Ep 606: How Coyuchi Tested True Meta Incrementality (6-Week Blackout Results)

0:00The interesting thing is that we have found that the customer that we're acquiring today is actually very different than our historical customer, let's say, that we acquired five years ago.

0:11Vicki Williams-Grahan:You went dark on Meta just to see what would happen. Can you walk me through what led you to that decision and then what you discovered after the fact? when you're investing in money in tools and marketing like meta like google whatever you're doing it's super important to understand whether that is profitable or not not down to the exact dollar but definitely directionally if you are profitable or not and so what i used to look at on a you know let's say monthly basis i'm now looking at on a daily basis there's a lot that goes into these things running a business

0:52Vicki Williams-Grahan:Vicky, welcome to the D2C podcast. I'm excited for this one because Koyuchi sits at a really interesting spot in D2C. You've got a premium product, you've got a long consideration cycle, high AOV, and the brand's been around long enough to have gone through a few different sort of eras of growth. So I think there's a lot here for operators. For people who don't know what Koyuchi is, can you give us the quick version? What is the business today and what do you oversee? Yeah, absolutely. So Koyuchi is a luxury, sustainable bedding brand. Our vision is to enable people to live deeply at home and lightly on the earth.

1:30The brand has been around since 1991, actually. So it started in an area in Northern California called Point Reyes Station. It started as a little mom and pop shop in the town. And then over its first sort of 20 years, it was really a wholesale business. So you could find it in, you know, Bloomingdale's and Saks and Nordstrom, ABC Carpet and Home in New York. And then about 12 years ago, a little bit more is when they launched the DTC site. And so since then, the brand has shifted dramatically. We are still in Nordstrom and Bloomingdale's and Anthropologie and all those places. But we now do about 80 % of our revenue via our e-commerce business.

2:14But we sell basically your sheets and your duvet covers, towels, any kind of soft home textile you can find. And everything is organic. So it's either GOTS certified organic or GOALS certified organic. That's a certification specific to latex. But it's a brand that has been delivering comfort, high quality, and a very light footprint on the earth for almost 35 years.

2:41Vicki Williams-Grahan:And give us the short version of your path into the business. Sure. So I've been at Koyuchi. I'm the brand president, if I forgot to say that earlier. But I've been at Koyuchi for just over two years. I did come from another bedding and bath brand just before this. But I've been doing retail, e-commerce, direct marketing for more than 20 years. So started my career way back when, actually, in marketing at American Express. So for those that think American Express is a credit card company, I'm here to tell you it's actually a marketing company. And I started in direct marketing, specifically direct mail.

3:18So it's where I learned everything around incrementality and test and learn. but parlayed that into spending quite a few years at Guest Jeans and really helped to grow their e-commerce business there and then went on to work in movie tickets, fashion, you name it.

3:34Vicki Williams-Grahan:Just to dig in on that a little bit, why is American Express a marketing company, not a credit card company? Yeah, it's a great question. So it's two things. I think one is to convince someone to get a credit card. It takes a lot of marketing, so that's one side of it. But I worked on a really unique part of the business, which was called at the time they may have rebranded it merchant services. And so my whole job is that I worked with retailers and basically helped them market to card members to convince that card member to spend. So it was usually via an offer. It could be anything from, you know, you're going to get three X membership rewards points to an actual, you know, discount on a deal.

4:11But Amex is really unique in that it is both the card issuer and the bank, different business model than like a Visa and MasterCard. So we could see all the data of how people were shopping and therefore give you very personalized and targeted offers. So that was a big part of all I did all day, every day was actually market to consumers on behalf of the retailers that were my clients.

4:33Vicki Williams-Grahan:One thing that stood out to me in the prep for our podcast, besides geeking out on linen sheets, which I'm a total advocate of, it's an unusual category just because it's not premium betting is not an impulse buy. So when you think about growth, what's different about this business versus a brand where the average customer buys, you know, on the spot? Yeah, I think there's two key differences. One is that marketing aside, quality of product matters, right? So already we're dealing with something that is not an impulse purchase, which is not something you naturally need to replace. You know, it's not a tube of lipstick where naturally I'm going to run out and need to replace it or mascara.

