Why Your 3x ROAS Might Still Be Losing You Money — Matt Raminick | What Vanity Metrics Hide, Why Profitability Beats Revenue, What Numbers Actually Drive Profit, Why MER Measures True Growth, Why Forecasting Beats Dashboards (#462)

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00;00;00;00 - 00;00;17;26 Speaker 1 Your side. Traffic might be cold, audiences, warm audiences. The other ones are going to be conversion rate from the channel average order value. These are all really good directionally. But again, what impact are they having on the total business? Are you hitting your goal overall? Are you seeing overall new customer numbers grow? 00;00;17;27 - 00;00;25;09 Speaker 2 Everyone should probably has set up a pixel or a API, but it's still not working. What's the reason behind that? 00;00;25;11 - 00;00;32;10 Speaker 1 Great question. A lot of advertisers tend to overthink this a little bit. 00;00;32;12 - 00;00;53;08 Speaker 2 Hello, welcome to another episode of the eCommerce Coffee Break podcast. Tons of brands are scaling fast. Dashboard looks healthy, numbers look strong and on paper everything seems to be working. But behind the scenes, many brands feel the pressure. And when you scale based on the wrong metrics, you can throw yourself into a corner without even realizing it. So today we're tackling a question most e-commerce operators avoid. 00;00;53;11 - 00;01;12;22 Speaker 2 Why can a3x return on ad spend still mean you're losing money? To break this down, I'm joined by Matt Raminick. Matt is the founder and CEO of Sunnyside, a performance marketing agency working with lifestyle brands like Nixon and Peak and was over 15 years on the brand side. Helps brands to see past vanity metrics and focus on what really works. 00;01;12;25 - 00;01;14;02 Speaker 2 Matt, great to have you on the show. 00;01;14;07 - 00;01;15;24 Speaker 1 Yeah, thanks for having me. Glass. 00;01;15;26 - 00;01;20;07 Speaker 2 Let's dive right into it. Why can't a30s store mean you're losing money? 00;01;20;12 - 00;02;02;09 Speaker 1 Well, for starters, you know, a ROAS metric is only one way of looking at results. And it depends on how you define it, Right. Traditionally speaking, when you think about ROAS, you know, you might be talking about a channel like better ads or Google ads. So if looking at individual channel performance, such as within meter and you're seeing a high or decent ROAS number based on whatever your goal amount is, it might not always translate directly to actual revenue generation for a number of factors, one being the attribution settings in the channel. 00;02;02;12 - 00;02;25;10 Speaker 1 You know, if you add up everything across the board that you're doing, you're spending on marketing across Google Meta email, Klaviyo. You're always going to have 400% of what true dollar amount you're seeing in your Shopify, right? So that's the first one. And then the second one is you should be thinking about what your overall ROI is, right? 00;02;25;10 - 00;02;52;18 Speaker 1 Or MLR. So marketing efficiency ratio, like that's going to be a much cleaner way of understanding the true impact of marketing versus what the individual channel results are. And the last one is because ROAS is actually easy to inflate. So a media buyer could target past customers. They can go and target warm audiences only and probably see a decent ROI or ROAS on those types of tactics. 00;02;52;18 - 00;03;23;02 Speaker 1 Right? So if you're using the channels though, like a meta again, for example, for what it's best, which is your customer acquisition or awareness or generating new traffic to the site, generally you're going to see a lower ROIC number, but it will pay dividends over time. So all that said, our stance typically only side is to look at things a little bit differently where we use ROAS in the channel directionally to optimize day to day. 00;03;23;02 - 00;03;30;25 Speaker 1 But our our interest is more on overall impact to the business that these channels have. Mm hmm. 00;03;30;27 - 00;03;48;25 Speaker 2 So many good points in there, which I think our listeners are very interested in. And I want to unpack as a little bit more so about vanity metrics or say RO, as you said, is not really giving the full picture. There's other numbers who are not really giving the full picture. Can you highlight some of these where people get basically pointed in the wrong direction? 