Your competitors are offering 30% off during Black Week. Do this before matching them #116

A warm welcome to a new episode of Noll till 100. As usual, I have Fredrik Ankarsköld with me. Welcome back to the morning sofa. A new week, a fresh start, as we usually say. Absolutely. And we're really excited to get ready for Black Week.

Yes, today we're around the middle of September. There aren't many weeks left. You think Black Week is a long way off, but what is it, nine weeks away?

Those nine weeks disappear so quickly. Sometimes I think about being little, when the days dragged. The older you get, the faster the days go. Now that you're getting close to forty, nine weeks go so quickly.

God, am I the only one who feels that way? No, exactly the same for me. Almost scary, actually. Completely crazy. I think it's laughable, because every year we usually plan Black Week straight after the previous Black Week ends.

Then we evaluate and start putting together the plan for next year's Black Week, so we're not surprised again. Like SL every year when winter and the first snow arrive: ‘Signal chaos, signal failure.’ As if it were unexpected for the first snow to fall in November.

You shouldn't be surprised by Black Week. It's good to be prepared, and a lot can be prepared. At the same time, we have content to film for next year, because we roughly know what worked and what didn't. We don't know next year's trends, but we know we'll have an offer, campaigns and some bundle. You can prepare and film while there's still snow outside. It's really fucking difficult now, in mid-September, to film Black Week content. We know it changes. One thing we're completely sure of: the weather changes.

I remember an ad ahead of Black Week: ‘Buy your Christmas presents during Black Week.’ Santa was walking around on an ordinary day in Gamla stan. You could almost see they'd filmed it in the summer, with him standing there sweating.

That's the mistake when you film too early, off-season. That's why it's hard to film that far in advance. The best thing is actually, straight after Black Week or any campaign, to evaluate with a retrospective involving all or part of the team. What went well? What could we have done better? What do the results look like? And how do we take care of the customers we've just acquired?

Usually, you acquire customers at a discount. How do they become loyal and returning customers? The least we can do is get good reviews and ambassadors out in the community. Then we've done a good job during Black Week. Next question: how do we repeat what went well this year without losing momentum? How do we double down on what actually worked?

And how do you stop doing what doesn't work? Exactly, cut it straight away. When it's fresh in your mind, you can write it down. Now in September, when we think about last year, we've already lost quite a bit of what we know worked.

I know myself how memory works. If you ask what I ate three weeks ago…

…on the Monday, I have no idea. A surprising amount disappears. Completely crazy. Before we dive into the numbers, I've had a look at E-handelsindikatorn. How did Q2 go, and how has Q3 started? The figures certainly look positive. In June, total trade revenue was 14.7 billion kronor…

…and in July, we were up to 14.9 billion. June was slightly down on the previous year, July about nine per cent up. Above all, Q2 was up ten per cent. Q3 has started on exactly the same wave, with quite a strong August behind us. We have a tailwind in e-commerce. Why do you think the tailwind is so strong?

I'm wondering whether many people stayed home and shopped, or more people travelled. I don't know the statistics. Neither do I. More people should have travelled, but at the same time we know jet fuel prices have risen enormously.

It's even run out. SAS and certain airlines in Europe have cancelled lots of departures and had to adjust prices. Perhaps fewer people travelled, so online shopping increases. I think one big reason is the new import duty that we have to touch on. On 1 July, the EU introduced a requirement that parcels worth under 150 euros, around 1,600–1,650 kronor, be taxed at three euros per parcel. It sounds small, but three euros if you order from Shein for 90 kronor…

…increases the cost significantly. People shopping on Shein or Temu are discount and price hunters who want the best, cheapest price. Three euros sounds small, but it's about [unclear in the Swedish source: 343 kronor]. Quite a lot on the final price. We can see that online shopping from Shein and Temu has decreased.

At least according to the study that Svensk Handel commissioned from an external consultancy. From very high growth and high shopping penetration to a decline.

What do you think? I think it's good. For one thing, I love that it's good for the environment. If we set Swedish e-commerce aside for a second, we should have our global hat on: we only have one planet, one Earth. It irritates me that so many people buy disposable items or pure rubbish on those sites…

…just because it's gamified and there's a game engine behind it triggering people. With that said, it's good for Swedish commerce overall, and e-commerce in particular. What do you think when purchases of rubbish decline? Good. I met one of Houdini's founders recently. They make clothes, and some garments are even compostable.

Nice. Then it's more sustainable in both the short and long term. A lot of people don't think about… When I was younger, I was unaware, but Mum always made sure clothes had to be washed before use, otherwise you could get a rash.

I didn't understand why: they're new, why wash them? Exactly. Until I ignored it after moving away from home and got loads of skin rashes. It was the chemicals in the clothes, either to preserve them or because of the dye. Not all dyes are the same.

True. You're not just protecting nature but also the people wearing the clothes. Exactly. It's been shown in many tests where external companies tested chemicals from Shein products. Nine out of ten garments exceed the EU's limits. At some point, they ought to be banned, but the fact they've started with a duty and a cost…

…good enough so far. I'm happy. All right, into the Black Week swamp. Let's take the first of many questions. We get lots of questions…

…and it could be fun to answer a few. We've tried to think about the problems e-commerce businesses have when they're turning over around ten to twelve million, struggling and planning Black Week, or up towards a hundred million. This is for you.

