📦 - The Best of DTC Insights in 2020

Happy New Year everyone! 

Eric Dyck here, Editor-in-chief of DTC. It was my birthday on the 28th, and I always find this time between Christmas and New Year’s to be a great time of reflection (because no one wants to hang out). 

Whoo boy do I have a lot to reflect on this year…

What follows is a highlight reel of the biggest strategic insights and tactical takeaways from the DTC Podcast in 2020. We’ll start with some overarching strategic themes, and move into the key tactical takeaways. 

Let’s start at the beginning. 

1. The Pilot Episode - Angle Testing 

THE BACKSTORY

I accepted a job as Director of Content at Pilothouse on March 18, the same day the Province of British Columbia declared a State of Emergency regarding COVID-19. 

I was in my driveway on the phone with Jeff Shannon finalizing details, and I felt a rush of gratefulness and excitement. I had the distinct feeling of boarding a rocket ship as the world threatened to crumble around the launch pad.

Having known the founders of Pilothouse for years, and having built in similar spaces, I had been triangulating a way to work with them for a while.

When I joined Pilothouse, we had no idea what was going to happen and feared the worst. How would pandemic lockdowns affect the DTC space? How would our clients fare?

On Friday of my first week at Pilothouse, I just wanted to start getting our voice out there. I threw up my greenscreen, rounded up some experts and recorded some content. This was pre-DTC, so we called it the Pilot Episode of the Pilothouse Podcast. 

This conversation between co-founders happened when Pilothouse had around 25 employees. It contains a detailed breakdown of the major factors and strategies that have led us to grow our clients’ revenues astronomically in 2020, and to grow our team to over 90 employees, just ten months later.

📦  Experiencing 10 years ecommerce growth in 10 months

📦  Booming lead gen and luxury opportunities

📦  Transparency and alignment with clients, suppliers, and employees

📦  Facebook Ads account simplification and consolidation

📦  The Imperative of constant creative, angle testing

📦  The importance of bundling your products to raise AOV

🔑  Let your angles do the heavy lifting, and let your customers dictate your angles

The insight I want to zoom in on from this episode is Dave’s example of a heated lunchbox company from Pilothouse’s early days and how the team finds, creates, structures, and scales with “angles.”

Angles are simply the answer to the question: “what are the ways we can sell this product?” They are the linguistic, emotional hooks that stop a user from scrolling and entice them to engage. 

Using angles is as old as advertising, but what’s changed is the constant feedback loop we now have access to. With endless inventory and an ever-sharpening algorithm that allows you to rapidly iterate, it’s possible to find the concepts that resonate best with audiences. 

Angle creation starts with a deep dive with clients. We review all their materials, their product reviews, and testimonials to start pulling ideas. 

With research shared, we’ll initiate a brainstorm between the accounts’ buyers and the creative leads. How can we sell this product? What problems does it solve? For who?

We’ll create a document with 25 high-level angles we want to explore. For lunchboxes, it could look like:

• Heated food all day
• Hearty meals away from home
• Construction worker lunch
• Your kid deserves warm lunches
• Save money, eat better

From there we’ll create matching headlines, and images for each of the 25 angles. These go into Facebook and the battle royale begins. When you find angles that work, dig deeper on those and ask yourself WHY it resonates to reveal new aspects of the angle. 

When you find trends, you can start building the angles into your landing page for further conversion rate gains.

When you blast these angles out into Facebook’s audience, it creates a positive tension where Facebook’s algo is trying to find you the right customer while your angle is trying to find the right audience. Your angles FIND your customers and draw them to engage. 

The angle that worked best in the case of the heated lunch box came from their testimonials and product reviews. One testimonial said:

“I sent my son to school with a big fat, juicy steak.”

We zeroed in on this phrase, building out a whole story for the emotional journey of sending your kid to school with that much pride. It quickly became the winning angle and drove significantly more sales than any other.

