How high-growth direct to consumer brands are acquiring customers
[00:00:00] Aadil Razvi: Known as the DTC guy in Forbes 30 under 30 and Ad Weeks young, influential. He has led revenue growth as a DTC catch-all at multiple brands. Before e-commerce, he worked on social campaigns for various stars, and today he helps brands scale across all digital platforms.
Please give a warm welcome to Mr. Nik Sharma in the chat. I wanna just see just bang your hand on your keyboard and press enter. I just want just go get some energy going and
[00:00:25] Nik Sharma: get some numbers in the chat.
[00:00:27] Aadil Razvi: Yeah, exactly. Exactly.
And in the last four years, he's founded three health brands, Kettle and Fire, Perfect Keto and Surely, which each do tens of millions in revenue.
He's raised 20 million to build Kettle and Fire, gotten into 10k+ retail stores, Bootstrapped perfect Keto, launched 80+ SKUs, and has a small portfolio of Shopify apps he runs on the side. Also a co-author of one of my favorite books on Growth traction. A warm welcome in the chat for Justin Mares.
Wait for some love. Wait for some love to come in the chat. All right. There we go. We got goat. This is what I like to see. Okay, cool. Let's go and kick things off. We're gonna start high. Talk about some high level things that you're seeing in the DTC growth space going into 2023. We're gonna go into some more tactical stuff followed by audience questions and and then we'll wrap it up from there.
First things first, the state of DTC were at the end of 2022, going into 2023. What's new? What's different? What are the trends that you're most paying attention to Nik?
[00:01:41] Nik Sharma: It's a good question. First of all, we gotta get this chat lit up. We gotta get a one. I know how you're feeling. One to 10.
Strap it in the chat.
[00:01:49] Aadil Razvi: I agree. I every, everything is on pause actually, but until we get some numbers going in the chat. We, There we go. All right. There was a lag.
[00:01:58] Nik Sharma: 10. 10. Nice. Alright, so your question was the state of DTC. It is, I'd say it's like DTC started or not started, but DTC was a direct sales channel for the longest time, even back before Target and Walmart, like mom and pop shops in towns that was DTC technically.
And then with eCommerce and the addition of all the digital capabilities, it really evolved to more of a sales channel, and I think that's what it is today. It's just another sales channel alongside Amazon and wholesale and food service and restaurants, and clubs and all these other places you can sell into.
I do think though, the difference is that, six years ago, DTC was really a game. It was a huge advantage for people who didn't understand retail or didn't wanna play the retail game and ,or couldn't really compete on the shelf. It was, DTC was like the shelf space you didn't have to pay a slotting fee for, and it was more of a.
It came down to like, how good are you as a marketer getting people to your shelf a.k.a your site. But now it's become so crowded that it's no longer that simple and straightforward. It's just a combination of doing, 13 things, 110% right or you really stand no chance.
[00:03:33] Aadil Razvi: You definitely want to go deeper on that, but I'm hearing yeah.
It's saturated. Now every, everybody and their mom, before they, they were had the shop in town. Now they've all got some sort of DTC play going. I'm curious, Justin what do you got that, to add to that, what are you seeing in the DTC space going into 2023?
[00:03:54] Justin Mares: Yeah, I think that my realistic sense is that DTC is struggling, I think right now.
And I think a lot of eCommerce brands are struggling. Like basically, you have a lot of structural things going on. The ad, the iOS 14 updates from Apple have obviously, like quite impaired, a lot of different things that a lot of like the main channel from a Facebook, Instagram.
Another standpoint, I don't think that like TikTok targeting is quite there yet. And so you basically have the main channels that people are using for DTC are getting more expensive and working less well. You have. Inflation from a raw material standpoint and inflation from like freight and other sort of standpoints.
And I basically think it just makes, it means it's a very tough landscape for a lot of DTC. I do think that probably normalizes in the next like 12 months, but basically I do I think that there's this whole crop of businesses that have been funded under an operating model assumption that they can ship product at a certain rate, they can acquire customers under a certain cac, and I think.
All of those assumptions are getting blown out. And we'll see some of these companies not be able to raise and survive like the next 12 months, unfortunately. I know that's grim, but
[00:05:11] Aadil Razvi: yeah, man really downing the mood in here. No, that makes a lot of sense though. It's like the state of DTC is.
Look, we've got big privacy changes that have happened. We've got newer platforms that people are adopting, but the ad targeting tech isn't there. The main channels that everybody's been relying on for the last, three to five years, like those are becoming increasingly more saturated.
I'm tempted to just dive right into the solution just cause it calls for it. But
[00:05:42] Nik Sharma: yeah. Yeah, go for it. Nick. I was gonna say, so I don't know if anybody here has listened to the My First Million episode that Justin did, but if you haven't, it is, it'll be the most inspirational thing you, hour you spend listening to any podcast.
You should absolutely listen to it. In fact, I'm gonna find it shortly and link it in the chat.
[00:06:00] Justin Mares: I see.
[00:06:01] Aadil Razvi: We'll get someone to do that. Yeah.
[00:06:03] Nik Sharma: If somebody could do that'd be awesome. But the, so the thing that like got me fired up when I was listening to it is, There we go, Patrick just dropped it in.
