What To Do When You Can’t Spend Your Way to Revenue Growth with David Lorango (stage 4) - Ep. 352 - The Start, Scale & Succeed Podcast

Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Scott Ritzheimer (00:00):
Hello, hello and welcome. Welcome once again

(00:02):
to the start, scale and succeed.Podcast, the only podcast that
grows with you through all sevenstages of your journey. As a
founder, I'm your host, ScottRitzheimer, and there's a wall
that stage four founders keephitting, and it's a little
different than what we've talkedabout here on the show, because
what's happening here ispredominantly from a marketing
standpoint. Though. It's notjust marketing, but what's going

(00:24):
on is you're working on handingoff parts of the business.
You've got a management team inplace, you've got your marketing
playbook, you've done all yourhomework, and everything should
be working right? But you'respending more and more on ads
and trade shows and partnershipsand ads and trade shows and
partnerships and more and morein marketing, and the revenue

(00:45):
growth doesn't seem to be risingat the same rate. In fact, many
times for folks at this stage,it'll start to flatline despite
all the additional money andeffort. And so you pour in
another 100,000 or two trying tomake up for the lost ground, and
you end up losing money faster,and then, like, in like, what
is, what feels like the craziestthing in the world, your

(01:07):
marketing manager or someoneelse comes to you and says, Hey,
I've got it. I know the answer,and it's basically to spend more
money. And you just want to pullyour hair out, because you know
that it's not going to work, butyou don't know what will Well,
if you've ever felt like that,or if you're there today, than
about great news, becausetoday's guest has built his
entire career on solving thisexact problem for major brands
and entrepreneurs alike. Davidis the director of E commerce at

(01:31):
Uniqlo, and the founder and CEOof marketing agency startup
accelerators as a high demandcoach himself, David has helped
over 300 plus startup scalesuccessfully with over 15 years
of experience as an innovativemarketing leader, David has
driven growth for top brandsincluding Chanel, MAC cosmetics,
Clorox, forever, 21 and thewonderful company. And his

(01:53):
biggest success story was withNick's ice cream, which started
selling in the Northeast. And bythe end of 2022 Nix was selling
14,000 in 14,000 stores,including Walmart, and had
raised over 100 million in seedround funding, and the business
was doing nine figures. He'shere with us today. Mr. David
lorango, so exciting to have youon the podcast. Been looking

(02:14):
forward to this conversation,because it's maddening, you
know, and this isn't somethingthat I do. I do. I don't really
work on marketing with myclients, but so many of my
clients run into this challenge,and they they feel trapped. So
for someone out there who's whofeels like they all they got to
do is spend all anyone wantsthem to do is spend more money,

(02:34):
but they're not confident it'sgoing to work. What would you
say?

David Lorango (02:37):
Yeah, well, Scott, thank you for having me
excited as always to chat. It'sa problem. So all you owner
founders out there know thatyou're not alone in this. It is
a unique challenge, but it'salso one that's very common.
It's unique to your particularbusiness, right? So as you've
done this, like, why isn'tscaling? I've had so much
success now all of a sudden I'mflatlining. We in really kind of

(02:58):
start to define the parts of thereasons why. Right? So spending
into oblivion and trying tospend your way out of this
problem, it doesn't work. Andthere's a particular reason why
we can look at predict marketingchannels like meta or Google.
But ultimately, what you'redoing is, when you reach this
certain point, you've probablyalready maxed out your your your
addressable market andserviceable market, let's say

(03:21):
not addressable. What you'redoing is you're taking what
worked and you're trying to thenscale that out to a new
demographic or a new audience.Well, you haven't really
understood well, what's the nextlayer, or what's the next
audience, or what's the nextcohort want, actually, so if you
could take something like we canuse I was not unpopular, maybe
we use Nix, right? We started atNix. We were a business that was

(03:42):
highly focused on those thatwanted no sugar in their ice
cream, right? For basicallydiabetics and then keto. But
then as we had to scale outsideof that, right? We couldn't just
be the Keto brand. What happens?Not enough customers maybe care
or want no sugar ice cream orketo ice cream, right? What we
had to do is become a more broadbrand, and so when you start to
spend extra you need one of theelements you need to look at is,

