Episodes > Season 3 Episode 20

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How ShipBob helps merchants boost LTV

Kevin Marvinac, VP of Partnerships, ShipBob

What's in this episode?

On this episode, we talk to Kevin Marvinac, VP of Partnerships at ShipBob. Kevin explains the difference between most standard 3PLs and ShipBob, a brand who bends over backwards for their merchants by building their own warehouse management system and providing a top tier customer experience.

We then talk through Kevin’s passion for sustainability and how the ecommerce industry can make massive strides to better our world. Finally, we talk through Recharge’s favorite statistic, lifetime value. Shipbob maintains a significant focus on LTV by providing opportunities for merchants to increase average order value and decrease churn.

Connect with Kevin on LinkedIn. Check out ShipBob.

Episode transcript

Chase Alderton: In this episode, we talk to Kevin Marvinac, VP of partnerships at ShipBob. Kevin explains the difference between most standard 3POs and ShipBob, a brand who bends over backwards for their merchants by building their own warehouse management system and providing top tier customer experience. We then talk through Kevin's passion for sustainability and how the ecommerce industry can make massive strides to better our world. Finally, we talk through Recharge's favorite statistic, lifetime value. ShipBob maintains a significant focus on LTV by providing opportunities for merchants to increase average order value and decrease churn. So let's hop in. Kevin, welcome to the show.

Kevin Marvinac: Hey, thanks so much, Chase. Appreciate it. I'm happy to be here.

Chase Alderton: Tell us a little bit about yourself and about ShipBob.

Kevin Marvinac: Yeah, well so I'm Kevin Marvinac, VP of partnerships here at ShipBob. Chicago native. Also recovering entrepreneur. I founded a company in the ed tech space about six, seven years ago, ran that for a while, sold it, and then I've been at ShipBob ever since. So I've been here since we were 40 employees with one warehouse and now we're 35 warehouses and 1,200, 1,300 employees. So it's been quite a journey. I live now in Northern California with my family, my son, my dog, and my wife.

Chase Alderton: I love the term recovering entrepreneur. There's so much conversation about how difficult it is. Maybe that's a second part of this conversation. We do a debrief on recovering entrepreneurs.

Kevin Marvinac: Yeah, yeah. Yes, absolutely. I could do a whole podcast about that or we could just do it over a beer sometime. Maybe that's more appropriate.

Chase Alderton: There we go. What is ShipBob? Give us the overview there.

Kevin Marvinac: Yeah. So ShipBob is a global 3PL. Really it's nothing new to world in the sense that 3PLs have existed for a long time. So third party logistics, we store the physical inventory and then pick, pack and ship the orders when they come in from wherever, whether they're subscription orders, whether they're one time orders, B2B orders, et cetera. So again, the concept is not new. This is not like a world changing thing that we're doing here. Where our angle is a little bit different and I think why we've seen such really fantastic growth is the tech underpinning of it. I think historically, our industry, the 3PL industry is really fragmented. It's a lot of Mom and Pops. The warehouse equivalent of Mom and Pops. It's the individual warehouses with maybe 15 clients max, everything's running on Excel spreadsheets.

Kevin Marvinac: Maybe they have a WMS to do some automation, but it's pretty low tech. And so what we decided to do, our founders really, is they decided to take the Shopify approach of great technology underpinning the basic stuff that all of us need to do, and then sell it to everyone. So now even tire kickers and solo printers and dreamers can take advantage of this awesome thing or service that used to only exist in rarefied to the people that could pay the money. And so we've done the same thing. We literally took the Shopify approach to fulfillment. We said, hey, we're going to go after anyone from S&B to solo printer, fulfilling out of my garage all the way up to 150, $200 million businesses. But our technology is what allows us to scale. So again, not a new to world idea, but taking tech to this antiquated industry.

Kevin Marvinac: And nowadays I'd say the biggest thing that we do a little bit differently is just this customization at scale. Amazon has great fulfillment. If you want fast and cheap fulfillment, Amazon will offer it, similar to SFN with Shopify. Where we are a lot different in our ethos is we serve brands who want customization. They want to own their experience. They want the custom unboxing. They want the subscription with the specific rules for first order ships in two days. And then the subsequent orders ship slower and cheaper. They might want marketing inserts, gift notes, all those types of things that are frankly hard to do. We're focused on those.

