S11 E5: Scaling at the Bottom of the Funnel: Deep Dive Part II - Limited Supply

Summary

Limited Supply Podcast: Season 11, Episode 5 Title: Scaling at the Bottom of the Funnel: Deep Dive Part II Host: Nik Sharma Release Date: February 5, 2025

Overview

In the fifth episode of Season 11, titled "Scaling at the Bottom of the Funnel: Deep Dive Part II," Nik Sharma continues his in-depth exploration of scaling Direct-to-Consumer (DTC) brands by focusing on the critical strategies required at the bottom of the sales funnel. Building upon the previous episode's discussion on top-of-funnel tactics, Sharma delves into optimizing digital ad execution, creative and audience testing, enhancing the commerce experience, and effective measurement techniques. This comprehensive episode serves as a valuable guide for DTC brands aiming to refine their conversion strategies and maximize revenue.

Key Topics and Discussions

1. Proper Digital Ad Execution

Sharma emphasizes the foundational importance of a well-structured ad account. He identifies common pitfalls that brands encounter, such as:

Poor Account Structure: "Whether you're spending $70,000, $700,000 or $7 million a month, you need to have a very tightly run ad account. And poor, poor ad account structure leads to poor results." [02:15]
Outdated Customer and Exclusion Lists: Maintaining up-to-date lists is crucial for targeting and retargeting efforts.
Lazy Naming Conventions: Ad accounts should have systematic naming to streamline management and analysis.
Lack of Testing Methodology: Without a structured approach to testing creatives or audiences, brands miss out on optimizing their campaigns effectively.
Not Leveraging Post IDs Across Campaigns: "Not leveraging post IDs across campaigns is the worst mistake because it's the easiest to mitigate and do." [05:30]

Sharma asserts that rectifying these issues is relatively straightforward and can significantly enhance ad performance.

2. Rapid Creative and Audience Testing

Sharma advocates for an aggressive creative testing regimen to identify high-performing ads. Key strategies include:

Creative Testing: "Most ad accounts that I'll open up have anywhere from one to three or four ads that run the majority of the spend... focus on putting out more ad creative and testing what can work." [07:45]
Iterative Improvements: Once a successful creative is identified, iterating on its elements (e.g., text, imagery, hooks) can lead to further optimization.
Audience Testing: Continuously experimenting with different audience segments—broad, lookalikes, and interests—ensures that campaigns reach the most responsive groups. "Testing new audiences is one thing that a lot of people don't do... It's worth constantly testing all three of those." [10:20]

3. Individual Product Page Funnels

With the rise of catalog ads and the necessity for optimized product pages, Sharma outlines essential components of effective product funnels:

Answering Core Questions: Each product page should address why the product is sold, its consumer benefits, delivery speed, impact on the consumer's life, and how it compares to competitors. "Every good landing page answers five questions..." [12:10]
Integration with Tools like Marpipe: Utilizing tools to create scalable and optimized creatives can enhance click-through rates and overall ad effectiveness.

4. Commerce Experience (CXP) Optimization

Sharma introduces the concept of Commerce Experience, focusing on enhancing the user journey through strategic landing pages and website optimization.

Landing Pages: Tailoring landing pages to specific consumer segments or campaign messages increases relevance and conversion rates. "Landing pages should speak to different groups of people... shoppable blog pages would allow you to have an article with a shopping module within it." [15:00]
New Customer Offers: Crafting irresistible offers for new customers can significantly boost conversions. Examples include discounted bundles or trial offers. "These offers, you know their product is good. All these offers get you in the door." [17:30]
Website and Checkout Optimization: Continuous A/B testing of website elements—from homepage modules to checkout processes—can uncover opportunities for incremental revenue gains. "One test I remember... generated an extra 50 grand in one week from a tiny test." [20:50]

5. Subscription Optimization

A robust subscription model can drive recurring revenue. Sharma highlights the importance of:

Clear Value Proposition: Clearly communicating the benefits and reasons to subscribe is essential. "Make sure that your website clearly demonstrates the benefits, the reasons to subscribe..." [22:15]
Customer-Centric Messaging: Tailoring subscription benefits to align with customer shopping behaviors enhances appeal. "It's actually just the fact that it's more convenient to get shipped to your house than to go to the store..." [23:40]

6. Email and SMS Opt-In Strategies

Building a robust communication channel with customers through email and SMS is critical for retention and upselling.

Increasing Opt-In Rates: "If you're collecting below 7% of your site traffic opting in, then you need to focus on getting more opt ins for emails and phone numbers." [24:10]
Enhanced Personalization: Using collected data to customize welcome flows can improve engagement metrics like open rates and click-through rates.