Is... Justin built two companies completely bootstrapped that are direct to consumer, both with really unique models and really unique approaches to offset acquisition cost. The first was Perfect Keto, right? Or is that the wrong name?
[00:06:31] Justin Mares: Kettle and Fire was the first one, but yeah. Yeah.
[00:06:32] Nik Sharma: No, sorry.
[00:06:33] Justin Mares: One of the companies I started. Yeah. Yeah.
[00:06:34] Nik Sharma: I want the second one. Perfect Keto.
[00:06:37] Justin Mares: Okay. Yeah.
[00:06:38] Nik Sharma: So that was the one where you basically charged a, you had a membership fee that you tried to get up front, which I thought was fascinating. And then the second one was Surely, and both are bootstrapped, I think. And I was just more for my selfish reasons, I was gonna ask you like, how did you think about bootstrapping that in such a challenging environment?
And I thought some of the things you did with the the annual membership up front were really interesting as well, because if you have, even if you have a $60 acquisition cost, you can offset that on the first purchase and then you retain somebody for a whole year.
[00:07:13] Justin Mares: Totally.
[00:07:13] Nik Sharma: Yeah. Any thoughts there?
[00:07:15] Justin Mares: Yeah, so surely we've actually been quiet, but we actually did raise money. I basically think about funding, but Perfect Keto is totally bootstrapped. I basically think about funding from like funding makes sense. Went to support different opportunity sizes. And so for me, I think that Perfect Keto an amazing business bootstrapped like Keto, we launched in 2017 when Keto was just taking off, it was an incredible business. We helped a lot of people, but it was always a little bit unclear like is Keto gonna be the next like whole 30 or is it gonna be like the next, I don't know, Weight Watchers or like Atkins or something like that. And and so for that one, I think that it made sense to not over raise because like we wanted the flexibility to basically have a 10, 20, $30 million acquisition on the table where like everyone walks away happy, employees make money, founders make money, everyone does well with Surely I think that like moving into beverage is really expensive.
And I think that the overall consumer shift, from drinking our faces off in college all the time to drinking less. And like people are, Gen Z is the generation that is like drinking less alcohol ever. More and more people are starting to quit it, or at least lessen their consumption. I think that's a real generational shift that actually supports venture dollars being invested into a, into a consumer behavior change.
That's that broad. And so for that one, we decided to raise money and decided to start online and then gradually move into retail. So like next month, we'll be in all the sprouts nationwide. We're already in a hundred other retail stores. And so basically the model that I think works and especially in this DTC environment is like start online, build up a kind of loyalist crew of people that love what you're doing, get product and customer feedback on what you're building, and then gradually transition to retail where like candidly, all of the companies that I'm seeing are almost all making most of their money in retail at this point from like an actual profit standpoint. And so that, that's the playbook we're following with Surely.
[00:09:27] Nik Sharma: That's awesome.
[00:09:28] Aadil Razvi: That answer your question, Nik?
[00:09:29] Nik Sharma: Yeah. Yeah. There was something really interesting too that you said on that podcast, which was like you start something, you try to get it to five or six figures a month, and then you basically find an operator and then you become like the machine to make sure there's enough capital and resources, but then you let the team do its thing.
[00:09:47] Justin Mares: Yeah. Yeah. That's, I think, that's like more personally just fits how I to operate things. Like I have a little bit of add and so tend to really enjoy like the zero to one getting stuff spun up. And really don't think I'm the best operator in the world when it comes to eeking out, gross margin point improvements and negotiating freight rates and all this sort of stuff that goes into like winning the extra 10, 20, 30% that you need to build a really sustainable and good business.
[00:10:21] Aadil Razvi: Yeah. Started Perfect Keto today. Would you re-raise?
[00:10:28] Justin Mares: No, I'd probably do it the same. Yeah. Cause I think, although, to be fair, a lot of that would be like a question. The question would mainly be around like, what does the competition look like? When we launched Perfect Keto, there was like two companies that were doing a horrendous job selling on Amazon.
No one was doing like, content around keto. And so we could just blanket the SEO space from a keto content production standpoint. And we quickly were like the number one product on Amazon for like almost everything. If that was not true, if in today's world you'd be launching in a much, much more competitive environment and I would either want to find a channel like a TikTok or something like that where we thought we could win or do a hard push in a retail where there's fewer keto brands that have really won one today.
And I think that's probably what that would if I was to do that as I'm thinking about this, it would probably require raising a little bit of money. Yeah.
[00:11:24] Aadil Razvi: Are there specific DTC categories? Like maybe what Keto was when you had started out that you feel like you're smiling, You don't want, you don't wanna give it away Justin?
[00:11:39] Justin Mares: It's just, it's such a funny question. It's what is the next hundred million,
[00:11:43] Aadil Razvi: What's the next thing that's gonna make us a lot of money?
[00:11:46] Justin Mares: I wanna hear Nik's answer on this, but I would say really quickly, I think that functional mushrooms are still gonna be a huge category in the next period.
I think that electrolytes is like a category that's just starting to develop with only one winter. I'm mostly focused on like health and nutrition stuff. And then I actually think from a, like a diet trend standpoint, I think that I think that like supplements for vegans is going to be a huge category in the next five years.
