May Report Card Shocker: Under Budget but Over Profit?

[00:00:00] Taylor Holiday: Our predisposition is a system that we're trying to press into, which is that we are not going to overspend,

[00:00:05] Richard Gaffin: Mm-hmm.

[00:00:06] Taylor Holiday: to waste your money. That is like a disciplined behavioral pattern that is well worn into CTC. It's part of what cost controls help to enable is that you do not waste spend. The challenge that we have to continue to press on the system to produce is to make sure we don't lack volume in light of that, and so in this case, we underspent by about 6%. revenue by 2%. So there probably was room to press more.

[00:00:30] Richard Gaffin: Hey folks. Welcome back 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 for a CTC client report card update by Taylor Holiday, who's our CEO here, of course, at CTC Taylor. What's going on, man?

[00:00:46] Taylor Holiday: Nothing mustache lives on. You didn't lead with the Costa Mesa Yankees.

[00:00:49] Richard Gaffin: Oh, that's right. Damn it.

[00:00:50] Taylor Holiday: Mustache is still here. 10

[00:00:52] Richard Gaffin: That's right.

[00:00:53] Taylor Holiday: Themm in four innings.

[00:00:54] Richard Gaffin: Oh my God.

[00:00:55] Taylor Holiday: over at Seaview Little League. So we're, we're rolling on to Thursday.

[00:00:59] Richard Gaffin: Oh wow. Okay.

[00:01:00] Taylor Holiday: no-hitter in four innings. Just, it was, it was just all around, all around.

Great. Showing for

[00:01:05] Richard Gaffin: Wow.

[00:01:06] Taylor Holiday: Yankees.

[00:01:06] Richard Gaffin: Costa MEA Yankees firing in all cylinders. And hey, who else is firing in all cylinders? It's CTC, baby. There you go. That's right. I crushed the segue this time. So yeah, periodically what we've been doing is going over what we're calling the CTC client report card, which aggregates data from across about 60 of our clients, and gives us a sense of how close we got to forecast on in three metrics overall revenue spend and contribution margin.

So I'm gonna quickly read through what happened. And this is again for the month of May. And then we're gonna go, go into some specific wins that we saw and some learnings that our growth strategist got from across this dataset. So, first off we were 2.14% behind forecast on revenue. We were 5.83% behind forecast on spend, and 4.68% over forecast on contribution margin with which I would say roughly it's all within plus minus 10%.

So I would say we're forecasting pretty spot on. But.

[00:02:01] Taylor Holiday: kind of doing

[00:02:01] Richard Gaffin: Unless there's anything interesting to dive in on that, Taylor, I don't know.

[00:02:04] Taylor Holiday: start with a couple things. One, this continued exercise of publishing. Did we do what we say we're gonna do is an important level of accountability that drives the system improvement? And I just wanna continue to reiterate, you should be holding any partner that you have that tells you that they're gonna deliver on expectations to this level of transparency. It's inspired by Joy who does this for our global accelerator across his entire book of business. He publishes the results of each individual customer every month. And so we said, Hey, you know, this is a great way. For us to continue to publish this ourselves. So this is it. This is a how did we do against the thing we said we're going to do? And a wise man who used to work at CTC by the name of Nick Shackleford once sort of surmised the entire job of agency is to set expectations and meet expectations. He used to have say this a lot, and I think this is what this is. It's us setting expectations, creating a forecast, creating alignment to that goal.

And then did we meet that expectation? And you gave the numbers in reverse order. And our scorecard even goes left to right in terms of revenue spend, contribution margin. But I would say the actual objective is inverted. The primary objective number one is contribution margin. And across all of our customers, we are plus 4.7% to expectation revenue, just down, but spend less.

And so what that and this is, I would say. Our predisposition is a system that we're trying to press into, which is that we are not going to overspend,

[00:03:21] Richard Gaffin: Mm-hmm.

[00:03:21] Taylor Holiday: to waste your money. That is like a disciplined behavioral pattern that is well worn into CTC. It's part of what cost controls help to enable is that you do not waste spend. The challenge that we have to continue to press on the system to produce is to make sure we don't lack volume in light of that, and so in this case, we underspent by about 6%. revenue by 2%. So there probably was room to press more.

[00:03:46] Richard Gaffin: Mm-hmm.

