Which Product Should You Advertise Next? transcript

[Music] you sell a bunch of products which means you need to know and need to be able to think through which ones to advertise next which ones to focus your creative efforts on next that is a crucial question in your business if you sell multiple products it can be really hard to know where to put your creative effort which product should you sell should you be trying to sell more of should it be your most popular products should it be a product that's not moving as much so you can diversify your product mix a little bit more what about a high margin product that's slow mover all those kinds of question all those kinds of factors are important in considering where to put your creative efforts next because creative efforts are not endless a creative uh budget is not endless creative time is not endless so you got to think best about how to allocate your creative time and effort and dollars in your product portfolio and your product mix and your brand so today on the show this is a massive issue that really is important for determining the success of your business it's sort of a hidden issue in a lot of businesses and I'm going to tell you think through how to prioritize your creative efforts and budgets across your products give you a heuristic a rubric to use to think through that question but thanks so much for listening to for watching the interferes podcast I'm so glad you've joined me today let's dive into the question where you should put your creative efforts next which products should you advertise next I hope my framing of that question makes sense the basic idea right is that you've got a bunch of products that your brand sells and I've dealt with us with a bunch of different brands Brands there's a sort of some brands have one core hero product and they're all always a little nervous that if something goes wrong there at the market level or if they get suddenly get a bunch of better views and something happens there or inventory this is a really common problem you run out of inventory on the product and suddenly you can't advertise other productsc you can't spend any advertising dollars because your hero product now can't be sold and so suddenly your budget goes from $5,000 a day to $1,000 a day and it screws up all your forecast and all those kinds of things because something went wrong with your manufacturer you just didn't inventory plan well or whatever there's this question comes up all the time and so for all kinds of reasons Brands need to be able to Think Through where to put their creative efforts next and then there's a lot of questions involved here because it depends a little bit on what the goals for your business are and some of those things that are really specific and that I can't answer in the aggregate but I was helping a client think through this question for their business and they were actually thinking about it at the aggregator level they were thinking okay I they actually have multiple Brands and so they had to make some deter ations about where they could where they ought to effort their creative next because there's creative resources are limited right you only have so many dollars you only have so much time you only have so many people to work on your ads and so if you're going to run ads or even really anything you do send emails or generate organic content or anything like that how should you determine where to put those efforts well it sounds in some ways like an easy question right because the answer is wherever they have the most potential impact but that phrase wherever they have the most potential impact is is where the problem is because how to answer that question determines is determined by a number of things so today what I want to do is is just walk you through a few ways to think about that question the really the impact side of the equation if you think about advertising there are two sides of the equation there's the cost side and the impact side and what you want is to minimize cost and maximize impact the gap between cost and impact or maybe instead of impact saying the value you create so cost and value the gap between cost and value is profit and and so if you can minimize cost and increase and increase the value then that's going to generate more profit in your business so how do you think about that value side of the equation I've spent some time a lot of time on this show talking about how you minimize the cost side of the equation right that's where bid caps come in that's where having creative Buckets come in that's where ugly ads I just did an interview with Barry hot you can go back and listen to that that came in there's a link for that in the show notes but like I just think I have not done quite enough on the question of what about what about value how do you how can you determine which products are most likely to create the most value okay and so I'm going to give you a few steps today I'm going to give you five elements of your products that you can use to think through and and maybe what you do is sort of grade these on a scale of one to 10 in your business if you're trying to determine where to put your effort between three products or something give each of them a one to 10 grade on these five metrics okay and if those if the if you've got a product whichever one has the highest score just do this whichever one has the highest score on the combined across those five areas that's the one to put your product on next okay so 1 to 10 grading these five areas of the bit of of your products and then and then Focus there next okay number one margin this is the most obvious okay this is the most obvious place to put to put effort if your product is high margin you should consider running ads toward that product because the game is a lot easier if you have more margin dollar to play with imagine product a has 80 points of landed margin it's very cheap to ship right cheap to make cheap to package cheap to ship Etc nothing else about the product besides that if between product a and product B where product B has 60 points of margin let's say versus product a has 80 points of margin knowing nothing else at all you ought to put more effort into product a because the very simply right now I can uh perform at a lower return on ad spend and generate just as high or even a higher return and so margin is the most obvious place to look in your business and I see this all the time where brands have have multiple products with really different margins and they don't actually think through this very well they end up blending up an average margin across their entire portfolio and think like okay this is our margin but actually it's possible like and this