5:09So it's interesting because on the one hand, our products are very high quality built to last. On the other hand, the quality is so good that you want more of it. So that's really key to dealing with that. I think the other part of dealing with this kind of a business is really rethinking things that you have always thought about, whether it's when you're calculating LTV, how far back do you go to define your lifetime? And how do you think about your CAC to LTV ratio really differently for a business like ours than you would for a beauty brand? So that's one piece of it. Rethinking how you might set up something like a win-back campaign or how you would define someone as lapsed versus not lapsed.

5:52What kind of exclusions you might want to put into like your meta ads in terms of like, okay, I want to get new customers and not repeat. Or I want to purposely go after a lapsed customer. So those are all things you have to kind of think differently about. My thing is you let the data drive you 100%. But you really have to go back pretty far to understand the differences, A, in shopping patterns overall. But B, you really have to segment your customer to understand who is the consumer that is very, let's say, like fashion focused when it comes to their home. So they want to really change things out with the seasons because they do one thing for fall and winter when it's cold and they do something different for spring and summer versus who are the people that buy for replacement purposes?

6:37Who are the people that buy because they have a second home and they want to refresh that on an annual basis? So you have to get pretty deep into the data to understand those different customer segments in order to have a really successful business.

6:51Vicki Williams-Grahan:What can you say about the tools you use for that kind of segmentation? What do you rely on for that? Yeah. So we rely on both manual, I'll say that, data analysis, but I will give a plug for, they don't know what's coming, but we actually use a tool called Decile. Okay. And Decile has been amazing in helping us to do this kind of customer segmentation. I have to say the first time I did a deep dive customer segmentation, I was at Guess. I had inherited a database of 12 million transactions. And I use Microsoft Access to try to figure out RF and M, what are my deciles and what are the natural breaking points of frequency?

7:36And now Decile just does that all for me magically. And then they also released, this is a big plug for them. They also released Luma, which is their AI. And so now I don't even have to like click, click, click. I just asked Luma questions and I get insights. Pretty awesome.

7:50Vicki Williams-Grahan:Very cool. And then when the rubber meets the road on those segmentations, that comes mainly down into retention campaigns. Are you extending that also out into the metasphere to the top of funnel where you're looking for people that are, for instance, changing out their second homes, you know, linens? Yeah, it's interesting. So it's happened for us in two ways. Yes, it's definitely on the retention side. And that comes to light either in email marketing that we're doing or it's coming to life in direct mail that we're doing. The interesting thing is that we have found through Decile that the customer that we're acquiring today is actually very different than our historical customer, let's say, that we acquired five years ago.

8:30And I know we might talk about brand marketing and where that fits in. So I'll come back to that. So that has led us to make some changes in some of our targeting on a platform like Meta because now we have data to show that we're breaking into a new customer base and we can therefore go and target those consumers. The other way that we'll use that is in terms of lookalikes. And this has been happening forever, ever since our friends, custom audiences came on the scene. But understanding, okay, who are the high LTV customers and then building a segment just for high LTV? Who are the people that specifically come in through like our highest LTV product and building, you know, embedding and building a specific betting campaign based on that lookalike audience.

9:15So that's how we're sort of porting over the data. And then the most obvious is just like using the, you know, every once in a while we'll spend about up to 5 % of our meta budget on retention. And so finding that prime group of lapsed customers that have just lapsed or just about to lapse, aren't super far gone, aren't lost and aren't active, porting those directly into meta and targeting those folks.

9:37Vicki Williams-Grahan:You mentioned meta. And so I think one of the most interesting things of our pre-call was your sort of observation and experience when you went dark on meta just to see what would happen. Can you walk me through what led you to that decision and then what you discovered after the fact? Yeah, it was great. So there were a few things that led us to the decision, but it was really, it came down to like our, we had what Meta told us in platform was our ROAS. And then we had what GA4 was telling us what's our ROAS. It will surprise no one in the DTC space that those are two very different numbers, but it was also a lower ROAS than I'd seen it like fashion brands, but even other betting brands.

10:15So it was just a lot of questions around the value of Meta and how much we were spending there. Meta is our number one spending platform. And usually every once in a while, Google will kind of surpass it for a month, but for the most part, it is meta. So we decided to go dark. We went dark for about six weeks. And we basically were able to look at, and seasonality is big for us. So we did an analysis after the fact and said, okay, what were the year over year comps looking like when we had meta on in the beginning of 2026? We just took that timeframe. We didn't want all the noise of, you know holiday what were our comps looking like both generally but also specifically for new customer acquisition were we acquiring 20 more customers were we playing you know did we have you know 25 more new customer revenue whatever that baseline that we called that our baseline then when we went dark same thing what are we looking like in terms of year-over-year comps and then we turned back on meta and did it one more time what are we looking like year-over-year comps.

