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You need to constantly be thinking about how are you teaching somebody something, how are you introducing it to them differently, how are you making sure that this feels like it's going to impact their life. And that in my opinion is how you keep the strong brand identity. And of course as a company you got to do things over time, right? You need to consistently have good customer service. You got to consistently be doing the right thing. You got to consistently be coming out with good content. That's how the brand gets built. You can't build a brand overnight. It's not like Chat GPT where overnight you can have millions of users a good brand. You know, look at all the luxury brands. They take years, sometimes decades to develop. And that's another reason why sometimes venture is not a great fit for consumer brands. Because you can't just build brand affinity overnight. It's something that requires repetition and doing the right thing over and over and over again.
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Welcome to Limited Supply, the place for.
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Refreshingly real takes on what D2C is really like. I'm your host Nick Sharma. Let's start talking about money.
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I'm so excited to take a second and talk about this season's sponsor Motion. If you don't already use it. Motion is a SaaS tool that launched three years ago. I even invested in the company pre launch just based on how they were thinking about creative Analytics. Today. Motion's a no brainer tool to use in your marketing stack. Yes, it's creative analytics. Yes, it lets you track your competitors ads. Yes, it has the most beautiful UX and UI to report your ad performance. But let me tell you how people at Sharma Brands describe Motion. So I asked my team in Slack why do you like Motion? And here were the answers. The first reply says it's really moldable.
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You can use it for high level.
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More creative driven analytics or get really granular into the media buying analytics and data. It's a super accessible platform for all use cases and I think it brings our creative and paid teams together. The second reply says it unites everyone, agency and client, creative and paid founder and marketer. It's so dang easy to understand that everyone really can grip performance and speak the same growth language. The third reply says I love being able to reference prior campaigns using their filters and I love that we can use data from the past to make educated decisions on future content. As you can tell, we can't live without Motion at Sharma Brands and once you see a demo I bet you won't be able to either visit motionapp.com to get 50% off your first month when you mention limited supply to their sales team. Again, that's MotionApp.com to get 50% off your first month when you mention limited supply to their sales team.
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All right, guys, welcome back to limited supply. This is the end of the year part of the season, so I hope Black Friday Cyber Monday was good to you. I hope that you made a ton of money, you had a ton of volume. A lot of your existing customers came back and purchased again. And for today's episode, we're actually going to do something a little bit different. So we were supposed to have an ex founder who sold this company for hundreds of millions of dollars and has started a new one on. However, due to a scheduling conflict today, we're actually going to go through a list of questions that I got by email from a. From a brand that's doing just under a million dollars a month on Shopify and they're looking to get to about 5 to 6 million a month on. On Shopify. So per month. So these are the questions that I got and essentially what I want to do is I just want to read them out loud and kind of talk through them. It's going to be a little bit of a quicker episode today, so probably about 30 or so minutes. And I hope that today's episode is a good one for you. All right, so first question. Do you have a recommended team structure for a lean direct to consumer e commerce business? Honestly, let me tell you something. A few years ago, when I started working in E commerce and direct consumer, there was. It was very lean, right? Direct consumer was not really a thing. Maybe seven, eight years ago, it was sort of a thing. But you know, it was sort of just a separate function to a business that also had retail or their own retail stores. Like maybe a Madison Reed or you know, an Allbirds, something like that, where they had their own retail stores. Although Allbirds probably completely different business, but because they started direct consumer, but something like Madison Reed, where you know, they're selling into retail or their own retail or HINT is where I was right. We were selling into mass retail stores. E Commerce and Amazon Online were sort of this side business piece that sort of just existed and brought revenue in, but it wasn't the main focus. And so at that time our teams were super lean. I remember when I joined Hint in our first year, I think our team was about three. Three people, three, maybe four. It was myself who was sort of leading all things media. Buying creative strategy, you know, setting budgets, managing the actual media we had a person who was kind of an E commerce manager who would help make sure that the site is working. You know, the right offers are