Growth levers & performance marketing (Nik Sharma & Ben Grynol)

Paid, owned, and earned media are all ways that brands can reach new customers and engage with the ones they already have. But which lever needs to pulled and when? How important is performance marketing versus building brand equity? In this episode, Levels Head of Growth Ben Grynol sat down with Nik Sharma head of Sharma Brands. They discussed the benefits of each of these strategies and how to take them on at the right time.

09:16 – Understand the LTV of newsletter subscribers

Nik said that looking for signals like email open rates and then hypothesizing about LTV is a form of growth marketing.

But there’s also something to hitting the gas on that growth and getting these people through the door and signed up. I think what you guys are doing that most companies don’t think about is you’re taking this LTV-first approach thinking about okay, this newsletter subscriber. You could probably go into your newsletter platform right now and pretty much predict who is going to be your highest LTV customers based on data of open rates, and click-through rates, and how many emails they open in a row, and how many that don’t. And I’m sure you could pattern match that to the beta customers that you have on board. How many times are they clicking the link to go to a website? How much time do they then spend on the site reading something? Things like that. And I think that’s a really interesting world of growth. To me, that’s actually growth marketing. I think a lot of what other people consider growth marketing is really just good media buying. But to me, that’s growth marketing where you’re basically using signals to understand how consumer fit into different cohorts that you’re hypothesizing, and then treating them differently based on the actions that they take.

12:40 – Intent of education, not acquisition

Levels creates content with the intention of educating, not getting a sale.

So the intent of the company is different from the beginning. I think Levels is the same. The intent of Levels is we want to be the go-to destination when somebody has any question about CGM, or glucose, or things of that nature, regardless of whether they ever become a customer or not. I think you, and Sam, and the rest of the team could care less if somebody came to your site and converted to a customer. You just want to be that one person or that one brand that they remember when they did get their education or when they did learn something new.

16:10 – Build up brand equity

Brand equity depletes much faster than performance marketing. You have to sustain that to remain relevant and keep people engaged.

The way I think about performance marketing compared to brand marketing is you’re running a shower. You have your water tanks. Your performance marketing is your cold water, and your brand equity is your hot water. It depletes a lot faster and it’s a lot harder to build up. And I think there always has to be a balance of right now, if you guys turned on heavy performance, it would crush because the brand equity you have is really strong, and it’s really well admired. But if you just pivoted to only white listing ads and every third story is a Levels tracker, eventually people are going to be like, “Well, this sucks. I’m over this company.” And there’s a few companies in the space that have actually, they’re doing this now where every third ad is this one product that they’re promoting. But then you have to balance that with okay, how do we stay relevant? How do we create moments around what we’re doing? How do we keep people excited, even if we’ve hit them eight or nine times in the last three months?

19:00 – Give people brand FOMO

Giving value to your audience will make people get excited about your brand. They won’t want to miss out on being a part of it.

So a lot of the ads that actually do well today are ones that are education first. They do tell a story, and they basically do give all that information. And it has to be valuable. I don’t think you can sell a terrible product nowadays. I mean, you definitely shouldn’t because that’s not a good thing to do. But nowadays, you have to have something that is genuinely valuable to the person at the other end of the screen. And you have to frame it in a way where it becomes their idea to participate and their idea to want to buy. And I was talking to another founder this morning, and I think it just comes down to asking the simple question of how do you get somebody so excited that they have FOMO for not being a participant in what this brand is doing? Whether that means something as high upper funnel as signing up for the newsletter and just being a part of this ecosystem in general, or they’re a consistent, daily user of the CGM tracker.

24:46 – Don’t trade brand equity for acquisition

When you turn your focus completely to acquisition, people won’t care about your product.

And that I think is honestly the biggest flaw with companies that launch nowadays is they focus so much on okay, how do we build a site that has all the cross sells, and the upsells, and optimized product pages, which is great. But then they forget this piece of actually education and awareness and they go straight to okay, now we got to turn on Facebook ads. And, “Wait, why aren’t the sales coming through? Why is our CPA high? Why do people not click our ads?” And there’s this whole forgotten land of well, you sell a product. You’re not a brand at all, right? You sell a product, and maybe it solves a good problem. But no one cares because you haven’t put that out there, and they shouldn’t care because they don’t owe you their time, and they don’t owe you their attention. It’s your job to put things out, which then earn their attention on their own time.

29:19 – Lean into product-led growth

Spend your time and money on making a great product that people will spread the word about instead of marketing.

But I personally am a big fan of kind of what you said, product led growth. If it’s possible, I think it’s something that a lot of people should be focusing on. Even a company like Mad Happy does a great job of that too. Their products and the collections that they drop are just consistently 12 out of 10. And that’s what keeps expanding the brand. And what’s cool about product led growth versus advertising led growth is ad led growth is you’re kind of growing. You have this one central point, and it’s just slowly, the ripple gets bigger. But with product led growth, that happens with each consumer. So you have advertising lead growth times your number of consumers that turn into evangelists.

33:23 – Put in time, quality, and consistency

Growing a community like Jeep has with its head nod requires time, quality, and consistency. You can’t accelerate it.

I think it’s three things. It’s time, it’s quality, and it’s consistency. All three of them requires a lot of time. It has to be the best possible quality. Because if you’re an enthusiast about a Jeep, an off-road vehicle, if Jeep is not the best quality product, you’ll find the other one. And then you’ll become a fan of that and the evangelist for that. And the other one is consistency, right? If you’re a part of even the Levels newsletter and your first two emails are great, but then it looks like an intern wrote the rest of those because they had to fill out the welcome flow or whatever it is. You won’t be a fan of that. You’re not going to be excited to open that. So those three things I think are what it really requires, but the problem, and this goes back to why a lot of these DTC brands, they look for the arbitrage is time that you can’t accelerate. You can’t accelerate the zero to one, whether it’s launching a company, or whether it’s looking to build that head nod.

