Latest / Scalability School / Building Offers That Actually Move The Needle

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Building Offers That Actually Move The Needle · Scalability School

0:04
Andrew Foxwell: What I don't even know what episode this is. So we're just.
0:05
Brad Ploch: 5.
0:07
Zach Stuck: Is it.
0:07
Andrew Foxwell: Is it really.
0:08
Zach Stuck: Really.
0:12
Andrew Foxwell: Welcome to episode. 5 of the scalability school podcast building offers that actually move the needle. What's up guys good to be with you?
0:22
Brad Ploch: What's up? You're back from back from another side of the world a little bit here, aren't you?
0:27
Andrew Foxwell: Back from Dublin back from Dublin. Turns out traveling without your kid is insanely easy. Once you've traveled with the kids.
0:34
Andrew Foxwell: So yeah, good just just flying, listening to tunes the whole time. Nobody needed anything
0:40
Andrew Foxwell: got to see a lot of founder members. And yeah, it was sick. It was a lot of fun, always always good to get everybody together.
0:47
Brad Ploch: I'm taking both of mine to Mexico in 2 weeks, so I'll let you know how that goes.
0:52
Andrew Foxwell: Prayers
0:53
Andrew Foxwell: alright. Well, today we're talking about offers that actually move the needle. You know, a lot of people talk about offers. And you know, Zach was actually the 1st person that said to me many, many times, that offer is just absolutely not talked about enough, and how much it can actually change things for a brand
1:13
Andrew Foxwell: and since then we've kind of been riffing on it. So today, that's what we're going to be. Sharing is sort of all of the tactical stuff that we know on what it does like, what you can do with an offer to make it really special. So you know, Brad, right out of the gates. Start with a home run. Offer that changes the trajectory of a brand like, 1st of all, like, why are offers important. Let's just start there. Tell me about some of your offers that have really crushed, and how you've started to think about this.
1:40
Brad Ploch: Yeah, for sure. So I think we we spend a lot of time. I mean, we had an episode, an episode or 2 ago talking about creative and how creative is such a big lever, and I think offers probably fall into a similar level of
1:52
Brad Ploch: value, and what it can do for a brand, and there's not as many. There's just not a ton of levers that have the capability to really change the trajectory. So I'm going to do a little bit of a teaser here, and then we'll kind of break things down a little bit further. But we have a client of ours that we've been working with for several years. I'll be somewhat vague here, but they sell a consumable product. You can call it snack bars across a bunch of different flavors.
2:16
Brad Ploch: And just to give you a sense of what an offer can do this functionally. The only change that we've made year over year was continue to manipulate the offer. And this year, so far, they're up like 250% year over year in new customer revenue, largely driven by a 40% increase in Aov and just by coming up with with an offer. So I can be more specific about what the actual offer was. If you guys want to get into right away.
2:39
Zach Stuck: Yeah. But let's do kind of let's do it. Yeah, kind of talk about what it was.
2:43
Brad Ploch: Okay.
2:43
Zach Stuck: Like it like the cadence of the changes. How frequently you changed it! Talk about that might as well.
2:48
Zach Stuck: totally. I'm hooked for sure.
2:50
Zach Stuck: So.
2:50
Brad Ploch: Good. Good I have my sickness hopefully. My my voice stays with me here for the rest of this so long story short.
2:58
Andrew Foxwell: Keep it going.
2:59
Brad Ploch: Good. Good. Well, if I start, if I start hacking up along, I might have to pause.
3:05
Brad Ploch: Okay. So when we over the last couple of years over the last year we've we've kind of manipulated this a little bit. So it originally started with, they sold individual like flavor packs, meaning you could buy, you know. Call it 10 of the 10 of these bars in one pack, and you know, from my perspective, when you, if you're going to commit to a full 10 pack of bars. That's a pretty big commitment, especially if you don't know if you're going to like the flavor. So the 1st thing that we thought was, Hey, why don't we build out a variety pack, which I think
3:34
Brad Ploch: probably sounds like common sense for the average person? But I'm sure there's brands out here that sell multiple flavors of something like if you sell a consumable product that has flavors, and you don't have a variety pack. In most cases, I think you're probably missing out, you know. Maybe you can make an argument that, like pre-workout shouldn't be sold in variety packs for the different flavors. But I'm saying, if you have individual servings of a product I would highly recommend, considering a variety pack, because it's just the way that people buy right? They want to buy, find the flavor that they like, and then they're going to come back and buy more. So we made that.
4:02
Zach Stuck: Question.
4:02
Brad Ploch: And.
4:03
Zach Stuck: Question, are you doing like 8 packs in 4 of them? Is that what a like is that? How sorry? Maybe I'm jumping ahead. But or is it like a you're replacing a normal 8 pack, that's all. One flavor with a variety pack? I'm curious.
4:17
Brad Ploch: Great question. So the 1st basically what they originally sold was, you can buy any one of their call it 6 flavors. You get 10 bars in that box. Then we switched it to is you can get all we can get one of
4:29
Brad Ploch: each of the flavors. The problem with that. And this was kind of the. So the initial transition was, okay, great. You get, you get a box of 6 bars as a variety pack. But if you think about the Aov of that? It's extremely low which can work because it's kind of an Ltv play, but it can make acquisition really tricky if you're playing in the. I need a sub 20 cac. Like the you tap out pretty quickly on what you can what you can afford in the market. You can go up to. So the next thing that we did before we even got to really introduce
4:54
Brad Ploch: kind of like any crazy discounting piece of this was just double it. So you get 2 bars of each flavor, and then we functionally double the price of that. And the way that we justified that was, and this is where the real unlock came, was, we said, if you buy just one box
5:12
Brad Ploch: of 2 bars or 2 bars per flavor, so like, let me do the math here. It's if you buy one box of 10 bars, call it. You get 20% off, which is fine. But if you buy 2 boxes, you get 40% off.
