Solo Stove ignites brand vs. performance marketing debate

But in January, Solo Brands announced that CEO John Mellis would step down. In the same announcement, Solo Brands warned that its own fourth-quarter marketing campaign did not lead to the sales increase it had hoped for. This sparked a debate among the brand’s marketers and various business publications about what (if anything) was wrong with Solo Stove’s campaign. Did the company have unrealistic expectations about how much immediate sales improvement it would see from its brand marketing campaign? Brand marketing was being used as a scapegoat for other operational failures. Was it?

During Thursday’s fourth-quarter earnings call, the company revealed more about what it believes went wrong with its marketing strategy. “Brand awareness has been outstanding, and this will help us in the long term,” said Christopher Metz, Solo Brand’s new CEO. But he said Solo Brands should have spent more money on bottom-of-the-funnel marketing, given how important the fourth quarter is as a sales period.

“You want to spend across the funnel throughout the year, but you really want to get conversions during key sales seasons,” he said.

Metz’s comments are a nod to a challenge nearly every consumer startup encounters at some point: how to balance brand marketing and performance marketing while ensuring the two work well together. ing. As Mike Duda, managing partner at venture capital firm and marketing consultancy Blish, puts it, brands are in a “day of reckoning” as they seek to marry performance and brand marketing.

Many of today’s young brands built their businesses on performance-driven Facebook and Google Ads. These ad formats cost less than traditional mass media channels and are designed to reach people at almost the exact moment they are ready to buy something. If marketers can master the bidding techniques, A/B testing, and level of creativity required to make these channels work, they’ll see an instant increase in sales.

Brand marketing invests in elements such as TV ads, event sponsorships, and billboards to ensure that people think of your brand three to six months from now when they encounter the problem they’re trying to solve. It consists of: That means convincing people to reach for a Red Bull as soon as they’re tired or stop by a Warby Parker store every time they need a new pair of glasses.

The challenge for startups in today’s environment is for startups that have grown on performance marketing to get used to investing in brand marketing. I don’t think you’ll get as immediate returns from brand marketing as you will from performance marketing. But as a natural reaction to declining sales and executive pressure to cut marketing budgets, brands sharply reduce brand marketing spend, which can be spent building a pipeline of future customers. you risk losing time.

“[If] People aren’t talking about you and you won’t gain anything if they’re essentially thinking about you when the problem you solve comes up [necessary] It’s baseline demand,” said Jordan Baines, vice president of e-commerce and digital marketing at Inkbox Tattoos. “And if you’re not investing consistently, it’s really, really expensive to rebuild it.”

Nowhere is the risk higher for properly sourcing marketing dollars than in the public markets. In the public markets, Wall Street has little tolerance for margin erosion and declining sales. That seems to be one reason why Solo Brands took such quick action to point out its marketing mistakes and correct them.

Solo Brands’ fourth quarter sales were down 16.2% year over year. Meanwhile, on Thursday’s earnings call, Mets said Solo Brands would end marketing agreements with outside companies that provided much of its media spending and replace its current marketing agency. He added that Solo Brands needs an agency partner who “understands full-funnel marketing.”

“Everyone is trying to be more careful about their spending.”

Brand marketing is never completely obsolete.

But in the early days of Facebook and Google’s advertising platforms, there was a time when “it felt like it was all about performance,” says Nicole, vice president of brand and product marketing at infant formula startup Byheart.・Mr. Williams says. Hot young startups like Casper, Warby Parker, and Bonobos have been able to grow faster than ever before thanks to the instant profits that Facebook ads provide. And these brands raised hundreds of millions of dollars in venture capital because there was a bet that these direct sales would continue to grow exponentially.

But over the past five years or so, a few things have happened. Some once-high-profile startups, such as Casper and Allbirds, have had disappointing public market debuts. As a result, the amount of venture capital funding invested in DTC brands decreased by 97% between 2021 and 2023. As such, many consumer startups are forced to do more with less because they can’t bet on VC funding to fund future growth initiatives. .

