Acquisition

How Harley-Davidson and The Beard Club Use “Identity” to Build Customer Experience

September 25, 2018 by influexwp Leave a Comment

(Note: This is one of a series of posts to come around the various ways that marketers are crafting incredible customer experiences. In so doing, they are dramatically improving their customer retention and acquisition efforts, and concurrently building their brand.)

One of the most powerful ways to build customer experience is by tapping into raw human needs and emotions.

A person’s sense of sense, their actual, perceived and desired identity, is one of the more raw and powerful needs to connect with. Many businesses have done an excellent job of using their brands to help customer’s think differently about themselves. When done well, customers are proud to be associated with the brand and willing to show off that association in public. They begin to think of the brand as more than just a product. It becomes part of who they are and, even more powerfully, a reflection of who they want to be.

Of course, a business can use the power of identity in a negative way, manipulating customers through psychological games, but the examples shared in this section come from companies who are using this power in positive ways.

Harley-Davidson: More than a Motorcycle

Harley-Davidson has become one of the best-known brands in the world, in any category. People with absolutely no interest in motorcycles have heard of them and already have a clear sense of the brand’s distinct identity.

While most people associate motorcycles with younger demographics, the average Harley owner is forty, not old but certainly not a 20-something thing. This is due in part to the bikes’ cost; they aren’t cheap. But if you’ve ever met a Harley owner, however, you know they tend to be extremely proud to be a Harley owner. They love to show it off, and “owning a Harley” is a key part of many owners’ identities. They’re didn’t merely purchase a motorcycle; they became a part of a vibrant subculture.

The bikes themselves are loud, brash, and bold. You know when a Harley is moving down the street, and their owners rather enjoy that the bikes aren’t subtle. They didn’t join a membership where the card gets tossed in the trash nor is kept quiet. While it may not always be through their spoken words, but Harley owners scream being Harley owners.

One of the company’s biggest achievements has been transforming their product into more than a product. People know what Harley stands for: freedom, community, and a certain rebellious attitude.

Their website says it more directly, “If you want to fit in, take the bus.”

From a purely technical standpoint, there are probably better motorcycles on the market. However, Harley customers aren’t in it for the technical quality of the product. They are embracing the Harley attitude.

And for its target customers, Harley is giving them exactly what they want in terms of identity. For people in their forties and fifties, many of whom are empty-nesters, and some of whom are struggling through or approaching a midlife crisis, Harley restores for them a sense of youthful rebellion. Riders are able to detach from their jobs and the concerns of their daily lives to take to the open road with a sense of freedom.

While it’s hard to point to a single moment where the brand that had often been associated with the Hell’s Angels and featured in films like “Easy Rider” started attracting a growing following amongst older and more affluent customers (the average age used to be 32 and now it’s in the 40s, with average annual income increasing from $30K to $70K+), what is clear is that once the company noticed the CEOs, bankers and celebrities were taking to their bikes, they leaned in. (As an interesting side note, back in the early 1900s, Harley target farmers, then in the mid part of the century positioned itself as the bike for police officers. To say the brand has evolved and changed its targeting over time is a minor understatement.)

As an example of how the company has leaned in towards shifts in its customer profile, customers choose Harley-Davidson motorcycles because of how they feel and how they want to be as an owner. One way to amplify that feeling is by joining with others. Riding a Harley with others is a big part of being a Harley owner, and the brand encourages such connections with what they call H.O.G. (The Harley Owners Group).

H.O.G. was started in 1983, and today there are over a million club members. It’s the biggest factory-sponsored riding club in the world, and while many people think it’s managed by customers, each club is actually sponsored by a local dealership. In the past, dealers could only sponsor one H.O.G. each, but now they are allowed to sponsor two.

This is a great example of a brand recognizing what their customers would want, well beyond the basic “product,” and then creating opportunities to help their customers feel even more strongly about themselves and the brand.

From a financial side, this of course drives retention in the form of merchandise sales (I think we’ve all seen how decked out Harley riders can be) and certainly additional bike sales. That image and brand story that is then told – whether by hearing an owner talk about it or just seeing them riding down the road with others – no doubt leads to future customer acquisition. In fact, the company used to spend very little dollars in advertising. But that didn’t mean spending nothing on marketing. Their spend would show up in efforts like H.O.G. and other ways to support their customers. How’s that for a different take on marketing? And all the while the brand continues to form, evolve, and grow.

The Beard Club: Are You Man Enough?

The Beard Club began life as Dollar Bear Club, introducing themselves to the world through a video featuring the company founders, Chris Stoikos and Alex Brown, along with the rest of their team. Through that first video, as well as subsequent ones, they have tapped into something deep in the psychology of their target audience.

They aren’t the only company providing products for men with beards, but in each video, they have created a strong sense of what it means to be a man with a beard. They show images and tell stories of bearded men doing cool things, elevating the image of manhood in a positive way. On their website, they even ask the question, “Still don’t think you’re man enough?”

It’s interesting to note that their videos speak both to men who have beards and work to instill a desire to grow one for those who don’t. For bearded men, they’ve created what Seth Godin loves to describe as a “Tribe.” The Beard Club wants bearded men to know they are being spoken to, to know that there is someone who understands them. And The Beard Club wants bearded me to think about themselves differently, as particularly proud not just to have a beard on their face but to remind them that having a beard means being special and different. (Whether this is “true” is irrelevant, it’s the message the brand is telling.)