That is just gonna continue to gain steam.
[00:12:18] Aadil Razvi: Part of my brain with four sigmatic. So I I can feel that for sure. Functional mushroom. What about you, Nik?
[00:12:27] Nik Sharma: So I think that everything Justin mentioned, I would add sleep is another one that I'm seeing people are pouring into a lot more. I definitely agree with hydration.
I think and the cool thing about hydration is the more hydration grows, the more energy grows and they both grow together cause they need each other. I also think there is going to be some level of I don't really have much data to support this, but I do think there's gonna be somewhat of an overhaul in terms of a lot of the daily routine chemicals we use, whether it's for cleaning things, whether it's for like even our body soap, things of that nature.
But . But yeah, I think Justin nailed most of those. I don't know. I feel like generally there hasn't been a crazy amount of innovation in CPG as of lately. Probably cause a lot of the funding's dried up. But there has been, I think it, it comes down, there's always two ways. There we go Chris.
There's always two ways that drive innovation. One is either funding or one is like solving a serious problem that somebody has, which usually starts out as a super niche problem and then becomes something that a lot more people have. I love personally working on the ones with that start with a problem and finding a solution versus trying to find an arbitrage or trying to find something based on a trend.
And I think that's why like Justin's companies have been so successful. They're all like personal problem. So yeah, a lot of problems as we work with too they're all derived from like personal problems that a founder has versus let's get a PE firm together with red antler and try to make something happen.
[00:14:17] Justin Mares: Yeah, and actually one more thing I'll say is I think that the cold plunge trend is going to be like a mass is gonna continue to gain steam. Like I basically think a sonic cold plunge. Our generations like hot tubs, like how boomers were buying hot tubs for like pennies a day. I think that you're gonna see similar dynamics with like sonic cold plunge which I'm excited about.
[00:14:41] Aadil Razvi: Now you've got, you got me thinking. You got me thinking. For, I hop into the I, my version of that is turning the shower water on and hopping in before it warms up. And so that's the poor man's poor cold plunge. Nik what have you seen separates the winners?
We're talking about how saturated DTC is these. Like what really separates the big winners in DTC from the rest of the field? Is it funding? Is it brand? Is it product? What are you seeing are the operative levers?
[00:15:15] Nik Sharma: I think at some level you could definitely say like funding and, the teams that are used or the resources you have pre-launch can definitely separate a brand from another one.
But what I've seen super consistently like there's even been a good amount of brands I've worked with or helped launch through Mentor Pass, which is just calls here and there not necessarily an ongoing consulting relationship or anything. The brands that really have a true, and this sounds so corny, but like a true, authentic.
A reason to exist, not just like a good product or the ability to get eyeballs, but like they actually have a real reason to exist. There's a real story that brought the product to life and a real mission that it's going after and a real problem it's solving. And also something that, that consumers can then rally around which is usually, that last part really only happens when you're solving a real problem, not just like trying to arbitrage something.
That's what I've seen as like the real separator of brands that launch even with a ton of hype and don't sustain their hype or don't sustain their sales, versus the ones that are like for example, there's this fairly small skincare influencer, not skincare, like he, he's actually a doctor but facial recons, not reconstruction.
Almost like a facelift or Face Restore type of doctor. He launched a skincare brand and hasn't even set up the Facebook pixel on his site, but just hitting six figure weeks consistently. And it's just from the content that he puts out because his content is so him and and the product is actually formulated by him and the product actually works.
It's it's what he gives his patients after surgery. But that to me always just reminds me like the, Yeah, basically what Brandon said, the purpose built brands are the ones that are winning compared to the ones that are like and you can always tell them apart cause they actually speak to one very specific consumer versus a lot of brands try to speak to many consumers or solve many problems at once.
But yeah, I would say the ones that are more purpose built or the ones that again, just like solve one specific thing, those are the ones that, that I see sustaining their winning over time.
[00:17:51] Aadil Razvi: Consumers can sniff out the inauthenticity. When you when you're playing the arb, when you're, you know saying the right words for the wrong reasons it shines through.
You just, it's just unsustainable. So it's nice to hear that what you're actually seeing works in today's world, in today's very saturated, very noisy world is. That, that through line of authenticity. Justin, what you got?
[00:18:22] Justin Mares: I think that, I think Nick hit on a lot of the most important stuff.
I think that the other factors that I'm seeing, honestly, I think omnichannel brands are the ones that are winning right now, not the ones that are purely married to DTC. Like I basically think, maybe I'm talking my own book here also, so feel free to ignore me. But I think that I think that if you look around at the brands that are doing really well and are well positioned right now, it's ones that use DTC as a channel as opposed to ones that were like dogmatic about we're only DTC and we're cutting out the middleman. But really it just meant that like the middleman was Facebook instead of UNFI plus some retailer that you're working with. And so I think that is probably the biggest thing is having a brand that solves a real problem that can extend and move and move into retail and really build like a compelling omnichannel business.
Like those are the ones that I'm seeing do really well in this environment. And I think all the ones that are basically like, Index to the CPMs that are indexed to the CPMs of Facebook and other ad platforms are like not gonna do quite as well.
[00:19:34] Aadil Razvi: To require just a completely different type of organization though to be that, I don't know, just to like crush it at retail versus crushing a DTC. It just almost sounds like two different companies.
