Two-part interviews with successful CMOs: Their careers and how they got to where they are, and a deep dive into marketing channels for a specific business. Companion to the Marketing BS Newsletter by Edward Nevraumont marketingbs.substack.com
I realize there has not been an essay or a briefing in a while. I am trying hard not to let this newsletter distract me from writing comedy. It's coming along nicely, but at some point I will pivot back to writing more here. In the meantime, I hope you continue to enjoy these short conversations I am having with Peter and we are hitting the more interesting marketing news in any given week or two.In other news, my 1960s comic book podcast is re-branding. “Super Serious 616” is becoming “WHAT IF… MARVEL was real?”. I wrote a little about why we are making the change here. The big impedes was a big advertising push we are doing later this week that should (if all goes well) blast us to the top of the Apple Podcast charts. The hope is that after an artificial boost or two to the top of the charts, we can use the momentum to maintain that position naturally. It will be an interesting experiment. In the meantime I think the quality of those podcasts have gotten better and better. If you are at all interested, now may be a good time to jump onboard. In the latest episode we discuss just how fast Thor would have to fly in order to cross the Atlantic Ocean in three minutes, and what that means for situations like saving someone from a speeding truck.Now onto this newsletter's podcast:Full TranscriptEdward: Peter, when was the last time you saw a movie in the theater?Peter: Oh, we go every couple of weeks. Every now and again, it's a very different experience now with, the big crazy seats and having to pick your seats in advance. And it's just, it's not like it used to be, but still it's a nice getaway.Edward: Nice. So you paused during covid, but then you're back at it the same frequency there before.Peter: Actually, even during Covid we'd go a couple of times. There was one time we went to tenant. Only people in the theater .Edward: My crazy tenant story is, for a buddy of mine's birthday, I rented the entire theater so the two of us could go see it.Peter: There you go. Well, we didn't have to rent the theater, we just bought regular tickets and you still got it. Don't think or so, but during Covid when no one was going to theaters, it was like the safest place you could be cuz no one else was there. So fair it out. So we'll still do it, every now and again. But it is funny how the industry has changed and maybe not funny, maybe sad how it's changed so much.Edward: Yeah, I think it's interesting how little theaters have changed over the years, and it feels like they're changing quite a bit now. As you said they've made changes in terms of the seats are fancier and more comfortable and they're serving better food and so on. But in terms of like things like pricing, pricing has been, Hey, pay one price. Everyone pays the price to walk in and sees the theater. When you're dealing with a product that has an expiration date, like after 8:00 PM on Thursday, anyone who's not bought the ticket, those empty seats in the theater are going unsold. It's very much like an airplane, but theaters have never been priced like an airplane.Peter: I have never understood that. Yeah, they should definitely be using different kinds of dynamic pricing. And of course it's not just them. It's gonna be the same thing with sports venues and concerts and yeah. It's funny in those domains, you keep hearing a lot about it. Sometimes controversial, but movie theaters seem to be just clinging to their kind of dinosaur ways. Although I guess just now starting to change.Edward: And then even things like. Not just dynamic pricing, but even pricing by title. If you go and buy books, books vary in price. Every book you buy, I don't know what the price of the book is gonna be until I look at the price on it. And they're all over the map. Whereas when you go to see a movie, whether you're gonna see a 500 million avatar sequel, or are you gonna go see a nice little small new indie. They're all the same price.Peter: That, and that's why it's so interesting. So there's that new, 80 for Brady movie just came out and there's all this headline news about it's going to have a different price as if this is a radical. Even in the articles, it's saying this bold move just cuz they're charging a different price for movie. Yeah, they're absolutely right. That should be the way it always works. Not, this kind of one time weird.Edward: And apparently it has been done in Europe, so in Europe they have priced blockbusters at different prices than like smaller indie, lower budget movies. But in the US there's been a tendency not to do that. And I think the logic is like right or wrong, the logic has been if we price a movie at a lower amount, it will signal that the movie is flawed in some way and therefore it'll drive, even though it's almost like the idea of a luxury good. If I go and start discounting a luxury good, then maybe. Price elasticity is a negative elasticity. It might drive people away because it's considered bad because it's a lower price and it seems like that was the fear in the US if we reduce the price of the movie, people are gonna think it's a bad movie and no one's gonna go.Peter: And that's why we shouldn't teach economics courses cause people jump to these ridiculous conclusions, you know? You know, it was the same thing with professional sports a lot of major League baseball teams were saying, oh, no, no, no, no. We can't change the prices. Same issue that we don't want to devalue the product. And now they're doing it all the time, not only charging different amounts for different games. But changing the pricing as the game gets closer and even based on weather and who's pitching and so on, that's just become the rule. Now. It's just a matter of how you do it. It's just weird that some sectors, like movies have just stayed behind and just haven't gotten with the times.Edward: I went and saw, David Chappelle and Chris Rock were in town here in Seattle in December, and we went to get tickets. They like most of the seats in the house were at set prices now. Like the better seats were, better prices and so on. But the best seats in the house, it said this on the website, our top seats are dynamic pricing changing on a day by day basis based on demand.Peter: That's kind of interesting cause like go to a restaurant where they have fixed prices for everything, but then there's that, special steak or fish market price, which implies that everything else charged isn't at. Prices, everything should be in a market price and people get used to it. That's The Thing a lot of these venues hesitate to do it because of some sense of fairness or something. It's like, oh no, we don't wanna go down the same path as the airlines, but people get used to it. People understand that, as long as they're not being gouged, the fact that they bought the tickets later or they're buying better seats they should be willing to pay a little bit more.Edward: That's right. And, I think, maybe the airlines get us used to it, to a point where now it's not a big deal when it happens in the movie theaters. I remember it was probably 2003, 2004 was the first time I went to movie theater where I bought my ticket, like I bought my seat of where I was going to sit. Prior to that, I think every time I went to the movie theater you'd buy a ticket and then it was first come, first serve for where you were gonna be in the theater, of course. And it was around that time, 15 years ago or so where they said, Hey, no, you can actually buy your seat and now you can buy in advance. And now you can show. Just before the theater, just before the movie starts. And I think the concern at the time, at least what I heard prior to that was we don't want to do that because we want people to get to the theater early so we can serve them the ads. And if we start letting them buy their seat, they can show up at the last minute and they won't be able to advertise to them.Peter: Wow, that's such bad logic given how much of a premium they can make for those better seats. It's a whole lot more than putting a couple of eyeballs in front of ads. And in some way the psychological weirdness of having to choose the seat, I think is actually less painful, less cognitively taxing than the idea of paying a little bit more money because, you're closest to the showtime. It's a different kind of process and people adapt to it and become second nature just as dozen these other domains.Edward: And what's fascinating too, I think is who controls this pricing. When I was at Proctor and Gamble, we could go to the retailer and say, Hey, we want Swiffer to sell for nine 90 but we couldn't tell them that Walmart would, whatever price we told them, Walmart would put it lower and we'd be like, please don't put it lower. We're like, we want this be higher. We want this be high margin product. We want everyone else to charge more money for it. But they could do whatever they wanted. We couldn't force 'em to do anything. Now, we could rent ads on television saying, go to your local retailer and pick up your Swiffer for 9 99. But at the end of the day, the retailer decided, and it's that it's the same way with theaters. And so Paramount, you mentioned 80 for Brady. They can't set the price.But what they did is they went and spent a whole ton of market research and then put together a research pack. Basically it was a sales pitch. So they went all the big theater change and said, we did some research and it shows that the price sensitivity for 80 for Brady is really, really high. And if you reduce your price, you can fill seats with older people who otherwise wouldn't even go to the theater at all. And they had to make a pitch. And apparently, I guess that pitch. .Peter: That's great. And that's the way it should be, to get, whether it's the theater owners or again, any kind of venue, to run experiments that take chances, I think there's a real opportunity, whether it's the studio itself or some third party to come on in and start offering that, that kind of pricing expertise. Now, the next thing you gotta wonder about is will there start being a secondary market? For movie tickets. You know it's the idea is ludicrous right now, but anything's possible.Edward: Yeah. It just, it feels like, at least right now, the supply of seats is so much higher than the demand for seats. And also you have a zero marginal cost electronic product that you can just put more showings, right? So if you don't go and see it at a certain time, they can run another showing at another time. Like unlike live shows like a Beyonce show or Taylor Swift show, like Beyonce can only be in so many places at once. It can only be so many shows. They can keep showing avatar forever and ever and ever. And you're gonna get this almo, if not the same experience. Pretty close to the identical experience. No, no matter when you. .Peter: No, that's a good point. That there's not as much of a necessity for a secondary market as there is for sports or concerts. But on the other hand, there's a lot of people who are becoming accustomed to buying their tickets through the secondary market. You know, they'll start by going to StubHub or SeatGeek, and to see what's available. They, don't want to go to the primary market. Maybe it's cuz they don't trust the venues who are selling the tickets, or maybe they have a good experience with the secondary market. So I think it will emerge even if it's not quite as vital.Edward: So we've talked about this, these companies that have been very reluctant to move into this direction. Right. So Airlines did this decades ago. Hotels did it decades ago. Cruise ships have done it decades ago, like movie theaters took a long time to do it, like athletic venues like baseball and stuff took a long time to move in this direction. Is there any example of a company that started moving this direction or an industry that started moving this direction where it was a mistake? We keep talking about, everyone's like afraid to do this. They're like, oh, I'm afraid to put them, buy their seats in advance cuz they'll will miss the ads. Or we're afraid to do this cause our customers will hate us. But is there an example where they were right, where like they should have moved more slowly or not moved?Peter: Well, in terms of the overall movement, I don't think it's ever a mistake, but there's no doubt there's specific times, you know, specific games, specific sections of seats that are either gonna be priced too high or low. That's just the chance that these organizations take. I mean, let's face it, every game or movie or concert, they're never gonna get the pricing exactly right for every seat. So you just have to hope on average that works out in their favor. But, it's not an exact science, but it's a hell of an interesting science, no doubt about it.Edward: But is there an example of where dynamic pricing wasn't the right choice? That like, Hey, we had fixed prices. Oh, everyone wants us to move to dynamic pricing. We think it's a bad idea. Every example that we're talking about. It was actually a really good idea. Theaters are slow. They should have done it earlier, but is there an example where someone moved too fast and they shouldn't have donePeter: Oh, yeah. I'll tell you where the third rail is. Personalized pricing. Yeah. A lot of people mix that up with dynamic pricing. Of course, with dynamic pricing, as we get closer to the date or if it's a better seat or whatever, anybody would, would pay that higher price but personalized pricing to say, based on, given your characteristics, we're gonna charge you differently than me, even though we're coming in to buy tickets at the same time. Back around, right around the turn of the century Amazon experimented with that little bit and they got caught. They were charging two different people at the same time, different prices. And they, boy, oh boy, did they back down on that? They apologized, never again. It was just a little experiment. So yeah, that's a real danger zone. Not, to say it can never happen, but given our kind of how naive we are, even with just regular dynamic pricing. That's a step too far.Edward: Well, it's interesting you say it's funny, I remember that when that happened at the time, I didn't make the connection, but you're right, they did that. Where they got nailed, I think, was personalized pricing where some people were paying higher prices than others. We do personalized pricing where some people pay lower prices than others all the time, and no one gets upset about it. Like if rather than charging $8 for this CD for most people, but $10, if you, we knew you're like a high level, like a adamant CD buyer and you're priced in sensitive. They could have just priced it at $10 and offered $2 off coupons to a whole bunch of people. Instead of pricing at $8 for everybody and 20% of people paid 10, they could just price it at 10 for everybody and 80% of people got $2 off, and everyone would've been fine with that.Peter: That's a great point. As long as you separate out the list price from that discount from the coupon or whatever, then it's okay as long as people have to do something. But when it's just offered. And then when the face value is different for different people at the same time. And you're right, it might sound a little, hypocritical, but, that's the reality that we, haven't yet come to grips with.Edward: One thing I see on Amazon all the time now, not all the time, but fairly consistently, is I'll go to buy a product and on the main pages listed at one price, after I click through and go onto the product page, there'll be a little box and it says, Hey, click 5% off coupon, click here. Yeah. And I see that regularly. I wonder. If I imagine that's probably personalized that I'm getting, I'm seeing that coupon and other people aren'tPeter: that's right. And that again that's fine. That's totally kosher and people are good with that. It'll be interesting to see it. At what point though, do we graduate from that to just showing different prices and calling a spade a spade? I still think we're a long ways away from that.Edward: Fair enough. This has been fascinating, so think we're agreed that theaters are smart to do this. They should have done it a long time ago. The consumer backlash is going to be negligible. Theaters are just coming up with excuse, that's the word I'm looking for. It's an excuse rather than a reason.Peter: That's right. They're not willing to do the hard work. They're not willing to figure it out. And given the state that they're in economically, man, they better do some homework. They better find these kinds of revenue opportunities if they're gonna stay afloat. Cuz the old rules do not apply anymore and they get a adapt or die. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
Some quick updates:* I have an essay in progress. Will hopefully get it to you in the next couple of weeks* Stand up comedy is coming along. My first “big show” is on Tuesday. If you are in Seattle feel free to stop by at Club Comedy.* If anyone is interested in learning how to edit these podcasts and is willing and able to do fast turn-arounds, just reply to the email and let me know. It's not hard and it's kind of fun with the software I am using, but it is something I am ready to get off my plate.Quick Take aways:* Here is the article we talk about in the podcast (free link): With New EVs Arriving, Brand Loyalty Goes Out the Window* Here is the book Peter mentions: How Brands Grow* Too long/didn't listen: EVs have not changed the rules of loyaltyFull TranscriptEdward: Peter, now that electric vehicles are around brand loyalty doesn't matter anymore. It's all the Wild West. That's what the Wall Street Journal is selling.Peter: Oh man, I've heard this song before . It's the same old tuned men whether it was gonna be the internet, oh, that's gonna change everything. Or social media or covid. It's gonna totally upset the rules of loyalty. Yeah, those rules are pretty locked in and I'm willing to say same story here.Edward: So what are those rules of loyalty? What are the rules that the Wall Street Journals claiming are garbage now? Or are they just missing the entire.Peter: It all depends on how we define the rules. Where I'm coming from it coming forward it is from the top down. If we just look at actual behavior and just look at the choices that people make over time and how often they switch around and what they switch around from in two, there's some very regular patterns to that.And we could talk about it, but all if you go a level deeper and say, what are they thinking? How are they making these decisions? Sure. Maybe the psychology's a little bit different, but from a business standpoint, that's all cheap talk. All we really care about is what are people doing?And in that regard it's no different than people rolling a dye to say, which, which of these different items am we gonna buy?Edward: What they're, so let me quote from the actual article. It says that basically in the past, whenever someone bought a Ford vehicle, 58% of the time it was a Ford vehicle. Now, when they're buying the Ford Electric vehicle, 66% of the time, it's not a Ford vehicle. So there's significantly more people switching to Ford to buy the electric vehicle than we're switching to Ford to buy the non Ford vehicle.Peter: Yeah. First of all, we don't even know if it's significant or not, but second of all, it's cuz the set itself is changing. The number of electric vehicles out there is really different. It, no that's just nonsense. It's cherry picked, rubbish.Yeah. The way it's interesting that we talk about cars cuz the people who first set out these rules that I'm referring to and I know you know it well. There was a guy in London called Andrew Berg and his heir Byron Sharp at the University of South Australia.They basically say that it's you have your die. I have my die. And what drives our choices is, It's just as if random, and it's remarkable how well that story works. The do sleigh model as we call it. And there's no reason to believe it'll be any different here. Do you think So?Edward: You say it's random, but that's not entirely true. It's weighted random, right? Because if I have, if I bought, if my last car was like a Subaru Forester I think when I go buy to buy my next car, I'm more likely to buy a Subaru Forester than amped. Whatever the average of all the other market shares are. I assumePeter: you are so right about that.It's, yeah. It's not that we're all rolling a six-sided equally way to die. In fact, it's not like we're all rolling the same dye that, that there's gonna be this distribution of dice and even that is gonna be well described by again, a. Jewish lay distribution. Look that word up. And yeah, you, but you have your die.And the important point is that your die doesn't change very much over time. So whether it is covid or internet or EVs, you're rolling pretty much the same die. And there's just so much randomness around the choices that you make that it appears that there are some patterns, but there's really.Much to it. The only thing that could be going on here is that we might sometimes. what these like guys like to call a structured submarket. So it could be that though that that just as gasoline split off into leaded and unleaded, then people would move into one corner of it. Maybe we'll see something like that.But it's not some kind of fundamental change in the way that people make decisions.Edward: So again, I go back to. We're talking about, there's no, like the brand loyalty is not a thing, but brand loyalty in that example is right. There's something to, even if it's not oh, I love my Subaru Forester.It's the fact that. That I had a Subaru Forester before, I'm more comfortable. I'm the type of person who would buy a Subaru Forester the first time, which means I'm probably still the type of person who's gonna buy it a second time. Plus the fact that now that I'm used to using it, right? So I'm the, and I know it works and I know it.Presumably it operated the way I wanted it to operate. And so when I go to buy my next car, my default choice is the same car I had before. Now it could change, but the default choice is there, and that's a form of brand loyalty.Peter: But, so there, there's two pieces to brand loyalty and you described them really well.One is just that you just have this natural propensity for whatever reason, to buy some things more than others. That part Absolutely. Positively. And that's why your die might be, a little bit weighted more towards the Subaru Forester. And mine might be weighed a little bit more towards, I don't know, a Tesla or something.Edward: And is that the selection effect? The fact that I bought a Subaru Forester means that, I'm probably the type of person who buys Subaru forests.Peter: Exactly. Yeah. Cuz then the second piece to it, which is the part I take issue with is this idea of lock in this idea that my propensities get shaped by my behavior over time.There's not much evidence to that. Again, if you're a supervisor person Yeah. Then you're gonna lean towards it more than most people would. But your propensity to do it isn't gonna get higher over time. It's pretty. Maybe, but it's gonna pretty much stay at that same level no matter how many times you, you roll that die or buy a car, that's the big piece of it.We don't see that kind of lock in. We don't see that kind of learning. We don't see all of that romantic stuff that we like to talk about where the customers learn to love us and we learn to serve them better. There's not much to thatEdward: really. But I feel like. Say I'm doing, let's switch to a new category.Let's say I'm doing laundry. Let's say I moved to a new country, so now I have no brand loyalty at all. The first time I go in I, I look at the shelf and I pick one effectively at random, and I take that home and it works. I feel like the next time I go to the store to buy laundry, I'm gonna go and buy that same one.Just cause I know No, it works. Rather than trying to gamble on something that I don't know that.Peter: First of all, what you said effectively at random, there's gonna be a lot of influences on it. It could be the brand name. It could be where it's located on the shelf. It could be the colors, it could be stuff that you heard about, but you haven't even thought about, seeing ads for it on the subway or hearing people talk about it.So there's a lot of influences there that. Things look random, but they're not. And those messages, one way or another got through to you. So it might be less about the actual experience you had with the product and more about the, some of that implicit prior exposure you had to it, that's gonna drive those choices that you make.That's, that, that's the real important point.Edward: Sure. And so I, so you say, Hey, the, whatever those influences were the first. They're gonna influence me the second time, but doesn't, the fact that I used it and it worked influenced me like I feel like it does. I feel like. Once I have a chocolate bar that I like, I'm more likely to buy that chocolate bar again.Even if it was, let's say it was gifted to me. Let's say someone gave it to me rather than me choosing it. Once I have something that I know works, it feels like why wouldn't I stick with what worksPeter: well? Because of all, you might, you just might have a propensity to, to stay with that chocolate bar, but there's all kinds of reasons why it might be just variety seeking, that let's just try something different.I like this thing, but, ,Edward: that may, maybe that makes sense for chocolate bars, but I. For cleaning my clothes. You know what, let's just .Peter: But, but it could be a situational thing that, oh, my mother-in-law is staying with us this week. And, and she only likes certain kinds of things.And so there could be things that, that might be perfectly rational. Why you're switching around. But to, to me, as an outside observer, I'm just looking at that sequence of choices. And man, oh man, it looks an awful lot. , rolls of the dice. Now to be fair I mentioned all this work by Aaron Bergen Sharp, and they basically said, you have your dye, and it never changes.Now, I myself have written a bunch of papers that show that, that model's a pretty good first pass. But every now and again, people. Do throw the old die away and do start with a new one. So I don't rule out the idea of changes, what we technically call non-stationary. But the times that you do that tend to be relatively infrequent and they tend to be dare I say, random.It's not like necessary because of a pandemic or a or change in the macro economy. It's just, there's just something in your life that. Be related to anything anyone else is doing that just causes you to shift your preferences. And it doesn't happen that often.Edward: What about sampling? So say I'm a I'm a loyal, I don't know, strawberry jam eater, and I'm doing it all the time. Not because I'm loyal, but because I have a propensity to eat Strawberry Jam. And then I go into the grocery store and they give me a sample of, I don't know, grape. , does that have no influence on the chance of me eating crypto jelly?Peter: I did say that in, in fact, I'd say it's stuff like that. It's sampling, it's word of mouth. It's seeing a Super Bowl ad that sometimes we'll have people switch around a bit. It could be just a change in which things are on which shelf in this store. And and that's why to, again, to me as an outside observer, I see some switching around again there.Perfectly good reason. It's cuz someone, forced that grape jelly on me. But it makes it seem like that you are rolling a die. And so yeah, a lot of these influences will will have some impact on it. But to the outside observers, it looks pretty random and it looks relatively steady over time.Edward: But if, again, if I outside observer, if I'm the marketer who's running the sampling program, , I r I go and start sampling a bunch of these jams stuff. Can I expect that my jam sales are gonna increase and that the people who switch over to start buying that grape jelly are more likely to buy grape gel in the future? Like the impact is more than just the next purchase, but it might be like a series of purchases after that.Peter: This starts where it gets really interesting. So again, a lot of this. Great. Work by Aaron Berg and Sharp. And Byron Sharp has this book that I'm sure some of your listeners would know called How Brands Grow. And they talk about a thing called Double Jeopardy, which again, I know you know Ed, which basically says if you can get more people to buy it, if you could increase the penetration, the footprint, just the overall number of people who tried The Thing at least once. That in and of itself is gonna be associated with higher degrees of loyalty. So yeah, your point is pretty good. You get more people to buy it, they're gonna tend to buy it more often. They're gonna appear to be slightly more locked in having a slightly higher propensity to buy it. It's really counterintuitive, this idea of. Double jeopardy. But it's really powerful. It's pretty much universal. And it's something you should expect to see instead of it being the exception.Edward: Yeah. So then looping back to the wall Street Journal Electric car article sounds like they're doing the right thing by introducing the electric cars, they're getting people, so Ford introduces an electric car and it's getting people who didn't buy Ford before to be more likely to buy them now.So it's a customer acquisition play it brings and it brings 'em into the Ford fold. And then once they're in there, Ford's market share increases because they now have more customers they acquired with a electric vehicle. And then once that happens, the double jeopardy kicks in and they should. Those people who have bought those four vehicles the first time, more likely to keep buying them in the future.Peter: So you will see some of that. Absolutely. The big key is how to get that wonderful cycle going. And in other words, how do you do the acquisition? And again, going back to the great work of Aaron Bergen Sharp and others, you can't just lean on one attribute. You can't say, this is the coolest, newest electric vehicle. You gotta. Broadly appealing. You gotta really punch up a number of different attributes that, yeah, it's gonna save the environment. But you know what? It's all, it's also fun to drive and it's very safe and and your friends will like you better. So you don't lean too heavily. Don't nichey yourself.You want to make yourself broadly appealing and that's gonna bring in more people and just, implicitly get them to do to. Or to roll your side of the die a little bit more often. It, it really is amazing how counterintuitive that he did. Double jeopardy is, but you just see it it's funny to see a lot of companies stumbling upon it as if it's something new and unexpected, it's been there all the time.Edward: And what's neat about this is it does hint at that, the next paragraph in the article talks about how these people buying these $70,000 new electric vehicles it what says they're, I dunno if this is actually true, but this is what the journalist is saying. They're as likely to own a $30,000 Subaru Outback as they are to buy, as they are to have previously owned a $100,000 Porsche 9 1 1 sports car. And whether that's true or not, the idea that we should make these vehicles to appeal. Everyone rather than just some sub-segment. Sounds like a step in the right direction for the marketers anyway.Peter: Yeah, it, and it goes against the grain of so much of what we've taught and learned in the marketing 1 0 1 s. We just figure out what your distinctive attribute is and hammer that and find people who care about that instead. We're trying to say, not so much be all things to all people, but a step more in that direction.Edward: Great. Anything else to add, Peter?Peter: We just want people to appreciate that this is the way the world works, whether it's electric vehicles, whether it's soup, whether it's hotels we expect to see these kinds of patterns. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
Happy new year! Expect fewer posts this year. I will keep going with this podcast, but I am shifting my time commitment to (1) get the book over the line. No more excuses; and (2) Work on developing “business comedy”. I will write more about #2 at some point, but for now enjoy the podcast, and be happy if you weren't flying Southwest the last few weeks!Full TranscriptEdward: Peter, how were the holidays?Peter: Wow. It seems like a million years ago, doesn't it? It's amazing. We had that kind of one day after New Year's adjusting and then boom. But it was great. I went down to Antarctica and it was amazing. Super fun, super interesting. What about yourself?Edward: We tortured ourselves by taking our four little children to Guatemala and Belize.Peter: Wow, that's bold. That's bold.Edward: But I think the nice thing is both of us missed the travel meltdown that happened. I think we both got out before everything started falling apart across America.Peter: It was amazing actually being down in Antarctica. where it's kind of warmer and more pleasant than it was in most parts of the us. What a mess that wasEdward: Go to Antarctica for the heat .Peter: Well, it was summer and, I think unfortunately the repercussions of that are still rippling through and it's gonna be a while before that all settles down.Edward: It's interesting. We were flying on Alaska and there's now a direct flight between Seattle and Belize City. and there were three flights before ours, and they're a limited number of flights now that go back and forth. Like they're only every couple of days. And the three flights before ours were all canceled, so we're on the edge of our seats and whether we were gonna get back on time.Peter: And between all the cancellations that were happening earlier in the summer for different kinds of reasons, staffing, and now all of the kind of Southwest mess, which is more kind of operational issues, we have a very different feeling in the stomach when we pull up to the airport these days.Edward: One of the news this week, southwest Airlines had a big, big mess up where every, all the airlines kind of had trouble, but I think Southwest had the most at one point, I think they'd canceled half their flights. It was like a huge, huge, huge.Peter: Yeah. And I guess, if you read, some of the, articles and blogs about it, it seems like it was, it was inevitable, right? That they've been on a bit of a downward spiral in recent years and letting go of some of the operational aspects that would've never happened back in the old days. But, it's a shame it had to hit. Abruptly, and it's such an inconvenient time.Edward: Well, that's what's gonna happen, right? When you run really lean, if everything's going well, it's not a problem. It's when things start to go wrong, all of a sudden they can go really, really wrong because that's when things break.Peter: Exactly. And of course, the lessons to be learned are, How not to let them break, but also how to, how to recover from it. And I still think there's a lot of lingering questions about that.Edward: I think the Wall Street Journal was just publishing earlier this week about how Southwest is now saying, sorry. They're admitting their failures. They're offering, they said 25,000 frequent flyer points so that passengers hit by the travel meltdown. What do you think of that? Like, what is the value. The passengers who are getting that treatment to get them to come back? Or is it the signaling to non passengers that, Hey, we really.Peter: It's very interesting. My, initial reactions be really, really fun to, to talk through, was not a positive one. About that move. Couple of reasons. Number one, devalues the point. It's like, we're just gonna throw some stuff at you. You spent all this time trying to get people to value points and earn and get status and all the great things you can do. But just to use it as a way just throwing stuff at you, it kind of makes you wonder about the value of that currency and what it really means to Southwest. So there's one reaction. What, do you think about that?Edward: I think they claimed in that same article they said, those 25,000 points is worth $300, which would, which you put each point at worth more than a penny, maybe it's $300 if you do it absolutely perfectly in how you use it. But I think most people value these points at less than a penny. But you're saying that the fact they're giving points at all rather than giving people the $300, in either future travel or $300 in cash, the fact they're doing it in points, what degrades the value of the point .Peter: I think it does, maybe less from a fungibility standpoint, but from a psychological one, we try to associate these points with good things and aspirations and bonuses and like, wow, look at all things we can do with it. But here we're framing it or they're framing it as, this is a way that we're covering our ass and, and making up for a problem. And, I think it taints the idea of, of what these points are all about.Edward: I'm just thinking, when I was traveling, I stayed at,, back before Marriott bought them. I was staying at Starwood Hotels and they offered points for all sorts of things, but that was their go-to for both good things for, Hey, do these things we want you to do and we'll give you bonus points., get our credit card, we'll give you bonus points, stay in our hotels, get more points. But they would also use them for when things went wrong. And I remember times where like, Hey, they messed up my hotel room. Or there was really loud noise at night. Or they had, the pool wasn't working. And in those cases when you said, Hey, you guys made a mistake, their go-to thing was, well, here's some points. And I don't think I felt bad about that. I felt, I think I felt good about that.Peter: = I think it's different. I think it's a very different situation because, I've of course been in many of those situations myself, but, when it happens on an ad hoc basis like that, it's like, look at me, you know, I was a good negotiator. Look at what I got out of them. So at that point, it seems like a bonus. , I got something that other people might not have gotten. Whereas in this case it's a blanket offer, so it's not so no one's gonna feel like that they got something that they earned it, they're being treated all the same, and it's just sort of being thrown at them. It's not the outcome of some kind of, negotiation or something like that. So I think it's the points are framed very differently.Edward: Should they have done it below the line? . So instead of announcing that the Wall Street Journal they were doing it, should they have just approached each individual independently and said, Hey, we felt really bad. What happened to you specifically? Here's 25,000 points to make up for.Peter: And maybe vary the amount of points based on what people paid for the ticket or just how much inconvenience they were. Something like that. I think if they tried to make it a little bit more personal instead of just, again, sweeping it under the rug. Here you go, people, here's your points. Now shut up and let's keep going. I think that it might have just felt a little different.Edward: Who's to say they're not doing that? Maybe, they led out with the top line saying, Hey, it's 25,000 points to everybody. Here's the Wall Street Journal article. But maybe below the line they're saying, Hey, we're giving 25,000 points to everybody. But for you, We're gonna give you 30 or we're gonna give you 40 because of what happened to you and we wanna make so special.Peter: Or maybe it opens up that negotiation where people will go back to 'em and say, 25 isn't enough. I deserve more. In which case they would feel a little better about those incremental points that they were able to negotiate for. One of the other things that I find interesting about it, and this just kinda shows our age over here a little bit, is that Southwest, unlike the other airlines, hasn't been as, Has dependent on the loyalty program. They haven't called attention to it quite as much, and for years and years and years, they actively resisted having one. They always said that, look, we're just giving you a good deal. We're gonna treat you really well. We don't need to sweeten it in the way that some of these other big evil and personal airlines do. I kind of admired that about them, but then eventually they caved in. Everyone has to have it, butEdward: now they're so much money and a credit card.Peter: They have to do it, and that's fine. It's inevitable they would, but now they're calling even more attention to the program. And again, they're doing it in a way that has nothing to do with loyalty, that has nothing to do with that good feeling. It's just another currency. And it, takes, something special out of it and makes you start thinking about Southwest in a slightly more, I don't know, commoditized way .Edward: Have you looked at cohorts like this? So, like either an airline or something similar where something really bad happens. The people who experience that really bad thing, do you see what happens to their lifetime value? Does it drop significantly?Peter: I love that. I I love that. I can't believe that you raised that before I did. We do that all the time. In fact, the most obvious example being covid. But plenty of others, you know, we'll, we'll find cases where there's some kind of either competitive entry or the company engaging in some kind of other big strategic change. Not so much the first thing to do, but maybe the most telling thing to do is to say, , what's the nature of those customers, of the customers acquired during that time and how do they compare, you know, better or worse to, to others? I think that's a really great analysis to do and ends up being, I think, much more telling about the impact of that intervention than just a lot of the kind of day-to-day moment to moment. Nonsense on social media. So it's a great analysis. Now let's press pause on that and pick it up, a year from now and it would be great if Southwest would divulge some of that data.Edward: To me there's, three effects. There's one which is Southwest did this big mess up. It's in the news. How is that gonna affect my future travel with Southwest? Like how many times was I going to travel with Southwest? I wasn't affected by it, but I heard about it. Is that gonna drive down my future likelihood to fly Southwest then? Then number two is the people who were actually affected by it. They were traveling on Southwest, they released somewhat loyal to Southwest and that they bought one ticket. How is that going to affect their future travel with Southwest and is it gonna be more so than how my, I'm affected? You can even break that down even further by. People who, people who that was their first flight with Southwest. That's their only experiences with those Southwest. Versus a frequent traveler. And then number three is what effect did the intervention have? And I think the problem with this is that, Number two and number three, we can't separate because they're giving it to everybody. Now, if they've done it below the line, they could have just given it to like 90% of the people and 10%, 10% get nothing. You're screwed, buddy. Just so they can measure the effect of whether their intervention paid out.Peter: I love that. I love that. Or at least to communicate it differently to different people. Some people it could be a more positive message like, Hey, you get a free vacation on us. Or with other people it might be a, oops, we screwed up. You know, we feel bad. So that there still could be ways that they could try to get some insight from it. I suspect they're not, I suspect they're gonna try to make it as blanket and generic and, just get it out there and forget about this thing, which of course raises another problem which is they, giving points away isn't addressing the problem. all the operational issues that have been creeping up on them. The last thing they want is to throw a bunch of points at people and to see issues like this keep recurring, even if it's not quite as severe and public as what happened a couple of weeks ago. They're gonna still have operational concerns. And this whole points thing, the fact that weren't even talking about it, might call even more attention to future problems they have.Edward: Have you seen any examples like that? Like what should Southwest expect? What should it do to propensity to fly for people like me that weren't, didn't experience it? What should it do to the propensity to fly to the, for the people who got hit?Peter: Maybe The Thing to do, you gotta give some points or money or do something. But maybe it should be more communications around here's what we're doing to fix the problems. You know, here are the new people we're gonna hire and the new systems we're gonna integrate, and the new processes that we're gonna have to try to keep people alert. Again, I haven't stayed that close attention to this, but, I'd rather hear about the issues and how they're addressing them, rather than trying to just, throw points at people and pretend it's all better.Edward: I imagine this what the investors would care about more than anything else.Peter: Sure. And ultimately that might be what matters most, cuz there's no doubt they took a big hit here and I think people are gonna be looking at 'em skeptically for a while now. They need to earn people's trust back and again, it's not clear that 25 k points, closes the chapter here.Edward: They need a new, what's their tagline? Like, flying the Friendly Skies. Is that Southwest?Peter: No, that's, United.Edward: Oh my gosh. What's Southwest tagline?Peter: Oh, geez. , we should know our airlines better here. You're look, looking it up.Edward: Lofas. Nothing to hides. That's transparency. That's their, oh my gosh. That's terrible. .Peter: Yes, exactly. And, and here they're, they're trying to hide a lot, . And again, it's not very evil. It's not a conspiracy, but they're not being transparent. They're not addressing the issues. At least through this one tactic,Edward: they can do the new tagline. We will try harder. We'll do better.Peter: and we'll throw some points at you if it doesn't work. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
Essay and Briefing production has been low the last few weeks as I have been spending more time on building a GPT-3 powered comedy writing tool (and writing “business comedy” with the tool). If you have not checked out ChatGPT in the last two weeks, you should really do so. It is much slower now than when it launched, but still mind blowing. If it is too slow you can just use the GPT Playground, which is powered by the same back-end. GPT itself moved from 3.0 to 3.5 right around when chat launched. 3.5 is very impressive (it can rhyme now!). Spend some time playing around! It's not often that the most interesting, most advanced cutting edge technology can be in your hands this early (and practically free).Marketing BS is on vacation the next two weeks. In early January I will be back with another podcast episode (moving to Fridays), and hopefully some more text. Have a great holiday!Full TranscriptEdward: Were you a Westworld fan, Pete?Peter: That first episode in the first season was one of the most awesome pieces of television I ever saw. I was hooked with the first season and maybe watched one or two more episodes. That was it. How about you?Edward: One or two of the first season, or finished the first season and then one or two of the season?Peter: Finished the first season, that was, must watch tv. And then in my view, it jumped the shark very quickly after that. In fact, when I saw that news that H B O is gonna give up on it I thought they were just killing the program, but I didn't realize they were actually killing the, getting rid of the catalog too. That, that's crazy.Edward: Is this the first example of hbo? So HBO has pulled stuff from their catalog before, like they, they pulled some Sesame Street episodes people were upset with, but is this the first time they're pulling their own content from...Peter: It's the first I know of and indeed, the Sesame Street thing is different because that's not their content, but for them to have stuff that, that should be uniquely associated with them and still does, and on catalog basis, we'll have some value for them to say, nah, we don't need this anymore. It does have me scratch in my head.Edward: So there's no actual cost for them, whether they put it on the platform or not. There's no cost. But what there is an opportunity cost, and I think that opportunity cost has really been ignored in the past. And now they're saying, Hey, we can take this product that we have and instead of using it on our own platform, we can turn around and sell to some, sell to Netflix, sell to Amazon, have someone else owed it exclusively instead of...Peter: But it does make you wonder, like sometimes you'll sell content outright and say, here, it's yours now. Or sometimes you'll just license content. Or access. You think about lots of examples where, I don't know where Verizon will let Comcast use Verizon's phone services as a private label kind of play. So they're not giving up on it, but they're saying, Hey, we can have other access points to it as well. I just wonder if, maybe providing broader access rather than giving up on their own access makes sense.Edward: HBO has done that before, they kept Sopranos on their system, but they offered Sopranos to Amazon as well. So you can go on Amazon Prime and watch Old Seasons of the Sopranos. But what was happening there is it was non-exclusive. It was still available at hbo, but also available at Amazon. I think what's happening here is that there is a higher value in a piece of content that's exclusively available someplace else, and HBO's gonna try to realize that with Westworld.Peter: So you think it's an opportunity play for them that they'll make more money by auctioning it off to the highest bid. you don't think a kind of a cost cutting moveEdward: No, I don't think there's any cost. The cost to have more video on your platform is as close to zero as it comes. The storage cost is you're storing it anyway. And I think this and the streaming cost, if they're not streaming, that they're streaming something else, or they're streaming a competitor and you don't want your customers to do that. That's how you churn your customers. And so there's no actual cost for them to have it on there. There's an opportunity cost where they can go to Amazon Prime and Amazon Prime may pay, I don't know, 10 million to stream Westworld or 30 million if they get the exclusive rights to it.Peter: It's all about exclusivity. But again it's interesting how sometimes, people do put a premium on it and other times they say, nah, come on we don't care what door you come through.Edward: I think what's interesting is that all these streaming services are effectively competing with each other, but they're finding ways that they need to cooperate at the same time. And so you can go on Amazon. Amazon Prime is competing against HBO and Disney Plus and so on, but you can also buy HBO and buy Disney Plus when you're on the Amazon Prime platform. If you go on Hulu that's owned by Disney, you can buy HBO on through Hulu and so they're both, what's that word? Where you're competing and your friends at the same time?Peter: Frenemies.Edward: Frenemies. They're frenemies.Peter: Yeah. And that whole thing about the these kind of affiliate acquisition things that are going on just as you described that the companies getting some kickback from the content providers for selling subscriptions to it, that's something that we as consumers don't really understand a lot of money, a lot. Here it is company like, I dunno, Comcast will pay a bunch of money to get access to the HBO content, so get paid every time they bring subscribers in. It's weird how it goes both ways.Edward: I've tried to dig into that and I don't know what they actually pay. So when you buy HBO through Amazon, you pay your $15 a month, Amazon gets paid for that. I don't know if Amazon's getting a lump sum for getting the new subscriber, or they're getting like $5 a month for one subscriber. As far as I can tell, that data has not been shared publicly anywhere.Peter: The data's not shared. And again, I think very few consumers are aware that these things go on. So when a company starts calling attention to it, like Verizon is now doing, you want, maybe you want to elaborate on that a little.Edward: So Verizon, that is they offered a new deal yesterday. I believe that if you go and use their marketplace, I didn't even know Verizon had a marketplace. Like it never would've occurred to me to go and buy my HBO through Verizon. I have a Verizon phone, but that's not how, if I wanted to buy hbo, I'd probably do it through. Go to hbo.com or maybe I'd pull up my Amazon fire television and buy it. I don't think I'd open my Verizon app on my Verizon phone to go and buy hbo, but that's what they want me to do. And if I go buy HBO through my Verizon app, the. Verizon's gonna give me Netflix for free for a year. So they must be making something from that .Peter: Oh, clearly they are. And you gotta wonder what the play is there that maybe if they can be your gateway to more and more services, then you'll consider adding others and see them as a bonafide, app store in a way, even though we're, blissfully unaware of it. Maybe that's what they're thinking.Edward: I assume that once I subscribe to HBO through the Verizon store, I'm not, I'm still using the HBO app to watch my shows. I'm not going through the Verizon app to get the HBO stuff, which I think is what happens on Hulu. I can buy HBO through Hulu and now all of my HBO stuff is available right inside my Hulu app.Peter: So in a way they're trying to build a walled garden of sorts. But it's not so much financial considerations or even exclusive access, it's just that one, once you're seeing it through gateway, you're just not gonna switch. And then while you are using that gateway, you might access other things through it. Very different than, the traditional approach that apple's taking.Edward: It's customer acquisition, right? So if Verizon can get me to go buy my HBO through the Verizon app, and now all of a sudden I'm getting Netflix through the Verizon app, I've, they've now acquired me as a customer and getting that second, the second or third purchase, when I decided to go buy Paramount, maybe instead of going to paramount.com. My natural inclination, at least my on the margin, I'm more likely to go buy that through the Verizon app now as well.Peter: That's the bet they're placing. It'll be interesting to see if people feel any kind of loyalty to one Gateway or another. And what would drive that? Is it the brand? Is it the the interface that lets you access it? It's funny that we always talk about content being king, but now it's at least the presumption is that being the gateway to content might be the king. Not a lot of evidence for.Edward: It feels like in the real world, we see this all the time, clearly, like I don't buy my tide from Proctor and Gamble. P and g might have a direct to consumer tide business, but it would never occur to me to go to p and g or tide.com to go buy Tide. Instead, I either buy it through Amazon or I. Go to my local grocery store, my local Walmart, and pick up the tide. And it feels like in the digital world, the competition is like a drive away versus in the digital world, competition is a click away and it seems a lot easier switch from one storefront to another.Peter: Exactly. And what's interesting about it I don't know about you, but I have zero loyalty to any of them. I don't look at any of the, these interfaces and say, that's a good one. If anything, especially when you're doing it through the television, you're trying to spell out names of programs by using arrow buttons. Just horrible. So it's I don't think they've done a good job of, the customer experience of being content retailers in that regard.Edward: But I think there's something to be... there is a friction for leaving somewhere. So if you are on your Amazon Prime TV or on your Roku tv and you decide, I wanna watch deadwood on hbo. One way you could do it is go to your phone or your computer, sign up for hbo and then go and link it to your Amazon Fire television. Or the other way is you go on Amazon Fire Television and say, hbo, click here, sign up. I'll bet there's a lot of people who do that ladder rather than the former.Peter: And in the case of Verizon is that a presumption that people would be consuming the content on their mobile device because it's not clear that the Verizon gateway would help you with your home television?Edward: No. I'm a bit of a loss for the Verizon model, although, yeah if the Verizon, if presumably Verizon has, I didn't even know Verizon had a store, but they had a store and you could buy other things through that store. You could imagine a lot of these guys have these discount stores. You can imagine that you go on Verizon and buy your, I dunno, your AirPods through Apple at a $10 discount if you buy it through the Verizon store. And so if you get, if you start getting used to doing that, the reason to go, the reason to buy through the Amazon Fire television is because it's convenient and it's right in front of you and you're already using it. The reason to buy through the Verizon store is there has to be something else. There has to be the convenience is not there, so they better compete on price or something else.Peter: I think it's Apple envy I think that folks just have this feeling if we build it, they will come. That we can build the same kind of walled garden that Apple has. If they could do it, why can't we? And just makes you wonder a, is it is it that easy to do? And b well, you look at what some of the pressures apple's facing, is that even the right way to go? If you can.Edward: That's the other big news we've had this week is that, the EU is now gonna force Apple to have competing app stores. So up until now they've had a monopoly. If you wanna buy something through your phone, you have to buy it through. Apple. Now there's gonna be an, in theory, there can be other stores, but again, we're gonna have that same problem of why would you, as a consumer, why would you go to one of these other stores? Unless they're competing on price or they're not gonna, it's unlikely this other stores gonna have as better a better experience than Apple. So they better just offer things at lower prices.Peter: It's another example where regulators are stepping in trying to do things that, in theory is in the consumer's best interest. But you go back to G D P R, the whole data protection thing. There, it's, great idea in theory, but now every time you're dealing with the European firm, just all the accept this, click on that. It's, it ends up being a worse experience. You know what just take my data, but leave me. And I think it's the same thing here that they'll have a million stores. You won't know which one is which, and in the end, you're just gonna end up just choosing to go to the regular Apple one and, and paying more and getting less. But it's the one you know and you're comfortable with.Edward: The one thing the law is doing so I think that this, again, I'm with you, especially eu, they've made so many poor choices and there's some pretty terrible stuff in this recent law. But one thing that I think it's doing right is it's. Companies to basically circumvent Apple payment rules. So right now, like I can't buy a book through my Kindle app because Apple is gonna require 30% payment from Amazon. Amazon's not making 30% margin when they sell the book. And so the result is it's just lock out completely and I need to go. Into my browser, go into app Amazon, buy the book, and then push it to Kindle. And not only can I not buy through the Kindle app, Amazon can't even tell me in the Kindle app how to buy a book and use this new law is going to fix that. It's going to allow people to go and make in-app pur purchases by clicking off their app. They can tell people that they can go to their website to buy. They, it's still not gonna be a seamless solution, but at least the customer communication's gonna be a lot.Peter: Here's one thing I'm curious to get your take on it. Where I think where the EU stepping in is gonna be a tremendous benefit for consumers, and that's the cables connections to your Apple devices. Pushing people to, u s, BBC or some kind of standard instead of having their own proprietary thing. I don't see any downsides to that. Curious to get your take.Edward: Oh, really? So I think this is a huge mistake. We've come to, we've come to our point of disagreement. So USB cables have improved dramatically over the last 20 years. What EU is going to do is say, Hey, going forward, you have to use this technology this way. They're basically saying that we have now mastered the USB cable and there's no further technological advancements possible until we as bureaucrats decide to change the law.Peter: Oh, I wasn't aware of that. I was just thinking of them telling Apple that they gotta get in line with everyone else, but they're telling everyone, everybody has to get in line.Edward: This is the new, this is the new standard, and the new standard for USB cables is this, and it's not changing.Peter: Oh, ah yeah. Okay. Yeah, that's that's thrown out the baby with the bathwater. That's a shame. . Yeah, because you can imagine if governments had stepped in, just how bad the technology would be today. If technology didn't decide that in a market-based way. Wow. Yeah.Edward: All right. Hey. I think we've been all over the map today. I think just I think to wrap it up, to talk a little bit about traditional retail and how, if not just these, all these streaming stores, but actual physical retailer, they've always been in this place. The stores are selling Tide, whereas, HBO is selling movies. But you also have private label stuff that you're selling on your own. And so you are in constant competition with the person supplying all of your product. 90% of your products are being supplied somewhere and you're competing with all of them while you're selling them at the same time. And I think what we're seeing. The streaming world is as it's getting more developed, it's becoming more and more similar. To what we've seen in retail for the last a hundred years.Peter: And it's great. It's great as long as we can let you know, market forces determine winners and losers. And you we're seeing quite a bit of that happening in the streaming space. It'll look different a year from now, but hopefully better both from a consumer standpoint and from a ability to make money standpoint. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
Last week I published the first chapter of Peter's new book. This week I interview Peter on the book, who should read it, what the conclusions are, how it is different from his last two books, and why he is like George Lucas.If you are interested in buying the book, you can do that on Amazon, but this week it is 40% off if you buy direct from the University of Pennsylvania press. Use the code “HOLIDAY22-FM”Full transcript below.Main Takeaways:I fed the full transcript into ChatGPT and asked it for the main take-aways from the podcast. I then probed it for more, but it could not come up with anything else. I THINK that it only “heard” the first part of the podcast and ignored the rest. But here is what the AI thinks are the take-aways:Peter's third book, titled "The Customer Base Audit," is a prequel to his other books on customer centricity. The book focuses on providing insights into customer data and is considered a foundational work. Peter believes that if the book were released first, it would not have had the same impact as it does as a prequel to his other books. He believes that starting with the "sexy stuff" and then diving into the details is a better way to grab readers' attention and get them to care about the subject matter.Full Transcript:Edward: All right, Peter. We're back. We're back.Peter: It's always good to talk to you. Ed. What are we gonna talk about this week?Edward: We're gonna talk about your book.Peter: We're talking about my book. Love it.Edward: I know there's a heck of a lot going on in the world, but we're gonna take a break from fraud and we're gonna take a break from Elon Musk. We're gonna take a break from ai. We're gonna talk about your book.Peter: We promise not to mention any of those things.Edward: We told the audience that we're gonna do it. We did an excerpt from your book last week in the newsletter. So if you those listening who have not seen that, you should go back and check that out. And now we're gonna talk to the man himself. It's interesting, Peter, this is your third book, correct? I got the number right?Peter: It's crazy, but true. Yes.Edward: Okay. And so my concern always for like big thinkers when they're writing multiple books, is that the first book. The Thing that they've worked their whole career on. It's like the first Beatles album. They've worked on it for the last 20 years of their lives, and they get it down and now two years later, they have to get another album out and they just, okay, let's see what else we can get out. And the sophomore albums tend to be weaker than the first, I feel like with big thinkers like like Clay and Christensen when he releases innovators Dilemma. Earth Shattering book blows our minds on how to think about strategy. And then he proceeds to release four more books after that, that are frankly derivatives of innovators dilemma. Are you being derivative, Peter? What's going on?Peter: Actually it's a great question. Cuz this book actually comes first, and I mean that literally and figuratively that, if you look at the, of course the book is called the Customer Base Audit, but the subtitle is the first step on the journey to customer centricity. And literally it goes back to a conversation that I had with one of my co-authors, Bruce Hardy, back in 2004 long before I had any inkling of the other work that I would then write on customer centricity. So this stuff is actually much closer to the work that I really do for a living day to day with customer data and so on. Those other books are more of the the so what, like what do we do with the these insights. But this is the book that gives the insights. This is the book that if you were to read the first two and say, wait a minute, how would I know that this stuff is true? Prove it to me. This book does that.Edward: So is This is like George Lucas making Star Wars. So after he is made that then he can go back and make the movie he really cares about,Peter: It is the prequel to the other stuff. And again, in some ways it is foundational. In some ways it's really quite different. But I don't think anybody, I'm not saying everyone will like the book, but no one's gonna read it and say it's.Edward: Okay. And so which I guess if someone's coming to you for the first time, then do they read this book first as a prequel? Do they jump to the prequel? Or is it like, Hey, watch Star Wars first, enjoy that, and then read the next book to understand where that, where that song came from?Peter: Know, That's beautiful metaphor. And I actually agree with that. See, here's The Thing. I've been doing this kind of work forever. Even since, you were an MBA student 20 years ago and, 20 years before that. And for the most part, with some exceptions, like you people would ignore me saying it's all just quanti and who cares? So what, so I wrote the other books to basically say, pay attention. This stuff matters. You should care your business depends on it. And that's a great way to grab people's attention and get them to lean in and say, oh whoa, how do we do this stuff? This is the book that begins that, how do we do this stuff if we release this one first? People would've read it and said I guess that's nice, but so what? So it's nice to lead with the so what to lead with the sexy stuff and then have people roll up their sleeves and want to dive into the details.Edward: Got it. So the first book is customer centricity.Peter: Focus on the right customers for strategic advantage.Edward: And that, so that book is the why, right? This is how. Not. Not the how, but the why to do it. Why customer centric? So both the what and the how. Which is what and the why.Peter: Yeah, exactly. What are we talking about and why do we care?Edward: Cause people, I think back then, I remember talking to you and a lot of people think things like, oh, customer-centricity just means doing whatever all your customers want. Which is, that book says, no, that's not what it is. Let's redefine what customer centricity.Peter: That's right. And again, it's gotten a lot of people to pay attention and say, wait a minute, we should be doing that. Or, wait a minute, we've been thinking along those lines, but we thought we were alone. So let's start at the C level to get people to really care and to, care about, everything from incentives and organizational structure and corporate culture and stuff that I know nothing about. And then it's gonna charge the the. Quine nerdy people to to do their thing at the service of customer centricity.Edward: Got it. So number one is, Hey, yeah, buy in. We know what customer centricity is now and we think we want to do it.Peter: Yep.Edward: The second book is the Customer Centricity Playbook. Is that like the project plan to actually implement customer centricity?Peter: Exactly. It's the how do we do it. Yep.Edward: Got it. And so now we've gone full circle. Now we're back to the prequel, which is the customer based audit, which is the new book. And so that's about. I guess not. I was gonna say how, but it is it howPeter: it's first steps? It's step one of the how, which is get your data in order. Okay. Don't take our word for it. Look at your data. Let's not even run any models or forecast or lifetime value or any of that stuff, just given the data that you. Look at it the right way. And you'll notice that not all customers are created equal. And you'll get all kinds of insights about how customers change over time. Stuff that you know, I, and you to a large extent take for granted. But for most companies it's sometimes news they don't know about and sometimes it's the polar opposite of what they think they'll see when they look at their customers.Edward: Who should read which book first?Peter: See, it depends who you are. That's right. So if, so again if you're c level, as much as I'd like them to dive right into the audit I recognize its place, it would be start with books one and two again, just to be motivated to wanna lean in further. If you are someone who plays around with data, you're a data scientist or maybe you're someone in the CFO's office where you're comfortable with numbers you're, you're interested in accountability and rigor marketing often lacks. Then maybe you start with the audit and maybe after you see the patterns, then you start to say, what does this mean? What do we do about it? And that leads to books one and two. So it really does vary about, who you are and where you are in the org chart.Edward: Got it. So it, it feels like if you're the CMO and you have the authority to like make this happen, you should probably read the other two books. Probably read the first book. Read customer centricity. If you haven't been bought in on the whole thing, that's gonna get you bought, that's gonna get you bought in or you're gonna reject it, but at least you'll know what you're rejecting and so on. If you're not in the marketing department, so if you're not in the marketing department at all, if you're in the finance department, you could be as bought in as you are on customer centricity, but you're not gonna be. The marketing department to do what you want it to do instead, read the customer based audit. Now you can go and , it's right in the title. You can go and audit the marketing organization to to see what's going on with your customers. And you can provide that information just generally to the organization. And hopefully that causes things to move.Peter: That is exactly right. And really. That's a really big part of our motivation for doing this. A lot of the work that I've been doing recently, as has been this idea of customer based corporate valuation. Let's basically show the finance people that we can be their friend. We can be their partner by basically projecting revenue and free cash flow accurately and diagnostically. And again, this would be the first. Towards that. Cuz doing that requires models, projections, forecasts and sometimes people will be skeptical about that. How do we know you can forecast it? If we can look at the raw data, simple, just simple data summaries as we say in the book, unashamedly descriptive and see some of these patterns. Daring us in the face about the differences across customers and all that then it just makes you more curious, more willing to start taking that next step and forecasting things out. So this is the starting point for all that.Edward: It's more than just the numbers though. It's also how you interpret those numbers. Cause I feel like if you just come up like a chart and these are the numbers, that's one thing. But if you pull up the chart in the numbers and they look in a certain way, and you could, and you know what that means when they look that way? Then that's a lot more powerful than just having the chartered numbers.Peter: So let's talk about that. It's a really great point because yeah, just charts and numbers, eh but on the other hand, if we over interpret, if we start, getting too colorful with the interpretations and start bringing in things like you, Demographics and personality, character no. For us that next level down would be instead of just looking at overall sales, let's break it down into, were you active or not? How often do you buy, how much did you spend when you did? So let's come up with a, simple but powerful decomposition of sales and start looking at those separate drivers.And here we are, it's holiday season and every company is out there acquiring a bunch of really bad customers. Why are they bad? Is it cuz they're not gonna stick around or they're not gonna buy often or they're only gonna buy when things are on sale? It's really good to know that stuff. And then you could bring in the marketing messaging and all the targeting and all that stuff to basically, Either take advantage of or combat some of those next level patterns.Edward: So I remember even back when I was a student of yours, we talked about, you talked about how you use this the, when you go and do these analyses, these datas you see the same patterns everywhere, whether it's a long before eCommerce came around and then eCommerce companies, church attendance going to on cruise ships. It just didn't seem to matter what you were doing. You kept seeing the same patterns. I assume that's still the case.Peter: That's it and that's why doing it in this audit manner, that sounds so formal. And that's exactly the point that instead of just making it up as we go along, which is all too often what happens on marketing because we expect certain patterns to be relatively persistent, that we should be doing basically the same kinds of analyses on a persistent basis every quarter, every year, whether there's a crisis or not, whether there's a new product being launched or whatever. Let's look at things the same way, anticipating that those basically same patterns are gonna be there. And if there are differences, that's when it gets interesting. And that's when we get,Edward: So let's talk about that. So if the patterns are gonna be the same all the time, you do the audit and you almost know what your answer's gonna be before you start, because hey, this is just, it's almost like a. Let's go and measure. I remember we do these science experiments when I was a physics major in undergrad, and you do the science experiments and at the end of the day, you knew what the answer was going to be before you started because physics is what it is. And if it was wrong, you were more likely that you did the experiment wrong. Then gravity is different than it was last week. And if that's the case here where it's, hey, these are almost laws of nature, that you're gonna see these same patterns over and over again. But what are the differences in the audit? What's the gravity's not changing? What are the variables that change from one audit to the next?Peter: I love it. So we can take the, the two most obvious metaphors. One would be a financial audit. Again, you do your required financial audit from one quarter, one year to the next. And 99% of things haven't changed. But it's, the little bit of stuff that has changed is what makes the audit interesting and valuable. It's those discrepancies. Those variances, and then, Understand what happened and what we need to do about it. Same thing here. The basic patterns are gonna be the same but the, there's gonna be some nuanced differences for from one period to another. So just like we look for those variances in the financial order. The other great example would be your. Your annual medical checkup. just an audit of a sort and you want nothing to change. , you want it to be exactly the same from one year to the next. That's good. But there's always gonna be some kind of variance. And once again, we're gonna wanna understand what that means. I think it's a absolutely perfect analogy for why we do this and what we expect to see from it.Edward: And so can we get specific, are there examples that you can be like, okay, here's an audit. Or even a specific company, whether it's disguised example or not, of we did this audit, here's. The second audit, here's the third audit, here's what changed, or here's what we saw. Here's what surprised us to the, even the first audit. Let's start there. You do a company, you do a first audit. What are the surprises that you saw in a specific example?Peter: Yeah. One of them, as I alluded to before, and again, you and I have talked about endless times, is the holiday season is those customers who we acquire in q4. And again, I've gone on and on about this for years, about how those customers be acquired during that season aren't so good. And sure. Boom, we do this, you using real data set from a real company. And not only is it plain as day when you see it, but it's nice to then be able to go that next level down and say, again, as it purchased, frequency or spend or whatever. So we'll just see differences across, say, Cohorts of customers might be due to holidays, might be due to new product launch competition. Who knows what. You'll very often you will see those kinds of cross. They're slight, but they're persistent and they're important cuz it might be the case that you've overfished your waters. There are no new customers left to acquire. You're only getting crappy ones. So if you start seeing. These cohort level changes, it might tell you that your company is, your customer base is going over Cliff. So it's it's really good in that way. And the other part would be to tie it back to action, to tie it back to products. So let's, instead of just looking at which products we sell the most, let's look at our products through the lens of what's the quality of customers who buy. And to give us real guidance about what kinds of products we should be producing, developing, promoting and it's just, it's a whole different way of looking at product development, but through the appropriate lens.Edward: Got it. So the customers that bought Product A tend to churn out fast product customers that with their first purchase of Product B tend to last a long time. Therefore, we can afford to lose money when we sell Product B, but we can't lose money when we sell product a.Peter: Exactly. And I've been saying stuff like that and, General hand wavy terms for years. But it's really great to actually not only demonstrate that it's true, but to be a little bit more specific, a little bit more guided about it. Say, here's how you look at the data to see those differences and again, what they mean. And then of course, the back end is. Audit to action, what do we do about it? And that's where our third coauthor, Michael Ross comes in. Cause I'm like Hardy and me, he's a real world guy and he's been basically doing this kind of thing, again, not a formal audit like we're proposing but informal bits and pieces of it. And then talking about the, so what he's been doing that for years. And all we're trying to do is to make it a little bit more formal, make it a little bit more standardized. And I think the subsequent actions will be easierEdward: great. Excellent. So that's the first audit. So now you've done that and you've found all those low hanging fruit and you've made the changes but now you recommend what an audit every year, every quarter. How often?Peter: Yeah. It depends on the cadence of the company. For a lot of, I don't know, say a packaged goods company or a restaurant chain. Yeah. Quarterly would probably make sense. If you're selling mattresses, then probably yearly is more than enough. Really. It's not much different than how often you should be doing a financial audit. It just depends how how turbulent the company or the the ecosystem is. Could be a lot of different factors. You know what, I love that question cuz it implies we are gonna do it regularly. , you know how often I like that as opposed to should we do it at all?Edward: That is my next question, which is, okay, so going to the specific examples, we've done the audit once we've cleared up all the low hanging fruit. Now is there an example of a company who's done that and then when they do their second or third audit, they find something new and different because of some sort of.Peter: Oh yeah. Inevitably that's gonna happen. Again, it might be small. You of hope it's small, you kinda hope there's nothing. But the, but unlike physics, the world is constantly changing. There's all these forces on us, and in many cases we don't recognize the nature of the impact of that change until it's like too late and it's really showing up on the bottom line. The audit's kind of a, an early warning system about that. So again, it's fine if nothing's going on, that's good status quo, stay right on course. But when you see those little changes, then you're gonna wanna pursue them because those little things can become big.Edward: You talked about this kind of like being at the same cadence as financial statements is there any company that's sharing, is any publicly traded company that's sharing these as a financial statements or even, I guess a private company that's sharing it in board meetings privately that are doing these on a regular basis and sharing them public?Peter: We are starting to see it. And through my company, theta, there's been a couple of companies publicly traded, big, dry and publicly traded companies who have said that we want to start disclosing some of these metrics. We wanna know which ones we should disclose. We want to know what, caveats and guidance we can offer as a result of it. And then basically educate our investors and analysts to understand what that metric means and how it, it shines. A better light on just how healthy our company is. There, there's one that's about to start doing it I think in their next quarterly filings in in probably in February. And it's been really gratifying to see that again, though, I gotta admit, those companies are still exceptions and we want it to be more rural, that more companies will be doing this thing just on their own without needing us read the book and. Do it and that companies are doing it voluntarily just for, the right reasons instead of doing it because they're in trouble or they're defending against something.Edward: It almost feels more and more like this book should be targeted at finance rather than marketing. I, what I was writing my figuring out who my target audience was for, even for the newsletter, for marketing bs. And I often thought, you know what? I'm saying marketers are doing stuff wrong and people don't like to be told they're doing it wrong. When I get brought in to help out companies, it's almost always the CEO who's bringing me in or the investor bringing me in, not the cmo. If the CMO either is you know what? I'm comfortable with what Ed's doing, I don't need his help, or he's, they're like, you know what? I don't like what he's doing. Please don't help me. And so it's usually the CEO or the CFO that's bringing me in. And so I almost thought about, hey, marketing BS and having a tagline of marketing for finance people. I don't quite go that far, but this almost feels like it's that far. It almost feels like you should be going on finance podcasts and telling them all, start doing this audit, your freaking marketing team.Peter: Yeah, it's no doubt, and of course we're not doing out there to trash CMOs but you do have to acknowledge that the CEOs and CFOs do have more power and. In many cases are skeptical about, all what those customer experience campaigns or The Thing or the or, a lot of the other customer experience campaigns. What all that is buying them. This is a way to hold marketing accountable to basically say let's see, in the audit, can we see that we're getting a different mix of customers, that they're doing more stuff with us. So again, it's a very regular, accountable, rigorous way to demonstrate the impact of those marketing actions. We hope that the C'S will embrace it as well because they really are moving the needle. This would be the best way to demonstrate it, as opposed to, brand favorability, indices or customer satisfaction. Not that there's anything wrong with that stuff but the audit on these more financial metrics are kind of closer to the bottom line and therefore closer to the hearts and minds of the people who matter most.Edward: You know what I think this would be great for is a new cmo. If I'm going into a new business one of my philosophies when I started a new company is the first most important thing is getting all your metrics in order and get all your reporting done and getting that all set up. And then, and only then do you create five or six initiatives that we go after this stuff for. And then figure out if you have the team to do it, and then go and figure out your team. But this feels it's like a standardized way to go in and be like, no matter what your company is, use this format to go and get all your metrics set up. Cuz chances are when you come in, they aren't gonna be set up this way. And you need the, if you get them set up this way, you'll understand the business a lot more and you'll be able to track whether your initiatives and your team are gonna be. Moving things in the right direction.Peter: Amen. I like to give you a specific example of that. I know you like specifics. One of my favorite people who's been doing this, even if you haven't called it an audit for quite some time, is Zachary Anderson who runs all data analytics for NatWest Bank over in the uk, but in his previous gig in the same role at Electronic Arts, the gaming company, that's what he was tasked to do by the ceo, Andrew Wilson said, Zach, I want you to give me the four or five metrics that I should care. And I'm going to tie my compensation like for the next year or two to those metrics. And it was wonderful to see, first of all a CEO kind of going out on a loom like that and trusting marketing type metrics. Giving this kind of marching orders to not just one person but the entire organization and then saying some wonderful results emerge from it. So we wanna see that kind of thing happen. And once again, The metrics shouldn't be cherry picked by the CEO or any one person in the company. We should agree in advance should be a standard set of metrics, standard set of analyses that would apply to pretty much any company. And again, that's what the audit's all about.Edward: That's great. And so I think what we should do is in February when this company you think is gonna release their financial statements with this format, we should definitely dedicate an episode just to walking through those statements.Peter: I would love to do that. And of course, this is the kind of thing we're doing informally all the time. Big shout out to my former PhD student and co-founder, Dan McCarthy who really we talk about customer race, corporate evaluation. He's the man he invented as part of his dissertation and every time he sees companies talking about different kinds of customer metrics, like just last week he was talking about clear. Wonderful company and they put out some really interesting metrics and it was just really great to see Dan tear them apart in a positive way to say what it all means and what this, what light this sheds on the company that we wouldn't have known otherwise. And so then there's a lot of examples like that. And again, We just want that to become part of just the, a regular process and not this kind of one off thing that occasionally happens.Edward: That's good. Hey let's start here. So instead of just talking about Elon's latest adventures, let's when companies release earnings that have this information, or Dan releases one of his deep dives, let's make sure we talk about it on here and we can be the the heart bringers of.Peter: This is the right place to talk about Ed. Cuz not only do you appreciate and understand this stuff, but you do a great job of putting it in the right context to know where it all fits in. It's not just metrics for the fun of it. And I think it's important to get that full picture.Edward: That's right. Come here for your marketing news and your Star Wars metaphors. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
Today's episode further explores topics discussed in this week's essay. In the preamble to that essay I said that there would be no content next week. I am going to reverse that. Next week will be an excerpt from Peter Fader's new book. Stay tuned!Full Transcript:Peter: Ed, I love your piece on strategy versus tactics at Disney, Twitter and Dominion Cards. I love the way that you're weaving together a narrative that's taking three of the super hot, interesting topics and a fourth one that most people don't know about.Edward: It's funny, the whole Dominion Cards thing. I've been, I started playing this card game back in 2011. I went to the national Championships in 2012. And I just really enjoy it. It's like the only game I can think of where you actually need to figure out a strategy at the beginning of every game. I've been sitting on this idea of dominion cards as a way to talk about strategy versus tactics for many, many years now. And I've never felt really found the right kind of hook to put it in. And then when this thing happened at Disney on Sunday, I was like, aha, the hook is here. It's time to pull this out of the filing cabinet.Peter: Love it. Well, as a, reader of the column and as someone who thinks about these issues, there's kind of two natural questions that just has to be asked. I wanna get your take on it. So, first. How do you define or where do you draw the line between strategy and tactics?Edward: I think strategy is figuring out what you should be doing and it's trying to figure out what the end point is of where you're going for, and tactics is all the stuff that gets you there. Strategy can be done a bit in isolation. You can go back into your ivory tower and think about what the dynamics are coming out with your strategy and then tactics are going to be very much based on what's happening on the ground. What's happening at any given moment, how the competition is reacting, how economics is changing what type of people you have on your team and any given moment. Those are all tactical decisions like that a consultant is not going to be able to help you with unless he's actually there on the ground.Peter: So I always have a hard time with it, to be honest. Maybe this is just me being narrow minded or something. It's not just the next move is it the next three or four moves. Be specific about strategy versus tactics in chess, and then let's branch out to these other real world stories.Edward: I'm not an expert in chess. I'm actually teaching my kids how to play now, I'm learning along with them. But I think in chess there is a correct strategy. I think strategy in chess is things like control the center of the board would be a strategy. Be willing to sacrifice your piece in order to gain position in the board, or, move your pieces in such a way that you're able to castle fairly early in the game. Those would all be strategies, things that you're working towards over a longer period of time. Tactics are, given what my opponent has just done, what should I do next? And tactics can, you can look far into the future for tactics. There's nothing that stops you from looking nine moves ahead to the right tactic would be in that particular situation. But I think strategy stays in chess at least. I think strategy stays the same. There are correct strategies into chess and there are incorrect strategies in chess. Whereas tactics are gonna change every given game depending on what your opponent does.Peter: So let's take that, and again, it's still little fuzzy. I mean, you're being more specific, but still, and I'm not gonna press you on exactly where one begins and ends, but Disney. Disney. Disney. Disney. It seems like the narrative as you said is Iger had the strategy. Chapek's job is to come in and execute on it. Few missteps here and there. Expand on that beyond what you've said in the piece about that trade offering strategy and tactics.Edward: I think most people are agreed, even the disgruntled shareholders, is that Iger's strategy was the correct one or is the correct one, which is that the cable bundle is getting hammered and Disney in the past basically had a huge amount of leverage over the cable providers and was able to extract large amounts of money from the cable providers by the fact that they had this differentiated content both the traditional Disney content, but also the sports they had with ESPN. And that was a great place for Disney to be and it still is, frankly, they still extract a huge amount of money from the cable providers, but that is not the future. Clearly we see more and more people, especially young people cutting the cord, not going with cable television and moving into streaming. And it was really a question of when did Disney need to move in that direction and how long could they keep their pound of flesh from the cable companies and hold onto that as long as possible? So the strategy then becomes let's move on. Let's go direct to consumer and scale up our Disney Plus product. There's tactical problems in doing that because, Disney bought Fox, which came with 20th Century Fox, which allowed them to add a whole ton of more content to get like the breadth required to win in a streaming war. They got control over Hulu, but they didn't get full ownership of Hulu. And so Comcast still owns a chunk of Hulu in the US which makes all sorts of challenges for Disney on a tactical level on how to actually get to the place where they wanna be. But I think the strategy is clear. It's we wanna get to the point where we are owning that direct to consumer relationship. We are monetizing through a subscription product. We are monetizing through additional add-ons that people can do on top of that. And we are monetizing through our vast aray of merchandising, theme parks, cruise ships, and everything else to allow people to spend more and more and more with us. That strategy is still where they're going the last two big things Iger did before he left, were launching Disney Plus and buying Fox,Peter: LEt's be clear that Chappek isn't against any of those things. Strategically as you've pointed it out, he's on the same page. It's all just tactics not being quite the same as what Iger might have done or might now do.Edward: And even on tactics, I'm not sure, if you look at the things that have hurt the stock price and where Chap has taken ahead, like first of all, Disney Plus has grown faster than they ever thought they would. He over delivered on that. Whether that was his doing or the, the fact is the metric is much better than anyone expected, but there were mistakes along the way. He has fought. There's been lots of fights with the creative side of the organization. Chapek comes from the theme park side. He came into the CEO role and then immediately Covid hit and the theme parks all went to zero. So he was forced to figure out how to do Disney plus where all their revenues coming from for the foreseeable future. Now things have flipped and the theme parks are just minting money. They're doing really, really, really well. But he's pissed off a lot of people by raising prices dramatically. But again, I'm not sure what Iger would've done differently in that case because the demand for the theme parks has has gone way, way, way up. So in the short term, you can't go and build more theme parks. So supplies is what it is. And so you're left with two choices. Either you are raising prices or you are giving a poor consumer experience, either because the parks are just packed full, and they're just unpleasant, or you're turning away people at the door who have booked a vacation. And so none of those options seem great, and of those options, it feels like raising prices was probably the one that Iger would've done as well.Peter: Exactly. So here's the big question. I agree completely with that. It might be that how things play out now tactically and strategically would be the same regardless of which Bob is at the helm, but just having Iger just seems to have this warm glow that will just make the same tactics, not only more palatable but downright genius because they're coming from Iger instead of Chapek. What do you think?Edward: I think that's absolutely right. They're in such a tough spot right now. There's so much going on and it's super, super, super risky what they're trying to do. I think everyone knows that there's really no choice but to go down this path. But also everyone knows that it's a really hard path to go down. And so not only do you need to have the right strategy, which I think people think that is true. You need to have the right tactics, which frankly I don't think Chapek, if he messed up on tactics, it was on a marginal basis. But where there was a bigger mess up was a bunch of execution of those tactics. And so things like the Black Widow movie early on in the pandemic, they decided to take that out of the theaters and put it onto Disney plus. And I think that was a very rational tactical thing to do given the situation they're in. But in execution, Chapek got into a big fight with Scarlette Johansen, who really came down hard, sued Disney. They hurt their relationship with her. Now. Disney ends up hurting their reputation as a good place to go and work if you're a top tier creative. In the short term, maybe they make a little bit more money on the movie, but in the long run they damage the relationship with the very people that are creating the product that they need to excel with.Peter: Fair point. All right, let's pivot from DS to SBF and FTX. There you say that, or at least you're quoting SBF saying strategy was fine. The tactics were at fault. You don't really mean that, you're just saying that's what he said, but you think otherwise.Edward: I'm no financial expert, but I've been following it as closely as I can and it sure looks to me like there was all sorts of... So Fbf owned two companies. He had ftx, but he also had the trading arm, Alameda Research. And there was money traded back and forth between those two organizations. And what I understand is. So imagine if FTX had, I'm making up a number, 10 million tokens and they're sitting on them and those things are worth whatever someone's willing to pay for them and Alameda comes on and says, Hey, I'll buy one of your tokens for a thousand dollars. So now all of a sudden the stock value of those tokens is a thousand dollars times 10 million, which is a huge amount of money they're sitting on. And then they basically end up using that valuation as collateral to do all sorts of loans and leverage to go and do other things with their money. FTX then takes in a bunch of customer deposits and then loans those customer deposits over to Alameda. Alameda then is then sitting on a bunch of these tokens that they're using as collateral against the borrowing of that real money that people put into ftx. Alameda then loses a bunch of that money and it all comes tumbling down when they realize that their collateral is not worth anything. It's all made up collateral. That's my understanding of what happened. Nothing like that has happened exactly before, but things like that have happened before. It's effectively fraud. It's fraud and theft. SBF, however, went on and interviewed Kelsey Piper over at Vox, and his argument was hey, we were doing was great. We were doing all sorts of awesome things, but our record keeping was terrible. We just made a bunch of like rookie terrible, incompetent mistakes. The new CEO who came in to run the company, Is backing SPF up in that yeah, this whole thing is a mess. That everything here is. What was his quote? I quote, I quoted him on my piece. He said, never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here. And this is from the guy who also oversaw the bankruptcy of Enron.So it was a mess. They clearly, clearly, clearly were tactically incompetent and SBF is claiming that they didn't know they were stealing all these funds. It's entirely possible that he's right because they seemed like they didn't really know anything that was going on. And there was no financial backups and no guardrails for anything. But generally the overall strategy was built on a house of cards to begin with. So whether their tactics were correct or not maybe it wouldn't have collapsed as badly if they had great tactics, but it was gonna collapse one way or other.Peter: In this case, it's not strategy versus tactics, as you say in the title of the piece, it's and. They're doing bad and both, and it's hard to, pin the blame on one type of decision or another.Edward: The hard part of writing this piece was that given the fact that their strategy was so unethical and terrible and their tactics were so incompetent, how did they manage to get as big as they did so that they caused this disaster to happen.Peter: It's crazy. But but then speaking of which, it takes us to our third character of the week, Elon Musk. Now, you and I had a conversation a couple weeks back. We were saying generally positive things about verification, badges and just the possibilities of getting the business model right. And of course it's too early to tell for sure. But, these couple of weeks since that conversation, well, things have gone differently.Edward: Specifically the thing that we talked about, which was the Twitter blue, $8 a month to get certified.Peter: Verified.Edward: Verified. Verified. And what happened was that the verification process was effectively just having a credit card. So it wasn't like they matched. Your name that you put on Twitter with the name on your credit card or check the address, or had you send a a driver's license with the verification, it was a matter of pay the $8 and you can name yourself whatever you want. In terms of. Strategic idea, allowing people to pay $8 to get certified seems like a very valid idea and a very, I don't know if it's, it is the right strategy, but arguably, at least we argued a couple of podcasts ago, is that it was a good strategy. In execution what that allowed them to do because they didn't create any of those guardrails, they didn't have any verification process beyond paying the $8 is people impersonated all sorts of companies. They impersonated Elon Musk, they impersonated giant companies and had them say ridiculous things with a certification check next to them, and it became a big joke. And so an example of potentially a good strategy with very weak tactical execution.Peter: And what about the broader issues? The way he's running the company, day to day tactics, strategy, whatever it is, it's not good, but what, which basket would you put it in?Edward: I think there's an overlap. First of all, part of it seems like he's kind of changing his strategy on the fly. He's going back and forth and changing what his strategy is, but I think in general, his thesis going into the company was that this company was mismanaged. We need to eliminate a large number of people at the company and replace them with other people. We need to change the culture of this place from one of working from 10:00 AM until 3:00 PM to one where you're working from 7:00 AM until midnight and coming in on the weekends and turning into a hard driving startup type culture with a much smaller team that's much more dedicated and highly compensated. And it feels like that's his strategy. And he wants to go to create a company that ships product really quickly, makes mistakes, fixes them, and keeps going. That is something that I think most owners of most businesses would want for their companies. The challenge becomes how do you get there from here? And that's where there's been lots of flailing and failing. That doesn't mean the whole process is gonna fail, but there's been lots of mistakes made in that process of getting from A to B. In a situation we're getting from A to A to B is gonna be hard no matter what, even if you did it perfect.Peter: So what's your longer term prognosis? Do you think that he'll get this strategy right and line up the tactics appropriately?Edward: I don't know. It's so hard to know. I think the strategy is right. The question is whether the company will survive the process of getting them there. They're burning through cash. As an example, they laid off a bunch of people via email that work in Europe, and you can't actually do that. It's illegal to do that in Europe, so all those people that they fired in Europe actually aren't fired, they turned off their salaries. They're not making any money anymore, but all those people have a class action lawsuit that's going to go against Twitter and there's going to be a huge fine. That type of stuff matters in a situation where it, if they succeed, it's gonna be by the skin of their teeth. They're the Amazon in 2001 where we need to keep doing everything right and working our butts off to keep this plane flying over the treetops so that we can take off and circle the planet. But before we can circle the planet, we need to get over these trees. If they get over the trees, I think there's a good argument. Twitter's a fantastic, unique product that can do all sorts of incredible things and far more than the old team was doing. But he still has to get over the trees and that's where it's a lot unclear.Peter: Yeah. So it takes us to kind of the bottom line, as you say, and I don't think anyone would disagree. Strategy becomes far more urgent in rapidly changing environments. Who could argue with that yet at the same time, in rapidly changing environments. We start rearranging deck chairs, which is far more tactical.Edward: I think when things are going smoothly, when things are not changing, strategy frankly doesn't matter very much. Tactics matter a little bit, and execution matters a lot. When you're in a place where things are changing rapidly and you need to get to someplace new, all of a sudden strategy matters a lot. But that doesn't mean that tactics and execution matter less. They still matter a lot too. It just becomes like everything matters. It's becomes so easy to fail. You only need one chin in the chain to break and you're not gonna get there.Peter: And I think all three of these cases show that interplay. So again, it's not strategy versus tactics, but focusing on the and, getting to sync up properly and, easier said than done. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
I have been exploring a new AI tool that is allowing transcript creation while I edit the episodes. It's not perfect, but it's pretty great for those who prefer reading to listening. I plan on including transcripts of all episodes going forward.Also: Apologizes that yesterday's essay did NOT have more than 1-second of audio. I am still working through these tools. The audio should be live on that post now (I chose not to re-send it to your email) In This EpisodeFader and Nevraumont discuss Elon Musk's plan for charging $8/month for a blue checkmark (plus other benefits). What metrics should they use to know if it's working? Can subscription revenue compete with advertising revenue? What are the different types of Twitter users?Keep it Simple,Edward Full TranscriptEdward: So, Peter, do you have a blue check mark?Peter: I do. I'm so fortunate. Of course the question is how long will I keep it and what will I have to pay to do so, and what benefits will I get associated with it?Edward: How did you get it? Was there a process you went through? Did the school help you do it?Peter: No, it was actually through my previous company, Zodiac the one, we sold to Nike. That at that point the CEO said, You know, we ought to get blue check marks just to give us more credibility. It was a pretty simple application process, but you know, a lot of people who have been trying to go through it, who are at least as qualified as I am. It seems like there is, or at least was, something pretty arbitrary about it, but hey, I'm one of the lucky ones. ,Edward: You're part of the in group. When I was at General Assembly, the, my head of PR came to me like basically on day one on the job, and she's like, We need to get you a blue check mark.And I had to go and change my Twitter account was linked to my Gmail address and I had to switch it to my general assembly email address, and then she went to town and did her PR stuff to try. Get the blue check mark, but it never happened. Two years of trying it and never got the check, I even as a CMO of general assembly I was not renowned enough to get the check.Peter: That's exactly my experience cuz I think you honestly, in a position like that, deserved it more than me. I think maybe the professor thing helps, but there's plenty of professors with the big followings and great content who don't have it either.So maybe that's what the, All the musk nonsense will actually bring some order, some predictability to who gets a check or who gets which kind of check cuz there really should be more than one of them.Edward: There kind of is. So I guess for those who... I imagine all of our listeners know what's going on right now, but just a really quick summary is that Elon, there was a rumor that went out. Was it Vanity Fair or The Verge? It was the Verge last weekend that talked about how all the blue check marks are gonna have to pay 20 bucks a month just to keep it. And then yesterday we're recording this on Wednesday, yesterday, on Tuesday, Elon came out and said, No, it's gonna be $8 a month.And it includes not just the blue check mark, but a bunch of other kind of benefits, if you will. And then on top of that, really red down people like Joe Biden for example, will get a, not a blue check mark, but like an. A descriptor underneath them that says that they're authentic and real. Which was the original purpose of the blue check mark to begin.Peter: Right, right, right. Yeah. Really a validation, not just a status symbol. But if you look at some of the benefits that they're talking about, some of those benefits make sense for creators. Some of the benefits make sense for readers, and I think it's important not to mash the two together.That's why they really should be a different kind of subscription based on what you're using. Twitter.Edward: I guess so, so big part of this, it's interesting. The last essay I wrote for for marketing BS couple of weeks ago was all about paying for status. And this, it feels initially like this is paying for status and a lot of that's what it is, right?So you pay to get the blue check marks right now are primarily a status tool, although I know you have some features that us non-black marks don't have. But going forward this is going to replace that blue check mark you are paying for the status. But the benefits you get seem to be around production.So if you, the tweets that you produce are more likely to be seen by other people you're, you get listed first in the mentions. You get move to the top of the replies. And so there's a bunch of features like that. So you, the stuff that you produce is more likely to be seen, I don't think.And that makes sense. Yeah. And that's good for everybody in some ways too because it kills the spambots or if you're a spambot, you're not going. Verified, you're not gonna get the blue check. And so all the spam bot stuff gets pushed to the bottom. But so does everybody. So do all the non blue check mark.People get pushed to the.Peter: Now for me personally I, yeah, I'd pay something to keep the blue check, but I'd also pay something to improve my reading experience. I would love to have more control over the timeline. I'd like to get inside some of the curation algorithms and, tweak them to, to, to my benefit.To me that that's more important as a Twitter consumer than a Twitter.Edward: And, but now, so those benefits though, should, are those benefits that they should be charging for, because every social media platform has that, which is, hey, we want to show people the content that engages them, that they would enjoy.Why if you're able to do that, if you're able to show people better content, they're gonna use your platform more, and you're gonna make more money on ads, at what point would you be like, Hey, you know what? We could make this person's experience better, but we're gonna put that behind a paywall and we're gonna give them a worst experience.That just, it feels like that's not The Thing you want to be charging for.Peter: That's a big philosophical question, but you're right. That, that this is how everybody does it. So presuming that a Twitter's gonna follow that mold, the most obvious one of all is if I pay a reader subscription.Don't show me any ads, right? Just like with Spotify, give me, gimme the ad free version or maybe have, a new Netflix one where it's a lower price with some reader control but some minimal number of ads. So there should be something about that. But also if I'm gonna pay that I wanna have complete control over whether things are in chronological order or whether I want to trust their recommendations I'd.Do my own curation like that.Edward: That's fair. But you can do that now. It's Twitter's ability to produce things and new product features have been very slow. But right now I think your default is a algorithmic feed. But it's fairly simple to change that to a chronological feat if you want to. I don't think many people do but it, but the ability is,Peter: I find that it still does chronology in a weird way and sometimes then jumps back a few hours in time and maybe it's just me, I don't know.But they, they definitely can and should clean that up. But like I said, there, there should be different kinds of features for different kinds of users that would involve different kinds of subscriptions. And of course there'd be the grand subscription that would give. Everything for a super power user who's creating and consuming, get all those features.Some, bundled price.Edward: Nice. And so right now, I was I guess the question on everyone's mind right now are the screaming and shouting people on Twitter are talking about the fact that hey, the, like Steven King for example the writer. Went and posted something about how he's, there's no way he's gonna pay for this because Twitter should be paying him.And in some ways he's right. Because if you look at right now the new Blue Check mark program is gonna be, the benefits are not for the readers. I guess the little bit they think he said something about half the normal ads that you would normally see, but majority of the benefits are, hey, the status benefit and a bunch of production benefits, like your content gets seen more often.So it's producers that are gonna be charged for this, but at the same time, isn't it the producers that create the value for everybody else?Peter: Of course that's true with all social media platforms. I don't think Twitter's any different in this regard. And I think a lot of people are making noise about it.Because of who is in charge now. I think it's just a visceral reaction. Oh, it's Elon Musk. I think if Twitter had announced changes like this at another time, a lot of folks, I'm not gonna speak for Stephen King or some of the other celebrities would say yeah, it's about time that, that I get those extra boosts that I deserve.And you know, what, eight bucks a month I'm paying more money than that for a lot of other content subscriptions that are used far less.Edward: Fair enough. How what do you think, how, what percentage of Twitter's revenue then, if this, assuming this thing works and it's successful at all, like, how much revenue can you get from this subscription product versus the advertising model?Peter: It's a great question. It goes right into my strike zone, which is we could look at the next year o over the short run. They're so reliant on advertising that there's no way that they could come close to matching it with subscription revenue. But in terms of long run customer lifetime value, if they start to ratchet down the ads and focus on bonafide benefits to creators and readers through a different well calibrated subscription services. You give 'em a couple years and they could completely flip it and make it almost entirely subscription based. And that's the direction they should be moving in. Not only would that be steadier income, you'd have a better sense of who's doing what you'd have much better metrics to use for internal and external guidance. Right now, everything they're doing with monthly active users and daily active users doesn't make a whole lot of sense. It's not easily tied to, to revenue so that they can really improve the stream of revenue, but also the predictability the understanding of it. And that's great.Edward: So your prediction is, call it in three years, the majority, more than 50% of the revenue comes from subscriptionsPeter: If they play their cards right, and it's real hard. To be pro Elon. It's just unpopular position to take, but it's...Edward: low status. It's low status these days,Peter: ...and so I'm gonna avoid the personalities and I'm gonna avoid endorsing or critiquing some of the statements you've made. But just if you just look purely at the business decisions and the urgency that he's bringing to it, it's about.Edward: The only other social network I can think of that has this both model where you can use the network for free or you can pay to get effectively a blue check is LinkedIn. Like LinkedIn, you can become an in member or something like that.Peter: Yep, yep.Edward: But I don't think LinkedIn makes much money off the in members, do they? It's not significant, is it?Peter: I don't know. I don't know if they break that out, but I know I'm paying my $300 a year to, to get some of those benefits and so on. I don't use them all that much.But but sometimes it's really really valuable whether it's for some of the companies I'm running or the books I'm writing. I do it without batting an eye. Now granted, it is covered under my university, research and teaching budget. But I do it with without even thinking. And that's, I'm paying I think a good bit more money than I'd be paying for Twitter, which I use a lot more than LinkedIn.Edward: Yeah, fair enough. What, so what do you use the LinkedIn one for? So you're paying for the premium, like I've paid for it from time to time, mainly for recruiting purposes. What are you using it for?Peter: So a part of it is to have a little bit more control to both the get a better sense of who's looking at my profile. To have more control about being the block who sees mine being able to send, not that I do a ton of these InMail messages, but again, just sometimes I do want to do a bunch of that.I run a separate group and to have a little bit more control over there as well. So it's a bunch of little things. Again, any one of the things, the most important things I get out of LinkedIn would be far less significant than the benefits that I'd seek from Twitter. But I still do it anyway. I don't have a problem doing, so it's just matter of finding the right price point.In LinkedIn's case, they have a bunch of different tiers. I'm not even sure which what I have, and that's the direction Twitter will go as well.Edward: That's interesting. You're gonna pay for the Twitter check, and you're gonna expense it through your department?Peter: That's a good question. Whether I, I could do that or I guess so. I mean it's in some sense no different than LinkedIn and I certainly spent a lot of time talking about my research, my teaching, the books that I'm writing on behalf of Wharton, including a new one that just came out this week, The Customer Base Audit.Edward: So we should talk about That should be our topic next week. Next week our discussion gonna be your book.Peter: I'd love to do that, but right now it's Blue Checks instead of Blue books. So yeah I think I would do that and I would encourage others to do the same.Edward: That's an interesting point too. You got your blue check because of your work with your last company, you're gonna be able to pay for this next check with the expense it, I imagine the CEO of every company in America is gonna expense this and then the executive team and all the PR people. Right now it feels like the blue check marks are disproportionately journalists and authors, but is in the new blue check mark world become people that can expense it will just take over.Peter: And of course then there'll be a hierarchy of checks and there'll be clear criteria beyond money about what it takes to achieve one. You can't just purely pay for blue check. You have tweet enough. You have to show some credibility that there was. That application that you and I have both tried to fill out. And so if you start making it aspirational that in order to move up to, the next check you have to tweet a certain number of times, you have to engage and, do other things that are beneficial to the Twitter community. If we make it incentive compatible for people to, to lean in and participate, that's great. It's good for everyone.Edward: That's interesting. So you're saying $8 a month is not gonna be enough, $8 is what it costs, but you still have to, You have to jump through some hoops in order to be allowed to pay the money.Peter: That's right. Exactly. You have to, again, establish your credentials and you have to participate enough to really earn it.Edward: It goes back to the, what I talked about a few weeks ago, which is here you're paying for status, but if it's only dollars, then there's no actual status involved.So it has to be, you have to do a bunch of stuff. You have to be legitimate, and then you can pay for the status levels. It's, I did some math this morning. So right now if every single blue check mark on Twitter starts paying for it. And no, no one else does. Only the blue check marks pay for it, it's pretty minimal revenue. It's something like 50 million per year on a business right now is doing what, 4.5 billion? And so if that's all it does is he ends up milking the blue check marks. It feels like this is a bunch of noise for nothing. And so it only really works if he gets a significant percentage of the base.I think it was something like, If 10% of the base start doing it, it gets can't remember what the exact number was, like half a million dollars or something like that. He has to get a pretty high number in order for it to be significant against his advertising, at least at this price point.Peter: And that's exactly why it's a multi-year initiative. It, it's not gonna happen overnight. And again, with all these haters out there, whatever he tries to do, people are gonna declare it to be a failure a few months from now. But it is a behavioral change on the part of people to actually not only seek out the status and pay for it, but to change their Twitter habits to.Be a better member of the community. So I think as he changes, not just check marks and basic functions, but as he changes the nature of the way that, that people use Twitter I think people will start to see more and more value, more and more urgency to start doing it. Instead of feeling that that he's holding a gun to their head.Edward: What metrics should he be looking at? So he goes and pulls the trigger on this and some people sign up for it and some people stop using Twitter. What numbers should he be looking at to know whether or not this is going in the right direction of whether this is trending to the place where three years from now it's gonna be the majority of his?Peter: It starts to become the things that we really can measure and manage effectively, customer retention. So we can say, how many new people have signed up for a particular status? Of all the people who signed up last year how many of them have retained it? Things that are very easy to measure.You think about all these lawsuits, obviously the big one that more or less forced them to buy the company. There was another one last year that I was actually an expert witness on Twitter's behalf about measuring daily active users and monthly active users. It'll be great to move away from that to metrics that are harder to argue about and are more directly related to the health of the business.Edward: And measuring the growth of this thing is easy, right? So you can, How many people signed up and are paying $8 a month? What's your arr? How much revenue are you making on this new product? How many people are signing up per month? How many are churning out and canceling after one month? That feels like the upside, the revenue side is easy to measure. The downside of "Hey, because this is there, I'm Steven King and I'm gonna stop producing content on Twitter'" how does he know how much damage he's causing because of this?Peter: That's a great question, and of course we'll never know for sure from what people are saying. You have to run the experiment. You have to try it. Again, maybe with multiple tiers. I think Musk, I think to his credit, look, the fact that the rumor started at 20 and now he's saying eight. I think he's finding out what the market will bear. Both in terms of price and in terms of what features and functionality needs to offer.I think they're gonna find a pretty comfortable middle ground where serious producers will be compelled to stay with it, but will feel that it's worth their while.Edward: But what's, the metric? does he take number of tweets written by non-paying customers and track that on a day to day basis. Is he doing like an individual customer level model where he takes all his producers, everyone who's producing tweets and tracks them over time and. Use, almost like almost treats like a tweet, like a transaction to try to measure if someone's, if a transactor, a transactor, a producer is churning off rather than buying a product.Peter: I would love to see that. And if we think about that kind of behavior we see very commonly in, in different kinds of settings, like even for a lot of different non-profits. A museum will look to see how many people are going to the museum and how that relates to whether they renew their their membership. Companies are doing that kind of thing all the time. Again I've seen some of the insides at Twitter and they have not managed that well. They've had a lot of really ad hoc measures, some of which have been around spent, time spent on the timeline tweets post and so on. But they haven't come to agreement on it and partially cuz these measures they've looked at haven't been directly tied to revenue, which is engaging with.Edward: But it's interesting though, cause there's two parts of it. There's the producers and for them, whether they look at ads or not is almost not relevant. It's whether not they creating compelling enough content that's keeping other people engaged on Twitter? Because where the revenue's coming from is all those people who are just reading the tweets and seeing the ad spending to me it's being a daily active user and a monthly active user and time spent on site. That's the metric that's determining how well they can monetize is not?Peter: And, but I love the way a company like Spotify is doing this sort of thing. And now again, we can't call them necessarily a paragon of business success just in terms of raw profitability, but I think there's a lot of respect for what they do and how they do it in these terms, having the advertising based model, the subscription based model.And they know that when they're bringing a new artist on board they will look to see. Not only how often that music is listened to or downloaded, but the value of the customers who engage with it. And so they can actually start to put a price tag on an artist based on the value they're bringing to the platform. Of course, that's something that, that's negotiated, but they're doing it in a data driven way. No reason why Twitter can't be doing very similar kind of thing.Edward: Got it. So yeah, so they can put up like, Hey what, how much value is is Donald Trump bringing to our platform? How much value is Taylor Swift bringing to the platform in terms of driving other people to engage in that content and keep them on the site longer so that they can sell the ads?Peter: And staying with the Spotify or even Sirius XM model, there might be cases where it makes sense to pay someone, especially as other micro blogging platforms arise. And we hear a lot of talk about them, usually for political reasons. Sure. We might have bidding wars about about content creators. That would be a very healthy ecosystem, and at that point, they really have to deliver meaningful value to the creators and the consumers.Edward: It's interesting. Spotify is doing the reverse right now, and so everyone's getting paid to be like all the music, all the musicians, all the, every time a song is played, the musicians are paid, but they're allowing musicians to basically bid to have their songs played more often on playlists and so on. And effectively the musicians don't have to pay themselves, but they're basically bidding in lower. Lower royalties. "Hey I'll take a lower royalty in exchange for being played more often". And I think it's almost like Twitter's doing the reverse of that. If everyone's gonna need, everyone's gonna need to pay. But now, once I know the lifetime value, once I know that Taylor Swift is worth a lot, I can go and take that $8 that she's paying and I can discount that to her.Peter: Love it. I love it. Now, of course, Spotify has it much, much tougher. It's a much more competitive market and dealing with all those royalty issues dealing with the music industry. Oh the cost, the complexities, the limitations. Twitter has it easy. They really do, at least right now. And yet they still can't, punch their way out of a paper bag. I think if they really start to look at some of these other business models and practices and emulate the good ones, the ones that they can really capitalize effectively, I think the skies might be very blue for Twitter. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