Their message is also aimed at those who don’t have a beard, to say, “This is what you could have. This is who you could be. This is the life you could live if only you had a beard!”

Of course, any customer knows that having a beard isn’t a magic ticket to a wonderful life. The message is clearly tongue-in-cheek, but it still creates an identity that many men crave. Not only does it create a sense of aspiration, but it offers accessibility: “All this can be yours!” It could even be considered a call to arms: “If you don’t have a beard, grow one!”

What I find helpful in looking at The Beard Club vs. Harley-Davidson is that while the latter used its marketing dollars outside of pure advertising, the videos in which The Beard Club uses this strong sense of identity are primarily customer acquisition vehicles. Sure, they help reinforce the brand message to existing customers. But many of these videos are primarily used to bring on new customers. And for those who lean more towards the performance marketing approach, crafting an experience using identity is no longer something vague but can be integrated with the same data-driven approach, but just done from a creative side to intentionally create an experience, even before someone has become a customer.

Who You Are, Who You Aren’t

It’s important to recognize that Harley-Davidson and The Beard Club have a well-defined target customer. They don’t try to be all things to all people. If the leaders of Harley-Davidson decided tomorrow to target a completely different demographic, they would need deliver their experience in a different way. That’s the key. The product would be essentially the same, but the experience around it would change in order to target a different type of customer.

That is perhaps an obvious but crucial aspect of tapping into identity. And that is in being crystal clear of who your target (and existing) customer is, what they value, what you can offer them that is a clear point of differentiation, and that you can deliver on that message.

Some businesses try to create a sense of identity, but they fail to go deep enough. They don’t speak loudly enough about the identity of their brand because they don’t want to alienate other potential customers. In the early stages, as a few different demographics are being tested, this approach might make sense. But over time, not going deeper can mean a weaker connection with customers. Yes, it means making a tradeoff and likely turning away a demographic, but brands that seemingly go all-in by speaking loudly to a specific target customer do better than by trying to speak to everyone.

And that is in part because that specific customer wants to be treated a certain way. Unless there can be very clear segmentation within groups, trying to speak both to married women over 40 and single men in their 20s is very very difficult. The language, imagery, tone, messaging, etc. should be different for those two groups. So as much trying to straddle a couple worlds may feel like neither is alienated, it also means that neither get the sense that the brand truly understands them.

As you consider your own business, do you have a clear sense of who you are and who you aren’t? Are you clear on who your customer is, at least for 70% of the business? That’s the group you should be directly all of your messaging to. That is the group to see how you can connect with their sense of identity. Whether in the form of reinforcing what they already feel or creating a sense of aspiration based on who they are or want to be. And whether that shows up in strategic marketing efforts, in Facebook video ads, in the product or service you deliver, or anywhere in your business, being able to tap into someone’s sense of self can be one of the more powerful ways to build that customer’s experience. One of the big wins we can have as marketers is for customers to tell stories about our brands. And yet when that story is an outgrowth of their identity, it carries a much greater sense of impact and authenticity.

Crafting Amazing Customer Experiences: The Strategy That Helps Marketers Both Build the Brand AND Scale the Business

April 11, 2018 by influexwp Leave a Comment

Think about what happens when a customer has an amazing experience with your business. They are happier, more satisfied and more engaged. Which typically means they will buy again from you. So they stick around longer and are worth more to you as a customer. When they are happy, they’re more prone to tell positive stories about your business. Those stories help to craft the brand. Similarly, people talking good things about your business in an authentic way drives word of mouth. Which is the cheapest form of customer acquisition, not to mention helping your paid media efforts to be more effective. And since referred customers have been shown to be some of the highest value, these are particularly profitable customers.

That’s a lot of goodness…

Every marketer wants to grow their business. It’s human nature to do more, push ourselves, and our businesses. At the same time, the big win isn’t always just growth. The payoff happens when the business you’ve built becomes a brand that customers know, love and are excited to engage with.

On the spectrum, performance marketers generally believe that growth comes from pushing paid media hard, and that in selling and delivering on the product, you build the brand. On the other hand, traditional brand marketers approached things as “build the brand and the sales will follow.”

At the same time, we now operate in a world that is no longer either/or. As much as many things in society are portrayed as binary, marketing is not that way. Growing your business with more of a performance marketer’s hat is not at all at odds with building a brand. In fact, there are ways to achieve both concurrently.

One analogy I’ve found helpful is that performance marketing (aka direct response) is to brand as income is to wealth. You need income to get to wealth, just as you need a performance marketing approach to generate sales on the path to building a brand (I’d posit that even if you are funded, there has to be a sustainable business model in place at some point – see Blue Apron if you need a counter-example).

Over my career with my clients, the goals of scale and growth are typically the biggest reasons we engage. With a history in paid media (8 years at Beachbody and with my clients since), exploiting channels like Facebook, TV, and otherwise has been a cornerstone of my work. That always transcends to conversion and maximizing the value of each customer. Let’s be clear, there is a massive amount of scale and value that can be generated with this focus.

At the same time, every marketer faces the point where a channel has seemingly maxed out and so a search for a new channel to scale occurs.