[00:03:46] Taylor Holiday: big themes as we've headed into June that I'm pressing on Luke and Tony and all of our other people is don't miss on the volume when it's there.

Go get it. And so I think that's the lesson coming out of what I see here is we executed the, the discipline playbook. We need to make sure we're ensuring that we squeeze out every dollar possible where possible and be aggressive where we're actually exceeding targets and expectation.

[00:04:09] Richard Gaffin: Yeah. So then let's, let's jump into some of the ways that. Obviously the forecasting is one part of it, but one thing that we also do, and one of the expectations that we set for our clients is that we're going to respond to the data. And so as we see these sort of overages or underages, if that's a word, across these different revenue or across these different metrics, rather our growth strategists respond in specific way.

So here's a couple sort of insights that came out of this. One was given that revenue was slightly under forecast for a client here one of our growth strategists, max kind of leaned into strategic price testing. Which really sounds like to me just raising prices across you know, a number of different, of the product line or whatever.

[00:04:45] Taylor Holiday: probably a

[00:04:45] Richard Gaffin: happened there was that boosted a OV significantly without negatively impacting conversion rate, which then kind of brought that number back to where, or closer to where it needed to be. I dunno, any thoughts there?

[00:04:55] Taylor Holiday: this is great. So, so what, what we're gonna try and do with this series and in the future, we'll probably even have some of these growth strategists come join us to tell us a little bit about what they did is we want to help to reiterate to all of you that great forecasting is an exercise in execution more than it is in modeling.

You have to work to make it right. What we're gonna highlight are what were some of the things that we did to get back on track when we were off course. And depending on where the deficit exists, we're gonna cover a few different versions of deficits. The corresponding sets of actions are different as well. So in this case, we have a gross strategist. I think this was Max in this case who's talking about the fact that he was slightly behind on revenue. So the deficiency to the target of the system was revenue. And so what they leaned into was price testing. They were able to take some of the core SKUs. And in simply increase the price and see that it was more elastic than they thought that there was actually room to increase the price without affecting. Conversion rate revenue goes up. In that case, gross margin likely goes up too. And it led to a big win that got them back on track. So especially April and May, price testing became a big narrative topic for a lot of brands because there was this, all this concern around tariffs and are we, where are we gonna actually find that pricing?

So it kind of reenter, reentered the zeitgeist of marketing again, to really get clear. On your price testing. And so, whether brands ended up having to pay the tariff or not, that exercise is really valuable to figure out where you can actually maximize the revenue to capture.

[00:06:19] Richard Gaffin: Yeah. Okay, so let's jump into, let's jump to the third one 'cause I think there's a little bit more meat on that bone. But, so this is about contribution margin, exceeding forecast overall. So one particular tactic, one of our growth strategists used was, this is really interesting. Successfully leveraging a short, deep discount.

This is up to 60% off for just 10 minutes. The result there was rapidly boosting revenue, which offset margin pressure through increased order volume. So the takeaway there is like this type of very rapid flash sale can work to kind of relieve some of that pressure. Is this something that you've seen before?

[00:06:51] Taylor Holiday: Well, yeah, so 10 minutes is a pretty

[00:06:53] Richard Gaffin: Yeah.

[00:06:53] Taylor Holiday: That's cool. I I, I would, I I actually, it might be fun to do a little bit more of a deep dive on that,

[00:06:58] Richard Gaffin: Yeah.

[00:06:58] Taylor Holiday: but I think one of the things we talk about is that you're always trying to answer this question for your customer. Which is why do you need to buy right now?

Not later. Not next month. Not maybe someday. Right? Freaking now and 60% off for 10 minutes is certainly that. I know that one thing that I have done in the past is that Kalo one Black Friday, we ran a different skew on a deeper discount than the site wide every hour for a whole day. We would go orange rings for the next hour, Navy blue rings for the next hour, and it was like these sort of rolling cascade that gave people a reason to keep coming back and checking for

[00:07:32] Richard Gaffin: Mm-hmm.

[00:07:32] Taylor Holiday: on. I think these kind of gamification, like prior to the, obviously all the terra fours, have you ever shopped on Temu? Did you ever,

[00:07:41] Richard Gaffin: Yeah. Yeah, yeah. I've, I've looked at it, I think we talked about it before, that like, they sell, you know, like a chainsaw, but then also like, ankle socks, like that kind of thing.

