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- [00:00]
John
On a. Oh, just trust me. I read a book by some famous marketer or whatever, right? With some kind of simplified graph. Like they're gonna be like, who the hell is that person? Like, I'm not gonna trust you. Like that's the argument some marketers are trying to make. And that, that is not business speak when talking to executives.
- [00:15]
Interviewer
Hey everyone. Today we're talking with John James about measuring business effects of brand marketing. So buckle up and let's start Grammys.
- [00:26]
John
Yeah, my name's John, I currently live in Australia, but I was formerly. I'll give you a quick career background, but formerly used to work in advertising agencies, then worked in some digital agencies, then started a business of my own, worked in Silicon Valley as a growth manager. Then I'm sort of more on that advisory consulting side. Still get my hands dirty, which we'll come to in a minute. But most of the time I'm very much focused on the earnings outcome of all this activity as opposed to the optics or politics that kind of goes along with a lot of the marketing and sales function. So you can ask me as much or as little as you want, but that's kind of my special. If you had to talk about it.
- [01:12]
Interviewer
That's interesting. Not a lot of people talk about money when it comes to marketing, which is a bit weird. It's like you don't do that. That's for the cfo. So it sounds like you have a job that is very much in demand. I can imagine maybe like because you obviously talk a lot about advertising and marketing in general, but I think mostly about how advertising works and let's start there. It's a very open question. But advertising, how does that, how does that work?
- [01:50]
John
It's interesting. I'm actually doing a bit of a research study on this, like primary research myself. Like verbatim responses, like open ended questions. What is advertising? Is one of the questions. It's very interesting the answer to that. If you talk to people or read the writings of people like Byron Sharp and the ebi, advertising is quite broad. It's like any kind of communication from an entity that is like commercial in nature. So that contrary to popular perception, could be organic SEO or organic social. Doesn't have to be. Means you're paying for it per se, with cash. It could be the result of an employee doing some work or whatever. So using that broad definition, I understand where they're coming from there. But when I've done my research, most people associate it as some sort of like monetary paid option coming out of the Cash of the company that is promoting something in some way through a channel that most people are familiar with. And I know that's a very broad definition, but that is what most people think it is. When I've tested this between marketers, non marketing executives and a control group, which is just the layman.
- [03:05]
Interviewer
Yeah, I think that's interesting. And I do see that split between what most people call organic content versus paid ads, even though, you know, advertising in a way assumes it's paid. But I think that's. If it wouldn't be the case, then there would be a lot of confusion about when we're talking about advertising versus organic. So I think, I think that the.
- [03:32]
John
Key point here between the two is like one has a cash expense against it and one has more of a hidden expense, which is like time cost or opportunity cost, which can be far larger, which often isn't measured. So hey, we didn't pay. We. You hear the stories in Twitter and everything of this tech bro who's like, hey, we got to $600 million ARR with and we didn't do marketing. And like we only did xyz and they just basically explained they've done marketing. I'm like, yeah, that cost you millions in staff cost, opportunity cost probably even higher. So like that's what I'm saying. Like it's more like advertising tends to be that more obvious cash burn costs that people associate with advertising. But if you use that broader definition, it's like any form of sort of promotional communication through a medium to basically sell something. Otherwise what's the point?
- [04:21]
Interviewer
Interesting. And like, then I think the next question is there's like, roughly, I think in the industry we talk a lot about two buckets of advertising. One which is like, let's say top of the funnel, brand marketing, whatever you want to call that beast. And then you know, the other one, top of the funnel, Conversion oriented performance marketing. Describe that, that split if it's real or not. Like what is going on there?
