Sampling, Bundling, & Subscriptions: How Offers Drive DTC Growth (With Cherene Aubert) transcript

I love Shereen Alberg. She's a great friend of mine and she's on the show right now. She is arguably the goat of all marketers ever in the history of the world. She's she's great. She's a great growth leader in the e-com space in the D2C space. You probably know her from her time at Common Thread Collective leading all strategy there for a while. Maybe from her time at Bobbie, a formula brand where she led all the growth and eventually the sloth there, which we'll talk about today.

She was at Ilia Beauty. She now runs Growth Capital an e-commerce market or a a marketing agency for brands >> [music] >> in the beauty and wellness space. We'll talk more about what Growth Capital does and who they serve in a little bit. On the show today, we're talking about offers. Shereen posted something that I absolutely loved recently, sent around to my whole team about how the thing that really drives the growth is the offer, more than the ads, more than anything else, but the offer is the most important thing.

This is sort of the sort of thing marketers throw around. They throw around that idea that the offer is the most important thing, but Shereen actually brought >> [music] >> some rigor to the thought and to and to showing why that was true, how to think about them in your business. And that's what we're going to talk about today. Why and how are offers the most important thing in your business for growing your business, how central they are to the growth process, and how you can implement them in your particular business, which is not like other people's businesses and therefore has to think about this differently.

We'll give you some frameworks to think about it with. And there'll probably be some giggles along the way. Let's get into it with Shereen Alberg. Hello, Shereen. Hi, Andrew. Thank you so much for having me. Always glad you've got the forever invite. I hope you know that to the Andrew Fairhurst podcast. This is an open door. You just walk in anytime. We'll just we'll just start doing an interview. You know. I would I'm going to just show I'm just going to barge into your home and we'll have a podcast. >> Please do that.

That'd be awesome. You're welcome. You don't live that far from me, so that would be fun. [laughter] Okay. So, listen, you posted this thing. You posted this thing about how you at one point had to slow down sales when you were at Bobbie because it was the pandemic and everybody was out of everything and formula you couldn't you literally couldn't sell more stuff. So, you had to figure out how to not get people to buy your products.

Many people, of course, watching or listening are thinking you should be so lucky, but to my understanding this was actually hard. And so because of the unique world of formula and what people needed in that particular moment, people needed formula. And so they were trying to find anywhere they get it and so you had to change you had to create friction to do that and and this led to broader thinking about offers. Tell people this story.

I just I gave a quick version of it, but tell people the story cuz I that will be the jumping off point that we then will allow us to think more about offers in general. But, this is a a really big thing I'm thinking about right now. So, tell people the story and and how you arrived at the conclusions you arrived at. Yeah, it's you know, to understand what happened at that time, I'll I'll give you a background on the industry.

So, the infant formula industry has been a duopoly forever. Two brands run the industry. Bobbie was a disruptor brand is a disruptor brand, came into the industry I think the first D2C subscription formula brand. There are other incumbents now. And when there's a duopoly, you know, something interesting happens. There's limited fixed supply. And then you also have to think about like, okay, how does the how does the infant formula market look?

It's not necessarily growing exponentially. It's growing as as much as baby people are having babies and only a percentage of those babies require formula. So, manufacturing capacity is pretty fixed and then it's highly regulated. So, you can't just like import, you know, a ton of formula from China or wherever just like you can in other industries. So, pretty >> lot of drop shippers out there, huh? In the >> Not not a lot.

You can't drop ship baby formula here, people. >> [laughter] >> Yeah. No drop shipping demons. Yeah. >> And so there was like one uh instance where one of the top two brands had a major issue with their manufacturing. Babies were getting sick. They had to recall their entire supply. So, you just imagine overnight probably 30% of the inventory on the total market just wiped out. And not only does that create a supply crisis, but that created like a demand frenzy.

Like remember in COVID when people were hoarding toilet paper and then they would go to like Costco and buy 800 rolls of toilet paper. So, it's kind of like that where people were like hoarding and then stores had to prevent people from buying. So, just like complete pandemonium to set the stage. Yeah. >> So, you know, my wife was breastfeeding at the time and we we we definitely gave away some frozen breast milk. Like it was like it was like we had the people who were so grateful cuz they were running really really low.

It was I remember that. It was crazy. Yeah. Yeah, and it's like if you you know, if you haven't had a baby, you like the worst thing that you can that's not the worst thing you can do, but like once your baby finds a formula that it tolerates, you don't want to switch it because it can create like disruptions to their digestion, their sleep. It's just like you don't want to do it. So, parents are panicking. They're worrying if they can feed their children.

