It's not set it and forget
it. We continue to work at it.
Speaker:We continue to try different things
and really push the envelope.
Speaker:I think that's one of the reasons why
we've been successful on the performance
Speaker:marketing side.
Speaker:Well, hello and welcome to another edition
of the E-Commerce Evolution podcast.
Speaker:I'm your host, Brett
Curry, CEO of OMG Commerce,
Speaker:and today we are talking to a
really remarkable founder of an
Speaker:amazing brand with an amazing story.
Speaker:Talking to Russell Breuer from
Spot and Tango. Listen to this,
Speaker:a hundred million in revenue, profitable,
Speaker:almost exclusively DTC subscription only.
Speaker:Amazing value prop in the marketplace
are doing some amazing things.
Speaker:They're vertically integrated,
Speaker:which in a world of tariffs and no
tariffs or uncertainty and all that
Speaker:craziness, that is a brilliant
play. And so lots to unpack,
Speaker:lots to discuss, lots to learn from. So
excited that you're here. And with that,
Speaker:welcome to the show,
Russell. How's it going man?
Speaker:And thanks for taking the time.
Speaker:Awesome, thanks Brett. You
hit some key highlights.
Speaker:We're excited to be here
seven years into the journey.
Speaker:Still a lot of wood to chop,
Speaker:but it's been very rewarding and happy
to share some of my experiences today.
Speaker:Love that. A lot of wood to chop,
man, that is the game, right?
Speaker:The game is always,
Speaker:I'm going to do this thing and then I'm
going to go build this mode and then
Speaker:competitors catch up. I got to
keep going. Things like that.
Speaker:It's a never ending game, but hey,
Speaker:that's what we signed up
for as entrepreneurs and
so we just got to enjoy it.
Speaker:What I'd love to do, Russell first,
because as with any great product,
Speaker:any profitable company,
Speaker:it starts with meeting and
need and being different.
Speaker:And so how did you kind of come to the
value prop and explain it to people,
Speaker:what you sell and why it's
so special in the market?
Speaker:Sure. So Spot and Tango is a pet
health and wellness brand. In short,
Speaker:we make incredible food for dogs.
It's a mission-driven brand.
Speaker:All of our products use fresh
human grade, whole ingredients.
Speaker:We exclude anything artificial,
no synthetics, no food colognes,
Speaker:no fillers. Really.
Speaker:The founding story hearkens back to
a studio apartment in New York City,
Speaker:which is cliche but true.
Speaker:My wife was cooking fresh meals
for our Golden doodle jack.
Speaker:In fact, her mother was cooking fresh
human grade meals for her dog, George.
Speaker:So there's a family history here
and of course aspirations to be an
Speaker:operator and entrepreneur.
Speaker:I was head scratching why and
explored the space and looked into the
Speaker:category and our belief is that
health and wellness as a right,
Speaker:not a luxury. And what started
as really a bootstrapped,
Speaker:incubated concept,
Speaker:we found vets and nutritionists to
develop recipes that meet the nutritional
Speaker:needs of dogs for all life stages.
And it's really
Speaker:studio to incubate our kitchen to a
hundred million dollars plus business
Speaker:in seven. It's amazing. It's
amazing. It's been a big wave,
Speaker:but the mission remains true.
Again, everything that we produce,
Speaker:all products, all ancillaries, treats,
supplements, our fresh line Unkibble,
Speaker:which we can talk about,
Speaker:it's all whole fresh human grade
ingredients and that's what we do.
Speaker:It's all delivered online. So
we are a subscription model.
Speaker:It's all personalized. We learn a
lot about your dogs age, weight,
Speaker:and activity level to really inform the
portion, the caloric portion per meal,
Speaker:per day per dog. So personalization's
a big point, but we're digital junkies.
Speaker:It's what we do. It's all online.
The value prop, it's convenience.
Speaker:Skip the trip to the pet
store and Pon Tango shows up.
Speaker:That's the high level.
Speaker:That, dude, you're speaking my
language. And as we were prepping,
Speaker:you were talking about performance
driven, conversion focused marketing,
Speaker:which that's been my world since
the beginning of my career,
Speaker:and so love hearing that as well.
Speaker:But let's talk about Unkibble just a
little bit because you and I we're also
Speaker:talking before we hit record.
Speaker:There's some other food products
on the market that are fresh food,
Speaker:but they come cold and you got to put
'em in your refrigerator next to your
Speaker:food, which I love Our dogs, my
family, especially my wife and my kids,
Speaker:huge animal lovers. So
we take care of our pets.
Speaker:I don't really want my food next to my
dog's food, just my personal opinion.
Speaker:But what is Unkibble and how are
you differentiated in that regard?
Speaker:Yeah, so Unkibble offers the benefits of
fresh and the convenience of Unkibble.
Speaker:Back in 2019, again, the original
recipes were fresh, fresh,
Speaker:frozen. And to your point, it's
expensive and it's inconvenient.
Speaker:For an example, urban City Center,
the freezer, Aviva German Shepherd,
Speaker:you're choosing either dog's, food
and freezer or your own, okay,
Speaker:park the Bengal Bites on the counter.