there. At the time, Shopify was not what we were using. We used to use this ancient garbage product called Symphony Commerce and you had to submit tickets for everything. And this e commerce manager was really managing Symphony and their dev and tech team. And then we had one analyst who would basically run the numbers constantly and look for insights or patterns or things that we could take and turn into more revenue opportunities. That was basically my E commerce team for an eight figure or a business that should have done very low seven figures but ended up doing just over eight figures. Well, more than just over eight figures in year one. And it goes to show that, you know, lean teams is where it's at. Then we went to this place I think for the next few years after that. That was in 2017, you know, 2018 to probably 2022. I feel like maybe 2020. There was a lot of companies that obviously direct consumer became a thing. Everybody was raising money for it. You know, people were getting tons of cash for it and it just resulted in, you know, a ton of people being hired. You had massive offices with hundreds of employees and the revenue did not match how many employees that they had. And you know, now we're sort of back at a place where most brands are leaning toward very lean team structures. You know, Jolie, for example, is I think two full time employees. Outside of the two founders. Lemmy, super lean team. Momentous, super lean team. Eat sleep, super lean team. These are all just very lean teams. So anyways, the question is, do you have a recommended team structure for a lean direct to consumer business? I would say you sort of want to make sure you have one person on ops, OPS and finance that could be the same person if they're able to do that. Otherwise you have two people for that. You want one person. And OPS should be, you know, supply chain, product development, making sure that the trucks are picking up the pallets in the right spot, dropping them off, you know, nothing is broken, etc. Etc. On the marketing side, which is I think where most of this question stems from. You know, I think you can do it in a couple of ways. I think that if you, it really depends on the type of talent you hire. If you hire channel managers who are really good at managing single channels, you're going to need a couple of those. If you hire kind of like a growth person in the way that I feel like I was a growth person then you might not need a bunch. Like you essentially need one growth person, maybe a coordinator on the media channels, maybe a creative liaison or somebody to help kind of execute creative. The creative piece too. You know, if you execute that in house, that's a different staffing versus if you execute that with agencies and contractors, that's a different staffing because then you just need a quarterback internally. Basically what I've seen is like either you have quarterbacks internally who are managing external partners, or you sort of build these in house, but you build them very lean. So instead of having seven video editors, maybe you have two, you know, editors who are constantly cranking things out. The other thing is also just understanding process. So for example, you know, a video editor might not realize that once they make a video, that one hook, if it proves to work, can be turned into 15 different videos and tested across that. Or if one static ad works really well, that can be now ripped into 30 different static ads. Because you have the template in Figma, you can go to ChatGPT, you can say, this is the winning copy. Make me 30 other versions of it immediately put it into figma, export it, get it into Facebook, get it live. So it sort of depends like how you run it, whether you have team members in house or externally. For example, if you're buying media in house, that's a different structure than if you're just managing a team like Sharma Brands to run your media and creative. So most of our clients, I would say, tend to be on the leaner side. They look to us to manage media, creative, email site or some combination of that. And internally they more so focus on finance ops, product development, and sort of brand marketing. Personally, I think that's the best kind of setup because things like finance and product development and brand marketing, those should actually be done in house for sure. But the things like growth marketing and, you know, merchandising and offer testing and things of that nature, you sort of want to be able to leverage data from like, for example, our other clients or other accounts that I see or that my team sees. So anyways, all that to say I think lean is the way to go. And if I were doing this today, I would definitely stay lean. I think Jolie, for example, did a phenomenal job. A bunch of the other companies I mentioned too, where you stay super lean internally and sort of leverage different agencies or vendors, contractors, freelancers for everything externally. Next question is what percentage of revenue should ideally come from each channel, for example, organic paid email referrals, returning customers, et cetera. Well, to Be honest, it's completely different for every business. If you have a high consumables business, you know you're going to have a lot more returning customers than if you're for example, something like eight sleep. If you're a consumable, you're probably also going to have a lot more email revenue than if you were not. Generally I would say organic for I basically look at it as like organic and paid or I think email falls under organic, traffic returning falls under organic. It's