[00:19:47] Justin Mares: Yeah, The re.. it is, for sure. Yeah, I think that they can work well together and you can build something good, but I think it's definitely two different companies and I think that the reason is that's true is because no one is crushing it in DTC right now, or like almost no one in DTC.
It's just like structurally much harder. And you're seeing all of these companies, all these brands that like have invested in headcount. Assuming a certain baseline of sales and profitability that are like struggling to grow or cutting their ad budgets or cutting like a bunch of other stuff.
And so I think that, and truly I also think that if you're building a brand to sell it at some point to an acquire, that can help take it further. More and more brands,like aren't their big acquirers, are not looking at your brand and going, Oh, great. You built it to 15 million in DTC, 20 million, 30 million.
We wanna buy just a pure play DTC brand. They're looking at a real product, a real brand, a real company that's scaled across channels and has some real like profitability, revenue scale, and proof that they can work in a brick and mortar environment. At least, like that's what I'm seeing. And maybe Nik is seeing something different too.
[00:21:00] Nik Sharma: Same.
[00:21:00] Aadil Razvi: Yeah. So neither of you all are seeing pure DTC plays, like really working right now. That's it's unsurprising. I'm not. so close enough that I would have a pulse on these things, but I guess the feeling is that, oh these brands are just leveraging TikTok ads and they're, using influencers and they're just totally crushing it, purely on DTC.
Is that not actually what you're seeing in practice, Justin?
[00:21:31] Justin Mares: No, I'm not seeing that in practice. I basically am seeing. I'll like I'll do a quick 32nd thing of what I think is going on. Basically like Facebook ad costs go through the roof, which means that everyone else goes, Oh shit.
We like have growth projections that we need to hit, either for investor reasons, headcount reasons, cashflow reasons, whatever. And so they start investing in other channels, which means that you have a flood of money that is going to influencers, TikTok, YouTube, and stuff like that, which is bidding up other advertising channels because Facebook was sucking all of the marketing dollars from cpg in, into or Meta whatever in, into what they were doing.
And I basically think that you look at now, when we started Kettle and Fire, we could pay influencers like 15 to 20% of the sales that they were driving. And it was a good deal for us and for them. Now you're looking at deals with influencers with similar scale in a much more competitive platform where these deals aren't even working as well.
And these influencers want thousands of dollars upfront plus like a higher revenue share plus all this kind of stuff. And so I, I just think that DTC is like structurally more expensive today than it was even two years ago. It doesn't mean that like there aren't brands that are crushing it. It just means that I think you need to have a much more profitable core product that you're selling to a customer to make the math pencil out.
And I think it's just much harder, more expensive thing.
[00:23:00] Nik Sharma: Yeah, I fully agree. I feel like winning the brands that I see just winning, and by winning like first order profitability on a paid, acquired, paid customer. On a customer that was paid to be there. Those are usually companies with a good amount of margin to play with those play with those ad platforms.
And and they're also not just set up in a way to get a purchase. They're like I think a lot of people, when they think of DTC, they think, Okay, run an ad and then get a purchase. But it's now it's like you gotta be so sophisticated in how you build these funnels, pre-purchase, around the purchase, around the purchase.
Even if you go to go to Surely's site, you'll see all the bells and whistles to increase that AOV. But then post-purchase, like what's the experience post-purchase and how do use business intelligence tools to make sure that. What you're even doing pre-purchase makes sense to drive the highest LTV post-purchase.
And then how are you getting them into subscription? And then in subscription, what are you doing to lower churn by 0.2%? There's just so much more comp. It's not as simple as like setting up a site and running. Running ads anymore, or even just like running influencers or even just finding a high margin product.
It's like you've gotta build this entire ecosystem online. I always go back to this example of like your online, your website has got to be the equivalent of walking into an Everlane store. You've gotta be greeted at the front. You've gotta feel welcomed. You've gotta feel like there's an, there's a piece of the brand that you're attaching to or building a relationship with.
You've gotta have the path to get in. You've gotta make sure somebody's there to ask you for help or you're able to get all the answers you need. And so I think and then back to the thing of Justin was saying around how the cost of DTC has gone up. I fully agree. If you're running a Shopify Plus store and you add, like somewhat of the basics, bells and whistles, you're probably spending five to six grand just in software and that's before you're paying for inventory or advertising or freelancers, agencies, etc.
So I think it's and yeah, and I think there is a brand that we work with, big supplements brand. And for them the goal is like they actually view e-commerce as both direct consumer and Amazon and any other e-retail channels outside of that as well. And the game is really figuring out how do you make sure your advertising is leveraged not only online in your .com, but also then other e-retail channels as well as like in-store retail.
[00:25:49] Aadil Razvi: Nik, what do you think are the underpriced opportunities for DTC deep growth right now? Are there underpriced opportunities? Is everything saturated? And actually the answer is, poke your head outside of the DTC hole and look around. There's other yeah, other ways of doing this.
[00:26:12] Nik Sharma: Yeah. I think there's a couple the one that like everybody knows in their heart but doesn't want to do, because it takes effort, is like creating good content. Whether that is creating good SEOed content that ranks well, or whether that is even something as low friction as like investing in your own TikTok and building that up.
