What to do with that LTV:CAC data: Bambu Earth on Creating Phenomenal Customer Experiences

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What does long-term growth look like for DTC brands? How can businesses focus on profitability beyond the initial sale and into the next 3, 6, or even 9 months? It’s not always easy for cash-hungry startups, but it’s vital for sustainable scaling. Kohlman Verheyen’s work with Bambu Earth is a great case study for combining metrics with genuine customer connections. Kohlman digs into their founder-first approach, the success they’ve had with product bundles, and the communication plan they use to grow their base of fanatical brand loyalists.

Show Notes


Kristen LaFrance: (00:43)

The initial plan with this episode was to release it a week after the chat we had with Taylor Holiday, but as these two episodes go perfectly hand in hand, I've decided to push it out early for you. So keep this in mind when you hear me mention, "last week with Taylor." More like, earlier this week with Taylor. Once you understand your payback windows that we learned about with Taylor, have a handle on the LTV to Saas ratios, and are in a place to start executing, what do you even do with this data? What are the tactical steps you can take once you have ahold of it? Kohlman Verheyen, head of acquisition at 4x400, a sister company in a common thread, explains some of the tactical impacts the LTV to SaaS data has had on his work with Bambu Earth, a skincare company run by 4x400. Taylor gave us the why and the what. Kohlman is here for the how. Enjoy.

Kristen LaFrance: (01:33)

Hey, Kohlman. Welcome to the show. How are you doing today?

Kohlman Verheyen: (01:36)

Fantastic, Kristen. Thanks so much for having me on. It's a blast.

Kristen LaFrance: (01:40)

Yes. I am excited about this episode because it follows up last week's episode with Taylor Holiday pretty darn perfectly. And correct me if I'm wrong, but I believe you are the one who actually developed the LTV to SaaS tool and spreadsheet that Taylor talked to us about last week.

Kohlman Verheyen: (01:56)

Yeah. I think that's probably pretty accurate, depending on which one he talked to you about, but yeah. He originally came to me and said, "Hey, we've got to figure out ..." Essentially, the little skincare business that we were working on growing was getting 1.3 on Facebook prospecting ROAS and he was like, "Man, I don't think we're winning at 1.3, but we might be winning. We might just be asking the wrong question, or playing the wrong game, essentially. So, we started to think about what the other longer term metrics could be that, if we believe that people come back, which was the anecdotal evidence, can we support that with empirical proof? So essentially, yeah, we built a tool that, in real time, pulled in everybody's orders, connected it with an email address, and then used the email address to look up how many previous orders they had, if they were a subscriber or not, if they were a discount or non-discount cohort, and then ultimately what their LTV was.

Kohlman Verheyen: (02:54)

It was really rudimentary and pretty clunky of a tool, but it got the job done enough where we were able to answer the kind of binary question yes or no. Does LTV matter in our business? And then made investments towards that.

Kristen LaFrance: (03:11)

I love that. I watched the webinar of you guys going through it and was just, the whole time like, mind blown, and am still mind blown every time I see any of these metrics. They unlock such amazing things for brands. For people who don't know, because it actually took me a while to understand how you were all connected, can you explain the Common Thread 4x400 relationship and what you run at Common Thread?

Kohlman Verheyen: (03:34)

Yeah, absolutely. Common Thread was originally actually started with 4x400 in mind. 4x400's the little holding company that I work for. We currently own three brand in very different industries, but essentially, the partners came together. This was a bunch of years ago. Taylor would know better. I don't even want to take a stab at it. A long time ago. And they said, "We think that we can do eCommerce pretty well, and ultimately we want to be on the equity side of that after working, doing digital marketing, paid advertising for smaller eCommerce businesses and making them a bunch of money." They said, "We want to be on the cap table, ultimately. So, how do we do that?" Obviously there's more to eCommerce than just digital marketing. So they said basically, "We want to start an advertising agency." Which, I think the restraint here is actually so brilliant and really admirable, instead of just going for it, because they were young and ambitious and thought they could do it well. They said, "Let's take an additional step." And so they said, "Let's start a paid advertising agency strictly for eCommerce businesses and basically spend other people's money learning how to do paid advertising." And ultimately did that, grew that to be a really successful agency. They were like number 345 on the [e500 00:04:51] list in 2018, so really successful eCom digital agency.

Kohlman Verheyen: (04:58)

And then finally said, "Okay, we feel good enough about this. We feel like we've got some of the basic fundamental building blocks in place to be able to own and grow our own eCommerce brands." So that's kind of when they went into acquisition mode. They had two brands and had started and shuttered one by the time I was hired. I was hired to do acquisitions for them, so basically biz dev on eCommerce, hunting no. And then the acquisition all the way through to ... Actually, who even knows how far it goes? The first business that I acquired on behalf of 4x400 was a little skincare company called Bambu Earth. That was in March of 2019, so we're coming up on our one year anniversary with that business. I was basically just in a position to ... Hey, we're not going to make any more acquisitions right now, so your job's going to significantly change if you want to stay here. And I was like, "Well, I definitely want to stay here," so they basically tasked me with growing the business, essentially, like managing, and running and guiding the business and all the different parts across our shared resources at 4x400.

