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The Unstoppable Marketer®
Trevor Crump and Mark Goldhardt bring you quick marketing and entrepreneurial tips, tricks, and trends for DTC business owners, entrepreneurs, and marketers. These are lessons they've learned through the years of being right in the thick of scaling dozens of businesses. Whether you have an established business looking to grow, just starting your business journey, or trying to become a digital marketer, this marketing podcast will not let you down.
The Unstoppable Marketer®
EP. 111 Mastering Customer Acquisition: Fixing The Leaky Bucket
In this episode of the Unstoppable Marketer podcast, we explore the challenges brands face when balancing efficiency and growth, using real-world examples from the clothing industry. Discover strategies for maintaining customer acquisition and retention, and learn how to optimize operational costs to ensure long-term profitability. Tune in for insights on leveraging product seeding and ad strategies to scale your business effectively.
Please connect with Trevor on social media. You can find him anywhere @thetrevorcrump
You can't just deny reality, Right? You can't just say hey, I don't like gravity because it wears me out over time, like it doesn't matter.
Speaker 1:So I'm going to stop using it. I'm just going to pretend that gravity doesn't exist. No, it's there, it's happening. But how do you adjust as a company through operational costs? But also, yes, you can get more efficient with ads. A lot of people just don't have a good plan of okay, I can stomach the pain if I know the benefit will outsize it Absolutely. And it's really hard to get over that if you don't have someone in your company or if you don't learn how to do it or if you don't hire someone to show you. Hey, yes, here's the reality. Sorry, I know it hurts, but this is how you're going to scale.
Speaker 2:Yo, what's going on, everybody? Welcome to the Unstoppable Marketer Podcast. With me, as always, and back in the studio, is Mark Goldhart. Mark, how are you? I'm well.
Speaker 1:Good.
Speaker 2:How are you Great, you've recovered. Yeah, we're were in the studio. We're in our personal studios last yeah now we're back.
Speaker 2:It's been a minute since we've been with Grayson and Film Lab and I've missed you guys, so we're back. Yeah, thanks for being here, grace. I was using my crappy microphone. If you listened to last week episode, hopefully it wasn't too bad, but uh, we got it figured out though. I think it worked fine. The content was good. It was content was good. We talked all about uh, so the episode comes out. The episode came out a day after. I have to talk in future past tense. The episode, if you're listening to this episode, the previous week's episode came out two days after the ban. Yeah, the ban was on the 19th.
Speaker 1:The episode dropped to the 21st, which is a Tuesday, right, it's a 90 day extension.
Speaker 2:Yeah. So we talked all about like, hey, this is how you make it, so you don't just crash and burn if you have relied solely on TikTok. But it seems like that band's most likely not going to go forward.
Speaker 1:We need to check the polymarket odds. Yeah, I don't think it's going to go forward. We need to check the polymarket odds.
Speaker 2:Yeah, I don't think it's going to. I never actually thought it was going to, personally.
Speaker 1:So well, here Trump likes it too much. Yeah, I mean he did call it out. He said that's why he won the youth vote, yeah, which we called that out on this podcast months before the election months before he won, or weeks at least, maybe not months.
Speaker 1:Yeah, because we were watching it. It was like the new age media versus the old guard and we were talking about how trump was taking advantage of the podcast and and he was getting on tiktok and he was doing these things. That was connecting in a way, in a fun way. Well, yeah To the youth.
Speaker 2:And just his natural presence and the things that he does are oftentimes viral things that suit the platform very well. For example, him handing out fries.
Speaker 1:He is kind of just like a ridiculous. Yeah, handing out fries at McDonald's. Yeah, handing out fries.
Speaker 2:Kind of just like ridiculous handing out fries at mcdonald's.
Speaker 1:Yeah he's just kind of ridiculous it's a viral thing.
Speaker 2:So, yeah, listen to that episode, because whether tiktok's banned or not, whether it gets banned or not, that episode is a really like it's an eye-opener episode. Right, there was a lot of people that I was talking to, like I know a lot of creators who've built brands and products on on tiktok solely, who just couldn't even. You know, they were beside themselves, and so that episode is a really good episode to help you understand that, at the end of the day, you know, we don't own a lot and it can be taken away, so you got to make sure that you've got. Um, it's interesting, right, we talk a ton about how there's so many brands that always want to diversify like crazy, but then you and me have kind of pulled back on the diversification discussions to say, hey, no, you don't need to be on Pinterest and advertising on twitter and tiktok and meta and google yeah, it's mastering you know if you're under a certain you know we we tossed the number 20 million out.
Speaker 2:I don't know exactly how we've gotten that, but that's just sounds good yeah, that's kind of what we've experienced. No, I mean, we.
Speaker 1:We've just seen that in our client list and we've also seen. You know, if you just go on twitter and follow people like uh sean frank of ridge I know he has also advocated for that in the past- yeah, yeah, and he's a hundred, they're over a hundred million dollar. Yeah, brand so and he's, and I think he said like up to a hundred million he might have said 50. I think there's a 50, yeah. Yeah, we'll have to go back and check so, so like that we'll have to get him on the pod.
Speaker 2:It's this world right of like diversity, you know where? To me it's like, okay, hey, couple ad channels, metagoogle, but then, yes, of course, be dialing in your email, be dialing in your SMS.
Speaker 1:Those aren't channels.
Speaker 2:You can argue that they are. They're not ad channels. They're not advertising channels. No, they're not.