There's so many, there's so many brands that are doing it right and they're getting so many sales as a result just because they're spending that time and making that in. . Another one that I like because the cost of postage doesn't go up is direct mail. That's a good one.
Another one that we recently have been running is called Agile. They're like, they put billboards on the side of trucks and they're also venture backs, so you get good discounts right now. Within like Facebook itself, I would say, The best opportunities are probably around like whitelisting and putting out more sponsored editorial or advertorial type of content, less of the quick cut, 15 second ads that drive you to a product page.
And I would say the last thing that's been pretty instrumental in increasing conversion rate and driving down the cost of acquiring a customer is using really solid landing pages versus going to like a homepage or just a product page.
[00:27:48] Aadil Razvi: Personalized landing pages.
[00:27:50] Nik Sharma: Yeah.
[00:27:51] Aadil Razvi: Got that. So I heard creating just A+ content.
We're talking SEO, we're talking TikTok. Just, organic content that your audience would get value from. You mentioned direct mail sponsored editorial content, particularly leveraging Facebook. And then just really personalizing the flow from start to finish, particularly the the landing pages specific to the audience that lands on that page.
Justin, what do you have to add to Nik's? Nik's? I was scared for a second. I'll be honest. I was scared that you were gonna tell me. There are no under pressed opportunities left . And we were gonna cut the session short. But Justin, go ahead.
[00:28:40] Justin Mares: Yeah, I think that I think Nik had some great points.
I think that I basically think about what are the new where, what channels or platforms or websites are like attention syncs that have not been properly monetized or don't have an ad. A lot of money being thrown at them yet. I put this in the chat, but I actually think this is like an amazing opportunity for the right brand, but only fans is like making so much money and has so much attention and other stuff spent on it.
And yet no one is monetizing it from like an ad standpoint. You're looking at Instagram influencers or getting insanely expensive, TikTok, all these sorts of things. I pretty certain that there's no, no one really focused on reaching out to like big only fans, creators and trying to get them to like, push your product, which is interesting to me.
So I think that's maybe one, I don't know how scalable that is. The, then I think Nik nailed a lot of the other more scalable ones. But I think the truth is that like when I think we're moving much more into a world kinda like we had in before the advent of sort of Facebook and the like, where marketing is hard and it requires creativity and it requires creating content and it requires like a point of view on the world as opposed to just I can hire someone on Upwork, throw up a landing page, throw up a badly designed ad, target it correctly thanks to Facebook, and like I can generate clicks and sales just driving them to a landing page.
It's like no one who did advertising in the 50's 60's ,70's, whatever would've believed that this, that, like the era of advertising we had for the last eight years would've been a thing. And so I just think we're going back to the way that it was, which is like, marketing has to be inherently interesting, creative, and attention grabbing in order for it to work, which I think is just harder.
[00:30:36] Nik Sharma: Yeah I, that's something I've thought about a lot, like when I was at Hintwater. I used to think Dude, fuck the brand marketers. They have no idea what they're talking about. They just want impressions for no reason. And we can run performance all day and we'll have the best return on any marketing investment.
And now we're at this point where it's like you have to actually think about the the overarching theme or mission or what you know, customers are getting excited about. And then slowly bring them down that funnel. I always have this really creepy visualization in my head of somebody's floating with wings on their back at the top of the funnel, and I have to reach up with my hand and grab them and bring them down.
[00:31:22] Aadil Razvi: I love that. I love that a lot. While there's a lot of gems in what you both shared. I particularly the thought experiment around what channels are attention. That aren't properly monetized. I think that's a really interesting place to start poking around. What are I guess let's see how we're doing on time.
Alright we'll we'll try to rapid fire. We've got a lot of good questions. What are the most important metrics for DTC brands to focus on? Nik?
[00:32:01] Nik Sharma: I would say repeat purchase rate is a big one. I would say another big one is the repeat purchase rate for somebody who interacts with customer service or basically submits a ticket at any point.
Obviously subscription churn. And we also look at subscription churn by product or conversion rate by product, which is pretty helpful. Yeah, those are probably some of the main ones. I'm curious to see what Justin has
[00:32:39] Aadil Razvi: First like I hear retention is the key behind a lot of those things is like, Hey, are people actually sticking around for this thing that we've built?
[00:32:50] Nik Sharma: Yeah.
[00:32:51] Aadil Razvi: Cool. Justin?
[00:32:53] Justin Mares: Yeah. For us, I think it's like all retention stuff. And then retention and conversion rate. Repeat first. What it costs us on first purchase although we recently made a shift as omnichannel brands for to the ones that I run. Surely we'll soon be that we basically are starting to not break out our marketing budget across like retail and DTC anymore, and just focus on more of like marketing as a holistic thing and look at how it drives velocity in sales across both retail and online. Just because we found that like siloing led to slightly worse decisions. I'm not sure if it's a good move and I maybe, maybe not on this thing next year, cause all my companies are dead and that is a huge failure. But it's something that we're testing right now. So we'll see.
[00:33:44] Aadil Razvi: I'll go ahead and send you the calendar invite ahead of time, just in case. Awesome. That's super helpful. Let's get into tactics. Let's talk about Black Friday, Cyber Monday.