This can be exhausting – the constant paid media, conversion, LTV, CPA model. Again, I’ve always considered myself a paid media guy, driven heavily with an analytics mindset. This stuff can be a big deal and can be used to push a business pretty far.

At the same time, word-of-mouth, and to a certain extent referrals, rarely gets that much attention. It can feel like it’s not trackable or measurable, when in fact there are ways to do so. And yet, it’s the cheapest form of customer acquisition and typically sees the highest value customers.

So where does word-of-mouth come from?

In essence, it comes from the stories customer tell. The good and bad ones. Those show up when someone asks them about a product they are using, on review sites, and beyond.

Where does these stories come from? Most often, from people’s experiences with your business.

And in a world where the customers are the ones who actually define the brand, as much as we try to affect it, those stories – which are an outgrowth of their experiences – are the way the brand comes to life.

It’s this progression and evolution, at least from my side, which has led to the realization of the power of customer experience. Not just CX in the online user experience definition, but much more broadly.

That crafting amazing customer experiences can serve both the growth goals of a business while elevating the brand. And while I don’t believe in silver bullets, it is convenient when a strategy can serve multiple goals concurrently.

Why don’t more business focus on customer experience?

When you’re growing a business, sales are key. Without them, the rest is moot. And with so many different platforms and tools, it’s easy to get caught up in trying to optimize and scale paid channels. But even within doing so, it’s possible to create an experience – I’d argue that Dollar Beard Club (now The Beard Club) has very effectively used videos to craft the experience AND to acquire customers. For them, there really isn’t a distinction between the two.

Also, setting a goal around word of mouth is not common. And while it’s not perfect, looking at direct and organic traffic as well as referral customers can be an indicator of word of mouth, especially when paid media may not be as strong. There are a host of other metrics that can inform the strength of word of mouth – volume of social engagement (shares, hashtags, etc.), as well as indicators like Net Promoter Score (“NPS) and CSAT ratings. All of these typically follow when repeat customer rate is strong and refunds are lower.

None of those are entirely perfect, but there are certainly signals to look at to better inform the volume, and certainly the likelihood of word of mouth.

Finally, it’s also true that retention and building long-term value can simply be a prioritization and sequencing challenge in an organization. Especially those that are just getting some traction on sales. It can mean attention and resources (time, dollars, people, technology, etc.) that feels like it’s pulling from sales. But based on the above, that additional attention should assist sales, not be viewed as a draw from it.

What, then, do great experiences look like?

Think about the businesses you rave about. That your friends and family post about for no good reason other than they are excited to do so. Which businesses get talked about at conferences and in case studies.

There’s the list of regulars – Nordstrom, Amazon, Ritz Carlton, Apple, Starbucks, Disney.

And there’s good reason that they often pop into mind and are talked about. They’ve put a ton of time and attention towards the experience they want their customers to have.

There are countless other examples:

Harley-Davidson

Peloton

SoulCycle

The Beard Club

Buc-ee’s Convenience Store

Sephora

SaddleBack Leather

Rock n’ Roll Marathon

Loot Crate

Each of these businesses has created a brand, in part by intentionally crafting a great experience for their customer.

How they do so can include a variety of tactics:

-Different forms of media, such as video and music, for example, can be powerful in helping to deliver an experience.

-The product itself may be differentiated in such a way that may establish a unique experience

-Arguably, for some businesses like Uber, AirBnb Stitch Fix, the product and experience are so intertwined that there isn’t a clear delineation of one versus the other. This is reflective of many shared economy businesses and new business models around existing services (taxis for Uber, hotels for AirBnb, retail for Stitch Fix)

-Clearly, customer service affects the experience. As do how you handle the various components of the transactional process (acquisition, returns, cancels, etc.)

By far the most powerful way to craft experience is by tapping into people’s sense of identity and community. These are raw human needs, so can be the most powerful. And certainly not mutual exclusive with any of the above.

Let’s look at just a few of the above:

–Harley Davidson customers clearly have a sense of identity attached to what it means to be a Harley rider. And whether it’s at Sturgis in South Dakota or at one of their local Hog events in countless cities across the US, there is a strong sense of community with the Harley world.

–Peloton and SoulCycle are each fascinating by themselves and taken together. Both are focused on indoor cycling. And even though SoulCycle customers go to a brick-and-mortar location while Peloton riders are at home, both nail customer experience.

(As a side note, this is one category I feel particularly qualified to discuss. I spent 8 years at Beachbody, was a licensed SPINNING instructor with Johnny G back in the day, have ridden across the county on a bike and have tried most cycling programs.)

For its part, SoulCycle, has become a lifestyle brand. SoulCycle is about identity, community, and apparel. Despite being a health and fitness company to start, you’ve never seen a before-and-after picture of their customers (at least not by the company). Whereas FlyWheel and SoulCycle were true competitors in NYC, FlyWheel focused on winning and being #1 while SoulCycle has been about being a team and inspiring yourself and others around you. And no doubt music is huge for SoulCycle.

Peloton similarly does a ridiculously good job with music. Anyone who has worked out at home knows how good or bad music can affect that experience. Just how much they are paying for music licenses is not clear, but they are using music well. It’s important to note that the Peloton bike and screen are top-notch. And with superb instructors and even the way they shoot the class, you feel a part of the in-person classes shot at their NYC studio. As much as Flywheel was about competition, Peloton has a leaderboard, a la Strava, but it’s a choice you have the option of hiding. But for those craving competition, it’s there.