Speaker 1:You can argue that they are, they're not advertising, they're not, no, they are, I don't know, like, that's just, they're not even. Yes, they're part of your acquisition strategy. But good, good grief, man, like email and SMS is just an extension of your website, basically, or should be, yeah, but people don't really treat it that way so well.
Speaker 2:So yeah, we don't really need to get much more of the TikTok ban. One thing I do want to say, I want to point out Inauguration Day happened. I just want to point out my favorite part of Inauguration Day was Zuckerberg getting caught looking at Bezos' girls' cleavage. Yeah, that was awesome. I saw that that was awesome. I saw that that was like so good, is that not just?
Speaker 1:a clever angle though.
Speaker 2:Have you seen? Have you seen? Yeah, I mean it could be, but everything looks so like it looks like Zuckerberg knew exactly what he was doing. Do you know who Jack Mack is? Do you follow Jack Mack? He's the Barstool Sports. He's part of the ball barstool sports. Organization, yeah and he crushes it because he just like takes these, he just takes like news but less but, but puts more of like a pop cultural vibe to it versus like Flooding in Italy.
Speaker 2:Yeah he's not doing that kind of stuff. He's taking events that are seemingly stupid but he makes them into spectacles. You know, and that one I mean he was, he was one of the only people, uh, at barstool, that kamala harris reached out to her team, reached out really to have him interview her.
Speaker 1:Yeah, but they didn't right, it wasn't there Like she stipulations that she was like hey, send me your questions.
Speaker 2:He sent them and they wanted to and they were like no, sorry, not going to happen. But anyways he, he breaks it down in slow mo and everything. And it's so funny Like he. So funny like he, like zuckerberg looks at him and then like smirks and smiles like he just got away with something. And then she turns like really quickly and looks right what looks to be right at him. So he like he tenses up like he got caught. But she's talking. She goes to say something to the person right next to him, so she doesn't him, but she like immediately looks in his direction and then, once he realizes that she's talking to the person next to him, he like smiles and smirks again. So to me it seems very like yes, it could be clever angles, but to me it also looks like he saw it and he was doing it on purpose. I mean, she was very much flaunting it you dirty dog to be seen, I think, but zuck the car.
Speaker 2:His carnal nature got the better of him, didn't it on on inauguration day, in front of everybody especially since, like especially since a trillion dollars worth of people were standing next to each other like that was the most photographed group, so it was really shocking that he even tried microsoft ceo. You had it was microsoft or google. Meta twitter tesla spacex yeah and uh Tesla. Spacex and Bezos A lot of money, nearly a trillion dollars.
Speaker 1:A lot of power, a lot of money. They call it the American oligarch.
Speaker 2:Yeah, so what are we talking about today?
Speaker 1:You think that's an oligarchy, Grace Grace said.
Speaker 2:I don't know what that is. What are we talking about? Interesting discussion today. Yeah, I think you want me to set the premise.
Speaker 1:Yeah, yeah, set it up, so we get.
Speaker 2:I got a LinkedIn message From somebody, from a previous client, dum dum, dum, and she said hey, how are you? What's up? We're thinking about working with you guys again, which in the agency world, just to be 100 honest, doesn't happen like once somebody leaves you, or you leave them very rarely, do you continue to work like, do you? Do you work up?
Speaker 1:work together again although it's happened with us a few times it has happened more frequently than I would have ever assumed.
Speaker 2:Yeah, um, we don't lose a lot of people for it to be big.
Speaker 1:but yeah, yeah, Not to toot our own. Our retention rate's really long, but it's more of a we usually I mean of the people that have left. Sometimes it's just not a good fit on for either side, Totally Right.
Speaker 2:Totally, for many reasons. Reasons, yeah, on both sides.
Speaker 1:so sometimes people yeah, for we can get into that another day, but the pros and cons of just eight working with agencies yeah I think it's a really good thing. I think there's a lot of good work to be done from agencies but sometimes, depending on your flow as a company, it's not. It might not be a good fit with how you work an agency or just that person.
Speaker 1:There's many reasons um and these guys either that's what happens, like either you know, it's just not a good mesh performance whatever, or a lot of the people that have, uh, out of the that has left us, a lot has been because they end up hiring in-house For sure. Yeah, like they want to end up. They think it's there's too much control of it's. Either they think there's too much control over their company from a third party yes, because you're generating so much revenue yes or it's hey, we just want more control.
Speaker 2:Just like to get on somebody all the time yeah, often, oftentimes it becomes I'm spending this much money with you guys. I could find somebody one or two people to come work for me full-time in-house, and then I'd be able to call them at any given time and have them do anything for me. Yeah that's oftentimes a big reason why somebody wants to go, so so out of those reasons for leaving.
Speaker 1:When they come back, it's not as surprising, sure, sure, because it's like, hey, we want to go this direction, it doesn't work out, couldn't find the right people to do it.
Speaker 2:A year later, it's like, hey, this, yeah, this was better so in this, in this situation, we don't need to dive too much into because we don't want to give out too much, because they left for what we felt like was was a very justifiable reason. Uh, for for internal purposes, there was not a to you know, at least to our knowledge, there was not a hey, we don't like working with you. Hey, you're not doing good work.
Speaker 1:It was just a difference in how there's a big difference in the strategic vision of how to accomplish the goal, so which we, we were not in agreeance sure of of how to accomplish the goals that they wanted to. So we presented our plan. They presented another.