36:07 – Get the credit for connecting people

When you build a community that connects people, they’ll go on to share value with each other, but you’ll get the credit for making the connection.

I think that one thing brands don’t think about is when they have this group of consumers, and customers, and evangelists, and subscribers even, a lot of times, they do share relatively a lot of the same interests or behaviors, things like that. And there’s a lot of value I think in even just figuring out how to connect consumers with one another. Doesn’t have to be that Levels needs a community manager who’s talking in the Facebook group, and posting a poll every day, and doing something like that. There’s a lot of value in just knowing, “Oh yeah. I found this person through the Levels community. And Levels wasn’t necessarily involved other than they orchestrated this space for me to find somebody really dope.”

39:52 – Don’t incentivize referrals, make them premium

When your brand creates a premium experience, offering your users only 2 or 3 referrals to hand out makes them a hard-to-get item and a special thing to share.

I wrote a newsletter about referrals and loyalty a few weeks ago. And I just hate way that most referral programs are built. They’re incentivized to give you $5 and give $5 to somebody else. And they just come out very fake. They’re there because they have to be. It’s a part of that playbook. But I think the way that Levels is a very premium experience. It’s not a product, it’s a premium experience. And because of that and because of the brand and I think a lot of it is the education and the quality of that experience. People become evangelists and really excited about their own experience with Levels. And then they end up talking about it. And if they were to know that they could bring somebody else in to also share that experience with them, they would totally do it.

46:32 – Segment your waiting list

Create segmentation within your waiting list of length of time on your list and amount of engagement and you’ll know who to target first when you launch.

Ideally, you’re getting maybe 25 to 50 per cohort, which allows you to get a decent enough sample size. And then I think you’ll start to see okay, you’re right. This person that’s been on for two years, they don’t care anymore. Or you might see this person doesn’t care, but the person who’s been here for two years has opened over 70% of the emails we sent them, they’re ready to get on the call the next day. But I think you’ll be able to basically understand from that, what you’ll really be able to do is just predict okay, what is the likelihood of this person converting? And depending on what your goals as a business are, if it’s, “Well, we need to jumpstart revenue,” well then you’ll be able to just filter down to exactly what you know based on pattern behavior that’s going to convert the highest and bring them on board.

Nik Sharma (00:06):

If you’re running a shower, you have your water tanks. Your performance marketing is your cold water, and your brand equity is your hot water. It depletes a lot faster and it’s a lot harder to build up. And I think there always has to be a balance of right now if you guys turned on heavy performance, it would crush because the brand equity you have is really strong, and it’s really well admired. But if you just pivoted to only white listing ads and every third story is a Levels tracker, eventually people are going to be like, “Well, this sucks. I’m over this company.” And there’s a few companies in the space that have actually, they’re doing this now where every third ad is this one product that they’re promoting.

Ben Grynol (00:58):

I’m Ben Grynol, part of the early startup team here at Levels. We’re building tech that helps people to understand their metabolic health and this is your front row seat to everything we do. This is A Whole New Level.

Ben Grynol (01:11):

Thinking about content, thinking about marketing, thinking about information in the world, there are all these different buckets that it can fall within. As a company, they’re what’s known as earned, owned, and paid media. What are the different buckets of why are they important?

Ben Grynol (01:39):

So Nik Sharma head of Sharma Brands, and I sat down and we talked about this concept of earned, owned, and paid media. We went into the unique things that make each one of them beneficial in their own. It’s also very difficult to generate certain things. You can’t really manufacture earned media. It either happens or it doesn’t. Own media, it’s something that’s easier to control. That is information or content that you create by your organization or within the company.

Ben Grynol (02:08):

But it’s not necessarily guaranteed that people will get value out of your content. It’s not necessarily true that organic media on its own will have a strong enough foothold to actually be engaging. You can also create owned media that’s not that interesting. That is very much a truism in itself. Paid media, well this is the idea of performance marketing. Very nuanced, and there are a lot of things to discuss about it. There’s not necessarily an approach that’s right. They all have their own benefits to them. So Nik and I sat down and we discussed this outlook on the three different buckets of content, what are the benefits of each and when, and why should certain companies take them on at different times? Should they do all of them? Should they do none of them? What is the outlook? Well, at the end of the day, you have to decide what is right for you as an organization. Here’s where we kick things off.

Ben Grynol (03:06):

I thought it’d be good to chat through, we just did a think week this week, where we take time off and we just go deep on writing memos, and ended up writing one on growth levers, and thinking about them for scale. And we’ve got all these interesting things because of inbound wait lists and how that’s continued to grow. So there are a lot of challenges that were identified, things that are in the back of my mind that we have to solve for and I wanted to pick your brain on, was this idea of growth levers. Talk a little bit more about the wait list. Talk about performance marketing.

Ben Grynol (03:40):

And one of the challenges we face, just being very honest about it is we don’t know our true growth rate. We really don’t know our true growth rate, right? As somebody who signs up for the wait list, is that a conversion? Not on the actual it’s like, because we’re still getting percentage of her bottom of funnel. So it’s really hard to forecast moving forward. What is our true growth rate going to be? And then how can we impact with certain growth levers? So that’s setting up the conversation for just thinking through what are growth levers? How should we think about them moving forward?

Nik Sharma (04:12):

Yeah. That’s definitely a good conversation. What kind of growth levers do you guys look at now? For example, you just mentioned people set ending up to the wait list. There’s always a drop off from wait lists to then getting on the phone with Mike or somebody for onboarding. And then from there, I’m sure there’s probably, I would imagine anywhere from a 35 to 50% conversion rate of people who end up paying the bill and getting the sensor, and then getting onboarded in the app and whatnot. Do you back out?

Nik Sharma (04:42):

When we were talking about increasing email signups, someone who just walks in the room might say, “Well, let’s just optimize for the cheapest email signup,” versus I think the way you probably think about it is, “We’re capturing this email today, but we don’t really know the CPA of this email capture for the next three months.” Is that right?

