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Welcome to season 11 of limited supply, a place for hot takes on what it's really like building and scaling consumer brands. I'm your host, Nick Sharma. Let's get into today's episode.
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As a brand, you know that you're spending hard earned dollars driving traffic to your site. The problem is 98% of that traffic is anonymous. You don't know who they are and once they leave, it's hard to find them again. There's a new tool called Instant that helps you identify these visitors and get.
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In front of them.
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Instant gives you another chance to convert these shoppers into buyers using their RET marketing platform. You can use their platform to send about two to three times more site abandonment emails, which you already know generates meaningful revenue and build audiences to retarget on meta, double your abandoned flow revenue and increase your roas with Instant. Want to see it in action? Sign up by March 26th to get 50% off your first month. Just go to Instant One Limited to claim that 50% off. That's Instant One Limited, foreign.
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Welcome back to Limited Supply. This is another episode. I'm your host Nick Sharma and today we've got quite a fun episode. So starting off, we're going to talk about a DPA report that I did with Marpipe. Marpipe is a SaaS company that focuses on helping you have better catalog ads out in your feeds, whether it's on Facebook or TikTok or Snapchat, wherever it is. We looked at about $2 billion of catalog revenue and derived a bunch of insights from that. So we're gonna go through that report today. I happen to have one of our clients in the office and they're launching their second business, second brand. There's four founders. And so I kind of looked at what are 10 things that I see all of our second time founder clients do differently than our first time founder clients. And I wanted to break that down because I think it's just interesting. They always have a much faster launch timing, they always have a much more aggressive route to, you know, that $10 million mark. And I was just thinking, how come they do it so differently than first time founders and what are those differences? And then the third thing was you've heard House, we've House has sponsored the podcast before. We've talked about House before. We've talked about incrementality testing. And we looked at a House test we did with one of our clients. You know, everybody's always trying to think how, how do you get more scale out of Meta or how do you get more scale out of TikTok. And how do you do it in a way where you're not just running purchase objective campaigns? So we ran a couple of other things between more upper funnel objectives with this client, tested it with House, and found some really good results. So I'm excited to share those with you and hopefully some of those test results can carry over into some of the stuff you're running and maybe save you some money or make you some money. Before we get into the episode though, I just want to ask you, have you, do you subscribe to this podcast? Because if you don't, please, please hit that subscribe button. And if you haven't left a review, please do me a favor, leave a review. The reviews help a ton, so even if it takes you 10 seconds to leave a review, I'd really appreciate it. It won't take you more than 12 seconds, though. All right, without further ado, let's get into today's episode. And as always, if you've got questions, comments, concerns, request requests, song requests, whatever it is, shoot me an email. I'm just the letter nharma.com or shoot me a DM on X. All right, let's get into the episode. All right, so for today's podcast, I want to start with the Marpipe report. So this is a report that we did, Sharma Brands and Marpipe, and there was a lot of interesting findings and some good takeaways in terms of why I think you should probably be running enriched catalogs if you're not already doing it. So if you don't know why I like catalog ads, well, they kind of act as like this carpool lane on a highway. So on a highway you've got, you know, take a California, Southern California highway, you've got eight lanes. Six of them are regular highway. You know, everybody's stuck in traffic. And then two of them are the carpool lane. You only get in the carpool lane if you're running with, you know, if you pay for it or if you've got three or more people. Now, with catalog ads, you've got the. Well, in ads in general, you've got the different auctions, right? So, so there's the auction where you're basically competing for a customer in their main feed. And then there's the catalog ad auctions, which are done separately. And because of that, I consider catalog ads to kind of have this carpooling effect where whatever you've got going on in your business as usual stuff, your catalog ads kind of run on their own. They don't need their targeting. They don't need, you know, updated creative every week or every two weeks or just a rigorous amount of, you know, new creative testing. If you use something like more pipe, you can just create the templates in there and then, you know, send them in to Facebook for catalog ads or TikTok or Snap or wherever. But anyways, we put this report together, we tracked over $2 billion in catalog revenue. And the biggest stat was that if you used enriched catalogs versus plain catalogs, your ROAS was basically just about double. It's right under double, but about. Yeah, just about double. Some other interesting stats. So AOV wise, there is a 76% increase in AOV from enriched catalogs, meaning that customers are spending a lot more per order. And it's likely because these catalog ads feel very on brand. They get you in and they just get you excited when you get to the site. There's a 47% lower CAC with catalog ads. So brands are getting customers for nearly half the cost. 53% higher conversion rates, which means that there's more of those clicks are turning into purchases. 