TL/DR: Don’t skimp on angles, don’t skimp on testing, and ALWAYS look to your customers own words to fuel your angle strategies. 

Check out this smart way to refresh your angles for 2021: VoxVerba.com

Andrya, the founder, is a friend of mine. She’s just launched this A.I. backed service which, for only $100, will transform your customer's own words into sales copy with a custom copywriting guide and brand-positioning insight report, built entirely from your customers’ voices. 

Andrya has worked with some of the world’s biggest brands on semantic and narrative analysis of their customers’ words. She’s boiled down her process into a $100 service that you can get for 20% off with promo code DTC20 📦

2. DTC Podcast Episode 3: Performance Marketing and the Huffman Strategic Formula  

THE BACKSTORY:

In 2005 I started working at an affiliate marketing company called Neverblue. When I applied and interviewed (from a Dairy Queen booth) I really had no idea what they did.

Over the next seven years, I learned all about digital performance affiliate marketing, which was a newish idea in 2005. At that point “affiliate marketing” was more about building websites and monetizing passively through organic search traffic, but as Google adwords gained steam so did performance media buying affiliate networks like Neverblue.

Being an affiliate marketer is kind of like being a mandalorian bounty hunter (without as much armor, or honor). You select an offer, go out and buy traffic to hopefully produce a conversion which is worth more than the traffic you bought it for. Your profit margin depends solely on your skill and your ability to read and react to data. Because you have zero control over the product as an affiliate, you focus entirely on how to target and get people to buy it. 

This kind of focus leads to innovation. As an affiliate marketer, you push the boundaries constantly -- both on the ad creative and the traffic targeting to make every single impression and click count. The data feedback loop and endless stream of traffic allows you to optimize ruthlessly and achieve profitability. 

If this sounds familiar, it might be because it’s what we write about every week. Pilothouse eats, sleeps, and breaths it. Jeff, Kyle, and Andrew, Pilothouse’s co-founders, also all worked at Neverblue with me. 

As hotshot media buyers back then, we’d scoff at the “Mad Men” mentality of big ad buys that measured brand lift and sentiment. We’d see companies being taken to the cleaners by big digital agencies that had media buyers who’d never been in the trenches, pulling levers to make every cent count. We’d say,

“one day performance marketers will take it all over.”

Around this time, Dave Huffman was working at the biggest media buying affiliate network, Clickbank. He was learning the same lessons about digital direct marketing. He’s part of a trend I’ve noticed in 2020, of performance marketers with the same roots as me taking over high profile growth marketing positions at exciting companies. 

Turns out we were right!

This interview stands out to me as one of the most value packed 60 minutes I’ve ever recorded. Dave is a fountain of great information as he chronicles his marketing team’s growth from one to 15 in three months, along with all the tactics and strategies that worked best, driving 50 million in revenue.

📦How to truly differentiate in your niche, and why category creation is a must

📦Direct instructions for a Free Plus Shipping model that is still the leading revenue driver 

📦Why sitewide promo strategy is king

📦An affiliate traffic source from the past, registration path, is returning in a big way

📦The strategic formula that sorts your team out

📦How your podcast should be a central pillar of your marketing strategy

📦High level team building with KOLBE, an assessment that measures how people take action

🔑 The ultimate strategic formula: CV x AOV x Frequency = Revenue

The piece that I want to zoom in on for this podcast was a strategic formula that Dave provided in the cast, and which he learned from marketer Drew Sanoki, another guy who’s been bringing a ruthless performance marketer’s mindset to some of the world’s biggest brands.

The formula is: Number of purchases (CV) x average order value x buyer frequency.

Dave’s words are best, so as he explains it: 

“Every quarter I set benchmarks for CV, aov, and frequency and then we have an ultimate goal, which is revenue, and we just use those levers to impact the revenue.

“The beauty of it is, when you look at it as a formula you can decide to pull one lever, two, or

three, or you can just use two to balance out the third. Every time we drive one up, another one falls. 