really like email and paid and it should generally be about a 50, 50 split. It's usually anywhere from paid is generally anywhere from 30 to 50% of revenue and then the between email and organic you're getting the other, you know, 50 to call it 70% of the revenue. That's probably a good thing to target this year. What was interesting to see during Black Friday is a lot of brands that saw a Black Friday that wasn't as strong. It was, it was, it was directly correlated to them also not doing or you know, cutting budgets or cutting initiatives on the brand marketing side which led to less organic traffic and you know, less organic sales, meaning non paid, non paid media sales. It, it was probably a function of like optimizing for costs at some point during the year or coming into this year where they decide, you know, brand marketing, I feel like tends to get the first ax right. Oh, do we really need this social media agency? Do we really need this content creator seating agency? Do we really need this PR agency? Do we really need to do creator events or influencer dinners, things of that nature? Those are the things that tend to get cut first versus, you know, paid media. It's like, why would you cut paid media when you can see the cost and the revenue coming in at the same time? So a lot of brands that ended up cutting that definitely saw that their organic traffic died a lot this year. And for some of the brands where it was really one main one where I saw they had a Black Friday that was less impactful than last year. And when we looked into it, it wasn't that paid was less efficient, paid was actually more efficient, but it was the fact that 50% of their revenue last year came from paid or sorry, from organic. And this year they didn't have any of that coming in. They had a much smaller percentage of that. Okay, next question. Do you have a target customer acquisition cost to lifetime value ratio? What period of time do you utilize for LTV calculation? I don't think there is a target CAC to ltv or CPA to LTV ratio, I would say maybe a rule of thumb is like one to four. So, you know, for every dollar you spend on acquiring somebody, you're making $4 in revenue. That would generally account for your cogs and all your costs of shipping and production and overhead. You know, I'm thinking that that also works from whether you're a mattress company or you're a supplement company. I think if you're a consumable, you have the opportunity to extend LTV a lot more. But the difference is that if you're a mattress company, your LTV is just going to be significantly higher, right? You, you might have a, I'm just making these numbers up. If you have a $2,000 mattress and you can acquire somebody for 4 or 500 bucks, 600 bucks, then you know, you've got that 1 to 4 ish ratio. But also your margin there might be, you know, $1,500 compared to if you're selling a vitamin C supplement. Again, just making this up and you acquire a customer for, you know, a hundred bucks, but you can only get 400 bucks out of them. There's just different, different numbers or different playing fields. But one to four is probably a good rule of thumb. Maybe. I think it also depends, right? If you're, if you're acquiring a customer that is a consumables customer, you know, I know a lot of supplement brands or beverage companies, food snacks companies, or really anything that's consumable, they're sometimes fine with acquiring customers at break even or sometimes right below break even because they can rely on their product to do the job of bringing somebody back to it for refill or for another version or, sorry, for another product itself. Whereas if you're buying cookware, if you're buying a mattress, if you're buying a laptop, a pair of headphones, you know, a pair of sunglasses, you're sort of buying once and you may not come back. You know, your, your average numbers of order, your average order numbers per customer might be like 1.1. Instead of in a supplement business, it might be, you know, six or seven. So it all kind of depends there. And then deciding how you, how you determine, you know, how much you want to increase your CAC threshold to acquire customers at scale. Also, there, there are ways, you know, you can acquire customers for a supplement brand, for example, that are more profitable, but then you probably, you might not have the ability to scale as hard, so you might just have less opportunity to spend because when you're trying to get into the real competition of spending. You know, things get expensive. Next question is, do you recommend incorporating loss leader products into a product lineup? Absolutely. I, I tend to look at products AS T Tier 2 products. Tier 1 products are sort of your flagship products that are driving majority of, you know why people want to come to the brand. So if you look at, you know, Caraway or Hexclad, it's their main cookware set, the 12 piece set or the cookware set from Caraway, it's the, it's the, it's the stuff that's really driving people there in the first place. The stuff that sort of built the brand, the stuff that the brand's known for. Now the tier 2 products are more things that you add on or incentivize or use to gamify the purchase. So for example, let's say you order a cookware set for, you know, 400 bucks. The free shipping threshold is 450 bucks. Now you would use tier two products. Maybe they're aprons, maybe they're oven mitts, maybe it's a set of knives, maybe it's a salt and pepper shaker. You know, you would use those products as those tier 2 products to sort of get to that AOV threshold. So technically I