5:28
Brad Ploch: what we found is like 85% of people buy to just go for the doubled up offer to get the 40% off. And that's kind of that unlock is kind of what led to that. 250% year over year increase in new customer revenue.
5:42
Zach Stuck: So curious. So backing into the offer, why does it work right? If Aov goes up doesn't necessarily mean it's good for the business, unless your cost of traffic, your conversion rate, your Cpa stay in line. So like, how did that get affected, even though you punched up Aov by 40%.
5:58
Brad Ploch: Yeah. So with the with the higher Aov, we had the ability to actually like afford more in Cac. And I found this. I'm curious if you've seen the same thing. But I've noticed that when Aov goes up it's almost like you unlock new bounds of spend inside of like Meta. For this case. It's just like you become available to so many more people because you can afford that. And that doesn't mean that every single purchase is going to necessarily be profitable right? They might be losing money on the people that
6:23
Brad Ploch: end up only buying one version. You know, the 20% off offer. They might not actually make money if somebody does that, but it blends out to be enough. If they take the 40%.
6:32
Andrew Foxwell: Yeah, yeah, I mean, definitely opens it up right? I mean, the thing it strikes me, what you're talking about is so much of offers is is absolutely just consumer psychology like stuff as well. Right? It's it's it's, you know. If I'm gonna buy one box, I'm gonna take a risk. Why not buy 2 and get 40% off? It's like, my mind goes to the phrase of like, Oh, we can get through those which makes sense like, it's like, Yeah, I get through a couple of boxes, those. If not if they. If I don't like certain flavors, I can give them away like you're not gonna hate all the flavors. Yeah. I wonder.
7:00
Brad Ploch: And if you literally messaged like with it, like, you're not gonna hate every flavor.
7:05
Brad Ploch: Yeah, it's buy more.
7:06
Andrew Foxwell: Buy more save more. You're not gonna hate everything.
7:08
Brad Ploch: You'll have to like something in here. You'll have to like something in here right? No, that's a great point. But I think like so backing up and kind of breaking down each of those those kind of like steps that we took. It was okay. First, st like, thinking about how people want to consume this consumable product like they don't want to over over commit to something. They're not sure if they're going to like great. So we got a variety pack set up for them. Sounds like a no brainer, but some people still aren't doing that. And then it's just like figuring out, how can we combine this thing? How can we incentivize? Maybe buying more so that way they lever up and increase their over.
7:37
Zach Stuck: The biggest thing that we've learned, not just for hollow, not for our other brands, but like a lot of homestead clients, is people brand owners inherently think people aren't going to spend this much money on my product. They're like, there's no way someone spends $80 on bars of soap like our Aov is $35.
7:54
Zach Stuck: They will, they will. And the chance that you actually create an offer that's strong enough that they feel like the value which we talked about like with David Herman. Getting the value to be as punchy right now.
8:05
Zach Stuck: Knowing like consumer segment is maybe a little bit down is, is kind of like the sweet spot. So not only are you pushing up Aov, then that gives you more ad dollars to spend, which means like, even if you can keep your conversion rate relatively the same cost of traffic, relatively the same like. You have a pretty good chance of like producing more contribution margin. So I think that that's that's the other side of it is like we like to push people to say, Hey.
8:28
Zach Stuck: get out outside of your comfort zone with this, and like really try to sell them more of it. But the way that Brad just explained I feel like is a perfect way that actually makes sense. You can't just force people to buy
8:37
Zach Stuck: 20 the same sock for us for hollow right? Like we're bundling a bunch of things together. The more products we drop, the more the bigger our bundles can be and the more unique they can be. And I think that that's that's kind of, like the the sweet combination of both.
8:50
Andrew Foxwell: Yeah, I mean, I think what you just said is that value right? And talking about like, what is an offer beyond discounts of the value constructs of perceived benefit positioning, emotional safety are really big, you know. We think of offers many times as discounts only, but I think rethinking it through like a an idea of a value stack.
9:10
Andrew Foxwell: So examples of what are the offer examples, I mean, obviously, bundling is one
9:17
Andrew Foxwell: what are the other ones that you guys see that have worked really well.
9:20
Brad Ploch: Yeah, there's a there's a bunch of different options, and they probably even cross pollinate and can be used in a bunch of different ways. So I'll just rip through a bunch of different examples and then talk about maybe why we like some of these. So gift with purchase is pretty straightforward. They buy. Maybe they need to hit a certain card value bunch of ways you can play with this, but they buy. They get something for free bundling is basically just like trying to get them buy more, maybe of the same thing, or a combination of things that go well together.
