[04:24] So for the folks who aren’t familiar with you or your company, let’s start there. What is this Snacklins company? What do you guys sell?
- Yeah, Snacklins is really interesting. You know, we’re not a traditional snack company or chip. Snacklins was actually started as a bar bet between our founder and one of his good friends who used to work in a barbecue joint. And here in Washington, DC, where I live. And he actually grew up Muslim and couldn’t eat pork growing up and so he was kind of joking, “What if we could create a vegan pork rind?” And he’s kind of a mad scientist in the kitchen.
And you know, over several months, was experimenting with different ingredients, and came up with a snack. It’s made from yuca, mushrooms, and onions. It’s crunchy, airy, delicious. And the best part of it all, kind of the mad scientist part of it, is it’s super low calorie. So we view it a little bit as a vegan pork rind, but it’s also just a delicious, plant-based, healthy, low-calorie chip. And we offer it in four different flavors. And I oversee all of our marketing and eCommerce, and as part of that, our digital advertising. We’ve been around now for about five years, but have been really growing over the past two years. So yeah, that’s, that’s Snacklins in a nutshell.
[05:56] So when you say really growing, give us an idea of the size of the company today, either in terms of revenue, or number of bags of chips shipped, or something our audience can sink their teeth into.
- Yeah, so in fiscal year ‘20, we did just shy of $4 million in sales. That’s total across eCommerce and our wholesale and grocery stores. So I don’t know how– what that boils down to in terms of bags or number of Snacklins sold. But it’s a lot. Part of that growth was because we were featured on Shark Tank in October of 2019. Right before that, actually, we were featured on The Rachael Ray Show. So, you know, two very different TV platforms, but got a ton of awareness from that. And I’ve been growing our eCommerce business and our retail footprint ever since.
[06:52] And you joined the company about approximately two years ago when it got funded. Is that right?
- Yeah, in late 2018, early 2019, we received a significant round of funding just to kind of get Snacklin to the next level from inside of our founder’s kitchen to actually opening a factory, hiring a small team of myself and a few others to take marketing and launch our e-commerce and everything. So yeah, I came in just after that round of funding in 2019.
[07:27] Okay, and so back then, do you remember roughly what the sales were per month?
- When I first started, we didn’t even have e-commerce. We– that was– but you know, in the before times, before when our factory was just getting started. So I’m– no, I don’t remember, but definitely sub-$1 million.
[07:50] Okay, so significant growth.
- Oh, yeah. Shark Tank and you know, the publicity we’ve received has just sent us kind of on a rocket ship. And we’ve been growing ever since.
[08:01] And did the founders do a deal with the sharks on Shark Tank? Or did they just get on the show?
- We did, we made a deal with Mark Cuban who is an investor to this day.
[08:10] Okay, great. Have you ever interacted with Mark yourself?
- So I have never personally met Mark. I know our founder has. Obviously, in person when he was on the show, but we work with Mark and his team very closely. And he’s a big fan and proponent of Snacklins. I think he actually tweeted about us a few weeks ago.
[08:32] When you say you work closely with his team, what kind of things does Mark Cuban’s team do for you guys?
- There’s all different connections and advice that they can provide from businesses that they’ve worked with in the past. So I can’t go into super specifics about what it is, I’m not even always necessarily looped in at that level. But he, his connections– and he’s just, he’s actually invested in lots of different food companies, especially vegan as well. People who have been watching Shark Tank, he’s really grown his investments in meeting companies. So we’re just able to learn kind of as a collective group of Mark Cuban companies on what best practices are.
[09:18] Well, sure, yeah. Makes sense. If he’s learning something in one portfolio company, he’s got what you cross the other ones. Alright, so let’s talk about revenue split between Amazon and direct-to-consumer. What’s that look like?
- Yeah, so lately, it’s been 50-50. When we first launched e-commerce in mid-2019, we first pursued Amazon. And we launched our own website powered by Shopify a few months later, but Amazon was sort of dominant in that. A few months ago, we did a whole website rebrand and launch about new packaging and just a totally new user interface. And lately, we’ve been kind of seeing a more even 50-50 split between our e-commerce revenue.
[10:07] Okay, so here’s how we’re going to spend the rest of our conversation just so the audience knows, I’m going to spend the first next little bit talking about what makes Amazon successful. And then we’ll do the second half talking about what makes D-to-C successful on your Shopify site. So you have outsourced the management of your brand to a company that basically runs the Amazon channel for you. Is that correct?
- Yeah, we were in very close partnership with them. But yeah, they both are 3PL and they fulfill our orders, but they also manage our Amazon advertising and listings.
