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Ep 502: DTC Survival Guide To Increasing Your Marketing Efficiency: A Fireside Chat with Dave Steele, Pilothouse CEO | AKNF
00:19:19
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- [00:00]
Eric Dick
Eric It's All Killer no Filler. I'm Eric and today we have a really special treat for this week's Pilothouse All Killer no Filler podcast episode. We've got Dave Steele, CEO and co founder of Pilothouse. Dave was one of our first guests on the DTC podcast and he was on quite a lot in the beginning, but as of late he's been deep into the weeds of scaling up Pilothouse and scaling up Pilot House. He has done. When I started working with him, we were 17 team members and now the entire Pilot House organization is above 175 people. It's been an absolute wild ride. Dave does a lot of his content internally in our quarterly meetings where he gives these incredible speeches that really fire people up and inspire people. And so I was really excited to turn him loose on a solo episode of All Killer no Filler where he talks about how to navigate, how to think about navigating the tariff situation, the financial situation that brands find themselves in right now. So without further ado, I give you Dave Steele, CEO of Pilothouse, in this very special fireside chat on All Killer no Filler.
- [01:09]
Dave Steele
Hello friends of dtc. We and the world are at an inflection point and there's no going back to normal. These recent tariffs on US imports have been a wake up call for everyone, a mortal reminder for many, and yet for some, an advantage. One thing in my mind is certain, this will prove to be an evolutionary event for our community. The brands feeling the full weight of these tariffs today are the ones who will be first to evolve. Driven by necessity, they'll embrace automation, AI and efficiency. Not as luxuries, but as tools for survival. These diligent operators will rethink every aspect of their business. New supply lines, new tools to automate roles, new enhanced partners to replace stagnant ones. In doing so, they will cultivate a workforce proficient in AI driven growth strategy, while others remain complacent, anchored to outdated operating systems. Like Tesla building its cars around a fully electric software first architecture while traditional car companies struggle to retrofit EVs into platforms designed for gas. In these times of break and rebuild, we must push into the discomfort of what isn't here yet, but will be. Because even if these tariffs return to previous levels, once you've seen a vision, a path, a version of your company that can operate with 10%, 15% or more additional margin, there's no going back. My view is that brand owners have a duty to stay on that path, to build that war chest and the resiliency that comes with it. And if we look at the broader economic and political landscape, this is likely one bump on a long road from Sun Tzu. The art of war is the art of deception. While we're facing the disruptive effect of what's right in our face with these tariffs, there's an unseen counterpoint off to the side that we don't yet understand, but we must prepare for. This is a premise repeated through history. That said, what I love about this DTC community is how nimble, creative and resourceful we can all be in times of crisis. And in the end, I'm confident brands will find their efficiency and stabilize. Yet the eye is not satisfied with seeing, the ear not filled with hearing. Before long, aspirations of those affected will once again include growth and in most cases retain the need for efficiency. And the weight of those mounting expectations will pressurize your marketing. So my word of advice is to be careful and specific with how you apply that pressure to your marketing team. I want to share with you today my view on how brands should approach increasing their marketing efficiency in this new landscape. My point of view is shaped by an intention to merge the foundational strategic principles that have underpinned marketing since the 60s and 70s with the executional principles that have allowed performance marketing to flourish in the digital age. Now more than ever, you need a scalable system, not just an omnichannel strategy. Systems are interconnected and predictable. They make sense of complexity by approaching in terms of wholes and relationships rather than individual parts. All too often. Meta, Google, Amazon, email, TikTok and others operate in parallel to one another, each governed and measured as an individual part rather than collectively as a system where the whole is greater than the sum of its parts. This force multiplier, the 11 3, is the most powerful form of marketing efficiency, and unlike CPMs and tariffs, the design of your system is in your control. At the system level, performance isn't about how efficient a channel acquires a customer, but rather how efficiently the system influences a consumer through their journey from brand unaware to loyal customer. Measuring the efficiency not just on conversions at the bottom of the funnel, but the entire funnel from top to bottom. That measurement transcends channel, and the greatest brands have created efficiency at that level to achieve true scalability and predictability with their marketing. In other words, scalable business outcomes do not happen without influencing consumer