The Loyalty Podcast
Podcast 67 - Loyal Customers As A Sales Channel
(upbeat music) - This Law to Podcasts is brought to you by Tricycle Marketing. Since 1996, Tricycle Marketing has provided advisory, studios and technology platform services. Tricycle's Insights Outward Platform is a proprietary platform as a service law to solution built from the requirements of over 100 law to implementations, serving the retail, entertainment, dining, travel, financial services and healthcare industries globally. For more information, please visit tricyclemarketing.com. Now, before we get started, here is a taster of the conversation to come. (upbeat music) Whoever can own both sides of that value chain is going to win massively. Because if you can own the traffic and the transaction, you've got this entire ecosystem where people don't need to leave and you're profiting from all sides. Tic Toc have cracked the code. Now, they are the first people, really, who, you know, they've got the social media side. They've released their shopping feature. And for the very first time, it's actually a feasible platform where we're seeing real brands have a lot of success. (upbeat music) Some of these creators are generating six figures for themselves, like in commissions each month. There's serious, serious money being made by these creators. And as the creators realize how much can be made, we're seeing a flood of affiliates and creators and influencers coming in. (upbeat music) - Hi, I'm Ian Pringle. This is the Law to Podcast and Law to Wired, where we help you make the most of your law to strategies by listening to us talk about what we like to talk about most, which is Law to Law to programs. We read a lot about the three stages of web, where web1 was static pages, web2 was interactive content, and web3 was moving towards a time where users rather than centralized authorities have control. We've seen the same trends in loyalty, where the first generations of Law to programs with static one-size-fits-all propositions were replaced with more dynamic content where no one member gets the same experience. But what could web3 of loyalty look like? We've all seen the full storms of blockchain and NFTs, but could the explosion of TikTok shop give us the first glimpse of what customer control could really deliver for brands? And does social commerce have the potential to eclipse Amazon or even Google as a sales channel? To slow this fascinating question, I'm joined by Mark Ross of Console Social, who's an expert in this area. Hi, Mark, and thanks for joining us on the Law to podcast. - Yeah, thank you for having me. - It's a great pleasure. So to get a started tonight, Mark, can you give us a brief introduction to yourself and also just talk through what we mean by social commerce? - Yeah, absolutely. What you said, my name is Mark Ross. I run Console to Social, and we are a TikTok marketing agency, serving DTC and e-commerce brands. So we've been in the TikTok space for a good number of years and I've probably going on three and a half years. Originally, just running ads for brands. You know, managing their ad spend, running their media buying, sending that traffic over to their website, obviously with the intention of making sales. And that's kind of been the legacy way of running marketing as we know it up until now. But like you mentioned, there's this new shiny object on the horizon called social commerce. And it's been in the pipeline for a while. There's been murmurings and there's been talks and everyone's saying it's the next big thing, but it never really seemed to have hit. There was a lot of talk in China, you know, this whole rise of live shopping and they seem to be a little bit ahead of us. But for some reason in the West, like we didn't really seem to have it. And social commerce really being this idea of shopping within the platform itself. So the legacy model that we kind of know of today is you run traffic or you run ads on these social media networks. You send that traffic off of the platform onto your website where you then try and make the sale and get the conversion. With this model, you're taking that traffic from social media and the transaction is actually built into the platform. So rather than that person clicking on an ad and leaving coming over to the website, they would click on your ad, it would come up with a little, you know, check out button straight within the app. They click buy and the product is shipped and on the way to them and the user is back into scrolling. So this whole idea of social commerce, it's about these platforms supporting commerce within the app itself to support with, you know, frictionless checkout, you know, better data optimization and sort of just overall a better commerce experience for the user. - But how is this different from the kind of influencer model that marketers are used to? Or marketers are being ripped off by whichever way you want to look at it? - Yeah, exactly. So with this new model, you know, it opens up a lot of new opportunities. The legacy model, you know, if you're working with say creators or influencers to go and make your content, there's been that whole idea in the past where, you know, if we could work with influencers and offer them a percentage of sales, then, you know, we can tap into that or, you know, use link and buy over 20% off and then we'll give creators commission. But it never really worked. At A, it was very messy. It was hard to track. Did they actually come from that link? The influencers ended up losing out because, you know, they never actually made any commissions off those link and buys. So they lost interest and lost trust. And what influencers would do is they