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DTC 17: 📦 The scale edition
May 21, 2023
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Greetings from Victoria! Looking for a break from politics? You’re in the right place. 

 

Today we’re going to share some insights, distinctions, and tactics around the concept of ‘scale.’ So put your ‘nonlinear’ hat on and get ready. As Verne Harnish says, "There are no straight lines in nature or business."

 

Welcome to the newest members of the DTC community: Dear Brightly, Feel Goods, Stokes, Revlon, Chomps, Hülya Home, and many others joining in the last week.

 

Let’s get on with the show. Here’s what we got for you:

 

📦 Two Pilothouse senior media buyers riff on the mechanics of scale -- what it is, how it works, and tactics you can use to make it happen.

📦 Learn how you can use Facebook’s automated rules to give yourself the productivity of an entry-level employee.

📦 Not easy, but clear: Sarah Blakely’s remarkably clear 14-year path to DTC nirvana.

📦 $131.9 million in ad spend later, here are some key takeaways from the ad tactics of Trump and Biden.

📦 Check out the one book we’re reading that’s helping us experience greater work freedom and effectiveness (and can do the same for you).

 

Read on to find out the difference between vertical scale and horizontal scale. Read to the end to find out the number one idea Naval Ravikant would teach every single person, if he could.


Let’s Build: The DTC Influencer Flywheel Challenge (Enrollment Closes Saturday)



 

We know we know. This fella up here doesn’t look old enough to be managing over $1,000,000.00 per month in influencer ad spend. But, well, he does.

 

And he helps his clients become hilariously profitable in the process.

 

Join Nate Vankoughnet on Day 3 of the Influencer Flywheel Challenge as he shows you one of the secret skills of media buying: how to build a whitelisting and dark posting ad campaign.

 

Don’t wait. Enrollment closes this Saturday at 12:00 pm PST.


Save Your Seat Now.


The Mechanics of Scale: How Does Scale Work, Anyway?



Folks in the DTC space looove the word ‘scale’ (including us). The word gets thrown around a lot. But what exactly is scale? What needs to be true for it to occur? And what’s a process you can use to scale up?

 

We caught up with Pilothouse senior media buyers Stu Mason and Taylor Cain who’ve experienced scale at breakneck speeds to find their answers to some of our pressing scale-related questions.

 

What is scale?

 

Here’s the definition of Scaling: Increase something in size, number or extent, especially by a constant proportion across the board.

 

Pretty straight forward, right?

 

But there are actually two ways you can scale:

  • Scaling UP (vertical) 👉 Increasing spend and budgets
  • Scaling OUT (horizontal) 👉 Broadening your reach across new audiences and angles

Many think of the first kind of scale -- vertical. But you should actually begin with horizontal scale. 

 

Scaling out involves adding more audiences and finding new angles to test. You’re broadening the scope of WHO resonates with your product, and what they like. 

 

Once you have that understanding of what works for who, you scale up by doubling down on what’s working, and cutting what isn’t.

 

What needs to be true for scale to occur?

 

Stu gives his insight on when to scale up and when to scale out:

 

Scaling up: I rely on my key indicators and data to tell me. If you’re noticing ad sets and campaigns that are profitable, throw fuel on the flames! If it’s an ad set, you can duplicate it 5x and up the budget 2-3x. That’s a quick way to scale vertically. I’ll also do a similar thing with campaigns if I’m finding a CBO that’s super profitable. It sounds redundant because of audience overlap, but I’ve seen it kick Facebook out of its rut and the algorithm was able to find other profitable pockets within the audience

 

Scaling out: if you’re experiencing ad fatigue or audience fatigue, you’ll notice performance starts slowing down. Or maybe you’ve tried scaling up and it blew your performance. Now’s the time to scale out. Go back to your roots and rethink your offering -- what angles haven’t you tried? Are there different types of people that may find appeal in your product? How about a totally different format of creative? You may find expansion using a different placement because your audience responds better to those. Here is where modelling can help a lot. Look at different styles and types of creative...Try video...Rewrite your ads in someone else’s voice.

 

What are some common scaling mistakes?

  • Kicking campaigns into the learning phase 👉 When you scale budgets up too fast, you can cause your ad set or campaign to go back into the learning phase which leads to a ~15% performance hit. Avoid this by scaling budgets up by no more than 25% per day.

