The Key Elements You Need to Be Successful With DTC Facebook Ads with Nigel Thomas

Andy Splichal:

Welcome to the Make Each Click Count podcast. This is your host, Andy Splichal, and we are happy to welcome this week's guest to discuss today's topic, which is the key elements you need to be successful with DTC Facebook ads. This week's guests previously built a seven-figure agency and consulted many seven and eight-figured direct to consumer brands on their marketing strategy, knowing what it takes to implement complex paid social campaigns at scale. He is currently the CEO of Alpha Inbound. A big welcome to Nigel Thomas. Hi, Nigel.

Nigel Thomas:

Hi, Andy. How are you doing?

Andy Splichal:

I'm doing great. Thanks for joining us today.

Nigel Thomas:

No problem. I'm glad to be here and hopefully I can share a few insights to the audience and talk about that age old Facebook advertising. We like to have fun. I know there's a lot of brands that struggled over the last couple of years. A lot of things have changed. But guess what? Facebook ads certainly is not dead and there's a hell of a lot of opportunity. It's just the game has changed somewhat.

Andy Splichal:

Great. Well, we're excited to have you. Now let's start with on your website you have a great big bold. It says, stop thinking about ROAS ROAS and start thinking about revenue. Now, that goes a bit against the grain of common thought because a lot of marketers really concentrate on the profitability on the ROAS. So why don't we start there? Why do you believe that online advertising needs to focus on revenue more than on ROAS?

Nigel Thomas:

Yes. So first of all, where does ROAS come from? That is a metric that's for Facebook and Facebook are incentivized to get you to advertise and spend more money because that's their business model. So obviously they want to indoctrinate you into thinking about ROAS because that helps their company. Right. Now, that doesn't map up to your revenue. Now, I'm going to show you an example. So let's say that you're a supplement brand and you're selling a product, you're using different channels. Facebook is one of them.

Nigel Thomas:

Now, Meta. Facebook will just call it Facebook. But I'm talking about Facebook and Instagram advertising. It's on the same platform. John is scrolling on his phone and he's on Instagram hanging out with some friends and he sees one of your supplement ads. So it gets his attention and he's thinking, wow, this could really change my life. John's a bit of a health freak, so he's really into buying supplements. He's like, yeah, this has really got my attention.

Nigel Thomas:

Then just as about he's going to click onto the ad and go to your website. His phone rings and it's his mum, it's his grandma's birthday tomorrow, he needs to go and buy her a present. Okay, so two weeks later, John remembers about this ad. He goes into Google, he searches your product, he goes to the website and he's about to go and place the order. He's having a looking around, he's checking the reviews, he's understanding if right for him. Just about as he's going to make that order. His phone rings again. He's got a really important business meeting, so he has to go.

Nigel Thomas:

Another two weeks goes by and now John is on TikTok. He likes to use a lot of different social media platforms. Andy and he sees another Wanderer ads. This time it's a testimonial from a customer saying how it's transformed their life. This time there's no stopping John. He puts his phone on silent, he goes through to your website and he buys not just one, but know things of the product because he's so indoctrinated at this point. Now we've got to look at the Attribution. So we've got TikTok, we've got Google, we've got Facebook.

Nigel Thomas:

Now if we were just to look at the ROAS from each channel, the smart money would be to put all of our money back into TikTok, right? Because that's where John came from. But that's not what the customer did. Because if we cut out Facebook, we cut out Google. Now we've cut out the customer journey and the discovery channels. And that's why looking at single channel attribution, it doesn't work anymore because the customers are using all of these different platforms. And the customer journey is they want to be educated, they want to understand your product. And if they don't buy on impulse, which by the way some people do, especially if it's a higher product, in this case if it's $5100, they're going to be hopping around these different platforms. So what we like to do, and the North Star of how we look at advertising instead of single channel attribution ROAS is a blended ROAS across all of the channels.

Nigel Thomas:

So all of your marketing dollars in and all of your revenue out. And this North Star, some people call it Mer, which is marketing efficiency ratio, but it's essentially just blended ROAS across all the different channels. This is in line with what your customers are actually doing instead of what the platforms and how they're incentivized. Does that make sense?

Andy Splichal:

Yeah, I mean, you're talking about a last click attribution. But let me are the problems with the last click attribution?

Nigel Thomas:

Yes.

Andy Splichal:

If you're doing this, let's say you're advertising on four or five or six different marketing channels, how do you tell which one's a dog, which one's not working?