–Buc-ee’s may be a brand folks outside of Texas may not know. But the fact that a convenience store is on the list is telling. Buc-ee’s may be the nicest convenience store on the planet. That’s why they’re here. It doesn’t take much to describe why most people go to a convenience store and all the parts they can’t stand. Often it’s to get gas, use the bathroom and to get some simple foods. Rarely are any of these better than horrifying. Instead, a typical Buc-ee’s has 50-100 gas pumps, is immaculately clean (the floor is spotless when you walk in and there are Purell dispensers next to each urinal in the men’s room), and the food is just amazing. When was the last time you said the food at a convenience store was something you looked forward to? And did I mention that these are 100,000 square-foot locations with shelves and shelves of jams, jerky, candy, not to mention a section on Buc-ee’s accessories. Essentially, Buc-ee’s did what I refer to as “Do the opposite.” Take everything that was horrible about a place, and do it in a polar opposite way.

-This list can go on for pages, but the final one I’ll mention now is Loot Crate, a box company for gamers and geeks in general (their language, not mine). What they’ve done particularly well is to tap into Seth Godin’s notion of “tribe.” By naming their customers Looters, on their site and in their emails, they immediately impart a sense of both identify and community on their customers. It’s not imposed, but it’s welcomed. At the same time, something I love is they are very clear about who they are trying to speak to. Their order confirmation email includes an image of a nerdy-looking woman (Note – as a math major from MIT, this is another area I feel highly-qualified to discuss). Loot Crate doesn’t shy away from who they are speaking to. In fact, they lean in. And while that image may not work for anyone else here as necessarily the core customer, it works for them.

Which leads to arguably the most important aspect of crafting an amazing experience.

Knowing your customer.

That sounds like such a simple statement but how many companies try to be all things to all people. Or are concerned about alienating 5-10% of their audience by not leaning in as boldly as Loot Crate has done. Your core demo may not be as clear, but don’t underestimate how much can be lost by not letting your target audience know loud and clear that you’re speaking to them. Part of the job of marketing is to separate the audience – to attract those you want while dissuading those you don’t.

As for devising your own strategy, knowing your customer, at least who you want to attract is one key step. As is knowing your brand values and what you want to stand for.

Keep in mind, too, that experience can and should be tied to measurable aspects of your business. Not perfectly. And not always. But nothing in marketing these days is “perfect” or an “always” thing. Even one of the most measurable components of the business, traffic from Facebook or Google, has clear areas of grey (attribution window, methodologies, cross-device, etc.).

Next, think about what you are replacing.

For starters, be honest about whether your product is new? Very rarely is the product entirely new.

-StitchFix is a new model for shopping for apparel

-Uber is a new way to get a taxi

-Tesla is an alternative to other cars.

The models and execution were different, the core premise wasn’t.

Hotmail was new. The iPhone was new. Spanx was new. If you have a truly new product, then product can win on its own for a while if it’s good.

Given that most products aren’t conceptually new, and they are a way of replacing what people have available to them, dig in to what people are currently using?

-What do people like about the thing you are replacing?

-What are their pain points around those things?

-What do you bring to them, especially if they’ve never had it before? This could be everything from health to convenience to identity.

-What do your customers value? What *should* they value?

Look back on the above examples and how they have created experienced for their customers that didn’t really exist previously.

Finally, it’s important to be self-aware about your organization’s resources and capabilities. What are some areas you have a sense of skill at or feel like you can create a true point of differentiation around?

The final finally, attach a business outcome to these efforts. Don’t just call them “brand marketing”. Depending on what you do, you should see an impact on one or more of these areas:

-Better performing paid media

-Increase in direct, organic and referral customers

-Higher repeat customer rates

-Lower refunds

-Low inquiries to customer care

-Higher NPS scores

It’s a rare case that a strategy can serve the growth and brand goals of a business. Frankly, consumers would rather have great experiences. They have become accustomed to the status quo. But when done well, as these companies have shown in crafting amazing experiences, consumers reward businesses both with their pocketbooks and thru word-of-mouth.

And aren’t those the outcomes that all marketers are looking for?

(I’m always interested to hear from others who they think nails (and doesn’t nail) customer experience. What aspects of the above resonate? Which parts would you like to delve deeper into? )

Next Level Media Management for Performance Marketers

April 25, 2017 by influexwp Leave a Comment

(This is the third in a 3-part series where I share some of my “secrets” to scaling a performance marketing business. Here are part 1 and part 2, if you missed them.)

This post is specifically titled “next level” because it assumes the first level of media management is in place. That means having the basics of Customer LTV as well as having a working unit economics model. You can see my posts here and here if you want more info.

The question then moves to, “How would you feel about paying 3x what you currently for customers and being really happy about doing so?” Because it’s likely that you could already be doing so.

The basis of this possibility comes from the fact that customers from different traffic sources, or from different targeting options, are likely worth different amounts. You may have one ad set on Facebook where the average customer is worth $100 in gross margin and another where the average customer is worth $200. But if you are managing both ad sets based on the same target CPA, then you’re missing out on additional opportunities. If your unit economics model is based on an overall average, then you’re also likely overpaying for the lower-value customers.