00;03;48;27 - 00;04;22;16 Speaker 1 Yeah, I think ROAS is the biggest one that we tend to see, especially when maybe it's a younger brand or a smaller brand that's really just trying to get their footing. But also, you know, I think that some of the other metrics that people tend to get caught up on are just the overall traffic. Right. So traffic is a big one where if you know, you're you might not need as much traffic to the site as maybe you think you do, especially if you have a decent conversion rate and average order value and conversion rate on the site. 00;04;22;17 - 00;04;49;06 Speaker 1 The other metrics that I think that might be a little bit misleading are going to be site traffic. Right. Because that's overall just one piece of the story. Your site traffic might be called audiences, warm audiences. The other ones are going to be conversion rate from the channel average order value. These are all really good directionally. But again, what impact are they having on the total business? 00;04;49;06 - 00;05;12;03 Speaker 1 Are you hitting your goal overall? Are you seeing overall new customer numbers grow? Are you seeing repeat customers grow? What is your contribution margin? And what are some of the more metrics that are aligned maybe with your PNL that your CFO would be looking at? That's kind of what we're more interested in versus some of the more vanity metrics at the channel level. 00;05;12;06 - 00;05;30;18 Speaker 2 So that makes perfect sense. The other thing that operators get caught up quite often is that the numbers are not much. And you mentioned before that you have different numbers in like ads, Google ads, and then what you see in Shopify. Now every one should and probably has set up a pixel or a API, but it's still not working. 00;05;30;22 - 00;05;31;28 Speaker 2 What's the reason behind that? 00;05;32;05 - 00;05;54;15 Speaker 1 A lot of advertisers tend to overthink this a little bit, and I think what it really comes down to is that as long as you have your Shopify in sync with media, you have Cappie set up, you have your pixel events are firing, Google ads are conversion events are firing, that's going to get you about 80% of there. 00;05;54;18 - 00;06;33;12 Speaker 1 You could go a lot further. You can find third party vendors that help with more server side tracking and and more advanced tracking. But I believe that for the majority of retailers out there, the integrations that these channels have with Shopify are going to be enough for you. And so based on that, I think the signals that we tend to look at that are more indicative of success or not are going to be things like response to the creative itself, like our our new customers are responding, making sure you have exclusions in place where you're excluding your past customers. 00;06;33;12 - 00;06;57;11 Speaker 1 For the past 12 months and then really trying to have enough creative diversity where you're getting a good read on what the customer responds to or not and then reacting on that. So when it comes to some of the technicalities, these are things that definitely matter and you should be checking them on probably a quarterly basis just to make sure that everything's firing the way it should. 00;06;57;13 - 00;07;10;11 Speaker 1 But overall, you know, I think that once you're past that, it's it's more about how you look at the signals within the channel and with what's happening in in your bank account at the end of the day. 00;07;10;18 - 00;07;28;05 Speaker 2 I think that's the most important thing. You want to see what's left over in your bank account. Now with Sunny Side, your performance marketing agency, but you have a bit of a slightly different background than most agency has because you come from the brand side. So you basically helped brands in the day to day business On growing the numbers. 00;07;28;08 - 00;07;33;00 Speaker 2 Give me a bit of a background on your approach when it comes to marketing. 00;07;33;03 - 00;07;56;25 Speaker 1 My approach here is that before I started an agency, I'd never worked in an agency. So I spent about 15 plus years on the retail, e-commerce and marketing side. I managed agencies as part of my role. So working at retailers like Quiksilver and Volcom and Paxson before I started the agency. I was tasked with procuring and managing agencies day to day. 00;07;56;26 - 00;08;29;27 Speaker 1 And so I learned a lot about what it was that they did well and what the things were that I would have improved. So in thinking of those, that's what really helped me to formulate a plan of how we wanted to go to market as an agency. And our secret sauce really has been from the beginning, which is no secret, really has been putting A-plus players who have former brand experience in front of some of the brands that we work with or all of the brands we work with. 00;08;29;29 - 00;08;54;24 Speaker 1 And the reason why we do that is because these people have been on the front line. They've been at the table long before. Most of the time agencies are brought in. They've dealt with the real problems day to day that operators deal with. So they understand the nuances of what it means to run a business day to day and can help make informed decisions to help our clients grow based on the challenges that they're facing. 