Let's go. ‘All our competitors are offering thirty per cent. How do we come up with an offer that sells without giving away the entire margin?’ It's fundamental during Black Week and all campaigns: know your own numbers so you don't discount yourself out of profit or make a complete mess of it. It differs depending on margins, average order value and repeat purchase rate. Do you need to discount or not? So many parameters, no simple answer. If we're to draw a conclusion anyway, you need to run the numbers for yourself, not everyone else. Even companies in your industry can be completely different. If we take Såpa as an example, we know we have…

…hardly any campaigns during the year. At most, a free cloth or refill at some key moment. Black Week is our only campaign. Whether the discount is small, ten, fifteen or twenty per cent, we know people buy. Above all, products they'll use up over the coming year, in quite large quantities. Who buys? In all likelihood, existing customers first.

We need to keep that calculation in mind. November sales are, in a sense, future sales we've brought forward. But some might have switched brands without the campaign, so there's no exact answer. We know every percentage point of discount from the top line disappears from the bottom line, more than you think.

If we discount by 30 per cent, that doesn't mean the gross margin or gross profit is affected by 30 per cent. It's considerably higher.

Usually considerably higher, we can add. You need to calculate GM1, GM2 and GM3, which I know you're good at. We can take a few things and take…

…thirty per cent as an example, if possible. Let's take a product that normally costs a thousand kronor. Okay, twenty per cent, because we'd already written out the calculation. The product cost is 400 kronor. Then you have 600 in GM1.

If you lower the price twenty per cent to 800 and the product cost is unchanged, GM1 falls from 600 to 400. So a twenty per cent discount reduces GM1 by 33 per cent, not twenty. Then GM2: you have to pick, pack and ship the order, pay card fees and other variable costs. Say a hundred kronor in total, for simplicity.

Then GM2 goes from the normal 500 to 300 kronor during Black Week, a decrease of forty per cent. Then GM3, what's left after marketing. A normal customer acquisition cost of 250 kronor gives GM3 of 250. During Black Week, perhaps the discount increases conversion and lowers the customer acquisition cost to 150.

Despite that, GM3 is only 800 in revenue minus 400 in product cost, minus a hundred for shipping, fulfilment and card fees, minus 150 for customer acquisition. That leaves 150. GM3 per order has gone from 250 to 150 despite more efficient advertising.

That's true in many cases, a really good numerical example. It's also dangerous, because many companies get their calculations wrong, especially when they've just reached ten to fifteen million and want to push hard during Black Week.

I sat with our team at [unclear in the Swedish source: Boset] this morning and said we need a better CFO calculation. What do we actually earn during a campaign? I'm afraid this is exactly where people miscalculate. Sure, we get greater volume and more efficient marketing costs, but that doesn't mean we earn more.

There, we have to get really good at turning customers into repeat customers. We'll probably get a bit more volume during the period, but fulfilment costs may rise when we have to pick and pack evenings and weekends to catch up. We get a bigger backlog, more customer service cases, more of everything.

Just because we sell more on the top line doesn't mean we're more profitable on the bottom line. Review marketing costs. Ideally, they should become much more efficient than in the example, where the improvement was about forty per cent. We'd need even more, sixty, seventy or eighty per cent.

In my calculation, card fees, fulfilment and shipping don't change. The card fee is variable, so of course it changes a little with the discount. It is…

…should be a little lower because it's a smaller part of revenue. Exactly. But fulfilment can, as you say, increase if volume is higher than usual and more staff are needed.

Yes, often temporary staff who make more picking errors per order or per thousand orders. More returns during Black Week too. Lots of things stack up, and they're individual to your brand. You really need to understand the finances…

…when you put your foot on the accelerator. Two things change during Black Week whether you offer a discount or not. One is customer behaviour. People have waited weeks, sometimes months, to make purchases because they group them around Black Week. Even without a single krona of discount, if you just change to some black colours in the ads, you'll see a significant increase in sales volume compared with not having black ads.

You don't even need the words Black Friday anywhere. As long as people see something with a black theme, purchasing behaviour increases. Partly, it's the time of year when people are more eager and primed to buy. We've brought forward some Christmas shopping…

…and pushed back some shopping that normally happens in October–November to Black Week. Even without a discount, people have been seeing the ads for a long time and thinking you might offer a discount…

…and saved your products. I don't know if I differ from the average, but I have a list: these are purchases I need now and can't wait for.

Then I have purchases in a Google document called Black Week. A product list of things that might go on sale. If they're on sale, I buy then. If they aren't, I probably buy anyway.

That's exactly how many ordinary Swedes think. People tend to make a list, often together as a family. They basically buy from it regardless of whether there's a discount. Bigger purchases, such as a new TV, speakers and the like, tend to do well during Black Week. Electronics companies got into Black Week planning early and have sharpened their approach so it fits consumers' purchasing behaviour very well.

