Ep 619: Stop Growth Hacking Your Brand to Death with Duncan From Pilothouse | AKNF

0:00Duncan:Before we jump into today's all killer, no filler episode, a quick word about who makes this show possible. The DTC podcast is brought to you by Pilothouse, the performance agency behind some of the fastest growing DTC brands in the world. Creative, media and customer journey all under one roof. Performance and brand without the tradeoff. Every Friday, we hand the mic to a Pilothouse operator to break down what's actually working in their space right now. Want a team that treats your growth like their own? That's Pilothouse. Head to Pilothouse.co and now on with the show. What it's done is it's completely undercut the growth hack mentality of iterating your way to success, which is, I heard recently described as, the worst creative strategy of all time.

0:41People have built a brand that actually means something to people. Maybe one of the most dangerous things they can do is go work with a performance marketing agency. They're measuring themselves on return on investment, and when you're measuring yourself only on a return on investment, then you're going to do stuff that tries to drive up ROAS, that will turn the lights green this year, but next year your brand's going to mean less. How are you actually going to carry this person through the customer journey from never hearing about you to believing in you to being a person who buys not once, twice, but three times?

1:11That's the real battle.

1:19Duncan:It's all killer, no filler. I'm Eric, and I'm here with Duncan Ferguson, Senior Strategist at Pilot House. We decided to come in and actually use this great studio that we have here in office that we use for clients all the time. Why don't we start using it for our content? Welcome, Duncan. How are you doing? Great. How are you? Very good. Thank you for having me on the show. We kind of framed up a discussion today around the age-old canard of brand and performance. Canard! There's actually some truth to it. But we wanted to get in first with a discussion of Andromeda. I was having a conversation yesterday about Andromeda.

1:52We always talk about Andromeda. And the way people talk about it is very interesting. and I'm curious, do you know why Meta created Andromeda?

2:02Duncan:So my layman's outsider's take was just that like, in my understanding of the way ad targeting worked before, there would all be these predefined segments and that would always be updating sort of based on Bayesian algorithms or something like that. And when you had an ad request, it would kind of be like a Plinko chip in this system and the algorithm would look at what it knows about the user and then look at all these predefined segments and make it find the right segment, look if it performed and update its segments based on that, versus this LLM world where it's like you can just put in a wall of data to these LLMs, and then the LLM will find the right spot to route your query or route your creative based on its LLM algorithms.

2:42Duncan:I don't know how accurate that is. Do you know why they did that? No. This is interesting. So it's really relevant to the brand versus performance question because the reason they did it is because of AI, but not so that AI could help them. It's actually to counter all the AI slop that was coming in. So if you think about a performance marketing perspective where people are making hundreds of iterations, we've done this. Oh, yeah. We've done this for years. Yeah. Hundreds of slight iterations, and you're uploading them, testing them all. The problem is that that was already overloading their systems.

3:20Their infrastructure was creaking aggressively underneath the load of the millions and millions of slight variation creative. And then AI allowed people to just explode the number of slight variations. And so they needed to change how they served ads to be able to handle all the explosive uploads of AI slots. And so what it's done is it's completely undercut the growth hack mentality of iterating your way to success, which is I heard recently described as the worst creative strategy of all time, which I completely agree with.

3:57Duncan:Which is just change the button color to this and add, yeah, change the first three seconds. Just do these tiny little variations on the same creative in order to gain favor with the algorithm. Yeah. When in reality, we were choking it to death. Yeah, 100%. So they had to change the algorithm to force people to be more strategic and more thoughtful. More imaginative. Not specifically, I'm sure this is maybe part of the calculus, but I think they say it because it's better for the people that are users of Instagram or what have you. But really, it's because they wanted you to go from 100 variations to one so that they could handle the explosion of content.

4:39better.

4:39Duncan:I wonder if that's working because I feel like people are just making more diverse creatives now because it's like the messaging hasn't changed or there's still a lot of messaging about volume of creatives. There is a lot more messaging about diversity and actual like plausible angles in each of your creative like the variations are not going to serve you. That's the lingo. Personally, my hot take on this is that diversity is a red herring. That is a surface level interpretation of what's actually going on. What's actually going on is it's forcing people to be good at marketing. That's really what's going on.