41% lower cost per purchase. So efficiency is up across the board and then 55% higher ROAS. So ultimately you're making more in every dollar you spend. Now across a cohort of about 650ad accounts, we saw that basically regular image video ads had a ROAS of 4, whereas catalog ads, enriched catalog ads had a row as of about 8.2. Now Facebook has been working a lot on catalog ads, more so than I think any other platform that I'm aware of. And one of the things that they have launched recently and have been testing, and we've been testing too, is these video LED catalog ads, meaning, you know, okay, now think about it. Don't think about plain catalog ads, but think about the enriched catalogs. Those have those different elements. It may be a buy now, pay later icon, it may be a five star review icon, it may be a quote, it may be a title, whatever it is, you can basically create that similar format or template when it comes to video catalog ads. So you don't necessarily have to have a custom video for every single product and then upload that into the feed. Instead you can create video templates. So let's say you've got the render image of your shoe, right? Let's say you sell 4,000 different shoes on your website, but you've got this one image of a shoe. Or even if you sell a T shirt, right? You've got Kind of the cutout image of the T shirt that's standard across the board. Now you can create this video template where the video is essentially the shirt is there, and then the text appears or something flies in. And then you can take that whole concept and just replicate it across your catalog. So you've got the element that starts and then you've got the text that flies in, which is synced to the catalog. You've got the reviews that fly in, which is again synced to another thing. So you can create these video catalog ads and sort of leverage this, this, this feature, which, if you know anything about when Facebook launches features, they always give favored rates and pricing and, and everything. You know, the numbers just look better when you play with their new features. So right now we've seen that the brands that are leaning in saw 40% increase in sales and 50% more views compared to the static ads. Now, this is something that's going to get bigger and bigger this year. I've heard from many sources that there's going to be a lot more limitations put on advertising in terms of how you can target who you can target and, you know, what you can really do outside of creative. So this is something I'm really excited for. Plus, we know that TikTok and Snap are also working really hard on improving, improving their DPAs and their catalog ads. I also just think that generally, I don't know if you've uploaded a product to TikTok Shop. If you have, you know, how many features and how many labels you have to add to that product listing, that's going to become probably uniform across every platform. And the reason that's important is because now the platforms understand exactly what traits and tags and things of that nature people are interested in in different products, which will then help you as a brand serve more efficient catalog ads. I also think in the near future, when we're wearing smart glasses and you know, AR is built into those, and, you know, it's not a Vision Pro, but it's like a pair of glasses. You'll be able to just look around your house and you're gonna see ad, you're gonna see a piece of art on a shelf, and that's technically a catalog ad. An AR catalog ad. Or you're gonna turn around and see a new couch in your living room, and that'll be another AR catalog ad. I think catalog ads are very much a part of the future, and I think it's important to get on board with them and make sure that you've Got a creative practice in place that helps support that. Okay, the next thing I wanna jump into is what I call second time founder differences. So one of our clients is actually office today. The founders sold both. There's four founders, two sisters and two co founders. Well actually both two pairs of co founders who had worked in separate companies before but were, but collaborated. And it just got me thinking, you know, what are some of the things that these guys are doing differently that we tend to see as a pattern across founders who are launching their second brand or third brand or fourth brand that you don't necessarily see from the get go with people who are launching their first brand. And so that's what I wanted to focus on. You know they say that the first time founders tend to focus on product and brand and second time founders really focus on distribution. In the last year alone we've probably launched, you know, more than a few handful of brands. I'd say at least 30, 40, 50% of those are post exit founders. So this is at least their second time. And these are the, these are basically 10 things that I see them do differently. So one is they aim to compete, they aim to innovate, not compete. So they don't look at a product and say, you know, I can make a better deodorant, I can make a better weighted blanket. They say okay, what can I do here that no one else has done here? And what can I do that's proprietary only to me so that if somebody wants this, they can only come to me. Some examples of this update is an energy drink. They leverage an ingredient called paraxanthine which allows the, you know, it's basically derived from natural caffeine. It doesn't have the crash. David, Protein is another great example of that where they've got this protein ingredient that nobody else has, allowing you to get more proteins per calories or more, more proteins to calorie ratio. Normally it's I believe it's 1 gram of protein for 10 calories. Whereas with David you've got 28 grams of protein with 150 calories. So just under just above half I guess. Other examples of this Jolie, you know, they're not necessarily competing with a nice looking shower head. They brought the filter in and so that's their innovation. I always like to think of K18 shampoo as another example of this where they, you know, they're not competing with the average shampoo in the aisle. They