7. Review Collection and Syndication

Social proof through customer reviews can significantly impact trust and conversion rates.

Collecting Reviews: "The best thing you can do is have reviews... a line of copy that says over 100,000, five-star reviews... drives very high trust." [26:00]
Syndicating Reviews: Distributing reviews across multiple platforms enhances visibility and credibility. "The more social proof, the better it is." [28:25]
Setting Review Goals: Establishing targets for review collection ensures continuous feedback and accountability. "Set goals on how many reviews you're trying to collect per day, per week..." [29:45]

8. Measurement and Analytics

Accurate measurement is vital for assessing campaign effectiveness and making data-driven decisions.

Types of Measurement: Sharma outlines various measurement methodologies, including:
- In-Platform Reporting: Uses data modeled by platforms like Facebook, which may not always be 100% accurate.
- Multi-Touch Attribution (MTA) and Multi-Market Mix Modeling (MMM): Tools like Triple Whales and Prescient help in understanding different aspects of campaign performance.
- Incrementality Testing: Determines the true impact of advertising efforts beyond what in-platform analytics can show. "Understanding all these different types of measurement is knowing that they all have different play, different roles to play." [31:10]
Comprehensive Tracking: Assessing multiple points of sale and advertising channels requires sophisticated tracking to capture the full picture of campaign performance.

Notable Quotes

On Ad Account Structure:
"Whether you're spending $70,000, $700,000 or $7 million a month, you need to have a very tightly run ad account... That's like the hardest part or, sorry, the easiest part."
[02:15]
On Rapid Creative Testing:
"It's all a numbers game in terms of figuring out which ones are going to find scale."
[07:50]
On Landing Pages:
"Landing pages should speak to different groups of people... shoppable blog pages would allow you to have an article with a shopping module within it."
[15:00]
On Subscription Optimization:
"Sometimes it's just the fact that it's more convenient to get shipped to your house than to go to the store..."
[23:40]
On Review Collection:
"A line of copy that says over 100,000, five-star reviews... drives very high trust."
[26:00]

Conclusions and Takeaways

Nik Sharma's in-depth analysis in this episode underscores the multifaceted approach required to scale DTC brands effectively at the bottom of the funnel. Key takeaways include:

Foundation First: Establishing a solid ad account structure is fundamental to any successful advertising strategy.
Test Relentlessly: Both creative and audience testing are essential for uncovering what resonates with consumers and drives conversions.
Optimize the User Journey: From tailored landing pages to compelling new customer offers, every touchpoint must be optimized to enhance the commerce experience.
Leverage Social Proof: Robust review collection and strategic syndication can significantly bolster consumer trust and drive sales.
Data-Driven Decisions: Employing a combination of measurement tools ensures a comprehensive understanding of campaign performance, facilitating informed decision-making.

By implementing these strategies, DTC brands can enhance their conversion rates, maximize return on ad spend (ROAS), and achieve sustainable growth in a competitive marketplace.

Looking Ahead

In the closing segments, Sharma hints at the upcoming episode, which will feature an expert in supply chain, tariffs, and international trade, promising further valuable insights for scaling brands in the global arena.

Subscribe to Limited Supply: Make sure to subscribe to Limited Supply wherever you listen to podcasts to stay updated on the latest strategies and insights in the DTC space.

Transcript

A (0:01)

Welcome to season 11 of limited supply, a place for hot takes on what it's really like building and scaling consumer brands.

B (0:08)

I'm your host, Nick Sharma. Let's get into today's episode.

A (0:12)

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B (0:57)