5:13You have to make ads that are actually

5:15Duncan:strategically effective and thoughtful instead of just throwing a bunch of crap out there. And we're going to get into, because the thing that that makes me think of is how you'll be making all of these ads for a various customer avatar for one of their objections that they might have, or another one of their objections they might have. You might look in your ads manager and see that those particular creatives don't have very good ROAS. Like maybe they're not driving conversions at a profit, but the modality that I understand now is that you do need to be telling this story in your ad account.

5:47Duncan:So even if something might not be showing direct ROAS, that you might need it in the ad account because it will assist on future conversions. Yeah. Like my perspective, maybe a hot take for performance marketers, maybe not, depends on who you are, but the framing of this conversation assumes that the entire world happens in your ad platform, which if you just think about your own experience of the world, how you interact with the brand, I asked you a question just before we started, but when was the last time you received an ad for a premium brand, a product that's, let's say, over$200 and you bought immediately.

6:29Duncan:It's never happened, I don't think. Never happened. I've never done it. And that was an oversimplification. Performance marketers don't try and get people to buy right away, but they do try to get people to buy very quickly. Yes. That's because they're optimizing for things like ROAS, immediate return on investment. If you're a regular person experiencing a brand, you would know that you actually have a sort of long dance in relationship with a brand before you decide to buy. 100%. And so that is the difference between performance marketing and brand and finding a way to make those things align where you're getting a return on your investment, but you're also not forcing yourself to take actions that would get someone to buy immediately.

7:09Duncan:Right away. The slap chop. We talk about like if you're trying to get someone to buy, you host a slap chop webinar and you have got some guy yelling at the camera, showing what it does. And that actually can. Like one of the things we started with was the canard of brand versus performance. Exactly. And for the past two or three years, we've been saying it's a false dichotomy. You need both. You can't have one jeopardize the other. But it is a reality that if all of your creatives are optimized to direct response and all of your brand messaging is about buy now, you will be eroding the brand. Yes.

7:42Like if you're a typical performance, like if you have a performance marketer and a brand marketer in the room, the brand marketer is going to say, that's a bunch of crap. It's going to make us look bad. You're going to kill the brand. and the performance marketer is going to say, you're spending a bunch of money on stuff that doesn't have a return on investment. That's a bunch of crap. You're going to kill the business. And so these two people have very different perspectives, but actually there's a world where they can work together. And they're just at different points in a real person, like yourself, your experience in a customer journey.

8:11You're wearing a Filson shirt right now. How long did you know about Filson before you bought that shirt?

8:16Duncan:I knew of them, but I literally was a walked into a retail store. There we go. And the reason I actually bought this is it's a large, and I almost always wear an XL. And I tried it on. It was a large. It made me feel so good. And a rich friend was standing right there. And I was like, I just got to buy this. And I just bought it. It was a peer pressure purchase. You were in Gastown? Yeah, it was. Gastown, Vancouver? Yeah. Okay. So did anyone in there say, hey, by the way, you should buy this now. It's 20 % off. No. Did they tell you about the features and the benefits that put you under pressure?

8:45Duncan:No. No, they didn't. So you might have had an impulse buy, but you'd heard about the brand before. Knew it was quality. It was quality. And then there was a moment at which you decided that you were going to buy, which did have some implied urgency because you probably weren't coming back for a while, but no one was pushing you to buy. No. That's a normal way people buy from a brand. And when you're thinking about performance marketing, they're trying to do something that's actually quite unnatural, which is like, hey, I know what you just meant, but you need to buy this thing right now. I'll give you 50 % off.

9:11And people are like, okay, whatever. It seems like a good deal. And that is how you kill a brand. And that's how you kill long-term, reliable, repeatable growth.