It's just complete pandemonium. And we, you know, as a growth marketer and operator, I'm looking at the numbers and I'm like, hey, sales look really good. Like what happened all of a sudden that like demand spiked. And I think those are, you know, my first introduction to how a fixed market is so sensitive to changes in competition like that. And so like pretty immediately we saw demand spike overnight and we had to make really quick decisions.

We had to run quite a few different forecast scenarios. We were like, hey, if we if we look out a few months, we're going to run out of all supply for our subscribers. Our subscriber base is our loyal customer base. We don't want to disrupt their experience. We want to be the only brand in the market that stays in stock during this period of panic so that parents can look to us as their peace of mind and their ability to subscribe is like a guarantee.

So, that it became kind of like a big part of the brand strategy and we had no clue how long this would last. So, we had to make very quick decisions on pulling down our marketing, stopping all acquisition, putting friction into the the experience, asking reminding people to cancel because people were sharing subscriptions. So, we just went through this whole period of like pulling everything down. And I will tell you that completely rewired my brain and how I think about growth.

Okay, how? I mean, I expect you to keep talking right there, but that's what I >> I know. I was going to keep talking, but I feel like I was talking for so long. I need >> [laughter] >> No, this the story the story is a good story. I mean, I'm tracking. So, I appreciate you doing that. So, do that. But but yeah, like tell me tell tell me tell me how you did that. I want your listeners on the edge of their seat waiting for the answer. >> Yeah, yeah.

And we're going to actually get to the answer to that question in the in 20 minutes. So, yeah. Yeah. No, Right at the end of this, yeah. We started, you know, kind of going back to the the post that you mentioned. I pulled marketers. Which I'm going to link, of course, in in the show notes, yeah. Yeah, and I asked them like, what do you think is your biggest source of growth right now? Is it your your ads, your emails?

Is it influencer? Is it partnerships? Is it your offer? Like what is driving your growth right now? And you know, seeing what marketers say, I think like the the biggest I think I think market marketers sentiment has changed. I pulled marketers over the course of the last few years and I think more and more of them are starting to understand what drives growth, but a very large percentage of people will say their ads are what's driving the highest volume of growth.

So, in that moment where we knew that we had to react, we had to pull down our marketing, we started pulling down every lever. First thing, oh wow, demand demand has like, you know, multiplied overnight. We can't keep it going. Pull back the ads, okay? Demand keeps coming. All right, stop sending email campaigns. Demand keeps coming. Dang, we thought we thought those things were the big growth drivers. Stop all automated email flows.

We turned off every automated email flow aside from like the required, you know, transactional emails. >> Right. Demand kept coming. Turned off all partnerships, all marketing activations. We pulled down every single lever. Brand marketing, TV, everything. The demand kept coming. We took down our trial offer. That was our acquisition offer and the demand like cut in half immediately. And my mind was blown because I was like, it's it's all of these other things are the vehicle that get you to your destination and the destination is what um creates either a low barrier to entry or a high barrier to entry.

And it just completely blew my mind. And then I think like fast forward, we were in this period of time in the business where we had to, you know, reconfigure the whole business model during the shortage and rebuild supply. The whole industry had to rebuild supply. Nine months later, the industry is back to normal. We kind of like open things back up to normal again. And we're like, well, we got to now start the process of ramping growth back up again.

And like, you know, just the your brain as a marketer is wired one way. Your brain is wired to think growth comes from ads. Growth comes from email. So, we like had to start to like rebuild the engine and it's like so dumb. We were like turning on ads again, turning on emails again. We're like, where's all the growth? And um and that kicked off this like, you know, retrospection first that hey, our offer was the thing that drove the um most um uh like cut our demand the most.

So, going back to that thinking, our offer is going to be the thing that will drive our growth the most again. So, we started this like 6-month period of like iterative offer testing, and that just became like a core tenant of the business and I think a core, you know, part of growth strategy now that Yeah, and there's so much you can do with offer. Um Okay, I have one more question about this story. And I think you're right in framing this as like the things that we think about as the driver versus not.

But uh what I want to do now is actually get into what the offer was a little bit more. And then I want to talk about why why the answer for the person listening or to or watching this is not just do the offer that Sherine did because I don't think it is. Uh I think there's some unique dynamics of Bobbie that make the offer that you suggested really good and that brands need to think a little more carefully about that.

I know you have some guidance on this, too. So, just just before somebody listens to what you're about to say about what the offer actually was and then turns off this episode and says uh and says, "Got it. I got the magic offer. I'm going to go do it." You need to know that that's not what I am saying and I don't think what you are saying either though I don't want to put words into your mouth. So, um so, let's do that right now.