Speaker 2:We were not de acuerdo, so we we decided to split yeah, to be fair, they attempted ours for a very brief moment, less than a month, correct? But it required more pain much, yeah, much more than that.
Speaker 1:So which we, which we are honest about, like yes, if you want to accomplish these goals, this is the path, and it's going to be painful for 30 to 60 days.
Speaker 2:So I feel like we're being slightly cryptic. Let's dive deeper into the problem we're not going to talk about. We will not out who these people are, ok, but it's. Let's just say it's a clothing brand, okay, and what this brand was extremely good at was creating high quality products that once were in the hands of the customer. The repeat purchase was extremely strong, okay. So I want to say I can't remember at the time, but it was around 80% returning customer rate and, and just to let everyone know, an 80% returning customer rate doesn't mean that 80% of the people who buy came back and bought again. Meaning, if there were 10 people, that doesn't mean that 80 of the people who buy came back and bought again. Meaning, if there were 10 people, that doesn't mean that eight of them came back and bought. What just means of those 10 people?
Speaker 2:it means almost times yeah whether it was by one person or eight people, or two sure or three which it tends to be two yep, came back and bought four times right, two people bought four times or whatever. Okay, so it tends to be two. Yep, came back and bought four times right, two people bought four times or whatever.
Speaker 1:Okay it tends to be out of 10 people.
Speaker 2:Two come back and buy the majority. Yeah, 80% of them. 80% customer return, customer rate.
Speaker 1:And that was their situation. They have a very strong loyal cohort.
Speaker 2:High lifetime value.
Speaker 1:High lifetime value of those specific people.
Speaker 2:People, but most people would come in and buy and then not buy again so, so, and and they also were really great at drops, so it was very specialized, unique stuff it wasn't like they had basics, that people were just coming in and out and buying all the time, okay, and so the plan was that their issues were that, hey, revenue is we're not growing in revenue, profitability revenue is not growing. And when we jumped in and looked under the hood, we recognize that it was because they were actually relying too much. They were returning customers actually too high compared to what their new customer ratios were. Right, agreed.
Speaker 1:Well, the emphasis was placed on efficiency and profitability. Well, when I say profitability, I want to be careful with that term but I say efficiency. So the emphasis for them became very much efficiency focused, which they were, and they were being efficient, blah, blah, blah. But and this is like right after iOS 14 and blah it is Right. So this is right, as we were changing, or we had already changed it, but people started going to like contribution margins and profitability docs and all that stuff.
Speaker 2:We're talking about ROAS as frequently, and or blended MERs and yes, yes, yes. So so the plan.
Speaker 1:So they were efficient.
Speaker 2:But then, when we presented the reality of what it costs to acquire a new customer, With, with with the type of content they created and the types of products that they created. Yes, Right.
Speaker 1:And the amount of time it takes to turn those into profitable new customers. They did not like the idea of it getting more expensive. They also benefited from the Instagram boom, which a lot of brands that are out there did, so they came out. It was really easy to acquire customers meaning the very like chronological yeah especially female based customers on Instagram.
Speaker 1:right, yeah, in 2013, 14, I think it's two thousand, like 14, right to 2020, something like that, yeah, so yeah, see, I was gonna cost 13, 14, I think it's 2014,. Right To 2020, something like that, yeah, so so, yeah, it was going to cost more than they wanted in the on that first purchase.
Speaker 1:Yes, and, and, and let's just be real and cause it and the reason why it would cost more is cause they needed to acquire more to fill their customer funnel to replace what would be end up becoming the diminishing return of their returning cohorts.
Speaker 2:Yeah, so essentially, this happens a lot with clothing brands and this isn't just a clothing brand discussion, um, because this is going to fit into many brands that require, uh, that require customers to continue to come back in order for them to be profitable. Yeah, ok, and so what happens oftentimes is, let's just like, imagine that every company is a five gallon bucket of water, ok, and, and every company has holes. Every bucket has holes drilled into that bucket, okay, and so when you fill it up with water, some companies have more holes and other companies have bigger holes, and some companies have less holes and some companies have smaller holes. So, as you're filling this water up, water is leaking out.
Speaker 2:Now the big conundrum that many brands will face is am I pouring more water in than water going out, right? So is it either staying level, or is it always slowly rising, but very, very slowly? Or is it always slowly lowering, even though I'm constantly pouring, because customers in the clothing brand space like, let's say, it's kids clothing, for example, kids clothing you you are losing customers all the time because your customers grow out of your product. Let's take a baby brand.
Speaker 1:Yeah, your customers grow out of their product. You might have a lifetime value of a parent or household, right Over five years, sure, but eventually they don't have kids anymore. Yeah, or there's a gap right Like let's say that they're say that maybe they really like you for boys clothes and not.
Speaker 2:That's what I was gonna say yeah, maybe maybe you have girls that you love the product for girls, and then you have a boy and they still make boys clothes, but you're just like, oh no, I'd rather buy from zara or whatever you know, or you name the clothing brand. So, yeah, whatever. So, anyways, what was happening was we started to recognize that, hey, because you guys have wanted to be so efficient, you have been right. You've seen this ROI number of, let's say it was a five. I can't remember what it was and they were really stoked about that. Hey, we're profitable, we're at a five, things are really really great. But what was happening was they weren't recognizing that the rate in which they were acquiring customers, which is the poor, which is the water pouring into the bucket?
Speaker 1:Was too slow.