Speaker:So really is in response to customer
feedback. And the question was,
Speaker:is there another way of the mountain?
Speaker:Is there a version mission-driven that's
shelf stable that delivers pound for
Speaker:pound the same ingredient integrity?
And the answer is un Unkibble.
Speaker:We call it fresh dry again.
Speaker:So we use all the same fresh
she in grade ingredients,
Speaker:but we take out the water through
a very novel, fresh, dry process.
Speaker:No water removes the need to
freeze, it removes the dry ice,
Speaker:it removes the installation in the box.
Speaker:Those savings get passed
along to the consumer.
Speaker:So what we're offering is
affordable health and wellness.
Speaker:And from a pricing perspective,
on average we're 30 to 40% less.
Speaker:It's amazing.
Speaker:And other fresh brands
you may have heard about.
Speaker:And so we're occupying a unique white
space from a pricing perspective where
Speaker:we're attracting a lot of
aspirational consumers,
Speaker:Unkibble consumers who want to
feed their health and wellness,
Speaker:but they want the convenience, it's scoop
and serve in the pantry personalized.
Speaker:And they don't want to deal
with the headache of, oops,
Speaker:I forgot to defrost my
frozen food overnight. Right?
Speaker:Right now my dog's eating ice cubes.
Speaker:So we're in a very different business
and we've been doing that since we
Speaker:launched Unkibble in April of 2020.
Speaker:It's brilliant. I think it
strikes the perfect cord,
Speaker:kind of threads the needle
of exactly what people want.
Speaker:We don't want to feed our dogs
junk, and that's become very,
Speaker:very clear that most of what
we'd be feeding our dogs is junk,
Speaker:but we also don't want the inconvenience
sharing freezer or fridge space or
Speaker:whatever. And so love what
you guys have done there.
Speaker:I know a big part of that is your vertical
integration and your manufacturing
Speaker:facility in Allentown, pa. And
as we talked about in the intro,
Speaker:in a world of tariffs on and
off and all kinds of craziness,
Speaker:you guys look like absolute geniuses
having your own facilities here.
Speaker:So talk about that decision.
Speaker:Why did you do that and what does that
unlock for you and for your customers?
Speaker:Great question.
Speaker:It's been an incredible journey for
the vertical integration build your own
Speaker:factory piece. Yes. In hindsight, it looks
like we had the perfect crystal ball.
Speaker:I can assure you at the time we
were focused on the supply side,
Speaker:we launched Unkibble in April, 2020.
Speaker:We tell this story that our first purchase
order we thought would last six plus
Speaker:months. We sold out in four days
Speaker:in very short order,
Speaker:one co manufacturer turned into six
co-manufacturers and they couldn't keep up
Speaker:with demand.
Speaker:There's questions on
costs of goods margin.
Speaker:You're shipping freight all over the
country between comans to logistics
Speaker:centers, product consistency,
there's a number of.
Speaker:Questions. Quality control. Yeah,
consistency. When you got six different.
Speaker:All over the co, if you asked six
people to make a chocolate chip cookie,
Speaker:the cookie is going to look
a little bit different.
Speaker:We took that to heart and we
decided shortly after launch,
Speaker:having Unkibble that building our own
factory and owning our own supply chain
Speaker:was very important.
Speaker:We have now constructed a 70,000
square foot facility in Allentown,
Speaker:Pennsylvania. It's about
two hours west of New York.
Speaker:We have a hundred people on site. It's
been a huge win for us. It's amazing.
Speaker:We push all the volume through
that facility. It's unlocked,
Speaker:tremendous margin wins,
it's boosted inventory,
Speaker:it's hedged against stockouts.
We we're rapid innovators.
Speaker:And I think the most
important point for us,
Speaker:when you think about the food
landscape within the pet category,
Speaker:most brands don't manufacture
their own products.
Speaker:They.
Speaker:Don't know where the ingredients come
from. They're not involved procurements,
Speaker:they don't understand food safety plans.
They don't understand quality control.
Speaker:They don't understand packaging,
shipping or logistics.
Speaker:They are marketeers selling somebody
else's product as their own,
Speaker:which is a reality that's existed
since the beginning of time.
Speaker:Sure.
Speaker:Which is fine for us.
Speaker:We take ingredient integrity very
seriously and delivering an exceptional
Speaker:customer experience. And our
Allentown facility has been the tool,
Speaker:the enabler of that since we
own every facet of supply chain,
Speaker:that for us has been an incredible
differentiator in this space as we are the
Speaker:leaders in fresh dry,
Speaker:in a fantastic moat and something frankly
that most people just aren't doing.
Speaker:And then to your point, yes,
the phone rings now and gosh,
Speaker:you guys tariff proof, resilient. You
know what the answer to that question is?
Speaker:Yes. Did we know? So at the time, no.
Speaker:It was a bit of a false send and here
we are and we're reaping the rewards.
Speaker:I love it, man. I love it.
Speaker:I know this isn't the path for
everybody for a variety of reasons,
Speaker:but what did you learn in that
process of going vertically integrated
Speaker:and what advice would you give?
Speaker:When do you think other
DTC brands might consider
Speaker:taking the path that you took?
Speaker:Sure.
