The Marketing Playbook From Nik Sharma, "The DTC Guy"

0:00Paid ads is just taking content and putting it in front of more people who you think are going to resonate with the content. If you start with organic and validate what works, you've already got proof that there's a good chance that'll work when it comes to paid.

0:18Hey, what's up? Benjamin Gottlieb here, and this is Shopify on Location, coming to you from New York City. For the next few months, stop by the channel each Thursday. You're going to hear in-person conversations from the Big Apple with Shopify merchants and thought leaders in e-commerce and marketing. You will not want to miss it. Our guest today is known as the DTC guy, and there's a good reason why. His expertise is all over some of the most successful direct-to-consumer brands. Think Carraway, Feastables, and Juneshine, to name a few. He runs not one, but three agencies. And if that's not enough, he also invests in startups and writes a weekly newsletter that's basically required reading for CMOs.

0:59Nick Sharma can tell if you have a good product and, just as important, how to sell it. Nick, thanks for being here. Thanks for having me. What a killer intro. Well, thank you. I think that's over now. We can just leave. We're doing enough for the show. Ready to go. Nick, we all have that family member, right? You know the type. At dinner, I have this great business idea. Come on over. Let me tell you about it. But you get pitched all the time. So what makes a good product? Well, I think there's a couple things that come to mind. So my mom recently had this idea. And, you know, she was like, well, we could sell this product for$99.

1:36We can manufacture it overseas. And, you know, it sounds like it's a great business. And then we'll put it in Target. And, you know, the first few things that people don't necessarily think about, one is, okay, how are we getting eyeballs? How are we getting eyeballs to see the product? The second thing is, which actually should be the first thing, is like, what's the use case of the product? How does it compare to other products that already exist in the same market or as a competitor? And so those are the couple of things I first think about is, you know, why is this product going to win over its competitive set?

2:08And the second one is, why are people going to care? And if you get past the why will people care, then it's about how are we going to get eyeballs? A lot of the brands we've worked with will have a celebrity co-founder, celebrity partner. And so it's very easy to get eyeballs up front. But otherwise, you have to spend that money to go basically get those eyeballs. That is a big piece of the puzzle, right? You could have the best idea, the best product. Maybe mom's idea is great. I'd love to hear what it is. But selling it is a whole different animal. And that's where you really excel. So let's start with how you begin to market a good idea.

2:43Yeah. I like to find hooks and angles. Let's say we're selling a cooling cream for your feet, right? Or just a cooling cream, a moisturizer that has cooling properties or cooling effects. I didn't even know I needed that, but go on. Yeah, exactly. So now the audience of people who would want to buy a cooling cream is probably very small. But then the audience of people who want to buy a solution to stop itchy feet is probably much bigger. And so I like to first validate what the hooks and the ideas are that will lead to the sale of the product. And from there, then it's about figuring out where can that message live or where can you say that message?

3:19Where can you talk about the benefits of that product that will actually bring people in and get them attracted? A lot of times at first, it's social media. So whether that's organic social media, you're creating content on short form platforms that give you reach without any pay, TikTok, Reels, YouTube Shorts, etc. And then it goes to the paid platforms. You know, how do you pay for ads in a way where you can basically place your product in an ad and drive eyeballs there? Of course, if you're on Shopify, you also get the benefits of the shop pay boost and being able to show up in the shop marketplace.

3:58Well, we're going to talk a lot about organic versus paid a little bit later in the interview. But I want to get back to this idea that you just brought up about hooks and ideas. It kind of reminds me of songwriting in a way, right? When you're writing a song, you're looking for that hook. And you're big when it comes to marketing on explaining things in a simple way and really having something that resonates. Easier said than done, though, right? I mean, how do you go about that? One is we have a litmus test that I love to use. which is your grandma should be able to understand what this is. So if you have a product and you have a product page, you're explaining what the product does on the PDP, your grandma should be able to go there and fully understand what does the product do, why does it exist, how is it going to benefit me, if I order it today, when is it going to arrive, and how does it compare to the other products on the market that say they do the same thing.

4:47The second person you want to make that for is a drunk person. So somebody who's taken three shots of whiskey or three shots of tequila, can they still manage to go through that page, understand everything, and then eventually get to checkout. Outside of that, it is very similar to songwriting or even to crafting content, right? You have to have some sort of a hook that grabs attention. That hook that grabs attention is your permission to get somebody to stay for the rest of that, whether it's scrolling through a PDP or watching the rest of an ad. Everybody has 100 million things they could be doing on their phone or on their web.