00;08;54;26 - 00;09;10;23 Speaker 1 So that's been a big differentiator for us. It's we really hang our head on that line and believe that it's truly one of the ways that we benefit the brands that we work with, maybe from other agencies who are purely folks who have only been on the agency side. 00;09;10;29 - 00;09;23;05 Speaker 2 Now, if a new brand approaches you and things are not looking as they should look, how do you approach this? What's kind of the onboarding? How do you get the grip of what they need to do? 00;09;23;09 - 00;09;53;27 Speaker 1 That's a great question. We have a pretty extensive onboarding process and it usually kicks off with an audit, a typical audit where we go through the accounts. We try to understand what's working, what's not working. A big component of that is looking at the creative, trying to understand what's resonated with the customer, what hasn't. And the next thing we look at is the trailing 12 months of financials and we want to understand what is what the spend was, what the revenue was, how many new customers they got. 00;09;53;27 - 00;10;19;13 Speaker 1 I mean, repeat, we compare that to the previous year and then the next thing we do is we actually build out a 12 month forecast for the client looking at their net revenue goals, what their spend is going to be, and then back out a contribution margin target because our number one stance is you could be hitting your goals overall from a revenue standpoint, but if you're not profitable, it really doesn't matter. 00;10;19;13 - 00;10;42;24 Speaker 1 Your business isn't going to sustain. So for us, we really put a big emphasis on profitability and helping these brands become profitable. So with that all in mind, then we can now understand where they're at as a baseline, where they're trying to get to help them to understand our system and how we look at forecasting for the brands. 00;10;42;26 - 00;11;03;16 Speaker 1 The last component is really taking a look at, well, last two pieces really are what are the go to market moments coming up, What are the what's on the brand's calendar that we can really attach activation to each month? So what are the three or four different things, whether it's promotion, new product launch, collaboration, etc.? And then the other piece is the creative. 00;11;03;19 - 00;11;32;08 Speaker 1 So really going through all the existing creative, what all exists now that we could either use as is or use to at least generate some learnings from and then help them help inform the next iteration of content. On the brand side, the type of brands that we tend to work with don't usually outsource creative. We're talking about lifestyle brands like Brixton and Nixon and Municipal. 00;11;32;09 - 00;11;58;04 Speaker 1 These are all brands that really hold the creative close to their vest and don't typically let outside agency touch it. Fair enough. Same thing was it was when I was on the brand side. It was really tightly controlled. Right? So our position is more coming in from the strategic angle of helping build the bridge between the brand creative in the channels and what needs to happen in order for them to deliver us effective, creative. 00;11;58;04 - 00;12;22;08 Speaker 1 And so a huge part of that operating process is really going through creative, getting the system in the framework set up to have a really tight strategy in place and then generating the flywheel effect where we iterate, provide back feedback. We're even going as far as informing the brands photo photoshoots before they go out and capture content, helping them understand what worked in the past. 00;12;22;09 - 00;12;51;10 Speaker 1 What we're seeing out in the market and then helping them with content creation efforts from a strategic point of view. So it's exhaustive. It's about a 90 day process from start to finish, and we're in the middle of it right now with a couple of brands, and that tends to be a pretty heavy lift in the beginning. But once all these foundational elements are in place, it really sets the stage for a really great working relationship. 00;12;51;13 - 00;13;09;28 Speaker 1 And that's why over the past three years or so, we've had a 95% plus retention rate with the clients that we were worth because we we really have a really firm idea, really good idea of what it takes in order for these folks to be successful. And to your point, a lot of that really does start with the onboarding. 