Speaker:I think the business case
needs to be very strong
Speaker:product market fit firstly,
and depending on growth rate.
Speaker:And look,
Speaker:ultimately there are thousands and tens
of thousands of brands that outsource
Speaker:production A okay, my point
was more within the pet space,
Speaker:and so that's fine, but for us, demand,
outstripped supply significantly.
Speaker:So there was a need. So rapid
product market fits is one two,
Speaker:unity economics is the
second consideration.
Speaker:Are you better outsourcing or
insourcing? And in many cases,
Speaker:depending on the category, it's
better to have someone else.
Speaker:If it's a commoditized trade, it's
better to have someone else do it.
Speaker:And you focused on what you do
best, whether that's marketing or.
Speaker:Marketing, sales, whatever. Yeah.
Speaker:Exactly. And then ultimately when it
comes to actually building a facility,
Speaker:give yourself a long lead time.
Like two years. Okay. This.
Speaker:Is not overnight notes. We're not
spinning this up in six months.
Speaker:This is not our tariff for leaf plan.
This is like I'd say thoughtful,
Speaker:intentional, strategic. Yeah.
Speaker:Exactly right. Brett, I think at a
sprint it's 18 months if not two years.
Speaker:Identifying a site, obviously
there's a bill design firm involved,
Speaker:there's CapEx, there's equipment,
there's staging capital, there's equity,
Speaker:there's debt,
Speaker:there's a lot of pieces involved
and team to bring that to
Speaker:life. And of course operating a facility
brings a number of other challenges
Speaker:that we've managed and
managed well. But nonetheless,
Speaker:there's an early consideration set.
Speaker:But I would say that having your own
assets, having your own manufacturing
Speaker:unlocks significant intrinsic
value for any company in any more.
Speaker:I think a lot of brands that are winning
do own those types of assets and the
Speaker:strategic landscape looks at
and says, these are different.
Speaker:Haven't seen that playbook.
Speaker:Yeah, love that. Totally
agree with that for sure.
Speaker:So you guys are subscription only.
Speaker:Was that the plan from the beginning
or was that a pivot over time?
Speaker:Why did you guys land on that and what
have been the pros and cons of going that
Speaker:route?
Speaker:Great question. So day one, yes. At the
person personalized product firstly.
Speaker:So we have kind of an
onboarding questionnaire.
Speaker:We learn about your dog's weight activity
level to really inform portion or
Speaker:calories consumed per
day subscription is fit
Speaker:for the pet category. Why is that dogs
need, it's not a want, it's a need.
Speaker:Subscription is a convenience,
it's a value prop.
Speaker:You don't need to go to the pet food
store. It shows up on a regular cadence.
Speaker:On average, for us it's every
four weeks. Customers love it.
Speaker:We're building out broader product
platform with treats and supplements and
Speaker:other food products as well. Dental
care, which we're launching soon,
Speaker:which we can talk about. But
because that need exists,
Speaker:people need the box every
four weeks. And so for us,
Speaker:it's always been that way from a
reoccurring revenue perspective,
Speaker:commercially speaking, that's certainly
a way to scale business. Brilliant.
Speaker:And I think the other point here
is within the pet landscape,
Speaker:dogs do need consistency of diet.
Speaker:We don't advocate the dogs
to change proteins every day.
Speaker:This is not Turkey on a Monday, beef
on a Tuesday, lamb on a Wednesday.
Speaker:That can be a disaster for the
Persian rug digestion important.
Speaker:So consistency of diet is also very
important and that also leans towards a
Speaker:subscription model. So it's very
fit for purpose for the category.
Speaker:Totally makes sense.
Speaker:It fits the value prop for
the consumer in terms of the
Speaker:pet owner, but also for the
pet and also for you guys.
Speaker:So perfect alignment there
across the board. Curious,
Speaker:what have you guys learned? What
have you done to make that Yes,
Speaker:easier for shoppers?
Speaker:Because I know a lot of people will
probably hear the story and hear the value
Speaker:prop and think, I want that for
my dog, but what if they hate it?
Speaker:What if I hate it? What
if something like that.
Speaker:So how do you get someone
to take that initial leap?
Speaker:They've never seen the food,
they've never held the bag,
Speaker:they haven't seen it in store. To
immediately go yes to a subscription.
Speaker:How have you made that an easier yes.
Speaker:Right. So firstly, it's
a considered purchase.
Speaker:So we're not selling tennis
shoes or to your point,
Speaker:what is this thing?
Speaker:I've been feeding my dog Unkibble
since the beginning of time.
Speaker:Why are you using fresh human grid
ingredients? There's a lot of education.
Speaker:Firstly,
Speaker:I'd say we use a lot of email marketing
and funnels on SMS to continue
Speaker:that education. The pros,
Speaker:the benefits of these types of recipes.
Speaker:We use a trial also, so there's a 14 day
trial, there's a happy pup guarantee.
Speaker:These are our tools to give
consumers comfort, that.
Speaker:Risk reversal guarantees type of thing.
Speaker:All of the above. And I
think it gives people, look,
Speaker:I think the landscape's changed.
