Fiera Cosmetics' 60% Price Drop: Sales Exploded, Reorders Collapsed transcript

Dan Kernat is the CEO and co-founder of Vera Cosmetics, a mid-eight-figure cosmetics brand that has learned a lot of hard lessons in a lot of areas that I've talked a lot about in this show. Everything from product sourcing and challenges related to operations to incrementality to price testing and everything in between. Really cool story of a brand that is doing really, really well, founded in 2020 in the mid-eight figures, and you're going to learn a lot from Dan and his journey with Vera Cosmetics.

Expect particularly to learn in this episode about exactly the things I just talked about. About price testing gone wrong, some mistakes made there. Expect to learn in this episode about incrementality testing and how that's shaping up in the business now, including thinking about other channels besides just the standard ones that we're considering. Let's talk about affiliates, some of that kind of stuff. And about supply chain operations and how and the kind of mistakes that get made in a business with complex details related to color and all of that.

Let's get into it. Dan Kernat from Vera Cosmetics. Dan, thanks so much for joining me today. I I want to jump right in and hear about your price testing stories. You have told me that you guys in your success have made serious uh mistakes around price testing. I have been talking about price testing for actually a long time on this podcast, and so I want to hear what you did wrong. Um so uh so I'm going to skip the like tell us all about Vera, it's a cosmetics brand, people can look it up, and let's just get right into it.

Tell people all about price testing and your journey with that and what you have learned along the way. Sure. Uh yeah, definitely lots of uh lots of hard lessons probably where some of these grays uh from from come from. Yeah. And you have small kids, you told me, so uh yeah. >> Yes. Yeah, yeah. >> My kids are basically the same age as yours. That's where some of mine have come from, too. Yeah. I like to say, by the way, the number one dad thing is regional, so no competition here.

Uh you know, I'll take the Toronto area. Um so price testing side, you know, it's a big lever that we all have when we're selling anything. And one of the complicated pieces of price is there's the initial conversion rate, there's the initial kind of profit metrics, and then there's the long-term value of the customer um and how it affects reorder rates. And one of the things that we learned um is a $40 concealer customer is not the same person as a $16 concealer customer, and their buyer buying behavior and their reorder habits are totally different.

So first, like coming to look at it, we're like, "Okay, how are we going to measure it?" And we have a fairly consistent traffic cost um and we're like profit per visitor. The product has a cost, shipping has a cost, fulfillment, all those other costs that we factored in. And conversion rate obviously changes. If I sell something for a dollar or if I sell it for 30, you're going to have a a totally different conversion rate.

So we started calculating the profit, and we started just split testing and running through all these different prices. And um I actually have a neighbor who um has a data science company, and he advises Brookfield uh on a ton of their acquisitions, and he like does gas station pricing. So like what amount can you charge for regular gas versus premium depending on the time of day, depending on what side of the road you're on, and always optimizing based on where you'll lose people.

So him and I would run together, and I would always pick his brain on all those testing we were doing, too. And one of the complicated things, he's like, "Ideally, in a perfect world, you're going to want like three rebuild cycles of and if I have a concealer where someone's, you know, reordering every 2 and 1/2 months, then I need, like in a perfect world, I need 7 and 1/2 months of data to really start getting strong understanding of like what is the lifetime value of these customers and how are they reordering?

And in the real world, when you have a website, when you have Amazon, when you have all these things, you can't just have all these different prices everywhere. Like it would cause a disaster, makes angry customers. Um like it it just doesn't functionally work. And so, you kind of have to compress it and and you're getting statistical significance. I mean, we sell a lot of concealer, I think. I think the year we started doing this price testing, we have we sold a concealer every 24 seconds in in 2023.

And um So, we're selling a lot of concealer, we're getting a lot of data, and the price keeps going lower and lower and lower. And we're looking at this, and then our our sales start spiking. All of a sudden, we're in the top three selling concealers on Amazon, and we're in the best and like and and meanwhile, we kind of have to keep lowering, lowering, lowering. We At some point, we like we locked in this price. We decided to go with it.

We started massively increasing our orders cuz now our concealer volume's spiking. We're selling so much concealer. And as soon as we moved that split test live, like literally as soon One of the complicated things about split testing in general is that it's not like everything else is constant. You have these algorithms that are deciding what traffic you get, and based on all these signals they're getting, which now they're getting different signals.

It's different buyers. It's way more signals. And so, all of a sudden, your traffic starts changing. And all of a sudden, our acquisition costs started going up. And the value of the customer started going down. And we also thought at the time like if I give someone this great value, I'm selling them this thing I used to sell for a lot more, I'm making way smaller margins on the product side, but we're giving people greater value, so the reorder rate should be higher, and it was just the exact opposite.

And I've actually done this testing across multiple products, also with my new concealer um that we just relaunched. And I And I just have Every time I've ever tested this, the lower our product costs get, or the lower our sale prices get, the lower the reorder rates get, which I just found to be a really uh strange thing initially to wrap my head around. Mhm. I I think it's such a fascinating story, and it's the reason I wanted to start there, because I have this basic theory, which is that like price has been picked basically out of thin air by a lot of brands.