This is the key to next-level media management: moving beyond a single target CPA.

How do you do so? Start segmenting customers into different buckets – that might mean Google vs. Facebook at the outset. Then it might mean different campaigns/audience targeting for Facebook. You might find that creative differences drive different customer values. As a small side note, it’s important to look at the full funnel – so you may have a segment with a really high LTV but also a very low clickthrough rate, which nets out worse than a different segment with an LTV that isn’t the highest. You can’t just look at things in a bubble. A holistic view is important.

But if you net out with a ROAS (Return on Ad Spend) that is significantly different from one segment to another, you may want to consider shifting how you manage these segments. In terms of how you define ROAS (a term I hate; just a bit more than EBITDA…), you can look at day 0 as well as the lifetime gross margin (net revenues less variable expenses) of those customers relative to the cost to acquire them. Day 0 average order value may be a proxy for lifetime, depending on what happens on the back-end. Or you may need to layer on more info. Each business has its own dynamics.

The broader point here is that you likely have customers who are coming from a certain place (station, platform, ad group) that are worth a different amount than another segment. As such, you should be managing how you evaluate those media sources based on different target metrics.

In a best case, your highest-value customers are coming from a channel that you can scale dramatically higher with a new target CPA/ROAS goal. Or you might discover that because of these differences, you should limit the rate to which you’re expanding spend. At a simplistic level, imagine you thought Google and Facebook customers were worth the same when in fact Google customers were worth far less, but you could only scale Google – well, it might take some time to discover that error, and that time and mistake might’ve cost you a lot of money.

Executing on this approach requires solid analytics, which I know is the bane of everyone’s existence. Facebook and GA have different attribution methodologies, so you end up having to triangulate across a couple different approaches. But you’re likely having to do this already. So, making sure you’re sending the right order values back to Facebook and Google, for example, and having a UTM structure that is robust and consistently used across all channels are the foundations to tracking and being able to do the necessary analysis.

Then, it’s a matter of having someone pull the numbers and then managing the media appropriately.

Which leads to one more point. The actual managing of the media.

Meaning, if it’s an agency, then how do you work with them, and vice versa. Or if done internally, how does the internal team operate. I don’t have a rule of thumb on either. I’ve seen agencies work and fail. I’ve seen internal teams work and fail.

In a world where there are a massive number of people running paid traffic, online and offline, it is shockingly difficult to find partners (again, whether internal or external) who can really nail paid traffic. That’s not being rude or disrespectful. If you ask a group of top-notch marketers who they would recommend to run paid traffic, it’s usually a very short list of folks, which the group probably wouldn’t agree on anyways.

That’s because paid media is really hard. Especially when you start scaling. And that’s not simply because of the supposed diminishing returns of scale – I’ve actually seen results improve upon doubling of spend, and at 6-figures plus of weekly media.

Paid media is really hard in part because of a number of factors:

a) Reporting and tracking – as I already mentioned above, systems disagree. But it takes a rare company that fully understands the differences and gets confident with what they (and you) are really looking at.
b) The difference is in the details – As spend increases, the number of campaigns, ad sets, stations, and placements increase. At scale, all those little variances, errors, or anomalies that used to be ignored really start to add up. At Beachbody, I’d often say how crazy it was that we had an internal team managing an agency, who had both a client services person and buyer, who then worked with someone at the station. From one perspective, it was absurd to pay someone 6 figures internally when you have these external partners, but when you’re running $100MM of media, just how much do they need to improve to more than ROI their salary and bonus? The answer was enough to justify having them on board.

That’s what happens at scale – minor changes really add up. You can be annoyed, or you can acknowledge the reality and then manage through it (and if you can solve the original annoyance, then great).

c) Too many people accept the easy answer – I’ve been on so many calls where a hard question was answered with something other than facts. But it sounded really good. For my part, I learned some of this rigor in a Stanford Business School class taught by Andy Grove, founder of Intel. That guy wouldn’t accept a single statement in the class without facts, without data. Answers that sounded nice but didn’t have solid facts to back them up weren’t tolerated. And yet, most businesses operate this way. What sounds like a good explanation only is one when everyone is looking at objective information. Not to say that subjectivity comes into play. As we use to say, “The numbers don’t lie, but they also don’t tell the whole truth.” Clearly, this is a point that transcends media management and into the entire organization, but it’s a particular issue here.
d) Especially in the digital world, the platforms have a ton of nuance and are constantly changing – TV media management has its particulars and challenges but the number of ways that Facebook has changed, the minor little differences that can happen with targeting differences, and the fact that the people who really understand the platform are likely a handful of engineers who have no exposure to the sales team nor marketers – all these can make TV media management seem like a breeze (it isn’t – I’m just trying to make a point here…). Those changes and subtleties require a close eye and real digging into what’s happening (see a, b and c above).

To be honest, nail this part first (the basics of media management), then get to managing to different CPA’s. Not that it’s an order of magnitude more difficult, but rather it’s necessary no matter what. Very few people are actually doing it well. There’s a skill to managing, be it vendors or employees. None of us is perfect so asking questions and pressing (respectfully) can uncover something that isn’t being optimized.

