Listen Now

Ever find yourself scrambling to make up a deficit in the last couple weeks of each month? We’ve all been there. Fortunately, there’s a solution — it just requires a major mindset shift.

On this episode of the Ecommerce Playbook Podcast, Taylor and Richard discuss the true value of forecasting and the key behavior that can get you to your revenue goals: spending your time, effort, and money at the very beginning of the month, not at the end. 

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 as always by Taylor Holiday, CEO of Common Thread Collective. Taylor, how are you doing today?

[00:00:14] Taylor Holiday: Doing good, man. Your GQ guide is, uh, the e-commerce diagnostic toolkit flying off the shelves. You feeling good about that? Hot start.

[00:00:21] Richard Gaffin: Yeah, no, I feel great about it. So I've been, I've been out of office for the last few days exploring the Portland area where I live, and yeah, this is a great thing to come back to.

It's been flying off the shelves and yeah, it's been fantastic. And so here's the thing, look, we're recording this on Wednesday. This is gonna come out tomorrow on Thursday, and by that time, early bird pricing for the product will already be done. But for our listeners, we will be happy to extend that an extra day. We'll go ahead and a discount code for you guys. Here. Up at the top, you can go ahead and use that and get the early bird pricing for one more day, because of course, it's a digital product, so I can't say we're running outta stock, but that early bird pricing is ending soon.

So yeah, it's, it's a great feeling, man.

[00:01:04] Taylor Holiday: Did you like, so was this like you were the author, you've sort of poured your soul into the book and it was done and you needed to go away and sort of clear your head and not get caught up in the, the day-to-day sales and it was gonna be too emotional and just walk back into the numbers. Is that what you went with there?

[00:01:18] Richard Gaffin: that, that's sort of the feeling. It's like I just give it a week to be about the art and not about the numbers, not about the performance, just about my feeling vis-a-vis what

[00:01:26] Taylor Holiday: that's right.

[00:01:27] Richard Gaffin: But I mean, it was definitely a feeling of like, yeah, I put this together, I wrote it all. Is it gonna suck? Whatever, I'm gonna take some time, hang out with my parents for a week, whatever. So it's good to,

to be back. Good that people are are enjoying it. So, Anyway. Yeah. Here, here's a segue for you. Very helpful in hitting our revenue goals act, in fact, exceeding our forecast. And one thing that we

talk about today, well, we wanted to talk about a couple of things.

One, just a reflection overall on the value of forecasting, but also, and we'll get into this kind of second here. The issue of spend procrastination, let's call it saving

of your spend for the end of the month or trying to parcel it out in equivalent chunks throughout the month, and then finding yourself with a problem at the end.

So let's start off with just talking about the value of forecasting. So we talk all about all the time. While there is maybe some skepticism about what the point of it is, our forecast for Q1 landed within. 1% of what we

at, which is great. It's better to hit it perfectly than to even go over. So let's talk a little bit about how we did that, Taylor. How did we get to a place where we were able to predict it so accurately?

[00:02:36] Taylor Holiday: Yeah. So we always talk about this idea that forecasting is an exercise in execution as much as it is in modeling, right? And so, a lot of people the, the, I've, I've interacted with some clients or brands where they'll sort of dismiss the, the process of forecasting because for them, the idea that it's always wrong makes it worthless.

And this is like, I think, a very dangerous ideology because it eliminates. The importance of rigorous planning and what forecasting does is it helps you to very quickly identify where you are, importantly wrong, so you can course correct. And that's why I say it's an exercise in execution as much as it is in anything.

So for us, our process that we use cohort specific L t V model, and there's some really good data science that goes into building the retention curves and other things that form the foundation of our model, but it's not just a revenue forecast. It forecasts revenue spend first order, a o v, new customers, new customer orders, spend in every channel, spend in every campaign, every single day.

And so rather than just thinking about trying to forecast revenue, that's not really what I care about. What I care about is forecasting every input. every day

that I can very quickly identify where we're wrong. And that's the system that we've built at ctc. And so to be a, to, to look across, you know, multiple hundreds of millions of dollars in revenue, you know, tens of millions in spend in the first quarter, and we were minus 1% to revenue in forecast across the entire business is really incredible.