Ben Grynol (05:04):

At least, right? There’s a lot of different intent. And this is something we’ve started thinking about is maybe if we rewind. So January of ’21, we were working with an agency and we did some performance marketing. And it was to drive traffic, drive email signups. We were going conversion on it. We wanted basically to capture that email. And the intent is cool. If we can capture this, there’s going to be some conversion right down the road.

Ben Grynol (05:29):

Well, that’s gone on in perpetuity because the wait list launch could have been March of last year. It could have been September of last year. January of ’24, it’s not actually going to be.

Ben Grynol (05:39):

But the idea is we stopped it pretty quickly because there wasn’t a ton of value in just capturing an email, especially when you’re running performance against it when it’s like well, what’s the true value of that. It’s pretty easy for somebody to show intent with their email, as opposed to actually showing intent with hard dollars, right? Very different behavior and very different bottom of the funnel approach.

Ben Grynol (06:03):

So we stopped doing that and started thinking about back to your question of what are the growth levers that we think about right now? Well, there are so many things that can impact weightless growth. There’s so many that can impact email signups. And there’s actually value for us to achieve our mission in getting people to sign up, like to give us their email so that we can just send them the newsletter alone and say, “Here’s some material that you can educate yourself on metabolic health. Feel free to open it as much or as little as you want.”

Ben Grynol (06:35):

And what we find is that there’s a ton of people who get value from that. So they might only ever be this we’ll call it a free tier where you go, “Yeah. Maybe in perpetuity, we want to continue collecting emails because we don’t use product marketing.” And here’s where you can get your CGM at the bottom of an editorial article. It’s straight up like, “Hey, what are omega-3? And why should you care about them? How does that impact your metabolic health?” Cool. You got value out of that. That’s all we’re asking is we hope that you found something valuable.

Ben Grynol (07:06):

So there’s this thought of thinking through the different growth levers to even drive that as one of our goals, right? Collecting more emails. But then they’re also lever we can ignore, which is we’re a venture back company. We have to generate meaningful growth numbers month over month, once we’re in launch mode. So what is going to impact that? Right? How do we fuel the fire with that? That’s what is one of the challenges to think through?

Ben Grynol (07:35):

And then the last part of it is what’s our true growth rate based on the things we do today, like paid placements on David Sinclair’s podcast, which is generating a ton of great traction. That’s still probably not indicative of a true conversion rate right now, because we’re still getting a ton of top of funnel traffic where people sign up with their email, and the actual conversions based on using his link are a percentage of, right? So it’s like, “Okay, cool. What’s a true growth rate.” And you’re like, “It’s really hard to say,” which is not a good answer.

Nik Sharma (08:05):

Yeah. Yeah. I mean, it reminds me of that scene in Silicon Valley where he’s like, “No revenue is the goal. You can do whatever you want as a venture backed company.” But I personally love the way that Levels has built it’s because it’s all about quality over quantity. And I think quantity comes as a byproduct of really high quality. Even with the newsletter that I send every Sunday, I’ve never spent a dollar pushing somebody to sign up for the newsletter list, nor have I spammed groups or anything. And it just grows by forwards and because there’s a commitment to opening it, and people tend to find it valuable, which is I think why people love Levels. Levels could actually come out with almost any product. And I think people would buy it because there’s so much trust built into the brand from the way that you guys have done marketing, which is more education driven and story driven. And it’s not you’re two dudes in Silicon Valley, you found an arbitrage space, and now you just found another product to be the tech and you’re just pushing it online. But you’ve got real doctors on board. You’ve got real science. I mean just from sitting in the all hands, you can tell that the culture is very much aligned with it too.

Nik Sharma (09:16):

But there’s also something too, hitting the gas on that growth and getting these people through the door and signed up. I think what you guys are doing that most companies don’t think about is you’re taking this LTB first approach thinking about okay, this newsletter subscriber. You could probably go into newsletter platform right now and pretty much predict who is going to be your highest LTV customers based on data of open rates, and click-through rates, and how many emails they open in a row, and how many that don’t. And I’m sure you could pattern match that to the beta customers that you have on board. How many times are they clicking the link to go to a website? How much time do they then spend on the site reading something? Things like that. And I think that’s a really interesting world of growth.

Nik Sharma (10:02):

To me, that’s actually growth marketing. I think a lot of what other people consider growth marketing is really just good media buying. But to me, that’s growth marketing where you’re basically using signals to understand how consumer fit into different cohorts that you’re hypothesizing, and then treating them differently based on the actions that they take. Whether that’s going to your site, the time spent, all those things.

Nik Sharma (10:28):

And honestly, that’s what makes me really bullish on Levels is the fact that everything is very considered across every step, and nothing is rushed. Which investors might not be the happiest about, but I think when you look at the finish line in 15 years and you put Levels at the starting line with two or three other companies that are trying to do something similar, I think Levels is at the finish line first and the fastest. That launch period or that time getting to launch might just take longer. Whereas other people see that as an arbitrage opportunity, which always just ends up as short-term success.

Ben Grynol (11:06):

That’s one thing that I’ve been thinking about. Companies that go down the path of performance too quickly and they rely on it is their channel for acquisition. And then I think you and I have talked about this before where it’s like then there’s some algo change. There’s some consumer behavior change. A platform is the de jour platform. And people go all in on that.

Ben Grynol (11:24):

Facebook goes down. Remember when Meta went down, whenever that was. And everyone was like, oh my goodness, “My DTC sales are just plummeting. I lost so much revenue.” And you’re like, “That was your only acquisition channel.” You relied so heavily on that being your all for driving growth or revenue that it hurts when you have, there’s platform risk associated with it. So that’s something that I’ve been thinking a lot about too, which is [inaudible 00:11:48] a sustainable growth engine.