And and they just they've they've made this decision that has this huge impact on their business and on their margin profile and all these things. But they've made the decision almost totally irrationally. Like they just sort of randomly pick a number almost, you know? And maybe they're looking at competitors a little bit or whatever, but something like that. And And so what you're describing is that once you start right trying to make the decision more rationally, you actually realize how complicated it really is because of all of the extenuating circumstances.

You mentioned two of them at least there. One of them being the changing profile of your traffic based on the price. And another one being uh the changing LTV of your of your customer base on the price. Um and and all of that within this framework where you said you can't just sit and wait 8 months for the actual answer. But I One of my takeaways here is is that um among other implications, it's one of the reasons why I really try to push people in some way towards like don't make a decision on this too fast, even if you do go and test it, because because like you said, like the stat sig details are hard.

There's all kinds of like change about it. If you can sort of limit the variables in your split test, that's obviously better because of for the reasons that you've just talked about, etc. It just is is really complicated. And there is this argument that like excellent um excellent operational work in a company uh on the marketing side will often include split testing. And in fact, one of the things I would say that you guys ended up doing, if I'm just repeating back the story, is you ended up getting a huge piece of knowledge by paying attention to it, which is that it's actually much better for your business.

It cost you a lot of money to get that knowledge, right? But it's actually much better for your business to sell a $40 concealer than a $16 concealer. And you were never going to know that objectively without making the mistakes that you made. So, in one respect, like it sort of worked out in the end, although I'm sure it was very painful and you got some gray hairs because of it. Um but you end up with this really critical piece of knowledge, and that I think probably does shape, I'm assuming and you can I'll let you speak to this, shape how you then approach almost everything about the marketing profile of your business afterwards.

It's like, okay, this is the kind of customer we want. This is the kind of customer we don't care about as much. We'll take them if they come in, but we we but we're not going to go after them in the same way. Um you know, so that means that you got to think about influencer differently, you got to think about channel differently, you got to think about all these things cuz now you're trying to appeal to a certain kind of customer, your brand, all those kinds of things, you know?

So, um it cre- it I love like the process of thinking hard about this sort of thing ends up creating downstream benefits that I think are really, really important. Um but often in sort of counterintuitive ways, right? Uh that that's that's at least the way I would interpret the story that you just told. Yeah, and I'd say the other thing that's really important for people to think through at the outset is to do the math on what those reorders are actually worth.

Because there's the cost of the reorder, which is your product and your shipping and all the in you know, if you have retargeting costs associated with it. And then if you cut your concealer as the example from $40 to $20, that that reorder you have $20 less room. Um and yet you still have the same fulfillment costs, you still have the same kind of retargeting costs, you still have everything else. So, you're making so much less money on all those reorders that it really has to be worth it that you're making extra money somewhere else to compensate for that.

Yeah. I Yeah, it's it's it's There there is no substitute in a consumer product business for like deeply understanding unit economics. It just is no substitute for it. It matters a lot. In fact, I would say it for any business. Like I'm building an agency and we're thinking really hard about like the unit economics and the gross margin profile of a customer for us versus our services. It just Yeah, short-term, long-term, all of that.

I think it's uh There there there is no substitute for it. Um Okay, so you ended up landing on a spot where you're back to 40 bucks. Is that right? Or what or whatever the price is? We sold so much concealer at lower price point, which was a really bad move for our business. And we had to slowly stagger it back. >> What's that? >> When was this? What was the timeline of this just so I can understand sort of the shape of the business.

Uh I think we probably did that in in 2023. We kind of started right >> it's a couple years ago. ended up bringing it down and then we we kind of sold at big scale through the beginning of 2024 and we're acquiring these lower uh these lower cost customers, we'll say. Yeah. >> and then we just started building it back up kind of in increments and then we um did some consumer testing to put together a new concealer that we could bring in that more premium concealer at a higher price to kind of go after the type of customer and where we want to position the business.

Yeah. Okay. So Okay, so Sorry, so you you incrementally came back over that time and the net result now is what exactly? So we have our old concealer that's running at 32 because we didn't want to alienate all the lower cost customers now. >> Sure. raise the price too much. And then we have a new concealer we sell at 45. Oh, interesting. So you just introduced a new product at a higher level. Uh that's that's really interesting.

How has that done? It's doing well. It's relatively new. Um one of the things we do in our business, we have a process called reality testing. Um and what we like to do is get a lot of feedback from our customers. And so in introducing anything new, what we'll do is we'll find a big cohort of customers who love our product, like your five-star review people, and we'll go find your one-star review people. We'll recruit both of them.

And we'll give them like free gift certificates or whatever to come and complete these product surveys for us. And so the idea is, and the idea into going into any project like that, is what can we do to keep all the characteristics about our product that the people who love it love, while simultaneously addressing um what people don't like. And you can't keep everyone happy in in in the real world, you know, but you can move things in in positive directions.

Um and so we do a lot of that uh testing on our end, and and that's something we did with that product to try and uh I I guess bring up our overall star rating on it, and introduce a more premium concealer that we could then sell at a higher price. And that's what you did for the $46 version of it? 45, yeah. 45, yeah. So, what's the um so what what were the improvements? I'm curious, like what what kind of feedback, how precise, how specific did the feedback get?