- [04:51]
John
It's real. My litmus test is does the customer think that way? The answer is no. Short answer to that. Does I just see it all as a company trying to sell me something or talk to me. Right. So using that litmus test, we're talking about a false dichotomy. But I think internally there is a split within the industry and through roles internally within the organization and through how marketing is budgeted and spent. Most importantly, I'll give you an example. Just yesterday or day before, I was looking at the results of a DTC or direct to consumer retailer. They're a furniture retailer in AU doing 500mil. ARR just hit some earnings. You know, they reported on their public listed company and we looked at the unit economics and they, they had hidden TV advertising, which is 2% of revenue by the way. So 2% of $500 million. They had not included that in the customer acquisition cost. So all the other channels, so Google expenses, Facebook expenses, all that kind of other stuff was included. And TV was excluded because it was a different line item in their accounts. This is a publicly listed company by the way. And I was like how is that possible? So there's, there is a split that is sometimes not always a political thing or a status thing, which we'll come to in a minute. Sometimes a financial thing as well to make your figures look better. So. But if you want to go back to the history, arguably I think this split really happened. If I had to pick a year, it was 1956 or 7 in the US with a company called Procter and Gamble. And Procter and Gamble they had some accountants who wanted to split the media expenses that incurred commission payments to third party entities. So agencies example from the ones that did not, which tended to be more internal or how media buyers that did not incur commissions. And that's where this line occurred on the budget. So the line separated the ones that had commissions above the line and the ones that didn't have commissions below the line. And that's where these ATL BTL terms come from. And that's where it started. And interestingly, if you talk to Hollywood as well, the same thing happens with the credits of a movie. When the credits roll, you have above the this there's a physical line back in the old days of all the executive producers, the directors, all that kind of thing, all the very important people who had the money. And then below that is all the actual people who, you know, the grip and the staff and the, you know, people filming all this kind of lower level people. So ATL BTL was a split that was started with budgeting and PNG was I would say reinforced with this Hollywood thing because back in the 50s 60s TV was huge. To make a TV commercial you had to hire basically a film director to create it. Actors, same kind of thing. So there's cultures kind of reinforce one another. A lot of status in that of course and kind of still is a bit to this day I would argue. And, and that is then spread through into this ATL BTL has become brand versus performance. Before that it was A split between brand advertising and direct response advertising. There's actual split between agencies which we can talk about if you really want to, with Ogilvy and other things. There was response marketing agencies versus, you know, advertising agencies who did more of that high level stuff and then has flowed through, I think into 3.0 version, which was the rise of the digital era in 2005, 6 which was. Oh, digital is encroaching on this, namely Google and Facebook. Right. If we have to be specific here. And they were named performance agencies. In fact, this started in the early 90s with a company called Performance, which was later bought by Google, who sold and resold Google SEM marketing or search marketing advertising to clients. And that's kind of where this term comes from. And to delineate the two, which very different kind of ecosystems and ways of measuring and executing campaigns. I get it. You know, you had sister agencies, you had advertising agencies over here with other media and then you had the digital agency here with performance. So I get it. But I think it's the wrong way to look at it. And we can dive into that if you want to.
- [09:13]
Interviewer
Yeah, I mean, I think it's very interesting because I've often been involved in both areas. I'm often helping with producing ads that are like performance marketing ads. And then I'm also doing brand campaigns and stuff. And often for me there is not really a distinction. It's only maybe being aware of what does this person already know about us and then how far do we need to like, you know, what, what do we want them to do basically. But what I do see, and I think it's a, it's something you've talked about before. But what is a big challenge is let's say the idea is we want to reach a broad amount of people, you know, that we're a small brand, the market doesn't know anything about us. We want to reach a larger, larger amount of people. We don't want to per se reach to people that already know us. Like then you get into this, this idea of what we call a brand campaign where it's something you want to draw the attention and okay, that's great. But there's two things I think a lot of people struggle with is like, one is how do you even define, like how broad you want to target and then how many people you want to reach with the money you have. And then the next part is when you do launch that campaign, how are you measuring the success of it?