9:44
Brad Ploch: Subscription incentives, pretty straightforward urgency and scarcity, so just kind of like the phrasing around it. And like, you can only get this for a limited time, which I think that that's probably slept on one a little bit, even the guarantee aspect of it. Where, hey? 30 day money back guarantee like. If you go to a website right now in any. Ddc darling, go to hollow like there's a 99 is a 99 day money back. Guarantee. Yeah, like it's there. And I think a lot of people
10:09
Brad Ploch: like forget that that's really valuable for customers, because they're they're trying to avoid. There's like some loss aversion thing probably in there and then free shipping. And so
10:19
Brad Ploch: across all of those. And we can go into specific examples whenever you guys are ready to do that. But I'm a huge fan of like. How do we increase the perceived value of this thing as opposed to doing discounts straight up. Now you can do both where you can try to stack and bundle things up and do gift with purchase, and then you can also add a discount on top of that. But I think what people forget is like, the cost of your product
10:42
Brad Ploch: can be cheaper than a dollar or percentage off the top, depending on how you do it. Right? So if if it costs me, I don't know, I probably shouldn't do public math here. But like, if you're going to offer a 40% discount like what you could probably give away. A lot of people could probably give away 2 of their product and still be cheaper than taking that margin off the top. And I think that's that's why I always try to lean towards like give with purchase and bundling ones, because I think the perceived value can be really strong with those.
11:15
Andrew Foxwell: Cool. Sorry. Yeah.
11:16
Andrew Foxwell: Hang on, cause there's a helicopter going by my house, so just hang on one second.
11:23
Andrew Foxwell: Brad, on your audio. There should be a you should be able to roll over the mic by the way, and go to audio settings and then select a background, noise, suppression, and just make sure it's on like high.
11:38
Brad Ploch: Kids screaming.
11:39
Andrew Foxwell: I we I could hear your kid. Yeah, not a. It's not a huge deal, not super noticeable, but like just a fyi for you
11:46
Andrew Foxwell: okay? And so I'm gonna clap. And then we can. Zach, you can come back in.
11:51
Zach Stuck: Cool.
11:54
Zach Stuck: all right. So when it comes to like hollows for or hollow, start start back over. Let's rerun this back up, Andrew.
12:04
Zach Stuck: Do you need to be unmuted, or is it fine to clap when you're muted.
12:08
Andrew Foxwell: No, it's kids, because it shows a spike in the audio. So Shane knows.
12:11
Zach Stuck: Oh, shit. Okay. Got you got you? Sorry? I thought you were muted when you did it. You're gonna have to clap like 5 more times ready.
12:21
Zach Stuck: Yeah. So when it comes to offers for us. Brad, I think, like some of these examples are really relevant. Right? So
12:27
Zach Stuck: for our brands we were trying to like mix potentially, get the purchase with bundling, with other things, with scarcity, with guarantees. I think this sweet spot of a really good offer is not just taking, like one of those and trying to combine a bunch of them together that still makes sense for your margin. So for hollow like we just had a pretty big win in the last week
12:46
Zach Stuck: we have run a buy more save more concept. For a long time this has been something that we've done for years. Ftc regulation is okay with a buy more save more offer. Kind of being evergreen. As long as you're not like considering the sale period. That's kind of like the sweet spot. And if you are, it has to be relevant to a specific product during that sale. So for those people that are interested in running that it's definitely an option to do, and you can run it all year round
13:11
Zach Stuck: without any issues. As long as you kind of set it up that way. Now for us. The big unlock that happened in the last week was we were selling basically 2 pairs for 10% off, 4 for 26 for 38 for 40% off.
13:26
Zach Stuck: And we push those all up by 2 units. And we pushed up our free shipping threshold from buying 2 pairs to get free shipping to 4 pairs to get free shipping.
13:35
Zach Stuck: So now it's 4 pairs for 10, you know. 6 for 28, for 30, 10 for 40, and push up our free shipping threshold.
13:44
Zach Stuck: The crazy thing is new customer. Cpa went down 10%. Aov went up 16%.
13:50
Zach Stuck: So like the net change is pretty wild. And what we realized is we were looking at the percentage of customers that were buying less than less than 4 4 units, basically 1, 2, or 3 units.
14:03
Zach Stuck: and that it was like 40% of our orders were people buying 1, 2 or 3, because they could get 10% off and they could get free shipping
14:10
Zach Stuck: like screw it. We're gonna push it up to 4 and see what that happens. So we got a little bump from Aov there and then we also pushed up the discount offer to make it even a little bit more challenging.
14:18
Zach Stuck: The crazy thing is, once we were looking at the like, the top sold combination of products. We we found out that, like people, were more incentivized to now buy 6 pairs for 20% off and get free shipping. And the discount felt proportionally bigger
14:36
Zach Stuck: because they were actually getting a bigger number off than what they were used to on average, and it was still falling below a hundred dollars, which is kind of that sweet spot for us from an impulse purchase standpoint. So now we went from having 40% of our customers buying 3 or less units to. Now having 40% of our customers buying 4 units just absolutely shifted the like, the dynamic of consumers. And how they shopped our site. And for us
14:58
Zach Stuck: we didn't really care about
15:00
Zach Stuck: didn't really care about this because we're pushing growth, we're we're still pushing 70, 80% every single day is new customer revenue. So these are people that are usually seeing the site, seeing the offer for the 1st time, and I think a lot of brands are afraid they're like, Oh, well, my existing customers aren't going to like this. If you're trying to grow your business. The biggest you know case there is that you have 70%, probably, plus of your new of your revenues coming from new customers. So
15:24
Zach Stuck: I think, like, this is just like, fundamentally feels like it would be the opposite. It's like, Oh, we're going to push up margin. Maybe Aov goes up, but new customer Cpa climbs as well.