00;13;10;03 - 00;13;24;00 Speaker 2 Now, when it comes to numbers, a lot of founders and brands rely on dashboards, on performance reports and whatever. What do you create? Where do you look into when it comes to reading the numbers and figuring out what's going on? 00;13;24;02 - 00;13;51;26 Speaker 1 I think a lot of brands and agencies tend to get hung up on attribution, and for us it's still the holy grail of marketing that nobody's quite cracked it figured out, right? So for us, we just rely on the source, the truth being Shopify, right? Net net revenue, gross revenue, new customer orders, repeat customer orders, and that we have our own proprietary set of sheets and tools that we use internally that have been built over decades working in-house at brands. 00;13;52;02 - 00;14;20;04 Speaker 1 And so these are these are CFO grade tools that we use for forecasting that we build out, and then we load all that into a tool called Store Hero, who we recently partnered with over the last year. We love them there. They really kind of they were the front runner, I think, for us. And in looking at different tools out there when we were trying to find a dashboard solution, because forever we were using our own spreadsheets that we were building out manual reports. 00;14;20;04 - 00;14;42;16 Speaker 1 And so for them, we've worked pretty closely in helping to inform the tool and in figure out ways for us to to merge what we're building on our side with what they're doing. So we're leveraging our here now across all our clients. It's more of the source of truth. And we like it because it gives you the true read of what's actually happening with the channels once you've plugged everything into it. 00;14;42;18 - 00;15;04;05 Speaker 1 But we can load in all of the cost of goods at the product level, any other marketing expenses, and then we can track against a contribution margin goal for the brands. And so that's been really an eye opening game changer for us because now we have a real time point of reference that we're looking at both with the brands and internally. 00;15;04;07 - 00;15;19;19 Speaker 2 Yeah. So I'm curious as to how, you know, they were guests on the show a while ago and it's definitely good to have one source of all the data. So it makes it makes a huge difference. Now, you were saying that you're working with lifestyle brands. Who's your perfect customer who falls under this category? 00;15;19;25 - 00;15;41;26 Speaker 1 The ideal customer for us is a brand that's generating between five and $50 million plus a year in annual eCommerce revenue. They have a robust marketing and brand plan in place where they're not overreliant on paid channels to do the heavy lifting to generate revenue for them. So they're doing collabs, they've got a strong product point of view. 00;15;41;28 - 00;16;11;28 Speaker 1 They know who they serve, they know who they're taking market share from. They understand their customer really well and they have a really strong creative pipeline. Those are kind of the elements that we look for when we're vetting a new client. And, you know, some are or some will have stronger aspects than others in certain areas, and others may have, you know, stronger than others in other places. 00;16;11;28 - 00;16;33;18 Speaker 1 So I think what it comes down to, though, is truly class. I think when a brand understands who they are, who they're for, who they're taking market share from, and what their product does or serves, what what problem it solves. Those are really the key things that we try to look for, because without those core things, then you're kind of just guessing, right? 00;16;33;19 - 00;16;55;10 Speaker 1 And so that those are those are really the non-negotiables. Usually we can find a fit for most instances, but as far as vertical goes, we try to lean on our expertise. Most of us come from apparel brands. We've worked in retail for a long time, so we don't touch any kind of lead gen or B2B or anything that we just have no experience with. 00;16;55;10 - 00;17;09;11 Speaker 1 We don't try to pretend to be experts in in those industries. And so for that reason, more for us, we try to just just does lean on what our experiences and the type of brands that we have worked out with and and love to work with. 00;17;09;18 - 00;17;19;03 Speaker 2 You mentioned already some brands you worked with. Could you share some success stories? You don't need to name the brands or case studies of businesses that you have worked with and what kind of results they saw. 00;17;19;05 - 00;17;38;26 Speaker 1 Yeah. So the longest tenured client we've worked with is a brand called Bik. It's a brand based here in Newport Beach where we're located. We've been working with them for five plus years now. In that time, the brand has grown more than 3,000% in eCommerce revenue. And we are our model is a little bit different than most agencies, right? 