Speaker 2:Was too slow, so that was just lowering. So every year it was like whoa, we've been so efficient, but we made less money.
Speaker 1:The same logic applies really heavily with subscription brands too.
Speaker 2:For sure, for sure, yeah, so yeah, this should play to anybody who needs retreating.
Speaker 1:And I think this ends up being one of the big fighting points behind the cost cap advocatesists. I'll call them yep, and cost cap being a bidding, bidding strategy in meta and the max conversion, max value evangelists is, I think in these certain situations we can acquire. If you're a media buyer, you can acquire customers at a 2, 3, 4, 5 RX or return on ROI, rx. Why do I say RX? I don't know ROI and that sounds really good, yep, except it's really hard to grow generally.
Speaker 2:Yes. And you know, don't come at me, taylor Holliday and whoever else.
Speaker 1:Andrew Ferris yes, it's true, you can grow with cost caps too. I'm not saying it's either, or I think this is just generally the principle that happens is hey, at some point you can acquire customers profitably, but it depends on what your overall business goals are Totally, and so with this particular company, they wanted to keep acquisition at whatever it was their CAC. Yeah.
Speaker 2:Let's just say I don't want to spend more than $40 to acquire a customer. Let's say they have a $90 AOV.
Speaker 1:Yeah, but once you try to scale it that it usually would start crumbling.
Speaker 2:Yes, yeah. So we essentially just pitch this plan to say hey, you guys do a couple drops a month.
Speaker 1:And, yes, there's other pieces, like you said, there's content, there's the type of ads, there's a lot of components here. Sure, you can make things better all the time, right, but generally speaking, let's just talk about holding all that constant. Yes, hey, if you want to acquire more, this is the barrier that we have. Like, we're efficient in this little space, yes, but you got to start competing, you got to start expanding your addressable market, and it's going to cost more money, but in the long run, you will be more profitable and you will be more efficient.
Speaker 2:And you'll be able to scale.
Speaker 1:And you'll be able to scale, but in the short run it's going to hurt.
Speaker 1:Yes, yes, because you're used to getting X amount of dollars for every customer and you have this returning customer base that you're a little drunk on right now Yep, but before you know it, this returning customer base that you're a little drunk on right now yep, but before you know, this returning customer base is going to be gone. Yeah, exactly. So, anyways, it was a difference of opinion. We, we left, yep, and then what happened? Is this company this was in, this was in just a timeline 2021, early 2022 oh 2020, yeah like early 2022.
Speaker 1:So over two years this company shrunk by 90%.
Speaker 2:Yes, yeah. You see, not only total revenue shrinks, but you see as they immediately, almost instantaneously, after working with us, they shut budgets.
Speaker 1:I mean, they cut budgets probably well, because they were trying to be 70 efficient on yep customers and immediately the month that they cut budgets.
Speaker 2:New customer acquisition plummets plummets and then eventually, within like five months, they could turn it off, or maybe it was four months, they turned it off, they went to a different agency yep, they turn it off completely.
Speaker 2:And not only do you see, you know, um, I'm just going to put numbers out here just to like, just to help people understand. Let's say they were at six, you know. Or we'll just say 10 million. Okay, let's say they're at 10 million. The next year they dropped down to seven. New customer acquisition was, let's say, if it was 10 million, 2 million Drops down to 1.5 million from 2021 to 2022.
Speaker 1:And this is where the strategic vision of efficiency, because you start getting drunk on this idea, like, oh, we didn't even drop that much. Yeah, because for a year it doesn't look like that bad.
Speaker 2:Yeah oh, hey, we dipped.
Speaker 1:You know, we went from 10 to hey, we're not spending money and we only went down, so we were actually more profitable.
Speaker 2:Yes, we only went down a million and a half revenue was down 15%, 20%, whatever, but Profitability was up 15% because we got rid of all the ad budget, we got rid of what we were paying for agencies. Maybe they consolidated a little bit, but anyways, all said and done from 2021 to end of 20 to 2025. But I want to emphasize the first year wasn't that bad. First year wasn't that bad, it was the. It was the second to third year that was massive, and then the third to fourth.
Speaker 1:Yeah, right, so they essentially go from 10 million cohorts are aging out and leaving, yep, you. So you, you see a 10, 15 drop, yep, okay, but then from there, so we, we go to from let's just call it for math's sake 10 to 8, 8 and a half yep, but then they drop from eight and a half to four yep, and then and then that kind of holds steady for about three to six months, right, and then it goes from four to 1.5.
Speaker 1:Four to 1.5, yeah, yeah and then, and then, trajectory would be around 700 for the for this coming year would be yes if things went down that path would go from 1.5 to 7 yep and and and all I see it's like, it's like clockwork, clockwork.
Speaker 2:The net new customer acquisition dip. You just see the returning is like three months behind it.
Speaker 1:Yeah right, three months behind returning starts to dip for every decision you make with with new customer acquisition and just so you know we're not, we're not bringing this up to talk bad about these particular people because they I don't think this founder had the right advisors around her.
Speaker 2:Sure yes. But also, at the same time, after talking with them in their world, it was making the right decision for them. They ended up at the time, consolidating the business and getting rid of a lot of fat know getting rid of a lot of fat. You trimming fat bad opx from what they might have been paying for warehousing internal hires hires.
Speaker 2:That might not have been efficient or whatever it was, and so, anyways, the good news is is like they had a aha moment and they said shoot, we have to like, figure something out here, because we're not acquiring new customers at the rate that we need to. Um, and, and that's what happened is this leaky bucket. Took them two and a half years before. They were like oh no, this is a problem.