Uh what was the what exactly was the offer or as exactly as as you can remember it and I may have a follow-up question about that, too, but but start there. I actually love that framing because in order to like before I even reveal the offer, I want to give some background on the business and the genius behind the business, you know, Laura Modi, the founder and CEO of Bobbie came at the industry to solve problems that she saw as a mother and I think she had a totally unique perspective.

She was also an Airbnb executive. And they had a completely different way of thinking about business and customer experience. And so, she was obsessive about customer experience. And I think that was the magic of the offer is that she understood the customer journey. And she didn't just replicate what was out there in the market because if she replicated her predecessors, the business would not be, you know, it's like in the it's got to be like the top three now like vertically vertically integrated baby formula US-made baby formula.

So, that type of thinking is spot on, Andrew. Like, you have to think about your business and your customer experience. And the offers live, you know, that they have many offers live on their site right now. But the primary business model is a subscription. And they have a trial into subscription. So, you can get a two-can of formula, you can test it out, and if it's a fit for your baby because there's two customers, there's the parent and the baby, and the baby has to accept the formula and like it, like what we talked about.

And then they they have exponential LTV growth over that first, you know, customer acquisition cost um because parents don't want to switch their formula. So, yeah, it was it was a two-can trial offer. Um a publicly available on their site today. But but the why behind it was she knew that parents were not going to blind subscribe to a high AOV 10-can infant formula subscription unless they knew for sure that they were they had a chance to try it and their baby was going to love it.

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Go to richpanel.com, get on a call, tell them I sent you, and get started today. Okay, so I hear two elements of the business in that story. One of them is there is a real there's a real aspect of the customer's experience where the there's a question about whether or not and there's there's actually going to be very clear feedback for the customer about whether or not the product works for the customer. And that feedback is does the baby consume the formula and it sits okay and it doesn't screw up the baby's sleep or, you know, give the baby an upset stomach or whatever it is, right?

So, there's sort of this trial element of it where the it has to work and it has to be a good fit. And so, that's that's like part of it. And there are going to be some babies for whom it will not probably be the right fit and many for whom it will be, but mom is not going to just push through it if it's not a good like they they they need to try it. They need to try it before they're ready to commit to a whole bunch of it.

Formula's expensive. Like, you know, and so you you need to you need to try it first and there's a real clear feedback mechanism on whether or not it works. Secondly, there's a bunch of LTV in the business because once the once the once that a fit has happened uh and the baby accepts the formula, then you've got a situation where okay, great. Now I'm going to reorder endlessly and I and and this is a decision in fact that mom is not going to rethink.

Like, she's just not. She's just going to go, "This is the one that works. I've got it. I'm buying it and please send it to my house this often until I am done with with with formula." Anything you'd add to that? Yeah, there's a there's a clear trade-off there, too, right? So, like if you you have any subscription business, it could be any kind of food business. Like, think about like Daily Harvest or HelloFresh or any of these food businesses.

Um they could just have a subscription called with that evergreen X% off forever. If that's your first purchase, you're you're probably going to get a smaller volume of people that will subscribe blind and commit compared to if you have a really good introductory offer, you allow people to try it, you allow people to envision their life with it and and uh I what you're doing is you're opening the floodgates to more people and you're probably increasing your churn rate and you will have a bigger drop-off in retention.

And it's a it's like a math equation. It it's a numbers game. It does the volume offset the churn? Or if you're subscription and you don't have an compelling introductory offer, you're going to get way lower volume of first-time subscribers, but those first-time subscribers are probably going to be retained at a way higher rate. So, I think that's like the continuous as far as subscription business. And then for any business when you're doing this like offer testing, you have to like assess those trade-offs.

And but the thing I think though is that the the trial size almost certainly is not profitable at acquisition for Bobbie. I don't I mean, maybe in that particular moment it was just because the demand was so crazy, but but my guess is that you're you're really not even thinking about it that way because the LTV is so bankable for who you know, it's so it's so stable for for that is and so so, and uh again, correct me if I'm wrong, what the trial size probably wasn't profitable?

I can't share any private uh details, but I I do think like, yeah, if I were to like if I were to reframe it, like you would have to have conviction that your LTV growth could pay for whatever the cost is. But I think, you know, the other way to look at it is like you're paying for you're you're paying for your offer in what you would have paid in CAC. So, like if you weren't running an offer like that, your CAC would probably be five times higher.

Yes. It's just a matter of are you going to give the the money to in the form of a discount or whatever to your customer and ultimately your manufacturer in some way or you going to give the money to Zuck, you know? Yeah. And it's [laughter] like it's like that's the that's like the that's the question. But there's like some amount of dollars there that just tends to move from one to the other. And part of the offer testing game is like which one of those will take less from me?

