How Obvi Overcame Our Biggest Challenges

Hi everyone, 

Welcome back to another bite to chew on. 

Two years ago, everything changed for us.  

24+ months of the COVID pandemic had upended everything, from supply chains to inflation and interest rates.

And the IOS14 update stripped Meta of 50% of its data.

All of a sudden, building a business became harder overnight → 

• Advertising became more difficult

• Money and financing became more expensive

• Ordering inventory became a nightmare

We quickly learned that we had to become much more strategic and purposeful in the core aspects of our business. 

Or we wouldn’t have a business. 

This year we surpassed $80 million in sales and we’re more profitable than ever. 

But even as recently as 18 months ago, there were times when we weren’t really sure Obvi would make it. 

We know there are other DTC brands out there struggling with their own challenges. 

Hopefully, this dive into our experiences will help. 

On the menu

• Post-iOS14 marketing pains

• Confronting our identity crisis

• Evolving our finances and cash 

We have a confession to make. 

We recently stopped doing competitor research. And the benefits have been HUGE.

Competitor analysis is obviously extremely valuable. But it takes a ton of time and effort.

You have to comb through ad libraries, product catalogs, websites, brochures, and sales data - that’s if you can find all this stuff. 

Then you have to put it all together to make sense of it. Dedicating enough time and resources to do this right became a major barrier for us.

Until we tried out Particl → a new competitor intelligence platform.

With comprehensive data from over 20,000 e-commerce brands, heavyweights like Hexclad and Gymshark are already using it. 

The best part for us is their super powerful dashboard of reports and visualizations.   

Now if we want to look up our key competitor's sales, product catalog, or pricing models, we have real-time access. Right down to the individual SKU level. 

Because of that, Particl has leveled up our market intelligence while drastically reducing the pain and effort that usually goes into developing it.

So, yeah - market intelligence is still super important to us. 

But we’ve ditched the old ways of doing it and switched over to Particl. 

And we’ve never been more plugged into what’s going on in our industry.

Right now Particl is offering a 14-day free trial.

If you’re a brand in a hyper-competitive industry (like us), then check them out and see if they can help you get an edge over your competition. 

Post-iOS14 marketing pains

If you were around in the Pre-iOS14 days, you know it was much easier to just feed Meta $1 and get $3 in return. 

These days, a lot of brands are lucky to break even on the platform. 

Obvi was no different. 

We went from cruising along with Facebook advertising basically being our lone growth lever to hitting a brick wall. 

All of a sudden our ads weren’t profitable. We tried doing the things we had done in the past to get over the hump. It didn’t work.

We had to start turning down spend because of our ballooning cost of acquisition. 

But that’s a vicious cycle - 

It means you’re trading growth for profitability, which eventually shrinks your awareness. 

That, in turn, shrinks your new customer acquisition, and then your volume, and then eventually your business altogether. 

So we had to find another way. 

What we had to learn

When the money taps turned off and Meta CAC’s jumped, it forced to focus on 3 core things:

• Creative development

• Commitment to CRO

• Organic visibility

Creative development

The first major lesson was we were not testing enough creative.

In terms of ad concepts, landing pages, offers - none of these things were really a priority for us previously.  

We used to focus on testing 3 to 4 ad concepts a month (because that’s all we really needed.) 

These days, we test 30-50 ads per week. That’s how drastically we had to change the way we marketed on Meta. 

When we first started to struggle, we went back to what had worked so well for us - authentic-looking, lo-fi UGC-style videos. 

We seeded products, made scripts, and flooded our account with this style of ad. But it didn’t move the needle. 

What we actually needed was creative diversity. Not more of the same.  

Our FB rep confirmed this was an issue and shared a version of this graph with us: 

When we mapped our ads using this framework, we found we were completely over-indexed on the low-quality, video ads quadrant. 

So we set out to fill in the gaps in our account. And we saw things begin to improve, new audiences opening up, and better performance across the account. 

Of course, just “make a lot more ads” sounds easy, but creating new and different concepts all the time can be a huge roadblock. 

Especially if you were used to only doing a handful of times per month.

To adapt we learned how to regularly mine data from our customers to help generate fresh concepts →  

• Post-purchase surveys

• Product reviews

• Ad comments

• Customer service tickets 

Now we constantly seek to out th conversations are happening around our products and how to turn them into ad concepts. 

The last big, thing we discovered was → expand our top-of-funnel messaging. 

We needed to go beyond marketing to people who are already in-market looking for the solution we offered.

Instead we had to find and appeal to people who are part of our target demo, but may be not be problem aware yet. 

This way we can be top of mind when they start looking for a solution.

Commitment to CRO

We’ve projected our CAC to increase by 20% every month over the next 2+ years. 

When we tell that to other founders they ask - “How do you plan to combat that?”

By improving our conversion rate by 20%+.

We know - CRO is often considered complicated, but it doesn’t have to be. 

We have done a lot of the advanced stuff over the years like in-cart upsells and free shipping threshold, but - 

We have also found that just A/B testing stuff like messaging, headlines, and images on core elements of your website can make a big difference.

Resonant messaging, images, and headlines + fixing friction in your buy flow = drastically improve your CVR.

And If you can increase your conversion rate at a higher rate than CAC increases, you win.   

Organic

We have recently become obsessed with getting as many eyeballs on the brand as cheaply as possible

(meaning outside of paid media on Meta). 

