Everyone wants to start a DTC brand, but how do you actually grow it from scratch? Nik Sharma shares lessons he’s learned from building some of the most well-known brands.
Nik Sharma is one of the world’s best startup growth marketers. He’s helped to build brands like Judy, Caraway and Hint Water. The next Coca-Cola and the next Unilever will be built using the principles we’ll dive into below. Of note, this conversation is really important if you want to build an online brand and you don’t want to pay all of your marketing budget to Facebook and Google.
How Nik got started in DTC marketing
Garry: Nik, thank you so much for coming on the YouTube channel. You have a wealth of knowledge about direct-to-consumer (DTC). You’ve launched many pretty amazing rocket ships whether it’s Judy, Haus, Caraway… How did you know that you wanted to do this (work in media and tech)? You’re quite young, and you got started so early.
Nik: Yeah. Well, first of all, it’s an honor to be on this YouTube channel with you considering everything you’ve done as well. When I was in high school, I was never the smart kid. My 15-16-year-old immigrant mindset was like, “All right, well, how am I going to pay for a house and a car and all this one day if I don’t have good grades today?” So I started thinking, “All right, I’ve got to figure out how to get good at something [so] I’m not struggling later in life.” This was probably my sophomore year of high school when I was in San Diego.
I started thinking different things. I was deejaying at the time. I was always hustling in some way, and at that time, it was deejaying. One of my neighbors was Jesse Pujji, who runs a company called Ampush. Ampush is now one of the largest advertising companies, but at the time, he was just getting started. I’d hear him — his family and our family would get together all the time — and he would always talk about Facebook advertising or social media marketing. I started getting interested in that. One thing led to another, and I started doing social media for different celebrities — again, all through just cold emailing and trying to get into those networks. After that, I deferred college initially, and I joined an adtech company in San Francisco. There, I got to learn the side of paid marketing — advertising basically — everything from how algorithms work to how machine learning works to all [of] the complexities behind paid advertising. I was also working with brands, whether they were publishers like Refinery29 or Complex, to companies like Walmart and TripAdvisor and really large Fortune 100 companies. [I was] trying to learn and understand how they all use paid social, programmatic advertising or native advertising in different ways. I got a good combination of knowledge through both the organic social side as well as the paid side.
How Nik got his first role as Director of Performance Marketing for Hint Water
At the adtech company, one of the things I was also doing was sales. Naturally, I was also just chugging Red Bulls and Rockstars. One day, this brand, Hint Water, showed up in our kitchen. I pretty much shifted all of my Red Bull to drinking Hint. I got addicted to drinking Hint and I started being really corny on Twitter…tweeting the founder and tweeting the company and placing really big orders for our office kitchen. After I left that company, the Hint founder and I were DM-ing about, “Well, maybe there’s something we can do for Hint.” Fast forward a few months, and I ended up joining Hint as the director of performance marketing.
Garry: Oh, interesting.
Nik: Yeah, so I didn’t really have any formal experience or formal education either. I basically joined [Hint]. One thing I realized was the cost of a click from an ad platform to their site was really expensive. Whereas for publishers, we were getting clicks for pennies and that was one of the greatest things we were doing for publishers. So I was like, “All right, well, how do we create interesting stories here? And instead of selling the what or the product, how do we sell a reason or the why or [a] story behind something that gets somebody on their own [to] want to invest in the product?”
Right around that time in early 2017, The Hustle, which is a newsletter, was picking up traction. I reached out to my friends at The Hustle and said, “Hey guys, I have this crazy idea. You guys are a newsletter, but I want to take advantage of your site and I want to put up an article that talks about one of the founding stories of Hint.” Kara, who’s the founder of Hint, was like, “Well, I’m not really sure what I should do with this now because I’m a tech executive, not a beverage executive. Should I maybe call somebody at Coca-Cola and see if they just want to take it off my hands?” The response that she got was — in a very demeaning way — “Sweetie, Americans love sweet.” We decided to take this story and talk about how she built the product, how she got to that point with that phone call, and then she decided she was going to be one of the few pioneers in creating something that is unsweet but still enjoyable — that’s what the article was.