Couldn't it be like… When we moved to a new flat, I knew it was many months away, but that I could live with the old TV.

You wait, right? Exactly, you survive with your existing technology until Black Week. A hundred per cent, that's right. So, to sum up the question, it's very individual.

But know your numbers and make a calculator. We also see a higher average order value on those days. Purchasing behaviour changes and the conversion rate increases regardless of what you do.

You can work with bundles and increase the average value even more than normal. A good period to be in e-commerce. But don't spend more on marketing if you're giving discounts, is the gist. The next thing not yet in the calculation is returns.

Exactly. From previous years and working with a hundred different kinds of brands, we know returns tend to increase during campaigns, especially Black Week. Many extend the return period until January, so people can buy Christmas presents then and return them at their leisure. That's kind.

Some who extend returns until January see reduced return behaviour. It could be because people forget to return things, get used to having the product at home or something else. It could be anything. I bought a football goal that was a bit too small for playing with the children. It was the last one on the shelf, so I took it home and thought: if I find something better, I'll return it. Time passes, you forget, and then thirty or forty days have gone by. Then I think: I have the football goal anyway, let me just put it together so we have something.

Right. In a busy everyday life, and I'm not alone in that. It's like that for many Swedes. So an extension from November to January can also reduce return behaviour. But we know returns increase during campaigns.

One challenge is that if you sell out of a product, you can't sell it to someone else who would have kept it.

Exactly, especially not during that period. When it comes back, it might not be resellable because of its condition. Also, the period may be over.

The season may have passed, especially for ski jackets. They peak in October–November ahead of the season. There are impulse buyers during the season, but then the product might have to go on sale.

As you can hear, there are lots of different parameters when we look at the calculation. The most important thing is not to miscalculate. If we take it to an extreme and simplify a lot: put a twenty to thirty per cent discount across the whole site and you'll get more customers. In all likelihood, you'll see bigger average baskets, because people add more products to reach free shipping, but also because they're getting things cheaper and are more inclined to buy. You'll see greater volume in the number of transactions and then a worse gross margin across the board. But that doesn't mean the calculation gets worse.

The calculation can improve depending on the customer acquisition cost. If it's historically been twenty to thirty per cent of the margin and drops to five, ten or fifteen, you might do fantastic business. If the cost is roughly the same as before Black Week while volume increases, all you've done is slaughter the margin…

…and usually that's bad business. Not necessarily, because you may have acquired lots of new customers discovering the brand. Again, it depends.

It depends. Let's take some more return figures I've calculated. A product with a five per cent return rate creates quite a small problem. If instead it's fashion with a thirty per cent return rate, the maths gets tough.

On a hundred orders, you've advertised for a hundred customers, sent a hundred parcels and paid fulfilment and card fees. But only seventy purchases remain in the example…

…because you get thirty per cent returns. Yes. Using the same example, a twenty per cent discount, 150 kronor in customer acquisition and thirty per cent returns can end up at around zero GM3.

Okay. As you mentioned, if you don't do anything else… It's always ‘it depends’. Now we're calculating more as if…

…everything is static, including the average order. Conversion has increased a little because customer acquisition has gone down. It's just an example to discuss. You can't just ask how much we sold. We might have been bleeding money and making a loss.

True. Something many miss is bundles, as you mentioned. Most should create natural, ready-made packages. People are stressed during the period and need help. Guide me: which three products should I buy if I normally buy one?

It might be difficult with clothing bundles, but easy with basics. Everyone needs T-shirts and underwear. It's easy to group that type, such as ordinary white or black T-shirts…

…of high quality that you normally sell one or two of. Make five-packs and see how it goes. Another tip is the cart, the one that pops up when you press ‘Add to cart’, where you see the summary and go to checkout.

Really use it. Såpa uses that space for upselling. Absolutely, take a look at how we do it, because it's one of our best retail spaces. From the ad, you usually land on a product page, not the home page. You see neither a category page nor the about-us page, just the product.

In the best case, you've clicked through, and then it's usually the shopping cart, the minicart, you see. Use that space for upselling. Better there than moving it forward to checkout. At checkout, you just want people to click through and buy.

If you have upselling at checkout, especially if you recommend a product or a super deal, there's a risk of losing the customer. They go back to that particular product page and start researching something they hadn't planned to buy.

That's happened to me, going back to find out more. Me too. I was on Gymgrossisten's site…

…and saw an upsell at checkout: do you want this? I started wondering whether I needed it and went in to read. Then my child was hanging on me: ‘Dad, we're going to play hotel.’ Okay, let's play hotel. I put my phone away and forgot the purchase. I didn't get a good cart reminder either. Two days later, I discovered it, because the product had run out and I needed the supplement. Then I went and bought it on [unclear in the Swedish source: tias]'s website.

They lost the entire purchase because they put it in checkout. I didn't reflect on that at the time, but much later, because I work in e-commerce.

Isn't that risk there in the minicart too? I think that risk is low. There, you can click into the product. Checkout is often locked so you can't move on, and people have already started entering contact details.