And it's a testament to the way that the system is working. Now. Our hope is to help our partners exceed those expectations. And that's where we want to now build on is like, okay, we wanna be accurate, but we also wanna try and break our own models and in the future go out and outperform them. And so that's, that's where we're sort of putting our heads down now as we go forward.

But it, it really is a testament to the process and the journey that is forecasting and then the corresponding system built off the back of it. And Luke did a good job. Luke Austin on Twitter, who have, you haven't followed as one of our growth strategy leaders. Um, It leads the growth strategy department here at CTCs lowercase l underscore U k e Austin on Twitter.

And he did a good breakdown of what we're seeing in Q1 about how we're seeing returning orders flat year over year, but q1 In comparison to Q1 of 2022, where returning orders were up. And so what these little signals do of having expectations of returning orders, expectations of new orders is they're signals to us about the future for every brand.

Because what that means is that 2021 was a year where we ramped up new customer acquisition a ton, and then all of a sudden you reap the benefits of that in a latent way in your existing customer profile in 2022. Well, what happened was 2022 new customer revenue was down, and so this year we're not seeing the growth of the existing customer revenue, which means more brands are having to drive their growth through net new customer acquisition again, which is expensive, which is margin deteriorative, and all of these are really, really important signals about the future health of your business.

This ties to the shrinking sponge. This ties to net active customers. All the ideas of C T C are encapsulated in this, and we have windows into it. We can see it right now about what the future's gonna hold because of this clear indication and expectation of every single data point.

[00:05:48] Richard Gaffin: Yeah, that makes sense. I think it's important and we've, we've mentioned before in the podcast that forecasting is not, Prophecy. Right? And it's also not

And I think the idea a

is that people will a number as if they were, you know, what is it? What is that guy? The amazing kreskin or whatever, making some guess about what's going to happen, you know, two years from now. And that's not the case at all. Like in fact, what we can do is forecast and then. Put the system into place to make the, make the forecast come true. And that's

[00:06:17] Taylor Holiday: That's right.

[00:06:18] Richard Gaffin: for instance, one thing that popped out or that stood out to me in Luke's Luke's thread, cuz basically what we're talking about is we're monitoring the specific data points you mentioned and then making tweaks on a daily basis. Based on how those indicators work. For instance, we've been transitioning the majority of our accounts away from Pmax as a default because of the

that we're seeing show that like, despite their, the sort of promise of the algorithm, us doing it a little bit more manually is what's working.

And that's, those are, that's just one of the things that contributed to us being able to, to nail that forecast. So I wanted to like maybe break down a little bit more like what, what is our secret, I guess beyond that, like is there anything else specifically

we can point to?

[00:06:57] Taylor Holiday: Yeah, and, and the part of the reason we wanted to do this forecast is because I think a lot of it starts around the execution relative to the calendar, and so today's May 3rd as we're recording this, and we have a meeting later today on the calendar that we call the Start Right Meeting. It's a new process that we've introduced because we see that the primary place where people miss forecast is actually in the first week of the month.

And why is the first week of the month more important than the last week of the month? Well, in, in business, oftentimes we're playing these time-bound games. We're playing a 30 day game. That there is a goal in a period and we have to achieve that specific objective. Now that's set within the context of a broader goal, usually a year, right?

But again, it's just another time-bound game. And when you have these sort of games that you have to win, you have to have a specific strategy for victory. And one of the keys is that there is a compounding either gap or value that gets created relative to your performance early in the month. So what do I mean by that?

Well, If I miss my spend target and then my corresponding revenue target by a thousand dollars a day for the first five days of the month, I now have a $5,000 deficit that needs to be reallocated into the rest of the month. And what happens often is that those early misses compound to a level that you can't actually make up in the back half of the month.

it is much easier to scale back in and achieve more in a more efficiency later in the month than it is to try and scale up and maintain efficiency because a couple of things happen when you increase spend one. Generally this comes from either launching new campaigns or pushing existing campaigns into spaces that they've never been before, and that usually means.

Some time period of optimization and inefficiency learning phase is another way to think about this. You launched a new campaign. It's in learning phase for a while. Those are gonna be your most inefficient periods of spend. And so when you launch new things, you have to plan for a period of inefficiency and you're gonna realize the, the value over time.

It's gonna optimize over time. So we, we really early on in the month want to batch launch new things and then scale down into efficiency. There's two other reasons why this is really important besides just the avoiding the hole that you create. That's hard to dig out of the, the second thing is, is that if you think about L T V, okay, we think about this oftentimes in really long windows like L t, V, what's the value of my customer over three years?