would just go, okay, well, if I'm going to make a post for you, I know that you're profiting on the back end. So I'm going to charge you 3,000 for a post or 5,000 for a post or whatever ridiculous number they could come up with on the spot and feel like they could get away with charging. And brands were the ones that were losing out because they were paying over the odds for these creators. No guarantee that anything was going to work. But with the rise of social commerce, what it's allowed is it's given an environment where people are actually shopping within the platform. The conversions are taking place and there's 100% transparency into where has that user come from? So what video did they watch that actually led to the sale? When did they click? How much did they spend? How much are you due as a creator, et cetera? And what it's allowed is for creators and really anybody on the platform to work on a commission basis where, you know, rather than getting paid up front, you as a creator get paid 20% of the sales that come through your video. And as a creator, you're tapping into the upside potential of these sales and people buying on the platform. And it really is, it's opened up a whole new world. I mean, there's some creators on TikTok show. You can look up the analytics and you can see how much the creators are generating. Some of these creators are generating six figures for themselves, like in commissions each month. There's serious, serious money being made by these creators. And as the creators realize how much can be made, we're seeing a flood of affiliates and creators and influencers coming in because rather than, you know, that one time payment up front as a creator, you can now tap into the upside with the brand. If you make really good content and you're actually able to move product off the shelf, as a creator, the upside for you is massive. And so we're seeing a huge shift in just the way that brands and creators and influencers are collaborating and interacting on the platform. And obviously it's great for everyone involved because as a brand, it is de-risked for you. You know, no longer are you paying five grand here, five grand there for a post. You send out your products, you get the content up and then you're only paying once that content is making sales. So really it's aligned the incentives the whole way down the chain for everyone involved. - And are these big creators or the big influencers, what do you want to call them? Are they focusing on creating an audience that they can sell anything to? Or are they specializing in one particular product and then hammering that? - Yeah, I'd say what we're seeing at the moment is it's more general at the moment. So it's everyday people who, and this is probably the most interesting part is if you look at some of the top creators and the top earners on TikTok shop at the moment, it's not your massive influencers with millions of followers. It's Dave down the road with 20K followers. You know, he's maybe like a little bit of a micro influencer. He's got a couple of followers, but it's not massive creators. It's sort of everyday micro influencer type creators and they're tapping into massive earnings. So yeah, it really is sort of everyday people. Obviously different people and different accounts lend themselves to different niches. So you know, maybe you're a young female and a lot of your content is around beauty or hair styling or fashion or getting dressed up, et cetera. So there's a little bit of that of, you know, making sure that your creator fits with the type of products but it is actually quite broad and the scope of tapping into that as a creator is quite wide. - And so can you talk us through the creator journey and you know, from how you get on and get samples and all that sort of stuff? So the creator journey and what makes TikTok shop different from what's happened before? Why is it suddenly grown? What's the particular secret source that they've come up with? - Yeah, of course. So as a creator, it is very, very simple. So as long as you've got the followers, I think as long as you cross 1000 followers on the platform, you can apply to become a creator, very, very simple. Just within the app, you go to creator program registers and affiliate. And then once you're in there, there's all the different brands available to you. So you can either, you know, search through the database of products and request free samples that you want to create with or alternatively, if you already have products in hand that you've, you know, maybe bought from a brand or a product you've got around the house, their own TikTok shop, you can just tap in and start selling them and tag the product in your videos to start promoting with them as well. So yeah, it's a very, very seamless experience as a creator in terms of a getting set up and into the program, but then also just, you know, tagging the products into your videos. But why has social commerce really taken off now? Well, I think there's a couple of reasons for that. To give a bit of context as well, I mean, there's been talks of social commerce for a while and they're not even just talks, I mean, we've seen it. But it kind of flew under the radar a little bit. So if you think back to Instagram shops, so Meta brought out their initiatives in the last sort of three or four years and it was the big thing, you know, wow, like Instagram had shops, you can buy in the platform now, you know, make sure you're tagging your posts with your products so that people can buy, but it never really went anywhere. You know, it was one of those things that it was a tick box exercise, you know, make sure you've got your shop set up and then