Ep. 56 | 3 Marketing Myths with Steven Sashen
This week in the Accelerator we example three marketing myths that need to be busted. Steven Sashen, CEO of Xero Shoes joins me to discuss what works and what doesn’t. Not only is the story of Xero Shoes itself a myth-buster, but Steven shares how his experience with internet marketing tactics led him to the critical questions marketers should ask each time they hear a vendor pitch. Only then can you sort out what could be truly of value to your business versus what will simply burn your cash. Finally, Steven shares a special offer from Xero Shoes for our podcast listeners.
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Allison Hartsoe: [00:01] This is the Customer Equity Accelerator. If you are a marketing executive who wants to deliver bottom-line impact by identifying and connecting with revenue generating customers, then this is the show for you. I’m your host, Allison Hartsoe, CEO of Ambition Data. Each week I bring you the leaders behind the customer-centric revolution who share their expert advice. Are you ready to accelerate? Then let’s go!
Allison Hartsoe: [00:33] Welcome everyone. Today’s show is about three marketing myths that you probably believe and why they aren’t true. And to help me discuss this topic is the Reverend Steven Sashen. Steven is the CEO of zero shoes, which is an amazing company founded on breaking down yet another industry met. Stephen, welcome to the show.
Steven Sashen: [00:53] Well, thank you and since you’ve introduced me as a reverend, that puts a lot of pressure on me and I really don’t appreciate that at 9:00 in the morning.
Allison Hartsoe: [01:01] You’re very welcome. Tell us a little bit about how the idea of zero shoes came about.
Steven Sashen: [01:12] Oh, it was a total mistake. I had no intention of finding myself in the footwear business, but 11 years. Uh, it was 11 years ago, yeah, that 11 years ago I got back into sprinting after a 30-year break and was getting injured pretty much constantly. And one day a friend of mine who’s a world champion, cross country runner, said, hey, why don’t you take off your shoes and see if you’ll learn anything from running barefoot? And what I learned was why I was getting injured and more importantly how to stop getting injured. And so I stopped, and my injuries went away, my running got better, I became a master all American sprinter. Act technically, for men over 55. You may be talking to the fastest Jew in the world and competition for that one. And uh, and so I wanted that whole natural movement feeling that I was getting from being barefoot and I started making sandals based on this 10,000-year-old idea just to get us some rubber strap to your foot basically.
Steven Sashen: [02:01] And more and more people kept wanting them just as a goofy little hobby. And one day a guy who was a barefoot running coach said, if you treated this little hobby like a business and had a website, I would put you in a book that I have a contract, right? So by that point, I had been an internet marketer since 92, and I’ve built 500 websites or so. So I rushed home, and I pitched this idea to my wife, brilliant idea. She assures me that I am completely mistaken and tells me do not do this, it’s a waste of time, won’t make any money, you know, please just don’t do it. And I’m a good husband. So I told her I wouldn’t. And then I built a website after she went to bed and then it just took off. And we’ve been remarkably lucky, and we’ve evolved way beyond just selling do it yourself sandal kits to just having a complete line of, a casual and performance shoes and sandals that are all based on this crazy idea called your feet are supposed to work naturally like the rest of your body. They bend, they moved, they flex, they feel, so we make shoes and sandals that let you live naturally.
Allison Hartsoe: [03:00] Perfect. Perfect. You mentioned that you have a heavy internet marketing background, but tell me a little bit about what you specifically do or what the team does on kind of a general basis.
Steven Sashen: [03:11] Everything. I mean literally I. The only thing we’re not doing right now and that will be rectified in three weeks is I’m not doing any native advertising and that’s in large part because it’s something we’re probably gonna end up talking about in a bit with one of our myths because native for quite a while which was completely bogus and it’s now only partially bogus and so everything from content to SEO to every sort of paid advertising you can think of to influence her to word of mouth to, I mean you name it. Actually, you name it. We do it. If I can track the results, I don’t do anything where I can track the results.
Allison Hartsoe: [03:44] Incredibly important point. So I want to define native advertising for just a second and correct me if I don’t explain this the same way that you see it, but I see it as basically people taking content and repurposing it into media as an advertising platform. But it has a very, very small disclaimer that says, you know, this is advertising. So it’s kind of in line in stream content that is influential because it’s posing and not so much as advertising but almost as an editorial.
Steven Sashen: [04:13] Yeah. Advertorial is the way people refer to it in the print world. And my favorite example of this actually from about eight years ago, we started zero shoes in November 2009 and as early 2010 when the footwear companies still thought this idea of barefoot running was going to put them permanently out of business. They were freaking out. And there was this article that people were passing around about how barefoot running was going to give you an ebola, and you’ll step on hypodermic needles in your kids won’t get into a good college and you know, whatever problem they could think of. And I was the only one who noticed there was a tiny little logo that said brought to you by brooks running. Uh, it got tons of attention. So that’s a classic example of a native.
Allison Hartsoe: [04:52] It’s like the gorilla that walks through the basketball shooters.
Steven Sashen: [04:55] Yeah. Right. Yeah, yeah,
Allison Hartsoe: [04:56] yeah. Okay. So let me play devil’s advocate for a minute. Tell us why I should care if the conventional wisdom about marketing is wrong and buying the same martech everyone has, I’m using it the same way, I’m wrestling with the same issues. I am, you know, I’m pretty much on track, right?