Hi everyone,Post-send note: In the original post the audio was only 1-second long. That has been fixed now.As mentioned in yesterday's email, I will now begin including an audio version of these essays. The audio is created in my voice with an AI. For those who listen please provide feedback on the quality and whether it is worth continuing.Between Meta's stock collapse and Musk's takeover of Twitter, the future of social platforms dominated headlines last week.On that note, today's essay looks at VR/AR and Meta's new headset.—EdwardReal FidelityIn January 2020 — before most North Americans had heard of COVID-19, let alone started processing its impact — I wrote a Marketing BS essay that connected the science of music technology (CD vs vinyl vs live concerts) to videoconferencing and office productivity. Specifically, I coined the term “real fidelity” to explain why our enjoyment of an experience — music or sports or work or anything, really — is significantly shaped by our perception of its “realness.”Eight months later — with many people using technology to connect with colleagues, classes, and friends — I wrote a follow-up post that expanded upon the idea:The term fidelity refers to the formats we use to communicate sounds, images, or experiences. Fidelity plays a fundamental role in the effectiveness of a marketing strategy. For instance, video can deliver a message more effectively than audio. And a video played on a large, high-definition screen is more impactful than one played on a small, low-quality screen. The most powerful fidelity is real life. A live presentation in an auditorium (usually) holds people's interest better than a YouTube video of the event — a phenomenon that many parents discovered [in 2020], while watching children struggle with Zoom-style classes.In that second essay about real fidelity, I used the concept to explain why companies like Netflix, Meta (then Facebook), Google, and Amazon were betting on a post-pandemic return to the office. The reason? Co-workers felt like something was missing from their collaborations. Despite the improvements in technology, videoconferencing didn't feel as “real” as face-to-face interactions.Humans crave that sense of “realness” — so much so that it drives many of our decisions. As I wrote in my first essay about real fidelity:At times, our compulsion to attend live events seems to defy logic. I would never pull up YouTube and watch an hour-long lecture, but I was drawn to go see Bill Clinton during one of his “live in conversation” tours. For an $80 ticket, I sat at the back of an enormous theater, with a view far worse than the one I could have watched on my laptop. That is the power of real fidelity.Better FidelityOn October 11, Meta announced that their new virtual reality headset, called “Quest Pro,” would ship by the end of the month — at a cost of $1500. Unlike their earlier Quest headsets (cost ~$400), the new device is aimed at the enterprise market. The Pro model offers multiple technical upgrades that support AR (augmented reality), like higher resolution, wider peripheral vision, automatic eye tracking, and the ability to see full color in both the virtual and physical environments. Plus, the device's improved processors allow people to engage in more seamlessly immersive (and therefore “more real”) business meetings, brainstorming sessions, and more.Most pundits from the mainstream media, as well as many of the smart analysts I respect (Ben Thompson, Benedict Evans, John Gruber, Kevin Roose, John Carmack, etc.) reacted to the Quest Pro announcement with skepticism. There seems to be a critical consensus about two key points:* Meta is too early: Useful VR is still ten years away — especially the social aspects. Plus, there are limited barriers to entry; when VR tech finally matures, another company can just come along and leapfrog Meta.* Customers don't want full immersion: Meta believes that VR is the future for both office productivity and personal recreation. This strategic bet assumes that immersiveness is a defining characteristic in the tech continuum from desktop computers to laptops to mobile devices to VR. But smartphones are actually LESS IMMERSIVE than desktop computers. The shift from desktops to laptops — followed by the mobile revolution — was the result of consumer demand for convenience, not immersion. Where's the evidence that customers are clamoring for VR experiences?Point 1 could easily turn out to be true: Meta might be too early for VR, just like many mobile-focused companies in the mid-90s were too early.For Point 2, though, we still don't know how consumers will feel about immersive tech (it's hard for any of us to have a strong opinion until developers refine the VR gear and platforms). Instead of focusing on immersion, then, I might suggest an alternative way to frame Point 2: “convenience is the most important element for bringing a new product to scale.” Getting someone to try something new is HARD — just ask P&G about the challenges with teaching people to use fabric softener. As such, I agree with critics who think Meta faces an uphill battle convincing consumers to make “putting on a headset” part of their everyday routine — especially at a cost of $1500. (The early research isn't encouraging. Only 28% of current VR set owners use their devices daily.)And yet…VR has a “killer app” — presence. And, as I wrote in my first real fidelity essay almost three years ago, presence really matters. There are many types of experiences that work much better (or only work at all) when humans are physically together in the same space.By definition, VR cannot achieve 100% real fidelity, but the technology is definitely approaching interactions that “feel” real. Nothing on a two-dimensional screen comes close. Could VR attain a level of sophistication that replicates the feeling of collective presence? Meta seems to think so.And if VR does, in fact, ever manage to offer a reasonable facsimile for physical presence, here are some likely applications for VR (in order of “corporate-ness”):* Meetings* Conferences* Sales* Learning* Comedy* “Hanging out”* Tabletop gamingI'm probably overlooking some other important use cases, but that list of seven is a good place to start discussions about how things might play out in VR.MeetingsClearly, Meta understands that workplace meetings will be a core piece of their VR business.The company has already launched Horizon Workrooms — “a virtual space that brings teams together in the metaverse.” There is a web app version of Workrooms that anyone can use on their computer, just like a regular video call. But to access the VR features, you need a (base model) Quest headset. And with a Quest Pro, you can unlock AR functionality, which allows you to build a virtual model of your physical office; that way, you can interact with other people's avatars in your familiar office environment (with the same placement of your monitors, keyboards, etc.). With Workrooms, you can also bring your computer into the space, so you don't have to give up multi-tasking in big meetings (or if you want to pull up a slide or a spreadsheet, you don't need to leave “the room”). You can collaborate with colleagues on whiteboards. You can throw around ideas.Plus, Quest Pro can replicate elements of human communication. If you smile in real life, your avatar smiles. If you look away, your avatar looks away. If you put up four fingers to drive home a point, so does your avatar.Workrooms is more than just a novelty — Meta is developing a business tool that evokes the “presence effect” of collaboration. If you have not tried a headset yet, I highly recommend it, if only for 15 minutes: The experience really does feel like you are “there” — as long as you can get over the cartoon-like graphics. It is nothing like the rows of video screens you experience on Zoom or other video platforms.Moreover, the virtual space offers some advantages over real life (beyond the obvious convenience of working in different parts of the world regardless of time or distance). In addition to Workrooms, there are third-party software programs that allow you to build and manipulate three-dimensional designs, create and shape chemical molecules, and generate housing and infrastructure projects. Given that most people haven't even put on a modern VR headset, it's incredible how many high-quality third-party applications are being developed — and most are free or very inexpensive.Last week, I was working with some clients; they are debating whether to remain a remote-first company or to establish a physical office. They see the benefits of building a company culture with in-person collaboration, but they also recognize the challenges (real estate costs, recruiting talent, and office distractions). I suggested they pause their decision — until they purchase three Quest Pro headsets ($4500) and experiment with some team meetings in Horizon Workrooms. When I receive their feedback, I will report back.Ultimately, I expect virtual meetings will be THE feature that eventually convinces users to adopt Meta (or whatever company leapfrogs them). For the rest of today's essay, I'll describe how other activities might develop viable use cases for this nascent technology.ConferencesLet's be clear: no one decides to attend a conference because of the keynote speakers (no matter how prestigious they might be). The profile of the speakers is a way to signal the conference's quality, so that potential attendees know the event (and its networking opportunities) will be worth their time.For many people, the value of a conference comes down to these things:* Sales* Account management (i.e., meeting with existing clients all in one place)* Job search (subsidized by your company)* Vacation (subsidized by your company)* Love (or sex, for the cynical — subsidized by your company)* Serendipity (The most productive time I ever spent at any conference was sharing a taxi back to the airport with a random stranger who eventually became a lifelong friend)As everyone realized over the last few years, online conferences can't really accomplish any of those things. In turn, many people have opted to give up on online conferences altogether.But what if you could attend a virtual conference experience that still managed to check off several of the above points? A virtual event won't get you a vacation, but there might be ways that new tech innovations could provide suitable alternatives for the other conference goals (with a big asterisk on point 5…).SalesPart of the reason salespeople travel to the client is signaling. They are showing you just how much they care. Taking a client to dinner or lunch or a live sporting event can be a great way to build relationships. Duplicating those experiences in a virtual space might not be possible. But there are also millions of sales calls that have been enhanced by moving from the telephone to Zoom. And I expect that shifting those Zoom meetings into the virtual space will enhance things one step further — with a more interactive way to get to know each other, to understand the client's business, to identify pain points and solutions, etc.The hard part will be getting the client to put on the headset.To reduce that hesitation, here's an idea: for big enterprise sales with a very high potential contract value, what if you sent the CMO (or CFO or CEO) a Quest headset, along with an invitation for a meeting in virtual space? That approach is obviously expensive, but so is any tactic that tries to interrupt the workflow of a senior executive. If the take rate for the meeting is high enough, a $1500 (or even $400) headset might deliver a better ROI than sending another branded paperweight.LearningThere's a cringeworthy Meta ad that shows students visiting Ancient Rome and watching debates with Mark Antony. The problem isn't the lack of possibility — exploring virtual 3D worlds is possible now, and the fidelity will only increase over time. The issue is Meta's misunderstanding about how people learn history. Watching an experience in VR isn't much better than watching a documentary on those old rickety TV/VCR carts (while your teacher sits at their desk, grading papers). We also know that sitting down to watch a lecture — either on a Zoom screen or in a physical classroom — is a pretty terrible way to learn anything.There aren't currently any large-scale education platforms for VR, but there are signs that learning may be another killer app. Motive is a Canadian tech company that's been creating immersive video games since 2008. They've partnered with companies in the mining industry to develop VR-based safety training modules. In the computer simulation, workers move through an interactive mining environment that requires them to recognize hazards and operate machinery. Sitting at a computer station is obviously much safer than conventional workplace orientation methods, but what are the results like? Early studies suggest that learner retention is significantly higher than other modalities. In another example, the University of Maryland ran a test/control study of AR training versus desktop training — they found 90%+ higher retention with the AR approach.I believe the two most important training use cases are situations where training in “real fidelity” is either very expensive, very dangerous or both. Even if VR is not as good as training on site, if it can reduce the time required working with expensive equipment (i.e., in a mine), or save lives (i.e., allow a junior surgeon to practice without the risk to a real human being), then it seems like mass adoption for those situations is not unreasonable.Consumer-aimed educational products are also emerging. PianoVision is a VR tool to help people learn to play piano. You can imagine how effectively the right software could help someone develop muscle memory for a stationary task like that. I expect similar possibilities for activities like golf or table tennis. (In fact, there's already a free table tennis app where you can play against another user or a “perfect AI” that feels shockingly like the real thing — without the dirty work of picking up the ball when you drop it).ComedyComedy is much funnier when you are in a social setting. (This phenomenon might explain why comedies are on a downswing in Hollywood — fewer and fewer people are seeing movies in theaters, compared to solo viewing at home).During the COVID era, there was a rise of online comedy shows. Many of the shows resembled Zoom videocalls, while others had comedians standing on stage, performing in front of a wall of screens (like this one). Many of the shows experienced tech hitches and logistic limitations — the same types of issues that companies discovered when they shifted meetings online.For comedy, getting the right mix of audio is particularly tricky. Muting the audience makes the show feel dead, but turning on everyone's mics to allow laughter can overpower the comedian (especially if they have to compete with random babies and dogs).Improvements to VR could make an online comedy show feel like a social situation, with the “presence” of other people laughing around you. There would definitely be market demand for live comedy shows that people could watch from the comfort of their home.The industry would quickly change. Stand-up comedians spend a lot of their life on the road (which is a lonely experience for many of them). With a more immersive tech platform, comics could put on a headset at 7:00 pm, deliver their 40-minute set, and take the headset off — and already be home to tuck their kids into bed or spend the night with their partner.For producers, the cost to book a higher-profile comedian would decrease (no need to book large venues, etc.); as such, stars would have more opportunities to reach audiences around the world. Bookings might be harder to come by for emerging comedians, who would now be competing in a global market (which isn't that different from the story of the last 20 years, as technology has reduced friction in everything).The biggest technical challenge here is supporting large groups of people simultaneously in the same space. Right now the cap for the number of people who can be live in a single venue is only 20. That makes for a pretty poor live comedy show.Hanging OutVR platforms offer lots of ways for people to connect socially. Internet chat forums evolved into social media platforms; the next iteration might include having people's avatars interact in a virtual space. Groups of friends could “gather” to watch a football game or awards show on TV — with everyone in their own individual houses. You can't really go on a (physical) walk with someone, but you could play games like mini-golf together.The business opportunity in “hanging out” might not be immediately obvious, but a lot of value in companies comes from lunchtime conversations, post-work drinks, bowling nights, etc.Remote employees miss out on those types of social connections and outings. Company off-sites and retreats can help bring everyone together, but those events, by definition, will happen infrequently. VR could provide alternative ways to build a close-knit team.Tabletop GamingDemeo is a VR game that allows friends to play a Dungeons & Dragons-type adventure together — controlling characters, solving puzzles, and defeating monsters. When you play, you can opt for a view that looks like a digital version of an in-person roleplaying game (people sitting around a board, moving pieces, and rolling dice). But the VR functionality also allows you to change your relative size and position, so you can zoom in and become part of the action.Many tabletop games have already been ported into electronic form (I've seen families playing Carcassonne on their tablets, online chess is growing dramatically, and anyone who owned a Windows device in the 1990s knows the rules to Solitaire).Imagine a VR environment with virtual dice, cards, and tables. People could gather and play countless games, without the need to program any “rules.” Of course, this would require players who know the rules, but no more so than playing a game in real life – only now you can do it with someone on the other side of the continent. And if you did want to learn the rules for a new game, current VR headsets aren't good enough to let you read text from a book, but linking to a computer is an easy way to bring in written material from outside the virtual setting.Will Meta even be around to see this?On October 27, Meta announced their latest earnings (or lack thereof). In response, their stock quickly dropped 28%. The company is now worth $266 billion, down from over a trillion dollars last September (just before announcing the rebrand to Meta). They have fallen a long way. If they continue along this trend, will there even be a company to realize their vision of the Metaverse?One thing VR-believers have going for them is that Mark Zuckerberg has maintained control over the business. While he only owns 14.6% of Facebook stock, his “founder shares” give him 58% of the voting rights. There is nothing stopping him from continuing to spend $10 billion per year on VR and AR R&D. While Facebook's net earnings and cash flow have dropped dramatically from 2021 (when they were bringing in $10 billion or more of both per quarter), they still made $4.6 billion in net revenue and almost $200 million in positive free cash flow in Q3 2022. If the company ever found themselves in serious trouble, Zuckerberg could just reduce VR investments by a billion or more dollars to keep the company liquid. Meta is in no danger of folding.The real risk to Meta is holding onto their talent. Employee compensation at Meta is a roughly 50/50 mix of cash and stock options. When the stock price drops by 70%, that means a 35% pay cut for everyone who works there. If you are smart and talented, why not leave to build products somewhere where you will be better rewarded? The silver lining right now is that there are hiring freezes at most of the big tech companies these people would consider jumping to. But that situation won't last forever; sooner or later, Meta is going to have to address compensation. And beyond compensation, Meta will need to ensure that a very large workforce (now almost 72,000 employees), still believes in the company, their mission, and their chances of success. Zuckerberg may be a true believer in VR, but how do the marginal employees feel?If Zuckerberg can somehow keep his employees happy and engaged, then there is nothing stopping him from going all-in on virtual reality. As a clue, here's what one of Zuckerberg's friends and former professors wrote about the CEO back in 2012 (in response to a Quora question about Zuckerberg's attitude to money):Mark's main motivations were pretty clearly based around materially changing the world and building technology that was used by everyone on the planet. It's not like he didn't know that if he was successful, he'd become incredibly wealthy - and I wouldn't go as far to say that he would've done everything he's done if there wasn't a big financial payout from it all. But that always seemed like a happy side-effect of his true goals. My impression back then was that if he had to choose, he'd rather be the most important/influential person in the world rather than the richest. And I think that's visible in how he directed the company to focus on user growth and product impact rather than revenue or business considerations. Even today, while Facebook makes a ton of money, it could probably make magnitudes more if that were its primary goal.The post continues to explain that Zuckerberg was happy living in a small apartment and sleeping on a mattress on the floor, before his security team dragged him into a more protective environment.It's entirely possible that Zuckerberg is not focused on maximizing shareholder value of Meta in either the short or the long term. It's possible, even likely, that he is spinning the story enough so that he has the flexibility to spend Meta's billions of free cash flow towards building what he sees as the future.If effective VR is only possible by spending $10 billion per year with a negative ROI, then without Meta's investment it might not otherwise happen — or only far into the future when the related costs have been reduced by tangential technologies. Zuckerberg may be okay with that. He owns the wealth to make that investment. But, since his company is public and employs tens of thousands of people, even if he believed that, he could not say it. Zuckerberg has to build the narrative that the investment will eventually pay off (and that shareholders and employees are smart to invest their time and dollars with him).It remains to be seen if Meta will be the one to make VR happen, if VR will go into another long winter, or if Meta will kick things off before another company takes it over the finish line. But it sure looks like Zuckerberg is ready to either swing for the fences or go down swinging.Keep it simple,EdwardEdward Nevraumont is a Senior Advisor with Warburg Pincus. The former CMO of General Assembly and A Place for Mom, Edward previously worked at Expedia and McKinsey & Company. For more information, check out Marketing BS. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
I have been playing around with some AI audio tools. This should allow all podcasts going forward to have full transcripts. It has also allowed for pretty fantastic text-to-voice applications. I spent an hour recording my voice to have it analyzed by the AI. This allows text editing of podcasts (i.e., In the live recording I say “price insensitive” when I should have said “price sensitive”. I can use a text editor to just delete and replace and the AI will put the new words in seamlessly - in my own voice. It's like a personal deepfake).But the tool can do more than just find and replace words. Attached to this post is the full text of last week's essay “Paying for Status” in audio form, read in my voice from an AI. It is also available via the Substack player, and all major podcast apps. If there is any interest at all, going forward I will include audio like this in all essays (and transcripts for all audio).The AI audio is not perfect, but, to me, it sounds a LOT better than most of the “robot” customer service voices one has to deal with in every day life. I would love your feedback on what you think of it. Just reply to this email. What else to expect this week:* This week's essay is coming (Hopefully tomorrow. It was delayed due to Halloween). Topic is VR/AR and Meta's new headset* Weekly marketing take with Peter Fader is on schedule for Thursday morning (now with a transcript!)* For those that are interested in our analytical exploratory take on the early Marvel Universe, a new Super Serious episode will also drop tomorrow - also now with a transcript for those who prefer to read rather than listenKeep it simple,Edward This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
The experiment continues. Fader and Nevraumont explore the latest earnings results where brand spend seems to be up, while direct response spend is down. This is very different than any other downturn we have seen in the past. What is going on? We explore at least three theories.Thank you for the feedback on last week's episode. I WILL work on getting some sort of “instant transcript” for these so they can be read as well as heard, but it may take me a while as it does not land on the top of my priority list. In the meantime know that these are very short and only once a week, so hopefully their value per minute of your time is high.Keep it simple,Edward This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
A new experiment!Wharton Professor Peter Fader and I are going to try something new. Ever Wednesday (give or take) we will spend 10-20 minutes discussing the marketing implications of something topical in the news. In this first episode we discuss the parallels between P&G's recent announcement that they are raising prices, and Netflix's recent earnings call (and their move into a lower-priced ad-supported tier).Some relevant links:Peter's two part interview with Edward in November 2020: Part one. Part two.A 2019 essay about Amazon Prime Day and discounting where I quote Peter: Happy Double Prime DayThe WSJ article we discuss in the episode (free link)The October 18th, 2022 Netflix earnings call transcript.We would love your feedback on this experiment. Please reply to this email with your thoughts. I will forward all messages to Peter (unless you tell me not to). We do NOT have transcripts for the episodes yet, but if there is interest I will work on a solution. The provider I have used for my CMO interviews would be too slow, but there are acceptable AI solutions now that should be able to turn things around quickly at reasonable quality.Keep is simple,Edward This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
This is Part 2 of my interview with Stuart Wood (CEO of Caravel Law). Part 1 here. In this part of the interview we talked about how one goes about marketing professional services firms. Stuart marketed both the leading firm in Canada, and now oversees a “start-up” law firm. There are some similarities and some real differences in how marketing is done in these environments. I hope you enjoy this - it is a little different than our normal discussions on Marketing BS. Transcript:Edward: This is marketing BS. This is part two of my interview with Stuart Wood. Today we're going to dive into his experience overseeing marketing at two Canadian law firms, Caravel and Torys. He was CMO at Torys and CEO now at Caravel. You were CMO at Torys, which is a very, very established law firm in Canada. Now you're CEO of Caravel, which is a much newer law firm, relatively new. How do law firms differentiate themselves? What makes someone choose one law firm over another?Stuart: It's a challenge for every law firm, I think. Because what you'll see, if you look at law firm marketing, there's a lot of the same language, a lot of the same descriptors that they're trying to use for themselves. There's a lot of generic terms that are used. You'll see a lot of advertising, which are things like chess pieces and these strategy images that they think are going to really differentiate their firm, but it really is a lot more and more of the same.We try to differentiate ourselves in a few ways. But one of the keys for us is to try to differentiate through innovation and our business model. We've taken a lean approach to legal services, the same way that I applied lean principles to different businesses when I was a consultant, playing them here at Caravel as we take out everything that doesn't add value to the client as a way of trying to get the costs as low as possible.We practice in a different way where our lawyers—well before COVID hit—all practiced remotely as a way of eliminating the cost of a large expensive office on Bay Street. That means that we attract talent—great lawyers that have 15+ years of experience and just for whatever reason are looking for the flexibility of being able to work remotely.Nowadays, that's something that all law firms are trying to do, but for the founders of this firm 15 years ago, it was a pretty innovative idea to get rid of the office and have all the lawyers practicing remotely.We try to essentially implement legal technology in a way that actually delivers value for the client as opposed to just looking good in a press release. We use contract automation software and different things so that it feels different when our law firm is working with you versus when you're working with a traditional firm. We're not trying to just be a less expensive version of a traditional firm. We're trying to feel different from the client when we provide our services.Then lastly, I think law firms really try to differentiate on service. It's hard for me to compete with a big firm that has a team of staff on a client floor—the art collection, the filtered water, and everything like that that gets delivered.We have a director of client happiness and another person who works in our client happiness department. We really try to distinguish ourselves in the way that we care about our clients and pay attention to what's going on in business and how we can be helpful.Edward: A lot of those things sound like great ways to make your clients happy and to keep your clients from churning, from sticking with you. They don't sound like top-of-the-funnel ways to get people to even know about your firm, to consider your firm, or to select your firm when they're deciding which firm to choose. How does someone know? Do you do marketing to let them know that, hey, we have a different model, come and check us out?Stuart: Yeah, we do. Some of that is through the types of work that we do. We really try to grow through referrals. We try to do as much as possible to have our existing clients help us grow and be a part of building the firm, but we try to market ourselves in different ways as well.We have a podcast, which is called Business Decisions where I talk to entrepreneurs and speak with them about their businesses, how their businesses are evolving, and the kinds of challenges and business decisions that they're facing. Then, I talk to one of my lawyers about one of those business decisions and the legal implications of that. So bringing together the startup world and the small business world with the legal challenges that they have to deal with.One of the ways that we try to reach that audience is by showing that these are the kinds of clients that we work with and the kinds of things that we help people with, and hope that that resonates with people.Edward: Does that work? There was a company here in Seattle called Avvo that was basically a marketplace for lawyers, but where they did fairly well were these Q&A things where people would post questions and lawyers would answer those questions. The reason why lawyers are answering those questions for free was the idea of someone who would read that answer and be like, oh, that's the problem I have. I should go and talk to that specific lawyer who answered that question. Is that what you're trying to do with the podcast?Stuart: Yeah, a little bit. Most law firms are trying to do content marketing as much as possible. It's one of the things that lawyers are particularly good at. This has just happened, this development and this new legislation. Here are what the implications are for you. That's one of the things that all law firms try to do and what we're trying to do with our podcast, but also with some of the things that we put out.We try to really think about it from the perspective of the clients and what actual business decisions they're facing right now. In particular, if you look at the COVID-19 situation, there were a lot of questions at the beginning, which were not huge legal challenges but I don't think I'm going to be using my office for quite a while. Can somebody help me understand what my options are for my commercial lease? If I have to renew my lease in the next little bit, how should I be thinking about that, one of those challenges are?We tried to show up at TechTO events. We sponsored one of the TechTO events and had four lawyers there just to answer questions from entrepreneurs. We created a free legal help desk for people to contact us with COVID-19-related legal questions, which were largely employment, real estate, those sorts of things, and contract analysis. What does this mean? Just things that people hadn't considered until they were forced to consider them due to the circumstances.We'd really try to just put ourselves in the shoes of our clients. What are they wrestling with? What's top of mind? What do they need help with? How do we put something out that's helpful and useful to them?Edward: Does that work? Have you been able to track that top-of-mind awareness you get from doing that type of work through a new client coming in the door?Stuart: I don't really try to get all that granular with my tracking on some of these things so I couldn't tell you specifically which of these initiatives is working.The firm is growing pretty quickly. In particular, in 2021, it has been a pretty dramatic growth year for us. It's an endorsement that the things that we're doing are working. But if you were to ask me how much of that comes from the podcast, how much of it comes from the client's happiness efforts, and how much of it comes from the monthly newsletter that we put out and the content that we share to try to be helpful to our client base? I couldn't tell you what percentage belongs to each, but they all add up to a recipe that's working well for us.Edward: When a new client comes in the door—not expanding on an existing client, but a brand new client comes in—do you ask them, how did you hear about us?Stuart: Yeah. It's almost always from someone. Hiring lawyers is a little bit different. There are certain types of law where maybe you're going to go onto Google and just type in personal injury lawyer or something like that, and maybe you get leads that way.In general, what we're really trying to do is make sure that we are a law firm people have heard of that have some familiarity with it so that they'd speak to one of our clients and they hear what a great experience that client is having. That we're not a name that they've never heard of or a firm that they're not familiar with. That we're in the consideration set already so that when they hear more about us, they'll reach out and get in touch.Edward: Stuart, do people even hire law firms? Going on a little bit of a tangent, are they hiring law firms or are they hiring the individual lawyers? We talked about this referral, I've heard of you. Are they hearing about Caravel, or are they hearing about an individual lawyer at Caravel?Stuart: It's definitely both. It's a little bit different than other professional services businesses. In consulting, people generally will talk about the firm and will mention the firm name. You see a lot of lateral hiring in law firms of lawyers moving from one firm to another, and the clients go with them to their new firm because the loyalty is really to that individual lawyer as opposed to the particular firm.Sometimes it is, but a large part is the relationship with the person who's actually doing the work matters a lot more in legal services than it does potentially in other professional services for sure.Edward: How do you do that as a running marketing for the firm? Are you trying to reduce the amount of marketing to the lawyers, or do you increase it and then leverage it for the firm?Stuart: At the firms I've worked at—in particular at Torys—I started an initiative where we did video podcasts. We were the first firm to do that. That was really to get my lawyers out in front of people. They could see them, they could hear them, and they could see that they're not intimidating.Torys is a pretty strong brand in legal services in Canada. In some cases, it can be an intimidating brand, so I really wanted to put people front and center so that you could see our people, hear them talk, and hear what it's like to have a conversation with these people. I think that was very effective at humanizing the firm and getting some inbound interest in the firm that way.We would do dinners with CEOs to try to get and have speakers come in as a way of getting exposure so that more people who talk to one of my lawyers had a chance to see that they were both excellent lawyers but also excellent people to work with in difficult situations. I thought that was really important.We do the same thing at Caravel. I have just an amazing team of lawyers. I just want more people to know about them and to have a chance to listen to them or see them in a video, at a conference, or something like that. Because the more exposure people have to my lawyers, the better the firm is going to do because we have an incredible group of lawyers.Edward: Is the idea then that you have to have a group of lawyers at a time? It's almost like you're going to sell them as a bundle rather than as individuals. I can imagine that if you start raising the profile of any given individual lawyer, they can take that with them. That brand equity takes the elevator down from every evening at 5:00 PM.Stuart: Yeah. To a certain extent, you have to rely on the culture of your firm and the firm that you're trying to build, that you give them a reason to choose to practice with you as opposed to going someplace else.Certainly, you can read all these stories in The New York Times about partners that are moving from one firm to another for what I think seems like outrageous sums of money. They're worth it because they bring all that work with them.That's certainly something that you have to be mindful of. I had one client that said to me, I'm sure you have a basket full of stars at your firm. I just don't know who any of them are. That's going to work against you if you don't put your people upfront and give people a chance to see that you do have excellent legal talent that can really help them, and that would be thought partners, real support, and trusted advisors for those clientsEdward: Are all these top law firms priced the same, or is it significantly different from law firm to law firm?Stuart: There are definitely differences. Caravel is a lot less expensive than a traditional Bay Street law firm in Canada. It depends on the market. The rates are different in Vancouver than they are in Toronto, for example. To a certain extent, people want to feel like they're getting great value more than they want the cheapest lawyer for sure. I think legal services have signaled quality through rates.How do I know this woman is a great lawyer? It's because she charges $1000 an hour. She must be a great lawyer to be able to charge that much for her time. That's a really important signal that they send to the market through their rates.I'm not sure that clients want to find a lawyer that has the lowest rates because they will associate that with lower-quality either work product or service. What they really want to find is that person who feels like an excellent value. I'm getting that lawyer who's a great lawyer and who I know is going to do a fantastic job for me. I feel like what I'm paying is fair.Edward: How does Caravel get around that? You guys are cheaper than (say) Torys. Does that signal that you're lower quality? How do you manage that?Stuart: I don't think it signals that we're lower quality. I have a huge amount of respect for the big traditional law firms. Having spent time in one for a long time—six-plus years—I feel like I have a real appreciation for all the things that they are very good at.There are the types of files that big, traditional, national law firms can handle that we would not be the right fit for. But I do think it means that we have to explain and share with people what is different about us and why we are at the rates that we're at. That is different than just lower quality because I tell all of the clients that I speak to that I don't want anybody to be holding us to lower standards than they hold their traditional law firm to just because we're less expensive.We think that we provide as good or better service than all those firms, and our lawyers are all experienced great lawyers who have relevant industry experience and exceptional training. They are every bit as good lawyers as what they would find elsewhere. You have to do some education to make sure that people don't just see that it's a lower-cost law firm, but a different way of practicing.Edward: How much of your marketing has to go towards lawyers rather than clients? I imagine, to your point, what you're selling as a business is effectively the people that are working for your business as a service firm. Having really strong lawyers is really, really important. Is marketing a part of that to make sure you can attract really strong lawyers?Stuart: Absolutely. There's certainly a virtuous circle that gets created. The best clients attract the best lawyers, and the best lawyers attract the best clients. Once you get that virtuous cycle going, it's a nice flywheel effect that you end up with.The matters that you're handling, the financing rounds, the IPOs, and the M&A deals that you're doing, people notice that and you end up attracting talent as a result of being seen as being in the mix and serving the kinds of clients that people want to serve.The nice part about Caravel is we serve a lot of innovative leading startups across Canada. In a lot of cases, the fact that we serve some of these technology companies or what have you that have garnered headlines and attention over the last decade is a vote of confidence from one of those startups. It carries a lot of weight with other clients that then consider Caravel to assist them.Edward: I see that. If you go and say, hey, we serve Google, Facebook, and Apple, that's a really good signal for clients to be like, oh, I want to go and be with a law firm that serves those guys. It's also a good signal for the lawyers to be like, hey, I want to go and work for the guys that serve those guys.Are there other other types of things that don't have that flywheel effect? Is there a trade-off? Is there marketing that you can send out to be like, hey, this is going to be good for the clients but bad for the lawyers, or bad for the lawyers but good for the clients?Stuart: There's always the tension in a professional services firm that jumping through a lot of hoops to make your clients happy can often come at the expense of the consultant who's asked to travel more than you would say is a reasonable amount or late nights for a lawyer that may affect their work-life balance.To a certain extent, if you're trying to market to both at the same time and you're sending a message out to lawyers that, hey, we have a flexible model that allows you to practice from wherever you are, you have to be mindful of how that message is going to be received by any clients who are seeing that marketing.If you are talking about what exceptional lengths to go to to provide service that goes above and beyond to your clients, that may have an effect on lawyers thinking, well, that sounds like long nights that maybe is not what I'm looking for. You do have to manage that trade-off for sure.Edward: It's interesting. Google doesn't have that problem. Google can advertise that they have free lunches, pedicures, massage therapists, volleyball courts, and laundry on site—all these employee benefits. But that doesn't make me be like, oh, their staff is going to be coddled, therefore, I'm not going to use their search engine.Maybe I do that if it's a lawyer who talks about, hey, we have all these special things that make people super relaxed and so on on-site. That doesn't make me want to use those lawyers anymore.Stuart: When you hear all that, oh, that's going to be expensive might be the first thing that comes to mind. You do have to manage that.To a certain extent, as you are out there in the market trying to tell clients about your services, it certainly is always in our mind that the people we want to come work with us are also reading those ads, reading that content, and are learning about our firm at the same time. We do always have both audiences in mind with whatever our marketing efforts are.Edward: Which is more important? If you had to choose between marketing to lawyers or marketing to clients, which one wins?Stuart: I generally think of most of my marketing as being towards the clients, but I am always aware that if I don't have lawyers, I have no business. I really try hard to make sure that I'm always respectful to my lawyers and trying to create an environment where they feel appreciated and respected for the skills that they have and the hard work that they put in.Then, I rely a lot on the fact that my lawyers have all been practicing for a long time. They know a lot of the people in the market. In general, if a lawyer is considering coming to work at Caravel, they're most likely going to know somebody that works at Caravel and are going to call that lawyer and ask them what it's really like to work here. I expect that a lot of the marketing or the representation for the firm is happening without me knowing anything about it or being aware that it's even happening.Edward: It seems like referrals are extremely important for your clients, but also extremely important for your lawyers. It feels like that's the number one marketing channel for both sides.Stuart, before you go today, tell me about your quake book or quake article. What quake content have you read that has fundamentally changed the way you think about the world?Stuart: In the startup world—which I came to later in my career—I would say one of the books that really had the biggest effect on me was The Hard Thing About Hard Things by Ben Horowitz. I actually take a great deal of comfort from the fact that it's supposed to be hard. I think that's true at the law firm as well.The challenges that we've talked about today are all challenges that all the law firms face for sure. Law firms are unique businesses maybe because of the nature of the services that we provide, but they're at the core of their businesses.We have to take care of clients, and we have to take care of our talents to make sure that they are there and ready to do a great job for our clients. We have to market. We have to worry about pricing, where we are, and what our competitors are doing. We have to think about innovation, technology, and everything like that.A lot of times, it seems very hard, and there was a part where I took a great deal of comfort in the message that it's supposed to be hard. That's actually a sign that we're on the right track.The piece that I always go back to and I share with people the most is this Fast Company article from the '90s which was by a world champion juggler. It was all these lessons from juggling that he shared in the article, which I thought was really insightful. It was all the things like you touch something, you let it go, and then you have to trust it's going to come back into your peripheral vision at the right moment to deal with what agony does, and then you have to let it go again.This idea of, how do you manage all the things that you have to manage when you're a CEO or when you're running a team—as I was early in my career of a couple of hundred people? You can't watch things all the way into your hand and watch that because everything else will fall if you try to do that. You have to trust your process. You have to trust that you'll see things at the right time and have the right systems in place. You have to trust your team to do good work and manage those things.I've shared that article with probably 40 or 50 people, I would say, in the course of my career.Edward: That's a great way to end it. Thank you so much, Stuart.Stuart: It's a pleasure. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
Thank you for your patience as I take time with the new baby. It has been pretty great barely working (professionally) for the last six weeks. I have half-written a briefing that I keep thinking I will finish and send, but it continues not to happen. I have not decided when I will really ramp back up. In the meantime, here is another Marketing BS interview. This one is pretty unique. Stuart was CMO of the largest law firm in Canada without ever being a lawyer (and is now the CEO of a newer firm). Part one, like always, is about his career. Next week I will drop Part 2 which explores the mechanics of how he thinks about marketing a law firm (with all sorts of learnings for service businesses). Enjoy. The Transcript:Edward: This is Marketing BS. My guest today is Stuart Wood, CEO of Caravel Law. It's a leading law firm based in Toronto, Canada. Today we're going to cover Stuart's path becoming a CMO and now CEO of a law firm, but not actually a lawyer himself. He was at Loblaws, McKinsey, Torys, Exact Media, and more. In the next episode, we'll dig deeper into what it means to run marketing for a law firm. But today, I want to focus on Stuart.Stuart in 2005, you were an engagement manager at McKinsey. It's not uncommon for people to leave McKinsey when they're engagement managers, but it is fairly unusual to leave and become a CMO immediately. It's also extremely unusual, I think, to leave work for a law firm. Tell me exactly how that happened.Stuart: The main reason that it was unusual was that I joined a client that I had been serving as a consultant. I had a consultant's worst nightmare. You put forward a series of recommendations and then the client turns around and says, well, hey, why don't you come on board and do all this stuff that you said we should do? The list of recommendations that I had made was now recommendations to myself. I was in a unique situation of trying to take all the analyses that I've done and all the recommendations that I had put forward, and now put them into action.It was a unique opportunity, a chance to implement what I had seen. I'd had a chance to work with the team for three and a bit months. I really had a good feel for the people. I really liked the environment. I really liked the leader of the firm, Les Viner. I jumped at the chance to join the management team at Torys.Edward: You came on at that project work, the McKinsey work you were doing for them. Was it a marketing project?Stuart: No, it was really a full strategy review for the firm. The firm had expanded into the US and had done a number of interesting things. We're five years onwards, wanted to take a look at some of the decisions they've made, whether they still made sense, whether there were execution issues that they could tighten up, that kind of thing. So I came in and led that project to make a set of recommendations overall for the firm.Edward: Who was the individual at the firm that was your client? Who was thinking through the strategic problems that you're giving these recommendations to?Stuart: I've worked most closely with the managing partner at the firm. But I really worked closely with the entire executive committee, which was made up at the time, I believe, of seven senior lawyers at the firm including a managing partner.Edward: They were all lawyers. They were all practicing lawyers who were presumably trying to hit billable hours, targets, and billing clients and managing teams, and then they're doing this on the side, which is like, what is the strategy of our firm going to be?Stuart: Yeah. The managing partner at that firm doesn't actually practice and doesn't work with clients any longer. His full time job was running the firm. But the other six members of the executive committee were active leading senior partners inside the firm who ran practice groups, had responsibility for the most important clients at the firm, that kind of thing. So they had to juggle all the strategy responsibilities and talk through all the business decisions at the same time as maintaining an active practice.Edward: Then why bring you on as a CMO? Why not head of strategy or chief strategy officer?Stuart: I was essentially in charge of business development, marketing, and strategy for the firm. I became a non-voting member of the executive committee. So I had an opportunity to attend all the executive committee meetings and participate in all the decision making that went on from that point forward.Edward: Why call it marketing? The three months you spent were doing strategy work for the firm and now you come on board to implement it, but they're calling you marketing.Stuart: I think the intention wasn't for me to do a lot of marketing work, but they had a 14-person marketing department. I was nominally replacing the person who had run the marketing department. The thought was at the time, it's a high-performing group, it won't require a lot of your time. But a lot of the stuff that you're going to do with clients and with the overall strategy we want of the firm, we want that to dovetail nicely with what the marketing department is doing.Edward: Got it. When you were at McKinsey, were you a marketing specialist, or are you more of a strategic specialist?Stuart: I was more on the strategy side. The first marketing job I ever had was chief marketing officer, which is an odd path for sure.Edward: Yeah, I get that. Now you're at Torys and you're the CMO. How much time are you spending on marketing versus what you'd call strategy?Stuart: I would say it changed. I was there for 6 ½ years. I would say the first two or three years, there was a lot of strategy work, there was a lot of organizational work, getting the office in New York and Toronto to work well together. We ultimately then went on to open an office in Calgary while I was there. They've since opened a couple more, but there were three when I left.There was a lot of work like that that I did. But ultimately, positioning the firm in the market became a big important part of my job. How we represented the firm out into the market and a lot of the things that I think of is marketing like pricing, how we treat our alumni from the firm, and things like that. That became a bigger part of my role over time.Edward: How did you learn those skills? Was it just learning from your direct reports, the people had been doing marketing?Stuart: Yeah. I would say I had some learning from the team. It was a strong team, so I was able to leverage that. In particular, for things where you don't have a lot of experience naturally from just being part of companies and working your way up. There are things like running events and some of the marketing stuff. I had very good outside advisors. I had an excellent advisor who I really trusted and came to rely on heavily who was helping me with public relations and some of the other things that I didn't know very much about.In my second week at the firm, there was a situation where the firm was in all the newspapers, and reporters were calling me, and I went out to talk to my assistant. I said, why are all these reporters calling me? She informed me that I was the chief spokesperson for the firm, which hadn't come up in the interview process.I ended up having to deal with this situation and having never been trained on any of that stuff, just really at the start trying not to make any horrible mistakes. But pretty quickly, I realized that I needed someone to come in and give me some media training and how to be able to handle those kinds of questions without inadvertently making the problems worse for the firm.Edward: That's crisis communications. It's not just a CMO specialty. It's a subspecialty within public relations, which was a specialty. It's right down there. You thrust into that without any background in it, it's got to be challenging.Stuart: It was challenging for a couple of reasons. One was—this is going back a little bit but—blogs were coming out. I'd have the Wall Street Journal Law Blog calling me about this situation looking for a comment within just a couple of minutes because they're about to go live with this. It wasn't like these or newspaper articles that were going to come out the next day. These were a lot of things that were going to be going online within minutes and you have to provide a comment.Oftentimes, with regards to a courtroom situation, I had people in the courtroom who were providing me with updates. But if I hadn't gotten an update by the time reporters were already reaching out to me, I was in a certain sense flying blind. I had two individual lawyers who were really involved in this case who were providing testimony. I felt a lot of responsibility for their situation, their individual careers, and how their reputations were going to come out of this.Because I believed then, I believe now that they hadn't done anything wrong. But there were a lot of things that were being suggested and you want to be very careful about how you manage that because it wasn't just the firm's brand that I was trying to protect, I was also trying to protect those two individuals and make sure that the things suggested about them weren't accurate.Edward: I want to go back a little bit on the path that you took to get there. What were you passionate about when you were 12–14 years old?Stuart: I would say I had two passions, which were really just sports and music. I was either outside playing sports or I was inside listening to music. Those were the two things that I was really passionate about.Edward: Where did that lead? You did a lot of music at that age. I tend to believe that the stuff you do at that age does carry through the rest of your life. Did it for you? Is music still a thing and it didn't affect your career in any way?Stuart: It is still a thing. I still have an active band that we play in clubs around Toronto when pandemics aren't stopping us from doing so, which is a great outlet for me, and write songs and things like that. It gives a creative outlet for me for sure. I ended up going on to play sports all through university. I was the captain of my university volleyball teams. I was on the university hockey team.I played that way.I think you'll learn a lot of skills in terms of teamwork, leadership, overcoming adversity, and things like that when you're playing sports all the way through.Edward: Related to this, is there anything that you believe strongly that many other people don't?Stuart: One of the things that I came away from McKinsey really thinking was that most of the time when I would go into an organization and spend time with the senior leadership, there was really not a lot of magic to it. You meet these people, they'd be smart and talented people. But a lot of the business challenges that we were working on were not enormously complex. Sometimes that outside perspective was really valuable or the ability to look at a lot of data and pull out some insights that they could action were. But actually, it was really taken by how straightforward a lot of the business challenges that we were working on were.In particular, one of the things that really, I think, separates good consulting from bad consulting is the degree to which people are actually bringing creativity and ideas to the table. That's carried forward in my legal law firm career. I used to say to the lawyers at Torys, and I say it to my lawyers now all the time, that if you want to demonstrate thought leadership, it actually involves thinking. You have to sit down and think about it.If all you're doing is reporting like, well, here's what the government just announced and here's what the rule is now, that's not really thought leadership, that's reporting. But if you want to actually demonstrate thought leadership, you take the time, you put some thought into it. I really enjoyed that part of my consulting career. Where I had an opportunity to take a problem and try to come up with a creative or innovative solution to it, or think about it in a way that they hadn't thought about it before, as opposed to just, well, this is a strategy study so let me get out the slides to have the pillars in it because that's what we do on strategy studies kind of thing. I think that's one of the things that I've tried to bring to the rest of my career following consulting.Edward: What did you do when you graduated college? What were you thinking at the time? Where did you go?Stuart: I'd had two plays that I wrote in university that got put on, one by the Halifax Theatre Explosion Festival or whatever. I had the opportunity to sit in the audience and listen to actors on stage saying my lines and reciting the rants, speeches, or whatever I had told my jokes. I just found that intoxicating. I really loved it.When I graduated from university, I wanted to be a reporter or a writer of some kind. I did think about going to journalism school. I actually went through the steps of applying to journalism school but ended up concluding that actually creative writing, screenplays, a novel, or something like that were more what I was interested in doing. That's what I thought I was going to do after I graduated from university.Edward: Did you say thought? So you did not go that path. What happened?Stuart: I did one of those traditional post-university backpacking trips across Europe visiting a lot of countries and journaling through a lot of that. Doing a lot of writing while I did that and then I came back and determined that I really wanted to focus on this. So I ended up actually moving to Hawaii, really just as a place that I thought would be a lovely place to spend some time where I wouldn't know anybody and I could really focus on writing and just see if I had things to say and things that I wanted to express.The interesting part was that you're right, I did finish a few things. I was pretty critical of my own writing, I would say. I wasn't really sure that I had the right career path for myself and ended up after about a year coming back and then starting to get a job.Edward: You chose Hawaii. Do you think you would have had more success if you'd gone to a colder or more miserable place?Stuart: Maybe. Actually, I found the environment pretty inspiring. I took up running and eventually became a scuba diver. I lived with three guys who were all surfers. There was a certain uniqueness to the place, which I think also was helpful to the effort.Edward: So then you came back to Canada and you started working in the supply chain. Is that right?Stuart: Yeah.Edward: How did that carry through to the rest of your career? What did you learn there that was valuable?Stuart: I think supply chain logistics was a great foundation because it's all about problem-solving and it's all about problem solving under difficult circumstances or constrained resources. I would be faced with challenges like, this truck is hitting 8 hours north with 21 pallets of groceries and 1 pallet of meat was left behind. Now, what are you going to do because you can't have the grocery stores that are six or eight hours north of the city not have meat to sell?You can't just put that one pallet on a truck and ship it up there because the economics don't make sense. You got to get creative and figure out how you're going to solve that problem.I did some really interesting projects there. We opened up a new distribution center for slow-moving goods. I got to design those systems for Loblaws across the province of Ontario, which was great. I eventually got to lead a three-shift operation for Loblaws where I had 230 people who I was responsible for. I had to learn how to communicate with people on other shifts that I wouldn't actually see and have a chance to speak with directly before they started their work that day.There were a lot of things that I learned from that experience, which I think have helped me throughout my career for sure.Edward: What was the biggest failure point in your career? Where did things not go as expected?Stuart: Definitely after I left Torys, things didn't go as expected. I would say there were two things. One was I was really disappointed after I left Torys to then start to look at what my career choices were at that point and to learn how little that law firm marketing experience was valued outside of the law firm world. I really thought that Torys was the best law firm marketing job in the city of Toronto. I wasn't looking to do that again after I left.After 6 ½ years, I really felt like the partners had heard everything I had to say. They would know what I was going to recommend to them with regards to a client before I even opened my mouth. I really felt like the impact I was having was a lot less after six years. It's the right time to leave, but going on to do something afterward, there was really a sense of, it's not the kind of marketing experience that you're looking for.You're senior enough that you can't go into the junior marketing roles that maybe would give you the chance to get the experience to move into the senior marketing roles in a consumer goods company, for example. You can't go into those roles, but also, you haven't done all the jobs coming up that would prepare you to be the head of a marketing team that's much larger than when I was managing at Torys.That part, I came to view as, I didn't necessarily make the best choices as to what to do with my career next. I ended up going out and starting my own company, which was a learning experience, but it didn't go well. There were a lot of things that I, in retrospect, could see that I did wrong that I could redo. It was really when I got into the chief operating officer roles that I moved into next that my career went in the right direction again.Edward: Is there any learning from that? Is it like, hey, you learned that, maybe you can pass it on to somebody else? But going forward in your career, is there anything to take away from that like, hey, don't get yourself trapped in a situation like that again?Stuart: I'd be curious to see what happens next. I may have done the exact same thing to me now being someone who's not a lawyer but is the CEO of a law firm. The firm has done very well. I think Caravel Law has been very successful in my three-plus years as CEO. However, I'm not sure what opportunities there will be for me after this.If there's a next act, what that would be is a little bit unclear. I guess maybe I haven't learned that lesson as well as I should have. But for sure, I think, to make those choices intentionally, and I'm thinking about it more than I did the first go-around.Edward: What are your productivity tricks? What do you do to be productive that most people don't do?Stuart: One of the things that I think was particularly helpful early on in my career—when I had things happening on another shift that I wouldn't actually be there and see—is I don't try to overly control what my team is doing. I'm fortunate at Caravel. We have a great team. I have people that work with me that I really trust and rely on. But I'm not scared of mistakes, something getting out that doesn't go particularly well, or an ad that maybe comes out and some of the lawyers are not big fans of.These are all things that you learn not to stress too much about and taking the time to try to get complete control over those sorts of items so that no mistakes happen, nothing gets out that shouldn't have, that the team is perfectly managed at all times. I think one of the keys is to trust. I trust my team. If they make a mistake, we work through it, we come out the other side of it, and everything's going to be fine.Edward: Stuart, this has been great. We're going to pick this up in part two when we dive into some of the work you did in the law firms.Stuart: That sounds great. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
You can find Part One of my interview with Vineet Mehra here.In Part Two of the interview I spoke with Vineet about his time at Walgreens. We talked about what makes Walgreens/Boots different from CVS and their other competitors. We dove into how Vineet used the vast amounts of data Walgreens was collecting (>80MM people in their US loyalty program) to fairly radically change business processes (including eliminating the flier completely). Enjoy.Transcript:Edward: This is part two of my interview with Vineet Mehra, Chief Growth and Experience Officer at Good Eggs. Today, we're going to dive into his time as CMO of Walgreens Boots Alliance.Hey Vineet, I think we can safely assume that our listeners are familiar with Walgreens. Walgreens is slightly behind CVS in terms of number of pharmacies in the US, but you're way ahead in terms of number of pharmacists. You can say the similar thing in the UK. Boots has almost twice as many locations as the number two player, but more than three times the number of pharmacists. Let's start there. Why do Walgreens and Boots have so many more pharmacists per location than their major competitors?Vineet: At the very core of Walgreens—and we'll focus on there for now—is this idea that the biggest asset the business had even in a digital age was that Walgreens had the best corners in America in terms of where our stores were located. You go to any major city, any suburb of a major city, places where you least suspect a Walgreens, and it's on that perfect corner. It's easy to get in and out of. It's centrally located. We had a Walgreens within 2–5 miles of every single person in America. That makes a really big difference in a business. Even in a digital age, believe it or not, physical location matters. I'm sure we'll get more into that, but that was a big part of what our difference was.Edward: Does that explain why you have more pharmacists? Because every location you have is a busier location than where your competitors are placed?Vineet: Yeah. We had some extremely busy locations and good corners where there's a lot of traffic. That probably does explain some of that for sure.Edward: How does the business do that? Is it just because you guys were around longer? It feels like every pharmacy would want to be in the best location. Why did Walgreens get the better locations and your competitors did not?Vineet: I definitely wasn't around for that period, but I'll tell you that the history of the company is fascinating at Walgreens. That idea of the best corners in America has been something that's been permeating in the company for multiple decades. While it sounds obvious, it's also not the cheapest play to go and acquire the best real estate in the country—the best corners—and build those out.I wouldn't say that that is the most obvious play in terms of economics, but Walgreens always had foresight. The team that built up this business up to almost 9000 stores across the country really focused on that fact. Isn't that how most great businesses are built? There are two or three things that initial leaders and founders think about, and they're uncompromising about it. In the case of Walgreens, it was all about finding the most convenient and easy locations for customers and patients to take care of their health. Edward: Does that philosophy continue? I know you used the word convenient. Clearly, most drugstores, pharmacies, and convenience stores—convenience stores even have the word convenience in their name. How much of that flows through the company, this idea of convenience? Being in those great locations is convenient. Are there other things that pushed you in that direction?Vineet: It's really about enabling people to take care of their health, but this idea of convenience is something that—as you see today—is all over the place. Convenience is taking different shapes and forms. Especially in a world like today where we live in an omnichannel world, people want to either pick up something. They want something delivered. They want something dropped off. There are so many different ways that people want to acquire the goods and services today that convenience remains a big part of not just Walgreens but of the industry. You think of the entire categories and businesses designing themselves around getting goods to you as quickly as possible, on demand as possible. I'd say that the Walgreens real estate strategy was just V1 of a world and human nature where people want things when they want them. That's especially true in healthcare and when you want to take care of a family.Edward: Let's talk a little bit about you coming on board. Clearly, the real estate play has already happened, but you got to keep this business growing. What are the next levels? What do you do as CMO to get this business growing? Because again, that's what you're responsible for inevitably, getting this thing to grow faster than it was before you came along.Vineet: It comes down to any job you get into. You look at what are your differentiated assets when you enter a role? Probably, that's part of selecting whether or not you join a company as well. Do you believe that if you join, there are differentiated assets that you can really leverage to drive competitive advantage? In this case, one of the things Walgreens Boots had was an unbelievable loyalty program membership. Walgreens had close to (say) 80 million, 90 million people in this loyalty program. Boots had—from a ratio standpoint—a similar percentage of the UK population. Let's call it 15 million–20 million.You put all that together. What I saw in a world where marketing was becoming increasingly digitized and increasingly programmatic was that we had access and understanding of what customers were doing because the vast majority of purchases happening at Walgreens were done as "logged-in users" of the Walgreens loyalty program. When you have access to that many customers and you have a platform like that, the opportunities in today's marketing ecosystem are endless. Step one was really thinking about what was the future of that loyalty program? How would we leverage our understanding of consumer behavior at the identity level in the most powerful way possible? That's where we went with our strategy. We call that mass personalization.Edward: Before you came on board, this loyalty program already existed. They already had these members, but you saw an opportunity to leverage them in a way they weren't doing before.Vineet: Yeah. The program was extremely successful, but it was largely a couponing program. You would log in and then get access to different coupons. You could use (if you recall) the Walgreens flyer or the paper pamphlet that will come into your mailbox every single week. There was a lot of that happening.You would get Walgreens points. You could use them to drive further discounts off the products you were buying. That's actually what it was. It was a promotion and discount program.Coming out of Silicon Valley myself right before the Walgreens opportunity, I saw an opportunity to drive personalization and not use such blunt instruments as general couponing, general paper flyers, and things going to people's homes.In today's world, if you get the right ad and MarTech in there, you can do things in a much more customized way. That's where we went off.Edward: This couponing program was not personalized coupons. If it was a diaper coupon, it went to everybody, whether or not they thought that person had kids or not.Vineet: There was some level of personalization, but it was things like you were part of a parent's club or you were part of another club. You were opting into different sorts of things where—as you know where the world's going today—can you almost predict what that person's next purchase is going to be and almost delight them before they're even thinking about the topic? It's all about can brands delight customers and do that at scale? That's what this strategy that we put in place called mass personalization was all about.Edward: That mass personalization, was it effectively hey, we're going to keep doing the coupon program we're doing before, but now, instead of sending everybody the same coupon or coupons based on their affinity groups, we're going to change those coupons up per person in a way that we think is going to drive conversion higher?Vineet: That was part of it, but it was so much bigger than that. It went all the way from shifting our media mix from being 70% bought in the upfronts—many of your listeners will know the upfront TV network buying situation—to 70% programmatic where we would buy most of our (let's say) CTV work and radio all programmatically because we could literally match customer cohorts through The Trade Desk and through DSPs into the the media world and get much more targeted in the messages we were sending.It went all the way from the media down to things like how we were doing couponing which became much more personalized. We actually eventually ended up eliminating the paper flyer and roto completely which was quite a big move at Walgreens because that was a huge part of the shopping experience and journey at Walgreens. Our coupons and our personalization became so much more effective from a redemption standpoint than just a blunt instrument and then all the way down to creating new revenue streams.We launched something called the Walgreens Advertising Group which was a way for CPG companies who really struggle with direct attribution of their marketing spend to actually buy into us almost like a media network and be able to track conversions with every dollar they spent.It went all the way from completely transforming our promo and couponing world, to programmatic media becoming the source of our growth dollars, to an advertising network, through to (lastly) the launching of a new app which was irreplaceable. I was in a retail pharmacy business at the height of COVID. People have to do vaccine setups, vaccination appointments, and testing. We created an app where personal health became the center of that app as opposed to couponing. The app became the digital front door for Walgreens which would then show you that you could go into shopping. You can go into healthcare. You can go into finding care. It was a total reinvestment in our app as well that became personalized to you as a user.Digital front door, media, couponing, and programmatic advertising really just transformed the infrastructure of the company.Edward: There's so much meat there. I want to dive into bits and pieces of this and we'll see how much time we have today. Let's talk about killing the flyer first. You had this flyer that existed for 100 years at Walgreens, and you killed it. First of all, how do you get that decision through internally to go and kill something that's been around for so long? Then, how do you know what it's costing you after you do it?Vineet: I don't know if it was really around for 100 years, but it's definitely around for quite a while. We're in this new golden age of marketing. What I love about this age we're in is that everything is measurable. Nothing has to be done with a blunt instrument.This was done very simply. We first ran A/B experiments. We took certain areas where we might have pulled the flyer, and we ran only couponing programs. We looked at redemption rates. We talked to manufacturers who were supporting a lot of those coupons. We basically looked at raw data and the cost of producing that flyer—which is not cheap. You've got to print it and there's a lot of labor that goes into planning this. It's almost like you're releasing a little mini magazine or you have local paper every single week because you got to pick every box. There was a lot of cost involved in that.We compared that cost to the upside of personalized couponing. We ran that in a very controlled way across the country in different areas with different cohorts and with different segments, and eventually got to the conclusion that hey, the data is now indisputable. The time is now. We made that call. Was it an easy call? No. Was it data-driven? Yes. Was it a popular call? I'd say with half the company, the people understood it. Probably, the other half of the company, to this day, would want it back because there are just no perfect decisions. You're inevitably going to leave some customers not happy with the fact that you make that call. But you take all of the costs and more importantly the mindshare of people who are investing weekly and making that flyer happen every week and you repurpose that to the future of what retail is going to be that also pays dividends. Less hard to measure, but sometimes as a leader, you've got to make those calls.Edward: Yeah. That's your limiting factor always, the number of smart people you have working for you and what they're spending their time on. What's the difference between couponing and flyers? Are those like electronic coupons? What do you mean by couponing?Vineet: The flyer was essentially something that would go into your home and you'd see all the sales at Walgreens that week. Couponing would be like you get those paper coupons you can cut out. What we moved to was much more digital couponing. Literally in your inbox, here are the best coupons for you this week. We would use that instead of the flyers themselves. Edward: Let's talk next about buying a television. You're buying 70% upfronts and then you switched to 70% programmatic television, is that right? Vineet: Programmatic media in general. Edward: A lot of programmatic media are things like digital paid social, Google Ad Network, and so on. Does that mean you shifted your spending from television to online digital?Vineet: Not necessarily. Programmatic is a word that gets used and abused in many ways in our industry. At least the way my mind captures it, there's the direct response which are AdWords and some of the social media networks that are there. We continued to do that. That was never going to change in our mix. What I'm talking about is more of the mid and the upper funnel where we did a lot of radio buys, TV buys, and some of that area that a lot of companies call brand media, a bit higher up in the funnel. A lot of that money was actually spent in the upfront. We would upfront-buy a whole bunch of TV inventory and lock that in. The problem with that is you don't have flexibility. If you try to cancel it, you get all these giant fees. It was really in that space around TV which we moved a lot more to things like CTV, over-the-top players, full-episode players, and things like Hulu, YouTube TV, et cetera. We started to shift a lot more money into still linear TV played on your screen but done through tools that were much more precise like connected TV and radio. Instead of going from general radio, we'd use things like Spotify and other ad networks that were much more logged-in, ID-based networks. You got to remember, because we had this loyalty program, we had IDs. We could actually match IDs in a much more powerful way than most companies could. For all intents and purposes, we almost created our own walled garden media network in a way. We were able to do that in a pretty powerful way.Edward: When you do that, do your CPMs go way up? When you're buying connected television or Spotify ads versus all city radio on the big station, your CPMs must be a lot higher. Vineet: CPMs will go up just due to scale. Frankly, a lot of those audiences in CTV are more expensive to buy than linear, but ultimately, effectiveness goes up. That's why I think you've got to really look at things like attribution and those kinds of things more than CPM to make these kinds of decisions. Edward: You could measure the lift when you started doing connected television because you could apply it to 80-million people on your loyalty program. How do you compare that to what it was before though? When you're running a national television ad, how do you know how effective that was?Vineet: It's what everyone does. What's that saying? Fifty percent of your marketing is wasted, you just don't know which half. I think the way you look at it is you look at things like foot traffic. You look at things like redemptions. You look at things like online site visitors. In the past, they were largely just multi-touch attribution tools that I would say are 60% at best. Even the best vendors in multi-touch will tell you these are not perfect tools. They're directional tools. But once you can get to ID-based and you can actually look at behaviors of groups of people that have been exposed to these ads within your own ecosystem, you can literally see what action they take after looking at that ad. It's almost taking a direct-to-consumer playbook to retail at scale. That's why we call it mass personalization.Edward: Is there a risk though that now, because you're doing these connected television, that's a lot more trackable? You spend $1 and you know you're making $1.50, whereas before, you were spending $1 and you didn't know how much you were making. To your point, you're 60% accurate. Is it possible that you end up trading accuracy for impact? Is it possible that television before was more impactful and you just didn't know?Vineet: It's possible. It's not that we moved out of TV. We were just rightsizing the amount of investment. We still did it upfront. I think that upfront TV is always going to play a role in large companies' marketing mix because you've got to raise top-of-mind awareness especially in a category like ours which is a high-frequency category. It played a role, but again, everything is A/B tested. We would take control groups, we would remix things, and then we would go to the next one. As long as as a marketer, you're focused on experimentation and A/B test-based decision-making, you can work your way through this world of imperfect data that we have. That was the approach that we took.Edward: Vineet, this has been fantastic. I would love to spend more time talking about basically the advertising group that you're building. I feel so many retailers are doing that now and I think digging into how you guys were thinking about it would be awesome, but we are going to wrap it up. Before we end, can you tell me a little bit about a quake book that you read that changed the way you think about the world?Vineet: Yeah. There's this amazing book by Bharath Anand—who I actually asked to join my board at Worldwide Effie—called The Content Trap. We live in a world now where with personalization, what's happening is we have so many channels we need to fill with content constantly. You've got journey after journey of email. You've got all these programmatic channels. You've got all these direct-response channels. The key really is how do you not get wound up in this trap of infinite content and instead focus very clearly on what the role of content is meant to do in every channel and really enable your business to not focus on volume but impact? It's a great book that is a great distraction of our time as marketers, which is how much content do I need? He really calls that the content trap. It's something worth talking about and reading.Edward: Vineet, thank you so much for your time today. This has been fantastic. Vineet: Thanks, Ed. Really appreciate it. Good to talk to you again. 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I delayed this week's edition on the hope I would spend Tuesday after the long weekend completing a briefing. I have a ton of great stuff to share with you all, but the time to write it all down did not happen. Instead I want to share with you a great interview I did with Vineet Mehra. In part one we talk about Vineet's big break to a head of marketing role in his early 20s, and how he leveraged that into the career he has today. Lots of great stuff in here on how to think about things like “General Management roles” vs. “Functional Area Leadership”. Part Two will cover some of the fascinating work he did at Walgreens. As always you can listen to the interview in any podcast player (click on the link next to the imbedded audio for the links.TranscriptEdward: My guest is Vineet Mehra, Chief Growth and Experience Officer at Good Eggs. Today, we're going to cover Vineet's path to CMO: P&G, General Mills, Novartis, Avon, and Johnson & Johnson. He was a CMO of Ancestry, CMO of Walgreens, and now at Good Eggs.Vineet and I worked together two decades ago at Procter & Gamble. Super pumped out on the show today.Vineet, let's start off: You've had a killer career, but I'd love to talk about a few of the big leaps that you had. If you want to start, in 2008, you went from a Marketing Manager at General Mills, and then you took on the Head of Marketing job for all of Canada for Novartis. Talk to me a little bit about how you made that transition happen.Vineet: First of all, Ed, thanks for having me. Obviously, it's so great to see you after almost two decades. I remember us playing foosball in a room as account managers trying to grow our businesses at retail over there in Canada. It was a real highlight of my career, I remember. It's great to see everything you've done as well.I have definitely had a couple of leaps that have happened. This specifically that you're talking about—going from General Mills over to Novartis Consumer Health in Canada where I had the opportunity to run that business—was honestly a little bit of good luck and a little bit of knowing the right people at the right time, which truthfully, if anyone tells you anything differently, that's how a lot of us get our first big leaps.In this case, there was actually a headhunter or a recruiter in Canada who knew me from the time when I was an assistant brand manager. She happened to be doing this search and just thought, hey, why not? Why don't I just throw his name in the hat? It's a long shot, but you know how recruiters need to build this portfolio of candidates—the young up-and-comers, the established players, and the people in the middle.I think I was just thrown in as the young up-and-comer. Like yeah, we'll just give you the high-energy 20-year-old and see what happens. It just so happened that the President of Novartis, Canada at that time—who, by the way, is still at the company, running the Global Oncology business now, he's an unbelievable talent—took a liking to me. We met a couple of times. One way or another, the headhunter's long shot, 20-year-old candidate ended up getting the job. There I was, I ended up becoming the Head of Marketing for Canada.For those of you that are Canadian listeners, Novartis has brands like Buckley's, NeoCitran. These are just unbelievably Canadian brands.It was such a great opportunity to spread my wings for the first time. But knowing the right person, luck, and just going for it (I guess) played a big part in that leap.Edward: I definitely have been in places like that where the headhunter brings you on and you're like, I am clearly not the right person for this role. You totally have me there so that you can show them a balance of range of, hey, here's the person that's much less experienced than the person you need and here's the person who's much more experienced but way too expensive. Let me just show you what they're like out there so that when I show you what you really need, you actually jump at it. They're almost giving you people that they know you're going to reject because they know you want to reject somebody. They make it a lot easier themselves.Vineet: There you go. It's like going around and looking at houses with real estate agents where they take you into the cheap house to the expensive house that you can't afford. I was definitely the cheap house that she didn't think anyone would want, but also, I wouldn't harm the process or her reputation as we were going along. That's definitely what I was. There's no doubt about it.Edward: That's how you got in front of him. Apart from just being personable, why did he take you versus the one that she was trying to sell him on?Vineet: I think energy is everything. I really do. I'm a big believer in positive energy and connecting with people through energy. You see a lot of books, and I'm not saying these are wrong around things like active listening and all these tools to connect with humans. You need to do those things. Those are important, of course. But in this case, I was just really excited. I was the underdog. I was just excited to even have a chance to talk to someone like this.I think that energy just rubbed off on him. He very much took a chance. It's a true story I'll never forget. Even though there's always a gap between when you get the job and when you start on the job, there's always a little bit of space there.I remember that the head of HR at that time had told me that when my name was announced to the organization, because I was essentially the youngest person in the marketing organization as the head of marketing at that time, people went to the CEO of Canada and said, is this what it takes to be the head of marketing of Canada? They looked at my resume, saw how short it was, and were like, I can't believe that this is who you choose.I remember him telling me in a conversation later on, he said to me, I just told them do you not trust me? It was an amazing thing where this is totally a thing of him taking a chance and him believing in the energy I had to really make a difference. I think he saw in me a desire to make an impact and grow the business. It just came down to him making a bet on frankly, my excitement, my energy, and the impact that I could make. It was really that.Edward: When you came into that interview, how did you prepare for that interview? Did you give him like, hey, here's my five-year plan for how I'm going to run marketing for Canada, given that you've never run marketing before?Vineet: I wouldn't have even known how to do that. I could do that for a brand or two, but I wouldn't have known how to do that for an entire department. There were a couple of things. There was a brand in Canada—which you'll remember well, Ed—called Buckley's. The tagline was "It tastes awful. And it works." It was this huge cough syrup in Canada.I remember growing up with that. I told him a story—I still remember this—about my experience with Buckley's when I was a kid. My dad was a pediatrician. He used to give it to me, and it was the nastiest thing I'd ever had. I told him some ideas I had which was specifically, hey, why don't we turn the bad taste—if I just get technical for a second—into a reason to believe in the product as opposed to making that benefit?We talked about that a little bit. We just went deep. We talked about what a creative campaign could look like. From there, we just connected and we actually ended up doing that. Buckley started growing crazy. That all came out of that conversation in the interview.Some of these brands I have deep familiarity with, we did some riffing on what these brands could be and how we could position them. That's pretty much as much prep as I need to do because you got to remember that at that stage, all I really knew was brand management, not necessarily department leadership. I stuck to what I knew, and we did that.Edward: You come on, and you take on this role of running marketing for Canada. What did you not know that you had to pick up on the job?Vineet: I didn't know anything. Edward: You knew how to run brands. You've been a brand manager. Now, effectively, you've moved from running a brand to running all the brands.Vineet: Yeah. Even more than that. I had people that were running those brands. Actually, what I didn't know is how to onboard onto a business. Onboarding as a department head is very different from onboarding as a person taking over those brands because the last thing those folks wanted to see was I was going to come in and do their jobs for them. These are smart, empowered folks that I had to figure out how do I onboard and set the right tone appropriately? That was a big part for me.The second part that I didn't know was the role of a department head across a company in terms of creating followership, not just inside your department but across the company. That's another really misunderstood thing that you don't see. When you're growing up, you don't realize that the department head has to create followership, not just from within marketing but IT and all the other functions that need to support customer-centric growth of a business.Frankly, I had to learn a lot about hiring and making the right talent decisions. I made some early mistakes because I just hadn't hired at that level before, and I was looking for the wrong things. In that job, while in the end, we were very successful, we had great business success, and it took me around the world—that opportunity at Novartis—initially, I'll tell you that that year was tough. I was working tons of hours and I thought that outworking everyone would solve my problems. What I learned really early was that it wasn't about the work. It was what I was focused on, the talent I was bringing in, and how I was leading. I learned a lot in that first year.Edward: How did you learn that? Did you have a mentorship? The CEO that brought you on, did he sit you down and say, hey, Vineet, you know what, for the first month, I need you to go have lunch with all these people so that you can build your relationships? Oh, by the way, I want you to talk to the head of HR about how to hire people. How did you pick up those two skills?Vineet: It's really interesting. I didn't really have mentorship because frankly, I didn't have a network at that stage in my career that was "high-powered" enough where I could just call people and say, how did you do this? Actually, this CEO or president of the Canadian business was very high-performing and team-oriented.What I mean by that is we would do all these high-performing team sessions where we would go offside, give each other candid feedback, and do these round robin-style feedback sessions. I'm sure you've been in those before. I got my butt kicked in those sessions. I would literally go through these sessions and my peers actually would just give me feedback. Vineet, I know the business is growing, but stop doing this. They were brutal with me. I was 10, 15 years younger than everyone, and they just let me have it.I tell you, in many cases, I thought it was inappropriate—the way they were giving me feedback—but at the same time, it's entirely warranted. To be honest, Ed, it was situational. Again, a little bit of luck, a little bit of me being really open to listening, but I happened to be on a team where high-performing team norms, feedback, and candid peer feedback were a core part of how this leadership team ran.If it wasn't for that, I'm not sure I would have learned lessons as early as I did in my career. I'm not perfect by any means at this stage as well, but man was that a crash course.Edward: It's interesting. I came from the consulting world where you receive harsh feedback all the time. There were times when I was at McKinsey where I'd come home and I'd cry. It was so brutal. But as terrible as that was, you're still forced to learn even from some of the bad feedback I was given at McKinsey.One time, I had a partner that told me that my notebooks were too small. He was very insulted by my small notebooks. I think even in situations like that, you can say, hey, even if I don't buy his feedback, I can still understand that now, I know that somebody thinks small notebooks are inappropriate. Now, I have that piece of information in the back of my head.I wonder, in the situation like you're in where all your peers are maybe a little bit threatened by you because you're 15 years younger than they are and you're all reporting to the CEO, they feel like, hey, I can be negatively constructive on this guy because I'm not threatened by him in the same way that it would be with a similar-age peer. While it becomes negative and hard on you, it allows you to learn at a faster rate than you otherwise would from people who are more polite.Vineet: I think you're right. It was well said, Ed. The other part is what people don't always internalize, which I learned in that. We talked a lot about deep, personalizing feedback. That was huge to the point where it's like, this is feedback. It's not an insult. As a young kid in your mid to late 20s—I think I was 26 or something—that's a hard thing to figure out. To this day, many of those peers of mine on the leadership team are still dear friends, and I would have had it no other way.Edward: I want to talk a little bit as you're moving on through your career. You spent a lot of time in marketing in packaged goods, but you also had some GM roles. If at all, how did you think about managing your career moving back and forth between pure marketing roles and general management roles in terms of advancing?Vineet: My whole career theory is all about chasing experiences, not necessarily titles or pay. What I mean by that is if you dug one layer deep into my career, I've taken three pay cuts in my career. I've just been chasing experiences.To me, those general manager types of roles—my biggest one was later in my career where I became the Global President of the baby care division for J&J, that's a big role—were just about continuing to learn and continuing to grow. That's really how I thought about it.I'd be lying to you if I would say I was playing this perfect chess game where I perfectly planned it. I was literally just chasing learning. I was always curious. If general management was the thing that was going to teach me a lot at that moment, that's what I was going to do. If going international was the thing that was going to teach me a lot at the moment, that's what I was going to do. That's essentially how I played that.Now, in hindsight, general management teaches you amazing skills because by definition, as a general manager, you're not an expert at really much of what you're leading and you have to rely on others. It teaches you a lot. I was just really simply chasing experiences as a curious person.Edward: Is a lot of that being opportunistic about pull opportunities? A recruiter comes to you, and you say, hey, you know what, that's too similar to what I've been doing before. I'm not that interested. Oh, that's really different. Let me go, throw my hat in the ring, and jump for that.Was it even more aggressive where it's like, hey, if I want to advance my career, I need an international opportunity, so I'm going to go out and look for one?Vineet: It wasn't really that aggressive. People say, hey, what's the secret? How do you get a good career? How do you move quickly through your career? I know it sounds cheesy, but I just answer by staying curious and exploring learning. A lot of my moves were internal moves. The company would take me international or give me a general management assignment after a marketing assignment. In other cases, it was a recruiter or a headhunter giving me a call. In both cases, those were enabled because my curiosity led me to build a network, to ask people for help, and to be really open-minded to things that others wouldn't be open-minded to.Ultimately, it came down to not necessarily chasing things, but definitely chasing experience. I wasn't actually chasing an international career because that would unlock a move or two moves from now. I was definitely paying checkers, not chess. I guess that's the way to put it.Edward: Sure. But even with those international opportunities, was it a matter of you saying, hey, current manager, for my next role, I'd really like to do something international? Or was it a matter of Emma's going to nail this role, this international opportunity comes up, and they say, Vineet, would you be interested?Vineet: It happened one time in my career when I was an intern where I asked for an international assignment. That was at P&G, I recall. I went to India with P&G. I was just like, hey, can I do something international because I had nothing to lose. I was a university kid on my second internship with P&G.Every other role was happenstance. When I went to Europe for the first time with Novartis, there was a new CEO who had come in. She saw me in a meeting and said, Vineet, I need you to go to Europe. My story was I literally bought a house with my family, my first house in New Jersey. We never even moved into the house. Two weeks before closing, I moved to Switzerland. I was definitely not planning to buy a house. We moved to Switzerland two weeks before that. My wife was pregnant. I got asked. I got tapped on the shoulder. This is what has happened constantly in my career.I think it's just that energy. It's the focus on impact. It's just being open-minded—when someone asks you that question—to say yes. I think people would be surprised how many times where if you really look at it, you might have had an opportunity that you just might not have been listening for. That's an important thing to think about.Edward: I love that. That's really great. Vineet, what are the biggest failure points in your career? Where did things not go as expected?Vineet: We've all had plenty of those. I would say for me, I already told you the Novartis story, that hard lesson of learning to be a department head and a leader. That was honestly a really tough time in my career. Because my career was moving so quickly, that happened multiple times in my career. I had to take 6–12 months and really just make that work. I went to Switzerland. I became the head of marketing for Europe there. Big job. I was 29 years old at that time. I'll never forget that I had onboarded with my team. I was living in Switzerland trying to lead an organization, all of whom are sitting in their countries. I was sitting in Switzerland by myself, so it's remote leadership for the first time. I really struggled with that as well. I'd say in my first six months, I got pretty challenging feedback on how I was leading remotely and how I was connecting with folks in terms of just not being able to make the same connection I could in person.I had a boss who (today) is a great friend. At that time, I thought I was going to lose my job in my first six months over there in Switzerland. Again, it just came down to that side of it.I've also had really challenging moments during business and brand launches, product launches, and things like that where things don't go the way you want in your first six months. You're literally fearing for your job because at a certain point—and you know this Ed—you're paid to deliver. There's nothing like feeling when you're going out in the world, trying to deliver on your business, and essentially, you just don't hit the numbers. I've had moments like that through my career as well. You just learn from each and every one of them.Edward: It's interesting. One of my early managers told me to think of your career as two-year chunks where you come into a new job, you spend a year really learning the job, then a year delivering on the fact that you figured out how to do it, and then you move on to your next thing. Looking at your LinkedIn profile, it seems you've done a lot of that. These two-year chunks where you come in, the first six months challenging and trying to do the job or you're going to get fired, the next six month learning the job, getting better at it, spend the next year delivering, and then you go and repeat the process again.Vineet: It's just been the way it's been. I was at P&G for eight years. I was at Novartis for seven or eight years. I was at J&J for four years. It just so happens that every company, every two years, they were either moving me or I got pulled into my next challenge. It actually has worked out that way.Every couple of years, I've been in a new role because the company sees the impact exactly like you said in that second year. They're like, hey, can you do it in another spot in this company, and someone pulls you on the other side. The faster you can get up that learning curve in those first six months, the more impact you can have at speed. That's really what I focus on, the learning curve which again goes back to that notion of curiosity and just being willing to listen.Edward: Vineet, do you have any productivity tricks? Do you have things that you do to be productive that most people don't do?Vineet: Yeah. I'm really fanatical about productivity. I have one mindset and one trick, I would say. I'm sure one of your listeners have listened to this and have experienced this idea of energy for performance. I definitely do not focus on managing time. I focus on managing energy. It really is this idea of being a corporate athlete. How do I feel about myself? What do I eat? When do I eat? How do I sleep?One of my most productive uncertain tasks—which is a very different way of managing things than managing just a calendar and your time—is I'm very focused on managing energy and managing the different roles in my life, whether that's being a father, a husband, a leader in a company, an advisor, or a board member. I've had all these different roles that I have and I think about how do I keep my energy high for all those things? That's the mindset.In terms of actually managing and hacking a calendar, for a lot of your listeners who have either admins or their own processes for managing things, I read this book that changed my life. It's called Getting Things Done. I'm sure many of your listeners have listened to that. There's this total tactical hack here, this app called To-Do. Shameless plug for the app. I am relentless. Any time I ask for a follow-up, any time I want to book a meeting, everything goes into that place. What it does is it clears my brain. Everything is in that place. A lot of people work off lists. I don't have lists. If I have something to do, I'll put it on the date that I think it needs to be done. A lot of people will put it today. I'll put it two weeks from now. I open up my app and it's staring in front of me like, oh, I have to get that done. I never feel this burden every day of looking at a giant list and checking things off. It's much more planned and I don't get overwhelmed by the day.The second hack is that my admin has the same app. We have this amazing system where she has the same view that I do, so she knows exactly which codes are hers to take care of and which codes are mine. She takes care of all of that. We're almost in-sync with each other without thinking. That's a huge part of it. I've seen a lot of people bring in admins and executive assistants into their lives as they get more senior and they're just ineffective with that person beside them. That's another thing. Find someone you appreciate, show them tons of respect, and create a system that is invaluable. As you get more senior in your career, that also matters.Edward: Vineet, this is great. We're going to pick it up with part two shortly.Vineet: Let's do it. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