Speaker 1:Yeah, okay, so now and and we bring this up too, because I don't think a lot of people have the right advisors or you know you come consultants, but this is, this is strategic planning, that that we do and there's others that do it great too. Totally. But it's good to have some third parties come in and look at your business every once in a while so that you can get an independent view, an outside view and idea of what your business looks like in the coming years, because I think sometimes you get it. I mean, we all do it. I don't say this because I'm the smartest guy around, it's just it's easier to come in when you don't have like an emotional investment and give real advice.
Speaker 2:Totally yeah, when you don't have, when you don't have necessarily skin in the game, right, sometimes, yeah, sometimes it's hard and everyone knows that in relationships, yeah, a lot of people have a hard time Giving objective advice in relationships because they're personally invested in a relationship, so maybe they don't want to hurt a feeling, or maybe you know whatever it is so it's the same thing with a business.
Speaker 1:It's it's. Sometimes it is very valuable to work with an agency or a consultant or just an advisor who knows what they're doing?
Speaker 2:Yeah, just to come in and look at it and maybe you don't have to work with them, but and what was really nice about when we presented this to him is mark and I had experience working with another company at the time. We'd only at the time, in like 2020, 2019, 2020 had worked with one other brand who had gone through something very similar. We've now since worked with several that's that's been in this very similar situation and we watched that brand kind of crumble. Um, they were, they were the king and queen of the particular industry that they were in and had the ability to, at one point, um, while we were working with them, valuations were extremely high uh, eight figure high evaluations to sell Um and recently, uh, you know, because they didn't make some of those decisions of filling up that bucket, uh, quicker than it was emptying Um, you know, we've we've heard recently that they've sold for a massive amount, less than what they could have sold for.
Speaker 1:I don't want to say pennies on the dollar.
Speaker 2:But Compared to what it was, yes, so now we have another example and once again, mark and I this is like the reason we want to talk about this is because we have now experienced this, whether they've been clients of ours or people we've just consulted with, or whatever friends and business owners who are going through this. So many of you are going through this where it's like and geez, it happens.
Speaker 1:It feels like this happened. It has happened so many times. I mean, on just thinking about it really quick, I mean there's like what, five, seven companies that we are personally we've intimately worked, yes, right. That I don't know if I should use the word intimately.
Speaker 2:Yeah, Intimate seems weird but that we have contractually worked with.
Speaker 1:I don't like that word.
Speaker 2:So so we're bringing this up because this was kind of the first time that somebody came back.
Speaker 1:Like kind of the first time that somebody came back, like they the problem that we said would happen. No, that's not true. Happened. That's not true. We currently are working with someone who came back. Yeah, I know that was a. That was more consulting. Yeah, okay, fair enough, but still sure, we we consulted with someone we.
Speaker 2:They decided to go in house running their ads for them.
Speaker 1:We were just consulting for them they decided to go in house, yeah um, which was probably the right move for them at the time.
Speaker 1:Like they, they had a really bad experience with with an agency yeah and they asked for some help of just like how to do it, so some training, and like how to just bring it in house. So we helped them. It wasn't working out, but they recognized that, hey, something's not working because, even though our returners are coming back like we're doing everything we need to do, it seems like we're acquiring their. Their revenue just kept shrinking and shrinking and shrinking. Yep, okay, and then, ever since they changed their strategic outlook, it's gone up.
Speaker 2:Yeah, they were they up really dramatically? This company you're talking about was in the exact same position that this company was and very similar product, just to a different demographic right. Yeah, yes.
Speaker 1:But they have since been able to grow their online store really significantly because they had the I guess the right perspective of hey, even though it's getting harder to acquire customers. You can't just stop, you can't just deny reality, right? You can't just say hey, I don't like gravity because it wears me out over time, like it doesn't matter using it I'm just gonna pretend that gravity doesn't exist.
Speaker 1:No, it it. It's there, it's happening. But how do you adjust as a company through operational costs? But also, yes, you can get more efficient with ads. But also, how do you just have a better understanding? Because I think a lot of this is companies operate in the dark. They have no idea. A lot of people just don't have a good plan of OK, I can stomach the pain if I know the benefit will outsize it Absolutely For sure, will outsize it absolutely for sure. And it's really hard to get over that if you don't have someone in your, in your company, or if you don't learn how to do it, or if you don't hire someone to show you hey, yes, here's the reality. Sorry, I know it hurts. Yep, this is how you're going to scale. And then remember, most companies that scale and get big, they do it off very little first time or first customer profit Totally, if any at all.
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Speaker 2:We love Bestie and we use it for every single brand we work with. Go check them out today at bestieai. Yeah, there's definitely brands that are first-time profitable and we always shoot for that. Obviously, you want to shoot for that, but in the clothing space or a high-returning customer space, sometimes you can get away with not being first-time profitable, and so with this brand Mark's talking about that it came back to us when we were consulting for him.
Speaker 1:We told him, we pitched the same thing and said, hey, the first two to three months are going to be brutal. Yes, from an efficiency, especially because of how profitable and efficient they had been for so long. Totally it. It was a hard move to make.
Speaker 2:But once again they were profitable and efficient. But so profitability and efficiency was kind of like here, maybe on the growth, but overall growth was this, but then they stopped growing and then they started. Eventually, profitability starts to shrink and we and we showed them this entire projection yeah and we've done this a few times with people.