comes to the question of like Rass Target out account people will say what Rass Target should I have well it just depends right if product a has 80 points of margin and product B has 60 points of margin all of things being equal product a has a lower row ass Target than product B because again you get the same return and so this sounds obvious but think about this care carefully in your business there's all kinds of elements of it sometimes also a hidden element of margin is that if you could sell more of the product you could also make more of the products when you manufacture it and you might have price breaks in doing that so not only can you get more margin or not only do you have more margin now but if it's a high margin product it's a slower mover or even a fast mover right it's possible that you can actually get more margin later as well by doing higher volume there and so there's sort of a secondary margin benefit to generating more sales on the same product just because of economies scale so margin is number one that's really obvious make sure you are considering that if you have not already Well yeah if you've not already signed up for my email on my website go do that I'm the email pop up on my website promises for essentially Commerce resources one of those is my unit economics calculator that you can use at the product level to calculate your margin and even your targets across across the board so go check that out go check out the unit economics calculator I honestly I don't even send a lot of email like I in fact I don't know if I barely basically ever sent an email to my list about much but you can go get that free unit economics calculator that will help you determine this for different products all the way down to the level of like returns and merchant account fees all the things that go into your landed margin to your customer so margin is number one number two lifetime value okay so this is sort of part of margin in one respect because it's connected to it but actually is a little bit different it's essentially margin over time right and so LTV lifetime value of a customer now you can measure LTV all kinds of time windows and there's all kinds of secondary factors here related to cash management and some of those things right you might have a a product with a lower long-term LTV but a higher LTV on a short window and maybe that's more important to you because you get cash back faster Etc I tend to look at this on a one-year LTV basis but but have conversations about cash Etc but again all of the things being equal higher LTV is better okay and higher LTV products ought to eat up more of your Marg time so I was an extreme example of this I was just talking with a brand that has put lots and lots of their effort into a very high margin very low LTV product okay and so it looked to them like it was the place where they could generate the most Facebook sales because it was very high margin let's call it I don't remember exactly but let's call it 75 points of margin landed at the customer okay pretty high margin product so it looks like a great product the problem is it had almost no LTV the product lasts forever works great and you don't need very much of it at a time and so and so it the because of that it it basically generated no LTV I mean maybe a little but basically none right on the other hand they had an they had another product actually a series of products that were much worse margin like 50 points of landed margin to the customer so significantly less if you only went off your the first thing I said here margin only you would easily pick number one but this second product customers went through it really fast it had like 300% annual LTV so if I spend a dollar today I'm generating another another $2 over the rest of the year right like just a huge amount of LTV and therefore the potential contribution margin that this product could generate was way higher than product a and and so product a would really need to would really need to generate a very low Rass to get anywhere near the contribution margin of product B and that difference is really significant because over more time if you've got a bunch of LTV you can generate way more contribution margin in your business now there's all kinds of problems with doing this related to forecasting related to cash management Etc okay so this can be tricky for you if you want to get a sense of kind of how to think about this in your business like go listen to either of my interviews well go listen to my interview with Jack ruin I'll put the link in the show notes for that I actually don't know if my second interview with Jack Rubin will be released by the time that this comes out so so at least one interview I have with Jack Rubin maybe two and if I have them both I'll put them both in the show notes to to hear somebody Express how to think very well about LTV in your business because if you can unlock this and measure it carefully it can be extremely powerful and you can generate way way way more money um for your brand by investing in higher LTV products in fact this question is so significant that I I actually watched a brand really specifically put way too much effort into Pro into one product when they should have put it into another and just didn't realize that they were just going to have a much harder time actually generating the same level of contribution margin in the business because of this and it was all about that margin question I've seen this in a number of places happen the same way and so make sure that you're thinking carefully about LTV in this process in some ways what both of those two things are getting at is is this question of contribution margin right contribution margin measured as uh Revenue minus ad spend minus cogs okay so Revenue minus all variable costs associated with the business and that's net landed cogs it's everything associated with getting a product of the customer however much money you have left over is the is is the is contribution margin and and measured over time that's the LTV consideration here and so you generate a bunch more contribution dollars over time because of that another way to think about this is like almost like you're investing in different products in a or investing in different equities in a portfolio right if I can get a a 100% return on my money for product B when I can only get a 20% return annualized on my money from product a then product B is the place to go right it's just really clear now the thing is you may realize more of that 20% Upfront for product and so that's the reason people go there but if you sort of think about the the product again as like an investment vehicle then given more time and given sort of an annualized