Cody Plofker

How To Profitably Do Marketing In A DTC Business

Published over 1 year ago • 4 min read

Happy Sunday! This email is coming on a weekend because I am in the middle of moving and things are hectic.

It's a tough time for many DTC brands and cash is tight. I firmly believe that whether in good times or bad times, marketers and finance teams need to work very closely together to keep a handle on cash flow and probability. So after receiving a bunch of questions, I thought I would list out a few of the things that I think all marketing leaders should be working on to ensure things are running smoothly.

Before we do, I would appreciate if you could share this with a friend. Just forward it to someone on your team who you think would benefit from receiving this weekly. And if this was forwarded to you, you can subscribe here.

1. Work To Understand Finance Better

Being a CMO, or a marketing director is not easy. You need to know how to acquire customers, need to keep up with the latest changes on each platform, and you need to have a decent understanding of finance, especially as it relates to what you're doing to grow the business. Admittedly this is not a strength of mine; so this is something I am going to focus much more on in the near future. Nearly all of us can wax poetic about CACs, LTVs, and the like but have much less comfort around things like working capital, contribution margins, etc;. I believe every marketing director and above should take the time to educate themselves on these things so they can understand how their role impacts the bottom line.

2. Get Tight With Your Finance Team

In that vein, you should be working very closely with your finance team. We meet every single week and work very closely together to manage the P&L and discuss opportunities and threats. This is where you need to drop the ego; and instead consider this a learning opportunity if this isn't your strength. Learn how they look at things from their perspective, and the effects of the marketing and growth that you are causing. For example, one of the downsides of a high growth business is cash flow constraints. Did you know that you can be crushing it from a CAC or MER perspective and scaling hard yet still temporarily running out of cash? Yes, it's very possible if you don't keep an eye on things. You must work to understand your working capital.

One thing all fast growing businesses should do is keep an eye on their Cash Conversion Cycle and work to bring it down. This is where scale in your business really comes from. Not a targeting hack, but savvy operating to decrease the reliance on cash and lower your risk as you scale. Your ops team should be negotiating terms with your suppliers as you grow and you've built up credit with them. On the marketing side, there are a few things you can do. There are new excellent credit card companies that will allow you better terms than a typical amex, so you have more time to pay it off.

I personally recommend Parker, partly because that's my dog's name. With Parker, you can get net 60 terms, which gives you a lot more time to pay off your ad spend. This can allow you to continue to grow and scale without as much fo a cash reliance in your business.

3. Evaluate And Negotiate Your Software Needs

You should be evaluating your software needs at least quarterly. There's a good chance you have 5 figures a month in savings if you're an 8 figure brand just by cancelling unused softwares, switching to cheaper providers, and asking for a better rate if your business has grown a bunch since you've signed up.

Also, many companies will provide a significant discount, or even comp your plan if you're willing to do a case study with them. You never know if you don't ask.

4. Evaluate Your Use Of Agencies

This is a hard one, because a lot of brands get this wrong and it can really backfire in a negative way. As you grow, you'll likely begin to pay agencies more and more each month because you're spending more on ads. What was once a few thousand a month is now a very large bill at the end of the month for what seems like no more work. Sure you can take it in house and save a bunch of money, and for some brands that is a good idea. However, you have to be very careful. Many brands will bring things in house to save money, and then their performance tanks. So take a really hard look at yourself and be realistic about if you have the ability to achieve the same performance internally. I personally don't love seeing the bill from our video creative agency every month, but I know our overall investment would be way worse off if we tried to do it ourselves.

5. Cut Wasted Spend Like It's Your Own Money

There's probably a lot of wasted advertising or marketing spend that is not helping to grow the business. As a marketing leader you need to work to understand incrementally very well. A) you should be trying to cut out spend that is not efficiently driving new customer acquisition when you can and B) You need to make sure every new dollar you invest is going to bring you new customers profitably. For most businesses, there's a good amount of spend that contributes very little to top line. For some, that may be retargeting existing customers on Facebook. Besides the ROAS looking great, how do you know these customers are buying as a result of this spend? Run some holdout tests here. For others, Snapchat and Pinterest are claiming a lot of credit without driving any new customers to your business. You need to organize and run tests to understand, and then either have more profits or re-invest back into more profitable activities.

If you guys want an amazing place to network and learn from marketing leaders, I strongly recommend The Foxwell Founder's Membership. It's a great community of top notch marketers and media buyers that you can turn to to learn best practices, strategies, and get support in real time. I personally owe a lot of my success to this group. You can join here.

I also managed to get reads of my newsletter a sweet deal with Parker. If you want to get amazing net terms so you can scale without worrying about cash, this is a great deal. Readers of my newsletter can get up to 60 days net with zero interest with $500 cash back. Parker will also pay 3% cash back the first 30 days up to $300,000. That's up to $9k in savings, plus what you gain with the net 60 terms. Just reply to this email and ask for an intro, and I'll get you hooked up.

P.S. It's my birthday tomorrow, and I'l also moving into a new home this week. . I'm going to do my best to get a newsletter out next week, but if not you know why!

Brought to you by Northbeam

Cody Plofker

Hey, I’m Cody. I'm CMO of a 9 figure DTC brand and write a weekly newsletter with actionable marketing advice to make you a better marketer in 5 minutes a week.

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