And and you know what I mean? And and end up and and of course, where's the retention going to is that going to affect retention at all in an overall timeline? But yeah, I um I the reason I think it's so important to hit that is because you're describing a perfect business for a trial offer. And food and bev actually tends to be this way. Um there's this other element with food and beverage, which is that like you can't taste it online.

And so, like, you know, I've just been to so many events where people are out handing out samples of their food products. And uh and it's it's such the obvious way to do this, you know, because because what people need to do is figure out if they like it. And if they like the taste of it, you know, for for food and beverage. And obviously with formula it's a little different than that, but there's this element of like it has to you don't want to go buy a whole bunch of it and subscribe to it if you're not sure if you're going to like it, but once you do, like you can you will buy a whole bunch.

And so it's the perfect sort of framework for trial offer where you make the money on where you make the money on retention. Whether or not it's profitable on first purchase, like either way you're making most of the money on retention very clearly. So so I think what's interesting that is to think about this in another framework, which is what about um what about brands? How do you think about this? I know you spend a lot of your time with beauty brands and and wellness brands and stuff like that.

So this honestly may not even apply to a lot of the brands that you're working with as much, but I'm curious if you have perspective on this. Go go to the other end of the spectrum and think about a brand that has low LTV uh and and basically is the offer still that as important for them? And if so, how ought they to think about offer formulation? Because they should not be thinking about a trial size offer, right? Like a brand with no LTV, like they should they should they should not be thinking about that.

Yeah, and I I think the food samples is such a good idea. Like chances are if you're a D2C first brand whatever offer is best for your business has probably already been tested in retail. Like you could go look at retail and like look at look at Costco. Look at like go to a department store. What do they give you? Like, you know, talking about beauty, they give you samples. They give you little perfume samples. They give you gifts with purchase if you spend a certain dollar amount.

They give you If you go to like a home improvement place, they give you free design consultations. They do free setup. So like this whole world of offer is not new. It's been proven and like tested to death in retail. So yeah, I would I would almost even like look there and then you you know, taking beauty beauty is another example. It there is LTV growth. There's it's consumable product. I think challenges with beauty, of course, everyone wants first order profitability and then they want cross category penetration.

So sampling, gift with purchase is huge. Bundling is huge. Incentivizing people with lots of free gifts when they spend a certain dollar amount is huge. And this is again, like we're all doing it on D2C for the first time in the last like 15 years, but like you can go to freaking Nordstrom and Macy's and Bloomingdale's and they've been doing this for like decades and decades and decades. Uh you go to Sephora, they do it.

So >> Yeah. And the whole And the reason is because they've done the analysis and like we did this analysis at Ilia, as we looked at I was very skeptical of sampling. I was like, why would anyone buy a full size product if they're getting tons of free samples everywhere they go? And I was wrong. Like you look at the sampling retention and how like if you're let's say you have a hero product business and you have other collections and you're using sampling as a way to incentivize first purchase and you're gifting like samples, minis.

If you look at the the retention from the orders that you gifted like the if their first order included a gift you will see surprising retention lift and category penetration through sampling because people will are creatures of habit and they'll find something that they love and they want to keep getting the thing that they love. Um but I think, you know, in in another business, like let's use cookware as cookware is like kind of a thing that you buy during big milestone moments and the I think at first order profitability and capturing most of your LTV in first order is probably very critical for um some of those categories and the bundling, the multi-piece nets.

They're like you're just merchandising the same products over and over again in different formats. Yeah. Make the bundle bigger in that case because it's very likely that if somebody repeats it's going to take a long time. It's going to be not not nearly as impactful, whereas like if you can get somebody from $200 to $250 in that first order, it's like a it's a huge it's a huge value add. And then the other thing is with D2C in in particular uh so so I mean, first of all, you have to conceptualize that way, which is like, okay, if if the majority majority of my value is coming on first order, then I need to think about how do I make that first order as big as possible without without it costing me a bunch of additional customers or a bunch of additional CAC, basically.

So that's there's tradeoffs there. And in fact, the thing I would say about this whole problem of offers, my the thing I've noticed most digging into offers with one brand of mine recently, actually, a whole bunch is that it's just a gigantic series of tradeoffs. And and it's really hard initially to figure out what those all are. And if you become fixated on one metric, you often do it without really thinking carefully, you do a disservice to the brand.

I'm actually going to put together an episode soon sort of trying to lay out what all these tradeoffs are specifically around around thinking about how these things play out in retention and in in the long tail of it because I think it's very easy to make mistakes around this. So subscribe wherever you're watching or listening because you're not going to want to miss that. It's actually I actually think that. It's going to be a very good episode.

