Let’s get right to it …

Because packed is an understatement.

📦 Mike Beckham on free-shipping thresholds, AOV & CRO

📊 HexClad’s ad naming conventions + data visualizations

💀 Sean Frank with 10 lessons on last week’s zombie brands

🏈 Jason Panzer’s “addendum” to Super Bowl ads (EP060)

🤔 Q&A contribution straight from our own Operators Slack

Creative Performance, Naming Conventions & Data Visualization

Most DTC brands rely on paid social for customer acquisition, making creative optimization critical. Unfortunately, they overlook intentional naming conventions and the visualization of that data.

For example, I need to answer the following questions to best inform our next creative sprint for Pizza Steel ads.

• Are videos or static images performing better?
• Which specific assets are doing best within the top-performing asset type?

Gathering these insights requires the following ad account naming conventions.

• Category: Campaign level (pizza steel)
• Asset type: Ad level (video versus static, etc.)
• Classification: Ad level (product, lifestyle, review, etc.)

What are the conclusions from this graph?

Within all Pizza Steel ads, static images are out-performing videos, and lifestyle images are out-performing product shots.

Our next creative sprint? Lifestyle image ads!

We live in a paradigm where everyone knows shipping is a significant cost, but customers expect inexpensive or free shipping through subsidization.

How you handle this issue is one of the most important decisions you face.

When we were first getting started, all of our sales were on Amazon. We didn’t have the economics to drive DTC traffic, so we added an insert to every bottle that offered a discount for a free accessory.

All the customer had to do was pay $5.99 for shipping and handling.

Lots of people took us up on this offer, but we weren’t having much success selling our core drinkware products. At the time, most of our products were $20.

Customers didn’t see any reason to pay $5.99 in shipping on a $20 item when they could get it shipped for free by Amazon.

Our website’s AOV during this period was a paltry $22! We knew we needed to get our AOV up and encourage people to buy more drinkware, so we instituted a new shipping policy …

Orders over $10 shipped for free.

This change kicked off a phase of topline growth. Customers started buying more bottles and tumblers. AOV was going up, and our sales were not as concentrated on Amazon as before.

Just one problem: Our economics were terrible.

We were bleeding money on many orders. Gross margins for the site were unsustainable. So we changed our shipping policy again …

Now, we would offer free shipping on orders over $30.

This change slowed our revenue growth but created much healthier gross margins. The change was worth it.

After all, what use is growing your website really quickly if it isn’t generating any contribution profit?

Gradually, we increased our threshold to $50. Then to $75.

Every time, we saw our AOV grow and our margins improve. While this was happening, another major development in the business occurred.

We started selling a lot more items that were $30-$60.

The only problem was our conversion rate kept dropping. We started to see numbers close to 1% some days. We took a fresh look at our numbers and decided we needed to retest a much more aggressive strategy …

Drop the free-shipping threshold back down to $25.

It was a bold move. Margins as a percentage dipped slightly, but it was more than outweighed by all of the performance increases it unlocked.

We saw conversions triple from users who had a cart value between $25-75. As a result, total contribution profit shot up dramatically.

What did I learn from this experience? Three lessons …

1️⃣ Beware of proxies

Proxies are metrics that you use to gauge your health in an area, but they are indirect. For us, we had come to view website AOV as a proxy for overall website health.

The problem is that proxies aren’t actually the thing that matters. They only point towards the thing that matters.
​
Organizations forget that important fact. As a result, they optimize a proxy … even if it no longer drives success.

At some point we needed our AOV to go down for our website to grow.

2️⃣ You must retest your assumptions

A wise man once said, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

It is easy to run a split test, note the result, and then hold that as gospel truth indefinitely.

Here’s the challenge: The world changes.

We had run tests saying that a higher free-shipping threshold was better for us. But our business evolved. We began selling many items that were $30-$60. And our customer base grew dramatically.

It was critical to retest to see if the new environment called for a different approach.

3️⃣ Leadership is about judgement

Ultimately, we decided to retest because a key member of our management team was willing to say, “I think we are getting this one wrong.”

Not an easy thing to do when all the previous data points in the other direction.

Your role as a leader is to leverage good judgment to determine where to test.

TL;DR — Benefits of an executive assistant (EA); how to find, trust, and delegate to an EA; navigating the boundaries between work versus life; prioritizing your time + finances based on both personal values as well as professional goals.