It's around the corner. How are you thinking through a success, a successful campaign?
[00:34:07] Justin Mares: We. I am, I honestly, I don't have a good answer for you right now. We have a team that's been managing that and doing a great job. Yeah. And I haven't been like involved in Black Friday planning at all so far this year.
[00:34:19] Aadil Razvi: So the lesson learned is grow the business up to a point where you can delegate such things.
[00:34:25] Justin Mares: Or that I'm super lazy. One of the two.
[00:34:28] Aadil Razvi: Maybe those. Nik what you got?
[00:34:32] Nik Sharma: Yeah, I mean we are basically, we're right now. Getting through all the production of what we're doing for Black Friday.
So a lot of it is started with analysis on copy, messaging angles, creative, feedback from customer service or even just customers in general around what they like and what they don't like or what they react well to. Then we are basically, making changes or, to any existing funnels or website stuff.
And then, we're just basically cranking out a bunch of landing pages, ad creative, doing a lot of testing to make sure everything works. But honestly, it's not anything I would say too crazy, like once, once you've got your offers set in stone then it's just about making sure that you're fully able to track everything, traffic, everything, get everything approved on time.
Make sure it's in the right hand. If you're running, for example, if you're running your offers on email and sms, that's pretty easy. If you're running it on paid ads, you wanna make sure everything is submitted, ideally one or two weeks prior, so you're not lagging in the approval. And then you wanna make sure that all your tracking capabilities are set up.
If you're, for example, if you're using influencers or newsletters to, to get more traffic, you're using the right UTMs, you're making short URLs or vanity URLs. Yeah, I'll just like the small stuff to make sure that, six months from now you can actually track the cohorts of customers who came in through Black Friday and understand what that did for your business over a six month or 12 month period.
[00:36:16] Justin Mares: The only other thing I'll add quickly is something that's worked for us historically is Black Fridays every Monday. I've never, I think it's the best. It's the opportunity where your core consumer is the most willing to spend an absurd amount of money on a lot of your product. And so we found a lot of benefit by offering tiered discounts up to 30, 40, even 50% sometime if they would buy like a lot of product.
And that generally worked quite well.
[00:36:47] Nik Sharma: Yeah. One thing one thing we did at Hint was. The AOV was like 40 bucks and a case of water is 20. We did a super high AOV for Hint, which was 99 bucks for nine cases, something like that. Nine for 99. And yeah, people went bananas to spend on the high AOV.
And so I think generally if you can do three to four x your AOV. A lot of your core consumers are gonna be, really happy to buy. Everybody, that's like the highest intent of the shopping of the year for most people. And taking advantage of that, but then also making sure that you're thinking about your subscribers and that they're not gonna feel like they should unsubscribe because they just got a better deal.
[00:37:41] Aadil Razvi: And how do you think about that balance?
[00:37:45] Nik Sharma: Generally, like for promotions that run throughout the year. You just try to make sure that you don't go, you don't over you, you don't go over the discount subscribers get. So I think at Hint it was 15%, so we just never did anything more than 14%.
Unless it was a first time customer and they had a specific offer they came in on, but that was only applied to first time customers. But the other way to think about it is like in your merchandising. So if you are putting together a fat bundle for Black Friday, You wanna make sure that the products you're merchandising in that case of nine, nine cases for $99, I think two or three were like top selling skews.
The rest were basically a culmination of mid to lower sell through skews. And it was a lot of, it was really to push inventory out of the warehouse. But it didn't stop subscribers from waiting for their next shipment because their specific flavors, which were basically, the top five or top seven flavors weren't necessarily in that bundle.
[00:38:55] Aadil Razvi: Got it. Let's do just a couple more questions and we'll wrap this up. Nik, you touched on this earlier, so I'll throw this to you. But what role does branding play in DTC growth? We're talking about oversaturation of channels, we're talking about lots of view entrance and different categories.
What role does branding play, and do you see it becoming increasingly more important over time.
[00:39:22] Nik Sharma: I think it's definitely important I think of branding as the external face of culture that your company has or that your company sets. So I think it's a it's important in the sense that it helps people understand if it's the right fit for them or what you're about.
But I think more importantly than spending a bunch of money on fancy fonts and illustrations and colors is making sure that you have like really good strong content behind it all. Because there's a lot of brands that have phenomenal logos and colors and what, and they look pretty, but there's no substance behind it.
It's just the outer layer of the onion, but the second you peel it, there's nothing there except, just a shitty product. And some funnels to get you to buy some product, but if you were to flip it and say, All right, let's spend, or let's not even spend any money my favorite example is Moiz from Native.
He took the font from Harry's and the colors from Casper, and that's what made a hundred million dollar brand sell to Procter and Gamble . If you take, if you take pretty like shitty branding, but phenomenal content you will win 10 times more than the person who spends a ton of money on branding and doesn't invest in, in the content side, or like making sure there's something behind that fancy branding.
[00:40:53] Aadil Razvi: Got that. Yeah. I like the frame You said the Harry's brand plus Casper's font? Is that what you said?
[00:41:01] Nik Sharma: Yeah. Harry's font, Casper's colors,
[00:41:05] Aadil Razvi: Harry's font cost, Casper's colors. That, that is that's the one liner. I love it. Justin?