Chase Alderton: That's awesome. Really well said. So that's exactly what I want to dive into today is the balancing between creating a tech stack, making sure that everything works and flows together, but still being able to own the whole customer process throughout the whole thing. That I think is the piece that everyone's looking for now, especially as we move further in 2022. Acquisition costs getting higher, it's really difficult to acquire. We're seeing money starting to tighten up a little bit. Keeping those subscribers and keeping those one time customers purchasing over and over again is huge. And I think customer experience is that main part there. So not going to prompt you or anything, but how do you guys think about customer experience at ShipBob? Is there any one thing or one metric or one stat or one significant piece of the puzzle that you really dive into or is it truly the whole thing?

Kevin Marvinac: Well, that depends. Do you mean customers as in purchasers of ecommerce goods from our merchants or our customers, which are the merchants?

Chase Alderton: The goal is always to deliver better final experience for those end customers. So how do your merchants-

Kevin Marvinac: Got it.

Chase Alderton: ... think about providing that experience?

Kevin Marvinac: Yeah, totally. Because if it was the latter, if it's our merchant experience, we do the typical stuff, we do the feedback sessions, which are really intense. And then we do NPS scoring and feature requests and all that stuff. And that's great.

Chase Alderton: Totally.

Kevin Marvinac: If we talk about the end customer experience, like how do we help basically as a 3PL, that's frankly, behind the scenes. We don't want to be front and center. We don't even want our brand anywhere near the end customer. How do we help those merchants sell more or do better or whatever? We think about it typically on two vectors, well, maybe it's three vectors. So one is just the table stake stuff. It's the basic job to be done and we better do it consistently and in a crazy high rate. And so that typically takes the form of SLA achievement. Service level agreement is our industry term for our promise to our customers.

Kevin Marvinac: So we promise a 99.98, I think on time fulfillment rate. And we monitor that daily. Customers can see it in their dashboard, meaning merchants can, and we want to make sure that if your end customer, if you're a merchant, your end customer wants to order from you, they get it in a timely fashion based on your promise that you're putting on your website. So that's all the table stake stuff, and delivery speed comes into that too. We do a lot of carrier management. We have 35 carrier services we use. So that's the basic stuff. We always got to do our job. If we don't do that, nothing else that I'm about to say matters, nothing matters. So that's a lot of our focus.

Chase Alderton: It's worth actually drilling into that just for one second, that often gets overlooked. And I think that's the basis of some of these companies that scale so well, you look at your Shopify, it's something we were talking about earlier. They just do everything so well on a base level. It just works. You never have to worry about, is this thing going to work? Is it not going to work? How is this going to fold into my overall profit and loss? It just works. And that's such a huge piece of it that really cannot go overstated.

Kevin Marvinac: Yeah. It's a great point. For better or for worse, it's one of those things that sometimes folks assume is the case with all the companies out there and it's just not. And then they get burned later, which makes a lot of our job, when we focus on these basic things, a lot of it's about retention. It is very retention focused in terms of our customer base. We typically have an incredibly high retention rate. It is actually an insanely high retention rate for 3PL, which we believe is a proof point of we're actually doing our job that we promised during sales process. So all that stuff is basic and table stakes. And I'll say one more thing about that. You mentioned it's overstated how easy that is.

Kevin Marvinac: It totally is overstated how easy that is. It's incredibly hard to do. As a matter of fact, we are, I think the only major 3PL at this point beside maybe ShipMonk. We own our entire WMS. So every line of code that controls every touch of every package or every order I should say, and then package that comes from literally from the point it hits Shopify's API and its placed all the way through to its on a customer's porch. Every single line of code in that value chain is controlled by us and our engineers.

Chase Alderton: That's amazing.

Kevin Marvinac: And it's crazy. It's honestly crazy. I think when we pitched this idea, way back in the day, we were fundraising quite a bit, VCs were like, what are you guys doing? Why don't you just go buy a WMS? We firmly believe we take this Apple approach where we firmly believe that owning, like they own the hardware and the software and they believe that's a better experience. We want to take the same approach. We want to own all the OMS, all the delegation, all the brain. But we also want to own the WMS, the IOT, the things that move the physical world. And we take a really stance there. So we also own or franchise all of our warehouses, which is again, not to make this about ShipBob but it's all about control. If you cannot achieve your SLA, which happens sometimes. It's an exceptions driven business, things happen, it's the real world. How do you make it better instantly? And if you don't own your fulfillment centers, or if you don't franchise them and you don't have lots of control, then how do you do that? It's hard. So anyway, that's enough-

Chase Alderton: [inaudible 00:08:43] to do any of that.

