The Truth About Why Growth is Slowing

CMO: Growth isn't slowing because we have more competitors or the meta algorithm no longer works. It's because we have zero awareness and are only available on our website. We live in a bubble where we think we think everyone knows about us and assume that since our website is available to anyone on the planet, we can scale infinitely. I'm afraid that's not right.

Founder: I don't believe you. And didn't you say stats like brand awareness are bogus anyway?

CMO: in the context of measuring our marketing, I think it's bogus, but from the perspective of getting some objective data on who even knows about us, it's useful

Founder: Yeah, but our TAM is, in theory, $3 billion, so even if we capture 1%, we have a big business.

CMO: Of course, capturing 1% of that total addressable market's revenue doesn't mean we only need 1% awareness. It's a basic conversion funnel. Many more people need to know about us to convert 1% of the TAM to buying from us.

Founder: what is the funnel conversion rate?

CMO: The most reputable researchers tell us we need about 10 times the awareness to capture 1 percent of the market. Our awareness is at 1 percent, so we need to 10x it.

Founder: yikes. But speaking of Meta's algorithm, they need to automatically take care of driving awareness to continue delivering results for us, right?

CMO: no

Founder: Do you care to elaborate?

CMO: to be fair, in the beginning, they did drive awareness for us. However, we quickly moved through that initial awareness. They define "results" as high short-term revenue ROAS. When we started spending on meta, we were so small that every person who saw an ad was also being made aware of our brand. Meta was great at finding those people who would also be most likely to both click on our ad AND buy in our chosen attribution window. Every dollar had high ROAS and drove incremental revenue. However, beyond that point, to keep delivering short-term ROAS, once we built that tiny bit of awareness, the algo's focus shifted more toward converting that small audience. Not that it doesn't work to reach new people, but only if it delivers the high ROAS in our chosen attribution window, which limits the scale of new people reached if we continue to focus only on driving maximum short-term revenue ROAS.

Founder: I'll give you this one

CMO: Most people don't know this, but meta advocates are doing awareness-driving media, which could include engagement-optimized campaigns, boosting posts, etc. They've done extensive studies showing how it makes our direct response ads and helps drive more revenue from organic search, which we've completely ignored for the last three years. It takes a few months to start seeing it, but facts are facts.

Founder: I had no idea they advocated that. I assumed they wanted us to put everything into ASC campaigns and give implicit trust.

CMO: nope. Crazy right?

Founder: To be honest, I'm feeling a little enlightened, but I'm still not fully bought in. You also mentioned that we're wrong to think that we can't grow to the scale we envision long-term by only being available on our website. I'm afraid I have to disagree with that. Anyone in the US can come to our site and buy and get our product in two days. How can you tell me that's not true?

CMO: ready to hear some facts? 85% of our category's purchases happen offline.

Founder: so we have access to 15% via e-commerce. While lower than I thought, we can still build a massive business on the 15%

CMO: Not so fast. Amazon, Walmart, Apple, eBay, Macy's, Etsy, and other big players own 60-70% of e-commerce sales, which gives us about 6% that we can capture. We're spending 100% of our marketing dollars on 6% of the purchase opportunities.

Founder: well, that doesn't make much sense

CMO: you're telling me

Founder: So, what does this mean? How can we begin capturing 1% of the addressable market?

CMO: three things: first, it starts with content—our content stinks. We need an internal content team and machine to generate lots of cheap, effective content that doesn't hit people over the head with a hard sell of product, offer, and urgency all the time. This content needs to a) earn engagement but also b) convey who the brand is, c) what we sell, and d) help the viewer understand why they'd choose our brand vs any of our competitors. b, c and d don't need to be on the nose. There are varying degrees of hitting on each of the four components, and every month or at a portfolio level, we want to come out balanced across a.

Founder: cool. I hear that. Been feeling similarly. What's next?

CMO: second, we need to put money behind this content and get it in front of net new audiences, knowing it won't drive short-term revenue.