Nigel Thomas:

Well, it depends how much data you've got because honestly, the most reliable is first party data. So actually getting feedback from your customers. So you can have surveys on your website, your customer support team. If you're using a platform, let's say in shopify using something like gorgeous, you can have questions set up in there. But obviously if you haven't got any traffic, it's a lot harder to do that. So I just want to make it pretty clear we still look at single channel attribution, it's just not the North Star. Obviously we still need to have some sort of return on those platforms and be looking at different metrics like cost per click and tr and everything.

Andy Splichal:

You're just not taking it as the end all, be all.

Nigel Thomas:

It's not the North Star.

Andy Splichal:

Got it. Now, you have quite a bit of experience working with direct to consumer brands. In fact, I think I read on your bio that you had spent over $100 million. What type of ads have you found typically perform best for a direct to consumer brand?

Nigel Thomas:

I mean, over the course of the last six years it's changed a lot. But right now, with the rise of obviously TikTok and these kind of platforms, the competition for content has become a lot more fierce. So user generated content tends to be the best performing, but it really depends on the channel and it really depends on the product. For example, it's going to be harder to have user generated content around a sofa compared to a supplement product that maybe is for your pet. And that is obviously a lot easier to advertise on something like Facebook because it's about how the customers are using these go. People don't think about this, Andy, but people don't go onto Facebook and Instagram to buy products. They go on there to socialize because it's social media and you have to interrupt them with an ad that doesn't look like an ad, it looks like an organic post to get their attention to click to your website.

Andy Splichal:

What are some of the best practices to try to gather some of that user based content?

Nigel Thomas:

Speak to your customers more. So if you have first party data, the best place to start is to comb through your customer reviews. And then what you want to do is segment them out into the objections, the biggest pain points that your customers have. You want to look at the stories when someone authentically talks about how this product has changed their life there's golden pieces of information in there. And by the way, you can also use Amazon if that's one of your best selling platforms. And then the other thing is, and this is the most important, the language, if I was to talk to founder of director consumer Brand Bandy I'd be saying things like conversion rate, CRO, CPA, all these kind of acronyms they use and they understand that. Now for someone who's got a pet, they probably use a very specific kind of language. And these are the ways that if you include this in the ad copy, you include this in the creative, that's how you get the outsized returns and you make the most of every single advertising dollar spent.

Nigel Thomas:

And the problem is that in this space, obviously a lot of these ads are getting run by marketing agencies and the barrier to running a marketing agency is a laptop and a WiFi connection. Now, resourcing is the biggest heel of a marketing agency. I know I built three of them. So what tends to happen is these marketing agencies so they don't have to spend much on hiring people or they hire cheap, they basically just copy what everyone else is doing. They skip all of that customer research process and this might work but the thing is because they copied someone else, they copied another brand in the space when things go wrong. And that strategy doesn't work anymore because they haven't got the foundation of the customer research. Now they can't fix it. But if you have all of the pain points, all of the objections, all of the language that your customer uses, you can keep making tests and iterations on that because the base of it, the inputs into your system are really high quality.

Andy Splichal:

There's a lot of great stuff in know talking about Facebook ads. What are some of the biggest mistakes that you find that people commonly make besides copying others ads, not doing customer research. But what are some of the other mistakes?

Nigel Thomas:

That they don't spend enough money.

Andy Splichal:

Don't spend enough money?

Nigel Thomas:

Yeah, they have unrealistic expectations of how much it takes to get results and also unrealistic expectations of the returns they can get. Now, I put a post about this on LinkedIn today and I said I was going to piss off quite a few marketers because the advice that's given in the space Andy, is all back to front and I'll tell you why. So all of these platforms, they're auction systems. So in an auction, as we know, the highest bidder wins. So everyone wants a higher ROAS and they want a lower cost per acquisition. But in reality, the best way to go is to spend more to acquire customers. Now, how do you do that? Obviously you've got to look at the back end economics of your business. So if you have a higher lifetime value and you have more customers that are returning and you have higher profit margins, then you can spend more to acquire a customer.