Nik Sharma (11:51):

I think the other thing though is to me, Levels, doesn’t even sit in the world of that type of marketing, and neither does a brand like House. And it’s because it’s the intent from day one. It’s not let’s just build this machine, this acquisition machine online. The intent from the very beginning with house, the intent is we want to educate Americans. There’s three main intents. One is we want to educate Americans on this [inaudible 00:12:21] culture. The second is we want to push the large alcohol incumbents to be more conscious of lower ABV drinking. Because not everybody needs a hangover, and not everybody needs to drink a high proof alcohol on weeknights or just to celebrate. And the third one is they want to be there when people are getting together.

Nik Sharma (12:40):

So the intent of the company is different from the beginning. I think Levels is the same. The intent of Levels is we want to be the go-to destination when somebody has any question about CGM, or glucose, or thing of that nature, regardless of whether they ever become a customer or not. I think you, and Sam, and the rest of the team could care less if somebody came to your site and converted to a customer. You just want to be that one person or that one brand that they remember when they did get their education or when they did learn something new.

Nik Sharma (13:12):

So I think when you compare that to a DTC brand, which their intention is, “Okay, we’re going to go quadruple our sales next year. And the year after that, we’re going to double it again.” The actions that are taken are significantly different in that zero to one stage.

Nik Sharma (13:28):

House is another company that didn’t spend any acquisition dollars their first maybe two years of business. Everything was driven by the education, by the content created from consumers, from the word of mouth, from the gathering. And that’s because it maps to the intent that they had similar to Levels. A lot of the, at least from what I see externally, a lot of the people who want to try Levels, it comes from word to mouth. It comes from people seeing it on social media. It comes from FOMO basically versus, “I saw an ad, and I can’t wait to go get 20% off.” The intent of Levels is so pure, that I don’t think that even when you do hit launch, and you might see this opportunity on paid media for arbitraging CPMs and lifetime value,. I genuinely don’t think you guys would exploit that in a way that is not valuable to the end consumer where 10 years later, they’re still thinking Levels for being a part of their life. Does that makes sense?

Ben Grynol (14:29):

Yeah. Something we’ve been thinking about a lot with this idea of value through membership and just value as a company. So it seems so ridiculous to spend time other than yes, a company should spend time building culture internally and making sure that as an async and as a remote company, that you’ve got relatively strong infrastructure and strong foundational values in place. The idea of, “Hey, we’re going to just record ourselves using reminders and superhuman.” And we put it out to the world not because it’s like, “Hey, look how good we use these things.” It’s like, “Hey, here’s how we use them. If it’s helpful to you. Awesome. No ask. We’re not asking you to do, now go to our blog. Now buy a CGM.” If that inspires you to build a company one day or to feel like you can do it or just be better at your work, awesome. Hopefully that helped you out. Happy to help. It’s like the cliché, happy to help. Right?

Ben Grynol (15:22):

But that is truly the intent from the editorial standpoint. All the educational material we’re putting out pertaining to metabolic health from the business standpoint, all of these silly videos that we do and all these silly, “Hey, here’s a blog post about the way we use this platform.” It’s back to the intent. So do you think if we went down the path of performance marketing, that it dilutes the brand? Now there’s two parts of the question. One is the acquisition channel and the other is strictly the awareness play of we’re paying to provide lift to the ultimate guide to metabolic health, just because no ask in it. It’s, “Hey, hopefully you read this and change your outlook on why you should care about your metabolic health.” How do you look at those two things? Is there any dilution in our brand value? If we were to do either?

Nik Sharma (16:10):

The way I think about performance marketing compared to brand marketing is you’re running a shower. You have your water tanks. Your performance marketing is your cold water, and your brand equity is your hot water. It depletes a lot faster and it’s a lot harder to build up. And I think there always has to be a balance of right now, if you guys turned on heavy performance, it would crush because the brand equity you have is really strong, and it’s really well admired. But if you just pivoted to only white listing ads and every third story is a Levels tracker, eventually people are going to be like, “Well, this sucks. I’m over this company.” And there’s a few companies in the space that have actually, they’re doing this now where every third ad is this one product that they’re promoting. But then you have to balance that with okay, how do we stay relevant? How do we create moments around what we’re doing? How do we keep people excited, even if we’ve hit them eight or nine times in the last three months? How still stay exciting, which is I think what Levels does really, really well.

Nik Sharma (17:18):

I think there’s also a way of acquiring customers in a performance manner that is still building brand equity. I mean, that was something that I did at hint really well, which I called it performance branding, which is you efficiently spend performance dollars. But at the same time, any of the messaging, the creative, the pages you drive people to, it’s entirely focused on education versus me pushing on you to buy. I’m going to give you all the information. And eventually, the information is so compelling and actually valuable that it’s going to become your decision to make the purchase with us. Versus, “Here, scroll down, scroll down. Click this.”

Nik Sharma (18:02):

And I think when you look at post iOS 14 and 15 with the tracking issues, that used to work really well, where you could just have very performance driven marketing. Because Facebook immediately could take 75 touch points that you have on the internet between publishers, and apps, and what you’re doing on your home wifi network, and whatnot. And basically put you on a scale of one to 10 and say, “Okay, Nik, because he went to the Levels site and he spent 7.8 seconds on this page. And then he navigated towards the wait list page and entered his email. But then he went back to a different page and maybe he chose a different color of something. We’re going to put him at a 7.9 out of 10 in terms of interest. And we know that historically, if we show him this specific messaging with this creative, at this time, in this placement, we have a very high probability of converting him.” Now Facebook has really none of that info. Most cookies get deleted within a day.

Nik Sharma (19:00):

So a lot of the ads that actually do well today are ones that are education first. They do tell a story, and they basically do give all that information. And it has to be valuable. I don’t think you can sell a terrible product nowadays. I mean, you definitely shouldn’t because that’s not a good thing to do. But nowadays, you have to have something that is genuinely valuable to the person at the other end of the screen. And you have to frame it in a way where it becomes their idea to participate and their idea to want to buy. And I was talking to another founder this morning, and I think it just comes down to asking the simple question of how do you get somebody so excited that they have FOMO for not being a participant in what this brand is doing?