[00:41:12] Justin Mares: Yeah. I think about brand as like, when we think about it, we talk about it as I totally agree with what Nik said, that a brand has to have a strong thing that you stand for as opposed to just like a bunch of pretty fonts and, a pan company that looks like daily harvest and and a sheet company and like all of the like DTC sort of branded thing that looks the same.
Yeah. The look exactly. Like I, I basically think that a brand when I think about it, is it's a set of things that you like are absolutely willing to accept the consequences of not doing, and so like at Kettle and Fire, We're willing and we put our brand on, like we're not gonna put crap in our products that we think is like making all of the rest of the US sick, unhealthy, have chronic disease, all those sorts of things That has trade offs and real consequences for us in that we pay more for ingredients, our products cost more.
It's not like we can't get into Walmart, we can't get into some Costco stuff like this because like our product is too expensive, which stems for our values. That's like the brand that we wanna build is one that's uncompromising on nutrition and uncompromising from like a wellness standpoint. And so when I think about like people talk a lot about brand, for me, I think that the most important thing is to ask what negative consequences are you willing to bear for the sake of a brand?
And like that I think is the thing that you need to talk about a lot because that's ultimately what people resonate with.
[00:42:44] Aadil Razvi: Of things that you're willing to accept the consequences of not doing. Have to I'm gonna have to chew on that, man. That's a heck of a statement there. But I get it.
[00:42:55] Justin Mares: You're clearly phrase into this.
[00:42:57] Aadil Razvi: Yeah. no. You like are leaning into the things that, like the lines in the stand the sand that you're drawing, like almost become your brand.
[00:43:07] Justin Mares: A hundred percent. I think it's would Patagonia ever do would they ever like compromise and use like some horrible for the environment plastic that saves them 30%?
It's like everyone knows the answer is no, and that's why it's the Patagonia brand is what it is, because everyone knows that they would never do that. It's like for the average brand or company. It's do you have a strong sense of what Freshly would or would not put in its food products, not to pick on them for any reason?
It's just the first one that came to my mind. It's not really, and thus, I also don't have a super strong association with Freshly as a brand. If they went away, I'd be like I guess that's annoying, but it doesn't, it, there's no like brand loyalty there. Cause I'm not really sure what they stand.
[00:43:54] Aadil Razvi: Yeah, that, that could be its own hour long discussion. I love that. Yeah. We'll, rapid fire a few audience questions and we'll call it a day. Justin, for omnichannel marketing, that's something that you had mentioned. Are you also considering more traditional channels like, TV and over the air?
[00:44:14] Justin Mares: Yeah. We've started testing. We started testing TV. I think over the air really depends on who your target market is. If you're selling to older people, then it makes sense. That's less of our target market. So we haven't tested radio. But I do think that, yeah we've done some TV tests and are doing more TV tests in two months.
[00:44:36] Aadil Razvi: Nick have you also experimented with TV at all?
[00:44:39] Nik Sharma: Yeah. Yeah. Election seasons coming up and that is the best time to be running TV ads because everybody's glued to their TV and but yeah, TV is from my experience, TV has been closest to a channel like Tabula or Outbrain where you basically test a bunch of different sites and you test in Tabula and Outbrain, you test a bunch of different sites and narrow down to the sites that work best for your brand or for what you're selling. TV's similar where you you test channels in the cheap way. You first test channels during their remnant hours, and then you bring it to the prime time hours, and then you slowly start figuring out.
Which ones work best for you and which ones don't work best? And so like for, we had a brand that tested remnant, did well, tested Prime time, did well, and then we just found that there was one specific TV channel that was just consistently driving super low acquisition cost. And we push all our budget there until that gets exhausted.
But yeah, TV's proven to do pretty well. We've done some radio and like FM radio and satellite radio stuff and not anything insanely, great to write about. I think those are probably better for maybe things that are like, all state or Hershey's, like things that are that, that are brands that people already know and love and it's just a reminder cause you can't really see the product or see the benefits of it.
But another one that has worked in that similar vein is podcasts. And it's usually because you're not necessarily going after like an arbitrage channel. You're going after the alignment that your products benefits are with whoever is hosting the podcast.
[00:46:41] Aadil Razvi: Got that. Yeah that's I like the comparison to Tabula and Outbrain, that makes it real for me. And Okay. Yeah, we'll get in one, one more audience question. We'll call it a day. There's a hint of exasperation in this person's question that I think. I would love for you all to speak to, basically you're mentioning the raw cost of DTC has gone up, high margin products are struggling.
If that's the case, there are all these podcasts and leaders out there, like what are they talking about around this and like what, where, what are the resources that people can check out after? This session to actually stay on top of the current state of DTC moving forward.
I'll ask Nik cause I think he's got a pretty good answer for it.
[00:47:34] Nik Sharma: Honestly, one thing that I found to be the best is so when I started working in this world of commerce and CPG, I just tried to find other people who were doing very similar stuff. And and I just started forming group chats or becoming a part of group chats or finding people to go get lunch with once a month.
Like in San Francisco there was a small crew where myself this other guy, Scott Swanson, Mike Duboe, who's now at Greylock and another dude who was at Third Love. We were all kind of spending the same amount of money in terms of advertising and once a month we'd get lunch and we would just share a bunch of things that were like working and not working.