15:32
Zach Stuck: but because the dynamic where customers were buying, then the most frequent thing that still kept them under 100, and they got free shipping, and the discount seemed more dramatic. It was $20 off that they were saving versus just like $4 off. That they were saving.
15:45
Zach Stuck: That combined, I think, is what got what got it to unlock.
15:48
Brad Ploch: Something really interesting in there is like you kind of took like a really big bucket of. So if you look at, if you were to like graph out your Aovs, or maybe not Aovs, because that's average. But if you graph out your order values in like a histogram, I think you can see, like the different buckets that people fall into, and something that I'm actively trying to convince a client to do because they're worried that if they lower their threshold on discounts that
16:11
Brad Ploch: people will be less incentivized to go up. But it's like they have a bucket of people that spend less than $40, and it's the biggest bucket by far. So I feel like
16:20
Brad Ploch: we, we actually talked about this on a on a separate call. This the 2 of us is like, what are these like
16:26
Brad Ploch: trying to find these like big pockets of like? Okay, the top of a landing page. Most of the people see, this was like in this context is, how do I get the 80% of people that are only spending $40 to go up? It's like, yeah, you might lose them off the top end. They might get less people spending $300. But, man, there's there's so many people in that smaller bucket that you push them up. It can make a huge difference to Aov. So.
16:50
Zach Stuck: That's what did it for us. Yeah, I mean, like we, I mean on the top end. I think the average customer that's buying 10 pairs is like spending, you know. 2. What is it? 100 and $80, or something like that, I think, is what what we just pulled the data on.
17:02
Zach Stuck: But the that 40% of our customers, which is the biggest block of any any one of those phases, was was sub 10% discount and free shipping. And we're like, okay, push them up like, let's let's let's get that that threshold up. So
17:16
Zach Stuck: I'm really glad we did it. Obviously, it's ripping so thankfully it worked out. These are not always things that that pan out, but I always like to that same point. I think brands sometimes say, oh, this will never work like sometimes you gotta just try shit
17:32
Zach Stuck: because you you honestly don't know. You don't know the weird unlocks that will happen, and the dynamic that might happen like for us.
17:38
Zach Stuck: that we would have never guessed until we looked at the like the data after the fact. So.
17:42
Brad Ploch: Yeah, how did you roll it out? Did you just like Rip the Band-aid, and let it rip or.
17:46
Zach Stuck: Full. Send. Yeah, full send. It's just too big of a change. It was too big of a change to do like an intelligence Ab, test that we were just like, send it and then, yeah, weekend over weekend. That's what those comps are is new customer. Cpa has done 10% weekend over weekend. This is last weekend, and Aov is up 16, and it's holding.
18:03
Andrew Foxwell: Nice. So let's so we've talked a lot about bundling and the things that you guys have done with bundling. I think obviously, there's, you know the other types of of like gift, with purchase or subscription, or free shipping, or doing a combination of talking about free shipping a little bit as well. I feel like, if you can. Subscription is like absolutely such an incredible way to grow.
18:24
Andrew Foxwell: Obviously.
18:26
Andrew Foxwell: supplements are are standard for this right? Lowering the Cac. By pulling the Ltv. Forward with those initial subs like.
18:33
Andrew Foxwell: what other examples have you seen?
18:37
Andrew Foxwell: Cause, I would say, of the founders community and the people like the brands that I'm aware of, and and the brands or agencies that I'm aware of, a lot of it is is absolutely bundling, and I haven't seen a ton of success with gift, with purchase.
18:49
Andrew Foxwell: Free shipping sometimes can can be great, but it's not like a massive unlock.
18:53
Andrew Foxwell: I'd say, if you can do scarcity. That one is a really big one. Especially if it's like a scarcity of how many left, or like a limited run product that does incredibly well, you know. Like, think about Jenny Lynn, from snarky teas, like basically all of the tea she's released, she releases are limited. Run. That's it. Like they don't, they don't run them again.
19:17
Andrew Foxwell: What other things have you guys seen that's really been like, Oh, yeah, that's a really good one or I think more people should try this.
19:26
Zach Stuck: For subscription brands. I think the biggest thing, and I think what your goal should be is a figuring out like, do you have the financial model, to be able to spend more, to acquire that customer right? Actually understand your Ltv. Of it, of that customer, and like what the what the cohorts look like. So I think that's like, first, st before you really dive into like offer testing.
19:44
Zach Stuck: Second, I think a lot of these subscription brands can punch up their one time, purchase price and try to optimize the discount on the subscription so similar to the buy more save more Fdc. Regulation has no issues with you, discounting for subscription, so that discount for subscription can be as big as you want it to be, really. And if you know, like, you can start to play with that
20:06
Zach Stuck: discount on subscription. That's where you might be able to get some unlocks. Where, hey? Maybe you drop your Aov below $70 below $50. And that brings your Cac way down. And then it's like your basically repayment rate speeds way up. Because now you're not spending a hundred dollars to acquire a customer on subscription. So that's been one that we've seen for homestead clients kind of across the board that that seems to work quite well if you, if you really do the math and pay attention to it.
20:32
Brad Ploch: Yeah, I will. Just this is a painful anecdote for me. I don't know if I'm I don't know if Dan from create will be upset with me. Saying this, but like
20:39
Brad Ploch: couple of months into him starting that business, he we like considered investing, and we passed because I did it. I did not value subscription in the way I should have valued subscription and that was like the only reason is like, I looked at numbers. And I was like, this is great. But like, I don't know that your numbers are always gonna back up from Ltv perspective. And I was 100 wrong and I regret it every day. But, you're right about like understanding understanding. That aspect can like fundamentally change how you look at the economics of your offers.