once it was there, you forgot about it. You never saw any sales, it never actually worked. Because really what Meta did was they just thought, okay, we're gonna slap out a shopping feature on here and people are gonna buy. They didn't really put any effort into thinking, how do we get people accustomed to this? How do we get traffic, et cetera? So that was Meta's attempt. Amazon also attempted this. So all the social media platforms have been trying to build this commerce feature. Amazon, who already owns the marketplace and commerce side, they've been trying to build the social media side. Because there's a real battle at the moment for whoever can own both sides of that value chain is going to win massively. Because if you can own the traffic and the transaction, you've got this entire ecosystem where people don't need to leave and you're profiting from all sides. So what we're seeing is the social media channels are in a mad race to unlock commerce and platforms like Amazon and some of the other online marketplaces, they are trying to build out that the social media side. So Amazon brought out their thing, it was called Amazon Spark in the last couple of years. Again, it fell flat on the face. It's very hard to build a social media network from essentially nothing. But TikTok, this time round, have cracked the code. Now they are the first people really who, you know, they've got the social media side. They successfully have established that over the last sort of five years. They've released their shopping feature and for the very first time, it's actually a feasible platform where we're seeing real brands have a lot of success. And we're talking brands doing, you know, tens of millions of turnover within the platform itself in the short space of time that has been out. Now, the reason that I think they've unlocked it is they've really considered what a platform needs as an ecosystem to support social commerce and have built it from the ground up to support it. In the TikTok short ecosystem, you can really handle everything from within the platform. There's an affiliate center where there's an entire database of creators that you can browse through. The really cool thing about that is that the creators are actually ranked based on their performance. So, you know, you can log in there and you can see, okay, how much revenue has this creator generated? How many videos have they made? What other brands have they worked with? You get like a GPM metric. So similar to when you're running ads and you get like a CPM, which is like your cost to get in front of a thousand people, there's a GPM metric. So these creators are ranked on how cost effective is it to get in front of the eyeballs? And it's really this like blend between creators and influencer marketing with performance marketing. Ultimately, as a brand, you're looking at moving products off the shelf and TikTok has built this ecosystem, which supports that. And then on top of that, you know, once you find the creators you like, there's a message button, you click message, you're now in direct contact with the creator, you send them a little option to request a sample, they click a button and the products in hand. So this entire like seamless process between a creator and affiliate discovery, you know, contact, connect, get the product in hand. And then on the creator side as well, you know, getting that content onto the platform and connecting it, it's all this very seamless experience. - I mean, you keep talking about a platform, but to me it sounds like a very well designed marketplace really where you're meeting traders and you're able to exchange information and also get moving pretty quickly. - Yep, 100%. And in the back end as well with the seller center, you're managing all of this from the one place. It's like a dashboard where you've got your products in there, you've got your listings, you've got your order request coming through, you know, you've got your Philips creator platform. So they really have built a self-contained ecosystem where everything that you need, covering a very wide scope is right there in front of you and it allows you to get set up and moving very quickly. - And what sort of brands these days or what sort of categories these days are working in what sort of average cost? I guess we're not selling cars on here, we're selling what type of stuff are we selling? I mean, it's probably shows by, I'm not watching TikTok every day, but which products work best? - Probably still struggle to sell a car. There's no real voices on the market yet. But yeah, it's a very good question because in a lot of brands as they look to TikTok shop, you know, asking some of the questions, you know, as TikTok shop, right for us, you know, should we get on there? Now, what I would say is, A, the kind of industry that you're in and the type of products you have is very important. So, you know, if you're selling makeup to young female demographic or you're selling, you know, sports supplements to middle-aged guys, you're gonna have a good time on TikTok. A, the product, you know, the audience is there, very easy to demonstrate, very easy to communicate benefits, sort of visually demonstrable products. You're gonna have a very good time. If you're trying to sell hammers or paint to dads in their fifties, you're gonna struggle a little bit more on TikTok. So I'd say the first thing is to think about, you know, who are we selling to and what is the type of product? And honestly, 90% of the time when you ask that question, that is the common sense answer. It's like, does your gut tell you that your customers are on TikTok? If so, then it is a viable channel to start to explore. So