created something new, they innovated on, on an ingredient, put that in there and that's what makes their product. So they're really looking to just innov, not simply just compete in a category that may or may not already be full. The second one is they are super anal about product enhance, not what a specific icon in the brand book looks like. So you know, everything is about getting distribution. David, for example, just launched, you know, weeks ago and it's already in my local bodega next to my apartment. They're just really focused on being everywhere. They're not romantic about, you know, we can't be on Amazon, we can't be in a retail store, we can't be here. You know, they want to be where the customer, they know that customers are going to shop where customers want to shop. And so they're very focused on making sure they're getting distribution and then supporting the sell through in that distribution as well. Number three is kind of from my point of view as a partner or an agency is these guys don't look for discounts. They're not in it for finding an agency that's going to give them the best price. They're not in it to, you know, see who's going to basically sweat the most. They're looking for the best agencies. They want us to get involved maybe as an investor, maybe as an expert equity partner or maybe they, they don't like some, some new brands just don't. They just want to pay us for it and they just want the best work possible. But then once we get, get involved in lock in, they want to step on the gas. They're insanely fast to move. And this brings me to my next point which is that they don't take more than 24 hours to reply. You know, they're always super fast to reply. You can usually. Second time founders are usually all on text. They prefer text. Everything is done quickly through phone calls. You know, it's not like hey, we're going to wait for the weekly meeting or we're going to do this or that or that. We are waiting for stuff to get back to us because they just get stuff done real quick. And I think one big reason for that too is that first time founders try to perfect everything. Whereas second time founders are like, you know, let's get it 95% perfect and get it out the door. That's better than it being 100% perfect and never getting out the door. Getting out the door late.
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The next one. Number five is that they don't focus on any KPI except units sold and profit. They don't care about how many Instagram story impressions we're getting. They don't care about, you know, how many. I don't even know. I'm drawing a blank here. But they just don't care. All they want to know is are we selling units and are we making profit? If we're selling units, we're not making profit. That's not good either. If we're making a profit but we're not selling units, that's also not good. They want to make sure that we're selling units, we're scaling, and we're doing it in a way that's sustainable for both us and them. If it's not sustainable for them, it's not sustainable sustainable for us as a partner either. Number six is they don't waste time on marketing concepts, placements, programs that don't drive intent for sales and then the actual sales themselves. So things like the refer for refer a friend, programs, sponsoring random events where there may be a celebrity who's attending, you know, sponsoring a dinner that might be covered on the Cooking channel, paying a five figure deal for an influencer to post something. They're not focused on this stuff, they're just focused on cans and hands as they say in the beverage industry. Or basically just getting product in people's hands. Number seven is second time founders. They barter extremely well. Whether it's an event like I just mentioned, you know, let's say it's a pop up event or a sports event and they need product, you know, they'll say, hey, let's make a barter deal. You get what you got, you want, we get what we want. And obviously if you have a good product, they're going to want the product for sure. So they're really good at that. In that case, they're also really good at getting vendors involved either Maybe at a preferred valuation or with an equity split for some of the services that they do. And of course if it's a brand that's going to end up doing really well, then that works out for everybody involved. Number eight, they hire the best people from the get go versus the cheapest. So very similar to what I just mentioned earlier about agencies and vendors and softwares. They're not after finding people who are just going to do the job and do it for the lowest salary. Instead they want to go find the best possible people and figure out some sort of a compensation package that works for everybody. Usually obviously there's going to be some equity piece involved in there too. But they're really just here to find the best people, trust them kind of as the CEO of their own departments. So if you're a head of marketing, you're like the CEO of the marketing department. If you're the head of supply chain, you're the CEO of supply chain and just let them do their thing. They know how to do it, that's why they're there, that's why they got hired. And they're just really good at finding that kind of talent. Number nine is they fund it in a much smarter way. So either by leading with their own capital or ensuring they don't have investors who aren't aligned with the exact vision that the founder has, they're, they're usually very smart about capital, whether it's raising debt, whether it's raising equity, whether it's getting lines of credit. You know, my advice would also be that if you aren't sure what to do in that, in that world, go talk to a second time founder, talk to somebody who has done this before or talk to somebody who has just gotten past the stage you're about to get to. Which brings me to number 10, which is that they've already made the mistakes. So it's hard to learn from this one without going through some actual mistakes other than if you build that tight network of people who have been where you are going. But you know, they have a network, they've got