21:09
Zach Stuck: Yeah. And we, I mean, like we have some homestead clients that are now doing, you know, like mid 8 figures, Mrr, that have figured out this math right? So they've gotten to the point where they're like, Hey, you know what? I can actually lose $100 on my 1st purchase $50 on my 1st purchase, because.
21:24
Zach Stuck: you know, my cacta Ltv is this model, and as long as I'm not spending so much into it that it will actually start back out by month. 3. That's kind of where the sweet spot happens. I think if you have subscription and you have a subscription base like, I think that that's something that you should definitely try to play around with more is like, how much are you willing to discount that 1st order, which should in theory bring down the cost to acquire a customer. And as long as you're triangulating those 2 with your repayment time, that's kind of where, like the secret sauce, and like a lot of special stuff, comes up.
21:53
Brad Ploch: Yeah.
21:54
Andrew Foxwell: Yeah, that I mean, so much of it is like building the stack of all of these things. You know, Brad, you know we were talking about. Ag, one. Obviously, example that we Dtc darling, we can look at, but obviously subscription monetary discount, welcome kits or freebies, or like freebies that come with a welcome kit. Free shipping money back guarantee. Right? So it's like.
22:18
Andrew Foxwell: it's all of that like, how do you sort of consumer psychology wise? Make it like really hard to say no, to be like, even if you're mildly interested. It's like, Well, I can try this, and it's like, even if it's I'm getting all this other free stuff with it.
22:31
Andrew Foxwell: It's it reminds me of back in the day my mom actually bought miracle blades knives off of the TV. I don't know if you guys remember these but like every every 2Â min, they would just be like, and if you order. Now you get a new. You get another Japanese, you know, knife, and then if you order now you get a bread knife
22:55
Andrew Foxwell: and like we, my mom still has those knives for what it's worth.
22:59
Zach Stuck: I'll give you. I'll give you guys in the listeners people on, you know, subscription brands just like one little hack that I think, is really interesting, too, to test. You could call it offer testing. You could call it just part of, like the funnel testing
23:11
Zach Stuck: for a client. We started started running this, but only offering free shipping on the 1st subscription. So the thought is, Hey, I'm going to get my 1st subscription, they say, hey, I get free shipping. Great! I'm pretty sure creates or Groons runs this. I don't remember who it was.
23:28
Zach Stuck: That I saw with as well. Maybe I'm like giving away a little bit of their secret sauce, but we did it for homestead client before I saw it for what it's worth, and we know that the the churn rate, even with that, didn't really drop at all for this client, and it was just like starting to then add another 5 $6 per order per month, and just extra revenue that you weren't, that you were just basically writing off completely and taking the hit on. So
23:51
Zach Stuck: I think, like the other side of this, too, is like, if you're a subscription business, think about the offer in sequence. It's not just the 1st offer. It's like other things like, how do we charge for shipping? Do we increase shipping over time? Do we decrease shipping over time? Do we add in free gifts with like the second, rebuild, the 3, rd rebuild. These types of things, can definitely have a big impact on Ltv and the growth of of Ltv.
24:12
Andrew Foxwell: Well. And so, Brad, like, let me just let me just ask you about how you think about like testing and offer. There's pieces to this, obviously. And so do you.
24:23
Andrew Foxwell: How do you go through? Is it like big swings? First, st
24:27
Andrew Foxwell: you know, obviously avoiding micro testing is good, like, I feel like people sometimes like we're gonna do. 5% off doesn't do anything.
24:33
Andrew Foxwell: How do you go through this? Is it? And then you build the creatives to match it with a lander. And like, I mean, like, what's the process of you like? Okay, client, we agree on an offer. Here's kind of like, where, how are we rolling it out and testing it? And how we're using like a a b testing tool as well to understand significance and stuff like that.
24:50
Brad Ploch: Yeah, that's great question. So I I actually it. It starts a little bit before clients saying, yes. So I think we pull up. We we, I keep a spreadsheet that says like a unit economics calculator. And it just we, we put the different scenarios kind of side by side. It's basically like,
25:09
Brad Ploch: you know, here's here's offer number one. It's the it's the buy to get one. Here's the buy 2 get to. Here's the. Here's the free shipping. Here's the whatever versions it's putting all of those things side by side and understanding. What does success look like? Meaning? We need to understand like, do we think?
25:24
Brad Ploch: And this is to Zack's point, a little bit earlier? It's like, do we think it's even possible to achieve this Cac or this Roas number with this offer, because if I need a 7 x in order for me to like, break even, and I have no Ltv. Terrible offer like, not worth not worth pursuing. So we start with just like throwing it in a unit unit, economics, calculating spreadsheet. And just like, okay, what does. What does Cac need to be in order for this to be worthwhile? That's like step number one.
25:47
Brad Ploch: and I would say to to what I was. The point is gonna make to to Zack's point earlier is like, sometimes I look at that. And I'm like
25:54
Brad Ploch: this is not gonna work. This is this is like this just doesn't make sense. And then we try. And we're like.
25:59
Brad Ploch: okay, it worked. It was fine, like, we just need to chill out of that.