• ​YouTube​
• ​Apple​
• ​Spotify​

TL;DR — All things ad creative, including: examples, hooks, types, use cases, testing, incrementality, value propositions, calls to action (CTAs), marketing mix, diversity, different stages of the customer journey, and more.

• ​YouTube​
• ​Apple​
• ​Spotify​

This week’s top-five trending news stories, curated by the editor of CPG Wire

1. ‘Zombie Brands’ Plague the DTC World (Modern Retail)

A new phrase has entered the vernacular. According to Anna Hensel at Modern Retail, a number of consumer brands that raised money at high valuations are failing to grow. Drew Fallon, the CEO of Iris Finance, offered some interesting counterpoints. What’s the Operator’s take?

Sean Frank, CEO of Ridge

1. If you raised money in 2021–2022 and haven’t grown 300%, your valuation is down
2. If you own equity in a business on 2021 marks, that equity is probably underwater
3. Brands are valued at 10x EBITDA best case (they need to be hitting the rule of 40)
4. No profit? Doesn’t matter what the growth is — investors aren’t interested
5. Why? Because no one is selling off revenue
6. Don’t invest in DTC rounds in 2024 unless it is based on a trailing 12-month profit multiple
7. Even great brands are selling for less than their inventory value
8. You can’t sell for a higher multiple than what public companies are trading for
9. Most founders/execs from this era own equity worth zero because of liquidation preferences
10. This had to happen and will be a good thing for the brands that survive

2. Capri-Sun Explores Minority Stake Sale (Bloomberg)

Remember Capri-Sun? Well, the beloved beverage brand is looking to raise $500M via a minority stake sale. Why? The company hopes to reacquire its North American license from Kraft Heinz. Capri-Sun sells a whopping 6 billion pouches per year and generates around $1.4B in annual revenue.

3. Alliance Consumer Growth (ACG) closes Fund V with $160M (PR Newswire)

Consumer-focused growth equity firm ACG closed its fifth fund with $160M in capital commitments. With the close of its latest fund, ACG has raised over $1B since launching in 2011. The firm is an investor in Athletic Brewing, Clio Snacks, Harry’s, OUAI, and many other brands.

4. Athletic Brewing Scores $50M in Fresh Funding (CNBC)

Athletic Brewing closed a $50M equity funding round led by General Atlantic. The leader in non-alcoholic brewing launched in 2018 and is already a top 10 craft brewer in the United States.

5. FTC Sues To Block Mattress Mega Merger (Axios)

A grumpy Federal Trade Commission is suing to block Tempur Sealy’s $4B takeover of Mattress Firm. The FTC argues that the largest mattress manufacturer buying the largest mattress retailer would be a net negative for consumers.

From E060: Defending Your Time, Standing for Something & HexClad Super Bowl Ad

Insight: Surprise lesson (TIL)

You can pay thousands, hundreds of thousands, or millions to marketing agencies. But if you are not deep in the weeds with them, you will not get the best possible result.

Nobody knows your brand better than you do.

Controversy: I disagree

With Mike’s email organizational and cold call tactic of sending most things directly to a spam folder. Sometimes, there is a gem in the dirt that can genuinely benefit your business or assist someone else’s business.

But hey, Mike is a busy guy.

Regret: I wish I had said

That not everything you hear applies to you. There are always exceptions to the norm — and you may be the exception.

Shocker: Hottest hot take

Was Sean’s perspective on HexClad doing a Super Bowl commercial. Typically Sean hates things where the attribution is tough to measure.

Question: I still don’t know

If the potential brand awareness and “cool factor” from a Super Bowl ad makes sense for Hex. Let me know what you think — shoot me an email at jason@hexclad.com​

This one comes straight from the Operators Slack group, edited + shared with the original author’s permission.

“Is Fulfil really worth the hype?”

• ERPs generally come with their own set of checks and balances that the teams need to follow
• If you’re at a scale and complexity that you need an ERP (like we did), it does help to use Fulfil​
• We optimized inventory through order points, and our cost of capital has come crashing down
• We send inventory to our warehouse plus external channels: Amazon, Shopify, Walmart & eBay
• That way, we can sell inventory not just in hand but also at our supplier locations
• We have effective purchase orders that are 99% automated via EDI (Electronic Data Interchange)
• Customer service knows where the customers’ orders are at any given point — very important for us
• 90% of our accounting transactions are automated, but there’s considerable room for improvement
• I think this article talks about some of the points you need to consider before having an ERP solution

Until next time,
The Operators

PS: Special thanks to Motion for backing us as a sponsor even before day one.

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