I've been thinking about it and it's going to be really helpful to people. So so so subscribe wherever you're doing that. But the um the the thing that I that strikes me is that is that like over over here, like you say, okay, we got to get the offer as big as possible on that first purchase. So drive up that AOV. So then you start giving a discount or something, but then that hurts your margin except that also you get money back in shipping costs because people always underestimate how big of a percentage of their margin goes to last mile shipping, which is core to D2C.

It's what D2C is. So anyway, so there's that game and then it's like, okay, well, maybe you want to do that with like a higher AOV bundle over here and let your customers who want to buy less go to Amazon where the economics tend to work a little bit better on the shipping side of things or you know, there's all of this kind of stuff like that. But the key is the the less LTV you have, the more you have to build the whole thing around how do I make my money upfront on day one and what are the different ways I can reframe my offer.

And there's endless amounts of testing that you can do to accomplish that. But but it's it ends up being like the most important thing. And probably for most it's going to be about some kind of version of bundling. Yeah. Yeah, and I I think, you know, apparel is a really tricky one because the whole whole >> cycle is like, you know, it's based off newness. And I want a new Well, maybe men's apparel is is a lot easier to do offers cuz you guys just want the same shirt 10 times.

That's like, you know, a lot easier to position >> yeah. than like, you know, for women's apparel requires like, you know, consistent new product launch volume. Yeah, I've heard people say this about apparel and then men tend to not like So I've I've actually heard in general that men tend to to be I I've never validated this, but that men tend to be better subscription customers uh because they don't like shopping on average as much.

And so the idea that they don't they don't have to engage with the shopping experience, whereas women tend to actually enjoy the process of shopping more and therefore they the subscription thing is not as much of a value add to them because they Now, obviously there's it's a blurry line and you meet people with all kinds of different preferences and all that stuff, but that sort of makes sense to me and the apparel example you gave is is sort of intuitive.

And in fact, this gets at another thing that I that I've wondered about for a while, which is like I think it's possible that one of the things that everybody is sleeping on is thinking really differently about men versus women in their businesses if if they appeal to both because I do think it's possible that they have different preferences on lots of things, you know. Anyway, sorry, I cut you off, but No, totally. And I I think you're right.

And and maybe it's like men don't even hate or dislike shopping, but like women like really enjoy it most, right? Like it's so fun. So yeah, and often times they are shopping for the whole family. So yeah, it's really that whole thing could be a >> Yeah. But I think as it relates to, you know, the as it relates to offers even even in apparel, if you like go back to the retail thing like if you go go to to retail apparel stores the way that they get you is with like membership programs.

So it could be, you know, more than loyalty, but like you know, there's so many of these like retail credit cards or memberships where you can stack points and earn rewards. So I think it's, you know, there's there there is still there is still some kind of offer for retail that works. I think the thing that's really interesting through some of the testing that I've done is we generally um underestimate like how much people don't care about shipping.

I think we think everyone cares so much about paying for shipping because it's annoying and you never want to pay for it. And you have Amazon where you can get everything on Prime and you don't have to pay for shipping. But there's some of the testing I've done I found that free shipping as an incentive doesn't always drive incremental sales lift. But if you get someone if you can take that same amount of money that you were going to give someone for free shipping and give it to them in the the form of a discount and charge them for shipping even if the net sales is subtotal is the same, people prefer like to feel like they're saving something off of what they're buying.

They care about that more that and obviously every brand has to validate that for themselves. It could be different based on your customer and your audience, but sometimes you can charge for shipping and just pass off a discount to the client. I bet I tell you something that's happening in your meta ads account right now that you have not noticed before or if you have noticed it has been a vexing problem you have not been able to fix it.

Go pull up your account. Go pull up the breakdown button and click on audience segments and look in your ads that are supposed to be prospecting ads. [music] I bet for many many people watching or listening to this, there's a bunch of ad dollars going to existing customers even when your ads are supposed to be going to people who have not been customers, new customers [music] in your ad account. And that might be for a couple reasons.

One of them might be that your exclusions aren't tight enough, but I bet for a lot of you, you actually have done the work of getting tight exclusions and defining your audience. Like you've you've >> [music] >> used the pixel exclusion. You've used your Clavio integration exclusion. You might have even pulled in the Shopify audience existing customers plus exclusion. You do all those things and find that nonetheless a huge amount like a really significant portion of your ad spend is reaching past customers instead of going towards new customers.

That is hurting your CAC. That is hurting the efficiency of your ad spend and it's making things worse for you. And there is a tool that actually solves this problem. I know because I use it for an account of mine and when 35% of the ad spend that we had was reaching existing [music] customers, that number went down to less than 5% within like a couple of days. Basically the moment we installed Waste Not. [music] Waste Not.io is a tool that very simply layers onto your ad account.