Kohlman Verheyen: (06:14)

So, that's a really long-winded way of saying CTC and 4x400 basically are under the same umbrella. We're sister companies, is kind of the way that I like to think about it. One offers services for cash, and the other offers services for equity and owns outright at least the majority share in multiple businesses and utilizes shared shared resources across those brands to recognize efficiencies, economies to scale, and then that's the company I work for. I was previously doing acquisitions, and currently running Bambu Earth, basically, along with the founder.

Kristen LaFrance: (06:51)

Yeah, and I think the coolest part about this is that this bridge between CTC and 4x400 and then now on to Bambu, is that when Taylor was on the show talking about all these things that they found and things that are working for the brands that he is representing as the advertising side, also the fact that you guys are pulling this information from actually working on a brand and doing this for a brand, proving what's working and what's not working, and then being able to bring that back over to the advertising side. I think it just gives you guys a reach and tactics that you can find that other agencies can't really, because you have stake in some brands, and so you're actually having to do the operational side of things, too, which I think a lot of times between brands and agencies, there's that discrepancy, but you guys have kind of filled that hole by having 4x400.

Kohlman Verheyen: (07:42)

Yeah, absolutely. It's a really cool ecosystem where we're able to test and kind of recycle best practices between the brands that we own and the brands that CTC works for. I think one of the coolest parts about that is the access to information that we have. We get to see all of their accounts' performance, like their ad sets and campaign-level stuff, and really what's working. And because they represent such a broad variety of brands themselves, we've been able to pull best practices for kind of a lot of different components of our businesses. And then likewise, that's kind of the way that we leach off of them a little bit, along with scaling some of their best people ultimately. But I think another way that our relationship is really symbiotic is because they come to us and ask just more wholistic eCommerce best practice questions like, "Okay, if we're going to run this kind of sale, how do we exactly implement that?" Or, "What's the best way to implement [inaudible 00:08:53] flow so that we can get better ROAS? Because Facebook will still attribute that to itself." Just a lot of different concepts like that. Like, "What kind of things do we need to implement on supply chain in order to offer this BFCM kind of offer?"

Kohlman Verheyen: (09:11)

So, yeah, it's pretty cool. It's really fun to work with those people. There's a bunch of really, really bright minds down there. I say "down there" because the way that our office is structured, we're up in the balcony, which is like this stowaway attics that's definitely not up to fire code because it's a tiny little spiral staircase, and we'd be screwed in the case of any natural disaster. But downstairs is ... They've got a much bigger footprint than us, just being a more people-heavy business. But yeah, it's pretty fun.

Kristen LaFrance: (09:42)

Yeah. It makes for such a cool setup, which is why I was so excited when I was talking to Taylor. The whole time we were interviewing ... And I think it's like an hour and 20 minutes because it was Taylor and I, so of course we just went off on this stuff ... But the whole time, I was thinking and I was going, "This is all such valuable information, but what if we bring on one of these brands who's actually implemented these metrics and learned how you've dealt with them?" Which is why, then, it made so much sense to bring you on, because not only are you the one who is running a lot of data for Bambu Earth and running the business, but you also built the tool and built the metrics that we're going to talk about today.

Kristen LaFrance: (10:22)

So I'm curious, when you put this all together, first of all, taking me back to where it started ... Taylor came to you and he said, "Hey, I don't feel like we're winning on advertising here." Was there kind of a moment of panic that made you guys go like, "Okay, we've got to think of something else?" What was the trigger that was like, "Okay, there's something we're missing here?"

Kohlman Verheyen: (10:42)

Yeah. Your question about panic's totally valid. There's been a lot of panic over a lot of years at 4x400. We are basically self-funded. We raised a million bucks and blew through it in the first basically 12 months with a bad startup that we had, and just ... We're definitely not an efficient business with only three brands. We're definitely playing the cash line pretty tight with only three brands. We're much more effective, probably, with six brands. But yeah, the question was, "Hey, Bambu Earth, since we acquired it, hasn't gone anywhere. It's July. We basically have one last big shot at this thing, and if we don't figure it out, we're going to close it up, because it's a resource drain. Like, in 30 days." So that was like Fourth of July weekend, and I was like, "Okay, cool. What are we going to do about it?" And it was basically going to be my head if we weren't able to scale it, because it was my job to scale it.

Kohlman Verheyen: (11:44)

So essentially, the panic turned into, "Okay, what's the best asset that we have here?" I wanted to make the bet that ... We had made a bunch of bets between March first and early July before that, but I wanted to make the bet that our founder was the most compelling piece of information that we could ... One step below prospecting, basically. So the concept there was, get Amber, who had been doing clean skincare since 2009, which for anybody in the clean skincare world, is basically equivalent to liking Justin Bieber, when he was three years old. Right? Like way before it was cool. So yeah, basically the concept was, how do we get Amber just one step below prospecting? And if we think that we're not winning currently at 1.3, because you just can't scale 1.3, and we have no idea if people are going to come back. We can't get anything better than 1.3 on Facebook. So essentially, the concept was, if people are coming back, then how much? We needed to go and figure that out, so we kind of went and tried to figure it out. Roughly threw some numbers together, add it, said, "Oh, my gosh. On any time window that we'd look at ... Yesterday, last seven, last 30, last 12 months, last four years ... We don't see anything less than a 30% repeat customer rate. Okay, that's really interesting.