“We acquired 8000 new customers last month. When we did that our AOV went from $185 to $98 and then some days it was $45. 

“Here you can see we’re overloading acquisition and driving aov through the toilet. So then next month we just average that out a little bit -- we back off acquisition and we focus more on frequency.  

“With a strategic formula, all of your team's actions could be filtered through one of those prisms. All your actions can work towards increasing one of those three factors.

“Our team is built around this strategic formula:

• Our performance marketing team really owns customer volume (first-time buyers acquisition). 
• Our Director of CRO really owns AOV
• Our Head of Email owns buyer frequency through repeat purchasers 

“So when we're setting these targets for these objectives they know immediately what they need to do. I don't even really need to say ‘okay guys we need to fill out the back end flows.’ I just say ‘this quarter we need to increase buyer frequency from 42 back up to 60.’ so you know Kerry (email) knows immediately what she needs to do to make that happen and then we’re just kind of off to the races.” 🏎

TL/DR: The evolution of performance marketing has been an amazing thing to be a part of. Dave Huffman’s (Drew Sanoki’s) Strategic formula is an incredible example of the highest evolution of the performance marketer’s mindset: Let the data tell the story. 

Data is meaningless if you don’t know what to do with it. By filtering it through this strategic formula, you can make calm and rational sense of your top priorities as a business on a day to day basis. 

📦Bonus for newer subscribers : “The Process” Content Marketing Schematic from his Boardroom Post from DTC Newsletter 19. 

🥂 For easy access to all DTC content, join DTC+

3. DTC Podcast #6 - Tom Shipley and the DTC Masterclass

Tom Shipley is one of the original first mover DTC icons. He started Keranique, a high nine figure woman’s hair brand in 2009. I was lucky to meet him through a mutual friend and have him on the DTC Podcast back in August. 

Tom exudes kindness, magnetism, and confidence. He’s a DTC trailblazer who established many of the key mindsets, strategies, and tactics that thousands of other brands have since emulated. 

Our interview with Tom was one of the most impactful discussions we had in 2020 and it was impossible to limit the insights from this cast to just one. Tom’s backstory serves as a parable for how to be successful in DTC (and in life). Please enjoy his words directly:

THE BACKSTORY

Tom Shipley’s backstory serves as the ultimate 2020 reminder of how to be successful in the DTC space. As he tells it:

“In the middle of college I decided to take a shift in life and pursue a passion I had and I actually moved to Israel at the age of 20.

“Getting into special forces changed the way I thought about life and also changed the way I thought about business.

“As entrepreneurs, the probability that you can actually grow a brand to a million or 10 million or 100 million and sustain it over five years, is substantially less than 1%. A normal person would say it is impossible. As entrepreneurs, our responsibility is to shut that out and stay focused on the goal. 

“That's what I learned at the age of 20 in the Israeli Special Forces. I knew that the standing army was 170,000 soldiers. Of those, 60,000 are combat soldiers and of those there were 10,000 trying to get into this Special Forces Unit. Those 10K get put through physical, technical, and emotional tests to whittle them down to just 500 soldiers. Those 500 soldiers get put through five or six days of hell to break you in every way and test everything from your integrity, your physical endurance, your mental capability, and lots more. Out of those 500, they picked 25 people to join Special Forces. Eighteen months later, there were 13 of us left and that was the team. 

“This process we went through and the philosophies we picked up created the foundation for my entire entrepreneurial career. After going through this process, I realized that EVERYTHING was possible. There is no such thing as an obstacle that can’t be overcome with innovation and focus.

“I love the theme of the movie The Martian, Where Matt Damon’s character is stranded on Mars against all odds. At the end of the movie, Matt Damon’s character talks about what he did when all hope was lost. 

“His advice is to identify the biggest problem that’s right in front of you. Focus on it with all your resources while keeping the end goal in mind. Knock each task down and move to the next. Like dominoes, as you focus on each most immediate and impactful issue, you’ll create momentum and each issue will become easier to solve than the previous one. 