Nigel Thomas:

Because no matter how good your content is, if you can spend three times more in your competition to acquire customers, you're going to win with raw economics. Now, for a bootstrap brand, they might not have the capital, the cash, or they're not venture back to be able to do this. So how do you compete with the goliaths in your industry? Well, if you have fantastic customer service and word of mouth marketing, you need to think that for every one customer you're purchasing from Facebook, they're going to tell three others. So I was speaking to a brand the other day that had fantastic customer returning rates and I was so excited to speak to Mandy thinking, what's the hack? What's the technology? What's the secret they're using here? And it wasn't anything that I expected, but by the way, it was so much better with every single order they were sending out, not only were they writing handwritten notes, they were also including a picture of the person packing that product and a reason why they love the company. Now, the result of this is the customers that received those products organically posted about the brand on their own social media profiles, which meant that for every single customer they were buying, they were getting four more. So now, when they go back into that auction system, the CPA target isn't actually for one customer, it's for four or five, because obviously, they've got that word of mouth marketing and that's how brands need to think. Instead of thinking, how can I get cheaper traffic? How can I reverse my unit economics so I can spend more to acquire customers? Because even if you've got a really cheap customer acquisition cost, long term, the cost of advertising is only going in one direction, it's going up. So that means that even if you got a cheap customer acquisition cost now and it works, your economics, it won't work in a few years time.

Nigel Thomas:

So the way to combat this is to start thinking about, how can I get customers to speak about my product through great products, through great customer service, and then I can, for everyone, get four more and spend more to acquire customers. That honestly what I just said there. That's the biggest thing by far. Like any hack tactic we're going to speak about today, that just focus on that. Because investors, the biggest thing they look at is the lifetime value to CAC ratio, how much a customer spends your business over the lifetime, compared to how much you can afford to spend to acquire them. And if you can spend more to acquire them, the enterprise value of your company is going to be a lot higher. So if you want to go and exit at some point you're going to have to deal with this then. So do it now and give yourself a massive competitive advantage.

Andy Splichal:

So you had mentioned agencies and hiring out your Facebook advertising to an advertising agency. What are some of the things that businesses should be on the lookout for when interviewing potential agencies to run their Facebook ads?

Nigel Thomas:

Yeah, so my big thing on this is doctors. You might be thinking, what the hell, Nigel? But doctors always listen before they prescribe. Well, good ones do, anyway. So it's about how curious they are. It's about the questions that they ask. So, five years ago, it was really easy to get results with Facebook ads. You could have one Media Byron Ten ad accounts to get the same results. Now It's about ten times the work.

Nigel Thomas:

So the biggest trait that you need to look for in a marketer or an agency is a problem solver because that means that the person you hire, not only will they figure out what's working now, when things change, they will also figure out the new strategies. And honestly, the best advice I've got, and when everything got really hard after iOS 14 and we had to keep all of our clients, was understanding the Macro part of the business. So micro is just what's going on the Facebook ad Account, right? That's what a media buyer does. Macro is understanding the supply chain is understanding about retail, it's understanding around profit margins, financials. If you understand all of those things now, you understand how what you're doing impacts all of those things. So you can essentially speak to the business owner and the business and put together a strategy which is in line with the overall macro business goals. So the questions that will come from that, when you're on a call with an agency, if they're asking you questions around, okay, so this is your hero product. How much stock do you have? How long does it take to ship the product out to a customer? What are the margins on this product? What is your lifetime value? These are the kind of questions that really good marketers ask because they understand the macro impact of your business and it means that they care about you winning as a business.

Nigel Thomas:

They don't just care about making some money short term off your Facebook ads.

Andy Splichal:

So Amazon is, no surprise, super popular. Do you ever for your direct to consumer products? Do you ever direct them to an Amazon store of the products? Or are you usually sending them to companies, shopify BigCommerce their own website?

Nigel Thomas:

Usually it is direct to the websites because obviously the downside of Amazon is you don't own the data, right? So even if it costs you twice as much to send it to the website, you now have that data. And obviously the long term value then for the business is a lot higher. Now, Having said that, we have done it before, because again, we think about the customer journey because Amazon has obviously got so much trust of their customers. Let's say it's a supplement of product again and John's checking it out, the likelihood of him then going to Amazon and checking if the product's there is pretty high. And if you don't have your product listed on Amazon, he will probably go and buy the competitor. Which means now you basically just paid an advertising cost to get your competitor a customer on Amazon. So we definitely, if the brand isn't on Amazon, we recommend them getting listing there. We've tracked in the past, let's just say a company is on Amazon and they're not advertising on Facebook.

Nigel Thomas:

We've seen the incremental lifts of the spillover from Facebook to Amazon. It is pretty hard to track, but we have seen trends and correlations, and we have tested it before where we send them directly to Amazon pages to obviously boost some other rankings. But honestly, just using Facebook Ads in itself, using Google Ads, using TikTok ads, usually that level of awareness automatically over time, know generates more of a compound effect on all these platforms together. So it really depends on how they look at the data, Andy, but we try and educate them to understand that. Customer journey.