guess it's not necessarily a loss leader in that sense. But I do look at Things as Tier 1 and Tier 2 Tier 2 products, or you could even call it Tier 3 products are sort of those really good gift with purchases. You know, it might be, it could be anything as a gift with purchase. But again it sort of just helps to gamify the consumer to want to place that order or you know, get something else. Loss leader in general, I think of retail or like a Target or a Walmart, you know, basically discounting something heavily to get people in the door. I don't know that that works online because I think if you see that opportunity online, right, you can go directly to that and purchase it and get out versus in, in Walmart or Target or Costco. Their whole point of you knowing that there's a product on sale, you know, they're going to put that in the back, they're going to make you walk through all the aisles and find seven other things they like. Right? That's the whole strategy is as soon as you walk into the store and you're going to buy that pair of AirPods for $100 cheaper than, than it is at Apple, they're taking the hit on the discount there or they might be paying or subsidizing part of that discount for from what they paid for those AirPods and then selling it to you. But they know that they're going to get a much higher cart size because you're going to be walking through the store to get all the way in the back and pick up those AirPods. So hopefully that helps answer that question. Next one is at what stage of business growth do you recommend bringing media buying in house? Well, this is, this kind of goes back to the lean team question. So it sort of depends. If you plan to, you know, bring media buying in house, you really need to set up the full function in house. And that's everything from measurement and reporting media buying itself across all the channels. Facebook, Google, TikTok, Snap, Pinterest, AppLovin, display if you're doing that, YouTube if you're doing that, Taboola if you're doing that, you know, all these channels. You also need to be able to have media planning strategy and make sure that that's cohesive and working together. From a creative standpoint, you want to make sure that's cohesive. You know, it is definitely a few people that you're going to be bringing on. I would say, general rule of thumb, I would say is, you know, if your costs to pay an agency significantly outweigh the benefits and also the costs of bringing these people in house, then it probably makes sense to bring it in house. The advantage you get with the agency is that, you know, for example, I see, I don't know, 25 different ad accounts and I can see what's working and I can see what type of hooks are working and I can see, you know, for example, this, this meta health and wellness thing that's going on. I know exactly how to fix it for one and then I can replicate that across the others. So those are sort of the advantages of doing it out of house. But to bring it in house, you know, there's definitely cost savings. A lot of the big performance marketing brands tend to bring it in house. A lot of them too will have actually learned this from Mike Miller, who's a really senior growth person. He will basically test channels with agencies up into a certain point. So essentially where it becomes too expensive to keep running it with the agency and then bring it in house. And I think that that's a great way to do it too because you sort of get the learnings and the understanding of how somebody does it before you end up bringing it in house. And it's not really, you know, you're not tricking anybody because you can Be upfront about that. And we've had clients be upfront about that with us too. Like, hey, we want to work with you guys for three months or six months or 12 months. And then we want you to actually help us hire those people and bring them in house. And so, you know, we'll get them going, essentially start the car, get it going and then as we sort of hand the keys over, we'll go out and find them talent, help them interview and bring them in house, train them up, etc. And then they sort of take over.
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Whether you're spending 50,000 per month, 50,000 per week or 50,000 per day on ads, there's one thing that you need in all those scenarios. It's creative analytics that help you understand what's working and driving more revenue. With Motion. Their software makes it so stupid simple to see what is performing, what is missing the mark, and what you should continue to double down on with Motion. Their software makes it so stupid simple to see what's performing, what's missing the mark, and what you should continue to double down on. Motion reports are also the only reports I've ever been able to send to a brand, CEO or cmo, but also to the performance marketing team and to the creative team. Their UI makes it so easy to interface, so whatever you're looking for, you can find it or you can create.
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Custom reports for it.
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It's literally an idiot proof software. And I say that as someone who gets easily confused with complex ui. I want you to try Motion because like myself, I bet you won't be able to live without it once you try it. Go to motionapp.com and when you talk to their sales team, mention limited Supply to get 50% off your first month. Again, that's MotionApp.com to get 50% off your first Month. When you mention limited supply to their sales team. Try it out and let me know how you like it.