This is Part 2 of my interview with Angela Rizzo. Angela was the CMO of eSentire, a leading company in the cyber-security space. Since the recording of this episode she has left eSentire and is looking for her next opportunity. If you would like to get in contact with her, please just reply to this email. (For all interviews you can click on the link next to the audio player to add the stream to a podcast player).I expect to be back with an essay or briefing next week. I will also be going back to dropping a second post per week with interviews shortly. Enjoy!TranscriptEdward: This is Marketing BS. This is Part 2 of my interview with Angela Rizzo. Today, we're going to dive into her experience as CMO of eSentire. Angela, can you start by explaining what eSentire does? Angela: Yes, I'd be happy to. At eSentire, we provide an affordable, premium cybersecurity service with end-to-end proactive protection. eSentire invented a new category of cybersecurity. We call it Managed Detection and Response and I'll refer to that as MDR. MDR was invented to do two things—detect the fact that bad actors are attacking a customer environment, and then take action to contain the attack before the bad actors can do any harm.We think of these attacks in three categories—vulnerabilities, threats, and breaches. Vulnerability is defined as a weakness in a customer environment like a bad patch management practice. A threat is an exploit of the weakness by the bad actor. That's where they're trying to get into the environment. A breach is the successful exploitation of a threat. That means they're successfully able to get in. We monitor and manage for vulnerabilities, threats, and breaches. Time is critical to detect these things. Once we detect something, we then isolate and contain the attack. Edward: There are thousands of cybersecurity companies out there now. What are you doing? What is eSentire doing that's different? Or is it a matter of you're doing the same as everybody else? You're just doing it better? Angela: Managed Detection and Response is its own unique category. We have to think back to the fact that cybersecurity is a massive data analysis problem. In order to effectively provide cybersecurity protection, you have to be able to find the needle in the haystack. This is the simplest understanding of what we do.We do this in combination with three key things. First, we have our Atlas platform. There is a term that is going around right now in the analyst community and in the market called extended detection and response or XDR. This is the platform that is needed to ingest, normalize, and analyze all of this data. The second thing we do is called multi-signal ingestion. There are some cybersecurity companies out there that just ingest one signal. They'll do endpoints, or they'll do logs. We ingest multi-signals. We monitor customers' networks. We work with best-of-breed third-party companies, and we ingest their endpoint signals.We just announced our alliance with Microsoft to ingest the Microsoft Defender endpoint signal. Customers who have Microsoft licenses can work with eSentire and eSentire can manage the MDR associated with the endpoint. Edward: If a company isn't using you then, are they not analyzing these endpoints? What are the other cyber companies doing? Angela: I mentioned there were three things. You've got the platform, the multi-signal, and then the people within the SOC, within our Security Operation Center, and within our threat response units. You have to have the combination of these three things to be considered MDR, Managed Detection and Response. Many cybersecurity companies are either selling a point solution, or they're selling software, or they're claiming that they're selling MDR, when in fact they don't have all three of these things working in unison. Edward: Does a company need to use you in addition to someone else? Are there other elements in cybersecurity that you guys don't handle that they need to supplement?Angela: Yeah. Companies need to have basic security controls in place. They need to have firewalls. They need to have next-generation antivirus software. They need to have multi-factor authentication. They need to train their employees to understand phishing and not click on emails, if they don't know who these emails are from, and not click on any links. If they have these four things, these are like table stakes from a security perspective. You add an eSentire to provide this overall MDR service. That allows us to fully understand what's going on in the customer's environment so that we can hunt and contain those threats on our customer's behalf on a 24/7 basis. Edward: If I were to use the metaphor of a house, which people would understand. Someone needs to train the people in the house to lock the door when they leave, and that's not you. Someone needs to build the walls to make sure they're super secure and strong locks on the doors and plexiglass windows, and so on, guard dogs. All of that stuff is protecting the house. Your job is, hey, someone is going to actually breach the house. They come in and they try to open the door. You know when that happens and you set off the alarm so you can react. Angela: You can think of it as a house or you can even think of it instead of a house, as a small business. You've got all of this traditional security—the locks on the doors, the guards sitting at the desk, the dogs barking. Sometimes employees will open the door, like my example on phishing, employees will open the door, and let these guys in without knowing who they are. Now, the bad actor is in the building, and we can detect when they're in the building. But now they're searching. Is there personal identifiable information of the employees that I can gather? Is there a bank statement and information on customers that I can gather? Is there an intellectual property that I can gather?You think about this. We're in the digital world, and we're able to see who is actually doing these types of things in the customer's environment and have the ability to determine this isn't an employee looking at this stuff. This is somebody who got in via a backdoor. We have the ability through eSentire Managed Detection and Response to isolate that person, and to contain the threat so that this bad actor doesn't start moving laterally through the company to continue to gather more data and more information. Edward: Your company gets better as you get more clients, as you get more signals. Angela: Exactly. If you're customer number 1025, you have all the learnings from customers 1 through 1024. All of the learnings that we have had up to date are now applied to your environment. Edward: But more than that, that new customer now, because just the fact that they're on your platform, if anybody attacks them, that information gets shared to all the customers that came before them. There are positive externalities in both directions. Angela: Exactly. Edward: What do customers do that don't use you? It sounds like your product is pretty essential for protecting against these threats. Presumably, you don't have 100% market share, what is everybody else doing? Angela: There's some confusion in the market because there are a lot of people, a lot of companies that claim they do Managed Detection and Response. They're slapping the MDR label on their service, when in fact they don't. We invented MDR as I mentioned earlier. We have a very strict description and definition of what MDR is. We believe that, again, they don't necessarily have the combination of all three things and do the three things the way in which we do it—the platform, the multi-signals, and the people.There is some thought out there, and I think about that, too, as the CMO, as to why are they not banging our doors down, knocking our doors down to get our service because it is something that is very unique in the market and our customers are pretty happy. Edward: That brings me to my next question. When companies are seeking you, I know they are, is your product sold or bought? Angela: It's a service. Typical customers are small and midsize enterprises, SMBs, and small enterprises. We target companies from 250-5000 plus employees. Typically, the CISO, CIO, or head of IT are the people that are looking to buy this service.Edward: Are they out there looking for your solution? Or is it a matter of your sales calling them up and making sure they're aware that the solution exists and they should buy it? Angela: I see what you mean. Yes, absolutely. Sorry. It really gets sold. We have to sell it. We're a private company in Canada and one of the things we're working on right now is improving, and increasing our brand awareness. We do that via a variety of methods. But yes, some customers will come to us via customer references. A customer works with someone in the same industry and they've had a very positive experience. They'll refer them.We also have roughly 100 channel partners that are out there, selling eSentire to their customer base. Roughly 40% of our new bookings come from our channel. We're constantly educating the market. Part of the problem, Ed, is that a lot of people don't think that they have a problem, and a lot of these SMBs don't think that they're going to be a target. These bad actors aren't going to come after me. They're after the Marriotts and the bigger companies, and we're saying no. These bad actors are going after all companies of all sizes, and SMBs are targeted because they aren't putting these types of protections in place. Edward: I would imagine, again, you're an SMB. You have a lot going on, a lot of decisions to make, and your cash is very valuable to you because you have a high cost of capital. Going in putting money into security is downside protection rather than upside growth. Angela: The other thing is we have to convince people that they have a problem because they don't think that they really have a problem. Quite frankly, the industry has confused a lot of buyers. You go to a trade show like RSA. There's 3000 plus security packages software you could purchase. But what they don't tell you is you have to have people behind whatever you buy.Let me give you a great example, I'm sure you've heard of SIEM, Security Information and Event Management software. You put this SIEM software on your environment and it basically logs, then sends you alerts. If you're an SMB, you can be flooded with up to 10,000 alerts a day. What is a small business going to do? When I talk about finding that needle in the haystack, there's no way they're going to find that needle in the haystack if they're getting 10,000 alerts a day. You cannot hire enough people to actually do that work. That's why having a platform, being able to ingest all the signals, and then having the right people focus on those things that are truly the red flags, that's really what companies need. My job is to convince them that they have this problem, and once they understand it, the sale is actually pretty easy. But we really have to get people to understand what we do, and how we do it, and how it sets us apart. Edward: I imagine many companies treat security as a checkbox of the CEOs sees to the CTO, or the CIO, do we have security in place? The CIO goes out and finds one of these packages and buys the package, and slaps it on, and tells the CEO that they're good. Unless something goes disastrously wrong, nobody asks the right questions. Angela: That's a good point. I also think that you've got a couple of other things that are occurring. You have people that say, in order to be compliant, I have to put A, B, and C in. You go ahead and put in A, B, and C, but just because you're compliant, doesn't mean you're 100% protected. Edward: That's right. People are jumping through hoops rather than actually solving them for the problems. Frankly, most of the time, when they don't solve the problem, they'll be okay. But in some percentage of the time, they won't be. If that happens, the CIO probably points to the attackers and says, this was unavoidable. There's nothing I could have done and nobody knows any different. Angela: It's interesting because people know that they need to have basics. They need to have the next-gen firewalls. They need to have antivirus software. They need to have multi-factor authentication. They need to train their employees around phishing. Don't open an email, and don't click on a link if you don't know who it's from. You have all those things, then, you also need eSentire on top of that to provide the MDR service so that you have a service that understands fully what is going on in your environment. Again, when the red flags pop up, you have the resources at eSentire that hunt and contain those threats on behalf of our customers.Edward: You mentioned before that once you get the conversation started, your conversion rate is pretty high. How long does that take you to convince somebody that this is a real problem that they need you to solve? Angela: It depends. If a customer has already been breached, we can probably get in there and up and running in a matter of a few days. If this is a new lead that has come in through one of our webinars, or they've engaged with the website or content, it could take anywhere from two to three months to get them on board.Edward: If the first thing happens, if they've just started being breached, they feel a sense of urgency where like, we need to fix this so that it doesn't happen again, whereas if a breach has never actually happened, it feels like this is something that can always be put off to tomorrow. It might be important, but it's not urgent.Angela: Exactly. Edward: Do you need internal champions? Do you need multiple people in the organization to buy in before sales happen or if the CIO says, hey, let's do this. Does this just happen automatically or do you need to provide the CIO with materials to help convince the CEO and other people in the organization that it's worth investing in?Angela: It's interesting because typically, we work with the CISO or the CIO. From a technical perspective, they get it and they understand the value. Now, they have to go get the CFO or whoever has to approve the purchasing decision to sign off on it. I don't know if the CFO is really going to care that much about the technology. What they need to understand is, what is the risk that we are avoiding by having eSentire? What is the return on investment by making this investment in eSentire? How many people do we not need to hire? How do we ensure it again? This is basically a risk in our ROI.We provide that information to our prospects in the selling cycle so that they can go back and articulate that back to the buyer—the person who has to make the buying decision, and approve the final buying decision. Edward: How do you divide your marketing budget? How much of your budget is spent on the direct acquisition of trying to get those people that just had a breach, and they're searching for a solution to come to you, versus brand-building and content, and creating a perception in the marketplace that you're out there? Angela: It's probably 50/50 right now, in terms of building the brand because even though we have been working with MDR, even eSentire's been around since 2001, the term MDR was coined five or six years ago by Gartner. Internally, we think that we know MDR, but we still have a lot of education to do in the market especially, when you have other companies like MSSPs or other companies that are adopting the MDR term, but they're not really doing MDR. We have to educate people that, no, when we say MDR, it really means this. The people that you're talking to, our competitors, are not really doing what we define as MDR.There's still quite a bit of education that we need to do. We're spending a lot of time, quite frankly, in PR—driving more earned media, getting our experts in our threat response unit, in our operations teams, in marketing—to go out and talk about what we do and how we do it. We're getting those stories published in tier 1 and tier 2 publications to get the word out in terms of what we do and how we do it. Edward: How do you know if that's a good ROI, good-spent ROI in your spend? On the direct acquisition stuff, you can measure it. You can measure whether your click on paid search led to a lead, which led to a SQL, which led to an opportunity or a sale. But when you do that PR and the top-of-the-funnel stuff, how do you know you're not wasting your money? Angela: We watch our share of voice, which as you know, identifies how many times we get the mentions and our share of voice. We're about 20 points ahead of any other competitor in the MDR space. We measure that.Edward: Angela, a lot of companies that sell products like yours—these SaaS bit products to these SMB businesses—swear by account-based marketing, but you guys generally have not had a lot of success there. Why do you think so? Angela: For account-based marketing, I'm not simply seeing the ROI at this point. I suspect that one reason is that we rolled it out to the entire sales force and then we declared victory.Edward: You basically did what you're telling your clients not to do, which is don't just buy a software solution and check the box, and say you're done. That's what you guys did for ABM. Angela: Exactly. Guilty as charged. ABM requires focused attention and alignment for marketing and sales. You've got to have the right targeted personas, you have to have the right content. We went too big, too fast. We rolled the program out to all of the sales without a real clear focus plan on, are these the right segments? Are these the right personas? Do we have the right content?Sales reps get busy, especially, you get to the last month of the quarter, they're going to focus on closing those deals. They're not going to be focused on the ABM. They need marketing to help bring them along. What we've done is we've scaled back our efforts on ABM. We're now focused on one rep in one specific segment and she's totally bought into the ABM program. What I believe we need is we've got to build a successful program. Let's start small. Let's build this program. Let's understand what we need to do to make it work, and then let's figure out how we roll it out more widely. Edward: That makes a ton of sense. Figure out how to work at a small scale, and once you have it working, then scale it up, rather than trying to scale it up, and then figure it out after big. Angela: Exactly. Edward: Forty percent of your leads or your revenue come from these partner relationships. As a marketer, do you spend much time trying to help the partners sell more, like providing the partners themselves with tools? Angela: Oh, absolutely. I have a field marketing team that is tightly aligned with our regional vice presidents in the field. Then also, we're aligned with our vice president of channels. We are working very closely to not only enable the channel partners. We think of our channel partners as an extension of our sales team. If we're going to go out and build content for the field sales reps, we think about, how is the channel going to use this? How do we create this in such a way that if we modify it at 2%, then any channel partner can use it? They can slap their logo on it and they can leverage it.We also work with our channel leader to look at how we recruit more partners. How do we ensure that we're getting the right partners to continue to drive because the goal this year is to drive 50% of our bookings through the channel? We need to grow it by another 10%—really super tight alignment with the sales teams in the field, and with the channel sales team.Edward: Angela, thank you so much for being on the show today. Before you go, tell me about your quake book and how it changed the way you think about the world. Angela: Oh yeah, my quake book. I read this book a while back. It's called A New Earth by Eckhart Tolle. It was very eye-opening for me. His perspective is that we're so caught up with our ego and we allow ourselves to get caught up in our own thoughts. Our thoughts really are not reality. They're just our thoughts. He encourages you to focus on the present moment. The present moment is all we have. The past is gone, the future is not here yet. It's all about the present. The other thing is to help me realize that we really have no idea what other people are really going through, especially now. We just need to be kind. Be kind to each other because we just don't know what people are actually dealing with in their own lives.Edward: That's a great note to end on. Thank you so much, Angela. Angela: Thank you, Ed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
I wasn't sure I would have a new essay for you this week. Unfortunately the new kiddo has had to spend more time in the hospital (nothing serious, but out of caution “just in case”). I'm not worried about him, but it has taken up a fair amount of time (beyond the normal baby-taking-care-of time). Rather than leave you with nothing this week (and next) I am polishing off this interview that has not been released yet. Angela WAS the CMO of eSentire, a leading company in the cyber-security space. Since the recording of this episode she has left eSentire and is looking for her next opportunity. If you would like to get in contact with her, please just reply to this email. (For all interviews you can click on the link next to the audio player to add the stream to a podcast player).TranscriptEdward: My guest today is Angela Rizzo, CMO of eSentire. Today we cover Angela's career and path to CMO—Sprint, EDS, Hewlett-Packard. Angela is now the CMO of eSentire, the global leader in managed detection of cyber threats. I'm super pumped to have this discussion.Angela, you were recently promoted from VP of marketing to CMO. How has your job changed? What did you do to get that promotion?Angela: I joined eSentire as VP of marketing in July of 2018. When I came on board, most of the marketing focus at that time was on face-to-face events. We knew that we needed to add more programs that delivered higher quality marketing-qualified leads.I realized that the team was really talented. They just needed a bit more direction and leadership support. I moved quickly to work with the team to expand our focus from an events-only focus to include integrated campaigns, focused on what issues the customers were really grappling with, and how eSentire MDR could solve those issues.We started doing more paid promotions—Google display ads, paid social media, SEM, SEO. I put in a lead-scoring program. We also started doing a lead-nurture program. We started to build transparency in reporting by creating new marketing dashboards in the sales force that covered everything from where were these MQLs being created to how much pipeline were we actually generating that was marketing-attributed.Edward: You were doing all that as the VP of marketing, or you didn't start doing that until you became CMO?Angela: That's correct. That's what I was doing as VP of marketing that I think led to the promotion to CMO.Edward: What happened when you became CMO? How did the job change? Did you take on other responsibilities, or was it just an escalated title and compensation package?Angela: No, I did take on more responsibilities. I actually took on the corporate comms function which I had never run before. That included analyst relations, public relations, community relations, and employee relations. This was January of 2020. I get the promotion at the end of the month, and then COVID hits at the end of February. Now, I'm finding myself focusing on how we need to communicate to our customers on what's going on with the company so they can be assured that we're still going to have 100% operations.Edward: Did you have any experience doing those things before you became CMO?Angela: No, I did not. Along with putting together the customer communications, we also worked doing employee communications. We were at a point prior to the pandemic where we were doing quarterly employee all-hands. We actually went weekly once the pandemic hit in March.We were actually pretty fortunate, Ed because the company was prepared to have every single employee work from home. Everybody started working from home in mid-March, and we were doing weekly all-hands meetings. As the CMO, I was actually pulling together the content, making sure that these meetings got scheduled. Our CEO and entire leadership team participated in every meeting because we felt that it was just critical that we kept everybody up-to-date on what was going on.If you recall, a year ago nobody really knew what was happening day-to-day. We have employees all over the world. We have employees in North America, Ireland, London, and Canada. We just needed to have this regular cadence of meetings to keep folks informed. I think at the end of the year, we ended up doing 20 all-hands meetings starting in mid-March.Edward: It worked out great. Obviously, you stepped into the role and you did fantastically. How did they trust you to do that though? You had no experience doing that particular part of the job. Why did they thrust you into that role?Angela: I demonstrated as VP of marketing when I first started that I could look across the organization and figure out what are the things that are either broken or need some TLC. In addition to the marketing function, I actually took on the business development reps when I first took on the VP of marketing role.I did that because I thought we could do a much better job flowing all of our leads and MQLs into the business development reps if we were part of the same team. I was demonstrating as VP of marketing that I could take on roles that might not have traditionally been part of marketing, and almost, I would say immediately, within a few weeks or a few months, start to show progress.Edward: When you took on those BDRs, you had never led a team of BDRs before. Is that correct?Angela: I did have some experience at HP. We had an SDR team down at Conway, Arkansas when I was running the cloud team. I worked with a small group of those SDRs. But this was a little bit different because the entire company was focused on this group of BDRs. They did nothing else other than support what we're doing at eSentire.They were aligned with sales, and I had convinced leadership that if we could align these BDRs with marketing, I really felt like we could improve productivity. We could make sure that they're focused on all the inbound leads as well as doing the outbound, and it would probably help us with better alignment across the employee base. I have to tell you, I'm proud to say that we did exceed all of our key objectives in the calendar year 2019 as we were going into 2020 when I received the promotion in January of 2020.Edward: Your success there with the BDRs, do you think that was instrumental towards the organization taking a risk on you, bringing you in as CMO, having you oversee these areas that you'd never overseen before?Angela: I was able to demonstrate that I really like to get my hands on the things that are most broken, and see what we can do to really fix them, and move them forward. This was an area at the time in the business that we really weren't getting what we needed out of this team. To turn it around and to see the progress within the first 30 days, and then to really see it mature over the next several quarters was really a feather in my hat. It really did help move the business forward in terms of providing more top-of-pipeline opportunities for sales reps.Edward: I want to go back now to see the path that got you to where you are now. What were you like when you were 12-14 years old?Angela: I'm number six out of seven kids. I was the entertainer in the family. I always had the ability to make people laugh. I love the crowd. When I was in junior high—I guess that would be when I was 12 or 14—I ran for student body president of the school and won. That was the beginning and maybe close to the end of my political career.I was a pretty happy kid. I was very upbeat, and I just loved surrounding myself with people. Back in the time I grew up, Ed, it was in the 60s and 70s. There wasn't an internet. There weren't iPads. There weren't cellphones. We played outside. We were always active, always engaged with other people. My dad worked, my mom stayed at home. It was pretty much a traditional family at that point.Edward: A little later on when you were about 18, you started doing stand-up comedy?Angela: Yes, 18 or 19 years old I did stand-up. People always encouraged me to try to do it. They thought I was funny. I thought I'll give it a shot. I have to tell you, the first time I was on stage and told a joke and got a laugh, it was amazing. It's like a drug. I have done stand-up comedy off and on throughout my life. The first time I did stand-up I was 19 years old, and then I didn't do it for a while.When I started working at Sprint, we started going to a local bar down the street from the office. I was going there doing amateur comedy nights once a week. I probably did it for a couple of months and then I thought, I want to focus on my career. I don't think being a standup comedian is really going to make it for me. I really want to focus my time and energy on building my career.Edward: What did you take away from that time, if anything, from years of comedy? Was it a pure distraction, or did you learn anything there that you use today?Angela: Back then, I was really struggling with my sexuality. I was gay and was having a hard time dealing with who I was and being my authentic self. I found that back then, I really couldn't talk about the things about my life because anytime you start to talk about your life you expose who you are and how you feel. The comedy that I was doing was very surface-level.Fast forward a few years later, I realized that once I could get on stage and just be myself, talk about my life, and be authentic, I think having that level of authenticity is really important because if you're hiding something, whether it's something personal about you or something you don't want people to know, you can't be truly authentic.What I learned from comedy was, yeah it's fun to get up, tell a joke, and get a laugh, but if you really want to do stand-up comedy, you really have to talk about your life and talk about who you are. I didn't really do that until probably, fast forward 15-20 years later when I was in Kansas City doing stand-up comedy and then really just being able to be my authentic self.Edward: Let's jump ahead a little bit. Where were you in your career when you were 25?Angela: This was a tough time in my life. I just mentioned being gay, and I was actually married when I was 19. I got recently divorced at 25. I was very disconnected from my family. I was unemployed at the time. I was having trouble finding work. I only had a high school diploma. I did not go to college because I got married at a very young age. It was a very difficult time and one of my brothers is a podiatrist, and I convinced him to hire me part-time just to help him in his office. He had an office in San Francisco.I would schedule the appointments for him. I'd do the billing. Those were the other key roles. One of the things that I had to do in this role is I had to rub lotion on the feet of old people. His patients were really old. I recall the moment that I was doing it for a patient and I just said to myself, this is not my life, I can't do this.It's circa 1987, Sprint at the time was headquartered in Burlingame, California and they were running a job fair. I applied and I was hired at Sprint as a customer service rep. That really was the big change in my life when I was 25 years old. I ended up getting on at Sprint, and then three months later, I was promoted to supervisor. Eighteen months later there was an opportunity to move to Kansas City.There was a huge contract that Sprint won that I thought, I can just start up my life over. I can start in a new city with a new job at this company that I've been with for a few years. Let's go for a few years. Let's see what happens. The rest is history. I've never looked back from that time.Edward: You spent 12 years at Sprint, moving up progressively more senior the whole time you were there. What skills did you develop there at Sprint that serve you now as CMO?Angela: It comes back to building great relationships with the people that you work with especially with customers. I love working with customers. I work very hard so that people—not only my peers and people who I work with but also customers—know that they can count on me. I took advantage of every opportunity that I was afforded at Sprint. I really developed this reputation as someone who could get stuff done.When I had the opportunity to move to Kansas City, I jumped. I thought I would be here in Kansas City for a few years. I was actually here for 10 years. I moved back to San Francisco and then back to Kansas City, but we might get into that. I have to tell you that in order to think about what skills I learned as a CMO, I was in a support position after I moved to Kansas City. I'd learned over time that the best thing that I could do is find ways to say yes when somebody came to you with a problem.Somebody wants something, how do I get to yes? It wasn't always that way. At first, when somebody would come to me with an issue, I would find all the reasons and excuses why it couldn't be done. Back at that time, I was really the office of no. It was because at that time, I had a boss who had very adversarial relationships with his peers. I realized I was modeling his behavior. He left Sprint. I started reporting to a new boss, and this is probably one of the people who has had the most influence in my life, my new boss at that time.Again, this was 1990-1991. Her name is Nancy Cole, and she taught me that in order to succeed, I need to focus on what could be done, not what could not be done. How do you say yes when somebody brings a problem? They don't want to hear why it's hard. They need you to figure out how to get it done. That approach and perspective changed everything for me.It was also at a time where I was encouraged to get my undergraduate degree. Nancy wanted to promote me to director but she couldn't do it until I had my degree. At the time, I was actually in a non-traditional college. I was going to school at night taking an accelerated program every five weeks, earning three credits. I needed to go faster so I doubled up on the course work in an accelerated program, two classes a week. These were four hours every evening and I was still working full-time.I ended up graduating with honors in '94 with a Bachelor in Business Administration, and then shortly thereafter, I was promoted to director. It really was this lesson of someone in sales, a customer, or someone in another department comes to you and they need something, how do you say yes? How do you figure out how to solve their problem?Edward: I want to jump ahead to your time at HP. You were there for a decade, advancing in sales, getting progressively more senior in sales, and then you switched into marketing. How did that happen?Angela: My entire career to date spans over 34 years in technology. I've had the opportunity to lead many functions in my career—sales, operations, customer service, product management. Marketing was the one area that had always interested me, and I'm always up for learning new things. When the opportunity presented itself for me to move into a leadership role from sales to marketing, I really jumped at the chance.Edward: I want to talk about how that happens though. You, obviously, at that point had demonstrated your ability in sales. Marketing is very different from sales, and you jumped in at a fairly senior level. What did they see in your sales skills that they thought you would excel in a marketing role?Angela: I've always had a knack to be able to translate really technical concepts to non-technical teams, look at what customer requirements are, and then translate what the customer requirements are back into the technical teams. We thought the skill would bode well in marketing, really understanding what is it that we're trying to deliver to the customers and how do we translate that back into not only the technical teams but into how we market the offerings.Edward: What are your productivity tricks? What do you do to be productive that most people don't do?Angela: I really believe that people do not need to be micromanaged. Most people and most people that I have come across in my career, there have been very few instances where I have come across an employee who doesn't want to do a good job. Most people want to do good. They want to succeed. They want to work hard. They just need guidance. They don't need to be micromanaged.I treat my relationships with my employees almost as a partnership. These are the things that we need to accomplish. This is the time frame of when we need to accomplish these things. Let's figure out how we're going to get there. Let's establish these goals. Let's measure. Let's adjust. Let's repeat. It really boils down to just trusting my team to do their jobs and being available to them when they need my support.Edward: Angela this has been fantastic. We'll pick this up tomorrow with a dive into your time at eSentire. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
Sam Heath and I worked together at McKinsey many many years ago. He is now responsible for marketing Tim Horton's in Canada (where it is by far the largest quick service restaurant chain), and Timmie's fledging business of selling its product in grocery stores. Last year, out of nowhere, Sam's heart stopped and he “died”. Last week we explore how that event affected him and his overall career in this episode. This episode dives into Tim Horton's - both the stores and the CPG products - and how he is growing the two inter-related businesses. You can also listen to these interviews in your podcast player of choice: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed (for premium episodes).Transcript:Edward: This is Marketing BS. This is part two of my interview with Sam Heath. Today, we're going to dive into his experience as head of retail for CPG and Tim Hortons. Sam, we're both Canadians, and every Canadian in the country understands Tim Hortons down to their bones. But for American listeners, can you describe a little bit what Tim Hortons is and what it does?Sam: This might be a little bit of a long answer and I'll come at it in two ways. One way, our former CEO tried to describe this to everyone at Burger King right before the merger happened. He said, imagine if Coke operated restaurants in the US and there was no Pepsi, which is a pretty good idea of how important the brand is. Fundamentally, it's a coffee shop/ breakfast/ lunch space that has about a 50% share of the QSR market in Canada, which for context is the sum of what the next 13 chains combined. The next chain is McDonald's. It's just absolutely massive in terms of what it means for Canadians who want to eat.Edward: In the US, McDonald's has the number one share of the QSR market, is that right? Sam: Yes.Edward: What percentage would McDonald's have in the US roughly?Sam: I'm a few years away from this, but probably 20%, 25%.Edward: Got it. McDonald's is in the US, Tim Hortons is at 2 ½ times that in Canada.Sam: It's the only market McDonald's operates in globally where they're not number one, and they're a distant number two to Tim Hortons in Canada.Edward: Got it. Tim Hortons is almost even more than that in Canada. I don't think there are many Americans who define themselves by McDonald's, but it almost feels like there are Canadians that define themselves by being a part of the Tim Hortons community. Sam: Yeah, and this is the other way that I wanted to try to get at it. If you're a big fan of an NFL team, or maybe even better, a college football team in the US—that type of just extreme buying of what that brand means to you, what that team means to you—that's the place that Tim Hortons takes in Canada. College sports are just much less important. People get Tim Hortons tattooed on themselves regularly. Weddings happen at Tim Hortons every year or two. People choose to get married there. It means things in a way that I don't think anybody truly understands.Edward: How does that happen? At the end of the day, they serve donuts, coffee, and sandwiches. Why are people getting married at Tim Hortons?Sam: In the 80s and 90s, a big problem for Canadians is who are we as a country, as a people? All of the answers up until that point, it's we're like Americans, but—we're less this than Americans, we're more this than Americans. Sometime in the mid-90s, there's a book published called Timbit Nation that tried to answer this. The book said we're a nation of people that have Tim Hortons and go to Tim Hortons, to a lesser extent Canadian Tire.The way the brand got there is it is a brand by Canadians for Canadians. It's always being 100% franchised. The people running Tim Hortons restaurant have been members of the local community. There's been this really intuitive sense of how you make coffee, donuts, bagels, breakfast sandwiches, and things for the people that are around you that are like you. No one ever planned strategically. It just evolved. But after 40 or 50 years of that, you end up looking around going, Tim Hortons represents us because it's just us trying to do the best we can for each other.Edward: How does Tim Hortons think about marketing in Canada? I can imagine awareness is not a problem. What problem are you trying to solve with marketing in Tim Hortons?Sam: That's a good question, and no, awareness is not a problem. It's 99%. I keep saying, I want you to introduce me to a person who's not aware of Tim Hortons in Canada. It's more a matter of how you express that Tim Hortons is Canada in a way that does not come across as seeming arrogant.Canadians feel like we're part of them and we're in us. We are number one. Canadians don't want to hear us tell them that we are number one. We're Canadians' favorite coffee and if we tell Canadians we are your favorite coffee, there's dissonance. There's a clash between how people think about us and how we're talking that comes out there. They want us to be humble and they want us to serve them. That's the difficult part in all of our advertising, is reflecting that humility, which is tough when you are so big and when you are 50% of QSR.Edward: What is the goal? What metrics do you measure to say like, hey, our marketing is doing well?Sam: Ultimately, we measure the same thing that everybody in marketing does, which is sales. Are sales going up? But that's often a trailing metric for what really matters. We're also looking at brand health, brand connection, and share of preference. Do people say that we're their favorite coffee? Do people say they look forward to going to us? Do people trust us? All of the things you can imagine to define a brand and how people feel about the brand that we know, end up over months or a year leading to declines in visitation or in sales.Edward: If you run those correlations, do you look at how much people trust Tim Hortons, then look at what the sales are six months after that, and see whether or not there's an R-squared that you can measure?Sam: We do. We try and find them in simple marketing ROI metrics that try to tease out all the different factors that go into your marketing that will often reveal things like this. But ultimately, the link ends up being soft. This is one of the arts of marketing. You have to take it on faith. There is a general correlation. But nobody can say that if trust drops six months later, this goes down because trust can also be affected by macro factors that have nothing to do with Tim Hortons specifically. Edward: You can imagine a world where even if trust goes down, people continue to shop there because McDonald's has a bad quarter or because of something else that happens with your competitors.Sam: That's exactly right.Edward: You operate on trust a little bit, or you just have a certain belief that these are the good things to do. Those good things sound like, hey, creating advertisements that drive up trust, creating advertisements that drive up, would you say, that this is my favorite coffee. Is that a statement that you measure and track overtime? Sam: Yeah, we do track favorite coffee, that's the exact wording of it. It's now lost to me. We track, favorite coffee. We track, it's a place for people like me, which is one of the standard brand metrics. That one tends to be quite important for the crowd, people, feel about the brand, overall. Edward: How do you build marketing that does that? What do you do that's different from many other places that are trying to build awareness or consideration? You're trying to build, hey, this is a place for me. What does that look like?Sam: This gets into the qualitative pieces of marketing a little bit. There's a weekly comedy show called This Hour Has 22 Minutes. They fairly regularly, for a while, would produce parodies of Tim Hortons' ads. Tim Hortons would make an advertisement, and the comedy show would recreate the advertisement as a comedy sketch, and air that for free in one of the country's most popular comedy shows. Imagine if McDonald's US and Saturday Night Live will recreate your latest ad and air it on Saturday Night, it's a pretty big deal. That tells us we're doing the right things. We look for those types of ads.Other ones literally pull on the heartstrings. There's a series of ads that we ran over a while that made people cry watching them. An immigrant father taking his kid to hockey practice, and then his kid growing up, and taking his kid to hockey practice, and how Tim Hortons played a part in that whole. There's one about Wayne Gretzky meeting Tim Horton at the first store he opened, and talking about how he went into hockey, partially because Tim Horton told him to keep playing.Those are the ads that we know are driving the brand. Ultimately, we also have to launch our latest cold brew coffee, which is really important. But we know that if people are crying or making fun of our ads, then they're linking to people on a pretty deep emotional level.Edward: Tears and laughter. Is that the metric?Sam: Tears and laughter. Although we found that one hard to get a quantitative measurement of.Edward: Tim Hortons is this dominant player in Canada. I imagine your brand has not succeeded as well in the United States. Why do you think that is? Is it just too tied to Canada?Sam: We've done really well in a few US markets—Buffalo, where we're number one by market share similarly to Canada, Detroit, Columbus, Rochester, a few of these, Upstate New York, Ohio, and similar locations. We have close to 800 restaurants in the US and they do quite well in the markets that we're in.I think a lot of our success in those places may be due to the fact that we entered at a time when a lot of brands are pulling out of these rust belt cities when manufacturing is getting hollowed out. We came in and there's a lot of emotional goodwill towards the brand from locals in those US cities who remember us coming in when a lot of other brands won't. We have had some success in the US.Edward: These are all franchise models in the US as well?Sam: They are. Yeah.Edward: The same thing that happened in Canada, where it was the local people building this business happened in these upstate US markets where it was local people—maybe in a time when the community was struggling—local people were stepping up and running these things, and they connected to the local community.Sam: We ended up with a similar type of connection as we had in Canada in those markets. But when you look beyond those markets, you're right. We have struggled to move out, to establish the brand. In some parts of New England where we've expanded two or three times had been forced to retrench. We just couldn't make our stores profitable, and we had to pull back.Edward: It's interesting that these markets that you are successful in, tend to be almost like border cities. They're very close to Canada. Is that something to do with it or do you think it was just the timing? If you had entered Alabama at the same time period back when these other markets, other quick users were pulling out, would you have been as successful there or does it tie to the fact that these people know what Canada is because they live on the border? Sam: When I write my alternative history book, I will explore that in-depth and until then, I'd just be guessing. Edward: Let's talk about the CPG business. You've been running the CPG business for a while now. Even for our listeners, describe a little bit. What does the CPG business mean for Tim Hortons? Sam: I'll give it a quick history which describes what it is. We started selling some of our packaged coffee in grocery stores in Canada around 10 years ago because the grocery store came to us and said, hey, would you consider selling it as your packaged coffee? We'd like to put it on shelves. Which is not normally how grocery stores interact with their vendors. Edward: This sounds an awful lot like how you've managed your career. The Tim Hortons-CPG business grew the way Sam grew his career and they came to you.Sam: It's just, oh, I guess we can do this if someone does it. Exactly. From there, in 2015, we decided to get strategic, small as strategic, and say, what if we actually went to the grocery store and asked them to list our product and that led to just pretty rapid growth between 2015 and we decided to do this. By late 2016, we became Canada's number one CPG coffee brand, neck-and-neck with the other two.Since 2017, 2018 with a couple of adjustments, strategy, and more products, we now have probably doubled the market share of the next largest coffee brand on shelves in Canada. We've also expanded into soup, granola bars, through licensed deals, and ready-to-drink coffee, and cereal. In 2017, we entered the US CPG market, although so far really just with coffee. Edward: Let's start with the Canadian business first, how do you think about growing the CPG business from a marketing perspective different from retail? Or is there a difference? Do you just basically coast on the back of the retail brand? Sam: In terms of brand strength, we are a very small part of Tim Hortons' total sales, what it means in Canada. We're not having a significant impact on the brand. Clearly, the overall brand strength which comes from restaurants is why we've had success in CPG? What we really try to do is make sure that nothing we do can harm the master print. If we started selling Tim Hortons pencils and USB chargers in retail that would probably annoy Canadians like, what are you doing? You're just putting your name on everything? We try to do what we can to reinforce it, but we're a small force overall for what Tim Hortons means in Canada. Edward: The purpose of CPG then is it's almost like, hey, we've already built this brand in retail. Let's go into CPG. From the minimal additional effort, we can make some profit. Every time you see Tim Hortons on a shelf in a grocery store, it's the equivalent of a billboard on the side of the street advertising the retail. Sam: From a marketing perspective, it absolutely is. We've got some pretty good research that says, the more you see our soup on grocery store shelves, the more likely you are to go to a restaurant to add soup for lunch. The other thing though, is 80% of coffee is still consumed at home, despite how much coffee we sell in our restaurants in Canada. We didn't want Canadians going home and going, I want to make myself a nice cup and then have to look to our competitors for their at-home coffee. If you're reaching for coffee at breakfast in the morning when you don't go to Tim Hortons restaurant, we wanted to make sure we were there so that we stayed present [...].Edward: Got it. CPG is a lot more of a defensive play then than an offensive play?Sam: It's a bit of both. The sales and profit are nice, but it's also a matter of people expecting us to be there. Again, you look at the brand, it's about being humble and doing what Canadians want us to do. They want to drink Tim Hortons coffee at home. I'm not going to tell them they can't. Edward: Do you do any marketing specifically for your CPG side of things, or is it just a matter of like, hey, you've done the marketing for the retail and CPG is just a distribution channel? Sam: It's largely just a distribution channel, and the marketing that we do for CPG products tends to be to raise awareness that they exist in this format or just getting more prominence in the grocery store aisle. When you are shopping for your coffee, we want to have our displays, our signage, our offers jump off the shelf. Unlike with restaurants, you've got to decide where you're going for coffee well in advance of picking up the coffee, or either walking down the street one way to Tim Hortons and the other way to go to McDonald's. On the grocery store shelf, you just raise your hand 6 inches and you're buying a different brand. The more permanent we can be there, the better our sales will be in the grocery. Edward: Yeah. I know you're not a digital marketing guy, but I kind of think a little bit like your retail business is top of the funnel. Do marketing, do brand, do television, but then your CPG business is almost all direct response stuff. It's like this equivalent of paid search or by the corner display or getting on eye level or hitting the person with the flyer as they're walking in the door to say, hey, it's $0.10 off today. Sam: Or a $1 off. That's exactly it. If we can get the display or in the aisle that interrupts the shopping experience that gets it in front of you. The reason that the brands do this and why we do this is we know that it works. The more display space you can get, especially outside of the coffee aisle, the more likely you are to pick up sales from people that otherwise might choose to buy a different brand. Edward: Do other direct response stuff work for you? What about something like direct mail? Could you use direct mail to drive this business? Sam: We've used direct mail in a couple of specific instances and they're basically new product launches. We launched instant coffee in 2019, and we mailed sachets to people to sample at home to drive awareness and trial. We're doing something exactly equivalent with a granola bar, food lunch. If you're in Canada listening to this, you might get a Tim Hortons double chocolate granola bar in the mail. You might have received one. That is designed overall awareness where that's a new category for us and awareness is 17% for our granola bars. We know that we can drive it higher. We've got a great product and we want people to try it.What we've found is absolutely no correlation of those activities with sales. Again, we're taking it on faith. We know that 50,000 people tried the product within the country of 40 million people. That's not many.Edward: That's interesting. When you run those direct mail tests, you don't do them like, hey, we're going to do some in the East side of Toronto, not the West side of Toronto, and then see what happens to sales over the next three months?Sam: We have tried those and we cannot find a signal among the noise of our sales data. We keep doing it because we know that it does mean 50,000-100,000 more people have tried the product and the demand made by. Some things you just have to take on faith. In the tests that we've done, we can't get a response high enough to actually measure. Edward: That's interesting. Is that because you don't do it at the scale necessary to measure a response? Or do you think that the response isn't there? Sam: It could be both, getting to the scale necessary is either fabulously expensive. If you're mailing out instant coffee to be in the households who would never consider buying instant coffee or wasting a lot of your marketing budget on people that just aren't in the category, or it could be that it's just not there. Having sent the infinite marketing budget to get to the scale that we need, it's really hard to say. Edward: How do you think about marketing the US differently than Canada on the CPG business because you don't have that giant retail brand behind you that's giving you 99% awareness? Do you need to do things differently in the US? Sam: I love this question because we have a very specific answer to it. We re-did all of our packaging 1 ½ ago. In Canada and the US, we tested a set of about 10 different taglines. In Canada, the tagline that we put on all of our packaged coffee now says, “Roasting in Canada since 1964.” Which is correct, we've been roasting our coffee here. We haven't changed the blend since 1964. Canadian thought, you've been here for a while. You're like us.I've been in Canada since 1964 when I was born here. People liked the sort of comfort routine of that. In the US, that was mediocre at best. What the US liked, whether it was in a market where they know as well like Buffalo or a market where much less known like Texas is, “Canada's Favorite Coffee.” Which, if you recall, we tested in Canada. Canadians hated that. It probably would have hurt sales if we used it. In the US our bags say, “Canada's Favorite Coffee.” We've got the research to back up to make sure we're telling the truth, but in Canada, it says, “Roasting in Canada since 1964.”What that's reinforcing is we realized we needed to tell Americans something about our coffee. We couldn't just say, hey, we're the stuff you get in the coffee shops. We need to say there's a reason to buy this and Canadian coffee is a unique selling proposition. It may not be the strongest possible way, but again, we didn't design this brand. We have to sell what we have and that's worked really well. We're growing at something 25% per year, five years straight in the US grocery market. In March, we're number two by dollar sales growth, 2021 versus 2020. It seems to be working. Edward: Sam, this has been great. Thank you so much for being on the show today. Before you go, can you tell me about your quake book? The book that you read that changed the way you think about the world. Sam: Absolutely. It is The Three Marriages by David Whyte. He is a poet-philosopher who does an awful lot of corporate speaking engagements. He basically says work-life balance is [...] for two reasons. It implies that there's a static balance point that you're trying to get between work and life and two, there's no place left for the self. He says that in life you have three marriages. One, your traditional marriage with your significant other, two with your lifelong work, and three with yourself. Each of those marriages is a conversation, and each of the conversations is in conversation with each other. It sounds high-level, highfalutin poetic. It was one of the most profound things I've read. It helped me get more effective at work and think about work differently and the relationships for the rest of my life. Edward: Sam, thank you so much for being here today.Sam: Thanks, Ed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
Sam Heath and I worked together at McKinsey many many years ago. He is now responsible for marketing Tim Horton's in Canada (where it is by far the largest quick service restaurant chain), and Timmie's fledging business of selling its product in grocery stores. Last year, out of nowhere, Sam's heart stopped and he “died”. We explore how that event affected him and his overall career in this episode. Next week we dive into Tim Horton's - both the stores and the CPG products - and how he is growing the two inter-related businesses. You can also listen to these interviews in your podcast player of choice: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed (for premium episodes).Sponsor MessageGet paid for your feedback, join Wynter's research panelWant to give back to the community while having a low-key side hustle to fund your habit? Provide feedback on product messaging for industry-leading B2B companies, be compensated every time you do it ($15-$50 per survey). Takes ~10-15 min to take one survey, low-key time commitment.Transcript:Edward: My guest today is Sam Heath, head of retail for Restaurant Brands International. That's the CPG group for Tim Hortons. Today, we cover Sam's path to overseeing the restaurant chains, the entire CPG business—Brown, McKinsey, OLG, Burger King, and Tim Hortons. I worked with Sam when we were both at McKinsey Canada. I'm excited to chat with him today. Sam, in 2015, you were the Senior Director of Innovation for Burger King, but then you left that to run all of marketing for Tim Hortons Canada. You've never had a marketing title before. How exactly did you get that role? How did you jump from running innovation to running marketing? Sam: At the time, Burger King was a little bit crazy in a way that I describe match my type of crazy. They took people that had done well in whatever roles that they'd had and gave them more stuff to go do. I'd look at marketing. I've done analytics. I've done other things like that, but I'd never done the actual direct-to-consumer go get impressions, sell the product, sell the brand marketing. It was a really pretty big jump. It was taken by the people I work for on faith that I could do a good job at it. Edward:At that time, Burger King owned Tim Hortons. It was one organization.Sam: When I joined, it was just Burger King, but when they moved me up, it was about a year after the merger had happened. Edward: You had delivered for them around innovation. They said, hey, we trust you to run innovations. Now, we're going to trust you to run marketing. Sam: For the most iconic brand in all of Canada, yes. Go from this team of six people that are sampling hamburgers in the test kitchen. Why don't you take over this team of 70 with a $300 million marketing budget up in Canada?Edward: Why did they think you were capable of doing that? I know you're capable of doing that, but why did they think you were capable of pulling that off? That seems like a big risk. Sam: It is a big risk, but it was taken by people who had taken risks like that at Burger King and seen them paid off. They also were willing to replace me if it didn't look like it was working.Edward: You said they took risks like that before with you, or are they just risk-takers in general?Sam: Just risk-taking in general. It was very much the culture of the organization. This was a bunch of people who looked at Burger King and said, this is a good brand—it's just clearly not doing well back in 2011—bought it and said, we need to change everything to turn this around. They went from a 300-person organization in 2011 when they acquired Burger King, I think about 20 of those people were left when I had joined 2½ years later.Edward: When that opportunity came up, did you put yourself forward for it, or did they come to you and say, hey, we have these gaps. Sam, can you step into it?Sam: It was very much the second. They said, we have this gap. The semi-annual upside is what's happening. I got invited there under the pretense of making a presentation on something else. When I met with the President, Tim Horton, he said, congratulations, we've got a new role for you. It was a jump of a couple of levels, at least, and an order of magnitude more responsibility.Edward: What do you think when you do that? Did you think you had the marketing skills to do this? Did you think you're going to figure it out as you go along? What was going through your mind?Sam: I've always been interested with everything that's going on around me. It's not like I was ignoring the media advice and the creative that was happening while I was designing hamburgers or working on pricing. I just liked to see how things plug together and organize, and I trusted myself to learn the pieces that I didn't know. Also, as you get more senior, you trust yourself not to need all the details and build a team that's capable of filling in for your own gaps. Edward: What skills did you think you were missing going in? What did you think that, hey, these are the things I need to figure out fast if I'm going to be successful on this job?Sam: Honestly, all the pieces that people traditionally think about as marketing—creative review, creative design, how do you translate what the brand stands for into what you're actually saying in the advertising, going from overall marketing strategy down to campaign, sliding down to briefs, down to approvals of the creative that's going out on television, digital, and other places.Edward: Now you think you know what you don't know. How do you go about getting those skills? What did you actually do to be ready?Sam: The previous CMO did a great job of setting me up for that. I had his team to rely on. Clearly, Tim Hortons was a brand that had had a positive store sale count for over 20 years. They had a team that knew how to do this. Just being gentle and being careful. Just being given a job doesn't mean you need to change anything. Often, you're a caretaker for what came before. It's a mistake marketers make to say that, well, I'm here now. I need to change everything. Rule number one should be first, do no harm.Edward: It's interesting. Oftentimes, when things are going well, that's not when they replace the head of marketing. Here's a place where they replaced the head of marketing. They brought you in but things were already going really well. It feels like that's a time when you hire someone who is a caretaker marketer, but you're in a place where they brought in somebody who wasn't even a marketer at all. That almost feels like they want to shake things up, but in this case, they didn't want that. Sam: There was, again, that culture piece from Burger King of risk-takers, people who want to be bold and change things up. They wanted to put that culture in place at Tim Hortons. They wanted to maintain the results but still move over to what is now the RBI culture of being a bit more bold and taking a few more risks. Ultimately, if you look at the performance of Tim Hortons in the few years after that happened, there was a bit of a stumble. It was a bit of a mismatch for the brand. We can talk about strategically, whether that was the right choice, but that's the position that I was placed in.Edward: That's interesting. I'm thinking about you, particularly, rather than the company. How do you think about changing things up and making things better when you don't have a lot of expertise? You're reliant on the team because they're the experts on this, but at the same time, they hired you on to change things. How do you make those changes without messing things up?Sam: If you have learned how to do a new job enough times, you start to get an idea of what it feels like to learn a new job. You know that there is a structure that you're trying to understand, a set of processes, a set of routines, and things that are done for particular reasons. You have an idea of what that wheel looks like once you do understand it as you're trying to figure out. Taking that meta approach to learning a new job while trying not to disturb things, what I try to bring to that was I like to measure everything. I like to have a bottom-up roadmap or scorecard of how things fit together so that we can see whether things are going well or not. Often, that type of high-level organization, that connective tissue that plugs together all the little bits and pieces that marketers are doing every day, every week, every month, that I found is where I can usually add value and help people see what they're doing better.Edward: I want to go back and talk a little bit about the path that got you there. What were you passionate about when you were 12–14 years old?Sam: I was passionate about Space Lego and role-playing games, whether computer games or specifically, Dungeons & Dragons. Edward: Do you think diving into Lego, diving into D&D affect your later life at all? Did you develop skills there that play out today or was it a one-off and it didn't really matter? Sam: I'm not sure that I developed skills during Lego and D&D that changed me. I think it's more that I chose the things then that I liked doing and I honed skills that I may have already had. Lego is a lot of organization, seeing how things get put together, and being patient as you meticulously follow these rules to achieve a great product. D&D is just a really interesting game. It lets you explore everything from how rules create conduct in the world to all sorts of other things that are useful for managing around the management table. Edward: Let's go forward a little bit and talk about your first job. In your first job, you were a bike courier? Sam: Pretty much, yes.Edward: Talk to me a little bit of what you learned as a bike courier and how that affected things later. Sam: First, just to set the stage, in the 90s, there were a lot more bike couriers hopping around than there are now. You've probably seen a few in cities but they have largely been replaced by Adobe Acrobat, esigning, and things. There were hundreds in Vancouver. Edward: This was not a food delivery. You aren't Postmates of the 1990s?Sam: No. I was doing bank deposits, getting documents signed, dropping off documents to be signed, everything else. At one point, I showed up at the bank and realized I've been riding around with $40,000 cash in my backpack for the previous 1½ hours. People would hand you deposits. It was interesting, which was for some reason really motivating and inspiring for me. It felt like I was the grease that was helping the wheels of commerce keep turning. I was helping real estate deals get signed, seeing big contracts get closed, seeing how and why people were soothing each other for different things because these were the documents I was carrying around. Edward: You became aware of that stuff or was it a matter of, hey, Sam, take this piece of paper and get it across the street? It was like you've learned what the pieces of paper were for and the impact of your decisions were.Sam: You do because people don't call a bike courier when a document needs to get there eventually. I would show up at offices seven minutes before a bank six blocks away was going to close and something you needed to get to the back before close. They wanted me to know how important it was. There were times I was delivering legal depositions or summons and I couldn't deliver it. I would go back and give a statement that would get taken down and taken to court.People would talk to me. People like talking to people. I was friendly and personable. I learned a lot more of how these businesses were running and people would think I would. Edward: It's almost like those stories of the guy working in the mailroom who learns how the CEO operates and then moves up to the ranks. Sam: The secret of my success. Edward: You got your PhD in Computer Science. What were you planning to do with that before you actually left the world of academia?Sam: I planned to leave the world of academia since I realized that I was in the world of academia pretty much. I thought that getting a PhD in Computer Science would be a good way of getting a good-paying job as a teacher. I like teaching people. I like helping other people understand problems and dive their way through things. Once I realized that all I had to do was research and that was what I've built myself a path to, I got out as fast as I could. Edward: You went to McKinsey. Why did you end up in McKinsey?Sam: I ended up at McKinsey because they dropped off a stack of brochures in the mailroom of the computer science department where I was at. A friend of mine said that one of his high school friends went there. They were smart, liked it, and so would I. It was no more strategic than that. Edward: On that note, I want to jump ahead a little bit. In 2013, you joined Burger King to develop their pricing strategy. After spending a bunch of time doing strategy at McKinsey's, strategy at OLG, you're doing more strategy at Burger King, but then you left a year later to run product innovation. That seems a pretty big switch for someone who had been spending their career doing strategy. How did that happen?Sam: One thing, you may have guessed from why I decided to leave academia, every time I've tried to make a strategic choice or plan out who I want to be in five years, I've been spectacularly wrong in my career. A decent explanation of what strategy works is the questions that clients don't know even where the question fits. It's not even that they have a question they don't know how to solve. They don't even know where it fits. They go, oh, it's not operations or it's not marketing. It's a strategy. Let's call in somebody.Edward: It's the other.Sam: It is really the other bucket. After a career literally of answering the random questions that nobody could figure out how to answer, I got pretty comfortable with just jumping into, this topic looks interesting. I'll go do that now.The opportunity came up in Miami to go do pricing for a year. I did that. Because I correctly guessed that Burger King was a company with a culture that was pretty well-attuned to how thought, after a year of doing pricing, they said, hey, why don't you move to the test kitchen and figure out what sauces we should put on our original chicken sandwich and extra-long cheeseburger? You seem like you might be good at that. I'm like, okay.Edward: It is interesting the way you describe it because it feels like coming from a career in strategy, people think of strategy as, hey, what's the five-year plan? What's the 10-year plan? But for your own career, you're saying that strategy is the last thing on your mind.Sam: It could sound like that, but in my experience, strategy isn't a bottom-up, let's think about what we should be doing in five years. It's more a matter of, we're doing a bunch of stuff and we don't know how it fits altogether or we don't know that it all makes sense. Can you come in and take a look at all the things we're doing and make sure that there is a connection to our underlying core of who we are as a company?I think of strategy not as a bottom-up, high-level thinking but more of an organization, seeing how things that a company is already doing fit together. I think that's similar to how I've thought about my own career. We can figure out how it fits together afterwards. It's more a matter of making sure that the individual ideas make sense at the time.Strategy is looking across things going on and plugging them together. Career decisions are doing things and figuring out how they fit together afterwards. You've probably got a pretty good intuitive idea of what you want to do next.Edward: It almost sounds like strategy is story-telling.Sam: I think that's very, very much the case. You need to help senior executives figure out how to tell the story of who they become as a company.Edward: Your career is almost the same idea. You do the things. You take opportunistic chances. Then, after the fact, you can go back and tell a story about how it all fits together.Sam: Which interestingly, if you go back to when I was 13 years old and running a Dungeons & Dragons game, sometimes, your players just do stuff. You go, yeah, that makes sense. I can fit that together into the story I'm telling. It's not that it was pre-planned. You're just working with what exists.Edward: Sam, what were the biggest failure points in your career? Where did things not go as expected?Sam: I think if you look at any of the times I've switched companies or switched careers, that's when I realized that the current plan that I was on wasn't working anymore. I [...] those things as failures. I spent five years getting a PhD that I realized four years in I did not want. At one point, I realized that I didn't want to be a consultant anymore.There haven't been any spectacular failures where people have come to me and said, you've really disappointed us and we're going to fire you now. Instead, I'm more a matter of the thing that I thought was interesting. It evolves or changes in a way that I no longer like or I evolve and change in a way that I'm no longer interested in. That happens every 3–5 years. We just change.Edward: Sam, you're now a head of the retail of Restaurant Brands International. I want to cover more of that in part two, but I want to touch on an experience you had last summer, if you're comfortable talking about it. Tell me, about 40 minutes last summer, you died and they managed to bring you back to life. In a movie, that would cause you to reevaluate everything in your life and change who you are and what you think about. Did it do anything like that for you? How did you change after that event if at all?Sam: That's a really good question. For anybody thinking about business was spectacular, it would be like a scene from the most over-the-top hospital drama you've seen. The first defibrillator did not work on me. They had to go find an antique one that happened to put out more power. That's what eventually restarted my heart back to life.I thought about this and I still think about whether I should be reevaluating my life, but my approach of, am I happy with what am I doing right now and if not, then I'll go find something else to do has served me pretty well. I haven't spent 10 years chasing a goal that's 10 years down the road in the hopes that once I achieve it, I'll be happy. I try to make sure that I've enjoyed what I'm doing along the way.I came out of that. Actually, the first thing I did was send a selfie while I was still intubated to my Microsoft Teams group at work saying, don't think I'll be in at work today. I was back on the job within 8 weeks of meeting 39 minutes of CPR with a very talented team at the Toronto General Hospital.My reevaluation of my life ended up not really being one. I'm still pretty comfortable with the choices I've been making.Edward: Sam, what are your productivity tricks? What do you do to be productive that most people don't do?Sam: You're either doing things or you're not doing things. If you're doing things, it's less of a worrying about focusing on staying on one task or focusing on the highest priority item, than continuing to work on it until you lose momentum, you lose steam.I would rather finish 60% of one task, get distracted, go to 50% of another task, go back to the first one, and then force myself to finish something after I lose interest. As long as I am being productive, I don't really worry necessarily whether it's my top priority item or third or fourth in my priority list. I just enjoy the fact that I'm getting things done.Edward: There's something about that. Like prioritization is overrated in that you're much better just be getting something done than spending a lot of time trying to optimize for the right thing to do.Sam: Things are either important or they're not. If they're not, they shouldn't be on your list. If they're important and they're on your list, as long as you're doing anything, you're doing well.Edward: I read somewhere—I can't even remember who it was—their model of as long as your distractions are also something you want to get done, then you're fine. If you stop doing what you want to do because you go and spend time on Facebook, that's not so good. But if you're stopping doing project A because you're distracted to do project B and then you get distracted and start working on project C, you're probably going to be in a good place by the end of the month.Sam: Yeah. That's exactly right.Edward: Sam, this has been fantastic. We're going to pick this up next week under my new publishing model. We'll pick up with part two. We're going to dive into Tim Hortons' business.Sam: Right. Thanks, Ed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
My editor lost Internet yesterday causing the Tuesday essay to be delayed. It will be released later this week. In the meantime here is part two of last week's interview. My guest today is Charbel Zreik, managing principal Manifestation Capital. In 2012 Charbel founded a search fund, purchased DCI (a hospitality-focused telecom company), successfully turned it around, scaled it to a national footprint and then sold it. He now advises entrepreneurs attempting to scale similar sized businesses. This is Part 2 of the interview where we talk about DCI and how he turned around and scaled the business. Yesterday we explored Charbel's career and path to CEO. You can also listen to these interviews in your podcast player of choice: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed (for premium episodes).TranscriptEdward: This is part two of my interview with Charbel Zreik. Today, we're going to dive into his experience as CEO of DCI. Charbel, can you start by explaining what DCI does or what they did?Charbel: Yeah. DCI—when I acquired them—went into hotels around the country and put in telecommunication systems. They put in the phone systems that managed all the phones in the room—including putting all the phones in your room, but also they put on the telephony that managed the call center, the software that managed the call center where the calls came in to make reservations and things like that. At the time, they had just started doing WiFi management. Going in and putting in all the access points to transmit the Wi-Fi, to design the WiFi system, and what's going to get perfect WiFi coverage in a hotel. As well as take the calls from the hotel guests when they couldn't connect to the WiFi system so that it's remote monitoring of the system and remote help desk support.Edward: Was DCI a commodity then? I assumed that you didn't have a monopoly on this business all across the US. What did hotels do, that you weren't using you?Charbel: Yeah, we did not have a monopoly at all. Mostly they had other service providers like us. But sometimes they had local guys—just random Joe Doe, two men in a van that went around and did IT support for the local hotel. Yeah, we had local competitors. There were 10 or 20 other national competitors like us doing the same thing. And in the rare situation, they had their internal IT guys doing it. Edward: What made you different from the other 10 or 20 other companies doing what you guys are doing?Charbel: At the end of the day Ed, it was two things. One was just service. Literally, the reputation that we had around jumping through hoops and being able to contact the owners at DCI in the middle of the night when things went wrong to make sure that you weren't getting some random person in a call center, but you were getting the highest level of expertise to solve your problems. That was one thing. The second thing was that we did more than one thing. Yeah, we were just starting out on WiFi at the time. But when we did the telecommunication system and the WiFi system, they really liked that because it was one throw to choke and it wasn't having to go to multiple places. Because these systems ultimately were interdependent on each other. Edward: Most of your competitors were doing one of the two?Charbel: Most of the competitors, exactly. Edward: If you're a hotel, you'd have a WiFi provider, you'd have a telephony provider, and you guys come in and replace them both? Charbel: Exactly, and sometimes, when one went down it was the fault of the other. To troubleshoot it, you'd have to go through the process with the first vendor, and then they'd be like, hey, we can't find anything. Our system is saying it's the other vendor that's down. You're going back and forth between the two to try to figure it out. Edward: What did you see when you made the acquisition? What was the opportunity there that you thought you could buy it and make it worth more than what you bought it for? Charbel: There were probably three things that I would point to, Ed. One was the fact that they were just starting up in WiFi, and I saw WiFI as critical and central to the success of the user experience at any hotel. We all know that anecdotally. It's really important to have great reliable internet access at a hotel for a guest because that was a growing part. I was like, okay, if we could take that part and really scale it, we can have a much more valuable asset, number one. Number two is I saw six owners who were technical geeks. They were very skilled in their technical trade, and they had two guys outselling. I thought that we could come in and slap on a sales and marketing engine, attach it to this great technical know-how, and really scale the company from there. The third thing I saw was phones were a dying technology in hotels, no one was using the phone in the room anymore. But there was an emerging technology, which was taking these phone systems and making them remote, making them hosted—putting them in a call center. You're deploying these voice systems at a fraction of the cost. Because even though people weren't using them, they were still important and necessary for 911 regulation and other reasons. Bringing in this hosted voice concept was something that I saw that was emerging in the industry that I thought we could really take advantage of.Edward: How is the company getting new clients? You talked about a sales team. There were two sales guys. Was it all inside sales? They would just call hotels and ask if they wanted the service?Charbel: Pretty much. That was the main thing they were doing. They were working one hotel at a time. One relationship with a general manager or IT director at a time. The head sales guy, who was super talented at the company actually, was also forming a lot of partnerships with, for example, the guys that did the original construction or the cabling that pulled the original cables for the technology in the hotel. Those guys will pull them in on a project, and then likewise, he would pull them in on his projects. There's a lot of different components in a hotel. There's the mini-fridge, there's the in-room controls, there's the audio-visual. There's a lot of different components. He was really in the middle of that ecosystem and would count on a lot of cost referrals to happen. Edward: How many of your new clients then were new hotels versus finding an existing hotel to switch over to you as a service provider?Charbel: It was probably 20-80. 20% were new hotels and 80% were us gaining market share by infiltrating the market. That's just sheer numbers. The hotel supply only shifts between 2% and 4% every year. By definition, there were just not that many new builds every year. We were capturing more than our fair share of new builds. But still, as a percentage of our own business, shifting existing properties was probably closer to 80% of it. Edward: How do you get someone to switch then? If I'm a hotel and I have telephony—assuming it's working and the WiFi is working—why would I switch? Or is that the opportunity? You jump in when something goes wrong.Charbel: Yeah, you hit the nail on the head, Ed. You got to stay around. Have a great reputation. And when something goes wrong or the contract is expiring—a lot of times it were contracts, especially on the WiFi side, there were three-year contracts—you would come in and build that relationship. Or if you're doing telephony already, a big part of the opportunity for us is going to the guys where we do telephony and say, hey, when is your WiFi contract expiring? Why don't you give that to us in addition to the telephony and just have one less vendor to manage? So that was part of the value proposition.The other part was you're always looking to do something new and innovative no matter how small it was. On the WiFi side, there was much more room to innovate. We were fortunate enough to team up with some more innovative brands along the way. Those customers pushed us to innovate. For example, Kimpton was one of our customers, and they were really paying a lot of attention to the user experience. When a guest walked in from one Kimpton to the other, they wanted to recognize the device and say, hey, welcome back, good to see you. Because you're a loyal customer, here's level two free access of 15 megabytes for you. That's for free because of your loyalty to Kimpton. We're doing some innovative things like that. That helped differentiate us and helped us win some new customers. Edward: Before you were there, there was no marketing function at all. You planned to build a marketing function. Did you actually build one? Is marketing important? Charbel: You really bring out my humility here because I never actually got around to building one. That, I would say, held this back from really turbocharging our growth. I really focused on sales and I grew that team from 2 or 3 people to 17 people by the time I left. It was a really strong emphasis on sales and creating multiple departments within sales, account manager, and things like that.I always had one of the more junior salespeople also contributing on the marketing front and trying to do that. We have a baseline marketing function. We went to a lot of tradeshows, spent money on the in-person type of marketing events. But we never had a marketing machine that could make our cold calls a little warmer. By the time we're reaching out to totally new customers, they would have seen our brand, they would have gotten a pamphlet from us, they would have seen our newsletter. We never really had that. That was going to be the next step that I never really got around to before selling.Edward: It's hard when you try to build something new like that. It takes a while to build, and not only does it take a while to build, once it's built, the impact of that is also spread out over a long period of time. If you're in a place where you're planning to hold the business for five or even eight years, unless you do that right away, it's hard to see the return on that investment in the time that you want to sell.Charbel: Totally right on. I ended up signing that company in a little bit under four years. It ended up happening much faster than we thought. I felt like the low hanging fruit early on was really all about sales. Especially because these guys were going out to one hotel at a time, and one of the major things that I did was go to the national brands. Walk into Marriott Corporate or walk into Starwood Corporate and really start working more closely on that corporate level, and doing everything that needs to be done in order to accelerate traction at the corporate level. They had a couple of corporate accounts when I came in, but a place like Marriott, for example, that demands so much of a company in terms of its infrastructure and its processes, they did not have the whereabouts to get into before I got into the company. Really doing that major account management, I felt like it was a lower hanging fruit then gearing up our marketing function.What's interesting is when we were acquired, our acquirer combined us with a company that does TV for hospitality. Now they have a phone, WiFi, and TV all in one, but those guys had really tuned up their marketing function. And then when you talk to their sales team, their life was so much easier than my sales team. My sales team was working so much harder without a marketing function than those guys that had a really well-honed marketing function. All their initial calls we're that much easier. Edward: I believe it. It's one of those things where it's hard to see until you have the contrast happening right in front of you. Because we have built a marketing organization, three years later your sales team had it much easier, but they wouldn't remember three years earlier when they had it hard. Charbel: It's so true, man. It's so true. It's one of these interesting things. And I, myself was a victim to that type of thinking. It was very hard for me with all the urgency that I was feeling. With a quarter to quarter targets to hit, it was hard for me to really think of a longer-term strategic initiative like marketing. Sales just feel a little more controlled. How many people did you get out in front of? How did the conversations go? It just feels a little bit more controllable. But when I finally saw it, I was like wow, okay, now I really understand the importance of marketing.Edward: A fast feedback cycle, you also know whether you're doing it right or not. If you hire a bad salesperson, you're going to know pretty quickly. If you're doing bad marketing, you may not know for quarters and quarters and quarters that it's actually bad. It all depends on how well the person spins it—who tells the story rather than how effective they are. Charbel: Yeah, that's a great point, too. Edward: So much of what you were doing, the execution was important. It was less about having the perfect strategy and more about executing really well, and that relies on having really good people. In a business like yours where you're not like a Facebook or a Google, you're not even a Verizon—you're selling telephony to hotels. It's almost the opposite of a sexy business. How do you attract really top talent that you need to succeed in a company like that and have awesome execution?Charbel: Definitely one of my top three challenges. If not the top challenge. It's very difficult. And on top of that, we were located on Long Island—nothing against the Island. There's a lot of wonderful things about it, but it's a tough place to pull. It's not New York City. You couldn't live in New York City and work out of our office. It was just too far. It was a challenge. It really came down to, I really, really believed in the vision of the company. I had a very clear vision to be the number one converged network provider of IT services to the hospitality industry in North America. My vision was very clear. I knew what that meant in numbers every year all the way through year five. I knew what that would likely mean in terms of an exit. I would just paint that vision and I incentivize my top managers with equity. I'd be able to also dial it back to an exact dollar number that person would get if this vision became a reality. That's really what I would do. I would talk to these great talented senior managers and I would share with them my excitement, my vision, why we were poised to really do well on this market, and what that would mean for the company, for the investors, but also for them personally. I think that really helped us to get a couple of players that made ultimately a lot of difference. Edward: A lot of what you're doing—it was this awesome, awesome execution—was very similar to what a McKinsey turnaround process would look like. Was there anything that was not in the traditional McKinsey turnaround playbook that you used to be really successful and turn this thing around?Charbel: Yeah, absolutely. I think there were a lot of grassroots things that I had to do that we would have never talked about at McKinsey. For one, I stepped into a culture that was very insular, very close-knit. Getting the allegiance of the people inside the company was very challenging. It took a combination of, for one, I gave equity down one notch to about the next 15 or 20 employees. That's something that not only McKinsey wouldn't do. My board was like, hey, you're crazy. What are you doing? Why are you getting so many people on the company equity? We never do this. We give like two or three people equity and that's it. But I was in a company that had a lot of talented people. I felt like it was important for me to really let them know that this is, I'm coming in, I'm going to demand more of them, but it's not just going to be about me. The return is going to be for all of us. Spreading that equity down the chain, even though it was very much unique and unpopular with my investors, I think ultimately helped me be successful. I also just formed very personalized relationships and understood individuals' motivations. My top sales guy was a very talented guy and was producing amazingly well when I came in. But I got to know him and I got to really build a lot of trust between the two of us. I got to know him, his quirks, and the things that drove him really well. I just developed every year a custom incentive plan for him. Like literally given his personal situation. Was he buying a house, was he not buying a house? What worries you moving through the time? I was able to triple his productivity, and he was already producing at an amazing level. That's because we formed such a close partnership, trusted each other, and I was able to tweak the incentives in a very personal way. That's something else that comes to mind. Another thing was just being very entrepreneurial and going with your gut. I remember, soon after I came into the company, I had a call with Marriott who we're trying to win as an account. I remember the guy at Marriott, this brash guy from Boston literally yelling at me, being like, Charbel, I don't care about McKinsey or Wharton. I don't know what you think you're doing here. I don't care about any of that. At the end of the day, you've got a shitty product. I'm not going to put it in my hotels. Call me back when you got a better product. Click. Within two months of that phone call, that guy at Marriott was on my team. He had quit Marriott, he was working for me, he was incentivized with equity around building that new product that he had wanted to build. Doing things like that—you're not going to find in a book—it's just the opportunity comes your way, you have to recognize it, and you have to go with your gut and move quickly. Edward: That's amazing. You managed to call him back and offer him a job?Charbel: I managed to call him back, have very careful conversations around his interest in working with me, and then I had to figure out how I pull it off without pissing off Marriott. It was a very fine dance between interviewing him, screening him, and making sure he's the right person for the job. Then allowing Marriott to be part of the decision and to give me the blessing on me hiring him, and really just do the dance around that to make everyone feel like we're doing the right thing and not screwing someone who ultimately became a very important customer for us. Edward: Charbel, this has been fantastic. Really, really impressed with what you built there and the fact that you turned around and sold it in four years. Before you go, can you tell me about your quake book? The book that really changed the way you think about the world?Charbel: Sure. There's been a few of those. But for me, the really, really influential book on me was the book written by Eckhart Tolle called A New Earth. That book, in some ways, talks about a lot of the things that we talked about with regard to meditation. But really puts the onus on one, to become aware of this precondition mental state that we're in of the fact that our mind tends to run rampant most of the time. There's a lot of benefit and power that could be obtained by coming into your body, coming into the present moment, coming really into a fully integrated power of being, if you will. I really had that message solidified in me through Eckhart Tolle's A New Earth. He also wrote The Power of Now, which is more popular and has a very similar message. But for me, A New Earth was really his masterpiece that made a big influence on me. Edward: Thank you so much for your time today. This has been fantastic.Charbel: Thanks so much, Ed. I have a lot of fun. Appreciate it. This is a public episode. 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My guest today is Charbel Zreik, managing principal Manifestation Capital. In 2012 Charbel founded a search fund, purchased DCI (a hospitality-focused telecom company), successfully turned it around, scaled it to a national footprint and then sold it. He now advises entrepreneurs attempting to scale similar sized businesses. This is Part 1 of the interview where we explore Charbel's career and path to CEO. Tomorrow we will talk about DCI and how he turned around and scaled the business.You can also listen to these interviews in your podcast player of choice: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed (for premium episodes).TranscriptEdward: My guest today is Charbel Zreik, Managing Principal of Manifestation Capital. Today we're going to cover Charbel's career and path to CEO. Cornell, JP Morgan, McKinsey, Light Beam Capital, DCI. Charbel now coaches CEOs to help them scale their businesses while simultaneously growing spiritually. Charbel and I stayed in touch with the time at business school, more than a decade ago. I'm super excited to have this conversation. Charbel, you had come from a finance background and then in 2012, you left McKinsey to form a search fund. You never really been an operator at all before. Your fund acquired DCI in 2014, and all of a sudden now you're a CEO without any real operating experience. I have a few questions for you on that. Number one is, how did you convince investors to give you money to run a business when you had never run a business before in your life?Charbel: Can I just say it's great to be here with you today. I'm excited to do this together. There were a couple of parts to convincing the inventors. Part of it was selection. I went to investors that I knew were in the business of backing raw talent and not experience. That was really the first important step is to find this small insulated community of about 30 or 40 investors that I knew would be willing to take a bet on young entrepreneurs as a first time CEO. That was the first part. The second part is walking in there, you had to convince them a couple of things. Sure, there were a couple of technical things, like you have to show that you could either close a deal or lead people. Those were the two things, and they'd be willing to take a bet on you if you could do one but not the other. Of course, having never closed a deal before I was really angling towards hey, I could lead people. I'd had some roles in the past. Actually, one of the things that really resonated with this community was the fact that I had grown up running my brother's moving business when I was younger and I had experience managing a blue-collar workforce. That's what these investors fear—the smart, McKinsey Wharton grad coming in here but having no sense at all how to deal with normal day to day human beings. Having had that experience under my belt, it went a long way.Edward: Your time at JP Morgan and McKinsey, how many direct reports would you have? How big was your biggest team that you're managing as an analyst and consultant?Charbel: JP Morgan was small. There were like four or five people there. I was an associate at the bank that I was managing. At McKinsey, maybe the largest team I managed was 12 or 13 people including people that weren't direct reports to me, they were indirect reports. Again, 5-7 direct reports and a handful of indirect reports.Edward: And in DCI, how big was your organization?Charbel: When I sold it, I had about 150 people. Edward: That's like an order of magnitude change. It's interesting, they cared so much about the experience you had when you were effectively 14 years old taking on this job, almost as much as they cared about the fact that you were a high paid McKinsey consultant.Charbel: Yeah, I would say even more. I remember I was still working at McKinsey at the time, and I was going around meeting a bunch of these investors. I was like, wow, I haven't talked about this in decades. Why am I spending more time talking about my brother's little $2,000,000 moving company than I am talking about these global experiences at JP Morgan and McKinsey that I've had? They were sure enough to know that that's the stuff that mattered. And also, with those investors, you talked a lot about more fundamental things to who I was as a person. I remember, when I was in Boston talking to definitely top three influential investors in that community. I remember distinctly being in this guy's office and he's looking through my private placement memorandum, and you can just tell he's kind of bored, he's not impressed, and we're nearing the end of our half-hour. And then as he's paging through he's like, hey, what's the hardest thing you've done kid? I stop and think I'm like, screw it, I'm just going to be honest here. The hardest thing I've done is forgive my father after he left my mom. I remember Bill closed the PPM, pushed it aside, and he's like, tell me a little bit more about that. I've been talking to my son in law about that, tell me a little bit more about that. We spent a bunch of time talking about that. These guys were looking to see what kind of character you had shaped, what kind of growth you had deep down as a person as much as anything else.Edward: I'm a big believer that the experiences you have when you're 12–14 affect your entire life. I don't think I've ever seen it as directly as this. If you hadn't had that experience, if you hadn't been overseeing your brother's moving company when you're that age how do you think your life would have been different?Charbel: I'm fascinated by the fact that you have that kind of philosophy and then how you chose 12–14. I've never heard someone choose that age as an inflection point. But what's ironic, most of these stories that I just told you—my father left home when I was 14, and I ran my brother's moving company when I was 14. It's amazing. They both happened at that age. It's hard to say, man. In retrospect, it's 2020. I'm very grateful for the path that I've had. I wouldn't want it any other way. But running that business put me through hell on so many different levels. It stretched me intellectually, emotionally, but just the sheer pressure because my brother went away every summer. He went back to Lebanon where we immigrated from, and he was gone. I was running the business for two and a half months. I had about 15 employees at the time. I was dealing with all these highbrowed decorators—New York City French decorators who were decorating these high-end houses and then hiring us to move in the furniture. It was a lot of just weight on my shoulders at the time. I think that probably shaped me more than anything—having that kind of responsibility for the employees, responsibilities for the trucks and the furniture on a day to day basis. But I think just the weightiness of having to deal with those kinds of customers and delivering on the overall mission at such a young age.Edward: Do you think you still would have gone to Cornell if you hadn't done it? Do you think you still would have worked at JP Morgan?Charbel: Those two things, yes. I think yes. Would I have eventually owned my own company and run it? That part I'm not sure. Because seeing my brother do what he did built in me a fire of like, okay, this is culture gone—my brother did a phenomenal job building that company, but he was very what you would expect of an entrepreneur running a $2,000,000 business. He controlled a lot of the things in the business. He was very authoritarian in his managerial style. I saw that and it built a fire in me of, hey, can someone do this differently? Can there be a different culture of empowering people and unleashing the best in people?JP Morgan, McKinsey—they're good places to learn certain elements of leadership, but you're generally a culture taker or not a cultural setter. That fire that was built within me in those early years at my brother's company, one, built the fire of wanting to come out and build a certain type of culture. But two, I had felt the weight of being an entrepreneur like that, which is a very different type of weight than trying to make the next promotion at McKinsey. It's a completely different kind of pressure.Edward: You got these investors to trust you to go in and become a CEO of this business. After, again, having never run a thing or operated anything since you were 14 years old. How about yourself, were you worried? Did you have a concern about your ability to actually pull it off?Charbel: Yeah, I was terrified. I remember being so terrified the week before we close the deal about running the company. I found myself starting to find different excuses not to do the deal until I finally named it. I'm like dude, you're terrified of going in and managing these people. It was a completely different group of people. These guys were not the McKinsey type, not big intellectuals. The six owners I was buying the company from were all like bodybuilders, all huge, 6'3'', 250lb guys, and I was going in there to manage them and tell them what to do. I was so terrified about this different type of environment where it didn't matter how smart you were. You were not getting respect for having a certain type of intellectual caliber. The brands were a detriment to me. They had hardly heard of Wharton, McKinsey, and JP Morgan. I had heard of them, it was a detriment to me that here's this pretty boy coming from these big brands thinking he knows what he's doing in IT and telecom. That's what made it particularly scary at the time.Edward: What skills did you wish you had that you were missing?Charbel: So many. But I would say, the one skill if I could pick any that I wish I had was knowing how to accept people exactly where they are without being judgmental of where they were on their developmental path and still show them the road ahead to developing further. I came from a culture, especially at McKinsey, where people were very critical of who you are by design and we're giving you feedback left and right all day long. I mean, you were at McKinsey, you remember that culture. There's almost an innate sense of being critical in order to be great. Even clients at McKinsey, we went in being a little critical of and thinking that how could you possibly do it this way. I learned very quickly that the average person—at least in my experience in this business—feels more than they think their experience of you. Being in their company, I can bite my tongue when I feel like being like, you idiot. I could bite my tongue and be like, that's not exactly how you should have done that. It didn't matter that I bit my tongue. If I felt it, they felt it. By the time the end of my tenure as a leader of that company came around, I had actually made a shift on that. It was the most difficult shift that I had to make as a leader. But core to that shift was this one skill, which is the skill of, no, really accept people where they are, lose the judgment about where they are as a professional, and then show them the path upwards. Edward: That's incredible. At the time you spent at JP Morgan as a financial analyst, what skills have you developed there that actually did help, or was it almost all these soft things that came earlier?Charbel: Look, my investors love me. In the boardroom, I was the man the whole time. I never wavered from being great in the boardroom. Those were the skills of JP Morgan and McKinsey. There was no strategic problem that I couldn't break down into the options, present the options, and present a confident recommendation for. I never got too stuck in the weeds. I could drill down all the way to the bottom of the weeds and catch any nuance in the financials, and I can go all the way to the top and talk about the two or three most important things to the company. That's great. That was wonderful. It helped me a lot not to make any strategic errors, and it helped my investors feel extremely comfortable with me.Those were good skills to have. They helped me upwards. They didn't actually help me in being successful and running the company. They didn't help me with my customers and my employees, which is ultimately the bulk of the equation when it comes to success in that business. Edward: We're going to talk a lot about that tomorrow for our second part. I want to talk about your time at McKinsey. McKinsey's a tough lifestyle. You're working a lot while you're there. Tell me a little bit about what you did when you were not working at McKinsey and how you made your personal life work?Charbel: That was challenging. We travel. We get up at 4:30 AM, 5:00 AM Monday morning, fly to the client site, and come back at midnight on Thursday. That was really challenging. For me, I was lucky enough just as I entered McKinsey to have had exposure to the art of yoga. Right before I joined McKinsey, I had just come back from a yoga ashram in the Bahamas. Where I had gone first seeking just a place to go and tune out so I can make a decision about this long-term relationship that I was in. My friend had promised me, hey, go there. It's a great place to tune out. I arrived and the next thing I know, I'm being awoken out of my tent. I pitched a tent on the beach. It's a beautiful serene blue island in the Bahamas. The next thing I know, someone's ringing the bell in my ear at 5:30 AM in the morning, and I'm waking up and doing two hours of meditation and two hours of yoga. And then I had a few hours free, some workshops, some vegetarian meals, no alcohol, no caffeine. And then I would do another two hours of yoga, another two hours of meditation. That was supposed to be my retreat. Eventually, I got into the zone, and it did serve as a retreat. That ended up being a really beautiful gift for me because it introduced me to yoga, introduced me to meditation. I think, every year—except a couple of years that I spent in Dubai—since then, let's see that's been 15 years ago. I think 12–13 of the last 15 years I've gone to that ashram every single year for somewhere between one and three weeks and tuned everything out including my board, including all my employees, and really dove back into that retreat. That was very helpful for me at McKinsey. Not only going there, once a year obviously but also having my own yoga and meditation practice on a definitely weekly basis and a lot of it on a day to day basisEdward: Obviously, you feel that the meditation work that you do has helped you immensely in your career and in your life. Can you put that into words to help someone who doesn't do that to explain a little bit about how it helps?Charbel: That's definitely the toughest question you've asked me today, Ed. There are so many different ways we can go at it. On a very basic level, it's basically taking a lot of the random noise and activity away from the mind. Our mind is a beautiful tool and could really be put to work in the service of some things. If we have a specific problem, we could put our mind to work in the service of that problem. The challenge with our minds is they take a life of their own. If I asked you, hey Ed, what's going to be the next thought that you have? You're going to have a hard time answering me because a lot of times the next thought that we have isn't up to us. In that way, there's a lot of random activity, random thoughts that come and go in the mind. There's fear that's developed in the mind from millions of years of evolution that have left us negatively biased, where we're vigilant and trying to manage fear and the downside of things. The mind creates some self-chatter around that—managing the downside, trying to foresee something bad that might happen, and think it's way out of that situation. The practice of meditation really brings a lot of that to stillness and decreases the amount of that random activity so that rather than being at the whimsical winds of your mind, you're a little bit more in the driver seat in terms of what you put your awareness, consciousness, and mindfulness directed to.Edward: Charbel, what's the biggest failure point in your career? Where did things not go as expected?Charbel: I would really say the first couple of years of running that company. I remember a juncture point—March 2016, I've been in the company a little bit under two years. The [...] was hitting the fan. I don't know if I can say that on this podcast or not, but the [...] was really hitting the fan. I mean, six or seven things were going wrong. My lead developer had developed a mental illness and had deleted our software program. I had fired the finance team for just being negative and having a cultural challenge. The new product that we launched was going sideways, and all these hotels—their internet access was going offline. I had the CIO of Starwood on my phone being, what the heck are you doing? You've got to fix this. A lot of things were going sideways. A lot of it, honestly, comes back to the failure and leadership that I talked about earlier. It was about me not being able, to at the time, really put some senior leaders in place that could be fully empowered, whom I could fully trust, support, and work as a strong team with. I had tried to control too much. I had been too negative with the people that had reported to me. I had been too critical rather than supportive and empowering of people, and that all came to a head in March 2016.Edward: What did you take from there? What did you learn that you were able to eventually have a very successful exit with that company? Charbel: I remember at that point of being maniacal about shifting my leadership style. I've hired a leadership coach at the time and I was like, you know what? I'm not exactly sure how I'm going to shift this, but I know exactly the points where I'm failing. I know that when I have these conversations, I go home at night, and I feel bad about myself. Because it was someone who had failed, and I had taken that failure on their part. I felt like they offended me somehow, personally, and that they let me down. As a result, I thought less of them. We had a tough conversation, I was critical in that conversation. I could see the point of where this leadership style where the rubber was hitting the road. I just became maniacal about that. I was working with my leadership coach at the time. I made these little laminated cards of the shift that I wanted to make. I wanted to go from this to this kind of behavior. At the time, my meditation practice was really in high gear, so I would use that as part of it. At the end of my medications every morning, every evening, I would take out my laminated card and really reinforce for myself the types of behaviors that I was going to have. At that point, I remember I was working on that shift, I also set out and I got approval from my board to hire three senior managers—a head of finance, a head of sales, and a head of operations. I said, hey I'm going to do it differently with these guys. I really honed in on my recruiting skills, as well as my leadership skills, and that's really what made the difference. By September or November of that year, I'd hired three very talented individuals. From that point forward the shift started to happen in the company. Now other things happened too. We had a very good acquisition that we made that helped to accelerate a lot of the changes that we're trying to make. But that turning point first came internal with me about shifting my leadership style and then manifesting that by these three senior recruits that I brought in place to help me run the company. Edward: Charbel, beyond just meditation, what are your productivity tricks? What do you do to be productive that most people don't do? Charbel: I think that's such an important question, Ed because no matter what we're doing in life, there's only a certain amount of time that we have to put towards it. There's probably a couple of things that I do beyond meditation. I meditate every day, twice a day. That's really bread and butter to my centeredness and direction in life. But beyond that, I would point you to other things. I'm a big believer that a year is just 52 weeks. If you're going to do anything great this year, you better do something great this week because that's it. You just have 52 of these and that's your whole year. I really prioritize my weekly planning. I have my annual goals every year. Those translate to quarterly goals, and then every week I review my quarterly goals and say, what needs to happen this week in order for me to make sure that these quarterly goals are going to happen?This weekly prioritization process—I'm really a big fan of, and there are other things that go along with that. Putting the big rocks first, the most important things first, and then letting the smaller pebbles in the jar, then the sand in the jar, and letting the smaller things fill in around the bigger things. But that whole process of weekly prioritization and weekly vision is really important for me. The other thing is self-care. I feel like demanding everything that we demand of ourselves, it's so easy for the core asset of ourselves to be depleted. I'm a little bit anal about how I do self-care. When I was running my company—I'm no longer running it now—I had this very specific check in, check out rituals every day. Where I would literally get up and do my morning meditation routine, et cetera, and say, okay, now I am checking in my role as CEO. Now I turn on my ringer. Now I actually take off my beaded necklace and I put on my gold necklace. I literally step into another role. Now I'm going to allow the thoughts that I get about the business, to stay in my mind and percolate because that's helpful. But when I check out at night, when I take off that gold necklace and put on the beaded necklace, when I turn off the ringer, when I do my second meditation, when I get any thoughts that come in, I'm going to write them down real quick on a notepad and leave them alone. Those check in, check out rituals were really important for me. I also scheduled my workout throughout the week so I knew I was going to get them in along with my meditation sessions. That self-care routine is right up there next to my weekly vision and planning.Edward: I just want to make a note to our listeners that you are wearing a beaded necklace as we do this podcast.Charbel: I was afraid you would notice that I wasn't taking this podcast as such a serious professional endeavor. I've actually never worn that gold necklace since I sold that company. Now, my personal and professional life has just melded so much more. Edward: We're going to pick this up tomorrow when we talk about the business itself. Thanks, Charbel. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