that's the first thing. The price point aspect is also an important one. What I would say so far for TikTok shop is, it's important for the customer to have perceived value in what they're getting. So number one, that can just be price point. You know, if you're selling something for three pounds on TikTok shop, obviously very high perceived value. It's low cost, I'm guessing an item, it's a bargain, I'm going to buy. That can also be like bundle packs. So maybe if you have like, you know, a variety pack of your products where you get, you know, a six pack of different flavors for 40 pounds or something like that. You know, and again, there's that perceived value of them getting a good deal. Again, that stuff does very well. What we are saying is that the price points between that sort of, well, anything from like five pounds up to 60 pounds is, you know, a good range. Beyond 60 pounds at the moment is a little bit harder. It's definitely possible and there is brands out there who are having success, you know, in that range of like 60 to 100ish. It's just that the platform is quite new. And the reason for why I think that is, is because it's still a very new platform. There's still a little bit of skepticism within the marketplace of what is TikTok shop, you know, why am I buying within this platform? Is it safe? Is it a scam? Is the product actually going to show up? And if you think about like, if you throw something in front of me when I'm scrolling through my feed, then it costs five pounds, even if I'm a little bit skeptical, I'm going to go, the worst that happens is I lose a fiber, my product doesn't show up and I've lost nothing. - You know, Mark, what you're describing is the early days of the internet. I mean, you're looking at someone who's 50 years old and that's exactly what was happening at the beginning. You know, people thought you were mad to buy things on the internet. And so I don't think that's any different from any other new technology that's come along, so. - It is the exact same pattern that's happened, you know, every time and history repeats itself. And actually, if you look at it over in China, there's a social commerce platform called Hindu Jew. Again, China is quite a bit ahead of us in this social commerce race. And they actually vary strategically when they were trying to integrate this social commerce idea into the marketplace and with consumers. And they actually started off selling agriculture products. So in China, culturally, it's a little bit different. They buy a lot of produce and stuff online and whatever. But they started off selling things like apples and corn and cereal and bread and things like that because it was, again, low price transactions, very low risk, very easy to get people to transact and to take a chance on buying a couple of apples online. And that was actually their host. Like they purposely went down that road for that exact reason. It's because they knew that in order to establish this social commerce idea with consumers, they had to build the trust first and they led with the cheaper products to get in there. That was a foot in the door. And then that opened up the rest. And now it's hundreds of millions of dollars every single year that they're transacting through the platforms. And TikTok, I think, whether they meant it or not or whether it's just because that's human nature and that's just the way things evolve, it's showing the exact same path. At the moment, it is the cheaper products. It's a good place to get a deal. But even our sales over the last four or five months as we start to work with different brands and stuff on the platform, we're seeing it get easier to sell the more mainstream products. - And do you think this is going to be a foot in for the brands to sell direct? Do you think the likes of Coca-Cola or the other big brands are going to get into selling direct rather than through retail? Is this a real channel for that? - I think there's a lot of potential for that. So interestingly, so TikTok show up again and they were the first people to really crack this. But the very first time in our history, social commerce in the West is viable and there's brands making a lot of money through these channels. But the door is now open. All of these other platforms are following suit. Met us to catch it very hard. They'll be out with their platform soon. YouTube has already announced their version called YouTube Shopping. And if you look at it, it's literally a copy and paste of the TikTok shop model. Videos, affiliates, partner with them, sample requests, content, it's the same thing. Interestingly though, YouTube have taken a slightly different approach. And rather than, you know, TikTok's idea was, you know, let's go in at the mass market. You know, low-ends, cheap products, very easy, quick transactions. YouTube has gone a slightly different approach and they've released their first version but they've partnered with Target Nike. You know, these big name brands and they're going down that route of, let's work with these big, reputable brand names to get our platform off the ground and really start to integrate it. So yeah, I absolutely think that how much of this for Coca-Cola, for example, or how much of a priority will social commerce, V versus retail, I don't know the exact mix or how that plays out but I know for a fact that, you know, they'll be on here and they'll be using these channels for sure. - And if in loyalty programs, we've always been very used to the pyramid of customers being that the high-volume, low-value customers at the bottom and then as you go up, there's a smaller number of customers that generate more and more money for you, you know, the