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Next question is how can we move away from excessive sales and coupons without significantly impacting conversions? Are there any rules for coupon to margin ratios? So to be honest, my, my philosophy here is, and I learned this from the then CFO from hint was basically you never discount more than what you offer your subscribers. You never want to put subscribers in a position where they feel like they don't have the best possible discount. So at the time I believe we were 15%, maybe 20% on subscription orders you would save. And so the largest discount we could do was 10% or 15%. I think sometimes we could get away with 17%. But you know, we would phrase that as a dollars off versus a percentage off. But we would never go to a point where it's better for one time buyers or, or yeah, really one time buyers than subscribers. Now new customers is a different thing because if you're a net new customer and you're making your first purchase, then you know, you've definitely heard me talk about that new customer offer, that new customer bundle. And I think it's worth giving some sort of a discount or a great offer, merchandising, something amazing for them. But for existing customers, you really want to focus on, you know, trying not to discount if you, if you don't need to, if you do need to, you want to make sure it's something light. I would try to see, you know, there's, there's discounts as one lever, right? Another lever might be a gift with purchase. Another lever might be cash back. And cash, cash back is great because you know, if you're discounting off the gross revenue, you know you're significantly impacting your bottom line. If you're discounting off or instead of discounting, if you're just giving cash back, you know, the $10 that you give somebody that's cash back, your cogs on $10 of gross retail value might actually only be, you know, $3.10. And then out of that, if only 40% of people redeem the cash back, you know, you can see how the math works out to be much more favorable for something like cash back. Gift with purchase is the same thing, right? If you, let's say you have a supplement business and you're selling this travel pack or something like that, you know, it might have a perceived value of $19 or $24, but it might actually cost you a dollar to produce or 50 cents produced and landed. And so you have this high perception, but the cogs of that similar to the cash back is actually much lower than the discount they think they're getting. Another really cool idea that I'd run a hint once was something like, hey, if you subscribe to three cases of water, we'll give you three months of Spotify for free. And the reason that that was so cool was because that three months of Spotify, whatever the actual hard cost of that is to give somebody, which, you know, I think it's like a dollar, that's like the trial they run is like a dollar for three months. So that might be for Apple Music, but same case, that dollar becomes their cost of customer acquisition, right? So in this case if you subscribe to three cases of Hint and I give you three months of Apple Music, that Apple has no problem giving that to us because their cost of customer acquisition from us is $1. Right. So there's different ways. And that's another lever. The perceived value of that might be $15 a month. So that might be a $45 perceived value. They just spent 39 or $36 on the water. You know what I mean? They look like they made money by doing this. So, yeah. So that's another lever to leverage. And then second to that is, do you believe that constantly offering coupons devalues a brand? Is there a max coupon percentage you recommend? Yeah. So essentially, same thing here, right? I would just make sure that your subscribers are taken care of. You want to make sure that your most loyal, your best customers are not necessarily seeing something where they want to unsubscribe or they feel like they got ripped off. Really, the biggest culprit of this is actually when you sell in retail and Amazon, and if you have something like, for example, if you go on discount in summer during Target or your product goes on discount during Back to School in Target or Walmart, Amazon's going to actually match that price. And so that's the only time where you sort of have a thing that's out of your control maybe is when a retailer is doing a discount that they're subsidizing or that you're deciding to subsidize in retail to get a better slotting or better placement in the store. And then Amazon will try to match that. But in most, most cases, you know, I would go with the philosophy that I listed earlier. Next question is, how do you maintain a strong brand identity as you can scale and introduce new customer segments? Well, short answer is that, you know, you want to kind of leverage this concept that I call performance branding, which is building brand equity on the back of your working performance media dollars. What that means is that, you know, every ad, every message, every offer, every every social media post, every landing page, every product page, every hero section, you want to make it so that it feels like a full funnel experience. Whether somebody understands exactly why they're on your site and what they want to buy and why they want to buy it, or they somehow stumbled across your ad, your landing page, your display ad, your YouTube ad, your product page, you know, your. Your About Us page. That should also be just as appealing to somebody who knows nothing about your brand. And you can sort of educate them on the why and the how and the what, what makes you different and how you set yourself apart and why you're better than the competition, et cetera. So that, in my opinion is the best way to do it. You know, building a strong brand. You can't build a strong brand without having customers. And the best way to get customers is to make sure that you're appealing or able to educate all of them because you really want your customers to buy the why, not the what. You know, if, if somebody's just buying a product from your site or from your brand, you know, that's not a long term customer. If they're buying the why for product, that's a long term customer. And so essentially, I think that's