behavior. Our role as marketers is to observe the core shifts happening in the market, consumers shifting like waves in an ocean pushed and pulled by forces in and out of our Control, navigating and positioning our boat in that ocean within favorable tides and trade winds is how we move efficiently. A recent example as a Canadian, when President Trump said he'd like to see Canada become the 51st state, it was like dropping a boulder in that ocean. That triggered a wave of consumer behavior shifting towards buying Canadian. And many of our Canadian DTC teams who observed this shift and positioned into it felt the added efficiency in their marketing. But you see, it wasn't because their 20th ad iteration hit the mark or the algorithm found a pocket. It was because they understood where the consumer was moving and what motivated them. And they connected with that undercurrent. Don't get me wrong, creative velocity and iterative testing is important. But in our hunt for efficiency, we can't allow the little things to block out the big things. It reminds me of the saying not seeing the forest for the trees. And I said this wrong for a long time. The correct phrase is forest for the trees. It's incorrect to say from the trees or through the trees. And the meaning is when someone is so caught up in the details that they fail to understand the bigger picture. The reason it's for the trees is that the word for in this case means because of. You can't see the forest because of the trees. That's a nuance, but it's important. It's saying the details aren't just details, they're obstacles. You can't see the forest because the details are obstacles. In other words, when your mind is occupied by the details, there is no room, no capacity to see the forest. Performance marketing teams, while priding themselves on squeezing every ounce of value from every step of the customer journey, can often be so heads down on the little things that they miss the big ones, like these waves of consumer behavior. And the least efficient marketing position to be in is adrift in calm waters, burning through ad dollars as if manually rowing for momentum. Now is not the time to ask how do we row more efficiently? We must instead ask a strategic question. How do we move and position ourselves in the trade winds and influence consumer behavior? The answer lies in the true meaning of creative. Not ads, graphics or design. That's content. I'm talking about creative, the novel ideas and concepts that act as a mainsail to bring strategic positioning to life. A bold banner overhead for all to see and for content to align with and rally behind. These creative concepts are born from insights gathered from observations of these consumer ships in the market. So to use an example, let's think about the non alcoholic aperitif category Post pandemic, there's a rising cohort of consumers, especially Millennials and Gen Z, who are intentionally stepping away from overstimulation. That's not to say they want boring wellness. They want vibe, rich, aesthetically elevated rituals that match their values and their Pinterest board. There's a growing rejection of the old masculine ideal. Stoic, performative, emotionally unavailable, embodied in the image of a man alone with his whiskey. This next generation is choosing presence over posturing, fluidity over rigidity, and rituals that invite connection, not armor. While they drank to shut down, we pour to open up. From these insights, a creative concept can emerge. Taste the quiet. A sensory first concept that transforms the product into the medium. In the same way that a home is not just a shelter, it's a medium for identity. The product isn't just a drink, it's the conduit for these consumers to translate their values into an experience, to project their own meaning that to them, Drinks with Friends is about introspection over impulse, thoughtfulness over trend, quiet over loud. And underneath this banner is where tactical execution can iterate on that concept collectively as a system across all channels, paid, organic, offline, online. One executional example could be a creator led short form video series that completes the sentence. Quiet tastes like silence between friends that feels full, not empty. Taking the long way home on purpose, finishing a task and not picking up your phone. The success or failure of this tactical execution doesn't just generate performance data, it generates strategic insight. And when creative concepts connect, it reveals more than what works, it reveals why it works, allowing for a deeper understanding and therefore replication and scale. Because if you can't recreate a winning ad, you're operating on luck. And if you pull at this string further, you can see how these insights can become a wellspring and even inform product development. Just imagine an iteration strikes a cultural nerve and goes viral. Quiet tastes like a glass half full. And finally, enough. The insight not just that the creative worked, but that your audience craves emotional sufficiency rather than indulgence and consumption. They don't need to accept the baggage of previous generations like not being happy or good enough. Unless you own a house, a car, are married, and have a university education, that's not just a message, that's a product brief. So you launch a limited edition aperitif called Half Full with the bottle