5:25How do you stand out? Exactly. And you have to really earn that time and earn the permission for that person to stick with you. I love those archetypes that you just pulled out for the examples, grandma and the drunk person. I love how the drunk person is three shots, by the way, it's hilarious. Three shots, yeah. Maybe a little bit more, but those are great people to think about, imaginary people to think about because storytelling is really personal and you wanna talk to an individual when you're trying to tell a story, not to this broad audience. Why is that effective? Why is it effective to think of somebody when you're trying to market a product?

5:59You know, it's kind of like that saying, if you stand for everything, you stand for nothing. It's the same with marketing and thinking of who your customer is. You have to really think of, you know, I would say no more than four people that you're trying to sell to. Even when I write the newsletter, right, I think of three people. I'm always writing for three people only, not for everybody. One is like a founder who has no money but needs to make moves in marketing. One is the CMO of a company that's doing$50 million or more in revenue. And the third is an investor of an early stage company. I always think of Kirsten Green, who wrote the first check into Bonobos and Glossier, et cetera.

6:35And so, and I think good content is always created for a couple of people, not for everybody.

6:48That also allows you to sort of build out that lifestyle, right? Like if you think about Allbirds, Allbirds when they started were, they were like the tech bro shoe. And then it built that lifestyle that everybody wanted to flock to and become a part of. I think that's consistent with a ton of other brands that have done well. Hexclad with chef-made cookware or Jolie with people who want to be better for themselves and only use the best products. And then it sort of builds this lifestyle that other people get attracted to and want to become a part of as well. And by the way, our interview with Joey Zwillinger of Allbirds is earlier in the channel here back in April.

7:22So check out shopify.com slash podcast for that. Back to this idea of organic versus paid marketing. This is a common pain point. How do you know which avenue to pursue, to drive down when you're choosing between the two of them? Well, you know, I always think of it this way. It's like if you've ever seen the movie Cars, the Disney movie, there's that scene where they're building, they're paving the asphalt on the road. and there's a big truck that's basically putting the asphalt down and then another steamroller behind it that's smoothening everything out. I always think of it as it's the same thing.

8:00You have to build your brand equity and you have to build brand awareness and create content and build legitimacy with organic. I think that's the easiest, cheapest, fastest way to do it. You can't do it just with paid. Correct. The steamroller after is the paid traffic, but that wouldn't work unless you have that legitimacy and awareness that's planted with organic. Obviously, if you have, you know, millions of dollars, you can go spend on TV and out of home and all these channels. But, you know, I have this thing I call the broke man's content playbook, which is essentially you use these social platforms that give you a ton of reach.

8:33Again, TikTok reels and YouTube shorts. And then, of course, channels like YouTube or Instagram. But you're able to create content that way. And then you see what does well, and whatever overperforms. So let's say your baseline is you get 3000 views on a video on TikTok. If you all of a sudden get 7000 or 12 ,000 views, that's a good indicator to now move that over into the paid side of the mix. And you start running ads that actually, you already know will resonate with the audience. Because really, the best way to think about ads is not that they're just ads and that they're going to work automatically, but it's rather how do you take something that works and just stretch it and just get it in front of more people, right?

9:13Paid ads is just taking content and just putting it in front of more people who you think are going to resonate with the content. If you start with organic and validate what works, you've already got proof that there's a good chance that'll work when it comes to paid. Really good learning is here. So in other words, what you're saying is organic is kind of the test field, this kind of stuff, and paid is where you really lean into what you have proven works. Correct. Right. It's a great piece of advice for any founder listening right now to the show. I guess is, is views, is that the only way you know if your ad is working?

9:45I mean, how do you tell if your organic video or your paid ad is performing well?

9:53Views is actually not the greatest metric on the ad side. Definitely not. you want to basically look at click-through rate. You want to look at CPM. CPM in ads will tell you how much does the platform like what you're putting out. And that's usually a factor of - For our listeners, CPM stands for - Cost per thousand impressions. So for example, if you are running a Facebook ad and your CPM is$20, that's a good CPM. That means that Facebook likes what you're putting out. It's getting decent enough engagement to where Facebook is rewarding you with a lower CPM. and it's probably an ad that's doing well.

10:28Now, the second thing you have to look at is CTR, click-through rate. So do people actually care about what they're clicking on? And then you can look at the metrics down the funnel. So you have CPM to start, that tells you how much does the platform like it. You have click-through rate, which tells you how much do people on the platform like what you're putting out. So clicking on different pages, checking out different products. In this case, the click-through is just on the ad itself. Okay. And then once you get to the actual site, you have your ad to cart metrics, your checkout initiated metrics, and your purchase metrics.