[10:43] Okay. So there’s a decent chunk of my audience that’s actually in that business. They’re wanting to grow Amazon brand management agencies and Amazon reseller agencies, so it’d be really helpful for them to understand from your perspective, why was it more beneficial to deal with an agency or a third-party company than to try and hire staff to do this internally?
- Yeah, it’s a great question. And for us, it was a little bit of a no-brainer. Amazon is the, you know, 500-pound gorilla in the room, I guess. You really, as an e-commerce brand, have to be on it to be successful even. Before I answer your question I’ll just say, even when we run advertising on other platforms outside of Amazon, we see an uptick in Amazon sales, because of the halo effect of people going to Amazon first. So we knew we had to get Amazon right. We couldn’t have this steep learning curve and have issues where we were waiting for a response from Amazon. So we sought out an agency that knows the ins and outs of Amazon really well, works with other brands in the food and beverage space, and can use what they’ve learned when working with those brands to help us build our presence. We just thought that doing it internally would be more of a headache than it’s worth at that point.
[12:18] Okay, so I want to unpack a few of those things because there’s some good information in there. So you want to affirm two things that I heard: one, that knew the ins and outs of Amazon, and two, had expertise in your niche. So let’s deal with those one at a time. How did you really– aside from them telling you, “Hey, we’re really good with Amazon,” how did you know that they were really good with Amazon? Or did you kind of have to just take their word for it in the beginning?
- I would say we partially took their word for it, but one of the founders and had staff at this firm is an ex-Amazon employee. And so they’re kind of intimately know the workings of Amazon, their listings, their support, the operations, how fulfilled by Amazon versus seller-fulfilled Prime versus fulfilled by merchants, how they all work, and the standards that Amazon expects. And so that was a really big differentiator to us in choosing this firm. We also knew another brand that was working with them, and their experience was beneficial in helping us decide on this agency.
[13:30] And are they in the same industry as you? A snack-type?
- They’re, yeah, they’re a beverage, so more or less the same space.
[13:39] So that comes to, then, the second part of the question: their industry focus. Now this company, do they happen to focus only on food and beverage? Or do they just happen to have a number of clients that are in the food and beverage space?
- Yeah, exactly. The latter. They just have a number of clients that are in food and beverage, but I’ve actually toured their massive warehouse and facility, and there’s tons of different food and items and perishables, non-perishables, all sorts of stuff.
[14:09] Okay. So from your perspective, if you had to pick a new agency, let’s say this one ceased to exist. What would be the factors that you would place the most weight on when picking this new agency? Would it be in this focus on food and beverage? Or would it be other things?
- Probably not. I don’t think experience and food and beverage is the top priority, I think that’s a plus. But ultimately, their experience with Amazon and just the ins and– what they know about the ins and outs of how Amazon works. And coming at it from an analytical perspective, we have a lot of conversations with our current agency about how much inventory should go into Amazon, how much should stay at the warehouse, where should we allocate ad budget.
There’s a lot of really thoughtful, data-driven conversations and decisions that we’re making with this agency. And that’s sort of how our team operates. And we just kind of really vibe with them. So if I were to look for a new one, I would look for that same relationship that we have currently, just very communicative and very data-driven.
[15:27] Okay, makes a lot of sense, because we’re in the world of clicks. And there’s a lot of data to be had.
- Exactly. Also know, before you move on, they built – from the time we started with them to now – they built this entire sort of data dashboard, where we can view performance of our products, performance of our advertising, look at what other products are being purchased with ours. So they love data. And we love getting access to this dashboard to view how we’re performing. That’s a huge plus, and something I would also recommend others look for in agencies they’re going to work with.
[16:07] Do you know if that dashboard is something that– would they build proprietary from scratch or the US industry tool that they can share with you?
- So I think it’s a little bit of both, they built a custom for themselves, but it’s using some sort of provider platform on the back-end, but it’s all custom-made for them.
[16:29] Okay. All right. Makes sense. In terms of the agreement that you have with them, because I know that folks in my audience who are trying to get clients like you, they’re always perplexed by, well, what should the agreement look like? So is it a multi-year agreement? Is it a month-to-month agreement, and then roughly without disclosing anything that you can’t or don’t want to disclose, like, what is it– how do they actually get compensated for doing what they’re doing in terms of managing the account, and ad spend, and so forth?
- Yeah, I’m actually not sure about the timing on the agreement. I can’t jog my memory for some reason on that. I think it is multi– I think it’s at least a year, that we sign on every year. That’s my guess. But on your second question, the way that they make money is, they charge just a small fee on each, on each box that they ship out, each order. They use the individual bag as the unit. instead of saying that a pack is the unit, our one product, you know that one bottle of soda, whatever it is that the company is selling, they view that as one unit. So we can create any types of pack sizes, varieties, mix and match of things, all in one box. And so they charge us for putting that pack together, and a small fee on the shipping as well.