half filled by design and etched with the phrase and finally enough. It's not just a product, it's the embodiment of the insight Creative told you what mattered to Your consumer and your product and marketing made it real. More importantly, this grounding on a creative concept provides the first foothold in measurement moving from channel level efficiency to system level efficiency. That's because these concepts have the capacity to generate demand and influence consumers from top through to bottom of funnel. And this is not to slow down the speed of creative testing. Styles, formats and variations at high volume are needed to feed the algorithm's optimization appetite and find those winning lock and key combinations for each individual consumer. I have a quick sidebar on speed for my fellow agency people. It was one of our clients from maybe five years ago, shout out to Shane Parrish with Farnham street who ended up firing us after we failed miserably. We had screwed up budgets, we launched ads with typos, we missed the mark on brand voice. It was a mess. Not a not a proud moment. And when that happens, it's so tempting to just turn the page and move on. But in this case, something special happened. Because we failed so bad, we were forced to reshape our identity. And thankfully Shane was gracious and imparted some wisdom in that process. Previously we valued the concept of speed building fast, moving fast, testing fast, failing fast. That was our ethos. But the downside of speed was all too real with the mistakes we were making in our haste. So Shane ultimately taught us that speed without good direction won't get you any closer to your goal. Enter velocity, which in physics represents speed with direction. So move fast but towards the target. We now rally behind velocity as one of our core values at the agency. And what I'm trying to show is that a creative concept provides the direction that marketing teams can point their speed towards, especially performance marketing teams. It gives them something to grab onto that's tangible, that isn't capital B brand, but it's brand accretive. And in many ways I see the creative concept as the choreographer in this dance between performance and brand. I heard it said that where performance wants to be loud and disruptive, brand wants to exude a quiet confidence that comes from being the real thing. Now think about this. With the rise of AI creative, high speed execution and tools that instantly generate and copy hundreds of top ads, this is resulting in unprecedented speed. But my bet to you all today is we're going to see countless brands spinning their wheels faster than ever but not getting any traction. It's for this reason I've become a believer that if your actions and marketing spend doesn't generate insights, you're not meaningfully further ahead. You've merely rotated the hamster wheel one more rotation so truly consumer insights are the lifeblood of real marketing efficiency and yet are so often overlooked in a flurry of action or in the hunt for short term marketing efficiency. Meaning it's our role as marketers in this age of AI to transform that speed into velocity by adding clear direction. And now more than ever, I believe that direction will make or break brands. In years past, that direction was good enough to merely compete on price and product alone. But as e commerce matures and the novelty fades and competition rises, those paths will be the first to face the coming commoditization. LLMs and AI agents will be a meteor in the ocean compared to Trump's Boulder. Consumer spending behaviors will change forever, particularly for demand capture. Entire categories will be commoditized when agents choose on behalf of consumers. Order me a single ingredient organic Ashwagandha supplement sourced from India at the lowest total cost. Unless your competitive advantage is manufacturing, you don't want to be fighting for margin in that squeeze. Which means the direction added to speed must be toward concepts that create an anchor to emotion, to purpose, community, meaning, or a brand promise. More than ever, those will be the primary driver of a meaningful margin between your cost of goods and retail price. And at the same time, I don't want this all to sound like doom and gloom because there are so many new marketing evolutions and channels that rich in opportunity like social commerce and live shopping, which are demand generative in nature. And that art of the sell, the persuasion isn't going anywhere no matter how efficient the new intermediaries between product and consumer become. And I'll leave you with this I am a believer that there's a hopeful, prosperous path for any marketer willing to roll up their sleeves and learn the tools of the future. Just as Facebook was once daunting and complicated, and this DTC community is special, no matter what comes our way, we'll do what we've always done in this game. Build our way forward. Thanks for listening. If you have any thoughts on any of this, send me an email davilothouse co Godspeed.
- [18:53]
Eric Dick
Thanks for listening to today's episode. If you're not getting the D2C newsletter, you can subscribe for free at directtoconsumer. Co. And if you want to learn more about Pilothouse's All Killer no filler services, take off to Pilothouse Co. I'm Eric Dick and this has been the DTC Podcast. We'll see you next time.