[00:07:48] Taylor Holiday: the whole time you're in the app, it feels like a casino.

[00:07:50] Richard Gaffin: Yeah, totally.

[00:07:51] Taylor Holiday: click this button to see if you could win four to 112% off. Or

[00:07:56] Richard Gaffin: Yeah.

[00:07:56] Taylor Holiday: know, like for the next seven seconds, click this product and you'll get it for a hundred dollars.

You know, or like for free. You know,

[00:08:02] Richard Gaffin: Mm-hmm.

[00:08:03] Taylor Holiday: this like never ending casino of changing offers and opportunities and things to try and to get you into engage. And so I do think we underappreciate. you have a job to do of like captivating people's attention when they're even on the site and engaged.

And so I think these kinds of ideas of like imagine you show up to a site and you can sort of get to an exit intent pop up and it was like, for the next three minutes, this skew for just you is on sale 29%.

[00:08:30] Richard Gaffin: Yeah.

[00:08:31] Taylor Holiday: I think there's a lot there. When I look at how effective Temu was at that gamification of the shopping experience, that especially within the right demographic there's something there for sure.

And so this is obviously a cool, and it extend, they beat contribution margin forecast by over 5%. So even the steep discount didn't hurt in terms of driving overall dollar volume.

[00:08:50] Richard Gaffin: Yeah. I think it'd be interesting to dig into too, like a, a lot of the times we kind of push against the idea of discounting, particularly in this way because of it sort of cheapens brand, but it feels like something that's this sort of like unique or innovative perhaps, has the per effect of allowing you to, to discount that deeply without actually ruining brand equity.

I don't know if that, does that track with you or no?

[00:09:13] Taylor Holiday: Yeah, I mean, I, I think the, the discounting thing, know, it's funny, I was listening to the Operator's podcast and there's this, like, what tends to happen in moments where things get hard is like people tend to like loosen their opinions on this. It

[00:09:24] Richard Gaffin: Mm-hmm.

[00:09:25] Taylor Holiday: becoming like, yeah,

[00:09:26] Richard Gaffin: Yeah,

[00:09:26] Taylor Holiday: actually aren't so bad.

Everybody, everybody should probably discount a little, you

[00:09:30] Richard Gaffin: Mm-hmm.

[00:09:30] Taylor Holiday: And so I think, I think. It's sort of a privilege position, is the idea that

[00:09:34] Richard Gaffin: Yeah.

[00:09:34] Taylor Holiday: exist. And so I think for most brands, price is always gonna be the most powerful lever that you can pull on. Now,

[00:09:40] Richard Gaffin: Yep.

[00:09:40] Taylor Holiday: be habitual in that, you don't want it to be the only lever but it certainly can be one. And again, if you can tie it to these ways in which it's sort of fun. And it doesn't feel like you're just doing it 'cause you have to convince someone to buy and this is the only reason they would,

[00:09:54] Richard Gaffin: Mm-hmm.

[00:09:55] Taylor Holiday: There, there's, I think there's certainly ways to use it tactfully and it kind of connects to the next one.

If we go to 0.4,

[00:10:01] Richard Gaffin: Sure.

[00:10:01] Taylor Holiday: I think is a little bit of an underappreciated opportunity, which is like segmenting more specifically your customers and using offers in these specific segments in ways that can be impactful. So let's go through that one.

[00:10:15] Richard Gaffin: Yeah, yeah, sure. So, I mean, really like what this is, is talking about is kind of like overall executing the, the way that we kind of like run the system here. But I, I'll just kind of read out what, what they have written here, which is that employing new and versus returning customer forecasting models pinpointed precisely where actual performance diverge from target.

Adjustments included ramping up email and SMS outreach, generating fresh evergreen, paid social, creative, and tailored promotional strategies to specific segments. Effectively a per closing performance gap. So a little on the vague side in terms of, of what actually happened there. But I do think like that the overall message is that, is that kind of thing about the reaction to the model, right?

So the model allows you to pinpoint where actually the shortcoming actually is. So you have some sense of where the biggest opportunity is. And then what our growth strategist did was just attack those with the various levers that they had. But yeah, what do you wanna dig into here?