But one of the things that we know about the value of customers over time is that, most valuable period to you, besides their first order is actually in the subsequent 30 days. Like that's, and that's counterintuitive in many cases, but that means that in a customer acquired on May 1st actually has a high likelihood of contributing additional revenue in that same month period.

So if you don't get those customers today and tomorrow and the next day, you aren't getting their repeat purchase in the back half of the month, it's not coming. And that same idea applies not just to customers, but website traffic, right? Is that your traffic today is your remarketing audience tomorrow.

And if you look at your time lag report, right, there's some percentage of customers that purchase on days 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, all the way up till day 30. So if you don't drive that traffic, you don't acquire those customers early in the month. They aren't present and able to be realized later in the month.

So you have to over-index now. There's all sorts of caveats about depending on maybe you have a sale in the back half of the month or you're launching a product in the middle of the month, that will change your spend. But the big mistake I see people make is, oh, my budget's $300,000 for the month, divide by 30, spend evenly each day, and that is not the right allocation front.

Load your budget. Scale down into efficiency. That's the key, one of the key, key operational tenants to success.

[00:10:41] Richard Gaffin: Yeah. And, and it strikes me too, like the, the reason that so many people fall into that trap because, I mean, just the basic human instinct towards procrastination is that the first five

you're not, you don't have this sort of the specter of missing your revenue goal breathing down your neck yet.

And so there's definitely a tendency or an

[00:10:59] Taylor Holiday: That's right.

[00:11:00] Richard Gaffin: not push as hard, and then what ends up happening like this is maybe one of the top five reasons people get into this cycle of running, you know? that sort of you know, commoditize their product or whatever at the end of the month is because they're, Digging themselves a hole. And then the last, you know, week or so, they have to go ahead and figure out some way to make up that number. And then because of that, they're not thinking about the first week of the next month. that just

[00:11:25] Taylor Holiday: That's exactly right.

[00:11:26] Richard Gaffin: And you have to get to some point and, and maybe this is something you could speak to Taylor, like how do you incentivize people say, actually first 5, 6, 7 days of the month, that's D-day for you.

That's what you have to be

[00:11:39] Taylor Holiday: Yeah. Well, and what you're talking about is so human and like even my little league team, okay. We have this I've started joke. We sort of have called ourselves the comeback kids. We've done a couple of big six thinning rallies. It's the last inning in little league. But what all of what has started to happen is that all of a sudden it's like, all game.

They're sort of asleep playing around in the dugout, and then the sixth inning comes in and they're like, okay, now we're gonna come back. And it's like that energy would be better applied to the first inning, and then maybe we wouldn't be in a five run hole. You know? And so there's sort of this principle that is like, you're right, the reality of failure or success doesn't set in until, because we have all this hope and optimism and possibility of things that may occur later, but by the 27th of the month, that's all sort of gone, and now you're scrambling.

So we are trying, I, I don't know how to incentivize it. I mean, you could, you could come up with goals and things all around it. What we're trying to do is bring heightened awareness and focus to it. So I mentioned today the meeting that we call the start right meeting, which we try and do the three to four days into the month.

We wanna make sure that n any metric that is more than 10% behind within the first four days of the month that we're actioning and course correcting against it. And this is where like, again, this is why the forecast is so important, is because it gives us, we can see. Every metric we can see. If we're off on new customer C p A, we can see if we're off on repeat orders.

We can see if we're off on first order, a O v. We can see if we're off on spend. We can see if we're off on email revenue, whatever the indicators are. And in STAs, it's literally red and green. We call it the hunt for red October, right? It's like, where are you behind? Go fix that tile. Go improve that metric.

And that sort of clarity and action orients your behaviors towards the areas of greatest impact and allows you to not be wildly off course so that you have to do, like you said, desperation, efforts of running sales, et cetera. To get back onto the path. And so that, that's been something that is just, it's not intuitive to people.

It's like a, at the beginning of the month, it's like, all right, we got a long road ahead of us versus, no, no, no. Now's the moment for urgency and that will afford us the ability to sort of scale back, reap the Bennett rewards of that later in the month.

[00:13:42] Richard Gaffin: Makes sense. Great is there anything else you wanna hit on this?