Welcome back to Limited Supply. Today's episode is a continuation of last week's episode which was all about. It was actually derived from a newsletter I wrote. So it was an eight page newsletter all about how I would focus on scaling a brand. And today's podcast episode is the bottom of Funnel portion. So last week we talked top of Funnel and kind of went through that in greater detail. Today's the bottom of Funnel. Before we get into today's episode, I just want to make a announcement. If you are not already in the limited supply Slack community, go ahead to limited supply pod.com and sign up for the Slack community. We've got about 5,000 plus people in there that are talking every day. Everything is divided into different categories. Whether you're interested in Amazon or retail or you know, you're a brand of $1 million a year versus $10 million a year versus $100 million a year. Everybody has their own groups as well. So fill it out. It's super actionable. A lot of people find value in it. There's also a lot of local meetups that happen. I know there's one about to happen in la. We've done them in India, we've done them in London, we've done them in New York, we've done them in Austin. So if you are in a city where there's probably other limited supply listeners, which there likely are, jump into that and find the local meetup that's happening soon. Okay, so for today's episode, like I said, we're going to go into bottom of Funnel and then I believe we should have some time to go and talk into the commerce experience. So I'm going to start with the first one, which is proper digital ad execution. I'll tell you what really grinds my gears when I look at ad accounts or audit an ad account when they come to Sharma Brands is just bad account structure, outdated customer and exclusion lists, lazy naming conventions, no testing methodology for creative or for audiences, no innovation or tests of alpha features, beta features, you know, whether they come from Meta or Google or TikTok. And then the worst one I see, which is the worst because it's the easiest to mitigate and do, is not leveraging post IDs across campaigns. Whether you're spending $70,000, $700,000 or $7 million a month, you need to have a very tightly run ad account. And poor, poor ad account structure leads to poor results. It likely means that you have poor ingestion of data on the algorithm side of what's actually being done to serve those ads. Overall, you know, it's just messy. It leads to bad tracking and bad analytics. And you know, you, you just have to get the ad account structure right. That's like the hardest part or, sorry, the easiest part. After that is the hard part, which is the next thing on here, which is rapid creative testing. This goes hand in hand with good media buying. If you have good media buying, you can do good creative testing. If you have bad media buying and good creative, I mean, you can pro. It'll probably still work, I've seen that work. But you don't set yourself up for the best possible swing there with rapid creative testing. You know, usually less than 25% of any creative you'll put into the account ever sees any sort of scale. Most ad accounts that I'll open up have anywhere from one to three or four ads that run the majority of the spend in an ad account. And so what you really need to do is just focus on putting out more ad creative and testing what can work. It's all a numbers game in terms of figuring out which ones are going to find scale. Once you find something that works, you know, let's say you find a static ad that works well. You take that static ad, you keep the image and you change the text. Make it, you know, 25 different things that you can test. Do the same thing in the reverse. Keep the text, try different imagery or different graphics or different layouts. Same thing with the video. If you find a video that works, keep the hook, try a bunch of other stuff behind it and vice versa. Keep the hook Try different products. You can, you can do much more with video than you can with just statics. This leads into one more rapid testing which is testing audiences, messaging and offers, the amo tests. So you know, testing new audiences is one thing that a lot of people don't do. They tend to just go broad or they just go with lookalikes or they just go with interests. It's worth constantly testing all three of those. And of course on the interest side, different versions of interests on the lookalike side, either from your own first party data, cutting that up in different ways, buying second party data, which is basically first party data you buy, and creating look alikes with that. But all of that is is necessary on the messaging side, finding new angles, you know, new angles. Open tams. If you're selling a creatine supplement, you're going to speak differently to a woman in Manhattan than you would to a gym bro in Wyoming. Right? But if you can master being able to message differently, you're basically opening and widening your tam. And then the last one is offer testing. So yes, you can just drive people to your website, your homepage, your product page. But as we've talked about many times here before with the offers, what you want to do is try to figure out what is a offer or some sort of a catch. All order merchandised in a way that it fits a net new customer to have the best experience. So maybe it's got all the flavors of your product or if you've got 25 flavor flavors, it's got the top three flavors of your product and it's got enough product for the whole household to sample it. So audience messaging, offer and creative testing, that is something that more most people just don't do. And I'm not really sure why. It's obviously very easy to do. It's not like you have to do physical labor. You sit in your underwear at home and you just add new audiences or make new versions of a creative and Figma. But I don't know why more people don't be doing this. The next one is individual product page funnels. So you've probably just seen in general, catalog ads are taking much more spend and eating up much more spend. I've gotten to know Dan, the founder of Marpipe, and he is saying that more and more bigger brands are signing with them every week. Massive brands, because they're just making bigger and bigger investments into catalog ads. It's also something that, you know, Meta and Google and TikTok and Snap, they're all aggressively Pushing catalog ads, it's so easy for them to serve it right from a creative standpoint, you're just pulling what a retailer already has. If you're using Mar Pipe, then you run it through there and it creates the catalog for you at scale and then you just run it into your inventory. So