributions are paid that way. The IRS taxes use that way, like the game is just really, uh, organized in these calendar years, and so likely that's the first place that governs it.

Now, if you're an individual proprietor, you own a hundred percent of your business, then maybe you have less of that kind of obligation. But for 95% of business owners, the 2025 financial goal is the governing barometer here. That should. Be used to make this decision. Um, now there, in many cases, we are coming in and helping people to sort of like let go of that, to try and reset the health of the business on a longer term horizon, to be more aggressive, to restart a growth engine.

Like, so it, it really depends on where you're at as a business, what the goal is. But without that conversation, you can't possibly make this decision.

[00:15:37] Richard Gaffin: Right. So yeah. Right. We we're helping with people with this twofold. One is maybe defining the goal. The other is if the goal is defined, showing them how to actually actually execute against it. So you'd mentioned before that like. The most common scenario when people come in is they discover that they have been overspending against whatever goal that they had set for themselves before. Um, what are, what are like some other scenarios that you discover using these tools?

[00:16:00] Taylor Holiday: Um, I think that, uh, the understanding of what is the cost of revenue growth, so let's say it's the opposite. Let's say you're down on top line revenue, and we say to you, okay, well the problem is your new customer revenue file is shrinking. So you need to restart your growth of your new customer revenue.

You're gonna have to invest in that for a while, and then eventually you'll be able to start to realize more of that latent existing customer revenue that's offsetting, let's say, break even new customer acquisition. And so to be able to say like, Hey, if we wanna go after max new customer revenue, it's gonna come at the expense of $280,000 of contribution margin, um, in, in whatever period that we might be after.

Is that okay with you? Can you afford that? And if so, then we should be more aggressive in this pursuit, in this time because it's gonna have the best long-term growth opportunity for the business. Especially if you have this much LTV. Now it's very different if you're like a hard goods business with very little LTV, but in most cases, like maximizing lifetime contribution or maximizing revenue are going to be good decisions for high LTV businesses.

And again, this is why we come up with a sort of golden rule that. If you're a returning customer, contribution margin can cover opex, then you can fund fast growth because you can be running that at breakeven or a slight loss. So these are all just different business scenarios that like, and this is where like when people think about like, is setting a media budget an easy task?

No, it's actually really not. It requires an intimate knowledge of the choices on hand. That's what the model provides and their implications on the financial realities of the business. Most marketers are not equipped to help you work through that.

[00:17:39] Richard Gaffin: Mm-hmm. Right. No, I'm thinking like that kind of goes back to our point that we've been making over the last few episodes about. The clarity or the types of clarity that this provides. So of whether or not you have this tool or not, you have to make these decisions. Most people are making these decisions.

It's almost

[00:17:53] Taylor Holiday: Commend changing their list size.

[00:17:55] Richard Gaffin: what this does is it gives you maybe for the first time some

[00:17:58] Taylor Holiday: Oh, okay.

[00:17:58] Richard Gaffin: needs to happen. I think like if you scroll down to, to our, uh, I think this is such like an interestingly stark, table here, because you see the max contribution margin you spend, what is that?

[00:18:10] Taylor Holiday: 67,000.

[00:18:11] Richard Gaffin: K to generate 53. And a half K, um, bottom line, right? if you spend 68 K,

[00:18:19] Taylor Holiday: So,

[00:18:20] Richard Gaffin: will

[00:18:20] Taylor Holiday: so what we would say then is it's

[00:18:23] Richard Gaffin: down and down.

[00:18:23] Taylor Holiday: really important that they improve with content and strategy to retain people on list,

[00:18:28] Richard Gaffin: more

[00:18:28] Taylor Holiday: actually stick around and also find ways to bring in

[00:18:31] Richard Gaffin: decision about what

[00:18:32] Taylor Holiday: Yeah, and, and really you're deciding do I wanna spend an extra $121,000 to generate an extra 111,000?

[00:18:41] Richard Gaffin: right.

[00:18:41] Taylor Holiday: one like that and understanding that that's the choice on hand.

But what it does is it produces 13,000 or no, 23,000 more dollars over the course of a year. Well, is that a worthwhile trade? I don't know if it's, I don't know if it's right. Like the delta in these isn't large enough on a lifetime basis. I think to play with this kind of risk, this tends to be, 'cause the other thing that this causes is this makes next year's, year over year comp harder.

Because the likelihood is that this, with without some significant change in the underlying product set, it's going to be harder to produce the same efficiency. Next year, you're gonna be further out on the customer curve. There's gonna be likely more customer adoption. So when you redline this year. The other problem you're creating is a diff is complexity to next year's comp.