access to capital, they know which agencies to work with and they don't make as many costly mistakes as a result. Those are very quickly the 10 things that I think that second time founders just do better. And I'll try to go deeper on this and maybe I'll turn this into an article or a newsletter. If you're not signed up for the newsletter, go sign up. It's Nik Co email goes out every Sunday about 100,000 people get it every Sunday. And what I'll do is I'll go deep on the second time founders thing because I think that's going to be really interesting for people. Now the next thing I want to talk about is a house test that we did with one of our clients. So house, if you don't know house and incrementality testing software, and there's basically a few different types of measuring the performance of advertising or your ad spend, One of them is this concept of incrementality testing which basically says that if you were to run a holdout, let's say you want to test. Well, actually we'll just dive into this test. So I'll dive into this test and then I'll sort of explain everything that I was just about to explain. So one of our clients at Sharma Brands is Lalo. They make baby products, they have award winning products for children and luckily we have the pleasure of making all their ad creative, running their ads, handling their measurement, etc. You know, I've always been a huge advocate and definitely on this podcast about how you should always focus on optimizing ads towards the bottom of the funnel. You want to focus on purchases, you want to focus on subscriptions, you want to focus on bundle purchases. If you've got custom events, you know, if you're in the category of health and wellness and now you have these restrictions, then this is actually really relevant because you want to figure out using incrementality testing, what custom events to optimize toward. But anyways, when you get to the point of diminishing returns, which means you're spending so much on this purchase objective that if you spend more, your efficiency actually becomes less, then that's when I think you should start testing events that are higher up in the funnel. Add to cart, initiate checkout, selecting a different variant, whatever it may be. But if you're just running direct to consumer as a sales channel, you can almost just focus on the purchase objective for the most part. So because Lalo sells in retail stores, they sell in online marketplaces, they sell on Amazon and they sell on their dot com, we want to test something. Could we generate similar or better efficiencies if we tested ads that ran an add to cart objective on meta versus just the purchase purchase objective. So we set this up, we set it up as a three cell test. We had 40% of our traffic was the purchase objective stuff, which is what we is kind of the evergreen stuff for us. We did 40% as add to cart and then we did a 20% holdout. Now my initial thoughts were, well, I don't think Add to Cart's gonna work as well because you know, everything that we see, if you just run to the dot com, you tend to see that people run Add to Cart campaigns. People add to Cart and then they bounce. However, because they're available for sale on Amazon and other marketplaces, we thought this could be a really, really interesting test. So we ran it. And inside Meta, which has a limited tracking and shorter attribution window, we saw numbers that didn't look so good, especially out the gate. But then when you looked at the three week holdout inside House, we saw that the purchase event campaigns were actually only 2% more incremental to the Add to Cart test. So Add to Cart performed extremely well. Only 2% less incremental than what we normally run. And it proved that for this brand, Lalo, with its omnichannel distribution, the Add to Cart campaigns work. People are buying on other platforms, they're buying in stores, they're buying online on Amazon. And so then we thought, okay, if you're running this on meta and it's working really well, could you do a similar thing on TikTok? So we did the same thing on TikTok. We ran a two cell holdout test. One was where we drove 60% of our traffic. 60% of the spend was for traffic ads. So not purchase ads, but just upper funnel TikTok traffic ads. And we've also seen with many other brands that TikTok is actually a phenomenal prospecting tool. Even if you just run for. Just run TikTok as your prospecting channel, not meta. Anyways, we ran it as a two cell test. So 60% was going to traffic campaigns and 40% was the holdout. Now when we looked at these results, we actually saw that there was a 12, just under a 12 and a half percent lift in New customer revenue, which means that. And there was also a good lift on returning customer revenue. But it just comes to show that, you know, you got to test everything. I would not have guessed that the Traffic campaign was going to work as good as it did for Lalo, especially given that it's a really high AOV product and definitely has a longer sales cycle. But you know, while these tests don't work for everyone on every channel, it's important to look at all the different models. In this case the incrementality model versus just a seven day click one day view or a one day click one day view, which is what you might be running in meta to understand how you should be testing and optimizing your entire acquisition strategy. If you've got any questions about the House test or want to jam on it, shoot me a DM on Twitter and I will respond with any questions you got. That's all for today's episode. I hope it was helpful, I hope you enjoyed it. I hope that your car ride, your ride to school, your gym workout, however you were listening to me, was made incrementally better. And again, if you've got any questions, shoot me a note. Please make sure you like subscribe, leave a comment Wherever you're listening, YouTube, Spotify, Apple, all of it helps. And if you've got any requests for topics you want me to cover, shoot me a message as well. Until next Wednesday. I hope you have an amazing week and an amazing weekend and talk to you soon. 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.