probably the punchline here is as you're, you're scaling and finding new customer segments, you know, a lot of the early advertising that you do is so focused on we need to crack the code on these angles and this and that. But once you sort of start to get these angles that work, if you're entirely just focusing on, okay, now we just got to go harder, harder scale harder, you know, more ad spend, more creative, that looks just like that, then you're sort of losing that why piece of it and just really doubling down on the scale part. So punchline is you need to constantly be thinking about how are you teaching somebody something, how are you introducing it to them differently, how are you making sure that this feels like it's going to impact their life. And that in my opinion, is how you keep the strong brand identity. And of course, as a company, you got to do things over time, right? You need to consistently have good customer service, you got to consistently be doing the right thing. You got to consistently be coming out with good content. That's how the brand gets built. You can't build a brand overnight. It's not like ChatGpt where overnight you can have millions of users, a good brand. You know, look at all the luxury brands. They take years, sometimes decades to develop. And that's another reason why sometimes venture is not a great fit for consumer brands. Because you can't just build brand affinity overnight. It's something that requires repetition and doing the right thing over and over and over again. Okay, next question is we are currently in the middle of a rebrand. Should we iterate the new branding as it becomes available or hold new product launches so we can launch the rebrand all at once? It's a good question. Honestly, here's the thing. Most people do rebrands when they feel like their brand is not resonating with people, and they tend to focus on things like design and the creative side. You know, what does it look like, what are the icons, what are the colors, the fonts, etc. In reality, the thing that you really want to try to figure out and understand is positioning. So how are you positioning what you are selling in terms of making sure that it feels like a value or something of convenience for the actual consumer? And secondly is the messaging, but then also the offer. So, for example, what is the actual thing you are bringing somebody? Is it a variety pack? Is it something of which they can sample and try different scents, colors, textures, things of that nature? Rebrands, for the most part, is a big focus on positioning and a lot of times when it comes to design or site work, it's around the ux. It's not necessarily that the UI is going to significantly impact something that's fairly rare. It's really around the ux. The UI is sort of like it comes with it, but really it's about the ux, the customer journey, the funnel. How are you thinking about introducing things from, you know, from product education to where it's sourced from, to why it's. It's the right one for them, et cetera. So, all that said, if you're in the middle of a rebrand, I would say probably wait for the new product launches. Typically, what I like to do is, as I'm going through the rebrand, design work is being done, the new site work is being done. I actually like to take those approaches that we're planning to put in the new brand and test them with landing pages from existing ads and ad sets that are already performing well. That way you have a control, which is your ads and whatnot that are doing well, and then your variable is the landing page that you're testing, so. Or, sorry, the branding that you're testing. So that's how I would go about it. And essentially, you know, that should, that should help you understand what works and what doesn't work. And then by the time you finish the rebrand, you know, you have a little bit more data that you can leverage when you're doing that, as far as you know. That said, though, I will also say there's a brand that we worked with called Salud, and it's an incredible brand, very beautiful brand and website. You know, we sort of helped them do a rebrand and we didn't end up changing any of the packaging. We kept all the packaging the same, but everything then online, so we sort of created a New style guide from a digital standpoint. But we didn't have to, you know, alter or change the original packaging. So you could also do it that way. We've done that probably three or four times this year where a brand has come to us and you know, we saw a very easy opportunity from really a UX and a messaging standpoint to improve the brand experience. And we can keep the packaging the same because we don't want you to have to go reprint all your packaging or you know, reprint everything. But instead, you know, we can do that really on the site side of things. So that's probably the two approaches I would, I would think about doing if I were you. Next question is, when expanding product offerings, how do you determine which products will resonate most with your current audience? Well, you could use there's different tools like Internet research company or Particle. You can essentially go and see what are other companies in your space selling or what types of products are moving the fastest for them. You can also my favorite way to do it is sort of just like reading between the lines, like reading through customer service inquiries, asking your customer, sending them a survey. You can straight up ask them what else or you can even. One thing that I heard that some of the old publishers do or even Sheen does is they will basically populate their site with a bunch of stuff and it may not even be created or produced, but they'll understand what the click through rate is of that image or that product or, or, or for the publisher side for that article. And then depending on that, if it gets a bunch of clicks, you know they're going to go and actually stand that product or that article up and start producing it. That's one way to do it. Another way is just testing something, you know, put a pre order up, see what the fulfillment rate or the sell through rate is. There another way would just be sending out a survey and saying, hey, this is what we're thinking of making. A lot of times too, brands