If you missed my interview with Customer Chief Officer at RevScience Abby Schommer, you can find the full video of the interview here.
This interview is packed with so much good advice that I couldn’t resist posting an extract of the transcript below.
Before we start, can you please tell us a little bit about yourself, about what you do right now, your background, and how you got into the field of marketing?
Abby: I’m Abby, like you mentioned I’m the Chief Customer Officer at RevScience. […] I actually come from an advertising background, so I worked at a series of different adtech startups early in my career, working with direct response marketers to help them automate and optimize their marketing buys.
After that I went over to Facebook and actually worked platform side for a number of years. When I was at Facebook iOS 14 happened so we had a big bout of this measurement reckoning the way that advertisers were quantifying the impact of their marketing previously just wasn’t sufficient anymore. So I started working with a lot of marketing mix modeling companies during my time at Facebook and that’s how I got introduced to my co-founder.
Now I actually went to work at his media mix modeling company and thereafter we decided we wanted to go on and start solving data challenges for customers. Not just the biggest customers in the world, actually small to medium businesses as well, we realized there was a lot lacking in their data visibility and kind of the data they were equipping themselves with when making not just marketing decisions but all decisions related to their business. So that’s how RevScience came to be.
You mentioned small and medium businesses, so let’s say I work for a small business and I’m currently doing my marketing inhouse. How do I know if I start looking for a marketing agency to work with, and what should be my criterias?
Abby: I think even taking it a step back further, I think there’s certain questions that business owners need to be asking themselves before they start running paid marketing at all. I think a big misnomer out there is that paid marketing will kind of address other challenges of your business. If you’re not a profitable business, paid marketing can get you to a point of profitability, whereas in reality there are many instances where running paid ads could actually accelerate your losses, not your profits.
So one of the things I always challenge small to medium, and even large business customers to do, is to look at their contribution margin. And that should really be your litmus test for understanding how you can be spending on marketing if at all.
Your contribution margin, for anybody who doesn’t know, is in essence your revenue net of all of the variable expenses associated with delivering that revenue, or making a sale for an e-commerce business . That’s things like your unit costs (or COGS), but it’s everything else as well. It’s processing fees, payment options, shipping… Basically everything that goes into getting that product sold to your ideal customer.
And then you know you want to look at all of those variable expenses relative to the revenue you’re making on producing a sale, and see if there’s room to spare. If there’s not room to spare, then adding paid marketing to the equation will just make you less profitable. Your variable expenses will start to further outweigh the revenue you’re making from each sale, so that’s kind of a foundational thing that business owners should be looking at.
You should really have a healthy contribution margin before you start to introduce marketing, because your marketing dollars will also take you so much further. Because once you do have a healthy contribution margin, and something that also allows for a little additional variable expense in the form of paid ads, then running paid ads will accelerate your profits. Or it will accelerate how much money you’re making on each sale.
So if you have additional fixed costs, scaling marketing can start to overcome that fixed cost, and it will get you closer to a place of profitability or grow your profitability. That’s something I really implore business owners to look at. If they’re not running paid marketing at all, do they have room to run paid marketing and add to their variable expense? If so great.
And then I think to your question too, if that is the case how do you know whether to go with an agency or do it in house? I implore a lot of business owners, if you can, do it in house. I understand that for some folks, they don’t have the resourcing internally or they feel that they don’t have the expertise. So I think if you are at a place where you feel like you really maxed out your ability to run paid marketing effectively in house, you’re lacking some of the skills, […], then you can look to an agency in so long as your contribution margin again allows for that additional buffer.
Because you’re not just going to be spending money on paid ads, you’re going to be spending money on agency fees, potentially both variable and fixed. So just make sure you have that extra cushion and make sure the agency you’re going with can kind of supplement what you’re not able to do in house.
Let’s say I have the budget to advertise but I don’t have the team in house to do it and I’m looking for an agency to work with. And we know there’s a million agencies out there, so how do I find one and how do I make sure I choose the right one?