Uh I think I think people can learn from a process like this, and this is the reason I'm asking. So, what kind of feedback did you end up getting, and how did that actually affect the product? So, one of the things um is our our original concealer, it's called our luxury concealer, is a thicker product. And in general, like our products and our brand is made for mature women and mature skin, right? Which has some different characteristics of making makeup for a 20-year-old, let's say.

Um and how certain products can crease with with uh with more mature skin, or or show up in different ways that people don't like. So, one of the things is that thickness meant that like when people were to use it, they had to warm it up a bit to put it on and it and and there were certain things that if we made it just a bit more blendable, but we kept the kind of coverage that we had in our original one and we kept like some of the attributes that people loved and finding that perfect balance uh or as perfect as we could get it was kind of our goal.

Um and so, yeah, we summarized a ton of reviews and then we recruited all the customers and we kind of briefed the chemists and we got everyone together. We're like, "Here's our exact objectives. Here's exactly what people love about it. Here's exactly what people don't. Like, how do we kind of find the the right balance?" Did you send the new version of it to those same customers? Yeah, well, they approved the new version in the end.

So, sometimes when we do reality testing, we'll do our best to come up with when when we bring it to that point, it's because internally we've decided, "Hey, we have this really great And then they tell us if we're right or wrong. Um and and if they tell us we're wrong, we'll go back and we'll do the whole thing again. We'll do it again until they tell us we're right. Um so, right now we have and we really scaled this up in our business because we're not I'm not like we're thinking long term in how we grow our company.

So, we have over 20 active products in development right now and they're all in different phases because when you do it right, it takes a really long time. Uh so, I mean, first of all, like you have to find the right packaging. And when you when you think you've found the right packaging, you might send it to the lab and you're like, "I want to make a 35 ml whatever." And they go and they fill it up and they're like, "No, this is only going to fit 33." So, just a process of like finding the right container and then getting the branded samples and making sure the colors match and making sure this and this and this.

And then you go into like compatibility and stability and line trials and all these things where you might think this product is great and then you put it in your container and it starts separating in a month. And And what they do is they put it in these like ovens basically to accelerate how fast it'll age because then you can do kind of accelerated stability testing. Um and then if people aren't liking the product for whatever reason in your reality testing, like maybe it's too this, it's too that, they don't like the scent, go back and forth and back and forth.

Then you're redoing all stability. And there's like ocular testing and this and so the layers of it. And if you don't do certain testing, so for example, uh we have a PO with QVC for January. Now, QVC says, "Hey, anything is going on your face, you need ocular testing." Okay? So, I need to make sure that if you're putting my concealer in your face, it's not going to irritate your eyes. And if you get a complaint on Amazon and there's like this like a drip testing where it's basically you're you're testing skin sensitivity.

Um if you don't have that done, cuz you could launch on Amazon and not have it done and then you don't you get one complaint, you're gone. And then the process to go through that, it takes months. So, you like your products just won't be listed on the Amazon for months until you get that it's not irritating skin and you can say, you know, dermatologist approved on your uh product, but yeah, there's so many hard lessons.

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Mostaffing.com/af get started with them today. Did you guys did did you guys have this mentality from the beginning of the business? Like when you launched in 2020, were you this meticulous about product development and were you developing as many products and like I mean or is this something you sort of a muscle that you generated over time? I I'm really interested I'm I'm starting a brand on the side right now and it will go on skin though not on face I don't think.

And and I'm I'm thinking about this kind of thing and one of the things that we're considering is like the sort of MVP version of the product just to try it you know sort of like is there anything here or not? Um and and I've wrestled with this a lot like part of me is like I don't know if it's a real test if we don't like really make sure the product is exactly right. Um but then also you could just do that for forever and like you said it takes a very long time to get great data on this and great feedback on this.

And so yeah I'm thinking about this sort of that early stage person like how has this developed for you guys over time in the business? Cuz at your stage now if I'm thinking down the line and I'm like I want to build a $200 version of Fiera or I don't know what you guys' goals are but like if it's something like that then it's like this is exactly right which is like it's not just about like generating new Facebook ads that's that are going to make your business grow.

It's about developing 20 new products with that people are going to absolutely love you're going to have a clarity unit unit economic profile. Like this is like operational excellence right? This is like how you actually build the thing out of the thing that you want to build. But but I'm curious like sort of how that has developed over the timeline of the business. I think it's like anything at least in my life right?

Whatever it is you pick up running you don't start as an excellent runner right? Like when you first learn how to do media buying you didn't start as an excellent media buyer. You make so many mistakes right? And and you learn from them. Hopefully, you learn from them. And And ideally, what you do is you can try and recruit the smartest people you can find to help you do certain things. So, certainly, we made all kinds of mistakes.

And I think one of the things that we've always been good at though is like understanding the limitations of our own knowledge and where we need the most help and what we're good at and what we're not and um for example, at some point like because the original packaging we had kind of done and it it wasn't the prettiest packaging. And we're actually in the at the final stages of a rebrand. So, you can actually see both our older and newer branding on our site still as we kind of work through the last of our older branded products.

But, one of the things we did is I'm like, our internal team may be great at buying, you know, ads on meta, but we weren't seasoned professionals in creating packaging for, you know, 60-year-old women. And so, what we went and did is I found um the people who had grew the origin brands under Estee Lauder. And one of them actually specifically did the whole study for all those brands globally on how they weren't meeting the needs of mature women.