Founder: good luck getting that past Fred the CFO

CMO: This leads me to my next point. Third, we need to measure differently and to be able to measure differently; we need to update our definition of success.

Founder: oh, here we go. Are you going to go on a 'brand' spiel?

CMO: Nope. I don't know about your old CMOs, but this is about making more money in a measurable way.

Founder: interesting. Consider me intrigued.

CMO: primarily, we need to incorporate total contribution dollar generation over longer periods of time in our success definition to complement revenue growth goals for the year, quarter, month, etc. The best way to grow total contribution dollar generation over the next 3 years (at a contribution margin we like) is to get more of our revenue from direct traffic, organic search, and organic social referral vs. clicks on ads.

Founder: So you're saying we need to start driving our whole business with organic content? Earth to CMO—we get no organic engagement. We're not Kim Kardashian or Selena Gomez.

CMO: partially, it's because our content stinks and isn't earning engagement, and the other part is clarifying a point: I am not saying that we don't spend. We do spend but against different creative.

Founder: Does. Not. Compute.

CMO: Well, lemme finish. We spend money on creative that might not get people to click and buy right away but gets them to search for the brand, learn about the brand to the degree that they have memorized the URL, or go to our social profile and click the link to our site when they decide to come "in-market."

Founder: That makes sense. But how?

CMO: We use different tactics and objectives (boosting, engagement objective for profile view, etc.). and we use other channels. We want to drive purchase behaviors other than the classic "click-ad-and-buy" flow we've gotten so good at, such as searching and entering our URL when making a purchase. To drive that point home, I'm not suggesting we knee-jerk away from driving short-term revenue. I'm advocating more balance in the purchase behaviors we drive with our ads.

Founder: Hmmm... it seems too good to be true. Going from just focusing on driving short-term revenue to doing that AND also driving these higher-quality purchase behaviors? What's the catch?

CMO: Nothing, at least I don't think. It's just something we hadn't been doing because we didn't have any way to measure it. These types of purchase behaviors generally have a revenue per session 50%—200% higher than paid, and the contribution margin is even higher. We want to drive as many of these types of purchase behaviors with our paid and organic content as we can. We need to do both. It's about balance.

Founder: Balance isn't a bad thing, but how do we move from where we are to where we want to be?

CMO: deally, we start growing revenue coming from organic searches and direct traffic at the same rate as paid. since paid revenue has been the only source of growth over the last few years, we'll want to be able to overweight into driving these higher quality purchase behaviors once we get through BFCM, and we should start seeing our paid driving revenue from organic search and direct faster than paid YoY growth.

Founder: And you're telling me this happens when we just start boosting organic posts that drive lots of organic shares, saves, follows, etc.?

CMO: AND increases the probability that people will search for our brand or enter our url in their browser when they decide to come in-market for our category.

Founder: It always comes back to creative, at the end of the day. This is interesting, don't get me wrong. It's going to take me a minute to get comfortable putting money behind organic posts to boost them, pop them into engagement ad sets, or even put them in conversion-optimized ad sets, given the fact that 15 minutes ago, I would have told you that's the most idiotic thing on planet earth.

CMO: It'll take a second to come to terms with the reality that evaluating all our marketing by how it drives short-term revenue isn't optimal, so I'll give you time. Let's chat next week and go through all our old organic posts to see which ones hit the quality engagement thresholds that would warrant graduating them to paid in some form.

Founder: Bless you. This sounds ridiculous to me, but the status quo isn't working the way I want it to. I've always intuited that the content we've been putting out has been driving value that wasn't captured in 1 or 7-day click revenue but needed a better alternative from a measurement perspective. So, if we can get some insight here, I'm optimistic that it'll help us effectively fill the funnel in a way we haven't been.

CMO: Yeah, exactly. Somewhere along the line, intuition became a bad word. But if we're intelligent, we can put numbers to it in a way that we can invest against. But have patience—we'll get there.