This is part two of my interview with Jon Mamela. Yesterday we explored his career at Procter & Gamble, Fairmont and his path to becoming Canada's top destination marketing leader. In this part of the interview we explore how destination marketing is different from traditional “company” marketing.You can also listen to these interviews in your podcast player of choice: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed (for premium episodes).TranscriptEdward: This is part two of my interview with Jon Mamela, CMO of Destination Toronto. Today, we're going to explore the world of destination marketing, specifically his experience in marketing Canada, and now the City of Toronto. Jon, can you start by describing what a destination marketing organization does?Jon: Sure, Edward. Organizations within the destination space can vary in terms of their mandate and the work that they do. Generally, I would summarize most of them in terms of the representation of the local community, be it restaurants, hotels, attractions, businesses of all sorts, that effectively benefit from what we define as the visitor economy. The destination marketing organization is the entity of the agency that represents those organizations in promoting and selling the destination to various source markets that are important to them, to bring new visitors into the local economy.Edward: How do you measure success then? Is it the number of visitors that are attending? Is it the amount of dollars spent?Jon: It really varies, again by organization and where its particular focus is. Most destination marketing organizations promote two primary forms of travel: one being a leisure traveler coming in and vacationing—as a couple, as a family. The other is the means with which you bring a meeting or what we call a business event into the community. That business event can take the form of a corporate meeting, it could be a sports event, it could be a large cultural event and the like. The means and the measures behind those two segments vary tremendously. One, you could be at the upper end of the funnel, measurement and outcomes of it in terms of making your destination, the destination being more aware and people in your target audience are more aware of your destination, down to consideration, and all the way as a lead over to the business event site, in particular in terms of assisting through the sales funnel and through the sales efforts, actually book a meeting that comes to the destination in itself. Measurement varies extensively. It can be attributed or at least tracked to. It means with which your hotel occupancy in your community sits at, the means of expenditures if the capacity in the means with which you can measure actual visitor expenditures at the cash register (so to speak) can also be assessed, and there are means with which you can do that buying third party data, so we take a look at that those types of measures as well.It's a pretty broad broad measurement scorecard (so to speak) relative to the role with which the organization will play, the segment of business they go after, and how (again) the community also holds them accountable.Edward: Are you targeting ROI? Are you targeting, hey, I have this much money to spend. It's going to drive this much value for our community?Jon: Depending on the sophistication, on your ability to do so, we can. At Destination Canada, we're used to being prior to where I'm here at Destination Toronto. We had an ROI calculation and a means of calculating an econometric model of return on investment across markets with which we invested in. That was based on quite a bit of historical data on visitation and marketing expenditure, relative also the forecasting on various elements or factors that would indicate what we would anticipate or see in terms of our performance of our marketing going forward. I've been in an organization that does it both ways. The more sophisticated and larger invested organizations or larger budget organizations where I was before get to that point. You can debate and have very good conversations, whether the means with which you don't own a cash register, how accurate that work was. I thought it was very well-constructed with third party expertise that we had, alongside with their internal business intelligence team. At a point with which you're truly getting down to ROI would, in absence of owning a cash register, is definitely challenging. It's up to the organization if they're seeking to go there or are expected to go there.Edward: I expect you could measure revenue or measure expenditures is probably the easiest way. Is there an equivalent for profit? What did destination organizations care about in terms of the equivalent of profit? Is it the tax revenues generated by those tourists? Is it the profit of the hotel chains? Who's paying your bills and what does success look like then?Jon: I was going to answer to you earlier a list of options there, all the way to option (e) all of the above to some degree. The funding mechanism for destination marketing organizations vary greatly to a degree. I would say vary greatly in terms of the nuances of them but primarily fall into two means: (1) They're based on what is called an accommodations tax, usually at the hotel level. If you're traveling and you see a line item on your hotel bill about a destination marketing fee or promotional marketing fee that is captured by the hotels, attributed, and flowed back to the destination marketing organization, that is one option. (2) Sometimes, it can be a line item expense for a government or a regional municipality in terms of direct contributions. It's taxpayer-based.I think the popularity of having travelers or visitors into your destination, funding the marketing and sales activity is one with which a lot of destinations go to. Declared at a city level, state level, or province level, usually find it as part of a platform or focus of the government in terms of recognizing the value of the visitor economy, and investing behind is as much as maybe not to the same dollar amount but in terms of the health care line expense and the like. It varies in an organization, depending on what makes up a better organization. So, it usually happens in those two means.Edward: I expect the feedback cycle is very, very slow. Like my wife has wanted to go to Bhutan since before we even met, and we still haven't gone together. When we finally do, I expect tracking the visit that we do have to the marketing message here 20 years ago is just going to be impossible. How do you know what marketing is working and what isn't?Jon: That's a great question. Study after study that we've seen and witnessing that the means of how many times one changes their mind in the past to purchase in the journey of deciding where you're going to go and what destination rises to the top, and how quickly one can be subverted over to another destination almost at the point of the cash register was seeing something more compelling and the like, is tremendous. The means to tie it back that ROI, and believing that with which the marketing activity that you've put out in the market has been the lone attribution or a big part of the attribution, is extremely difficult in this sense. And again, because most destination marketers don't own a cash register. When we have a sales force—as we do a global sales force that is selling business events—where it's a very engaged one-on-one conversation into a series of engagements through the sales funnel process, they're particularly our efforts that brought a meeting over to the destination.On the leisure segment side, it is that Holy Grail and the means with which we worked with the likes of Google and others that we've tested in very interesting ways. A means with which we have confidence in the exposure of the marketing and the messaging, to what we look at when there are various technologies out there in our industry that tag browsers to show that we know we reach you on your phone and you showed up in our destination.That attribution comes again with a lot of questions and debate whether there's accuracy and ability to do so. Those organizations and technologies certainly support what they believe this to be true. They're certainly valid, they're great data points, and they can be used in various ways, but a true attribution, unlike in a lot of other categories, when (as you said) the means of choosing a destination can take years, as you've noted to Bhutan for 20 years, or even the next year and how many other times you've engaged that brand, you're not going to be—by means of your financial ability—in touch with your journey all this time, You can even say it's the Holy Grail; it is a bit difficult even to suggest that it's going to be an easily provable or a worthwhile pursuit.Edward: Given that difficulty, what do you do? What are you optimizing against on your marketing spend in the short term that you can measure?Jon: In terms of what we look to, in terms of where you can drive behavior of a customer. Optimizing our spend, what we create in terms of the story of the community and the means with which the content partnerships and the means with which we generate content. In addition to traditional paid media options, content co-creation, publication, and dissemination is a big part of where a lot of destinations have move to, in terms of what is the story that we're telling on behalf of the community and what are the means with which the content you create, where that gets viewed, how it gets passed along, how gets engaged with, is a big part.An example there, for instance, while I was at Destination Canada, Korea was one of our key source markets. We co-invested into an opportunity there with which was a long-form content play that we were able to link back. Again, not with 100% certainty, but we were able to link back given the growth in the explosion of interest in the destinations that were featured in this long-form content in Canada, from the purchasing, what's happening with travel agents and tour operators who are featuring [...] that the link to that is something with which you try to make the case.In terms of real time optimization, we do so on performance. A little bit just in terms of the performance, the media in terms of getting people to our website, and the means with which we optimize against the mix of the media choices there, so we optimize that behavior. A behavior (for us) is a digital referral onto a partner and optimizing investments. Someone from us and moving onward to a hotel would give us an indication of someone taking a further further lead into the community in terms of inclination to visit. We will lead and optimize. We optimize towards leading a customer further down the path to purchase in many instances.Edward: The end of the funnel is relatively easy to optimize, I imagine. What is your cost per visitor to a hotel landing page? Is it what I expect you can do? What percentage of your budget would be end-of-funnel versus early funnel in destination marketing?Jon: I would anticipate that there's 50/50 sometimes. It varies on the year and varies on the objectives (I guess) of the organization in terms of the expectation of the community and the stakeholders, and where the focus of the business is going to be. Clearly, in a global sales activity with which we're bringing in business events certainly leads a lot more down to the bottom of the funnel in terms of us really trying to close and win business and the like. There is some top-of-the-funnel effort and activity is selling Toronto's a place to bring your business meeting, so I might be more of a 30/70 split, whereas driving and attracting a leisure visitor could certainly be anywhere it's 50/50. It's going to be (again) on the intended outcome or what you're trying to seek to achieve. More and more, the importance of holding that obligation and driving home the collective community story and the content (as I alluded) getting created behind that and top of the funnel is becoming more and more important and difficult to do really well. More important is because no one else in the community is telling the community stories, much as destination marketing organizations should itself.Edward: In that story-telling, in the top-of-the-funnel stuff, is it primarily input metrics? Is it a matter of, hey, we created this content. We think the content is good, therefore we've done a good job, rather than trying to figure out how much revenue has been generated by this great content?Jon: Certainly. I would say there are output measures. Working with publishers in terms of engagement time, with content, the referrals, the forwarding on, the passing along, the means with which it actually performs with the embedding of the ability for someone to dive deeper or search your website or onto another landing page and the like.Edward: On those output metrics, have you ever looked at the correlation between those output metrics and actual visitors over some delayed time frame? If you do a really good content campaign in 2012 and you have all those output metrics of engagement and stuff being really, really high, does it correlate to more visits in 2013 and 2014?Jon: It can. What we've done in terms of working with Google here is actually taking a look at what that lag period is between engagement with content and advertising to search, and then onwards to visitation. It was (I think) the first global pilot for Google to do that with destinations. We did that as team Canada to really take a close look at that. It can be done. It's not done as being less confident in the results. It does cost, but the means with which the expectation of the stakeholders of the community is expecting us to prove that, certainly can vary from the work I've done in the past. It's challenging, absolutely, but it can be done. It can be done and we have shown it through that work with Google.Edward: What type of correlations do you see? Is it to the 0.1% range or is it like a 0.5%? If I get that metric up, how confident should I be that it's actually going to do something?Jon: That was the first time pilot that we did with Google in terms of trying to prove a point in terms of how we set it up and to test that again, similar as we talked earlier about the means of setting that up in a clean test environment but a balanced AB sample approach. Statisticians are a much more complicated scenario planning and modeling than I'm describing it here with you. The means with which and the correlation, I can't recall what exactly was. I'm not saying it was one, and even at 0.5 I can't recall, but the indication was that the means of the investment would give you the impression that it was worthwhile to continue to invest, that you would see the return. I just can't recall. We didn't act on it at the time. It was pre-pandemic, so the industry itself in terms of here in Canada with our borders closed, to go in and start marketing to Americans, to continue to prove the model and prove the case would be difficult to do so or would be meaningless at this point.The same type of tests I'm working with OTAs and the like are possibilities here to correlate and connect based on (again) if you're doing high-level funnel content efforts or you're going down to the bottom of the funnel. Tactical means can also be done with them.Edward: That's a nice lead-in. We recorded this podcast in early 2021. Covid shutdowns have been going on for almost a year now, but the vaccine is being distributed, so the end is at least visible. How did Covid change the way you thought about destination marketing last year?Jon: The importance of staying top of mind, even with everything going on in the world, once our target audiences' lives, the state of concern, security of one's health, the health of themselves and their family, when and how would travel come back, and when the means with which people look at travel as something with which they want to pursue, all of our research is indicating clearly the importance and the high level of desire. Travel still sits on people's expectations when this pandemic goes to a stage of not being a pandemic, that the borders open, and the confidence and safety is addressed in terms of being able to find some degree of the next wave, the market behaving and people behaving. The importance of staying top of mind and now addressing a combination of both being inspirational, still. Travel's one of those most inspirational categories that you can connect with people on but also the importance of health and safety. You're not coming across as a destination purely not by health and safety alone and you're coming across as if your Clorox or something to that effect, where the efficacy of your product is fully depending on the brand reputation. The need to recognize health and safety, the balance of health and safety, and the experience one would have has now risen in importance to the customer and the traveler. What exactly is the experience I'm getting on the other end? What can I expect? What is the physical separation and distancing that businesses and experiences are delivering? What is sanitization going to be and such? There's no turning the light switch off and this pandemic disappears and behavioral shift just goes back to what used to be. It's not going to be like that in our indication of the research, so the needs on marketing the destination will have to have a very careful and an appropriate balance of messaging, without getting to the point where it's so factual and sanitized, overused means with which the inspiration is lost because inspiration is going to be equally as important.Edward: That gets me to another thought. I often say that marketing is less about advertising what people think and often more about things as fundamental as product. Now, at least in most organizations, a product is part of the organization, but for destination marketing, not only does your marketing or not control product but your whole organization is a control product. The product sits under all the hotels, attractions, airlines, and sanitation departments effectively for the city that you're marketing to. Do you ever have to try to have any impact on the product or do you just live with the product that you're left with and focus on the advertising?Jon: In terms of the direction we take, we don't focus in terms of the development and the progress in terms of product. We don't own anything, we don't manage anything as you've alluded. Some organizations in the destination marketing space have a pretty aggressive look at product development and would possibly have a means of either co-investing or facilitating co-investing and direction in terms of what gets designed and developed in their local community. Here in Toronto, we don't. When I was at Destination Canada, we were neither at that national level, by any means. You are—including coming out of this pandemic—going to be a means of taking a very—as we do—close eye on. Who's going to make it through at the other end of this pandemic? What's their business vitality look like? We have a very different compliment instead of a product that we can market coming out of this—at least in the near term—and where we will be in the future. That is part of the unique challenge and the means with which the effort to rise above any singular product or experience. Being able to encapsulate that collective experience within the community in a way that you're not putting logo soup or a means with which it's just a quick flash of this, show this, show that, show this, and at the end of the day people don't know what you actually stood for.Edward: Is there anything you can do to influence those products, though? Is there anything you can do, like hey, is there a way to improve the quality of the hotels in the country, or the distribution of hotels, or the entrance fees to national parks? Are there any leverage you have at all to influence the product itself, or you're just left with creating the content with what you're given?Jon: More the latter. You're certainly not doing so in absence of having numerous number discussions, staying connected to your community, and stakeholder engagement that we put dearly in terms of the importance of staying closely connected to our industry. The decision's often on a private enterprise' standpoint of owning a property or managing a hotel, to an attraction. If anything, we can provide intelligence of who the visitor is, what they're looking for, how their behavior, attitudes, and consumption patterns change. We could provide the intelligence, but the means to really make an impact on what you described—in terms of a decision outside of our hands—we certainly could be an advocate and a point of view at the table on things but certainly by no means do we try to drive that change or expect we could make that change. Speaking of your notion of park passes, it wasn't our decision at Destination Canada but working with Parks Canada to make parks accessible in 2017, which was Canada's 150th birthday. It was a big move to expose the parks and I think they've done even further activities of the sort since to make parks accessible to many more Canadians and visitors. They'll cover that. Clearly, parks are an opportunity to continue to promote and showcase all that there is to offer in that vein. That decision wasn't ours, but we capitalized on it when I was there.Edward: It sounds like you can collect information about what your customers or potential visitors are looking for, and you can feed that information to the people who are building the products. In a way, that's your lever of influence. Your lever of influence is effectively knowledge dissemination that they otherwise wouldn't have.Jon: Absolutely. Again, through the means of financial data, credit card data, and direct debit data, we and other fintechs can track where and what type of categories are visitors from various markets buying, where they're buying, what season and the like. Coupled with model data, we have the ability to take a look at an anonymous fashion where people are moving in and around the community. Mirroring and layering those two—although they're not connected by any means—starts giving us quite a bit of insight in understanding behavior without intercepting and interviewing a ton of people. You're gathering it anonymously in the background. That's invaluable information and insight. You see the shifts pattern-wise by season, by origin, by visitor, year over year as well. It's incredible value that our stakeholders do really appreciate.Edward: Jon, one of your big successes at Destination Canada was driving visits from Korea. Can you spend a couple of minutes just walking through how you did that, what the impact was?Jon: Absolutely. It was one of my career highlights in terms of the success that it drove. I think every CMO would probably lean more to my data side than my gut side in terms of making a call on something. This is a bit of both. Having trust in my team in Korea who came to me with a strategy and a plan, the long-form content within Korea and the TV series were extremely popular. Arguably, we filmed at the various locations and we've all heard the success stories of New Zealand, Iceland, and other places within the popular HBO series. The opportunity was presented to us that this new series is going to be chosen in terms of destinations around the globe, and we were approached as one of many destinations to see if we would have interest in hosting the filming crew to film the show.Important with the team and a great group that I had working with me in Korea was ensuring that the storyline was authentic to Canada and that it wasn't just a misplacement of a storyline and a place that doesn't seem natural, or just seems out of whack. You just lose confidence and that could be any means you'd want to go and see that place because it just didn't even connect with the story.Fortunately, the story was a really odd mix of both humor, sci-fi, romance, drama, all embedded together in a great Korean style fashion with content creation. They make it work. We went in with pretty much all chips in to see if this long-form content series that was going to promote Canada overall but a particular region of Canada in Quebec City could, in fact, connect with travelers. The team certainly sold me on the idea that Korean travelers and many travelers also in the Asia-Pac region were very keen and made travel trips and decisions on where popular film series in Korea also took place. Seeing that first-hand in the [...] really quite surprised. I don't get popular fans of certain shows will do that here, but it was more of a general trend there. We went all-in, collaborated with our local national airline—Air Canada at the time—and with the Fairmont Hotels, and put together a [...] to bring the crew over. These are top A-list actors in Korea, filming various segments of the show in Quebec. The result of this series—I think a 13-part series—where we weren't in every minute of the show in terms of the destination but very important points in the story, including the closing point which is the romantic conclusion of the story, happened in Quebec. The popularity of this just went above and beyond anything we would have expected. Now, having the benefit of having Korea's equivalent to Brad Pitt and another movie star–caliber actor doesn't hurt either, but the outcome was hundreds of millions of views of putting Quebec on the screen of everybody in Korea and beyond. From television to social media, in counting, we had over a billion views of this content. It's incredible. The means with what was then putting a place on the map almost, somewhat overnight in terms of the popularity of people wanting to go and see the scenes or the location of the scenes, to see these in Quebec.Kudos to some of my colleagues in the industry who were sold on my case, that this actually had potential. It was one of those [...] you think the data's right in terms of the potential, but you got to go with your gut. This is something worth pursuing and fortunately it really did.Edward: Did it translate into actual visits?Jon: Absolutely it did. The hotel, that particular Fairmont property with which it was filmed, saw incredible growth. I can't speak to the particular hotel performance per se. It's just on top of my memory, but our visitation from Korea was well over double digits, like into the 10% and 20%, 30% growth that we were seeing coming into the country overall. Recognizing how popular that was, that was a big driving force of who was coming in.Edward: How fast did that happen? Jon: Within a year. The benefit of having a director fly with Air Canada helps, so people could get here quickly, direct from Korea to Toronto, or Vancouver, or to Quebec City. It was pretty quick. And the means with which we stood out in the market for sure and capitalized on the series itself through really an omnichannel approach with which we promoted on social channels. We had the actors commenting on their experience in Canada. In addition, we did [...] and intermediate was all in, but the anchor and the crown jewel of it was that TV series.Edward: John, thank you so much for your time today. This has been really great.Jon: I really appreciate it. Thank you, Edward. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
I met Jon while interviewing for the role of CMO of the Emirate of Dubai. In this interview we talked about his path to being the chief marketer for the country of Canada. Tomorrow we cover details on how destination marketing differs from more traditional “company marketing”You can also listen to these interviews in your podcast player of choice: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed (for premium episodes).TranscriptEdward: My guest today is Jon Mamela. Today, we covered Jon's path to CMO. Procter & Gamble, Fairmount, Four Seasons, Destination Canada. Jon is now CMO of Destination Toronto, the partnership that's focused on growing tourism in the greater Toronto area. I'm excited to have this conversation and where it's going to go today. Jon, you were Director of Customer Experience at Four Seasons when you got the CMO role for Destination Canada. How did you get that job from where you were?Jon: The opportunity at Destination Canada presented itself through actually a bit of my past when I was prior to working at Four Seasons, I was with Travel Alberta. An organization who worked closely with Destination Canada at the time. I got to know the National Tourism Group through collaboration, partnership, co-investment in marketing, got to know the leadership and on my time at Destination Alberta, leaving over to go to Four Seasons, I received a call about 2, 2 ½ years into my role at Four Seasons. From then, at the time, the CMO who is ascending into taking an interim CEO responsibility and at the same time they had another individual leave and opened it up as an opportunity to the marketing department and was approached to interview. The opportunity to take and put on the Team Canada Sweater was intriguing enough to do something. You normally don't get too many chances in a lifetime to market an entire country. This enthusiasm, I put my name and the hat, went to the process and was successful in landing the role. Edward: You had destination marketing experience before that role, but in the meantime, you had built out expertise in more end of the funnel even retention marketing. That end of the funnel retention marketing experience at Four Seasons, was that considered valuable or were they really hiring you based on your Alberta experience?Jon: I think a bit of both. I would say that the opportunity with which I had to work in Destination Canada had responsibilities on both ends. In terms of the experience with Destination, our Travel Alberta which was important for appreciating and understanding the industry and the industry dynamics and that upper funnel engagements and approach and strategies. But at the same time, with which the responsibilities and the work that we did at Destination Canada and is still being done, there is lower funnel activity going on and that's working with the trade channels and the conversion channels with which where the path leads a customer to make an actual booking is a very important relationship to hold with the likes of travel agencies, tour operators, OCAs and the like. Having that experience at a hotel side and appreciating that dynamic in mixing and melding the two was invaluable in the time spent at Destination Canada. A bit of both.Edward: Was there any skill you were missing you took that CMO role that you had to develop after you're there?Jon: Yeah. The biggest skill or the opportunity to grow into was the dynamic of when representing a country as large as Canada and complex as it is, the number of partners that we were bringing into the fold to help coinvest and help us go to market was very key. I would say a skill to build was the relationship building and the importance of staying in touch and engaging and building the business case as to why a destination like where I'm now in Toronto to Alberta to Ontario, British Columbia, Vancouver. Why would they come on and market with Destination Canada when they themselves have their own independent brand, they have their own focus strategy, where and how do we add complementary value. The building the business case and building consensus. Clearly having learned a little bit of that at the hotel level and working at a brand level in the hospitality industry, you're doing similar commitment behind building commitment with hotels under your management. But a little bit different when these are pretty independent organizations. With different boards and different mandates. That skill of building the business case to bring everyone in together and operating as Team Canada was something that I would say I didn't have a great deal, a little bit of exposure in Alberta. But during the course of my time was built over my tenure. Edward: Jon, I want to go back to the path that got you there. You grew up in Canada but you chose to go to college in the United States. Someone who also grew up in Canada, I know that's fairly unusual. How did you come to that decision?Jon: It was a pursuit of my interest in playing sports that took me to the United States and there are certainly many Canadian athletes in the US university and college in the CWA system. The opportunity to take my passion playing soccer alongside with the opportunity to go to university took me down to the US. At the time too, when playing soccer while schooling maybe is not as popular as playing hockey in Canada as it still is today. But soccer certainly has grown in popularity. But the opportunity to broaden my exposure to the world, so to speak, in the early ‘90s, getting down to the US, playing on a team of international teammates from around the globe and pursuing my education at the same time got me down to the US at the time when it wasn't too popular thing to do. But invaluable as it led me to continue on my education and to my MBA and then on to Procter & Gamble in Cincinnati. Edward: That's my next question, having done that, you decided to stay in Canada, you went to University of Toronto, how do you think your career path would've been different?Jon: That's a very good question though. Looking back at it in terms of the interesting and if everyone looking back at their career looks at what doors opened at what points in time and who you meet in the circumstances of it. I don't anticipate I would probably have a breath of career maybe in terms of the companies I would've worked for necessarily. Not that P&G isn't here in Canada. Clearly my career took me back to Canada working with the hospitality and tourism industry where I am today for a great extent of it. But I don't know if the same doors would've maybe been made available to me. At the same time, a door can open but you have to be able to make an entrance and make an impact at the same time when it comes to your career and working through past engagements and relationships in your network and the successes you've had. I don't know if I'd be where I am today just based on the nature of where I may have studied and where that would've lent to it. To our question, something tells me there could've been [...] that I could have landed in a similar path and career. But it's probably not, I would probably maybe find myself if either maybe in a banking industry, which is pretty financial services which is pretty significant here in Toronto. Or I had stayed out west, maybe in the agricultural sector or something, who knows where it's quite common. I look back at it and just bewildered a little bit and turns out things always play themselves out when you take a look back at what's been across your desk and what passions and enthusiasm you have and what connections can lead you to. Edward: You started your career at Procter & Gamble. In 1996, you were Brand Manager for Digital Marketing. This was back before even people were even calling it digital marketing. What did you guys call digital marketing back then?Jon: Interactive. P&G Interactive was the group name.Edward: So you're Brand Manager for Interactive Marketing. What were the big problems you were trying to solve back then?Jon: On the group, I had a particular focus on the consumer market intelligence side of the group's focus and working closely with everybody in the small team that we were. It was an interesting time in the sense that we were looking at determining with this advent at this channel what would be the migration and the migration strategy to bring brands under the P&G umbrella into those channels and how do we effectively show as this was always being taunted then, their flaunted story that it was the most measurable channel, you can get the ROI, it's so much better than anything else you could.The degree of which P&G measures and monitors investment in spend for media and programs is extensive and well documented within the organization. This was an improving ground. We considered it the next evolution in step of the new media channel. Like going from print to radio, to radio into television, and to television to internet. This was a means with which we were showcasing the incremental value that was going to be enabled by two way conversations with customers, the building of databases. Unlike we would've been able to build before, the opportunity for different forms of contents, trying to determine the ways with which traditional means of marketing and selling CBG based products was going to work in the ad model spaces and channels that were options that were available then. It was pretty broad. It was really making the compelling case that we needed to be there and it wasn't just an environment for new startups and the like be a technology based startups or content plays that a package goods company could capitalize on the creativity that was permitted. The data was now at a level that we didn't have direct access to before and the means with which the measurement was lining up to similar measures where we would test advertising efficacy all the way through close model purchasing systems that we were very ahead of our time back then.Edward: Part of what you're responsible is for is attribution. How did you do attribution back then? Attribution today is hard enough. Back then I imagine the tools you had to work with were pretty limited.Jon: They were. Attribution primarily done with the means with which we succeeded in it in a very interesting pilot test with a variety of technology players and data panel providers. Working with the legs of AC Nielsen. At the time, there was just starting to become the means with which you could create internet panels which were then cookied or tagged in terms of being able to witness, monitor your web browsing behavior way back then. A means with which we could close the loop in terms of the investment and spend of the marketing and insurances that in splitting a shop per panel who committed to participate in various research and split that panel in a maybe fashion that allowed us to expose by being able to serve ads to one audience versus another and watch exactly also what they were—these same panels used by Nielsen at the time—would come home and just scan their groceries. We're doing so in terms of being able to then serve that grocery buying data off their receipts and the like. We had a means with which a central foreplayers, the advertiser, the shopper in panel, the ad serving media company, and the publishers got together in the means with which we effectively created an online digital close environment for the degree with which we'd be able to adjust spend, expose certain audiences to certain communication messaging and then watch what their behavior was by virtue of what they were scanning and bringing home back from the grocery shopping bag. Edward: That's amazing. I was going to say, I feel like now, so much of attribution is based on last touch attribution. I push companies to do more and more randomized control trials. You guys are effectively doing a randomized control trial back in 1996 to measure the effectiveness. Clicks didn't even factor into it. It was a matter of hey, did these guys actually buy more or did they not? And then you just assume that whatever impact you had on that panel was broadly applicable and then just rolled it out more broad.Jon: Correct, yeah. Clearly with the modeling on any other means of incremental exposure to other advertising was also considered and factored in, correct. Edward: P&G tries to keep people around for life. That's their motto. But you left in 2001. Why did you leave?Jon: Procter & Gamble, a lot of people make that decision early on in their careers to commit to an outstanding career that can be provided by the organization or people leave at that point of the five year mark and around that five year mark in many instances. For me, it was really taking a hard look where my passion was with the work we were doing in the interactive space. The group itself was, the P&G interactive group, we had a mandate that the need and necessity of that functioning unit inside as an internal consulting group for the brands didn't need and hopefully it wouldn't have to exist after about five years that the brands and the organization would and by the growth of the internet was going to make us obsolete and that the need of group, we would just migrate back into other line function opportunities. I took a look around and at the time, there was the pre internet bubble and at that point a lot of P&G expertise and brand marketing and other functions were leaving to go to Silicon Valley and other parts of the country. Taking a look at what my colleagues were going to and where I was looking to expand my opportunities and my passion of what doing this versus getting on to a brand was a decision of taking a risk of exploring options outside the business. Unlike P&G-ers being recruited directly to something else, I took the opportunity into parting the organization to assess multiple options to really appreciate whether this was an environment and a place that I was moving into the internet space was going to be something I was truly enthusiastic as much as I was in Procter & Gamble. Inside P&G, the opportunity to experiment, you're the biggest fish clearly inside of an environment, in terms of the media spend, you're sought after by so many publishers and so many technology brands wanting to prove their business case on the benefit of what they could serve P&G as a client, and the like. But when you leave, you're pretty independent. It was a big change. But it was a risk that paid off ultimately in an interesting way. For me, it was pursuing what I thought was going to be of a long term career in the internet space itself. Edward: Now, I also heard that you met someone on an airplane. Jon: Yeah. That's part of the continuing part of the story in terms of speaking to the doors that opened, so to speak, although we didn't want to open the door in the airplane at least while in the air. But the opportunity when I left Procter & Gamble and just doing independent work with various brands that I had got to know and organizations, a conversation on an airplane led to a path in a career shift and pivot to the hospitality, tours, and travel space. That just simply occurred by being, you always say, ignore your neighbor on your plane. You don't want to be the Joe talker and bothering anybody, and it was mutual respect, we hardly chatted much at all in a flight at the time from Toronto to Denver. But having a mutual common interest in sports. The individual, he was reading the sports pages. The Toronto Newspaper at the time. I struck a brief conversation, it was near playoff time. Through that short conversation, a quick why you're flying, where are you coming from, led to a love to stay in touch should be back in Toronto and led to an introduction into Fairmont Hotels. Which I didn't appreciate knowing a lot about even though we're Toronto based at the time during the merger at a buy out that they were in the midst of. But it led to a great career and a start in hospitality. Had I not struck up a conversation, I was sitting next to this fellow, I would not be where I am today. Edward: You hear these stories from time to time about a chance meeting on an airplane leads to something. I never talk to the person sitting next to me. Am I making a mistake? How do you make stuff like this happen?Jon: As I said, I wouldn't be the guy that you'd be like, my gosh, tell this guy to shut up and pay attention. I don't know. It was one of those you don't know in terms of where conversations can take you. The enthusiasm to have and have them, being open to wherever it goes and a lot of them don't lead to anything other than just being cordial and striking up a discussion. But if you don't try, you don't know. You'll neve realize what could be on the other side of it. I'm not suggesting to everybody to say that's the secret sauce to driving your career forward. But it was something that worked out at that point in time. Again, it wasn't from a conversation of here's a job. It was clearly the opportunity of introduction that led to further discussion of then let's your process of engaging with the VP of Marketing at the time for Fairmont Hotels and Resorts and the opening they had that my background was a suitable fit. The opportunity presented itself. I would just only encourage when you can strike up a conversation with what might be a stranger or someone whom you might only know by a third degree connection on LinkedIn to where it could lead. You'll just never know. You just need to be pretty open to it. Edward: Jon, at Fairmont, you oversaw loyalty. Fairmont's loyalty program is very different from what people might be familiar with, at say Marriott or SPG. Why was it so different? What were guys thinking?Jon: Yeah. Certainly, it's a different structure. Fairmont as a brand still exists, it's now woven underneath Accor, which is a larger global hotel, hospitality player based out of Paris. But back when I was with Fairmont as an independent company and a brand, it at the time, as I alluded earlier it was an interesting point and its history, Canadian Pacific Hotels had acquired Fairmont Hotels out in the United States along with Princess Hotels in terms of an acquisition. The amalgamation of those three brands led to, at that point, of going forward, three separate programs that were coming in that each hotel brand had a loyalty based program functioned and ran differently. They're just similar to what the industry had been on a points basis, of a spend, receive X points and the currency and through redemption of that currency was with which the benefits primarily are realized. Fairmont recognized at the time that this expansion, this opportunity was going to present itself with a unique marketing challenge of which did not sit with a lot of cash on hand to be out there competing with the likes of Marriott, Hilton Heights of the world and that the opportunity to build and engage with customer directly through means of the loyalty initiative was going to be one that which we could do more smartly in terms of the cost model behind it. But at the same time count on the customer to be the voice of the brand and to engage others to speak about the experience they had at the Fairmont. The avenue we went which was purely based on annulating with the luxury brands, most luxury brands were doing in terms of offering personalized service and attention, doing it at scale, doing it in very large hotels which was a new proposition because we had large room properties versus most property brands or smaller room counts. But doing it with that attention of personal benefit and recognizing that you, Edward, are the same Edward going to multiple properties under the same banner and building upon the knowledge built and understood by one property to parlay that into ways with which we could customize your experience going forward. That proposition of personalized attention enhanced in stay benefits that we launched in various ways and capacities in partnership with a lot of other brands that wanted to get in front of an affluent customer led to a unique positioning in the market that was welcomed once people understood it was in the program. Clearly, everyone's comparison to what the industry standard was or what I was getting at Marriott or as I said, a Westin at the time, part of their merger, Hilton and the like. We really found to our customers that it was more meaningful to know who you were, how important you are to our business, and how we personalize your experience with what was most meaningful to you. And not simply just reward you with a cash currency that was sitting as a liability to the hotel company and was looking like everyone else's programs primarily. Edward: Jon, what were the biggest failure points in your career? Where did things not go as expected?Jon: That's a great question. I don't think anyone asked that one of me before. I'll answer from the perspective of maybe first career path and then secondarily maybe from a progress in terms of a success of the work that has led with many successful and talented people. From a career path standpoint, I would say maybe, I'm not going to look at it as a failure, but I look at it as maybe an opportunity. You give up opportunities as much as you pursue and take others. Again, I don't classify it as a failure, but I do undertake and look back had I stayed in some of the organizations a little bit longer as to where my career would have progressed inside those organizations. Be at Procter & Gamble as we talked earlier, but leaving around that five year mark or sticking around with Four Seasons or a Fairmont longer than I had in the past and building up my career in that capacity. But I was always leaned in and most attracted to the opportunity of additional growth and responsibility and broadening and enhancing skills. I always felt maybe the accelerator to get that outcome was through a move ultimately. But you can take a look back and see some of my colleges were still with those organizations doing very well and do wonder a little bit. Classification as a failure, maybe not so much. But opportunity in terms of one given up to pursue another. On the side of that question to the pursuit of what may not have occurred in terms of the production or the delivery of work and success or failure in the business. I look at that one too and I'm a little bit struggling to say I would lean on something, I'm not suggesting by any means perfect hit the homerun every time I'm up to batting. Maybe I always challenge myself with expediency which the work that I'm leading is getting out the door on behalf of the organizations trying to be faster and more nimble and the like. I look back at the level of accomplishment of maybe not being as either as much as I anticipated we could've gotten to or at means with which the work itself was either passing the baton at some point on to others to carry on after I left. But I don't look at it particularly as a significant failure. But I have to give that one more thought. It's a great question. I'm sure if I spend more time at it I'd come up with something for you. Edward: Jon, what are your productivity tricks? What do you do to be productive that most people don't do?Jon: One that I find in terms of the amount of information I like to peruse, and keep up to date and read. I have a pretty consistent means with which I organize and file information and a system in terms of the devices and where I hold stuff so that it's not scattered in terms of multiple devices and content being placed in multiple places. I go through a pretty regimented approach in terms of unifying nomenclature and filing systems, so to speak, on multiple platforms from Evernote to Google Drive and others that I use. I find that means of quick access and application of something I'll be there I've read in the past. Bookmark red, taking personal notes to be able to ease up access in finding and applying it on a regular database would certainly be a big part of what I find that helps me personally on my productivity side of things. And that being diligent in doing so on that front. Which takes a little bit of additional time because I appreciate the business of everyday life to everything from the general environment to recall something. I read something somewhere, I've done something somewhere. I definitely capitalize on the means while trying to have great consistency and where I put anything I learn, anything I observe, anything I listen to in a pretty consistent fashion for easy retrieval. I try to remember it and apply it would certainly be one of the big things I find from my productivity hack, I guess, if you call it that. Edward: Jon, this has been great. We're going to pick this up tomorrow with a dive into Destination Marketing.Jon: Great. Thank you, Edward. This is a public episode. 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My guest today is Tom Seery, founder and current Executive Chairman of RealSelf, the leading review site and marketplace for cosmetic surgery. This is Part 2 of the interview where Tom explains the tools he used to build and grow the RealSelf business into the largest site of its kind in the world. Subscribers also have access to yesterday's interview where we explored Tom's career path that set him up to found RealSelf.You can also listen to these interviews in your podcast player of choice: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed (for premium episodes).TranscriptEdward: This is Marketing BS. This is part two of my interview with Tom Seery. Today we're going to explore how he grew RealSelf from scratch into the leading cosmetic surgery marketplaces in the world. Tom, can you start by describing what RealSelf is. Tom: RealSelf is obviously a website. Maybe it's not obvious—realself.com. It is a resource that enables people to find information that is related to cosmetic procedures. Cosmetic treatments ranging from botox to cosmetic surgery, and to find bulk information about what those treatments are like and to find a doctor or a clinic near them or relevant to them and map that up to booking an appointment. Edward: You came from Expedia immediately before that. Was RealSelf pitched as a TripAdvisor for cosmetic surgery?Tom: Did you hear that from me before? Because that's pretty good. In my original pitch, I actually looked at the deck recently and I literally said it's a TripAdvisor for your body, face, and smile. That just seems to really help people get quickly to oh, okay, what does that mean? Then, it will lead to describing what you mean: body, face, and smile. What I mean by that, by the way, is millions of people in the US and hundreds of millions globally have explored, continued to be interested in whether they should move forward with a cosmetic procedure. Thankfully, they're very thoughtfully considered purchases because while the return policy stings in some of these things. It's pretty permanent in many cases. It's modifying your body, your appearances, it's taking some risks, and it's financially a big deal. I know you've had a background in big purchase decisions. This is up there with home buying, getting married, and having kids. It's that level of thought and consideration. Edward: The fact that it's a high priced point, permanent, and rare, is what makes it different from the hotel space and what TripAdvisor is doing? For many people, travel and hotels are also very expensive, but it's not as permanent or life altering. How is RealSelf different from TripAdvisor? Tom: TripAdvisor, travel is still a very important intimate experience. Where you go with your family or you personally where you stay, where you sleep, where you take off your clothes, where you take a shower, where you spend your limited time off or time away is a big deal. That's the magic of what TripAdvisor tapped into, is that people actually want to dispense of all the risks that go to making the wrong decisions associated with that. But it's still ephemeral. It's a transaction that you get over. You get a bad hotel experience, you can laugh about it. But when it comes to a cosmetic procedure, that's just not a really acceptable outcome. You don't want to be in a place where you've made a wrong decision and suddenly now, you're facing a consequence of looking “botched” or just an outcome that you just hadn't expected. You want your expectations delivered on. Edward: I guess it's much more risk averse when you go into cosmetic surgery than when you're booking a vacation. How does that risk aversion play into the design of the actual website and product?Tom: Yeah. It is absolutely. Risk aversion is a good way of thinking of it. Or wanting to have not just 5 answers to questions, but 500. When we talk to people who routinely use RealSelf and what our value proposition is, is that we want to have answers to all of your questions. The best way to get you answers is not just Q & A, in which we have millions of answers from doctors, but actually learning from others who've had these experiences in an authentic way. We have hundreds of thousands of stories told by real people with photos, with video of what it's like from start to finish. Including people who've decided not to do things. It's that kind of level of authenticity and trusted exchange of information that enables a person to make an informed decision. Edward: So it's very important for RealSelf then to collect not just reviews, but detailed intensive reviews that go into far more detail than a book review in Amazon. Tom: Yeah. The star rating is not the point. It's the story. Story telling associated with these procedures is what differentiates RealSelf from Google, Yelp, and others and that. People tell their stories overtime, updates, and like I mentioned, imagery and photos that shape the journey. The entire journey a person goes through from start, to recovery, to living their life, and what it's like afterwards. That created the concept of having people not just tell their story, but say, was it worth it or not? We created the Worth It index. That's people yes, it was worth it, or no, or I'm not sure. We count those up and now we have rankings of every procedure by its Worth It rating. That's become, in our industry, a very powerful vehicle for identifying patient's satisfaction and customer satisfaction. Edward: How do you get users to do that? How do you get a user to invest the time and effort to go and do that whole tracking process?Tom: The motivation for a person on a platform is perhaps different than others. When we've dug into that and listened to our audience, members, and community members, why are you doing this? Are you trying to get back at your doctor? What's the reason? You have extra time on your hand? The motivation in our audience is typically women who are posting. Women have this tendency to want the world to be a better place and help, have more of a community view. They said, because this person was doing it before me and helped me so much, I wanted to also contribute and make it easier for the next person. There's a lot of negativity in the internet and things like RealSelf and that motivation point to the beauty of the internet and just how incredible people can be in terms of trying to make the world a better place and its own place. Edward: How much time and effort are you guys spending internally to go and facilitate that, or do you make it possible then just let it flow in?Tom: Yeah. The [...] problem is a real issue when you're starting a community. Bill Gurley from Benchmark visited my office—and I say office because it's a room with three of us in it—when it first started. And he said what you're doing here to start a community is something that larger companies would never do. It's like building a fire when you're camping, he described it as. It takes a lot of discipline. You don't just throw a log on and say, okay, then pour some gas on and hope it just catches fire. You have to actually start with kindling and you get the right conditions. It has to be dry enough. You just have to be nurturing. In the early days, getting that early kindling required things like convincing people to share their stories on the platform. The way I found them was things like YouTube, and like who's willing to share already about their procedures and experiences on YouTube and say, hey, would you come over here and also post. That worked. But what moved from there and captivated more conversions and postings was controversy.That's why I created the word that writing is a binary yes or no. I don't know how to say this in a way that hopefully doesn't sound manipulative, but it does force people to pick a side. When you have two sides and when you have two sides and something it does usually create conversations. It was not worth it, it was worth it, and then people debating that led to more and more engagement.Edward: And then once it gets going, do you have to do very much at all? The team today, now that you're 14 years into the business, did you worry about other things and just let that part run?Tom: It certainly is not as intensive of effort. I don't know, flywheel. I know you're very science based in marketing. I hate to use the term flywheel. It certainly has some elements of network effect where you're saying more begets more and it self serves. But it does require nurturing and a lot of community guideline renforcement. There's no shortage of actors out there who want to post things or trolls who want to take away from whatever it is otherwise are great experiences online.Edward: That's the consumer side. What about the doctors? How do you build the marketplace on the doctor's side to get them engaged?Tom: Doctors are a really interesting group of professionals. I really didn't know how they thought and what was important to them until I started the company and started learning and talking to them. They're very much, as you would hope from your physician. You walk into your doctor, you don't want them to say, hey, I just got this new thing in yesterday, can I inject you with it? What do you think? You want to try it? You're like, woah, wait. They're cautious by nature, they're scientists. They want to see proof points, data, and research around something. As well as they are very much intrigued by their peer size. They tend to have what are called key opinion leaders who they look to whether it's a journal writer, people have written journal articles and authors or speakers at conferences. I centered on that. In the initial days, I really focused on getting myself on the podium as a starting point and also forging relationships with those key opinion leaders was another part of my strategy. Edward: Has that changed over time then too? At the beginning, you had to do those things the same way you needed to go and use the kindling on the fire on the user side. Now that you're 14 years into the business, has recruiting doctors changed? Or is it somewhat kicking into more podiums?Tom: Yeah, with the pandemic, definitely the podium has been collapsed to a digital experience and the digital conferences really aren't working for reaching to audiences. I would say that the environment whether I like it or not has changed and maybe forever changed, we don't know yet as of this recording. But it certainly comes to fruition where you realize that your target customer, they don't necessarily follow the same dynamics as the way the industry is structured. We find that we're most relevant to practices that are in growth mode, for instance. They really do want incremental patient acquisition in value that they tend to be a little bit more youthful, doctors who grow up with technology tend to adopt it more readily. Other factors like making it a typical customer acquisition where it's maybe not that individual is who is on the podium at the top of their career.Edward: Tom, how does RealSelf monetize? How does it actually take that two sides of traffic and turn it into cash?Tom: We sell advertising to our doctors and the subscription add product. We've tried to keep it as simple as possible after listening to doctors and realizing they have no time. One thing that doctors can say over and over no matter what specialty you speak to is they are time starved. They didn't go to school to learn how to be marketers. They want something that's simple. This idea of bidding on platforms like Google AdWords or Facebook, yeah they could outsource it. But generally, they needed something simple. So we created a pretty simple ad product that they could be for instance, featured for a procedure like say, surgeon here in Seattle could be featured on the platform for setting the number of impressions for rhinoplasty. And they would pay a flat monthly amount for that no matter what it did for performance. Though I think guarantee is the number of impressions. That model has been around with us for many years and we're looking at the next stage of the model moving to a more performance driven approach. Edward: It's interesting. There are some marketplaces out there like hotels, like Expedia, that monetize so well, where the aggregators monetize so well that the providers are basically pushed out on the search. Have you searched for hotels in Seattle? The paid results are Expedia, Booking.com, Hotels.com, followed by tiny little marketplaces you have never even heard of. Marriott and Westin aren't listed there at all.But if I searched for cosmetic surgery in Seattle, the results are all individual doctors. I don't see RealSelf or the paid results at all. Why the difference?Tom: We do some paid work in targeted ways. But there are certainly not inherently built transaction models that the industry doesn't have like a model by which, oh, if you deliver a patient to me, I will pay you X. In fact, in many cases, in many states, that's against the law. This idea of your doctor getting paid for referring you to a specialist would be seen as quite concerning. There's a lot of regulatory reasons for that and just an industry that's very cottage-y. We have individual practices that we work with small practices, small businesses and they just don't have a common standard way to either aggregate their supply of spaces of their schedule nor a common understanding of how to “sell” that or fill it. This idea of inventory is something that just doesn't exist in the market as well. It's a very challenging space to monetize because of both technology and limitations as well as a lack of precedence on how transactions should be monetized. Edward: Tom, what do you think is driving that? Because it's not just RealSelf. If I look at Avvo in the lawyers space or Yelp with restaurants, we see similar patterns where the restaurants or the lawyers or the cosmetic surgeons are fine paying a lot of money to Google. But then the individual websites aren't set up with the paper click model, aren't set up with these auction models. Why are these doctors willing to do the auction model on Google but not on RealSelf? Why is it too complicated on RealSelf, but simple enough on Google?Tom: Yeah. I think I'd take exception with your observation in that. Let's say if you've talked to most of our customers, very few of them actually advertise on Google and if they do it's through their web vendor and it's just a couple thousand dollars thrown at it. There's no sophistication put around it. Web vendors, it's easier for them because they can make a little bit of money with the markup and they can self manage the campaigns. In some ways, inadvertently, we have cut out their technology team, their web vendor, and they don't have an easy way to work with us and they do have an easy plugin for these other platforms. That may be an oversight on my part. I don't quite know over time, I'll maybe reflect and understand that. But generally, our customers don't, I say this without any disparagement because it's more from a place of empathy. They don't really know how to measure ROI and the customer's journey to them is a very convoluted one. If you want to look at complex purchase paths, boy, our space would probably be up there on the top 10. We would use real estate easily in terms of how many touch points it takes and information where it comes from and how long a person considers and what influences them. This idea of simply ranking better in a directory is pretty attractive to doctors. Okay, I want to be number one on Google. Why? Because I think a lot of people use Google. That's about as simple as it gets in terms of how those models appeal to doctors. Ours is more influence driven and influencing consumers with content and also rankings. But it's just more nuanced and requires them to pay more attention and take more time. Edward: What gets RealSelf to grow more? Do you need to sign up more doctors and get them more interested in advertising or do you need to get more consumers interested using RealSelf to make their decision?Tom: Yeah. We need people like you to help sell for that. No, it's a two side marketplace. You need a network to grow on the supply side and in our place, it's served like a three side marketplace. We need brands to help facilitate these brands. They are the ones who have most of the margin, like botoxes of the world who need to help support the ecosystem of consumer education and conversion. Certainly, a growing, engaged audience, and high quality intent. Getting marketplaces is a work as you have experience is really tricky because you got to get those all right. I think the most important strategy for us is where you and I have talked about years ago, so you'd probably shake your head like you're still doing this? It's like, we still need to think of how over time RealSelf moves what I would describe as a passive model where it's impressions driven to direct driven which is performance oriented. Where we're getting paid when something happens. Something closer to the transaction. That can be regulatorily supported and approved. Edward: It's tough though. As you described, when you're in a business where so much of the influence happens so early in the funnel, it's so the value you're creating as early in the funnel to get credit for the revenue it's generated at the end of the funnel. Tom: 49% of our audience members who found a doctor in our platform go to the doctor's website to book. According to our last survey. I mean, if that's not leakage, I don't know what it is. Edward: Tom, thank you so much for being here today. Before you go, tell me about your quake book and how it changed the way you think about the world.Tom: I really appreciate you having me on your show and I'm a huge fan of your postings and way of thinking, of course. It's kind of in line with your BS, of like let's look at things closer and let's look at it from a data driven view. Mine is not a book. I read many years ago, I should probably get a date on this, but it was probably ‘92 or something like that. I was very fearful of what was happening, at that time, the biggest health concern was HIV AIDS. It was very much seen as unknown, anybody could get it no matter what you did. I was very concerned, as I was single, college graduate, dating, very fearful of contracting AIDS. It wasn't until I read an article in the Wall Street Journal, it laid out in really clear terms the probabilities and the real data around the risk levels of a sexual male to contract HIV AIDS. It just really helped me understand, you have to go beyond the headlines, you have to dig into hype and really dig into the math to understand something as important as your own health and safety. Just like you do with your show here and your writings. I think I had an early experience with that that helped shape my approach to lots of things in life and business. Edward: Tom, thank you so much. I really appreciate your time today. Tom: It's fun to leave the show talking about AIDS. Edward: On that note.Tom: Thanks for letting me end with that. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
My guest today is Tom Seery, founder and current Executive Chairman of RealSelf, the leading review site and marketplace for cosmetic surgery. This is Part 1 of the interview where we explore Tom's career and how he found himself founding RealSelf. Tomorrow we will explore how he grew the RealSelf business.You can also listen to these interviews in your podcast player of choice: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed (for premium episodes).TranscriptEdward: My guest today is Tom Seery. Today we cover Tom's path to founding RealSelf, Drexel, University of Washington, and Expedia. Tom is now Executive Chairman of RealSelf. I'm really looking forward to this conversation. Tom, you were only a Director at Expedia when you left to found RealSelf. How did that happen?Tom: I really appreciate being on your show. I'm laughing because I think you're already disparaging me saying I was only a director. Being a director at Amazon is a big deal, but in Expedia, it is probably not as significant of a hurdle.I left Expedia feeling like I had been there for a long enough time to be empowered to go do my own thing. I don't know where you went to college, but I was in college and there were always these individuals who never graduated. They were six-year students or five-year students. What's wrong with you? Why aren't you graduating? They're actually the smart ones. Why would you want to leave this little cocoon of wonderfulness, at least at my school? I kind of started feeling that way after six years at Expedia. I think I've got the learnings I need and the vision to go start my own thing. Filled with that and a lot of naivetés, I decided to forge my own startup and go down that path.Edward: How do you get other people to trust you with limited experience? You obviously raised a lot of money for RealSelf. How do you do that when you don't have a lot of experience? I guess you had more than a lot of those kids doing it straight out of college?Tom: The power of storytelling, my friend—vision, power of persuasion. Part of a startup is you're always selling. You're selling a vision, you're selling an idea that's bigger than yourself. You're trying to convince people to leave perfectly great jobs at companies that are in this region to do something crazy, join a startup, and get paid less than the market rate.Edward: What skills that you already have to go into that job as CEO? You did spend a lot of time at Expedia. What were the important skills you developed along the way that you had going into that job?Tom: When I'm asked this question of what was the enabling force that really got you to a place where you did this? I think it's this level of confidence that I had built in myself. I do say there's a little naiveté, as I say to that, which is maybe some blind ambition and mixed in. You do have to have a very confident perspective and feel really good about your ability to take something from nothing, to do something bigger than yourself. That confidence mixed with the ability to help people distill down specific things that need to be done and work through ambiguity is a soft set of skills, I guess.While there's a lot of amazingly intelligent people I've worked with and individuals who are much more talented than me in specific areas, I think having that range and that capacity to lead through uncertainty is perhaps one of my strengths that I've been able to tap into.Edward: What were the most important skills you were missing when you took that job that you had to develop quickly?Tom: Well, I could list all sorts of things I didn't have. I would center the most around how—it's sort of an order of operations in seeing things and never having seen these things before. I didn't know what to do, what order, and a lot of guesswork.Part of that was also, who do you hire at what stage? What is the skillset? The tendency of a startup is we should be selling something. Okay, Mary, over there. Why don't you pick up the phone and start selling? You just take somebody who's got maybe a little bit of extra time and say, why don't you go do this thing? Not recognizing their skills. There's talent, there's the discipline that's associated with driving sales. I think there's that lack of understanding of how to match the activities to the right people with the right talent and then doing things in the right order. I think there was a little bit of unnecessary chaos in the early period of trying to do a lot of things in a swirl as opposed to in a methodical way. Then, not raising enough money. That also accompanies all of that.Edward: Now, let's go back to the path that got you there. I'm a big believer that the experiences we have when we're 12-14 affect our entire lives. What were you passionate about at that age?Tom: My next-door neighbor, Heather, was one of my passions. She wasn't very interested in me, but I was very interested in her. In fact, I taught myself how to disco dance—that's how old I am—just so I could maybe catch her eye. It didn't work so much.My passions as a kid were across your typical youth of beyond the sports and all that kind of stuff, I was fascinated by commerce. My teacher was a coin collector and one day brought in part of his coin collection. I just became obsessed with coins. I would go to the bank and exchange $10 for a roll of quarters so I could look through every quarter to try to find one that was more valuable than $0.25.The bank teller got to know me because I would do this cycling of coins and building my collection. To this day, my little kids just found my coin collection the other night, actually. They're like, what's this? I'm like, it was some obsession I had, but it's pretty cool. It's all laid out there. There's a lot of stuff. It's still not very valuable, by the way.That desire to find a little bit of an edge or an unrealized value was something that must have been something that was more innate or inherent in my mind in the way I was built and designed by my family, my parents, or my DNA.Edward: What about relationships with people? How is that happening when you're at that age and how did that affect you?Tom: It's interesting. For me, there has been a lot of reflection on why I am who I am today, and what are those shaping factors? I'm reflecting on that because as a parent, as you realize how you are creating the world that your child sees in many ways and how they approach it, at least. I'm consciously trying to make sure my children approach life in a very kind and open-minded way. As a kid, I had very supportive parents, but they were busy. I was a latchkey kid, as they said in the 1970s. My mother worked, and I clearly needed more attention than I was getting at home. My old neighbor once told me that what was unique about me as a kid was I was always in somebody else's living room. I was constantly in somebody else's house. They said they believe that I was doing that because I was looking for additional nurturing. I went out, got it, and found it. I think this idea of connecting to people was just something—in an unknown way to me at the time—I did for sustenance and survival, if not development. Relationship building is something I actually love doing. It's been very important to my business at RealSelf, which is focused on doctors, and they're very relationship-driven, like in many industries. It's one of my superpowers.Edward: Let's jump ahead. You graduated college and how did you start your career?Tom: Well, my actual first thing out of college was to work for a congressman in D.C. where I drove him around to fundraisers. I learned that politics is really just more about raising money than anything else. It made me less interested in the world of politics. Plus, it was funny. Back then it was very polarized. There would be parties for the Democrats and parties for the Republicans. You didn't want to mix the two. It just turned me off. I ran across an individual from a company that was a computer company in Philadelphia called Unisys. That's still around. They were doing some weird stuff around environmental remediation of old manufacturing plants. Unisys was UNIVAC, Sperry, Sperry Rand. If you have seen a typewriter—for your audience members who know what that is—it's the Remington typewriters, as an example. This company goes way back to the 1800s. They had lots of facilities that were closed, shuttered, Superfund sites, and they needed help on assessing the risk associated with those but also managing them. That was my first job working for Unisys as an environmental administrator, consultant, project manager.Edward: What did you learn there? What did you pick up doing environmental science that you took later into your career?Tom: While I was there, I decided I needed to get more analytical rigor to the approach and that's something that probably, hopefully, has sat with me through business as well. You need frameworks and models for approaching complex problems like what to do with a massively contaminated facility. I learned—both by going to school at night and getting my master's in environmental science, but also in the role—how to use a science-based approach. And then use that science and data to persuade organizations like the EPA that we were doing the right things and that our approach was right. There's a lot of negotiations, working with lawyers through litigation with multiple parties. Also, just owning my own portfolio of problems that I got to manage pretty large budgets around what's pretty fulfilling as a pretty young professional.Edward: What about the soft side, Tom? Things like the corporate hierarchy, corporate vision, and mission statements. Did you take anything away from your time there? I heard you had a fancy office when you first started.Tom: Yeah. Unfortunately, this might say negative things about my personality type. I hope not. One of the things that my colleagues would tease me about was I just didn't like the idea of working in a cubicle. I noticed that the most powerful people in the company had offices, and I wanted one too, even though I didn't deserve one.I found an empty closet that was the janitor's closet—literally mop buckets, mops, brooms, and stuff like that. Somehow I got a desk and moved in there. My buddy helped me lift it. I ran a phone cord through the ceiling, so I had a phone, and I just set up shop. No one said anything. I even put my name on the door.I would say I'm the kind of employee you don't want to hire. I didn't follow the way things are supposed to be. I guess that was an early sign I needed to be an entrepreneur, write my own ruleset, and set up things so that I'm successful. As the company I was at was a huge corporation with something like 110,000 employees when I began. When I left, it was about 45,000. I went through this incredible amount of bloodletting of employee layoffs and depressing environmental situations. Meanwhile, you'd walk down the hallway. There'd be these signs and slogans saying, our company values and what we stand for. I got a jaundiced view of how those really meant. I'm really excited for our team today at RealSelf abiding by leadership principles that are similar to those you see in Amazon where they actually help individuals recognize these are what behaviors we encourage, evaluate, and reinforce in our day-to-day. That seems to be much more materially helpful and less check the box, we got it done for the required values, and so forth. That's been my approach.Edward: Tom, what made you move to Seattle? What was the driving factor that got you off the East Coast and came out here?Tom: The janitor took back his office. I'm sure the janitor was like, what the hell is going on around here? It's funny. Edward: Maybe he took a cubicle. Tom: Yeah. He's like, okay, these cubicles are way nicer than this little windowless room. In college, one of my friends grew up in Seattle. I was amazed by how he wanted to go back to Seattle after he graduated. For me, I grew up in a small town where everybody leaves and doesn't go back. I was just like, what's up with this Seattle thing? I had visited as well. What really triggered my desire to make a move west was I was reading The Wall Street Journal in the lunchroom wearing a tie, of course. You wear a tie to a computer company job. The article talked about admins or secretaries—as I recall in the past—at Microsoft who were retiring at age 30, 31, 34, and buying second homes at the San Juan Islands. I was just amazed. How is that possible?They talked about how they had stock options. I didn't know what that was, so I had to look that up. Once I read what a stock option was and what it meant in terms of a company really valuing you as an owner, not just a dispensable employee, I realized I was a sucker. I was in the wrong space. I was in the wrong industry, the wrong size company, stage, and region. I literally told my girlfriend—who is my wife now—I'm moving to Seattle, you want to come? We jumped in my Honda Civic, drove cross-country, and got here. I have been here for over 20 years. Edward: Tom, what were the biggest failure points in your career? Where did things not go as expected?Tom: The biggest failure—the one I can't get over—is when I worked for Expedia, I recognized an opportunity that exists in the market to create a private label business. I pitched my boss on this idea of creating a way to power, say Alaska Airlines could have Alaska Hotels that we power behind the scenes, powered by Expedia. I created the concept, I named it, and I worked with the team to get it launched. Then, our divisional heads said, well, would you like to lead it? I said, gosh, no. I'm just the idea guy. I'm just here to enable others and just to help things grow. I don't want to be the leader of that. I would say that was huge. He actually said to me later that it was a big mistake too that I didn't step up. I reflected on that, why didn't I seize on that? It goes back to that sort of janitor's office that I had where I really didn't play the game well. I didn't really understand how things worked inside corporations and how you move ahead (so to speak).I just didn't do well in that environment, as I probably could have if I really learned how to seize those opportunities, career growth, and so forth. I look at that as a big miss, but I'm not harboring any more than it's just learning in life.Edward: What did you learn from that? Did you learn basically that, hey, maybe I should work for a big company, I should go start my own thing? Or is there something you take away from that that helps you run a company better?Tom: Actually, I learned that I am an entrepreneur. I do have the ability to see things that others don't. I do have a way to galvanize individuals to go and create something from nothing. What I needed to prove was that I could actually then drive. That was what led me to start my own company.It was, okay, now I can take it to the next step, which is to do things and also not be encumbered by having to report to somebody, have to get a PowerPoint presentation done, and just actually have degrees of freedom to express things in my way. I learned over time the team's way, but initially, it's a pretty selfish endeavor to start up a company.Edward: Tom, what are your productivity tricks? What do you do to be productive that most people don't do?Tom: I should never write a book on that. When you read that productivity, I don't read the books but the blog post that you can see about, here's all the things you should and shouldn't do. I kind of do them the wrong way.I'm actually my most productive self when I'm under the gun when I have one minute left, and I need to get something in. Our CFO can attest to this, I'm not a very good longitudinally long-term planner. I respond well to pressure. An example of that which would drive, by the way, team members crazy, I would be doing a presentation at a major medical conference. Right before I was to go on, I would pull up my slides and change them as I was preparing to plug in my laptop and display.As of 15 seconds before I was to present in front of several hundred doctors, making adjustments on the fly. I loved it. It led to better outcomes.Edward: The number of conferences I speak at that I asked for the slides four or five days in advance, I just don't know how people do that. I do the same thing. It's very hard to not want to change them at the last second.Tom: I always say you don't know me then if you think I'm going to get slides done four or five days in advance. It's just not going to happen.Edward: Tom, this has been fantastic. We're going to pick this up with talk about RealSelf. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
My guest today is Juney Ham, co-founder and CEO of Beacon. He was previously an executive at Expedia and Airbnb, and CMO of Hired.com. This is Part 2 dive into the Hired.com business.You can also listen to these interviews in your podcast player of choice: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed (for premium episodes).TranscriptEdward: This is part two of my interview with Juney Ham. Today, we're going to dive into his experience as CMO of Hired. Juney, can you start by explaining what Hired does?Juney: Hired is a talent marketplace where vetted engineers, product managers, designers, and other professionals can connect with in demand companies that are actively seeking great candidates for their open roles. Hired built the technology platform that allows candidates and clients to connect and interact with each other directly through the system, which also creates more efficiency and transparency throughout the process.Edward: How is that different from every other recruiting organization out there? Everything from monster.com to our local regional recruiting agency that can find a developer for you?Juney: It's a great question. Hired is, first and foremost, a marketplace which is one of the first times that a marketplace paradigm was used both in terms of the value proposition for attendants and clients, as well as the positioning in the market whether that's Monster or a boutique recruiting agency. Hired also pioneered some of the more interesting aspects to the model when they first launched—having companies actually request interviews or pitch the candidate, versus candidates generally entering a company for the interview process. Also to provide salary transparency upfront which is, I'd say, something that still doesn't happen that frequently outside of platforms like Hired. It's interesting, before Hired rebranded, the company was called DeveloperAuction. The salary transparency was actually structured like companies competing for candidates and bidding on them. Candidates would see who was offering the most before deciding who they wanted to interview with. Base salary was an important component to how a candidate would prioritize the opportunity that these various companies were offering. Given that the company was first focused on rails engineers in San Francisco during a time when rails engineers in San Francisco were some of the most in demand roles in all of the startup ecosystem, this made a lot of sense given the supply constraint nature of the market at that time. We also supported candidates. We got a team called talent advocates. They partnered and supported candidates with everything, from navigating the platform, to providing interview best practices, mock interviews, and overall career guidance. It's something that is happening more frequently now. I would say that there are a new crop of companies providing these kinds of services to candidates directly today. It was one of the first times a company that was primarily being paid for and incentivized by clients provide amounts of free service to candidates. I just thought that that was really interesting. The model is one where Hired had the flexibility to be able to do that.Edward: Is it not then a monster.com or indeed.com with additional services layered on? You said that it's a marketplace whereas Monster isn't. Why don't you consider Monster or Indeed a marketplace?Juney: Monster and Indeed are job boards. They're places where companies put their job descriptions. It's a static experience. Hired in terms of the marketplace, we were constantly calibrating the volume of candidates and clients that interact within the space. There was a qualification layer that happened. It allowed for us, being Hired, a little bit more control over ensuring that the overall interaction quality was high. Whereas a job board like Monster, anybody and everybody can put a post on the job board. Depending on the role, location, all these things—for sure, we'd have a vastly different experience if you have 5000 jobs of which many of them aren't really qualified or vetted from a job description quality standpoint, or are these roles actually what they say they're representing. There's a lot of that work that happened within the marketplace for Hired. I think that's one of the key differences between a job board paradigm and a marketplace paradigm. Edward: You do qualification on both sides, right? You're making sure both the candidates are good enough before they can apply, and that the jobs are good enough before they're allowed to be posted.Juney: That's right. I would say that in a world where supply and demand are equally calibrated, you would do roughly the same amount of qualification on both sides, but for Hired—especially during the time that I was there—the market was broadly supply-constrained and yet we wanted to make sure that the quality of the candidates' really high and was reflective of the roles that were available on the platform. There's a lot of vetting that we did on the candidate side and it involves something that we positioned to the market. It was one of the reasons why companies came to us—because they felt that we were doing a lot of that pre-qualification upfront. Therefore, the candidates that were on the platform that they were seeing, there was confidence that those candidates were going to be the right fit for the roles.Edward: That was my next question. Where is the limiting factor? Was the limiting factor in finding qualified candidates, or is the limiting factor in finding qualified jobs for those candidates?Juney: It was more on the candidate side to be fair. We did a pretty good job of fueling the top of the funnel. It fueled around the total population test that we thought would be a good fit. Because qualification was done both for the skills, experience, and the tenure of the candidates that were in those relevant roles—and ultimately the role that they were looking for in the next step in their career—it was also what types of skills. At that time, the geographic component was also very important. Remote is obviously an important factor today but not as much a factor then. The alignment between the candidates, where they were located, what they were looking for, and ultimately, what roles were available in the platform were also factors in how to think about which candidates would be introduced to the platform. Our qualification criteria was such that, about 5%–10% of the candidates were approved, which means 90%–95% of the candidates were rejected from the platform. Even though from a candidate acquisition standpoint instead of the marketing standpoint we're bringing a wide variety of candidates into the organization and into the funnel, we're only able to surface about 5%–10% of those candidates that are in there at the time. It was definitely a supply challenge for us.Edward: Your monetization effectively was every time you place a candidate at a job, that company would pay you.Juney: Originally, yes. The model was transactional. As you describe it, any time a role was filled, the company would pay a percentage of salary as a fee. Over time, as we were also working with more midmarket—and then ultimately enterprise companies—we had played with different models as well. There's also a subscription model. There were base pay type models as well that we experimented with. Over time, the shift in revenue became less on the transactional side and more on the subscription side.Edward: Even so, even on the subscription side, the company's effectively paying for placements. If you're not getting them placements, they're not going to renew the subscription.Juney: That's correct.Edward: You're collecting all these candidates. Out of 100 candidates, you collect only 5 or 10 of them you're putting in front of companies. What do you do with the other 90 people? Is there any way to monetize that exhaust, or is it just gone?Juney: This is a really great question and one of the challenges that I was addressing over a long period of time in Hired. A combination of things were experimented on and then things that we executed against. One is, as I was saying before, there are a variety of factors as to why a candidate wouldn't enter the marketplace. Some of those are due to a candidate's specific components, others are related to the client's specific components. Some of those things change every time. What we started to build was a way to nurture all of these candidates that might not have been the right fit for the platform at the time, but that we believe in the future—or as the client ecosystem of opportunity is changed—that they would be. There was this long-term candidate nurturing paradigm that we were building to ensure that candidates that did unfortunately not qualify still had an opportunity to be qualified in the future. That was the big component to it. The other was, the challenge with what we were doing was that if they were not qualified today, there's definitely a chance that they could be qualified next month. Beyond just overall nurturing to ensure that we were top of line in a world where if they're looking for something else, the Hired brand is still a positive experience for them even if they weren't qualified, the other piece was ensuring that as we were seeing the opportunities within the platform change, we had a mechanism to pool those candidates, even if they weren't qualified in the traditional sense to be able to qualify them down the stream. There are a number of different ways to actually reach out to them for specific opportunities that were specific to their experiences and what the client needed. Edward: Where did you find the candidates? What marketing channels did you use to go and get these hundreds, thousands, and tens of thousands of candidates to go and apply?Juney: We did a lot of performance marketing around Google, LinkedIn, Facebook, a lot of the standard search in the marketing and paid social channels. Edward: These are people who are looking for jobs. Someone who says, I'm looking for a developer job, and Hired effectively becomes a distribution place, almost like getting the shelf space on search for when someone's searching for a job, you want to be in their face.Juney: That's right. For the roles that we were working with companies on, we are definitely focused on search. Making sure that if somebody is looking for an opportunity—rails engineers in San Francisco—we would be there. Then, we would bring them onto the onboarding experience, and then once we've gotten their information, then we will qualify them or not. In those situations generally, it's a higher degree of confidence that they were qualified.Edward: In a situation like that, you're competing against every other recruiting organization out there. How do you win at auction? Do you monetize better than those other options because you're more bespoke?Juney: A number of our features and the things that we called out in our experience were interesting to candidates. Therefore, whether you are competing with every legacy or modern competitor, Hired had a number of things going for it.One was the Hired brand was actually really well-regarded in the technology ecosystem data companies. The fact that we had "the best companies" competing for your attention within our marketplace was definitely a strong selling point for candidates. As well as the fact that they could work with the talent advocate, the fact that companies actually shared offer details before you even interview with them, makes it such that the experience itself was different for them.Beyond the fact that we did what we can to be excellent within the operations of managing these channels, some of these value propositions were definitely additive to being able to convince them to apply for the platform.Edward: It's interesting. When it comes to these marketplaces, effectively, by making it more attractive for the consumer side of the marketplace—or in this case, the employee side of the marketplace—you can better attract candidates, which then lets you get more leverage towards attracting the strongest employer side or the strongest B2B side, which then gives you an advantage in attracting more of the best employees because you have the best employers.Juney: That's exactly right. We actually hired a lot of our engineers off the platform ourselves. We participated as a client in our own marketplace. It was interesting to be able to do that because it also provided a really great candid experience for those incoming employees. It connects this idea that our mission externally—which was to transform how hiring works—was something that's basal internally in practice. It's a fantastic employer branding opportunity.Edward: Roughly what percentage of your placed candidates are coming in through either paid search or organic search, through direct search? Juney: Paid search and organic search? That number actually changes a lot over time, but I would say, it was a good quarter to a third percent, or 25%–33%. The rest were a combination of direct type-in and other kinds of referral channels. We had a pretty strong referral program on the candidate side. That was leveraged a lot from our existing candidates that participated in the marketplace. It was a pretty significant percentage, but not the majority.Edward: It's interesting though. If you say that the significant percentage is coming in through direct type-in, or coming in through referrals with existing employees, you have to get existing employees first before you can get the referrals to happen from them. Are the knock-on effects of the paid search 2X, the 25%, is it close to the 50%?Juney: I would say earlier on in the tenure of the company, the number of SEMs and SEOs representative samples of the total population of candidates decreased over time. In the beginning it was 40%, 50%, 60%, because that's how we were actually building the marketplace initially. To your point, I think there were knock-on effects, but it's also an example of how as the company scaled, and as the population matured, both on the candidate side and the client side really, that these other channels started to bring in value because we were actually continuously engaging this community. For example, the referral component increased significantly over time. In the beginning obviously, with the first cohorts, that channel's not existing, so a much higher percentage of our candidates came from SEM primarily. Over time it was SEO, but as the company started to mature, that number hovered up like that, 25%—35%.Edward: Apart from referrals, direct type-in, and some that are naturally going to come towards you, what were the other outreach channels that you used that were effective? How is paid social?Juney: We did paid social as well. It was effective as well, but there were different components around paid social that were advantages as well as disadvantages. I think the overall volume adds that we had were higher but the qualification rate was lower. Edward: When you say qualification rate, there's different reasons why they're not qualified. Were they not qualified because they weren't good? Because they didn't have the skills, or they were not qualified because they weren't really actually ready to take a job? Juney: It was a combination of candidates that were not qualified because maybe they were too early on in their career, or they would be in markets that we haven't launched in yet. For example with Facebook ads, we have a lot of candidates that just weren't qualified due to the fact that we didn't have the marketplace active there, or we didn't have roles that were specifically for the skills that they have. Think about engineering as just one example. You could think about the hierarchy of roles that are associated with being a software engineer. You could be a product engineer, full stack, it could be back-end, it could be data.There are all these different elements around the role itself that subdivided into more specific categories. It could just be that there's misalignment around that person's skill set and all of the roles that we had available. Quality is not a perfect word here but quality as it relates to the candidate's experience or what they bring to the table, it's in the candidate's overall representation in the client-side and whether we have roles for them.Edward: That's interesting. That feels like that's a problem solvable with better targeting. Is it just that at paid social you couldn't target effectively enough to go and find the people that were the ruby on rails developers in San Francisco, Berkeley area?Juney: At that time, I would argue that targeting has massively improved as Facebook's platform has evolved and matured. Also, think about this. A candidate that is being marketed to for rails engineer—they might actually have some rails experience, but have never actually developed in an engineering organization for that technology, or have done different things around it. It's not super clear whether you're targeting them or whether that person that is being targeted to actually, correctly represents their experience. Some of that filtering and that qualification is a lot more nuance once they actually apply for the marketplace. We have to get through thousands of conversations. Part of that qualification is the majority of those candidates that were qualifying would actually have some set of interactions with the teams internally to determine if they were qualified or not. Some of that information you can't really pull until you have that conversation.Edward: How about podcasts? How did the podcast work for you?Juney: Podcasts are really effective for us. It's interesting because there is obviously a vibrant community of creators, podcasts, particularly like engineering, software development, and startups. Podcasts work awesome for us. They work really well. Over time, we became pretty competitive and just locking up inventory to be able to have a consistent podcast strategy became tougher over time. I would say that one of the main challenges is that there's no infinite inventory of podcasts that are highly relevant to the audience that we're going after. That was the main challenge around the podcast. There was more about ensuring that we have enough inventory. There's a consistent approach to being able to not be out bid, or basically ensuring that we can continue to advertise on podcasts. That was the major issue for us, but overall as a channel, podcasts are really effective.Edward: If feels like that's kind of the issue across the board. Effectively, you ran out of inventory. There's only so many people searching for ruby on rails, developer jobs in San Francisco on paid search or on SEO. There's only so many people listening to a podcast about how to be a better ruby on rails developer. Do you eventually just hit them initial returns and now you need to go on branching the other products? Juney: It's interesting that you bring that up. I wouldn't say we directly address that problem or that challenge during the arc of Hired's growth. Hired initially had a very aggressive stance towards expansion. Not too long after they started, we were expanding into different types of engineering categories. We started out with rails engineers. They were all engineers. Then, we went to the product vendors. Then, we went to the designers. We actually piloted and launched marketplaces for salespeople and marketers too. Starting from San Francisco, we launched New York, London, and Paris. We launched Chicago, Toronto, we launched a variety of markets. On a per market cohort basis, we definitely ran into head wins as we thought about both scale and efficiency over a company-growth standpoint. The focus was to continue to launch new markets, categories, and new geographies. I would not say it directly solves the problem that you're bringing up at all. But it was a different sort of challenges that we needed to also tackle which was, how do we ensure that for every market we're launching, we're actively launching and scaling those channels right out of the gate to ensure that the marketplace has the critical mass of candidates and clients to be able to work and be effective for that market.The biggest things that we saw were each channel—when we launched each marketplace—had different levels of effectiveness. It was really a matter of calibrating all the different channels that we had under disposal to calibrate the market. The other thing to note here is it wasn't that we were trying to massively grow candidates and massively grow clients and that this was this infinite inventory and do whatever you can to drive as many candidates to the marketplace as possible. There was this constant calibration where we want to ensure that if we have a lot of clients on the platform representing a number of roles, that number actually did fit in into how many candidates we ultimately want to bring on to the platform. It wasn't so much that it was everything at breakneck speed all the time. There was this bit of information that was being passed between the two sets of marketplace to ensure how much do we want to grow our overall candidate population based on what roles we had on the client-side.Edward: Juney, this has been fantastic. Before you go, talk to me about your quake book and how it changed your way of thinking about the world.Juney: My quake book is The Hard Thing About Hard Things by Ben Horowitz. I remember reading it the first time. I read it essentially cover to cover in one, maybe two sittings. The thing that was so poignant for me was that the problems that founders, entrepreneurs and executives go through are the kinds of problems that I had seen as a founder myself but didn't really see out in space. These were problems that people weren't comfortably talking about. Sharing issues, challenges, and problems that you had gone through as a founder or as an executive were not things that you did. It wasn't really celebrated. The book really helped me understand that people, even with Ben's stature, had gone through a lot of these challenges and had to struggle through these problems. The lessons you learned across every aspect of being a leader were lessons that you learned ultimately but also through a lot of failures. For me, it helped me understand that as an aspiring founder or leader that I will get to the other side. It could be that I will encounter many failures, many hard lessons, and challenges but getting through that was almost like what you earned—the currency that you earned to be able to then continue to grow and move forward. For me, that was the most important thing which is making everything a lot more real and ensuring that I didn't have to project this aura of perfection or this ability to solve any problem through sheer intelligence alone. It was that a lot of this is falling on your face and stubbing your toe. The act of falling in your face and the act of stabbing your toe actually is what drives you to learn those lessons and be better over time.Edward: Juney, this has been fantastic. Thank you so much for your time today.Juney: Thanks, Ed. I had a really good time as well, I appreciate it. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
My guest today is Juney Ham, co-founder and CEO of Beacon. He was previously an executive at Expedia and Airbnb, and CMO of Hired.com. This is Part 1 of the interview where we explore Juney's career and path to CMO. Tomorrow we will explore the Hired.com business.You can also listen to these interviews in your podcast player of choice: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed (for premium episodes).TranscriptEdward: My guest today is Juney Ham. Today we covered Juney's career and path to CMO, University of Pennsylvania, PriceGrabber, Expedia, Airbnb, Upside, Hired, and Porsche. He's now the co-founder and CEO of Beacon, a talent consultancy. We're lucky to have him here today.Juney, I usually start these discussions with how you got your first CMO role, but for you, I want to talk about how you got your first marketing role. Because you started as a software engineer, then became a product manager and a data analyst, and then you were hired to run search marketing for PriceGrabber. Why did they hire you for that job?Juney: First off, Ed, thanks for having me. I'm excited to be here and chat with you about all things marketing. To answer that question, I first need to go back to my earlier experience as a software engineer. I graduated with a CS degree. I started my first job in software engineering, and the first project I landed for the company happened to be building software for the marketing team.If you recall, in the early 2000s, Google and AdWords had just launched and it was building momentum. There was already Overture, which was Yahoo's platform. The whole performance marketing industry was just starting to coalesce, and so the timing was really great.I was fortunate to get into all aspects of business, from a marketing perspective through the system's lens. Everything from keyword generation to performance data, analytics, bid optimization algorithms, and even building user interfaces for the marketing team to access the system itself, and manipulate controls.I was able to do that in my first go-around in the role. I'm really, really lucky to be in that environment. One of the things that I enjoyed and ultimately craved was to be able to make recommendations and to provide decisions based on the analysis I was doing. Writing SQL queries directly into the database and from there pulling insights and areas of optimization for the marketing team. I think that it was an amazing opportunity to see how marketing, which is a business function, and me sitting in the engineering role, to understand how those decisions were made and how they evaluated those decisions. I think the thing that got me—both in terms of this is really exciting, and also, I don't love this—is the recommendations that I would provide. I spent a lot of time making those recommendations and thinking about the implications. Sometimes they were acted upon and sometimes they weren't. They didn't provide me a ton of context as to why either way.That whole journey was what led me to discover that my passion was more in the strategy side of the business and wanting to be a part of the decision-making process versus being the person building software, systems, and tools so that that team could do the work that I wanted to do as well. Going back to your question about being hired to run search marketing, they came to me knowing that I didn't have any marketing experience. One of the questions that the hiring manager had was why should we hire you? You have no actual marketing experience.I gave them a little bit of that context around my time as a software engineer and how that led to my passion for wanting to make decisions around marketing. But also, I put it back to them. I said you know this already about me. I believe in a different approach and I walk them through—if they were to hire me—the marketing team would not look like a marketing team.It would be a team of engineers and a team of analysts. If they are okay with that, if they want to take that leap of faith with me, then let's go do this. Otherwise, they're better off hiring somebody else with actual marketing experience. I guess the rest is history. They ended up making that decision, and ultimately, going down the path where we did approach search marketing—at least for that company—very differently. It ended up having a meaningful positive impact on the business.Edward: Yeah. I think when marketing hasn't been run with math and you replace it with marketing run entirely by math, math tends to beat non-math. I think there's something in both math and non-math together, but if you have to choose one or the other, I think most companies are realizing that math wins.After PriceGrabber, you moved through companies getting progressively bigger jobs, but basically staying in the world of search. But then in 2011, you jumped to run all of the digital marketing for Airbnb. How did that transition happen?Juney: Airbnb had been reaching out to me for a good part of my tenure at Expedia. I had built a bit of a relationship with the company in advance of taking the job. Given that, you and I had overlapped a fair bit at Expedia, you know some of the major changes that the company was going through around that time. We were all going through that. It was at times chaotic, and I think I was in the process of having this conversation with Airbnb that was gaining momentum. Ultimately, I was excited about what Airbnb was doing. I was excited about the opportunity that running all of the online marketing would entail. With any big decision that I've made in my career, there's usually that component of which I don't know how this is going to play out, or I don't know how to do this. Some of that energy is so that I can be pushed into a zone of discomfort. I know myself enough to know that doing that allows me to grow and as it's how some of my best work actually ends up happening.Edward: That's why you're interested in the job, but why did they want you? How are they comfortable giving you the authority over things like email, social, and SEO when you really had no experience in those areas?Juney: It's a great question. It's interesting. One of the reasons I was actually optimistic was that online marketing reported to the CTO, Nate (at the time). He had run some of the early experiments and some of the growth hacking initiatives when Airbnb was in its infancy and prior to my joining. I think he understood the importance of online marketing as a whole, having this foundation of data metrics and analytics. A lot of the conversations that Nate and I had were around things that were very, very tacticiany topics—writing queries directly into the database and wanted to see the entire team SQL or some of the optimizations we did across various channels.Even though I didn't have any experience in email, affiliate marketing, or referral marketing, I think there was this understanding that my core experience and expertise that I've built-in analytics, as well as online marketing, particularly around SEM and a little bit of SEO was enough for them to take a bet on me. Because of the way that we approached those core channels together, we were very, very, in line philosophically about what to do there.I think that the approach that Nate had around wanting to scale some of the paid marketing channels, which was, at the time, one of the most important initiatives, the company was very much in line with how I was thinking about scaling it. He understood that there was a little bit of learning that I had to do to take on something like email or partner marketing, and he was okay with that.It was this idea that the spike that I had in marketing aligned with Nate's philosophy around how to scale the online marketing program at Airbnb, and also aligned with the near-term, mid-term priorities around which channel they wanted to focus on.Edward: You spent three years after Airbnb as an entrepreneur before coming back into the traditional workforce as CMO at Hired. Was your responsibility there the same as Airbnb with a bigger title, or was it a broader scope?Juney: It was a broader scope. At Airbnb, I was mostly focused on online marketing—paid search, social, SEO, lifecycle partner marketing. A lot of the work that we did outside of that, I had partners working on, and they were often in different departments, so conversion rate optimization, working on many pages, or even the referral program sat in a different part of the organization.At Hired, I ran all of it plus had a dedicated team of product managers and engineers for some of the growth initiatives, and I also was in charge of brand product marketing, pressing columns. It was a much more horizontal marketing role where I was responsible for online, which is a big part of the marketing initiative and the budget for both candidate marketing and employer marketing. But I also ran some of the more brand-oriented and pressing columns oriented on efforts as well. It was like a true CMO role, which I would not consider the Airbnb role of CMO role.Edward: A lot of that starts becoming marketing that's not math. I assume when you're running the branding work for Hired, you weren't just plugging in those numbers into a spreadsheet and getting an answer. How did you develop those skills? How are they comfortable with you taking on the non-math parts of marketing?Juney: I would say the reason why Hired ultimately went with me was that similar to Airbnb, there were a lot of things that Hired was focused on and were near-term priorities and strategic initiatives the company cared about.That was a lot of the online work and the performance marketing work that I did at Airbnb, Expedia, and previous roles. But my experience as an entrepreneur at the upside, which is the Fintech company I started and sold prior to joining Hired, was definitely in the trenches experience building the brand. Thinking about how to leverage the online marketing work that I did in previous roles and ethics in my career, and feeding that into how do I build a brand from scratch?How do I position this company? How do I think about these elements that I previously not done before, and leverage some of the experience that I had to try and grow into the role (if you will)? I think that experience, just as a whole, allowed me to understand where I can apply some of the data-driven decision-making or the analytical components of what I did into things like testing messaging.Everything from running different ad copy, and then taking that ad copy and applying it to Media Relations headlines were the types of things that I was able to do. These are things that I have no idea what I'm doing. I'm just figuring it out, but I was able to learn these things over the course of those three-plus years I was running Upside. I think that experience and those anecdotes that I shared with the executive team, were enough to be like, okay, this guy obviously has a deep set of experiences and expertise around online marketing, and we need that.Even from a brand perspective, messaging, and positioning, he's thoughtful about what that looks like because of his experience building his own company where he had to build a brand from scratch. Some of the lessons that he's learned can be applied to what Hired is going through as they think about evolving and scaling the brand for its constituencies on both sides of the marketplace.Edward: I want to go back a little bit about your path towards getting there. I have a theory that things people do between their 12 and 14 affect their entire lives. What were you passionate about at that age?Juney: Twelve, fourteen was like middle school, high school. In middle school, high school, I was definitely into what pop culture would consider nerdy things and played a lot of video games. Much to my parents' chagrin. I tinkered a lot with computers. I was also really into music. I was in the marching band in high school, and then later on in college, I joined an a capella group.I was into a variety of things that were artistic, but also technical. If you use the phrase art and science, I had a little bit of both. I even ended up starting a side hustle around building a web design company. I would build websites for other people and things like that. There's a lot of things that if I look back on my early childhood or during that time. Those things have been threads that have continued even to my life today. I would say the biggest thing for me was going through that experience in high school where I was really into computers. I had friends where we would all talk about and build different configurations of systems and things like that.I thought that would translate into a successful career in computer science and software engineering. You and I know that building computers and computational mathematics have nothing to do with each other.For me, Penn was pretty awkward in some ways because it helped me understand, or at least, it made me realize that computer science was not really about tinkering with computers. It was really about math. It was about a lot of theoriesPenn's program, at the time, was considered to be fairly theoretical and academic versus Berkeley, which was equal parts theory, but also had a lot of practical experience in education. For me, it was a bit of a wake-up call realizing that computer science and what I thought a software engineer would do had nothing to do with ultimately what I was going to experience in the professional world.If I'm going to be 100% honest with myself, I would say building the professional skillset that I ultimately have now had very little to do with any intentionality and more with a combination of luck and just refusing to quit. Even though realizing the theoretical components around software engineering, computer science, was just not what I actively enjoyed.I would say, I was okay at it or pretty good at it, but it wasn't something where I saw myself being 20 years from now, I'm going to be at the top of my field just exploring computer science concepts. That was absolutely not in the hundreds of things that I would want to do down the road.I think the big thing is I suck with it. I graduated thinking that I didn't really have a future as a programmer, but given that was my degree, and those are the roles that I could probably have the highest likelihood of getting accepted for, I did it. I think that's what ended up also foreshadowing that I wasn't going to be in a role as a software engineer for that long.Edward: No, it's fascinating. Like at the general assembly, we taught what we thought were the five most core skills for working in a tech company. Which were software engineering, UX design, marketing, product management, and data science and data analytics. I think you're the only person I've ever met in my life that has expertise in all five of those things.You developed this interesting skill sack that I think has helped you or hopefully has helped you, but almost pushed you towards entrepreneurship, where I think that's where it's probably where it's most valued. Your first stab into large scale entrepreneurship was Upside. Usually, when you start a company like that, you're optimizing marketing for the product, but you reversed it in that situation?Juney: Yeah, actually, it's a great point. Briefly, Upside was a financial technology company. We helped registered investment advisors, mostly startups to early-mid-market SMB, to early mid-market RIAs develop an online presence and be able to deploy their advice online.We started out thinking actually about the product as a consumer product. We were starting to build that out. As you or the audience may know, there are companies like Betterment and Wealthfront that had started to solve for the direct to consumer proposition. We were building a product that had a unique angle but still really focused on direct to consumer in the very beginning.We're starting to see that the market was getting crowded around B2C. We were also seeing—in terms of the conversations we were having with everybody from investors to potential end-users to just a broader ecosystem—that there was this gap that wasn't being filled.We had switched to B2B as an experiment, as a pilot to see what response or what interaction we would get from this audience of RIAs. Originally, we were positioning the product and the company in a very boring way. We're like financial software for advisors with a lack of personality, a lack of messaging or positioning at all, and we were running through a bunch of tests in AdWords.I was also using that as a way to determine what would our broader messaging be to our audience from a pure information architecture standpoint? How do we actually push the company in a world we're like financial software for advisors isn't just going to cut it? It's not going to differentiate itself from all of the other players out there, whether they were legacy players from generations ago to potential competitors in our MBA peer group.We were testing this ad out, which was beat the "robo-advisors". It played into this Zeitgeist at a time where RIAs and people—who were seeing Betterment and Wealthfront start to scale—becoming nervous about their own position in that ecosystem. This phrase beat the "robo-advisors". I remember having just an order of magnitude, better performance metrics, and we're like, there's something here. We ended up using that phrase everywhere. We tested it on our homepage. It was like our hero message. We did some testing around how to pitch reporters and publications, and we found out every time we use the phrase, beat the "robo-advisors", it would just work.It just made us realize, wow, not only was our product, maybe more appropriate for this audience that was seeking other solutions, but our messaging tapped into something. It tapped into this idea that there were new players in the ecosystem, and you yourself need to do something. But as an individual RIA or as an individual firm, what are you going to do?You're going to partner with a company like Upside, who can help you beat the competition at their own game. This oriented not just our messaging, but also our roadmap, how we thought about what types of features we would build for this community, and ultimately, how we engage them beyond just things like press and thought leadership.It was how do we interact with them from a sales perspective? How do we interact with them from a customer success perspective? All of that was rewritten because of some of those early tests we did. This goes back to my earlier point about sometimes I ended up using a data-driven or optimization focused paradigm for something that's as disconnected from that part of marketing as the press, but those are some of the examples of things that I did with the skillset that I had. Having not built a brand before, having not done messaging and positioning before and it ended up working out, at least in that situation.Edward: What are your productivity tricks? What do you do to be productive that most people don't do?Juney: I think the biggest thing for me has been, I keep a physical journal, a notebook, and I use all of the online tools that everybody else does, whether it's Asana, Reminders, or different note-taking apps. I found that using a notebook and writing things in them gives you a level of like a tactile feel, and it makes it so that it burrows into your brain a little bit more.I use a program called bullet journaling, which is a very specific methodology that also appeals to a little bit of design orientedness, where there are specific elements that you used to define whether a task needs to be completed, it needs to be moved into a different category, or if it needs to be pushed out further ahead or into a different section.That's been helpful because, for me, there's a lot going on running a company as a CEO of any size company is challenging. You have to context shift a lot. You're doing everything from sales to doing account management, to marketing, to finance, to operations, and back to sales, sometimes within an hour of each other.I would say being laser-focused on using that bullet journal and making sure that it is the thing that I reference all the time—I carry it around with me—has been helpful from a productivity standpoint. Also, recognizing that wherever you're storing that information, your natural tendencies are going to dictate how well or how not well, you use them (so to speak). Also, recognizing that you should lean into those things.If you are somebody that needs to use Asana organizationally and there are things that you value around Asana around note-taking or task management, but you also know that it's just not going to be that place that you're going to go to all the time. That's okay. Just find the thing that works for you and make sure that for Asana, you're using it for the benefit of the company and the need that it has. But also making sure not to force yourself to use that platform if you also know that things are definitely going to fall through the cracks because it's just not designed for you. Also, use something like a notebook even to be able to manage all the things that you need to do.Edward: Juney, this has been fantastic. We're going to continue this tomorrow with a dive into hired.com. Thank you.Juney: Thanks. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