10:58That tells you, if for example, let's say your CPM is low, your click-through rate is high. That means the platform likes your ad, the people like your ad. Now when they get to your site, there's no ad to carts. That means there's some misalignment on the page they got to compared to what they thought they were getting to you for. It's not what they expected. Exactly. And so looking at these metrics helps basically understand and diagnose where you could be going wrong or what you need to fix. You got to look at other data points. And then organically, you know, views, you could be having high views for the wrong reason, right?

11:31You could have, if you're selling women's lingerie and you have a million views, but it's all men who are viewing it, you know, views is not a great metric there. And so even then, like a lot of times I like to use links in comment sections or link in bio and just understand traffic. That's one way. The other way is just understanding engagement. So if you got a million views, how many comments did you get off of that? How many shares did you get off of that? Generally, back in the day on Facebook, if your likes and shares were at an equivalent number, you have a really good post. Right, and today, because there's so many different platforms, so many different ways you can get your product before prospective customers, data and diversity in data is key.

12:13I'd be remiss if I didn't mention that we at Shopify do a pretty good job of helping you digest and understand some of this data, what are some of the things when it comes to our platform that you think Shopify does really well? The revamped analytics in Shopify has gotten much better, especially around cohort analysis and cohort data. I think the average order value now, not including things like discounts is also very helpful. The Shopify reports tab is probably one of the more underutilized reporting features in Shopify, but you're almost able to cut up anything I personally like to go and look at conversion rate and metrics per page or per page that's landed on.

12:54The other thing that Shopify does is, you know, like just really rich integrations into companies like Triple Whale. So you can actually see other versions of that data cut up. So overall, I think the Shopify analytics tool is really sharp, sometimes more helpful than Google Analytics even. But I do think that, you know, a lot of the metrics, especially as it relates to content performance. And every media buyer who's bought ads will resonate with this, but it just comes down to gut feeling sometimes. I'm glad you brought up content performance because part of the equation that's changing a lot today is how much it costs to get a customer.

13:34Customer acquisition costs continue to grow and it's a big issue, especially if you're just starting out and you don't have a lot of cash on hand. When do you know and how do you understand and the moment that's right to start spending more for your customers. So assuming somebody's starting from zero, I think that, you know, the first thousand customers you should try to go get without using paid methods.

14:02And the reason is because you're really trying to understand what is the messaging or the positioning or the reasons that somebody's coming to buy this product. You're still testing is what you're saying. Exactly. You're really trying to understand where do you have product market fit, right? So if we go back to that cooling cream, just advertising something as a cooling cream is not going to work. But you might have 25 different reasons somebody wants a cooling cream, and you can test those 25 different reasons using organic content or putting out content or even just going to a supermarket or a flea market and talking to people and understanding why they're buying the product.

14:37I think that's how you should get your first thousand customers. But basically, you want to really understand and hone in on what is it that the majority of people are coming here? Why are they coming here to buy this product? And then you turn on paid, and now you have something that you know works. You're not now testing this and throwing things against the wall with money behind it before you understand why it actually works. Then once you turn paid on, you should have three milestones, basically. The first is how do you get to$1 ,000 a day in revenue with paid channels efficiently? and efficiently can mean break even or slightly profitable.

15:14Once you get to$1 ,000 a day, how do you get to$2 ,500 a day? And then how do you get to 5K a day? And 5K a day is 150K a month business, which is - This is gross sales. Exactly. That's a decent sized business. Once you get to five, it's very easy to get to 10. Once you're at 10, it's easy to get to 20. But that first 5K a day in sales really forces you to think about how are you understanding what the customer needs or what the customer wants from you? And until you can do that and sort of very meticulously understand that, it's hard to scale unpaid. When do you give founders permission, Nick, to start freaking out because their ads aren't doing well, right?

15:51I mean, they've got an ad, they've been pushing it out for a while, and performance is low. Pretty early on, I would say. I think it's hard to quantify exactly when, But, you know, if you're running an ad and nothing's working and you're, you know, let's say a week in or a couple thousand bucks in, you can probably kill the ad. The other things you want to look for is, you know, outside of just purchases, you have to look for a few things. You have to understand, is there social proof that exists for the brand? So if I'm launching this cooling cream and, again, somebody goes to the site, they see cooling cream, it's got all these benefits.