So, from the writing on the packaging to the, you know, sensorial experience to what ingredients are in and how, you know, mature skin's different. And we went and found these like really exceptional people that help augment our team. And you know, worked with them to say, "Look, these are our goals. This is what we're trying to do." And then they, being from that world forever, brought in all these incredible relationships, too.

And, you know, amazing chemists and labs that would work with us to develop what a lot of these new products are. But, uh without question, we didn't just start that way. It It became that way. We proved the concept first. Before Fiera even started, we had just sold some concealer. Um We ordered some concealer, sold some concealer, proved the concept and went from there. That makes sense. I I like that running analogy quite a bit because I think it's a good It's sort of the way I've thought about it with this brand I'm starting is like you know what like no matter how perfect I try to get it until you actually start going you're just not going to you're just not going to do that.

You need feedback, you need bad reviews, you need all those things, you know, and you learn over time and and mistakes in an earlier stage of business don't compound too much actually because it's really hard to make the product so bad that like you can't get out from under a few early bad reviews or whatever. Um I you know, I think. We'll find out I guess, but but I but I I think that's the case, you know, if you if you're just sort of trying generally.

But the idea that then you would just develop that muscle over more time, I think uh I think is is really helpful. Um let's let's actually talk about the operations and supply chain side of things. Wait, actually I do have a running question for you first. Are you Are you you're a serious runner now? It sounds like. No. Uh I would I would say I I did it I did my first and only marathon last year. Uh Mhm. and my body has when we're done when we're done talking today I'm going on a run with one of my brothers.

Um but uh my body has since told me it does not like running that much and so so I've been listening. So I I I'm trying to keep running though. >> But Yeah. One of my primary fitness goals in life is to never run a marathon. So so far I'm doing great. So yeah. It's a decent strategy. My body would agree that that's a that would have been a good goal. Yeah. One of my other ones was to never do a cold plunge, but then my uh my business partner invited me to his house and he has a cold plunge and so that one I didn't I didn't achieve.

I ended up doing a cold plunge and it was it was tough. I don't know why everybody's excited about it. Uh it wasn't as bad as I thought it was going to be though. Um the the uh the I want to talk about the operational supply chain side of things a little bit as well. What what has been critical for you guys? I mean you just talked about I mean it sounds like new product development when I hear 20 products in development as it is a big part of it, right?

So and that's its own beast, the NPD, right? It's like it's a there's a all kinds of elements of that process including sourcing, manufacturers, and like you said, like you know, you starting to source the the the packaging manufacturers and you and especially with something you're putting on your face, there's testing and all that kind of stuff. I'm curious as to hear a little bit more especially with the attention that you were talking about paying to unit economics sort of like how if there's anything you could say about how you've weighed out the various priorities in the supply chain process.

On the one hand, there's like there's a one strategy that's sort of like test as many products as quick and fast as possible. It sounds like you guys want to be careful about that even though you also have 20 going at a time, build a big pipeline. There's like a get to the get to the MOQ and then and then uh sort of optimize over time mentality. There's a prior Some people who will who are making all kinds of decisions about trading off something like net terms and cash management relative to relative to unit cost.

Some people have different priorities on those things and essentially financing the unit cost in different ways. So I'm just curious again as a company that's launching that many new products and and just by definition a cosmetics brand, you got little variations in colors and things like that that are part of the process. Talk to me big picture about the way you guys have thought sort of strategically about your supply chain and then maybe we can hone in on wherever you think you guys are great from there cuz we haven't talked about this before.

So I'm curious where your mind will go with this question. Sorry if that's too broad. No, no. It's it's fine. Um So you're right, there's a lot there even when you look at an existing product and you take something like concealer. I have a shade of concealer. I I have two shades where there's one that I sell 2,500 of this one shade for one that I sell of another. Like if you take my most popular and least popular shade, so if you think about inventory planning, right?

And then let's say you're launching a new color and and meanwhile, you know, no nobody wants to make, you know, a thousand of something or 500 of something. Even if my order we bought I'm ordering 300,000 units of of concealer, the fact that I'm I'm using 2500 of one shade for one of another right there. Just like makes that one shade non-viable for most people to want to even make. Um but yeah, when you're launching any new product in general that has color, you don't know what the color split's going to be.

So there's all kinds of complications around it and based on who your audience is, you can you can kind of make some educated guesses uh as to what they use or you could even look like for example on competitor brands if they have the same kind of customers as you on Amazon and figure out try to figure out like what exactly they're selling per shade of what kind of shade ranges to try and make a more educated guess as well.

But in general, one of the things with a brand like this is the greatest value the brand has are the customers. Like that's what It's not, you know, our inventory or it's not anything else. It's that over time we have built up a group of loyal customers because we take care of them. We have great customer service. We try our best to make sure that we're only selling the great products that were made for them. It's why we go to such lengths to test our new products and of course we get stuff wrong um and and we're not perfect at it.

But you know, the problem with from our lens just quick launching stuff. So in general, what you could do, you could go take someone's off-the-shelf products, not make your own products, not develop anything, and just start testing things out. In the context of trying to build value in a brand, you want to own formulas. You want to own your products. You want to create products, not just cuz there's manufacturers in the world that make products for lots of companies that all sell the exact same product with a different label.