My guest today is Geoff Henshaw, former CMO of Stoko. Stoko manufactures and distributes kneebraces built into athletic wear that is comfortable enough to use everyday. Yesterday we explored Geoff's career at Shoes.com, 1-800-GOT-JUNK and more. Today we focus on how he was growing the Stoko brand. Note this episode was recorded Geoff was still CMO of Stoko. HE is now looking for his next CMO opportunity. Feel free to reach out to me if interested and I can put you in touch. You can also listen to these interviews in your podcast player of choice: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed (for premium episodes).TranscriptEdward: This is part two of my interview with Geoff Henshaw. Today, we're going to dive into how he is growing Stoko. Geoff, can you start by describing what Stoko is and what they do?Geoff: Yeah, for sure. Stoko is a company that creates supportive apparel. Our first product launched in October of this year. It's a compression tight with the same support as a conventional knee brace.Edward: Is Stoko a product or is it a company? Geoff: Stoko is a company. Our first product is called the K1 as in Knee 1.Edward: Is the idea that you're going to introduce a series of these products that are all related to bracing the body?Geoff: Exactly. We found that with knee braces, specifically—the knee brace actually from a technology perspective—hasn't evolved or changed meaningfully in about 50 years. People's relationship with knee braces is obviously horrible. People emotionally despise their knee braces. Through four years of research and development at the University of British Columbia, this product was created, which is incredible. Thinking of a compression tight, almost like a tighter version of a very tight Lululemon tight. It's got over 50 meters of cabling going through the garment. That cabling is connected to two dials in the waistband. You put the tight on, you can click the dials in the back, you can turn them, and your legs are fully supported.As you can imagine, the application is huge for a number of sports across North America. Since our launch, we're just hearing tremendous feedback from both elite athletes and weekend warriors like myself.Edward: Who uses it? Is it people that would normally use a knee brace, or is it more than that?Geoff: Great question. When we looked at the product, we looked obviously at the end-user. We believed that the time that they would be using the product would be in relation to when they'd had a knee injury. There's a lot of technology in the product, so the product costs are quite high, to be honest. What we believed is that we needed to sell it at a $400 MSRP. We believed in that MSRP price. We needed to compare it against a knee brace.One of the things that we are finding is that elite athletes, particularly, we've actually got it on a number of national team freestyle skiers and snowboarders, young people that never had a knee injury in their careers. They are terrified of knee injuries, and they're starting to use the product preventably, which we're really excited about because obviously, that's a huge market. For the general population, we felt like the value proposition was strongest for people that had—either recently or in the past—a knee injury and they're not happy with the knee brace solution.Edward: Does it totally replace a knee brace? It is more comfortable than a knee brace but as effective as a knee brace?Geoff: Exactly. Customer utility is highest when you're looking at brace support. It has all the support of a conventional knee brace, but the level of comfort is so much better. I don't know if you wear a knee brace. Do you wear a knee brace? Edward: I have at times in my life, but I don't now.Geoff: Okay. The level of comfort is like 9 out of 10 and a knee brace would be like a 2 out of 10. That bracing support plus comfort equals something called compliance, which means that you're going to be wearing it more. Therefore, you're less likely to reinjure yourself or get injured in the first place.Edward: Is it preventative? The elite athletes that are using it as a preventative measure, do we know if it actually is preventative, or is it just a matter of it makes them feel like it might be?Geoff: Well, I'm going to avoid the legality in that question. We believe that it protects from the potential of future injury. There's a bit of a placebo effect also where you can feel the cabling actually holding your leg in place if it's moving into a compromised position. I would say that certainly early indicators are that you could imply that it could be preventative. But certainly, there's a lot of legalities as you know as a marketer, so we need to be really careful about that claim.Edward: Is there any downside? Does it limit mobility at all to be wearing this as an elite athlete?Geoff: No, there's literally no downside. I just got an email from a kid on the Canadian freestyle team. I'm saying kid, I think he's like the early 20s. He just is now sitting 13th in the world in freestyle skiing. He said he's been wearing it every World Cup run that he's been doing. Certainly, there are no limitations, which is really the beauty of the product.Edward: But he doesn't wear it when he goes out for a run around the block?Geoff: Yeah, he wears it. Compression is huge right now. The idea of really pushing yourself is obviously important. But I think things are now really starting to shift towards recovery. There are compression benefits actually in the product also. For someone like that, if he's actually wearing it on his flight home because it benefits him from a compression perspective and a recovery from the flight. He's kicking around wearing it day to day because, as you know, it's a common fashion to wear compression tights underneath shorts just like skateboarders do and professional basketball players do.Edward: Where is the path for more products? Do I just go through the joints in the body and say you're going to have an ankle one, an elbow one, and a shoulder one?"Geoff: Great question. Our vision is that we have our product for every athlete in the world. We consider anyone who has the ability to walk or to move an athlete. That really helps inform our product roadmap and it also helps form our pricing. Our pricing is really sharp. And our product roadmap would consider joints in the future that have a high incidence of injury. That would include ankles and shoulders, for example. But certainly, we're focused very much on the knee right now.Edward: Start with one before you start jumping to the next. What does your distribution look like? Is it all direct to consumer?Geoff: Yeah, the primary channel is direct to consumers, and that's commerce specifically. But we do see a huge opportunity around retail. We're starting with specialty retail because oftentimes, people are going to specialty retailers to find a solution to this problem that we have. We've found it to be sort of a logical intersect. The second area that we're looking at is around medical professionals. That includes, for example, physiotherapists where they, from their clinic, can actually recommend their patients to purchase our product to help them with an injury that they have.Edward: But you have not gone into that. So far it's 100% ecommerce?Geoff: No, we've actually pushed into relationships. I'm in Vancouver, so we pushed into relationships with a couple of national retailers in Canada. More on the specialty side, which we're really excited about, and then we have medical professionals currently referring our product to their patients. They would refer a patient, and then we would provide them with a commission based on that transaction.Edward: That referral though is still done through the website or some sort of platform?Geoff: Yeah, that transaction occurs on the platform because really their core business for medical professionals in treating patients, obviously. If they're getting into fitting and returns, that's not going to help their business. At that point, they hand it over to us and we're able to interface with the customer from there.Edward: Are there any concerns around the doctors themselves? If they get a commission from you every time they push this out to their patients, are the doctors themselves worried about the conflict of interest of them getting paid to push a product?Geoff: Yeah, very much. Again, we launched this in October, what we've heard back from that group of medical professionals is they are very patient-focused and they'll do the right thing for their patient. If that includes referring our product, they'll absolutely do that. It's been interesting because I would describe their reaction to a referral fee as being indifferent. What that's meant for us is that as an organization, we've had to invest more heavily in product knowledge and product understanding. Oftentimes, that means that those medical professionals actually have to wear the product themselves before they're comfortable referring it on to their patients.Edward: Does it come back to your Coastal Contact days of providing free products to the physiotherapist with the hope of getting a revenue stream?Geoff: Yeah, totally. One of the things that we found is that because people have had this tough relationship with their solution—being a conventional knee brace, for example—there's a multiple on each product that we sort of seed.They're wearing it, then they're liking it, and then when appropriate are recommending it to patients. But then they're also telling others in their network, family, and friends about this great product really is incredible. Ultimately, that solution feels better than paying Google and Facebook for acquiring new customers.Edward: It's always better when you have a marketing channel that isn't in an auction to the highest bidder, but obviously harder to build, though, too. I could turn on paid search tomorrow, but if I want to build a network of physiotherapists, that's a lot of work over a lot of years.Geoff: Tell me about it. Trust and scale are critically important for that particular program, for sure.Edward: How do you scale that? Do you have a sales team that's calling on all these? It's not really sales because you're not selling them anything, but like a community relations team that goes and calls on all these physiotherapists across the country?Geoff: Yeah, we have an outbound team that is looking to set up product knowledge sessions. I think, for us as a startup, looking to immediately automate or scale things, that wasn't really (in my opinion) a great solution because you need to get in there and figure it out yourself first and have these one-on-one interactions. Ideally, you want a few people to go first. That's really important because it creates a little bit of a flywheel effect where you can then point to other people that have joined the program and then that I think adds and builds a little bit of trust for future people who aren't going to join the program. As we build that out now, we're at a stage where we're looking at digital channels to generate leads for our sales team then to speak to.Edward: Yeah, it's always a challenging thing because you have this upfront cost of getting a physiotherapist on board, but you don't know what that revenue stream is going to look like or what type of physiotherapist to get on until you've invested it for a considerable period of time.Geoff: Exactly. With that said, within physiotherapists specifically, generally, they have a binary opinion towards bracing in general, so we identify that first. And then the second part is to understand what percentage of their patients that come through their practice have, for example, a knee injury currently. From there, we can rough out whether we think this is a good partnership to pursue.Edward: What does it look like? You get a physiotherapist on board and they're excited about working with you. How many products will physiotherapists sell in the next month or 12 months? Have you even thought up through that?Geoff: That's a great question. Generally, we believe it would be close to 30% of people that are coming through a physiotherapist would be appropriate for our product. That's kind of the way that we think about it.Edward: That's because 30% of physiotherapists are dealing with knee injuries, 30% of their patients?Geoff: Exactly.Edward: You mentioned a little bit before about when someone tries this thing, they tell their friends and family about it. That type of viral coefficient is, first of all, fairly common in unusual products and it's fairly common in apparel. You're both an unusual product and a piece of apparel. How do you accelerate that? Do you make sure that you have a really big logo on the side of your pants?Geoff: The logo on the K1 tight is something that we're always talking about. Currently, it might be a little bit too subtle. That said, you can actually aesthetically see that there's kind of cabling within the tights, which actually looks cool, and we believe sparks conversation.The things that we really look at are through the customer journey or athlete journey, as we call it. What are opportunities for people that have purchased the product to actually share their experience? Obviously, if you look at the unboxing, that's an opportunity. A small card saying, hey, if you love this, tell members of your family or friends about it.The second is obviously digital. Even within an automated welcome series, post-purchase, and if we see someone has given us 9 or a 10/10 from an EPS perspective, we will send them an offer that they can distribute to members of their family or friends to really encourage that advocacy. Edward: Have you estimated what that viral coefficient is? For every product that you sell or every customer you acquire, how many more customers are you getting over the next 12 months from that customer telling people?Geoff: My gut tells me it's three. Edward: Well, that seems really high. Geoff: It does seem really high, but if you talk to and I probably talk to a customer at least once every two days, they have had something dramatic happen in their lives, which is this knee injury. It's impacted them from, oftentimes, being able to do something that they have a spiritual relationship with, which is exercise. The solution that they have is either wear a brace or not wear a brace, neither of which is particularly compelling. We're providing them with this incredible solution that they will then wear doing this activity that they have this great relationship with and often there's a social component. That is just ripe for them to talk about the product that they're wearing.Edward: Even so, most people who have knee injuries don't have a lot of friends who have knee injuries, or do they?Geoff: Great question. There are particular sports where the product is particularly relevant. The two sports segments that we're looking at right now—and we're actively focused on—are ski and snowboard.Edward: If you could get someone on a ski team, it quickly spreads to the rest of the team.Geoff: Exactly. If you get even within skiers and snowboarders, certainly, there's a ton of, unfortunately, a knee injury. Those opportunities for people to talk about the solution that they have are right there.Edward: My wife gave up skiing just before we met. She had a big accident at Whistler, and she hasn't skied since because she's so afraid of hurting her knee. Do you think this is going to change her mind? Now she can put on one of your pants and start skiing again?Geoff: I'm going to give you a promotional code, so that should help even more.Edward: If it gets her back on the ski hill, I'm happy to pay full price.Geoff: The other nice thing is that—depending on who your insurer is—it should be reimbursed.Edward: Geoff, you do a bunch of retargeting. How do you account for incrementality? How do you know how many of those people would have come back to you anyway?Geoff: Good question. I think retargeting is certainly challenging within a digital marketing mix. For us, in all transparency, we haven't proven that out with Stoko yet. One of the things that you can do pretty clearly is also looking at what you're more established competitors are doing. If it looks like they're doing heavy retargeting, you can probably make a bit of an assumption that, okay, this is a high consideration purchase. People are going to be coming back to your website multiple times and checking out what their options are. We started with that kind of thesis and then started to invest more heavily in retargeting. Obviously, there's a number of different channels that you can look at from a retargeting perspective—everything from Google to Facebook to [...] et cetera.Right now, we're fairly heavily invested in retargeting. I think what I have found is that certainly, you want to look at the full journey of your customer. To me, the best test for retargeting is what happens when you turn it off. I think one of the nice things is that we're at a stage as a company where we can run those tests. We're not looking at attributing 15%-20% of our revenue to retargeting. We can do it in a fairly binary way where we're, okay, let's turn off retargeting and see what happens. I think that's generally the best way to test retargeting personally.Edward: That's one of the nice things about when you're a small enough company. If Coke turns off the retargeting, they have no idea what it exactly did to sales. When you're small enough, you can see any given channel, you can actually see the differences that happen. Geoff, this has been fantastic. Thank you so much for your time today. Before you go, can you tell us about your quake book and how it changed the way you think about the world?Geoff: Yeah, for sure. It's actually an author that I've been reading this year. He's a Canadian called Joseph Boyden. What he looks at is First Nations experience in Canada, really starting with their first relationships with European settlers. For me, obviously, a lot has happened this year. But for me, it really helped me understand the condition of First Nations in Canada, which is not great, not good. It helped me understand how things that happened generation after generation after generation ago impacted where we're at today. That it's important to acknowledge those things to understand how we could even attempt to make things better.Edward: Thank you, Geoff. I really appreciate your time today.Geoff: Thank you. Thank you for having me. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
My guest today is Geoff Henshaw, former CMO of Stoko. This is part 1 of the interview where we explore his career at Shoes.com, 1-800-Got-JUNK, and more. Tomorrow we look at the Stoko business and how he is creating a new category of “everyday injury prevention wear”. Geoff is currently looking for his next CMO opportunity. Feel free to reach out to me if interested and I can put you in touch.TranscriptEdward: My guest today is Geoff Henshaw. Today we cover Geoff's career and path to be the Chief Marketing Officer. UBC, Coastal Contacts, Shoes.com, 1-800-GOT-JUNK? Geoff now oversees all of the revenue for Stoko. Stoko was founded in 2017 and manufactures athletic wear with built-in orthopedic knee braces. I'm excited to have you here today, Geoff. Geoff: Thanks for having me.Edward: Geoff, in 2016 you oversaw brand and retail marketing for Shoes.com and then you were promoted to running all of marketing. How did you get that promotion? How did they move you from running part of marketing to running the whole show?Geoff: The Chief Marketing Officer was no longer with the company, and I was familiar with the marketing functions that were driving revenue for Shoes.com, so I had the opportunity to move into the role. Edward: What skills were you missing? You've never run all of the marketing before, now you were. What were your gaps?Geoff: I think Shoes.com is obviously competing in a very competitive space, which is shoe online retailers so competing with Amazon and Zappos. The area that I was missing was (I would say) the hard marketing skills. I just hadn't necessarily practiced as much as I'd like to. That would also be on the performance marketing side. While I was there, I had the opportunity to really learn from a guy, Brad Wilson, everything there was to know about controlling unit economics, understanding the impact of pricing, and how to think about your overall marketing mix.Edward: When you got there and you had to pick up those skills, why did they trust you to take on that role? Because performance marketing is usually one of those—it's not the most important, but it's the most obvious and the fastest feedback cycle on all of the marketing functions. To put you in that role without that, was there a risk? Why take the risk on you, just because they knew you well?Geoff: Yeah, I think definitely a part of it was that I was a known entity. Roger Hardy oversaw clearly where I was at previously and then oversaw Shoes.com. Having that relationship certainly helped. I think I was also very clear on the things that I didn't know and had also assembled a team of strong operators around me who can certainly step into those functions where I can lead and manage them from starting at objectives and strategy. Then leaving and leaning on them for the tactical execution.Edward: I want to go back and talk about your path to getting there. Your first role out of business school was at the General Manager position. Many people aspire for the GM role, but you just started there right out of school. How does a newly minted CMO get a country manager role?Geoff: It was an interesting role in that it never existed before and the country manager role for Canada, for Coastal Contacts at that time, that was the country they were generating the most revenue so it's an important role. I think the areas where I was able to land that role and then enjoy and perform well on it were getting clear on the objectives, the strategy, ensuring that all the key stakeholders were supportive, and then getting after it, which I think everyone really appreciated. It's something that I've leaned on that formula for my entire career.Edward: How do you get started in that role? If I'm a new MBA coming out of school, did you go out and look for GM roles where you can jump into a GM role right away, or was it a coincidence? How did you find that?Geoff: It was kind of a coincidence. I was in Vancouver, Canada and I completed my MBA at the University of British Columbia. At that time, I was interested in Management Consulting or working for an ecommerce startup. Management Consulting basically in Canada is limited to Toronto. I wasn't interested in commuting to Toronto or living there again.I found that I was very focused on local opportunities, and just through the MBA program, I was referred to this open role that was available with [...]. I just did my homework and came with the focus and energy that they were looking for, and they decided to take a risk on me.Edward: Were they planning to hire a newly minted MBA for that job, or did you impress them with your skills and they took somebody with less experience than they were hoping for?Geoff: Yeah. They had a culture of hiring MBAs. There were a lot of MBAs on the marketing and the leadership team. They were willing to roll the dice on me.Edward: Talk a little bit about what you did in those roles over at Coastal Contacts, especially around customer acquisition.Geoff: The main thing I did was look to get a deep understanding of not only the target customer but who the most profitable customer was. With that disability into that customer, it becomes a bit of—I would describe it as—a rallying tool for an organization where you can build out things like personas. You can talk about net promoter score, and you can ground organizations and team's activities into the experience of the customer.With the Canadian market and then with what we call the Commonwealth market of Australia, New Zealand, and the UK, it kind of focused on the customer, our value proposition, where the organization was properly positioned to drive that value proposition, and then rallied teams, activities, and behaviors around driving and stimulating a great customer experience of driving that top-line revenue.Edward: You also gave away a lot of free products.Geoff: Yeah, and it was a really interesting insight, which—full credits to the team—started before I got there. Their insight was clearly, at that time, had a net promoter score north of 80 if I recall, which was far and above the industry average for net promoter score. Based on that insight, we were able to say, hey look, we're delivering this incredible experience to people, and our product cost is actually quite low.In fact, our product cost is below what our acquisition cost is. We also anticipate that there's going to be a huge opportunity for recurring revenue. People have insurance benefits that they can rely on to purchase new prescription eyeglasses one time per year or once every two years. There's a great opportunity for recurring revenue with glasses, contact lenses, and sunglasses. What we decided to do, in a limited way, is starting to roll out testing around the first pair free. Again, the hypothesis is if you deliver this incredible experience where people get their first pair of eyeglasses for free, you're essentially removing all barriers. There's a good chance that they're going to come back again for more prescription eyeglasses or contact lenses and even better, they're going to tell their family and friends about it.Edward: Let's jump ahead to when you left Shoes.com and you joined O2E Brands. O2E is best known for those big trucks plastered with 1-800-GOT-JUNK? After spending a lot of your career to that point in ecommerce, how do you go about learning a service business like that?Geoff: Great question. I think O2E, Ordinary to Exceptional brands—the focus on home service verticals and their franchise. They are on the opposite end of the spectrum from our Shoes.com. It's super fragmented, Geoff's truck service can startup a business tomorrow and be driving around and digitally advertising.The things that I focused on were the customer, how to think about the customer, and how to get insights on the most profitable customer and connect the marketing function. That means the structure of the team, KPIs, to understanding the customer. I think my admission at O2E when I started was essentially to modernize the marketing function at the organization.Edward: How do you get to know those customers in a real visceral way?Geoff: I think there's a number of different tools, but generally, the way I think about it is if you can align with your internal stakeholders on who that most profitable customer is, that's step one. The second part is if you can spend some time getting to know that customer, that's important. Part of my onboarding at O2E and working on the 1-800-GOT-JUNK? business specifically was I spent a ton of time in major cities across North America just actually driving around on the trucks. I was one of the guys, in full uniform, and we were going out and doing jobs for customers. From there, I was able to understand day-to-day on the job what it felt like to be on the truck, understand the experience that we deliver to our customers. One of the things that became clear was that people generally were getting specific jobs done.For example, they were moving out of their home and they required our services, or they were moving into a home and they required our services. What was interesting there, Edward, is that activity throws off a digital signal. That's a life event that's captured within Google audiences. From that basic insight, we were able to target groups of people that were moving and we were able to target them with our message and then design customer journeys that were super relevant to people moving. That allowed us to drive that top length growth and a great customer experience. Edward: One of my favorite quotes from Jeff Bezos is about how when data and anecdotes disagree, the anecdotes are often right and you're doing something measuring it wrong. Did you find that at all? When you were doing this customer research, you're doing all the analytical parts, but then you also went on the road and visited and met the customers. Did you find those anecdotes and data disagreeing, or did they usually just come together and they supported each other?Geoff: That's a great question. I think the thing that getting out there, observing, and being with customers helped me understand and helped us make some adjustments specifically to the 1-800-GOT- JUNK? value proposition. That people aren't out there shopping for junk service. You might be shopping for shoes or for skis and you might visit a number of different sites. But generally, for junk removal services, you've got a specific job to do. That insight in itself allowed us to understand there's a handful of things that generally people need.For example, they're moving in, they're moving out, they might be renovating, or there might have been something dramatic that happened like a death in the family. Oftentimes, those activities, again, you can target them digitally, which is really exciting. But the thing that changed for us is that we understood that generally, the person that's looking for that service is high intent versus before, we might have viewed it as simply someone is coming across our service and were top of mind and that's why they're selecting us. No, actually, someone's having an event happen in their life. Edward: Geoff, what were some of the biggest failure points in your career? Where did things not go as expected?Geoff: That's a big question. That made me pause. I think there are a few things. One thing was at Shoes.com, that was a job and a role that I had returned back from Sydney, Australia. I moved back for that role. When I joined the organization, it was tough. We were competing in a very competitive category. Ultimately, Shoes.com went through a period of heavy financial distress and was ultimately acquired by Walmart. But through that period of financial distress, we needed to lay off people—people that I really cared about and it was pretty emotional. I felt like I had failed them to a degree and it was just disappointing because many of them I consider friends and I'm still friends with today. That was probably the hardest part for me and my family.I think the second part is just dealing with [...] interesting because I know you've got a concept that things happen to you between when you're 10 and 12 and that's really impactful. I think it's still how you deal with conflict. It's still something I continue to work on to this day and just making sure that things like getting exercise, sleep, staying hydrated, and keeping your energy up to the day, are all important factors so that when those times of conflict come up during the day, and they can come up (in my opinion) very unpredictably, you're able to deal with them in the right way.Edward: I once had a VP at Amazon explain to me in the early days how close they came to going bankrupt. What he explained to me was when you're taking off in an airplane, if you've never had that experience of the airplane brushing the top of the forests, then you never get the intensity you need to go make the plane take off and fly. It sounds like you had that experience at Shoes.com. Unfortunately, it sounds like you hit some of those trees in the way you go, but did that experience catalyze you for later on in your career? Do you think you would have the career you had if that hadn't happened if Shoes.com had been a lot more smooth?Geoff: It's a great question. The analogy that I probably use is going a day skiing and not falling. When I go skiing with my kids, if they don't fall it's like, were you actually trying as hard as you could? I can confirm that we tried as hard as we could. We did a lot of things wrong and a lot of things right. I think what I learned is going through that experience was really hard, but I think the things I took away from it are (to your point) I will hold on to those for the rest of my career.You can definitely start to identify those signals that are warning signals much more quickly. You can act in a way that you know you need to act because oftentimes, they are urgent and you need to react to them quickly and you know those are the right signals to be acting upon. My next stop was O2E Brands. I was able to apply a lot of what I had learned at Shoes.com. Over the course of three years, we closed double the size of that business. That was right when COVID hit, but it was definitely on pace to double, to get to close to $500 million in revenue.Edward: Geoff, what are your productivity tricks? What do you do to be productive that most people don't do?Geoff: I think the things for me are building out lists of priorities the night before the next day. My wife absolutely hates it because I'll sit on the bed and just write it down in my master notebook. Here are the top three things for work, here's the top one to three things for family, and then here's the top one to three things for exercise that I want to do the next day. I just find that that allows me to start the next day without having to think through what I need to be doing. I can just start. It also allows me an opportunity to look at a larger list of things and just understand, are there patterns or trends that are merging that don't allow me to get through the things I want to get through. To give you a quick example, one was I definitely wanted to continue to read as much as I could in the evenings. I found that I wasn't able to reach a particular goal of mine related to reading. The reason why is because I was looking at my phone and I was like, that's just completely useless time. After 9:00 PM, I don't need to be looking at my phone. What that led to me doing was just putting my phone in the closet so I don't look at it anymore and I can spend some time reading. Edward: When you put those goals, are they only daily goals, or do you have a system for doing them longer than daily?Geoff: No, I actually had someone, [...] who introduced me to this concept just before I did my MBA. He talked about thinking about your life in 10 years and writing out a rich 4-6 sentence description of what you would love for your life to be like. Then mapping out in 10-, 5-, and 1-year increments anchored to that 10-year vision what would be your goals, and those goals would be connected to your family, your personal life, your own physical wellbeing, and then professional.Then setting what my three goals are going to be in five years and then setting out what are my three goals going to be for this year. Then three goals in each of those categories—nine goals total. All of those daily goals are anchored to a roughly 10-year plan.Edward: Do you go back and review that? You've been doing this for ten years, can you go back and look to see what you've done versus the goals you set 10 years ago?Geoff: Yeah, it is crazy actually. When I first did this exercise, I, for example, set salary goals for myself and my family goals. We didn't have any kids. I wasn't married. I started doing this about 11 years ago and everything came through, which I know they're obviously talked about, but honestly, it was stunning when I looked at it. Just writing those goals down is so powerful. Edward: Geoff, this has been fantastic. We'll pick this up tomorrow. We'll talk about Stoko. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
My guest today is Steve Schildwachter, former CMO of Museum of the Bible. Steve started his career working at advertising agencies before moving to the client side. In the interview we explore that transition, and his later transition from for-profit to non-profit.This is the free edition of Marketing BS. Premium subscribers get access to part 2 of Steve's interview tomorrow where we dive into marketing a non-profit museum (and twice the content every week).You can also listen to these interviews in your podcast player of choice: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed (for premium episodes).Today's essay is sponsored byTurn your audience into a businessIndependent content creators are generating more than $2M per year using this open source, customizable publishing platform. All of the features you need to launch a new blog, newsletter and membership site are built-in — with proper SEO, a clean editor and paid subscriptions with 0% fees.TranscriptEdward: This is Marketing BS. My guest is Steve Schildwachter. Today, we cover Steve's career and path to CMO, Leo Burnett, DMB&B, FCB Global, rVue, and BrightStar. Steve was, until recently, the CMO of Museum of the Bible, and I'm excited to have him here. Steve, by 2013, you'd risen in the ranks of advertising agencies to become an Executive Vice President at FCB. You oversaw brands like Raid, Pledge, and Windex but then you left to join the client-side as a CMO of rVue. Why did you do that?Steve: First of all, Ed, thank you very much for having me on the show today. It's a great honor to be here. I pretty much came to the end of the road in the advertising agency business. The business had changed a lot during the time that I was there, having started at Leo Burnett, brief time at DMB&B, and then many years at FCB. Very, very valuable experiences, I wouldn't trade them for anything. During that time however, the advertising agency business has become much more commoditized. There are a number of pieces to that but it became apparent to me that if I needed to innovate, I needed, at least for me, to go somewhere else. I had been keeping my eye for a long time on the media technology startup sector, a lot of exciting things happening there. When an opportunity came up to make that jump, I did it. Edward: Why did they hire you? At that point, you had no experience on the client-side, you always used to do advertising. Why take a risk to bring you on as a CMO?Steve: It was not that big of a risk for a couple of reasons. It was probably more of a risk for me because I was leaping into something that at that time was completely unknown for me. It was essentially an advertising concept, rVue was a media technology company that networked together about 150+ digital out of home networks. The clients for rVue were effectively advertising agencies and their clients who were trying to decide how to divide their media budgets. It was definitely a world that I understood very, very well. In that sense, it was a pretty natural transition. The other thing was that at least one of the participants was very known to me. I was being brought in as part of a new management team. The CEO who was hired is somebody that I had worked with in the past. Another is a Chief Technology Officer who I've met for the first time but we jived very quickly as a leadership team. We had a great experience there for a couple of years. Edward: What important skills did you take with you from your ad agency work into that job?Steve: I would say for sure, the knowledge of the change in media landscape. One of the things that I had made a point of in my last several years at FCB was to stay on top of the media portion.FCB at the time was running the few agencies that still had a media department inside. They had a separate media agency, all the agencies had split off, Leo Burnett, we got Starcom, and all the other ones out there. But FCB, even though we had a media buying partner within our holding company, we still have a media department inside because we had to be on top of that for our clients. The media landscape, having stayed on top of that was a skill that was very required for me going into that job.Edward: What skills were you missing? What did you not have that you had to develop on that job?Steve: That's a great question. I would say two things come to mind. One is I needed to get back into a ninja action figure stance like I was when I was coming up as an Account Executive, because in a startup, you don't have all of the supporting functions around you that you have at a large company like an ad agency or any large company. I found that I was pretty comfortable with that. I had always been doing my own PowerPoint presentations and that type of thing. Making travel arrangements for myself was not hard but it was something time-consuming that I never had to do before. You think differently, you have to renew in a startup. There's very few people in the company, you have to completely change the way that you work and the way that you're productive. That was one thing that I was missing. Another thing was understanding and really appreciating the sales function. There were some things that I knew about it intuitively. As an advertising person, I would try to understand who I was approaching and make sure that I was bringing something that was relevant to them versus relevant to me. But having had to hire a sales staff, manage them, and keep track of them was completely new to me. It was a great learning experience. Edward: Steve, I want to go back a little bit and talk about the path that got you there. I'm a big believer that the experiences we have when we're 12–14 affect our entire lives. What were you passionate about at that age?Steve: I was passionate about a lot of things. I was passionate about baseball, I was passionate about different things that interested me. But from a professional development standpoint, let's say it was really writing and communication. I had a teacher when I was around that age who saw that I had an ability to write, an ability to communicate, and he nurtured that. It was really a foundational experience for me. It taught me that writing, for me at least, is fun, it's something that I like to do. It led me to some insights about how communication works, what makes communication effective. I couldn't possibly learn all those lessons at the age of 14, but I learned to appreciate them. I was always that kid, even in college, who would much rather write a 10-page paper than take a Bluebook task because I liked the process of writing.Edward: What about that teacher experience, the fact that you had somebody who could develop you that way, did that affect your later career at all?Steve: Yes, definitely it did, it taught the importance of mentorship. Not just that teacher, I was surrounded by teachers. I had two uncles and one aunt who were teachers, and I talked to them a lot about what do you do, what is your experience, what is that like? I very nearly went into that as a career. It was one of the things I was thinking about doing was going into teaching. Eventually, I ended up choosing advertising and marketing. I don't regret that at all, but along the way, that appreciation for teaching has stimulated my curiosity and made me a self-learner. It has also inspired me at certain times to take somebody aside, somebody that I'm managing or somebody that I'm working with that there's maybe a requirement or an opportunity to teach them on the job and coach them along. I've mentored a lot of people through the process and it's really, really fun to see them now in leadership positions later. That's very, very satisfying. Edward: I want to jump ahead a bit, you're at FCB for about three years and then you moved to Latin America. What drove that decision?Steve: That was a really wonderful confluence of personal and professional. My first job at FCB was actually with a below the line division they had at the time. I got hired there to work on the Wendy's hamburger account because I had previous experience in the same category with another brand. I had a great time there and everything but meanwhile, the so-called main agency for Cone & Belding was taking on the global business of S.C. Johnson and they realized they needed somebody to run the Latin America division. I speak Spanish and my bosses observed that while I was in this first role that I adopted my oldest child who's now 25, she's from Paraguay. My second child is from Venezuela, we did those two adoptions. They thought, well, we need somebody to run the Latin America portion of this global account, maybe Steve is the guy. I took that role and moved to Buenos Aires as a result.Edward: How did that affect you? If you hadn't done that, how would your career be different today?Steve: I have to tell you, not only what I lament not having done, I lament having come back after just a few years. The reason I didn't stay down there was because the Argentine economy collapsed. There was this so-called Tango Effect that essentially made it necessary for us to come back because the currency collapsed and there was not much happening there. To your question, what it did do for me is it completely opened my horizons in terms of how I interacted with people, how I conducted myself as a global executive. Having to speak a language in a foreign culture, be a part of that culture on a day-to-day basis, and just deal with all the people that you deal with is an incredibly mind-opening experience. Most Americans don't have that opportunity. I say this not as a criticism or an insular country because we're very self-sufficient or very large or within practically our own continent. Not many people would get the opportunity so I feel very blessed to have worked abroad. It opened my eyes in so many ways, helped me be a better colleague, and also helped me be a better listener to people. You have to listen harder when you're listening in a second language, trying to understand. Then you have to start saying, oh, they think about this completely different than I've ever thought about it before. That really helps you to be, like they say, a better colleague but also maybe more innovative.Edward: That's an interesting thing too as an agency. When you're at an agency, you're a step removed from the business. In fact, as a business person in general, you're a step removed from the business from what your consumers are experiencing. You often have to really work to figure out how your consumers feel about your product. In an agency, you're a step removed from that because you're dealing with the business, who then deals with the consumer. How do you go about understanding a business when you're a step removed like that in your agency?Steve: Somebody that I respect very much is the head of CMO recruiting at Spencer Stuart, told me that he thinks that advertising agency executives have a leg up because of all the different kinds of businesses that they're exposed to. If you think about it, I spent probably half my career in franchise brands, half of it in consumer-packaged goods with the smothering of some other things. But you're exposed to all these different experiences and all these different ways of working that help you see the possibilities of how things can be. I would also say that working in an agency, if you do your job right, you can be as close to the consumer, if not closer than your clients. One of the things that clients always told me is they said, wow, we really appreciate how you get into the milieu of the clients, you talk to clients. Of course, we conduct the research on their behalf so that's a little hygienic sometimes. Just going to the store on a Saturday, seeing what products are moving, asking people why they buy what they buy, and just getting a sense of the category is something that any good advertising agency person should be doing, or at least that historically was the case in the places where I worked. Edward: You got pretty deep. When you were working with S.C. Johnson, you filed your own patent.Steve: That was a funny story because I learned more about entomology and pesticides than I ever imagined that I would know. That's not something I ever imagined at age 12 and 13 is that I would be an expert at bugs and how to kill them. It was really interesting to me.My client, S.C. Johnson, had the largest private entomology lab in North America so you could go there, you could work with the scientists, you can understand. It was necessary because the kind of advertising they were doing at that time at least required powerful demonstrations of efficacy. Before, I went to my Creative Director and said, here's what we're trying to sell, I had the very understanding of why should people buy it. Working in the lab with the scientists would help me understand what worked and what didn't. In the process of that, I got friendly with a number of scientists and I brought to one of them this observation. In South America, consumers down the trade in some of the more outlined retail locations were buying some of our more expensive products that frankly didn't sell well. One of them was a little cardboard square that you would put in a device, like an electric air freshener, but it was an electric mosquito repeller that people would use at night. These were more expensive than most people in that socioeconomic level could afford, so what they would do is they would cut them in order to get more use out of the ones that they bought. We thought, maybe there's a way that we can dosify them a little bit and make them perforated or segmentable so that people could get more use out of it. We essentially created a new kind of skew that could only be distributed down the trade and it basically facilitated the consumer behavior that we already observed. We applied for a patent on that and got it.Edward: I want to jump ahead a little bit. You left rVue to join Bright Care as CMO, but then about two years in, you just kept the CMO title but your job role expanded dramatically. Can you talk a little bit about that?Steve: BrightStar Care is a great company. I would say that is definitely to me the most superior brand in that home health care category right now. It's a very entrepreneurial atmosphere, and I had some good success in my first couple of years with marketing and things related to marketing. I was asked by my boss to take on some other things. I found myself, like at rVue, I was back in charge of some sales teams and everything so I was still learning some of that. My boss was very patient with me on that score. I was assigned to a lot of different things just based on the success that I had in the first couple of years in marketing. Edward: Then what happened? You take on all these additional responsibilities. How do you divide your time now between your old responsibilities and these new ones, and still achieve what you want to achieve?Steve: It was really challenging because as I said, a very entrepreneurial environment, a lot of things happening very quickly. It's a much bigger company than a startup but behaves like a startup, and that's a good thing. That company in particular, the founder and CEO has an unbelievable work ethic, strong accountability. I loved it, but it was a challenge. I would say anybody who goes through a similar transformation at a company, expanding their responsibilities, needs to make sure that they have strong lieutenants in charge of each of the areas that they're overseeing. Someone that they can be accountable to, someone they can rely on, and not incidentally somebody who's going to push you as a manager. Lieutenants should be coming to you and saying I think we need to be doing this, I think we need to innovate in this area.Edward: Steve, what were the biggest failure points in your career? Where did things not go as expected?Steve: On what we were just discussing, I think it was a mistake for me to accept one of the roles that I had. To me, the very soul of BrightStar's point of difference is its registered nurses. There was a department that had orders of registered nurses who would liaise with the nurses of each of our franchises. They were excellent, they were amazing in gerontology, they were amazing at working with clients and everything, but fundamentally, their role was not so much commercial as it was operational. If I could've turned down one department in retrospect, it would've been that one. I loved them, I thought they were excellent, but it was just not something that I had the wherewithal to manage. I would say that's something where I probably should've said, are we sure about this, I'm not sure if maybe that's something that I should take on. Edward: How did that learning affect later in your career, if at all? Did it change your perspective on taking on responsibilities in other places along the way? Steve: Yes. I'd still consider myself somebody who wants to contribute in any way that my contributions would be welcome. I'm definitely not somebody who goes out to seek, build an empire, expand, and everything. The responsibilities that I was given at BrightStar were not ones that I asked for, but I am willing to help out. That hasn't changed. If I'm ever in this situation like that going forward, I'm going to be a lot more discriminating and just really think through, is this something that I can succeed at, is this something that's good for the organization to have me oversee?Edward: Steve, what are your productivity tricks? What do you do to be productive that most people don't do?Steve: There are a number of things. Years ago, I did what a lot of people did at the time, I read The 7 Habits of Highly Effective People. That helped codify for me a lot of things I was somewhat doing naturally, but I really got focused on those things that we call big rocks. You've heard this analogy before. You've got a container full of big rocks, sand, some gravel, and this type of thing. The big rocks represent those priorities that are most important that are going to move the ball downfield for the organization. You got to focus on those first because if you focus on all the less meaningful stuff that's the sand, you'll fill up your container with things that now don't allow you to fit in the big rocks. You always start with that.I would say that I went through a period where I got way too fascinated with planning ahead like that. What I've learned more recently is to leverage coincidences, things that happen. Call them coincidences, call them happenstance, call them divine appointments, whatever you wish. Things will pop up and you have to have the awareness in the moment, and the full vision in order to be able to take advantage of those things when they arise. There may be something that comes up and you think, wow, this is a quick easy win, if I jump on this right now, I can really do something great for the organization so let's get a team together and address it.Planning ahead is great, but you've also got to be willing to look for those coincidences when they come up.Edward: How do you differentiate between a coincidence that's an opportunity you should jump on, and a coincidence that's a distraction from the plan that you were trying to work on?Steve: This I will mention in not a positive but not a negative way, just a more discriminating way. This Art of War by Sun Tzu, it was a thing years ago to quote that book. I would say take a step back, look at all the different maxims listed on that book. What it's really about is fortune favors the prepared. You have to have a certain ripeness about you and a certain handle on what all's going on in order to succeed. It's not about doing something machiavellian like under-cutting a competitor or that type of thing, it's just paying attention a lot and being aware of what's happening around you. That's how you distinguish one coincidence, a coincidence that's productive versus a coincidence that is a distraction. If you've got a sense of what's going on, you can make those judgments right in the moment and be able to decide, yes, this is something I should chase for a day, or no, this is something I should just let go.Edward: Thank you, Steve. We're going to wrap it with that and we'll come back tomorrow to talk about your experience at the Museum of the Bible.Steve: Thanks so much, Ed. Great speaking with you. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
My guest today is Amy Gordona CMO of Kestra Financial. Amy had an incredible career in more traditional financial services before moving to Kestra. Kestra is a unique company which provides a platform for independent financial services professionals. This is part 2 covering the Kestra business.This is the free edition of Marketing BS. Subscribers were sent Part 1 yesterday, as well as this week's essay (on early vs late funnel metrics and the link between COVID tracking and marketing). You can subscribe here:TranscriptEdward: This is part two of my interview with Amy Gordona. Today, we're going to explore her experience as CMO of Kestra Financial. Amy, can you start by explaining what Kestra Financial is?Amy: Kestra Financial is a wealth management platform that supports independent financial advisors. We're sometimes more traditionally known as a broker dealer. An independent financial advisor is an entrepreneur who runs their own wealth management or financial planning business. We supply the backbone for an independent financial advisor. We supply the technology that they use, we supply the investment product selection that they give to their clients, and we provide the compliant support that they need in order to operate their business.Edward: The type of business Kestra is, has it been around for 100 years? Has there been financial advisors who have used platforms like this?Amy: You can probably think about Merrill Lynch, think about companies like UBS. All of them have operated broker dealers from back in the time. If you think about the term, you needed a broker in order to transact your business. That broker usually sat at a firm like Merrill Lynch or UBS and they used a trading platform to transact your business. That's how that business got started.Edward: How is Kestra different from Merrill Lynch or UBS?Amy: Specifically, Kestra Financial caters to the independent financial advisor, meaning we support entrepreneurs. A company like Merrill Lynch or UBS, their advisors work under their brand.At Kestra Financial, we support the independent financial advisors' own brand. You, Ed, would have your own brand. You would have your own shingle outside your brick and mortar location. The clients are yours. They are not Kestra Financials'. They're your clients. We merely provide the support that you need—the services, resources, and support that you need to serve your clients well. That's how we're different. We don't dictate how financial advisors do their business, how they facilitate their business with their clients. We merely support their right of choice, their right for choice in serving their clients.Edward: The difference would be if I'm a restaurant owner, I could go and start my own restaurant. Then, presumably use some sort of tool to help me do that restaurant. Or, I go to McDonald's and say, hey, give me the whole kit caboodle. In both cases, I'm running my own restaurant. One is a franchisee and one is an independent operator. You guys are servicing the individual operators rather than the franchisees.Amy: That's exactly right. We support and advocate for what they need in order to make them more successful. We're a B2B business, we're not a B2C business.Edward: The people who come to you, what were they doing before? If I was a financial advisor and wanted to do my own shop, was that even an option before? How would I do that?Amy: An independent financial advisor has to affiliate with a broker dealer. We don't like to refer to ourselves as a broker-dealer because we don't just supply broker-dealer services. Like I stated previously, we supply technology, we supply practice management, thought leadership, and compliance oversight. We are full service for a financial advisor. If a financial advisor didn't want to affiliate with a broker-dealer, they wanted to take on all of those services, and all of that compliance compliance risk themselves, they would have to operate their own independent RIA or they would be a captive financial advisor like they are for Merrill Lynch or UBS.Edward: Got it. You sit in between the two options of like, hey, do it all yourself or go to UBS and use someone else's brand. You let them have their own brand without having to do all the heavy lifting of doing their own brand. In email marketing, you're like the substack, or I can have my own brand but they run the platform for me.Amy: That's exactly right. I think one of the things that separates an independent financial advisor from someone who wants to operate within Merrill Lynch, UBS, or go on at their own is exactly that. They want to take some of the risk off the table, they want to take some of the business management off the table, but they still want to be able to make their own choices and run their own business. It's exactly that. It's a happy medium with all the support you need, but not without all of the risk. Everyone knows that financial services is a highly regulated industry and it should be. End investors deserve to have oversight over how people are managing their money. Kestra Financial provides those umbrella services that help protect end investors, but also help financial advisors be able to have all of the resources they need to provide solid financial planning services to their clients.Edward: Kestra is actually a holding company for four different brands, is that right?Amy: Kestra Holdings is a holding company for four different independent brands. Kestra Financial is one of those brands, that's the company I was originally hired to support. H. Beck is the second brand that we own and they are also a broker-dealer. Arden Trust is a personal trust company that we acquired. Then, the fourth company is Bluespring Wealth. That is an arm of the company that we launched about a year and a half ago. That arm of the company focuses on acquiring independent wealth management businesses in the industry.Edward: Kestra, see if we get all these straight, is a kind of business we've been talking about back. H. Beck is the same thing with a different moniker.Amy: Yeah, it's the same business. It's also a broker-dealer, but Kestra Financial and H. Beck have a slightly different target market, so to speak. Both independent financial advisors, but a little bit of a different segment of the industry. They are differentiated in that way.Edward: They're differentiated from a marketing perspective, not a product perspective.Amy: Correct. They're differentiated from a marketing perspective. Absolutely. Edward: Then, Arden Trust, that's a completely different business.Amy: Completely different business. They market personal trust products to independent financial advisors and to financial advisors. Financial advisers along the spectrum of wealth planning for their clients come across estate planning needs. Part of those estate planning needs are needing personal trusts. Arden Trust provides the vehicle for those trusts that financial advisers use for their clients.Edward: Is that a vertical integration play? Is that the idea that, hey, now you already have these relationships, you might as well sell them more stuff and so you get the stuff to sell them?Amy: We like to view it as an ecosystem in the sense that, yes, if you have an independent financial advisor and as we just spoke about a few minutes ago, they need resources in order to have a wealth of options for their clients and their clients' needs. Part of those options are estate planning needs. When they come across the need for trust services, it's a better position to be in, as we feel, to have those services available to our advisors as part of the ecosystem.Edward: Then, Bluespring Wealth is you basically owning the financial advising. Is Bluespring Wealth just effectively a client of Kestra? Like, your own biggest client?Amy: Actually, no. However, that segment of our business arose out of a need in the industry. Anyone who starts to look at the trends in the financial services industry will start to see that many of these financial advisors who built their businesses over the last 20 years are baby boomers. They are now entering their 60s. Some of them are older, some of them a little younger. There's a gap in the industry. That gap in the industry is called succession. Many of these folks that have built their businesses don't necessarily have a child that's going to take over their business, they don't have a younger partner, or a younger advisor who has the capital to buy their business from them. The valuations of these businesses are strong right now. These entrepreneurs have built successful businesses and with a solid client base who they have very close relationships with.The succession options for these entrepreneurs are limited and they need help. What's that saying? The cobbler that doesn't know how to fix issues or has worn shoes? A lot of these entrepreneurs just have not worked on their business in terms of succession planning. Bluespring Wealth is a succession plan option. We have the capital to buy these businesses, but continue to foster the relationship, keep the entrepreneur, the principal, or the owner in place so that they can continue to have the relationship with their clients, and we can continue to grow their business—help them grow their businesses.Edward: Is that how it all fits together? Is it all just different pieces that all drive that core business? Each piece is profitable on its own, but it becomes more profitable when they integrate?Amy: You've nailed it. That's exactly right.Edward: It all comes down to initially acquiring agents or acquiring customers' forecast financial. Is that the key entry point?Amy: That's the key entry point. I think what makes our B2B marketing unique is that while you are selling pieces of a widget, so to speak, we have a technology stack and that technology stack is innovative. It is a valuable part of what the financial advisor needs. Again, we have a wealth management platform and we offer a choice of investment products that is valuable to the financial advisor. We have compliance oversight and very business friendly compliance that's very valuable to a financial advisor. We really are selling ourselves in so much of this sales process. If you are going to rely on a company to help be the backbone of your business, it's not just about the technology and the widgets within the company. It's about who is serving you. It's about the people that you interact with and it's about the culture that it helps create for you in running your business.A lot of what we're selling is the firm itself, the people, as well as the resources. That's not easy all the time. I don't know how much your audience knows about this side of the financial services business, but for an independent financial adviser to move their business to a new company is a lot of work. It's not easy. It takes a lot of different pieces of paperwork and a lot of time with their clients explaining why they're moving and why the better resources that are in Kestra Financial are better for their business. In order to convince someone to go through that, what I like to call pain to get to a better place, it can be a very long sales cycle. It can be very much selling yourselves, ourselves as much as it is selling the pieces of resources that we offer.Edward: Who are you selling to? Are you selling to the advisor who's at UBS looking to put up his own shingle? Or has their own shingle already and wants to get rid of all the back office work that they don't want to be doing anymore?Amy: Both. We absolutely sell to both. We absolutely support both models. If you don't have your own shingle, you're a part of a wire house firm, you want to own your own shingle, and you want help doing that, we provide the support to do that, including the real estate. We handle that entire transition for you, get you all set up, and ready to go. If you already have your own shingle, that is our main support lever that we have. Edward: You're saying that the larger market is people that are already on their own shingle and they want to take off a lot of that effort. Amy: Correct. Edward: It's easier to convince somebody to do what they're doing now, only make it easier than it is to convince them to do something new.Amy: Right. For us, it's all about upgrading the resources that they have. So many financial advisors that have their own shingle have been with a firm for a long time. Now, the technology that's supporting them is out of date or what they want to do to build their business just isn't an option because the firm they're with doesn't have the support that they need. Kestra Financial is an upgrade for them in terms of the resources that are going to support them.Edward: Are they out looking for a better solution or do you have to go to them and explain that, hey, there's a better solution out there?Amy: I think it goes both ways. I think there are some that absolutely have reached their breaking point on a specific pain point. That pain point can be technology, it can be the compliance support they're receiving, it can be the investment choice of products that they have, it can be the client, or the customer service levels that they receive when they need help from someone at the firm. Usually, there is a specific pain point that drives the financial advisor to want to look at new firms that can provide relief to that pain. That is the best situation to be in. If you can identify that pain point, then we can really move down the sales cycle into the sales cycle faster. It also works where an advisor almost doesn't know that they have pain until we show them that there's something better. Once we show them that there's something better, we can then start to demonstrate that you had pain you didn't even know and we can relieve it.Edward: Those first types, the people that identify their own pain, I assume you're collecting them on Google paid search and organic search. They're going to type in, like, solve my problem. You appear to have the results at the right time, correct?Amy: Yup. We're deploying a persona-based, what I just referred to, pain point-based awareness tactics and also our organic search, our paid search, all figures around those pain points, looking for better technology, who's the number one broker-dealer, be a part of a culture that helps your business grow. We try to build personas around those pain points and then build tactics to support content that demonstrates how we can relieve that pain point.Edward: Rather than someone searching for backend support, they're looking for specific issues like, I need a new bookkeeper or I need a new timekeeping manager. You basically target those individual pain points and say, hey, not only do we solve that problem. We can come in, take over everything for you, and take away all your pain points.Amy: Correct. I'll give an example of a consideration, some consideration as we ran with testimonials about those pain points. If compliance is a pain point for you, we ran testimonial ads where some of our existing advisors are talking about the support that we give. When it comes to technology, same thing. We've run ads and tied those ads to pieces of content, tied those ads to search topics, to search terms, all having to do with how we are better at that particular pain point.Edward: Obviously, Google, but are you running them on financial services publications that these people read?Amy: Exactly. Trade publications and financial services are very heavily read by all financial advisors. wealthmanagement.com, financial-advisor.com, investmentnews.com, they have huge followings that they've built up over years of being very respected and trusted sources of new rules and regulation, best practice management—all types of resources and topics. Those trusted resources are where financial advisors go to read their news of the day. Using those trade publications and investing some of our marketing dollars in those trade publications is almost imperative.Edward: Are they effective display ads, or are you getting advertorial? How are you getting people to actually see and read these ads when they're going and reading their daily media?Amy: Both display, newsletters, paid content, and promoted content that's in both on their sites and in their newsletters. Doing podcasts, having members of our team do podcasts with some of their editorial staff, engaging in bylines and contributing pieces of thought leadership to those trade publications are all part of the things that we do to partner.Edward: How do you get their attention, though? How do you get them to interrupt them? Like, if I'm looking at Facebook, I get interrupted right in my news feed. That ad unit on Facebook is really, really effective. The targeting is one thing, but the ad unit is so effective. Are there equivalent ad units when you're in these financial publication services that can get someone's attention, they don't just drift over?Amy: There are. What I have found, there are ad units that can get your attention. You can buy pop-up models that don't go away until you x out of them. You can buy a run of the page where you're basically surrounding the entire page, where you're sponsoring something. What I have found though, too, is when you're running your own business, you're really interested in ways that you can grow your top line. You're really interested in ways that you can be more effective quicker, and make more money. An entrepreneur wants to make more money. What I found to be secondarily just as effective is having the right content. Yes, you can run ad units that are attention grabbing, have the whole page that then an adviser can't miss. You can have the right page search terms. When you start to offer an advisor real valuable content about how to effectively make them more money, be better at what they do, serve their clients better, I find that our engagement has been strong. With trade publications, you have a lot of opportunity to offer that content, whether it's part of their paid promotion or it's part of conversations that you would have like we're having today, that's where the trust is built with the financial advisor and where the proof is in the pudding, so to speak.Edward: I've often argued that product companies are becoming more and more like media companies because that's how you get the attention. You need to have the person pay attention to the content. The way to do that is to create good content. You can only hack the subject line so many times before someone starts ignoring you if you don't have good content behind it. How long until you guys start a fifth company that's actually creating content for financial advisors?Amy: I just had a conversation with a colleague where I said we missed it. We could have been billionaires. All we had to do was figure out how to start a company that creates a turnkey content and lead gen engine for financial independent financial advisors. I'm talking B2C, helping financial advisors find more clients and get engaged with more clients. I think I could have retired already to Bora Bora.Independent financial advisors, again, going back to their profile, they built their business brick by brick. These are people that worked hard, like shaking hands, going to little league games, and getting involved in the community. These are people that care about their community, but they're not necessarily marketing geniuses in terms of how to evolve with the times, become more digital, get their website looking spiffy. Actually, that's part of the services Kestra offers—helping them with those marketing tactics. However, if I could have figured out how to start that one company that put a turnkey package together to help every financial advisor do that, I might be doing the podcast that you're doing today.Edward: Amy, thank you so much for being on the show. Before you go, tell me about your quakebook and how it changed the way you think about the world.Amy: My quakebook was a book called Dopesick. Have you ever heard of it? Edward: I have not.Amy: Dopesick is actually the story of how OxyContin became such a problem in the United States. It looks at the corporate greed that drove painkiller production to the place where it is today and the devastation that it's had on many Americans. I'm a fairly optimistic glass half full—believing in the good of people type of person. The facts that are laid out about the purposefulness that Big Pharma specifically went, the plans that they dropped to specifically drive pain medication into parts of the country where they knew people were working hard jobs, suffering economically, and suffering health wise was borderline sociopathic.I always knew there was an element of that in big businesses. By the way, I still believe that there are lots of great big businesses out there and lots of great people who do great things. The cost, the way that the scales tipped in this particular case where money and profits became more important than anything else, it really made me think twice.It's part of the reason why I like working for a company where it's a smaller company in the grand scheme of things and where I feel that I have an impact because that book did it. It shook me in terms of where things can get out of control, how people will just go along with something, how so many people went along with this plan knowing it was damaging human lives, and the destruction that it did to too many people. So many lives have been lost over pure greed, pure business greed.Edward: I think there's something really nice about working for a company that you feel proud of and you think is doing a good in the world. I think it'd be very hard to work for a company that you don't believe in, too.Amy: That is a lot of driving force that keeps me excited today. At the end of the day, people like my parents need financial help. They need financial planning. I grew up in a middle class household. My father worked hard every day in a blue collar job. He worked his butt off but needed help in order to be able to retire. People that we support provide that help to people like my parents. I'm really proud of that.Edward: Thank you. This has been fantastic. I really appreciate your time today. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
This is part 2 of my interview with Chris Chapo. Chris has never been a CMO but he has overseen analytics at a number of organizations including Apple Retail, JCPenny and now Amperity. In this part we explore Chris's take on analytics and what he feels CMOs need to know.This is the free edition of Marketing BS. Part 1 was available to subscribers on Wednesday.TranscriptEdward: This is part two of my interview with Chris Chapo. Today we're going to dive into his data analytics insights and how they can help CMOs. Chris, let's start with this question, is data science the future of business?Chris: I personally don't believe it is, which is kind of funny given the fact that I am a data person, and I self-proclaimed “data scientist”. I'd say taking an evidence-based approach to understanding business problems and solving business problems, to me, that's the future of business if you want to be scalable and sustainable in the future. Data science is just one of the methods you might use to achieve that vision. Edward: What's another example? What are examples of evidence that's not data science?Chris: Sometimes people look at data science as the fancy statistical model which will say let me predict the future and the outcome of what's going to happen, which could be one approach. But I'd say another simple approach to creating evidence is doing experimentation. If you've got two different potential marketing treatments that you may want to show to consumers and you're not sure which one is going to be the most effective, try it out. The confidence you'll have in that will overcome any sort of doubt you may have and a statistical model which says, well, this person should get message A with 0.76 accuracies, and this person should get message A with 0.72% accuracy. You're like, how do you interpret that? Oftentimes, experimentation is a great example of how to do that. Another one that I find really helpful is bringing consumer insights and what you would call traditional research to bear and combining that with data analytics and data science methods. An example of something where I've seen these people really successful is creating behavioral-based segmentations where you talk to your consumer base about attitudes and beliefs. But at the same time, build statistical models to predict which segment a person may be a member of. That's useful when you want to personalize two people based on their segments versus just create personas that are interesting but not necessarily actionable. Edward: Why is that not data science? Is it data science only when you look at purchase data? But as soon as you do external research data, it stops becoming data science and it starts becoming something else?Chris: I think data science by itself, honestly, is a very overloaded term. It can mean a lot of things to different people, and as such, then it means nothing per se because there's nothing that's specific. But one of the methods that I think most people traditionally think about for data science is the more purchase-based activity drives it or signals such as do I click on something, what did I do on a website? Thinking about it, more focused on propensities and predictions about activities versus understanding someone's core beliefs. One could say—and there are some examples where people I was training—try to approach and model people's emotional states and understand some of those few more “data science” methods. But it's usually not the mainstream when people talk about data science. Edward: Chris, what do you do for long feedback cycles? In short feedback cycles, you can run experiments; or you have the results, you can look at the inputs and the results, and you can run all sorts of data models. What about things that have long feedback cycles? Things around hey, I influence you now and you buy a car two years from now based on the stuff I'm doing for you now. Is there anything that data science can help in trying to understand those long feedback cycles?Chris: I'll give you a couple of thoughts. Of course, data science is not a panacea. It doesn't solve all problems. But one thought of how to approach some of those long feedback cycle problems are creating leading indicators. Actually, doing some analysis understand, yes—to your point—maybe this outcome I want to predict is something which will take a couple of years for it to play out. Customer lifetime value is a great example of that. It takes a while to actually observe it or even products where there's a long purchase cycle. But is there something where we can do an analysis first off to say, usually, people who have higher lifetime value—or in the case you just mentioned—who do go on to buy a car? These are some of the behaviors they exhibit first. While it won't necessarily be 100% predictive, but focusing on experimentation on those leading indicators and using that to help (to your point) to take your best guess using data on if I continue doing more of this thing, this will help us drive something in the future. I'll give you an example of this that wasn't a team that I lead, but it is something I learned when I was in Intuit. One of the things that they wanted to do was get people to go from trial members of QuickBooks online to full paying members. That usually takes a period of time to actually show up. It takes 30, 45, or 60 days. What the team did when they did some analysis is realize, if I can get people to do this one little action within their first seven days, that has a high correlation to someone converting to being a full paying member. They had teams who were focused on driving that little behavior, which was connecting to your bank account. Again, they would have entire teams focused on experimentation to drive that, and how can I get that rate higher? What are the things I could do? Because they knew that it would pay off in the future.Edward: Do you run into selection effect problems? You do that correlation, not causation. I imagine that 100% of people who are paying members connected it to their bank account, but that does not necessarily mean that connecting your bank account leads to payments. It could be that it's the other way around. Chris: Yeah. I think that's one of the challenges with this. This is why an example of that, the team would go back and validate that. Those people who did that action did have a higher spend than people who didn't. But to your point, the question selection buys come in. There are a couple of different methods that one could do to help address that. In this example, because we're selecting who gets this potential treatment versus those who don't because this is an online product, you can validate that in a true AB test fashion. Now, this scenario is not quite as easy. One of the things that I'd seen teams apply are things like propensity analysis where you may not necessarily be able to have a control group, but can look statistically to say this person who does an action that we hope is a positive one or experience is something different, can we find somebody who's very similar to them in terms their past purchase history and use that as a pseudo control group.But it's still not necessarily (I would say) as solid as a lot of the statisticians in the world would like. That comes to one of the pieces that back to this concept of data science is important is not getting super caught up in just the 100% accurate solution, but what is good enough to drive a better business result than we've seen in the past? And how can I make sure that this is not that we want to have random chance to spare only success measures, but how is this better than our other approaches, and can we get better over time? Those are a couple of examples. Edward: I definitely buy that. I think that a lot of the issues with academia is they're trying to get to the right answer. Whereas in a business, the right answer is not what you need. You don't need to know the exact right answer, you just need to know a better answer than what you were doing before. You spend a lot of your time in retail. Let's talk a little bit about retail loyalty. How do you measure loyalty in retail?Chris: That's a great question because most people will measure loyalty based on how much people spend or likely to spend. Honestly, I'll protect the guilty here. There's a cable company that I use, which I spend a lot of money with but I do not like the cable company. I am not loyal to them. And if I had another choice that provided the same level of service in terms of speed, bandwidth, and all those things, I would in a heartbeat choose something else. Oftentimes, how I think about loyalty—particularly in the retail sense—is when you're able to build a strong emotional connection between the consumer and the brand. That connection where people—you've heard the net promoter scores, one surrogate of an example of how to measure that. But if you're so connected, I love this brand so much. I will choose them above others. There's something specific about them that makes me want to buy from them. That to me is an example of when you've got that loyalty. The hard part is how do I measure that? How do I create a system to instrument that? But to me, if you can do that, that to me is a north star for retail analytics. Edward: The finding loyalty as a positive emotion rather than the lack of a negative, you're splitting out the loyalty that is I'm going and searching for this thing versus the loyalty that comes from lock-in. Chris: Yes. I would say it's loyalty, I'm going out to search for what I love in this thing. If I had a choice, I would choose this over others. That to me is that connection. You see it, oftentimes, anecdotally when people talk about their favorite brands, they talk about how it makes them feel. I'll give you an example, I used to love Virgin America. That was my favorite airline. I would choose them over others because of how they treated me as a flyer.For certain people, that emotion isn't important. They may choose something else. They may choose Southwest because they want to feel like a smart savvy flyer, not an emotional connection on what they feel when they experience the brand. To me, it's really around that emotional feeling that, quite honestly, can be difficult to measure, but it is really important, and you know when you've got it. Edward: Can you measure with the price premium? I imagine most people when they fly, find the airline that's going to take them to the place they need to go, at the time they need to go, and then they choose based on price. Whether it's $100 or $99, they end up going with the $99 one. You imagine the more they're willing to pay to go to that $100 one, $110 one, or $200 one. Is that the measurement of how much loyalty there is?Chris: It might actually broaden it. Instead of it being a price point, it's just general friction. One area of friction could be paying more. Another could be—in this example we're talking about the flights—I'm willing to take a connection even if the prices are the same. I'm willing to have a layover because I love this brand, and I want to be part of the experience. Even though I know that there is someone who flies there directly. There could be other pieces as well. You think about the friction side of things if you have a bad experience with a company. Going back to this flight example, say that your connection flight was canceled and you're sitting there at the airport. You may be more willing to forgive that bad experience if you have loyalty to the brand versus if you don't.I actually broaden it to the friction or the discretionary friction you may be able to deal with. The more you're able to deal with it potentially, the higher you have loyalty to the certain brand. Edward: Can you quantify that? Because I imagine things like willingness to do a stopover on a flight, there's a dollar value you can calculate. Someone is willing to accept that stopover versus going direct. Most of those friction things, things that you can put a dollar value on until you eventually get to the point where hey, there's a number that we can put on the loyalty of any given customer?Chris: That's an interesting question. I haven't thought about it in the macro sense. But I think in very specific examples, one could do this. I'll give you an example back in my Apple retail days. One of the big challenges that people face—particularly in the 2007–2011 timeframe—was the stores were busy and getting help could take a long time. We were able to quantify the impact that having to wait for help, whether it be the genius bar or whether it being for help to purchase, actually had on someone's—we used the net promoter score methodology—likelihood to recommend the store experience. For those people who had prior great experiences, the negative effect didn't impact as much as people who were either newer to the store experience or had prior negative experiences.Edward: First impressions matter. If you make a great first impression on your customer, that first impression can be sticky and get you through some bad experiences down the line. Chris: Oftentimes, the people remember how you ended the experience first, then how you began the experience, and then everything in between. There's some research done—and I feel bad I don't have it off the top of my head—by some folks who were studying the impact of lines and how people had the experiences. But the ending mattered more than the beginning in individual experience. Edward: In terms of multiple experiences, are you always better than to invest in those early customers rather than a customer that's been around loyally? It's almost like if a customer's loyalty, that's the one that you'd least need to invest in?Chris: I'd thought about this in three buckets. There are your best customers, your almost best, and then everyone else. Oftentimes, I advocate spending enough on the best customers to keep them there. That is because if you have enough bad experiences, they're going to fall down. We've all probably experienced things like that company used to be great, but they're not great anymore. Enough to keep in there, but it's that next year, the next best that I personally would say you should invest more in. Edward: Chris, is it the best though, or is it the new customers? Because it sounds like you're saying before is that first impression really, really matters. Chris: Next best could be (to your point) the first impression for folks. We know that based on the channel of acquisition, the profile of this customer that they are likely to be, they would be on the path toward best customers. Treat them at the very beginning really well. Or could be people who've been around with you for a while who are starting to increase their purchase frequency, but they haven't necessarily got to that loyalty phase. I wouldn't say that I would choose either over the other. Going back to this concept experimentation, to actually try it, you don't know which one you're going to have the most leverage with. Honestly, I would say—at least my experience from most retailers—you're going to need to balance the acquisition component and your first impression with customers and so forth with those who are buying from you but aren't necessarily up at the top. You'll need to invest in doing both of those. Edward: What are those key metrics? You mentioned NPS, but other metrics that retailers should be using to predict or to be optimizing against to make sure their customers are loyal?Chris: I think the net promoter score is definitely a simplistic measure to use and it's fairly effective. Particularly in driving closed-loop operational improvements around customer experience. That's definitely a key one. Another one that I am a big proponent of is predictive customer lifetime value. Although it can be difficult to understand and interpret. It's really helpful and a barometer to say here's what we think at least the future spend will be. One area that takes a little bit of time to suss out, but if you can actually—for an individual brand—understand those emotional benefits that someone gets in your brand and find a way to measure that. That's another great way to experience this. Edward: What's an example of that?Chris: An example would be—going back to my Virgin example because they're the longer around. Imagine one of their things—the emotional benefit is—makes me feel special and welcomed. Maybe that's the emotional benefit. I'm just supposing that.Edward: Is it market research then? It's a matter of asking your customers survey questions and figuring out which of those answers matter?Chris: Which are the answers that matter, and there's an approach where you can figure that quantitatively through stated importance versus derived importance on these emotional benefits. You can either ask them (to your point) on an ongoing basis or if there's a way to actually—going back to leading indicators—measure that in a different fashion. That can be interesting. The question would be I don't know necessarily how to genericize that because a lot of that has to do with each individual customer and brand. That's why I would think through that. Edward: But it's a matter of the generalized way to ask a bunch of questions, run correlations, and which of those questions end up being leading indicators of the left-hand value of success in the future and then optimizing towards those questions. Chris, this has been great. Can you talk a little bit before you go about what your quake book is and how that changed the way you thought about the world?Chris: The book that stands out for me is a book called Tribal Leadership. Why that's important is it goes back to the example I shared with JCPenney and a few other examples I've had. The team that you're working with—the tribe that's trying to drive change in a company or drive success—matters probably more than the actual strategy of what the company is, at least in my opinion. Because I'm a big believer that teams that are motivated and work well together can solve any problem. Again, that's kind of [...], to some degree. It's something that I‘ve actually experienced personally in my life. What I love about this book Tribal Leadership is it talks about different levels of organizations. Starting with what they call level one, which is like prison gangs and tribes that happen there where they say things like, all lives sucks. All the way up to the very top level words like nirvana and flow. It's that one group you work with where everybody is just completing out their sentences, understand how to work together effectively. It's that once in a lifetime opportunity. What I love about this book is it gives you concrete examples of—if you're in a level two or three group—how do you get to the next level. And what are some tips and tricks to help you as an organization grow? I read this book first when I was in Intuit, it helped me as a leader understand that the craft of my work—which is analytics and data—is important. But what was more important is how to create a tribe or team that is successful and can drive the future. That's my quake book. Edward: Thank you so much, Chris. This has been fantastic. I really appreciate your time today. Chris: You're welcome. Thank you very much too. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
My guest today is Matthew Kemp, principal of SCP&CO, a mid-market private equity firm. Prior to his role at SCP Matthew was CMO of BlueGrace Logistics, and the founder of three very successful companies. This is Part 2 of the interview where we dive into marketing 3rd party logistics in general, and BlueGrace in particular.This week's sponsor:BugHerdThe easiest way to collect and manage website feedbackTurn email chains and spreadsheets of vague feedback into actionable tasks. Pin feedback to elements on a website and capture the technical information to help replicate bugs and solve issues. Track feedback tasks to completion.Try BugHerd for free today.Transcript:Edward: This is part two of my interview with Matthew Kemp. Today, we're going to dive into his experience as CMO of BlueGrace. Matthew, can you start by explaining what BlueGrace does?Matthew: Sure. BlueGrace Logistics is known as a 3PL. 3PL is an acronym for Third Partly Logistics. Think of them effectively as a broker consummating transaction on two sides. They are sitting in between clients, like Procter & Gamble, S.C. Johnson, Coca Cola, who needs to ship their wares around the country from either bringing it overseas into the country and then the distribution centers or from distribution centers to retail. Customers who need to ship things and then the actual carriers—trucks. There are tens of thousands of carriers throughout the country, and we are basically sitting in between those and helping customers interact with the carriers.Edward: Maybe I'm not aware of this, but trucking is one of the biggest industries in our country that many people don't even think about. Last I saw was an $800 billion industry with over a million truck drivers in the US alone. These third party carriers, there are actually effectively three different types. Is that right, three different types of carriers?Matthew: Carriers can fall into our two main components: LTL and then full truck load. LTL is less than truck load. The big carriers are ones that you're going to know, the familiar names, they're UPS, they're FedEx, there's Saia. You've seen these trucks on every highway whenever you've ever taken any kind of road trip.Full truck load is actually very much a mom and pop industry. There are tens and thousands of full truckload carriers. The average owner may own two, three, four trucks. In fact, there's tens of thousands of single truck operators out there. The difference between the two, full truck load is I go to a place, you have purchased my entire truck. I'm going to go to one location, I'm going to pick it up whether or not you fill up the entire truck is not relative. It's you own me, you own my truck, I'm going to go from point A to point B, and my time is not going to be distracted.Less than truckload is got to be much more sophisticated, much more difficult pricing strategy. This is where these major companies like FedEx, UPS, Saia are going and making multiple stops. They're finding five or six different customers, going and making multiple stops, grabbing things from those locations, taking them from Tampa to Atlanta and then going around (say) the Atlanta Metropolitan Area, stopping another six times to deliver their goods. Funny enough, BlueGrace started as a specialist in LTL. It's known in the industry as being an expert at LTL shipping. Truck load is something fairly new to the company. Funny enough, it has a lot to do with the fact that you and I know each other. When Warburg Pincus came on board and became an investor in BlueGrace, one of the things that they decided to do to help grow the company was to bring on some expertise in sales on the truck load side of the business. We have then diversified the company a bit and have two sources of revenue coming from two different distribution channels.Edward: Talk about those distribution channels. As a marketer, how do you market LTL versus full truck? Is it the same or they're different marketing channels?Matthew: They're very different. Full truck load is something that is in many ways “easier” because the logistics are very simple. It's point A to point B. That being said, the pricing is a little bit more complicated because it's based on the market. When a hurricane hits or there's some natural disaster, there's a snow storm, the pricing for truck loads can change daily if not hourly. LTL, while the actual logistics are really complicated because you're going through all these different stops, the driver has a very complex route, the pricing is actually something more like you would find on Orbitz or Expedia. I can go to the software that BlueGrace has developed called the BlueShip and place an LTL order without having to worry about the pricing change. I just tell you where my point A is, point B I can put the zip codes in. I tell you the weight, I can tell you how many pallets. And then I will get a price [...] online and I book that shipment and know that that price is actually going to be valid for the next 24 hours. That's not available on the full truck load side.To get back to the original question, there is some difference in marketing. The truck load world is something where we try to go after very, very large entities. I mentioned some of the customers like S.C. Johnson, Procter & Gamble, and Coke. That's a market where, because they can fill up the entire truck, that must mean they are shipping large quantities. They can afford to make large purchases. The average truck load could cost a customer $3000.LTL is smaller. You're going after small- and medium-sized businesses because the amount of items being put on any given truck is much smaller and it's not uncommon for the price of an LTL shipment to be just a few hundred dollars because you're only taking some portion of the truck.You're marketing really to two different constituencies. Truck load is you're going after the Fortune 1000 or even the top 5000, 10,000 companies in the country. On the LTL side, we were going after much smaller companies, and you try to strike a balance between the two.Edward: Why do both? What's the synergy between doing both LTL and full truck for different customers entirely?Matthew: Selfishly, you want to diversify your revenues. Truck load can be wildly profitable. You would like to be in that business. The gross margins are much higher. That being said, it is so much more variable. When the good times are great, if you're making tons of money when there's capacity restraints, then it can go really badly for you. BlueGrace has really benefited from having the two revenue streams.On the marketing side, you could actually do business with more companies if you can service both their needs. There are some companies in the midmarket. They've got needs on both the LTL and the full truckload side. Being able to do only one or the other limits how many companies you can talk to. Having both has really benefited BlueGrace and have been able to expand the universe of companies that they can market to.Edward: When you acquire a mid market company as a customer, you can then turn around it and sell two products to them. Whereas if you only had one of those products, you could only presumably sell one product to them, so your monetization per customer is significantly lower if you don't have both products.Matthew: Correct. You and I have spoken in the past about this enterprise type of customer where in the 3PL world, some customers are transactional. They're not committed, they don't have a relationship where they sign a contract, but they are just regular customers where you have a good relationship. We actually attempt to try to sell two- and three-year agreements to have companies outsource all of their logistics to BlueGrace. In that market, you have to have diversified types of distribution channels because then you're dealing with complex types of distribution or logistics transportation apartments. If you don't have all of the various distribution modes covered, you're going to lose a business. We don't have all of them in-house. For the ones like intermodal, which basically includes rail and Air Express, we would then supplement our capabilities internally with third party partners so that we could come as a package to a customer and say we do offer all the distribution channels that you could possibly be looking for.Edward: Are most of BlueGrace's competitors doing all three as well? Or is BlueGrace more unique in that they do all three?Matthew: They're very unique. I would tell you that most people do truckload. A lot of transportation companies only want to do truck load and when you get into the business, that's the one that is juicy because the margins are so much higher. A lot of the press that you're seeing in the industry with Uber freight and all the competitors, what they call digital freight matching, those are all centered around the truck load market. There aren't people who are trying to break in and disrupt the LTL market. It's much more difficult to do and there's very few companies that have the sophistication that BlueGrace has. We have limited competitors on that side, but we have hundreds of competitors on the full truck load side.Edward: But meanwhile, your LTL competitors are companies like FedEx and UPS. There are few competitors, but giant competitors that are going after you.Matthew: Those probably aren't competitors as much as partners. Those are the people we are bringing loads to. We are helping people get on to those trucks for FedEx and UPS. That BlueShip technology I was telling you about, we get pricing from FedEx, UPS, and Saia in all dominion and upload those prices into our database. Those are the prices being displayed to the customer when they're booking an LTL shipment.Edward: Got it. You're almost like an Expedia for LTL shipments.Matthew: Correct. That's a very good analogy. If you saw the website BlueShip, it will look and feel like almost every booking website that you've seen. You have the hotels.com, Expedia, Orbitz, or even on Amazon, we take a set of inputs, you hit submit, you get results. Just like you're booking a car. It's nice because, like when you're booking a car, the names are familiar. I have Hertz, I have Atoz. You got that comfort when you're booking LTL with BlueGrace. I've heard of the companies that are being given the options. I've seen all their trucks. We're very similar to that on the LTL side.Edward: BlueGrace's growth was primarily driven by sales. In terms of marketing spend. It's a very small percentage of your overall revenue. What role did marketing play? How did you grow the business with marketing?Matthew: Indeed, what you described is something that the CEO himself would admit a few years back, which is it was very much a sales organization, almost all of the outreach to prospective customers was via the phone, via email from a sales organization trying to hammer the phonebook in the old days. What we wanted to try to do was transition to a situation where companies were calling us. That's so much an easier sale when the phone is ringing and you're not having to make phone calls. We took a very small marketing budget and we started deploying it against [...] leadership in content ideas. We did not have a webinar series before I got there. We created a webinar series. We had no such things as white papers with very few case studies. We started building this inventory of assets collecting information about what we do and presenting it to customers in a really user-friendly way through video on LinkedIn and other places, and started drawing people's attention. We went out to the media, we hired an outside agency to help us with the press, and wrote articles that were published in industry publications. Folks are always looking for those kinds of opportunities. By and large, when you start Googling certain topics, all of a sudden through the years, BlueGrace became more of a relevant result and we started getting some really, really interesting inbound calls. From CEOs and COOs of very, very well-known companies that are commonplace and you would be proud to have as a customer. That wasn't happening before I got to BlueGrace.Edward: When you do that top of the funnel–type marketing, how do you know what's effective and what isn't? Some of the CEOs reach out later and individual sales are worth lots and lots and lots of money, but how do you know which of your early funnel marketing stuff was worth doing and which parts weren't?Matthew: That's a great question. Tying in the date that's coming in, the leads to the CRM, and doing reporting downstream is really important to us. We could measure each channel, whether it was coming from Google, LinkedIn, a webinar, or a tradeshow, and continue to watch those activities. We would upload into our CRM the source of every lead, and then as it spit down to the bottom of the funnel, we could see if we were being effective or not.That was the first project that I took on when I got to BlueGrace. As the CMO, I was the executive sponsor for the company building a proprietary CRM. We got rid of Salesforce. It could do a lot of things, but it wasn't really suited for what we were trying to accomplish. We built this really saleable little CRM called Bonsai, and it was able to capture (we felt) more of what the logistics sales development cycle looks like. Especially on those enterprise sales where there's a very, very long sales cycle. Nine months was commonplace, sometimes 18 months from initial contract to sale. We felt like having our own proprietary CRM was the way that we should help manage the touch points for the customer and track each of these sources all the way to the sale.Edward: You did some sports sponsorships as well. You sponsored the Tampa Bay Lightning. How did that go?Matthew: We did. When I was there, that was over 50% of the marketing budget, was a partnership with the Lightning. It wasn't really effective and it took me a little bit of time to convince the folks at BlueGrace. I'm not well liked for making that decision because when you come into the building, you're surrounded by Lightning apparel and signed jerseys from all the famous players throughout the hallways of the company. We were the official shipping solutions provider of the Lightning. We are no longer that.The problem with that is that most of the promotions were going on inside that building. When you go to see a Lightning game, sure, there are 15,000 or 18,000 people all screaming and happy that Lightning are doing well and they're seeing our name. The problem is, our company is national. We are helping people from Miami, Florida to Portland, Maine to Seattle, Washington and San Diego and every [...] in between. Primarily, shippers, there's a correlation with manufacturing. You're shipping something that you've made or you're a wholesaler. That industry just is not really something that has a presence in Tampa, Florida. There's just not a lot of that distribution going on here. While our name was getting out, it was getting out to people who could not become our customers. It just wasn't effective.We took that money and put it into getting in front of decision makers that could use our services and that was more of a happy ending for the company, but for the employees who liked having that relationship, not so much.Edward: Do you think that it's helped you attract employees?Matthew: It certainly did. But I don't know about retaining them. That part I don't know, but we did make use of the Lightning logo and the colors when we would go out in the community and do recruiting events. We would do some events that were actually at the Lightning games, drumming up, looking for young people or even at any kind of a heart walk, any kind of 5K. Anything that we participated in, it was nice to have the tie into the Lightning. I will say, from the recruiting perspective, yes, it was a benefit, but in terms of growing and translating into sales for our company, I would say it's very ineffective.Edward: Which marketing channels did work very well? I know you did a lot of paid social digital video.Matthew: Yes. I would say LinkedIn was the place that we were wildly successful over and above all the other places. Here is the hard part about logistics. There is no list. There is no place that I can go and a database will tell me, here is a list of companies who were spending a million dollars a year on shipping. There isn't such a thing as that list.A lot of what we have to do is qualifying companies. It's more of just trying to get people on the phone and learn a little bit more about their business. You could even be spending a million dollars on shipping, but if you're doing the “wrong” kind of shipping, if you're doing all Air Express, we can't help you. If everything that you put is on a freighter, ocean liner, we can't help you. If you do a lot of warehousing, that's another kind of distribution model that we don't participate in.We needed inbound leads that translated into conversations, where we could quickly qualify and then move through the channel or say, sorry, we really can't help you. Getting in front of folks on LinkedIn was helpful because we started figuring out not just the decision makers that might be someone who has a title in the transportation department, but there were influencers. The CFO, while they don't traditionally have the logistics arm or the company reporting to them, they are heavy influencers in decisions where you're spending a million dollars, $3 million a year on any kind of service.We market heavily to CFOs on LinkedIn talking about have you audited your supply chain? Top five reasons why a CFO should be doing XYZ to their supply chain. That became very effective. We started getting their attention. Lots of those leads would then be filtered down for their organization and then someone at the company gets an email from their CFO, says call this company. They're probably going to have to call that company. Again, they're not technically the decision maker, but have a heavy influence.Funny enough, we don't compete on “sales.” We're not offering you the lowest price per se, but with our software and our service, the entire package of going with BlueGrace is probably a better package than some of our competitors, and that was something that a CFO actually responded to quite well.Edward: How did you support outbound sales? Given that the business was growing primarily with sales, was it marketing supportive and helping accelerate sales?Matthew: Yeah. We had a couple different arms. Again, the company was broken up into the side that supported the transactional side of the business—the Coca Colas and whatnot of the world—and then this enterprise side of the business. The transactional side was a little more difficult for us because the nature of those companies being small and medium business, the retention wasn't great. People would use us once but then they may not need to ship again for a month, or three months, or even a year. The LTL side of the business is so SMB that you couldn't build relationships. However, we were really effective at supporting the sales organization on the enterprise side. That's where you have only 9 or 10 senior sales representatives who have got 20 years of experience. They are customers who are making million-dollar decisions about a budget over two or three years, they respond heavily to content that we were providing, the webinars that we were doing, the white papers that we are writing. That side of the business dovetail really nicely. The trade shows that we were going to pay to become speakers at events.Really showing authority because the decision there is a much bigger one. If I make a mistake buying a $250,000 LTL shipment, I'm not going to get fired. If I pick the wrong 3PL for Florida Tile, they spend $6 million a year on shipping, somebody there could possibly lose their job. The marketing side was really geared more towards those decisions, which is becoming experts in the field and creating really strong brand awareness with the mid market.Edward: Risk avoidance. No one gets fired from hiring IBM. No one gets fired for hiring BlueGrace.Matthew: Right. What we aspire to is to have that be the case, yes.Edward: Matt, this has been fantastic. Thank you for being on the show today. Before we go, tell me about your quake book and how it changed the way you think about the world.Matthew: The book that I mentioned to you was Nudge. I went to University of Chicago. Nudge was written by two renowned people in their field, but both very interesting University of Chicago personalities. The interesting thing about the book is you have Richard Thaler who actually comes from the economic side of the business and works in the business school. He's known as the Father of Behavioral Economics and has recently won a Nobel prize. The upside of the book, something that most people probably do not know. His name is Cass Sunstein. Cass Sunstein was a professor at the law school. I had a really interesting experience at the University of Chicago. When I was attending business school, my wife was in law school at the University of Chicago. I regularly walked across the midway in very frozen temperatures to go and socialize and eat lunch with her.I got to see and know Cass Sunstein a little bit. He was a Rockstar in his own right at the law school. The two of them combined and wrote the book. I raced out to buy this. I waited for a paperback. The two of them together, obviously, you have two of the smartest guys in the country in their respective fields. The part of economics and decision-making around our behavior is really fascinating. It gets to the root of everything that happens in microeconomics. Everything can be boiled down to human behavior and how simple ways that we can rephrase someone making decisions get them a changed behavior. Thaler's most famous one is that he talks about on and on getting people to contribute to 401(k)s in their companies. Having people opted into that decision without them even asking for it isn't a harmful thing. He makes the case that if you just simply have people choose to opt out of 401(k)s, they're not going to do that, like, oh yeah, I want to save. But if you don't do that, very few people will actually opt in and it ends up being the most well-educated, the highest thing people who will participate in a 401(k).That's just one example, but it's the most concrete one that he has in terms of getting the US and the average person to be better at saving around the country. There's anecdote after anecdote in there. Each chapter is obviously its own case study. I find it to be an absolutely fascinating book. Obviously, you can hear when I talk about it because I've actually met, not hung out—that's probably too strong of a word—but gotten to know through association both the authors because I was at the University of Chicago when both of those guys were there, too.Edward: Thank you, Matt. This has been fantastic. I really appreciate your time today.Matthew: It was great to talk to you. Thanks for inviting me, bud. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