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I reached out to them and said you got to come on and advertise with my my show, my audience because it's just a really great tool. So waste not.io, get your exclusions right, spend better ad dollars, spend more efficiently. Go check it out today. I love this point, Sherene. There are all of these that is just a fascinating little insight in general that there are that customers are not responding rationally to the amount of money they're saving.

You know, like and another one I think this applies to potentially is the 10% off sort of discount that people do, right? Where it's like uh it's like like first you know, new new customer you get 10% off and I I've told the story a lot of times, but I've seen Drew Sanocki, long time e-com veteran, say that there have been places where he whenever he used to acquire an e-commerce brand, the first thing he would do would be to cut off that offer because it turned out customers actually didn't care about it.

And the point was just that like it all it did was just hurt margin. 10% just didn't actually move the needle in getting people to purchase. And so this notion of like if you're going to offer a discount, you need to put it somewhere where it's actually going to create value perceived value to the customer. Not you know, not just actual value to the customer, but actually perceived value to the customer. And the and the free shipping thing is is a great example of this.

Like it may not matter at all. All you might be doing is hurting your margin. And and yeah. I I I think the bundling thing is another big deal too because it really matters which products you bundle and where that price threshold is. Another thing I've seen happen a lot of times is people start to try to build this bundle and they go like, oh, I'm going to add this product over here and that's going to get me from 50 to 60.

But it turns out that that's $10 worth of product that customers don't actually care about very much. And that doesn't move the needle whereas getting from something from 50 to 70 is possible if you just put in a better product with a better discount or something like that. And it in and so it becomes this game of like just test test test test test religiously. One of the things that we're doing at AJF Growth right now is building, you know, sort of like couple clicks and then we'll have a lander built and ready to go.

Partly because we want the message we want to be able to control the message testing and all that stuff that you can do with a with a lander, but it's also for this reason. Like we want to be able to say like how fast and how aggressively can we get through different lander tests because we have all these ideas and they're really different for different customers. But we just think it has such an outsized impact on the way that you actually create value in the business and having some kind of a system in place to be doing this all the time just matters a lot.

And again, there's lots and lots of ways to do it. Um You know, what one of the things that you I know pointed out in a in a session you did recently with with our friend Aaron Orendorff and and Operators folks was the trade-off between CVR and AOV. Can you talk about that a little bit? I think it's another thing people sort of overlook. Yeah, it's I mean going back to the bundling and building the biggest bundle possible.

Like you're going back and then tying that to the Bobby example, you're kind of creating a higher barrier to entry for people. So there are offers and there are bundles. Like if you're if you're a bundling brand that work really well for customer acquisition and driving CAC down. I'll give you an example. It's like a sample of minis or like a trial sample like we talked about. And then there there are AOV building offers that can actually drive up your CAC.

And it's really important to figure out like which audience segment, which funnel stage, which KPI are you trying to impact with your offer and have that like clarity of thought. Cuz like you know, if if my goal is to drive up AOV if I do that for new customers I'm probably also going to drive up my CAC and I just need to make sure that the math makes sense. And like you said are we giving that money back to Zuck? Um in exchange for a higher LTV, higher first purchase, but we're still paying for it in CAC.

Or is there like a low barrier to entry way to bring in that customer and then you have your high AOV bundle like cross category penetration you know, bundle for your existing customers and that's your it's still available on your site, but it's like an email thing and you're you're maybe you don't have a new product that you're launching, but you want to reposition your existing product catalog as something new for your existing customers.

I found that like these higher AOV bundles work great for existing customers, but they're not so great for new customers. Yep. A second ago you sort of referred to a bundle brand and you said bundle bro and as you said bundle bro, I thought you were going to say the phrase bundle bros. And I like a bundle bros like as a as a designation of like some kind of bro D2C marketer or something like that. You know, the bundle bros.

The bundle bros. We're all bundle bros. You know, there's bundle bros out there. It's like chat like like it's like calling it feels like a Chad like calling somebody a Chad scalar or something like that. Although you're probably the ultimate Chad scalar as I understand it. I'm a Chad scalar. I'm a bundle bro. I'm not a I was once a drop shipping demon. >> [laughter] >> Yeah, I know about that. Okay. Okay. So but actually I would like to now tell you my my current hottest take in all of subscription and offer thinking.

Are you are you ready for it? I'm ready. Are you sure it's pretty Okay. All right. I'm so ready. My hottest take in all of retention type stuff right now is that getting customers to subscribe on first purchase is not very important and often is actually highly counterproductive. I I've I have changed my opinion on this. For a while I heard people say this and was thinking like you're crazy. I'm looking at the subscription retention rates and they're just so much higher than the others.