Kohlman Verheyen: (13:14)

But how much do those people spend? And within 30 days, how much do those people spend? And if that's true, then maybe within 60 days is a better question for us, because Facebook will record on a 28-day window, but the 60-day window ... Maybe they come back and make two purchases. Maybe we don't have to be profitable on first purchase, was really the question that we needed to ask and figure out how many purchases in could we afford to push profitability down the road. Does that make sense?

Kristen LaFrance: (13:47)

Yeah, it makes total sense. And the crazy thing to me is that one, this wasn't already out there, but two, that ... First is the concept of a 30-day payback window, when you really think about a lot of products, two months is a lot more reasonable for a customer to come back and buy again for the majority of people, so it makes so much sense. What I like is that it sounds less like there was this moment of panic where it's like, "Okay, we've got to get something moving, because the ROAS isn't moving, we're kind of feeling stagnant." So it feels a little bit like you guys just changed how you looked at it, and then found a lot of success, and then were able to leverage the new information you found, versus completely reinventing anything.

Kohlman Verheyen: (14:31)

Yeah, totally. That's exactly true. We didn't change our product offerings at all. And Taylor probably touches on it pretty significantly in his video, but essentially, his point to me was, "We might be winning, but we might just be winning at a different game than we're trying to win at right now." So we were trying to win at the profitability on first purchase game. Like what we need to do with FC Goods, which is our vintage baseball glove leather wallet company, because it's not a consumable, right? People don't come back every 60 days and buy a new wallet. So we have to win at first purchase on that product. But with a consumable product, like everybody in Silicon Valley is raising money against this later kind of profitability model like, "We're going to go a year without being profitable. It's Peloton, and Brandless, and [Glossier 00:15:24], and all of these different companies that are raising tons of money against, "No, we don't have to be profitable on first purchase. We can be profitable on second, third, fourth, maybe six months down the road." And then you use all that money to just go and buy a ton of new customers so that eventually, when that snowball starts rolling downhill, it gets bigger, and then you become profitable at the bottom of the hill instead of trying to be at the top of the hill.

Kohlman Verheyen: (15:48)

So the questions was like, "Are we winning at a different game?" So, ultimately, we had to find out basically what our ROAS target could be if we wanted to push on Facebook delivery and scale our ad spend, and be profitable at various points in time. So we wanted to be profitable at 28 days, and we couldn't' really do that unless we were doing 1.3 on Facebook, but we could go down to a 1.0 on Facebook, if we wanted to push profitability to 60 days. And if we wanted to push profitability even farther, which we don't, we could probably go lower than 1.0, which is a crazy concept. You're not even covering your cogs at less than 1.0. It's an interesting concept, and so essentially what we discovered is ... And the way that we've made that really actionable, Kristen, is in a couple of different ways.

Kohlman Verheyen: (16:45)

I think, number one, you can't manage what you can't measure. I think that was [Drucker 00:16:50], but it's totally true for us. So, first and foremost, we needed to get really clear about what percentage of first order value people come back and spent. I'm looking at September cohort right now. Within the first 30 days, people spent 35% of their original AOV in September cohort, which is like the first month that this business really took off. And Black Friday, Cyber Monday, you'd probably expect it to be a little bit lower, and it is. It's 24% of AOV. That's just whatever ... Taylor calls it the law of shitty cohorts, and it's essentially just like the larger the pool, the more they wait for deals. They're kind of in the shopping behavior, but then it drops off and maybe they bought it as a gift, so they don't come back and buy again. Like whatever, a lot of different things. 24%.

Kohlman Verheyen: (17:41)

But in January, we're at 24% on first 30 days, and that window's not even closed because, as we're recording this, today is the 19th of February. So, there's a couple of days left. Whatever we expect that to be. But then, in October, the 31- to 60-day window ... So that's not November. It's December and it's potentially January. 31 to 60 days is an additional 28 and a half percent of AOV. So that means that ... Let's say that AOV is like $50. And additional 35% of $50 in the first 30 days is another 14 and a half ... I'm sorry, no, it's ... Yeah, it should be about $14, $15. Yeah. It should be like $15, $16, and then an additional 30% is going to be another $20 or so. Or whatever. My math is probably totally wrong on that, but you see what I'm getting add.

Kristen LaFrance: (18:38)

I'm impressed that you're able to do math off of your head anyway, so I'm just trusting that you're right. But it does make sense, yeah. I'm curious as to like ... When you guys ran this, the first time you started looking at things, what really surprised you right away, and what really was a signal of, "Oh, if we focus in on this, we'll be able to make a big difference for this business?"

Kohlman Verheyen: (18:59)

Yeah, the thing that surprised us was actually coming to terms with LTV. Because this business that we acquired has been around since 2012, what would expect LTV to be when you take over a business and start flooding it with new customers? If you exclude all the of the new customers, you want LTV to be super high because you want to believe and you want to see, empirically, that people actually just love the product, and they love the brand, and so they come back, and they just abandon all of their other skincare stuff, or at least most of it, and they just keep coming back for years. When we first acquired the business, LTV was like $500 on a $50 AOV product. It was just bananas. So the concept there is like, "Oh, okay. I think we might really be on to something." There's a lot of people coming back for a long period of time. Super small cohort, of course. Lots of family and friends, like when we first acquired the business, and it did 106,000 total dollars in top line revenue in 2018. Yeah, 2018, that's right.