Speaker:I think obviously e-commerce is playing
a greater role in purchase decisions and
Speaker:people have greater comfort online
disclosing their credit card details,
Speaker:receiving a box in the mail when they
haven't maybe heard of these brands
Speaker:previously. Our job is to educate,
Speaker:give people comfort that
we're here to support them.
Speaker:And then we have an incredible customer
service team. We're available on SMS,
Speaker:email chat, voice messages,
Speaker:don't go unnoticed for
days. They are responding.
Speaker:It's amazing lesson.
Speaker:So it's those multiple touch points
that I think builds a relationship and
Speaker:that's unique to direct to consumer.
Speaker:We have a direct relationship
with our customers.
Speaker:They tell us what's working well,
Speaker:they tell us things that
we can fix or improve upon.
Speaker:They inform new product innovation
and it's an amazing first party.
Speaker:Data is an amazing dynamic and
again, our job to serve the customer,
Speaker:but those are some of the tools that we
use initially to help give people the
Speaker:idea that we're here for them, give 'em
comfort to make that purchase decision.
Speaker:It's amazing. As with most things,
Speaker:when you're building a great business
and running great marketing or building
Speaker:great offers,
Speaker:it's not just one thing that you
do that kind of creates the unlock.
Speaker:It's lots of little things,
Speaker:stacking lots of little things to
create a delightful experience.
Speaker:But what would you say
are the biggest levers,
Speaker:the biggest levers or the biggest
lessons in increasing conversion
Speaker:rate? Increasing the number of people
that take you up on subscriptions.
Speaker:Yeah, I think when you think
about the marketing funnel,
Speaker:and we're very much focused on
direct response, lower funnel,
Speaker:I'd say consistency of call to action.
Speaker:What you're advertising in
terms of product image and copy,
Speaker:is that experience replicated on site,
Speaker:on homepage or landing page is
the consistent checkout Is pricing
Speaker:consistent? It's the no surprise rule.
Speaker:What we promise we deliver through
the funnel through checkouts following
Speaker:through post conversion
as far as onboarding with
Speaker:email or otherwise. So I think that's
really important. Supply chains.
Speaker:Also, one thing I'll kind of interject
there because it's such a great point,
Speaker:Russell,
Speaker:is we talk about you don't want to create
whiplash where it's like I see an ad,
Speaker:I see an offer that looks great, I click
on it and then I'm like, wait a minute,
Speaker:where am I now? And what is this.
Speaker:Exactly?
Speaker:And if it creates a disconnect
or whiplash almost, man,
Speaker:it's hard to overstate how
impactful that is negatively. So.
Speaker:That's right.
Speaker:Really let call that up.
Speaker:I completely agree.
Speaker:I think rapid AB testing informs that
consumer feedback informs that. And look,
Speaker:everyone's busy. There's
many distractions online.
Speaker:People always ask who are your
competitors? And look, e-commerce,
Speaker:we're all competing for clicks, right?
Speaker:We're all competing for
your attention online.
Speaker:And so totally in terms of the
marketing funnel, that's one point.
Speaker:And then look on the supply chain
side, maybe Amazon ruined the party,
Speaker:but people expect product to
be delivered soon thereafter.
Speaker:Once you check out, they want
that box within one, two days max.
Speaker:And so we've spent a great deal of
time ensuring that we can do that.
Speaker:We work with four distribution centrals
across the country for business.
Speaker:And so monitoring that
one to two day shipping,
Speaker:radius delivery accuracy, all of
the above, that's really important.
Speaker:That's important for retention. And again,
Speaker:to my point about food
being a need versus a want,
Speaker:food can't be late, right? And
it's late three or four days.
Speaker:Again, maybe you can.
Speaker:Wait, looks like you're fasting for the
next couple of days. Fido doesn't work,
Speaker:doesn't work, yeah.
Speaker:It doesn't work. Maybe your tennis
shoes can be delayed but not your food.
Speaker:And so that's another
really important point here.
Speaker:And then expectation management with
our customer service folks have a lot of
Speaker:questions about, again,
back to the benefits.
Speaker:How do I transition to this new
diet? How often should I expect this?
Speaker:I want to try a new recipe. I have
multiple dogs, all of the above.
Speaker:There's a lot of education handholding.
Speaker:And so we've invested
significant resources in our
customer service team and our
Speaker:kind of customer data tech to ensure
that we are in rapid response mode in
Speaker:education mode at all times.
Speaker:That's amazing. Let's talk a little
bit about the education piece.
Speaker:So you've kind of broken it down.
Speaker:It sounds like there's definitely
an education piece upfront.
Speaker:So you're competing for that click,
getting someone to the website,
Speaker:maybe they're signing for your email list,
Speaker:you're educating them on why
Unkibble, why this process?
Speaker:How is this going to work? So
there's some upfront education,
Speaker:there's then education after
someone becomes a customer.
Speaker:Can you talk through that?
Speaker:What have been some of the big lessons
you've learned there and some unique
Speaker:things you do in terms of education?
Speaker:The most important consideration
upon purchase is ingredients.
Speaker:And we've learned that through
Hotjar. Heat maps on websites,
Speaker:iterate surveys, talking
to our customers directly,
Speaker:voice of customer people have
always said the first consideration
Speaker:when considering a new diet or
new food is what's in it, right?