Steven Sashen: [05:15] No. So when you asked me that, it reminded me of one of my favorite presentations ever. It was at a Recommerce conference, and it was done by this guy named pep lie, who is a conversion rate guy. And his opening slide, and it might not have been as the opening slide, but that’s the way I remember. His opening slide was there are no best practices. And I love that. I mean, I literally stood up and applauded because everyone will tell you here’s the way it works. And it may work for certain people at certain times in certain business models, but it definitely won’t work for everybody. We’ve done a lot of conversion rate testing on things that people promise will improve conversion. And I have found out that they have done the exact opposite. They have reduced conversion and in fact, here’s a story I’m speaking way out of school. I did one of these tests with this one conversion rate, a company that I was working with, and it turned out that they then got hired by the company whose product we were testing and this company advertises very heavily just do this thing, and it will improve conversion. And after a few months I called them and said, so where my results atypical, they said, no, we actually can’t find anyone for whom this product improves conversion.
Allison Hartsoe: [06:21] That’s not something you want to hear after you’ve tried that tool.
Steven Sashen: [06:23] Well, no, I mean in a, more importantly, it’s something that the company who made the tool didn’t want to hear and they’re still promoting this thing as if it works. And, you know, look, maybe there are some people for whom it works, but not for everybody in every business model, you know, so that’s what he is, is a, does your business model fit that particular strategy and can you make it work yourself because you know, no two products and audiences are exactly the same. Or even if they are, it’s, you know, if you’re doing the exact same thing as everyone else, then it just looks kind of copycat, anyway, I’m going to work in the long term.
Allison Hartsoe: [06:56] And in a sense the fact that everyone else is doing it, it’s like ways, um, you know, once everybody goes a certain direction, it’s no longer the fastest way to go
Steven Sashen: [07:04] or also just look at the most common webpage styles right now. So it’s all these long single page things with lazy loading and Blah, blah, blah. And in the same way, when you drive around some neighborhoods near where you live, you see architecture from 10, 15 years ago and go, what were they thinking? That’s what happens every few years with web design as well. And it’s the same thing with marketing tech things. So, uh, there was a phase that really, uh, happily didn’t take off fully, but things like gamified optin tools, it’s like, hey, we got a spinner and you can, this is my favorite one actually right now we have a little spinner. You spin a wheel and get a chance to win a discount. And invariably if you don’t get the most valuable discount your responses, screw you. You know, it was like an idea that really took off because it’s game of vibe. But then people were realizing, wait, it’s not working that well and not knowing it was because people were getting mad because they didn’t win the big prize.
Allison Hartsoe: [07:53] So in a sense it had the reverse effect. Yeah. Here’s how to piss off your customers. That’s a new business model. But surprisingly common right after you’ve ever been called a call center, right?
Steven Sashen: [08:06] Well, you know, it’s funny you say that because there are things that you can do that will undeniably piss off your customers. That may be good for your business. Maybe it’s pissing off the right people, or maybe it’s pissing off, you know, a certain number percentage of people. But it’s making you so much more money that you’re willing to suck that up, and you know, get those angry emails every day since the dawn of Internet marketing, there’s been this idea of one to one marketing where you have the right message for the right person at the right time delivered in the right way, and it’s never going to happen. And when you’ve been doing this, as long as I have, you see these things come back and forth waves, and people are now talking about it again. It’s not gonna happen, and you know, we get an email once a week from someone who doesn’t like some aspect of what we’re doing. And I literally reply to them. They go, I really appreciate it. It’s not possible to do this, right? And just so you know, the reason we’re doing what we’re doing is because it makes us more sales. And our goal is to get more shoes on more people’s feet and change more people’s lives.
Allison Hartsoe: [08:58] Isn’t that perfect? I love that sense that you don’t have to be all things to all people because I see this all the time, particularly in the CLV space because we oftentimes advocate that there are customers that are propelling your business and these are the people you really care about. And then there are customers that are maybe causing a fair amount of drag or a fair amount of cost, and it’s okay not to serve those people. You don’t have to be Nordstrom and take a, you know, a tire return when you don’t even sell tires.
Steven Sashen: [09:29] I actually wonder if that really happened. It seems so wonderfully apocryphal that, that it almost makes me doubt it, but I think it actually did. I have no question that at a certain point someone in that transaction with, this is going to be an awesome story.
Allison Hartsoe: [09:43] I’m sure they did. Okay. So let’s, uh, we’ve been talking a little bit about some myths. Let’s dig into, uh, one of the myths that I, I think I hear an awful lot about a lookalike modeling. I’m hearing a lot of people who are using Facebook, using google, using other tools to kind of say, Hey, I can take this seed of people, and I can find more people like these groups and get more people to my site that are more valuable. How is lookalike modeling may be a bit of a myth?
Steven Sashen: [10:16] Well, fundamentally it’s because we’re looking at things after the fact. So you’re identifying what some people may have in common with other people, but not necessarily why that would be important. So in other words, let’s use. I can only use my companies as an example. People buy our products for a number of different reasons. Some people do it because they’re looking for a lightweight travel shoe. Some people are looking for a hiking shoe or a running shoe or a sandal, I mean there’s different products attract different audiences, and unless you’re separating out all of that by specific product and even if you are separating it by specific product, people can look at the exact same product and buy it for 10 different reasons, and you don’t necessarily have a way of identifying that. So if you try and turn that into a lookalike, you’re going to be getting people who maybe have similar demographics but have completely different motivations and as you expand the look like you’ll have more and more people who have no interest in what you’re doing.
Steven Sashen: [11:08] Like favorite example is when we dumped all of our emails and various segments into Google, and they came back and said that we should be targeting snowboarders because so many of our customers were snowboarders. It’s like, no, no, no, no. We have a lot of customers who happen to be snowboarders, but snowboarders aren’t our customers. We’re not making winters use for snowboarders. So they’ve Kinda got the Venn diagram upside down or inside out or something kind of backwards. So that’s one part. And the other is, there’s this continual tweaking going on about what are the things that are important to match and how many things do you want to match. And so there’s a bit of mythology just about what it even means, like who’s identifying what are the important factors to match, and how close do they have to match, and what statistical significance, and how are you demonstrating that it’s true.