- [10:37]
John
Exactly, exactly. So I think the key thing here I say the difference between the two, if I had to be really simplistic here, so that's kind of wrong, I would say the difference between the two is like measurement, time lag, so what period of time you measure the effect, cause and effect of that investment. So performance marketing tends to be quite a narrow and quick window of time versus brand marketing tends to be a bit longer, I would argue. And then the other thing is that it's, it's not a channel discussion. But there are certain ways you can use certain channels that have pros and cons. Some channels you can target better in market customers, we call it. So people who are ready to buy right now versus people who are perhaps not ready to buy right now, but may do so in the future. And there are certain channels who don't give you that option. You, you just have to target very broad parameters and sort of take your chance. And by virtue of targeting that stuff, you'll get some people who are in market and most people will not. Right. There are some technologies around there that purport to and sometimes do allow you to target those people that have signals that are like more what we call in market buying signals. And that has definitely been the case. Again, there's a lot of caveats to that. Depends how you set it up. There's a lot of details in that you need to be very aware of, but very, very simplistic. Example, I want to find a brand marketer in the Netherlands or something, right? Oh, brand marketing agency in Netherlands. So type that into Google. Like that has a higher intent purchase or in market orientation than someone going what is brand marketing? And typing that into Google. So I had two campaigns, I had to split them up. Very simplicity between the two. I could call one more performance orientated or direct response. I could call another one that's a bit more of a long tail trailing. Do I want to get both of those people? Sure, probably. I don't know, test it. But that's a very simplistic way of doing it. Can I do that with a TV buy? No. You know, can I do that with the radio buy? No. So that's, that's the difference, I think. And people get hung up on this being a channel discussion. The channel is just a conduit. It's a medium that your message goes through to market. Again, there's lots of different things. Sometimes the medium is the message. You know, there's ad stock or some sort of halo effect of that medium. I get it. But I think people think of this in the wrong way. And they create this false dichotomy between the two activities when really you should probably talk about it in a bit of a different way that's more constructive, especially when you're talking to executives and trying to get funding.
- [13:17]
Interviewer
Interesting. Yeah, there's a lot to, there's a lot to unpack there. Like, I mean one, one of the things that, that I find very interesting is like it's, I've been in a lot of positions where like startups, scale ups, companies are moving from like a purely, let's say performance marketing oriented approach or maybe like, maybe they have a sales team and they started doing a bit of like paid ads to get some more people to the door. And then at a certain point they, they realize like, okay, this is not working. Like it's hard for us to get through the door. Like it's costing us a lot of money to acquire customers, you know, the valley of debt and all that stuff. But making that transition to brand marketing or whatever you want to call it is hard. And like that's true. You mentioned it. Like it's hard to get CEO CFOs on board with this, especially if the cost is different and then the, you know, the direct performance is also different. Like how do you even talk about shifting towards this type of marketing?
- [14:26]
John
That's a really good question. This is what people pay me for. But at the same time I think it's a really big problem right now, especially the last couple of years. So I think the death knell for me if I had to pick a year, would be 2021 with Apple's ATT or App Tracking Transparency update, which really severed a large chunk of that feedback loop of digital attribution. So if people don't know about this, basically Apple forced an update through iOS 14.5 back in 2021, which severed the connection of complete attribution. So therefore every iOS user and most people opted into this like 80, 90, 95% of people, right? IOS. So that's like what, half sometimes of your mobile market, which is the majority of your traffic. So let's just say at least 30 to 40% of your traffic, right? That granularity of the response so cause effort and then the measurement of that response is now anonymous. Nobody knows. So therefore if you're advertising through Google or any other digital attribution program and you're trying to optimize for some kind of conversion event, whatever, it was all an estimate. Nobody knew. So Facebook rolled out some kind of capi update. Google did that kind of thing. But the point is, nobody knows. It's completely anonymous. So you're missing a huge chunk of your sampling and your feedback loop, and therefore you can't optimize around that. Now, a lot of the digital marketing ecosystem don't understand this and been still operating in denial about this for years. But it's really coming back to roost now, now that the price of these ads is increasing quite a bit. 100% in four years, at least 120%, if not more. So that is huge. And that means that sometimes it's cheaper to look at alternative channels. So what's happening is that the measurement's kind of broken, but a lot of people are still stuck in this digital attribution thing where they export a readout from