00;17;38;26 - 00;18;01;13 Speaker 1 So with with that, more than probably about a half a dozen clients that we work with now, we're fully embedded with their team. We're an extension of what they're doing internally. So that means fractionally ecommerce direction. We're giving them we're helping advise on their their annual forecasts. We're doing creative strategy all on top of the paid media and in most cases email and retention. 00;18;01;15 - 00;18;25;17 Speaker 1 And so for us, that's like our ideal partnership, right? Where we can come in and help really inform what's happening with the business. And so in the case of Big, that's that's been the partnership that we've had with them for a long time now. And so really for us, this it's been a great success story because it's been a it's been a true partnership in the sense that there's a lot of trust involved. 00;18;25;19 - 00;18;48;21 Speaker 1 And they look to us for recommendations on everything from promotional cadence to product focus from a marketing standpoint to where to spend the next dollar on marketing, you know, to be the most profitable they can. And so I think like most brands though, in the last few years, they've had their challenges and we've found ways to to navigate that. 00;18;48;21 - 00;18;53;09 Speaker 1 But overall, it's been a a great success story that we're super proud of. 00;18;53;12 - 00;18;57;11 Speaker 2 Now we need to talk about pricing. How do you charge your clients for your services? 00;18;57;13 - 00;19;20;09 Speaker 1 Yeah, good question. So for us, we try to keep it simple. We generally have a flat fee retainer that covers off on the the embedded consultancy model that we run. So again, it typically includes fractional support from a consultative level on the e-commerce business where we're actually coming in, like I said, building the forecast. We're looking at creative strategy. 00;19;20;11 - 00;19;48;17 Speaker 1 We're really getting our hands dirty with the brand directly, trying to understand what it is that they're trying to do, and then building a formula based on what we know works and then putting that into action based on whatever channel it is they're asking us to manage. So it depends. It really there's a base fee involved that's usually flat retainer, try to keep it super simple and then depending on the channels that we're managing, it flexes up and down. 00;19;48;20 - 00;20;11;25 Speaker 1 In some cases we've done different types of models where there was percent of ad spend or some kind of incentive bonus on top of it. But we found that the best approach is just to keep it really simple, and that creates a lot of predictability on both sides for the brand and us. And so that's that's typically the model that we've been working with for the last year or so. 00;20;11;27 - 00;20;25;21 Speaker 2 Mm hmm. And so it's your brand experience. Keeping it simple is also good for your client when it comes to their marketing budget. So I can totally relate to that. Matt, Before our coffee break comes to an end today, is there anything you want to share with our listeners that we haven't covered yet? 00;20;25;24 - 00;20;49;19 Speaker 1 I'd love to hear from you guys. Come find me on LinkedIn. I'm pretty active on there and I love chatting with you people, so certainly reach out and yeah, if you have any questions about anything as it relates to e-commerce marketing growth, paid media, I love chatting about all this stuff. It's what keeps us going. So don't don't hesitate, reach out, appreciate it. 00;20;49;21 - 00;20;52;02 Speaker 2 What's the link to your website? Where can people go and find you? 00;20;52;06 - 00;21;06;17 Speaker 1 Yeah, we're at Sunnyside, California dot com and yeah, have a look. We just redesigned our site. Super proud of it. Brilliant designer. I've been back as did the design and the brand identity for us. 00;21;06;19 - 00;21;22;00 Speaker 2 I will put the links in the show notes and you're just one click away. Matt, thanks so much for giving us an overview on how you can grow your sales by looking into the right numbers. And I hope a lot of people will reach out to you. And what I really like is that you have this brand experience and not coming purely from the agency side of things. 00;21;22;03 - 00;21;23;07 Speaker 2 Thanks so much for your time today. 00;21;23;14 - 00;21;25;18 Speaker 1 Yep, likewise. Thanks, class. I appreciate the time.