Nik Sharma (19:47):

Whether that means something as high upper funnel as signing up for the newsletter and just being a part of this ecosystem in general, or they’re a consistent, daily user of the CGM tracker. And they’re opening the Levels app seven to 10 times a day. And they’re logging everything from exhaustive walks, to blueberries, to their large meals spare. Especially today, I think it all goes back to how do you get somebody excited? And how do you frame it in a way where, or not even frame it in a way, because that sounds sketchy. But how do you make sure that what you are delivering is genuinely valuable to that person versus there’s an arbitrage opportunity and we can sell into it?

Ben Grynol (20:31):

There couple things that are interesting with the space we’re in too, that I’ve thought about from a performance standpoint. So let’s use cars. Not like Tesla. Assume it’s just naturally aspirated, gas powered car. People already know what it does. They know the job to be done. They get it. You’re not selling them on a value prop. You’re just selling them on brand at that point. Assume it’s an SUV or something, visually look at it. They can identify what the job to be done is. And they’re like, “Yeah, I’m in or I’m out.”

Ben Grynol (21:02):

We’ve got a different job to do. Educating people about this thing, what is the benefit to using this thing? How can it change your behavior, your life, all of these things, the way that you make decisions.”

Ben Grynol (21:15):

So there’s an element of the awareness play, the education and awareness play that’s top of funnel not even from a brand standpoint. Here’s what this thing does. It’s a little bit different play than our company that you can skip. You’re basically just skipping the education phase because everyone knows what the car does.

Ben Grynol (21:34):

There’s a couple questions on this. So one is do you think that companies, maybe it’s a little bit John Nash, like game theory. Do you think companies think that they should undertake performance? Because it’s like well man, everyone does it. So we should do it too. And then they just get into this weird game theory of where are they going to get to Nash equilibrium on it? Do you think that happens?

Nik Sharma (21:58):

Yeah, I think it happens a lot. I think when anybody starts running ads and they’ve got something good, it converts well. For one, because it’s like you’re introducing something which is actually valuable. And two, generally the platforms love to give you good returns. It’s the first few hundred or few thousand dollars of spend.

Nik Sharma (22:21):

But the problem comes when the focus shifts from we need to focus on education and building brand to we need to acquire X number of users in a short period of time. And the problem is that there’s less focus put on sustaining or increasing that brand equity. And there’s more focus on okay, how do we get more content out that fits that performance channel? Or how do we start adding upsells in cart? It just becomes a game of how can we trick this person into becoming a customer versus how much can we push education so that it’s still their decision?

Nik Sharma (23:00):

When that shift happens, that to me is always a big red flag or, “This company is going to be in trouble soon.” When it’s all about okay, how do we drive sell through? Or when it’s all about how do we drive top line? We were talking to a company today and their entire goal is sell through at a retailer and online direct-to-consumer sales, but there was nothing around okay, how are we educating the consumer? How are we going to make sure that when they search for the product, there’s relevant content there? Then I said, “Okay, we really need to think about what is the journey leading up to this? When somebody comes to this ad, let’s assume they just even click the ad. When they get there. We can’t just assume that this one product page is going to do everything. There needs to be a component of why does somebody trust us as a brand. What does our brand stand for? Is that communicated?”

Nik Sharma (23:52):

There’s this whole ecosystem around it that a lot of times gets forgotten. And I think it’s because some of the early successes in DTC and performance marketing were actually companies that had built really strong, incredible brands that then turned on this funnel of heavy performance customer acquisition. But they had that whole piece of it prior to turning that on. Whereas when you start with that and then try to build back into now, how do we build brand, or what is community and all these things. It just turns into this well, what’s an app we can use to build community or what who’s a consultant we can hire to go build our community? And what is the coupon redemption app we can use to drive sell through at Walmart and Target. And it just never works like that. I mean maybe a 1% chance that that’ll work. But it’s so rare that that works.

Nik Sharma (24:46):

And that I think is honestly the biggest flaw with companies that launch nowadays is they focus so much on okay, how do we build a site that has all the cross cells, and the upsells, and optimized product pages, which is great? But then they forget this piece of actually education and awareness and they go straight to okay, now we got to turn on Facebook ads. And, “Wait, why aren’t the sales coming through? Why is our CPA high? Why do people not click our ads?” And there’s this whole forgotten land of well, you sell a product. You’re not a brand at all, right? You sell a product, and maybe it solves a good problem. But no one cares because you haven’t put that out there, and they shouldn’t care because they don’t owe you any of your time, or they don’t owe you their time, and they don’t owe you their attention. It’s your job to put things out, which then earn their attention on their own time.

Nik Sharma (25:42):

I don’t know if that makes sense, but a lot of the brands today expect that consumers will see an ad, and they better click, and then they better come, and they better buy our trial. And once they buy our trial, they better come back and they better subscribe. And they better subscribe to a bundle, which makes sense for us from an AOV standpoint or a margin standpoint. And if they don’t, then some thing is wrong with Facebook, right? Everything goes to blame on these platforms.

Nik Sharma (26:12):

And that wouldn’t happen if there was proper education and just everything before it that should have happened in that zero to one versus I guess a lot of brands play this game of 1 to 10 or 10 to 50 without playing the proper zero to one and building that foundation. And I think that to me is one of my favorite things. And whenever I invest early in a lot of these companies, it is distinguishing okay, does this founder have the know-how of how to build that zero to one properly? And if they don’t, then it’s very hard for them to get to that 1 to 50 or 10 to 50. And that part actually is efficient versus they just go out and end up raising tons of money. And by the time it gets to that 50, it’s not where it should be.

