A (0:00)

The reason some brands have such low customer acquisition costs and such high returns when they spend on ads is because their organic side is doing extremely well. A lot of celebrity brands, their biggest advantage actually outside of, you know, maybe getting the first couple million dollars in revenue without spending a dollar on ads, their biggest advantage is that long term their acquisition costs are super low because there's already awareness on the product. And the best way to think of paid is is really just extending what you're doing organically. You don't want to think of paid as sort of like the end all be all strategy to acquire customers and to build your business. You want to make sure that paid is a piece of that, but organic should also be a piece of that.

B (0:45)

Welcome to Limited Supply, the place for refreshingly real takes on what D2C is really like. I'm your host Nick Sharma. Let's start talking about money. 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 are the answers. The first reply says it's really moldable. You can use it for high level, 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.

A (2:24)

Welcome back to Limited Supply Today, as you can tell, if you're watching from YouTube or seeing a clip somewhere on TikTok or anywhere else, you'll see that we've got a new setup here. We worked with Kevin at DreamStudio and put this amazing studio together. It was a long project, but so worth it. You can see how amazing the studio looks. It sounds great, Looks great. I'm actually talking to a camera. The lighting is perfect. You can't get any better than this. So welcome back to Limited Supply. This is one of our last episodes of 2024, which is very exciting. And so with that, we will be doing a listener mailbag today. And what's fun about today's episode is a lot of the questions are focused on customer acquisition. So I think going into the new year, one thing I want to do is really focus on customer acquisition tactics that I'm excited for personally. Meaning, you know, things I'm excited to test myself, excited to channels I'm ready to explore, tactics I want to try out. And so I'll talk a little bit about some of that today. But for the most part, for the most part, I will be focused on today's questions. So a lot of these questions actually came in from our Slack community, which is now at just under 6,000 people, which is amazing. 6,000 marketers, CMOS founders, we've got investors in there, we've got experts in fulfillment and optimizing costs and everything that you can think of related to E commerce. So if you're not in there Already, go to slack.limitedsupplypod.com Sign up or just click the button on the homepage. It'll take you to a form. Once you fill the form out, within 24 hours, my boy Shin will let you in and you'll be categorized and put into a number of Slack channels. You'll get a proper intro and it's just a great way to interact with the community. A lot of times I love seeing how people are just asking questions on a daily basis. You know, what are your Shopify? What's your, what's your payment rate for Shopify? For Shopify payments? Or what are you guys paying for shipping for this? Or you know, what vendor should I use for this? The questions are awesome and it, it encourages a lot of dialogue. So definitely check that out. We're going to be doing a lot more with that going into the new year and with meetups around the globe, which have already been happening, which is so cool. But for today, we're Going to get into today's episode, we're going to talk all about customer acquisition. So we have a number of question questions here and we're going to go deeper on them. If you hear something. By the way, I appreciate everybody who sent me a voice note or an email with feedback on limited supply. It seems like a lot of people want a lot more things around customer acquisition and scaling that and a lot more tactical. So going into the new year, what I want to do is basically put together a list of all the things I want to talk about and then I'm going to try to go find experts for everything. If I don't specifically know something about that, my expertise is mainly around customer acquisition and growth marketing. And so for those of you who asked for things around, you know, optimizing operational costs or, you know, raising capital, I'm going to try to find experts to bring in to do that. So without further ado, I think let's get started. On today's episode. The first question comes from Amy and she asks how small, how should a small self funded brand optimize their budgets for ads when every dollar counts? Well, Amy, the first thing I'll say is, and this is, this is something that's going to keep coming up because a lot of people have asked, sort of like a similar thing is what you don't do in terms of organic marketing, meaning what you cannot drive in terms of eyeballs or clicks or awareness from your organic marketing efforts, that's what you're going to make up for on the paid side. The best way to think of it is like, you know, if, if you're not able to get impressions on organic, meaning whether