Kohlman Verheyen: (20:03)

And so, obviously, it was really micro. It was basically an owner, operator type situation, and then we wanted to see ... Okay, well if that's true, then as we start pushing on this, does that kind of hold, obviously? And we're not seeing $500 in LTV on the same kind of group, because we're looking at a very different window. It's five months instead of five years, but we are seeing that a couple of actionable pieces are subscribers. Subscriber LTV versus non-subscriber LTV is like ... It was 5X, the last time I measured it. It was actually $500 for subscribers versus non- subscribers. Non-subscribers was like $120. And that was with a giant chunk of new customers, so that was a really cool figure. So it's like, okay, how do we work subscriptions into our post-purchase flow? And so, we built out a huge post-purchase flow. That was another part of the actionable like, what do we do with this if we ... Facebook will tell us what we want to see between one and 28 days on ad spend, but then between 30 and 60, and 60 and 90, what does LTV look like, and how do we effort towards increasing that percentage of AOV increase between 31 and 60 days, and 61 and 90 days?

Kohlman Verheyen: (21:25)

So I built out a 90-day post-purchase flow, and it's like 45 emails long, and you get an email, whatever that is, every other day, and it was doubling down on this founder concept. It's like every other video is our founder. I'm sorry, every other email in the post-purchase flow is a video link to our founder on YouTube talking about something. Either talking about a product, or talking about, here's why you're beautiful, or here's how you can help your skin through exercise. Basically just like, get her on camera as much as possible, because she's incredible magnetic. She's an authority figure in the space. She's trusted and she's incredibly kind, and she's relatable, and she's just all of these things that often times founder are not, and unfortunately in 2020, eCommerce brands are not. So we wanted to say, she's very counter, let's take a bigger bet on that. So, yeah. And it's proven to be really effective. You can imagine how many people are getting 90-day post-purchase flow. There's so many people in that flow right now, still from Black Friday, Cyber Monday, and it's pretty cool.

Kohlman Verheyen: (22:38)

And in that flow, I don't even yet have anything about, "Oh, go and take our skin quiZ," because it just didn't have ... I'm behind on that component, too.

Kristen LaFrance: (22:49)

Because you've got a couple things on your to-do list, right?

Kohlman Verheyen: (22:52)

Yeah, one or two.

Kristen LaFrance: (22:54)

Just one or two. So, it really is finding this kind of 60-, 90-day payback window, and then also you can figure out what products lead to the highest 60-, 90-day ... I just lost the whole term.

Kohlman Verheyen: (23:12)

60- to 90-day payback window. Yeah, you're totally right.

Kristen LaFrance: (23:15)

There we go. When you find that ... And I think I said it in an interview with [Erin O 00:23:20] before, where I said, "When you find data like this, it's kind of the plot lines of your story. You can say, okay now we know the general track of a customer who comes in via this channel, and we can expect x something on 60 days or 90 days." So when you get that, and then you took that data to Bambu, it sounds like the biggest thing you changed is really the post-purchase flow, and figuring out what to do after someone buys one. What were the changes that you made within that flow based on the data? What did you really see as like, "Oh, this is an opportunity to maybe push this kind of product on day x, or push subscriptions on 90 days?" Was there something that really made a difference in your flow that you've seen good results from?

Kohlman Verheyen: (24:05)

Yeah, that's a good question. I don't know if there's anything in the flow that we did wildly different, other than just making it super long and really engaging. Our click rate, our open rate near the end of the flow are even really good. I think that that means people are still engaged, and we don't offer too much product. It's not too product-heavy. I think every third email is a product upsell, like a product highlight where we talk about ingredients and the value propositions of that individual product, and then of course, everybody who purchased that product got in the flow because they purchased that product, is excluded from that email. So they just skip it. So whatever, it ends up being like once every four, four and a half emails, is actually product-centric.

Kohlman Verheyen: (24:55)

And honestly, I'm not even doing that much detailed segmentation of my customers in Klaviyo. There's just so much room for improvement there, it's crazy. I could spend my whole life doing Klaviyo stuff and still never do it all that well. But I'm starting to do quite a bit more of that, just kind of really detailed segmentation, especially on my skin quiz. We put this skin quiz on our site. A lot of skincare companies have it, but it's basically like, "What kind of skin do you have, and where do we recommend that you start with our products based on ..." Just because so many, so many people will be ... Our customer service tickets engorges. We're just blowing up with, "What do you recommend for my skin?" So we put this quiz on our site, and basically what we learned ...

Kohlman Verheyen: (25:51)

Your question about first product purchase was really a good question. I had that in the original LTV to SaaS document that I built for Taylor and the team, but it was, like I said, really clunky and kind of hard to trust because there's just discrepancies that made it kind of sketchy. But we've since significantly upgraded to a better tool, and essentially, what we find is that multi-product funnels versus single-product funnels ... Multi-product being like kits and things that we bundle together, and obviously, it's discounted a little bit. But when we bundle them together, people get an opportunity to try multiple products at the same time, and end up ... The chances that they have a great experience ... My hypothesis on why multi-product funnels works so much better for LTV than single-product funnels is, even though it's a more expensive customer to acquire, I think the theory is basically just, the chances that the person has a phenomenal experience with one of the products in the bundle and comes back and buys more, or something else, or trusts the brand, or whatever ... For a number of different reasons, comes back and purchases again, is much higher, obviously, because there's more products in there than if they just try one product.