11:15So we were able to actually calculate, like A, we were able to say, fun fact, we did lose sales by turning that off. So as much as folks may or may not want to play in that space, I'm here to tell you that if you turn it off, you're going to generate less demand for your business. But we were able to quantify exactly the dollar amount missed that we had missed out on because we knew where we were pre, we knew where we were post, and then we had two numbers. One was higher than the other, but somewhere in between those two numbers was the amount of revenue that we lost. And we used that to calculate an actual incremental ROAS on our meta campaigns.

11:52And what it said was that we can put a lot of trust in that platform ROAS. So, again, I am not here to promote any type of platform or whatnot. The hot take is very close to the meta ROAS that we were seeing in platform and much, much, much higher, obviously, than the GA4 ROAS we were seeing.

12:13Vicki Williams-Grahan:And it didn't just affect D2C. You were saying that you saw impact on Amazon and in your key retail accounts as well. Yeah. So in my entry spiel, I forgot to say that we are now on Amazon, have been for many years. That actually predates me coming to the brand. But we did. We saw like that trajectory both in our what we call key accounts. So Nordstrom, Anthropologie, Bloomingdale's, et cetera. We saw that stall out when we turned Meta off. And we also saw Amazon take a dip. So that is really interesting, right? It makes sense because everyone has their preferred way of shopping. And so we're available across all of those places.

12:53And if we're not making ourselves top of mind for you or introducing you to the brand, you're just less likely to come and shop.

13:00Vicki Williams-Grahan:So how did this change? I think I might know the answer. You rely more on on-platform data. But how did this experiment change the way you think about attribution? Yeah, I mean, it really did point to the fact of, okay, these tools have gotten to a place where we can rely on them in terms of like the ROAS that they're saying. Now, Quiju is a small business. I think that, you know, we don't right now have like an MTA tool. We don't have like a measured or North Beam or anything like that. So I think what it's done is it's just given us confidence to say that at our size and at our scale, we don't have to necessarily, you know, sorry to the folks out there, but we don't necessarily have to find the budget to invest in one of these platforms at this point in time.

13:43We can, A, trust what's in platform, or B, we can rely on experimentation like we just did. I don't necessarily think that everyone needs to go dark. There were other reasons that were driving that, but even doing what I've often referred to as a dim market. So take that 50-50 split, figure out what your key markets are. Maybe you go dark in 50 and stay on in 50. If you really feel like you're curious, you can't take the revenue impact, go 80-20. You know, it'll take you a little bit longer. But it's enforced our commitment, I would say, to test and learn, in addition to feeling pretty good on a day-to-day basis about what the platforms are telling us.

14:24Vicki Williams-Grahan:In the pre-interview, you said something that I don't think enough people talk about, which is how granular you've been able to get with forecasting. What does that actually look like day-to-day? Yeah, we are super granular. So, again, American Express, I think I looked at our results on like a monthly basis. I was like, hmm, okay, that's what we did. Cool. Moving on. Not a big deal. not a make or break moment, huge company, what Vicky is doing day to day is really not making too much of a difference. Fast forward to a small business, a DTC brand, whether you're a startup or not, when you're investing money in tools and marketing like meta, like Google, whatever you're doing, it's super important to understand whether that is profitable or not, not down to the exact dollar, but definitely directionally, if you are profitable or not.

15:08And so what I used to look at on a, you know, let's say monthly basis, I'm now looking at on a daily basis. But there's a lot of seasonality in our business, which there is in almost every D2C brand. But for us, we have a pretty decent promotional calendar. And so the to the extent that we are comping a promotion, we ran yes, last year, introducing a net new promotion, or opting out of comping a promotion, it's important that we understand if the business is performing the way that we expect it to. And honestly, the best way we've been able to do that is to get to a daily forecast of what we expect to generate every single day.

15:48We're using historical data for that. There's a lot of guesstimates around it. But what we're looking for is not that we hit that 100 % every time, but that if we thought directionally things were going to head one way and we are on day three or day four of it's heading in a different direction, in particular if that direction is bad, then we need to pivot really quickly. So I think that's a real big difference between small businesses and frankly, DTC businesses where you have the flexibility to turn things on and off really quickly. And a larger business is you have to understand where you expect things to head.