return you could sort of think through the question of where to put your time in fact I really like this way of thinking about products in general is thinking about them as investment vehicles every product you sell is an investment vehicle when you go order it from your manufacturer when you go advertise it you're thinking about it in terms of where can I maximize the return on my money just thinking through that rubric really helps right and so that's the idea of contribution margin over time margin and LTV make up a lot of that okay now look again in some ways it sounds like that could be everything you need to know about how to think about where to put your products okay however that that is not everything you need to know because there's actually a few other factors that are a really significant deal here and the next one I want to talk about is total addressable Market okay Tam Tam Tam total addressable market and I want to think about that at the product level Tam is the notion that a certain product May inherently have an ability to reach a much wider audience than another I'll tell you I've considered a product I've considered starting a brand around a product that has very high margin and pretty good LTV so far as I know and the whole thing that is keeping me from starting this brand and launching this brand with this product is that I am not sure there is much tamam there essentially I would have to do the true work of creating demand for this product in a way that could make it really tough for me to actually get any meaningful scale in the business like I bet I could sell $500,000 to a million doll in Revenue worth of this product I'm not sure I could get it to 10 and I'm not sure I could get it to much above that I'm I think I could maybe get it to five but I as I assess that question that is the whole issue for me is like oh could I really get it there or is it like two or three max in which case is that really worth my time or else there just some other places to put it even though it's high margin decent LTV I think it's just a challenge because there just not that many people who use it and I'm not totally sure sure I could convince them to start okay and so that question ends up playing into tons and tons of Brands decision- making how many people are there really who are going to buy this product is the advertising job going to be drastically harder because there are just not a lot of there's just not a lot of demand for the product in the marketplace people sort of underrate this element of meta ads that meta ads in some ways is actually I mean it is a demand generation platform to be clear but it's kind of also a demand capture platform like don't miss the fact that it's the moment you start getting served an ad for one product right or you go start searching around for one product what happens meta serves people on Instagram and Facebook adds for a whole bunch more similar products right competitor products in the same space you need to add members of your team who are good quality employees people who can make a real impact in your business and yet you also want to keep your business lean and you want to not pay too much for that in a way that eats away at your profits this is a classic problem for every business but if you are in e-commerce you should do that you should solve that problem by working with my friends at more Staffing more Staffing is a recruiting agency that helps you find like recruit uh onboard train and ongoing provide ongoing coaching to incredible e-commerce talent in the Philippines where you will be paying top dollar relative to Filipino salaries which will attract incredible talent to your business and at the same time uh will will be less than you would pay for those same folks the manager director even executive level in your business uh in the US you can find incredible talent and if you're thinking about Filipino Talent OR overseas talent in general entirely as like $5 an hour virtual assistant you are you are missing a big opportunity there is much much more Talent than that available to you in the Philippines with people with deep e-commerce resumes who can make a serious impact on your business in fact more Staffing was founded by Greg Cary who was running a us-based e-commerce business at some point I think had a team of like 17 employees from the Philippines on his team full employees not just like overseas contractor you talk to occasionally but like real employees across the business eventually one of those employees so talented she ended up being the CEO of more Staffing in the Philippines her name is Lara I've had her on the show twice like these are incredible people whove figured out how to do a great job really adding huge value to the business in the Philippines to your business in the Philippines and so you should be considering this there's no reason for you not to not only have I considered it I've done it I have a team in the Philippines that was staffed entirely by more Staffing working for me and my agency across video editing design production those kinds of things project management they're great I love them they do awesome work and they're huge help so consider adding Talent from the Philippines to your business by going to more now.co to get connected with more Staffing that's more now.co got my own uh page now for you to go visit more now.co and get connected to more Staffing today in that respect meta is actually demand capture platform as much not as much but in in some way similarly to the way that it's a demand generation platform and there are very large Brands built by selling boring stuff that lots and lots of people need okay and it's because there's just so much total justful market for that product so for you if you are running a brand and again I've dealt with a client that had one core hero product that was not as good on the margin side and was pretty close on the LTV side as some other products they launched the difference is product a the one they were selling a whole lot of had really good Tam really good total dust Market everybody needed this product okay and product B not so clear and secondly there's sort of a related thing here where for product B it also seems to me that like the brand kind of got associated with product a in a way that made it so that product B just didn't the same resonance in the market from that particular brand because they perceived the brand as a brand that sells product a and so product B was kind of a stretch like I don't know if I really need that now there's counter examples of this and you can win on this over time there's a great example that I heard Sean Frank from Ridge give recently where he noted that the brand Bick was