all these platforms love it. And therefore you need to make sure that your product pages you're going to are basically funnels of their own, kind of like landing pages. And every good landing page answers five questions, which is one, why are you selling what you're selling? Two, why should I care as a consumer? Three, how fast can I get it if I order today? Four, how will it make my life any better? And five, how does this compare to other products on the market? If you can answer those five questions on the product pages of your website, your catalog ads, which is in the bottom funnel stage, will be significantly more effective. And of course, if you optimize a creative with a tool like Marpipe, then your creative will also be a lot more effective at driving Click through. This leads us right into the next section. So we did top of Funnel. We just went over bottom of funnel. And the next one I want to go through is Commerce Experience or as I call cxp. So the easiest one that I've talked about probably at least a thousand times is landing pages. It is 20, 24, and you are still not using landing pages to speak to different consumers in different ways. So your homepage, while it's obviously optimized toward what you believe is the most effective content to be on your homepage, it only speaks one way about your product. And the problem is when you're running ads, you're speaking to different interest groups, different demographics, different reasons why people are coming to buy. This is why landing pages are relevant. So you can actually speak to these different groups of people. You can also use landing pages as listicles. You know, five reasons why this creatine gummy is in everybody's gym bag. You could use comparacles, which are like a listicle, but it compares two brands. You've actually probably seen those similar to advertorials where they've got, you know, pros versus function of beauty and it's some article that's being run as an ad. You've got bundle, product style, landing page. So, you know, take three of my creatine gummy flavors, put them in a bundle, build a landing page off that, you've got social proof, heavy pages. These are great for higher AOV products, mattresses, electronics, you know, whatever it may be, you've got shoppable blog pages. So a little bit different than advertorials. Advertorials are usually click through to a product page, but shoppable blog pages would allow you to, you know, have an article with a shopping module within it. All of these types of landing pages I just ranted off, these should all be built directly inside Shopify in a modular fashion, which is the standard for Shopify 2.0. This makes it so that an intern or people like myself, you know, the one Indian who doesn't know how to code, can go in and duplicate pages. They can iterate on the page, they can add new sections, delete sections, move them up and down, copy a section from your product page to a landing page or vice versa, and just make all these edits. Ideally, if you do them right and you have all of these coded back to the metafields, you can do these on your iPhone as well. Following the landing page comes obviously the new customer offer, which we've also talked about many times before. The reason hints got 36 bottles for $36. As a new customer everyday dose has 50% off their first order. Harry's has a $5 shave trial is because all of these offers, you know their product is good. So people are staying because the product is good. All these offers get you in the door. You're on the fence as a customer on their website and the way that they get you over this is they bring you in on an offer you cannot refuse. Hint normally goes for, you know, two to three bucks a bottle in retail. It's probably a dollar to $2 when you buy it in a case. But if you get it for a dollar a bottle, you get to try 36 bottles, three different flavors of the top selling variety. Like why would you not. For dose you have 50% off, why would you not try it? Harry's five bucks. You know, you spend more than five bucks just walking outside your house or breathing in New York City. For me, what I've realized is that especially if you have brands with consumable products, the best way to scale customer acquisition is by figuring out some sort of a honeyhole acquisition offer. And I don't know why we call it honeyhole. That's just a word that we started calling it about seven years ago. But in this, in this perfect honeyhole acquisition offer, you figure out the merchandising and the messaging and sort of like the largest TAM approach to that. And in theory this is a, you know, this, this offer becomes Your control when running new channel experiments. So if you're running, if this is your best offer on Meta and you want to launch tv, well, you run with the same offer because that's your control. Whereas the channel here and how the traffic behaves is the experiment. Okay, this leads us to the almost second to third to last, which is making sure your website is optimized and so is your checkout. So most brands will use some sort of a Shopify template or buy a Shopify theme. It's pretty rare for brands to use fully custom websites unless they have, you know, unless they work with an agency like Sharma Brands where that's what we do. But you want to try to test and iterate on everything. We use intelligence for a lot of our AB testing and monitoring of results and just analysis. But you know, everything from the homepage modules, the above, the fold PDP sections, the slide out cart, the navigation, the organization of the collections page, the checkout extension, all of these things should be tested, measured, implemented permanently if they did well, and then test it again. And you know, there are so many data points you can leverage from heat maps, from session recordings, from scroll depth maps, from your post purchase survey, from knowing what kind of copy gets the most clicks when it comes to ads. All these data points can be incorporated into what you test on your website. And then you should run these tests and do it. Especially if you've got a lot of traffic and you sell a lot of product. You know, one test I remember, I remember there's a hair care brand, celebrity hair care brand, we worked on one tiny little test of a button in the cart, generated an extra 50 grand in one week. So $200,000 a month was in incremental revenue was generated just from a tiny test that, that we ran there. So if you've got a lot of traffic, do these tiny tests. As you have lesser and lesser traffic, do some larger tests. Why not? You are honestly, you might actually be one. You might really be one test away from upping your conversion rate by 25, 30, 50%.