the reporting of Facebook ads or Google Ads or whatever. Am I getting into some kind of dashboard? And they're looking at conversion columns and clicks and, you know, blah, blah, blah. And they're trying to make sense of that, going, these are our economics. And that sounds really cool. And CFOs love this, by the way. And that's why it's been rewarded like money in get this behavioral action, get this response. That's how you economics, great, can we double that? Because double that equals more double earnings. This is great because you're selling basically certainty in a very uncertain, complex environment. And finance people and CEOs love that. Right? Now if you go, hey, this doesn't work anymore. This has been wrong. What's the reaction you're going to get is like, hang on, we've been investing in this for like two or three years. What do you mean it's wrong? That is not a conversation people want to have or admit to. So, number one, you kind of have to approach that very carefully, right? Because there's a lot of sunk costs in that and a lot of governance issues associated with that. So you have to be very political the way you approach this and just go, this is what's happened. We've been running on these assumptions. These assumptions are now kind of breaking or getting with higher risks of appetite around those. So therefore we can depend on those less. We need to move to a more sophisticated measurement solution is the kind of way that I talk about it. And the way you do that is very basic. And this is funny because this is how we used to measure marketing back in, I don't know, pre digital era, which was, you know, a very basic incrementality test is like, hey, I put money in. We did this mugging campaign and then we measure the effect over a period of time. Oh, hey, you know, sales went up 20%, therefore, was that worth it or not? Yes or no. And that's how marketing decisions were made. It's very simple. And you do some primary research, brand tracking off the back end of that. So you might physically go and do a primary research and talk to humans and poll them and going, hey, do you, do you know this category? Do you know the brands in that category? In that category, do you know our brand? You know, yes or no? And you use that as a sample to then go, hey, we got sales to X. We kind of had a brand effect that we can sort of go, hey, in the next couple of months we might get some more sales because there's that latent effect and they'll come back in market. Therefore we can kind of predict with some kind of certainty that we'll get X off the return on that investment. That's how you did it. And that was a very accurate way of doing it within margins of error. Then we went to this granularity thing and this is what the whole digital marketing ecosystem will sell you, which is this perfection of, I'll call it like false certainty around, you know, cause and effect using digital behavioral attributes. And that was the case, I'll be honest, back in the early days until privacy came in and it was diluted. And this has all started with Apple, by the way, mostly. And that has become less and less reliable. And it's getting to the point now where people are spending more and more money and not seeing a return on that and they can't figure out why. And I think that's then created. Coming back to your original question, this, this moment now, where people are going, this is not making sense, where we're spending more, we're getting less profit margins increasing, what's happening? And they need to move to. Back to. Ironically, back to the old way to it, which is like incrementality testing some kind of raw model, some people call it. Mmm, doesn't really matter. The point is you have some kind of baseline measurement for what would have happened without any marketing investment.
- [19:48]
Interviewer
Yeah.
- [19:49]
John
And then you adjust that for seasonality and all those kind of dips and troughs and stuff. Right. So again, very contextual on the particular category and market that you're in. And then you introduce marketing expenditure and you measure how much it deviated from that baseline. And then you go, hey, to the cfo, this is our baseline. This is what happened after the marketing investment. Therefore, I think with some kind of certainty with error and tolerances that we got X return. That is a really good argument for a cfo. Like, that is a good conversation to have. Not, hey, we should switch from digital to brand and just trust me because it's better and everything and you'll get sales in some time. They're going like, what are you talking about? I can't assign budget to that. Just trust me. I read a book by some famous marketer or whatever, right? With some kind of simplified graph. They're going to be like, who the hell is that person? Like, I'm not going to trust you. Like, that's the argument some marketers are trying to make. And that, that is not business speak. When talking to executives, you, you have to work with them and go, hey, this is the way I would approach this. What do you think about this? Get buy in. You know, road test me here. Like, criticize my way of thinking and measuring. And finance and CEO, people like CxOs are trained in mathematics and finance. So like they're going to call you bluff. So, so quickly if you just go in there, hey, we need to invest in brand. Just trust me. That is, that is like the worst thing you could do. And I think a lot of marketers mistakenly do that. And yeah, that's the way that I would approach it very, very simply is like, work with them and get their feedback on it and create a crude model that will improve over time.
- [21:26]
Interviewer
I feel seen, John. I feel seen.