it's on TikTok, whether it's on, you know, PR articles, which I don't think are that effective anymore, whether it's on, you know, other people posting and tagging your product to their own network, you know, if you can't seem to do that, then where you make it up is on the paid side. The reason some of the some brands have such low customer acquisition costs and such high returns when they spend on ads is because their organic side is doing extremely well. A lot of celebrity brands, their biggest advantage actually outside of, you know, maybe getting the first couple million dollars in revenue without spending a dollar on ads, their biggest advantage is that long term, their acquisition costs are super low because there's already awareness on the product. And the best way to think of paid is really just extending what you're doing organically. You don't want to Think of paid as sort of like the end all be all strategy to AC our customers and to build your business. You want to make sure that paid is a piece of that, but organic should also be a piece of that. So to your question, Amy, how should small self funded brands optimize their budgets for ads when every dollar counts? First you really need to understand content that works. And I think the best place to do that if every dollar really does count. Your small budget brand is testing that on organic, social. All these platforms, TikTok reels, shorts, even LinkedIn X Facebook stories, all these platforms push your organic content pretty heavily and you can easily get a read of does something work, does it not work, does it have a chance of doing really well, et cetera, whatever does well, move it over to the paid side. If you think about some of the fastest growing brands on TikTok today that you know, it's a bar soap doing $5 million a month. The reason that their ads work so well is because all they're doing is actually taking content that's doing really well organically and the boost, boosting it from an ad standpoint separately. Another way to answer this would be if you were starting with just meta, right? If you're like, okay Nick, you know, don't tell me about organic content, don't tell me how to whitelist stuff, just tell me how do I maximize dollars with ads. The way I would do it is basically start with meta. The reason I like to start with meta is the feedback loops are really sharp and really quick. Meta is meta is for the most part a click through based platform, which means there's, there's two ways to do it. Click through based platforms and view through blade, view through and click through and they're actually sort of more attribution ways to categorize it. So click through attribution is, you know, I see the ad, I click it within a certain window. Usually that's seven days. So within that seven day window, if I go buy the product after clicking an ad, that ad gets the click through attribution credit. If I see an ad like the platform knows that I saw it, I saw the impression, but then later I didn't click it, but then later ended up buying the product that gets view through credit. Now the reason platforms like a North Beam are so important is because it'll actually help you understand which view through or click through credit to give credit to. Right? If I see a Facebook ad for a phone case, but then I go to Google and search Pela phone Case and I click the Google Ad. Now you're kind of conflicted, right? Do I go into Facebook, do I give credit to Facebook or credit to Google? That's where platforms like Northbeam are really helpful because it helps you understand which channel or which ad deserves the attribution. I'm getting off topic, but all this said Amy, the best way to do this is start building funnels inside Meta. So think about who you're targeting, what is their sort of problem, and what's your solution to their problem. Design the ad. Where are you landing people? Is it a product page? Is it a landing page? Is it a listicle? Is it an advertorial? And then you want to basically see how those users convert. So start with meta. You can usually get the most amount of data there. It's also the easiest place to start with smaller budgets. You know, you can start On Meta with 50 bucks a day and start to see what works versus maybe on TV. You've got to spend a thousand bucks a day, 2,000 bucks a day. And so start with meta, see what works, and then as things start to work, just double down. Right? Don't try to go and scale too quickly or do anything that's not going to be beneficial to you. Just start slow, start to see what works, and then really hit the gas. A lot of the brands that do well sort of follow this path. Of course, they've got their organic piece, but they start slow. And then as they start to see things that work, you just start adding more fuel to that fire. Hopefully that helps. Next question comes from Kuljeet. Kuljeet asks, how can brands measure ad creative effectiveness and know when to scale or cut abs? Well, Kuljeet, you asked also about ctr, CPM and CPA benchmarks. I can't necessarily give those to you because those are so specific from brand to brand, not even from