Kohlman Verheyen: (27:12)

Let's say they try 10 products, or five products out of our skin quiz starter kits, and they have a 10 out of 10 experience with one of them, and like a five out of 10 experience with the other four, the chances that they're going to come back and try our brand again is actually really high. It's way higher than just the average of their experience across those. Versus, if they try one product and they have a seven out of 10 experience with it, they probably will never come back. So the concept that we're trying is like, okay, skin quiz. How do we just funnel people through the skin quiz so that they try multiple products, they trust us a little bit, it's the age-old concept of get them saying yes. We've got a couple of yes or yes questions in the skin quiz, and then ultimately, it recommends a bundle based on their skin type. And it's got their name and a couple of other almost gimmicky type of things on the PDP, but it's ultimately just trying to be deeply personal, which is kind of our brand tone and the name of the game for us is deep relationships with our people.

Kohlman Verheyen: (28:19)

So, that's kind of what we've been using. And then I'm working on building out a super badass post-purchase flow for that one, and a customer portal for that, based on the skin quiz results. I'm pretty excited about the LTV levers that we're currently playing with on those things, but as far as numbers go for those LTV ... LTV of our multi-product funnels is like, within 30 days and 60 days, it's like both of those cohorts are like 25% of original AOV. AOV is twice as high as single-product funnel AOV. It's $100 instead of $50, and then in the first 30 days, they'll come back and spend an additional 25%, and additional $25 for multi-product funnels, our kits and stuff, and then in the next 30 days, they'll come back and spend an additional $25. That's pretty much as far as we've tested it. We don't even know. Maybe in the next 60 to 90 days, they come back and keep spending $25 a month. That's amazing. And if that's true, then $150 basically is your AOV in the first 60 days. How much would you spend to acquire a customer? We're currently spending $45 to acquire a customer. What if we wanted to jump that up to like $90 per customer? How much audience does that unlock for us, what can we do? How does that impact our scalability?

Kohlman Verheyen: (29:58)

The only thing holding us back from doing that is, we don't have the credit card limits to go and spend that kind of money. So, do we go talk to a bank and get 500,000 so that we can just go acquire a ridiculous amount of new customers, expecting them to come back and spend 25% ... Even 20% ... In the next 30 days, and 30 days, and 30 days and basically just push on that, and see how far it holds.

Kristen LaFrance: (30:22)

And something I have to note because we talked a little bit about it before we hit the recording, but you kind of started this by saying it's your theory with the skin quiz that this multi-product funnel is going to work better. But the coolest part about this is, while it is kind of a theory, you've also been able to prove it with this data and shown, you know what, when we actually do offer this, the 60-day payback window looks a lot better than if we're offering, say, just the full-sized products on the skin results page.

Kohlman Verheyen: (30:51)

Right, right. Yeah, we did test that. We split test using CRO, basically the exact same product page that we have, except you were able to add each of the products a la carte, and the funny thing is that that creativity was born out of necessity. We were out of one of the products of the six that made up the kit, so it made the entire invisible SKU of the kit out of stock. It was the Tuesday after Cyber Monday, and we had sold out of all of our kits over the weekend, and it went crazy. We sold so many of those kits, and then on Tuesday, we were like, "Oh, shit. We're out of the facial mist that makes ..." It's literally included in every single one of the kits on the skin quiz. So we're like, "Do we pull the skin quiz off of the site? No, it just made us 40,000 in three days. Or do we find something else?" And so I was like, "Let's just a la carte all of these products." And then we're like, "Oh, cool. We can keep making money be doing the a la carte things, and then once we got the kits back in stock, we split tested it and we're like, "Oh, wait. We still make more if we only offer the kit." So we pulled the a la carte pieces off of there.

Kohlman Verheyen: (32:09)

There's just so many more things that I want to test as far as optimizing the results page, that landing page coming out of the akin quiz, because yeah, what it we offer the full-size products alongside the mini products? What if we offer the option to subscribe to the full-size product on that page? What if we offer the option to subscribe to the mini product? I don't know why anybody would ever want to do that, but who knows? People are crazy, and I'm not great at predicting their behavior. So, let's just go find out. I love that concept about eCommerce. If you don't know, go test it. You can find out.

Kristen LaFrance: (32:43)

Yeah. You can test it and find out a beautiful thing. Now, it's funny that I actually didn't even notice. I just bought, I think, the cactus mask thing yesterday, and I actually didn't even notice until we were talking earlier today, but you guys do have subscriptions, which then leads into a really interesting conversation on ... We're talking about LTV, we're talking about a 60-day payback window, we're talking about this cash multiplier. How does this all fit into, then, adding into a subscription? What kind of metrics are you looking for to determine, is subscription growing? Is it a good idea for the business to even have subscriptions? Really, what are you looking at to determine how your subscription's growing?