  • Unwieldy horizontal scale 👉 The one drawback to adding lots of different audiences is that you’ll have more to manage. Be sure you have the capacity to keep an eye on them for the first few days. Also careful to not optimize too early by using too many automated rules. Taylor warns that he’s seen this cause too much complexity (not knowing what’s working across too many ad sets) that’s led to poor performance.

  • Scaling vertically before 300 conversion events 👉 Facebook recommends that a conversion event (lead or purchase) is fully optimized once it’s had 300 conversions under its belt. Scaling up before this could lead to wonky performance. Think about it. When you increase spend, you’re putting more pressure on Facebook to show your stuff to more people. Yet if it doesn’t have the data it needs, your campaign will be less efficient.

  • Insufficient logistics and inventory in place 👉 It turns out clicking a few buttons and building a campaign can cause the wheels to fall off the bus if your logistics aren’t sound. You need to ensure your supply is set up to align with the demand for strong customer service. With a sound experience from purchase to delivery, you’ll be set up for more social proof, supporting more sales, more happy customers, and exponential growth.

What are some effective scaling tactics you could test right now?

  • Duplicate ad sets that are working → When you do this, you’re saying to the algorithm: "I like where we’re headed. Let’s keep looking so we can find more profitable pockets."

  • Use alternative bidding → Don’t let the algorithm get comfortable. Shaking up your bidding strategy sometimes forces the algorithm to find another profit center.

  • Don’t be afraid to experiment with scaling → Try doubling your budgets over the course of a couple days. Does it have a positive impact, or break the campaign? You might be surprised.

We’d love to hear from you about how you look at scale. What’d we miss? Hit ‘reply’ and let us know.


How Influencer Marketing Built a $400 Million Brand: The SPANX Success Story



Sarah Blakely is revered as an OG DTC success story, but it didn’t happen overnight. 

 

In fact, the timeline goes something like this…

 

1998: Sara Blakely cuts into some control top pantyhose and the idea for SPANX takes hold.


2000: Neiman Marcus places SPANX’s first large order.


2000: Oprah names SPANX one of her Favorite Things.


2001: SPANX is featured on the QVC home shopping network.


2012: Sara Blakely appears on the cover of Forbes as the youngest female self-made billionaire.


2012: SPANX opens its first standalone store in Virginia.


It took Sarah 14 years to build a brand that made her worth $1B. And if you break that down, that means that each one of those 5,110 days of those 14 years was worth around $195,695.


Of course this isn’t easy, but following the steps she took to get there charts a remarkably clear path.

 

The simple version is this:

 

Step 1: Show the problem, and then show how your product solves the problem. Don’t tell. Show.

 

Step 2: Leverage influencers like Oprah for PR.


And of course there’s more to it than that. For the in-depth version that charts Sarah’s success path click here.


Automated Rules: Kinda Like An "Entry-Level Employee Conducting Executive Level Business Decisions



With the holidays around the corner (and enough stress to go around), we’re here to save you time, money, and hassle in the latest All Killer No Filler Podcast where we share our favorite Facebook Automated Rules.

 

Like Senior Media buyer Charley Tichenor (@CTtheDisrupter) says in the poddy:

 

"When you use rules correctly, it’s effectively an entry level employee conducting executive level business decisions, without error or emotion, 24 hours a day, looking at billions of people, trillions of data points, on millions of websites, without error."

 

As media buyers it’s easy to get attached to your campaigns, but using automated rules in the way we describe in this podcast really helps you overcome this attachment, so you can feel confident that you’re spending your budget in an optimized way (and can then sleep well at night).

 

🤓  2 automated rules that will help you find winning ads quick

 

Stu Mason advises that you create 20 variations of your creative to test against each other. Isolate the one variable that you’re testing for (primary text, headline, or image for example) and keep everything else the same across all 20 of the ads. Create a campaign and ad set for this test and dump all ads in.

 

Set up these two rules, and within a few hours, you’ll know the champion variable that you can then add across all scale campaigns to watch performance soar.

 

Here are the rules you can put in place to run this test:

 

Rule 1: Turn off any active ad in the ad set that exceeds > 400 impressions

Rule 2: turn off any active ad in the ad set at CPC that exceeds > $1.50*

 

*Rule of thumb. May vary especially with higher-end product CPCs.*

 

For only $100-150, you can test up to 20 variables.  Within the 400 impressions each ad is alloted, you will have enough engagement metrics to know which variation can be crowned the champion. You can use this to test headlines, landing pages, or any variable that can be isolated. 