Steven Sashen: [11:56] What we’ve seen with lookalikes is when we start scaling it up and spending more money, you’re getting more traffic, the CPA goes down, performance goes down, and that alone tells me there’s something wrong with it. Even if I can identify the specific thing about why, but there’s another component which is now they’re building AI into some of the lookalike stuff, and the problem with that is AI or an and slash or machine learning, both of which are terms that are misused like nothing I’ve ever heard before. For machine learning or AI to be effective, you need to have a specific goal that is training against. And what happens is in the early stages it’s wrong and stupid. The question is, will it ever get smart and then we’ll get smart enough, fast enough to dig you out of the hole that it created while it was trying to get smart. So it’s just this basic oversimplified idea, we’ll find people just like your customers, and they’ll buy more stuff is just not grounded in reality.
Speaker 1: [12:50] Well, and I also think what’s so interesting about that is you mentioned that it’s kind of demographic first. So it, you know, I’m looking at snowboarders, I’m looking at the easy things, the easy categorizations that I already know, but yet when we think about Google, and we think about Facebook, there’s a huge privacy backlash that they’re tracking everything that we do and they know so much about us, but yet this look-alike model example actually proves that they don’t know enough about why we do what we do. Even though they, they’re seeing the behavior, they’re not perhaps connecting it to the advertising enough to learn why a snowboarder is buying this or is it the fact that there a snowboarder or the fact that they happen to be in a certain location.
Steven Sashen: [13:33] And this is probably very different depending on the product category. Someone who repeatedly buys tide soap every three weeks. You can make some good predictions off of that one, most likely, but someone who’s buying a luxury car, if they’re on a gay cruise, I mean, there’s so many things where you just don’t have enough data points. So there’s a lot of things in the marketing world that sounds like they make sense until you started thinking of the counterfactuals and what’s really going on behind the scenes that you can’t know.
Allison Hartsoe: [14:00] Ah, critical thinking. Okay. Okay. Let’s take the second myth that marketing is a quantity game. Talk to me a little bit about the quantity problem in marketing.
Steven Sashen: [14:14] Oh, alright. Well here’s where all trying, uh, keep people from giving you money. So I’m like you said early on, there’s the 80 20 rule, the whole Pareto principle that you’re going to get most of your money from the top 20 percent of your customers. And I have a friend who demonstrated that it was totally true. Uh, it was a company called Karmaloop. They were in bankruptcy, and he just went in and analyzed the data and look at buying behavior and then sort of catering to that top 20 percent and took it to $10,000,000 the next year. So that was definitely undeniably true. But there are other businesses. Ours included where that just not the way the math plays out. Um, while we do get a lot of our revenue from the top four percent, 10 percent, 20 percent of our customers, the real value is in the bottom 60 percent.
Steven Sashen: [15:01] First, there’s just way more of those people. We’re not a big catalog company. We’re not Nike where we’re selling all manner of things beyond footwear and, and, and thousands of skews, thousands of different styles. We have a relatively small product line, and our products are designed to last for a long time, which is some people argue a big problem, but suffice it to say, when we look at where the value is, it’s kind of a barbell. So there are the best customers that we definitely want to pay attention to, but we can only do so much because they’re only going to buy so many pairs of shoes over such a period of time. And then there’s the other end which is the people who were one time buyers where if we can turn them into two-time buyers, we’ve improved our business by something like 70 percent and even more.
Steven Sashen: [15:43] There’s definitely business models where all you need is like a thousand customers who love what you do, and you can keep offering them sort of the classic marketing funnel. You get them in with a free offer. Then you sell them a $7 thing. Then there’s the $47 thing and then the one $97, whatever. And then the $500 coaching program and the $10,000 mentorship program and the, you know, then they’d give you their first born child and a classic thing of getting the most out of a smaller and smaller subset of your client base. Or we’re in a space where almost everybody buys shoes. And so the real scale is not going to come from catering to the top x percent, but by making our products available to the extent that they can be, not everyone buys everything. People who spend $500 on a pair of shoes are not going to be buying our $20 do it yourself sandal kit.
Steven Sashen: [16:31] That suffice you to say, for us the bigger move is to go up the funnel of awareness up to people who didn’t know about this whole idea of natural movement. Never read the book, born to run. We’re not interested in barefoot running. We’re probably not even runners. You know, maybe they’re looking for shoes for other things. Or maybe, and I think this is true, the real value for us would be interrupting people who aren’t even thinking about buying shoes, completely not in their mind. If we can interrupt them with something like a thumbnail image that says what’s wrong with your shoes? It doesn’t even have a question mark, just like a statement. And then the opening line is, think about coming home at the end of a long day and you pick up your shoes, your feet feel better when you’ve done that? Because if they do, it’s because you’ve been wearing the wrong shoes.
Steven Sashen: [17:10] Pattern interrupt could get them to go, and then you say, look, it’s not your fault. Almost all shoes are designed in the same wrong way. Just look at the shape of your shoe. Is that the shape of your foot? Probably not. It’s probably squeezing your toes together and probably has an elevated heel that messes with your posture and probably doesn’t let your foot feel the ground, which is crazy because you have so many nerve endings in the bottom of your foot like that’s designed to help you balance and move effectively, and you’re not letting it do that. Does that make sense? The value of the number of people that we could open that conversation up to, I would argue is greater than what we could do by just focusing on the top.
Allison Hartsoe: [17:43] So that to me sounds like a different spin on a quantity game. So we’re saying that the myth is that marketing is a quantity game, and yet there are two ways we think about quantity. One is I bring people in, and I sell them the same stuff, so they come in and I kind of take them through the same track. But the other aspect of quantity is the funnel of awareness. I’m reaching out to a broader quantity in both cases though. Isn’t that still a quantity game? Where does quality come in?