My email address… You want to see what shipping costs. Then the upselling starts, almost at the last step, and you think…

…you abandon the purchase. The minicart is often used as a wishlist. I'm not going to buy everything I put there; I want to compare sites. At Såpa, I might put things in the cart to see the total for what I need. If it's just one package, there's a risk of people dropping off, but often they click on several things and want more.

I use it as a wishlist. Put lots of things in and then start removing them at checkout, down to what I need. Then you're one of about 72 per cent who use the minicart as a wishlist.

A common behaviour. So drop-off or bounce rate after add-to-cart doesn't have to be negative. It can be part of the buying journey that's picked up later.

That's nice online. In a shop, you can also leave things at the till, but it's considerably more awkward.

Much more awkward. But bounce rate exists in shops too. You look and think you'll come back after checking the rest. Often in shopping centres or clusters where lots of people sell the same thing. Sometimes you forget or don't have time to come back. It's much harder to fit everything in physically.

But sometimes you come back later, shop and complete the purchase. Another question is: should we run Black Week, Black Friday or Black Month? Black Week, Black Friday or Black Week Month. That one's difficult too. It depends on which category you're in.

If you're something like Lyko, for one thing, you have these sale rules to comply with. You can't do more than four or five major clearance sales a year. You want to maximise them, but not put all five one after another. First, you have the big sale during Singles Day.

You have Father's Day just before it. Then Singles Day on the eleventh, and Black Week coming a week later, at least the start, since lots of people start early…

…around the Thursday of the week before Black Week. Then the Christmas campaign straight away at the first Sunday of Advent, the first Sunday, which can fall on the first or second of December. Lots of sales periods closely packed into a few days. You need different things to communicate, otherwise you wear out the target audience who've bought from you before and are also most likely to buy now.

You have to take that into account. If you're a multibrand store, like Lyko in the example, perhaps you should run Black Week Month starting in the days or week before Singles Day, often around Father's Day. The communication can be Black Week Month, with a Father's Day focus.

Then we focus on Father's Day products and gifts for him. Then Singles Day, gifts for yourself. From there, the focus shifts to gifts for others close to you: mum, dad, partner, siblings and children. To bring Christmas sales forward. When Advent arrives, everything moves more or less to Christmas campaigns and a Christmas-only focus.

Different focus groups during Black Week Month. Even if you have a discount, you don't need to discount everything at once. The campaign should have the same name, Black Week Month, for that type of…

When you're staying within the rules, that's what you do. Then you have a D2C brand like Såpa or Mockberg. There, there aren't really any reasons to discount for that long. You should have a short but intense period. Not just Black Friday, because people are stressed to bits and might not have time to shop that weekend. Then you've missed the purchase. The recommendation is the whole week, a Black Week starting the Sunday before, because we know Sunday is a good e-commerce day. Or the Saturday before. Then you finish the Sunday after, or include Cyber Monday in the package. In total, perhaps ten to twelve discount days…

…or run Black Week as intended, Monday to Sunday, including Black Friday. You can call it Black Friday Week and have strategies for discounts and which products are pushed on different days. Highlights? Bundles? A Black Week mega-pack or something similar?

As an e-commerce business, you can have different communication during the week. Then you can focus on which products should go on sale.

Then you can use it for products that aren't moving off the shelves anyway. How do we get them out of the warehouse? Then you have brands like Twistboxes, a startup without data from the previous year, which also doesn't have that many repeat customers. You buy a roof box, and hopefully you don't buy another but are happy and keep it for many years, perhaps generations. What do you do with that kind of customer during Black Week; do you want to discount? Twistboxes is a product innovation, meaning there isn't a comparable product on the market. Of course, there are competitors, other brands selling roof boxes. So as a consumer, you're choosing…

…one or the other. But if you've been eyeing Twistboxes for a long time and need the campaign to kick-start the brand, perhaps you should have one. Or an upsell where something else is included for free.

Or nothing: we're boycotting Black Week because we don't need it. Different strategies depending on the brand. I'm not saying we won't have Black Week at Twistboxes. I'm saying perhaps you don't need it if you're a Twistboxes.

Then there are brands that take a stand, such as Asket. They close the site during Black Friday. Lots do that, and it's absolutely well-intentioned. The idea behind closing or not discounting is that otherwise you're contributing to consumption and shopping frenzy, where people buy things they didn't otherwise want.

That's partly true. It's honourable to stay out. But if they don't buy your products, they'll buy someone's.

Closing the site doesn't help the environment or consumption overall. The same consumer buys from a competitor, perhaps a product that's worse for the environment than Asket's.

Yes, that may be the case. They still want to buy Christmas presents or whatever it may be. I don't see a positive side to Asket closing the site. The least they could do is stay open and say: we sell as usual, because we don't have the margin room in our product that many others have. We have a fair price all year round. They don't usually run campaigns on other days either, right? That would have been fair communication, and you'd have got an upturn in consumers anyway because you're taking a stand. Does it work for everyone? No, I don't think so. Såpa is a better-for-you alternative and is usually the…

…in e-commerce media and all media as sustainable and environmentally sustainable. We've done everything we can, but our goal now is to reach as many households as possible. If you buy from Såpa, you're not buying things to throw away, but sustainable products that work for a lifetime, ish. Products you can use any time and that get used up over time.