like number one in disposable razors number one in pens and number one in lighters and in cheap lighters and if you think about that like those three categories lighters pens and disposable razors actually have nothing to do with one another so over enough time you can be you can do great in multiple categories right but again all of those do also have really broad Tam so so think about that question in your business does this product that I'm advertising have a real chance to reach a wide audience if so it becomes more appealing if not it may be that it's a really tough advertising LIF now this could be the job of great advertising okay great advertising could create demand for that category in the space and if you are awesome at this skill then maybe it's something you want to do again especially even if it's limited Tam but if it's high margin High LTV and that's one of the things that keeps me coming back to the product I mentioned earlier that I've considered starting a brand around but is like maybe I could solve the advertising problem in a way that made sense but that's kind of the question for me there's sort of a I'm GNA give you a 3B here A subo B with this Tam question which is to factor in seasonality because Tam actually changes relative to seasonality in fact for one brand I was mentioning earlier this that they had products a that they were so associated with selling they sold this lots of time the only problem is that product is also pretty highly seasonal so during certain months they could sell a whole bunch of that and really it was a silly idea for them to spend much time selling any of their other products in their portfolio but for product B maybe the time to really effort that product was when the seasonality got worse on product a okay and so so if you are a brand that has a highly seasonal product it's possible that what you actually have to do is do product developments around your sort of your offseason to try to solve that problem or to just think in terms of like okay yeah at some point this is where I want to put all my effort is in product a but not right now right right now is not the time that I need that so yeah so I think that's the other Factor here with Tam is that Tam actually kind of changes depending on seasonality all the time and let's take a super extreme example right imagine you're selling Christmas wreaths okay during a lot of the year you're total addressing market for Christmas wreaths is zero nobody's buying one okay but during a couple months your total adustment Market is huge for that product and so you can go sell a lot of it and so and so Tam changes seasonally depending on those things all right so we've got margin number one LTV number two Tam number three with with reference to seasonality okay number four let's talk about inventory position okay now this is another really obvious thing there's a few sub factors here that I want to talk through but it's a really big deal if you are constantly selling out of your product and cannot stock it fast enough you should stop putting your advertising efforts in that product for a little bit and see if you can solve another one again this is an issue I've run into with clients where I've got a product that's really hot in the market outperform my expectations really significantly basically driven by Tam similar margins similar LTV to other products I'm already selling Tam is massive on it right now so we're seeing we've got a lot of Tailwinds as we Tam related Tailwinds as we launch ads and yet we are having some trouble keeping that product in stock because it's going so well so now that means we're going to go put our efforts into products that do not fit those top three um elements of my rubric as well entirely because we have to go solve I mean not we right the advertising team doesn't have to solve this somebody in the business has to go solve the inventory issue they got to change their demand planning they got to go rework with their manufacturers think about shortening timelines all those kinds of things but that stuff doesn't get solved overnight and because that stuff doesn't get solved overnight the marketing team now has to go and shift their focus to other products and so inventory possession is a big deal and this is actually one of the reasons to think about this question in general the more Diversified your ad account is around multiple products the more or the less fragile it is based on these kinds of things if you lose your ability to sell some of product a but you can still sell product b c and d because product a only takes up 40% of your out account even though it's your best product right now you go put effort into a product BC and d and still be in pretty good shape if product a is 90% of your ad account and 90% of your ad spend you can run out of real trouble there and so there can be sometimes a value and just diversification across the board for these other products now that said if you are selling if 90% of your spend is going towards product a you probably ought to think about stocking more of it over more time you probably ought to have your your operations team having a conversation with your marketing team going like hey we can run out of we can run out of products BC and d and it's not a big deal let's not put our cash towards stocking a whole bunch of this stuff okay but product a we definitely want to keep in stock if we do not keep that product in stock we can run into some real trouble and so you think about your inventory ordering differently relative to those things this is why marketing Finance operations supply chain got to be in the same room together at some point to talk about what's going on for these things it's never going to be perfect but it's and in a fast growing business these things are really hard to predict but but ultimately it's really important they're talking with one another to try to minimize those problems as much as possible but inventory position is a really big deal and to be clear inventory position also can be a seasonality issue as well right so imagine you sell apparel imagine you sell sweatshirts okay at some point you need to really maximize your efforts towards creative for the fall into the winter and over the spring you do not want to do that as much unless you have so many sweatshirts around that you're going to sit on those things all summer and you really need to sell more of them and so you create some sale or whatever and put a bunch of effort toward get turning as many of those uh sweatshirts back into cash as possible to get you through the summer months Cashwise right that can be a challenge as well so those elements are all important factors in thinking through this but inventory