Steven Sashen: [18:11] Well, I would agree with you. It’s a quantity game if you think about quantity from other, from opposite sides of the spectrum. So what it does many and the other is the smallest appropriate. So that’s, that’s one way of thinking of it. On the quality side, Oh yeah, yeah. Um, there’s a common aphorism in marketing that if you want to go broke you, you try and sell a product to everybody. And that’s always true kind of. There are certain products that if they ever become monetized in ways that are pure evil, everybody will need them, and you can sell to everybody like water. You know, water is becoming a scarce commodity, and there are people who are trying to prioritize that, which is terrifying, but even in that, there’s always going to be something where someone’s gonna find a way to segment that and have some crazy expensive water that was pulled out of a, uh, well by nuns who’ve only levitate to get to and from wherever they go or whatever it is. So there’s always going to be that component of market segmentation. There’s got to be a mathematical formula where we could define what we’re calling quantity and quality. In other words, it may be that the best move is a high-quality prospect. Maybe someone who only buys one time, the high-quality prospect, maybe someone who buys every week. It totally depends again on the product and the business model within that product category.
Allison Hartsoe: [19:33] Okay, So let’s say like a mattress. I may be a high-quality buyer, but I’m probably only gonna buy one time every 10 years, and it’s not exactly the same strategy as if I’m buying tide like you said before on a cadence. So I’m going to say that there’s an innovation factor around this space where if it’s a commodity product and I know that I needed on a regular basis, that’s a different play in marketing then if it’s an innovative product that requires a broader understanding for people to know that they have a problem and then know that there’s a solution.
Steven Sashen: [20:06] And you just nailed my favorite topic is the whole problem solution question. So if you have a product that is undeniably a solution to a real problem, that’s a very different thing than if you have a product that is totally discretionary. And the problem is something as ephemeral as whether the customer feels entertained, and others, If you’re selling entertainment, um, that’s a different problem than if you’re selling a cure for psoriasis. And everyone tries to make marketing about problem solution and they really shoehorn certain things into the problem. So there is a whole culture in the footwear world of people that referred to as sneakerheads. They buy, they sell, they collect their trade sneakers. Nike has capitalized on this in a way that I find, frankly, pure evil. They launched a new limited edition product almost every week, and people who don’t have the money to be buying those things buy these things.
Steven Sashen: [21:05] Not always, but as a general rule, that’s there, that is their target is to go after people in the inner city who don’t have the money for really doing this. And the problem they say they’re solving has to do with status and has to do with purpose and mission and all these things that are just such a far stretch. And what they’re doing is they’re just really capitalizing on certain psychological issues that human beings have and desires that people have and it’s not really a problem. If you don’t look like Mike, if you don’t dress like whomever, you know, that’s not really a problem. And so I find things like that somewhat morally reprehensible frankly. And I also find it kind of funny that we are susceptible to it. I remember I was at a, a big footwear conferences, it’s all footwear Ceos, and this one apparel company, women’s apparel company, just started coming out with shoes, and they were pretty from an artistic perspective, but they fit so badly that they literally couldn’t find models who fit in the shoes, uh, every picture is like, you know, the woman’s foot is falling off or, or, or just coming out of the edges, or, you know sliding down in a way where it clearly you couldn’t walk in it. And people are talking about this thing like it was the second coming of Christ, and I just wanted to get up on stage and should go, these are just shoes people. It really is kind of amazing.
Allison Hartsoe: [22:21] That’s fantastic. Well, you know, keeping in line with the evil of advertising. Let’s talk about native advertising and how that has changed or is that a way to approach the quantity-quality game?
Steven Sashen: [22:34] Yeah, it is. A couple of years ago, these guys were saying, hey, I built the symbol on a website and I buy some traffic, and I’m making over a million dollars a month. Don’t you want to do that? I said, wow, of course, I do. And then you look into it, and there are two components to this that were pure evil. The first is that native advertising was the, and let’s call it the genetic dawn of clickbait headlines. So that’s where it was once native advertising kicked in where you started seeing all these things like, you know,
Allison Hartsoe: [23:01] five ways to improve your shoe fat or something like?
Steven Sashen: [23:05] No, no, no, no. Five ways that your shoes are killing you. The secret. Something that nobody wanted you to know. That what I mean, all the stuff that. It definitely gets your curiosity, and it’s like, oh, I definitely want to know what that secret thing is. Who, who wouldn’t want to know that these actors are turning 50 this week, whatever it is. So that was part one, is it just, they really started honing in on how to steal attention in ways that frankly never deliver. And so that’s annoying in itself. I mean, if you’re going to write a good ad, you want it, you want people to see the headline, respond to that ad, get to your website or whatever you are, wherever you’re sending them, until like they did a good thing. But the more important thing is this business model, so here’s the way people doing it.
Steven Sashen: [23:45] They’re building these clickbait websites where once you get to the site, you have to click, you know, like a thousand times to actually see the thing that you wanted to see, to begin with. And they’re buying traffic to the website from one of the companies. I won’t mention names because they all do it and I don’t want to single one out. So they’re buying traffic from company X for say $10 a click. And then the ads on that page are the ads on that site, they’re getting paid per view per page and whether you put it all together on average people were seeing five pages, they’re getting on average $2 and fifty cents per page view from all the ads on that. So they’re buying clicks for $10 and then they’re getting $12 and fifty cents back from the average visitor from the same company. So they’re buying clicks from $10 from company x and then getting paid 1250 from company x company x.
Steven Sashen: [24:31] What that means is there’s another company called the advertiser who’s too stupid to know that they’re just being played. They’re sucking money from stupid advertisers. And most advertisers, especially the ones with big budgets are stupid. And I just mean that they don’t, they’re not tracking closely enough to know when this arp quote arbitrage play is just someone stealing money from you. Frankly, it’s a lot like certain people in the stock market where they’re making money by front running giant pension funds, and they go, look how much money we’re making. It’s like, no, no, you’ve just taken that money from old people. And why it doesn’t cause a public outrage is simply because people don’t understand that it’s happening. Or if they do, they don’t realize that it’s actually affecting them personally and it is affecting them personally, because when there’s that kind of stupid arbitrage play, it raises the cost of real advertising.