Every time that the brand Hint is mentioned — I don’t know if it still does – but at the time, it was going to a landing page where there was a very clear offer to try the product and essentially sample what Hint is. We launched this campaign on Facebook ads initially, leveraging The Hustle and promoting the story, which then sells the product. All of a sudden, our acquisition costs dropped by probably 70%. We essentially [increased by] 5x — our number of new customers per day within the first week — and [increased our customers by] 8 or 9x within a month per day; it just led to this hockey stick growth. At the time, I don’t think DTC was really a term. My job was… or at least this is what the CFO told me: “Look, nobody really lasts in this position of performance marketing. Your job is to just simply acquire customers efficiently. That’s what it is.” [So,] I was always focused on how do we test new tactics and test new channels. We found this storytelling angle to really be something that brands were not really doing. Brands were really promoting, like Hint’s example: try two cases of watermelon, one still and one sparkling, and get 20% off versus this is the story that led to the creation of this brand, which makes you internally feel like, “Now I want to support this brand.” I spent two years at Hint and that’s kind of when DTC got its name.
Garry: Which is not that long ago. It was fairly recent.
Nik: No, probably like, yeah, two to three years ago.
Garry: That’s why there’s not a university for this because you can start the university when the time is right.
Nik: Exactly. That’s kind of how I got into it. I was a huge fan of the brand. I was really young. I had nothing to fall back on, which meant I had to work 10x harder.
Product first, then marketing
Garry: That’s awesome. I mean, necessity is the mother of invention. And it sounds like there are a bunch of things that you can extract from that. First off, I guess having a good product helps a lot.
Nik: Product is the foundation to anything that does well.
Garry: Yeah, I think you got that right.
Nik: Whether you’re a services business or a CPG business or a SaaS business… If the product is not there, all [of] the marketing in the world won’t be able to do anything for you.
Garry: Yeah. And then after that, it sounds like a recognizable, understandable brand helps a lot.
Nik: Yeah, totally. Create some kind of foundation. The best way to think of it is like, “How do you create this walkway between you, whether you’re a brand or an influencer or a tech company, and whomever you’re trying to get to, whether it’s your customers or users or followers? What does that walkway in-between look like where not only you can walk but they can also walk, and it’s a very even playing field?” There’s no one side higher than the other. It doesn’t feel like a teacher-student relationship. It feels like you’re kind of all on the same playing field. It’s similar to when you think about the art of the sale. You always start with the common ground or when people talk about the weather; talk about something that’s common for everybody first and then figure out a way that you become relatable to your consumer or your user.
Garry: Yeah, it’s interesting. When I was in college, I did some research with a professor named Cliff Nass. His whole thing at Stanford was people treat computers like people. Now that media has been eaten by software, it’s actually [that] people treat brands like people.
Garry: “Oh, hello. Great to meet you. This is where I’m from.” It’s very human, which is easily lost. The second you add digital to the front of any title, people think that it gets very technical and it’s pure code and all of that, [which] couldn’t be the furthest from the truth. It just goes back to telling a good story; being identifiable and relatable; feeling when you meet someone who’s trying to do something different or noteworthy, you want them to succeed. Then, you actually have a relationship with that brand. I do think that that’s a new thing, especially in the face of what consumer [business] looks like in 2020 under the thumb of some of the world’s biggest technology monopolies, right? Whether it’s Facebook or Google, this is actually the reaction. This is what the rebels have to do. This is tattooing actually, which is interesting.
Tips for starting a DTC brand from scratch
Garry: Going from there, a lot of people watching will actually want to start their own DTC rocket ships, like your experience with Hint or Judy or Haus. What do you tell them? Starting from nothing, what do you start with?
Nik: Yeah, I mean, I think one thing that has happened over the last year and a half in this world of consumer [is] there has been a shift from “oh, let’s launch the nth skincare brand,” which is basically the same products from the same manufacturer with just a new label on it, to “let’s actually look for what are people asking for to be solved.” So the real question is: Is your brand solving a problem that wasn’t already solved or is it solving a problem in a more efficient, faster, better or more accessible way? And if it’s not, then it’s probably not something that is, first of all, relatable to a consumer.
Garry: You got to be better, faster and cheaper.
Nik: Exactly. You end up spending almost just aimless marketing dollars trying to convince the world. When you’re pushing something that doesn’t really have a functional purpose for the end consumer, you can’t really create a community around it because there’s nothing to share about what it did for somebody. The biggest thing with a lot of the brands that I or my team has focused on in the last year or so is a lot of them help solve some kind of problem consumers are having. Now, whether it’s Haus where they’re solving the issue of not wanting to be hung over the next morning after a cocktail at night….
Garry: You want to have a good time but you don’t want to have too good a time.