And the problem with a lot of industry like trade press is those people have never spent a dollar in their life, or they've never made a dollar in their life. They're just sitting there writing about it and they, their opinions are formed also based on who they consume from on the internet or who they hear about or what headlines they read.
And so I find that a lot of the stuff that gets touted in a lot of the industry press is usually It's usually pretty bad and like pretty bad advice generally, or like they, they tell you things to go do, but it's six months after it's already been discovered and exploited. And then the other side of it is you have there's a bunch of people now who just get paid retainers by different SaaS companies to tell you things.
Yeah. And so I think the best one is you gotta go find a tribe of people that you can, be homies with. Go find five or six people to throw in a group chat and just shoot ideas around. And see what happens. There's I've created a few of those. I've created a Slack group where I think we call it like E-com operators, and we've got 80 people in there.
Yeah, and we just share, Hey, has anybody worked with this software, they claim to do this, Or, Hey I'm looking for this. Has anybody had experience figuring out how to connect this to this? Or Hey, we're thinking about working on this, has anybody done this? And how do you approach it?
And that's, it's so much, he, it's so much more helpful to have a group that you can go to and just get quick feedback. And especially from people who have done it before versus like, All right, now I gotta go to modern retail and figure out has somebody written about this or has somebody investigated it, or yeah, I just think I think make a group chat.
[00:50:08] Aadil Razvi: Yeah. Yeah. Find your tribe. Yeah. That's exactly, You look at Mr. Be interviews, how he, blew up. Initially he found his core group of folks and they spent day in and day out grinding together. And like that's how they took off. I will also cause Nik won't do it himself, say to check out the limited supply show with with Nick and Moiz.
It's the resource for this sort of thing. Agreed. Absolutely check that out. Justin, what about you, man?
[00:50:39] Justin Mares: Yeah I think that honestly a lot of on podcasts and other places, like people don't like to talk about putting up Ls, like as a founder or an operator. You get paid when everyone thinks that you're crushing it and amazing.
Like either, whether that's raising from investors or having someone like Nik wanna hire you when they see that you're crew like killing it on TikTok or whatever. And so the deck is pretty stacked against anyone actually talking about ecom being brutal right now. And so I really do think that you actually have to be in operator circles to get a sense of what's actually working and what's not and why things are challenging right now. If I had to guess, I would say that things are gonna be structurally challenging for at least another two years. Or till whenever Apple launches, like their ad network. And I think that the funding environment's gonna turn and a lot of, a lot more DTC brands are gonna go under in the next like 18 to 24 months.
Cause they're structurally un profit. And so I think that you're not going to see anyone talk about this, but you're gonna slowly see more people like filing, saying we're shutting down the company, we're going through chapter 11, something like that. Just because like it's in no one's advantage.
It's no one does well when they talk about how big of a challenge they're having. And yeah, I really think unless you're an operator in the game, you're not gonna be able to get a sense for how hard it is and what's actually going.
[00:52:10] Aadil Razvi: There you have it, folks. The sobering truth from Justin Mares and Nik Sharma.
You thought you were coming here. It was all gonna be rainbows and butterflies. You were sorely mistaken. We only drop knowledge bonds out here at the Growth Summit. Thank you both Nik and Justin for spending your time with us today. Let the people know what you've got going on in your life and how they can get in touch.
[00:52:35] Justin Mares: Yeah, so I'm on Twitter at jwmares, m-a-r-e-s. I also have a substack where I just write monthly about health, wellness and starting companies. Yeah, that's it,
[00:52:49] Aadil Razvi: Nik.
[00:52:50] Nik Sharma: Go subscribe to that monthly email. It's phenomenal. You get like the work update and the personal update.
I also have an email nik.co/email. It's a weekly newsletter. All things direct to consumer. What we're seeing, We just launched an energy drink today with hundred thieves. So this Sunday I'll be writing about that. And I'm also on Twitter, so you can DM me on Twitter or just say hi or not.
[00:53:17] Aadil Razvi: Didn't even get to talk about that. That sounds you now, I'm, now I'm, I have to check out the newsletter Nick. Thank you both tremendously. This is a ton of fun. Awesome way to cap off day one of the Growth Summit. You've both been so generous with your time. You can go ahead, leave.
[00:53:35] Nik Sharma: Wait, we gotta,
Yeah, we need ask real quick, how's everybody feeling in the chat now? We started with eight. What are we at now? Are we at tens? We had thirteens.
[00:53:44] Aadil Razvi: Yeah. If I see a single number lower than eight, we're not doing the growth summit the next two days.
[00:53:51] Nik Sharma: Fourteens.
[00:53:52] Aadil Razvi: All right, here we go. I like the double digits.
[00:53:57] Nik Sharma: Awesome.
Incredible. Now we got tons of energy. We've got hundreds and hundreds of people tuning in live right now. You all were amazing. Tons of awesome takeaways. We will most likely catch you next year at the Growth Summit, but yeah. Thank you very much everyone. I'll see you tomorrow at 9:00 AM PT.
We're starting the audience growth session with Shaan Puri and Saagar Enjeti at that time. You don't wanna miss it. Thank you both very much.