[00:11:04] Taylor Holiday: no. So I think that's exactly right. So if you, if you're able to see, oh, my deficit is out of my expectation number, my returning customer revenue, then you can go to begin to ideate to solve that problem. And the sort of blunt force one is like mass ship, everybody an email with an offer. But I think, and a lot of times what we'll get is brands become resistant to this idea of just sending more email. But what can feel better to them is we're now gonna take slices of your email base and design communication relative to them. So, I don't know, you imagine you are born primitive and you have pe, you have men and women in the customer email database. So that's an easy slice of offers. You have leggings, purchasers, you have people who have bought shoes.

You have people who have bought tactical pants. You have people who bought outdoors products. You can look at sort of the seasonal calendar of moments and things going on, so what you can do is you can start to say, okay, maybe if I have a million person email list, here's 50,000 that I'm gonna design and say something really specific to them. So this offer's gonna be for a smaller subset to try and make up a little bit of deficit, but it's gonna feel very personal. It's gonna feel thoughtful, it's gonna be about. Trying to expand a customer's engagement deeper into the product catalog. And you can now start to segment. Same thing with SMS. And so sometimes when we have these deficits around returning customer revenue what we like to do is say, okay, are there opportunities to do win-back campaigns about someone who bought leggings a year ago?

And maybe they have never come back. And so we're gonna write an email about how we've improved our leggings over the last year. We're actually gonna like tell you a story about why you should come back and it's gonna be very specific and thoughtful. And so I think just trying to be, take the deficit of returning customer revenue and use all the available resources to go solve it, I think is a, is an important action that you can take when you're clear on where the deficit comes from.

[00:12:49] Richard Gaffin: Yeah. And, and I think like, you know, I'll, I'll jump back to number two, which we skipped. 'cause again, it's a little bit sort of, it's more general, but it does speak to the same thing, which is, that managing spend means holding each marketing a channel accountable to specific business objectives, which allowed our growth strategists then to quickly diagnose, spend inefficiencies, reallocating resources to the channels most aligned with the brand's goal.

So very similar, but maybe more on, on the sort of the paid channel side in terms of having some understanding where to allocate your budget on a daily basis based on actual performance. So I dunno if anything else that you wanna dig into here on this report card Taylor.

[00:13:26] Taylor Holiday: No. Well, I want, so the other one we have is this, like you said, the spend management and channel accountability overall spend exceeded forecast by 6%. And the, the note is just this idea of clarity of allocation to different channels.

[00:13:38] Richard Gaffin: Yeah.

[00:13:39] Taylor Holiday: We've been public talking about this sort of new metric around IMR, this idea of incremental marginal return, which is basically just I oas, so your incrementality factor times your. Channel conversion value or times your gross margin. and what it allows us to do is when we open our dashboard, we can visually very simply compare every channel to one another. So that you can look at, it's often very hard to go Google's at a 14 rows and meta's at a 1.7, like, which one should I actually allocate the dollars to?

But when you can see them all, and they all are compared to the same IROs expectation or IMR expectation, then you can make allocation decisions much more clearly. So.

[00:14:16] Richard Gaffin: Hmm.

[00:14:17] Taylor Holiday: today I was trading notes with growth strategist around where they're at and it's like, Hey, Google is being underspent here.

Like, it's just very obvious and intuitive. And so I think one of the things that we are constantly. Feel that we have an advantage in is the clarity of allocation, the clarity of cross channel allocation, which is usually such a difficult thing to decide between, to determine the next best action. And so I think you look at all of this and, and it's the clarity of expectation, whether that's new versus returning customer revenue, channel level targets, you know, overall revenue and contribution margin that gives. The opportunity to create clarity of action. Clarity of expectation, creates clarity of action, and that's why we're able to persistently forecast and deliver on those expectations month after month after month.

[00:15:01] Richard Gaffin: That's right. And speaking of which, we will talk to you guys again next month to review our June scorecard. And, and as Taylor mentioned, I think what we're gonna do is bring some of the growth strategists who actually executed some of the stuff on so they can dig a little deeper into the specifics and kind of get a sense of what it actually means on the ground to set those expectations and then meet them.

So for the time being, thanks folks for listening and we will talk to you next time. See ya.