Kohlman Verheyen: (33:25)

Yeah, it's a good question. So, we're looking at Churn, although I don't ... I'm just, honestly ... And it's probably heresy to say on this podcast, but I'm not ultra concerned with Churn at the moment, just because our subscriber growth in two and a half months grew like 180%. So, I'm not concerned that we have a churn rate of 13%. It was 11 a month ago, and I just don't care that it's inching up, because ultimately, the amount of people that I can pull into my subscription platform ... I just haven't begun to even scratch the surface at what we can do as far as customer acquisition, and I think that we've got a couple of the building blocks in place to keep customers. We've got a great product that people come back to and it's super effective. We've got a brand that's authentic and that they can trust, and we've got good customer service. They can reach out if they need us. We touch base every once in a while with some really basic flows. We've got a long post-purchase flow, so we're always in their inbox. We've got mini-sized products so they can try new stuff. We've got full-sized products so they can commit and see how long it lasts them. And then we've got subscriptions on the full-sized products only. We don't have subscriptions on the mini products, I think. Actually, I should probably confirm that. It just wouldn't make any sense.

Kohlman Verheyen: (34:50)

But either way-

Kristen LaFrance: (34:51)

That sounds like it would be a logistical nightmare.

Kohlman Verheyen: (34:54)

Oh, yeah. And also, you just don't make any money off of subscribing to ... We've got good enough margins, we can offer 10% off for subscribing and we discount our kits. So basically the way that we do subscriptions is like, just commit. Your skin wants you to commit to something. One of the worst things you can do for your skin is try all sorts of new products. So we try and message that a little bit. You can save money. That's another value prop, and if you love it, put a ring on it, kind of thing. And honestly, we've only tried subscriptions with our current full-sized products and kits. We have not tried it yet with any skin quiz stuff. I imagine that that's just going to tear the roof off of the whole thing, because all that we currently offer is skin quiz starter kits. So it's like, if you have dry, breakout-prone skin, and you're under 45, we have a specific kit that we recommend to you. Let's say you're interested in trying it, so you go and buy the mini kit. It's going to last you like two to four weeks or so. But we don't currently, because we just are in the process of building it out right now. It's a like giant push for Q1, is like, how do we get those kits in full-sized products?

Kohlman Verheyen: (36:13)

We have all the products. We need to build the SKUs, we need to get the product photography, but as soon as we have those in full-sized products, that's just, boom, drops, and becomes ... Three weeks into our post-purchase flow on the skin quiz starter kits and then we recommend that people upgrade to the full-sized kits if they love it. Or maybe there, we split test again like the a la carte pieces. Maybe they loved three out of six of the products that were in there and they want to commit to those, but they don't want to commit to the whole ... So then maybe we go and start a build-your-own kit, kind of thing. And then also ... You originally asked about subscriptions ... We've got subscriptions for our full-sized products, like I said, but what about subscribing to our custom starter kits? And it's literally on the PDP. It says, "Kristen's custom starter kit," and then it's going to say, "Kristen's custom essential kit." And then it's like, "Oh, just subscribe to Kristen's custom essential kit. Why would I need anything else? My skin likes it. It says my name on it, and it shows up every six weeks, and I don't have to think about it ever again. Also, I'm saving money because it's a kit. Also, I'm saving money because it's a subscription." It's the no hassle, it's the ... All the different pieces.

Kohlman Verheyen: (37:31)

And then ultimately, we just sit back and we say, "Well, we spent whatever it is, $60 to $75 acquiring Kristen, and now she's worth $250 to us in the first six months. Okay, sweet." And the piece are in place. The flows are going out. The honey's just trickling in. That's great news.

Kristen LaFrance: (37:53)

Yeah, I want to highlight something that you just said, because I thought it was really cool. And it's something that I think about a lot. I know this came out kind of last year, this idea. Another company we're going to have on later in the podcast called Jinx Pet Food, they came out and said, "We're going to be the first company that does direct-to-dog marketing," and they have this whole thing of like, the dog is actually the customer, at the end of the day, of their products. And what you said, and you're saying with subscriptions, the messaging is, "Just commit, because your skin wants you to." I think it's a really cool way that you guys are thinking is, the skin of your customer is pretty much the end customer. So if you can get your customers into the mind frame of like, "What your skin wants, we can provide to you, and we can give it to you on a subscription so you can just commit to doing what's best for your skin," is ... I just want to point it out for listeners. It's a really impressive way you guys are thinking really wholistically about the product and about the end consumer.

Kohlman Verheyen: (38:52)

Yeah, that's cool. I can't take any credit for that. That's the song that our founder sings all the time. She's just like ... Your skin is always talking to you, whether it's dry outside, or if you get sunburned and you start breaking out, it's like, "Well, don't get sunburn." Or if you eat a ton of sugary foods and you start breaking out, your skin's like, "I don't want sugary foods. I want ..." And your skin is actually an organ. It's your biggest organ. The concept is just like, "Listen to your skin. Nourish your skin." Wholistic skin health is what we're really about, and we know that it exceeds way beyond just the products that you put on top of it. It's the food that you eat. It's how much you exercise. It's the makeup that you put on, and a [bajililon 00:39:38] other things. How much sleep you get. It's how much water you drink. So there's tons of different factors. As part of our kind of value ad proposition, we want to make sure that we're not just like another company out there trying to sell stuff, but we're actually genuinely trying to care for people as a skincare company.