26:02
Zach Stuck: Yeah, I mean, we do the same thing for what it's worth, like homestead clients for the brands like we're running just like models on the offers all the time. Right? Because I think that that's to my point, 10% lowering new customer. Cpa, 16% increase in Aov like that is worth it for your business dramatically to try and actually like, take these big swings, but you have to run the math on it first.st So for us, we were willing actually to increase new customer Cpa. Our goal was to increase Aov
26:27
Zach Stuck: by $10 and increase new customer Cpa by 10%. So like, we set the predestined outcome. And then we're like, okay, let's send it and see what happens. And that was still going to back out to more contribution margin and more net profit per order.
26:39
Zach Stuck: even with those results which is like new customer. Cpo is going up, not down. So I think, like that's doing. The math before you take the big swing is absolutely necessary.
26:49
Andrew Foxwell: Okay, so let me ask you a dumb math question. So like I. So let's be, let me just be clear. I never scored anything above a C in any math course I ever took. Okay, so it's just like, why, I'm asking this.
27:01
Andrew Foxwell: when how do you do the math on a payback period
27:08
Andrew Foxwell: on something you haven't ever tested to that cohort.
27:13
Zach Stuck: So we're usually using like an aggregate of the of the payment. So are you referring to like an Otp product or a subscription product, both.
27:21
Andrew Foxwell: Yeah, I I was thinking, it's a subscription product.
27:24
Zach Stuck: Sure. So we're usually baselining it against like what we have now, right? And then, we're basically figuring out so let's just use. I'm just gonna run some quick. I'm gonna do math on top of my head, just because that's fun. So let's assume that you're selling a product for a hundred dollars on subscription with discount. Maybe it's 1 time. Price is 1 50. There's an expensive supplement. I don't know what it is, but
27:43
Zach Stuck: $50 off. Great.
27:46
Zach Stuck: What we're basically trying to figure out is okay. If I sell this product and I'm losing $20 on the 1st order, which means like, whatever cogs are 40 bucks opex, all this stuff it ends up being a loss of $20 in the 1st order. We're figuring out. Then, okay, if 50% of people come back and buy it again the second month, how much margin do we still have left? And and that is kind of what our our repayback period is right.
28:09
Zach Stuck: Might be 2 months, maybe 3 months, maybe 4 months might be a 90 day window. You might do like a quarterly subscription. That's kind of the sweet spot that gets you there.
28:16
Zach Stuck: Then what we're doing is we're saying, Okay, if we're discounting it from 150 down to 100. What are we willing to lose? And what is new customer? Cpa. In that range? If we cut the price by 66%, and we drop it all the way down to 50 bucks. What does that do to our new customer, Cpa. And does the aggregate of dropping the Aov down, which is like crushes your margin, but also could completely crush your Cpa.
28:43
Zach Stuck: Does the net loss of doing that actually benefit you more or less? Right? So that is kind of how we think about it. And that's how we do the math to figure out specifically for subscription brands. How much can we compress the original margin. And how much can we compress the Cac by just lowering? Aov, because there's a direct correlation from Cpa to Aov.
29:04
Brad Ploch: It's also.
29:05
Andrew Foxwell: Based. It's pretty. I mean you don't if you've never done it. I'm just saying, if a brand's listening to this, a 7 figure brand
29:11
Andrew Foxwell: there, there's an a figure brand. They're like, Yeah, I'm gonna do this like whatever I want to try this. But deep they they've never done it.
29:20
Zach Stuck: Sure it's just I mean.
29:20
Andrew Foxwell: It's just, it's it's a guess to some degree of like we.
29:23
Zach Stuck: 100 Pm.
29:23
Andrew Foxwell: Of people are going to do this. Yeah, okay, yeah. I mean that I didn't know if there was some like baseline, or like some sort of like, How are, you know there's some framework that I wasn't aware of.
29:33
Zach Stuck: I mean, not really. Again. The biggest thing here is, I think this is where a lot of people just like are afraid to try, because it's kind of unknown, right? So part of getting these big unlocks and these big wins is being willing to take the swing and go do it. I was talking to a brand that doesn't run subscription. They're in the pet supplement space.
29:52
Zach Stuck: I was like, you guys got to start running subscription. They were basically running this whole funnel where they were trying to push the craziest, highest aov possible, because they knew that if they kept like their Cac under 150, they'd still have margin at the end of the day. They were trying to say, 1st purchase profitable. And I'm like, actually, if you lower your Aov from 250 down to 50 on the 1st purchase, and you set them up for success, and you sell them a product that they're going to use every single day
30:15
Zach Stuck: your Ltv.
30:17
Zach Stuck: In your payback window, maybe a 30 day or 60 day window, so you might torch some cash for 30 to 60 days, but that as long as the churn doesn't fall off a cliff you may print more money than what you are right now, just trying to sell this crazy High Aov one time purchase. This has me completely like, once we started diving into these numbers and kind of this model.
30:36
Zach Stuck: This has been completely thinking, even rethinking like the sock business and things that we're doing like that where it's very one time purchase very heavy. So I will give a little bit of a. This is definitely something that we're working on right now. We haven't launched it yet, but I'm pretty stoked on is we're basically trying to take the concept of, okay, what am I willing to lose money on to get a customer? That's a normal one. Time purchase customer for hollow sock buyer 120 aov. Now, right?