(04:04):
who is your market? How do youstart to reach a new market?
Because you're probably oversaturating, and instead what
you're doing with more spend,it's the same message to a
different consumer, and it's notresonating. You have to think
about changing your strategy,changing your approach, diving
deeper into understanding whatyour new target market is going
to look like spending more andthen. So that's just element

(04:25):
one. Now let's talk a little bitabout the technicals. Right?
When you're in meta and you'rein Google, they're actually
great platforms to be able tostart testing this. So let's say
with Nick's ice cream. We wantedto be we didn't, but we're gonna
use example of this of otherbrands that I've worked with.
Now we're gonna be the proteinice cream. We're heavy on
protein. That's a differentaudience than for moms and kids
or for those that like to snackor premium snack. You can throw

(04:47):
that in there. You can do youcan do ads that test into a new
market segment. If all yourmarketing team is doing is
coming back and saying, we justneed to spend more, you're going
to see diminishing returnsperiod if you don't change it,
the algorithm is now Google and.Meta allow you and have some
opportunity to test into newmarket segments by doing that
through new creative but you'regoing to have to think through

(05:08):
strategically at that point,right? A lot of what happens
when you've grown and scaled,maybe you've gotten lucky and
haven't really even thoughtabout something like target
market. I also have found thatthat is also where owner
founders just aren't thinkingabout this, they aren't really
understanding how to scale intothe next level. And it's not you
can't do that at luck anymore.And I you know not that any of
you had just luck, but you canhit lightning in a bottle, but

(05:29):
to be able to be the next togrow in the next phase your
business, you really have tounderstand what that looks like,
right? Who probably did this?Some of the best is Poppy. You
look at Poppy when they started,they were kind of this niche,
soda. Now, I would say, like thehipster, the earthy, crunchy
person, and then became foreverybody, right? That was a
value prop that expanded,expanded, if you look at early
Poppy and then the branding.Now, it is completely different.

(05:52):
It is a different brand, butit's still the same product that
everyone loves. So I would saythat's certainly one of them,
right? Spending on thesechannels and platforms, you're
not going to get better resultsjust by doing it. I would stop
my advice. My advice is, don'tspend more. Spend those dollars
on strategy. Spend those dollarson thinking through what you're
going to do, because you're justgoing to throw money into a
furnace.

Yeah, that's so good. There's so many ways to
go with that. You touched onsomething that we've not talked
about on the show, and I'd loveto share with our listeners, but
you, you started saying totaladdressable market, and switched
to total serviceable market. Sotalk to us. What did those terms
mean, and why they're sorelevant to this conversation?

Yeah, see, and, I mean, I think there's a third
one in there. This is kind ofmarketing lingo speak, but
you're a total serviceablemarket. So let's say again, we
had keto ice cream, right? Or orno sugar ice cream. Okay, well,
the people that care, it'sprobably this bubble. There's
going to be people that care.But you know what? You know
what, a larger audience caresabout friggin tasty ice cream.
You know, there's a reason whyHaagen Dazs still does the
numbers that it does. Becausewhen people think of ice cream

(06:51):
like, well, I don't wantsomething that doesn't taste
good. I want to enjoy ice cream.Your total addressable market is
everybody that would ever wantto eat ice cream. Any market
that you're looking to get intoyou want to understand what's
the absolute scale, or what'sthe peak, right? Ice cream is
easy. Soda is easy. Everybody isgoing to probably drink soda,
right? But then maybe noteverybody wants a healthy soda.
Well, it turns out more peoplewant a soda that tastes good but

(07:13):
isn't going to kill you withsugar and everything else that's
in kind of one of thoseproducts, like Coca Cola, which
I do drink no hate. But you haveto understand your total
addressable market, right? Sonow it became, well, just so do
people. But then there's a thirdsecond one in there, but it
basically the one that you'regoing to be able to reach
outside of your initiallyaddressable market, initial
serviceable, right? So it goesfrom Okay, well, we're keto, but