If you buy them at a discount, it's more likely you haven't bought another product. Then you've made a better choice for the environment and your health. We see it as a win-win.

All the way around. Do we have this year's dates? Everyone can check their calendar. Is Father's Day the ninth, or the eighth? The eleventh is a Wednesday, Singles Day. The most important is Black Friday, which this year should be the twenty-eighth, right?

The twenty-seventh. Black Week is 23 November to Sunday 29 November. You mentioned the Sunday before, so then you start on 22 November.

Yes, or Friday and Saturday, depending on the site's setup. In a few brands we part-own, I close the shop for a day, perhaps two, and collect email addresses from people who want access when we kick off. When we then do, we have the best offers…

…for existing customers. I talk about that often, and it's worth repeating, because Swedish commerce has forgotten it. People always want to attract and fight for new customers. But it's five times easier to dig where you stand, and that's why we reward existing ones.

They also become more loyal, spread the word and are happier if they've received the best offer. They get it when the site is locked and requires a login.

The code is only sent to people who've spent over a certain amount or bought a certain number of times during the year or years, or through a loyalty programme and so on.

Do you usually get the data from Shopify or the platform? Yes, obviously. We need raw data, not third-party data.

Next question. Where are we? Lots to work through; we've received questions and tried to summarise them. A recurring one is leads ahead of Black Week.

Is it worth paying for leads, meaning an email address or phone number, weeks or months beforehand? Can it discourage people from shopping when they receive the lead ads, because they save their purchases?

Then perhaps the gross margin worsens. What do you think? I saw a site where it said you could win the product for free by entering your email address.

They measured the effect themselves, and people shopped less. Conversion fell because customers hoped to get it for free.

Of course, especially if the email arrives after a number of days or weeks. But now we're talking about the competition, which is a different thing. There, I'd perhaps rather see various competitions organised ahead of Black Week than just having… It also depends where. Where are these email addresses appearing? Lead advertising is usually aimed at new customers on Meta…

…and you exclude existing customers, as best practice your entire existing email list, so Meta isn't chasing the same customers. You probably already have their address.

I'm very much about data. Without the answer, I'd do an A/B test. I buy that, but the test will be hard to measure, because you expose…

…lots of people to the lead advertising. How do you know whether they chose to shop later or when they got the ads? That's difficult. Yes, exactly. It becomes complex, and you also have to reach a large volume for enough statistics or data to make a judgement. Yes, some kind of significance. I agree. Hard to set up. What I can say is that we usually run lead advertising.

Not that it's the best way to go. Do you do it for all of them or some? Pretty much all. We had a Black Week with Såpa that went well without lead advertising in twenty twenty…

…two. Then we ran it in 2023, and it went even better. We don't know whether it was leads, better bundles or something else.

We also know we lowered the average discount from 2022 to 2023 and onwards, and it still worked. At the beginning, I think we had 25 per cent off everything, then gradually lowered it to an average discount of fifteen to eighteen per cent.

It sounds small, but it hits the bottom line directly. Exactly what we calculated in the first example; it makes a big difference.

Above all, we cut marketing spend at Såpa, but increase it in other cases. Everything is individual. Back to leads or not: I advocate acquiring traffic, and if we get their email addresses, we can communicate several times during Black Week without retargeting ads in Meta or needing them to see us on other platforms.

I like lead advertising overall and advocate starting early, ideally at the beginning of November. But not too early. If you start in October with Black Week, I think the effect reverses. The cost per lead, CPL, goes up, and you get an almost immediate discouraging effect on sales.

In a case like Såpa, we might start lead advertising only the week before, or ten, twelve, thirteen days before. At Mockberg, ZacZess or Twistboxes, we start a week or so earlier.

Perhaps twenty to twenty-five days before. Then we're back to the same answer: it depends. It depends. You need to weigh up for yourself what works best for your brand. I usually simplify e-commerce and say it's easy: do three things well. Drive traffic to a site, get it to buy and get it to come back. Pretty simple at its core. But this is difficult, and often you let gut feeling guide you. I'm not saying I'm better. I'm data-driven to my fingertips, but I also let gut feeling guide me. It's based on data and experience with hundreds of brands behind me, which means…

…if we're going to make a decision that can't really be A/B tested, because you need the significance we discussed, what do we do? It's hard to test the period. Should we take two countries where we're not that strong, Germany and the Netherlands, and do completely different things? Leads in one but not the other. Then Black Week is over and the learning is for next year. But you don't know whether some major difference in the country…

…affected the outcome. Germans' return rate is usually sky-high. Was it higher during Black Week? I don't know, it's difficult. Then there are periods too. I listened to an entrepreneur who sold a huge amount when electricity prices were higher, products that help you keep warm, warmer clothes…

…indoors. He didn't understand why the figures were enormous. I don't remember the percentage, but they were incredible numbers, based on the electricity price. When electricity prices fell, sales plummeted. He'd thought the campaign was so good, that everything was going well because of him.