Ben Grynol (26:57):

Yeah. You miss the sustainability standpoint. It’s part of our growth strategy doc, and it gets linked in a bunch of places where because we’ve got to pull product as opposed to a push product, we’re lucky that we get a ton of earned media through all the UGC. Sometimes it’s sharing like the superhuman snippets video. And other times it’s like check out my data, right? So it’s this wide gamut of things that feel very genuine. But that’ll allows us to not have to pay for top of funnel awareness because the community is doing the job for us, which is great.

Ben Grynol (27:29):

But in doing so, one of our lines that we use is we won’t compete for three seconds of attention. We’re not going to try to trick people into hack their attention and trick them into buying something like, got you. That’s just doesn’t fall within our values. And we always say we’d rather dump a bag, just a pile of money into improving the product, or community, or experience. And $0 into marketing, traditional marketing. Because it’s the right thing to do. And it’s back to the intent of trying to educate people about metabolic health.

Ben Grynol (28:03):

One of the questions, so actually a couple different questions. One is this idea of companies that don’t do any performance or any paid marketing at all. So the notorious one is Tesla, I think Tupperware is another one there. And there’s all these like case studies of companies that have done it. But there’s also the examples of the Times article that came out of the Freakonomics Podcast where they analyze spend. And these are companies that aren’t just saying, “Well we stopped spending 100 grand a month a year. It doesn’t matter.” “We didn’t spend $100 million last year, significant amounts of capital on marketing. We removed that from the budget and we saw no changes. We actually saw things go up to the right.” How do you think about that, this whole idea of not doing paid marketing at all and just focusing on building a great company?

Nik Sharma (28:55):

I think there’s definitely a certain set of companies where this works. One of the biggest things I think it requires is it has to fit into a routine that people are comfortable talking about. I think Levels fits in there. I think Eight Sleep fits in there as well. Tesla obviously, Tupperware. Things that you do them daily or at a high frequency that other people can relate to.

Nik Sharma (29:19):

But I personally am a big fan of kind of what you said, product led growth. If it’s possible, I think it’s something that a lot of people should be focusing on. Even a company like [inaudible 00:29:34] does a great job of that too. Their products and the collections that they drop are just consistently 12 out of 10. And that’s what keeps expanding the brand. And what’s cool about product led growth versus advertising led growth is ad led growth is you’re kind of growing. You have this one central point, and it’s just slowly the ripple gets bigger. But with product led growth, that happens with each consumer. So you have advertising lead growth times your number of consumers that turn into evangelists.

Nik Sharma (30:08):

So I’m definitely a big fan of it. I think there’s also different ways that companies do that, right? The Tupperware stuff is known for those Tupperware parties. Tesla is just the best of its category. So they get tons of earned media out of it. They have a very charismatic CEO who’s constantly kind of shaking up different things, which gets people really excited.

Nik Sharma (30:30):

So I think it’s maybe less marketing in one spot, but they compensate for it in a different way. But that said, I think every company should try to figure out what is that engine that is not powered by a rented platform that you can count on to drive awareness and excitement around your product.

Ben Grynol (30:50):

Yeah. It’s weird. It’s like you can’t pay for the head nod.

Nik Sharma (30:54):

You can’t.

Ben Grynol (30:54):

The head nod is something that you’re part of the tribe. The nod across so many, there’s a memo that we had circulated internally probably a month or two ago. And it talked about the head nod. And the head nod actually spans so many consumer groups that you don’t think about. Right? So when looking into it it’s like, “Oh, the head nod. The Jeep head nod.” And I’m like, “Yeah, I didn’t know. It makes sense. I get the Jeep head nod,” but where it started is I’m a huge car fan, love old muscle cars, love Corvette’s, love all these things. So understood the head nod from there, the boat wave, [inaudible 00:31:33] nod. There’s certain signals that mean you’re part of this community or this tribe. And it got me thinking man, you can’t pay for the head nod. You can’t manufacture the head nod. It either is there or it’s not. And it’s probably one of the hardest things to do is build a meaningful head nod.

Nik Sharma (31:51):

Totally. And that also drives people to want to be a part of that community too, and feel that sense of belonging. I think the head nod comes actually from when people feel in a very secure part, or they feel very secure themselves being a part of that brand, or that experience, or that community. But if you’re a boat owner or you drive a Jeep and that’s what makes you feel happiest, you’re more than happy to give that nod or be a part of that.

Nik Sharma (32:22):

When I see somebody on my Twitter timeline debating Eight Sleep, I’m always the first to jump in and just rave about how amazing the product is, because I’m not an investor in Eight Sleep. I’m not affiliated with them, but I genuinely love the product. And it makes me feel amazing as a person.

Nik Sharma (32:39):

And that’s actually another interesting thing. A lot of these companies that try to build community from a boardroom meeting of we need to build community, they try to manufacture it versus it has to kind of be built again into the foundation and the intent of the business from day one.

Ben Grynol (32:58):

The head nod is the LTV. It’s like, there’s no [inaudible 00:33:01] head nod. You convert to be a head nod. It’s just like, it doesn’t exist. But it’s funny because if the head nod is something that can’t be manufactured, it’s genuinely there. The only way to do it is to build it over time. You build it over time through intent, by building a great product, by building something that people feel a part of.

Nik Sharma (33:23):

I think it’s three things. It’s time, it’s quality, and it’s consistency. All three of them requires a lot of time. It has to be the best possible quality. Because if you’re an enthusiast about a Jeep, an off-road vehicle, if Jeep is not the best quality product, you’ll find the other one. And then you’ll become a fan of that and the evangelist for that.

Nik Sharma (33:45):

And the other one is consistency, right? If you’re a part of even the Levels newsletter and your first two emails are great, but then it looks like an intern wrote the rest of those because they had to fill out the welcome flow or whatever it is. You won’t be a fan of that. You’re not going to be excited to open that.