Speaker:And I think ultimately the consumer is
much more educated than maybe they used
Speaker:to be. We have very simple
ingredients. It's very straightforward.
Speaker:There's no confusion. If you look at
a pet food label, if you have a dog,
Speaker:it's confusing. We're that.
Speaker:That's one point. And so that education
piece is like, here's what it is.
Speaker:I think two reinforcing vertical supply
chain story about this is where it's
Speaker:made, this is how it's made. Again,
that builds confidence in our brand.
Speaker:And then Ultimately there's a lot of touch
points after purchase in terms of the
Speaker:inbox experience with
feeding guides or brochures,
Speaker:continual education,
Speaker:whether it's in regards to new product
launches or breed specific data.
Speaker:We have content marketing, a blog
if you will, called what the Pup,
Speaker:which is really talking about love
that parenting and pet issues.
Speaker:Is it okay for your dog
to sleep in the bed?
Speaker:I'd rather spend more time with my
dog than my spouse talking about
Speaker:breed specific information or what
diets would work or what to do with your
Speaker:dog's paws in the winter
or in the summer. So again,
Speaker:it's this kind of ongoing
relationship. And honestly,
Speaker:it's not all about selling product,
it's about building a relationship.
Speaker:Pet parents too.
Speaker:And I still have a ton of questions and
I've been doing this for a long while.
Speaker:I've 80 pound English golden retriever
named Sully who takes up half
Speaker:house's, my fourth child, and I ask
her that questions often. So again,
Speaker:we want to be a resource. So
it's not only providing food,
Speaker:it's being a resource and
supporting the pet parent too.
Speaker:It's so important and that
education piece upfront,
Speaker:but also understanding the
education doesn't really stop.
Speaker:I had a great experience recently with
these amino acids that I purchased for
Speaker:myself, trying to follow a pretty strict
workout program and have for years,
Speaker:but I'm 45 now. It's like building
and keeping muscle masses hard.
Speaker:So I bought these amino acids based
on an influencer's recommendation,
Speaker:but then I got this great guide to
amino acids in email after the purchase.
Speaker:It was talking about, Hey, how you should
use this 30 minutes before workout,
Speaker:take it immediately after workout.
Here's how you can take it,
Speaker:how it differs from protein and
creatine and all these other things.
Speaker:And I'm like super helpful.
Speaker:I feel like I understand
fitness decently well.
Speaker:But.
Speaker:I felt more empowered. I'm
taking more of the product,
Speaker:I feel better as well.
I started ordering more.
Speaker:And so it's just one of those things where
I think we underestimate the value of
Speaker:education post-purchase because that's
going to create sticky relationships,
Speaker:more referrals, more
all the things we want,
Speaker:plus happier pets and happier pet owners.
Speaker:That's it. And that speaks to
channel as well, right? Yeah,
Speaker:so any direct to consumer brand,
whether you're in pet wallet,
Speaker:razors meal kit or otherwise,
Speaker:there's an opportunity to
educate versus on shelf.
Speaker:So on shelf it's unpacked, but once
that purchase decisions takes place,
Speaker:a person leaves store, that
relationship doesn't exist.
Speaker:And so that's part of the power we
have from this channel of acquisition.
Speaker:It's amazing. Yep, totally,
totally agree. Okay,
Speaker:so you'd said something when
we were prepping very unique.
Speaker:I've been in this m and a space and I
have some friends in private equity and
Speaker:we're looking at acquiring a couple
agencies and things like that.
Speaker:So you mentioned return
on invested capital.
Speaker:That is not a term that I hear
marketers use a whole lot.
Speaker:Not a term that's really come
up on this podcast a whole lot.
Speaker:So how do you guys look at
return on invested capital to
Speaker:measure and manage your growth
and related to marketing?
Speaker:And I will say just
another bit of context,
Speaker:I think I'm really delighted that
there's this trend towards marketing
Speaker:and finance becoming friends and how,
Speaker:and I know you're a direct
response guy, I've been doing,
Speaker:I started doing DRT V in the early two
thousands and so direct response tv.
Speaker:And so I've always lived in this world,
Speaker:but it's really a trend
in e-commerce of hey,
Speaker:let's get finance and
marketing communicating and
let's make sure we're getting
Speaker:good return on our marketing
dollars. But even then,
Speaker:I don't hear people talk about
return on invested capital.
Speaker:So why is that a metric for you? What
kind of insights does that unlock?
Speaker:Unpack that a bit for us.
Speaker:It's our north star, our ops,
our finance, our marketing,
Speaker:the entire organization speaks this
language. A lot of direct to consumer.
Speaker:Brands have learned hard lessons.
Speaker:Growing top line and hypergrowth
with product market fit is possible
Speaker:for many businesses. If you understand
performance marketing, meta search,
Speaker:TikTok, direct mail,
Speaker:you can generate outsized
returns on the growth side.
Speaker:But oftentimes brands forget
about the unique economics.
Speaker:They forget about things like
net income, cashflow, ebitda,
Speaker:and they've learned hard lessons years
later when they look to exit or go public
Speaker:and third parties deeply
discount valuation or otherwise.