Speaker 1:It's like hey, based off of your current returning rates and based off of your customer acquisition and your cohorts and how your cohorts grow over time but then shrink, this is what's going to happen over the next two years. It's it's not going to hurt now, but if you don't fix it now, it's going to hurt. It's going to hurt really bad in three to four years, yep.
Speaker 2:And they, they just stuck with it for three months, like we just said, give it three months, um, and they went from not really being able to scale overall to, at month three, scaling two to three x with the same efficiencies. Before we started, yeah, right, yeah, now the efficiencies really dipped for two or three months, but then, boom, they start to skyrocket. Okay and so, yeah, the point we're just trying to make, guys, is, if you stop growing, if you stop putting fuel in your gas tank, you are going to save money. Right, I'm not spending money on gas anymore, but eventually you're not going to be able to drive your car. Yeah, eventually it's going to stall out on the highway.
Speaker 1:Well, if you run out of gas going 60, you'll coast for a little.
Speaker 2:Yeah, yeah, for sure, if you're going downhill.
Speaker 1:You don't stop immediately, but you're going downhill. You don't stop immediately, yeah, but so you're gonna stop, and when it and as you gradually stop the stop, like you know yeah you uh, your speed decreases at an increased rate. Right, correct, does that make sense? That makes plenty sense to me. So your your store. You don't fill it immediately. But if you prioritize the idea of efficiency too much, yes, you need efficiency metrics.
Speaker 1:I'm not saying to throw them all out like, yeah, you have to be profitable, you have to hit certain goals right those are all useful tools but, like if if you're operating for efficiency sake, for only for efficiency sake, then sometimes you start making decisions that will lead to a decrease of your store at an increasing rate over time.
Speaker 2:Yeah, and eventually you will, if you will efficiently put yourself out of business. Yeah, efficiently put yourself out of business, yeah. So, okay, there's an elephant in the room with this discussion, because this plan that we're talking about costs money right, oftentimes the scale that costs money, because we're talking about ad dollars and so this situation can generally only work dependent upon what your cash flow looks like. So let's talk about that for a second.
Speaker 1:Yeah, you do have to pay for it.
Speaker 2:You got to pay for it. And if you don't have a credit line or investment or just cash flow in the bank, how do you go about doing it Right? So the first and quickest and easiest way is to develop a really good ad strategy with good content. Ok. But if you can't just throw one hundred thousand dollars or ten thousand dollars or whatever that number is, at ads to scale at the rate you need to scale, you have to think about other things, right? So either one you need to think about consolidation and making things more efficient. I can't tell you what's happened to us lately. Um is, we've, we we've kind of changed our processes quite a bit and we've become much more than just a media buying team where we're just like, hey, give us money, we'll spend it and we'll tell you how it worked. And we dive so much deeper into everything this brand is doing, into everything this brand is doing, even down into what their OpEx looks like.
Speaker 1:Yeah, and I don't know if it's Not to necessarily like work in that, but to but you have to understand it, right, yeah? You have to understand it, because it's all interconnected with profitability.
Speaker 2:Yeah, yeah. We have some clients who come to us and say, hey, I need to make for every dollar we spend. I need to have like $6 in return. And we're like that's crazy, why? Oh, my OpEx is not, you know. When you start to dive deeper into it, you realize that they've got hires. That don't matter, they have a warehouse of you know and you're like.
Speaker 2:Oh, okay, yeah, you, just you. You are poorly managing your OpEx right. So so if you can't do that, that's your number one place you need to look. Number one place is you got to go and just look under the hood and see what's happening within the business, and as a business owner, you have to be able to make decisions that sometimes might suck we're never advocating to fire people or anything like that, but that's the reality of making sure you're getting what you need out of a good, efficient OPEX. So OPEX is number one. Okay, Jump into it. Look at, do you need the building that you're in? Do you constantly have to have?
Speaker 1:Yeah, like we've worked with a company that's paying outrageous amounts of taxes. Oh yeah, Because they are headquartered in California.
Speaker 2:Yeah, right in LA, that doesn't matter. At the beginning it was cool for them to do it because it was LA made. Now they're not even that anymore. So you know, and so they've recently moved.
Speaker 1:Yeah.
Speaker 2:And now I mean they're still in California, but they're not LA taxed the way they used to be. They're more inland and so maybe it's not as sexy, I guess. But the most sexy thing on planet Earth is money, right? Like it's not sexy to be on the beach, I'd much rather be 20 miles inland with cash in my pocket and not insane amounts of credit card debt and then I'd rather drive to the beach.
Speaker 1:Yeah, profit, profit rules.
Speaker 2:So profit, profit. Well, number one was ad game, right? If you've got I mean, we're not saying that just because you got the money to not clean up opex, right? I'm just trying to address some things of like okay, well, trevor, you might be talking about a brand who has the ability to spend a hundred, 200, 300, $400,000 a month. I'm not that guy, I'm. I'm. You know, I might be only making. You might be listening and you might be a. I've only made a hundred thousand dollars in your company's lifetime. So if lifetime, so if I'm talking to those people who just don't have the money, you have to get more creative. Yeah, right, and so opex is one way. The second, the third way I would say is you gotta go.