But but I'm coming to I've come to the conclusion more recently that that in fact it just is not actually very important to get people to subscribe on first purchase. Before I tell you why how does that hit you? I think you could be right and I think for the brand I I think it you could be right if there's confidence in the product and there's confidence in like the customer's experience with the product. And and you have confidence that the customer if they one time purchase will like the product so much that they will be incentivized to come back.

Cuz subscription is basically just like taking the thinking out of it and kind of forcing them to be retained onto the product. Yeah, I think that's right. And I think that's a a key part of this. Basically if you have a crappy product, you should try to get people to subscribe on first purchase. >> [laughter] >> Because there because then the default matters a whole lot, right? Because they're not going to want to buy it again otherwise.

But if you don't, if you have a product that people can actually experience the impact it's making in their life and they feel it and it feels good and they feel really good about it. Then it becomes less important. And I I have come to that conclusion partly from watching some retention curves in some businesses. So there's actually there's two elements of the reason I've come to this conclusion and this is a preview of of the retention episode I was talking about earlier.

Because because I'm going to tease this out more with some numbers, but but one part of it is that I've watched um brands implement massive incentives to generate subscription on first purchase and and because obviously subscribers are retained for longer, right? So one of the things that happens is it did increase it did increase subscription or did increase retention rates for some period of time in the business. But over four to six months something like that, the retention rate of less subscription focused brands of less subscription focused offers and more subscription focused offers, they converged on each other.

And and basically what I think happened is that that sort of defaulting people in to subscribing behavior worked for a little bit. Um and then once people were no longer interested in the product or it wasn't doing what they wanted, basically it just like it just eventually people go and cancel it, you know? Like it's it's like it doesn't last for forever. And the problem is then with the other side of the equation, which is that in fact at the same time it costs a whole bunch of money to get people to make that commitment up front.

Uh it's very hard to see this in your data because let's say you have a $100 CAC, okay? On on uh some set of customers and it's uh and it's uh it's a bunch of subscribers and one-time purchasers all at the same product page, okay? And you have a $100 CAC on that ads. The problem is you can't actually see, nobody actually can see how much of that $100 average CAC is uh is applied to the subscriber versus the one-time purchaser.

So, it may be that you're paying $170 for a subscriber and $50 for a one-time purchaser and etc., right? And the and the the delta between those two is actually a really big deal. So, now the subscriber has a really high bar to clear in their retention because you paid so much in contribution margin to to get them to subscribe in the first place that they really have to last a lot longer in your business, otherwise the math doesn't actually work very well.

And so, what I what I think is that it's actually easier in a lot of cases to do something that is sort of sneaky, which is that in the food and bev example or in the Bobby example that you gave earlier, in those examples you've got uh a really good incentive to get product into people's hands and let them try it. But for a lot of other subscription brands where there isn't that kind of relationship to the product, where there's sort of a taste component or a you know, a component like that, um where it's this really deep experience with the product that's going to make somebody want to rebuy, and I'm thinking here a lot in the supplement space or something, where where the the experience of the product is a little bit less obvious in some cases, um that actually what's better is to try to get people into a higher AOV up front.

Get people into multiple products up front. And that does a couple things. One of them is you can often get the same CAC against a higher AOV by uh by not forcing subscription so hard, by not incentivizing that instead just incentivizing a bundle. So, you just get more products in people's hands. But secondly, it means that when customers have a good experience with the product, even if they are retained at a lower rate, they spend more per per future order as well.

Cuz now if you've gotten the second product into their hands or something like that, uh they they end up being worth more over time. And the reason I the reason I say all that is because another thing I have not even referenced here is the volume of of of customers that you can acquire. Like it may be easier to get a whole bunch of subscribers or not as many subscribers and which one of those allows you to describe to deploy more dollars?

How does AOV impact that? How does the cash flow impact that? You know, if you've got a bunch of cash, then you can probably afford to pay for a longer timeline of profit of of value creation. If you don't, it's really hard to manage that over time and you actually need to accrue more value up front. And and so, the point is like there is this kind of constant back and forth testing and reallocating and reassessing that has to happen.

And I think that a lot of brands make this mistake of of thinking that subscription is driving a whole bunch of additional value when actually it's it's not. That's actually it's it's actually it's not that subscription is causing the value, it's that the value you're providing is causing the subscription. And and that if you get that order wrong, it it can be really messy. So, anyway, there's my there's my hot take filled with probably needless amounts of nuance, but but that's the idea.

I love it. And I think you know, going back to the Bobby example, too, like they're an omni-channel brand now. Um there there is a huge trade-off cuz it's like right now their subscription, their trial goes straight into their subscription. And if they don't do that, they're uh increasing the volume of trailers. And those people might just go to retail and then you lose like the margin gains of having them subscribed on D2C.