[18:03] And that’s the sum total of their compensation. They don’t charge any retainer fees, no percentage of gross revenue, no percentage of ad spend, nothing?
- I think there’s a percentage of ad spend as well. That’s the ad side. But no retainer.
[18:17] Okay. So essentially, they’re getting a slice of revenue, and they’re getting a slice of the ad spend.
- Yes, they grow in their revenue as we grow.
[18:26] Yeah. Okay. Which is pretty typical for how agencies like this–
- And that’s something else, that’s something else we loved. We love that they have an incentive to make us grow.
[18:39] Yep, absolutely. Okay. Now, let’s talk about your Shopify store.
You started– you launched on Shopify, roughly when?
[18:54] Okay. So October 2019, October 20. So a year and a half? Now, one of the things that– I do a lot of interviews like this with brand owners, and some of them, I think mistakenly, think that selling on Shopify is so much more profitable than selling on Amazon. But what I don’t think they’re taking into account is the cost of the traffic. Because obviously, on Amazon, there’s a lot of traffic that’s just there. What is your opinion on the profitability of one channel versus the other?
- When I look at the numbers between Amazon and Shopify, our margins are definitely better on Shopify, and that’s mainly because of Amazon’s FBA fees or their shipping costs sometimes that are higher than ours would be. So on paper, our margins are better. That said, we pour a lot more dollars into driving traffic to our website than we do to Amazon.
[20:06] Yeah, so your gross margins are better.
- Exactly. That said, it’s easy to– I can’t, I’ll say this: I can’t overstate how important it is that we get back customers’ information, though. We get their email. And so we can email them you know, numerous times and really elongate their relationship and their lifetime value with us. And that’s really the most important thing, that we’re able to build a relationship with the customer. We can more easily set up limited-time offers, promotions, coupons, actually engage with the customer, where Amazon’s completely a black box, and doesn’t allow us to do that. We still love Amazon, when we think about the ideal customer experience, we might be willing to pay more to acquire a customer if that lifetime value might be longer. So even though I would say maybe the margins maybe can be awash in some ways, or to your point that it’s not as profitable as some think, I wouldn’t just look at the profit on one sale. I would look at the lifetime value of a customer across all time, I would argue it could be higher on something like Shopify versus Amazon.
[21:23] I agree with you. However, the flip side of that coin, and I’m curious as to whether you factor this into your analysis is, when you start to rank well for organic keywords on Amazon, you start making sales to customers that you didn’t pay. And while they’re not making it onto your customer list per se, they could be on ‘Subscribe and Save,’ or they’re simply making a purchase that you didn’t directly pay for. Does that– when you compare one channel versus the other, and you look at LTV of one channel versus the other, do you factor that into your thinking? Or is it so arbitrary, that it’s really hard to quantify and therefore doesn’t really get into the “one is more profitable than others” conversation?
- I think it is a little bit hard to quantify. But I’ll say it’s also industry-specific. We actually right now do not bid on non-branded terms on Amazon. We just haven’t really dove into that yet. We will. But one of the reasons we haven’t is because keywords in the food and beverage space, in the healthy snacking space, are unbelievably competitive. And so in order to rank exactly like you’re saying, it would require months of investment at a loss before we can really see the return on that. So when we think about $1, towards Amazon non-branded search versus $1 to Facebook or Instagram advertising, I’ll put that dollar back at Facebook and Instagram advertising. Because what it’ll do is it’ll potentially drive people to my website, or generate more awareness about Snacklins. And then people were searching for Snacklins on Amazon. And we spend almost 100%– you know, so much of our revenue on Amazon is coming from branded search, obviously. So we own our own brand on Amazon, and completely.
[23:35] So with respect to Facebook, and Instagram campaigns, are they profitable from the first purchase? Or do you need people to make X number of purchases before you achieve profitability?
- You know, it’s a work in progress, as I’m sure some listeners can relate to. I would say most times, we’re not profitable on that first acquisition from a customer on Facebook and Instagram. But we work to make sure that we are profitable on their second. We’re kind of making an assumption that a certain percent of customers we pay for are going to return and a certain percent aren’t. And we’re comfortable with, you know, whatever that acquisition cost is. Anyone who’s a Facebook/Instagram advertiser has seen it’s gotten more and more expensive, but it still doesn’t really– there’s not really that many other platforms that rival the reach and complexity of the Facebook/Instagram platform. So that’s where we continue to focus.