“If you keep that up, you're gonna get home from Mars pretty soon. No matter how impossible a whole task might seem from the outside looking in, when you break it down into a series of possible single steps, anything is possible. 

“Entrepreneurship means focusing on each challenge sequentially, and when all the chips are down all you need is a plan that's impossible enough to be possible. It's happened to all seasoned entrepreneurs where everyone around us said, “Give up, you're done.” But there's something that's inherent to entrepreneurs -- we don't quit and we figure out a way. 

“There's a Hebrew expression, “I will find the way or I will create the way.” I will follow a path where someone else has laid down the framework. I love existing proven frameworks, but if I don’t have any, then I'll create one and we'll find a way to do it. 

“This is what we did at Keranique. We sketched it out on the back of a napkin, and sure enough, just a few months later we're up and running. We did our first million of sales two years later we had 10 million in sales and then 18 months later we hit our first 100 million in sales.” 

🔑 Tom’s super power: know your numbers

“I know my numbers. I'm a numbers guy. I run my numbers before I ever run an offer. Even loose numbers. Get them on a napkin and look at the assumptions to see if they hold up. 

“If you’re properly monitoring your conversion rates and your average lifetime value you can quickly make money. 

“There are key points of leverage in every business model. You always have to find, and understand, what the key levers are and really focus on that. Only the analytics will get you there. 

“If you fly too fast without the numbers you can lose everything. I've seen it over and over and over again. Especially in this business, where your bottom line is so much harder to keep a running count of, and your sales have to mature over 30 days. I think there's a lot of people in these early years of DTC that have been flying at a loss without realizing it. 

“I find it interesting when entrepreneurs are so focused on top line revenue. Personally I don't give a shit about my top line. I've seen so many businesses explode because that's what they focus on. I want to successfully 10x my bottom line while I'm delighting my customers. That's the formula for long-term success. 

“Do you know how to increase your bottom line by 50 percent? 

1. Increase your average order value by 5%
2. Increase your conversion by 5% 
3. Increase your your repeat order rate by 5%

“If you increase each of these by 5%, you'll increase your bottom line by 50%. The math is exponential there.  

“Some people are so focused on the price. They say, “I can't charge any more.” Have you tested the price? Most people don't test prices. Yes you might take a slight hit in conversion, but you have to focus on the bottom line. 

“I was having a call with a friend who's been struggling to grow his business. He's a phd

and he's brilliant. I asked him to run me through the numbers. I said what's your acquisition cost? I looked at his Facebook dashboard with him just to confirm it. 

“Now talk to me about your lifetime value. Tell me about the number of people taking your initial offer. What percent are taking the upsells? What is your actual lifetime value? 

“It turned out that the reason why he has been having trouble growing is that he’s been focusing on the initial offer and not his big ticket crossover. But when you combined the two together he was getting a close to an eight times ROAS on his spending. 

I said, “dude, just spend more.”

“He was concerned about the cash flow and I said “Listen, you have access to cash, so just go all in. Why are you hesitant here? You have a profitable business, so why not invest in yourself?

“You have to know your numbers cold and you have to watch them because then

the world opens up to you when you really understand the true unit economics of your business.”

🔑 Tom on the power of brand story

“It is not good enough for you to find a great product.  A product without a story is not a great product. If you say,  “I have a new type of plastic that

creates the best type of bottles,” no one will care because there’s no story there. 

“Finding a product with a great story is the way to really grow a brand. Consumer behavior is shifting and understanding the true motives of your customers is critical. 

“When you understand your customers and how they relate to your products and your content, you can pivot a little bit to create a unique vehicle to tell a new story.

“Where you tell it is less important than the story itself. Yes, I'm always looking for ways to find different channels with underpriced attention. 