But if you're actually trying to create value in a brand, um that's not the greatest route to go. And sometimes people will do that and customize it later. Um but we just felt like we can have a good enough product team at this point in our business that if you have enough in development and knowing they're going to take a long time, and knowing you're going to have stability issues on this, or this packaging's not going to work, or whatever it is, we can still at a good cadence moving forward starting now.

Like we've been We've been doing this and it's taken a long time. We have a really good release cadence over the next 12 24 months because we have built this pipeline now for so long leading up to this point. Um and in the economics of keeping your customers happy, if I just start selling a ton of bad products, people aren't going to trust me anymore. Right? And then when I launch something new, they're not going to want to buy it because they would think, you know, like I can't trust what these guys are selling.

They're just putting any product out there. If we take our time with it, then when we do release a new product, then right away we can have a huge uptick. The margins, the customer acquisition costs are very high. Any brand that sells in Sephora, as an example, Sephora has taken 55 points off the top, okay? So you're So from the $100, there's 45 left. Now, of the 45, it's not just product costs. The The company has to pay Sephora to advertise like to advertise to the customers out of the 45 that it's in the store.

Then you have to send people in to train the reps, right? Because the someone's going to walk in and say, "What moisturizer should I use?" Right? And and they're going to say, "Oh, you got to try FARSÁLI." But the only way they would ever say that is if you train them to. So, when you work it backwards, the margins in cosmetics, if you just looked at what the product cost and what it sell for, seem really high. Um but the only way you can capitalize on that from your existing customer base is if you maintain trust.

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That's why huge businesses like Ridge and Pela Case and Loomi are using Richpanel for their businesses. Those businesses are bigger than your business and it is good enough for them and so it is not a problem of scalability or something like that. Maybe another reason you might not switch, right? Is that it takes too long and that you're thinking like, "Oh, it's going to be this huge job and I got to switch over my whole thing and retrain my whole thing." Richpanel actually promises to get you transitioned to their tool in 2 weeks or less.

They are well aware that you do not have time to waste. There are more important things for you and your team than just like endlessly trying to figure out how their customer service tool fits into your business. And so they make it fast and easy and they hold your hand and get your team trained through it. Uh it's just one of those things where if you care about running your business really well, where you care about running it lean operationally, where you care about having a great experience for your customers, where they also, like I said, see a 30% reduction in tickets because the customer self-help portal that Richpanel provides is so good.

When you look at all those things together and man, they've also told me, I was with their CEO Amit recently and he was telling me about what their product roadmap is going to look like, some other really cool stuff coming down the pipe for them. When you just look at the whole package together, you should at least be considering it. Go to richpanel.com or follow the link in the show notes. richpanel.com, tell them I sent you and and see if it's the right tool for you.

I think it's going to be for a lot of brands. Go to richpanel.com and get switched today. That is a really good answer to the question because what it ultimately does is it works backwards from where value in the business gets created. And what I hear you saying is value gets created with repeat purchases. That's where the value is in a cosmetics business. And that means that everything about your process ought to be about finding ways to generate that.

And if you can do that, then um then you can have a really successful business. But to do that, the key is having great products. And that it means you don't screw around with anything that's going to screw with that because that is the thing where the business is because there's so much in the way of upfront costs. When I think of your Sephora example, it's like, well, the the thing that Sephora has, right, is reach.

Uh and so the reason you would possibly sell in to a uh company like Sephora, despite the margin profile you described, is because that so many customers are shopping for cosmetics at Sephora that if you can get in and be successful there, what it will create is reach and repeat behavior. If I if I buy all my makeup at Sephora and I like Fiera, then it's going to probably be a break even or a loss net of all the costs for that customer to you guys, to Fiera, uh ultimately, uh on that first purchase.

But if they're going to go back and rebuy it over and over time, then all those training costs up front, all that kind of stuff over time ends up working out just fine and, you know, ultimately paying 55 points of margin if it's Sephora, yeah, it's not that much different than paying Zoc, uh, you know, uh, for the reach. So, um, so yeah, so but in all of those things it's the same it's the same calculation, which is you make all the money on the repeat purchases.

And, um, and so, so designing your supply chain and optimization towards the value creation of the business is, I think, uh, is I think really good. And now, that was the way I just retold your story, but before I move on to the next thing, let me just pause there and see if you want to actually correct the way I retold the story or add anything to that. No, no, look, I think I think it was a good summary of it. I think, look, you you you got to maximize the value of your customers, which means you sell them stuff they like, you take care of them, you don't betray their trust, you make sure they're you're fair to them, and you make them love your brand.

So, when you come out with something they they are excited to try it, they trust it, they'll tell their friends about it, and and you're that's ultimately the biggest value you can build in a brand. I have one side lesson that I would I would caution people >> please, please. So, we started this process. We we started getting clever. Like, we started to think we were really smart when we were doing the rebrand. We were like, "Let's think up these smart names for every product, okay?" And so, I was I said moisturizer, and I have trouble saying the word moisturizer now because we made a product called moisturwiser.