Kohlman Verheyen: (39:59)

Unfortunately, it's kind of novel to care for people if you have a skincare company. But yeah, we are really trying to do that. I think one of our big pushes in 2020 is going to be kind of this concept of like, "We speak skin. Your skin is trying to say something to you, and you don't know what it's trying to say to you. We know what it's trying to say to you, and we're going to try and translate that for you, using tools like the skin quiz, using tools like surveys and communication, and even face-to-face Calendly stuff, and Google events with Amber, like direct face-to-face with consumers to say, "Hey, let's talk about your skin," and chat on our website. "Hey, let's talk about your skin. What are some of your symptoms right now? And what do we think our recommendations are?" even if it's not our product.

Kohlman Verheyen: (40:54)

It's one of the [inaudible 00:40:55] things ever that Amber's like, "Oh, yeah. Your skin is doing this. You should try Goddess Garden sunscreen, because we don't sell a sunscreen, and we care about your skin, so you should bounce off of our website and go try this other product. And also, we don't make any money off that." And [crosstalk 00:41:10] "What? Why is that so unheard of?" It's so cool. I have so much more loyalty to a company, deep long-term loyalty, LTV-type concept, if somebody isn't just out there trying to make a buck for themself today, right?

Kristen LaFrance: (41:26)

Yeah, actually committed to really finding success with your customers. This is a really cool point, I think, to kind of wrap on is that I've heard it both from you and Taylor where we're talking about really strict metrics and we're talking about testing and numbers and ROAS, and all these acronyms that we're throwing out, but at the end of the day, what this entire model is, like you said, kind of changing the game and saying, "Okay, actually, we're just playing a long game," and it ties in everything together, where now it becomes ... It's metrics and it's data, but it's all in the name of building deep, long-term connections and that is just ... You kind of poo-pooed your churn work, but you also then rattled off an entire retention plan that you have. And so, to me, it's so cool that we're seeing, now, less of this metrics versus customers and more now of this ... It's the slogan that I'm using: customers before metrics, in the sense of, you have these metrics that you can look at and that can formulate your plans, but if you really focus on long-term connections with customers, that's going to drive that LTV and those numbers, and it all works together in this beautiful bow of retention, and I love it.

Kohlman Verheyen: (42:42)

Yeah, exactly. I don't think they have to be mutually exclusive. I think that the customers are the metrics, and you use the metrics to serve the customers, and in lieu of customer service, which everybody hates, you have metrics and you can learn valuable information about your customers through metrics, and you can speak to them more personally, on a more personal level, if you have metrics. So, yeah.

Kristen LaFrance: (43:06)

I love it. I love it. It makes my retention heart so happy to see these metrics actually supporting good retention. So just to wrap up, I've got three questions for you.

Kohlman Verheyen: (43:16)


Kristen LaFrance: (43:16)

One, what are you most excited about in the next couple years for Bambu Earth?

Kohlman Verheyen: (43:21)

Oh, wow, the next couple years. That is such a long time [crosstalk 00:43:24].

Kristen LaFrance: (43:24)

I know it's a tricky question.

Kohlman Verheyen: (43:27)

Well, what do other people say? I don't know. I think in the next couple of years ... Basically, 4x400's thesis is, buy, grow, and then sell. If we don't really want to hang on to business past the $10 million annual revenue threshold, just because it requires a ton of other things, multiple customer service people, just deeper infrastructure. So in the next couple years, I'm excited about Bambu selling. But what I'm really excited about on a day to day basis ... And this is also long term consideration is the amount of women that we get to impact, really. Our purpose is to change the conversation around beauty. And that was [crosstalk 00:44:08] for the last 10 years. She's like, basically, "I want to exist in a world where beauty is not an industry that's driven by fear-based advertising. I don't want to tell women that they need something for their skin. I want remind them that they are beautiful just the way that they are." And that's a very counter-cultural kind of standpoint. And when she came on, we were like, "We don't want to touch that. That's brilliant." So I would just put that under a magnifying glass, basically, or through a megaphone. I'm really excited about the fact that 20,000 people have answered, "Yes, I am beautiful because I'm a human, and for no other reason." You know, skin quiz.

Kohlman Verheyen: (44:55)

Now, slight caveat to that, I only made the options be yes or yes on that, but just that concept alone ... In the skin quiz, 20,000 people have said, "Yes, I'm beautiful because I'm a human." That's awesome. And 20,000 is not that many, but over the next couple years, I want to see a million people say, "Yes, I'm beautiful because I'm a human." That gets me super fired up. I'm excited to bring some clarity to what does LTV look like with the skin quiz as the funnel. As we bring people in through prospecting ads, the next step down the funnel is, "Take our skin quiz," the next step down in the funnel is, "Buy or starter kit." The next step down in the funnel is, "Buy our full-sized essential kit." And then the next step down the funnel is, "Subscribe to Kristen's custom essential kit." And then you're just, boom, VIP, and then we'll leave you alone if you want to be left alone, and your stuff is going to show up without ever thinking about them again. I'm excited to see what LTV of that entire funnel looks like.

Kohlman Verheyen: (46:03)

And unfortunately, we're a couple of years away from learning what that actually is on any meaningful, longer-term concern, but those are the kind of ... If that's really solid, then that's your number one selling point for acquisition in 2021, 2022.

Kristen LaFrance: (46:24)

Yeah. Those were amazing answers. I don't know why I'm going to use the word [turtled 00:46:27]. Is that even a verb? I feel like you turtled at the beginning of the question and then just answered it with the best possible answer.

Kohlman Verheyen: (46:35)

Thanks. It's all part of a plan.