“At one time we were the third largest radio advertiser in the United States and now we're not on radio. For a long period, radio was a great example of underpriced attention. Same as print advertising before it. Right now the underpriced attention is on YouTube, so we’re doubling down there, but it’s not enough to spend into any channel if you don’t have a story for your product. 

“I love new offers, products, and stories. Merging these concepts has been game changing for my business. Whenever we're having a dip, or whenever we’re looking to hit that next level of growth, I’ve been able to merge a product, offer, and story together to create that next opportunity for growth.

🔑 Tom on expanding your content offerings to support product stickiness

“I'm thinking about doing things at a different level and a different type of content. Take a Keranique customer as an example. Could I sell to her in a way which meets some of her other needs? 

“I found myself thinking, “If we're the champions of hair regrowth, can we be the champions of self-esteem and confidence as you age?”

“What kind of content or program or curriculum could we offer that provides this intangible value where she feels better about the brand? Maybe it’s a product, or a free digital download or an app that enhances her life and creates a tangible benefit that creates stickiness with your customer to grow LTV.

“One thing I'm looking at is creating a five day challenge that would turn into a webinar program or course that I can sell. We could also do a summit in New York City. There, again, it's all increasing the dimension of her life and the upper level of that funnel. 

“A great example of this is Lululemon who puts on running events called Seaweeds in Vancouver, New York, and in Europe. They are these massive music festivals/running events. They get tens of thousands of people going. They have customer shorts and custom shirts that you can only get at these events. I've talked to someone on the inside at Lululemon and the amount of merchandise they sell just because of these summits is unbelievable. The feeling that people get, that they go and take part in this exclusive event, is irreplaceable. 

TL/DR: Things that seem objectively impossible, like joining the Israeli Special Forces, exiting your DTC business, or getting home from Mars, are doable when you focus on each critical issue in order, and never give up. To unlock the potential of your DTC business, you must have complete command of your numbers, build a solid brand story to merge with your products and offers. 

5 Top Tactical Takeaways From 2020

🏅Prospecting For Gold: Testing ad angles can be time consuming and tedious. When Senior Media Buyer Stu Mason joined the Pilothouse ranks earlier this year, he introduced us to a testing methodology called Gold Coin Testing. It’s a simple way to get fast and inexpensive data on your angles -- headlines, copy, creative, etc. -- to quickly find out what works and what doesn’t.

🏗 Build In Public: There’s a term in project management called ‘The Big Reveal.’ It’s when key client stakeholders aren’t involved in the build-out of a project (aka in the dark), and the agency simply dumps a ‘big reveal’ on the client when they feel they’re done. Spoiler alert: it usually doesn’t go over well. Why, then, do we do this with our products? Inspired by Mid-Day Squares, we’ve fully adopted the idea of building our products in public so that our customers can be enrolled in the journey (giving vital feedback along the way). 

🔪 Jugular Ad Opener: In DTC#13, we casually shared an ad opener tip that goes right for the jugular by addressing a key objection. For example: “Even if you feel you’ve had more eggnog than you can handle, there are newly discovered health benefits that might have you wanting to nog all year long.” While we knew the tactic worked, we were surprised by how many of our readers actually used it and saw immediate results. Turns out DTC subscribers are action takers 😎

🏄‍♀️ Surfers On The Wave: Your campaigns, audiences, and ads are essentially surfers on a wave. The ones that work today might not work tomorrow. BUT if a surfer has a proven history of good performance, you can put them back into action early in the day and see if they’ll perform again. This mindset encourages you to continuously put new surfers out there (creative iteration), and not get attached to anything. Listen to this cast to learn more about surfers and how you can use automated rules to manage them efficiently. 

🤩 Influencer Whitelisting + Dark Posting: Many DTC marketers struggle working with influencers because ROI isn’t clear. Our favourite antidote to this is whitelisting and dark posting. Whitelisting = running ad spend behind the post the influencer creates. Dark posting = running your own custom ads through the influencer’s account. These give you tremendous flexibility and longevity with your influencer relationships + trackable conversions.

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