This is Part 2 of my interview with Sunil Bhatt, CEO of Genuine Hospitality Group, the corporate entity representing the award-winning chef, Michael Swartz. Today we covered the challenges of running a restaurant chain during COVID - among other things. Enjoy!TranscriptEdward: This is part two of my interview with Sunil Bhatt. Today, we're going to dive into his experience as CEO of Genuine Hospitality Group. Sunil, can you start by explaining what Genuine Hospitality Group is.Sunil: We are a group of restaurants—mostly in South Florida, including one in Cleveland, Ohio—that we're trying to bring residents here in South Florida the best possible food and hospitality that we possibly can. The reason we use the word genuine is because when you come to Miami, a lot of times, people associate Miami with pretension or more glossy surface, superficial kinds of experiences in people. There are plenty of people in Miami who are not interested in that at all. That's perfectly fine for TV and for travelers, maybe, who are looking to get that sort of Vegas.There are so many people here who really want to have an experience where they are treated intelligently and not gouged, and not given crappy products put on a plate with a bunch of gold leaf on it and charged $200. Instead, they want natural wines, local products, simple preparation, great jazz, and service that is attentive while not being cloying. The word genuine was really important when Michael founded Michael's Genuine Food and Drink because it was really a little bit of off-brand for Miami. There wasn't a lot of farm to table, ingredient-driven, authentic, genuine kinds of restaurants here.It absolutely found a niche here in Miami with locals, then eventually tourists too, and eventually got him national acclaim because we have a bounty of products here. We have amazing fruits and vegetables growing here, an entire ocean full of fish, and incredible meat and poultry growing right here—at least in the Southeast. We focus really on giving people an honest product at a price that they can afford. We have people come six, seven times a week to eat at our restaurant because it's affordable and it's that good.We fuss over it. We spend a lot of time using the lens genuine. That's very important when you're trying to scale something or do something to have a lens to look through that can inform decisions you make. Whether it be in hiring or training, decor, landscaping, buying the right product, or product development in general. Even in your finances. It genuinely matters to us what's the lens we look through. On the business side, we really think about doing the right thing. What's the right thing to do? That to us is how we translate genuine. Whether it be on the legal side. There are plenty of opportunities every day for people to cut corners, trick someone, or mislead. Many illegal negotiations and how you treat your people and how you train them are lens of genuine, honest, pure—those things are in our logo. They are part of our values, and everybody knows that.For us, the devil is in the details. That's what makes Michael a great chef. He obsesses over the little things. Because he believes that the addition of a hundred little things together that you, as a guest, may not even know. For example, if I may, we have radishes in our bar. You could ask me why, but that's the thing, Michael always loves radishes, and he thinks it's a great thing to have on the bar. Those radishes—on a regular basis—get water down. We have a spray bottle behind the bar. Part of the steps of service of the bartender knows that every so often, he's going to take that water bottle and polish up those radishes so that they look good.It's a little thing and there are hundreds of them in the restaurants, especially in the kitchen, in terms of the hygiene of the kitchen, the recipes, the commitment to integrity back there that add up to something that the sum of the parts is much bigger than any individual parts. We try to translate that into how we run the business as well. Whether it's in contract negotiations, legal, or finance. That's very important for us. That word—genuine—means a lot to us.Edward: Michael Schwartz's most famous restaurant is Michael's Genuine. That's the flagship, but it's not the most profitable restaurant for you. Is that correct?Sunil: It's not. No, it is not. It is very profitable, however, relatively, our margins are nothing like software merchants, for example. This is in the SaaS company. When I say very profitable, for a restaurant, that restaurant does just fine. But we won't hit a 20% net margin with that restaurant. But we can consistently execute because we're rigorous about our cost structure, and we're rigorous about how we meet every week to review day to day, week to week spending within the restaurant—COGS, personnel, OpEx. We have safety nets underneath the team—the operations team in the restaurant—so that if for whatever reason costs get out of line, off the road, we'll catch it before it goes too far. We put in that kind of discipline, which is very unusual with restaurant businesses. Edward: Which restaurants are the most profitable? Why are they more profitable than the flagship?Sunil: We run pizzerias. In the pizzeria world, your margins are going to be higher because the costs of the products are significantly lower than you would get in a fine dining restaurant. You also don't need to spend nearly as much on your personnel in a pizzeria as you do in a fine dining restaurant, as you can probably imagine. Take us, people, to make the food, menus are smaller, service doesn't have to be the kind of service you would expect to Jean-Georges—or in your case—Canlis up in Seattle.Your personal costs are lower, your cost of goods is lower. Pizza is flour and water, and that's pretty cheap. The cost for us to make a ball of dough is not even a dollar. But we can charge $14 for pizza easily and people are happy to pay it because pizza is hard to make at home. You can, some people do, but the doughs are science experiments. To get great pizza, you got to work really hard on it. People are more than willing. The elasticity in people's willingness to pay allows us to charge enough so that our cost of goods and our personal costs are much lower. Our margins in the pizzerias are significantly higher than they would be in fine dining.Edward: How do you leverage Michael's name and reputation of genuine across the rest of the footprint, and how is that different from say, Wolfgang Puck?Sunil: That's a great question. Wolfgang Puck, obviously, is a national figure—not just national, international. Wolfgang Puck created the celebrity chef. Before Wolfgang Puck, there wasn't anything like Wolfgang Puck. Michael happened to work for Wolfgang Puck at a restaurant called Chinois in Los Angeles. Wolfgang happened to write the preface for our pizzeria cookbook, which you can buy on Amazon if you want. Anyway, he is a good friend of Michael's, and he is a legend. There will never be another Wolfgang Puck. There are Bobby Flays and there are folks like that, but Michael is not built that way. For me, when I think of Michael, I think of him as an asset. I obviously think of him as my great friend, my business partner, the father to three wonderful kids, and all of the other things that he is. But when I put my CEO hat on, I just think of him as an asset.Michael is great at understanding various aspects of operations. He's certainly very, very good when it comes to innovation and mentoring in terms of teaching and cooking. He is just a savant when it comes to cooking. I've cooked with him for 15 years, believe me, he is a savant. He has the same ingredients as you and me, and he will cook something that you're like, what? You do that? And he's like, I don't know, I've been doing this since I was 16 years old, so I better [...] that. Anyway, he's a gifted world-class artist. Artists have certain skills, and it's important for me, as the CEO of the company, to put him in a position where he can add the most value to us in succeeding as a business. Not just in terms of putting great food on the table, but also in terms of us actually being not just viable but successful and stable as a company. It's also important to put him in a position he wants to be in. He's a valuable asset.Where he makes the most difference for us is in his coaching, mentoring, innovation, and operations. What he doesn't love to do—even if he's quite good at it—is be a shill. I'm not calling Wolfgang Puck a shill, but that's not a core desire in him to be on TV all the time, to be going on the Food Network, or doing those kinds of things. I don't try to put a square peg into a round hole. I thought about it for a few years. We do leverage Michael as a celebrity, especially in social media. But we've also tried to focus on the Genuine Hospitality Group as an entity. Sort of like Unions Square Hospitality Group in New York. We've also tried to build the brands of the individual restaurants where they stand in the room without Michael. Because Michael doesn't cook there, and in fact, Michael never cooks there. We have amazing chefs to cuisines at our different restaurants. One of the things Michael has done incredibly well is seed some of his control to others. Very difficult for founders in any industry, especially when you're a founder and you created something from scratch and you're used to doing everything yourself. Being able to give over some of that accountability and responsibility without second-guessing, letting people fail forward, and do it differently than you would is a really tough task for a founder—especially a chef. Michael's done an amazing job of that. Not always been easy for him.But just even giving me authority over every aspect of the company, then giving the chefs authority over their individual restaurants, and the GM's authority over their steps in the service front of the house, and on and on. He's done an amazing job while being involved. He's had to find a balance of where he can be useful but empowering at the same time. I don't think we could've scaled if he didn't have that ability. We couldn't have. There's only one Michael. He can only be in so many places at one time. He's done a great job of letting go of control to me and to all the restaurant executive team and our management team.Edward: I want to dive to some of your marketing channels. How do you grow a restaurant business beyond simply having a good product and a good location?Sunil: Those things help. I'm not going to lie. We have not always succeeded. In spite of the fact that Michael's brand—our brand—here in Miami is extremely powerful, and I don't think it's arrogant or overconfident to say that. Anybody would say that we are probably the most well-known—if not one of the two most known restaurant groups in Florida.Edward: How did that brand come about? Was it primarily because you had such a good product?Sunil: Yeah. He changed the game here. Anybody will tell you that. He was a game-changer for Miami in the way that I tried to tell you before. There just weren't a lot of restaurants that cater to locals.Edward: What do you do as a CEO to grow beyond the fact that Michael's a savant chef that can create amazing products, and you can choose good real estate? But now, what? How do you excel above that baseline?Sunil: What we try to do was we've tried to open restaurants that built on Michael as the foundation. But then eventually, developed a legacy of their own without the lying on constantly Michael Schwartz, Michael Schwartz, Michael Schwartz because it's a little bit disingenuous in some ways. Articulating to guests that Michael's back there cooking your steak every day is absolutely ridiculous. We've tried not to be disingenuous. We set our ethics. Our values exist everywhere. They go through hiring, menu development, pricing, and servings.We have this playbook for how we like to run our restaurant. Whether it's Latin cuisine at Amara, a pizza at our pizzerias, café food in our café, or whatever it is. Even through our events where we do weddings, bar mitzvahs, and rehearsal dinners. Any of that is fundamentally genuine. We've established the word genuine and taken ownership of that. The zeitgeist here, that you're going to get a genuine, authentic experience where you're not going to get b******t quality of the product, pricing, some crappy server who doesn't pay attention to what we need, or some hostess at the door that's got a red velvet rope that tells you you can't have a table even though there are 25 empty tables in the restaurant just so it looks exclusive. There's a lot of that in Miami.We just don't do that. It's not our style. We don't cater to celebrities. They rarely come to our restaurant—sometimes, not often. They go to other restaurants in Miami that are (I would say) less focused on locals. We decided we wanted to focus on locals, and we wanted to establish the nature of the word genuine across everything we do. We've marketed the word genuine. We aggressively market our restaurants. We do a lot of product marketing where we basically say, hey, we have a special pastrami pizza today. We get people to come for the food, for the individual restaurant brands, for chefs in those restaurants, and for the genuine over the Michael Schwartz. Michael Schwartz is a Trojan horse for us in marketing.Edward: And you say you market it and you push it out. Where are you pushing it out? What are the marketing channels you're using?Sunil: Mostly social media. Almost exclusively social media. And we've done a little bit paid search, a little bit of performance marketing in the past. Mostly for our catering business. A lot easy like lead gen. It's easy. It's very difficult to track in the restaurant space. If I were to buy keywords in Google or if I were to buy Yelp, it's just difficult for us to track through to conversion.From my perspective, we have one person in our marketing. He is terrific. His name is Joel White. He used to work in Green Mountain Coffee, Red Lobster, and Pepsi. But he's in charge of everything. He's in charge of all aspects of our marketing. We have the great social marketing firm we work with called Gather & Grow, and they do a terrific job. But I'm used to working in companies where I can track down to the penny what we're spending, conversion rate, and lifetime value of the customer. In our case, we're doing almost all social media and email marketing. That's pretty much what we do. PR and events, but it's really hard to track. I don't know from one day to next how many people sitting in our dining room saw an ad, looked at a post, or even [...].Edward: You say social media and email, are these all organic social and organic emails? You're sending it to people who have already subscribed to you or people who have already fanned your Facebook page?Sunil: Almost all of our marketing comes through Instagram. We have bought some ads and we've paid for placements on Instagram in the past. But most of what we do is all organic. Whether it be on our website, through email, or through social.Edward: How do you optimize that? How do you know how many times you should be posting, or what images are working, which ones aren't, which ones are driving revenue, and which ones are just vanity metrics?Sunil: Hard to know. We go off of engagement scores—how many people viewed, liked, and engaged with it through a comment. We try to use some of those metrics to understand what works and what doesn't at that level. We're just not sophisticated enough yet to connect revenue to Instagram posts. We just don't. What I'm told is, hey, look, you can connect the two. There's a little bit of a stretch. I'm sure other people do much better jobs in much bigger, much more evolved (I would say) online marketing companies probably doing much better jobs than we do. We're just a small group of 10 restaurants with 2 people in marketing, 1 ½ people in marketing, and 10 people in our headquarters total.We basically hope that the fact that people are engaging—by commenting or liking—will indicate that people are going to come to the restaurant.Edward: Many years ago, I tried to run a marketing business for restaurants. It didn't go very well. You must be approached all the time by companies who offer, hey, do these coupons, we'll do a paper performance and get people into your restaurants. Have you ever considered that? And if not, why not?Sunil: Generally, the only marketing channel that we use that is anything like that is UberEats and DoorDash. That's probably a whole another podcast, but it's a fantastic subject to discuss. Because for you and me, having come from Expedia, it's not very different in a lot of ways, especially with the pandemic and how reliant people are on take out delivery these days. It's not very different from what hotels.com, Expedia, and Travelocity did years and years ago where they sat down right in between supply and demand and charged a very healthy fee for that service.Delivery is very impractical to do on your own for all kinds of reasons—insurance, managing schedules, and hiring. These guys have a big billboard—UberEats, DoorDash, and Postmates. We're paying some of the billboard [...] for sure, but I would say that is one channel that we do spend a fair amount of money in for marketing. I spend a lot of time trying to understand how incremental that business is, how cannibalistic it is versus coming to the restaurant. Because we're going to pay 25%–30% of our revenue for every delivery order we get from these guys.When you think about our margins, which are pretty narrow as it is—depending on how much you burden your P&L for that and depending on how incremental you think it is—you've got to be pretty smarter than how you use those services for sure.Edward: You have 10 restaurants. Have you done, like phased in AB test to determine what that incrementality looks like?Sunil: We have. We've done AB tests. It's funny, AB testing is not something people are thinking about in the restaurant industry. When I first started talking about it, people were like, AB what? But we did an AB test here. Basically, we just turned it off, and we compared it to historical data. We compared it to another one of our pizzerias. What we found was not surprising to me. A lot of that business was incremental. We did see a significant downturn when we turned it off.That's because I don't believe people are thinking, well, should we order in tonight or go out? They've made the decision at the top of the funnel that we're ordering in. We're not going out tonight. We're on our pajamas watching Netflix. It's just a question of where I'm ordering from. If you think about burdening the P&L, staff are already there. We don't have to add much more staff to create a delivery order. The rent's paid for, the lights are already on. Depending on how you burden that income statement, really, just with COGS, a little bit of personnel, if you feel like you must—depending on how much delivery you do. And then the delivery fees, the OpEx—there's a little bit of supply cost, but you can convince yourself that that business is profitable. Especially if you consider it to be 80% or 90% incremental.Edward: Sunil, this has been fantastic. Thank you for being on the show. Before we go, I like to end with your quake book. Do you want to tell us what your quake book is and how it changed your thinking?Sunil: Yeah. I read it a long time ago, haven't read it since. I read A Connecticut Yankee in King Arthur's Court. Twain's problematic in a lot of ways, for obvious reasons. I always think about just how grateful we should be for the tools and the life that we have. Especially given the privileged life that we lead here in the United States and specifically, at least my world. If I went back in time, and they said, hey, tell us about this thing called electricity, airplanes, or anything. I'm not sure I could add any value to people 200 years ago or 150 years. Running water is a mystery. I have no idea how the lights come on every day or how television works. You probably know 10 times more than I do [...] predicting the weather.If they said, hey, why don't you just know that there's going to be a hurricane in five days and you should probably take shelter? How do you know that? No, no, I turn on the TV, and then there's a radar. What radar? What's a radar? That's the thing I think about is how we should never take too much for granted the wonderful blessings that we have. It would be a damn shame to waste this incredible luck that we have to be born at this time and not be very appreciative and grateful for it. That's why it was my quake book.Edward: Thank you, Sunil. That's a great way to wrap up. Really appreciate your time today. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
My guest today is Aimee Johnson, CMOof Zillow. This is Part 2 of the interview where we went deep on the Zillow business model and how Aimee is driving growth there.As a subscriber-only podcast you will need to subscribe to the a private feed to get it in your podcast player. You only need to do this once. Simple instructions here.TranscriptEdward: This is Marketing BS. This is part two of my interview with Aimee Johnson. Today we're going to explore how she's driving growth as CMO of Zillow. Aimee, I'm sure my audience is very familiar with Zillow. Zillow is the first to expose data that was really not available anywhere else. But now if I search for a property address, I can find details on Zillow, but also Redfin, Realtor, apartments.com, point2homes, and dozens and dozens of others. What makes Zillow unique now from the consumer side, or is it just brand, equity, and trust that have been built up over the years?Aimee: Certainly brand, equity, and trust. Customers [...] we've helped them to dream and buy for 15 years now. Even if you just go on and look on social, the comments were just fantastic about how we've helped people find the home that they can move into. The New York Times had an article about us the other day about the opposite doom scrolling is Zillow. We hope scroll, we dream scroll, and we help you to get through this period of time that we're in right now. I think it's a little bit of both. I think it's the fact that we've been really empathetic to the customer. We are very transparent with our data. We want to be the marketplace that you go to because customers should have access to real estate data, and we believe that. We also believe that you should have access to fantastic agents, loans, and services that now are part of our brand and that we're moving into as part of Zillow 2.0 for our next decade or two or three in service. Edward: But is that why customers use you? Because you have better access to these other things? Or again, is it just you got there first and you built a good product, you're trusted, so you become the default choice?Aimee: I think it's all of those things plus it's our interaction with our customers. The way that our product is set up, the way that our data exists, the way we interact with them, and our personalization. We want you to know the data that we have that meets your needs before anybody else can. If you're looking for that home right now—especially in this environment—and you want to be the first one to know it exists so you can get on it, to go take a tour of that home, we want to be the ones that give you that information first so you can really get out there and find the house that you know is your future home. Edward: It's funny, you mention the opposite of doom scrolling. I was thinking a bit about my time at Expedia. One of the things that we found is the conversion rate from searching to actually purchasing an airline ticket was basically inversely correlated to how good the location was. When people were searching for Hawaii, the conversion was terrible. Everyone was dreaming of going to Hawaii. But if you search for Arkansas, man, anyone who was searching for Arkansas was buying a ticket to Arkansas. Not that I have anything against Arkansas. Do you guys find a similar thing? Is it almost like the worse the homes the higher the conversion rate? Aimee: I have to say, I don't know that we've looked at it that way because I don't know that we should define a home as worst to best. It's on the eye of the beholder.Edward: Lower price point homes, higher conversion rate?Aimee: No. What I would say is that the number of people—we have over 200 million unique users that come into our site monthly over 100 million people—pre-pandemic, there were only about 5–6 million homes bought and sold a year. If you think of the number of people that are looking and then you have the number of people that actually buy, there's about another 12 million that rent every year. If you think that this is the biggest ticket item people are going to spend on their house, it's super expensive. It's not like, yeah, I'm going to go to the corner store and buy a cola. It happens to be 25-cent more there, but I don't feel like walking to the Safeway. There's a lot of time before the purchase to see what am I looking for, what do I want, where do I want to be. It's thinking of yourself in a different life, et cetera. What we find is there is an actual life event that happens. When that life event happens, some of these life events will force you to or you will want to change the location of where you're living. It's not necessary what you're clicking on or if you're dreaming or not, it's what's happening in your life. Once you have that second kid. First kid, you can kind of like, one bedroom's fine. They're small. We have a small backyard, there's a tricycle, it doesn't matter. Second kid, oh my God, get me out of this house. I need a new house. I need a new house. Am I going to leave my city? I know this city. Schools are important now, and I didn't care about schools before. I'm getting a divorce. Now, if you're getting a divorce with kids, you stay close to the kid. If you're getting divorced or not, you may want to get the heck out of there. We're finding that there are all these life events that happen and then the question is how do we intersect the customer at the right time where they're having the life event to be able to help them find the new chapter of their life. The home is really chapters of your life and the next address is the next chapter. Edward: Aimee, can you walk me through how Zillow monetizes its audience? What are Zillow's primary revenue drivers these days?Aimee: Sure. Our primary revenue is actually B2B. It's working with agents. The customers can come and look, and all that is just we want you to have a fantastic time. We partner with the best agents in the market to sell advertising space for them. The majority of our money right now comes from the ad model that we have in B2B. In a future state, we're going to have the shift to 2.0, which is looking at what are the services that we can offer also to customers? For example, mortgages. For example, we can buy your house. In 25 markets, we will buy a house and we will sell that house. We have closing services that we offer. There are so many crazy inefficiencies in the real estate industry. How do we work with our partners in the industry to figure out where do we take out those inefficiencies, how do we create customer experiences where we can add value, and monetize some of those value streams that we've created efficiencies around. Edward: I would think, because of the dream scrolling that happens, I imagine you are getting contact with those customers before anyone else. Anytime that happens, there are opportunities. I imagine you could do lead generation for internet providers to new homes. I don't think Zillow does that, but I know there are companies that do. The way to win on that is to be the first person to talk to the customer. It seems like you are that person. Aimee: We are and we try to balance. What's been fantastic moving to Zillow is just the heart of everyone. How do we best serve the customer in their next move or as they're dreaming? Interrupting them with an ad for a different service that may or may not be something they're interested in, we're really interested like, let's help you dream, let's help you find your house. While those are opportunities, we've decided to really not go after them per se. We do have some advertising that we do. We have some great customers that we work with, but we don't do much of that right now. Edward: How much of your team's time and effort is spent marketing to the agents versus marketing to the consumers?Aimee: I don't know that I've cut the work by how much is B2B versus B2C. We do spend a lot of time working with our front line leaders on how we can work with our agents most effectively and efficiently. If we want to bring this dream of, wouldn't it be cool if shopping for a home is as joyful as moving into one? Even if it's a huge [...] for anybody out there that's ever tried to buy a house. To do that, we have to have a relationship with our partners where values are aligned, where we're both understanding what the end goal is for our customer to get into the house as frictionlessly as possible. We do work with our agents and our field folks to figure out which are the best agents? What do they look like? What kind of characteristics do they have? How do we communicate with them? Look at all these fantastic services. Here's how this could be a benefit to our joint customers. We do spend a lot of time talking to our agents that way as well. I don't know at the top of my head. I can get back to you with the percentage of time. For those of you that have worked in both B2B and B2C or B2B2C, there's a lot of effort when you have fewer people. But it is that idea of how are you going to communicate to them, the emails, advertise to them to get more agents in, the ones you want to stick with and stay with. The new products and services that you're launching for a much smaller number of people than obviously the B2C conversations that we're having. But the brand is the brand. As we're building the brand, we have this Zillow 1.0 we call it, which is we help people search and find. We're calling it now Dream and Buy. Not just Search and Find—Dream and Buy. If we're going to take a business that is loved for the Search and Find and for helping you find your next home. Now, we're going to help you on this journey that used to just stop and I found my house, I'm calling an agent. I'm figuring out what our loan is. We want to help you through all of that.We have to take the brand for what it stands for today. And we have to say, what are we going to keep with that brand? What do we not need anymore? What are we going to add to that brand? How does that come to life? What does it look like? Not just for our customers, but for our partners and for our agents. Wow, in a year, what do we want our agents to say? Well, Zillow really showed up in this way, and I'm excited they did. It's just as important that we understand how our brand shows up to our partners. There are a lot of really fantastic small business owners out there that we partner with, as well as our customers. They have to know, gosh, I didn't know Zillow actually could help me in this way. I'm going to go with them. Not only am I going to go to them for that, but their services are excellent. I'm going to tell my friends about it. Edward: Are there conflicts when you're doing that internally? I know like when I was in A Place for Mom, we had a similar thing. We had properties that we are partnering with, and we had seniors who were looking for properties to stay in. So many of the people internally were focused on the seniors and helping them that our partner kept on coming and be like, no, no, no, no, you can't say that. We can't use the word facility. Consumers use the word facility, but properties would never use the word facility. It's all communities. Do you have these conflicts internally between the people working with the real estate agents and the people working with the dreamers?Aimee: Yeah. I guess you could say we do in a way. If we're saying, Zillow is going to offer you this type of service, this type of convenience, this type of trust us in this certain way, you really do have to make sure that the agents that you're handing them off to or the business partners you're handing them off to have similar ways of working with your customers. Otherwise, you just let people down. You do have to make sure that we're understanding those SLAs and how we're setting up our partnerships. You also have people that are really precious about the thing they're working on, which is probably true anywhere you go. Where they're like, no, no, no, this is my customer. This is my end user. I don't have to think about how the effect is downstream on all these other people. They could figure it out. There's a lot of that every day just as there is in any company. But the more that you can run a relay in your company, meaning all your employees know what comes before you get the customer, what comes after you hand the customer off, the better customer experiences you can give holistically. Regardless of if you get it from a partner or give it to a partner, it's all the same experience. You have to be considering the whole thing. Edward: Talking about those real estate agents, any time you're [...] these marketplaces, there are many different ways you could monetize. At Expedia, when you sell a hotel, they take a percentage of the revenue generated from the hotel. You could charge the hotel per impression, you could charge per click, you could charge per lead, you could charge per qualified lead, you could charge per completed transaction, you could charge a revenue share. Each one of those further and further and further into the purchase cycle and moving more from advertising to almost a partnership. How do you decide where on that purchase cycle you guys should be charging the agents?Aimee: I can't go into too much right now. We are working on different types of revenue models. Again, looking at the type of customer experience we want to build, we're testing something called flex, which is you actually pay when the transaction happens versus for the advertising. Because we all want customers to get houses. The goal is that you'll land in a place you love so you could be your best you. The best way to partner is if everybody is incentivized, that the customer ends up in that fantastic house. That happens by an agent closing on the house. If everybody is in sync with the goal, then can the monetary system, can the goaling system be set up such that everybody wins in that scenario. We're testing everything from what does it mean if you get paid when the transaction closes out to an advertising model where it's what does that market in that zip code really warrant in regards to the number of leads, the number of agents, the activity on that market place? And then there are things in between. We're testing a bunch of different ideas now as we pivoted into this idea of Zillow 2.0, which is still relatively fresh. It's been about last year.Edward: Let's talk a little bit more about Zillow 2.0. You have a new CEO. You're moving into this new model where you're taking revenue risk and inventory risk. Zillow's stock took a hit when you said you're going to do it, even though I think it's the right long-term play. If you don't do that, you're effectively a media company, and if you do that, you turn into a marketplace. Marketplaces are far more valuable than media companies. It feels like it's a right long term play. How has it changed marketing, or has it at all?Aimee: Imagine if you have the best of both worlds? It's an and, so the brilliance is we have the marketplace which is great. Because we have the marketplace already and that's doing great. Not only is it the marketplace, meaning that's how we make money. It's the marketplace meaning it's the data, it's the information, it's all we've set up the infrastructure that actually allows us to evolve into 2.0. Now, if you have the data, the revenue, and a marketplace, you can pivot and be an and. You can be an and in that wow, we can be a marketplace for others' loans, and we can say we have loans as well. We'll put them side by side and you can choose. We can buy a home from you, and we could set you up with this great agent. Either way, you win. You want to sell your house, here's what it looks like. We have access to data and people on the one side, and on the other side now we have our own services that we can put alongside it. Just hand it up to the customers and say you choose which one you'd want to be a part of. I don't think it's an either-or. It's definitely an and. I think that's the strength of Zillow with these 100 million people coming in and these 5 or 6 million people buying and selling every year. It's how you get from that 100 million to identify the 5 or 6 to come up with the services that you can offer out to them—be it our services or other services—to help them get into that house that they want. Edward: And how do you deal with the fact that one of those models is going to monetize better than the other? Do you just accept the fact that by offering the second one you monetize less, or do you hope that the incremental choice will more than make up for the fact that one monetizes worse than the other does?Aimee: Your next podcast will be with Allan Parker, our CFO. I think it's been fantastic working with a company that's so innovative as Zillow is. Because just like everybody else, here's what we've tested into, here's what our hypotheses are, here's what we know we have to do at bar to keep going, to keep the shareholders happy, to keep our customers happy, to keep our employees happy. And here's what we're going to be testing on top of that. Our expectations, it'll get to this place. If it doesn't get to that place, what's our back up plan? Here's what our three-year plan looks like. Here's what we're doing this year. Here's what our expectations are. How do you check and adjust along the way? It's been fun thinking about the possibilities and working our way into those possibilities. Again, checking, adjusting, and moving forward. I don't know if that answered your question. You have to keep evolving, right?I go back to a little bit of Starbucks. If we didn't have the loyalty program, we didn't have a single source of customer identity, and we didn't have the mobile order and pay, they couldn't be doing curbside. They couldn't be having their stores open during a pandemic. They couldn't be innovating in things they are doing now that you don't know about yet that will be coming out soon. You have to constantly be looking forward to understanding where your customer is going to be. Regardless of, if it's scary, be smart about the way you're going to be servicing them in the way your brand can service them, and in a way in which your assets are set up to be the most successful to do so. For sure, the company is definitely leaning forward. Real estate is a mess. How do we help people fix it?It's not a person that's a disaster, it's all point solutions. It's no one's fault. It's just you think of real estate, you have to go to this guy over here and this woman over here, and you have to go oh, the title again. The deed is paid for the title, how come now I have to pay? It's not written down anywhere. You even go on Google, I'm going to get a list. The list doesn't share anything. It's the biggest check you will ever write. That is just a crazy space for innovation. Edward: There are line items on that check that will be the second and third biggest checks you will write. Aimee: That's the other thing. First-time buyers, even I haven't in the process of buying a home now. I have two kids. It's kind of like you have the first one, you're like, the six months I can't remember. Then you have the second one, you're like did that happen the first time or you blocked it out? It's the same with the fees. You remember the price you pay for the house, but you don't remember the fees, you don't remember what you had to do. How can we help with that? How can people understand it? Everybody just wants, again, to have the best life they can have. Regardless of if it's a sad moment in time, a happy moment in time, or somewhere in between. It's just hard, and it's so much harder than it needs to be.Again, that's why the marketplace is interesting because you have that marketplace infrastructure. Now it's finding the biggest friction points and saying, how can we help in those moments of pain better than anybody else. Whether it's working with the partner to get there, whether we're servicing the idea, it's all in service to get that customer to the next chapter in their life, the next place they need to be because that's how they move forward. Edward: Yeah. I think Jeff Bezos said something about how the customer will never be satisfied. There are always ways to reduce friction and make the customer better. You can never be disrupted by just making the experience better for the customer because it's never going to be good enough. It feels like real estate is one of those places where it's really, really, really not good enough. You're TAM for making the experience better is also a long ways away. Aimee: It's low hanging fruit, and it does require you to be focused because there is so much opportunity. The question is where is the biggest friction point that you as a business are set up to really satisfy the customer in a meaningful way in a place where the customer is ready to be satisfied? You do have to look at if you're ready as a company, that they're ready as a customer if you have the partner based setup in order to satisfy them. Otherwise, you can get ahead of skis and really lean in on a place maybe where your brand can't go, lean in a palace where you don't have the partnership, or lean in a place where the customers just don't believe you. That's taking too much change out of your brand bank. I think being really purposeful with the failure points you want to go after is supercritical. Edward: Aimee, this has been fantastic. Before you go, can you talk to me a little bit about one of your quake books? A book that's changed the way you think about the world and how it did that?Aimee: I guess people know me as the queen of commas. I'm always like, I never have one answer. I have multiple answers with commas.I am able to see strategic connect dots, and I also like to get stuff done. I always felt like a bit of a circle trying to fit in those square holes. I remember when I was a kid, I read Phantom Tollbooth. I was like, oh, the world is quirky. This is so cool. Wait, this word doesn't mean that thing and they're using it in [...]. A part of me, even when I was little, it used to be it's okay to be who you are because somewhere out there you're going to find somebody like you. It's good to have that centering and understanding you so that when you go to that next chapter of your life, you're walking into a place where you understand yourself and you understand all that stuff. That's a big concept when I was a little kid. It is still kind of now. I think the other book—Starbucks, is really big on servant leadership. Because if you walk into a store, the whole store is centered around handing a smile over the handoff plane. In order to do that, you can't do it the same way to the same person all the time. Your support center—your headquarters—can't just be thinking about the thing you're launching. It all has to be in service to something else. Leadership Principle was a book that we all read. It was 20 years old I think maybe now when we came into the company because it was so important to understand. Being a leader is about leading, listening, empathy, understanding, and service. That really changed my perspective on what a customer experience could be and what a journey is. People are having lives all around you, and you have the privilege to be intersecting with them at some point in time. You should see it as a privilege and understand how you can serve them. That really struck me. It struck me [...] for business. It's with my family, with my friends, and with other people. That really changed the way I thought about empathy and leadership.Edward: Aimee, thank you so much for your time today. Aimee: Thank you. It's been a pleasure. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
My guest today is Aimee Johnson, CMO of Zillow. Today's episode covers Aimee's career, including a deep dive into her time overseeing Starbuck's loyalty program.This is the free edition of Marketing BS. Premium subscribers will get access to part 2 of Aimee's interview tomorrow and twice the content every week.You can also listen to these interviews in your podcast player of choice: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed (for premium episodes).This week's sponsor is Flatfile.ioNever open Excel againThink of the last time you imported a spreadsheet. Did it work the first time? Nearly everyone has dealt with formatting messy CSV or Excel files. It's a pain! Enter Flatfile Concierge. Turn data onboarding into a collaborative experience with intuitive workspaces. No code required.TranscriptEdward: My guest today is Aimee Johnson. Today we cover Aimee's career path to CMO for Virginia Tech, SallieMae, Campbell Soup, Starbucks. Aimee is now the CMO of Zillow, and I'm honored to have her here today. Aimee, you spent 14 years at Starbucks including four years as SVP of Digital. Why leave then to join Zillow?Aimee: When I was at Starbucks, I was really enjoying driving digital innovation. Working across the business unit from the field to the technology teams, the marketing teams, et cetera. And when I found out about the opportunity at Zillow, I thought, while it's been fantastic working at Starbucks and getting that really well-rounded customer-centric view of a business, going into literally living in tech space and bringing all of the customer journeys, customer-centric, and understanding customer experiences into a tech platform. That was so ready to drive and then customer experiences to me, this was very exciting. Edward: You had the technical chops. Were there any marketing skills you were missing jumping into that Zillow CMO role?Aimee: The few I have that's [...] is just communicating what marketing was, how it could be used in a journey and not just hop a funnel, and how to look at a customer holistically and not just at the moment that you're intersecting with their life that they happen to be clicking onto your site. But I think it was just going back, just some of that basic. How can marketing help [...]? How can we partner with the business, how can we partner with the tech, how can we partner with the different groups within Zillow to really move their vision forward?Edward: There were no marketing functions like public relations, paid search, or anything that you were missing that you previously had that you had covered in your career. Aimee: I would say SEO. Even while I own paid at Starbucks, it was different. This is such a big SEO team. I don't run SEO. It's currently handled in the tech organization. But understanding and connecting with that team since I don't have SEM and some of the other intersecting worlds where we can all learn from each other. It's how we literally learn from each other. What is it that each channel needs, what is it that drives the ROI and meets the channel? How can you optimize a platform in such a way that more than one platform can take advantage of the content, for example?Really getting in and understanding the nuances across the different platforms regardless of the space in the company, whoever was driving it, we all need to work together with the same outcomes. Learning a new culture is so hard. After 14 years, it's like one culture and you step into a completely different other culture. Not a marketing skill, definitely like actively listening, terminology. I said personalization, you said personalization? What did you mean when you said it because here is what I meant when I said it. Just learning the words, learning the cadence of things, understanding the speed that which a tech company works a little differently than retail. You have to source the product, rate the product, launch the products. There's physical science. In a tech space, here's the idea, let's go try it. The speed—really understanding the speed. The marketing chops, I think I brought with me. There were some of these other pieces that I had to relearn. Edward: I was always told in my career that you should be careful about switching in general. Anytime you switch, there's a chance that something goes wrong. And that you should try to focus on switching one thing at a time. Either switch a function area, an industry, or a company. But don't try to switch all three of them at once.But I go back in your time, you've done that a couple of times where it feels like you switched three or four of those things all at the same time. Talk about switching from SallieMae to Campbell Soup. There's a place where you switched the industry, you switched your function from doing programming into marketing, and you switched companies all at the same time. Aimee: You know when you're a little kid and you learn how to ski, you don't have your poles, and you're really close to the ground. It's just like, woohoo, I'm going downhill. You have no idea to the left is a forest and to the right is a certain depth. You just go as fast as you can down the hill. And go this is fun.Some of the changes I did were just because that sounds fun. I haven't done that before, so let's try it. The switch from SallieMae to Campbell was super purposeful. When I came out of school in the ‘90s, there was a recession going on. I was in school. I did marketing. I came out of my marketing degree. But I did not have any work experience in marketing before. When I popped out, they were like, so what actual life experience do you have in marketing? I watched a lot of ads, that was kind of cool. Clearly, there were no jobs that I could take in. I ended up taking a job at programming—SaaS SQL programming because my dad was an engineer. We were always programming around the house and stuff like that. I was like, hey, this is easy. I'll do it. I then went to graduate school at George Washington University to learn the skill of marketing, I guess you would say. So then I can come out and say, wait, wait, wait, now I am a marketer, I have an MBA, I could do this thing, I know I've been programming. Now is the time to leave tech. What tech is this little thing? What is engineering, programming going to be like in the future? I got to learn the basic general managers as a CPG, and I just jumped over into Campbell's because it's a good training background at the time—the brands were great. There was an infrastructure that I could jump into and learn. At the same time, they had money to spend. The brand and the businesses themselves were interesting. And I have a family up in New York. Being right in Philly was great, going further up east.Edward: How do you get that job though? How do you move from SallieMae, working at a tech company, doing programming, and get a marketing job at a CPG firm? How do you convince them to hire you?Aimee: I could've gone in two paths at the time. Andersen Consulting had just switched to [...] to Accenture. Accenture was looking to do a change management practice in Washington DC. That was one avenue I could've gone. The other was I was interviewing the CPG companies of which one was Campbell's. It was, was I going to go down this tech change management path, or was I going to do CPG?I think I convinced the—between the case studies and everything—I just love marketing. I grew up, my grandma used to say, you never watch TV, you only watch commercials. I would talk about the characters in commercials. I would try to sell things when I was a kid. I just like knowing you and who you are, figuring out what you need, creating ideas, and figuring out how do I get those to you?I think I've just always been in that space where that's just fun for me. A part of being in an interview—even if you've never been in that space or done that work—if your enthusiasm, if your passion, if your understanding, if you're actively listening to the question, and answering what they're asking of you. Being true to yourself and how you're feeling in the moment and really thinking about what they're needing and looking for, then you just find a match. You find the company match that's willing to be with you and you're willing to be with them. It's like a business [...] moment, I guess.Edward: Let's jump ahead a little bit to your time at Starbucks. Among other things at Starbucks, you oversaw the loyalty program. I built my career in loyalty programs, and in spite of that, I believe they generally destroy value. I think Starbucks is maybe an exception. I wrote a long essay last year all about Starbucks' loyalty program. I said I want to talk to you about it today. My question, internally, what did you guys see as the key value drivers of the Starbucks loyalty program. Aimee: Way back when there were only 2 million people in the program. I don't know if you remember, we used to send birthday postcards—happy birthday. Way in the day, when direct mail is a thing. You'd get your little rewards in the mail. We saw a future of wow if I knew these people better, I could talk to them directly. I could talk [...] words directly because I know him, I know what he bought. I know maybe what he may want to buy. Our original thought was like, we know him better, great. And then, by the way, these smartphone things, they're becoming popular. By the way, we can actually get at the data that we couldn't get at before. All these things were converging together at a moment in time where I was lucky enough not to be at the eye of the storm so I can go off and innovate to the side. It's only two million people. She has a couple of heads. Go figure out and see what the thing is. I didn't have the pressure of the business. We had the conversion of technology and understanding. We have a system in place that people that loved it really, really loved it. In the beginning, it is still social. People are posting their gold card with a smile next to them. It's like all good things. We had to convince the organization that the loyalty program did not take money away from the shareholders and the company. By doing that, we actually looked end to end at the value of the program. That's when we decided that we were going to keep things like the app should be centered on the rewards program. That the payment mechanism, you have to get into the reward mechanism to pay because paying at the register is a value. We decided that the Starbucks card—which when I left I think had somewhere upwards of $7 billion on it—was part of the system. By the way, we had earnings from that as long as we kept the money. We did like an end to end P&L on the benefits of it, including the data, including the communications. When you actually do a P&L of the program, it was quite positive for our revenue. Especially because we could demonstrate that it was driving additional purchases and additional visits, especially when you brought in medium or lower users into the program.I think it was very interesting. We could do the testing. We had a convergence of all of the data. People were intellectually curious, and we were a success story for the company. We kept growing and growing and growing because customers found value in the program. Edward: How did you know the program was driving incremental purchases and not that people that wanted to make incremental purchases join the program?Aimee: Isn't it funny? That's always an excuse people give. Why are you just giving money to people that would've bought it? What we would do is we'd run a lot of AB tests. We would find if a person, let's say you're a brew drinker and you drink a lot of brewed coffee. There are certain things that happen with you that show us that you're a certain type of brew drinker. We knew that if you ordered a bagel the third time, now you have attached, and you're going to have a brewed coffee and bagel now forever or at least 75% of the time. We could offer similar personalities. One giving on the bagel offer, one not giving the bagel offer—see what happens over time. There was definitely a correlation (I would say), the statistical significance of yes, we did change that behavior. Even over time following the same user year over year, their increase in ticket and/or traffic will continue to grow. As we brought different features into the program—first it was just like buy 12 get 1. And then it was we had different things we can offer you at different tiers. We had payment in there and then mobile order and pay, which continues to be extremely—I don't know if it continues. I left two years ago. But it is a very, very incremental program. Where again, if you come, we tell you, hey, come back. Hey, we miss you. Hey, wouldn't you like this? Yeah, sure I do. I didn't know. I'll be there. All right, count me in. You can look at that in your heavy, medium, and light users. The light users are interesting and you probably know this. Is a loyalty program for everybody? No. Should it be for everybody? No. Then it's not really helpful. But if you could charter for whom the program is most valuable, it's that icing on your company's cake. It's the what's the little extra something that you can give somebody for coming a little bit more or for being a valued loyal customer. Your heavy heavies—are they may be more loyal, can you maybe get them to attach more? Your mediums—oh, foot traffic. Get them in a little bit more. Your lights—probably not a loyalty plan customer, but you could tease them a little along with the land until they decide to come to your establishment more often. There are different ways you can look at who you're bringing in and how incremental they are. Edward: The example you gave with giving the bagel attached, that's promotion-focused. You can totally AB test that. I'd buy that. You find new customers are like that. Some of them you give them the bagel offer, some you don't. You measure over time what the difference is. It's almost like a coupon play. It's like the new version of coupons that I'm sure grocery stores were doing a hundred years ago, probably with less sophistication. What about the base program itself? They're the most loyal customers. The ones that are buying Starbucks every day are going to be like, yeah, absolutely. I'll sign up. Now you're just giving me 10% off because I get every 10th coffee free or 12th coffee free. Is that a basic cost and then you have to use these incremental programs in order to make up that cost and get it over the top to make it profitable?Aimee: We did have a methodology for figuring out if the program itself was incremental. For example, how many billions of dollars walk out the door if we just shut the program down tomorrow? And it was incremental. In it of itself it just ran as itself, it was an incremental program, and that incrementality was over the cost. We did research around that. We kept that on continually just to make sure that we weren't trying to sell ourselves the idea of the program. And it lies in things like the program itself with even just the value it gets, gets you a certain point. And then all of the add-on features of being part of something, the recognition, and all that. That all adds to wow, they know me. They love me. I'm a real true customer of theirs. We have some crazy high—over 50%—response rates to satisfaction surveys that we send out because folks are just yeah, I'll tell you about my last visit because they love us. Even the light-medium users that are part of the program. We did continually test it to make sure it was incremental to the business. This is a lot of money. It's funny when I first was joining the business, the operators would be like, what the heck is this hitting my P&L? We would sell that bagel anyway. A lot went into partnering with the field teams to share with them like, actually, no, you may not sell that bagel anyway. Let me show you what we did to demonstrate that. If the loyalty program wasn't there, that mobile order and pay thing now, that's the biggest third channel you've ever had. Imagine now we don't have drive-thrus anymore. Would somebody still go to your store if they didn't have the convenience of a drive-thru? Would somebody still go to your store if they didn't have the convenience to have mobile order and pay? Some of the features that we had, you really turn off and you would see a drop. Edward: Especially the mobile order. Convenience (I imagine) is extremely valuable, especially on the margin. Did you guys look at the financial stuff too? When I wrote my essay a year ago, the amount of value in stored cash that people put on those cards, it's just a free loan to Starbucks. Aimee: The float is great. We looked at the float as part of the P&L for sure. Edward: At least on my math, that almost paid for the whole program itself, and then everything else beyond that was gravy. Aimee: Now I can't say anymore. Just to say it was beneficial. I think people lose sight of a couple of things. It's the ecosystem itself that makes a rewards program. It's not offering coupons. It's the totality of wow, we did little things. In the app, we would put your name on the cup of the content we were sending you.The whole idea of the digital experiences is how do you put in a digital space the feeling as if your favorite barista is there to help service you, what does that look like, and what does that feel like. And then what kind of events and experiences should we create digitally. We never really thought of it as a rewards program. It's like a click of this, that would've not worked for us. Edward: How much time and effort were you spending on that internal sales pitch? Marketing to your employees, franchisees, and the store managers that this is a good thing. Aimee: A lot. I had a fantastic boss, Matt. He was fantastic. Also, being an evangelist to it. You'd have to pitch the field, you'd have to pitch finance, you'd have to pitch senior leaders, you'd have to pitch marketing. Continually showing the value of the program.At some point, we did hit a tipping point. Where it was like, wow, we've made it. We're in our own cups. Starbucks Rewards, we were able to advertise our own cup. You knew at some point whether you could up take some of the best real estates in the store. That folks are starting to believe that the program is literally driving business. At some point, it was driving a third of the incrementality. It was a very strong program. But continually, right? A lot of it was, wow, who's my finance partner? Who's the biggest critic in finance? It's like this is draining my coffer. Let's partner, let's figure it out. Tell me why you think it's draining your coffer. Let's go track that back down and work with them together in the field. Okay, great. You don't want it on your P&L. Why don't you want it on your P&L. Let's have that conversation. Okay, marketing. Sure, you want to be talking about that unicorn frappuccino, but what's going on at the last five seconds of that ad, and can we really talk about downloading the app because here's what the ecosystem looks like? A lot of it is sure, everybody will always debate you on everything. Even if you have the best data in the world. Unless you could partner with those around you, actively listen to them, and actually listen. Because some of [...] they said, wow, I didn't think about that. You're right. Let's change it. That's where you actually get the buy-in. The tipping point doesn't happen just because of the tips. It happens because of partnerships, conversations, and no sticking of point of view, altering [...] but continuing moving forwards. Edward: Aimee, what were the biggest failure points in your career? Where did things not go as expected?Aimee: There were points where I thought I had stuff over the finish line and it just didn't go. We were trying to figure out how do you think about Starbucks coffee like brewed coffee. In marketing, there's a business [...] statement, there's a tone in manner, exists for existing, and you should be able to talk about it. They talk about coffee in a way that is like, it's citrusy yet fruity. It's coffee. What do you mean citrus and fruity? We kicked down a project that was like, let's talk about coffee so it has its own personality, so it's more approachable, so you don't come off as professors. We come off as geeks that love coffee. We just could not separate the product from the brand Starbucks. Enrolled a lot of people in it and just at the last minute, it just fizzled, didn't work. We never got it over the finish line. A lot of package coffee innovation just was a little bit before its time. There are some really cool coffee innovations. Some of which ended up [...] and other things in the marketplace. But we just weren't able to get it across the line. I call my failures, they're all like a bookshelf of future success. Because you never know when it just was not the right moment in time or something that you can go back from and learn. You remember when we tried that whole thing where we're gonna go to the farmer's market and we were going to try to convince people we're this little company from Seattle? That didn't work. Why didn't that work? What can we maybe learn? What were you trying to do? What's the problem that you're trying to solve, and how can we use that in the future? Because the problem is a good problem, we fell in love with the answer, and maybe that's why it didn't work. Edward: Aimee, do you have any productivity tricks? What do you do to be productive that other people don't do?Aimee: I am a processor, a bit of an introvert. On the other side, I write things on lists and lose my lists. List writing for works for some. Where's that list? And I spend 30 minutes procrastinating doing the work, trying to find the list. I love working with just a really smart other. Whomever it may be, whatever the topic is—that kind of crank through things. To work through what's the problem I'm trying to solve. To work through what is the goal. It's funny. I feel like I'm not productive at the same time I've managed to do a lot in my career. I don't even know how to answer that question. My crazy. I guess my crazy makes me productive, is that an answer?Edward: That's fantastic. Aimee, this has been so great. Thank you for your time. We're going to pick this up tomorrow, exploring your time in Zillow. Aimee: Thanks. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
My guest today is Rachel Porges, former CMO of Levain Bakery, the maker of the most famous 6-ounce chocolate chip walnut cookie. This is Part 2 of the interview where we explore how she grew the Levain business.This is the free edition of Marketing BS. Premium subscribers got access to part 1 of Rachel's interview yesterday and twice the content every week.You can also listen to these interviews in your podcast player of choice: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed (for premium episodes).This Essay is Sponsored by PulsarStop doing generic social listening: tap into Audience IntelligenceDifferent communities talk about the same topic differently. Carry out instant conversation analysis + audience segmentation in just one tool with audience intelligence platform Pulsar: understand the public conversation, identify the top communities in your audience, and glean actionable creative & media insights to power your marketing. TranscriptEdward: This is part two of my interview with Rachel Porges. Today, we're going to dive into her experience as Chief Marketing Officer for Levain Bakery. Rachel, can you start by explaining what Levain Bakery is, and how I'm mispronouncing it? Rachel: You're actually getting it exactly right, which is a first for me because nobody pronounces it right. Levain Bakery was founded about 25 years ago by two amazing women, Pam Leekes and Connie McDonald, as a little bakery shop in the Upper West Side in New York. They were actually training for marathons and were making cookies at home for themselves to keep up their energy. They're training for triathlons and were keeping up their energy with these giant cookies. They started selling them. The New York Times picked it up and the world changed. To this day, 25 years later, even in COVID, there are lines down the block at the bakeries for these cookies. They're an icon. If you've ever seen one of those pictures of a giant cookie being broken on Instagram, the genesis is Levain Bakery. Levain brought them private equity money a couple of years ago and hired a new executive chief, of which I was one, to take the brand forward and figure out how to scale it out of four bakeries in New York—three in the city, one in the Hamptons—and do three things. One was to increase the footprint of the bakeries and add stores, two was to grow ecommerce, and three was to launch into CVJ. I was involved in all three of those things over the course of my couple of years there. The store, it fits incredibly. Even in the middle of this pandemic, the performance of the stores and of all the other pieces of the business has been truly remarkable. I was super honored to be a huge part of it, and I continue to advise them today.Edward: How are they different than all the other bakeries out there? Is it just a better product? What makes them different?Rachel: It's a really interesting question. One is that this cookie, it's the first of its kind in this giant cookie. The cookies are six ounces. Picture a softball squished down and break it up with a ton of chocolate chips in it, it's a little insane, so just the size and scale. I think what Levain does better than anyone is in experience. When you walk in, you're greeted by people that love what they're doing. When you walk up to one of the bakeries—whether it's on the Upper West Side, or in the Hamptons, or the store we opened a couple of weeks ago in Washington, DC—outside, you see people snapping pictures of that cookie break. You see people with these joyous faces. That's what it does better than anyone.Sure, we have really great bread, some sticky buns, and all of those things, but what Levain does best is it creates a moment of joy for people. At any time, it's a big piece of it. Pam and Connie often talk about the fact that 9/11 people came up to the bakery as a place just to get a moment of normal [...] to hell that was that day. The same thing has happened. We got customers coming in during the pandemic handing our employees notes (with gloved hands) saying thank you for being here at this time. It's not just the cookie, that's the moment. What we see is that translates across ecommerce, certainly where people want to send their friend a moment of joy. They send our cookies via our DTC website. As I helped to create the CPG product, it was incumbent upon us to make sure that we did that there as well. It's really easy to throw something in a bag and put it on a shelf and have to be a different experience, but what makes those special is that breaking open that moment of joy, the dewy chocolate chips. We had to find a way to bring that to life at a grocery store when you don't control the environment around you.Edward: That cookie is obviously very important, especially for the brand. Is it important sales? What percentage of your sales would come from that cookie versus everything else?Rachel: I can't disclose numbers, but a whole hell of a lot. Edward: It's more than just a brand, though. It's like people come in and buy the cookie, and everything else is there almost just like an add-on. It's like, I'll have fries with that.Rachel: Yeah, which is ironic because the name is actually a type of bread. Levain is a leaven sourdough bread out of France. It's an actual name for a sourdough starter or a fermented starter. The brand is the cookie to some extent. Even our logo that we launched last year is a cookie. It has nothing to do with the original name of it. No one lines up down the street. I'd love to say they do. Certainly, our products are amazing across the board, but they line up down the street for the cookie. As we extended that brand, it became really important that the cookie stays at the center of it. That's where a lot of marketers sometimes get confused is they forget that the consumer has a voice in what you're trying to do. For us, it became really obvious as we were watching social media, as we were talking to people online, as we watched sales. They're telling us what to maximize growing this business. That became a big common arc of what we did as we extended the channels.Edward: Why expand the product at all? Do you get incremental sales by having bread? How do you decide what else to add in?Rachel: We've actually had much the same menu for the better part of 25 years. We haven't done a ton of add-in. Pam and Connie—prior to the growth equity coming in—made some changes along the way. In my time there, we actually didn't add anything. As we had to narrow the menu during the pandemic just to make it easier to operate, we didn't take out any of the cookies. We took out other things that were either complicated, took up space, or caused a little bit of operational hurdle. Bread actually—interestingly enough during the pandemic—became a bigger piece of it because people needed the staples at home in a way that they didn't before, or they had other venues to get it before. But the cookies remained true. In the time that I was there, there are three big innovations that I helped with. One was the ice cream sandwich on the Upper East Side last summer using our cookies, which is kind of a media darling at the time. It drove a lot of excitement because suddenly, we are using our cookies for a different purpose. By the way, ridiculously decadent and very much in keeping with the brand, we launched the first-ever chocolate chip cookie without nuts, which was unheard of before at Levain. Levain had only had a chocolate chip cookie with walnuts. We launched a chocolate chip cookie, it's called Two Chip Chocolate Chip. It has two different types of chocolate chips in it. We launched that when we opened our no-host store in February of 2020. We'll do that to the other bakeries as well. Just a couple of weeks ago, we co-created a cookie in Washington, DC with a local James Beard recognized chef. Again, made sure we savored the cookie and brought something to life, but did it in a way that localized the brand as we are going to new markets. Edward: I want to talk a little bit about moving Levain into CPG from retail. You've already mentioned a little bit of the challenges doing it. What are the other challenges of moving a retail brand into CPG?Rachel: Product experience is number one on that list, so maintaining the experience. It doesn't have to be the same experience as what we found, but it had to be something that was relevant. We actually didn't launch our six-ounce cookies into CPG. We did an everyday indulgent size two-ounce cookie. The reason we did that is because who needs the six-ounce cookie every day? You're not going to get the eating occasions you need for the velocity at the shelf at retail. We did that. We also did it in a way that wasn't very main to a lot of brands. You see it even recently with Milk Bar. They go and they launch into the same set that has Tate's, Oreo, and all of these other brands in it. For us, we decided to go to frozen desserts because it is a dead category in a place that we could really stand out and deliver real value to the retailer and to the customer. That was a lot of fun. The other thing is cannibalization. You have to be really clear of what you're trying to achieve, and make sure you do nothing to either bastardize or cannibalize the cash cow, the thing that's giving you life. Moving forward, assuming that the CPG product continues to be as successful as the early launch numbers would show, the vast majority of the consumers in the world are going to experience us first as a CPG brand. We had to create a really nice usage circle that encouraged them to also consider coming to New York and coming to the bakery or purchasing the crazy giant cookies as a gift for friends. It all has to be really harmonious. If you try to segment it out and make it one versus the other, you're losing the value that the future buyers at one bakery might actually want.Edward: Where is the future value of CPG? Is it almost as a loss leader driving to the bakeries, or is it a profit center in itself? In fact, to your point, a much more scalable product than your bakeries. Are your bakeries the marquee that helps you sell CPG or the CPG like a marketing channel that gets you to the bakeries?Rachel: Both. It's certainly the latter. It's certainly not a loss leader. It's certainly a valid profit center into itself as it grows. I couldn't say that you would put one over the other. Obviously, the scale you can get at a CPG, you can take [...] and go to 40,000 stores, as opposed to the cost of building out 40,000 bakeries. It would be alarmingly high, not to mention highly cannibalistic at some point. I'm not speaking to Levain strategy, but I don't think it would ever make sense for Levain to be on every street corner everywhere. We said that time and time again. There's still a beauty in the scarcity of that bakery experience and in making it a moment of joy. It's the same thing as my time at Kriser's and other brands. You have to maintain an experience to bother having a brick and mortar facility. It has to be something that you walk in. It's not just about the transaction. Nothing in brick and mortar is strictly transactional anymore. We've seen the failure of so many bricks and mortars that were strictly transactional. CPG creates a moment that appeals to a consumer who has a craving at home and needs something in their pantry or in their freezer to heat up at night. Retail creates an experience when you want to have that, when you an Epicurious traveler who walks into New York, DC, or wherever we had next, and wants a real moment of experience. There are different [...] but they are fed together if the brand stays harmonious. Edward: Let's say 40 years from now, the pandemic is over, people go to the restaurants again and both businesses are super successful. You've expanded to CPG, you've expanded the footprint for the retail. At that point, looking that far into the future, are they both comparably sized businesses? Maybe the retail business is smaller but more profitable, but the received CPG business is larger but smaller margins?Rachel: I don't want to speculate too far into the future. There's only so much I can share, but they both have a place. I think DTC does this well for what it's worth. Whether it's me or whoever comes in next as CMO and obviously our CEO—Andy—they have to make sure that they're always building around the consumer insight. That's the key for it. The consumers will dictate ultimately the size of the prize. They'll tell you how big it is. You could see a world in which the bakery product set is mimicked in retail at some point. Here's the core bet. Cookies are a red herring to some extent. What you're creating is a decadent moment of joy. It's ooey, gooey, delicious, warm, fresh-baked, and it has all this connotation around it. You could take your product line into different places. You could take your bakery experience to different places as long as you maintain that experience across the channels. I don't know whether it's size, product varieties, or how that comes to life, but the consumers will dictate the size of the prize for sure.Edward: What are the prerequisites for a retailer moving in the CPG? You've had obviously a lot of success, Starbucks has a lot of success, but I don't go into my Safeway and see Subway sandwiches prepackaged. Maybe those exist, but they surely aren't successful. What do retailers need to have done in order to be successful when they move into the CPG?Rachel: Building a brand that has something unique about it is the core. Not to crap on Subway, but I'm not sure that Subway has a unique factor in the way that if you look at Jersey Mike's, they do Mike's way and they have a sauce that goes on. There are unique things that make that special. You could take some of that [...] in it. They launched their sauces at Whole Foods and have a CPG business. Milk Bar has done it recently with their product. There's a real distinct point of view for some of these brands that have gone from bakery, restaurant, or a retail brick and mortar experience into CPG. Hale and Hearty did with soups here in the city for a while. That's what really matters. Years ago, when I was at Unilever, I launched P.F. Chang's frozen. It was the biggest launch in North America that year. It was because, at that time, P.F. Chang's was incredibly loved by consumers. It had a really distinct point of view. It was this very bold flavor profile to most of America at the time—this is 2010—which doesn't sound like it was that long ago, but P.F. Chang's is bold. When we were creating the products, we did our damndest to make sure that we kept that flavor profile, that mouth deal, to the extent that we were worrying one morning at 8:30 AM. We were talking about the cut of carrots. Bolthouse Farms had run out of the carrot cut that we usually use for orange chicken. We were tasting different cuts of carrots in the orange chicken to make sure we didn't do anything to lose that mouthfeel and taste profile for P.F. Chang's. That's what it is. You have to have a point of view that can be carried into a new format, irrespective of the chairman. I actually helped advise a small brand called tenoverten which is a nail salon company here in the city. They're [...] different times. They launched their nail products into Target. When they opened their nail salons in the city, it was with the idea of creating an environment that was better for the employees and better for the customers in terms of the chemicals used in the products, the odors, and the space, the nail polish remover, they were using non-acetone. They were creating a whole new environment. When they launched their products into Target, it was with that same mindset. It was with that mindset of being very conscious of everything that went into that product experience. It's been really great. They've had some great success in CPG. That's what it comes down to. Same thing if you look at a brand like Drybar. They were able to create products that live outside of their retail environment. It was taking that point of view and that experience into something that you could bring and port with you. Edward: That was super insightful. I want to dive back a little bit and go into the retail space and growing the retail space. It feels like a big, important part of growing retail is having a really good product and having a really good location. Given that you have those things, as a marketer, how do you help accelerate the business beyond that?Rachel: There are two things in my past that come to life. One is making sure that you're never resting on your laurels. Kriser's was one of my past experiences. I remember my second week on the job at Kriser's. The brand was called Kriser's For Your Pet's All Natural Life when I started. If you look across the parking lot in Irvine, California, or in Englewood, Colorado, you see Kriser's For Your Pet's All Natural Life. I walked back in my second week of the job and I said to the CEO, we have to change the name of the store. He said, would you like to wait until week three to have that opinion? I said, no. I know you've been doing this for nine years, when you're standing across the parking lot, you can't read it. People don't know what it is. You can't see that icon that you created. You can't see that it is a pet retail environment. We did and sales popped up. It was a matter of continuously questioning everything you are doing and making sure that it really rang true to what the customer needed. Along with that is the idea of using customer experience to help drive your communication. As marketers, we strive for advocacy. It's the top of the pyramid or the bottom of the funnel or the top of the funnel depending on which area your funnel's headed this week. You want those handfuls of customers to be really crazy advocates for your brand. Social media and digital platforms have given us a method to repurpose that at scale. At Levain, we took our social following from 100,000 to 250,000 people in less than 18 months. The way we did that was by using what consumers were telling us time and time. We didn't pay a single one of those followers. It was because we were using what consumers were showing their friends in our communication. There was this great virtuous cycle of user-generated content, sharing experiences, bringing people back, and wanting that same experience. We started creating our entire photoshoots around the idea of capturing that same piece of experiences. We did our influencer work, it became the same thing. As we built our new website last year in 2019, we did the same thing. We used images that were representative of what the consumer was telling us mattered to them. With retail as a marketer, it goes back to always being the voice of the consumer and championing that to executives who are more focused on operational efficiency, product assortment, or labor cost because nothing matters if the consumer doesn't carry it forward. Edward: Yeah. It's almost not even appealing to the consumer. It's using your consumers for market research, like figuring out this is what they value because this is what they're sharing and this is what's getting traction among consumers. Let's use that and just scale it.Rachel: For sure. It's the cheapest form of market research. Who needs to run a study when people are telling you every single day? You have social listening. There are a million platforms for social listening. Just search the hashtags on Instagram or on Tiktok, and you will see what consumers are telling you. You joked at the beginning of the last podcast or the beginning of this one, about not saying Levain correctly. There's a whole world in which we needed to understand that people don't understand how to say our name.On the back of our CPG process, our product, and on our website, there's a comment that says ləˈvan in phonetics. It's the idea of, oh, we can actually work and have this dialogue in this interaction with consumers. One of the tech platforms I love is a company called Pixlee. They're from the Andreessen Horowitz Portfolio. They do a beautiful job with helping friends commercialize their user-generated content, either by just embedding it on the website or by enabling you to make that shoppable by scaling the idea of a permissioning UGC. I use it on almost every website I put together, because isn't it better to show not tell? Marc Mathieu—who was the former CEO of Unilever and Samsung at one point—he had a quote. I'm trying to remember exactly what it was, but it's something along the lines of, marketing used to be about creating a story and telling it. Now, it's about finding the truth and sharing it. Insofar as we as marketers listen to our truth—not just our truth but what consumers are telling us is true about us—we're just going to be so much more successful. That gives us the content by which the van Gogh do your AB testing, site optimization, social media buying, and all of these things that are the technical side of marketing. They're BS—to use your term—if you don't have the right assets and the right communication embedded within it.Edward: This has been awesome, Rachel. Before you go, tell me about your quake book. Rachel: I probably have two, actually. One, I just finished reading Pride and Prejudice when I was a teenager. Edward: How did that change your world view?Rachel: I became a romantic. My parents weren't lovey-dovey. I wasn't into all the romance stuff when I was a kid, but that changed my view of where romance novels started. To me, it's the basis for almost every great romance novel that ever existed. Poor guys in my life have probably set up a really bad bar to be measured against. Most recently, I just finished reading Where the Crawdads Sing. I don't want to give away the book if people haven't read it, but it tells you about, again, prejudice about seeing the truth, and how much you can fall prey to people's ideas of what things are. To me, it was a truly beautiful book, but also that meant that I'm going to be thinking about it for quite a while.Edward: Thank you, Rachel. This has been great. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
My guest today is Brian Watkins, former VP of eCommerce for Bulletproof 360, the diet and supplements company. This is Part 2 of the interview where we explore how he grew the Bulletproof business.This is the free edition of Marketing BS. Premium subscribers got access to part 1 of Brian's interview yesterday and twice the content every week.You can also listen to these interviews in your podcast player of choice: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed (for premium episodes).This interview is sponsored by GoToWebinar:Save up to 23% on GoToWebinar Annual Plans!GoToWebinar eliminates the headache and hassle from webinar hosting. No matter your goal or skill level, you'll quickly see why so many choose GoToWebinar for easy virtual event management, performance data, videos, polls, and email invites and reminders. Try GoToWebinar for free today!TranscriptEdward: This is part two of my interview with Brian Watkins. Today, we're going to dive into his experience as head of ecommerce at Bulletproof 360.Brian, can you start by explaining what Bulletproof does?Brian: Bulletproof is a health and wellness brand started by Dave Asprey about six or seven years ago now with the goal of radically improving your own life. What Bulletproof does is basically develop a line of supplements, protein powders, MCT oils, and just a variety of healthy intakes primarily driven around the ketogenic diet. But it resolves, at the end of the day, around the Bulletproof diet, which Dave Asprey created with the idea that by bringing in healthy food into your system you can have better energy, gut health, and mental performance.Edward: What are the main products that Bulletproof sells that drive the majority of its revenue?Brian: There are six main product lines. There's MCT oil, which is modified coconut oil, which is a high fat, low carb, zero carb enhancer for food and diet. There's a supplement business so vitamins and other items that you can take for mental clarity, energy, and immunity. There's protein bars, protein powders, ready-to-drink coffee, and packaged coffee. Those are the six main product lines that are offered to incorporate different parts of the Bulletproof diet throughout your day.Edward: That's a pretty wide variety. It's practically a packaged-goods firm. Are some of those more important than others, or they're all fairly evenly divided?Brian: Back in the day, when it first started, Bulletproof is highly focused on the biohacker. There's a lot around what MCT oil was, and Bulletproof truly developed that category in time. But then also the supplement of a collagen protein regime and then also supplements created with the biohacker community was focused on and looked for.As the company has grown, we've grown beyond what a biohacker is to help maximizers—people that just care or are naturally invested in their health. A lot of this runs back to my days of considered purchases within jewelry because if you're going to be consuming something that you want to know about, there's a little bit more research and a little bit more pause. It made sense as we shifted from biohacking to broader consumer goods, how could we bring education in the consumers along in that process?Edward: Initially, your customers were primarily people who knew your founder, who read his books and were bought into his philosophy rather than his products?Brian: Dave started by blogging (more than anything else) about his own personal journey with food, and energy, and health. He ended up using content in building this foundation and then starting to provide very simple rudimentary products they wanted just falling because they were asking for. Dave, can you get us this? Can you show us this? Can you provide this for us? That then developed into what we know today. As you go down, it ships because what you had day one was a highly knowledgeable person making these purchases. Fast forward today, Bulletproofs at Whole Foods, and Walmart, and Target and it changes the overall value proposition of how you communicate the brand, the brand values, and also what it can do for you in terms of performance onto a single package as you're walking down the shelf.Edward: How do you do that, beyond the fact that he has built a reputation for himself and has a blog and has a book? How do you broaden the awareness and consideration for Bulletproof beyond that core audience?Brian: There's a couple of things. This is what brought me to the company is the product's work. One, people are making these purchases and then coming back like, wow, I can feel a difference. You start with just a very basic repeat-and-referral. You're developing these core pockets of influencers that are starting to communicate out. From that, you can build a foundation.When I think about Bulletproof, especially on the digital acquisition side, we started from the bottom of the funnel and moved up. We were very focused on repeat-and-referral businesses building our email communication and our content. What we did unique about the content is we didn't just spend time talking about the Bulletproof diet, ketogenic diets, or about these products. We went back and said, what are the things we're trying to solve? Are you having a problem with sleep? Are you having a problem with your energy? Are you having midafternoon crashes?What we would do is create content that was more solution-oriented. What that allowed us to do is move up the funnel and get highly qualified prospecting traffic to our brand where they weren't aware of the brand, but they were aware of their issue. We were able to provide a solution both in content and also product recommendations that would help expand that group over time.Edward: I often think of many products as being either Tylenol or vitamins. Either they're solving a specific problem, or they're making your life better in a way that you weren't even aware that you needed. It sounds like Bulletproof started, hey, we make your life better in a way you didn't know you needed and then shifted to be, no, we can solve these specific problems. Were you doing search marketing for people searching for how do I improve my sleep?Brian: We did some of that—this goes back to analytics [...]. We would take all the search marketing information, all the keyword information. You'd also be using the Google search webmaster information to understand keyword volume. If you think about a three-dimensional Rubik, you could understand where's the keyword traffic coming from, what issues are out there.We can then overlay that with the Bulletproof product line, which product lines are doing immunity versus health versus energy versus sleep. Then you could understand the phase of that consumer either based on their search queries—have they already been to the website or whatnot—within this very dimension. Then you have a consumer journey you can communicate to. Is this a prospecting visit, is this a repeat purchase, or is it the subscriber that might be thinking about unsubscribing? You can tailor these journeys to each of these consumers, and we used it across three channels at all times. You had the digital side for sure. Out there, either Facebook look-alikes or Facebook prospecting and Google-branded terms and non-branded terms, depending on what the ROI was. But then we also integrated that very tightly into look-alikes and [...] within Facebook, and then we also did physical mail as well—direct mail. With that, we were touching people across multiple communication channels with their need-solution in mind. That's what helped to elevate the awareness of the brand.Edward: How did you target with direct mail? Was it broad-based, or did you have the equivalent of look-alikes on your direct mail?Brian: We started by focusing on just our existing consumer. Step one was saying look, we know—from our email database—how many of our physical mail addresses have been purchasing or moved to inactive. We started by doing very basic inactive work, which is, hey, we haven't seen you in three months. We've sent you a ton of emails. You haven't opened them, so we're going to send you a physical email. We'll give you a small offer to see if we can get you to re-engage on our website.Edward: How did you know those people hadn't switched to buying at Whole Foods?Brian: We don't, technically. We don't have a single source to a thread online and offline consumer consumption. But what we found is that it's an issue around convenience. If people would typically have shifted to one medium or the other, if they like that, it doesn't matter what we're trying to communicate with them. It's not going to happen. How we thought about our value proposition fell into four lines across all of our channels. The first one was the price. We made sure that Bulletproof maintained the same price. If you're going to buy something at Whole Foods, Walmart, or online, you'd find within 5% or 10% depending on the pricing strategies of certain retailers, but the price would be the same. It definitely was online. The second thing was product selection. Whole Foods was only going to offer two or three items within a protein powder versus online, where we offer the entire assortment. You had a different set of selection. Convenience, nothing could beat that up. You're already at Whole Foods checking out and you're buying that. We can't win on that.Ecommerce convenience is around shopping at home, delivery from home. If you have Amazon, you could have fasted delivery. Then you're left with the brand experience. It's a long way of saying that we knew consumers for passing back and forth between channels. They weren't necessarily passing back and forth because of price. Even by incentivizing some of the 10% coupon or 20% coupon, we typically found they stayed in the channel that they wanted to be in versus having people optimize between channels overtime.Edward: When you found someone who had dropped out of your online purchase channel and you sent a direct mail to them, the assumption was they dropped out of the online channel. They hadn't switched to Whole Foods, they just dropped out completely. I assume you ran a test and control. You held back some people, sent direct mail to others, and saw whether the reactivation made sense in the long run.Brian: Exactly right. What we found is it absolutely did. It had almost a 2X improvement with our test sample size, and we do this for 3-, 6-, 9-, 12-month lapse customers so we could track and see their interaction over time. The other thing you can do is you can go back through and see—if you're using Amazon or whatnot—you can also start to mirror in your shipping addresses across multiple platforms as well. Those other ways to consider overtime, narrow that list of who is inactive versus who is just maybe moved on to a secondary channel.Edward: Talk to me about the Amazon channel. How did you work with Amazon?Brian: You got to love them in Seattle, and there's no doubt they're highly successful. But it's hard to be a brand on Amazon—I say that cautiously. At Bulletproof, we ran a 3P relationship. That means that we were managing our own data on our own pricing within the Amazon ecosystem, and that was important to us because it goes back to this, we wanted to have consistent pricing. We didn't want people to figure out or feel like there is differentiated pricing between our channels. We've grown to be one of the largest 3P sellers within Amazon. We use FBA, fulfilled by Amazon. We ship our product to Amazon, Amazon executes, and ships our product out to the consumer. But what's hard is that when you're in that Amazon ecosystem, you get two types of buyers. One is, you have people who are very brand loyal. It's just more convenient. To be on Amazon, you're going to get it in two days, you can add it to a broader order. Some of their subscription tools are just cleaner. You have brand loyalists that are already on Amazon that have a great LTV, and then you have this group there just discovering.What's hard about that is how do you stay top of mind in your Amazon search results. Because unless you have a brand recall, there are so many places within a page for Amazon to compete against you, either from their own brands or their 1P brands, which are brands that they're buying the merchandise for and selling on behalf of the other brand, or just other product placements and advertising. You're constantly trying to work that piece of it.And then you have to respect part 3 of that is there's a lot of data that shows if you look at where Amazon searches occur—and I don't have this data but Amazon does—but if you were to geolocate people as they are on an Amazon app, what you'll find is there's a lot of people shopping in an aisle at Target, pulling up an Amazon search result. Not because they plan to buy on Amazon or check the price, but because they're looking at the reviews. They're looking for a clean way to know what is the best product to look on the shelf of Target. They're not going to target.com. They go to Amazon because that's a large market. You also have to plan that to create credibility in some of your offline channels as well.Edward: You need the reviews on Amazon in order to drive conversion rates in other places. Is that just an assumption or do you have any data to make sure that's actually happening?Brian: There's a decent amount of research that shows that that is occurring. We never did. I'd have to think through it a little bit more, but I don't think we ever did a tremendous amount. We never plotted our review rates on Amazon to our conversion rates across channels or our adoption rates across channels. In general, if we found that we had a lower product rating in general on Amazon, that was a weaker product across our entire assortment. Is that just because it was a weaker product, to begin with, or was it an Amazon umbrella effect? We don't know. But when you talk to a lot of people working within Amazon advertising within the VC community for CPG goods, they do talk about this additional conversion effect, where Amazon advertising now is lifting overall conversion across a lot of channels outside of just Amazon.Edward: Amazon is definitely a distribution channel for you, people who are looking for Amazon and the review factor. Would you find that it was effective at all for discovery?Brian: It is if you're willing to make that investment. The question there goes into the efficiency of that listing and how are you going to get promoted. The key thing within Amazon is to be on the first page. If we're not doing branded keyword searches, but you're just typing in protein powder. The first question is, are you on that front page? Because if you're on that front page, you need to pay to make sure you're on that front page. If you're on that front page, the question is, are you getting the right traffic, the right keywords, and the organic lift you want to have? That's the key thing to brand awareness or prospecting marketing. When you go out and bid on the keywords of protein powder, it is so highly efficient out there that it goes back to the days of Google where it's probably break-even at best. Then you have to have that following and understanding which says, a first-time protein buyer on Amazon, what's the likelihood they will rebuy your brand on the second purchase? What you'll find is there are certain categories because what we've got at Bulletproof is you research that there are certain categories in certain product lines to have a high propensity of repeat and branded options. Those are the areas where we would spend exponential dollars in or incremental dollars in to promote those products. These just aren't going to be Amazon products that we can do profitably, so we leave that as a distribution solution to our loyal brand followers, but we're not going to use that for prospecting within that ecosystem.Edward: Did you use any of Amazon's display network stuff or only on their merchandising, only on their core search results?Brian: We did display as well. When you think about Amazon display, we viewed it as there are three different ways to apply it. Once again, I'll go back to the marketing funnel in reverse order which is, you could do display advertising around the realm of loyalty.Which one of the benefits of selling supplements is I know that there are 30 capsules in that bottle, which means in about 30 days you need to repeat order. What we do is we run loyalty display campaigns to go re-find those consumers if they had not already placed an order to date.Edward: You are using retargeting, not so much like look-alike audiences.Brian: On a delayed basis, retargeting. That would be one channel. The second channel would be straight retargeting right after they first did their search. That's remarketing. They've probably already seen our results once, chase them down for the next three days, don't know if they've made a purchase or not, make sure that they know about Bulletproof, and then the final one is that prospecting look-alike.What's the benefit of what Amazon does there in their display network is they have a tremendous amount of sub-genres and look-alikes, and so you can use that to mirror it over time. The hard part about Amazon display—and they definitely heard it a lot from us—is that they like to report out on view-based conversions.One of the difficulties with the display is trying to understand the role of view-based, which might make sense at the prospecting level. But it sure doesn't make sense when you get down to this reactivation loyalty level because you only want to spend that if you know it's driving an incremental unique conversion. It has to get down to that click-through because I already know they're converting. I need to know if that display ad drove that conversion or we got them from some other means, and that makes the data very difficult in those situations.Edward: I'd imagine that if you're retargeting, so many of those people are going to come back and buy from you anyway. If you're going to give them credit to anyone who sees the view, effectively, you're just stealing all this attribution you would have had anyway.Brian: There'd be a lot of meetings where they'd come and be like, oh my gosh, you should triple your display budget. It's going incredibly well. I can't take any of that money to the bank because those conversions were happening at a consumer level, but we couldn't attribute back to that channel. That's such a critical piece to this when you get down to the lowest part of the funnel is understanding what role that final conversion piece is. We wanted to use Amazon display more and more for loyalty and for cart abandonment, but we couldn't effectively always deploy it in a way and therefore, it's left in middle effectiveness in terms of a channel.Edward: Let's talk about your physical distribution and retail. How do you drive more sales there? Is it the same thing, hey, get on end carts and do lots of demos?Brian: Yeah. That's one more like, yeah, you should talk to our retail and brand group. Edward: Fair enough because you were only doing ecommerce.Brian: I was only doing ecommerce. I'll tell you two things. One is that it goes back to the days of Ritani, they play off of each other. There's something to be said that when you move your product into Whole Foods, Sprouts, Walmart, or Target and people see it, that's going to help grow the overall awareness of the brand. There's no doubt. The flip side is when we're doing the right things online and we're getting our information out there and we're showing it to people, that's going to help the in-store as well. What we would do a lot of times in store—which goes back to being an ecommerce person, where you can track that transaction, you can track that conversion so much easier—is you find things like we would do in-store demos. It's just really hard to understand. By the time you put a demo team in there—are they a product expert and people are trying it—and then you look at that store lift both that day and then 30, 60, or 90 days later, I'm not convinced that in-store demos truly drive a real change. I think the retailers love it because it's a value add to their consumers walking the aisles pre-COVID, but I'm not sure the economic proposition is there.Edward: Is it the equivalent of a view-through conversion?Brian: Yeah, in my mind it is. It absolutely is. Maybe that's why I don't end up helping out on the in-store marketing is because it's harder for me to quantify that next dollar. I feel confident when I say, hey, I'm going to put a dollar into this channel. I have a 90% degree of certainty I'm going to return X% back, be it two-time, three-time, or four-time [...].When I do an in-store demo or when I do high-level brand impressions and campaigns, I'm told, in 3-6 months, what we hope to see is a lift of X%, and that's important at some point. I always joke around like I appreciate the people of Budweiser when they run the six Super Bowl ads because I think they're hilarious. But as a marketer, I would have such a hard time trying to justify that sixth spin because I couldn't quantitatively put it back into where that sale occurs based on that investment.Edward: Brian, this has been fantastic today. Before we go, tell me about your quake book and how it changed the way you think about the world.Brian: I'll give you two because they are the very far extremes of book reading. One, I'm a huge Dr. Seuss fan. Maybe I created the lowest bar ever for Marketing BS. But Oh, the Places You'll Go! is an outstanding book to create perspective around one's journey. especially if you've ever done a day-one startup or gone through really hard career items. That book summarizes what it feels like and the highs and the lows. The other one that comes around with management is—Gallup produced a book several years ago called 12. It's around the 12 questions of employee engagement. That was a game-changer for me because when you influence people, you have three ways to influence them. You have role power. Being a previous CEO or head of the department, you walk around with this red neon light that says, I can fire you. It turns out people are going to laugh at your jokes and they're going to do what you say you do. That's role power.You can also have expertise power where you can walk in, and because you've done this for so long or you know the patterns better, the people are going to follow you because you've done it and you have this understanding that they don't have.But the real power is around relationship power. The book of 12 talks about highly engaged teams and how do you create engage-core forces over time. It all goes back to a high EQ and emotional understanding of teams. When I finally realized that and understood how to develop teams like that, it's just been a complete game-changer to how I look at my career and how I managed teams going forward.Edward: Brian, thank you so much for being here. This has been fantastic.Brian: Thank you so much. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
My guest today is Lindsay Pederson, owner and chief strategist of Ironclad Brand Strategy. This is Part 2 of the interview where we dive into how branding actually works to grow a business.As a subscriber-only podcast you will need to subscribe to the a private feed to get it in your podcast player. You only need to do this once. Simple instructions here.Transcript:Edward: This is Marketing BS. This is part two of my interview with Lindsay Pederson. Today, we're going to explore Lindsay's specialty, branding, and how she applied it to grow businesses. Lindsay, let's start with definitions. What is a brand? It's not a logo, right?Lindsay: Yes, that's right. It is not a logo. A brand is the meaning that you stand for, that your company stands for in the mind of your audience. It's that real estate in the brain of your audience, of your customer. That thing that you stand for, it might be something vague, and therefore not a very valuable brand positioning, or it might be something really sharp, and resonant for the customer, which is what makes it a more value creating brand.Edward: Now, the first brands were really just promises that you wouldn't die from bad canning technique. I think deviled ham, Deviled Underwood is the first brand. How much branding today is just consistency and how much of it is more than that?Lindsay: I think the fundamentals are the same. I would go back even farther with brands that before we even had a sophisticated, commercial, industrialized market and people shopped at the baker or the butcher and maybe there is another butcher in town, the butcher had a brand. They were particularly good at X, or they specialized in a certain kind of meat, or whatever, that's brand too. They probably didn't call it that, but ultimately brand is a capsule for trust. Some people will define a brand as a relationship between a business and its customer.If you think of what even is a relationship? It's an accrual of trust where there's good will on both sides. I think that that is really still the same. There's just like differing levels of scale and sophistication today than there was back with that first brand.Edward: You argue that brands are a sustainable competitive advantage. I think you say the only sustainable competitive advantage. Is that another word for mote as Peter would call it?Lindsay: That's right. Yes, so I argue that while other competitive advantages will obsolesce, or erode, or be copied, brands never can be copied. If it's a good brand which is one that has good will and high willingness to pay from the customers, then it's not going to be copyable, in the same way that you can't copy a person credibly. Patents expire, real estate first-mover advantage, that will eventually go away. IP eventually can be used by multiple parties. Monopolies get broken up. If you think of all the competitive advantages of the ages, all of them have an Achilles heel which is time, but brand doesn't. If it's well nurtured, it can be the only truly sustainable competitive advantage that you have.Edward: There are lots of examples, though, of companies that have failed that had powerful brands. Kodak comes to mind immediately, a great powerful brand. I'm not sure what the awareness of Kodak is, but it's probably in the 90s.Lindsay: It was a killer brand but you're right. In some ways, I think of marriages or relationships where it has to be nurtured. It needs to be kept relevant and Kodak lost its relevance with their customers. It's not like an entitlement that once you have a good brand, it will be your mote forever. It's when that spirit and the letter of that brand guides your decision making and helps you to be brave when technology is changing as is what happened with Kodak. It's not necessarily going to be your competitive advantage forever, but it has the best shot at being. If you nurture it and if you continue to care deeply about the customer that you're serving just like with any relationship.Edward: We're recording this in October of 2020 and Coke just announced that it's killing the Tab brand.Lindsay: I know. I'm so nostalgic about this.Edward: Well, that's the question. If a brand is so valuable and Tab is obviously a well-known product and really, all of these things are just sugar water with a brand on top of it, why kill the brand? Is that brand equity not worth anything?Lindsay: I haven't talked to anybody at Coke, but I suspect that—there's a little bit of a special case because Coke is a house of brands. It's a branded house of brands and Tab is just one of their dozens, if not hundreds of brands. The way I know at Clorox we had about 85 brands and several of our brands—the complexity of continuing to offer them outweighed the profit that we made. Especially with a physical item like Tab which is water, saccharine, and coloring mixed together. There's a high carrying cost and then there's also a high psychological cost to continuing to have this item even though it has low velocity in store.I imagine that partly there's an economic reason, that complexity is expensive with high capital goods like that but also just ultimately the most useful thing about a brand is that having a skew like that weakens focus. If you're focused on the thing that only you can do that your customer really wants and that you're really good at providing, that's what your focus should be. If Tab is detracting from that, from the Coca-Cola Company, then ultimately I can understand. Even though I'm nostalgic about it as an 80s kid, seeing Tab go away makes me sad, I can understand why it was time to let it go.Edward: Is building a brand really a matter of spending money? Can SoftBank come in, just pick a company, spend tens of millions of dollars and then magically have a brand?Lindsay: You can buy brand awareness. Again, to define terms here, your brand is what you stand for. The brand is the definition, the heart and soul of why your business deserves to exist. That promise that you deliver. You don't have to be a big company to have a brand. You and I used to have coffee at El Diablo Coffee Company down the street, now rest in peace, because they've had to close because of the pandemic.Edward: That's so sad. It was such a good place.Lindsay: That was a punch in the gut when they closed. They had a brand. They don't have brand awareness. They're a mom and pop, single store business but they have a really clear brand to their customers. Brand awareness is different. Brand awareness is the scale of people who know about your brand. You can have a really vibrant brand with low brand awareness like El Diablo Coffee Company. You can also have a really high awareness of brands, where people don't really know what you stand for. Like AT&T, they might be the largest TV and media buyer still, so they spend hundreds of millions of media dollars a year promoting their brand, very high awareness of the AT&T brand but a really weak brand definition.Those are two things, yes, you can buy brand awareness but the exercise of deliberately defining what you're going to stand for really exists outside of time and money. Even the mom and pop coffee shop El Diablo has a brand, this is our promise, this is our personality, these are the things that are product truths. Those things are true for any business, whether small or huge. If you have deep pockets, sometimes just like with a lot of things with money. Having a lot of money can cover all sorts of sin. If you have a ton of money like AT&T Wireless, you can spend to get really high brand awareness. That doesn't mean that it's a well-loved brand. It doesn't mean that it was money well spent to generate that awareness. They're really two separate things.I argue that when you have a precise conscious definition of your brand, it's going to make any awareness building you do more fruitful. It's going to be higher ROI because building awareness of a clear idea is going to be easier and more effective. It's also going to be easier for the customer to bond with you. It's one thing to be aware of something but to let it in and to let it become part of your consideration set is another step that just generating brand awareness is only going to go so far to achieve.Edward: Can you quantify that then? You're saying, hey, if you have a better brand definition, you should have higher ROI than marketing spend, than your awareness spend.Lindsay: Yeah.Edward: Should you be able to see that you can track things like how much I'm spending or how many impressions I'm getting and whether or not that's translating into awareness, or consideration, or purchases by how strong that brand definition is?Lindsay: Absolutely, you could. We're starting to get a little bit into the territory between these two which is what's your message, what's the copy, what are the words that you used to express your brand promise. I think I'm getting a little bit more into market research than I should, but you can do a 2-cell test of promise A goes in this cell and promise B goes in this cell and they're both around the same idea but one is precise and one is not.Edward: Where did you see that impact? Is it in impressions to awareness? Is it awareness to consideration? Is it a consideration to purchase? When you have a precise brand, do all those metrics improve or do some improve better than others?Lindsay: I love that question. I want to think more about it but—I can think of an example for any part of the funnel where it's beneficial. In fact when I start a brand strategy exercise, I want to learn what part of the funnel is strong right now and what part is weak so that the brand can help where this company really needs it. Oftentimes, especially with a B2B company, the response is we do really well with sales. When I've got a person in front of me and I've got 15 minutes to share a sales deck with them, we do really well. We don't have enough of those people coming to us.We have a really good close rate, a really good conversion rate, but we don't get enough people coming into the pipeline. If awareness is the problem, then the goal of the brand should be taking somebody who's unaware to aware, what's going to heighten our ability to do that singularity, make it very easy cognitively for a person to understand what you are. Really simple is what helps to go from unaware to aware. The reason is the person doesn't have a relationship with you yet. They're not going to give you a lot of their time and energy to try to understand what you are. You're going to do that with three or four words. Singularity is the most important thing with awareness.Consideration, it's usually more, okay I got the big idea that made me aware of it but now I don't believe you. You have to make me believe that you're going to deliver on that promise. The messaging should focus more on the reasons to believe. Let's take Volvo, so the promise is safety. The reason to believe in safety is, okay, we invented the five-point seat belt, we crash test. Those things then become the most salient part of the brand message at the consideration stage. Purchase, if people are leaving at purchase then it's often more like are you making it easy for them to purchase a yes? Is the price value right? All of those are manifestations of the brand.Edward: How much of branding then is the differentiation and just being different than the other competitors in your space?Lindsay: It's everything. It's the whole point. Your brand is to basically distill what is your most potent differentiator. That's what brand is. That's the point of all of this. If you come up with a brand that maybe is a neat idea but it's not differentiated, then it's not going to create economic value for your business. What makes a brand value creating is that it's differentiating. Absolutely, it has to be.Edward: There must be brands that are better in certain categories, like Harley Davidson kind of owns tough guy image for motorcycles. Maybe I've been getting too much Harley Davidson propaganda, but it feels like that is the right brand if you're going to sell motorcycles and anyone else who enters the motorcycle space now to choose something different or just be the lesser version of Harley Davidson.Lindsay: Yeah. I don't know Harley Davidson's share in their category, but I would guess that they dominate.Edward: They're a leader.Lindsay: They're the market leader. Taking a step back here, one of the first decisions that you make when you're defining your brand is if I look at my customers, my sweet spot customers, the people who I really want to be our customers, if they're not buying us, what are they doing instead? I don't just mean direct competitors. In the case of Harley Davidson, it might be walking, it might be riding a bike, it might be driving, it might be owning a car, it might be renting a car. Harley Davidson, as the category leader, what they need to differentiate against is not other direct competitors but substitutes. That's why the Harley Davidson positioning is all about kind of the badass spirit of being a Harley Davidson owner as opposed to the size of their engine versus other motorbikes.They make fun of car owners. In their headquarters, they have parking spots for their employees, most of their employees do ride Harley Davidsons but then in the distant parking lot, like the boonies parking lot, they have spots for cars. They're trying to push off against cars, not other motorbikes. It's still about differentiation. It's just that the frame of reference is larger when you're the category owner.Edward: Why do people hire you, Lindsay? What's the pain point that causes them to bring you on board?Lindsay: Yeah. Usually, the CEO and the CMO, depending on the company, what I often hear at the beginning of an engagement is we are vague about what we stand for and therefore it makes it hard for us to have effective marketing but it also makes it hard for us to do other things. We're a little bit of throwing spaghetti against the wall when it comes to what our new products should be. When we recruit employees, we don't know what to tell them about our values and our culture. There's sort of like a pain of lack of focus. The desire for the brand strategy is to be a north star that solves that pain. The most readily available and probably the most immediately put into place outcomes are marketing.The brand is everything that the customer experiences of your business which is not just marketing. That's why it's so important that it's coming from not merely a marketing activity but really a full business activity.Edward: What are the key things that matter now? If I'm going to try to fix this build or my brand at the beginning, what should I be spending my time on? What matters most? What things can I ignore because there's a million things I could be doing.Lindsay: You mean like different aspects of building a brand?Edward: That's right. I talk to companies all the time, maybe they're not building a brand, they have a brand, at least they have a brand name and they're doing some stuff and they're just trying to figure out like where they spend time when there's a million things on their list. If they're going to spend time doing 2-3 things to improve their brand, what should those two or three things be? A lot of times, just trying to change the names is where they go to first. I'm pretty sure it's not the right answer.Lindsay: I mean naming is really, really difficult for a lot of reasons. Particularly in this mature internet, in the age of the internet where the desired domain is already taken, naming is so difficult. On the other hand, I do think it's worth getting your name right because it's so unforgiving. Once you have a name and you've built equity with your customers in that name, it's painful to change it and sometimes you do have to change it. It's better, I think, to get really clear about, this again goes back to, what do you want to stand for, in a word, like a single idea. A word or two or three, not like a multi clause sentence.What do you want to stand for, and your name, and your logo, and your tagline and all of your visual identity? Let all of those work together, and your product, all of those work together to express your brand. Don't pin it on just one thing. If you have a name and you don't love it but it's otherwise not problematic, consider the fact that you also have other real estate that you can use to convey your brand, so you've got your tagline. I actually think this is probably the most under-utilized part of brand identity. There's a lot of focus on naming and naming is really hard. In a lot of senses, you don't have much control over it because you probably inherited the name or you couldn't get the name that you wanted, but the tagline can make up for a weakness in a name.The problem is in order to define your tagline, you have to do your brand strategy to know what's the thing that you're going to message is. My first recommendation is define your brand. It doesn't mean you have to hire a consultant to do it. You can do this yourself. What it really takes is some humility and empathy, take a step back. What are we really here to do? What's the nature of the pain our customer is in that we're here to solve? What's that like? What is the promise that we want to be known for and that we can deliver again and again to accrue that trust?When you do that kind of heavy lifting of defining your brand strategy, it's actually not that hard to develop your tagline, or to choose a logo, or to choose your colors. Those things are not heavy lifting when you've done the upfront work of defining your north star. I think that probably the biggest mistake here—I get a lot of the angst of I don't like our logo, but step back here. The customer probably doesn't care that much about your logo if they love everything else about your business. Have you defined for your customer? Have you made it really easy for your customer to see what you offer them by sealing a promise.Instead of do I like my logo, instead ask the question: does my logo express the promise that I want it to express? Is it true to who we are? To take out some of the subjectivity here, it doesn't have to be that hard. When there's a massive undertaking to redesign a logo, I often get nervous because I wonder if it's covering up something else. We are too nervous about making a singular brand promise so we're going to have a really pretty logo with a really big agency that's going to do it for us. I'm a fan of a really awesome logo, but just like if you're building a house without a foundation, make sure that the bones are there first before a huge investment in something like visual design or logo.Edward: Lindsay, thank you so much for being here today. Before you go, tell me about your quake book. What books have you read that's really changed the way you think about the world?Lindsay: Yes. It's been such a joy to talk to you, Ed. Thanks for having me on your podcast. The book that really changed the way that I work is called Deep Work by Cal Newport. I alluded to this earlier with my digital minimalism, which is another book that he wrote by the way, but the idea is that we as humans, our most scarce resource is our attention and right now especially when there's so much competing for our attention, you have to really protect your cognitive time. Instead of getting to brass tacks here, what he advocates and what I've really started to do is block out the most quality time of your day for thinking. For me, it's the first two hours of the day, and don't let there be low cognitive tasks creep into that.Instead of going about your day and squeezing the strategic cognitive work into the margins, do the opposite. Plan it so the most midi-important thing happens when you're most on and really push out things like replying to emails, to the less cognitively valuable time of your day. That's Deep Work, and also I think that it allows you—it's a productivity tool in a way, but it also is a joy tool because it helps you to enjoy what you're doing more and not feel so rushed all the time.Edward: Lindsay, that's great. Thank you so much for being here today.Lindsay: Thanks for having me, Ed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