- [21:29]
John
I mean, that's probably. I mean, most people don't care, right? If you're in a corporate job, who cares? Like, they just want some optics. But if you want revenue, that's the way you got to do it.
- [21:37]
Interviewer
Yeah, it's interesting. I mean, I hear a lot of these conversations and I've had them myself. Like, yeah, we need an organization or leadership that is like more brand led. Like, and I think often I think it's a bit lazy. Like, it's just like we want people to believe in the power of brand so we don't have to have these discussions because these are boring and we're creative people and just let us like do billboards and TV stuff.
- [22:03]
John
And they don't understand marketing. Right? Yeah. Yeah. Okay. So, so on my comment on that is that, yes, I think marketers are right, to be honest. Right. They're just really bad at explaining it and proving it because they don't understand it to the point they need to, to communicate it to those people who, by the way, care about very different things to marketers. So, yeah, I think first thing is, like, understand your audience. You are marketing to internal stakeholders. Right. Put your marketing hat on internally. Step number one, what do they care about? I know maybe marketers aren't aware of this, but CFO CEOs generally brought into the company with earnings targets tied to their renumeration. Yeah. So they'll get some kind of salary, they'll have some kind of target. If you increase this or maintain profitability or whatever, you will earn a bonus X at the end of this time that vests over. Whatever. It doesn't really matter. The point is they're about pushing the numbers forward. They're very much, generally speaking, motivated by increasing that bottom line of the company. Right. Easiest way to do that is to cut costs for profitability. Hardest way to do that is to, like, increase growth in revenue. Yeah. And that's where I think they lean on marketing. And they understand brand. Yeah, kind of. They don't really know how it works, but they understand it. The point is, if you say, oh, we'll invest in this, and then four years later, you know, you might get some revenue. They're like, I've got a. I've got a Q2 earnings target, like in 1/4 or 2/4 before I get fire. Like, that has no relevance to me in my position. Like, I'm not incentivized by that. So, like, I get it. And they'll nod and smile and go, yeah, that sounds a great idea. But like, they don't care. So I think number one is like, find out what they care about and then work back from there. And that will give you the lens of how they think about brand and marketing investments. And then from there, plan backwards from there into what you want to achieve. And I think a lot of marketers maybe don't have that conversation, don't understand it for whatever reason. I get it. Sometimes they don't incentivize to do it. Sure, I understand it. But, yeah, understand your audience. Number one, I think is very important.
- [24:08]
Interviewer
Yeah. And maybe to dive a bit deeper into that, I think, like, what I've seen as well is, you know, you see these beautiful graphs from like Binette and Field where it's like, oh, if you're invest in brand building, like, you know, this beautiful thing, it goes up and the sales activations. But in reality, like, you when you do, like. And I've had this before, like, where I did this brand campaign, very cool video, was very emotionally driven. Like. But the thing is, like, on the short term, we weren't really Seeing something and I was like, having the excuse for myself, like, oh, but this will be in six months and two years. And you know, the arguments you hear. And then, like, it kind of died. And it should have. But talk a bit about the real timelines of how advertising work.
- [25:03]
John
Sure. So I think that's very natural. When it's our work, it's our baby, we get very attached to it. We have emotional sunk costs. I spent months of my time and energy into this thing. There's the resource cost of different people, there's the budgetary costs. Sunk cost fallacy is very real. When we get into these kind of investments, we become more attached to it. Again, I'm not discriminating here. I've seen founders create this, like, really cool tech product and get really attached to it. I'm like, yeah, but we've got to sell it now to market. And the market is brutal. Like, they're going to tell you very quickly if they like it or not. Like, and are you prepared to hear that answer? Most of them are not. Right. So you get a center around that reality. I think the same applies sometimes to some of our marketing investments. Like, the more time and resources we spend on it, the more attached we are to it. To our detriment sometimes. Yeah. And I think the brutal reality is, like, the market doesn't care what we think of it internally, what people think of it. They're brutal. Yeah. And I think that's kind of step number one, like some kind of form of detachment. And I was reading this book. Sorry. A lot of investors and founders and business owners, we. We think more in probabilistic thinking, which is there's a complex system that we can't control. Yeah. So marketing, I think, is definitely one of those. Or business success. And there's no sure formula, but we can place bets, like playing a hand of poker, and we can play the odds. Yeah. And sometimes we're going to lose, sometimes we're not. But if we play the odds long enough, we'll kind of win. Yeah. In a long enough period of time. And I think some people go, hey, they put all their money into the pot and they go, I'm going to win this hand. I've got like double king or something. And then someone, you know, wins with like, some straight or, you know, a trip or something. So I think thinking in those that way is a good way of detaching yourself from becoming too emotionally involved in that. And I think. Sorry, what was the last part of your question?