9:19Duncan:Brand equity. It's funny because Pilot House originally was sort of, you know, I've been at this for six years with the company. And we all actually came, the DNA of the company, the founders, is from performance marketing. And when we came to the market, whether it's through D2C, our media brand, or Pilot House, our message was all about doing performance marketing right. And honestly, starting during the COVID, every brand in the world started being like, okay, I need to figure out how to go direct to my consumer. I do need to go performance. Why, when brands turn to performance marketing agencies, other than ours, I'll say, why do they find themselves getting burned, do you think?

9:57I would say, first of all, I genuinely believe that a legacy brand that has successfully built a brand, there's lots of brands that have been like, we're going to be a great brand. They built a brand. They invested a lot in it. No one cares. Okay. Those guys are in trouble. But people have built a brand that actually means something to people. Maybe one of the most dangerous things they can do is go work with a performance marketing agency. The way it shows up is measurement. I don't get goosebumps thinking about reporting and analytics. But they're measuring themselves on return on investment.

10:31And when you're measuring yourself only on a return on investment, ROAS, then you're going to do stuff that tries to drive up ROAS that will turn the lights green this year. but next year your brand's going to mean less and so that's very difficult to step back from you had someone on the podcast i can't remember how long ago had a great description of the gradual death spiral yes that brands follow when they start going performance first i think it was like we don't do sales but this time we'll do a sale because we have like excess stock oh okay performance went up, we see the return on investment.

11:06Okay, we'll do a sale like every year like that. Okay, we're now the regular returning or the direct traffic, people believe in the brand, is going down because you're becoming salesy. And then you're relying more on the sales. And then you have a sale every week. And then your brand means nothing to anybody. And also, you're not able to, you're actually killing your margin while you're doing all those sales.

11:29Duncan:So with your point of how, you know, looking for the lowest common denominator or the most direct response strategy when it comes to your creative and your meta account can lead to this sort of race to the bottom. What's the antidote to that in a way? Like how should you use ROAS numbers when looking on what to spend? Okay. ROAS is still important. It's when you look at ROAS. As we know, everyone has a dance with a brand. You hear about them. You start, the brand builds belief long before someone converts. And so you need to be able to have faith that you're building belief in your customer base by understanding who they are, what they want, and making sure that they want to be sort of part of your team.

12:11And then you have moments when they will convert, and that's where the ROAS comes in. That's building a customer journey that starts long before your meta, direct response, promo, or whatever. That's a journey that starts long before Black Friday, Cyber Monday, for example. That starts in March 2026. This year, Black Friday Cyber Monday, we're going to be building that customer journey. So we're building belief, building belief, and then people decide to buy when the moment's right, moments of inflection.

12:43Duncan:The one point I like from pre-talking first there is that you don't look at your rearview mirror to figure out when to hit the gas. And I think that's kind of a good statement about ROAS, is if you're looking at ROAS, it's not a leading indicator. It's a trailing indicator. Yeah. If you're constantly looking at lagging indicators, you're essentially just optimizing on the past, essentially is what you're doing. And so you're just getting caught up constantly. And we see a lot of brands who are just thinking, okay, a lot of money is coming in now, let's scale. And sometimes that has to do with cash flow.

13:14But really the ROAS is the last stop that someone is on when they're on like your brand's journey. And so using that to determine how you spend is kind of out of whack with what's actually going on in reality. Again, that's a platform first or channel first perspective instead of a customer first perspective. Yeah. Which is like what is the customer's actual journey and experience before they buy?

13:39Duncan:Talk to me about the fragmented experience of maybe working with agencies or working with multiple agencies when you've got different people in each, you know, in the cockpit of meta, of Google, of TikTok, of retention. What does that look like practically and why is it problematic? I heard a really good term for this recently. And it's from the experience of the brand side people. We work with our brand, what do you call them, heads of growth or senior digital manager, the person who's in charge of managing the vendors. And I heard this term. It was called siloed vendor fatigue. Where from the perspective of the brand side, again, we're all agency people.