So if you can play the game at this level, well then there's room if you need to be more efficient or if the degradation falls a little to still comp up without much sacrifice to the top or to the bottom line. And, and that's really important to think about over time. The other thing that we can do, and I'm gonna show you this is a little teaser for.

How these models interact. You don't get this part for free, but if you work with us on a profit system, you would, is that once you pick a point on the curve, it actually has an effect on a second dairy metric, which is your returning customer model, right? So we can sync the results from your new customer model and look at the implications on your returning customer revenue as well.

And this, this is how we get to the overall p and l is to say, okay, if I updated that. How is that going to affect my returning customer revenue as well? And so that's, that's really the game is to build. We're building a full p and l here, and this is just one part of the stack of revenue. It's a really important one.

And for some brands it might be 80 or 90% of the revenue, but for other brands it might only be 30% of the revenue. So it really depends as well.

[00:20:33] Richard Gaffin: Okay. One, one thing I wanted to hit before we move on is, is just maybe it, it strikes me as like being incredibly complex. Decision process or, or very difficult thing to parse out how you balance. The three variables we're talking about are the three types of goals, the contribution margin, lifetime contribution, margin, overall revenue. Are there any like that you have or

[00:20:54] Taylor Holiday: It's not,

[00:20:55] Richard Gaffin: go? Like what are the things that you need to evaluate to kind of

[00:20:58] Taylor Holiday: there was one or two things that really, I think what happens is that when you, uh, don't think like this, the transition to thinking like this, uh, and understanding the options and the relationships is a hard. It's a maturing of the business from like, we're just trying to spend as much as we can and generate the most we can.

Like that tends to be the enthusiasm of early days, but once you get here, you can't go back. Like it becomes so empowering to understand the choices and you feel in control suddenly. Big PO coming, big cash outlay for X, Y, Z. Reason. I have choices about what to do with my business and what the corresponding impacts are, and then I can document that and realize that when I come back next year.

'cause I have my entire marketing calendar indexed. I have every, I know everything that got me here and I know why. The model is what it is. I know what I would need to do to beat it, and I know how to change it. And all these different elements that it becomes incredibly. Powering to realize that what fi what deep, intimate financial knowledge helps you to do is to understand how to move your business in the direction you want it.

Um, and, and sometimes to understand why you need to make dramatic changes. Because there is not the yield that you need in the system right now. And so you need to change something that can be equally as empowering. Again, good information begets good inspiration. That's true creatively. It's true in finance as well.

[00:22:17] Richard Gaffin: That's right.

[00:22:18] Taylor Holiday: Yeah.

[00:22:18] Richard Gaffin: Um, okay, cool. Let's, uh, let's keep rolling here then. So what else, what else does this reveal?

[00:22:23] Taylor Holiday: Um, so I, I think we, we talked about, um, this idea of the next dollar in, next dollar out as, uh, being the question that everybody has is like, that next tranche of spend, where do I go with it?

Okay. Um, the other thing that you'll notice. Is that, did you happen to notice, Richard, what the difference was in the spend gaps in the last model? Like where it was?

[00:22:47] Richard Gaffin: it's like 5K,

[00:22:48] Taylor Holiday: Yeah,

[00:22:49] Richard Gaffin: something like that.

[00:22:49] Taylor Holiday: and so the, the, what that illustrates is that the slope of the line for everybody is not the same.

Um, and, and this is, this is where we talked about like spending power. This was, this was the original, um, framing of that term was. Basically, how flat is your line? In other words, how quickly does your efficiency degrade as you increase spend? And what you'll find is that the best brands in the world, the ones that have really great brand quality, that are able to spend lots and lots of money, what you'll see is that their line gets really flat, like it starts to look like as you increase spend, efficiency doesn't degrade that quickly.

So you can basically say this, this brand, it's like a 10 to one relationship. It's $10,000 for every incremental dollar of cac. Okay? So you see that 400,000 to 410 is basically one incremental dollar of cac. Okay? So now if I go back and look at the, the last business we were looking at, you'll notice this is $5,000 for one incremental dollar of cac. So half the spending power, right? So this brand has half the spending power. So what do we mean when we say spending power? How much can you increase your spend? Before C degrades a dollar.

That's the metric. So the last brand was a 10. This one's a five. The best I've seen has been as high as 20. In some cases. A lot of brands, it's low. It's like two, right? And that is the idea of spending power. How many thousands of dollars can you increase your monthly spend before CAC degrades $1? Um, and that's, that's the idea, is that you want that line to be as flat as possible, and you do that through the biggest tam, with the greatest brand, with the most awesome creative are all the ways in which you flatten the slope of that line and increase your spending power.