Nik: Exactly. Or with Judy, for example. There are emergencies that are happening, [and] 60% of the country’s not prepared. But if you go to Judy and buy a kit, you and your family of four are fully prepared for 72 hours with food, water, supplies, etc. The real question is: What does your company or brand do that functionally enhances a consumer’s life? If there’s no real answer there, then it kind of puts you in the backseat.
Garry: Yeah, there’s not even a reason to be, right?
Garry: Yeah, that makes sense. I recently learned a new Japanese term on Twitter — chindōgu — which basically [means] if you buy [an invention] to solve a problem, it actually causes more problems than it solves. That’s the difficulty in working with a lot of founders. It’s actually remarkably hard to look at your own creation. Founders make a thing, and the gatekeepers, like investors or for you, when you decide to work with a brand or not, the two of us are often the people who have to say, “Your baby is ugly. Sorry.” I have to say it in a really nice way, but it does sort of come back to like, “Is this actually better, faster, or cheaper? Do people actually want this?” That was definitely the repeating problem that we saw at Y Combinator with thousands of people trying to apply all the time. It was the number one reason that people didn’t get in; it’s not actually clear [if] anyone actually wants this [product] and it’s actually okay. [The] people starting companies will not know.
Nik: If your product truly is something that is great, then maybe your messaging is wrong. Maybe the way that you’re approaching consumers is wrong [or] the distribution methods you’re going after are not the right ones for you. Being wrong could be the thing that helps you almost re-understand what you’re trying to do.
Paid acquisition vs Organic: When do you do each?
Garry: So it definitely starts with the customer and what their problem is, and it is solved. Are people happy at all that you exist? Hopefully, the answer is yes, and if so, then you can work on a brand. Then, you can get a website up and running.
It feels like there are two big parts of getting customers. One is obviously the pure paid side and then there’s the organic. If you were just starting out, what would you advise people? Do you start buying ads off the bat? Tim Ferriss has famously said in his book “4-Hour Workweek” that you can just put up a landing page, buy some ads and actually see — you can validate before you build a single thing — whether people want it and you can use ads to do that. Do you advocate that kind of strategy? Are there things like that on the paid side that you’ve seen work?
Nik: Yeah, you definitely can. You can use unbounce.com. You can go sign up for a free trial [and] put up a landing page within an hour. You can throw your Facebook and your Google pixels on there so you can understand who’s coming there and you can capture the data. For example, if you’re launching a skincare brand and you’re selling a cream and that is your flagship product, you can throw the cream up there and talk about all the benefits [and] explain why somebody should buy it. Right from there, they can click “add to cart.” It’ll drop them straight in the cart on their Shopify site. That’s a very easy way to understand if your messaging, positioning and the way you’re talking about it are right.
What it doesn’t do is it doesn’t build a really strong foundation for the organic word of mouth, the organic referrals, the reviews that might come back or even the love for the brand. It might functionally help somebody and create or solve a problem they have — and maybe that’s all they want. There are some customers that just don’t care. They just want the product, and that’s it.
I always definitely recommend having some kind of organic traction initially. The best way to think about paid marketing is: take an image and paste it in a Word or Google Doc. When you stretch it, it gets blurrier and blurrier. With paid marketing, you’re taking your brand and stretching it. You’re making it bigger and bigger, but it has to be a very high quality photo in the first place for you to stretch it. Otherwise, it’s just going to get blurry and blurry. In my opinion, Haus is a great example. They didn’t run any paid initially; they just reached out to a bunch of people. Helena obviously has a great community of people she’s worked with in the past and who follow her on Twitter. Even if they didn’t have that, what they did have was a very exceptional and expensive — but it was worth it — unboxing experience for their product. I’m sure you’ve seen the investor deck for the raise after the seed. There were two or three slides on just photos being reposted of the unboxing; that’s what drove all the initial word of mouth. When people who were unboxing it take a photo, they put it on Instagram, tag the brand and post it to their stories. Not only did that give them a ton of content but if you posted it and I saw it, I’d be like, “Whoa, this is something I want to try.” Now, I’m going to the site organically without being paid to do it or without her paying somebody for me to get there.
I firmly believe that brands that go and really conquer the organic route before really getting their hands or their feet wet in paid are the brands that not only are a lot more in touch with what their consumers want going forward but they are [also] brands that will definitely last a much longer time. For example, if Haus were to cut all [of] their paid marketing today, they would still have a fantastic business. But if a company that basically only launched on paid — and that’s pretty much all they do — they would be hurting. And you see it, especially through this year. There’s been so many times this year when the paid media platforms have been so horrible to use.