To summarize, the media part of scaling is about a few things: 1) knowing what a customer’s worth and managing to certain performance metrics; 2) segmenting your customers and traffic to see how and where you should be managing to scale more efficiently, and 3) managing your media partner (agency or internal) tightly.

Everyone wants to reach their “next level.” Hopefully, this 3-part series has helped shed some new insights (or reminders) on what it takes to do so.

(If you have any thoughts on any part of this 3-part series, please leave a comment below.)

3 Pillars for Ensuring Your Company is Built for Scale

April 18, 2017 by influexwp 2 Comments

(This is the second in a 3-part series where I share some of my “secrets” to scaling a performance marketing business. If you missed part 1, you can find it here.)

Scale doesn’t happen unless something is working. It sounds obvious, but the reason I start with that point is that if you don’t have a working offer and channel (again, you can see Part 1 of this series), then this post would be moot. Thus, I’m assuming you have something that’s working.

The next step is about making sure attention is put in the right places. Some is foundational work, some is true operations. And whether you’re at $5mm, $50mm or over $100mm, it’s a bit of a relative question about putting in the foundations for the next level of scale.

So, what constitutes building that foundation? Well, fundamentally, I’m a believer that focusing on the below 3 areas can dramatically increase the chances of scalability and sustainability of a business.
1. Customer LTV
2. Brand
3. Operational Excellence

Customer LTV
I’ve written about the importance of knowing the value of your customer and having a robust unit economics model numerous times. I walk thru the actual model here and go over some additional basics here.

I’ll hit only the key points now:
1. There are 2 primary reasons you need to understand customer LTV and your unit economics model:
a) to manage your media. If you’re running paid media of any form and don’t know the value of a customer, you’re headed for trouble. You need to know how much you generate from a customer, what your goals are (% margin, breakeven by a certain day, etc.), and then that helps you back into your target CPA.
b) to identify the key levers in your model and where to deploy resources for improvement, testing, etc. Knowing your baseline metrics and goals is one thing. Great companies believe that they are never fully-optimized and so have a constant testing program. But everyone is resource-constrained, so knowing where to deploy resources is crucial.
2. Someone on the team must be accountable for maximizing customer LTV, and as a result, the target CPA. That doesn’t mean they do so at the exclusion of the brand (see the next main section), nor does it mean they do everything on their own. But someone must “own” customer LTV. You’re not going to get better at the pace you want if you don’t do so.

3. Customer LTV is a combination of revenues AND costs. It’s more fun and sexier to focus on the former. But if you reduce the latter, that goes straight to more dollars you can put to customer acquisition. Here’s are a couple of my posts about optimizing revenues and costs.

4. G&A, investments, capex, etc. should NOT be a part of your unit economics model. The point of the model is to capture the revenues and marginal/incurred costs associated with those revenues. You don’t need to hire a new person for each incremental order. Sure, at some point, you do need to make those types of commitments, but that doesn’t mean they should be included in that model.

5. Who has checked the data that is behind the assumptions in your model?

Brand
If you want to build a business that is scalable and sustainable, you need to focus on brand. Again, look at the patterns. There will always be exceptions, but I’m a believer in playing the odds when it comes to things like brand. And more great companies have put attention towards building theirs.

Having a brand mindset also provides the necessary counterbalance when you are driving so hard on Customer LTV. It can be easy to be so exclusively focused on Customer LTV that you lose sight of what truly serves the customer.

I’ll give you an example from my early days at Beachbody. In one of our offers, we sold 3 bands with 2 handles. In my supposed genius at the time, the math said that if you pulled out 1 of those handles, we’d save money. The math isn’t rocket science. But the move entirely ignored the customer experience – it’s not easy to switch handles from one band to another. Now, I doubt that this decision had a significant impact on the brand experience, but it’s a simple example of how an action might save you money and increase customer LTV while being pretty crappy for the customer. My bad….

I’ve become so much more focused on brand over the past couple years because it’s been noticeably absent from conversations I’ve had with performance marketers (another area I’ve posted about previously). Ultimately, the “brand” conversation is about customer experience. How are you serving them, how do you treat them, what experience does a customer have of your business? As much as we want to drive what the brand means, our customers are the ones who have the final say.

Brand is not simply a logo, fonts, or an ad you run. Your brand reflects the values and perspectives you stand for. The logo is simply a representation of those values, but the logo isn’t the brand. It’s easy to get these mixed up.

A strong brand means a higher company valuation. It means connection with customers, which leads to more repeat customers as well as word of mouth (which is another term for a $0 CPA).

At the same time, the difference is telling in the way that performance marketers vs. traditional brand folks look at brand and sales. Performance marketers believe that sales drives creation of the brand. While traditional brand folks believe that you create the brand, which in turn drives sales. I can’t say for sure who is right and who is wrong. But many people can’t afford to build the brand while ignoring sales.

Which is why the term “branded response” has gotten in vogue. The phrase reflects that it is no longer either/or, but “and” – brand and performance need to be built concurrently. We’ve seen this become particularly prevalent as e-commerce players have used video – Facebook and TV – to build their businesses. The goal is to drive response, but without feeling like the ShamWow! (Btw, Vince made 8 figures off that product, so there’s a good measure of respect behind what might’ve felt like a jab at the ShamWow…)

At the same time, especially if you’re in a consumer business, and a subscription one, the quality of your product and service can be a huge difference in how your customers experience and think about your brand. Just as many marketers ignore brand entirely, too many ignore the importance of the quality they are delivering, believing that good marketing will always win. True, good marketing is helpful. Good marketing + exceptional product – that can be a game-changer.