(07:35):
now guess what, we're just abetter for you, ice cream. So
you go from keto ice cream tobetter for you. You start to
market it out wider, and thenyou just become the best ice
cream, right? It's ultimatelywhere all of these mass brands
become, right? So even thinkhealth aid kombucha, they sold
and they just built a brandaround it, right? I think health
aid is a great case study foreverybody listening. Take a look
at how they did this. So manybrands were so focused on narrow

(07:57):
ROI, and that works. But guesswhat happens with ROI? It's a
one to one, at some point youhave to invest in brand. What
health they did is theypartnered with companies like I
heart and they scaled the heckout of their brand because they
spent on brand marketing, right?So they said, Okay, well, those
that really like kombucha may besmall or who even knows what the
heck it is. So they had to builda category. When they built the

(08:19):
category, they also became theowners of the category, right?
So this is also where a lot ofowner founders are thinking too
narrowly. And I get it, it'sscary guys to invest in
something like that that won'tshow return. I understand that
as an owner founder myself, butyou can't win without really
thinking about what is your nextbig move. And next big moves
here are going to take somedollars. I mean, that's the
other thing to think about.You're trying to spend little or

(08:41):
add it up, right? All of yourexcess spend in meta. You could
have spent 20, 3040, 50,000100,000 on something more
strategic than blowing it inmeta, but it felt safe, right?
These are just things that youwould think about, and how you
want to think about it is startto scale your business
outwardly. But again, it takesstrategy, right? So it's a great
question. You to grow yourbusiness, you also have to grow

(09:02):
your market, right? And that'sreally kind of how we think
about it.

I love that, because the the kind of inverse
problem is true where I'll seefolks early on who will try and
chase the total addressablemarket and appeal to everybody
right out of the gate. So wouldyou say that the this strategy
of going kind of TSM niche, andthen stepping up is the right,
is the right strategy.

I think so almost always. And I know this sounds
like marketing 101, and it kindof is right. I mean, the most
annoying thing, and this is notnew, but every whenever I ask a
founder who is your audience,they say, everybody. I'm like,
Okay, how much you want to spendon everybody, then you know what
that means. You better havebillions of dollars to spend,
right? Coca Cola can do thatbecause Coca Cola kind of is for

(09:47):
everybody. And if you reallywent niche with Coca Cola, it
probably wouldn't look verygood. I mean, like, who would be
their niche? Right? Kids, maybe,or kid people that don't care
about that. It's not healthy foryou, but it's tasty. Okay? So
you're gonna win on. Taste. Weall like it when it pairs well
with a burger, pairs well with alot of stuff, right? I always
like to start niche for a couplereasons. You win there. You

(10:11):
understand the market dynamics.You understand who wants your
product. And then you can changefrom there. You can pivot. You
can have other mark. You canhave other products within your
portfolio, right? It's it'smarketing one on one. Start
there, and also it's going toallow you to test more
intelligently, right? And eventhink about that now we know
where we scale. We now noticetarget a different market or a
different consumer from theirs,right? So there's you have so
much more opportunity to thinkthrough your market by going

(10:34):
smaller first, but still winthere, and then scaling it
outward, right?

And I think that's such an important point,
because it's smaller first. AndI think what's lost in the
noise, at least, what I'mgetting barraged with,
especially in my space, as beinga smaller shop myself, is this
idea that it's like, niche down,niche down, niche down, niche
down. And that's well and goodand true, but what happens is,

(10:58):
like you're saying, you run tothe edge of that market. So the
question that I have then, ifwe're saying, Okay, we've we've
got total serviceable market, wewant to move toward total
addressable market. We want toexpand our footprint. How do you
start to from a strategystandpoint, how do you start to
craft, okay, what is the nextstep out? What's the next ring

(11:20):
out toward this larger market.