Garry: I’m sure CAC (customer acquisition cost) is up a lot.
Nik: Yeah, and they’re spending so much. There are multi-billion brands that I know of that said, “You know what? We can’t even afford this. We need to turn off all advertising.” For a brand like Haus, that doesn’t matter because they have so much going for them on the organic and content side. They have great social reach. It’s also a product that people just genuinely love.
Garry: So it sounds like paid may be for validation and sort of a way to put more capital into growth, but without the organic, you are just not going to make it.
Nik: Yeah. Another great example for paid is when we started running paid ads for Judy. One of the things we learned was how people wanted to be communicated about the Judy product itself. We decided we wanted to start running national TV commercials. And so we said, “All right, well, let’s take six of our concepts of what we want to run on national TV. TV is not that cheap or quick to test. Let’s figure out —using paid media digitally —what we can do to test all these concepts. Let’s go produce these videos and test them all.”
Then, once we understood which one had the best reaction, engagement, shares, conversion [on social], that’s what we then took as our North Star for what we needed our TV commercial to be. And we produced our TV commercial using results we already had from there. Basically, we did that exercise using paid media digitally so that we were a lot more on point when it came to our national TV buy, which is a much bigger investment.
On Organic Marketing: How to hustle with cold emails
Garry: Shifting gears over to organic — the Haus example is great but that was probably a lot of Helena’s connections. What do you say to someone who hasn’t been around and doesn’t have the connections? How do you access that — The Hustle, cold emails and have a good product? Have you seen that work?
Nik: Yeah, definitely. I mean, Helena has a great example. She tweeted a while back about how to reach out to reporters and editors and ask them to try your product and see if they would write about it if they liked it. That’s one way. The other way is you just start DM-ing or you post it on your organic social media. Go to sites like Reddit and Product Hunt or create compelling reasons for why somebody should try it in the first place.
You start by essentially putting it out there. You don’t have to start with a big following or $100,000 in paid media. You can start playing in all these different niches. You can go to search on Twitter and type in keywords. For pure cream, you can type in a keyword for mask acne for example, and [for] anybody who’s complaining about that, you start replying to them with, “Hey, by the way, this is how you can get rid of it or you can also check out our cream, which helps you kind of get rid of this product or this issue.” There are so many ways you can do it. It only takes one customer to try it, think it’s great and [to] start spreading the news like wildfire.
Garry: That sounds like the pattern for online marketing, especially in the past 10 years. The pattern that repeats over and over again… doesn’t matter if it’s pure social. Even SEO is fundamentally built on this.
Nik: SEO is huge. It’s very underrated. Whether it’s creating really good content that lives on your own site and thoroughly answers questions for people, whether or not they become your customers… Or whether you have a really smart back linking strategy [that] is consistently linking back to your sites.
Garry: Tracking down people who are willing to link is kind of spammy, but the ideal version is not that spammy.
Nik: Yeah, the ideal version is you might be co-producing really high quality content or seeding really high quality content to other websites.
Which channels should you focus on?
Garry: This is a hard question to ask but are there best channels? Is it TikTok? Is it YouTube? The real answer probably depends on what you’re selling, but what are you seeing in the marketplace right now?
Nik: The real answer depends on two things. One is what your product is and who you’re going after. The second is how good you are at creating content that’s native to that platform.
Going back to the cream example, if you’re really good at just making landing pages and really simple direct response videos, it might be better off on Facebook and Instagram. If you’re good at making funny content or content that does well on TikTok, then maybe you can shift gears and focus on TikTok where you rely on the organic reach that comes from the content you put out and the cream is somehow integrated within what you’re doing on TikTok. If you’re good at creating long-form videos about solving skincare needs, maybe YouTube is the best place to do it; you [can] answer questions that people come to YouTube and search for. If you’re really good at writing and you love it, then maybe your best channel of marketing is SEO.
It really depends on what you’re really good at. Obviously, once your company or your brand or whatever it is gets really large, you’re going to want to be on all [of] these platforms. Initially, I always say, “Try to focus on one or two channels and really go deep on those channels. You want to master one or two channels so that you can get that traction efficiently before you just start blowing money on everything.”
Garry: That’s right.
The other interesting thing I find is [that] there are actually these giant communities of behavior on YouTube or TikTok or elsewhere that depending on what you’re doing, you might just be able to tap that. YouTube is not one YouTube; it’s maybe tens of thousands of different, incredibly niche, long tail things, and the algorithm has already clustered that content. That’s why collabs are so valuable for YouTube, which is interesting. Being able to leverage what is already built into the network seems to be one of the most important things to know.