16:26You know, I could have the best product page. But the second somebody Googles Nick's cooling cream on Google, if nothing exists, there's no social proof, there's no articles, there's no blog posts, there's no YouTube videos, I'm already fighting an uphill battle. So social proof is a big one that a lot of people tend to forget. It doesn't necessarily mean you have to go pay a PR agency$25 ,000 a month to get you articles. But there are bloggers that exist that you can go to and send them product and they'll write reviews. There are YouTubers you can do the same thing with. There's TikTokers you could do the same thing with.

16:58And you basically just need content to show up and sort of validate somebody's belief that this is a real brand, right? Nobody wants that feeling of, oh, am I about to get scammed? Because that's what the feeling they would have if nothing exists there. Social proof. So in essence, looking online for other folks who have desired this product or used, not even necessarily the same product, but something related. Exactly. Exactly. That's interesting. So you say you don't have to pay a big PR agency to do that. Is it simply approaching an influencer or approaching a journalist or a blogger and saying, would you write about this?

17:33Exactly. Yeah. And what's your approach to getting that to happen? Yeah. I mean, you know, if I was – so back to the cooling cream. I would basically Google best cooling creams. I would go find – you know, I'd go through the first five pages. Anybody who's written about that, I would email them. And I would say, hey, I saw you wrote about this. And I would link the article. You know, I just launched this product and we're trying to break into the market. I would love to send you product and see if you like it enough for a review.

18:04And that's about it. It's that simple. Old school, just it's the modern day knocking on someone's door, sending them a letter and saying, hey, I've got this product. Do you like it? Yeah. Good learnings here from Nick. I want to get tactical if we can and kind of move into a different mode here. Do you have a prescription for how much money a business owner should spend on marketing? It's something we get asked a lot. How much of my budget, regardless of where I am, should I be spending on my ads? Yeah, good question. So, you know, my personal rule of thumb is$1 ,000 a day. That's the budget you should have.

18:41Doesn't mean you're going to spend it all. Might mean you also might spend more, which is a good problem to have. But$1 ,000 a day is enough to properly test. You can get away with$500. It really depends on what the product is you're selling, how much education is required, and how much does that product cost, right? Because if you're selling, let's say you're selling a bookshelf, that's$300. To understand, yeah, to understand how that's going to work, or let's just zoom out and say, let's assume your customer acquisition cost is$150, right? For an ad set in ad platforms to prove significance that it works, statistical significance, you might have to sell 50 bookshelves in a week for the platform to say this is a good ad and we're comfortable running this.

19:28And so in that case, you would multiply 150 times 50, and I think that's 7 ,500 maybe. And so that's your budget for one week, right? But if you're selling a cooling cream and it costs$10 to acquire a customer, then$500 is all you need, assuming 50 purchases times the$10 acquisition cost. So the budget really depends on what the projected acquisition cost is, and that correlates directly to how expensive the product is. And is that an argument for if you're starting out or if you want to get into entrepreneurship or sell a product to maybe think about a lower cost item in the early days? or maybe when you just started?

20:08No, because I think the alternative is what I think most people should be doing, which is how do I create something where there's enough juice there where I can go create content? So let's take Carraway, for example. Carraway initially created a ton of content themselves, but also with a bunch of different content creators. Or take Jolie, for example. Jolie has created 10 ,000 pieces of content this year alone with a network of content creators that they've done the same thing. They reach out and say, hey, we'd love to send you a showerhead, let us know your address. And that's pretty much it.

20:41And so they relied on a bunch of people who are open to take the product and just create content for them. In turn, they got a ton of reach and that helped sort of pave that asphalt road for them to steamroll over with ads.

20:59So I don't think you necessarily need to think about that ad budget as you're building a product. You definitely want to understand a rough comp of what is customer acquisition cost going to look like. But if you have a brand where you can build a bunch of content around, then, of course, your acquisition cost is going to be much lower than, you know, if you didn't have that. And by the way, Caraway is going to be on our program in the coming weeks. Tune in on Thursdays for more episodes here on Shopify on location. Nick Sharma is my guest, better known as the DTC guy and founder of Sharma Brands.

21:36Before we get back to our conversation, let's take a quick moment here to thank you, our listeners, for listening. Shopify On Location is a special series we've been running all this year. We've been meeting our merchants and industry experts like Nick in person all across the country, all across North America. And the conversations have been incredible. But we can only keep doing this with your support and your feedback. So please leave a review wherever you're listening. And thanks. Nick, you and your team have made a lot of Shopify sites. right? And you have a lot of experience, a lot of insight into what works, what doesn't.

22:12What do you think makes a good Shopify store? The real answer is, will my mom look at it and have questions or complaints? And if she doesn't, then it's generally a store that converts over 5%, which is hilarious.