Where is brand created? The answer, for good and for bad, is that our brands are created everywhere. At every touch point and interaction. Pre-purchase, post-purchase, in the product, name a place. That can be daunting but it’s also the reality. Alignment across the company of what the brand stands for, how you expect to treat customers, vendors, or stakeholders, is crucial if you want to have a consistent experience at all the touch points. And to build something that is defining and long-lasting.

Operational Excellence
To scale, you need to build a machine that runs as effectively and efficiently as possible. At scale, the organization needs to run well so that it’s no longer a couple people getting things done, scrambling to take care of those last customers. Similarly, no longer is everyone in the same room nor even same building. Which means building out the org, internal processes, systems, and beyond.

It’s at this point where the importance of bringing in people who have “been there and done that” is so important. In a company’s early days, you can figure things out real time because often the scope of the issues that arise is manageable. But as the business becomes more complex, sophisticated and expansive in scale, it’s just not practical that the original team can manage these issues.

Not to say that people can’t evolve into these more expansive roles. At the CEO level, Bill Gates and Mark Zuckerberg provide great examples of founders who have transitioned into professional CEO’s of huge entities. But a) they are the exception, not the rule; b) you must be honest about different members’ real strengths; and c) simply because of the expanding scope and needs of the business, new people will need to be brought in no matter what. And if the existing folks on your team aren’t delivering with the new needs, it doesn’t serve anyone to hold them in those roles too long. I’ve seen plenty of examples where those people continue at the company and have a great career. And I’ve seen times where the culture shifts, their ego gets in their way, or there’s just another dynamic that they exit the company.

Operational excellence is such a broad phrase, but here are a handful of questions I ask clients when evaluating this area of their business.
• How well is the company led? (It sounds simple, this gets to the heart of building a business.)
• How well does the company run? (This is different than the first question – I like asking it because if there is supposedly good leadership but things don’t run so well – that’s a disconnect to investigate.)
• Can each functional area in the business point to improvements they’ve made in the past 12 months when it comes to vendor pricing or new / redundant vendors?
• Can you point to certain areas where things used to break but no longer do (increase in order volume, technology issues, quality of data, new hire onboarding, financial statements being produced more quickly, etc.)?
• When something breaks and a flood of customers call to find out what’s happening, do they a) get thru; b) get a reasonable answer with reasonable expectations. (I like a customer service question, especially when something breaks, as it goes to how front-line employees and workers have been communicated to, trained, etc. on what the brand stands for.)
• Is there a single person accountable for the different areas in the business, and do they and their teams have specific KPI’s / performance targets they are trying to hit?
Just asking these basic questions can start to reveal areas of opportunities.

Even if you keep your business focused in certain areas, but as the business sees financial growth, the number of moving parts increases. That could be as simple as more customers buying the same product (which has operational, technological and customer service implications) or more products you sell (the same as the prior issues, but you get to add product development, sourcing, etc.). It can also include new services, new geographies, or new partners, to name a few.

Regardless, each time the business changes or grows, it comes with its own issues. Some of these appear over time and may require step-function changes. At some point, your technology platform may require an overhaul, your office space may no longer be sufficient; or you may need to add a location with your fulfillment partner.

Operational excellence comes with a methodical and organized approach to breaking down the business, assigning specific people to be accountable for those areas, and then setting targets for them to achieve.

Typically, the break points for growth happen at $10MM, $25MM, $50MM, $100MM, and $500MM. Not to say there aren’t challenges along the way, but those levels are when a lot of businesses run into challenges. Knowing they are coming, planning for the next stages of growth, and then managing through as it’s happening are all just components of growth. The good thing is that it’s likely that others have gone through similar issues, and there’s a lot you can model off.

And really, much of this approach of focusing on Customer LTV, Brand, and Operational Excellence, is based on seeing what has worked (and hasn’t worked) at many companies to formulate an approach towards managing scale.

Stay tuned for the final part of this series, where I’ll focus on Next Level Media Management. It’s an area dear to my heart and allows me to share my learnings from managing over a half a billion dollars at media spend. Regardless of your scale, my goal is to provide some actionable insights.

As always, please let me know any thoughts or comments you have on the above.

Why Your Marketing Strategy Should Mirror Warren Buffet’s Investment Strategy

April 11, 2017 by influexwp Leave a Comment

(Note – This is the first in a 3-part series where I share some of my “secrets” to scaling a performance marketing business.)

My friend Joshua Lee just published a book titled “Balance is Bullshi*t”. It’s about people, work, and all that fun stuff. But it could very well be about marketing and building a business.

In our normal lives, many of us think we want “balance” and believe that balance means having a lot of a bunch of things. The problem is that it’s very easy to hold that perspective but not go hard in any one thing.

In business, just as in life, it can be easy to be lured (read: distracted) by the shiny bright object of the day. (I’m talking to you @GaryVee and your obsession with telling people to allocate 5-10% of their time to Snapchat when for most of your audience, that’s a valuable percent of their time. Not to mention, that doing so, pulls important mindshare away from their core business. Plus, is it ever really 5-10% when it’s something new, fun, or cool? Never.)