tend to have like brand ambassadors, you know, people who are sort of close to the brand that you can talk to and leverage. You can ask them for their opinion. You know, Sephora does this thing with their creators where every, I believe it's every quarter they get a 30 minute meeting with their creators to ask them a bunch of questions and figure out, you know, hey, what are your followers, what are they asking you about? What type of products are they messaging you about? What types of things are you seeing as a creator when you know all these brands are coming to you? So there's different ways to do that, but surveys is probably the easiest way to do it it and obviously the cheapest way to do it, the more complex way is maybe how I described like Sheen or some of these publishers are doing it. And then I think the way in, in the middle is trying things like pre orders and understanding what sell through rate is or click through rate is or you know, setting, setting up a wait list to see what the opt in rate is, things of that nature. In your opinion, what is more important, growing slower while profitable or scaling rapidly with minimal profit? Well, there's, there's basically, I mean the slower while profitable, you're going to have a lot more, you know, there's more emphasis on building a sustainable business or having cash on hand versus scaling rapidly with minimal profit. You know, you're, you might be at a break even point, but you're going to have a much larger gross number. The only thing you want to make sure is that if you're scaling rapidly, you know, a lot of people get caught up in scaling rapidly and sort of, they put themselves into the mini Ponzi scheme. So they're scaling rapidly, they're acquiring a ton of new customers. But those are not customers that are sticking around. A lot of these, you know, I don't want to call them out but a lot of these like powder businesses, they tend to do this where you know, they might be 100, 200, 300, 400 million in revenue, but their retention is garbage. And so the second they stop acquiring customers in, in their model, the whole thing is going to collapse because there's no foundation in which, you know, retention is being achieved here. That said, I think the first way is much better. In fact, I think there's a way to do both, right? Like typically a brand that a healthy trajectory is a very slow start, but then sort of that exponential or compounding growth as the product is a good product, the retention is high, subscription is high, LTV stays high. But for that you also have to do the things the right way. You can't just go in and you know, we got a product, we got to start running ads and scaling right away. So I guess my punchline or my answer would be to grow slower while profitable. You know, really focus on profitability. I mean at the end of the day, like what's the point of working so hard if, if there's no profit, right? You're just, you're just basically playing a video game at that point with Monopoly money. Next question. What is the most common mistake you see, at this stage, direct to consumer businesses make when they're trying to scale. Well, the biggest thing I would say is not investing in the right resources. So, you know, if you. Everything sort of needs to be proportional. If you're investing a ton into customer acquisition, you got to invest a ton into creative and retention and, you know, LTV optimization and product development and customer service and better packaging and working with better creators. It's really just making sure you're investing in the right places versus just investing in one. And then you create this lopsided machine where, you know, it ends up biting you much later. It doesn't mean that you can't stay lean. It just means that if you're going to put a ton of resources towards one thing, you got to make sure that you're understanding the cause and effect that that has in other parts of the business and then making sure that you're solving for that as well. So essentially, make sure that, you know, as you're building out your investment plan or your investment thesis into whatever you're doing, it's got to work across the business. It can't just work within marketing because you want to achieve 5 million in top line. You know, there's no point in having 5 million in top line if you end up getting chargebacks and returns and customer service tickets and product quality issues. You know, none of that is. None of that is going to be worth it at the end. Those are all the questions I got for today. I hope today's episode was insightful and maybe got you to think a little bit differently about something. Also, let me know what you thought about today's episode. It was more Q and A style. I appreciate all the emails that have come in, sort of giving me feedback on what you really like and also what you really don't like about the podcast. Because I feel like next year I'm really going to take this, you know, I'm going to take this podcast to the next level. In fact, we're building a studio today in our office and so I'm really excited for that and also excited to just be putting out more content. So please email me nharma.com with what you like and what you don't like. Even if it's like 10 words, you know, don't take more than 20 seconds to do it. I would really appreciate it. Or just record a voice memo on your iPhone and email it to me. That works just as well, but I appreciate all the feedback. I hope today's episode was helpful. And yeah, I can't wait to hear or sorry, can't wait to record the next one for next week and bring you something else. I think next week, you know, I plan to have a lot of these conversations finished up around the meta and the health and wellness stuff, so I hope to bring you some insights there. Until then, please email me if there's anything I can help with. Leave me a review, give me some five star ratings and appreciate your attention. As always. I hope you have a great rest of your week. Thanks for listening. We'll be back next Time to cut through the noise on cpg, retail and e Commerce. If you enjoyed this episode, why not share it with a friend? And be sure to subscribe wherever you listen so you don't miss the next one.
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