Thread by @TaylorHoliday

Somewhere around $50M many eCommerce brands go through a similar experience.

I call it "The Shrinking Sponge"

Here is how the story plays out time and time again...

Venture Capital group "Power Johnson Ventures" has just invested some fresh capital in DTC darling "Never Towards".

The first meeting with the executive team lays out one simple, obtuse, ambiguous, unclear goal. Growth.

Absent any clear indication of in what time horizon, at what margin, on which product, from which customer this growth is supposed to happen, the CMO excitedly gathers her leaders up...

Championing the new growth message she states that they will be focusing on measuring every dollar to ensure it is generating a positive ROI.

She doesn't want to see a plan or a request without proof of measurable return!

Content investments, "sponsorships" and events all get hacked.

Proof of ROI is the only way to win budget.

This KPI gets pushed down into the people responsible for channel-specific performance. Email, search, social, display all reporting on "ROI" in a fight for more budget

To start it feels amazing.

Meritocracy!

The best measurable idea wins!

The brand team keeps getting their ideas squashed while the digital" team doubles in size. All agency relationships are in-housed to move faster and push more scale.

Every marketing meeting email and search are the darlings, generating "Mind-Blowing ROI!". 

Hell, even the display team shows up with giant ROI numbers from the one trusted partners that survived, "critroll" 😉.

Budgets get adjusted to "winning" channels.

Tired of being neglected and losing budget the paid social team commits to adjusting their ad account to maximize reported ROI.

Prospecting budgets get moved to re-marketing

budgets on "existing customer" segments get bumped

and what do you know...

ROAS spikes!

For a few months, the marketing team can do no wrong.

Everyone is cheering their shiny ROI.

In search of more praise, $ continues to move from "unprofitable" prospecting campaigns, categorical search, and other cold traffic sources. Squeeze, squeeze, squeeeeeezzeee the sponge

Then one day everyone shows up to the marketing meeting ready to show off their EVEN bigger ROAS badges.

But when they walk into the room, someone from the VC's "finance" team is there.

The mood is somber...

Turns out over the last 30 days overall revenue is down.

One by one each channel leader shows off their results.

Confused VC "Trevor" demands they double down only on the highest ROI channels!

More branded search!

More emails!

More display re-marketing!

The team jumps to action.

They double the email sends for the month, but open rates fatigue.

They set the budget for branded search to infinity but the volume isn't there.

They push frequency on existing customer FB campaigns over 25, results go backward.

Days before the next meeting with Trevor", as desperation sets in the team reaches for a trusty lever... the promotion.

"We won't include core product," they say.

"Only excess inventory" they promise.

They whip up a 30% off email and fire... BOOM revenue.

Excited for the next day's meeting the marketing team rushes in showing off a record day for the month of March.

Trevor applauds... "Do more of that!"

So they... do.

"Just once a month"" they say.

"We'll always make it customer appreciation, not product discount" they swear.

"Only offers for existing customers".

Then by accident, a promo ad gets placed in prospecting. A 3:1 at the top of the funnel. A number they haven't seen in months!

Now it's August and sales numbers from the monthly promotions are propping up results.

Revenue on days between promotions is getting smaller.

New customers only make up 30% of the revenue,  down from a peak of 60%.

And then the death blow happens...

Oblivious to the underlying conditions and inspired by the positive revenue the last few months over-eager "Trevor" pushes the ops team to place a MASSIVE PO for holiday...

100% month over month growth from now till December!

Record expectations!

Q4 is a disaster. The sponge is completely dry. To eke out revenue, sales were bigger and deeper than ever before.

The 24-hour Black Friday sale lasts 3 weeks. 

Projections were missed by 40%, there is millions of dollars in inventory on the balance sheet to end the year.

The first meeting back in January the marketing team walks in and they see a new suit next to Trevor.

Jamie, the media buyer, has been fired and a "consultant" is now there to conduct a review on media allocation in Q4.

They light up their PowerPoint titled: "Incrementatlity"

End scene.

From here some brands will find their way to tighter metrics and focus on new customer acquisition.

Learning the lessons of never filling back up the sponge.

Others will get mired in the swamp of complex "attribution" models from "quants" and "ai".

But more than anything the solution must start with clarity of direction from the top.

What are we trying to do, and when are we trying to do it?

A seemingly simple question but incredibly complex to answer and operationalize across a large org.

Anyone lived this life?