Andy Splichal:

You had mentioned iOS 14. What changes do you foresee happening with Facebook ads over the next twelve to 18 months?

Nigel Thomas:

Well, Facebook as a business obviously lost a lot of money. They were putting all their eggs in the metaverse basket. And as we've kind of seen, that didn't really work. Now they've gone more back to the focus of what their business model is. So, honestly, there's been a lot of problems with the Attribution tools. I'm not going to name Know. I know some of the guys who work there and the great marketers themselves, and business people, but they're having a lot of issues because the data isn't mapping up with what's going on with the sales data. So what I foresee happening is Facebook becomes more and more accurate and we don't need the Attribution tools anymore.

Andy Splichal:

Now, you had mentioned building three different agencies. I'm curious, have there been any business books out there that you could attribute to your journey as an entrepreneur?

Nigel Thomas:

Yeah, so I actually got one here, which is I don't know if you can see that. It's called Legacy, and it's by James Kerr. And essentially it's about do you know the rugby team, the All Blacks?

Andy Splichal:

No.

Nigel Thomas:

Okay, so the All Blacks are the most successful rugby team ever, and they're from New Zealand. Now, New Zealand is a very small populated country, and even though their population is way smaller than all of their international competitors, they still manage to have the most successful rugby team ever. And the reason why is because they built their team culture off principles and values. So there's 15 principles in this book, and honestly, from the leadership standpoint and just learning how to deal with people, it transformed my life reading this book. And I often go back and refer to it, but it's all about being humble, hiring people on their principles and their values as people and then teaching the skills on top, but making sure they have that foundation there and everyone working cohesively as a team and just these kind of principles. That's the best way to build relationships in business because at the end of the day, whether it's D to C, whether it's B to B, it's all human to human. So when you understand how to work together as a team and really build a partnership, that's where you have the best long term success because you get that trust and respect, which in my opinion is way more important than money in business.

Andy Splichal:

That's one of my favorite questions to ask on my podcast and your answer was one of the best. And I have not heard of that book. So I am going to order that.

Nigel Thomas:

It's amazing. It's really good.

Andy Splichal:

Now, with your current agency, do you have a favorite success story of a client you could share?

Nigel Thomas:

Yeah, I do, actually. There's a brand called Eczema Honey and they essentially, as you can tell from the name, they help people solve their Eczema issues. And I actually have eczema myself. So how this relationship came about is I've started posting on LinkedIn. I've got like 38,000 followers, whatever there right now, but I didn't have at the time. And I use this product and I essentially posted about it organically on LinkedIn, just talking about how much I appreciate their marketing, how much they understood the customer, because I was the customer and I talked about how it transformed my life. Then the owner reached out to me and essentially we developed a friendship. And then we got to the point where we started running their marketing and the owner invited me out to help them with their pitch to Walmart at the HQ in Arkansas.

Nigel Thomas:

And that pitch was successful and now they're in 4000 Walmart stores. But the real key to this was how that brand owner operates and thinks about his external vendors. So if he's got an event, he will essentially fly out and pay for our flights, all of our team to go out there and be a part of his team and welcome us into his family. Now, let's say that we've got 20 different clients. And obviously I told you the biggest Achilles heel to agencies is resourcing. So extremely smart what he's doing, because obviously now as an agency, who are we going to prioritize? What? Yeah, probably the brand that flew us out to Vegas and pay for all of our hotels and brought us into all these events. And even outside of that, when we were at for example, what's the name of the big retailer? It's slipping my mind now, but one of the big retailers, they have a big event in Vegas. And we were there, we were talking to all the customers, we were talking to all the store managers.

Nigel Thomas:

And the amount of insights when I talk about that customer research, speaking directly to thousands of customers and hearing their success stories was so invaluable. And then we took that research and we made creatives that outperformed anything we'd ever done. One video that we did off the back of that, which actually we found that mothers with children who had Eczema were the best-selling customers, did 200,000 in revenue in a few weeks. And it was from those insights at those events. Plus the other thing is we felt then so much more responsibility because all of these marketing agencies, they're all sat behind computers working remotely. They don't actually ever have face-to-face interactions with the customers. When you see those face-to-face interactions, when you get customers coming up to you telling you honestly, this product has saved my child's life. When that happens 1000 times the amount of conviction and belief you have in this product to then put that and that kind of energy into the marketing that is so transformative.

Nigel Thomas:

So I recommend if any brand owners listening do that. Bring the vendors into your company, bring them into your family. Because the energy that that creates is something I've never seen before and it really changed my perspective on business.