[24:36] In the checkout process, so let’s say I saw I’m scrolling on my phone and I see one of your ads on either of those platforms and I come and say, “Oh, I want to buy you know, a bag of chips or two bags or a box or whatever.” What is the thing that people are most commonly buying on the front end?
- A variety pack, with all four flavors.
[24:52] Okay, a variety pack. And how many, how many bags come in that?
- You can get eight. Anywhere from eight to 48.
[25:00] Okay, so I’m seeing eight bags in the variety pack. I’m adding that to cart. Are you doing, in the checkout process, are you doing any one-click upsells where, for example, as I’m saying, “Hey, I want one bag,” I’m suddenly presented with an offer, which says, “Well, if you’d like to take three or five, you can get this kind of discount or this discount.” In other words, efforts to drive up AOV, average order value, are you doing stuff like that right now?
- Yeah, it’s a great question. Because we’re very focused right now on driving up AOV. We don’t do that right now. We just launched a new website back in November. And so there’s still, kind of, some improvements we’re making in exactly things like that, to drive higher conversion or drive, higher average order value. Well, we struggle with, as a brand is, we only offer one product. It’s a bag of delicious snacks. We don’t have really any other products on our website currently to go with it as kind of a supplemental product.
So people also have an expectation that you know, snacks are affordable; snacks are cheap. They don’t want to necessarily pay $40 for a snack they’ve never had before. So we focus more on lifetime value, instead of just getting the first AOV super, super high. Snacks is something you get them, you eat them, they’re delicious, and then they’re gone. And you have to order more. And so getting people to repeat, again and again, or sign up for a subscription, that’s, you know, just as important to us as increasing their cart size.
[26:40] Well, far be it from the host to give any advice. But I have interviewed many, many founders of consumer packaged goods companies. And I will say that though, the one thing that I do hear with reasonable regularity is that when you’re offering the two-pack, three-pack, four-pack, five-pack for volume discount on the front end, and that is actually quite effective. So for whatever that’s worth, maybe you’ll want to test.
- Yeah, no, we absolutely will look into that. Increasing AOV or conversion rates or all those things is our top priority right now as we continue to grow and scale our business. So I’ll take that advice, we’re going to look into it.
[27:18] And then the other thing, on the back end, are subscription boxes, obviously recurring revenue. That’s why I’m in the software business. Because I love recurring revenue. It’s the Holy Grail. I have interviewed and I wish I could think of the exact brands off the top of my head, but I can’t, because there’s been too many of them. But if there’s some way you can come up with a subscription box offer, monthly, quarterly, whatever, that can go a long way as well.
- We do have a subscription, it’s just whatever interval of the product people buy whatever they sign up for, and whatever size. But we– something we’re looking into, potentially for the future that I think people love is the interactivity of like a build-your-own box or create-your-own recurring box, something like that. So you know, there’s tons of opportunities for us in e-commerce to keep customers coming back. We’re only just getting started.
[28:11] Yep, absolutely. That’s the fun of it. So are you managing the Instagram and the Facebook campaigns with an agency or internally?
- We actually just brought on an agency about a month ago to help us begin to scale our Facebook and Instagram advertising. But previously, we were doing it completely in-house by me. So we’re kind of just finally getting to the point where we’re really ready to pour more fuel on the fire, take it to the next level.
[28:45] So that’s an approach I’ve actually seen work well versus just going with an agency from day one. And the reason for that is, you know what you’re capable of accomplishing in terms of the performance of your campaigns. And now, as you interview the agency– so I’m interested in the agency selection process. Did you, for example, say “Okay, agency, you go ahead and create another campaign that is advertising the same offer that I’m doing and if your campaign can outperform my campaign, then we’ll hire you. And if not, why would I bother?”
- Yeah, no, it’s actually part of our thinking exactly when we were hiring an agency. I mean, we consider the performance we were able to achieve in-house as the floor. “Can you beat this?” So that was one thing. I think the second thing kind of going back to our conversation about Amazon, is we wanted an agency that gains more when we do better. So our agreement is actually a little bit as a percentage of revenue attributed to Facebook and Instagram. And where we actually set a goal in our contract to reach a certain return on ad spend. So they actually– there’s a lot of incentives in place for them to reach our goals and go way past the floor we set for them. Yeah.
[30:16] What, in terms of attribution is a huge challenge? Have you, do you think you’ve cracked that nut at all? Because it is such a difficult thing to really try.