Nik: Totally. I think another big thing too is being really consistent with the actual branding. So for example, if you go to Google and search DTC Guy, the entire page is just me. That was by mistake. It wasn’t something I planned for.
But one thing I learned from that was — when my friend David Perrell just made a joke that, “oh, this is the DTC Guy,” he made me put it in my bio. That’s just what I went by for a little while. Now, if you search DTC Guy on Google, all you’ll see is me — being consistent with brand helps because the more places you put it out, the more places it helps almost consolidate it back.
Garry: Yeah. In the end, compound interest works well for investing — and it works well for brands as well — over the course of years really. It takes years to actually build these things. The crazy thing is when it pays off, it pays off so well. If you spend any time looking at See’s Candy, for instance, a good chunk of Berkshire Hathaway is off of the profits of See’s Candy being reinvested year after year. It threw off something like $5 billion worth of free cash over 20 years. Add that to the compounding of being in great companies over time and continuing to reinvest. You can’t lose with that kind of strategy.
Nik: I forget the quote — exactly — but it’s something about [how] compounding interest is a lot of nothing and then a lot of something really big.
Payback period is a myth
Garry: Yeah. First a little then a lot, which is nuts. In terms of economics, how do you think about it? Does it matter? Is it repeating versus not? How do you think about the payback period? Is that like the gold standard to measure all of these different channels?
Nik: The idea of payback period was a huge belief among investors for the longest time. Some really smart founders convinced investors that it would work.
The reality is that you can’t spend an insane amount of cash acquiring a customer only in the hopes that they would one day pay off the cost of the acquisition plus all the time in between to keep the lights on. Now, the way at least I think about acquiring customers or even economics in general is that you have to put margin and profitability first. Any other way is like driving on the highway backward, which doesn’t make any sense.
Obviously, if you’re selling cookware set from Caraway, you need to focus on being profitable on the first purchase because you might not have another purchase for the next two or three years from that same customer. Now, obviously it’s on the business to try to figure out from a product expansion standpoint how they can make that happen. But if you’re someone like me, maybe I just want a cookware set from Caraway and I don’t care for anything else that they come out with. There are customers like that. But if you’re a food or bev company or a cream or something that’s replenishable, then maybe you’re okay with taking break even on the first purchase or losing just a tiny bit on the first purchase because you have proven economics that this person will probably come back and your average purchase frequency per year might be six purchases. You know that by the time they get to the third one, you are now profitable and generating money back on that user. But it’s almost stupid to just blindly assume that your product is so good that you can wait to make the money back on the third purchase — unless it’s truly proven. Any other way to go about that is not very wise in my opinion.
Garry: Yeah, that’s probably the most dangerous thing about working on DTC consumer brands. You can look at your spreadsheet and feel like you’re fine, but you might actually all along have been selling twenty-dollar bills for $19 or sometimes $2. It’s tricky.
Nik: Yeah, exactly.
What does Nik wish he knew when he was starting out?
Garry: You’re onto such a great career in a very important space that’s brand new. There’s no university for this. What do you wish you knew when you were 15, [when you were] just starting off? Do you have any super hard lessons from that time, like “don’t step in this one”? What was the most surprising [lesson]?
Nik: Two easy ones. One is to probably focus on getting eight hours of sleep a night. Focus on getting proper sleep and focus on taking a proper weekend off and not hav[ing] to work every minute of every day in order to “compete” with others.
Another one is to be extremely open about everything you’re doing. One thing I’ve learned since probably 2018 is [that] the more I talk about the stuff that I do, the more I tweet about walking out of a meeting and thinking, “Wow, that was a really good campaign or that was a success. Let me put it out on Twitter or let me talk to other people about it,” the more I found myself surrounded with smarter and smarter people. I wish I had done that earlier. I used to think, “oh, I can’t give my best secrets away,” but the truth is that one, nothing is really a secret because somebody’s probably already done it or doing it if you’ve done it. Secondly, it allows you to create stronger relationships with people when you can talk about the things that work really well or that they can do. It can be very helpful to them. It just pays off in dividends.
For more conversations like the above, along other leadership and startup topics, be sure to check out my YouTube channel and subscribe. To stay up-to-date with all the latest in DTC, follow Nik Sharma (@mrsharma) on Twitter.