[00:24:36] Richard Gaffin: So talk to me about the, the utility of that metric. So is it like, this is just in interesting information to have, like, wow, I can pat myself on the back. Our, you know, the gap between our tranches of spend is like $20,000

[00:24:47] Taylor Holiday: No, it's your scale. It's how fast you can grow. It's how fast you can grow. What you'll notice is that if you have a lot of spending power, these businesses are growing 30, 40, 50, 60, 70% because they can keep increasing spend month, over month, over month without integrating to a point where it's not profitable anymore.

Um, and so the, the businesses that are growing the fastest tend to have the highest spending power. They, they usually, one of the, like this, it's often just represented by the tam, the size of the market that you're serving and your product's potential to reach it, and the quality of the creative, like how diverse is it?

How many channels are you able to drive from? Like how many sources of relevant realization are they and how efficient are you? So those are all different pieces of consideration, but spending power, like when we do, um, we've talked about if we ever update the GQ score, like it's one of the key metrics, right?

Um. Is that it's the, the right now in GQ score, it's all ratios, but this is a volume metric. It like shows you power, it shows you it's better to be growing a lot, not just a lot of percentages, right? So the volume matters a lot, and that's what spending power tries to illustrate for you. And so. There's also this question, one of the things we wanna produce at some point is a benchmark spending power report that allows people to see like, what, what is my business's growth rate potential?

Well, it's related to your spending power. And so part of this is like when you think about the kinds of brands that do have great TAM and these other elements, well maybe I don't have that. Okay, what do I need to do? This is maybe now where I need to think about product extension or these other things as, uh, illustrative of ways that you can fix that problem.

[00:26:13] Richard Gaffin: Gotcha. Um, yeah, so I mean, it seems like it's clear that like this, this spending power sort of metric, whatever, however you sort of define what that is, um. reveals to you either. Oh, interesting. I could be pushing spend a lot more than I thought I would, or I clearly have some sort of like brand equity, like creative quality thing that I need to work on in order to increase.

[00:26:37] Taylor Holiday: Yeah. Us. Yeah, sometimes. Sometimes it's like, Hey, you have a long ways to go still. In some cases it's, you've already grown a lot and why have you been able to do that? Like, so it just depends on where you're at in the cycle of it. But it's illustrative. Usually if we come to us and they're, they, they're like a big, fast growing business, we'll see that, oh, like you have a lot of spending power.

Like you've been able to increase your spend substantially without decreasing your cac. Like, or alternatively, we see the opposite sometimes where you tried to scale and it just fell off a cliff. Like the slope of your line is like this, the second you pushed up at all. It just disappeared. Um, and that, that's where you go, okay, well what's happening here?

Is this a really small tam? Is it, do I have bad creative? Is the offer poor? Like, what is there immense competition? Why the second I try and push up at all does it degrade so fast? And I think that's, that's kind of like the illustration of, hey, there's some underlying issue here to solve, um, that isn't just about make the budget bigger next month.

[00:27:30] Richard Gaffin: Right. if you wanna discover your spending power, discover the incremental, let's

[00:27:36] Taylor Holiday: Your marginal front. Let me take you to your marginal frontier. Let me give you your spending power and we're gonna do it for freaking free for $0. Show up and let us just give you some cool data to look at and understand about your business.

[00:27:48] Richard Gaffin: That's right. As Taylor said at the top, there is no reason not to do this if you are an eight, nine figure business. So please get in touch, comment thread code.com, hit that hire us button, let us know that you want to chat. We would love to talk to you about this. Taylor, anything else you wanna hit on this?

[00:28:02] Taylor Holiday: No, that's it. We've got one more over the next couple weeks. We've got. We got a case study of a customer who's gonna talk to you about like, okay, how is this actually playing out in real life in their business? They're gonna come and share a little bit about how it's affected them, and then we're gonna talk about seasonality and how spending power is related to seasonality in very dramatic ways.

Luke's gonna be on for that. I'm gonna be out for a couple weeks going up to an accounting conference.

[00:28:24] Richard Gaffin: Wow, fun.

[00:28:25] Taylor Holiday: in the woods of Toronto to speak and share. Those are my, those are my people. I, I'd rather be the only marketer in an accounting conference than a marketer amidst thousands of marketers, you know, but also Commerce Roundtable.

I'll be there at the end of the month, so come hang. Say what's up.

[00:28:39] Richard Gaffin: Cool, folks. All right. Lots to look forward to. Alright everybody, uh, we will talk to you next time. See y'all.