 

We use this process with most clients during the scaling face, as it allows you to quickly forge your highest performing ads from proven elements. You may recognize this as the "Gold Coin" testing methodology that we wrote about in DTC8.

 

🤓  Save time and money with stop-loss automation 

 

🏄‍♂️ To many media buyers "Surfing" refers to the process of proactively  awarding or penalizing campaigns with increased or decreased budgets depending on real time performance indicators. 

 

Put simply, you put more money into the good, and spend less on the bad, riding the wave if you will. 

 

Do rules work? Yes! We implemented these rules with Pilothouse fresh with an existing client last month, and saved 20% on our ad costs.

 

You can automate the process by having campaigns reset every 24 hours. Campaigns that meet a certain performance threshold by an assigned time of day are automatically assigned increased budget. Conversely, poor performers will have rules in place to have their budgets pulled back (pump the breaks), or stopped completely (cut bait). (Media buyers love metaphors!)

 

With this kind of automation, we may have increased or decreased budgets by 10-30% or stopped them entirely. This rule allows your campaigns to get a fresh start every day. Here a screenshot of a rule telling the campaign to decrease the budget by 99% at midnight. Every day it resets to $400.

 

Listen to the whole poddy!

 


Here’s an example of a "pump the breaks" rule. If we haven’t received a purchase before 9am local time, we decrease the budget by 10%


By noon if it still hasn’t recorded a purchase, cut it by 20%



Then by 3pm if the ad set hasn’t received 2 purchases, it’s time to cut bait and turn the ad set off.




We hope you get as much out of these efficiency-boosters as we do. After all, sleep is important. And if you want to nerd out with us, we dive deeper into automated rules in the podcast. Tune into the full cast here 👊

3 Guidelines No One Tells You When You Grow Your DTC Brand:


Greetings, DTC readers! My name is Sean De Clercq and I founded Kickfurther after I was unable to access the growth capital I needed for my merchandising business even though I exhibited fast growth and steady orders. Here are the three lessons I learned growing that business and beginning another.

  1. Raise your prices. It's the piece of advice Marc Andreessen said he'd give to startups. Many entrepreneurs believe they'll offer an inexpensive product, orders will follow, and explosive growth comes next. Raising prices allows you to hedge product, competitor and macro risks while providing the margin to offer freebies and promotions like free shipping or discount codes. Better margins also make wholesale orders economically feasible.

  2. Never go out of stock. Eh, it’s just a few weeks, you tell yourself, and it’s so expensive to order more inventory, especially if you need it expedited. The customers will wait, you tell yourself. You might know that your product provides a feature or benefits competitors don't, but studies show shoppers often find a replacement item versus waiting for your inventory to return. So what’s a growing brand do to avoid stockouts?

  3. Inventory management is imperative, but so is cash management. Where the two meet is often the biggest point of tension for a growing brand. Your inventory is your biggest expense (especially before you’ve unlocked volume-based manufacturing discounts) but also your biggest revenue source, and you’d love to order more to avoid stockouts and meet demand but you’re limited by cash on hand -- especially if you sell a seasonal item. Growing brands overcome this dilemma, remain on trajectory, avoid stockouts and unlock volume ordering discounts with Kickfurther inventory funding.

Learn more at https://grow.kickfurther.com/dtc



Biden Had Higher CPMs Than Trump - Here’s Why



This week’s guest post by Paul Jeyapal (@5anjeevan on Instagram), one of our favorite ad commentators, was written before the US election, so we don’t know at time of printing, which of the candidate’s ads ultimately won the day.

 

The views expressed here are a basic analysis of ad strategies and do not reflect political views held by DTC or the author. 

 

This week, The Markup.org reported that in swing states, Biden paid average cpm rates of $34 compared with Trump’s average of $17. The author suggests that Facebook might have unfairly charged the Biden campaign more to reach Americans. But in reality, Facebook wasn’t the problem - it was Biden’s ads.

 

Unfortunately for Biden, Trump’s low CPMs are directly correlated to his style of marketing that is often favoured by engagement based algorithms.