31:01
Zach Stuck: How do I get them back to buy more frequently? And we're basically stacking discounts and stacking free gifts when they go from one purchase to 2, purchase 2 purchases to 3, purchase 3 to 4, so I'm willing to take another hit on my margin as long as I can guarantee that I can get more of them back for the second time or the 3rd time. So it's kind of like the waterfall effect just like a subscription business would work. But you're treating it like you are within one time purchase most.
31:25
Andrew Foxwell: Yeah, it makes sense. Cause like, if somebody's if somebody's gonna order from socks from you the 3rd time.
31:30
Andrew Foxwell: like, now we're now we're in Vip, like.
31:34
Zach Stuck: 40.
31:34
Andrew Foxwell: A freaking sticker right.
31:36
Zach Stuck: 45% of our customers that buy 3 times come back and buy a 4th time within a year.
31:40
Andrew Foxwell: Like, you know.
31:41
Zach Stuck: That's like guaranteed on.
31:42
Andrew Foxwell: They're in like. Send them a license plate, you know, frame everything.
31:47
Zach Stuck: Yeah, this is where I think there's a lot of room for a lot of brands that are stuck in that like 5 to 10 million, because they're just stuck trying to acquire new customers all the time. They're not putting enough energy into saying, what would I actually be willing to lose to get one of my current customers that I've acquired for the last 3, 4, 5 years to come back and buy again. They're like, I don't want to run ads to them. I don't want to run remarketing to them. I don't want to do these things. Come up with an offer to get someone back in your business.
32:10
Zach Stuck: and as soon as you get them back for a second time, the chance they go up to buy a 3rd is more likely you can 3rd time, chance by 4th even goes up more. So I think this is where offers aren't just on the front end like, think about it for how you charge shipping? Do you charge shipping free shipping, no matter what, for your repeat customers? Could that increase Ltv. And add more net profit and get more of them to go from buying within a 90 day window to a 45 day window. These are the little tweaks that you have to take, not just on the front end, but also on the back end.
32:38
Brad Ploch: Yeah, and you can was something that we've done several times, and maybe it's a maybe it's not as clever as I'm making it up in my head, but, like I know, people do like the vip offers for people who have purchased, and it's like, if somebody is already bought from your business you pay to acquire. As you've kind of you're alluding to, you can afford to be more aggressive on the discounts to get them to come back and and buy again whether it's you give them a higher percentage off you throw in the free gift is all these things that you're kind of alluding to
33:03
Brad Ploch: and if you're not comfortable running a retention campaign, a Meta which we talked about in Episode one. It's like.
33:09
Brad Ploch: then send them an email and offer them a more aggressive discount than you than you think you you can get and say it's exclusive to them. Say, like, we don't offer this to everybody else. So when you go to the website, you're not gonna see this. This is only for you. That messaging is crushed for us.
33:20
Zach Stuck: Yeah, we're doing that now. It's rolling out like the next week or 2. Custom discount code for your second purchase, and then a custom discount code for your 3rd purchase that even levels up even more.
33:32
Andrew Foxwell: Oh, good!
33:33
Zach Stuck: No. The last point I was going to make is one thing that I think a lot of people don't look at also, is the Aov by returning customer. So like for us, it's like it was historically L. 3, 65, $85. New customer Aov. When we look back in 3, 65, $85. Second purchase was 95. Their purchase was 110, so it's like they are coming back and buying more and more and more. So if if you're only getting 15% returning customer rate or 25%,
33:58
Zach Stuck: 25% returning customer rate within a 1 year period, if you can double that, who gives a shit lose 10 more dollars on the sale? Right? So I think that that's where there's so many unlocks to be had when we're so focused on like running ads trying to get new people in trying to get new people in. There's a lot more that we could do. Offer wise to like. Get them back.
34:16
Andrew Foxwell: Well, let's let me talk. Let me ask about ads. It seems to me that in the times that we have tried to run, offer ads to prospecting audiences
34:28
Andrew Foxwell: and test them against existing winners. It's like it doesn't work, and it's kind of it's like a pain.
34:35
Andrew Foxwell: And it's hard to get them going and everything else, and so it's better to almost leave the top performers and keep iterating on that, and not have the offer necessarily in the ad and be changing the site.
34:47
Andrew Foxwell: Do you like? What do you guys think about this? I mean, certainly we have offer ads that run to like we, you know, on a on a capping basis to to previous customers
34:58
Andrew Foxwell: around a capped basis rather to previous customers, so they don't get blown up with like 5 of them a day. But how do you guys think about this? And what are you guys doing.
35:06
Brad Ploch: I, I think, using the website, as you were saying, is probably the best way to do it. In my opinion. I mean, you can. You can run a proper Ab test from from face from the Facebook side and and try to keep those separate. Because, you know, if you're concerned about people seeing different offers like, you know. And you're not using a proper Ab test like people. Legit might see the different offers which maybe isn't a concern to you. I'm personally kind of in the camp of, unless it's a specific promo period.
35:28
Brad Ploch: I really try to not include the offer in the Ad. Which we will do it. I'm not saying we won't do it at all, but I like to. I like to build the ads very much like value driven for why you should buy the product and allow the website to communicate the offer, which also makes it really flexible on the back end, where you can throw it. You can take your let's call it. Say, you're using a landing page, and the offer is really clearly communicated on. There you can throw it. You can duplicate that, throw it in intelligence with the traffic and and
35:52
Brad Ploch: and let it rip and allow that that offer test to to go through there. And that's much cleaner, in my opinion, than trying to yeah. Force in an offer into into the ads. You can. Maybe once you have your winner. You can. You can roll it out there. But I prefer to do it on the website side.