Allison Hartsoe: [25:20] Yeah. Yeah. So how do people, how do they find what’s going on? How do they know that they’re being a victim of this?
Steven Sashen: [25:27] Oh man, that’s a good question. Again, you know, look and see what the faggot remember what he said, that the easiest, right?
Steven Sashen: [25:36] Look, this happened to me when, when he first started this, and the barefoot running boom began in 2009, 2010, the same Internet marketers were selling courses on how to build a websites where all you’re doing is driving traffic and then getting, getting money from the AdSense ads that were on your site and they were saying, here are the niches to go after where you can make a lot of money. And barefoot running was one of them. And I knew that that meant I wasn’t gonna be able to buy advertising for years because it was too expensive because that was the only way that someone can make money off that niche. And in fact, it was true. The big companies were spending three and $4 a click to send traffic to their website, which was amazing because they didn’t even have a product that was offering what people wanted. They weren’t trying to keep people away from people like me.
Allison Hartsoe: [26:19] Yes, yes, I understand. Yeah. So wouldn’t a solution to that perhaps be to, and I’m, and I’m going to go right back into our lookalike model here, but to take the actual people who have the propensity to buy and say, give me more people like this, not give me more people who viewed x page, but give me more customers specifically like this group. Wouldn’t that target you, uh, more precisely and get you out of that?
Steven Sashen: [26:47] Maybe it depends on whether the ad platform has the ability to do that. And not all of them do. A lot of are all based on CPM, and they just aren’t willing to do that frankly because they know that if they did, the whole thing would fall apart. So they’re not stupid. They know how to present information so that they’re getting their bread buttered on the right side.
Allison Hartsoe: [27:08] Ah, the evils of advertising.
Steven Sashen: [27:10] A friend of mine years ago, a guy named Patrick Anderson, who unfortunately I haven’t seen it many, many years, but anyway, Hendrik Anderson had a great life. This is the dawn of Internet marketing. This is literally one of the first Internet marketing workshops back 24 years ago. Patrick said, making money is easy, figuring out where the money is flowing and then get in the way, and unfortunately, most of where the money is flowing is advertising so how do you get in the way? And there are many, many people who started companies probably with good intentions, who have realized that they could get in the way of that money flow, and then sometimes they realized that they weren’t offering anything real and they kept going, and sometimes they realized it, and they stopped and sometimes they just got put out of business when other people realized it. My favorite example of this, it was a local company, and again, I won’t name names to make too many people too upset.
Steven Sashen: [27:56] They were selling what they referred to as crowdsourced ad words advertising. In other words, they had a whole bunch of people who are willing to write ads and place the ads, and whoever got the click one. And I said, well, what’s the, how are they getting paid? They said, oh, well we use the Google keyword tool to figure out what an average click costs and then you add like 10 percent because that’s the incentive that they are going to get for writing that and hope to try and get the click, and you know, we take a little fraction of that. And I said, but if I write a really good ad with a really good click-through rate and a really high-quality score, I might be paying 10 percent of that average click cost. And there’s a long pause, and the person on the other end of the phone said, yeah, you’re a little more sophisticated than our average cost of.
Steven Sashen: [28:37] And I said, so you’re selling ad words to idiots. And it took about two years to people figured that out and they went out of business.
Allison Hartsoe: [28:45] Nice, nice. So I guess that is part of marketings game, right as to, to try to find where the value is, but at the same time try to find enough people to pick up that value. It’s a slippery slope. You know, when you’re going after more and more and more in order to keep that scheme running.
Steven Sashen: [29:03] Human beings, we like to believe what we believe. This is how we’re wired. Our brains are designed so that we have a belief and it’s energy inefficient to try and change it. So if you’re suddenly having the fastest growing company in wherever you happen to live or the planet, and you’re making gobs and gobs of money, and someone tells you, you have your head up your butt, the odds of you going, oh my God, you’re right, is about zero.
Allison Hartsoe: [29:26] Yep. So let’s talk about myth number three, which are coupon codes and discounting is basically a race to the bottom.
Steven Sashen: [29:34] Uh, well no, that’s not a myth. You just said it, that’s it. But that actually goes back to one of these kinds of best practices marketing things, if I hear more person say, well, the way you build your list, the way you make more money is by offering people some incentive to opt in. It’s like, oh, okay, but have you done the math to see if that’s actually working. And it, I haven’t met a company frankly for whom it really does. Most of the companies that I’ve seen where they offer some initial, first of all, when I go to a website for something I’m interested in, and the first thing I see is to save 10 percent by joining my list and want to call these companies and go, you know, I was just about to give you full price, right? Because I wanted the product.
Steven Sashen: [30:12] Why are you devaluing our relationship, to begin with, and why are you training me from the first moment I see your website to start looking for discounts on your site. Um, a friend of mine has a company. She, every Friday did a sale on one particular style of her product, and after a while, she realized it was the dumbest thing she’d ever done because people only bought on Fridays. And so she was losing money every day because people very quickly learned that the thing to do is wait for Friday and then wait for the next Friday. There are times when I offer discounts. I don’t do it, uh, on an initial load. I don’t do it when people first visit the site. I will do it later on in the funnel with I’ve emailed them a dozen times or a thousand times or it’s been a year since they bought or whatever it is.