 

3 Reasons why Trump’s ads were able to unlock cheaper CPMs:

 

📝 Direct response copy - For the last 12 months I have been routinely checking both candidates' ads. One thing is clear, Trump’s ad copy is written by direct response copywriters not a brand team. "Trump is calling on YOU to FIGHT BACK!" says one ad. All of the copy is designed to provoke an emotional response from readers  in order to get them to click.

 

🦠 Click baity images - A zoomed in, high contrast photo of a serious Nancy Pelosi with a red overlay. Trump’s team knows that click baity images like this get high click through rate and stellar engagement. Facebook’s algorithm is designed to favour content that it believes users will like which it measures through engagement signals.

 

🚫 Negativity bias - Everyone says they would prefer good news, but is that actually true? In a recent experiment conducted by McGill University found that participants often chose stories with a negative tone – corruption, set-backs, hypocrisy and so on – rather than neutral or positive stories. People who were more interested in current affairs and politics were particularly likely to choose the bad news. Negative ads are a pretty close thematic fit with Trump’s "outsider" persona. His team was able to trigger the negativity bias of Facebook users to drive massive engagement through carefully crafted ads focused on polarizing issues.

 

Joe Biden spent nearly $8 million more to get the same reach as Donald Trump. This is an expensive way to learn one thing - dial in the messaging first before pumping millions into amplification. Marketers and brands make this mistake every day. How? By focusing on ad units, paid traffic channels, and distribution without being focused on the most important thing -- getting the messaging right! 

 

You know what’s cheaper than $8 million dollars? Hiring amazing copywriters and brilliant video editors to nail the messaging.

 

It’s important as marketers and brand owners that we step back and analyze each candidate's tactics in a vacuum free of our own personal biases of politics. Sometimes it’s more important to study the tactics used rather than vigorously defend our favourite candidate.

 

For more in-depth breakdowns on ads, copywriting, and marketing strategy you can check out my newsletter on substack.





Google product logo revamp seems less functional, harder to distinguish



Things We Loved This Week

📝 Article: "Creative fatigues and creative expands." We often say "keep creative flowing," but what exactly does that mean? This article helped us really get it. Garrison Yang blends art, science, and insight in his Technical Guide to Facebook Creative.

 

🧵 Thread: @TaylorLagace answers the question. How can you use Gorgias to powerfully position INFLUENCERS at the front lines of your business as customer service reps via INFLUENCER WHITELISTING? 

 

🔨 Tool: Are you a customization nerd? If so, this one’s for you. Google lets you change the theme of your experience -- from Chrome to Google’s homepage.

 

💡 Email Ideas: Likely one of your top channels for sales is email. And if you think about it, every email is a bit like a section of a sales page that you get to keep building on. With the holiday season coming in hot, why not source a few ideas from some of the best e-comm emailers in the biz? Check out this collection from Sleeknote. 

 

Tool: Is Facebook's new privacy restriction, Limited Data Use, impacting your performance without you realizing? Loginhood just released a tool that automates privacy requirements across platforms to protect campaign performance. Going into a crazy holiday season, getting privacy checked off is an easy way to make sure you're not losing conversions.

 

📚 Book: We’ve been diving into the entrepreneurial genius of Dan Sullivan in his latest book, Who Not How. In fact, there’s a quote that aligns with our belief around the DTC community: "Joe [Polish] doesn’t believe he has the answers to everyone’s questions. Instead, he believes that with the right "genius network," any problem in the world can be solved." 

 

🧠 Naval AMA: Naval Ravikant took to twitter with three letters: AMA. Here’s our favourite, so far: Q → What are the most common/harmful cognitive traps that people fall prey to? A → Wanting to be liked. Also don’t miss his answer to the Q, "If you could teach everyone just one concept / idea, what would it be?"

 

🖥 Chrome App:  While taking notes is a great learning tool, it can be challenging to have efficient and focused meetings while having to make sure you get the important points down. Here’s an extension for the Google Meet tool (which we use a TON) that transcribes meetings for you.

 

🎙 Podcast: Many here have probably already listened to Kanye on The Joe Rogan Podcast, but wow was it entertaining. With awesome momentum and relentless pop culture references Kanye skims along the high level of some very advanced ideas, he seems to have a grasp of the big picture. His musings on his net worth, going from $50M debt to being worth $1.3B now are worth the price of admission. It feels like as a world, we’re due for some new ideas. We’re not sure Kanye’s the guy to follow, but we’re not gonna stop listening.


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