Right, a really good example. A follow-up about leads that I always get is how we know what to pay per lead. I usually simplify that calculation with CLTV, customer lifetime value.

If a customer has an average purchase of 400 kronor and a CLTV of, say, 900, that means they come back and buy for a total of 900…

…2.2 times or something over the next sixteen or eighteen months. CLTV has to be within a reasonable, foreseeable future, not calculated for ever.

Then you might wait ten years for the next purchase, which isn't worth it. So if CLTV is 900 kronor, perhaps your CPL cost can be… Your usual…

…cost per lead. If the normal customer acquisition cost is 150–200 kronor and CLTV is 900, perhaps CPL, cost per lead, should be an average of customer acquisition divided by ten. Say 175 divided by ten, so 17.50.

Or CLTV divided by about fifty. Nine hundred divided by fifty, what's that? Now I'm making a fool of myself on the podcast, but it should be eighteen kronor. Better mental arithmetic than mine; I can actually check.

Then you have eighteen kronor, roughly the same in the example. With a CLTV of a thousand divided by fifty, you have twenty. It is eighteen, well calculated.

I rounded 900 up to a thousand, took a thousand divided by fifty to get twenty, and then… Okay, whatever. Quick mental arithmetic.

With a thousand, it's twenty, so there's a certain difference between 17.50 and twenty. You can take an average or see that you're landing somewhere in between.

With a much higher CLTV, say 2,500, you get a higher cost per lead. The difference between customer acquisition cost divided by ten and CLTV divided by fifty is about twenty-five kronor. Perhaps a very big difference to consider. Should I pay 17.50 or forty per lead? I don't know. An average, if you can afford leads that don't become profitable immediately.

Calculate profitability on day one, after six months or after twelve, when the second purchase comes. If you can afford to be patient, break even initially and earn later, CPL can be increased. If you have to earn on the first purchase, stick to the first figure, around 17.50. Usually, cost per lead increases the longer the ad runs.

People get tired of it. Meta takes the easiest customers first, and then the lead cost increases. To lower CPL, you need more creatives, just as in other periods. Have a battery of different lead creatives. Competitions, as you mentioned, questions, trivia or a PDF, such as a cleaning guide…

…a quiz or something to bring down CPL. Those are the best tips. We're piling on the tips. I'm also thinking about how many use credit cards, or Juni and Treyd, to…

…temporarily finance higher marketing spend. Oh, I didn't know that. I don't have much experience and haven't done it myself. I wouldn't have done it myself. However, I know temporarily increasing stock ahead of Black Week is a problem if you have free cash flow problems…

…at the end of summer or beginning of autumn, where we are now. We have to buy in ahead of Black Week to have the bestsellers in place, and that's when people often take those credit facilities.

But you may have tied up so much in stock that you realise you need to free up… Say you have a campaign that's going really well…

…with good GM3 profit, and you want to increase marketing spend. What's that called in Swedish? Marketing cost. Okay.

We can use Swenglish. I'm trying to practise more Swedish. But then the budget might be missing because it takes a few days, even if Shopify is set to pay out every day.

It still takes days, especially over a weekend, to get the money if you want to push and grow during the period. Yes, it does.

You can have an Amex for that too. Always make sure you have money for marketing so the account isn't empty when things are going best.

That's how it is, whatever the time of year, but perhaps even more during Black Week. I'm thinking of someone saying: ‘We don't want to use credit.’ It can also be negative. Companies have gone bankrupt from using too much credit for stock, marketing and all those things. But also dare to use credit if you've really calculated the business case and realised that if we scale now, we can earn really good money.

I agree. Credit is a fantastic instrument in the toolbox. Not everyone needs to use it if they're profitable from the start and have control. But if you've been struggling, it can make the Black Week weekend and the sales much more profitable.

I'm also thinking about companies doing well but wanting to accelerate even more. The budget isn't there, so otherwise they'd have to continue at the same pace as before.

Of course, a good tool to bring out when needed. What's the lesson? Have some line of credit, either a bank overdraft facility, perhaps the best, because you barely pay before it's used.

When you use it, the fee is quite low. Then there are higher ones. If you don't have a bank overdraft facility or have maxed it out, perhaps you can have Juni or Treyd.

There, I want to add that some write ‘1.4–1.8 per cent per month’. But if you calculate what's called the effective interest rate…

…it's about eighteen per cent if you keep using it. Then it becomes awful. But if you pay it off after Black Week when the sales have come in…

I just mean be aware: the money can bring a lot of growth, but if you keep using it, perhaps you'll make a loss instead.

True. All right, let's turn the page. What's in the question box? When do you raise and lower the ad budget? When do you raise it? Back to basics 101: when the ads perform better than expected. You have a target and must have calculated your target ROAS and target MER or ROI.

How much product do we have to sell within a given time? Also understand the delay in sales, depending on the time of day you're advertising. Sometimes it's direct sales, like Såpa: what we spend now should pay off now.

In other cases, like Twistboxes, it may pay off in days or weeks, and everything in between. Understand the delay from ad to purchase, both before and during Black Week.