Steven Sashen: [30:59] And every discount that I do is one that we’ve split tested the crap out of to see if it actually is making us more money, and also seeing if the change changes user behavior. Um, and so we’re only doing discounts that have demonstrated that they have longterm value. Uh, it was maybe seven, eight years ago, I was actually posting on websites, hey, if you want to get products that are better price, whenever you get to the checkout page, and you see a field that says coupon code, do a search for that website’s domain name and the phrase coupon code and you’ll likely find one and then you’ll get a discount or sign up to be an affiliate and then by under your own affiliate link or you know, any number of other things, uh, uh, I’ve removed the coupon code field from our website. So that’s not even a temptation.
Steven Sashen: [31:44] There are some unscrupulous affiliates or marketers for other reasons. I don’t even know why, who will optimize for things like zero shoes discount, zero shoes coupons, zero shoes promo, and they’re trying to steal that traffic. We then have to optimize for that same term to tell people, yeah, we don’t do that because our products are affordable and they last a long time and, uh, and just dismissed this whole idea. Um, but one of the stories that I think about this, a weird tangent about racing to the bottom. Way back when I was a professional stand-up comic, and there was a time where three of us opened a brand new club, We’re the first comics to show up, and it was the first night for a three day weekend, and no one showed up for the first show. And so the club owner said, well, you know, what are we going to do?
Steven Sashen: [32:27] And I said, well, you paid for us to be here. If you want us to talk to an empty room, we’ll do that. But either way, you’ve got to pay us because you paid for our commitment for being here, not for us standing on stage and telling jokes for x number of minutes. And he didn’t like that, and shock, and, uh, this conversation went back and forth until one of the comics said, just give us 50 percent. And then I reached into his pocket and gave us half of what we were supposed to get paid. And I glared this guy. I said, you just killed this club. He said, what? I said, you just told this guy that we’re a bunch of suckers who are partners in his crappy business, and then he can low ball us and I know this sounds crazy, but that’s gonna be bad for his club, and within three months this place is out of business. It’s the same thing when all you’re doing is trying to compete on price and discounting for doing that.
Allison Hartsoe: [33:14] Yeah and I think people don’t oftentimes think that coupon codes are really a long term process of competing on price and I love what you said about how your training people’s behavior, because I, I saw a story and I’ve done this myself. I saw a story years ago about how companies that sell online will sometimes give you a discount code if you don’t complete the cart.
Steven Sashen: [33:38] We do that, and we only do it because we tested it, and we don’t do it every time.
Allison Hartsoe: [33:42] Isn’t that interesting? Once. Ah Ha. So it’s when you’re the new customer, and you don’t complete that you come back and you get the code. Yeah. Yeah. But I’ve also seen an interesting example with another online retailer or company that sold shirts and what they were doing is they had a big discount plan and what happened was they were actually attracting fairly low-value customers when they did this discount, and the result was that those customers then put up bad reviews about their products and that then eroded the higher value customers who didn’t want to buy again. So it created this horrible feedback loop of yeah, we’re getting more people in the book getting low quality, and because those low-quality folks don’t like our product, they’re eroding our base.
Steven Sashen: [34:32] If you go buy a Subaru, you can probably negotiate the price, doesn’t happen with that Porsche.
Allison Hartsoe: [34:38] Because Porsche doesn’t discount [inaudible]
Steven Sashen: [34:42] And you don’t have to be a high priced brand to take that same perspective. Laying into, my wife and I fundamentally believe that this whole discounting thing is going to be the cause at the end of the universe as we know it. And we just don’t want to participate in that kind of demise.
Allison Hartsoe: [34:57] Well, it is. It’s exactly like you say, it’s a race to the bottom. Okay, well Steven, let’s do a couple of things here. Uh, let’s talk about things people should be dealing with perhaps think more critically or to avoid being suckered in by common marketing strategies. What one or two things they might do to, to stay more immune to the marketing.
Steven Sashen: [35:22] I get hit up by people literally like five or 10 times a day who want my money and the thing I will say to them and look, let’s be totally transparent. You and I are talking about doing some work together, and I have said the following thing to you. You will know when I say it, you’ll remember it. I say, verbatim, how quickly and cheaply can I find out if you have your head up your ass. And what I mean by that is, well frankly exactly what it is which is. So what if it doesn’t work? I mean, you know, people are always selling me the upside. The only thing I can control is the downside. I can only manage risk. The upside is a bonus, but when push comes to shove, I need to make sure I’m not losing money and there’s nothing I like less than a conversation with some marketing person where they go, wow, I don’t know why that didn’t work for you, but thanks for the money, and there’s nothing that works at 100 percent, so I got to work on the assumption that I’m going to be one of the cases where it doesn’t work and see if I can afford that and see what someone’s going to do if I’m one of those people.
Steven Sashen: [36:18] If they don’t have an answer for what are they going to do? If it doesn’t work, I typically don’t work with them, because I know that there’s not even aware of what their business does and when they say things like, hey look, I can’t offer a money back guarantee. I go, of course, you could. If you knew your business really well and if you were really providing value. The math is simple. Take the percentage of times that you make money for your client and multiply that by the amount of money you make when you do that, and then you subtract the percentage of times that you’re wrong, that it doesn’t work and the amount of money you lose in time, effort, et cetera. When that happens, and if you end up essentially over one, then you know you have a company that could offer a money back guarantee, because you’re right more often and it’s more valuable when you’re right more often. Simple, but that’s the stock trading thing, but most people have never done that math for their own business.
Steven Sashen: [37:04] So that’s my favorite way of doing it. But the gist of what I’m talking about is I just pay attention to return. All I’m ever doing is trying to assess the probability of whether this is going to give me a positive return and then looking at what the potential risk is and just asking do I want to take that. I got hit up by a local company. They wanted me to sponsor , uh, some concert at a really, really wonderful, amazing, cool venue called red rocks amphitheater, and, I highly recommend, come to Colorado. Go to red rocks. It’s incredible. And you wanted like 10 grand or something. I don’t know what it was. I can have a booth there, and I could sell shoes. They were assuring me that it was going to be great. These are all my customers, their health and fitness minded, you know, men and women age 25 to 45, and they went on and on and on, and I said, yeah, let’s just do the math.