And I and I, um, and I I mix them up all the time. But, moisturwiser, we're like, "That's such a smart name. We sell to mature women like wisdom, like what if you go into the brand story, it works great. We have this moisturwiser, you know, and then I would start trademarking. I have like I have so many trademarks and in so many countries. Like, I could go on a side rant of trademarks and the the wild trademark wars I've been in for different ones.

You know, in when we were emailing in prep for this, actually, you were citing you were saying like here are the things that we could talk about. You said trademarks and product names was on your list of things you could talk about and I laughed to myself at that because it's like I've never I've done hundreds of interviews this fight. I've never had somebody bring that up as one of the things they could talk about. You know, so you know.

Well, it's cuz I been through so much. I I went through a year. >> I went through a two-year trademark battle to get the rights to use the Fear trademark in Europe. Uh that was a wild one actually. Crazy. But anyway, you type moisture up type moisture wiser into a search engine or into Amazon, what happens? It auto corrects. Right? And so They're like The the worst idea >> even think about that. Yeah, yeah, yeah, that's so funny.

Yeah. Thought it was so smart. I'm like this is the greatest name we've thought of. Um it's not. Yeah, that's so funny. Um yeah, gosh, I love that. Uh Man, uh I want to come back to actually the point just one more thing about the retention question and the way you framed it which is like you take care of your customers and you don't betray their trust. I have a little theory in my mind uh that I've sort of been kicking around which is that um Let's get very broad semi-philosophical here for a second, okay?

Um many people if not most people will uh basically assent to the idea um that sort of love is the most important value in the world. Uh and I mean that in a very personal way. Sometimes they mean that in terms of like, you know, you got your number one dad sign which is a little mark of your like kids' love for you and stuff. And it's it's like I I you know, I have small kids. It's the most powerful wonderful thing.

And not every relationship can be like with your relationship with your kids, right? Or your wife or something. But like the um this this notion of um this notion of like the importance of love in the world. I have had this little idea like I wonder I wonder if more brands ought to think actively about not just like how do I take care of my customers, but given the constraints of the relationship, which is a business and a customer, so it's not going to be like a relationship with your spouse or with your kids, okay?

But still, with given that framework, what if brands sought actually to love their customers, you know? As the way they thought about this and into, you know, I actually really like the phrase you said, to take care of them, you know? Or to care for them or whatever. Like I I wonder if that would not only, I'm sure first of all, you sleep well at night knowing that you guys are taking care of your customers and that you're not selling garbage to people.

Like it's very clear when you talk about this that you really care about that. And for me, at least I just I like that feeling. I like that feeling of like doing work that I'm proud of. So, it makes me feel good, which is good. But also, like I actually wonder if that would be sort of business-wise would be like a strategically smart to actually really have your whole team ask that question, to go like Okay, we we are at every step of the way going to really do our best to say like this is a human being on the other end of this transaction.

I'm going to love them and care for them. Again, granting some limitations in the relationship like something like that. So, anyway, it's just like a little thing I've been kicking around and and your story there is like sort of confirms that idea to me a little bit. That this idea that would be like we all sort of recognize there would be some value in the world if people behave that way, but maybe there's a way within the framework of this relationship to do that, you know?

I don't know. Well, I like it and I think Yeah. the other thing, one of the things I like to say about performance marketing is like performance marketing at its core is performance listening. Like you're listening. When you you come up with your you don't tell your customers what the best ad is or the best angle or the best whatever. They tell you. >> It's really good. You you sit with your team, you find the smartest people you can, and you come up with all the best ideas you can, and you put it out to the world, and the world gives you data back, right?

And that's how media buying works, and that's how Sierra works. And that's how whatever works. That's how companies work. And like I just apply that and we apply it internally to everything in a company. It's like I'm not telling you what the best product is. That's the whole point of reality testing. It's like you're going to tell me what the best product is and I'm just going to listen to you. And I'm going to listen to you when you complain and I'm going to listen to you when you're happy.

And I'm going to listen to all the things that you tell me. And I'm not going to be like fixated my mind on here's the outcome we have to get to. I'm just going to let you guide me there. And like I'm going to sit around with the smartest people I can find. I'm going to try and plug all the gaps in my own knowledge with incredible people around me. And then I'm going to put it out there. And I'm just like water rolling down a maze.

Like you're telling me where I'm going, not me telling you. And I'm going to listen the whole way. And if I do that and I allow that to happen in every part of my company and allow people to challenge everything in in our company like always. Like anyone who comes to our company like always encouraged. Like it doesn't matter whose idea it was. It doesn't matter who thought it up. Challenge everything all the time because it's the only way we'll ever be better.

Mhm. Yeah, that's good. Um okay, I want to move to incrementality testing a little bit because you mentioned it again when we were sort of talking emailing ahead of this this interview and it's such a hot topic right now. So um tell me what you guys have learned um from some incrementality testing at the stage of business that you're in which I think is part of the really interesting thing here mid eight figures. Um what are the what are the what are the highlight takeaways from your guys incrementality tests and and what are you what are you still learning?

Well, I mean to start with I think we've learned that we have a lot more to learn. Um as as the opener to that. Um It's tricky. It's interesting. Going back to um the new concealer. So we did a we did an incrementality test on meta uh when we started running our new concealer. And we wanted to figure out the best price. So, initially we started doing some price testing which was giving us the exact same results as the last one we did and so we stopped.