- [26:57]
Interviewer
No, I think, like, the Question. I forgot it myself. So I was talking about a brand campaign, like the timeline. That was it. Like, okay, how long does it actually, you know, have an effect?
- [27:08]
John
Yes. Okay, so really important, there's a couple of studies. I did an article on this. If you go to my LinkedIn, you can kind of find out. I created a newsletter for some people called A Dose of Strategy. Sorry, Plug.
- [27:18]
Interviewer
No worries.
- [27:19]
John
But the first one was about this exact thing, which is why I'm mentioning it. And I looked at four different studies. One of them is with Sharp, Kennedy et al. One is with Cohen Poles, a Northwestern University, Brussels. Actually he's in Brussels, close to you. Anyway, very good academic, practical academic. And two other things as well. One was a Canta related firm as well. But anyway, the point is I think this again, there's averages that come into play here. So there are, there are outlier events. So just caveat that. Yeah, but most of the time you will get most the return from your investment within a four to six week period. Yeah, that'll be about 50. So you have a half life between that period of time. So I. E. If your campaign is not performing straight away within the first four to six weeks, it's not going to get any better. And there is, I think this fallacy, I understand it. Agencies go, hey, no, just keep going, spend a bit more. Here's another piece of creative, like it's not working, whatever, it doesn't get better. It's very rare for that to happen. So therefore I think you're kind of looking at this curve that goes like this and then sort of has this tailing effect. The rest of the 50% will come in a very long period of time. And this is I think the key thing to sell to CFOs and CEOs. And again, look at those studies, they've been replicated, which is great. So there's some consistency around it. It's not just some random paper that isolated variables said, hey, this is the way it works. Like there's been a couple of studies that have found a very similar kind of curve. And I think if you show that to a CEO or CFO and go, hey, if we invest, we'll get a half life between four to six weeks. We can then expect another 50% of that return investment over some trailing effect between the next 50 weeks or 48 to 50 weeks, they go, oh, okay, great, there's some certainty around that. I kind of trust you a bit more and then just go there. We'll still measure it, but you know that's the really good way of selling the investment of something that is maybe a bit harder to measure. Maybe some of these mediums like TV or whatever else, or cinema ads, whatever, that there's no direct response or digital sort of measurement system into that. It's a really good way of revealing some of the value, or I would say undervalued value in some of those mediums that I think a lot of the digital marketing hat kind of companies exclude to their own detriment. And I think that's a really good way of measuring that and justifying that to your executives. So I'm a big proponent, like contrary to popular obsession, I'm a big proponent of brand. Right. I just think the way it's sold by vendors is sometimes inaccurate and I get why that's the case. And then that is then filtered through from the head of marketing to the executive. And that gives a really bad reputation back to marketing in general because they don't understand how to communicate that to the executive level. And I think if you understand that a bit better, I think all three parties will get along a lot better. And I think everybody wins. So I don't see anybody losing out of that.
- [30:32]
Interviewer
Interesting. I like the, the metaphor of like poker where you're like over time placing a lot of small bets based on probability and probabilistic. So what I'm wondering there is like, because this holds a challenge as well. Like let's say you're a medium sized brand. Not a lot of these, like what I've seen have more than maybe one or two or three people even in a brand team in a small market sometimes there's more, but you know, it depends on the market size and stuff. How do you go from like having one or two big brand campaigns to being on like every four to six weeks? Because that would be ideal, I guess, if you like take a wave, take another wave and then you still profit from some of the half life of the previous campaigns. Is that what you're advising first? Stuff like to be always on and then how do you be, oh, how do you get always on?