Nik Sharma (34:03):

So those three things I think are what it really requires, but the problem, and this goes back to why a lot of these DTC brands, they look for the arbitrage is time that you can’t accelerate. You can’t accelerate the zero to one, whether it’s launching a company, or whether it’s looking to build that head nod.

Ben Grynol (34:25):

Yeah. That’s something that we are working towards is building community on a deeper level. Right now, we’re lucky that community has organically formed itself. And it’s actually been beneficial. We’ve got a private Facebook group. It’s just under 2,000 people. So say it’s roughly 10% of all people who’ve been through the beta so far. And we haven’t had a ton of bandwidth to focus on it.

Ben Grynol (34:49):

But what’s happened over the past year is that as we’ve gotten less active, there was appetite if you want to call it that for us to be more involved. “Hey, we’d love if the team was more involved here,” and sometimes we’ll pop in and ask a question. But in general, what’s happened is by us being less involved, it’s organically built itself. So it’s not a support channel. It’s not a Levels is going to answer my questions. Billy’s going to answer Jane’s question because Billy just wants to answer it. And right there, it’s like you can feel the meaningful community connections coming from this group and these people who are doing it out of intrinsic motivation.

Nik Sharma (35:27):

Yeah. I think another thing that is undervalued is I think actually the best way for anybody who enters a new industry to get their name out in an industry is cold email, a shit load of people, and meet a bunch of awesome people and build these relationships. And then just start connecting people. When you find two people could be synergistic, you connect them.

Nik Sharma (35:50):

And when you connect somebody, there’s really no lift to you, right? Other than maybe sending an email or a text. But to those two people, you are now the person who connected them to somebody. And they might end up doing something magical down the road, but you’ll always be that person that gets the credit.

Nik Sharma (36:07):

And similarly, I think that one thing brands don’t think about is when they have this group of consumers, and customers, and evangelists, and subscribers even, a lot of times, they do share relatively a lot of the same interests or behaviors, things like that. And there’s a lot of value I think in even just figuring out how to connect consumers with one another. Doesn’t have to be that Levels needs a community manager who’s talking in the Facebook group, and posting a poll every day, and doing something like that. There’s a lot of value in just knowing, “Oh yeah. I found this person through the Levels community. And Levels wasn’t necessarily involved other than they orchestrated this space for me to find somebody really dope.”

Ben Grynol (36:54):

Yeah. It’s back to this idea of the head nod, the community, and growth lever. So a growth lever, I think Peloton had listed in their S1 … and I don’t think they listed exactly what it was, but they said, “Hey, one of the strongest growth levers or growth engines for us is referrals. We crush with referrals.” And referrals come very naturally if you do the head nod. You are doing the head nod with Eight Sleeps. So in a sense, you’re almost acting as a referral by getting in the middle of the conversation and saying, “Hey, I’m here to tell you how great my experience is.” But the alternative is people that you’re very close with you’re going to be like, “Hey, listen. I’m not selling you anything. I’m just telling you, my sleep is significantly better. My sleep hygiene, sleep quality is better because of this thing.” That is an informal referral.

Ben Grynol (37:48):

As soon as you start to think about the game mechanics behind that and incentivizing people in the right way, it’s like the head nod is a very strong growth lever. And it’s something that we’ve started thinking about too is user roof referrals are something that we have to understand how to push on them without pushing on them if that makes sense. So what are your thoughts around user referrals and how we can lean into those in a way that feels Levels? If you want to frame it that way.

Nik Sharma (38:16):

I think a lot of the referrals that I’ve brought into Levels either stem from, actually this is interesting. There’s been a few people that I’ve referred into Levels and either I saw them have a conversation somewhere and they were interested in Levels. And then I said, “Hey, let me be the one to put you on a red carpet with Mike,” right? “So don’t sign up for the wait list. I’m going to intro you directly to Mike. And instead of being on this 120,000 person wait list, he’ll onboard you tomorrow.” There’s vanity that comes in there. And I think that was something that Clubhouse actually did really well was is picking up on how to really nail that. But I do that all the time. If there’s somebody who wants to get on, and I know that I’m going to get the social capital out of it from making that referral and then they get started and whatnot, I’m always the first person to do that. Both because the social capital, and this person’s going to hold hopefully fund value in the product and the experience.

Nik Sharma (39:18):

But the other one, tactically there’s ways to do it, right? Referral links or codes with Sharma is the code. And that gets you ahead of it. But pushing on customer referrals in a Levels manner is funny. I don’t know that there is a specific message that go from Levels that says something really other than every person who’s gone through the beta gets two invites to bring somebody they really value into the Levels community. I genuinely don’t think you would need to say anything else to turn that on.

Nik Sharma (39:52):

I wrote a newsletter about referrals and loyalty a few weeks ago. And I just hate way that most referral programs are built. They’re incentivized to give you $5 and give $5 to somebody else.c And they just come out very fake. They’re there because they have to be. It’s a part of that playbook.

Nik Sharma (40:11):

But I think the way that Levels is a very premium experience. It’s not a product, it’s a premium experience. And because of that and because of the brand and the … I think a lot of it is the education and the quality of that experience. People become evangelists and really excited about their own experience with Levels. And then they end up talking about it. And if they were to know that they could bring somebody else in to also share that experience with them, they would totally do it.

Nik Sharma (40:42):

I think WHOOP did a great job with their referral system just like that. They offer an incentive of a free month. But WHOOP is kind of in the same category of you can actually see the change in your life. Not like I wake up and I feel better, but you can actually numerically see the values. You can see what your sleep was when you put your WHOOP on for the first week ever to being four, six months in. And maybe you haven’t drank now for three months, and your quality of life has just improved a lot.

Nik Sharma (41:16):

So I think you actually have that to your advantage. But I guess the punchline is the Levels way to do it in my opinion would be that. You tell somebody they have X amount of invites or they can skip the line with four people, and maybe they get an accelerated fast pass line with 10 other people.