It’s funny because I laugh when people ask this question. E-commerce business owners will empathize if you have a social presence at all, you probably already have agencies reaching out to you left and right, flooding your Instagram DMS, wanting to run marketing for you.
So it’s really important that you do go in with a level of intention, you do have very set criteria. Because if you just say yes to the first person who reaches out, it’s not always going to be the best fit.
As you’re looking to vet different marketing agencies, I do have a set of criteria. The first of which is always be looking for an agency that’s quite honestly asking you just as many (if not more) questions then you’re asking them.
You want agencies that are asking you the tough questions about your own business’s operating model, and ideally your business’s financials. I know a lot of e-commerce business owners might think “oh that feels really invasive”. But to be fair, if an agency doesn’t have a purview into your unit economics (again that contribution margin) they don’t know how much room they have to play with variable acquisition costs. They don’t know the type of returns they need to be getting with marketing in order to make your business profitable. And there’s actually no way they can know at any point in time when it is profitable to scale their existing advertising efforts.
So them asking you those questions is really in your best interest. If you have an agency that’s coming to you, and telling you without knowing anything of your financial structure that they can promise you these results, in a certain amount of time, that’s actually a red flag.
Look for agencies that are asking you the tough questions. Even better yet, if they’re asking you questions you don’t know the answer to yet, then you can go back and make sure you’re really airtight on your contribution margin. You can both be operating with that in mind in the partnership. That’s number one.
Number two: you want to be looking out for agencies that treat the partnership almost like they are your portfolio manager. A marketing agency should be looking at your entire marketing portfolio. Ideally they should be wanting to influence as much of that portfolio as possible. Because if they can see and influence what’s happening not just on Facebook, but with your Google ad buys, and maybe your Amazon ad buys, and they know what’s happening from a branding perspective as well, then they can observe the interaction effects between what’s happening on those different channels. And basically themselves optimize the media mix, and kind of the share of channel spend in a way that best benefits your topline profitability.
Agencies who only work on one channel, who are operating in a silo, really don’t have an understanding of if a performance is changing on a certain channel is that because maybe spend went up on another channel. It’s not reasonable to think that every single agency though can run all of your marketing, so to the extent they can’t do everything.
Look for an agency that wants to stay privy to your activity on other channels. Again this might feel invasive, like “oh why is this agency trying to scope creep”, and maybe try to find out what we’re doing with other agencies. It is it is in your best interest for them to know if you’re advertising elsewhere and how spend on other channels is going up and down, so they can kind of discern “oh this might be related to why we’re seeing the performance fluctuations we are on our end” That’s number two
I love agencies that treat their jobs as being portfolio managers. A continuation of that is I also love agencies who don’t just try to look multi-channel, but they look throughout the entire customer journey. They want to influence not just what’s happening on multiple channels, but what’s happening once someone who sees an ad lands on your website. Because you could be driving cost per sessions that are really efficient, but if by the time you get to the website your CVR is really poor, that’s going to totally offset all the great marketing work you’ve done. So agencies who want to have a firm grasp on what’s happening in the customer experience post-marketing impression, that’s just going to be to everybody’s benefits.
There’s a lot of really great agencies who do things like landing page customization, they also do website CRO services.. So agencies who are thinking beyond just the ads experience are really really great as well.
And then the last thing I’ll land on. I’m pretty outspoken about this and RevScience is as well like one of our core pillars of our analytics platform, is we don’t ingest any attribution. For those who aren’t quite clear on attribution, basically attribution is an attempt to credit one channel, campaign, or ad with the impact to a customer’s revenue, and kind of isolate that impact to that one channel, campaign, ad. But the reality is, what we know to be true of the customer experience and the customer journey is you can never singularly credit one channel with anything.
If an agency only looks to attribution to quantify the impact of what they’re producing as an agency on a channel, campaign, that signals to me that they’re not really honoring the nuance of the customer experience. So I love to work with agencies who don’t need to throw all attribution out the door, because it does still serve its place in certain capacities, but I prefer an agency that acknowledges the limitations of attribution and doesn’t just use attribution to make marketing decisions on your behalf.