36:08
Zach Stuck: It would do a little little bit of both, I mean, like there's always like the clear, the funnel ads that rip right for your weekend sale period stuff like that. But
36:15
Zach Stuck: yeah, for us, we've I mean, this year has been such like a drive as much value as possible to the consumer. David talked about it and on the pod, like it is really relevant. Whoever can show the biggest discount, I think, is getting the attention of the consumer. Which is, could be really bad for your business. But that's where you have to be very intentional about the math and how it backs out and like forcing Aov up crazy to actually unlock that big discount.
36:37
Zach Stuck: But for us, yeah, we we usually do include it in them. But it can be a total pain point. We usually rock in up to percentage. So we've been running up to 40% off. Like I mentioned, we kind of made some adjustments to that recently, but it's still the same up to 40% off for the buy more, save more. So I think that that's where, if you can create a really good evergreen offer that you can get, then, like play with the amount of units, then you don't have to really necessarily worry about having to turn off an ad that's ripping that now the discount is completely wrong, for.
37:04
Andrew Foxwell: And there's 1 thing, too. I just want to bring up, like the legality of some of this. I follow that rob friend Guy, or whatever his name is, on X, who's like the legal D to C. Guy, and he was talking about how there have been people getting hit by offer like offer or, you know, consistently running a sale. Or whatever do you guys, what are the rules around that that you guys are aware of that people need to be conscious of.
37:30
Zach Stuck: So this is not legal advice, but I would go talk to rob like, go talk to an attorney. That would be my 1st thing is, go talk to them. They will get you, course corrected first.st He's probably the best one in Dtc. That has seen a lot of things and keeps an eye on it. Buy more save more like I said earlier evergreen, as long as it's not tied to a sale. Good to go, I think, as long as you're not running a sale period within a 90 day window and not changing prices.
37:59
Zach Stuck: That is also good. To go strike through prices is something that you have to be very cautious of, of like letting strike through priced products. Sit on your site for too long. I know there's like Rob posted some brands that got in trouble for that, but I would definitely go. I don't know what his is. It is it, Rob? I know that our team has reached out to him and hired him like once or twice to Qa. Or stuff.
38:21
Brad Ploch: Business version for sure.
38:23
Brad Ploch: FREU. ND. Maybe I've tweet Adam all the time, too. Feel like he's doing free pro bono, Ddc. Advice often.
38:33
Zach Stuck: Got it. Yep, my twitter search is horrible, so I can't find him right now, but I'm sure if you just search Rob, Ftc. D. To C. You'll find him.
38:43
Zach Stuck: he that that's where I would tell people to start. To be honest, because I think like there's so many weird nuances.
38:48
Andrew Foxwell: Lot of new.
38:48
Zach Stuck: I'm gallant.
38:49
Zach Stuck: Yeah, yeah.
38:50
Zach Stuck: Time gap stuff. That's kind of odd, all that. But I think you know, there definitely are great ones that you can run on an evergreen basis and not have any issues with by Fdc rules. So. But I would definitely run stuff by Rob or someone like that spend the 250, spend the 500 an hour, whatever it is, do it. It's worth it definitely would highly recommend that we have a lot of our clients do that now, too.
39:12
Andrew Foxwell: So in closing. You know, offers are an acquisition lever and a margin tool, I would say, kind of wrapping up what we've said I'd say
39:21
Andrew Foxwell: the best offers are ones that feel like wins for the customer without killing your margin.
39:30
Andrew Foxwell: And you know, if you haven't, maybe pick one big swing to give a shot to and test it the next month. Any other closing thoughts on what we've talked about. Chance.
39:40
Brad Ploch: There's a couple of things that I think are like worth just thinking about, because the it goes deeper than just like what is the price of the product, although that's really important and like, what is the person getting? But it's like, what is the person getting and like? What does it mean to them from a value perspective? And how can you build the bundle? That's phrased. So it's like the naming of the bundle matters. You know what these are like. Small random things I've been thinking about throughout all of this. It's like the naming of the bundle can make a difference. You can
40:07
Brad Ploch: think about the economies of scale, as it relates to like shipping like when you start to get your Aov up the benefit of Zach selling an extra couple of pairs of socks means like shipping shipping margin gets better. Relatively. So like, you're actually opening up more margin in that way. So I think just like there's a bunch of different ways. You can manipulate levers, Dave recook. We probably mentioned him several times on this. He he had a tweet from like 2023 that I think about all the time where he was like.
40:32
Brad Ploch: Send me your business, and I'll send you an offer idea that's like margin or creative, or something along those lines. And it was fantastic. It just rips through tons of ideas where like, it's just things you don't think about that can really impact the offer. So there's a million different ways. That you can. You can. You can craft an offer that can be meaningful. So you just gotta pick and kind of commit and let it rip.
40:52
Andrew Foxwell: Gentlemen, thank you for being here. And yeah, if you enjoyed this episode, always feel free to let us know Andrew at Foxwell, digital com. You can email me if you enjoyed this, please subscribe on Youtube, subscribe on spotify or itunes or rate us in any one of those places we generally we very greatly appreciate any sort of rating. It helps us continue to grow and and get get good information out there. So, gentlemen, thank you for being here.
41:20
Zach Stuck: Thanks, all.
41:21
Zach Stuck: See ya.