Steven Sashen: [37:48] How many people are going to be there? And whatever the number was they told me, and I said, so for me to make money, my napkin drawing math is I need to get about a three times return on my ad spend. Actually, a three times return on my ad spend plus any additional fees. So if I’m working with an agency, there’s ad span, there’s going to be the cost of working with the agency. So I said, all right, 10 grand. So I got to make 30 grand. I knew my average order value is, let’s call it 7, $75, so I’ve got to sell whatever that is, 400 pairs of shoes, something like that, and there are only 2000 people in that we’re going to be a fair thing, so it’s like there’s no way that one out of five people are going to buy a pair of my shoes, no, no way.
Steven Sashen: [38:26] So that’s the biggest thing that I’m doing. It’s just that simple math, what do I need to make and is that possible based on what it’s going to cost, what are they going to do if they’re wrong? Part two is really paying attention to the different types of advertising that you’re doing and the types of people that are responding to those ads. So for example, I break things down based on branded versus non branded as a simple one. So let’s use google shopping or Google ad words as an example if someone is searching for zero shoes because they don’t know the difference between searching for something and going directly to the website. One of our biggest search terms is zero shoes.com, because people literally don’t know how to just type in the address bar, so it makes no sense for me to be paying the same cost per click for people who don’t know how to type in my domain name or who are typing in a misspelling of my domain name or any of my products.
Steven Sashen: [39:15] Then for people who are not looking for me from a branded perspective, so we break things down, branded, unbranded, branded terms. I need at least a, depends on the, uh, the channel, but anywhere between 10 and 50 percent return on ad spend or return on investment. Google used to have a really cool report where they would show you the value of having both the paid listing and the organic listing, and the way that occasionally just not show your paid listing. So they could do that math. I can’t find out if it still exists, if anyone knows about it, tell me. But suffice it to say, during that time, that’s when they demonstrated that it was, in fact, more valuable to have both the paid and the organic listing right next to each other. Now backing up to the beginning of our conversation, that might’ve worked for some people and not others.
Steven Sashen: [39:54] Unfortunately, there’s no way to tell now, but I work on the assumption that it’s true. That ,it’s just owning more of the real estate is probably valuable, but I demand a higher return.The same thing with retargeting, so retargeting, one of the most effective things you can possibly do, and people have already come to my website. I’ve probably already paid to get them to my website, unless you’re tracking the entire user journey and contract every interaction they’ve ever had, you got to work on the assumption that you’ve already paid to get them there, so to pay to get them to come back, you need to have a higher return. So I also demand a very high return on my investment for retargeting. And then for competitive terms, like literally going after competitive products, which I can do on Amazon for example. There too, I know I’m actually going to be spending more money because which footwear, in particular, people are often attached to what they already own, so there’s looking to find that thing and if I interrupt them and show them my product, that’s a much harder sell to make, and so I have a different demand on return for that as well.
Steven Sashen: [40:56] So the justice sort of kind of making a matrix about branded versus unbranded and top of funnel brand new traffic versus the bottom of funnel traffic you’ve already gotten in some way.
Allison Hartsoe: [41:05] That makes sense, and you know, demanding or asking for that return to vary is incredibly important. I think a lot of times we just look at the price and say, oh, is that something I can afford to pay? What’s the overall number? Is it fit? Does it fit in my budget? But the return is what you’re clearly emphasizing.
Steven Sashen: [41:23] And there’s another component of this factors into one of the things that you do for a living, which is how you do want to pay attention to when you want that return. So for us at the stage that we’re at, we’re bootstrapped company so we need to make money as quickly as possible on sales, and so we try to make money on the initial sale, which is kind of a rare thing to do in general, especially if you have a fall type business where you know over time that you’re going to eventually get someone buying that $10,000 given me your child kind of product, every dollar we don’t make this year is money we don’t have to buy inventory next year, which means we can’t sell that product, so we lose money. So I would love to be advertising based on our customer lifetime value. And for us to do that, again, because of the buying cycle with footwear is relatively long. We need to be able to handle that dip in revenue or that dip in return for the duration of the average time that it takes that additional purchase. Does that make sense?
Allison Hartsoe: [42:21] Yeah, it does. So basically if you make money on the initial sale, you don’t have to worry as much about the gap because your cash flow for inventory is there. But if you don’t and it’s fair to assume that not every customer will be such a high-value customer that you might make money on the initial sale. So if you’re expanding or you’re trying to get people in that may not have known you and get them to trust and do that first sale, you might have to go at par or even under in order to make that first transaction come through. But you only have so much time. So in that case, the duration, you know, you really want that second sale to follow up aggressively so that you can recoup your costs.
Steven Sashen: [43:00] And again, it’s just a business decision because let’s say, on average, the second sale happens in six months and based on that, we want to increase the amount that we’re willing to pay per sale. And we go negative on that first sale. That means that just for that six month period until people start making that additional purchase, we’re just floating that kind of cash. For us at this point, that could arguably be a few million dollars that we’d be floating. And we’re, again, just not in a position at this time to be able to do that. I would love the idea of being able to. Actually, I take this back. I was going to say I love the idea of being able to spend more, but I don’t know if it’s necessary.
Allison Hartsoe: [43:38] No, no. You shouldn’t be spending more. You should be spending more effectively.
Steven Sashen: [43:41] Exactly. If this is actually back the idiot marketers, so this is actually one of the things that people say almost like a mantra that everyone just assumes is true. It’s whoever can spend the most wins. No, it’s definitely going to be whoever spends the most effectively, and that may not be the most and arguably probably isn’t. I know a number of companies that spend a lot of money on acquisition, and they are backed, and they’re burning cash like there’s no tomorrow, and the entire business model is burned. So you get bought. Just hope that someday so than to you gives you an insane amount of money without, and thinks that they can somehow turn it around, even though you have just built your entire business with no evidence that you can do anything other than lose money.