Nik Sharma (41:34):

But I also think what that does is it keeps that cohort very high quality. If I know that I only have two invites or three invites to Levels, maybe even 10 versus unlimited, I’m going to make sure that those three or 10 people are some of the best people that I bring into the program. And I’m also just as a psychological byproduct, I’m going to make sure that there are 10 people that are also going to be excited about this. Because when they enjoy that experience, I get the credit.

Ben Grynol (42:07):

Yeah, there’s a social graph. I mean, that’s one of the things that was really interesting about … Twitter has somewhat of a social graph not from a person-to-person standpoint, but definitely from a I joined in that’s not on other platforms. It means something to say that you were on Twitter in 2007. That means something.

Ben Grynol (42:29):

Clubhouse did it from the social graph standpoint of Nik referred me in. That meant something. I don’t know how strong that social graph is now, but it meant something at the time. I wonder if the social graph is … something I was thinking about with members onboarding other members. Imagine if there was a social graph where you could see how many members you’ve onboarded or how many connections you have in that standpoint. You never want it to feel like it is this multi-level marketing. Right? And incentivize it, and that is so far outside our values. But the idea of seeing somebody who is a strong node in the network is a very interesting thing and knowing who that pillar of the community as. That means something.

Ben Grynol (43:14):

Lululemon does an amazing job with their community by distributing it geographically. You and I might not know the person in Regina, Saskatchewan who’s the Lululemon ambassador there, but Billy means something in that community to the 80 other people. And that’s a very interesting approach to building community and building this referral program, because you’re essentially referring people to become part of the head nod crew. You are now practicing yoga with this group of people. And that’s what matters is this micro community that doesn’t feel manufactured from a digital standpoint or an IRL standpoint. It’s all amalgamated, and there’s a lot of crossover in it. But it’s a really interesting to think about.

Nik Sharma (43:57):

Yeah.

Ben Grynol (43:58):

Lots of places to go. One last question here for you is this idea of the wait list. So we’re at, I’m going to get it wrong. I think as of yesterday, it was 191. I mean, it’s growing. It’s growing a lot. And we’re getting closer to opening it up. We don’t have a set date in mind where it’s like here’s the target date.

Ben Grynol (44:15):

But it’s inevitable that it’s going to continue to grow. It’s natural to see that people who signed up recently have a higher propensity to convert. There’s more intent there than somebody who signed up in May of 2020. A two year old lead is going to act a two year old lead. How do you think that we should launch, open up the wait list, and do it in a diligent way? Because one way is A, we can’t be naive and assume that there’s a certain conversion rate based on sheer size of the wait list. Extract out all the international leads and just say let’s, I don’t know the exact number right now, but assume it’s 150,000 that are domestic leads. Not all of those are going to convert at the same rate based on cohort, based on signup date, based on all these things. But how do you think we should be thoughtful about opening it up, knowing that there will be a probability of conversion for a certain number of people and not others, and never wanting it to feel like we’re trying to sell people or convert them? What’s the approach that you’d take with the wait list?

Nik Sharma (45:24):

Yeah. I think the first thing is I would try to tag these users as best as I could. So this email address, what device did they come in on? What browser did they come in on? What was their source? Was it a blog post? Was it they clicked the link on Twitter that brought them to the signup page? So I think at the end of this experiment, you’re going to want to look back, and you’re going to see some very obvious patterns.

Nik Sharma (45:48):

Second thing is then I think segmenting these lists. So your list is let’s say 200,000 people over the last two years. How do you create cohorts within this list of maybe this is 20 to 24 months. We’re going to create one that’s like they signed up within the last 14 days, 30 days, 60 days, 90 days, four months. But basically, you start creating these cohorts. And the way I would actually do it is pick a number of how many people you’re going to let in. But ideally, try to test multiple cohorts at once to understand what the conversion rate per length cohort is, or cohort by how long they’ve been staying on the wait list.

Ben Grynol (46:32):

Yeah.

Nik Sharma (46:32):

And yeah. And ideally, you’re getting maybe 25 to 50 per cohort, which allows you to get a decent enough sample size. And then I think you’ll start to see okay, you’re right. This person that’s been on for two years, they don’t care anymore. Or you might see this person doesn’t care, but the person who’s been here for two years has opened over 70% of the emails we sent them. They’re ready to get on the call the next day.

Nik Sharma (47:01):

But I think you’ll be able to basically understand from that, what you’ll really be able to do is just predict okay, what is the likelihood of this person converting? And depending on what your goals as a business are, if it’s, “Well, we need to jumpstart revenue,” well then you’ll be able to just filter down to exactly what you know based on pattern behavior that’s going to convert the highest and bring them on bull word.

Nik Sharma (47:24):

Versus the others, I don’t know. Maybe you’ll put that segment of if you find that long tenure, less than 70% open rate. They came in on, I love shitting on Android. So they came in on an Android. And that customer. Then maybe you actually create a whole separate segment to try to re-nurture them, or reeducate them, or build excitement within that group so that they can then transfer into a cohort that is ready to be onboarded. That’s probably the way I would think about it is tagging, testing, and then applying those learnings back to the list that exist.

Ben Grynol (48:03):

Yeah interesting. One thing we’ve been thinking about is jam and I did some wait list drip tests to see what’s the probability of conversion based on tenure and based on when that cohort joined the wait list. And some of the learnings were, I mean it’s silly to even say it. But we’re like, “We just have to take a full funnel approach.” Some people, if they signed up when our educational material might not have been as prevalent, and granted they can open emails and educate themselves. They might not know what they signed up for. So their CGM and all these things, it’s like we have to reeducate them about what this device is and why they would use it. And it’s like now I need to convert.

Nik Sharma (48:44):

Right.

Ben Grynol (48:45):

Well, let’s leave it there, man.

Nik Sharma (48:47):

This was probably one of the most fun conversations I’ve had in months.

Ben Grynol (48:51):

Dude, appreciate it immensely. Super, super fun.