14:24So from the brand side, think about it. You're sitting in the seat. You've got a CMO above you. They're telling you to, you know, let's just say they have a strategy. And then they're telling you to implement it. And you've got a meta agency. You've got a Google agency. You've got an email agency. You've got a, what are the other agencies? A creative agency. Creative agency. And so these people are all different teams, different philosophies, different cadences. Of course, like the biggest strategic decision is who to hire. But they're all fragmented and they all have to measure themselves somehow.

14:57And so if you think about what we do at Pilot House, which is we create growth engines. That's what we do. We create a growth engine that's made up of components. If an engine is made up of components that are working separately, that doesn't work very well.

15:14Duncan:Yeah. No torque. No torque, whatever. You know, like they're all being optimized differently. and the way to think about it is, first of all, most people in the industry are either generalists that are high up that don't understand the details or they're specialists that are so deep in the weeds they can't see the big picture. And that is, imagine that's separation where you usually have people that are either or and then imagine that separated across different organizations trying to work together. It's a nightmare. And each of them potentially thinking about last click ROAS. All of them looking for...

15:56Duncan:All of them fighting over it in certain ways and not coordinating on creative or strategy or anything. So then everybody starts fighting over attribution and ROAS when they're missing the whole other picture, which is how are you actually going to carry this person through the customer journey from never hearing about you to believing in you to being a person who buys not once, twice, but three times? That's the real battle. And then you've got all these fragmented, siloed vendors fighting over, like, who's ROAS is what. Yeah. And then you just never actually get to the big picture. And so as a vendor, you're supposed to be containing strategy.

16:34Every single person at a different organization that you work for frees the strategy a little bit.

16:39Duncan:And then you just have a very broken engine. Yeah. And so what's different about Pilot House is that we have a team of strategists who have the specialist experience and they have the generalist strategic chops to not only build the entire engine, that engine is contained in one organization where we don't have that fragmentation across different organizations. So it's not shattered. Like, I'm a nerd. I brought my markers. Okay. Let's see some marking. So like, think about it this way. So you got CMO, head of growth, and then head of growth, let's just say meta, Google, email. Email retention, yeah.

17:27And then TikTok. Ideally, this is how it's supposed to work. It's supposed to say, okay, CMO tells the head of growth what to do. Head of growth deals with all these. These are all different vendors. You've got your creative vendor, your meta vendor, your Google vendor, your email vendor, your TikTok vendor. They're all supposed to be working in harmony led by the head of growth. But what actually happens is the head of growth has to measure whether or not each of these channels is doing a good job. How do they measure that? ROAS. ROAS, usually, yeah. ROAS or some other bullshit metric that someone gives them.

18:01And then add on to that that these are different organizations. So you actually have breakage between the organizations across from the head of growth to your email, Google, Meta. They all have different perspectives and different strategies. So trying to get them all to work together is a nightmare. And so add on top of that that they're not working together laterally. This is getting crazy. But like they're also separated from each other. So there's a separation here and they're separated from each other. then you just have a weird broken engine that optimizes on the wrong thing and you don't have it all working together harmoniously.

18:40Duncan:Whereas at Pilot House, this is not me just pumping Pilot House's tires. This is a real thing and it's actually really hard to do. And that's why nobody else does it. So you have CMO, head of growth, Pilot House, strategist, and then growth engine. Let's just say meta, Google, email, TikTok. And the also important distinction is this is not, the strategist manages, it's like they're an account manager, but they're a strategist. They're not just there to up your costs every year. But this is the different picture. CMO, head of growth to the strategist. Strategist sees the entire picture. You've got Meta, Google, email, TikTok, all arranged as a growth engine.

19:39So they're not saying, where should we spend? Oh, Meta has a better ROAS today. Let's spend more there. And then less on Google or whatever. This team understands that they all work as one continuum to drive a customer through a journey. And so they actually all have different jobs and are orchestrated by one person that has the big picture view, but also they have the experience of getting in the weeds with the details. And that is a very difficult thing to do and get from an agency. Most agencies don't try and do this because it's very hard. And so this actually usually doesn't have that much of a vocabulary, and especially most of the time when it does happen, these people are not aligned to results the way a performance agency is.