[00:13:45] Taylor Holiday: Well, I, I think I think that what the, the key here and, and this is just, it all ties together, right? CTC methodology, it all ties together. Like one of the ways that this gets enabled is with cost caps, right? Because what, what someone might be sitting on the other side of this sort of screaming at the, the, the podcast would be is like, well Taylor, if you spend a bunch of bad money at the beginning of the month, your ROAS to make up for that has to now be way better later in the month.

Well, that's not what I'm suggesting. To be clear, I want to, I wanna just clarify that. I'm not saying spend bad money.

is why cost caps are so important, but it is to say that we have to think about a few other principles that are really important when it comes to utilizing this methodology. One, most ads don't work.

Most ads don't work. So if I have to go from spending $3,000 a day to $5,000 a day, I have to actually spend, you know, I have this saying that I use $2 of ideas for every dollar of ad spend. I'm thinking of revising it cuz it's actually closer to $3 of ideas for every dollar of ad spend. We see about like 33% of ads get to some meaningful amount of spend out on a cost cap basis for good brands.

And so what that means is that I need to launch $6,000 worth of campaigns to get into that good spend.

of good spend that I need. And so the other big issue that I see is people have budget plans that they need to spend, but they don't actually have the amount of things live that are actually ever gonna get them there at the efficiency that they need.

And they have expectations of budgets that are o of campaigns that have never spent that much before. They've never given you any indication that they're gonna get there. And this is especially true with search too, where you can't just scale up search. infinitely, it's volume constrained, right? Like, so if you're trying to go from spending $300,000 a month to $500,000 one month, you can't just be like, oh, I'll just, I'll just double my, you know, performance max budget.

Now PAX is a little different. Maybe there's a little bit more volume or double my brand search budget. But for the most part, you really have to be able to identify every day where every incremental dollar is gonna come from and. Have a backup plan because you should assume that it's likely not gonna work the the way you think it is.

And that sort of contingency planning is what happens. I mean, what gets developed on top of being able to clearly see things working or not working very quickly.

[00:15:57] Richard Gaffin: Yeah. That's such a good illustration too of like why measures at the end of the month don't work. So that, that concept of like, yeah. Ads rarely work actually, and, or it's, I mean, 33%, it's not bad I guess, but it's still not a vast majority of ads fail, and so the idea that like in the last couple of weeks of the month you're going to somehow crank out 20 ad concepts, and they're going

well enough for you to make up that gap

This actually doesn't make any sense, and yet we continue to do it over and over and over again because there's something about us that feels like maybe it'll work this time. You know? And I think

[00:16:31] Taylor Holiday: Yeah, that's exactly right.

[00:16:32] Richard Gaffin: you just have to sort of accept that the system does not work that way. You have to get everything out in that first week in order to give yourself a shot.

In the last week, I think.

[00:16:41] Taylor Holiday: Yeah. Here's, so here's what I would take away for, for those of you that are listening, you have a chance right now to win May, okay? And I want you to win May. So the question is, I have two questions for you. One, do you know where you're supposed to be today? Not where you're supposed to be for the month of May.

Like do you know where you're supposed to be on May 4th whenever this comes out? If so, how are you doing relative to that? And I don't just mean on revenue and spend, I mean all the leading indicators. New customer, cac, your repeat rates, your email revenue, your first order, a o v, you know all. How are they all pacing?

And if you're behind, what can you do to not go into the weekend? Because weekends are also a killer, right? And this is sometimes one of the things that happens is that it'll be like the first of the month will be a Friday. That's the worst day for the first of the month to happen. It's great. This may is a good month cuz it starts on a Monday, gives us a full week of action.

The worst is it's Friday. We sort of shut the day down and now I don't even really look at things till I get into the fourth, but this is a week. This is a chance to not avoid that. So before you go into the weekend, what can you do to course correct? You've got a lot of time left. Are things working the way you anticipated?

Do you have the creative volume that you need? Do you have enough campaigns planned? Do you have enough email sends in the pipeline? Like are you ready to go out and achieve the objective? If not, how could you course correct today to get there?

Hey everyone thanks for listening to the pod. As I mentioned in the episode, early bird pricing on the E-commerce diagnostic toolkit is still available. For our listeners, just follow the link in the show notes or enter the code POD197, that's POD197 on the product page to get the toolkit for the discounted price.

Thanks folks. We'll talk to you next week.