- [31:31]
John
Yeah. So I have this analogy and I think this came after I was reading, you know, the Robust Institute books and everything and I was like, I see a lot of companies like, hey, like I said before the tech example, we got here without spending money on marketing. I'm like, yeah, but what's the opportunity? What's the opportunity cost that you incurred by not doing all those things? You know, that's, that's could Be more than what you've gained. So I think my mentor is like, when you're in business and marketing and sales, like, you should always be selling and always be marketing. I call it ABS and abm. You should never stop the. The form of that will change. Yeah. So come back to your question. Like maybe it's the founder doing cold calling in the early days or the, you know, the small business owner cold calling different business partnerships, trying to get something off the ground. Yeah. And then you get a bit more mature, you hire a mark or two and like, okay, now we need a presence on this kind of channel or whatever because people are going to these touch points and I think you should be led primarily by the market and how they interact with your business. And I think there's a lot of bias that comes into here around like which channels to or mediums to invest in or what initiatives. Sometimes it's like, oh, well, I've always wanted to do this, so therefore, can we try this? Or I've only ever done, you know, social media, so we should invest in social media like this. There's a lot of like, weird distortions that happen there. But I think once you get past, I think, I think with Mike Taylor, I was talking to, he's in the UK actually. Really interesting guy. Ran a performance marketing agency, now works a lot in AI. I've talked to him a lot. Business owner, very nice guy, very smart. He said a lot of business can get to $50 million ARR, or annual recurring revenue with one channel just dominating one channel. He's like, there's a lot of evidence that you don't need more than one. And what's even weirder is that you can be in the direct competition with your competitors and they will use different channels to get to that same place. So you could dominate Google, they could dominate Facebook. Another person can dominate, I don't know, referral network or something. Yeah. Or TV ads, whatever. Like that's even weirder. Yeah. You'd think there'd be some sort of like, channel that is specific to that niche, but not always the case. And I think you can get to 50mil ARR with that. And a lot of people spread their focus too quickly, too early, and that dilutes their focus and dilutes the yield. So a lot of channels have this kind of, I call it like a minimum threshold. So hey, I'll put a thousand dollars into, you know, this channel. You're not going to get anything. You need to be spending like a large chunk proportionate to Everybody else inside your category to really get any cut through. Yeah. And I think a lot of people under invest and they do that times three and they're sort of like under this threshold and all their channels and they go, it's not working. Like, I think there's a, there's a case for concentration of your budget and doing something really well and executing really well before you then spread wider. So that's the first answer to your question. And I think once you get to a team, a small team of like maybe some kind of creative designer, some kind of an executioner or like shipper I call it, of campaigns or initiatives and then some kind of strategist or coordinator, manager kind of person. I think that's kind of your three people they might be referring to.
- [34:41]
Interviewer
Yep.