Um and what's really interesting is we weren't selling it anywhere else. It wasn't even on our website. We were only running offsite funnels to try and figure out what we should sell this for and we were starting to do this incrementality test. And running that um the halo effect of that running on meta was increasing our Amazon sales even without that product being on Amazon. So, I think people were seeing that and then going and buying our old concealer or going and buying, you know, other stuff, but it it was uh just for a totally unrelated product.

The the halo effect I found of that one is really interesting. >> If this is sort of too proprietary that you don't have to share it, but um can you say what the halo effect was and maybe maybe the way to quantify it would be like cuz this is a this has been a question for me for a long time and I've seen some tests and I've got some ideas around it, but if you generate a dollar in revenue on your website, uh how many cents do you also get on Amazon uh with the incrementality test you were talking about?

I can't Again, I I I can't I I It's It's and I'd be happy to share. What I'd say is this. Amazon represents about 20% of our total sales. Okay? Plus minus. Most of that is driven, like almost entirely driven from our paid ad strategy online to our site and it's like all kind of halo going going to Amazon. It's so heavily correlated. Like if I turned off our our meta spend, it just plummets. Uh Yeah, and you you have the added complication there of the fact that some of that Amazon revenue is repeat revenue, right?

So, uh exactly like how much of that is actually new customer off the back end of your of your meta or YouTube spend or whatever you're spending, you know, is is still in question. But, that 20% number, all other things being equal, is about what I usually see, especially for meta-heavy brands. And and it's almost exactly where I sort of make the forecast adjustments for clients of mine, which is like, "Hey, if we spend a much more money on meta here, here's the the lift I expect on Amazon." If I'm just doing like a vibe incrementality test, you know, sort of an unscientific uh approach to it.

So, yeah, I think that makes a lot of sense and uh and it is really important for brands to get that straight if you're selling on Amazon, because if you're if you are only assigning credit to your website for uh for your meta spend in particular, first of all, you'll you'll underrate your YouTube spend in particular. I know this is like a lot of incrementality studies have shown this, that sort of like YouTube has a higher halo effect on the Amazon for a bunch of reasons, but for even for your meta spend, first of all, if you add Amazon as a channel, it's very likely going to have both an added effect from meta, but also some cannibalization.

So, you have to be able to measure both of those to see that it there's there's incremental value creation or and then also some And then so, you just got to know it's going to change the way things are going. And then, you also have to think about it in terms of the true value your media spend is creating, which is like, if you only measure on the website, it's like, well, you should actually be recognizing like, I don't know, maybe there's more ability to spend based off of Amazon.

And again, in a business like yours, especially net of it LTV, you know, that that is just worth considering. So, I I mean, that's my take on it. Do Would you add anything to that in terms of what you guys have learned from that? Um no, I mean, I totally agree with you. Like, and attribution now is really complicated. And by channel, you really have to dive in and and other than doing incrementality tests, like we have uh we have triple whale.

Uh and the multi-touch attribution to us is like totally useless. Like I can't take that data and make real decisions and trust them. The MMM results are better and I feel like like they're lining up with our intuition of what we think's happening in in more places. And then when we start layering on the incrementality tests, I feel like that's the only time we can truly understand what's really driving and and Meta's incrementality was actually higher than we were seeing, you know, in Tripleway.

Versus like, um, you know, we did a test of AppLovin or Axon now and and, um, that was lower. We actually had to pull back that spend. Although it's actually doing better for us again, um, right now and and picking back up. But just like understanding that multiplier of looking and being like, here's what the platform stats tells me, here's what Tripleway tells me, here's what incrementality is telling me, which I'm going to hold as my gold standard.

So then like what multiplier basically am I or subtraction, or division, whatever am I putting on platform stats and Tripleway, and how am I going to look at this to try and make short-term decisions uh, of how to, you know, modify our spend. It's It's It's tricky. I see almost no evidence that an MTA is valuable at all for brands. Uh, I think it's mostly misleading. Um, I see mixed evidence to limited evidence that an MMM is very useful.

And I I and I think it's basically like for me, I'm at a point I I've never really used attribution software and I've sort of suggested others do the same. I It's not a shot at any of the people building, uh, like my sense of the Tripleway, Northbeam people. They're hardworking, really trying to serve their customers, all those things. But for me, it just seems like it was really a potentially useful tool in the iOS 14.5 aftershock, like in those early days where it was the only thing that could point you towards truth.