16:23And then you have to understand if you're heading in that direction. If you're not, you got to pivot. If you are, like invest more money and keep it going. But always monitor that contribution profit so that you can understand whether you're really investing in incremental revenue or if you're starting to kind of get to that

16:39Vicki Williams-Grahan:point of diminishing returns. And is that the North Star metric there? Contribution margin, contribution revenue? Yeah. Contribution profit is our North Star. And again, we kind of, there's no easy connection between my contribution profit today and what I spent on meta and Google and Pinterest, you know? So it's a little bit of like looking at trends and seeing, okay, if my investment is going up, is my contribution profit also going up? And if it's not, when I pull back my investment a little bit in marketing? Do I see that my contribution profit is either steady or better yet, you know, does it kind of go up?

17:14Because maybe I was going into some diminishing returns and I was paying too much for customer acquisition.

17:19Vicki Williams-Grahan:And then when we talked a little bit about the acquisition strategy at Koyuchi and the kind of the hero product or the products that you're kind of bringing people into your world with on Meta, you generate some learnings there through this process, I imagine, about seeing contribution margin. Talk to me a little bit about the order of operations when it comes to, you know, showing products to prospective customers. Yeah. You know, I think I've lived this in many worlds. So I'm not going to say it's the same everywhere. So it's something to pay attention to. So a couple when I joined actually, so we were talking about Decile.

17:56So when I got my hands on Decile, it was like, this is amazing. I can see the top three products that people are coming into the brand on very clearly. And for our business, it was the same three products every single month. I looked at it in January, February, so on, right? Same three products. They might switch in their order, but it was the same three products. And so I was like, well, this is brilliant. If I advertise those products, then I'm just going to acquire that many more customers. Now the reality of is, and I already knew it going in, right? We knew it that those all were sort of our most entry-level products.

18:28We're a luxury brand. We have, you know, some pretty expensive but well worth it products in our product set. And so, but people, you know, these were the most entry-level products. So I thought, great, let's do this. It'll be a volume driver for us. What I didn't fully appreciate was that long lead time that we talked about, the non-impulse purchase. And so inevitably, what we ended up finding was we didn't get enough of the volume velocity going to make up for the fact that we were bringing in customers at an even lower AOV than we have historically. And so we pivoted that. And this is like, you might say like, well, duh, you should have started there.

19:09But like all of this is experimentation. So we did pivot that and said, all right, let's focus on high LTV. We might lose a little bit of volume. We might lose a little bit of velocity, but we'll get the AOV that we want. So we made that pivot. And that has been working out well for us. Now, I will say I was in a meeting this past Monday and people were like, Vicky, our sale of this entry price point product has fallen off of a cliff. And I'm like, yeah, because we stopped promoting it. So this is a balance. Like even right now, we're like, all right, we can't go all in on one or the other. We have to find the balance.

19:45So we're now starting to sort of reintroduce this one specific product and see what we can do acquisition wise, trying to see maybe there's a specific, maybe it's a catalog campaign instead of, you know, a traditional campaign that might help us get there. But it's a balance. I'll say I've worked somewhere else where we found this. We had this really cute UGC ad that was promoting a product that was not a core product. It was a tertiary product for our business. And the UGC ad was amazing and it performed so well. But because it was tertiary, it wasn't helping us acquire our actual like the customer that was bound to be a high LTV repeat purchase.

20:22So we ended up bringing in all these one time customers that did not work as well. So, you know, all that to say, we all know creative matters, but even the product in that creative matters and where you're landing folks matter. And you're always going to be experimenting, I think. Yeah.

20:38Vicki Williams-Grahan:And it would be easy to follow the wrong signals, right? If you have a really high converting product and you're like, wow, this is put all your money into this. But in the long run, it's going to leave you wanting. And even other things. So we did have an ad that was wonderful. It was pushing a high AOV product, high LTV product. Yeah, we went out of stock on the color. It was so good. So it's like even not being in communication with your merch team and having that conversation up front of like, oh, this image is so beautiful. Let's use it. And then your merchant team being like, P.S., we bought really light into that product, you know?

21:13So there's a lot that goes into these things running a business.