- Oh, man, I feel like we could spend the entire podcast talking about attribution itself. We have definitely not cracked that nut. It’s been a real challenge for us. I’ll give the audience that kind of a peek into two metrics. We have a ton of traffic that comes from paid social, like Facebook and Instagram. But when you look at the attribution, especially because most platforms use last click, the vast majority of it’s coming from email or direct to snacklin.com. And so you’re– it’s hard to say, “Hey, you know, all this money that we’re putting into advertising, it equals directly sales.” We can’t prove that out. We do have, like, a post-purchase survey tool that we’ve implemented to ask the customer themselves where they first found out about Snacklins.
But that usually is actually more accurate for us. That qualitative survey is more accurate than sometimes these advanced attribution models across Facebook or Google Analytics. Last click, in my opinion, is just not a accurate measure of what is driving traffic and what is driving sales. So yeah, attribution is definitely something that we have not solved. I know it’s a hot topic across the industry. But right now, like I said, that post-purchase survey is what we’re leaning on most to understand what’s driving.
[32:06] Yeah, attribution is a tough one. Because I could see your ad on Instagram, and then I could put it in my Amazon shopping cart. And then a week later, I could check out and like, how do you account that that sale was attributed to Instagram? What are some of the tools that you’ve tried for attribution tracking?
- I haven’t actually paid for any attribution tools. I’ve been in contact with lots of different ones that are out there. But I mean, I’ve– Facebook’s attribution tool, we’ve played around with, just the Google Analytics data that’s readily available to us and looking at different attribution models that they offer. That’s– I’ve really– we’ve only really tapped into the things that are readily available and free to us. We’re not– because that nut is so cracked– hard to crack, we’re not really ready to buy a tool.
[33:02] Okay. Let’s talk a little bit about your offers on Instagram. By the way, which channel to the best of your ability to guess, which channel seems to perform better, Instagram or Facebook? Or they’ve been neck and neck?
- It’s a good question. I think they’ve kind of traded places. Sometimes it depends on sometimes the ad creative performs better in one place than the other. But I think Instagram just has a higher purchase intention. People are, like, shopping more actively on Instagram than they are on Facebook. So of late, Instagram’s been more successful for us.
[33:37] So let’s talk about the ad creative that’s working the best right now. Roughly, what does it look like? You see in, like a box, a bag of chips, and “Oh, these are yummy, you should get some,” or you know, what’s it look like?
- Yeah, well, so we did a rebrand as I mentioned earlier a few months ago. So we had to kind of rethink our entire ad creative strategy. We’re starting with all-new stuff. But the– what’s rising to the top is actually awesome, high-quality images, photos of our chip.
Snacklins can be hard to describe sometimes. We’re not really like a potato chip, we’re not really a puff. We’re sort of straddling this line of lots of different things. And you only really understand what a Snacklin is once you’ve tried it. So showing this really high-resolution, beautiful photo of the chip has intrigued people scrolling, you know, on Instagram or Facebook and lead them to learn more and click on the ad. We are kind of showing the bags a lot. Our biggest differentiator is our calorie count. The entire bag is 90 calories. And it’s not a bag of air. It’s a bag of lots of chips filled to the brim. And so we have an ad now comparing our bag’s worth of content of chips to another bag of chips and saying, “That’s 90 calories’ worth.” So we’re really leaning in on like, something that’s scroll, scroll-stopping. Has– it’s been our calorie count and it’s been our high-resolution chip photography.
[35:08] You should have sent me some chips. I could have been munching on them while we were–
- I know I would, right into the microphone, you know, some ASMR of the chipping, of the chip crunch.
[35:18] Right? Yeah, the ASMR stuff. It blows my mind. But anyway, that’s a topic for a different day.
- But we have a promo code for you and the audience!
[35:26] Get to that, yeah! So speaking of yummy and letting people try these things out. If folks would like to get 20% off, they just go to snacklins.com and on checkout, enter the word ‘flowster’, which is, if you don’t know, is the name of my software company, Flowster, F-L-O-W-S-T-E-R. So Jeremy, thank you so much for making some time to come and share the story of the journey so far, I’m sure there is a lot more yet to be mapped out, and so forth. So definitely feel free to keep in touch about having you back on the show at some point in the future. And thanks very much for making some time today.
- Yeah, absolutely. Thank you for having me, a pleasure to be here.
[36:09] All right, that’s a wrap for this episode. To get to the show notes go to brightideas.co/363. And if you’re a repeat listener, and you enjoyed this episode, heck, even if you’re not a repeat listener, and you enjoyed this episode, I would love to give you a virtual high five if you would do me the solid of going and leaving a rating for the show on iTunes or if you’re watching this on YouTube, smashing that like button and subscribing to the channel. Thank you so much for tuning in. We’ll see you in the next episode soon. Take care. Bye-bye.