It’s also easy to feel the need to be master of a bunch of areas. Or that just because other people are telling you that you’re missing out on a channel, that you should put resources there. The “answer” is that sometimes you should listen. And sometimes you should ignore those folks.

In fact, when I look at a business and see 4 traffic sources that are contributing equally to the business, I don’t view that as a positive. What that says to me is that one of those channels very likely hasn’t been fully-exploited. Instead, someone is trying to do a bunch of things. And thereby not killing it in any one channel.

In my experience, the companies that have achieved real scale have done so with one or two channels driving the vast majority of success. Not 6 channels all equally contributing.

Of course, we don’t want to be exposed if something happens to a traffic source, and there are definitely times you want to be in multiple places to catch the overflow from one channel to another (see my post here where I talk about the effect re: Facebook Video Ads). It is scary to be all-in, but that’s part of what it takes if you want real success. It’s the very rare marketer that can build a business working 4 hours a week (not that Tim Ferris actually meant only working 4 hours); no, you must go all-in to make great things happen.

I mentioned Warren Buffet in the title of this post. Let’s look at his investing strategy for a moment. His has not been a big diversification play to achieve his wealth. Sure, Berkshire holds a bunch of different stocks, but did you know that 75% of the value of Berkshire portfolio is held in 7 stocks. Don’t believe me? Check it out

Source: http://www.cnbc.com/berkshire-hathaway-portfolio

Buffet and his team make big picks. And this even with his “Don’t lose money” rule. They don’t do what the public is told – diversify your portfolio, pay that 1% management fee to the mutual funds (which by the way can add up to 30-40% of the value you should’ve had in your bank account), and don’t be too concentrated in where you put your money.

If Buffet and Berkshire were just a one-and-done example, it would be easy to point fingers and say they were asking for it. But nope, their financial performance is well-documented. They are concentrated with the bulk of their portfolio’s holding, and they have managed their risk. They do their homework, have their rules for investing, and when they find something that matches their criteria, they go all-in.

The reality is that there are HUGE societal pressures not to go all-in in pretty much anything we do. Most entrepreneurs don’t succumb to the traditional risk issues associated with starting a business, but that doesn’t mean that same pressure doesn’t affect how you manage your businesses. It seems logical to be diversified in how you run a business, doesn’t it? Diversification is what we are told repeatedly.

But when you actually look at successful companies, you’ll find many more instances of concentration and focus, as opposed to diversification.

With all that, then what do you need to scale a business?

Two offers. Two channels.

That’s it.

Two offers. Two channels.

(Of course, there are numerous aspects to scaling – I’ll touch on those in my subsequent posts.)

Don’t just take my word for it. Look at the businesses you want to emulate. Those who you wish you were like.

Apple – 60%-70% of its sales come from the iPhone

I’d argue their channels are their retail locations and then carrier partnerships. They don’t really dominate in a direct-to-consumer, e-commerce model.

Guthy-Renker – Proactiv was a billion dollar brand for them. And as much as they were in kiosks and on radio, TV was their primary channel.

AOL – you might not remember it, but the ISP grew because of those CD’s they mailed to everyone.

BioTrust – they have focused on supplements and grew heavily on the backs of affiliates and their excellence with email.

The list goes on and on.

When you find success, go hard after it. Don’t look at your other channels and offers and feel bad that they aren’t performing. Instead, lean in to success. That leaning in might help you to fund those areas that aren’t as successful. But remember this, when you are really exploiting an opportunity, that’s at the “expense” of something else. You need to give disproportionate attention to certain parts of your business. Outsiders will tell you that you’re missing out on other opportunities. So long as you’re scaling something that’s working, then take that criticism as a good thing, as a sign of putting your head down to focus on something that has legs.

Business can be personal. But your offers and channels are not your children. They aren’t your students. They aren’t your patients. Their feelings are not going to get hurt when you ignore them.

As silly as it sounds to make those comparisons, it’s very easy that just as we endeavor to treat those around us fairly and equally, that same mindset can be damaging to your business.

Getting focused on and in your business doesn’t only mean giving it its due time, effort and mindshare. Being focused means that time, dollars and resources are put into the highest-leverage, scalable opportunities.

Just as your friends may criticize you for not “having balance” in your life, or for not doing the same things you used to do (read: the things they want to do), you’re going to face those same types of comments when it comes to your business.

We all must get over it.

And need to go find those two offers and two channels.

Remember, concentration and focus, NOT diversification, are core aspects of the success you’re wanting to create.

(Join my newsletter here to get notified of Parts 2 and 3 of this series.)

Low-Hanging Fruit for Subscription Box Companies

January 30, 2017 by influexwp Leave a Comment

Subscription boxes tout not just convenience but customization. Not simply making it easier for you, but actually designed for you.

Many of them use surveys as you enter the site and the sign-up process. It’s a great way to gather information and preferences about a customer and to help inform the personalization. Now, just how customized a box is based on the answers really varies by business, but at the least, you get the feeling that your preferences are being taken into account.

Below you can watch a video where we break down a key missed opportunity that these companies should be testing to help better convert warm leads and inactive buyers.