Go back to your calculation and run the numbers. Above all, know your numbers inside out. If you don't, get help from someone good, like Mr ChatGPT.

It's no harder than that. Feed ChatGPT all the data: purchase prices, Shopify statistics, Meta statistics. Ask for a calculation, then sanity-check it with Gemini or Claude, because you need guardrails. They find errors in the original calculation that Mr ChatGPT…

…sent. Basic tips. Looking historically at the trend across many brands, you raise the budget early in the day and lower it later, except Friday, Saturday and Sunday during Black Week.

Some say changes ruin the algorithm. That's true to some extent, and even more so in the past, when algorithms were more sensitive to changes.

When you made changes, Meta even stated that a budget change could reset the algorithm. There wasn't an exact figure, but say as little as 25 per cent. Then it started over and found the same customers again and again every time you touched it. Now…

…Meta has changed. A year ago, it became possible to take old ads and change the copy. Even if it's a well-performing ad, that doesn't ruin it. The engagement remains, and it keeps running as if you hadn't changed anything. One tip is to take an existing ad with a lot of engagement…

Change the copy to your Black Week offer and then push it. If anything, it's more possible today than ever to make budget changes. You can scale up. It's pure bullshit that you can't. I can sometimes scale up a thousand per cent in one day, perhaps more. I remember the same when we sold other products in the other dropshipping store. We could test for 300 kronor, and I didn't follow the recommendations either. I had a Facebook representative I spoke to, who said: ‘No, increase by a maximum of 25 per cent.’ I was like: ‘But if I spend 300 kronor on a…’

…test and increase by 25 per cent, I'll be retired before I reach any substantial volume. I doubled roughly every four hours, and if it kept holding up, eventually you were at 10,000 a day.

Here I want to give another piece of advice. From 300 to 600, or from 300 to 10,000, the increase is large in percentage terms but not that big in kronor and öre. From 300 to 600 is a marginal increase in monetary terms. At some point…

…it's hard to ruin the algorithm. But going from 100,000 a day in a campaign to 120,000, you're increasing by 20,000. Start calculating CPM and how many more people there actually are in the target audience.

You can't go from 100,000 to 500,000 and expect the same result as from a thousand to five thousand. Brain-dead logic. I noticed that too. Some campaigns stall already at 10,000–20,000. The same thing doesn't work; the effect dies more and more…

…the more you increase. It depends on saturation in the country. How many people in the target audience am I reaching? In little Sweden, you have about six-point-something million Meta users.

How many of them are using the platform today, when you raise the budget? Perhaps half. Of those three million, how many have you already filtered out? You may have filtered out one gender and have only one and a half million left if you're targeting only women or men. Then you think: of those one and a half million people, how many are looking for my product right now, or are in my target audience right now?

You've narrowed it further and may be down to 300,000 individuals to reach. With a CPM of a hundred kronor per thousand, with a few thousand kronor you've started reaching the entire audience.

Per ad, and perhaps you want to reach the whole audience with several ads that day. Then a budget of 20,000–40,000 is fine, but not 100,000, 200,000 or 300,000. Then they've been reached far too many times with the creatives you have.

I also remember how Facebook used to be. Even if it said the audience was 100,000 people, the ad wasn't shown to everyone, but to a selected group they thought was the target audience.

That's right. It becomes a limitation you don't even know about or see numbers for. Unfortunately, there's a black box in the figures behind it. Otherwise, they'd be a little too transparent.

With a larger audience, internationally or in the US, I find that ads that work are easier to scale…

…almost infinitely. Only stock gets in the way. How many of the SKU do I have, and can it be shipped quickly? Okay, we've mentioned lots of terms, so I thought I'd explain. GM1 is net revenue minus product cost.

Gross margin one. Exactly. GM2 is what's left after shipping, fulfilment, card fees, returns and other variable order costs. Yes. GM3 is what's left after marketing, salaries and other OPEX. We haven't talked that much about OPEX…

Very roughly simplified: GM1, getting the goods into the warehouse. Customs and everything needed to bring the product in. GM2, the goods out of the warehouse.

GM3, the costs of getting the goods out, such as salaries, team, marketing, Meta, Google, Shopify and the card fees you mentioned. Very roughly simplified: goods in, goods out and the cost of getting them out.

You mentioned OPEX. Tell us more, what do you include? The abbreviation is about operational costs. What does it cost to run operations?

Things like rent for premises, fixed costs and salaries. Next question: how much do we dare buy in without tying up all our money in stock? Growth companies that are going to grow need to tie up more stock.

A rough, extremely rough, simplified calculation—individual, of course—is that from Singles Day to Christmas Eve or the day before, you usually see a significant increase in sales volume.

If volume increases thirty to fifty per cent in those weeks compared with the rest of the year, or thirty to forty per cent of annual revenue comes from there…

…cash flow and stock purchases need to be planned two, four or six months in advance, depending on the product. If you ship from Asia, perhaps the order is needed six months before.