The more you can do to raise awareness of your brand for free (or for pennies on the dollar), the more you can assist your paid media efforts and lower the cost of acquisition. 

How have we tackled this?

• Community

• Influencers

• Creators

For example, we’ve sent 2,000 care packages to influencers over the past 6 months alone, just to get more visibility and fresh audiences outside of Facebook. 

We have also committed to engaging with our Facebook community and sharing high-value, educational content. 

These core factors took us 5 years to understand and perfect.

It’s embarrassing to say we weren’t doing any of this 18 months ago, but the post-pandemic changes that happened forced us to evolve.

Confronting our identity crisis

It wasn’t all about our marketing. 

We also faced an identity crisis. 

Obvi began as a women’s health and wellness brand that made collagen fun and exciting.

But we drifted to other things over time that didn’t seem to tie back to our mission. 

As we experienced some success, our focus wavered and we started expanding our offering in all sorts of directions, including:

• A sexual wellness powder

• Protein bars

• A nootropic

• A kid’s protein powder

We were chasing so many trends in our industry that our website began to look like a dropshipping company due to the wide variety of stuff we were selling. 

We eventually realized we went way too quickly and were too scattered. 

The brand was confused and we had a bunch of products that weren’t contributing to the bottom line. 

It took us a year to go back over our offerings and rationalize our SKUs. 

We brought our brand back to our core, which was collagen, but we had to go through this painful process first.

Here’s how we rationalized our SKUs → start a spreadsheet 

• Column 1 → SKU name

• Column 2 → SKU Revenue

• Column 3 → Cost to make

• Column 4 → Cost to sell 

• Column 5 → Reviews

This exercise was clarifying. It showed which products were cash cows or had high velocity, and which products were simply clutter. 

We discovered we were married to random products for no reason. 

We were forced to pare our catalog back and even get rid of stuff that we personally liked but weren’t helping Obvi grow. 

This process also forced us to reconsider how we created new offerings. 

Instead of just formulating products with a bunch of stuff we think our customers might want, we now make sure to dedicate a lot of time and effort to research and customer feedback. 

That means we’re no longer rushing to market with half-baked product concepts.

In fact, even when we have a new product that sells out immediately, we don’t immediately double down and place a massive 10,000-unit PO for it anymore.

Instead, we are committed to months of testing to ensure we have the formula right and the product has staying power. 

Figuring out our finances and cash

When money became expensive and profit became harder to come by, we had to go back and re-assess our finances and our cash flow. 

A major realization for us was → 

Marketing is finance. Finance is marketing.

We used to silo these two functions in our business, but now they are tightly aligned. 

Pre-ios, the metric we looked at was MER (marketing or media efficiency ratio). 

The problem with this was it didn’t tell us anything about new customer vs returning customer revenue or how efficiently we were acquiring new customers. 

We still look at MER, but it isn’t our main KPI.

We have moved to Contribution Margin. We monitor this on a daily basis because we want to know how much net profit we are adding through our efforts. 

We track this metric hourly in our dashboards. 

But we also have a daily P&L report from our finance team that looks at whether we’re in the black or not. They will flag apparent overspending with our marketing team and we will look to diagnose and adjust. 

Those checks and balances have been important for us.

Negative cash conversion cycle

We also made a habit of looking at our P&L more frequently. 

If you’re a brand, you should be looking at your P&L around 5 to 10 times per month - not the typical “mid-month review”. 

Those days are gone. 

Having a feel for your business by the numbers is non-negotiable in this environment. 

One of the things this did for us was it made us get serious about inventory and cash flow. 

We set on a mission to achieve a negative cash conversion cycle. Meaning - collecting money for your inventory before having to pay for it.

Here’s how we’ve done it:

• Better payment terms

• New credit solutions

• A focus on pre-orders

One of our biggest financial unlocks was asking for better payment terms from our suppliers in exchange for a higher per-unit price. 

They were all happy to make more money in exchange for net 30 or net 60 terms. So now we have a longer time frame to pay off our inventory. 

We didn’t stop there though.

We found new Fintech tools and credit cards with extended payment terms. These credit options things can often add another 60 days to your payment schedule. 

Finally, we started leaning into pre-orders for new product releases.  

Not only does this build hype with our customers (Get our new flavor NOW or else it will be sold out), nut it means we’re usually completely sold out of the first batch of inventory before it even lands in our warehouse. 

When you add it all up, there are times when we are paying for inventory 120 days after ordering, which has revolutionized our cash flow and made managing  

Today our focus is increasingly to make the money on our inventory before we have to pay for it.

Sum it up

Starting a brand or launching a business has never been easy. 

But things got so much harder a couple of years ago thanks to macro factors like COVID and iOS-14. 

In fact, we didn’t just struggle with things strategically and tactically, but emotionally.

The speedbumps we hit forced us to evolve the business in terms of our marketing, product, and finance - but we all had to battle with disappointment, embarrassment, and imposter syndrome when things got really hard. 

The emotional toll when you’re struggling can be extremely stressful and it can impact your perception of yourself as well as your relationships. 

We not only had to figure out what needed to change in order to survive. 

We also had to learn how to be open and honest with each other, stay committed to our mission, and find the personal motivation to stick with it and adapt. 

Even in the face of doubt and anxiety.

We’re excited and relieved that we found a way to persevere. 

It was extremely difficult, but it has also been super rewarding. 

So if you’re facing tough times right now, just know that there can be a light at the end of the tunnel if you stick to it. 

All the best,

Ron and Ash