Allison Hartsoe: [44:25] Well, you’re going to love our episode with Dan Mccarthy that comes out in mid-January. He talks about exactly that and the math and the models behind it and on valuation. You’ll love it.
Steven Sashen: [44:36] I talked to one of the lead investors in a company that I know very well, and I said, so look, I’m a little confused. If you guys are profitable like you say you are, then why did you just raise another $65,000,000? It’s like, oh, well, you know, there’s a lot of ways of refining profit. It’s like, sorry, what? He’s well operationally profitable but still has a burn rate and negative cash flow. I said, no, that’s not profitable. That’s because you’re a private company and you can lie about your books. As said and also, you’re claiming you have a $2,000,000,000 valuation. I am just not seeing that at all. He’s, well, you know, there’s a lot of different kinds of equity, and based on the different types of equity, you know, you do the math based on that equity. I said, oh, so you just have some investors who are looking to get like a massive return, and so you called the valuation whatever that is because of what they want, not because of an actual evaluation. There’s a lot of ways of defining valuation.
Allison Hartsoe: [45:28] That’s right. That’s so true. But there’s only one way to define good customers and the way that we get them in. So we loved that kind of customer Lifetime Value, Equity Valuation. Up. Now,
Steven Sashen: [45:39] One of the best Segways I’ve ever heard.
Allison Hartsoe: [45:42] Now. Steven, if people want to reach you, how can they get in touch or how can they find out more about zero shoes?
Steven Sashen: [45:49] Well, I keep saying smoke signal carrier pigeon, but no one takes me up on it. So in lieu of that, you can find us at zero shoes dot com, and that’s x e r o shoes.com. Although happily I just made an amazingly cheap deal and reclaimed z e r o shoes back from the guy who was squatting on it. Yay Me. Of course, we’re at zero shoes or slash Zero shoes that every social media something that you can possibly find.
Allison Hartsoe: [46:13] Excellent. Excellent. Yeah, and. And it’s a fantastic product too. I just have to say this to myself because I did read the book ages ago and I am a fan of the barefoot running A. I haven’t found a way to actually run in bare feet but, gosh, you know, what a great product to step into when you realize, hey, I can feel good every day. Not just when I run but, when I move around, when I go to work when I wear shoes.
Steven Sashen: [46:37] Yeah. Well, barefoot is ideal, but it’s not practical most of the time for most people. So what we like to say is that we’re trying to make the natural movement the obvious healthy, better choice the way natural food is, because your feet are designed to bend and move and flex and feel the world. And so we just want to give you the ability to do that and still be socially acceptable. Not Look, there was one time I was walking to the office one day, and I catch my reflection in the window, and I got cut off shorts and a ratty tee shirt. My hair was especially big that day, and I just stopped dead in my tracks. And I looked at myself like, oh, I’m that guy.
Steven Sashen: [47:08] Did not know I was that guy. So yeah, it’s all about that. And I do want to say that even though we don’t do discounting things, I do want to give something to the people who are listening to this. We have this product that I totally love. We call it a rocks mat. It’s a piece of plastic, about 12 inches square with a bunch of bumps on it. So it’s like fake rocks. And you can just use that for a foot massage. We have people who buy like five of these, and they put them in different places in their house, like in front of their sink and their bathroom and their kitchen by their bed when they’re getting dressed. Uh, under their desk and so it’s a great way just to stimulate your feet, get some foot strength back by squeezing the little knobs that are on there and uh, and giving yourself a great foot massage. And so if people go to zero shoes dot com slash ambition, a, m, b, i, t, i, o, n, for any order, a makeup, a number, anything over 30 bucks, we’ll toss in a free rocks mat too.
Allison Hartsoe: [47:56] Wow, that’s awesome. Thank you so much, Stephen. I really appreciate that. I didn’t expect that.
Steven Sashen: [48:01] A, it’s my pleasure and B, I got 5,000 sitting in the warehouse.
Allison Hartsoe: [48:05] Well, you know, I actually can think of a really good use case for that friend of mine is a cancer patient, and for cancer patients, the extremities need to be stimulated, and they oftentimes lose feeling. So it’s a great application, and it’s not something you find typically when you’re looking around for what can I get my friend to help them?
Steven Sashen: [48:23] Oh no, that’s great. That just gave me wonderful chills. Thank you.
Allison Hartsoe: [48:26] Good, good. All right. Well, as always, links to everything we discussed today are@ambitiondata.com slash podcast, and we’ll also pull up that link from Steven. Thank you so much for joining us today. Steven, it has been such a pleasure to talk with you as always.
Steven Sashen: [48:43] Oh, well, thank you. It’s totally a treat.
Allison Hartsoe: [48:45] Remember everyone, when you use your data effectively, you can build customer equity. That’s customer goodness. It is not magic. It’s just a very specific journey that you can follow to get results. Thank you for joining today’s show. This is your host, Alison Hartsoe, and I have two gifts for you. First, I’ve written a guide for the customer centric Cmo, which contains some of the best ideas from this podcast, and you can receive it right now. Simply text, ambitiondata, one word to, three, one, nine, nine, six, (31996) and after you get that white paper, you’ll have the option for the second gift, which is to receive The Signal. Once a month. I put together a list of three to five things I’ve seen that represent customer equity signal not noise, and believe me, there’s a lot of noise out there. Things I include could be smart tools. I’ve run across, articles I’ve shared cool statistics, or people and companies I think are making amazing progress as they build customer equity. I hope you enjoy the CMO guide and The Signal. See you next week on the Customer Equity Accelerator.