It's a really good question. I start with
research. I look at a competitoror a like type of brand, what
are they doing? How are theytalking? What are they
addressing that we're not what?What is the market there?
Usually research. I'm going to,I would say, invest in research
or do it on your own, one of thetwo, right? Have teams, have
somebody that knows or has donethis and say, Okay, what are

(11:44):
your core USPS, right? So whatis it else about the product,
both the physical product,maybe, and also what's actually
in it, right? What are thethings that are going to allow
us to do that? So like Nick'sice cream, maybe we actually do
win on taste, right? Or maybe wepick a few key flavors that
we're going to make, we're thebest tasting better for you,
hands down, right? So that whatyou do is you do research. Well,

(12:05):
because we're, maybe we'relosing a Haagen Daz because
they're vanilla tastes great.Okay, well, maybe we can win
with chocolate, because ittastes better than a competitive
set. So we look at thecompetitors, and we start to
craft a message, and then startto scale from there. That's
certainly one sometimes, ifyou're in market, right? So
let's say you're, you have aproduct that's not TTC, but it's
in retail. You look at whereother retailers you want to get
into. So the retail game is afun one, because let's say

(12:26):
you're in a particular region,you want to find other similar
reasons regions, right, that arelike that. So let's say you're
in Texas and you're ice cream inTexas. Okay, well, people who
bought ice cream in Texas may bea different market than those
buying in the Northeast orreverse that, right? The WalMart
customer is going to be verydifferent than the whole foods
customer, right? So just becauseyou're in Whole Foods, you're
like, wow, I could get intoWalmart. Maybe not. Maybe that's

(12:46):
not the right place to go. Soresearch, honestly, researching
your market, understanding yourcore demographic, and then who
you're going to go on the nextrung out and then test it.
Right? That's where your meta,any all your ad spend, should be
now on testing, instead of justpouring into the same thing. And
also be bold. My other advice onany of this is being, not being,

(13:09):
and this is a hard one too. Onceyou have a know your market,
you're you're worried aboutrisking alienating who it is,
but then you can't really growand scale without taking risks.
And usually what I see a lot offounders in this stage are is
they hunker down right exactlywhat you're saying they do. They
double down on the same exactthing that they're doing, and
it's not going to work becausethe market isn't responding in
the next level. So you have tostart being bold and taking some

(13:33):
risks. Research is the first onethinking through, taking your
time, having your teams, hiringteams. Really want to look at
those that are going to help youcraft this narrative to be able
to go to market in a better way,right?

And, yeah, yeah. And David, that actually
brings me to this next questionthat I wanted to kind of pull
the leadership lens back onthis. You can't do that alone,
right? Especially not with allthe other things that have to
happen for your business to besuccessful. And so there's this
added complexity of managingother people who are engaged in
this process. And one of thethings that that brings is this

(14:06):
question of like, do we have amarketing problem, a strategy
problem, a team capacityproblem, a budget problem? It
can be hard sometimes to seethrough all of the mess to
figure out what is the actualproblem we're trying to solve.
How do you help founders get tothe bottom of that?

Well, that's a great point. I mean, as a
consultant, right? Sometimes Iwill be that person. Other times
I will say, here's the team tohire to do this, right? Because
let's let's also go, let's takeit back. You can't your skill
set as an owner, founder, youdon't have it anymore to be able
to be able to scale to the nextlevel. You just don't you have
what you have, and you do well,you're going to need to bring

(14:46):
someone or a team in to help youthen, because you just don't
know, right? You're hitting yourskill set limit, and that's a
good thing when you've donethat. Now it's like, well,
what's the next level? What do Ido? Who do I bring in? Who are
the operators that now know howto do this? I do this with CPG.
I. Have teams that I oneparticular agency that I partner
with. I'm like, these guys aregoing to get you into retail,
because we've maxed out yourDTC, you need to now be in

(15:08):
retail. So finding the teamsthat are going to do that,
because, again, you just don'tknow right. So to your point,
you know how to operate at thislevel. Great. Do the exact same
thing that entrepreneurial mindyou had when you started your
business to find the rightpeople. Do the same thing when
you're asking yourself, How do Ireally scale what do I do next?
Right? Because you don't know,and that is the reality. You can
research it yourself. You cantake the courses. You going to

(15:31):
be smart, but you're going toneed you're you're going to want
to cut. You're going to want tocut to the end of it. You're
going to want to cut to thechase and spend. Is not that. It
isn't, it's the right people andteams that have done it. So
that's it. It's either going tobe me, or, depending on the size
of the business or what theyneed, it's going to be somebody
else. But you kind of that'susually, Scott, where I find
people, right? That's usuallywhere they come to me, because
they're like, We don't know howto do any more of this. David,

(15:52):
help us, right? And yes, I andthe team are the guys, or
actually, somebody else is goingto be the team.