Speaker:Totally, totally.
Speaker:So I think that's a starting point
for a mind shift in terms of how we've
Speaker:operated this business. We
are very prudent operators.
Speaker:And what I mean by that is prudent growth.
Speaker:So return on invested capital really
is a measure of our marketing spend
Speaker:and it combines three key
metrics, lifetime value,
Speaker:contribution, margin, and customer
acquisition cost. Okay, it's beautiful.
Speaker:It's beautiful. When we spend our dollars
on any channel, let's say we spend,
Speaker:I'll give you a very rough example.
Speaker:Let's say we spend a million
dollars on marketing today.
Speaker:I'm now minus a million dollars.
Speaker:The question is how soon do I repay
that a million dollars and get to zero?
Speaker:That's one x return on invested capital.
Speaker:And then how long does it take to
generate a million dollars of profit?
Speaker:And so we look at the lifetime value
of our customers. In other words,
Speaker:how much do our customers spend on
average per year? That's my numerator.
Speaker:Multiply that by the fully loaded
contribution margin in the business.
Speaker:So what is my average profit
per customer per year?
Speaker:And then I divide that by the customer
acquisition cost and that informs the
Speaker:timeline to repay my
investment in marketing.
Speaker:We use that paradigm to
inform everything that we do,
Speaker:such that there are caps in terms of
how much we are willing to invest in
Speaker:marketing in terms of
customer acquisition cost.
Speaker:Of course if our LTV or our average
revenue per customer increases over
Speaker:time and our margin increases,
Speaker:we can spend more dollars at
a higher acquisition cost.
Speaker:But we use that framework
and route everything we do
in that framework and that
Speaker:ensures that our operations team, our
customer service team, product innovation,
Speaker:they're thinking about we need to boost
retention, we need to find margin wins,
Speaker:we need to figure out higher LTV,
Speaker:we need to figure out channels of
acquisition that are more efficient.
Speaker:We need to rapidly AB test. Is
our creative strategy working?
Speaker:How do we actually get CAC
lower on that or search?
Speaker:And so when you combine those elements,
Speaker:that has enabled us to be a nine
figure business and be profitable.
Speaker:And we've had that mentality
really since inception.
Speaker:And I think ultimately that
the other reality is data.
Speaker:You've got to understand
From day one,
Speaker:if you're spending a dollar on market
and you've got to know attribution,
Speaker:how do you allocate your money
and does that dollar go far?
Speaker:Are you acquiring a customer
in a subscription business?
Speaker:If you acquire a customer
and they churn 10 days later,
Speaker:that's not good for business.
Speaker:What percent of your customers are
churning in second order or third order?
Speaker:So the sooner you are aware and
understand the data that will inform and
Speaker:can lead to this type of ROYC equation
and that really drives decision
Speaker:making.
Speaker:Yeah, it's so good man. And it's
one of those things where, yeah,
Speaker:looking at lifetime value,
looking at contribution margin,
Speaker:looking at customer acquisition cost,
Speaker:creating these KPIs where your
entire team is seeing it and
Speaker:managing against it, it's what
matters. It's what matters most.
Speaker:And so you've got alignment
across the team on it.
Speaker:And I'm going through the
book right now, Moneyball,
Speaker:I dunno if you've seen the movie
or the book, but it's so good.
Speaker:And it's one of those things where
they're kind unpacking this guy,
Speaker:bill James who kind of
revolutionized baseball metrics.
Speaker:He created Saber Metrics is the title
that he gave it. But he's like, Hey,
Speaker:looking at rbis and
looking at batting average,
Speaker:that just tells a really
weird part of the story.
Speaker:But what matters is on base percentage
and slugging percentage without
Speaker:getting inside baseball, he
unpacks why that matters.
Speaker:It's like that's how you manufacture
runs and that's how you manufacture wins.
Speaker:Those are the numbers that matter and
there's some other things they measure
Speaker:too, but getting that kind of clarity
and getting that clarity across the team,
Speaker:man, it's valuable. So kudos to
you guys for getting that clear.
Speaker:It's part of our onboarding.
Speaker:We talk about it incessantly
throughout the organization and again,
Speaker:I would advocate any brand really
uses those types of metrics.
Speaker:Yeah, yeah, it's really, really
great. So that's awesome.
Speaker:Let's talk growth levers for a little bit.
Speaker:So I mean you guys have experienced some
great growth and it's all within the
Speaker:constraints or with the guardrails
of your return on invested capital,
Speaker:but what have been your best
growth levers over the years?
Speaker:What's really allowed you to scale?
Speaker:So we have a balanced playbook
between meta search or Google
Speaker:TikTok affiliates, influencer direct mail.
Speaker:We've been experimenting with OTT over
the top and also linear television.
Speaker:You could argue some of these are
very lower direct response channels,
Speaker:other are more mid funnel.
Speaker:We haven't spent and invest as
much in top of funnel things like
Speaker:billboards or subway cars or
wild pasting or otherwise.
Speaker:I think that's intentional
because ultimately our
belief is that in impressions
Speaker:and an impression,
Speaker:and you may be spending dollars on
meta and getting a million impressions
Speaker:and fewer conversions, but nonetheless
you're still getting brand awareness.