Apologizes for the double send yesterday. It seems one of my drafts got sent along with the final briefing. In case you are worried you read the non-final version, here it is again.My guest today is Lindsay Pederson, owner and chief strategist of Ironclad Brand Strategy. These podcasts are usually with a leading CMO, so this one is a little different. I have been very selective in having Lindsay on the show. I would love your feedback on whether you feel having people like Lindsay on from time to time is a good idea, or whether I should keep the focus 100% on CMOs. You can comment or just reply to this email. As a subscriber-only podcast you will need to subscribe to the a private feed to get it in your podcast player. You only need to do this once. Simple instructions here.Transcript:Edward: Today's interview is a little different. Usually, these podcasts are with CMOs. My guest today, Lindsay Pedersen, is not a CMO. For the last 13 years, Lindsay has been the owner and chief strategist of her own branding agency. She's done incredible work with companies like Starbucks, IMDb, Avalara and Expedia. Today, we're going to cover Lindsay's career and her path to running her own agency, Georgetown, Advisory Board, Deloitte, Berkeley, Clorox and now Ironclad Brand strategy. We're lucky to have her here today.Lindsay, my guests are usually CMOs and I start with how did you get your first CMO job, but let's talk instead about your choice to leave Clorox and start your own agency. Why did you do that?Lindsay: Yeah. I was at Clorox as a brand manager or in the brand management world for six years, the six years after business school. At that point, we had my son who was then two years old, basically eating us alive, my husband and I, and we decided to move to Seattle because I had family in Seattle that can help us with this child. We moved to Seattle at Clarkson's in Oakland. I was not looking to become an independent consultant. I was looking at roles at Starbucks and a couple other CPG companies. The way that it happened is that I was recruited for a director of marketing role at Starbucks and they had to do it on a contract basis initially while they waited for the hiring freeze to lift. I was technically a consultant as a head of marketing for this group and I loved it. I loved having an outsider perspective. I felt like I could be more candid than if I were an employee because I had a little bit of distance. It was sort of an aha, I would really like to do this for other companies; to be in charge of building the marketing vision for a group or the brand strategy for a group but on a consulting basis. It was not this conscious, well-thought out, I'm going to go start my own consultancy. I kind of stumbled into it. Initially, I definitely wouldn't have called it an agency. I would just say I am a brand strategist. I can build a brand strategy in the way that we do in the classic Procter and Gamble world. Seattle, being a tech town, was actually a pretty rare skill set. That ended up being pretty distinctive that would not have been that distinctive if I were in the Bay area but in Seattle, having the classically trained brand management from Clorox, it was something there's a lot of demand for.Edward: Got it. You'd say that your skill set, at least at the time, was not particularly unique in the package goods world. What was unique is that you're a package goods world person living in a tech town.Lindsay: Exactly and I think it's funny because in hindsight I see that at the time I was really confused. I didn't realize that Seattle was such a tech town and I found it so confusing that every time I said I did brand, people thought I was a logo designer. I was like why did you think that I do logos? That's the strangest response. I'm a brand person. I realize now that just the word brand is really confusing outside of consumer packaged goods. There's a different, more narrow definition of it. Absolutely, I was a dime-a-dozen in consumer packaged goods, but then in the tech world I could bring that discipline of CPG to a town that didn't have a lot of that. At least not in the same kind of schooling that I had.Edward: How did you get your second client after Starbucks?Lindsay: During that time when I was a consultant for Starbucks and I was realizing I really liked to do it on a consulting basis, I just reached out to my network and I knew my former boss from Clorox was running marketing at TMobile. I remember he was actually my second client but in addition to him, I was asking a lot of people like, would you need this? Is this something that you would want? When I got enough yeses to that question, I felt emboldened to leave Starbucks and have other clients so TMobile with my second client.Edward: You wrote a book. When did the book come in?Lindsay: Much later. This was 13 years ago that I made the shift from Clorox brand manager to brand strategy consultant and it has morphed quite a bit. Initially it was I am an independent consultant. I can do anything that a marketing director for hire would do. You probably want me if you want some classic, kind of rigorous look at your brand. I was a generalist, but what I realized as I became more seasoned, is that brand strategy was really unusual in the Seattle area. There was a really significant appetite for it. I started to sharpen down, to narrow more on brand strategy specifically, not brand management in general.Years into it, I developed a methodology. Instead of creating a brand strategy from scratch every time, I developed a method. There was a point, probably four or five years ago, where I really wanted this method to be something that anybody can use, even if they weren't hiring me. I taught a course—LinkedIn Learning will hire authors to create a course for them. LinkedIn Learning hired me to create a course. I think it's called creative brand strategy. If you have a LinkedIn Learning subscription, you have unlimited access to all of their video courses. When I finished that, the producers at LinkedIn Learning said you really need to write a book. This is a book.The idea of writing a book had been germinating for a while because I wanted this methodology not to just live in my head and there's something I had to get off my chest about brand, so I started writing a book. I published it a year-and-a-half ago. All of this took a long time. I didn't go from Clorox, to brand strategist, to author in a year. This took, I guess, that would've been 12 years total.Edward: When you're developing that strategy, it was almost organic because you spent time helping clients. You'd help one client, then another client and another client and sooner or later you started seeing commonalities around solving the problems, rather than solving the problem the same way every time. It's having to reinvent the wheel every time you could go and solve the problem effectively the same way every time.Lindsay: That's right. That's exactly right and some of the framework, some of the steps of the methodology are really similar to things that we did at Clorox for any brand strategy. I was taking things that I had learned and I was weaving them into a more readily rip-and-reapply sequence of steps. I didn't say okay I'm going to develop a methodology and then I'm going to go out and I'm going to use that methodology. I just found over a course of years that I had a methodology. It was silly to pretend that I didn't, to pretend that I was starting from scratch every time.The other thing that I got was market feedback. My clients felt a lot more comfortable knowing that there was a methodology behind this. To them, it felt like it would de-risk the project, that this is based on a tried and true process. It's not just based on a really creative person coming up with a cool ID. That was the other encouragement, the market was saying a methodology makes me feel better. Brands feel so squishy to people, and so that step by step methodology makes it feel less kind of shrouded in mystique. It actually also added value and made the brand strategy better because I can kind of circle the troops. There was more of an I'm going to bring in what I learned from across industries and across all of the types of clients that I worked with. It ensured that all of my learning was boiled into a process.Edward: I'm a big believer in taking structure to qualitative areas. I spent a lot of years doing improv comedy and much of improv comedy has people talking about just getting in touch with your inner feelings. Instead, I tried to figure out what are the story elements you need to tell one by one by one in order to tell an effective story?Lindsay: I did not know this about you, Ed. That's so cool. Some time, you're going to have to tell me more about that.Edward: I feel like more and more soft areas are becoming this way. There are books about screenwriting. Screenwriting used to be very much a qualitative thing of what a good screenplay was, I think it's called Save The Cat! It became a very structured solution for here is how you write a screenplay. I feel like you've done something similar for here's how you build a brand.Lindsay: That is so thought provoking. I think you're right. I think there's also the design thinking, the idea of taking design thinking and applying it to building a brand, that's also what this is. Design thinking, especially now, it's very widely used in product development and innovation. In a way, my methodology is a lot like design thinking for creating your brand, for defining who you want to be.Edward: I want to go back along your path to getting there. I have this theory that the things people do when they're 12 to 14 years old affect their entire lives. What were you passionate about at that age?Lindsay: When I was 12, 13, 14, I loved hanging out with my friends. I was a competitive tennis player. I do think that but I mean I goofed off like, hopefully, most 12 and 13 and 14 year olds are. I was a little bit of a serious kid in some ways. I remember during high school, I was the person that people would come to me to talk about their problems even if I wasn't friends with them. It was almost like I had this reputation for go talk to Lindsay. She can help you if you have problems or she'll listen to you. At least, this is the way that my brain is reconstructing it looking back, that was a long time ago. I do think that I gravitated toward like one-on-one listening and helping people get less confused, get less unmoored.I think that's true. I feel self-conscious right now because I'm not positive that at age 12, 13, and 14 that that was true. I remember that in high school in general that was like part of my reputation.Edward: You considered being a clinical psychologist.Lindsay: I did. Throughout undergraduate, I was planning on becoming a clinical psychologist which requires a PhD. It was built on this idea that I'm, by nature, a helper and I had an affinity for listening. This might be hindsight, biased, but I also think there is an element of just really deeply curious about people. I love to get inside the head of a person and try to understand what their world is like. I loved the clinical psychology work that I did as an undergraduate, scholastic work that I did.I went pretty far with it, but when it came right down to actually going to a program, it really means like giving up six years of your life to live in a random town in the Midwest during your early 20s. I just became disenchanted with the idea of giving up so much of my life for this. I also, at the same time became a bit disenchanted with academia. Just the ivory tower of a university was starting to get on my nerves. It was so impractical. I decided not to do that after all. I went into management consulting instead.Edward: Is there a world where you did do it? How different would your personality or life have been for you to have pulled the trigger and going on that PhD?Lindsay: Oh my god, that's like a mind blowing question. Number one, in a lot of ways what I do now is really taking what I liked about that and just applying it to a different context, applying it to markets instead of to one-on-one people. In a lot of ways, it doesn't feel that different. The nuts and bolts are really different. The lifestyle and the business model is really different, but it doesn't feel like, in spirit, there was that significant of a divergence, although, I'm a poor judge of this. I think somebody else might totally disagree with that and think that it was wildly different, I don't know.Edward: Eventually you go back to business school and then you start at Clorox. Why start at Clorox? Why take that job at a business school?Lindsay: My first week of business school and I went to business school, I was working for Deloitte as a management consultant and it was in one of those associate programs where after the analysts program and you have to go to business school in order to stay with the firm, so I kind didn't know what I wanted to do. I went to business school because I was expected to, and I didn't write that in my essay by the way. I think I had a very cogent direct explanation of what I was going to do with my MBA, but I really was confused at that point in my life. I knew I didn't love the life of the management consultant. I just remember this so clearly, the first week of business school, might have even been orientation, talking to a second year. I was a first year and I was talking to a second year who had just done her summer internship at Clorox. I was like, Clorox like the bleach company? What did you do for them? She explained, well I developed their creative strategy for a new ad campaign and I led some market research to do focus groups to learn about what kind of innovation we should be exploring. I was like, what? You can do that? That's a job? What I came to learn is that's what marketing is. I didn't really know what marketing was beyond the fact that—maybe I equated it with advertising which a lot of people still do. I thought marketing is advertising, but what I learned from this person who influenced me so much by telling me about Clorox was that it's actually kind of taking psychology and applying it into a business.I loved my marketing courses in business school, just blew my mind, micro economics, and game theory in marketing, it was so juicy for me. I applied to have my summer internship at Clorox. I did my summer internship at Clorox and went back when I graduated from business school. It's funny though because this was in 2001. If you can remember, in 2001 and in the Bay area, because Clorox's in Oakland and I went to Berkeley for business school. During 2000 and 2001, when I was in school, all of the dot-coms, all of these new internet companies were hiring people from business school and among my friends, I had kind of the silliest job. They're like, you're going to go work on liquid plumber or fresh step cat litter and they're going to do some sexy.com. When the bottom dropped out of that, I still had a job. It turned out that though not sexy, it was a really good move.Edward: I had a professor of business school who told me that he always knew where the bubbles were because that's where all of the MBA students were rushing to get jobs.Lindsay: Funny. That is so interesting, I love that hypothesis.Edward: I graduated in 2005 and everyone wanted to go into real estate and he's like, no one was passionate about real estate five years ago. I don't know what's happened.Lindsay: Wow, that would be so cool to chart that on a map, like a bubble—okay here's where the dot-com era happened and here's where the real estate boom happened.Edward: Lindsay, what were the biggest failure points in your career? Where did things not go as expected?Lindsay: I'll start with what I mentioned when I was a management consultant. I took this job with Deloitte because it was a generalist job. It's a great thing to do if you don't know what you're going to do but I was so miserable for that 2 year period. There were 50 weeks in a row that I traveled, usually for three nights, sometimes four nights, and I could barely problem solve. I was so miserable with it and that sucked. That really sucked. At Clorox, we've talked about some of the contents of brand management, P&G style brand management at Clorox. I loved the content of it. I loved learning a systematic approach to marketing. It's kind of like the smartest marketers in the world. That was really cool. Intellectually, awesome, but the culture of Clorox was brutal for me. It was very old boys, very risk-averse.If you think about Clorox bleach, it's kind of a utility so from a market perspective, they really wanted it to be very predictable and no big bumps, so no big bets were placed. That extreme risk-aversion super bummed me out. I knew that I didn't want to stay there forever just based on that. As an independent consultant, when I think about the hard times that I've had in my career, it is usually with some form of either getting a little bit too far away from what I really liked to do. Not being intentional enough and finding myself doing something that was on the tangents of something I really wanted to do. It took me away from my kids too much. Having a job or having a role that would make me work weekends, that's when I kind of hated it. I just want to quit. I don't know if you call it a failure. I mean the thing about having a small business, as small as mine anyway, is you just keep on pivoting until you like it.Edward: Lindsay, what are your productivity tricks? What do you do to be productive that most people don't do?Lindsay: I am a pretty strict digital minimalist. I don't have email on my phone. I don't have social media on my phone. I really use my phone as a dumb phone. I've got maps, I've got a texting calendar, I've got the weather and like two or three other apps. I just keep my phone from being too interesting. That is huge for me because your phone is with you all the time. If I don't have my phone with me, I'm much less likely to expend energy trying to resist something that's on my phone and then I can spend that time on a more cognitively rewarding task, like working on a blog post or working on a project for one of my clients. I think that's the biggest one. The next level of that is like actually just not doing social media at all. I haven't gotten there but I have put my main work computer—I have blocks so that I can't go to Twitter or FaceTime on this computer. It's kind of about creating boundaries. That's my big productivity trick, it's to create a boundary—it's the same reason that I don't keep Haagen Dazs ice cream in my freezer, I will eat it. I don't keep because I will eat it. I still will eat ice cream. I just don't make it quite so easy for myself.Edward: This has been fantastic. We're going to pick it up with some branding work tomorrow. Thank you, Lindsay.Lindsay: Awesome. Thanks for having me, Ed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
This is a free two-part episode of Marketing BS. My guest today is Peter Fader, professor of marketing at the Wharton School at University of Pennsylvania. Peter was one of my early marketing mentors and I loved this interview. This is Part 2 of the interview where we dive in deeper to the ramifications of Peter's signature research around “Buy until you Die”.You can subscribe to the podcast in your player of choice here: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed (for premium episodes).TranscriptEdward: This is part two of my interview with Professor Peter Fader. Today we're going to dive into signature research Buy Till you Die. Peter, can you start by explaining what this idea is?Peter: Yeah. That sounds really weird. Buy Till you Die. What's up with that? As we discussed briefly yesterday, it's not a model that I invented. In fact, I was actually against even trying it in the first place. The idea is that if you look at the way customers behave—it's not just customers—if you look at the way that repeated decision-makers make repeated decisions over time. I'll give you a wide range of examples as we go on. There's this remarkably consistent pattern. I'll stop short of calling it universal, but it's so robust, it's so common, that we should treat it that way. Yes, we should acknowledge exceptions, but they don't happen that often.The idea is this. Here's the analogy that I could tell, think about it in the case of a customer making repeat purchases of a particular brand or product. They're basically flipping two coins. Every day, you're going to flip coin number one, the buy coin. Will I buy this thing or not today? Simple as that, but they're also flipping the die coin. When that coin comes up heads, all that means is okay, fine, I'm still alive, I could flip the buy coin. It doesn't mean I will buy but it means I can at least contemplate it. But when that bad boy comes up tails, I'm gone, and I'm gone for good.That's why we call it Buy Till you Die. There's no coming back. There's no resuscitation. You just buy things for a while, and not necessarily at a very steady regular cadence, but you do have an underlying rate and undying propensity to buy things, let's say once a month.I don't know that you going to buy it once a month, but on average, you going to buy it about 12 times a year, but then something happens. I even no longer have a need for this particular product. I move away. You're no longer tracking me. Perhaps I really do die. I don't know, and then that rate, boom, drops to zero. It sounds really artificial. It sounds harsh. It sounds unrealistic, and I don't argue with any of that. I pushed back against it myself. When you put it up against actual data, and you allow these two coins to vary, it's remarkable how well it can capture, explain, and offer useful diagnostics about repeat purchasing behavior or, again, repeat decisions of almost any sort, and we'll dive into some of those almost bizarre examples.Edward: Yeah. Let's talk a little bit about, you said right at the beginning, there are some exceptions, but they're very rare. What would be an example of an exception where this doesn't apply to you?Peter: If you have some product or service where early on your customers either don't fully understand it, they can't use it as usefully as they can. Maybe some of the use cases for it don't emerge until later on, there might be some other complementary products or some changing behaviors. You might find people not just buying at the steady rate and dropping off, but there will be some cases—not just a person, but a whole cohort of people—will actually increase their purchasing for a while. That can happen, but it will level off and it will start to go down.Eventually, the Buy Till you Die will kick in, but sometimes it might take a while. If we started with that theory of going in, we might understate things is. There could be lots of other little twists there. I don't want to get too technical about it.For instance, it could be other changes in the marketplace itself, whether it's promotions that the company does, changes in competition, changes in the macroeconomy, that could make things a little bit less rigid than pure Buy Till you Die, and commercially, we can account for all of that. We have our basic core model, but then we can bring in some of these other situations and bells and whistles to make it just a bit more flexible, and sometimes it's very important to do that.Edward: Are there industries where it doesn't apply like church attendance or travel to Florida? Are there things where that radically different than just like purchasing all of Amazon or it doesn't work? What are those crazy things do?Peter: It's so funny that you mentioned church attendance because that is exactly the domain where this model was first dreamed up. I kid you not, Don Morrison who was a professor at Columbia at the time and then moved to UCLA. He's recently retired but is he just an interesting guy. He dreamed up this model literally while he was sitting in church in the Upper West Side in New York. He was looking at some empty pews and saying Mr. and Mrs. Smith, sit over there.They missed this week, but you know what, they're often sporadic about their attendance, so that's okay, but Mr. and Mrs. Jones, they usually sit over there and they never miss church. The fact that they're not here this week, gets me worried about it. I wonder if they're ever coming back. He actually dreamed up this model, and then did the math behind it in church, and then applied it to lots of other settings like that, whether it's nonprofits. Whether it's event attendance, all kinds of things, works really, really well there.Almost any setting where people are making repeated decisions to do something, whether there's a purchase involved or not. It might be watching a particular media like we've applied these models to Hulu. Whether it's visiting a website. Whether it is making a purchase. Whether it's posting social media content. It's just remarkable how well this simple model can characterize forecast behavior.Edward: Where is the resistance of the idea? You've been working on this stuff for decades, and yet I don't feel that it's like inundated the popular consciousness of business, even among experts in business and people who are the gurus of this stuff. Where's the resistance coming from?Peter: From lots of different sides, especially when we talk about marketing. Yesterday, we were talking about how I have this heightened respect for the finance people. Even though I'm a marketer, there's a lot of BS that goes on in marketing.When I bring these models forward, a lot of people will say, well, that might work well for company A, but our company is different, our practices are different, our customers are different, and besides, we're constantly being disrupted. We're constantly changing.Marketers will come up with all kinds of excuses not to have some formal, regular, predictable characterization of customer behavior. I can go to them and say, give me some data. I'll show you how well it works. I don't even, you know what, you only give me half the data. We'll hold out the other half, and we'll show you how well the forecasts work, and this is what I've been doing for decades, and they'll still push back.They'll say, okay, you know what, you can go talk to the nerds and analytics, but I have a business to run here. I need to focus on the brand. I need to focus on which celebrity we want for our Super Bowl ad, and they just don't want to be bothered with this technical stuff, but it wasn't till we commercialize it through Zodiac, which we spoke a little bit about yesterday.Especially now that we're starting to win over CFOs and other finance people who can see how well these models will help them do their job, and they are willing to trust models. They are willing to look at forecasts and not only accept, but look for regularities in the marketplace. That's been very, very, very helpful. Again, once the CFO accepts something, it makes it much easier to get the CMO on board as well, but sometimes they're still will be resistance. That's one of the reasons why I've been writing a lot besides founding the companies.One of the things that we haven't touched on is all of these kinds of books that I've been writing. All these books on customers' centricity, that are just basically a façade, a motivation, a Trojan horse, to get people to accept the models, to get people to care, to get people of want to run them, to get people to trust the outputs from them.Writing these books on customer centricity has also been very helpful, but again, sometimes companies will say, okay, okay, okay, I'm with you, how do we do this? Then we'll start to bring in the models, and then their eyes glaze over once again. It's hard. It's getting easier, but it's no guarantee.Edward: Can you give some examples of why it matters? Now I have these models, the models predict my future customer purchases far more accurately than anything before. My lifetime value of my customers could be different now. What does it actually change? Now I'm a CMO running my business, and I'm trying to figure out my next Super bowl ad. What is it going to change and what I'm actually doing on a day to day basis?Peter: Yeah. There are some enormous implications that pop right out of the models. One of them is summarized pretty well in the subtitle of my first book. The book is called Customer Centricity, which doesn't really mean anything, but the subtitle, Focus On The Right Customers For Strategic Advantage.There's really three messages there. Message number one is that not all customers are created equal, you better not talk about the customer, and you better not focus on the average customer because they're wildly different from each other. Thing number two is that the customers on the right tail of the distribution, they're not only more valuable than most of your customers, they're orders of magnitude more valuable. I mean, there's, wow, are they good? Wow, are they going to continue to be good? Thing number three is, there are ways that we can build our business around them. Let's really focus on those very, very valuable customers. Again, I'm talking about projected value. Not just historical value, although the two might line up with each other. Let's say what makes them different. How do they use and talk about our products differently from the average soso customers? What other services can we surround them with? How do we acquire more customers like them and what are we willing to pay to do so? If we can build our business around those really good customers, we can make more money in a sustainable, defendable, ethical way than just trying to play it right down the middle, saying, will our average customer find this product or message appealing? It's wildly different than the usual way that people go to market, but the models strongly support it. That's why I spent a lot of time racing, okay, you got the models fine, but let's really talk about these implications, and they really matter.It's been very gratifying to see a number of companies—I wish there were more—but a number of companies waking up smelling the lifetime value and starting to make decisions accordingly.Edward: Is that the opposite of what Byron Sharp would say? Because Byron Sharp says, I think that your loyalty is effectively a function of your market share, and the way to get more loyal customers is just to get more customers and some percentage will be loyal. As you get more market share, your loyalty increases, and your double jeopardy law applies. Do you argue against that or is it a supplement to that?Peter: It's a supplement. I'm glad you phrase it that way because pretty much everything that Byron Sharp, and of course, his original role model Andrew Ehrenberg said, 90% of that stuff is correct. Even there, it's going against the grain of conventional wisdom.I am just adding an extra layer on top of it. I agree with the notions that you just described, the double jeopardy law, the duplication of purchase law. If your listeners aren't familiar with it, and that means that they're not listening to you enough, because I know you do a good job of talking about it.Byron and company don't go quite far enough. I mean that in two ways. Number one, they assume that the models that they build, the fancy word for them would be the Dirichlet Multinomial Model. They assume that it's stationary. They assume that it's static. They assume that yes, there's the heterogeneity, but people don't change over time, and they do. They do in the way that we've been describing, Buy Till you Die, that there will be some non-stationary.There will be some worsening of customers, and it's important to capture that. When we add that extra layer in, it does not take away from double jeopardy, it just adds another light to it. Here's the other part is that, again, Byron and company acknowledge that customers are heterogeneous, but they refuse to acknowledge that some of those customers in the right tail are so, so, so, so, so good that if we put a little bit of extra attention on them, that we can do better than just trying to be everybody's best friend. All these things fit together, and I could get into lots more technical detail with it. Again, I believe everything that Byron says but he's leaving money on the table, by not allowing behavior change over time, and by not fully exploiting heterogeneity as much as I do. His points about, you still need to focus on mass marketing, and you still need to come up with products that are broadly appealing, I actually do believe all of that stuff. It's just that we want to put a disproportionate amount of attention for the care feeding and acquisition of those extra special customers.Edward: I think I've totally bought in on to the acquisition side of things. I think more acquisition is always great. My concern a little bit is about you have these customers who are really, really, really good customers for you already. To go and give them additional incentives to go and buy more, at a certain point, the really good customers are almost spending all their wallets within the category with you already. They're already super loyal. How do you shift them to become even more loyal? Am I missing the point?Peter: I got two words for you. First of all, and I never said the word incentives. That's your word, not mine. We got to find other ways to be crass about it, to squeeze more money out of them. Here are my two words, premium services. It's as simple as that.You think about something like a LinkedIn premium. At first, there was a lot of pushback about a lot of the features and functions of LinkedIn premium offered. Folks at LinkedIn were saying, well, man, most of our customers don't want that stuff. Why should we offer it?Well, the fact is, there are those right tail customers who are so good and use you so much, and use you so differently than everybody else. If we can come up with products and services that meet their fairly idiosyncratic needs and get them to pay for them, then we can make more money than just trying to sell them the same stuff over and over and over.I look at something like Twitter. I'm a big power user of Twitter. I know you are, too. There's no question that I would pay $10 a month for all kinds of features and functions that most people couldn't care less about, to edit my tweets, to have more control over my timeline, to have more visibility, and whatever. There's a whole bunch of things that power users would want to use, but companies like Twitter, Facebook, and so many others are just too chickenshit to go out there and make these premium services a priority.Jack Dorsey has made some noise about it recently but gets to it. That your heavy users want to pay more money, as long as they're getting good value for it. I think that's the key. It's not just giving them incentives. It's not giving them freebies, because you're right. They're going to buy from you anyway. It's getting to pay for more stuff that most customers wouldn't want.Edward: Is the opportunity more in a product than it is in marketing? It should be helping to product team more than the marketing team?Peter: It's a little bit of both. There's no doubt that we need to come up with products and services that are uniquely appealing to those customers will help us acquire more like them, but it is also in the messaging.Instead of just going to an ad agency and saying, hey, ad agency, come up with a fun ad. I look at what some companies doing in my favorite company on these lines would be EA, the game company, Electronic Arts. They will look at their most valuable customers every day, by the way. They're updating lifetime value for every single one of their multi-billion customers around the world. They'll look at the most valuable ones and say let's look at how they're playing a certain game. Whether it's Battlefield, Madden Football, or SimCity, and let's find out how our power users are using the game, talking about the game, what things they're doing in the game, and let's feature those kinds of aspects in our next set of ads.Let's change our messaging as well, to make other customers aware of some of these features and some of these uses because maybe they'll find that appealing, or maybe it will help us acquire new customers, who will then become power users themselves.There are ways to take some of these forward-looking metrics and models and use them in messaging as well, but you're right. It is more about either developing products and services or partnering with other firms. Maybe we won't even make any money on it, but if we can go to our best customers and say, we're going to surround you with all of these different sources of value, we're going to build a whole ecosystem for you. That's the way to lock them in and acquire more like them.Edward: Can we do most of that without your models? I imagine most marketers know who their best customers are, or they can find that out fairly simply without a great deal of math. And then once they know who their best customers are, they can then go and build products and services for them. They can go try to acquire more of those customers. At what point do they need to have a Buy Till you Die model to do that?Peter: It's an excellent point and the answer is yes. Let me elaborate. I'm so obsessed with these models, not only because of their practical value but even just because of their mathy elegance. That maybe I get into the model too much, and I used to really believe as I was writing the books and founding Zodiac that I can just give you the CLV magic wand, that money will just come raining down from the sky.You're right that the models are just a means to an end, and you can actually come up with some decent proxies for lifetime value. It might be based on historical value, it might be based on something like Net Promoter Score.There could be all kinds of proxies that aren't quite as accurate, aren't as predictive, aren't as precise as the models themselves, but they still do a pretty good job of sorting out who the good customers are from the not so good ones.The harder part is, first of all, just to look for that. It's just to say that's what we got to do is to sort our customers out. To develop the insights, the capabilities, the organization, the corporate culture, to allow us to do all the things that I was just talking about a minute ago. That's the hard part, and absolutely, you could get away with some imperfect proxies of lifetime value, as long as you have the capability to do all the other stuff that I mentioned before.You're right. You don't necessarily start with the models. You start with the mindset, you start with the tactics. You start with the organization and the messaging, and then once you're comfortable that you can do that, okay. Now let's bring the models in.Edward: To refine it and make it better. If you're a CMO, and you're looking to make initial steps to move in this direction, because, again, at any large organization, we know that trying to change radically is very difficult. What's the Trojan horse to get this thing started?Peter: Yes. I come in lots of different ways. I mentioned the books before, so let's start the sea level, and say the sky is falling, you're doomed to fail. It's going to be an utter catastrophe unless you repent and follow me. I'm overstating a little bit there, but this basically says there are fundamentally different strategies that you haven't thought about before. They're going to really celebrate the heterogeneity of your customers that can help you make more money. Let's start trying a big picture, like what are the limitations of traditional growth strategies? What are the windows to some of these new ones?There's all that and then there's the data. Again, I've glorified the models maybe too much. I'm in the process of writing my brand new book, with my partner in crime, Bruce Hardy, and yet a new partner in crime Michael Ross, interesting guys. This new book is going to be called The Customer Base Audit: The first step on the journey to customer's centricity. Before we have any models, before we have any forecasts, before we look forward at all, let's just look at our historical data, stuff that's right there at our fingertips. To understand a lot of these ideas that I've been talking about, about how customers differ from each other, about how they differ over time and about how they differ from each other and how they differ over time.Let's take a look back and just understand the basic patterns, but do so in a way that's both simple, but also very sea level motivating. Let's just get you to appreciate the goal that's in them their hills and to really motivate the strategies, the models, and all that thing.I'm coming at it every which way. Whether it's looking at historical data, whether it's writing books, whether it's focusing on finance, whether it's looking at other bizarre use cases of the models, I'm coming at it from every angle, eventually hoping that the message gets through and that the company says, you know what, let's try it out. Again, it's a long, long road ahead, but it's been working reasonably well over the last few years.Edward: When is that book going to be up here?Peter: Well, we're about halfway done with it. Actually, I just sent a revised proposal to my publisher, Wharton School Press. Sometimes, I'm going to guess, the middle of 2021, but then if any of your listeners are interested, I could probably send at least a sneak preview, a quick overview or even a sample table of contents, because we're really interested in these ideas, and the way that it really helped us build a bridge, from the big broad, almost qualitative strategies, to the technical forward-looking models to really complete the whole picture.I think is going to really make a difference, and this is, by the way, is the first place I've spoken about it. You're getting an exclusive, and I hope people find it appealing.Edward: I hope so too. Thank you so much for being on the show today, Peter. Before you go, can you talk to me about your quake book? What book really changed the way you thought about the world, and you can't use one of your own.Peter: I wish it was some mathy kind of thing, and there's no doubt that some of the books, papers, or journals that I've read as a professor have helped me out. But one book that makes me say whoa, and then I go back and read again and again and again, it's going to sound really strange, is Breakfast of Champions by Kurt Vonnegut.I'm sure that a lot of your listeners might have seen that book years ago. Go back and read that book again. It's astonishing, just the creativity, just the mind-blowing alternative worlds that Vonnegut creates. I found that so inspirational, just in how I tried to think that there are no limits, and now I think that I can be just a wild creative guy and get away with it. Besides the literal story there, there are so many lifelong metaphors that are taken from that book. I'm going to sound really strange, but I can't recommend that one enough.Edward: Thank you, Peter. This has been fantastic. I would love to have you on again.Peter: It's always a pleasure talking to you and I look forward to the next opportunity. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
This is a rare two-part set of free episodes of Marketing BS. My guest today is Peter Fader, professor of marketing at the Wharton School at University of Pennsylvania. Peter was one of my early marketing mentors and I loved this interview. In Part 1 we talk about Peter's career as a marketing academic and how he came to his signature theories around how one understands the value of a company's customer base. Tomorrow we will dive deeper into those theories.You can subscribe to the podcast in your player of choice here: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed (for premium episodes).TranscriptEdward: This is Marketing BS. My guest today is Wharton Professor, Peter Fader. I consider Peter one of my founding mentors for helping me understand how marketing really works. His most important contribution to marketing, in my opinion, is that you can model future customer purchases by assuming that your customer base is made up of a heterogeneous group of customers—each with their own intrinsic purchase rate and churn rate. And that those same models can be used in radically different businesses and industries to create extremely accurate predictions. Most importantly, because these predictions are accurate, it should influence what your actual actions are to grow your business sustainably.Today, we're going to talk about Peter's career and his intellectual path to this important idea. Tomorrow we'll dive into the idea itself and how it can be used for marketers in practice.Peter, can you start by talking a little bit about how you first started exploring the idea of Buy ‘Til You Die?Peter: Sure thing, my pleasure to do so. It's funny because that characterizes my career. That's what I'm most famous for. But (A) it's not my idea, and (B) it didn't even come to me until long after I was a full professor here at Wharton.I've been building all kinds of different models of customer behavior. How many customers will we acquire, how long will they stay, how many purchases will they make, and all that sort of thing. All the time looking at different data sets, thinking about different business settings, and saying, what would be a story? What would be a model that could capture and then project that kind of behavior?Back in 2001—again, I had been a professor here for 14 years already—I was building a model to capture a phenomenon that we see all the time. They did a customer-slow-down as they gained tenure with the company. It's pretty universal. I built a bespoke model to capture that and it was good, it was fine. I got the thing published. But along the way, one of their viewers was saying, you want to benchmark your model against this Buy ‘Til You Die model. Something that was invented back in 1987. But it was really technical, it was really obscured, so I thought it was an unfair request.I went to the editor of the journal and said, don't make me do that. Don't make me benchmarking that old obscure thing. And the editor agreed that I didn't have to. But I wasn't sure he would. I actually did benchmark the models that I was developing against these older ones and found that the old ones were much, much better.It doesn't show up in that paper. I then decided to devote the rest of my life, or at least the next 18 plus years, to exploring that other model—Buy 'Til You Die. Why it's so good, different variations of it, different applications for it, different motivations, and different managerial stories around it. That's basically all I've been doing since then. Taking someone else's model and running with it, calling attention to it, and finding some reasonable success with it.Edward: When did you realize that it was close to a fundamental law and not something that just might explain some of the data some of the time?Peter: Because I took it and started applying it to lots of other data sets. Again, this was more out of curiosity than necessity. That's just what we do as scholars which is just try things out. I wasn't only looking at the breadth of applications, I was looking at the robustness even for any one application. The idea that we don't have to have a long data set, and even if we have a shorter and shorter data set, if there is missing data, or if we don't have the same inputs that we get pretty much the same results.It started convincing me that this is more than just a cute model. It started convincing me that this is actually reality. I know that it's not—and I'm going to lose all credibility with you and your listeners here—but I'd like to make an analogy between this. Brace yourself—the theory of relativity. We all view that the theory of relativity, E=mc2, and all that stuff, we treat it as if it's true. It's not. It's just a theory. It's just a model. But the thing is it's so robust and explained so many different phenomena, even phenomena that weren't observable 100 years ago when Einstein was putting these ideas out there. But we just keep seeing it “proven” over and over and over again that we just treat it as truth.Now, I don't want to say that these BTYD models have anywhere near the implications, the importance, the cosmic explanations as relativity. But I think they're similarly robust and people would just be better off viewing them as if they were true instead of spending so much time pushing back and saying why their situation is different, why the implications don't apply, and why the world is changing. Let's just accept it as truth and our life as managers would be much easier and much more successful.Edward: But I want to go back a little bit to the path that got you here. I have a theory that things people do when they're 12-14 years old affect them for their entire lives. Where were you passionate about at that age? How did those things affect your later career?Peter: Oh my goodness. Wow, a bunch of different things, all really nerdy. The one that was most normal would have been baseball. At that time—I'm embarrassed to admit this, you're getting all this bad stuff out of me, Ed—I was a huge Yankee fan. I've repented since then. I've seen the folly of my ways. I was really, really, really into baseball statistics. Unfortunately, this was before anyone had heard of Bill James, sabermetrics, or Moneyball. All of that stuff was still years, years later. But I was almost—I don't want to say—inventing some of those kinds of things but I was thinking very much along those lines. How can we take the game of baseball and break it down into its underlying components, understand those things, and really focus on the underlying story rather than just the overall observable statistics? I was obsessed over that as I still am today. The other thing is kind of weird. I've always had an obsession with dollar bills with interesting serial numbers. Mom would come back from the grocery store and I would immediately go through her dollar bills. I would say, this one on a 0-100 scale, this one gets a 60. This one, maybe a 40. This one here, that's a 95. I'm going to keep that one. I was just always obsessed with interesting numbers, interesting serial numbers.Finally, when the whole internet thing started, I bought the domain name coolnumbers.com, and still own it today. That's all that site does is you put in any 8-digit number like a dollar bill serial number and it will tell you on a 0-100 scale how cool it is on my own quirky, arbitrary, don't even try to figure out universal coolness index. It's surprisingly popular. There's a lot of other nerdy people out there, or at least with too much time on their hands. That's the kind of stuff that I was doing. Just looking for patterns in data, but without any particular purpose or societal benefit. I'm really lucky that I finally found some meaningful purpose.Edward: I'm glad that you're working for good and not evil because I think on the website, you can enter your Social Security numbers. I'm sure people are doing that every day as well.Peter: Well, right now you can only put on 8-digit numbers. I'm waiting for some kind of undergrad or someone else. Maybe one of your listeners with too much time on their hands to help me flesh out cool numbers. You could deal with, let's say, a Social Security number, a 9-digit zip code, or whatever else. I got the algorithms all worked out. I just need someone to do all the coding.But thank goodness, I haven't wasted that much more time on it over the last 20 years. I had better things to do.Edward: You went to college for mathematics, but then you did a Ph.D. in marketing. Why did you switch?Peter: It wasn't my choice. There are very few people who say, Mommy, I want to be a marketing professor. It doesn't come up on career day when you're in middle school. It's an interesting story by itself because I indeed was just a solid math major. All I liked doing was crunching numbers, playing around with integrals, and all that sort of stuff. I didn't know what I would do for a living. I figured either end up as an actuary—calculating risks for insurance companies, I'd go to Wall Street, or maybe I'd go work for the NSA and break codes or whatever else.I was exploring all of these different options until this one professor, this marketing professor, her name is Leigh McAlister. She's still very active today at the University of Texas now, not MIT where I first met her. She came to me one day back in 1982 and said, you ought to be a marketing professor. You ought to get your Ph.D. in marketing. I looked at her and said, you ought to get your head checked because I'm a math guy, I'm not going into marketing. But she laid out this vision—again, keep in mind this was 1982, that's like 500 years ago.Edward: That's before finance was even getting into mathematics, let alone marketing.Peter: But she laid out this picture of what marketing would become. She was exactly right. That there will come a day when we'll be able to tag and track individual customers, know what they're doing, and then get some sense of which message we should send to which customer at which time. We're going to need rock-solid math underneath all that to figure it out, to make these decisions, and to evaluate those decisions. I didn't believe her, but she was very persuasive and she forced me to get a Ph.D. She literally—I'm not exaggerating—forced me to take this job offer at Wharton. I had offers from lots of other good schools, but she said, “Wharton is the place for you. It will have the people, the resources, the culture to let you pursue your quantitative passions in this domain.” And here I am. Now, this is year 34 on the faculty, calling her up every 6 months or so, saying thank you, thank you, thank you. She did change my life by pushing me in a direction that, again, I would have never imagined, and even actively resisted at that time. But boy was she right on every one of these dimensions. My whole life is just paying it forward to her in every way possible.Edward: If you hadn't met her, where do you think you would have ended up?Peter: Either a Wall Street firm or again maybe an actuarial firm. I took the first bunch of exams that actuaries take. I did an internship with an insurance company. I could see that there was some alignment there, but at the same time, it's not an industry that lends itself to creativity.I want to come up with new models, new explanations, new stories, just new methods. Whereas in insurance, even on Wall Street, and most of these other domains, it's once you have the way of doing things. It's just shut up and do it. I would have ended up doing one of those kinds of things. Maybe I would have been happy, who knows? I like to make myself happy no matter what's going on.But nothing could make me happier than the path that I followed. To have the colleagues, the resources, the incentives to come up with new stuff, and then brilliant students, including people like yourself who have taken some of those ideas and run with them, whether in academic directions or in commercial directions. I've just been super lucky to ride their coattails academically and commercially to find success both ways.Edward: Long before Buy ‘Til You Die, your first significant research was into strategies in a generalized prisoner's dilemma. What exactly did you find?Peter: Wow. That's a blast from the past. My dissertation at MIT—very few people know this because I tend to focus on all these predictive models of customer behavior and so on. But my dissertation couldn't have been more different.Indeed, I was looking at the prisoner's dilemma. I'm assuming that many of your listeners are familiar with it already. If not, they can search for it. There's so much out there on it. There's a lot of people who have been trying to “solve the prisoner's dilemma,” coming up with strategies that would be very effective in this very simple two by two game. Do I take the temptation to rat out that person, cut-price, or do the nasty action; or will I be good?The problem with the basic prisoner's dilemma, as they just implied, is that it has two players—me against you, and only have two alternatives because each of us does the aggressive tactic or the kind of nice tactic. Solving it, in that case, is fine but not very practical because in the real world, there's going to be lots of other complications, and let's just focus on two of them.Number one, there's going to be multiple players out there. There's going to be three or more firms. In fact, just moving from two to three is a giant leap forward because all of a sudden, if person number three does the nasty thing, what do I do? Do I wait for you—the nice guy, or do I respond to the nasty one? It's very, very complicated and we start getting all confused because if I react to him, then you react to me, and you get into this downward spiral.Number two, there can be multiple alternatives. Not just do you do the thing or not, but it can be shades of gray. You can be setting prices or discounts or even oil output levels if you think about OPEC. The generalized prisoner's dilemma that I put forth had a continuous range of alternatives. It was a price-setting and three players. It generalized, it built upon all the basic ideas of the textbook, two by two prisoner's dilemma. But it added all kinds of interesting complications, yet it still lent itself to some surprisingly robust strategies. Strategies that I explored in my dissertation. We've seen an interesting range of examples in business, in sports, and in life itself, where some of these strategies do tend to play out and lead to effective outcomes.Edward: In addition to your research, you've co-founded a few companies. Talk to me about Zodiac and how that happened.Peter: This goes right back to something I was saying a few minutes ago, which is riding the coattails of brilliant students both in the academic direction as well as the commercial. It's building out this Buy ‘Til You Die model, and they're really good. They worked really well. But most of the time, I was either just working on academic stuff to try to come up with new tweaks of them or just going to companies and trying to give them the academic version saying, here you ought to use this. Here, this model is good for you. Here's the code. Here's the spreadsheet. Here's the technical note. Here are some case studies. But the problem is, companies either found it a little bit too academic, or the kinds of data they were looking at was just so messy, so complex, or so large that the academic versions just weren't quite right for them. Back in late 2014, I had a conversation with one of my brilliant undergraduates. He basically had some ideas to make the models much more practical—to be able to run faster, to be able to run just much more efficiently. Brought in a couple of other folks, and we founded this company. First, we called it CLV Metrics—Customer Lifetime Value Metrics—kind of a lame name. And then we decided, you know what, we're getting such good traction on it. Let's make it real. We brought in some venture capital money. We started hiring a whole team. We changed the name to Zodiac, and it was a wonderful success.We work with a wide variety of firms. Whether it's retailers, travel and hospitality, telcos, gaming, pharmaceuticals, or lots of different B2B applications and different kinds of services. Just applying this Buy ‘Til You Die model in a wide range of scenarios and finding all kinds of success, all kinds of interesting tactical-use cases—it was really great. But of course, talking in the past tense, because in 2018 one of our clients came along and said, we want it all, and that client was Nike. We sold to Nike in March 2018, which again, was a wonderful outcome by itself, but also a tremendous validation for the usefulness, not just the academic interest in this, but the commercial usefulness of the models.Edward: We're going to go more into the usefulness of it tomorrow on our second podcast. You later, though, founded another company called Theta Equity Partners and this was different from Zodiac, correct?Peter: Yes and no. On one hand, there's the no part which is, at the very core, this very similar set of models, this Buy ‘Til You Die model. But the motivation and the main use case couldn't be more different. Back in the Zodiac days, besides working with lots of different companies that I described before, one of our clients was a private equity firm. They weren't that interested in figuring out which message to send to which customer. All they wanted to do was to say, listen, can you come up with the projected value of each and every customer, add all that stuff up, and tell us that number because we're thinking of buying that digitally native women's cosmetics company.We figured the best way to judge its valuation isn't through the usual top-down multiple approach, but it's from the bottom-up—how many customers will we acquire, how long will they stay, how much will they spend. That's what we did—the idea of customer-based corporate valuation. After we sold Zodiac to Nike along with one of my Zodiac co-founders, Dan McCarthy, we co-founded Theta Equity Partners. That's all we're doing is customer-based corporate valuation, working with private equity firms, family offices. I'm working with a lot of companies directly just to help them understand, unlock, and fully leverage all of that customer value. It's less about the marketer. It's just less about the tactics. It's more about finance, valuation, corporate governance, big strategic decisions, and again, it's been great. The models work well. It's probably an even more receptive audience—the finance people than the marketing people. Once you go over the finance people, then it becomes very easy to win over the marketing people as well.Edward: It's interesting, 38 years or so after you left finance to go into marketing, you're right back where you started with finance.Peter: I have to admit, I feel like a fish out of water because it's not really my home. It's not my core domain. I've been learning a lot over these last couple of years and I have tremendous respect for the people in finance and more and more every day. I can bring them a tool that they don't have through these models and through these perspectives. But the ways that they deploy it, some of these are very clever, smart, resourceful things they do, you could see why they are the big dog in most organizations and why people respect, maybe even fear finance much more than they do marketing. Because my objective is to bring them together and to get marketing and finance on the same level using the same models for strategic as well as tactical purposes, and we'll talk more about that.Edward: Peter,what was the biggest failure point in your career? What's the biggest mistake that you made?Peter: There's a difference between failure and mistakes. Let me talk about one of each. Maybe the saddest moment in my career—the one night I literally cried myself to sleep—was losing the Napster case. As I've said many times now, I'm interested in a broad variety of applications. I spent a lot of time in the ‘90s and early 2000s working with or maybe fighting with the music industry—there are amazingly good patterns there. It's very predictable. It's one of the better sectors if you want to apply the models, but it's a sector where they don't apply the models.Long story short, I got caught up in the Napster case, the original Napster, an original file sharing service that changed everything. I was with the good guys. Napster is trying to make the case why that file sharing service is the greatest possible thing for the music industry and making that case why it's good and why it will bring in lots of money. I wrote this whole long statement, did all this research about it back in the glorious summer of 2000, but Judge Marilyn Hall Patel, she pretty much rejected everything I said. She basically said, the idea that file-sharing could be good for the industry is preposterous and any research that would draw such a conclusion must be gravely flawed. I think those are her exact words.Edward: Your conclusion was wrong regardless of your methods.Peter: Exactly right. In the end, it didn't really matter. The reason why Napster was shut down, it had nothing to do with whether it hurt or helped the industry. But the fact is, it was against the law. The law might be stupid, that's a whole other question, so it was shut down. But I took it personally. I felt that this was a true failure on my part. I let down the revolution. It wasn't a mistake. It's just that I was betting on the wrong horse.Edward: How'd that changed things? Did you change your strategies going forward because of that event?Peter: Not really. It just made me want to fight harder. It's actually interesting. I said, look, this is just wrong. We need to show the industry that they are making a terrible mistake. In the early 2000s, I spent a lot of time banging on the door of the music industry, saying, listen, let's go after this together. Let's do the research to show the circumstances under which file-sharing helps, hurts, or is neutral. Let's really understand it. Let's understand the business implications. Let's not just stop at music. Let's talk about TV, movies, publishing, and basically all areas of media and entertainment.I set up a Research Center at Wharton for the Wharton Media & Entertainment Initiative. That went nowhere. Then we got a donation to set up the Wharton Interactive Media Initiative, and that was very successful. That then morphed into the Wharton Customer Analytics Initiative, which continues to flourish today. I spent a lot of time expanding on it. One might say pivoting from the work in the music industry to try to make a difference with models and understanding of customer data. It's just that the music industry and entertainment, in general, weren't all that receptive. It's just a matter of shopping these ideas and methods around to find a more receptive audience, which we did find a lot of success with.Edward: Tell me about the iPhone.Peter: Yeah, that was a mistake. A little bit of arrogance on my part. I was big into the BlackBerry. I mean that was a transformative device. Wow. When the iPhone came along, I staked out. I went way out on a limb staking out exactly the wrong turf saying, this device will just never catch on. Look at just how different it is. Look at all the features of a BlackBerry that it lacks. I'm never shy about my opinions. Usually, they're based more on data than just pure hunches. This case, pure hunch, wrong hunch, and I basically said that this is going to go down in history as a colossal failure. And again, I wasn't shy about it.When the iPhone celebrated its 10th anniversary of just a ginormous success a couple of years ago, people went out and found some of these—the incredibly dumb things that I said as it was being launched. I'll admit it. I'm big enough to acknowledge my mistakes. That's far from the only one. But probably the one that I got in—I don't want to say trouble, there's no trouble there—the most s**t for and entirely well-deserved. Even though I'm still not a big fan of Apple—I literally have never owned a single Apple device. Again, not that I'm against them but I just like buttons. I like to press things, whatever. I've learned better than to bet against them.Edward: This has been fantastic. We're going to come back again tomorrow to talk more about Buy ‘Til You Die. Thank you so much.Peter: Sure thing. It's always good talking to you. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
My guest today is Matthew Quale, president of Bask Bank (the only bank to offer American Airlines Loyalty Points in lieu of interest). This is Part 1 of the interview where we dive into Matt's career and path to CMO. Tomorrow we will explore how he grew the Bask business.As a subscriber-only podcast you will need to subscribe to the a private feed to get it in your podcast player. You only need to do this once. Simple instructions here.Transcript:Edward: My guest today is Matt Quale. Today we cover Matt's career and path to CMO. Princeton, General Mills, McKinsey, American Express, MetLife, and Brighthouse. Matt is now the president of Bask Bank and we're lucky to have him here today. Matt, many of my guests had a roundabout path to CMO but yours is more traditional than most. You started your career as a marketing assistant at General Mills. You took on progressive responsibility, but let's talk a little bit about the last two steps. First, you moved from a sales enablement role at American Express to running all the marketing functions at MetLife, how did you do that?Matt: What's interesting is you really do need to think about your career progression and plot out what are the pieces that you need. To your point at a very traditional marketing career, I've done a lot of stuff, print advertising, TV advertising, et cetera. As I was talking to my mentors, one of the things they talk about is you really haven't done enough technology. An opportunity came up with American Express to run sales enablement for the merchant business that included managing the Salesforce instance and gave me access to a tech team. When I think about what really drives the market today, I think about a three-legged stool. I think about data and analytics, I think about core creative, but then, I think about delivery through technology.For me, I felt good about my data and analytics from my time in consulting, I had the core creative. What I didn't have was technology and so much of marketing, particularly during the time on financial services, is that interaction between marketing and sales. For myself, one thing I always talk about is that marketing is a multiplier on sales activities. Having access to the CRM and having access to that tech team was really important for me in terms of actually building that tech muscle because digital is just going to be bigger and bigger going forward.Edward: Did you have the marketing skills to run all of the marketing prior to AmEx? I'm getting to the fact of why did MetLife take a person who is doing sales enablement and put him in charge of everything?Matt: Yeah, and also somebody who is in a different industry, who was an insurance person. Much of this also gets back to relationships and making sure that you are building a legacy, performance, and credibility. I had a boss at American Express who left for MetLife. He called me up and said hey, there's this great opportunity here at Met. He was really the one who introduced me to the opportunity and vouched for not only my market credentials but more of the fact that I was a strategic thinker and a transformation agent. As I went and interviewed with MetLife, who was really coming across was, they weren't looking for a traditional marketer. They've done that. They saw plenty of candidates who are in the industry. They're looking for somebody to really transform the marketing organization, in a lot of ways making more digital. For myself, the heavy technology and the heavy sales enablement played a really big role for them and something that they're very excited about.Edward: How did you develop those other skills? Because you're in charge of more than just moving them digitally and doing sales enablement. Things like branding and performance marketing and all the other things you weren't doing before, how did you pick up those skills?Matt: I guess when you actually take a look at a lot of my career, a lot of branding in places like General Mills. When you're working on brands like Cheerios and Kix, I've done a lot of repositioning work. Obviously, when I was with McKinsey, part of the marketing practice, doing a lot of marketing projects across a wide swath, but at the same time, oftentimes you are doing new things. I'd say no matter who you are, getting that next job, oftentimes your skills you don't have. That's really around building a team. I'll be the first person to say that I don't know every single piece of marketing, I don't have every single skill set, but what I can do is assemble a good team. That team really includes both your agencies as well as your internal folks.Oftentimes, what I'm trying to do is I'm trying to hire people who are better at things than I am. For example, even some of the core creative, I ended up hiring some great folks out of P&G and really my other brand came from P&G. I said, look I want to be my creative eyes. I think you're better at this than I am. One of the things I always try and do is trying to figure out where my weaknesses are and how do I build from there.Edward: For MetLife, you became the CMO of Brighthouse. At MetLife, you still reported to a CMO who controlled Snoopy and the blimps, but in Brighthouse, you ran the whole show.Matt: Yeah, I was dot and line at the world of CMO organization for Met. At Brighthouse, we were spin-offs. We talk about one of the largest spin-offs in history. We had $240 billion of assets under management. You're right. I mean, I'm sure there are definitely some moments where the president who became the CEO of Brighthouse said, “Do you need to go out and hire a CMO from someplace else, or do I have the talent internally?”Much about this—I think for your listeners of the podcast—is that a lot of this is about performance over time and making sure you're somebody who's seen as a good team player, somebody who's reliable, and somebody who's delivered. When you do that, people are willing to give you the opportunity for the next step up.Edward: Okay, I want to go back a little bit on your path to getting there. As regular listeners know, I have a theory that things that happen to people when they're 12–14 affect them their entire lives. What were you passionate about at that age?Matt: I think what's interesting is for me, it probably goes back even further. My mother owned an advertising agency and my father was a financial adviser. The odds I'd be doing marketing for financial service firms are probably pretty high. But I think about the things I think about at 12 or 14. This is what came to me in my mind was both doing a lot of strategy games—Risk, Axis and Allies, Roman Conquest—but also a lot of fantasy baseball. These are back in the days where my friends and I would get the box score and every week somebody had to hand calculate everybody's scores. We rotated around who had to calculate across the box scores and give the scores.It was really just this idea of looking at baseball in a different way and thinking about performance in a different way. Often, you had these traditional stats that probably didn't really measure the impact of the players. For myself, I think as I've continued to move into marketing, I've certainly been the kind of person who said, how can we actually make sure this is having an impact? How can we make sure this is having a measurable impact on revenue? I think that's really been something.And then obviously the strategy. All these strategy games are very much about how do you allocate your resources in the most efficient way possible, where do you want to enter or exit that's going to be effective. Much of what you're doing in marketing is really making choices. You're making choices all the time and you need to be able to measure the impact of those choices.Edward: You went to the University of Princeton. How did you come out different than the way you went in?Matt: Well, I met my wife. Certainly, if I hadn't gone to Princeton, I wouldn't have met her. I think what's interesting about Princeton is you're surrounded by a really bright set of students who work incredibly hard. I think for myself, I really had to dig in. Going from high school to college (I think) was quite a shock in terms of both the workload and intensity. For myself, I really had to figure out a way to elevate and raise my game, and I felt good about that. I felt good about the fact that I was able to achieve and do well there. I think in a lot of ways, it taught me a little bit more about how to work even harder.Edward: What would happen if you hadn't gone to Princeton? Say you'd gone to a local regional school instead. How do you think your life and career would have been different?Matt: It is really, really so hard to know how it would have been different. I think I probably would have gone to some of the same places. But obviously, I talked about my wife, and I saw some of my best friends from university times. I think in a lot of ways it's about the relationships. I think I probably still would have pursued the same career in marketing, but certainly having companies like General Mills come to Princeton and recruit gives you a really good opportunity and knock that first job.Edward: Your first job was at General Mills in marketing. Were you looking for any sort of corporate job, or was marketing something you were looking for when you started your job search?Matt: That's funny because I did investment banking in the summer before senior year. The thing I felt about investing in banking was the kind of thing that anybody who sat in that seat was going to come up with the same set of answers. What I really liked about marketing was the choices you made. The choices you made for that brand were very distinct and unique. I think my path, in a long-range, has always been moving to that leadership position, moving to that P&L ownership position. Really, the question was what's the best way for me to go get there? You always want to play to your strengths and figure out where you're differentiated.For myself, even though CFO is probably the more traditional path to getting to CEO, my financial skills are mediocre at best. It was interesting being at business school, where I was pretty average in terms of finance, but things like marketing and strategy were really where I excelled and was able to differentiate myself. I always knew marketing was quite a better place for me to play because you want to play with your strengths.Edward: You left line roles after business school to join McKinsey. McKinsey is known for, among other things, doing a lot of PowerPoint presentations. How did that experience affect your later marketing career?Matt: I think what's interesting is, I really enjoyed wanting these different brands, but at the same time, it oftentimes is very micro. I wanted to take a position where you're taking a look at the company holistically and thinking about resource allocation, cross-functionally, not just within the confines of a single brand, and you're making a different set of strategic decisions. I think what was great about the McKinsey experience was it really teaches you how to think strategically, teaches you how to problem solve, and a lot of ways teaches you how to communicate.We talk about PowerPoint. PowerPoint is just a vehicle. When I work with my team, I'm a big fan of written documents. I don't care if it's Word. I don't care if it's PowerPoint. I don't care about email, but what I've always found is that anything written down ends up getting shared more broadly and also really makes people think. They have to think about what they're going to write down and you end up getting a better response. I've spent time at companies where the written word wasn't as big. It was more just about talking and people walked out of a meeting with a completely different view of what was accomplished versus everybody's lined up around a piece of paper, saying I agree with these words. You've got a lot more alignments.Edward: Amazon argues that you should do that on a Word document rather than a PowerPoint document. Do you have a strong opinion on that?Matt: I definitely use both. I think it depends on the kind of presentation you're doing. I had started moving probably more to a Word document for a pre-read than on the PowerPoint. What I find with PowerPoint is if you're making a bigger presentation, where you're projecting, I think PowerPoint is a lot more effective. The thing that I honestly also really like with PowerPoint is, I was always a big exec sum guy, and you can almost do the entire presentation off of the executive summary. But really, the executive summary is almost just a Word document.Most people don't want to go through all these pieces. When I was a consultant when I moved in and now I had consultants present to me, I'm like everybody else. Who wants to go through a 50-page PowerPoint presentation? You want to go through just a few key pages that are really critical and you want to have a conversation drive some decisions.Edward: After McKinsey, you focused on sales enablement at American Express. I often see a tension between marketing and sales organizations. Was that your experience?Matt: Absolutely. It's been interesting, some of the organizations I've come into where marketing and sales are just completely apart. The word I'd often use is there's contempt between the two organizations. Marketing is off in their silo working on brands, and sales up doing their thing thinking marketing's not helping them at all. I do think as a marketer, you need to take a step back, swallow your ego a little bit, and understand that you need to be customer-backed. Now, this depends very much on the category. I know we're going to talk about the last thing which is really direct-to-consumer, but when you're an organization that's more B2B, your salespeople are really your best channel, really your most effective channel. Instead of thinking about sales as a separate organization, think about sales as one more channel that you need to work with. Really getting the sales team running and working closely with marketing, you get a huge multiplier effect across those enterprises.Edward: How do you do that? How do you get sales and marketing working so well together that they feel like they're on the same team?Matt: What's interesting at Brighthouse is the sales guys are really, really started getting along marketing. What's interesting is when they're recruiting, salespeople say, marketing's our secret weapon. They would actually talk about marketing to go higher. I think the big thing for marketing is your job is to drive sales productivity. When they understand that all you're trying to do is candidly help them make more money, they are on board. Where we're very successful was launching pilots with sales and then putting it up in front. I always give an example and oftentimes, it's small tactics that work. Trigger-based emails. I talked a bit about how important the CRM is but one of the things that we did was build trigger-based email campaigns. I've never met the kind of guy who's going to say, you have to do this. Instead, I'm going to find a portion of the sales organization that is going to embrace what we're trying to do. We found a group of salespeople who are open. What we found when we did the test and measure was that those people using trigger-based campaigns were selling a lot more than those who didn't. Whenever we have the national sales meeting, I would get up and say, here are three different tactics. We actually put the sales organization in quartiles, those who used this the most versus those who used it the least. You can see those using the most made more money than those who didn't. You find pretty quickly that the sales organization starts embracing what you're doing. You really need to build, test, learn, create that case for a change, and then you go sell it through.Edward: Matt, what were your biggest failure points in your career? Where did things not go as expected?Matt: Much of those moments came oftentimes from external activity, where something happens to you that you're not expecting. When I was at American Express, I was in a strategy role. My leader left. They left the company. When that happened, they decided to shut down our organization. They said you know what? We've built this around the leader. The leader is gone. You guys are all going to be displaced. We got to go find new jobs in American Express. It's one of the things you're not expecting. I think my wife was pregnant at the time. You feel like you're doing good work. Really, what it made me reflect on was the importance of both your network, but also managing your career. A phrase my father-in-law would use was managing your career is as easy as PIE. PIE stands for performance, image, and exposure.Your performance can be great but if you don't have broad exposure across the rest of the organization, you leave yourself in a situation where one person leads, or some situation happens where you're not going to be in a good role. The team that AmEx had done good enough work that we had three offers that day going to a new role. Now, as part of the way we ended up in the sales enablement team. Part of the reason I talk about the team is that some people at AmEx are still working with me 10 years later. Really, what you want to do is you want to build a really good team of folk you work with.Edward: Matt, what are your productivity tricks? What do you do to be productive that most people don't do?Matt: For me, I spend less time thinking about my own productivity and more time thinking about the team's productivity. I think as you get more senior in your career, [...] start getting these organizations that are 100 plus, your productivity is pretty small compared to all those people you have working for you. I really think about three things and it's interesting, but it's very much from prioritization, consistency, and culture. What I've used to great success is OKRs. You're probably familiar with OKRs but laying out the OKRs, the objectives, and key results for people, it really helps people understand what you're prioritizing and what they should prioritize, so they're not wasting motion someplace else.Then, I use the word ‘consistency' a lot, and that is both strategic consistency and emotional consistency. What's interesting is, you can really whipsaw your team even inadvertently, like coming up with different ideas, and you need to let people finish things through. The worst thing for anybody is when they start-stop-start-stop. I remember a lot of times when I was a junior in my career somebody walking into my cube saying hey, we need to do the analysis on what happened in Florida with the hurricane. Your whole day is burned and shot. It's hard to get to those basic strategic objectives.The other thing is just emotional consistency. What's interesting is you hear from people, we didn't want to talk to so and so because we're worried they weren't in a good mood. When people feel safe and secure, and they're not worried about whether or not the boss is in a good mood, it really allows them to go thrive. That last piece then starts playing into culture as well.Edward: This has been fantastic. Thank you so much for your time. We're going to continue this tomorrow with a dive into your experience at Bask Bank. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
This is the weekly free edition of Marketing BS. Every week I share one piece premium of content from earlier in the week. This week I am sharing the Wednesday Interview. You can (and should!) subscribe to get all the content. Most members expense the subscription, or get it as part of my company wide offering.What you missed this week:* Monday: Essay on Reviews and Ratings. What really matters on collecting reviews, and the math behind “review gating” (i.e., only collecting reviews from satisfied customers)* Tuesday: Weekly briefing coving everything from the 230 hearings, Kazakhstan's marketing play, Interplanetary Law as a PR tool, FICO Score inflation, DoorDash white labeling, Commuting impact, Long Lived Institutions and more…* Wednesday/Thursday: An interview with Rob Singer, CMO of Remitly (Part 1 transcribed below)Coming next week:* Monday: An essay on why polling did not predict the election as well as was expected, and what that means for how to implement (or not) market research* Tuesday: Weekly briefing coving the ballot initiatives, Facebook employee survey, money's impact on changing opinions, Spotify's price discrimination, smart TVs, Walmart robots and more…* Wednesday/Thursday: An interview with Matthew Quale, president of Bask Bank - the only bank to offer American Airlines frequent flier miles for interest (instead of dollars). Really fascinating way to leverage a loyalty program.Subscribe now so you don't miss it!Today's interview is with Rob Singer, CMO of Remitly, the leading mobile-first global remittance company and former CMO at Ancestry.com.You can listen directly through the email, read the transcript, or subscribe through any standard podcast player. Subscribers who want to get access to premium episodes will need to subscribe to the a private feed to get it in their podcast player. You only need to do this once. Simple instructions here.TranscriptEdward: My guest today is Rob Singer. Today, we cover Rob's career and path to CMO—James Madison University, Charles Schwab, StubHub, ancestry.com. Rob is now CMO of Remitly, a leading mobile-first global remittances company that has raised over half a billion dollars in funding. We are lucky to have him here today.Rob, you started your career in credit risk management and then moved into marketing through the CRM function. Your first CMO was ancestry.com. Talk to me about how you got that first CMO role.Rob: I would say, I've taken one of the most unusual paths to becoming a CMO, and that I am at least the only CMO that I've met that has never actually done a true marketing function before. As you mentioned, I grew up in the world of credit risk management. As a math major coming out of school, I moved straight into the analytics function, and then as I moved from credit risk into marketing, it was really just ancillary into marketing. I actually didn't ever report up through the true marketing department.My focus was on analytics, business intelligence, data warehousing, and information management. I then moved into the world of CRM. It was just a logical progression as to where I was going into my career. I was running that at Bank of the West, and then I was hired into ancestry.com under a very similar role as the VP of CRM.The one thing that had always been interesting in my career though is that starting with StubHub, there was always a very large gap or void in the CMO's seat. When StubHub was bought by eBay, the current CMO, Mike James, of the company left. They had opened up the role of CMO. For the remaining two years that I was there, it was never filled.Ray Elias who ran acquisition, myself who was in charge of CRM, business intelligence, and analytics—we were essentially the co-CMOs that were holding down the fort until they hired a permanent CMO. We did that. I got a lot of exposure to the marketing world by being in that place. They never hired anybody. At two years post-acquisition, I left and then moved on to Bank of the West.Interestingly, Ray became the sole CMO and they just officially anointed him that role at that point. I went to Bank of the West, and just a couple months into my tenure there, the CMO of Bank of the West left. They went on an extensive search for that. By and large, as the most senior person in the department, I was the interim CMO. I was never even given that title, but I was the one that reported up into that seat. I was the one that was responsible for essentially managing that function there.When I moved into Ancestry and the same exact situation that happened with Josh, it was just a very natural thing for me to do to just assume a de facto leadership role within the context of the marketing department. After they had searched for a while, they realized that they just wanted to turn that over to me. That is ultimately how I ended up getting my first CMO role.Edward: Why do you think that landed on your lap rather than the other function heads? Why was it the head of CRM versus the head of paid search or the head of brand that was taking on that interim CMO position?Rob: That is a great question. It was one that I was also asking at the same time when they did. Honestly—and this is the one thing that I've found throughout my entire career is that—the reality is I feel like what I'm good at is being a leader. Leadership is something that I've always felt comfortable being in a leadership role. I like accountability. It had a lot less to do with direct skills and direct experience.My philosophy has always been to hire the best people that I can find. People that have gotten far more about their craft and I will ever even dream about knowing; and providing strategy, leadership, and the vision as to where we wanted to go. I think these companies, what they saw was the person that they wanted in the seat was the person that could set the right vision, the long-term strategy for the department. Even if this person didn't have the direct hands-on experience that could just jump in and bid on paid search for the rest of it.That has been the story of my career. I have moved forward simply by being willing to step into leadership roles, being willing to be extremely uncomfortable, and really just having a lot of trust and a lot of faith in my team knowing that we are a team and together we are going to deliver on these things. I think that CEOs—as they were looking at their certain situation—that was just something that they appreciated and they felt comfortable with.Edward: How are the other peers feeling about that? Because I'm sure most people—at least at that level—think of themselves as being able to lead and manage people. And effectively you're taking on that role not because you have better marketing skills, but because you are a better leader and manager.Rob: Also a great question and probably a much harder question for me to answer. I will say that I have—by and large—maintained incredibly good relationships with the peers that I was working with at that time. I love collaborating. I love teamwork. I think that has been really a hallmark of my approach in general. That I always, always have believed that a strong team that is in sync will always be a strong collection of individuals.I love sports analogies. I've always discussed that my approach has been—if you look at the NCAA tournament—I love to build those teams that are these small schools that most people haven't heard of, but they've got five seniors that have been playing together for four straight years, and they make these deep runs into the tournament because they know exactly what their role is. They know where their teammates are going to be versus these teams that have these one-and-done phenoms that come out.Throughout my life—whether it's work, sports, or anything else—I've always had that philosophy. I love being on teams. I love playing a role in teams. I have always built really good relationships and really strong foundations with the people that I've worked with.I think the other thing too—and I do want to be clear about this, so I don't come across incorrectly—I've never asked for any of the roles that I've moved up. In fact, when Tim called me and said, “Hey, have you actually thought about putting your hat in the ring to be the CMO here?” My answer was like, “No.” I had no interest in any of those things. I've never expressed interest in those things. I've never been driven by being promoted. I've never been asked for it, never looked for it.I think that people were literally just happy that one, the role was filled internally versus bringing somebody else in. I was a known [...] to them at the time. I think everybody knew that I wasn't gunning for the job. I wasn't trying to stab them in the back. I wasn't trying to do any of those things. I feel like what it did was it gained a fairly authentic level of trust. But I also think the one advantage I have—having not done any of the functions within marketing—is that nobody lost any of their autonomy. No one's ever lost any of their control.I have always looked to my leaders to lead, to own their function, and to drive and hold them accountable to that. Ultimately, I'm sure there was disappointment at not moving up, but nothing negative came out of it for them. I think that that was a big part of the change management.Edward: How do you manage a team when you've never run those functions before? I know part of it is trust them, but I imagine that if someone says, hey, trust these developers. Go and manage these developers. I don't know enough about engineering development that I would trust myself to be able to hold their feet to the fire. How do you oversee areas where you have not had any functional experience in?Rob: I think there's a couple of vectors against that. One, I do always lean back on and rely on the things that I do know. The one thing is I'm very data-driven. I grew up as an analyst. I then moved into business intelligence and information management. I can always lean back on that. I'm very good at looking at numbers. I'm very good at assessing situations that way, and I'm very good at asking questions that the data put in front of me.Minimally, I can ask questions about what I'm seeing. If you think about it, even though I wasn't in the marketing department and doing those functions, my job was the major partner to them and providing the data and the analytics. In many ways, some of the frameworks around a strategy that we needed as a company to be successful. One, I've always been able to lean back on that.Then two, the best advice I ever got was from Tim Sullivan. He was the CEO of Ancestry. He could tell I was pretty nervous because he even asked me if I wanted the role and I said, no. He said, “Look, here's my advice. If you think of yourself as the head of HR for marketing, you're going to crush this thing. That's how you should always be thinking of yourself.” It just so resonated with me because it put into words, something I had always been in my head in my approach, but I'd never really thought about it that way.I know what I know. More importantly, I know what I don't know. I know what I'm not good at. I over-index where I hire into those areas. I spend a lot of my time building out the team and making sure that we're bringing in the right people so that I can ask them the right questions. But ultimately, at the end of the day, I'm always just awed by the people that I work with. It's hard for me to even put into words, but the people that are on my team are so good at what they do.It is just awe-inspiring for me to work with them. And because of that, it gives me the ability to lean back on what I know I do well, which is to build a team, provide a vision, aim for the stars, and really think about where can we go to make the crazy seem real. But at the same time, I can always lean back and say, okay, I think I'm seeing an issue here, but knowing that I can ask the questions and get really good answers from the team.Edward: Where do you think you developed that skill set? I don't even know if it's a skill set. That mental space of being able to go and get into the details, dive into the data, ask the questions, and still set the vision, create the leadership, and drive your people. Where did that come from?Rob: One, on the analytics side of things, part of it is just I can always go back and thank mom and dad. My dad was a math teacher and my mom was an accountant. The math gene runs deep within me. It's funny when I look at my journey through college and what I thought I wanted to do. I went in as a physics major thinking I wanted to get into physics. Then I moved into chemistry.What I realized is that, no, what I love is math. The application and all the rest of it weren't actually working for me. Going into the labs didn't work. But once I switched into being a math major, I was so happy. I was in my happy place. I'll never know if this ended up being the right decision or not.All I wanted to do was get my Ph.D. in theoretical math. But due to my financial situation—everything pressed so that I took a job right out. I said I'm just going to go work for a couple of years so I can afford to go back to grad school, then I never did. But I love math. It's always just been something that's been rooted. I feel like I got a really good education in that.But then coming out of school and immediately being able to put that to work and building predictive forecast models within credit risk management and moving that forward, I feel like I've gotten just a really good training in that. It's just the way my brain works. I was wired that way when I came out to think analytically and be able to look at data that way.The other facets of it, I also am going to put some genetics. I feel like my dad is one of those. I've watched him teach. I've watched him coach. He's a natural leader. I had a very good mentor just watching what he did. For me, it actually started when I was young and being in sports. I was a point guard in basketball. You would never know by looking at me. I stopped growing when I was in seventh grade. I was the quarterback on the football team. I was a basketball player, and then I stopped.I started to move again to the other sports that size was less of an issue because I did stop growing after that. But what I really just discovered was I loved that facet, and I think I took a lot of what I learned being in sports, being an athlete. Especially when I went to JMU and I was in college, I found a lot of outlets that enabled me to really learn about my leadership style, allowing myself to just learn my way into it.I've always sought to make myself uncomfortable. I've always found that I'm at my best when I'm nervous, when I'm harried, and when I feel like I'm drowning a little bit. I think I've just naturally found myself into those situations, and it's parlayed itself into what it's led itself into.Edward: What were the biggest failure points in your career? Where did things not go as expected?Rob: How much time do you have? I can fill the space with that. Oh, wow. I love this question by the way, and I apologize for soapboxing. If you go back and just delete all this, I totally get it. It's so funny for me—especially in corporate America—that everything is about showcasing what you do well. Everyone is like, here's what I did that was amazing. Here's what I did that helped inflect the [...] when I'm growing. It makes sense, right?. We're all trying to move up. Everyone wants to get a raise. Everyone's scared of losing their jobs. It's all about showcasing what you're good at.But the simple reality is step-function changes in companies and in people, and everything else happens when you fail—if you learn from it. You fail, you learn, and you go. We have a cultural value at Remily. Well, we have two of them: aim for the stars, and don't be afraid to fail. I love those. I actually think that the biggest part of my job and the biggest thing that I look at for companies is do we have a culture that encourages people to take major risks, knowing that if they fail, it's great. Just tell us what you learned and how are we going to do it better next time.I have quite a few failures and maybe this is just my way of reconciling it. I would say, one of the biggest ones that we made was certainly at Ancestry. This is even fairly early-ish on in my tenure as a CMO, so I was definitely not feeling very good about this one.TV was our big workhorse. That was our biggest channel on Ancestry. We're about 70% of our media span, which was a significant media span went into TV. It was just a great medium for us to get our message out. We're building category as well as really trying to inspire people to come in and do a hard hobby. That was our big channel, and we were pretty dialed in with our media mix.We knew who our target market was. We had an agency that understood who our market was. We knew what worked. We had a great attribution model, and we could easily steady as she goes with it. It was really incrementality that we were always looking for it on TV. There were small changes and tweaks that would enable things to get better. But I really wanted to see if there was a way to expand our market, become more relevant to a much broader base of people, expand our demographic.We took some chances before the upfront so that we could learn as we headed into the upfronts. For those of you that haven't bought TV upfronts or when you buy your media a year ahead of time, which locks you into your media bias in many ways. But it's the way to save some money and get yourself guaranteed impressions. Because we spent so much, we spent a lot on the upfront.We did some testing and what we saw—at a very top level—was that this is working. We went on to Comedy Central—Ancestry was not a Comedy Central advertiser—and we were seeing great spikes. We'd run this thing and we'd see spikes, but what we're seeing were spikes and traffic. But that was our early indicator that this was working. We were like, this is amazing. We have never seen such pops before.We actually had it to the upfront season and we moved some of our core channels. We moved money from our core channels that are just, hey, these look great [...] consistent. We started to move a lot of money into these new channels that were going to explode the growth of Ancestry, and they didn't. In fact, it wasn't good.We were looking at traffic. We didn't take the time. We were not rigorous enough. We didn't look at things that adapt. We didn't go into our attribution model. We just saw these early indicators that had always worked for us in the past, but we didn't think through it enough, like, hey, we made some big changes. And it didn't work. It was a lot of looky-loos, people had clearly never seen our advertising before, wanting to see what it was about a lot of mobile traffic that wasn't converting.It was not good. It was the first time that we were missing our numbers in forever. Here I was, the first person to start missing numbers at Ancestry. Unlike digital, which is in many ways, self-healing, you can go fix these problems relatively quickly. It doesn't work that way on TV. It took us 6-8 months to dig ourselves out of that hole.Now, the good news is we got really, really, really, really good at TV analytics. The best I've ever seen, and it took it to a next level at Ancestry. That was the moral of the story for me. We then went on to have the best years. The following two years were two of the best years in the history of Ancestry because not only were we able to get ourselves out of the hole, but we had learned so much from that process that we applied back, and it made us a much, much, much better marketing team.Again, I'm going to give Tim a lot of credit for this because he let us fail. He didn't panic us. He didn't fire everybody. He didn't lose it. He gave us the space to go fix it. He expected us to get it fixed. My big takeaways were it's a great way to lead. It's a good way to get people to think right. It's a good way to hold people accountable to it while at the same time, forcing that accountability into learning. That's what I'm going to carry forever, especially when you're talking to private equity firms in a process and having to explain this number.Edward: Rob, this has been fantastic. Thank you so much. We're going to wrap up now and we'll continue tomorrow with part two.Rob: Sounds great. Thank you. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
This is the last week Marketing BS will be 100% free. Starting Monday if you want the full Marketing BS experience you will need to subscribe. You can do that here. Subscribers get a weekly essay, weekly briefing and a two-part podcast interview (and more). Free subscribers receive one piece of content from the week every Friday. Subscriptions are half price until Friday.Adam was the co-founder of UrbanSpoon, Dwelable and now FreshChalk. He comes from an engineering background, but he has done some incredible marketing to grow his businesses. This is a dive into some of those strategies and tactics he used at FreshChalk. Some highlights:* How FreshChalk solves the problems of Yelp/AngiesList/HomeAdvisor* How Adam thinks about building two-sided marketplaces* How SEO has changed, and how he does it now* How to engage small businesses (who usually don't have time for “marketing services”)Subscribe to the podcast: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed.TranscriptEdward: This is part two of my interview with Adam Doppelt. Today, we're going to dive into his experience as founder of Fresh Chalk.Adam, could you start by explaining what Fresh Chalk is?Adam: To start up the Genesis story is always interesting. That's always the interesting part to me.For one of my prior companies, I had to move to Austin and it was one of those weird situations that probably nobody ever goes through, except for a couple of lucky or unlucky individuals. I had to move to Austin with a couple of weeks' notice, including my family, my wife, and my three kids, and my dog. One of those kids was actually a six-month-old at the time. It's very traumatic to have to move to a new place like that. We were settled in Seattle, we'd been here for a long time. It's great that we sold the company, but we were not super excited about moving to Austin.Our opinion changed once we've been there for a while, but the idea of packing up and leaving Seattle was very difficult for us. We arrived in Austin and we immediately bought a house right away within a couple of weeks, and I got a car and we moved in. We had to acquire a bunch of furniture on no notice. I had an intense need for professionals. I needed a house cleaner and a babysitter and an arborist to look after the trees. It wasn't a particularly nice house, but you're in Austin, there are trees everywhere. I also needed people in specialties that I had never even dealt with before. I needed a termite person and I needed a garage door guy. We needed all kinds of things.I worked quite closely with this team at HomeAway and I started asking them for recommendations. Does anybody have a good termite person? Does anyone have a realtor? Does anybody know a good arborist, a plumber, an electrician, a handy person? The list kind of went on and on and on and I amassed pretty quickly this little spreadsheet of recommendations of what I thought were the best people that have been recommended to me by my new co-workers at HomeAway.A funny thing happened, when I had that spreadsheet as part of the acquisition, a handful of people had moved down to Austin as part of the deal, and they started asking me if they could look at it. They said oh Adam, I know you care about these things. You built up this spreadsheet of these professionals. I need that stuff, too. I just moved here. I need a cleaning person. I need a babysitter. I need a handyman. Can I just look at your spreadsheet? At the time, I was very focused on vacation rentals. I didn't think much about it. But then when I was trying to figure out what to do next, I remembered that experience. I thought, there's probably something here after years of looking on Yelp and Angie's list and Googling for the best electrician in Seattle.That is a very annoying and difficult and unreliable process, I might say. I'd much rather have recommendations from friends. That simple idea turned into Fresh Chalk, which is recommendations for local professionals from your friends. I was very focused on home improvement. I thought home improvement is where it's at. That's the sweet spot for me. But as we talked to potential users of our products—consumers—we quickly realized that there were equal opportunities in beauty and wellness, and health, and healthcare, financial services.All of these things turned out to be really fruitful. As much as I needed a plumber, if you need your eyebrows waxed, your needs are just as intense. We built this product we're making. I would say great progress with it and people love it.Edward: Talk more about how it's different from Yelp. Because can't I go on Yelp and see how people recommend hairdressers and eyebrow cleaners and plumbers, and can't I even see if my friends recommended those things on Yelp?.Adam: To some extent, you can do that. You can look at Yelp and you can get recommendations. They're not going to be from your friends. I've never seen a friend's recommendation on Yelp. The reason is because there's no social experience on Yelp. It's a lot of strangers recommending things. I can say from my experience at Urbanspoon and after that at Dwelable, a lot of those reviews are fake.The best way to get great reviews for your business is to ask your friends and family to write great reviews of your business. A lot of those reviews are really not to be trusted. I think that's a problem with Yelp. That's a problem on Google My Business, which is what you see when you're Googling for businesses. I think to a lesser extent on Angie's list because Angie's list had a lot more validation of their reviews. But reviews, whether they're from strangers—trusted or not—are not going to be as good as reviews from friends.When you want a real recommendation, what do you do? You pick up your phone and you text your buddy. If you're considering a remodel, you want to talk to your friend who just went through a remodel. That's always the best place to get that information. The other thing I've learned is that I have a real love for the story. I think maybe even you and I have talked about this before. When you told me about your house, I wanted to hear all about it. I wanted to hear about how you found it and the work you did on it, who did that work, and what they did right, what they did wrong, what you learned. With my maximizer philosophy, it's just I'm intellectually curious. I want to hear about those things. It turns out that you can share those stories pretty broadly.And a lot of people find that stuff fascinating. Not just about home improvement, or doctors, or pregnancy or whatever, but like maybe even about products or travel. There's a human need to share these stories from friend to friend. I think that's where Fresh Chalk can really shine.Edward: Is Fresh Chalk a two-sided marketplace?Adam: Yeah, it definitely is. Like the other ones I've done, we have local businesses or small businesses on one side and consumers on the other. There is a marketplace. There's no transaction per se, so it's hard to really put the word “market” in there. We don't have a transaction yet might be a better way to phrase that. But it's definitely a marketplace and we have to keep both sides happy.Edward: Where do you focus then? Do you focus on the merchants or the users? How do you weigh those two?Adam: It is so hard. This has been a struggle with all the companies in this band that I've participated in. My philosophy, and I can't say whether this is right or wrong, but my philosophy is that I really want to focus on the consumer side of things. That's what I like to do.I think that if you don't have consumer interest in your product, then the merchants are not going to show up. Why would they show up to use Fresh Chalk? Why would restaurants be on Urbanspoon if there are no diners on Urbanspoon? They're just not interested. My purpose has always been to get consumers interested first. Once you have consumers, the businesses are always going to show up. If you don't have consumers, it's very difficult to get businesses to show up. But especially with something like at Fresh Chalk, a lot of what we're doing is social. It's friend recommendations.You can bootstrap just by having people coming out of the recommendations and then sharing it with their friends. That will create a distribution for your product, even without having a lot of businesses on the platform.Edward: So how do you get users? What have you found that's successful getting users onto your platform and using it?Adam: Fresh Chalk is interesting because it's a combination of—there's a social network component, so it's people creating and sharing in a similar way as they would do on Facebook, or Nextdoor, or places like that. I guess Nextdoor isn't particularly social, but there is a lot of sharing.And then there's a ton of SEO. We have landing pages for a lot of the businesses in the cities that we cover, especially places where we've gone deep like Seattle, we might have every business. We also have the categories. There's a ton of SEO traffic coming in. If you start Googling for businesses in Seattle, you're probably going to see Fresh Chalk showing up in the top 10. So there's an SEO component, there's a social or viral component, and especially in the beginning where you're tinkering with the product, there's a lot of manual outreach. You've got to reach out to users and say hey, can you, can you kick the tires? Just give it a shot.Some of these social networks, they really jump start with these massive marketing efforts. That's never been my way of doing things, especially I'm not into raising all this money to experiment. I'd rather experiment with small amounts of money, and then when you feel like you have a good story, then you can put some money on marketing to really expand your reach.Edward: Talk to me more about the SEO. What are you doing on SEO? You can build a directory and Google obviously likes directories, but a directory without any traction is not going to get very far on Google. Why are you ranking?Adam: There's something to be said for breadth. We have this great directory. The last few companies that are built, there's been a crawling aspect to them. Fresh Chalk aggregates reviews from other sites, and so we can actually build even without anybody.If you were to look at Fresh Chalk Atlanta or some arbitrary city like that, we probably already have a decent ranking for small businesses because we're aggregating reviews from other third party sources, and we can put stars on those pages and maybe even attract some links with our badge program. We reach out to small businesses and we say, hey, you're one of the best businesses in Atlanta, you should put this badge on your page. And it's true. They are one of the best businesses in Atlanta because we calculated it. We're pretty certain about it.It's not like it rings false and we've got this good looking badge, and a lot of these companies are very happy to put on their site that creates links for us and increases people's knowledge of Fresh Chalk. I think that SEO is always the long game. The way I talk about it is that it's like a garden and we have planted some seeds and the seeds are growing. I can tell you that yesterday was our best traffic day ever, and most of that is just organic SEO. We've been to the garden, we are watering the garden and some things are sprouting.Edward: Let's talk a little bit more about those merchants. How are you getting merchants to sign up?Adam: The easiest way to get them to sign up is there are some very simple pitches you can give them. I've always had good luck with really honest pitches. In fact, that's the only pitch that I can do.Edward: Adam, when you say pitches, is this like an email you're sending them or it's like you calling them up and talking to them?Adam: Direct outreach either through email or in some cases, phone. The things you say to these small businesses are honest. What you say to them are things like hey, we built this great page for you on Fresh Chalk and people are leaving reviews on Fresh Chalk. Would you like to be notified when you get a review on your page? People say yeah, of course I want to be notified. Then we go and collect an email address and they're on the platform. They're considered a verified merchant on the platform.The obvious backdrop to this whole conversation is COVID and lockdown and how that has affected small businesses in the US which is not good, in case anybody's been living under a rock. But if you put that aside, Fresh Chalk has had pretty good success with getting businesses to sign up on Fresh Chalk.Edward: Doing that way, doing the direct outreach, is that one of those things that don't scale, or do you think this outreach strategy is scalable?Adam: I've always had good luck with doing them in ways that don't scale in the beginning. So you try things. We may hire somebody, you just have to make a thousand phone calls. That's fine. If we measure the response rate, the commercial management, we may try a few different pitches. Maybe we hire somebody and have them send 1000 emails, handcrafted, and we measure the response rate. If it seems like it's working, we can always hire 10 people to do that. That's a playbook that has worked for me really well in the past.I have a high sensitivity to spam and people's time, and these small businesses are playing in an environment where all these small businesses really, really, really hate Yelp. I can't even tell you the anger that small businesses feel towards Yelp. They despise Yelp with the heat of 1000 suns. They really can't stand Yelp.In a way, Fresh Chalk through—I'd say some planning and a lot of luck—is the anti-Yelp. We don't have negative reviews. It's just recommendations. You can recommend a business. If you want to take a dump on a business and say I hated this place, you have to accumulate a certain amount of karma points on Fresh Chalk before you can even access that feature.If some electrician comes to your house and they blow your fuse and charge you $800, which by the way, has happened to me, and I want to leave a negative review, I can do that because I've been on Fresh Chalk and I've accumulated all this karma and I have access to the negative review feature. But you can't get these drive by negative reviews. These rants where people trash businesses, we don't have that feature. We didn't design it that way. It's supposed to be positive. We want to step away from all the negativity on the internet and get great recommendations from your friends. Sure, maybe your friends want to steer you away from businesses. But mostly, they just want to point you at the right electrician, not rant about the wrong one.When we talk to these small businesses, anybody who bothers to listen to us for more than about 30 seconds, they start to understand the Fresh Chalk is the anti-Yelp. It's social. It's positive. We want their business to succeed. It's free. It's a pretty good pitch. The trick is just getting past—if you can get them to pick up the phone and listen for a few seconds, you probably can get them to sign up. Edward: Right now, there's no monitor. As you said, it's free for users, it's free for merchants. Where is your monetization going to come from?Adam: I've had good luck with these businesses. Until you really know they've got some product-market fit and some usage and people are interested in what you built—if you built something compelling—that's always a good time to start layering on monetization, the kinds of products that I build. I'm very wary of trying to monetize too early. Obviously, if you build a platform where consumers are coming in to get recommendations for services, or products, or restaurants, or travel, the advertising revenue is obvious there. There's a very obvious play for businesses that just want to get more traffic. That's something that, if we had real traffic, I think we'd be looking into, once we get there.The other place that really stands out to me is referral programs. A lot of these businesses are already tracking referrals. If you use a particular service, they want to know how did you hear about us? Was it one of our existing customers? And then they kick them a $25 gift certificate or a free cleaning is something that dentists do sometimes. All of these businesses are looking for ways to increase their own businesses, and we're very receptive to that. Fresh Chalk, as a social platform for sharing recommendations, is really well suited to slide right into those referral programs and maybe take them over and start tracking them and doing rewards, and I could see that being a great way to monetize as well. But that's all down the road. Right now, we just got to make something that's fun, and then we can monetize it later. Edward: Transitioning from fun, you mentioned earlier that COVID has affected your business. You talk a little bit about how you guys responded to COVID.Adam: Obviously this has been a horrible time for everybody, particularly in the US, and if you're running a small business, it is so, so, so hard right now. We can tell that many small businesses are struggling or closing. The cities that have been hit the hardest and have locked down the best are the ones that are having the most trouble keeping their small businesses alive. The restaurant business is basically dead. Travel is toast. A lot of the services that people love on Fresh Chalk are really struggling.Our most popular category six months ago was probably nail salons, and people are not really going to nail salons at the moment, or if they are it's 1 out of 10 if they're going before. These businesses are on life support, Fresh Chalk is really well-positioned to, in some ways, be the voice of those communities. If you have something to say to your customers about what you're doing to be safe with COVID, Fresh Chalk is a great place to get the word out. We have a COVID status thing where any small business can say we're doing curbside pickup and we're all masked up. We do a very thorough cleaning each night with XYZ products. Fresh Chalk is a great place to say that to your audience.We've also advocated for a lot of these communities. We stepped in and we worked with some of these small business alliances to run surveys, to find out how small businesses are feeling about things. I have to say, it's heartbreaking. It's very sad. I didn't know this, but I am a lover of small businesses. I frequent a lot of small businesses in my neighborhood and around Seattle.I had a guy come to my house and his specialty was working on gas fireplaces. That's pretty much all he did and mine was broken and he fixed it, and then he spent half an hour rearranging the little fake embers so that it looks more aesthetically pleasing, which I didn't even know that I needed. But he was practically in there with toothpicks moving things around.When I meet somebody like that, it really makes a strong impression on me. Somebody who loves their work and it's not in technology and it is important and they're getting paid for it and they are enjoying it. I'm getting a lot of value out of it. I love businesses like that, and I want those businesses to survive COVID. A lot of them won't. I think it's incredibly sad. But Fresh Chalk is here to help some of them survive. We're doing our best.Edward: Adam, thank you. This has been fantastic. I like to end these interviews by asking you about quake books. But in your case, it's more of a quake genre. Is that right?Adam: Be more specific. What would you like to hear?Edward: I think you mentioned that science fiction has dramatically changed your life and how you think about things.Adam: I have read a lot of books that made strong impressions on me. Sometimes you read books, it takes you a long time to really internalize what they mean. Some of the books that I read as a kid, I think, are still resonating with me. Sidhartha made a really strong impression on me as a kid. I still remember very clearly, and more recently things like The Three-Body Problem which is a science fiction book.Occasionally, you read a book and you're just desperate for it not to end, and then once it's over, you close it and you think, I wish they had written another one, and they've been dead for 100 years. That's what a lot of my reading is like.I was reading a book the other day by Jack Vance who, I think, was a largely forgotten fantasy, science fiction guy. I was laughing so hard. I'm lying in bed, reading it on my phone. Shannon's asleep next to me, and I'm chuckling and the bed is shaking. It's the middle of the night and I'm cracking up. How often do you read a book like that? It's like my whole philosophy of life. I'm always going deep and looking for these hidden gems, and you know what? Sometimes you find them.Edward: We're going to end with that. Thank you, Adam. This has been fantastic.Adam: Thanks Ed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