How do you avoid tying up too much in stock? I'm no supply chain expert, but I make sure to have plenty of the bestsellers so I never sell out of…

…what we call evergreen, products that remain after Black Week. Ideally, buy more than you expect to sell. You want to accelerate if the ads and creatives work. If you're sitting on them after Black Week, so be it.

You sell them in January or during the next year. In Såpa's case, we produce as much as the factory can manage. In another case…

Do you have seasonal products? Not in that way. Sure, there are deck soap and Christmas designs, but they'll work next Christmas too.

Not a good example. Mockberg is better, with trend products. We shouldn't push in too much of what's trendy right now.

But evergreen, a few bestselling watches, must be in stock. No reason not to have them; they're not as seasonal.

They're not as seasonal. But at the same time, you don't want to tie up too much of your free cash flow solely in stock. Then you hinder growth elsewhere and can't be as flexible when other trends emerge and you want to make quick, agile changes. It's not a simple question. Again: know your numbers, margins, GM structure and P&L…

…and otherwise get help from an external e-commerce professional who can structure it and work through it in a few hours. Often, you find costs to cut and save enough to pay back the consultant immediately.

Here, with Claude and Codex, you can also connect to Facebook and Shopify. You can ask questions directly through them and get more data that way. The same with Spiris, I know, which is an accounting platform. There, you can also connect Claude, for example, and even ask questions about the bookkeeping. That would be fantastic, because I'm about to do the annual accounts with a non-calendar financial year. I'm considering doing it, but that's for something else. The question, like many others, is very individual and complex.

Don't tie up too much in stock; keep an eye on capital tied up in inventory. But don't sell out of the bestsellers. One place where you should have deliberate scarcity…

…is the Black Week seasonal products. A Black Week package should sell out and create fear of missing out ahead of the next Black Week or campaign.

Those products shouldn't be left over afterwards for clearance. Then you've messed up ahead of a future season and are eating into your own margin afterwards. Don't do that. If you've calculated and think demand for the package is 2,000…

Don't create 2,000, create 1,500 so you sell out a little early. Then you've done a perfect job and created scarcity. Sure, you lose a little on the last five hundred who don't get their package. But you've created hype in the community, so they buy in the future. We worked closely with a company in nails. There, we constantly created fear of missing out for as long as we worked with them, so it always sold out and we could push that. We also worked with a dress company early in Porobic Group's journey. There, the whole launch strategy was that we had to sell out. There has to be scarcity, hype has to be built. There really has to…

…has to be. Sometimes selling out is positive for the brand, especially seasonal products that can't be sold after the season.

Then there are evergreen bestsellers where selling out costs an enormous amount. Customers might choose a competitor. If you sell out of your…

We ran a shampoo company in haircare. If the bestsellers sell out when people need to replenish, what happens?

They're not allowed to shower for three months. That doesn't happen, of course, so they buy from the competitor. The risk is that they stay there, in their email and SMS systems, and continue there. High risk; you don't want to go there.

What do you think about people being or not being loyal? People aren't loyal to begin with, so to speak. Loyalty is a difficult concept in commerce today. Many talk about building community, loyalty and built-in ambassador programmes. It's fleeting, because consumers have many alternatives and switch between brands. Once, people were more loyal, for example to the company they bought their car from. My dad could buy one car brand and stick with it for twenty years. Extremely loyal.

Then he switched and has kept switching car brands. No loyalty today. It's fleeting because there are more choices than ever and it's easier than ever to start a company.

At the same time, we're bombarded with more advertising messages than before. Loyalty is declining. A better, cheaper or more innovative product always creates a risk of losing the customer.

I think so too. In the past, you weren't exposed to as much advertising. I remember TV ads when you were younger that you were forced to watch, no choice…

Sort of. You're bombarded with more advertising today than ever, and it's more tailored and adapted to get you to buy. We've become much better at the human, psychological and behavioural aspects than historically. It's faster and easier to test messages, test products and scrap things that don't work. Everyone has levelled up quite a few times just in recent years, not to mention the last decade. Then there's a question that fits here, on loyalty: how do we get someone who shopped during Black Week to make their next purchase at full price? It's incredibly important, but also very complex. The question needs to be broken into several parts. What type of customer was it? A returning customer who…

…bought at a discount but previously at full price, or a first-time customer? We'll make it a cliffhanger and save it until after Black Week, in December. Then you'll get a longer answer based on data…

…and actual figures from some cases we work with. Great, I'm looking forward to that. Brilliant. With that said, let's wrap up today's podcast. I hope you like it, because we sit down on the morning sofa almost every week because we enjoy sharing. If you're along for the journey and running a company from zero to a hundred, or feel you get something from the podcast, share it. Go in and like it. Subscribe on YouTube, for God's sake. We only have about fifty subscribers there. Now I'm exaggerating; I don't even know if we've reached that. Around fifty.

Incredibly few, and we've been publishing the episodes… To be able to pay the editor and keep enjoying it: subscribe and like when we post on LinkedIn. The least you can do is like and comment. It motivates us to do this every week so you get good content to listen to and hopefully learn from.

Share it with a friend, colleague or family, and that'll be good for us. Thank you so much for listening. See you next week, the same Thursday and morning. Bye!

Bye.