Andy Splichal:

So who is the perfect client for working with your agency?

Nigel Thomas:

Yeah, good question. I think it's know the people who want you to be a part of their journey. Now outside of that, honestly, something that just doesn't get talked about. And I think this is because Facebook ads were so easy and all of these social media platforms and the ad platforms were so easy five years ago that everyone forgot the fundamentals of business. Andy and the old saying goes you can't put lipstick on a pig, right? So what I mean by that is if you've got a terrible product and we try all of these marketing hacks and human psychology and tips and tricks but ultimately the product doesn't change someone's life. There's a shelf life on that and that catches up. And by the way, I've seen so many brands in this space that were built on marketing hype that now their margins are shrinking. And with the advertising costs going up and the fact that their customers don't talk about them in a positive light and they talk about them in a negative light, now it's really catching up to them.

Nigel Thomas:

So what I'm trying to tell you is honestly, and even though it might sound quite simple, the best clients are the ones that have the best products.

Andy Splichal:

Now how does your guys'fee structure work?

Nigel Thomas:

Yeah, so it depends on what we're offering. So we now offer all the content production. So we actually find all the creators, do all the scripts and the copywriting for these videos. The ones that we use in the ad platforms, we also do the media buying and we also offer a little bit of CRO. We actually develop customized landing pages. So we'll have a minimum retainer and that will start at 7500 a month. And it will go up to about twelve and a half thousand a month, depending on how many creatives landing pages and stuff are needed. And then we do a percentage of ad spend.

Nigel Thomas:

So it's either or. So let's just say for example, it's $10,000 a month or 10% of ad spend. Then when it gets past a certain amount of spend, let's say it's two hundred k and above, it will go to like 6% in ad spend. And then we'll tear down because obviously our biggest spenders that are spending half a million, a million a month, they're not going to be spending 10% on that million. So we incentivize, we go up. Great.

Andy Splichal:

And how can an interested listener learn more about working with you?

Nigel Thomas:

So if you go to our website, you can essentially book in a discovery call. And that's where the first part in our discovery process, and actually how two years ago we got some market share, is because we have a really good audit process. And I know a lot of agencies, they talk about, oh yeah, we'll do a free audit. What we do in our audit, when we talk about the fundamentals, and I talked about the CAC and LTV ratio, we look at the entire customer journey, we review the content, we review everything that's going on the ad account. But now, and this is the best part, we also have a financial cost model where we use all of our benchmark data, we get all the margins, all the cost of goods, and everything from the company. We plug in everything and then we work out what the cost they can afford to acquire new customer, and then we map out a six to twelve month roadmap. The reason why we do that, Andy, is because we want to make sure from our side that we're confident we can actually deliver. So that trust that gets built before we even ever sign a contract to work with these people has dramatically helped us.

Nigel Thomas:

And that's why most of our customers say one to two years. So if you go to our website, you can book in a free discovery. I think it's alphareinbound.com apply book in a discovery call instead of me just talking in big game. We'll show you through action how much we care about the brands we work with.

Andy Splichal:

That sounds great. Now, speaking of great, I mean, it's been great having you on. You've dropped a ton of knowledge. I really appreciate it. Is there anything else you'd like to add before we wrap it up today?

Nigel Thomas:

Just focus on the fundamentals. There's a lot of tech products out there, especially the shopify ecosystem. There's a lot of marketers that spin a lot of crap. But ultimately, long term, it's not about what you do, it's how you make your customers. Feel. And if you have great products, you have a fantastic customer experience, and you give those people a life changing moments that they'll never forget, you will always be okay in business, and I really fundamentally believe that. So focus on the fundamentals of business, focus on the customer. And if you do that, you'll have enough profit and you'll have enough cash that no matter what the advertising costs are, you'll always be able to spend.

Nigel Thomas:

And that's the best strategy for longevity.

Andy Splichal:

Well, that's great final words as well. Well, thanks for joining us today, Nigel.

Nigel Thomas:

Appreciate it. Andy, have a great day for listeners.

Andy Splichal:

Remember, if you like this episode, please go to Apple podcasts and leave us an honest review. And if you're looking for more information regarding Nigel or Alpha inbound Digital marketing, you will find the links in the Show Notes below. In addition, if you're looking for more information on growing your business, check out our Podcast Resource Center, available at podcast.makeeachclickcount.com. We have compiled all our different past guests by show topic and include each of their contact information. In case you would like more information, any of the services I've discussed during previous episodes. Well, that's it for today. Remember to stay safe, keep healthy and happy marketing, and I'll talk to you in the next episode.