But now I just don't I think it's sort of like platform numbers, the bank account, and incrementality tests, and that's basically what your attribution stack is Uh, and then almost anything in between there has a real chance of being misleading and in fact one of the problems with attribution tools in my view is that they they have high conviction on the things they tell you right they give they spit out a number and and if that number's wrong it becomes very hard for me for me mentally to shift away from it I'm like well that's what the number says you know even though everybody knows that's the case with the platform number they all recognize that there's view attribution in there that's screwing things up and you use 1728 a click and that I like whatever you know what about last click versus other things you know it's just all of these questions and so it's just like whatever people want a source of truth but if the source of truth is like potentially lying to you then it becomes a bigger problem it's almost like your your price testing story where it's like you're seeing the profit per visitor go up and up and up but actually if that's telling you with a lot of conviction something that's wrong it ends up being really costly and so that's where I think you're the way you just framed up how to use all that stuff is good Olivia Corey from House you know incrementality tool a while back so the way that they like to to think about this is like the MMM creates the test and then the the incrementality test validates it basically so the MMM ends up giving you the basics of like how to think about the test I would say because it'll be like oh here's a suggestion the MMM is saying this is happening now here's the now that will give you the next thing to test my own view on this is that that's even probably still unnecessary but but that you could just sort of skip that and go straight to the sort of just looking at channels and and maybe the more complex and if you guys get to 200 million like I said or something like that you know then maybe this becomes something where man you just have to have those tools but I think for the vast majority brands especially earlier stage than you guys are at um it's going to be a drain on on your time and attention so those are my words not yours you don't have to settle all that but but yeah Dan we only got a couple minutes left I'm curious if there's just any last thoughts any the The way I like going this question is any very top of mind things for you and your business that you think are helpful for people to hear, or things that you're thinking about, or just like big lessons that you go, "Somebody listening to this running a business, this is the thing that I want to tell you that is the most that will that will help you, that's most on my mind, or that I've learned the most over time." If not, it's okay, but Um Well, I mean I I I think we covered like take care of your customers.

I think that's a great starting point. You're saying what's like the biggest thing I would say to say to someone is that in in the era that we're in right now where it's so competitive to buy traffic, that's how you're going to live and die as a business is by leaving a good impact with the people you sell to. Um top of mind other things, you know, I mean like for us we're always trying to diversify our If you have a heavy table with one leg, right?

If people's business is just living on meta, that that's one thing happens. And there's so many businesses um that have been impacted because of that, right? You can't have single sources of failure like that. So, you know, it's been a big thing we've been working on is is just continuing to diversify our channels, and you know, affiliate being one uh cuz that's what a lot of my background was in was affiliate marketing.

Um and so the era was like it was all internal traffic basically for the lifetime of our business until more recently when I was like, "Hey, let's prioritize the affiliate channel." And then understanding incrementality ties into that, too, cuz there's so many garbage affiliates out there. Um And I think that like And when you look at that, there's different kinds of affiliates, too, right? There's like the your impact style, like has that kind of spread, but the older kind of uh performance-based affiliate world, there's big media buying and marketing teams that sit there and buy traffic to brands all day and do, you know, tens of millions of dollars a month in sales that if if you have the right connections and can kind of get with those groups, it can become inner pages that actually convert where people are willing to risk their own money sending traffic to your brand, it can be a great source of uh diversity.

Awesome. Um well, that means that the next time you come on, we're going to have to do just affiliate deep dive cuz I think that's something that has been elusive to me with brands that I've worked with. It seems like it exists and is real and can make a bunch of money for brands, but I've never seen it really cracked in a business that I've worked in. So, I would be I would be grateful to learn from you on that. We'll just to just break down all the details.

In the meantime, Dan, thanks so much for your time. I appreciate it. Is there anywhere at all that you want that to send people to? Are you sharing thoughts anywhere on the internet or are they just going to have to uh subscribe to my podcast and wait till you come back? I think they're just going to have to wait till I I've never even done a podcast before, so, you know. Well, you did great. Thank you very much. This is awesome.

Yeah. Big big shout out to my friend Sam Mendelson for connecting us. Uh I was asking Sam from Work Space Six, uh which is sort of an occasional sponsor of the show, I was asking Sam like, "Who are the people you know who are just like killers?" And he said Dan Carnahan uh from from Fiera. So, uh so, I'm grateful that uh he connected us. This is a great conversation. Thanks a lot for your time. Yeah, thank you. All right, if you notice there's a giant Andrew face in this episode, it is because I'm finally upgrading my camera and I'm in the midst of sorting some things out and I got a lens that's maybe a little too close.

So, we're going to see how we solve that in the future. Maybe we'll get a new lens. You know, the office is not that big, so, we'll see. Anyway, giant Andrew face for now. We'll see how long it lasts. Uh thanks so much for watching or listening today. I hope you do like this episode, comment on this episode, subscribe. I loved this conversation with Dan. Dan and I have not met before today. He was introduced by Sam Mendelson as I said at the end of the show and I really loved talking to him.

I thought there was just a I learned a lot. Felt like I was stimulated in a lot of ways um from that episode. So, um so, yeah, I I hope you enjoyed that conversation as much as I did. If you have thoughts on it, please do comment, like I said, but also email me at podcast@ajfgrowth.com. If you're interested in working with AJF Growth at some point down the line, you can sign up to join our wait list. We're not taking any more clients through the end of this year right now, but go to ajfgrowth.com, drop me your name, drop me your your information in the intake form there, and let me know what your business is looking like.

I might have a recommendation for someone to work with, or I might be able to say, "Hey, you know, this is this is when we're going to open up." I think I think it's it's worth your time either way. Maybe there's a conversation to be had about what can be done for your business, even if we're not the right to do it. So, ajfgrowth.com, that's where everything that I'm doing is ultimately hosted. Of course, you can follow me on X at Andrew J.

Ferris. I'd love to talk to you there as well. Thanks so much for watching or listening. I will talk to you next time.