But it could be worth like the CAC trade-off or it could be worth the volume trade-off. And all of those things are like you really do need to look at the order rate curves on those cohorts that came in through those different like one-time purchase versus the subscription and do the math and figure out which one's better. Yeah, if brands with high LTV tends to and it's almost a trap. They they they they can think, oh, I've got to do all this stuff to get the high LTV customer or whatever and then they sort of think like as long as I got the LTV, I'm good without really considering how much more they're paying in CAC to do it because they can be focused so much on the LTV.

I think it could be a real problem. So, and of course it can go the other way, too. Brands with a bunch of LTV can can risk under-spending because they just don't realize how much value they're creating or whatever. Uh okay, we're just about out of time. Any final final bangers you got for the people? Anything that's just like huge last thoughts? Final bangers. I mean, now I'm now I'm like, yeah, I I I like what you just said about subscription.

I mean, I'll think about that for like, you know, the next day and a half and see if I can test it. The the one final thought I will say cuz you said something really interesting about sign-up units and 10% off discounts. I'm going to give you this this part of the test. There's a brand I'm working with that realized that they did not have their sign-up unit triggering on their landing pages and they saw >> Oh, interesting. huge lift in conversion rate during the period that their sign-up unit was not open.

So, now we're like questioning everything and there's nothing that I'm like, this is so stupid. Why are we all doing this 10% off your first order when someone first gets to the site? It's like the wrong time. And when you do a sign-up unit AB test, you will see your sign-up unit is better if you have the offer. But I would just encourage you all to take a look at the impact on your total conversion rate and maybe do a test with it and see what happens.

This episode is not sponsored by my friends at Intelligems, but many of my other episodes are and as we're talking, all I am thinking about is uh is just that like it is just the ultimate test case for all this cuz we're talking about the trade-offs in conversion rate and AOV and profit. It's like and it's just exactly why just go get it, go set up a test like or reorganize operationally to make this kind of testing part of your business cuz the answer is going to be different for other ones.

Think and I to me the the big takeaway and part of the beauty of the Bobby example is understand how this particular customer is interacting with this particular product. Where is the value creation? Where is it in the what what is it like in their shopping process etc. and how do you think about what offer makes sense for that particular customer with your particular product in those particular ways and then really try to handle and understand those things.

If you just try to apply a one one-size-fits-all framework, this is one of those cases where it's not going to work well even though like you said, there are some categories that these things are tried and true like sampling at Sephora or something like that. You know, if you're in a category like that, it's a legacy category. It just do it works. Like it's been done. It's been tried, you know. Um get the samples, but but but you need to think about what your category is.

Shireen, you run Growth Capital. Who should be emailing you or going to your website growthcapital.co to work with you? What kind of brands should be doing that? Good question. We're working with, you know, brands that have a premium brand aesthetics that want people who understand and have been in premium beauty or premium wellness. Um we're we're your team. Um appreciate you so much, Andrew. And to all you bundle bros out there, sayonara. >> [laughter] >> That was the greatest sign-off ever.

Thanks. Links in the show notes to go sign up and talk with Shireen about growing your brand, which she will probably do very effectively cuz she is, as I said, the goat. Thanks, Shireen. Thank you, Andrew. Huge thanks to Shireen, who is so fantastic. I always love talking to her. I've got a bunch more great stuff coming soon. You don't want to miss it. Subscribe. We've got Cody Plafker coming very, very soon now, which is going to be really exciting to come back, talk media buying, get into the weeds of that sort of thing.

Andrew Youderian coming with his State of E-commerce report. Just really, really good episodes. So, don't miss those. Subscribe wherever you're watching or listening. Leave a comment on this. If you have any thoughts, any questions, anything like that. I read every comment on everything I release. I interact with them pretty much every time. So, if you want to get a hold of me, it's a good way to do it. You can also email me podcast@ajfgrowth.com.

I always love to hear from you about the show. I've had some really good feedback recently, some good questions, some good thoughts. Please send me that. And go to ajfgrowth.com to see everything that we're doing at any given time. And tell me a little bit about your business if you want me to work with you and work for you uh and help grow your brand profitably. I would love to do it. So, go to ajfgrowth.com, fill out the intake form there, tell me a little bit about your business or just if you have questions, problems that you're facing and you need um somebody to look at it, audit it.

Go do that. Fill out fill out the intake form, tell me about it. Big thanks to Wast Knot and big thanks to Rich Panel for sponsoring this episode. Go check both of them out in the show notes. That's it for this time. I'll see you next time.