category to category. We have two supplement brands we work with where, you know, one brand's Good Roas is 20, the other grant other brand's Good Roas is 2, both in the same category. But again, because the one with 20 has such a high organic market penetration, their paid ads perform extremely better, much better than the one that's just running paid ads. So anyways, how can you measure ad creative effectiveness? Well, I would 100% recommend you use motion, because motion is probably the easiest way to visualize that from a standpoint of a designer, video editor, animator, copywriter, copywriter. However, the way I would do it is essentially create a rigorous creative testing program inside your ad account. And I like to do this inside meta, or I'll at least give the example of meta, because I'm assuming that's where most people are spending. And the way I like to do it is you've got your scaling campaigns, right? Those might be CBO campaigns, those might be ASC campaigns, but essentially these are campaigns that are scaling. They've got majority of your daily budget in them. Now separate from that, you want to have a campaign that's set up entirely for creative testing. So the way that I like to do it is you have basically three ad sets inside this, you have a CBO and then you have three ABOs inside. One is focused on broad, one is focused on lookalikes, and one is focused on interests. And what you do is you put your, let's say you have creative number one. You take creative number one and you put it into the ad set that goes broad. You give yourself basically two days inside that ad set for creative number one to get a purchase and you give yourself three times your allowable CAC for that to hit its first purchase within the creative testing. What that does is it forces Facebook to push it a little bit and allows you to push it without just cutting it right at the, you know, the main CPA goal. You have the CAC goal, customer acquisition cost. If it doesn't hit in the broad ad set, move it down to the lookalike ad set. Let it spend two days there. If it doesn't hit there, move it down to the interest group ad set. Now, whichever one it works in, port that over to the equivalent scaling campaign. There might be a scaling for broad, a scaling for lookalike and a scaling for interest. So if it works in an interest, put it over to the scaling interest. If it works in broad, put it over to the scaling broad. And essentially what you do there is you have a six day turnaround max to understand whether or not a creative is going to work. And if it works, it's great. If it doesn't work, you tested it on low budget and you know you didn't put it in your scaling campaign. So it's all good. But that's how I would do it. Every week or at a minimum every two weeks you should be rotating in new creative using what you know works from a data standpoint. You can use motion for that and then taking that and actioning that. You might see that, for example, you know, one of your best creatives has a huge, has a really high hook rate, meaning people who See it stop scrolling and they want to watch something. And so you might then take that information and apply the same hook to another video. Right? Keep the same hook as the one that you know works, but then test out what is the main talking points. How does that differ from the hook or what is the call to action? How does that differ? Maybe it's a different offer. So all that said, that's how I would do it. If you look inside a motion for, if you, if you just use Ads Manager, you'll be able to understand you. You're going to know what's your cpm, what's your ctr, what's your cpc, your cost per click, and eventually what's your cpa. But the best way to do this is in motion because you can actually compare it to the rest of the ad account or to a specific campaign or to a specific creative or specific time period, which is why I recommend doing it that way. But hopefully that helps. And if this is fun or interesting, then I would love to do an entire episode on account structure, breaking that down and just see how most people do that. Okay, next question comes from Christy. And Christy asks, can you simplify marketing metrics and KPIs for people who aren't experts in the field? Absolutely, Christy. So marketing metrics and KPIs. Well, I'll tell you the few that I think come to mind. One is CPM cost per. I believe it's cost per Metro, basically cost per thousand people that see your ads. CPM is essentially, it's dynamic in most of the ad in the context that we're speaking in, which is performance marketing, CPM is very dynamic. The reason people love channels like TV or, you know, postcards or even some of these more like traditional publisher banner ads is because a lot of them tend to have flat CPMs. And you know, Procter and Gamble can go in and say, you know, hey, Vice Media, we want to buy 25 million impressions at A$3 CPM, and we're going to prepay that for the whole year with performance marketing. That CPM tends to change based on what creative you give to the platform, based on your targeting, based on how well you're positioning