Speaker 2:We talk oftentimes about the four different ways you can grow, which is distribution, conversion rate, average order value and getting repeat customers. You know, in this sense, repeat customers, you know, in this sense, repeat customers oftentimes comes from the first three, right? So if we're trying to fill up our bucket, let's ignore number four for now and say you already know how to do that because you've got good product, whatever. If you can't afford distribution, then you have to find ways to get distribution so you can product seed, you can build ambassador programs and affiliate programs and and I mean product seeding is like the more I study I know everybody is talking about UGC is like oh, ugc is overplayed.
Speaker 2:And but like, at the end of the day, if you go and look at every single brand who's crushing it right now, like I just posted a TikTok video today about Amara, amara, amara, the colostrum account, the not account, the colostrum supplement brand. They're like an AG1 essentially, but it's colostrum, not greens. How did AG1? What does colostrum do? I don't know, I don't know, but anyways, yeah, I don't know either.
Speaker 1:It's like how? I don't know, I don't know. But anyways, yeah, I don't know either.
Speaker 2:It's like how did AG1 win? They just put product in every single pretty health and wellness person's hands and then they advertised. Right? I just got off the phone with Comfort's founder.
Speaker 1:The sweatsuit Also. Ag1 got a ton of money Of course. Got a ton of money of course.
Speaker 2:so they invested a ton of money into advertising to make sure everyone knew who they were yeah, they got tons of seed rounds, right, I think they did. Let's, let's take, uh, let's take comfort then yeah, comfort okay, comfort.
Speaker 2:I posted a video about these guys. It went completely viral. The ceo called me and he's like I just want to talk. How did you know? Like, how did you figure out this information? Let's's talk about it. And I just asked him. I'm like, bro, do you have funding? No, no funding. How did you win? He's like we just got our product in every person's hands. It was a sweatsuit company. It is the most basic. Uh, what's the word I'm looking for? Uh, where there's too many people in the market, saturated.
Speaker 1:Hoodies sweat it.
Speaker 2:I'm looking at the hoodie you're wearing and I could never tell you I Mean this was notice of rec I you could have bought that on Amazon and you could have spent $300 and bought it from Brand name. Yeah, whatever, right, so they're basic things. And this guy's making, he's killing it, he's they're doing, they're doing 30 million a month. Right, like they're crushing it.
Speaker 1:Maybe it's 20 million it's a combination of product seeding and ads and ads, yes, and then they're doubling down on ads so like the point.
Speaker 1:I'm just trying to make the thing about product seeding is it helps people if you're working with a lot of, if you're working with a lot of ambassadors, small and big, yeah, like again, we're not saying go and get Kim Kardashian, no, no, no, no. We're just saying go and look at people in your industry, intent based ambassadors and influencers that are actually passionate about whatever it is that you can line up with. Yeah, get your product in their hands, work with them to run ads with them. It helps get, it even helps boost your ads too. Yeah, right, because then you're starting, you can retarget their yeah, engagement. It starts helping you. It's a very nice symbiotic relationship that you can build with people, so it goes hand in hand with ads but it's a good way to grow organically.
Speaker 1:It does have like it's. That's not going to be the thing that scales you to you can't just do that yeah, you can't just do that. So if you're only doing that and you think it's, not working, it's probably because you're not coupling it with ads.
Speaker 2:Yeah, well, I mean even my wife, right, okay, so, uh, pretty little just like background on my wife. My wife is one of the most healthy people I know. Right, I know your wife is very similar. My wife is the type of person who sends, like stool, samples to doctors to know exactly the type of things she should be consuming in her body. Right, like she is that person who knows. Right, like she is that person who knows everything. Like she will drink an extra glass of water and recognize what it does to her body. Like she is so in tune with her body and what she puts in it that it's crazy.
Speaker 2:She, I mean she's, she's got the aura ring, she's got everything you know. So she's like, she's like she will wake up and be like I didn't get enough sleep, I guarantee it, and it's sure enough. Like she just wake up and be like I didn't get enough sleep, I guarantee it, and it's sure enough. Like she just knows everything. Where me, I'm like I don't know anyways. Okay, even she, she is working. She is taking every supplement that has been the most scientifically possible wait. She has had the most scientific work done to say this is what you should be taking, the most scientifically researched.
Speaker 2:Yes, from blood work to spit to everything. And even she almost yesterday bought Armora because she's like I just see everybody doing it.
Speaker 1:Yeah, I don't even know what is colostrum.
Speaker 2:I know it comes from cows. I know colostrum helps, so it's not collagen, no, it helps. Babies like I know that. Like if you have a baby who has, uh, I want to say what's the what's the one where they have to put them under lights?
Speaker 1:now let's try to get. Let's try to get this uh arm row guy on here and tell us about it's a woman who owns it, but they're women.
Speaker 2:So colostrum comes from breast milk. So like those first, like the first uh, couple feedings ever, like right, when a mom has a baby, your wife would know this it's like colostrum that the baby gets. It's like almost, like there's so many scientific facts that's like if your baby gets that colostrum from you within the first x amount of time, like they will be so much better off, like that's their, that's their initial like journey to health and then eventually you don't make it anymore and it's just breast milk but you can take colostrum anyways. Guys, the point I'm trying to make, before we get into scientific facts about what colostrum does, is my wife knows she doesn't need that, based off of what tests she's done. Yet she almost subscribed and started spending a hundred dollars a month and I had to stop her.