classic Pareto principle of 80/20. Will the same be the same for the very top of your influences as well on this? Do you see a high portion of sales coming from quite a small number of very, very important customers? - Yes, 100%, absolutely. It is the 80/20 rule in full effect. So, you know, even if you're working with creators and you're sampling and sending out products, you know, you'll typically see, there's going to be a small group of those creators who are generating the vast majority of that revenue. And that's a good thing and there's pros and cons to that. And the major pros are, when you find those really good creators, you keep them close, you build a relationship, you get them on board working with your brand and you can actually start to build up this sort of little creator team who is working with you and helping to grow the brand. So, I'd definitely say that the way I've seen that is, you know, you're looking for those top creators that are going to be adding a lot of impact. - And this is where I see, you know, we've had affiliate marketing for years, but this is where affiliate marketing at an individual level, which I find fascinating from a loyalty perspective. - 100%. And I think this is the big thing that is kind of gliding under the radar a little bit at the moment, but I think it's one of the massive upsides to where this can go. Because this is a loyalty podcast and I'm sure that people listening are kind of invested in looking to explore the world of loyalty. And probably one of the things you've seen before is this idea of, you know, let's turn our customers into ambassadors or, you know, let's give our customers affiliate links and they can promote with us. And what you've probably seen is it never really works. It's a good idea on paper, but then it's like, it just always falls flat, you know, okay, maybe you get a couple of people to post about you, but it never really drives anything incremental as a brand. And it's because at the end of the day, there's no reason for these creators. There's no real upside for them. Are you okay? They might make one say or get a little bit of commission, but there's no real incentive. And as much as we like to think that, you know, our customers will run the world for us just because they love us. At the end of the day, we're all self-driven individuals. Unless there's something really in it for us, then we're never gonna be fully motivated to go all out and go the extra mile and do everything we can. But for the very first time again, the opportunity here is for your customers and everyday people to win with you. As much as you're winning as a brand and tapping into profit and acquiring customers, these everyday people could be earning thousands of pounds potentially and income for themselves into their pocket whilst also working with a brand that they love. So it shifts this idea of... - Well, let's get into that. Let's get into the brass tacks of that. So what's the typical ballpark of share of revenue? So if I'm buying a, you said yourself something for, let's take 30 quid. What's the kind of commission and the share of margin of all that? How does that work? - So I would say the typical offer at the moment on TikTok Shop is anywhere between 15 to 30% with the average being around the 20% mark. Obviously that depends quite a lot on you as a brand. So what's the price point of your product? To present on something very high ticket, then you can get away with offering more commissions maybe. Again, the margins of your product, et cetera. So it does depend. I would say that's the range of average at the moment. The other thing I would recommend though, is honestly, give away as much as you can. As much as it's feasible to give up to the affiliates in terms of commission, do it. There's also this calculation that you would probably have to do as a brand because if you think about it, say we're offering 20% commission to affiliates and we're able to sell 100 products at this 20% commission rate. Maybe we make X amount in margin from selling those products. Instead, if we were to offer 40% commission to affiliates, we're gonna get so many more affiliates applying to work with this. We're gonna get more content going out. We're gonna get affiliates trying harder to sell the products. We're gonna end up selling more on the back end of that. So at the end of the day, what you could actually have happen is you work out with the same margin figure at the end of the day when you work it out. So 100 here at 20% commission, you sell, say, five times as much over here at a higher commission. So you work out with the same margin at the end of the day. But over here, because you've given more commission, you've got more affiliates on board. You've got five times the amount of content and impressions and, you know, halo spill over into retail or Amazon or, you know, wherever. You've acquired five times as many customers who potentially come back and buy again. - So it's the classic how brands grow a kind of formula of physical and mental availability. And you're ramping it up on this. You're saying, you're saying break even or even make a loss right now because you're, the ultimate end game is you will grow your brand and to ultimately in a better place. And it's quite similar to how brands like glossier are grown where they've had a, you know, they created a sort of pyramid selling piece of people benefiting a lot from commissions of selling to their friends and all that sort of stuff. I guess what this is doing is it's doing it at an industrial scale globally. - Yeah, 100%. And it doesn't even need to be break even. 