Speaker:So you could argue that lower funnel
is both lower and top and mid, correct.
Speaker:There are different both
at the same time. Exactly.
Speaker:And I think that's oftentimes it falls
on deaf ears because more traditional
Speaker:brand marketers think they
need a billboard in Times
Square to justify proper
Speaker:funnel investment.
Speaker:We see lower funnels as kind of
serving both purposes. But look,
Speaker:we've got a performance marketing
playbook. I think for us,
Speaker:two big differentiators.
Speaker:One we focused on building
on incredible team internally
Speaker:that focus,
Speaker:we have channel specific buyers focused
that are pulling lever in-house,
Speaker:that's really important.
And then two creative.
Speaker:We are in the entertainment
Business at the end of the day.
Speaker:Totally.
Speaker:Busy on the go parents, they're
getting solicited for clothing,
Speaker:food, SaaS services. There's
a lot of distractions.
Speaker:And so
Creative is key and it's all about feeding
Speaker:all of these channels, whether it's
meta or otherwise with a lot of options.
Speaker:AB test created and maybe iteration,
a slight iteration on creative.
Speaker:It may be woman with dog with then
Unkibble in park and then it's
Speaker:copy test A and you can run the same
image, but copy test B, copy test C.
Speaker:In fact, some of our
best performing creative,
Speaker:we took a grainy photo of Unkibble
on shelf in our office with a
Speaker:post-it note sale that we ran
and we tested that versus studio
Speaker:produced assets, gifs, you name it,
Speaker:and the grainy photo because
it looked realistic. It is.
Speaker:Looked authentic. It was authentic. Yeah.
Speaker:People identify with that.
Speaker:That's why GC user generated
content plays quite well,
Speaker:but ultimately it's not set it and
forget it. We continue to work at it.
Speaker:We continue to try different things
and really push the envelope.
Speaker:I think that's one of the reasons why
we've been successful on the performance
Speaker:marketing side.
Speaker:I love it, man.
Speaker:And one of the best pieces of advice I
ever heard was any business should view
Speaker:themselves as in the business
they're in plus their media company.
Speaker:Plus you're in the business
of getting, keeping attention,
Speaker:driving some sort of action.
Speaker:And at the core of that
really is creative testing.
Speaker:I've always been a media guy and
a strategy guy. I love that stuff,
Speaker:but I love creative too.
Speaker:And really creative is the biggest lever
that we have now and into the future.
Speaker:And certainly AI and other things are
going to enable more rapid testing and
Speaker:more rapid expansion, things like
that. While we're on the topic,
Speaker:we didn't really plan on this,
Speaker:but any insights or any
perspectives on how AI is going to
Speaker:change performance marketing or
e-commerce in general or your
Speaker:business? Any POVs on ai?
Speaker:Absolutely. No, we are all exposed to it.
Speaker:It's topical innovations here.
I think it's a wonderful,
Speaker:we're looking at AI from both
workflow automation on the ops
Speaker:side. We're working with it
on the performance marketing
side in terms of either
Speaker:creative ideas or creative
iterations and helping AI to
Speaker:inform how rapidly creative gets tested
in platform and helping us make some of
Speaker:those decisions. We're
using it on the coding side.
Speaker:I won't mention all the vendors
we're working with. But nonetheless,
Speaker:even on the coding side,
Speaker:there's suggestive code to help our
engineers actually iterate faster when
Speaker:they're in the development cycle.
And so customer service as well,
Speaker:there are tons of opportunities where
you can start to not automate everything.
Speaker:We're still a very high touch
business, but nonetheless,
Speaker:there are some very standardized
questions that are better served through
Speaker:automation, not FAQs,
but where is my order?
Speaker:Totally, totally.
Speaker:Necessarily to give a tracking number
or provide guidance to where boxes.
Speaker:So we're looking at AI across all
functions of our business really to
Speaker:improve efficiency and ultimately
compliance in many ways and
Speaker:push the envelope.
Speaker:I would argue AI is not going to replace
everybody ultimately in a hightest,
Speaker:totally.
Speaker:Totally.
Speaker:Humanity will rule, right?
Speaker:People do like having conversations
and asking questions and there's
Speaker:TLC that customers expect when we're
talking about their dogs in particular.
Speaker:But look,
Speaker:AI is here and I think there's a steep
learning curve for a lot of brands,
Speaker:but there's a lot of folks out
there having the conversation.
Speaker:I think ultimately it's going
to be beneficial for all of us.
Speaker:Yeah, I 100% agree. That's what we
view it. And I've got a very run,
Speaker:very people driven business.
Our greatest expense is people.
Speaker:We can't scale without people. And
I have the same view where one,
Speaker:I think at a base level,
Speaker:AI is allowing us to do the things
we just have not ever had time to do.
Speaker:So that's part of it's allowing us to
do some of these things we would love to
Speaker:have done but just haven't been
able to. So that's one layer,
Speaker:but then it just supercharges your
best people and becomes personal
Speaker:assistant, personal strategist,
Speaker:executioner to make people more
productive and better. And so yeah,
Speaker:we're very bullish on ai. We're testing
it in lots of different ways. So yeah,
Speaker:I think that's a great
perspective. As we wrap up,
Speaker:we'd love to hear what's
next for Spot and tangle.