Also around the same time, consumer startups were hit hard by Apple’s iOS 14 update. In iOS 14, apps had to get permission from users before tracking their activity on the web. This temporarily reduced the efficiency of some marketing channels, such as Facebook, and some brands reportedly saw their CPMs spike.

Therefore, we encourage consumer startups to prove that they do indeed have an effective marketing structure (one that incorporates both top-of-the-funnel and bottom-of-the-funnel marketing) that will help them continue to grow their brand. There’s more pressure on us.

That’s a difficult task, especially during economically difficult times. E-commerce sales growth in the fourth quarter of 2023 was the lowest on record, according to Digital Commerce 360, which analyzed U.S. Department of Commerce data dating back to 2023.

In fact, Solo Brands’ Metz acknowledged that the company’s recent sales decline was not just due to poor marketing spending. He also spoke about the need to improve the company’s product innovation pipeline. And he acknowledged that consumer durables are experiencing a “coronavirus hangover” after spending on durable goods was brought forward due to the pandemic.

This illustrates the challenges many consumer brands are currently experiencing. Performance-driven brands recognize the need to continue investing in brand marketing. But the pressure is on to do so now that e-commerce business growth is already difficult to sustain.

Williams, who has also held positions at Harry’s and Mack Weldon, said a common theme that has come up in conversations with marketers is that “everyone is trying to be more thoughtful about their spending.”

Bullish’s Duda said he saw a “300% increase” in brand executives coming to his company this quarter, asking, “How can we get more full funnel?” How do you do brand marketing? ”

“Consistently, they don’t know what they want, they don’t know how to budget for it, and they have a kind of silent attitude that says, ‘We have to do this.’ That’s it. [do this]we have no choice,” Duda said.

Leap from performance to brand

Williams describes the role of a brand marketer as akin to an in-house marketer. This is her first piece of advice for brands looking to make the leap from primarily performance marketing-driven companies to companies that invest more in their brand. “I think we have to play a round.” [to different teams] And how can you actually sell your dreams and bring your vision of what it could be to life to inspire and move people? ”

Inkbox’s Baines said that when brands plan “above the line” campaigns (which he defines as brand marketing that speaks to key cultural moments), they need to plan at least six months to a year ahead. Ta.

“A lot of startups say, ‘We’re going to do a brand campaign this year, we’re going to launch in March,’ and that’s January,” he says. Baines says brands should use that time to shop concepts to multiple agencies and make sure they (or their agencies) are working with the right publishers who want to pick up the campaign. That’s what I advised. You may also want to test different messages for the demographic you want your brand to hit with your campaign.

Another big challenge that brands encounter when moving from performance to brand marketing is not knowing how to properly determine the success of a brand marketing campaign. Brand marketing is about driving both awareness and recognition. Observing things like increases in website traffic and social media traffic before and after a brand marketing campaign is the first and most basic way to measure its effectiveness.

But Baines also said there are ways to make top-of-funnel and bottom-of-funnel marketing more closely aligned. That doesn’t mean taking assets from your brand campaign and shoving them into Facebook ads. But what this means is that if a company is planning a large brand marketing campaign to run after its first year, prior to that campaign, it will use performance marketing channels to communicate different messages. That means you can test it. If your brand has a specific demographic you want to reach through your brand marketing campaign, you can test different languages ​​on Facebook and Instagram that you think will appeal to that demographic.

Another learning, Solo Brands’ Metz told Wall Street analysts Thursday, was that he believed the company’s bottom-funnel and top-funnel marketing efforts could have been more closely tied. he said. “It wasn’t linked to our website at all,” he said. We didn’t offer a full-funnel product that led to campaigns. ”

Baines said brands should leverage performance marketing to identify different channels, demographics, messages and customer motivations. Basically, use that channel to understand “what people actually respond to and engage with.”

That, in turn, “helps you understand what parts of your brand are working and working well. [and] You can use that as part of a detailed look at what happens. [brand marketing buy] “It’s like,” he said.