position really matters a lot and your ability to to actually Pro provide the product to make the product that you're trying to sell is a really big deal and can be a thing and in some ways that can be an override on all of the other factors at some point if you're run out of inventory doesn't really matter how it rates out on margin LTV and Tam okay if you're running out of inventory it just creates problems that you have to solve in other businesses and so you have to go make those efforts trying to get out in front of that and again the key thing here is to get your marketing team talking with your Finance supply chain folks and if it's a small business that might be one person but the but to get those people talking to one another can make a huge difference in solving this challenge all right so margin LTV tan Rel with factoring in seasonality inventory position it's number four let's talk about number five I'm going to call this operational lift okay operational lift here's what I mean by operational lift what I mean is essentially this is these are all factors the operational lift in your ads is actually kind of back to the cost side of the equation there may be some products that you have a very small asset library for on hand that you um don't have many ads at all and so you have to kind of start from scratch it's going to take you a really long time to run to build ads for those it's going to it's going to require a whole bunch of editing a whole bunch of shooting getting new influencers whatever shipping product to people all that stuff can be barriers to getting started advertising a new product and therefore they can be enough barriers there that you actually don't want to go and try to overcome all that effort as landing pages sometimes can be a factor here creating new offers all email follow-ups relative to certain products that are different than other ones all of that kind of stuff is all a factor here this is usually not a problem but I still want to call it out for most brands operational lift is not going to be a big issue in fact you may just on my scale of one to 10 measure out like 10 no problem where 10's good right 10 means it's a low operational lift not a big deal but it can be I've seen this be a factor for some businesses where they just don't have almost any assets built up their PDP isn't that good and they know it their landing pages are they haven't built landing pages for it Etc but for all those reasons I think that there's that sometimes this is a factor that people kind underrate in all of this that starting from scratch on a new product can really matter again for an aggregator this can matter a lot if you have multiple brands in your portfolio the operational lift to adding new creative for new brands could be super high very little about what works and what doesn't work there's sort of like intellectual operational lift right where you haven't spent money on it so you don't have a feel for what works uh with your customers all these things can be factors and it can just be one more thing to consider so operational lift from the advertising production creative side of things is an underrated Factor here that people just um often don't consider so that's it okay so there's my five there's my five buckets okay margin LTV Tam operational lift inventory position so if you just think about this right imagine you have a product at very high margin very high LTV very high adjustable market like uh Tam okay you have you have plenty of inventory on hand it's not too hard to make and the operational lift of doing it is is not too bad what I just described is a skincare business right that's why so many people are in skincare businesses because it's a really good opportunity and so maybe you would factor in Tam maybe You' factor in competition because it's so hard right maybe it's a supplement business can also be an apparel business in some cases though some of those things that I just said there don't apply quite as strictly that and there's massive Tam that's the thing that people love about apparel businesses decent margins sometimes pretty good LTV all that but but that's why so many people go into those businesses is because they check all of those boxes if you have a product that fits a whole lot of those that's where you should put your creative effort next because you can make a very big Financial impact for yourself and your business if you can hit on all of those things so that's it margin LTV T inventory position operational lift those five factors should weigh should be the things that determine where you put your [Music] creative all right thanks so much for watching and for listening to another episode of the Andre feris podcast I hope this was helpful to you I would love to hear from you if it wasn't any thoughts that you have I am all ears people have given me some great feedback recently and I'm so grateful for it I would also love any questions that you have as a follow up send all that to podcast AJF growth.com or or D me on Twitter at andrewj Ferris easy way to do that you can find everything that I'm doing at AJF gr. comom including contacting me including don't foret those four essentially Commerce resour that you can get for your business for free sent to you and I'm not going to spam your email inbox don't forget don't forget to go reach out to my friends at more Staffing virtual assistance can be helpful virtual professionals can change your business go to more now.co my own landing page now more now. goaf to get started with more Staffing and get incredible Talent from the Philippines working on your business what is coming next for me oh another opening books is coming next I've been talking about this a bunch but it's true it's going to be with a brand called pretty boy opening the books with a brand called pretty boy actually have another one scheduled to record as well I've got multiple opening the books still coming if you've not gone back and listened to my episodes with Naz Jafari from mixed by nazin or with fan Holtz and mik lawon from his team at beer brand go check those out people love those episodes and I think it's because they're the closest thing I can give you to really what do some of these factors look like live in an actual business where we show all the real numbers look at advertising dashboards together all that kind of stuff and you can find those opening books episodes by going to a.com miix or/ beard BR to go find those two episodes again I got more coming very soon so make sure you smash that subscribe button I would love to have you along for the journey in the future don't forget to rate review all those things are so helpful to me and I will see you next [Music] time come