This is Part 2 of my interview with Wendy White, chief marketer at Egencia (Expedia's corporate travel arm). Subscribe to the podcast: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed.Marketing Bs is going “premium” on October 19th. Following that date premium subscribers will receive four issues per week (essay, briefing and podcasts). Free subscribers will continue to receive Marketing BS on Fridays with one piece of content from the week. Subscriptions are half price until October 16th as a thank you to my longtime subscribers. You can subscribe here. Thank you to everyone who has already subscribed.TranscriptEdward: This is part 2 of my interview with Wendy White. Today, we are going to dive into her experience as a chief marketer at Egencia. Wendy, for those not familiar, can you start up by explaining what Egencia does, and how it's different from Expedia.com?Wendy: Expedia Group is one of the world's largest travel brands. Brands you might be familiar with including Expedia, Orbitz, Hotwire, hotels.com, and then, of course, there's Egencia. One of these things is not like the other, and it's definitely Egencia. That's because we are the corporate travel arm. We do corporate travel management, so we are a company that supports brands. Some of the small, fast-growing, and very cool unicorn startups all the way up to the world's largest brands that you're familiar with, that you can see on the TV advertising screen every night. We run their corporate travel program, which includes the software, by which employees buy travel, and the software by which companies set a policy. The negotiated rates they have, the HR system connections, etcetera. And then, of course, we provide all the great travel inventory that goes into those—the hotels, the airlines, the cars, et cetera, which is why it's a great connection with Expedia.Edward: How is Egencia different from all the other corporate travel companies out there like American Express Travel?Wendy: Like American Express, we're global. We operate in 65 markets, but unlike them, we're what would be called the original disruptor in corporate travel. Corporate travel, for the longest time—and I think all of us who are probably listening and have been around for a while—remember that corporate travel was to get on the phone with a travel agent, explain your long itinerary. I want to go to London, I want to go to Paris, and I come home. That person goes off and searches for flights, sends it to you in your email, and then you send it to your boss for approval, and you send it back. I mean, who has time for that?What we've done over the lifespan of our company is really modernized travel. Bring that consumer-like online booking experience to corporate travel, but also create for companies a single place where they can manage their travel program and all their markets at once. Set their policy once and have it be online in every market through the same experiences that you called in. Most of the larger competitors just can't do that. They don't own their own technology, it's not integrated, so we have a real differentiator.Edward: Is your customer base significantly different from the other players? Do you deal with smaller companies than they have, bigger companies, or different industries?Wendy: Yeah, we're lucky to serve companies of all sizes. Our smallest customer is still relatively large. They have several $100,000 of travel spend, and then, of course, we have the largest companies in the world as well. So we uniquely position our ability to do that around the globe, and we're very proud of that.Edward: But what type of company chooses Egencia versus choosing a more traditional, old-school travel provider? Are there any characteristics? Is it the type of CEO? Who comes to you and compares like, you know what, we're going to win this one for sure.Wendy: The culture of the company has to be aligned with wanting to drive a modern travel program experience for employees. Companies who really care about that employee experience as part of their travel program, and not just our cost savings. Obviously, we can deliver the cost savings, but as a traveler, I want to feel like my travel management company is with me. From the moment I want to get in my app, book really quickly, and in a matter of minutes know where my colleagues have stayed so I can book a hotel I feel safe at. Get in, book, get out, and then have the information at my fingertips, and my app the whole way through.We care a lot about that traveler experience and companies who really want to drive high online adoption where their travelers are self-serving. Their policy is easily implemented, and yet still want to have a great experience for the travel manager, in procurement, and the finance teams in terms of accounting, reporting, and the easy policy management. Even now, the duty of care, which is so important during the time of COVID, companies don't want to do that. They're really culturally aligned with us.Edward: I want to dive into some of your marketing channels. One of your more successful channels is paid search. I understand how that works for Expedia because if someone is searching for hotels in Seattle, likely wants to book a hotel in Seattle. How does that work for signing large corporate deals? Are a lot of travel planners searching for things like corporate travel solutions?Wendy: That's different, again, I think by the size of the company, and are they already with a travel management company, or are they moving to a managed travel program for the first time? Paid search is great for us in that more unmanaged to managed space, or companies who don't have an existing travel manager in place. Somebody who really thinks about this, and it's not in that travel management ecosystem. Obviously, larger companies, they've got travel, no programs in place, they have a professional travel manager, who attends the big industry conferences, et cetera. They know us already, but it's the folks that don't that are searching for managed travel, or business travel management that we capture through our search networks very well for us. The brands aren't that well-known outside of that industry player.Edward: If you have your large companies to small companies that you serve, paid search is the way you get the smaller companies, and you use other techniques to get the bigger ones?Wendy: Yeah, definitely paid search. I mean it definitely pulls in larger whales. I think the reason why a search can pay for itself—even for smaller clients that maybe your CAC to LTV ratio, wouldn't make sense to spend a significant dollar on it in terms of the acquisition. But the way whales covered the cost of that channel. Really for us in the up-market space, we're really focused on using more ABM techniques to go after that known target list of known accounts. The paid search really takes us all the way up to the commercial mid-market. It does really well for us.Edward: Yeah, I often call it hunting rabbits. You go out, you hunt rabbits every day, and you make sure you get enough calories in your rabbits. But every now and then, an elephant comes along, and the elephant is a bonus.Wendy: The elephant is the bonus, and it probably pays for the whole channel for the year for all those rabbits.Edward: Egencia is like software, and you've had a lot of success with software evaluation sites like Trustpilot and G2. How do you optimize those channels? Or is it just a matter of being there, and then make sure you can monetize enough?Wendy: We try to be there. We are not a company that has yet turned on paid promotion, or paid referrals through those sites. Some of our competitors have. You go on to one of those sites, you might see they have a lot more reviews because they have a paid program going, but so far we rely on the advocates that we've built in our customer base to put reviews out there for us and be PR advocates in a way that it isn't about giving them a reward, like a gift card, etcetera. I think that's the difference between us and a few of the competitors that we deal with within that space. We try to shoot our authentic relationships with our clients.We really focus on client engagements. We have both a strong account management team. We have a customer community that we really engage with, educational sessions, training sessions, and peer-to-peer networking. When we see that those clients are high NPS, we ask them to leave us a review. I think it's a virtuous circle for us to make sure that we're taking our applicants, and making them aware that we'd appreciate their support on those sites.Edward: Who does the asking? Is it the marketing team or the account management team?Wendy: Both. That works best when you're both asking. You want to ask at the point of a quarterly business review where it goes very well. The account manager can certainly say, we love your feedback. But as the marketing team sends out NPS service and we get a high response or great comments, we absolutely want to ask. And then we have asks that we put in our community. We used to run it on Influitive, I don't know if anybody here knows Influitive, but it's got a lot of Gamification in it where you can ask customers to do a thing and they could earn a point, get badges, and show off grades against their peers, and people love that.Why not ask them a reference activity could update your review on G2, and you get a badge to go on your profile in the community? People love it, I love it, and the customers feel good. They're doing something for us, we're doing something for them, and we have that wonderful symbiotic relationship.Edward: Do you have a similar toy for the account managers? How do you influence account managers to make sure they're doing the asking? I'm sure account managers are so focused on doing things for the customers. Sometimes they are like go away marketing, we want to do our thing.Wendy: Wendy takes a note about fun badging for account managers. I just wrote that in my notebook while you say that. I love that. Yes, I need to do that now.Edward: How do you influence the account manager? Is it just a matter of having good relationships with them? Is there anything you do to make sure that the marketing account manager relationship is good?Wendy: We talked to our account managers through enablement training every single week. We're constantly educating them. We're very visible in front of them. The fun thing that I think has happened over the last 18 months since we adopted Slack is celebrating each other's success visibly, and having really open and transparent lines of communications through our Slack channels. There's a lot of emojis flying, over-celebrating each other's successes, and sharing the good news. I think that builds a lot of trust, support, and rapport. I think that makes it a lot easier than when we have asked them to support those activities because they know it's important to us.Edward: Another big channel for you is events. How do you measure the success of event marketing?Wendy: I think for marketers, the number one measure of success is ROI in terms of either new logos and revenue created or existing customer engagement. On the acquisition and prospecting side, we absolutely do attribution for both marketing-created revenue, as well as marketing influenced revenue. We track it across all of our channels. We look at the success of our channels, and we're constantly optimizing. Events are a really strong channel for us. Business travel is about people. It's about people meeting face-to-face. For our travel managers, the procurement teams that work on travel, they want to have a trusted relationship. We do an incredible amount of meetings pre-COVID, especially at some of the most important business travel trade shows. Post-COVID, we're taking all of that online. We're continuing to do virtual events. Third-party events like CareCon or other things where we can meet new clients, but also our own events where we're highly engaging, and educating our clients. A huge thirst for information right now about travel advisories, how borders are opening and closing, and how companies are modifying their travel programs. We want to be at the forefront of helping our clients understand that. We're really leveraging events right now.Edward: What's the relative value of events for existing customers and keeping the engagement up and reducing churn versus going and acquiring new customers? How do you think of the events along those two lines?Wendy: We try to kill two birds with one stone (so to speak) all the time when we do educational events and invite prospects and customers. Last year, we did a roadshow in 53 cities and brought prospects and customers together. Bringing prospects and customers together should be a great thing for your company if your customers love the services you provide because they can be your best evangelists. Educational events, where we bring prospects and customers together, have been a big part of our strategy and continue to be even with small group roundtables that we're doing. Enabling our account managers to host 5, 8, or 10 customers and a few prospects in a small roundtable, giving them some content to let them do that.We've also really focused on user groups that are private to our existing clients, and letting them facilitate those conversations themselves. Even if they're going to share something they're unhappy with, I think it's still important to facilitate those conversations. We learn from them, they learn from each other, and it gives us a good understanding of where to focus next in terms of improving an experience. Be it a support experience or a product experience.Edward: These events are generally very high touch then. You know the sales that you get or the new customers you get from the events, you can tie directly back to the event. Attribution is not a problem.Wendy: Yeah, we do multi-touch attribution. We track everything so we can absolutely measure the ROI of our events. What I would say is before this year they were small. We knew it was on those events. Even if it was just a couple of 100-person webinars, but COVID changes everything. A lot of our events, recently 1500, 1700, and 2000 folks attending because their thirst for knowledge is just so strong in the industry. I think also, we probably got ahead of most of the competition in terms of being out with information, webinars, and events. I feel really proud of the work my team did there. Through March through June period of just being visible, being out in front of customers almost every single week with more information on small virtual events, webinar, etcetera to share information.Edward: That's incredible. You have 1500 people attending the event. You get their email addresses, presumably at the event. You know what companies were there. If one of those companies turns into a customer three months later, do you attribute it back to the event?Wendy: You bet. We absolutely look at the first touch. We actually look at the whole journey that the customer went on. Yeah, we absolutely attribute it. What I would say is you're not going to be surprised to know that the landscape of business travel is dramatically changed right now because of COVID. All of our acquisition channels are not performing like we expected them to during this period. That doesn't mean you give up on any of them. It means you're constantly testing and learning. You're looking at the data, trying to make some decisions about where to move money, or where to move resources and time. It's no different than we do in normal times, but right now, it's even more important for us because nothing is behaving like we expect. For example, 1700 or 2000 people showing up to a webinar.Edward: Yeah, that's amazing, especially when you have a long sales cycle. For you guys, I imagine—from the time you first touch a potential customer to the time they become an actual customer—must be months if not a year, sometimes between when you first initiate contact, when they sign their whole company over to you.Wendy: Sure, I mean, the larger clients are on a 3-5 year contract, so it could be a 3-5 year sales cycle. We're very much an enterprise style. Even if it's a contract that is coming up for renewal and they're issuing an RSP, it's still several months. We really focus on nurturing and engaging that prospect all the way through that sales cycle.Edward: When you're writing your ROI calculations—generally look back historically—you can be like, hey, we got these leads in January and by December, this many teams turned into sales, so we know if our spending was effective or not. But if your sales cycle is two years long, and then all of a sudden COVID happens and everything changes.Wendy: Welcome to my world.Edward: All your historical data doesn't mean anything anymore. How do you know what's working?Wendy: It doesn't mean anything, and believe me, we've had that same discussion every few weeks for six months. And you start to look at the new patterns that are emerging. Our organic traffic dropped off about 75% and hasn't returned. If you watch our marketing mix month over month to look where our acquisition is coming from, the profile of that mix looks dramatically different today than it did six months ago. A lot of that is just a shared force of will of the team saying, we're not going to wait for the organic traffic to recover. We're going to go out and seek out clients who made the profile, or people who need to think about this. We've just been very lucky to have gotten smart, to do some smart experimenting, and we continue to do that now.Edward: Wendy, thank you so much for being here today. I like to end these interviews by asking about your quake book, but for you, it's more of a genre than an individual book. Can you explain it?Wendy: You ask me that question ahead of this. I was a little prepared. What I said is, probably like the rest of the world, or at least the rest of America. I've been heavily influenced by the black lives matter movement to think differently about my approach to that topic. How To Be An Anti Racist is a great book that has come to my attention, but it's not just that. I mean, it could be something as simple as Ben and Jerry's anti-racism website, which is really quite amazing. If you haven't looked at it, I'd encourage you to do that.I'm reading a lot right now. I'm learning a lot, and I'm happy to be really engaging in that conversation.Edward: How have these books changed your view of the world? Did they solidify what you believe before, or do they change things pretty dramatically?Wendy: I think they solidified when I believed before, but they deepened my understanding of the systematic nature. The problems that we face and racism in America, from financial institutions to gerrymandering to how neighborhoods are designed and developed. We just have so much opportunity to make a change in how we attack these issues.Edward: Thank you, Wendy. That's a great note to end on. I really appreciate your time here today.Wendy: Thank you. This is a public episode. 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Subscribe to the podcast: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed.Marketing Bs is going “premium” on October 19th. Following that date premium subscribers will receive four issues per week (essay, briefing and podcasts). Free subscribers will continue to receive Marketing BS on Fridays with one piece of content from the week. Subscriptions are half price until October 16th as a thank you to my longtime subscribers. You can subscribe here. Thank you to everyone who has already subscribed.TranscriptEdward: My guest is Wendy White. Today, we cover Wendy's career and path to CMO—Berkeley, the US military, Intel, Microsoft, Tier 3, Surge. Wendy is now the chief marketing executive at Egencia, Expedia's corporate travel arm. We are lucky to have her here today. Wendy, in 2011, you were running marketing operations at Microsoft when you moved to tier three to be their chief marketing executive. How did you get that role? How did you move from running marketing operations to running all of the marketing?Wendy: That's a great question. How does anyone make that upward leap in their career? And maybe I should say leap like off a cliff because I was at Microsoft—an amazing company, great job, and I loved what I was doing. Funny enough, I got a DM on Twitter from somebody in my network that said, “Hey, would you consider having a conversation with the CEO of this company?” Who knew a DM on Twitter could change your life? But for me it did. I feel like I actually stood on the edge of a cliff and jumped off because going from helping run advertising operations for—probably at the time—a company that had the largest advertising budget in the world, to a small Series A startup and being the chief marketing executive there was a massive change.Edward: Why would they hire you? I'm sure you are great at marketing operations, but why did they consider you to run everything?Wendy: Well, I wasn't really a marketing operations person. The advertising operations at Microsoft were negotiating the advertising strategy across all the business units, running advertising, and execution everywhere outside of the core US ad development. So it was a pretty traditional marketing job, not technically an operations job. But what I had at that point was a career where I had executed across a variety of marketing skill sets.I think to be a chief marketing officer of any size company, you really got to understand the dynamics of all areas of marketing, and I had done that over my career. I had just enough expertise to be dangerous at everything, and I guess maybe enough humility to say, okay, I'm going to come in and figure this out and write out, no, I'm going to ask for help. That was attractive.Edward: How did you get those skills? Was that a serial? Did you switch from job to job and do each division, or is it a matter of you sitting next to people who knew those skills and you got it through osmosis?Wendy: It was a little bit of both. Mostly to that point, I'd worked at big companies at Intel and Motorola. But doing a variety of things is also working. At Intel, I worked in a division that was a brand-new division, and because of that, we had to grow the marketing as we grew that division. I had to do everything for a while. I was Jack-of-all-trades. I just think I had enough Jack-of-all-trades jobs over the years where I just picked up enough. But also, when you become the VP of marketing, head of marketing, CMO at a startup company, even if you don't know it all when you start, I guarantee by the end of the six months, you've figured it all out. You've tapped into your VC network to ask for best practices from other companies in that VC network. Or you've reached out to friends of yours and your network and said, please give me a crash course in Marketo overnight, so I know what the hell I'm doing. That's exactly what I did.Edward: I want to go back and talk about the path that got you there. You went to college at Berkeley. How did you come out of Berkeley different from the way you went in?Wendy: Life-changing. Absolute life-changing. I remember the first time I walked onto Sproul Plaza, which is like the big Plaza. If you've ever seen pictures of Berkeley with the beautiful iron gates—the scrollwork iron gate—you walk through that gate and you're in the Sproul Plaza.I remember the first time I walked into Sproul Plaza, and I was a very innocent young woman from Minnesota. I had just come off of a couple of years of active duty in the army, was now in college at Berkeley, walked straight into my first protest on something that was happening in China. Probably something around Tiananmen Square at that time. And I just thought, I don't even know what's going on. I didn't really have a worldview to understand what was happening in China. I think like many young people that go to university, your worldview expands. I think going to a place like Berkeley, that is true like on steroids. My worldview really expanded there. I went from always being a young democrat in Minnesota and really interested in Minnesota politics, to just having maybe a way deeper understanding of progressive politics and social justice. Also, just the realities of life lived in Berkeley, a lot of homelessness at that time. So I just went from being very protected to way better understanding of my place in the world.Edward: Do you think you would have got that at a different school? If you had gone to a regional school instead of Berkeley, would you have come out similar, or do you think that Berkeley itself changed you?Wendy: Berkeley—especially those periods, maybe even today—is a unique place. I feel really lucky to have experienced it. I think there are many other schools and universities that would have given me something similar, but there's this little secret something that is Berkeley that I'm not quite sure I'm tangibly explaining, that is indelibly part of who I am now.Edward: You started your career with the US Army. Tell me about the decision-making process that got you there.Wendy: When you ask this question, I always want to sound like I have a really great answer like I was so smart at 17, and I made all these great life choices. But really, what happened is I got in a fight with my parents. My older brother, who I blamed to this day for this. He was one year ahead of me in school, had made the decision to stay at home and commute to the University of Minnesota. We were about 20 miles away, and he moved into my parents' basement and that was his college experience.It was probably perfect for him, but to me, it sounded like the absolute worst college experience possible. My parents' proposal was you stay home, live in your childhood bedroom, and get in the car with your brother every day and drive to the University of Minnesota and go to school. I have an adventurous spirit. And I think being in travel now is a perfect place for me because it reflects my desire to see the world and experience and be a part of the world. Which is also ties into that Berkeley experience.So I think my parents were quite shocked when right around this time, I got a call from a recruiter and I said, hey, no way. I'm practically a 4.0 student, I'm going someplace amazing. And they talked me into, would you consider language school? Would you consider the army and living in California for a year? And I'm like, wait a minute. I would consider that. And I did, and I don't regret it for a moment.Edward: You worked in psychological operations. Is that the Army's word for marketing?Wendy: If marketing equals propaganda, then you bet. Yes. Psychological operations—for those who are not familiar—are the folks that take the loudspeakers and surround somebody's home, like the Noriega example, drop leaflets from airplanes, or take over radio stations or TV stations in a given [...] with the local populace. There are all kinds of things that psychological operations do, probably in this day and age, and I haven't stayed as close to it. Social media is one of the ways that maybe some of our competitors do it, but for us back in the day, it was very much governed by a set of ideas and principles. But it was very much psychological preparation of the battlefield, which was audience analysis, and then what do you want that audience to do? What behaviors do you want them to do? And how do you get them to do that with the channels that we had? So very much marketing.Edward: Did that skill set help when you moved into business? Do you still use it today?Wendy: Yeah. I got my first really cool marketing job at Intel because the chief communications officer heard about that. Called me up and asked me to come into a meeting with her in a small conference room. Challenged me to tell her about it, and then said, “Okay, I want you to work for me.” That's how I ended up in my first marketing job at Intel after I'd been at Intel for about six or eight months working on a business project. That's how I ended up in PR.Edward: That's where I was going to go to next because after your MBA, you did join Intel and you focus on B2B marketing. Was B2B marketing a thing you were shooting for, or it just happened?Wendy: Interestingly, my mother was an executive Control Data back in the day. I don't know if anybody remembers that company, but it was one of the original computer server companies. My brother and his best friend was the grandson of the founder of that company. I grew up with computers in my house from the time I was very small.My brother and I saved up, bought our first computer—TRS-80—when it first came out, and we always were upgrading computers. I was very into technology, grew up in that environment, and loved tech. When I got done with grad school and had the opportunity to go to Intel, I jumped at it because there was no company more than Intel (at the time) that was shaping the world as it relates to technology. I loved that experience, and I was really happy to go there.Edward: If 20 years ago, someone from the future went back in time and said in 2020, the US will be initiating antitrust action against four of the five largest tech companies and Microsoft is not one of those companies, I think most people would assume that the Redmond company had stumbled out of the top five. But they were actually number two at the time, and yet they avoided antitrust action.When you were at Microsoft, you led the global initiative to position Microsoft against antitrust risk. Talk a little bit about how marketing deregulators in governments are different from normal B2B marketing.Wendy: That's the most left-field job I've ever had in my career, and also another one that was super engaging and fun. During my first year at Microsoft, I had the opportunity to work in the antitrust division. They had, of course, just come through pretty significant actions with both the US regulators and the European regulators, and had some obligations under those decrees that they had to enforce. Which was around proving the interoperability of their products so they wouldn't get further fine for antitrust for combining things like Windows and Office.I did the marketing around the compliance issues. How do we promote the interoperability protocols to developers around the world? But more importantly, I had to work in some really fascinating, fun stuff like Microsoft support for Linux. Who would have guessed back in those days that was a big initiative at Microsoft? But it was. It was building bridges to open-source products, working with the open-source ecosystem, and promoting the open-source ecosystem. And then also donating a bunch of IP into what turned into the Microsoft foundation and a spin-off that they did.But I also got to work on standards, and how do you talk to regulatory bodies and regulators about standards to ensure openness of products? How do you influence governments around the world? Again, a really great foundational thing for marketers to understand is the environment in which you're marketing, including the regulatory environment and how to think about audiences and their perceptions at all levels. I learned a lot about research through that job. I learned a lot about influence models either direct through lobbying efforts or indirectly through software ecosystem efforts. It was a great role.Edward: It seems like a lot of the stuff you do is product-based. Do these things and that's going to help you against the regulators or reduce your risk against regulators. And then part of it is figuring out what actually does influence a regulator. I imagine that it's a different country by country.Wendy: It's a very different country by country, and I think you can even see it today. Fast forward where we are today and you can look at the Nordic countries versus Germany versus even France. They all have different personalities for those countries.Germany is all about privacy. France is all about the social protection of its citizens. The Nordic's halfway in between both. So yes, every country has a different personality. If you're going to be a global marketer, you should really understand the environment that you're operating in. How to think about marketing, not only to your buyers but to the governments that influence how your products are bought and sold.Edward: How do you get in front of those regulators? How do you influence them? Is it mass marketing? It's almost like sales where you have individual people? You're giving them marketing sales tools to go and talk to the regulators the way you'd sell to enterprise sales?Wendy: Yeah. Microsoft, they had a body of folks called National Technology Officers. You could think of them as super sophisticated, smart, pseudo-salespeople that call the regulators to explain to them technology, to influence their technology decisions, and to influence the regulations. A company like Microsoft clearly needed that.I think all large companies need folks that help explain policy and technology to the regulators. I mean, you've seen that. You've watched probably one or two of the regulatory issues happening here where you have executives testifying in front of Congress and the questions that get asked. A lot of regulators and legislators need to understand technology better.Edward: Wendy, what were your biggest failure points in your career? Where did things not go as expected?Wendy: Over the years, I really learned that in any business, the people that work with you and for you at the heart of how you lead and manage, how you get work done, how you create a culture in a company. And any time I think back to where I think I failed, it's always fundamentally about making sure that I was putting people first versus mission first, or understanding motivations or the right collaboration points.I could come up with any number of times that a project has failed because we took the wrong hypothesis or bet, but I liked those. I liked both failing and learning. It's when you've failed to really engage in and bring your employees along, that's where I consider that a true failure. For me, that's a leadership failure, and that's what I really learn from.Edward: Let's go back and see when one of those events did not happen. How would things have been different? What did you learn from those events that caused you to change?Wendy: I look now at my interactions with my current staff and the teams that work for me. The things that I've learned from those who have really impacted the way that I lead teams now. I can't say I wish they wouldn't have happened or that things would have been different because each one of us is a combination of all of our experiences. I'm hoping that all of those things have led me to be a much better leader today and a more empathetic leader.Edward: Wendy, you've had an amazingly successful career. What do you attribute to your productivity? Is there anything that you do that most people don't?Wendy: I'm an Energizer bunny, which I think is hilarious and maybe too much of a workaholic. I try not to role model that. I think for me being intellectually curious is important. One of the other things that have led me to be at the right moment at the right time or make the right decision is how much I read and stay on top of what's happening in the markets that I operate in. Reading my competitors, reading the industry news, and reading the influencers. That's one of the levers that makes an executive successful is having the right context in which to make decisions. That for me is one of the points I feel that's really helped me be successful.Edward: So it's a combination of both reading a lot and also just working a lot. How do you get the energy to actually do that? Is it just genetic? Or do you have any techniques that you've used to keep yourself going?Wendy: Well, they must be a little genetic because I look at my mom and I think I'm a real chip off the old block when it comes to my mom. My mom is 75 and she's still a senior vice president of a company, sales and marketing, and works four days a week. There you go. There must be some genetics there.If you work in an area that you love, if you really love the work, you love the content of the work, you love the team, the culture, and seeing the outcomes, I think, it's really easy to be passionate about it and to work hard at it. You've got that real integration of work and life. Of course, I have things outside of work I'm interested in. Believe it or not, like defining one that I'm super interested in the last six months is painting. I've become obsessed with paint by numbers. I have art all over my house now that I painted myself. It's paint by numbers, but it's still fun and I love it. So who knows?Edward: I'm going to leave it at that. Wendy, thank you so much. We'll continue this tomorrow when we dive into Egencia. Thank you. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
This Part 2 of my interview with Fred Swaniker, founder of Africa Leadership Academy (ALA), Africa Leadership Univerity (ALU) and ALX (among others). Fred is one of Time Magazine's Most Influential People in the World and has done the requisite mainstage TED talk. I believe this is the only time he has publicly talked about marketing.Subscribe to the podcast: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed.Transcript:Edward: This is part two of my interview with Fred Swaniker. Today, we're going to dive into his experience leading ALX. Fred, ALU is Africa Leadership University; ALA, Africa Leadership Academy; ALN, Africa Leadership Network. What does ALX stand for? Does it stand for anything?Fred: We wanted ALX to really stand for disruption. It's the anti-university, anti-high school, and we wanted to establish a new category of higher education and the future of learning, et cetera. It actually stands for whatever you want it to stand for. If you want to call it Alternative Learning Exchange, you can call it that. You want to call it Audacious Leadership Experience, you can call it that. Anything that you see as disruptive and unconventional, you can put that label on ALX. That was really the idea behind, like Google has Google X. We want to say this is a very different thing from traditional education. Edward: Explain to me what ALX actually is today.Fred: Think of ALX as a lifelong learning platform with programs that people can take at different stages of their lives. One of the things we believe is that the world has changed so fast, that what you learn in college quickly becomes outdated. You need to keep adapting your skills and learn new things, so you can remain relevant. But yet today, if you want to learn, you either go back to graduate school for two years or one year, or you're left with watching TED talks.So we thought we would build something that was more structured, that could walk with you along different stages of your life. We have different programs where you might have one program for recent college graduates, which is a six-month boot camp where they learn the skills that they should have learned in college, but they didn't. That would actually make them more highly employable, and then they get their first job.Edward: What are examples of those skills? Are you teaching them to code? Are you teaching them to do project management?Fred: Absolutely not. They're learning critical thinking skills, communication skills, leadership, how to manage projects, how to analyze data and make good decisions with it, how to manage themselves, how to manage up [...]. Basically, what you wish every entry-level grad would have, that they just know how to get stuff done, they ask good questions, they show up every day at work, and they're very driven and understand that, and are really open to learning new things.Let's face it. There are very few jobs straight off college where you need to be a specialist in anything. Investment banks will hire people who've done classics in history and engineering, and then they'll train them into what they want. What you're looking for is that adaptable person who's hungry to learn, and really has got these traits that make them highly employable. That's what we're trying to do within that program.Edward: How much of that is the person versus the training? How much is ALX that they're signaling, hey, I'm the type of person who likes to learn, and I want to come work for your company and I'll learn there, versus actual skills that they need to learn before they can start.Fred: It's a bit of both. We take them through a lot of learning by doing and giving them all feedback in ALX. One of the things we believe is that—there was a lot of research that shows—only 10% of any skill can be effectively learned in the classroom, 20% comes from your peers and mentors and coaches, and 70% comes from doing. But yet today, most education is only focused on that 10%. We try and really give people this simulation of the workplace for six months and we give them feedback and then they learn there. By the time they show up for work, they've really got the skills. We've basically done the work for an employer, that they would have had to do in upskilling someone for the world of work in their first year of employment. That aspect with ALX is the brand that we give because what we're signaling to the employers is that we have taken this person to a very rigorous selection process. We only admit about 1% of the people who applied to ALX. The employer knows that we filtered through a lot of folks so that immediately makes them take our talent more seriously.Edward: Why are they buying ALX? Are they effectively buying access to a job?Fred: We try and advertise that. We're saying that you're getting access to skills and networks that can create a lifetime of opportunities for you. You're also joining a club and lifelong community because the peers that you meet in ALX can open doors for you throughout the rest of your life and they can support you, et cetera. We are going to be your partner at different stages of your life. As you progress and you become a manager, you can come back to ALX for manager training. Then three years later, you need to learn data science, you can come up for ALX. We're constantly giving you feedback and identifying development needs, and we're walking with you throughout your career. That is what you're buying when you apply to ALX.Edward: Who are the buyers? Are they all university grads? Or before they graduate? Are they unemployed people? Are they trying to accelerate their existing careers?Fred: We have two main target audiences. One is the fresh university graduate. For example, in Kenya, it takes the average Kenyan college graduate five years to get a job. Many people have got a degree, they've got the theory, but they don't have the networks and skills. That's our target market for the first category. The second category are mid-career managers who want to accelerate their careers. We've got programs for those two different types.Edward: How are they finding ALX? How do your customers find you? How do the students find you?Fred: What's been really exciting is that most of them, the first cohort found us simply through three main ways. One is at the African Leadership Academy and African Leadership University. The two institutions that I built before ALX that built significant brands with them. We used to get thousands of people applying to both of those institutions for just a couple of hundred slots. We obviously had a lot of people who had tried again to ALA and couldn't get in. Tried again to ALU, couldn't get in. That's when we started ALX. Part of the reason they couldn't get into the ALX, ALU would also relate to cost. When we brought ALX to their city, then then they said, I've been trying to get into your institutions for several years, and now you're here in my backyard.”Many people just jumped into our ALX because of what we've done before.The second way in which they may have found us was through partnerships. We established lots of partnerships with universities because they have a problem. They're graduating kids and they're not getting jobs. We were a nice compliment to them; we're not competing with them at all. Youth groups and companies that are trying to connect with youth, et cetera. Finally, my personal brand. Over the years I have been able to build a following amongst young people because of the work I've been doing. I have about 200,000 followers on social media, so I just literally went and posted on those different platforms. That immediately spread and young people wanted to be part of it all.We didn't have to spend much money on marketing at all, to attract the first cohort. For the second cohort, they came because of word of mouth from the first cohort. We literally had kids who were standing in the streets of Nairobi telling everyone that they could meet, that you need to go to ALX because it's changed their lives. Their parents were telling their friends that you need to go to ALX because it changed their lives. At ALU, a customer acquisition cost was $3500 per student, at ALX it was $4 per student.Edward: Was that $4 per applicant or $4 per accepted student?Fred: Per accepted student.Edward: And you were only accepting 1 in 100 students? One in 100 applicants?Fred: Basically, we took 200 out of 14,000 applicants.Edward: So your cost per applicant is on the 6¢ range?Fred: Exactly. Basically, we spend almost nothing on marketing.Edward: Why are you accepting so few? Are they just not qualified? Or you just don't have the capacity or the throughput to put them in?Fred: A couple of reasons. One is we wanted to test the model first. We had to build up our capacity, our technology systems, people, et cetera. Two, we also want to make sure that we could place them into employment and entrepreneurship pathways, et cetera. We didn't want to have produced too much talent and not be able to…Edward: Meet your promise.Fred: Meet our promise, exactly. We wanted to just go a bit slower, develop the concept. But now, we're scaling significantly. We're going to train two million people in the next decade through ALX. We are really taking it up. Next year alone, we want to take about 50,000 people through ALX.Edward: How many of those applicants that came in, that you rejected, are you going to be able to accept in the future?Fred: Of those 14,000 I'd say we could probably have accepted 3000–4000 of them. I would say 20%–30% of them would have been eligible.Edward: The ones that aren't, is because you don't think you could train them well enough to get them a job after your program, and you just don't want to make that investment when you can't deliver?Fred: We have the luxury of choice, so we might as well just choose the top when we have so many applicants. It's generally easier to work with the best talent than the second-best talent. Since we have the choice, we might as well take the best talent. It's part of our brand as well, for the other side, for the employees, one of them if we can say, you can rest assured that we have only taken the top 5% or the top 10% of applicants. It enhances our ability to place them because the employers, the investors who might want to invest in them into their ventures, know that they have been through a very rigorous selection process. Therefore, it actually makes it easier to place them.Edward: You're in a place right now where you don't need to make any marketing investments really at all because you have a backlog of people, your operations are your bottleneck, not your marketing. But presumably, if your aspiration is two million people through your program, you're going to need that marketing muscle later on. How do you work on that marketing muscle when there's no acute need for it?Fred: I've recently built a significant marketing team, I brought in a CMO and digital marketing expert, a content expert, and marketing automation, et cetera. We've got about (now) 20 people and a marketing team. We are now going to be more deliberate in spreading the word to allow us to build a massive funnel for us to be able to scale as fast as we can and as much as we'd like. We are doing that, but we still don't expect our customer acquisition cost to be very high because we're finding that our product has a really excellent product-market fit. What we've done is we've also flipped the entire pricing model. You don't pay upfront for ALX. You pay for it afterward only when you have a job.We've got an interesting subscription model. Essentially, the upfront cost of going through ALX is zero, so we've got a perfect product-market fit, you can say that. We are building a marketing function. We are also about to launch something that we call the Do Hard Things Challenge. Because we have so many more applicants than we can accept, we're putting a barrier in the process which is to say, we will change your life when you join the ALX. You will get connected to an incredible network and you'll get skills that will support you for the rest of your life. But before we invest in you and give you all these opportunities, you need to show us that you're a doer and that you are someone who is a self-starter.The Do Hard Things Challenge is basically asking young Africans to show us over a three-month period that they can get a job, any job. Go and volunteer, do anything, and hold it for three months. Start a venture or start a project in your community. If you do well in that, then we will consider you for our application. That's going to both build the buzz around what we're doing and it's also going to signal the kind of brand that we stand for, that we are a place for doers and not just talkers.Edward: I think you have the luxury of being able to invest in your brand because you don't have that acute fire that you need to put out next week. You're growing things for the long term, which is allowing you to invest for the long term. Fred: Exactly.Edward: That said, one of your important acute channels is universities and having the universities flow students into your program. How do you work with universities?Fred: As I mentioned, universities in Africa have a big problem because about 45% of university graduates are unemployed. In Kenya, it takes five years for college graduates to get a job. In Ghana, it takes up to 10 years to get a job. So we are solving a problem for them. When we started in Kenya, for example, I leveraged my relationships and my reputation to visit some of the different universities. The vice-chancellors literally rolled out the red carpet for me. They had me speak to all their students. They shared mailing lists of all their alumni and they sent out blasts to all of their alumni saying here's an incredible program that you can go to and that will help you find opportunities. They were a natural partner because we had what they needed. We also partnered with various youth groups and media organizations, anyone because youth unemployment is a massive problem in Africa. Because we were providing a solution to that issue, many, many partners wanted to collaborate with us.Edward: Who led those relationships? Did you call in the chancellors yourself?Fred: In some cases, I did that. In other cases, my team just went and visited different universities and met the career development center, the alumni centers, and formed those partnerships. But I didn't need to open the doors. Our offering was so compelling that they welcomed us with open arms in most places we went to.Edward: I find that when you do these partnerships, oftentimes you can get the top-down support, but then when it comes down to bottom-up and actually delivering on it, they sometimes drop the ball. How did you ensure these universities actually followed through and gave you the support they needed? Did they hand you the email addresses or they send the emails up themselves? If so, how did you make sure they were sending out the right emails to the right people?Fred: In some cases, yes. They handed out the email addresses. In Africa, we don't have these crazy data protection laws, but in some cases, they did that. I mean, this is a few years ago; I think now we would do things differently. In other cases, they send it out on our behalf. The way we made sure that it wasn't just some fluffy agreement at the top is that I made sure that I went into these relationships with people who could then do the follow-up with their next [...].I made sure I got a commitment from them about who exactly in your organization should we work with to execute this? Can you let them know that you have made this commitment? Also in some institutions, we built the relationships bottom up because we went straight to the person who actually had that email list or whose job it was to find jobs for the graduates. They were obviously struggling, so we went to them with a solution and it was definitely not a hard sell.Edward: Do you have an account management team that continues to oversee each of these relationships at these schools as you scale?Edward: Not formally. We are going to set up something like that, but again, because of the word of mouth of the first batch of students, those relationships over time become less and less important because we now have our own graduates to vouch for what we're doing. We have a net promoter score of about 85 and Harvard Business School has a net promoter score of 42.Edward: So your word of mouth is going okay for you.Fred: Yeah, it's going all right. Yeah.Edward: It's really fantastic what you're building, Fred. Before we go, I want to talk about your Quake book, but in your case, it's not really a book. It's more of a blog post, is that right?Fred: Yeah. It's this blog post by Paul Graham, the founder of Y Combinator, which talks about things that don't scale. It's his advice to some of the founders that go through Y Combinator, that in the early days, they should really focus on creating outstanding customer experiences and getting a few customers to love them. Then from there, you can actually get to scale. Actually, the first time I heard that concept was from Brian Chesky, the founder of Airbnb. I was attending a conference where he was speaking, and he was talking about how, when he had joined Y Combinator, they'd ask him, they said, where are your customers. He said, well, I've got about 100 customers on the East Coast. So, Y Combinator was like, why are you here? Get out of this office. Go to the East Coast and find out why those 100 love you. Brian and his co-founders went and spent six months in New York, living in those Airbnbs with those hundred clients, and understanding why they like Airbnb, what was working, what wasn't working, and they figured out all kinds of things. For example, if you take a picture of the apartment and put it online, you're going to have more people wanting to book, et cetera. From that, they perfected their product. Then a few years later, they had millions of customers. Brian was saying how, when most founders start companies, they try and get to scale immediately. They're trying to be big [...] doing stages. The first stage is you need to create your product. In the second stage, you need to get love, which is a few people really, really loving your product. That's doing things in very unscalable ways for those first 100 people. Once you have love, you finally get scale. That philosophy goes back to where we started in our podcast yesterday where I was talking about the different stages of relationship-building, where you need to go from connection to continuous interaction to trust, and then finally collaboration. It's really saying get those first 100 customers to really love what you're doing. Then from there, you can get to scale.Edward: Tell me about how marketing is dead.Fred: One of the things that I'm increasingly of the opinion is that we have lost control of our brands. Well, not exactly. We need to think about how we build our brands differently. Fifteen, 20 years ago, you could put up a billboard or TV advert or whatever, and claim whatever you wanted about yourself. But with the advent of social media today, we live in a world of Tripadvisor, where no one actually believes what you say as a brand.I believe that the way to build your brand right now is only through customer experience. You have to deliver exceptional customer experience and then let your customers be your ambassadors. Our job is to create platforms that enable our customers to tell others about the brand because whether it's your brand as an employer, no one will believe what you see on your website, they'll go to Glassdoor or they'll go to LinkedIn and find someone who works with you and ask them what it's like to work with you. If your brand is a hotel, no one will believe what you say. They'll go to Tripadvisor. Any other products, they're going to look for product reviews online, Yelp, et cetera. Especially as we become more and more digitized, it's so easy for anyone to set up a website, set up something, and claim whatever they want to claim. I was looking the other day about how many ecommerce sites exist. There are seven million ecommerce sites that exist, and yet Amazon has been able to build a business with a billion customers and a $1.7 trillion market cap. Look at Netflix and all these guys. They've been able to do that only by focusing on the customer experience. Because there's so much competition, everyone is out there claiming whatever they want. The thing I really believe is that in today's day and age, the only way you can truly build a sustainable brand is by delivering exceptional value to your customers. Anything else, any other claim that you make, you'll quickly get found out and then you lose trust with your customers.Edward: And I think it's almost a red queen situation in that, in many cases, features and benefits satisfy customers, but in overall customer satisfaction and user experience, customers are never satisfied. The bar is always increasing and getting harder and harder and harder, which means there's always work to be done.Fred: Exactly.Edward: Awesome. Thank you, Fred. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
This Part 1 of my interview with Fred Swaniker, founder of Africa Leadership Academy (ALA), Africa Leadership Univerity (ALU) and ALX (among others). Fred is one of Time Magazine's Most Influential People in the World and has done the requisite mainstage TED talk. I believe this is the only time he has publicly talked about marketing.Subscribe to the podcast: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed.Transcript:Edward: My guest today is Fred Swaniker. Fred was born in Ghana but had to leave the country when he was four years old to escape a military coup. By the time he was 18, he'd lived in four African countries. Today's episode dives into his career, Macalester College, McKinsey, Stanford, Africa Leadership Group, ALA, ALU, ALN, and a mainstage TED talk. Fred's latest venture is ALX, a leadership development and talent sourcing platform. We are lucky to have him here today.Fred, you've never had a CMO role per se, but you've largely been the one responsible for growing your businesses, and I've never met anybody in my life who's better at fundraising. I think fundraising (in general) is a sales skill, but I would argue you've managed to do it by building a brand and then having people throw money at you. Where did you learn your marketing skills? How did you become a marketer?Fred: I wish it was as easy as you make it sound that people just throw money at me. I think that my approach to fundraising has really been one of not trying to do the hard sell. I really believe in establishing relationships and win-win partnerships that enable us and whoever we are partnering with to both achieve our goals.We've been able to raise about US$600 million in the last 15 years, from [...] different ventures, and I would say that probably about 50%–60% of the funds that were raised, I never asked for it. Our approach is really to inspire people and just share the stories of what we're doing, and those who are interested in what we're doing will step up and will join us, those who are not will move on. Maybe it could be the way I was brought up. My parents always told me never to go and ask people for money. I always thought, can I find a way to build a relationship that adds value and shows people the worthiness of what we're doing? If people see that, then they'll come to us and they'll participate in our vision.Edward: Fred, what happens before the building of the relationship? That before you can build a relationship with someone who's willing to write you a hundred million dollar check, you must have built a personal brand or a company brand that gets you there. How did you do that?Fred: Over the years, I've developed a framework that I use for establishing relationships, and I break it down into four steps. First, I met thousands of people around the world. Every person that you meet, there's some connection that you have. Maybe there's some mutual interest, you share a joke, there's some chemistry that you have with someone. That's stage one, which is the connection. Then maybe you exchange business cards, you exchange emails, et cetera.Then you enter the second stage which is a continuous interaction. This is when you're exchanging communication, you're meeting up for coffee every now and then, having lunch, you actually have some dialogue and then mutual exchange. Only a few of the connections move to that stage of continuous interaction. From the continuous interaction, people start to see whether you are someone who delivers on what you say you're going to do, and you establish credibility based on integrity, et cetera.From there, you get to trust, which is the third phase. Once you have trust, finally, and only once you have trust, then you get to collaboration, which is where someone could say, I'm going to invest in you. I'm going to donate funds. I'm going to join your board, et cetera. I think one of the mistakes I made earlier in my career was I would rush straight to stage four (collaboration) without going to the continuous interaction and building trust first. That's the way I approach relationships.Edward: How did you learn that, though? You made that mistake early in your career. How did you come to the realization that there was this four-step process? Did you read about it? Did you learn it from a mentor? Did you figure it out on your own?Fred: I read about this. There's one book that I read called Mega Gifts. It's written by this guy called Jerold Panas who interviewed about 100 people who had given more than $1 million to things, and asked them why they gave. It was really fascinating just learning about some of the philosophy behind that. Before that, when I started the African Leadership Academy, I had never raised money before really. I went to see the Dean of the Stanford Business School where I went, and I said, you raised a lot of money. How did you do it? That time, the Stanford Business School had just raised US$300 million from Phil Knight, the founder of Nike. I went to see him and I said, how did you do this thing. He said, “The first thing you do is never ask for money the first time you meet someone. Just show them what you're doing. Get them involved in what you're doing in some way. Invite them to see the campus. Get them onto a board or something. Then, only once you've built a relationship with them, do you then engage them in possibly supporting you financially.” I must say that there'd been some times when that rule didn't work. I remember very early on, I met this very successful technology executive. She came to South Africa on a business trip and we met. We had this lovely lunch and at the end of the lunch, she said, so Fred, why did you want to see me today? I was like, well, perhaps you can help us structure some thinking about our technology strategy for the university, for the [...] I said, okay, that sounds good. She had a relationship with the President of South Africa in terms of that. So I said, perhaps you can connect us to him, et cetera? Then she goes, is there anything else? I was with my co-founder, Chris Bradford, and he's kicking me under the table, as in, asking for the money.I was just remembering this advice from the dean who said, don't ask for the money the first time you meet someone, and this was the first time we ever met. I decided to just take a chance because she was really saying, ask me for the money. I said, we're hoping perhaps you could support us financially, and she said, I thought you'd never ask. She said, I was sold on your idea when I heard about it, so consider it done. She gave us $100,000 the next week, and she went on to give us about $500,000 over the next few years. Ultimately, you have to read the signals and understand when someone is ready to be asked. I think a lot of marketing is like that. You're taking someone through a journey with you and people have choices about where they can spend their money. If you wait too long before you ask for the money, you lose the deal. If you don't wait long enough and you asked too soon, you also lose the deal. So it's about really knowing when is the right time when you read the signals about whether this person is really interested in your product or service, and they've demonstrated through their actions and their behaviors that they're really interested in what you have to offer. At that point, it's a mutually beneficial partnership.Edward: That's great, Fred. I want to go back and understand the path of how Fred became Fred. I have this theory that what people do when they're 12–14 years old affects them for their entire lives. I'm not even sure what country you were living in when you were 12–14 years old. What were you doing around that age?Fred: I was there in between Botswana and Zimbabwe at that time. I had just started high school, I guess.Edward: What did you care about? What were you spending your time doing? What were you passionate about at that age?Fred: At that time, I was always reading about different kinds of technologies, and I was very passionate about planes. I was curious about how they worked. I used to read a lot about different kinds of planes around the world. I was always trying to invent things with my friends. I also started getting a bit into the business. I remember at the time, these Nike shoes and Reeboks were coming out and they were very popular. My family was from Ghana originally and we used to go back home every now and then. There were these secondhand Nike and Reebok shoes that have been brought imported to Ghana. It's kind of gross now that I think back then. You could buy them there at a really low cost. I would bring them back to Zimbabwe and try to sell it to my friends.I also was very passionate about gathering people. My home was the place where most of my friends from school would come and gather in the afternoons and we would just hang out. I loved bringing people together and having them connect with each other. If I look today, a lot of the work that I do, it has really been involved in building networks. I can say, perhaps that was shaped by that early experience because if I think about what we have done in creating that leadership group, it's been a massive exercise in networks. We've created a network of about 30,000 people with some of the most influential people in the world who have joined us in this mission. It has led to all sorts of exciting collaborations. Part of it is I really enjoy bringing people together and creating communities. I think perhaps that started then.Edward: So Fred, a lot of what you did as a child influenced your mission in life. Did you have skills when you're a child that influenced your career trajectory and where you are today? Was it these connection skills? Fred: One of the skills that I learned was how to adapt very quickly and to build relationships with new people. I was born in Ghana. I left there when I was four, and went to Gambia. Then when I was eight, I went to Botswana. When I was 12, I went to Zimbabwe. As a result, I had to learn how to adapt to different environments very quickly. I'd been to a new school every few years and I had to quickly make friends with different people. So, relationship building became something that I practiced very early on. As I mentioned earlier, I used to bring my friends together every afternoon and we'd just hang out, play games, and so forth. That became a skill as well. I believe I'm really good at designing experiences for people that make them have fun, and that makes them enjoy being in a place. That probably comes from some of those things that I was doing at that age.Another skill that I would say I developed is the ability to see patterns. A lot of my ideas today come from exposure to different countries I've been to, different people that I've met. I fill my life with a lot of diversity. That catalyzed a lot of the innovation for me because I'm able to connect the dots between something that is actually in this country, or that I heard from this person that I spoke to, or an idea that I read about in technology or in healthcare that I can bring into my work in education. I'm constantly scanning the universe to see what's going on and I'm able to bring together ideas from these creative persons to create new products that are quite distinctive. I think part of that comes from the fact that I was always in different environments and I had to absorb very quickly in this new environment that I went to, to be able to survive.Edward: You went to university at Macalester College. How did you come out different than when you went in?Fred: Macalester—if you don't know about it—has a culture that cares very much about social justice and about the world. When I went in there, I would say that I cared about the world, but I wouldn't say that I was obsessed about making a difference. I was going there to get a degree and get a job. But when you go to Macalester, every other week, there's some kind of protest against some social injustice. I remember the students took over the President's Office once because Macalester was buying their athletic gear from Nike. At that time, Nike had sweatshops in Southeast Asia. There was always this protest or that protest. It was very clear that you had to make a difference in the world.I would say that my social conscience changed. Even though my very first job outside of Macalester was not something that I would say was altruistic and made sense—I was working with McKinsey management consulting—I saw that very much as a means to an end because, by the time I left, I had really seen that I could make a difference in Africa. In fact, one of the things I did in my final year at Macalester was I wrote my honors thesis, where I looked at the trends that had happened in Africa in the last 50 years. I saw some exciting changes that were happening at that time. I predicted what I was going to do. Also, I predicted how Africa was going to evolve over the next 50 years. Many of the trends that I saw influenced my passion to go back to Africa. I would say that what Macalester did, it really made me a lot more passionate about the world, about making an impact in the world. The time that I had there enabled me to really do this honest thesis, understand that Africa was about to undergo a massive transformation, and it made me really excited about going back to play a role in that transformation.Edward: Fred, what would have happened if you hadn't left Africa then? If you had gone to college in Africa, instead of going to Macalester, how would your life have been different?Fred: My life would've been different in a couple of ways. Number one is I don't believe how to build networks. Some of the networks that I have today led me to do what I'm doing. My networks probably would remain very Africa-centric, maybe very Ghana-centric, or Zimbabwe-centric, whichever country I would have gone to. The second way my life would have been different is I wouldn't have developed such a global perspective. A lot of the work that I do, even though I'm based in Africa, involves leveraging global networks, global insights, global technology. I always think about what's going on in the world and how do I bring it to Africa, and how do I take Africa to the global stage. Finally, I don't think that I would have been as dedicated or passionate about social transformation because (like I said) you can't go to Macalester and not believe that you have to make a difference in the world. Kofi Annan, the former Secretary-General of the UN, had been to Ghana. He had been to Macalester a few decades before me. I remember being there and everyone's like, oh, you're from Ghana. Kofi Annan also went here. It was almost like you're expected to live up to his track record. I think those influences would not have been there if I hadn't gone to Macalester.Edward: It's interesting. By leaving Africa, you became more passionate about Africa.Fred: Exactly. What's interesting is when I arrived there I remember walking into the cafeteria at Macalester. In Africa, most people watch American TV, so a lot of people were always trying to mimic American accents. That was the cool thing. But when I landed in Macalester and I went to the cafeteria and I asked for food, there was a woman behind the counter. Actually, she was quite cute, and then she said, I love your accent. I suddenly realized that actually my African accent was cool in the US. That made me a lot prouder to be an African, and I really dived in more into it. The fact that I lived all across Africa really made me reflect on how special it was to be an African.Edward: Fred, what were the biggest failure points in your career? Where did things not go as expected?Fred: Oh, I've had so many failure points, but maybe I'll talk about two. One was about a year-and-a-half into my career at McKinsey. A client asked for me to be taken off the project. That was a real blow to me because my career had been rising very much in McKinsey at that time. I'd always had really great reviews on all my projects. But I had really pissed off the client that basically the CEO asked that I remove them from the project team. What had happened was I was a young kid. I was 22–23 and I was advising very senior people in the company. I thought I needed to show them how clever I was. I was always showing them how they were wrong and I was right about whatever idea I had, coming in and advising them then. I guess I thought that that was the way I should show value. I basically came across as an arrogant old prick. I learned a big lesson then, that when you are working with other people, you actually shine if you resist from showing off what you know. You actually will do a much better job at building relationships with others if you make them look great, instead of you trying to be great in the situation. What a very powerful lesson. It made me a lot more humble and made me realize that just because you think you know or thinking of the answer, doesn't mean you need to tell everyone about it. That was a very powerful lesson.Another lesson I learned was, after Stanford Business School, I started both the African Leadership Academy and something called Global Leadership Adventures at the same time. GLA was a summer program where we're going to bring kids from all across Africa, so all around the world to come to keep time for three months. It was the very first summer, and I went and rented out this holiday resort by this beautiful beach in Cape Town. The holiday resort could take about 150 people. I believed that we were going to get 150 kids from the US to show up in Cape Town, paying us $4,000 for a one-month experience each.I booked out the whole place for three months, then we went on the road trying to sell this thing. I signed a terrible legal agreement that committed me to pay for the full thing no matter how many students showed up. Lo and behold, we only got 35 kids to pay. I was [...] for 150 rooms. They just would not let me out of that contract. I ended up giving away another 30 slots for free. We had 70 kids who started being in that summer program, but I had to pay for 150 rooms. That was a very powerful lesson in being very humble when you make your financial projections for a startup, and also making sure you have a good lawyer when you're signing contracts. These are some of the powerful lessons that I learned from my failures. I can just go on and on and on, but I can only say I've grown simply because of my failures.Edward: I think being a bit more humble can be a lesson for all of us. We'll pick this up tomorrow in part two. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
This Part 2 of my interview with Nick White, head of marketing at Osano. In today's episode Nick explains what Osano is, the state of privacy management and regulation today, and how he is growing the company to become the leading global privacy management platform.Subscribe to the podcast: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed.Transcript:Edward Nevraumont: This is part two of my interview with Nick White. Today, we're going to dive into his experiences as head of marketing at Osano. First, Nick, can you describe what Osano is and what it is the company does?Nick Whitet: Osano is a data privacy platform. We're a piece of software that helps companies comply with data privacy laws. Over the past several years, more and more people have been asking for stronger protections around their privacy online. Meanwhile, politicians can't agree on anything, but this is one area where they see that they can do something, where democrats and republicans can agree and they could do something for their constituents. That's true within the US and that's true all over the world.Governments have been passing these laws and there's a big law in the EU. There's a big law in California. There's a big law in Brazil and South Africa. If you're a business, you're supposed to follow these, but it's a pain in the butt to understand what they are. They're all different. It's a pain in the butt to understand what you actually need to do to follow the law and make sure that you aren't breaking the law.Rather than have your attorneys and your engineers figure that stuff out and then instrument solutions, you can just pay Osano a small amount of money, significantly less than what cost for you to do all that stuff yourself. We're a software-as-a-service platform. We help companies follow all of these laws all over the world, regardless of where you are, regardless of where your customers are and regardless of what language they speak and read.EN: What's the alternative, Nick? If you're a large company, do you just go and redo all that work yourself internally? If you're a small company, just break the law?NW: You could. You can always break the law.EN: What do companies actually do? If they don't use Osano, are those the two paths?NW: Yes, generally. Either you can build this yourself, or you can pay for a platform, like Osano. There's different ways that you can build it yourself. There are tools that can help you along the way. We have competitors and there are different options for solving this. It's the most straightforward way. We are the most popular way and it's very simple and affordable.EN: Most of the time when you're acquiring customers, are you trying to steal them from a competitor or a different solution, or you're just trying to get them to comply with the law, period, and join Osano? What percentage of companies' websites right now do you think are following the law?NW: Between 10% and 20%.EN: 10% and 20% are following the law?NW: 10% and 20% of companies, of websites that have proper businesses are following the law. I'm not counting blogs and things like that. I think that your previous question about is the government actually going to come after me? Probably not, if you just are running a small blog or something like that. It is a green field and people are behind. There's just this perception that this is akin to a speeding ticket that you can get away with this and you might get a slap on the wrist.What we're seeing is that the fines can be very, very substantial. Again, these are all different across different regulations. For the European Union's law, it's 4% of your revenue. For Brazil's law, it starts at over 100 million dollars. That's the minimum. The consequences can be massive. The much bigger challenge is in people saying, “We'll risk it.” They just don't know. It's just an education problem.EN: Osano has a few different products. Can you explain your product set, or your feature set?NW: Yeah, absolutely. We help companies comply with all of these laws. These laws can be complicated in some sense, but they can also be really simple. If you don't get data privacy, you can think of it like all the lessons that you learned in kindergarten. If you want something for somebody, you should ask for it first. If you want something back from somebody, you should be able to ask for it and have them give it to you. If you want to know if somebody has something, you should be able to ask them and they should tell you the truth. That's all that our products are doing.When it comes to asking people for permission for something, we see that whenever we go to a website and a banner pops up and says, “Hey, do you accept cookies?” That's one element of our platform. It's what we call consent management. Another element is subjects rights management. That's the idea of if somebody wants their information back, you need to tell them what it is. We set up workflows and automations that allow them to gather information and then give it to people and deliver that information. Then if they want it to be edited, say you change your name, you can do that. If you want it deleted, then that's one element.Then the last major pillar of the platform is what's called vendor monitoring. You don't just need to make sure that your operations, your company is doing a good job and data privacy-wise, but you also want to make sure that all the companies you work with do privacy well. If you work with other companies, you're passing them your data and your customer's personal data, so you want to make sure that they are good actors.That was actually the impetus for this company. The founders wanted to know, are the companies that we work with doing privacy well? It turns out that problem is really complicated and it takes a lot of lawyers to figure that out. What they did is they just built a objective way of evaluating privacy. We created privacy scores. Created this ontology of over a 100 different ways of evaluating a company's privacy practices and then distilling all that qualitative information into one score. It's on a scale of 300 to 850, just like your personal credit score.We invested in a lot of this and a lot of this work. We have a team of two dozen attorneys, spending tens of thousands of hours rating well over 10,000 different companies. It would probably behoove us to keep this information and sell it. We do offer that as a component of the platform, but if you're curious about the privacy practices of your favorite website, we also give that information away for free.Osana.com is our main website, but we also have a consumer version of our website called privacymonitor.com. If you go there, you can type in Reddit and you can look at what Reddit's privacy score is and how it's trended over time, or any other website. So that's an overview of the platform.I guess, one last thing to share about Osano is that we're a B corporation, which means that we've been certified as providing a public benefit to folks. We aren't just focused on producing profits, but we're also providing something good for the entire world. We're very committed to creating a diverse workforce here. We're very committed to creating a more transparent Internet. We're very dedicated to having a very wide reach. That doesn't just mean serving a lot of different companies and we do serve Fortune 500 companies and tiny little one-person businesses, but we also have a set of open source tools. You can just take a lot of Osana's product. It's stripped down. It's not all the same. You can take that and build your own tool, if that's what you'd like to do.EN: Nick, who buys your product? It's almost like an insurance product. It's not going to help you necessarily grow your revenue, it's going to protect the downside. Who's your buyer?NW: There isn't one answer for you. Privacy is a new category and that means that there tends not to be a privacy person at most companies. At big companies, the largest companies, yes.EN: I would imagine the largest companies start doing this in-house. If you have a chief privacy officer, you're probably doing a lot of this stuff in-house.NW: A lot of times. Your website and your data systems are more complex. Yeah, the Microsofts of the world, they're probably going to build their own and it makes sense for them to build their own. For the vast majority of companies, it doesn't make sense. The math just doesn't work. Within any given companies, we really see three different buckets of buyers for us. One is product managers. Typically, the product manager for the website that say, “Oh, I'm responsible for this thing. Other websites have this and we don't.” That's one.Two is marketing. The thinking there can be a little bit underhanded. Marketing tends to not like privacy, because it makes it more difficult for them to do their jobs. If they set the tone of the privacy conversation internally, they can pick and choose what data, or how data is handled. It turns out that Osano's products are very marketing-friendly. Marketers really like to use us. The third bucket is compliance folks, just people who are in charge of making sure that companies aren't breaking the law. Then the fourth are what we call board members, like either VCs and investors, or the CEOs, COO type of folks who are most liable should something like this go wrong.Some people can be criminally liable at businesses for breaking the law. Those are the folks that would be most likely to be on the hook. They're also the ones who are very highly invested in making sure that companies follow the law of its letter.EN: How is it divided? Is it one quarter for each of the four groups, or is one group just over-represented on or buys or stuff?NW: Product managers are the most common. It's still the minority though.EN: Then once someone's looking to buy this thing, is it bought, or is it sold? Are you pushing it on these people to make them aware of it, or are they coming to you and looking for a solution?NW: It depends. There really are two different types of customers in that sense. Sometimes they know about the laws, they know they need to buy something they know that they need to find a solution. Then that conversation is very different. The conversation is about here's why we're unique and better than our competitors and why you should choose Osano over different folks.Then other times they're passive and then the conversation is, “Hey, here's what data privacy is. Here's what these laws are. Here's why they're so important and here's what you need to do.” It's much more of an educational conversation.EN: How are your sales divided between the buyers and the sellers, being sold to versus being purchased?NW: When it comes to count of customers, it's around 80% inbound versus 20% outbound. When it comes to revenue, it's roughly reversed. We have a sales team that's hunting and they're going to hunt the biggest deals, the biggest brands, the companies that have the most traffic and generally, that's how we charge for usage. That's how it works.EN: Most of those sales people when they reach out and they find a customer, were those customers sitting back and not really worrying about this until the sales people ping them, or were they in the process of looking and you just got them at the right time?NW: Most commonly, they were sitting back. It goes back to that statistic that we discussed earlier. 10%, 20% of people have a solution. Yeah, maybe a small percentage above that are thinking about a solution, but this is mostly green space. This is mostly not being dealt with. It's so crazy to me. This is a marketing problem. It's an education problem. It's a really interesting one, because my call to action is obey the law, which is most companies don't have such a strong call to action as that.EN: Reminds me of those companies that help you manage your sales tax problems across the US. Every state has different rules and doing it all is difficult and you have to do it. every state has different privacy rules and you comply with these different models and having someone manage that for you makes sense. How do you monetize it? Is it a SaaS product?NW: Yeah, it's a SaaS product. We're a freemium product. If you have a very small amount of website traffic, you can use us pretty much forever for free. If you have more traffic, you can kick the tires on us and we offer free trials, but we charge monthly or annually for this.EN: I assume there's tiers of products that you said offering more and more services for higher and higher monthly fees?NW: Yeah, that's right. It's traffic-based and it's also based on the number of other companies that you want to monitor. If you want to get alerts from five different companies, that's very different than if you want to get alerts and monitoring for a thousand different companies. On average, companies share data with 730 different companies many more than they think. Yeah, it just all depends on what those two numbers are; traffic and vendors.EN: The vendors is people that you work with. You're not monitoring competitors. You're monitoring vendors.NW: You're monitoring – yes. You can do that. Generally, the first vendor that people monitor is themselves. If their privacy practices fall off a cliff, they want to know. The intent is to watch the people that you have a contract in place with.EN: How do you acquire your customers? You have a sales team that goes and gets 20% and the 80% inbound. How are you getting those leads?NW: Search has been very valuable for us. This is a space that people are trying to figure out. As a marketer, you want to get the right person at the right time. The nice thing about this space is people are asking Google about what they should do and what data privacy is. SEM or paid search is very important for us. SEO is very important for us as well. A nice thing about this business is we provide widgets to other websites and surprise, we can link back to ourselves through those widgets. We have a very nice backlink profile. By writing content that's relevant to our customers and our product, we can rank for it quite quickly, thanks to all that nice backlink juice.EN: What is your split between paid and organic search, roughly?NW: It's heavily weighted towards organic today. I would expect that that changes over time, but it's heavily weighted towards organic. That's thanks to us having just this inbuilt organic search engine.EN: The reason why you're not doing more paid, is it – you're a SaaS business obviously, so you pay upfront and you get a revenue stream. Are you just constrained by capital in your growth, or is it constrained by ROI?NW: It's a combination of both. We're investing pretty heavily, but also, I would say the biggest thing is we're constrained by capacity right now. We don't have enough marketing people here to really focus on ramping up SEM. We're hiring, but we don't have a dedicated paid search person today. It's just something that I do for my 5% or 10% time. If we had somebody to do a better job of matching up queries to copy to landing pages, all the basic stuff that you know and talk about, we would be ramping it up faster. It's growing, but it could be growing faster. That's one piece. The other is for the terms that we're already ranking one for, we generally don't also buy ads against. We don't want to compete with ourselves, so that's another piece.EN: What other marketing activities are you guys doing to drive growth beyond search?NW: Content in general is really big for us. I came from finance prior, as a financial technology company. I see a lot of parallels with content. If you look at most of the information that you'll find out there about data privacy, it's not interesting. It's not good. It's acronyms and it's jargon and it's wall-to-wall legalese. It's just really hard to read. When I came here, I wanted – I was very motivated to educate myself. It was hard, because the content all sucks so much. I think there's a huge opportunity for us to actually write stuff that's engaging and interesting, while also being needy and teaching people stuff.EN: What's the value of that? You create that content. Is the value SEO? Is the value public relations? Is the value conversion? Is the value something to do with the enterprise business?NW: It's all that stuff, plus social, e-mail, onboarding, retention. It powers a lot of different steps. We share it in a bunch of different ways. I guess, a more specific component of content is our data-driven stuff. We have these vendor monitoring scores, which is a lot of proprietary data that no one else has access to, which is really remarkable and really interesting. Something that I found is these scores tend to correlate a lot with people's security outcomes.When I got here, I ranked all of our privacy scores. When I looked at the worst actors, or the people that had the poor scores, there a lot of them have been in the news lately for getting hacked, or some other type of data breach.EN: Data breaches themselves don't factor into the score. Security and privacy, they're separate.NW: Are separate. That's right. Turns out, these two things go together.EN: Companies that are sloppy on privacy tend to be sloppy on security.NW: That's right. I saw that via anecdote, then did the analysis to see that overall. Saw exactly what the correlation was. Turns out, yeah, not just that those moved together, but the severity of the breach moves together and we segmented that information by different industries and things like that, and produced a ton of content that's powered, yes, our blog, but also social and a ton of press. It's powered us syndicating that content to other websites. It's powered us doing a bunch of webinars and gathering folks that way. This is out and out marketing, where people don't ever interact with us and just use our self-serve platform. Also, it's lead gen for our sales team.EN: How do you value that? You go and you put a bunch of effort into this analysis and a bunch of your time. Presumably, that's time that's going away from not spending more than 5% of your time on paid search. How do you know what the ROI is on all that effort?NW: It's a good question. We do several things. First of all, we track all of the things for PR. We look at the hits that we get and the traffic that we get from that. When we get promoted on newsletters, we look at the traffic for that. There's a direct element. There's also an SEO element. If you put together content today and you get a certain number of backlinks today, you're going to get not just leads tomorrow, but leads tomorrow and the next day in perpetuity. There's some separate math there.EN: Do you quantify that math?NW: Yeah. The nice thing about being a startup is that people don't expect a ton of rigor. I come from larger companies that have a ton of rigor. It's pretty easy to do this stuff. People's buying journeys aren't that complicated, because there aren't that many marketing channels today. Also, the ones that we run tend to be the easiest to track. If we did TV and billboards, life would be harder.Also, we aren't working with giant data. We get tens and hundreds of thousands of visits, but we aren't getting hundreds of thousands of customers every day. That can complicate things. The math is pretty straightforward and given that there's no framework around this stuff, there's a high tolerance for moving relatively quickly. I'm still very adamant that we measure all the things and rationalize everywhere that we focus. As a startup, you have to move quickly and where we focus is everything.EN: Well, thank you so much for being on the show today, Nick. Before we go, can you talk a little bit about your Quake book?NW: Sure. My Quake book would have to be something called Stumbling on Happiness by Dan Gilbert. Dan Gilbert is a psychologist at Harvard and he's written some textbooks, but he's really just written one popular psychology book and it's called Stumbling on Happiness and it's extremely good. It's a very entertaining read. He's a funny guy. The substance was very earth-shattering for me.The main idea is our imaginations aren't that great. We don't know who we're going to become. We are good at imagining ourselves, our future selves. As a result, we don't know what that person will want. That means that today, we're sacrificing for that future person, but we're focused on the wrong things, and so we're delaying gratification and it might be entirely wasted. I woke up this morning and I got to work and I'm working, because I'm saving money and I'm developing a skill set. I think I want to retire at some point. I made all these decisions for what I think my future self will want.The vast majority of the time, we don't really sit and very thoughtfully think about what that person does want. We just use our imaginations from time to time in an indeliberate way and using your imagination is not the right thing, because it's flawed. Dan Gilbert breaks all this down. He explains why we're all doing it wrong and he explains how to do it right, which is just find direction through analogy. Find people who are living that life that you want that are further along in their career, that are further along in their personal life and then work backwards to determine what you should do next.EN: Thank you, Nick. Appreciate your time today.NW: Thanks, Ed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com
This Part 1 of my interview with Nick White, head of marketing for Osano, the leading website privacy management platform. Today's episode explores Nick's career and how he got his first head of marketing role at Wealthsimple.Subscribe to the podcast: Apple, Sticher, TuneIn, Overcast , Spotify. Private Feed.Transcript:Edward Nevraumont: Welcome to Marketing BS. My guest today is Nick White. Today's episode dives into his career, University of Washington, Pacific Continental Bank, Ignition Partners, A Place for Mom, Wealthsimple. He's now Head of Marketing at Osano, the leading privacy management platform.Nick, Osano was the first time you oversaw all of marketing, but you had everything except for brand at Wealthsimple, is that correct?Nick White: That's right.EN: You were hired there as a director of marketing and you worked your way into the head of growth. How did you make that happen?NW: I've been working at startups for a while and the nice thing about startups is that there's opportunity all over the place. There are way more things to do than there are hands to do it, and so you can just grab stuff. Over time, my interest and my desire to be opportunistic and add value to the company just led me to gradually expand my breadth of responsibilities, as I was also of diving into specific areas of marketing.It really just happened organically. Over time as I built up a reputation at Wealthsimple and as the company continued to grow and we needed more people, it was a pretty easy conversation for me to say, “Hey, we should hire this person and they should report to me.”EN: Did you take on more responsibility formally, or did you do the job before you had the job?NW: Usually did the job before I had the job. There wasn't a ton of formality in the initial stages when something needed to be done and that formality tended to come later.EN: Then who was doing it before you were doing it? Or just it wasn't getting done at all?NW: It wasn't getting done at all, or somebody was doing it as an afterthought. Most frequently, it just wasn't getting done at all. We realized that we need to do something. I was somebody who would very frequently put their hands up and say, “Yes, I'll do that thing.”EN: What were those things? How did your job change from being head of growth to being director of marketing?NW: I think the most straightforward way to think about it was on the basis of channels. We just started with pretty basic digital marketing. Over time, we expanded to doing a ton of e-mailing, to doing a lot of partnership marketing, to doing a lot of offline media marketing and a ton of data science and attribution work. With all of these different things, we didn't have domain experts in those areas. I knew some things about each of those areas. I knew that I could learn really quickly and that's just how it happened.EN: How did you learn that stuff? There was no one at the company to teach you, no mentorship. Where did you learn the skills you needed to do the job?NW: I think with most things in marketing, the basics are really basic. On day one at Wealthsimple, we set up paid search campaigns for the first time. Well, I never bought paid search before. It turns out, logging into google ads and setting up your first campaign is pretty darn easy. They put a lot of work into making sure that it's easy. Paid search can be really hard, really sophisticated, but not when it starts and not on day one.As the company grew, as we had to scale operations, as we got more sophisticated about our targeting and our bidding, my knowledge could grow with it. Nice thing about learning about marketing, rather than any other discipline, marketers like to talk about themselves online. They like to share how smart they are. There's a lot of crap out there, but if you look hard you can find the really smart people who are talking about this in a way that's really digestible, but substantive.EN: How are you able to find the good stuff and differentiate that from the crap?NW: I think to start with, it's reading a bunch of crap and understanding what that looks like. Over time, you realize that smart people tend to like to be around other smart people. Just finding the right areas, finding one or two people that tends to snowball, because the smart people will reference other smart people. The BS people will tend to reference other BS people.EN: That's helpful. What did you learn in that role that set you up for success at Osano?NW: Well, some of it is things that we've already talked about; the breadth of channels, the depth of knowledge required to scale at any given channel. All of these things are different. The way that you measure different channels are always different, at least slightly. Understanding things like that. Understanding operations was really valuable. A lot of the things that I learned that are most transferable are softer. Every business is different. To some extent, I'm learning a brand-new job.However, a lot of the softer stuff is quite transferable, so hiring, building a team and building a culture. Something that I really admire about Wealthsimple is that the founders were very thoughtful about creating a culture. They did a really good job of soliciting input, but not doing that too much and also, taking the reins and saying, “Hey, this is where the company and the culture is going.” That's not an obvious thing. Way too many businesses don't do that and especially early, that makes them bad places to be. That makes them difficult places to work and places that don't bring out the best in people. That's probably the most important thing that I've taken from Wealthsimple and then now applying at Osano.EN: I want to go back to the path that got you there. I have a theory that the things people do when they're in junior high school affect them their entire lives. Maybe even in grade nine. What did you spend your time doing when you were 12 to 14-years-old? What were you passionate about then?NW: I was into a lot of normal stuff. I grew up in North Dakota. Spent a lot of time riding my bike around with my friends, climbing trees and scraping knees. Did a lot of sports. I was very into geography and memorizing all of the capitals and all the lakes all over the world. There were a couple of non-standard things that I was pretty into. I happened to live right behind a golf course. If you cut through my backyard and a couple acres of woods and hopped a fence, you were on the third fairway of a public golf course in Bismarck, North Dakota.That was a really fun playground for me. I spent a ton of time in there with my friends building forts and golfing and also fishing golf balls out of the water traps at Riverwood. Around that same time, I got really into eBay. This would have been 1998. I would have been 13 and eBay was about 2. It was very small. The Internet was new and I was really into a couple of websites and eBay was one of them. The problem with that was I didn't have anything to sell and I didn't have any money.Going back to that golf course, my friends and I, we would go to the water traps at dusk when people weren't around and we'd collect a 100 or 200 golf balls. Then we'd fill up our golf bags. Really quickly, our golf bags got full. Then we'd go to used sporting goods stores around town and sell them. Well, pretty soon, their bins got full and then we had eBay. I started making money when I was 13. This was my real first job, by selling golf balls on eBay.I did that for a little while. As soon as I got enough money, I bought a trampoline. I happened to be very into trampolines at this time. I was an active kid. I bought one trampoline, kept selling golf balls, bought another trampoline. Then I started buying and selling trampolines on eBay. In hindsight, this is a very impractical item on eBay, given the shipping cost relative to the buying and selling price, but I was into it and it was a non-obvious place on eBay to be buying and selling stuff. It wasn't beanie babies or things like that.Pretty quickly, I cornered the market for trampolines on eBay. I knew exactly what price things would go for, and so I'd buy low and have them shipped to North Dakota and then I'd sell them for the market price. That was great, just because eBay was such an immature marketplace, there were arbitrage opportunities all over the place. That lasted for a little while and then that market was tapped out and the margins went away and then I got into golf clubs and things like that. Eventually, I got a real job, but that was a lot of fun for a couple of years.EN: Did you know the word arbitrage back then?NW: Definitely not. I just understood the concept of making money between a selling price and a buying price. I just intuited it.EN: Do you think that those experiences stayed with you in some way?NW: Yeah, I think so. I think as a kid, I was pretty restless, particularly in school. I wanted to move really quickly. I wasn't great at sitting still. I wasn't patient. Releasing those, or channeling those impulses into entrepreneurship and into having a side hustle certainly took me a long way, especially as a kid and into my career. I think those same things apply. If I didn't have that same level of hustle back then, I questioned whether or not I'd be – I would have been putting my hand up at Wealthsimple saying, “Hey. Oh, you need that thing done? I'm going to do it.” Not asking permission and just going at it.EN: Did you maintain side hustles through your career?NW: To some extent. I did until I didn't have the best experience. In 2011, I was living in Hong Kong. I was studying abroad for business school. I was feeling really restless there. School was really, really easy, and so I decided to start a business and I started a picture framing business, like buying and selling picture frames and professional printing. I set up a website. The reason why I chose that is I just knew that I could buy picture frames for really cheap, just over the border from where I was.I was going to go back to Seattle within a couple of months and I could create some relationships with picture frame manufacturers in Southern China and then have them ship first couple thousand picture frames while I set up a website, since when I got back I'd be in business. I started doing that. That was my first real foray into online marketing. Grew the business and it was going well. It was fine when I was in business school. Then I graduated business school and I joined A Place for Mom. I met you and started working in this very serious job.The problem was the company started doing really well. It just turned into this monster. Picture printing and framing is an offline business, their operations. I just been band-aiding everything. I had my roommates printing and framing these things and spraying down to ship them off. Then that didn't scale and then I brought in people on Craigslist. Then I would be leaving for work and letting people into my house. Then the wheels just really fell off. People started stealing from me and things were just constantly breaking. It was really awful.Meanwhile, I was trying to focus on this very demanding job, but I'd have to leave at lunch and not eat lunch, because I had to go fix a printer at home. It was insanely stressful. At that point I said, “Screw it. That's it. I'm done.” I sold the website and I haven't had a sidekick since. I've been really thankful. To some extent, I thought I just burnt out on it. But no. I think I'm better off just having side gigs within any given company. It's a lot easier to manage yourself that way.EN: You went to university at the University of Puget Sound. How did you come out different than when you went in?NW: I think that you're doing it right if when you look back on yourself a couple years before, you think that that person was stupid and naïve. I don't mean that to disparage myself, but I do find that I feel that way about myself over time. I think that's good. That's a good signal. That means that I'm growing and I'm getting smarter and better. That was certainly true from the first day to the last day at school. I think that I came to school with a very narrow view of people.I come from North Dakota and people are very similar there. There isn't much diversity. Most people are white. Most people are Christian and Republican. Most people like football and hunting and fishing. I'd done a lot of traveling as a kid, but I hadn't done a lot of really getting to deeply know diverse people and understanding that and appreciating diversity and understanding the importance of diversity was something that took me until I was 18-years-old to really get my head around. That was a tremendously valuable thing that stuck with me.EN: Say you'd gone to Minot State University, instead of the University of Puget Sound, how do you think your life and career would be different?NW: I'm not sure. I suspect – if I could answer that question by analogy, looking at my peers that went to college in North Dakota, I'd probably still be there. I probably would have gotten married in my early 20s, rather than my early 30s. I probably would have not moved to a different state. I probably may have moved to Minnesota, but that would have been as far as I would have gone. I'd probably still be there.EN: Some of that though is that those people that chose to stay are different people than you. Do you think you would have got the urge to leave later?NW: Maybe. A lot of my friends there have had the urge to leave and haven't left. It's really easy to rag on places like North Dakota, when we drive through it and see that it's just a wasteland. I am a defender of my home states and I do think it's a great place. I could have been entirely happy there. It's just a question of being a big fish in a little pond, versus a little fish in a big pond.EN: You started your career in finance. Even post-MBA, you were still in finance. How did you switch into marketing? How did you make that happen and why?NW: Really, I was just following finance. It was interesting to me. I did finance out of school. Really liked it. I did commercial banking through the 2008 recession, which was hard, but a very good learning experience. Then I did venture capital. Then I joined A Place for Mom doing corporate finance.It just so happened that that team, A Place for Mom, happened to do a lot of operational analytics, in addition to financial analytics. We were looking at numbers, but not all of the numbers had dollar signs in front of them, like at a lot of finance organizations. A Place for Mom had three big areas of the business. There was our call centers, our sales teams and marketing. We would disperse into these different areas. Over time, we formed a dedicated business intelligence team that I worked on, that was a little bit separate from finance. Was working on that and I was leading that.I was always the marketing guy. It wasn't from happenstance. I really was interested in it. I was interested in the people and I was interested in the problems. I was interested in one area of marketing in particular, which was TV and offline media. We're used to being very accurate and precise with our measurement of online media and the challenge of bringing that same rigor to offline media was really cool to me. I spent a lot of time doing that, working really closely with the person who ran that channel. Then one day, that person left. I walked in the CMO's office and I said, “Hey, I want that job.” I built up a reputation of being a smart person, that could learn quickly. They said, “Sure.”EN: Nick, what were the biggest failure points in your career? Where did things not go as expected?NW: I think the biggest failure point for me was probably right out of the gate. Not eBay, but when I graduated from college. I graduated in 2007 and the economy wasn't that hot, but a lot of my peers got good jobs and I didn't. I think a lot of the reason why that happened is me. I didn't take finding a job very seriously. It was winter and then spring of our senior year and I wasn't being very aggressive, or dedicating very much time to finding my next thing after school.My first job out of school was being a secretary at a law firm. I thought I wanted to be a lawyer. That job was useful in that I learned that I didn't want to be a lawyer. Just talking to the attorneys in that law firm, they were telling me, “No. Don't do this. If you can do anything else, don't do this.” Aside from that, it was really, really not fun. I spent my days learning Spanish and reading The Economist. My job was just way too easy and it wasn't stimulating and it wasn't allowing me to grow.I moved out of that just about as quickly as possible. In hindsight, it was a massive mistake. It was a really inauspicious way to start my career. Eventually, I got into banking, which there was a lot more upward mobility in, but that first step right out of the gate was pretty sub-optimal.EN: Now, it sounds like you learned something there. What would have happened if you hadn't had that experience? Would it have mattered?NW: I don't know. I emphasized one key thing that I learned, but I could have learned that probably by just getting coffee with five lawyers and not wasted six or eight months of my life doing a job that wasn't right for me. I've always valued learning and I was learning there, but it wasn't the things that I wanted to – it wasn't the knowledge that I wanted to gain. It wasn't the skills that I wanted to acquire. I learned some stuff, but I don't think it was the right stuff.EN: I want to end with one of your productivity secrets. Would you recommend that others get up regularly at 2 or 3 a.m.?NW: Maybe. I was a night owl my entire life. Then four or five years ago, something changed and I became a morning person. I really became a morning person, to the point where I wake up embarrassingly early. A lot of times, it's 2 or 3 a.m. I don't do this deliberately, so I wouldn't recommend that people set alarms to do that. I'm a huge fan of sleeping as much as you need. It just so happens that I can naturally wake up very, very early. It's been really great for me. I used to live in New York and the work culture in New York City is coming to work late, but stay really late. You work hard, but a lot of times people's days start at 10:30, 11 a.m. Really, really late.My co-workers would traipse in at that time and meanwhile, I've been working for eight hours. My level of preparation and the amount of throughput that I could have, just they couldn't compete, because I could be so far ahead. I basically had a free extra day of work relative to them. For me, it was great. This has just been a weird thing about my body's chemistry that's been really nice. I don't set an alarm. It just happens. If it just happens for you – 3 a.m. is a great time to work. There aren't any distractions, because there can't be distractions. Even if you go to Twitter, there's nothing happening. In that sense, it's really nice.EN: Thank you, Nick. We'll continue this interview tomorrow with a dive into how Nick is growing Osano. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit marketingbs.substack.com