'Cause I do, they, if you work it out properly and the extra commissions lead to more sales and more affiliates and more content and whatever. You'll actually end up making the same amount of money at the end of the month. It's just one option was very high margin, low volume. The other one was lower margin and high volume. So you've made the same amount of money but you've just done a lot more and sold more product which obviously has additional benefits to the brand over the long term. - Yeah, so if someone was listening to this and they were tips for getting started in TikTok shop, you know, what would your top tips be? - The top tips, I think, systemizing your ability to recruit an on-board creators because that really is the, it is really the fuel of the system. At the end of the day, you need affiliates coming on board. You need to get them set up. You need to enable them to make the best possible content for your brand and get them posting on the platform. - And can you automate that? 'Cause obviously people are gonna gravitate towards the biggest sellers. So are they just not getting bombarded by lots of brands or is there any way of kind of automating that or managing that? - There was automations up until recently. I mean, they're technical still is. But it sounds like what everyone was doing until now, it was just mass blasting all of the creators on the platform, just running like outreach automations and just blasting everybody. So TikTok just recently have brought out a new cap where if you're a new brand, you're limited to messaging 50 creators a week until you cross like 1500 pounds a week in revenue and you're capped at 50 creators. So yes, it is more challenging for brands now to find those creators. And also the top creators are bombarded with the best offers. So again, this is kind of what I mean by like, systemizing that onboarding. What we do as an agency is still use that platform for outreach and messaging within there. Do as much as you can and there, while she can. But look out with the platform as well. We have created like a landing page. So there's an application landing page which is like a creator ambassador program. So on there it's got an application form, explains a little bit about the brand. And essentially you can send traffic to that page from anywhere. So we could go on Instagram and DM creators on there. We could go to actor websites and put up a casting role on these platforms. You could run ads on TikTok, asking people to come and become a creator. It says that anywhere you can find creators on the internet, you can send people into this application form. And then when they fill out the form, you review their profile, review their content. And if they're a good fit, then you direct them on to request a sample in TikTok shop and to start creating content. And so I think that would be my number one tip for brands is have a system to recruit creators from not only the platform itself, but these different channels as well. Because you're going to need that fuel to keep the shop alive. The end of the day, if you don't have any fuel in the engine, you're not going anywhere. - And do you think brands, again, going back to the law to question, do you think brands could look for these creators from within their own customer bases as well? - Yes, 100%. Something that we do for all of our clients is in the post purchase flows, so in the email flows, we'll add in there. Sign up now and you could earn 1,600 pounds as an affiliate. We use a little case study about a creator who's worked with us already. And start to advertise that to anybody that's buying your product effectively can now become an advocate for the brand and tap into those rewards as well. So absolutely trying to incentivize that where you can. We do it in the post purchase email flows. I know of one brand that actually does it in the packaging inserts. They'll put a little flyer in there, letting people know how to do that. In fact, what the brand also does, they put a QR code on the flyer. So when you scan the QR code, it just takes you straight through and you sign up as an affiliate and you're now creating content. So definitely I would recommend incentivizing your existing customers to promote. At the end of the day, they're the people who have seen your product, seen your brand, they've bought their true fans of the brand. And they all come up with ideas that you would never come up with as a brand. Even for us as an agency, we're doing all this research and you're on Reddit and reading reviews and all this kind of stuff. Try to come up with the best ideas. And then some guy will just upload a 30 second video that we were like, "Well, how have we missed that?" And it's the best performing video. And it's like, unless you just get the hands, get the product in the hands of the people who are actually using it and actually want it, that's where the best ideas always come from. So yeah, let your customers run. They know what they're talking about. - And this is the thing, Mark. I've worked in marketing for 30 years. I've always said be prepared to be surprised by something. And I met you at a conference a few weeks ago and I was done founded by this and you live and learn every day. So I'd just like to say thank you, Mark Ross. It was brilliant. I really loved every second of that. So I'm sure we'll hear from you again because I do generally think this could be really big and give us a glimpse of what the future of monetizing customers could really look like. So thank you very much for that. If you like this podcast, please pass the word around your office and your social media. And we look forward to your company again soon. Thank you and goodbye. (upbeat music) (upbeat music) (upbeat music) [BLANK_AUDIO]