- [34:41]
John
They could be called different things, different tiles, doesn't matter. You need kind of all three sometimes as an agency, vendor, whatever. I think then the next step, step is like when you reach the saturation point with that channel or that, that particular phase of the life cycle. And with businesses they, they do go through these like very predictable steps where they reach like 0 to 1 million and then 1 million to 10 and 10 to 25, 25, 50 mil. And that will require very different approaches, different talents as well in management, different structures to get to the next step. And a lot of them get to those humps and they sort of like stall because it requires coming back to what you're alluding to, requires quite a change or an adaptation of the way we used to do things into something new. And that requires people to be open minded about moving on from what was working into some opportunities that may work that are a bit more risky, perceived as risky. There's a lot more uncertainty that you'll have to sell into that. And that, that requires a skill that again, coming back to this probabilistic thinking, this is a book by Matt Watkinson called Mastering Uncertainty that I'd recommend to read. He is quite friendly with Rory Sutherland's Alchemy. If you like Alchemy, you'll like that book and that talks about how to introduce and sell this uncertainty into complex environments. And I think that. How long do you want to talk about it? But it's very nuanced how you would step people through that. And that's kind of a lot of what I do is getting people to go, hey, we've done this, it's worked really well. We're hitting diminishing returns. Do you understand this? Yes. Okay, so we need to do something different do you agree? Yes. Okay, so let's introduce something different and the way I de risk that is by pretesting or doing a pilot. So let's invest a tiny bit into this. Keep everything that's already going, going. Yeah, but let's take a portion of our budget and invest into this new thing and see how that goes. And then again, you've got the measurement methodology of incrementality, hopefully, you know, in the background. So you're measuring that thing that may be a bit more hard to measure. So a brand investment. And then go, hey, this has lifted everything up by 20%. And this is proven again, coming back to Mike, he had this two identical. This is a really good story, actually had these two identical people in the travel market. They're both spending on Google Search. One was a bigger brand than the other, and one acquired the other. And he was working on the smaller one and he was then employed by the bigger one. And they wanted the campaign that the smaller one ran because now they own the company. So he's like, okay, so then he. And they're both running independently still. Right. So then he gets permission, this is very rare, to do the exact same campaign settings, everything that the smaller one was doing for the big one. And he noticed just because of the brand halo effect, it was like 20 to 30% more effective. So more efficient, more effective. Like, so that proves that brand is like, it's a halo effect. It's very valuable. Everything else is equal. Like, this is the best split test you could ever do. So I'm not denying that. I just think you need to get there and to do that, you need to change things and do a bit of a pilot test to de risk it. I think for decision makers, really good way to do it.
- [37:55]
Interviewer
Yeah, I really like the, like, I guess you. That's also like, how you think and how you're wired, but I like the fact that you're looking at it from, like, a very detached perspective. Not as in not caring, but more like, let's try this and put that there and let's de risk that. And like, it's really, again, going back to that poker metaphor where I think for me, sometimes I'm very much, like, looking at the cards I have in my hand, like, oh, really want to. Want to win this? Like, and because, yeah, like, you're constantly in the work, but I really like, like this, this stepping back and like, looking at the long game and, you.
- [38:32]
John
Know, when you, when you place more money into, like, if you're playing Texas autom know if people anyway. But like there's, there's certain rounds where you can bet based on the probability of you thinking you'll win, right. Compared to other people. And like there's like a couple of rounds where you can put more money in, more money and more money. It's a really good example of like sunk cost. The more money you put in, the more attached you are to go along with it. Even if it could be a really bad way of doing it, you know, so, you know, the cards come out, the flops, like really bad for you. You've got like two kings. Like it's like two, three, seven and you're like, oh, maybe someone has like a seven and a three. Like I'd be screwed. Right? Like. So like that's a really crude example of like. I think the same dynamic happens in everything that we do to a certain extent. And I know it's really hard to detach, but I think that's a better way of talking about it to executives, especially finance people.
- [39:20]
Interviewer
Yep, 100%. John, this was lovely. If people, if people want to like, find your stuff, like, I recommend it. You have some great memes as well on X. But like, what's your place where you want to send people?
- [39:36]
John
Somewhat inappropriate. Look, I have a private newsletter that I go into a bit more of the detail. If you want to go to, you know, hybridsy.substack.com, you'll. You can sign up there. It's a modest following. I would call it like under a thousand. But it's like some people who want that detail for everyone else, like just for LinkedIn, there's a newsletter there. It's a bit more of a simplified version of that. I think social media is not a great place because the way the algorithms are, like reward things is more for the. I call it the lowest common denominator or the midwit of the social media users. Like, Yep. So again, just to reward people, like, aren't really thinkers and for that reason. But yeah, there's lots of, lots of content there and just DM me and hey, I get DMs all the time going. I'm really interested in this and be as specific as you want and I'm sure I've talked to somebody about it and I'll just point in the right direction. So that's probably the best way of doing it. But I also love your work as well and I really like the way you've branded your podcast and your brand and I think it's visually distinctive. And I think it's like preaching, like doing what you preach, which is a good example. So thanks for doing what you do.
- [40:44]
Interviewer
Thanks a lot, John. Take care. All right. See, let me.