Kristen LaFrance: (46:38)

Okay, let's see. What do you want to see more from DTC brands in general in this coming year?

Kohlman Verheyen: (46:44)

Oh, man, authenticity. I'm a staunch believer that 2020 is going to be the filter year of authenticity. Actually, ironic that I use the word "filter." But I really believe that it's going to filter out ... The modern day consumer's just so savvy, and [crosstalk 00:47:04] a guy sitting in Manila on his computer trying to run a women's skincare brand. They can smell that now, right? Like, "Where is the 'About' page? Why is so blank? Why does it have a bunch of buzz words and not anything of substance?" Which I think [crosstalk 00:47:20]-

Kristen LaFrance: (47:19)


Kohlman Verheyen: (47:20)

Site. What is the mission of this brand? Why is social just a bunch of stock photos, and there's not one consistent person through the whole thing? Wait a second, there's ... So I think the modern day consumer is super savvy there, and I think that authenticity is going to be just a really valuable thing. I'm excited about that, because that's one of the giant thresholds that 4x400 ... We won't touch a brand, we won't buy a brand if it doesn't have an authentic founder story.

Kristen LaFrance: (47:51)


Kohlman Verheyen: (47:51)

I think that's one of my favorite parts about 4x400 is just, like, "No, we ..." Beyond just like we wait for that, we celebrate that, too, and we love to maximize that when it's available. But man, I can't even tell you, Kristen, how frustrating it is to weed through Shopify exchange, which is where you can by Shopify signs for sale, and just see drop shipper after drop shipper after drop shipper. It just drives me nuts. There used to be 20,000 listings on there. I haven't checked in a long time, because obviously, I don't do acquisitions anymore, but it was probably 95% drop shippers, and it drove me nuts because I would have to scroll and scroll and scroll to see if there was anything that had a real founder, like an authentic founder story.

Kristen LaFrance: (48:40)

Yeah. My listeners will know, authenticity is my number one buzz word said on this podcast, because I totally agree. There's also some people that say that the golden age of the DTC era is over because of this shift. I am on the team of like, "In what world was quick, crappy marketing that got customers kind of tricked into buying things and subscriptions ... When was that ever golden?" And now, this idea that, in order to really succeed, you need to have a passion and authenticity and care behind the brand. To me, that's the most exciting part, and I think it's shifting towards a much better industry. And yeah, it's going to be a little more difficult, but it's for the benefit of consumers and society as a whole which is, to me, very exciting.

Kohlman Verheyen: (49:31)

Yeah, I agree with you. I think the DTC graveyard's going to be littered with [Brandlesses 00:49:36] for the next couple years, right?

Kristen LaFrance: (49:38)


Kohlman Verheyen: (49:39)

That was a big play. It was a big bet, like "I think that people don't care about brand." and I think that brand is what people connect with on a personal level. So, when that's totally devoid, then you're just in the land of free plus shipping, and that's cool for 15 minutes, and then people freak out and get over it.

Kristen LaFrance: (50:00)


Kohlman Verheyen: (50:01)

I just think there's a lot of money thrown at brands like that for a long time, and so I just have more faith in the modern day consumer than that being a long-term thing. It's the same sort of deal as the .com boom, right? Like everything with a .com after it, [inaudible 00:50:17]. It's that on a higher volume, less value scale, and eCommerce being super accessible has kind of created that, and the people that are happy get to it first, and then people that are authentic keep it going forever and they don't fizzle and they don't burn out. Those are the brands where it's sticking around. That's the long-haulers [inaudible 00:50:41].

Kristen LaFrance: (50:40)

Yeah. Absolutely. I will note that I have been following Bambu's emails and you guys do such a good job, like you said, with the personal connection. Bringing in Amber as the founder, doing the videos. I'm going to make sure some of those emails are actually linked up in the show notes for you guys to look at, because it's some of the best kind of founder one-on-one communication I've seen in the inbox in a really long time, and it was so exciting to see you guys lean so hard into that. So I'll make sure that's in the show notes for sure, and before I let you go, Kohlman, where can people find and connect with you if they want to talk with you more after this?

Kohlman Verheyen: (51:18)

Yeah, that's a good question. This is so sad to say. I'm [inaudible 00:51:24], but let's just say email is the best place, I think. My email address is Kohlman, and that's KOHLMAN, so family spelling. Kolman@4x400.com. I would've loved to say Twitter, but I'm not active. I would love to say LinkedIn, but my LinkedIn game was pretty much just for biz dev looking for acquisitions, and I've basically shuttered it because it doesn't serve my day-to-day growth of skincare. And I would say Instagram, but I'm way less cool than I think I am on there.

Kristen LaFrance: (52:01)

I feel like you're probably pretty cool.

Kohlman Verheyen: (52:03)

It's mostly just pictures of my two-year-old. So, he's cool. He's cool.

Kristen LaFrance: (52:07)

There we go. He's cool. There we go. It's perfect. Well, thank you so much. And also, make sure to go check out Bambu Earth. Bambu Earth, B-A-M-B-Uearth.com. Sign up for their emails. Seriously, learn from these guys, because they're doing amazing things. Thank you so much for coming on and giving us so many great metrics and actually talking through some of the work that you're doing for Bambu.

Kohlman Verheyen: (52:31)

It's been a joy. It's been a joy. Thanks.