Yeah, that's great. So I've got another
question that I want to makesure folks know how they can get
in touch with you, David. Butthe question is this, what is
the biggest secret that you wishwasn't a secret at all? What's
that one thing you wisheverybody watching or listening
today knew?

The biggest secret that I think I would say
it, is that AI is not going tomake your business for you. I
don't know if that's a secret. Iwould say that I wish they
weren't. Maybe put it this way,creativity is what's going to
win. That's the secret. I wishpeople didn't. So let's talk

(16:34):
about that just briefly. AI isnot as creative as you think it
is. Creativity is going to winyour day. And if you're stuck,
you know what AI is going to dogive you more stuck things
you're not going to be able tobe creative. So what do I think
it is a secret these days,because everyone's talking about
automation, they're talkingabout machine learning, they're
talking about how these aregoing to solve efficiency
challenges. They're really,actually talking about how

(16:57):
that's going to make you morerevenue, and how that's going to
make you relevant, how it'sgoing to make you different. So
it's a secret to think where wecome in. We're being creative
with our solutions. We're havingyou be creative as a brand. I
think true creativity and marketdisruption is going to be the
secret that all of these brandsare going to win on the ones
that are doing what they'redoing before and relying on a
machine to do it. You can usemachines to be creative, don't

(17:20):
get me wrong, but that would bethe secret I wish. And I
selfishly, Scott, I like fun,creative marketing, and I think
it's gotten a lot of it's veryboring. Now, remember back the
2010, 2011, 1213, 2007, therewere fun ads. There were fun
brands. Bring it back. That'syour secret. Do that? Have fun
and have fun. I mean, maybethat's the other one. Scott is
people forget. We connect withbrands because they're fun and

(17:42):
we like what they bring us. Welike the joy that they bring us,
the happiness that they bringus, right? Coca Cola is drink
happiness for a reason. That wasat least their tagline. The
secret is be creative and havefun. And I wish that that was
more of a mantra, because ifyou're not having fun and enjoy
and I mean, enjoy it, truly.Enjoy the process. Enjoy this.

(18:02):
You're gonna get out of this.You're gonna find partners that
help you get out of your brain.If you're stuck in that, how do
I scale mode? And you'refrustrated, you're not having
fun, you're not thinking ofother ways that people are gonna
enjoy your product. You're stuckin this kind of negative cycle
loop. So I would say that insecret, be creative and enjoy
the process of what you'redoing.

So good, so good. David, there's some folks
listening that would love tohear more about the work that
you do and get your help. Wherecan they find out more about you
and your company?

Yeah, thanks. Would I LinkedIn? I do go on
LinkedIn, but I would saystartup accelerators.io. Just
fill out that form, and I amvery quick to get back to you. I
would give up my number here,but I'm worried about who would
spam me. But I'm alwaysavailable. I love chatting, and
I love kind of having these kindof conversations. Scott, so even
if you're looking to get intouch with me, you know, just a
15 minute call, tell me whereyou're at. I love just having

(18:52):
conversations with any of youguys, so don't be shy?

For sure. David, thanks for being on just
a privilege and honor. Havingyou here today. Really
appreciate it. And for those ofyou watching and listening, you
know your time and attentionmean the world to us, I hope you
got as much out of thisconversation as I know I did,
and I cannot wait to see younext time. Take care.

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What To Do When You Can’t Spend Your Way to Revenue Growth with David Lorango (stage 4) - Ep. 352

Episode Transcript

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}What To Do When You Can’t Spend Your Way to Revenue Growth with David Lorango (stage 4) - Ep. 352