your problem solution against the Persona that you're going after and what you have to offer. Your CPM will fluctuate if you are serving the platform, things that the platform believes are good for its own users, your CPM will be on the lower side. If you're mismatching what the platform believes their customer wants versus what you're offering, you're going to have a much higher CPM and a lower click through rate ctr. So CPM is really important. The next one I think is important to understand is ctr. And CTR in this context would be the click through rate of the ad that people see. So what percentage of people who see the ad actually end up clicking the ad and going through to the website or the landing page or wherever it is? CTR in general is just click through rate. So you, you might leverage the, the acronym CTR or click through rate in a number of things. It might be on a landing page. If you're trying to understand from a listicle going to a product page, you know what's the CTR of people who go, who read the listicle and end up on the landing page? You know, if it's 50%, that's an amazing CTR. If you're at 20%, you've got to really fix that landing that listicle. Next one is CPC cost per click. So coming out of the ad platform, this is just a function of CPM times ctr, right? So what is the click through rate out of the cost of what it takes to show a thousand people? That's your cpc, your cost per click. Moving to the website, you've got aov, which is average order value. So how many, what is the dollar amount that is that we're averaging when people are checking out? There's another one that's used a lot in high SKU brands called upt, which is units per transaction. How many items are people checking out with not the dollar amount, but how many actual items in the cart? The next one is roas. So looking at both the ad platform and the website, what is the return on ad spend? That's what ROAS stands for. And roas. Keep in mind a specific either to a channel or to a campaign or to a creative. ROAS is always tied to something specific. The next one is MER M er or media efficiency ratio. This is generally viewed as total spend to total revenue. So if you're selling, you know, if you're advertising on Facebook and Google and TikTok and Snapchat and TV and you're sold online on your.com, on Amazon, in Sephora, on Goop. You know, your MER is total spend on all the platforms to total sales on all the platforms. It sort of just helps you understand from a very high level how is your performance doing now it can be dangerous to look at MER as if you look at MER as an excuse for bad performance on an individual channel, it's not a good way to look at mer. If you look at MER as a function of, you know, we're spending a lot, we're generating a lot, or maybe, you know, you're a brand that's doing a few hundred million dollars in revenue and you need to understand what your ad spend is doing to that. That's a much better way to look at it. The last one I think is worth mentioning is iroas. So your incremental roas, meaning if you were to run an incrementality test with a new channel. So for example, let's say you're running Snapchat and you're driving sales to the dot com, right? You might see in Snap that your dot com only has a 1.4x ROAS in platform, meaning for every dollar you spend on Snap, you're making $1.40 in revenue. Now, when you factor in your IROAs, that would be after running an incrementality test where you might say, well, let's understand what that Snapchat spend. Let's see what that does to sales in Target or on Amazon or on Goop, and you can actually understand, you might realize that even though you're making $1.40 on your site, you're actually making another, you know, $2.60 across the other platforms. So your iro as is actually a 3, not just 1.4. Does that make sense? So for every dollar you spend on snap, in reality, that translates to $3.00 in revenue. This is something that seven or eight years ago, when I was running advertising scaling online for a direct to consumer beverage company, we worked off IROAS because we measured the incrementality of sales in Target, in Costco, in Wal, on Amazon. And we could actually see that for every dollar we spent online, we had a one row as on our dot com, which we were happy with because it's a beverage company. We had really good return rates, we had really high subscription rates. So the business was fine there. In fact, we could have gone down to a 0.6 or 0.7 and still been happy. But when we looked at the incremental roas across all of our channels, Amazon, retail, et cetera, it was actually a three. So that's why we had the ability to continue spend even more. Those are some of the metrics that are KPIs that I would focus on. Obviously, if you're looking at channels like email, you might look at deliverability, you might look at open rate, click Rate Unique Open Rate Revenue per Subscriber if you're looking on the website, you might look at email opt in rate. So depending on where you're focused, you might look at different metrics. But for today's episode in the context of performance marketing, I chose those.