Speaker 2:Like don't you know your health? You know you're actually already getting colostrum in some of the supplements, so why would you buy a colostrum? You don't need it. But she's like I'm just seeing everyone doing it and that's what product seeding can do, mixed with ads and product seeding is not that expensive. Some products, it would be right. We have a client who sells e-bikes and yeah, that's expensive to seed that. But if you're talking clothes, if you're talking supplements, if you're talking jewelry, if you're talking clothes, if you're talking supplements, if you're talking jewelry, if you're talking food, if you're talking anything in the CPG space, it is not a lot of money to just say, hey, here's a pair of earrings, yeah, hey here's some greens, so true.
Speaker 2:And just get it out there. So it's a great way. Borrowed distribution is what we call it. It get it out there, so it's a great way. Borrowed distribution is what we call it. It's borrowed distribution and then couple it with paid ads.
Speaker 1:Well, that is a great way to wrap it up. You know, full circle. We went from Zuckerberg looking at Jeff Bezos girlfriends breasts to pay more money to support in breasts Zuckerberg. Yeah.
Speaker 2:Yeah, to pay dads with Zuckerberg yeah, to pay dads with zuckerberg.
Speaker 1:You gotta keep feeding your baby.
Speaker 2:Your baby is your, your business. The big thing, the big visual here is think of your business as a bucket of water and, depending on how big your holes are, you have to just make sure you're putting more in than is leaking out and if you don't, that's as simple as it is.
Speaker 1:Yeah, and even if you don't think you have that leaky of a bucket it is for sure. Leaking yeah, every bucket leaks and maybe it doesn't leak a lot, but eventually it it speeds up yes, yeah, the holes can be.
Speaker 2:Grayson asked the question, which is a really good question. He said have you guys touched on what the holes can be? Right, the holes can be a thousand things. The holes can be. Grayson asked the question, which is a really good question. He said have you guys touched on what the holes can be? Right, the holes can be a thousand things. The holes can be um in in this situation, for, as we talk about returning, when you rely returning, your bucket of water.
Speaker 1:Is the money right? Like that you actually get to keep yep and the holes would be either operational costs right it's, it could be it could be hey, my kids grew out, so let's drill another hole.
Speaker 2:It could be my website sucks. It could be my product isn't good, but in this case the water is the money that's coming in. The holes are the retention rate, the lack of being able to keep those people going for a certain because not no one sticks with a brand all the time. No, there's very few brands that people have stuck with like can you? Can you think of the longest? I can, actually, I know this one for me. Can you think of what brand you've stuck with the longest?
Speaker 1:mo define.
Speaker 2:Stuck with you buy on a very consistent basis. Grayson says vans, mine's quip. Quip the toothbrush subscription I. I joined Quip in 2009. And every month I get charged, or every three months. Now I've edited it because I don't use their toothpaste anymore, because I use Xylitol toothpaste Apple. Yeah, you can't count that one though.
Speaker 1:Why.
Speaker 2:It's just so big.
Speaker 1:That's the one.
Speaker 2:You can't count Apple. You can't count that one, though, why it's so big? Well, that's the one. Can't get Apple. You can't count Nike.
Speaker 1:But? But the point I'm trying to make is you can't think of anything besides Apple.
Speaker 2:Guayaki yerba mate maybe.
Speaker 1:Yeah, okay, and you're pretty relatively new, last four years for you, I mean no, it's, I mean since, since I got home from argentina so that'd be 2014?
Speaker 2:oh, really, okay.
Speaker 1:I just heard about your remate, maybe four years ago, then yeah, brand you know, guayaki's been around, hasn't the one that's makes here, but now there's a new one called magic. Yeah, yeah, I've, I've seen it. That's Utah-based, that has some adaptogens.
Speaker 2:Some mushies, some mushies in there.
Speaker 1:Yeah, so, but anyways.
Speaker 2:The point is you generally don't stick with brands very long. You do sometimes right.
Speaker 1:Like I used to be diaper dyke-y and now more yeah, like if you're talking like apparel, which that's?
Speaker 2:that's a lot harder to stay with the brand for that long totally right because like, even a competition.
Speaker 1:Yeah, if like, hey, I'm a, I like lululemon pants or something yeah it's like well, roan makes good ones too, and so does viory so and so cuts and and color, and I you know like you name it. I think nomadic just came out with them too. So how do you build brand loyalty? Because I think, yeah, it's hard. It's hard to be if you can have brand loyalty which starts with your product but has to go a little bit more of an emotional connection.
Speaker 2:And maybe that's a good topic for next week. We've talked a ton about acquisition and filling the bucket, so maybe next week we talk about patching the holes.
Speaker 1:Right, especially with emotional-based psychology.
Speaker 2:Yeah, I like it Cool.
Speaker 1:Anything else you want to?
Speaker 2:add.
Speaker 1:I just need to go to the bathroom.
Speaker 2:Fair enough. Well, you've had.
Speaker 1:You drank two poppies on the the set, so that makes a lot of sense and a lot of water today, yeah.
Speaker 2:Okay, alright, everybody. Thank you so much. We're glad we're consistently back. We're back. We won't have as big of a break as we did.
Speaker 1:That was our fault.
Speaker 2:But we're back, so we're back, baby Subscribe, download, do all the things.
Speaker 1:Show us some love.
Speaker 2:We'll see you guys next week. Thank you so much for listening to the Unstoppable Marketer podcast. Please go rate and subscribe the podcast, whether it's good or bad. We want to hear from you because we always want to make this podcast better. If you want to get in touch with me or give me any direct feedback, please go follow me and get in touch with me. I am at the Trevor Crump on both Instagram and TikTok. Thank you, and we will see you next week.