Speaker:It sounds like you got a big
product release coming up,
Speaker:or actually at the time of this
release, we'll just come out,
Speaker:but talk about that product release,
talk about what's next for the brand.
Speaker:Great. We are very excited. We
are building product platform.
Speaker:So we have our food, we have UNC
Unkibble, we have our fresh recipes.
Speaker:We sell treats and supplements. Again,
Speaker:addressing all the needs
states of the consumer.
Speaker:We know a lot of our consumers
feed supplements or treats,
Speaker:even a third feed supplements.
Speaker:So there's ways and we've used
that input to launch new products.
Speaker:The human grid version
of that product for pets,
Speaker:the dental care solution is the
game change. It comes out next week,
Speaker:you'll hear more about it nonetheless.
Speaker:It is a scientifically
proven two years in r and d.
Speaker:The big game change here is a lot of
the existing dental care products in the
Speaker:marketplace are really physical in nature.
Speaker:There's a physical mechanic that scrubs
the dog's teeth, periodontal disease,
Speaker:it's a problem for dog penetration with
dental care products within the pet food
Speaker:landscape or pet category is very low.
I think there's a lot of education
Speaker:required.
Speaker:The worst case scenario is your dog gets
periodontal disease and ends up at the
Speaker:vet and spends $2,000 for a cleaning
or teeth removal or otherwise.
Speaker:This product does two things.
There's a very novel ingredient,
Speaker:a novel fermentate that
reduces oral biofilms.
Speaker:What does a biofilm is bacteria that
leads to plaque on a dog's teeth,
Speaker:plaque leads to bad odor. This product
actually removes those biofilms.
Speaker:So there is a scientifically
proven mechanism to do that in
Speaker:addition to the brushing.
So it's health and wellness,
Speaker:it reduces plaque, it reduces bad
odor, it fights periodontal disease.
Speaker:It's a big game change. We're excited.
We think it's another tiger by the toe,
Speaker:if you will.
Speaker:And Unkibble has been a hero product
and we think this product will be one as
Speaker:well. Yeah.
Speaker:So we've been scaring away behind the
scenes and it goes live next Monday,
Speaker:June 2nd.
Speaker:It's amazing.
Speaker:And it's one of those things where I
think that's so well aligned with who your
Speaker:target buyer is and what
they care about. And yeah,
Speaker:just a huge tam there for you to tap into.
Speaker:And so that's really exciting. And then
one thing I was curious about there,
Speaker:I know that there's been really some
education over the last few years on human
Speaker:health and how really oral
health for humans impacts
Speaker:so much of the rest of your health, right?
Speaker:You could be healthy in a lot of ways,
but don't take care of your mouth.
Speaker:And that has an impact on
potentially the rest of your body.
Speaker:I'm assuming it's got to be the
same to some degree with pets.
Speaker:Exactly. It's all connected.
Speaker:And this is holistic health and wellness.
Speaker:It's not just here's a single
ingredient treat or here's a supplement.
Speaker:It even comes, it.
Speaker:Sounds a breath mint it
serving a real health purpose.
Speaker:And to your earlier point about being
really health conscious and focused on
Speaker:exercise, it's the same with your dog.
Healthy exercise, going for a walk.
Speaker:It's really a mentality.
Speaker:It's not just scoop and serve
and it fixes all problems.
Speaker:You need to really embrace that. An
active lifestyle is really important.
Speaker:You need to think about all aspects,
Speaker:all moments of consumption and
dental care is no exception to that.
Speaker:It's awesome. It's awesome. Well, Russell,
this has been an absolute pleasure.
Speaker:Kudos to you guys on building
a great brand, a great product,
Speaker:a great offering is loyal
following people love you,
Speaker:pets and owners alike.
Speaker:And so I'm excited to see where
you guys go and grow from here.
Speaker:I'm definitely a fan. And so for those
that are listening, they're like, man,
Speaker:I got to get on this Unkibble Train and
I got to check out what Spot and Tango
Speaker:is up to. How can they learn more? How
can they figure out what their pet needs?
Speaker:Spot and tango.com, all
information's there,
Speaker:whether it's Un Unkibble or our treats
or supplements in this new dental care
Speaker:product. Spots and tango.com,
we offer discounts on trial.
Speaker:It's a 14 day trial with
a happy pup guarantee.
Speaker:So there's no reason not to give us
a try. And Brett, thank you so much.
Speaker:Amazing, fantastic opportunity. Really
enjoyed the conversation. Again,
Speaker:thanks for the opportunity here.
Speaker:Absolutely. Russell Breuer,
ladies and gentlemen, Russell,
Speaker:good luck to you and Spot and Tango
and look forward to watching the future
Speaker:success. Super exciting. And as
always, we'd love to hear from you.
Speaker:So I'd love to hear feedback.
Speaker:What would you like to hear
more of on the podcast?
Speaker:If you found this episode inspiring,
please share it with somebody else.
Speaker:And with that, until next
time, thank you for listening.