Kevin Marvinac: Or it creates three layers of middle steps between hey, customer A has a problem, and it's not on time. And the warehouse person that actually needs to go and physically move the good. So we just try to reduce those layers. Anyway, that's enough about ShipBob, but the first step is like I mentioned, it's table stakes. We got to do stuff on time. We got to deliver on our promise. The second vector that we use when we think about customer experience, end customer experience is all about conversion optimization and conversion optimization usually for us is about fast and cheap shipping. Because if you think about it, the Amazon promise, we live in this Amazonified world, primeified world, if you will. And so we typically want to offer as fast and as cheap two day shipping or less than two day shipping as possible to our customers, our merchants, so they can offer it on their website and they can get that extra conversion bump that comes from oh, cool. I can see that if I order this today, I'll get it by Saturday morning, which is [inaudible 00:09:40]

Chase Alderton: Totally. So-

Kevin Marvinac: Conversion experience is one. Second. And then that can help, especially with, as you mentioned, the rising cost of acquisition. The second vector, or the third vector rather is loyalty and retention. And that's a lot of this customization work. We do gift notes, natively. We focus a lot on marketing inserts in the physical package. Because I always like to say that your package, if you think about loyalty marketing channels, your physical package is the only one with 100% open rate ever. You're never getting 100% click rate on literally any other marketing channel, but you're going to get it on a physical good. So why not use that as a marketing vehicle? And we do, we allow all that stuff. We built it in natively to our tech because we really want to help our customers with retention.

Chase Alderton: Let's dive into the unboxing experience then. I love this whole idea. I heard that a few years ago and it was something that stuck with me that every single time you order something, it's really the only touch point that truly is 100% open rate or click rate or whatever you want to call it because it is the final package. And a lot of people just overthink that and they think, okay, well, the box landed on their doorstep, we're good to go. We'll wait for the next order, but it's such a missed opportunity. So like you said, put an insert in there or do a custom box or do some sort of surprise and delight or make sure that everything's arranged in the box a certain way. It's not just bouncing around depending on what the product is. Talk about how you were maybe examples of unboxing that you've seen worked really, really well.

Kevin Marvinac: Yeah, totally. I always one of the pinnacle unboxing experiences that I as a consumer always hold in my mind when I think about how do we serve our merchants better is Allbirds. My wife ordered some, I don't have any, but my wife ordered some one time or I think I got them for her as a gift. And it was just this unique and beautiful experience. I'm not a big Instagramer, but it made me want to pull out my phone. It was that good. It was all eco-friendly sustainable packaging, which as a consumer, I personally am attuned to, and then you unfolded it in a very different way from a typical shoebox. And it had some nice messaging on it. There was an insert in it talking about care instructions.

Kevin Marvinac: There was another insert on the other side that was talking about other styles and things that they have. I know they have the wool and they have the plant based. And so it was just this really cool experience relative to just ordering shoes or buying shoes in a store. And so I always think about that as that's the paradigm that we should shoot for, to offer our customers. Now, why do people not do that? Like you mentioned, it's expensive and it's tedious, or it's both, depending on if you're running your own fulfillment centers or fulfilling yourself, these are process flows that take man hours, they take labor. And that's expensive. Or if you're outsourcing, very few 3PLS can do this unless you come to them and say, I'm a huge business already. You're going to do anything I want you to do, because I'm going to pay you millions of dollars. So the big nut to uncrack is how do you enable that Allbirds type experience for the little guy? And so that's what we've been working on.

Chase Alderton: It's really interesting, because I think even things like tissue paper, like a sticker, like the type of box, I think goes a really, really long way. Everyone's so used to, like you mentioned, just the brown Amazon box that having something different show up, whether it's a green box or a blue box, just something that stands out a little bit more, immediately you recognize that's my package. I know what it is. The brand loyalty's there. That goes a long way. Even just in something simple as couple colors.

Kevin Marvinac: Yeah. And I think people sometimes overestimate the cost. Custom packaging is not cheap. And there's high, usually there's high minimum order quantities and things like that. But sometimes people overestimate the cost and hassle of it. I ran an ecommerce brand just on the side for fun, positivepartum.com. It's basically a gift set for expecting moms and to help the postpartum experience be much more positive. And we were very presentation focused because it's a gift set, it's a fun thing.

Chase Alderton: It needs to be. Yeah.

Kevin Marvinac: Yeah, yeah, exactly. It needs to be. And so what we used to do, which I thought was really, I think value add and we got some good commentary on it from our customers is we would have the custom box and yeah, we'd pay some money for it and stuff. It wasn't crazy though. It was just a pretty much a nice shipper with some good coloration and our logo on it. And then the tape was actually inspirational messages for Mom. So it was like you got this or you're the best Mom or Mom power or whatever. And then we would wrap all of that in a big black non-plastic poly mailer that is compostable. And it says huge black on the poly, it says this poly is compostable. And we got so many good comments on that. Yes, did it decrease our margin a little bit? I'd say two or $3 but the level of feedback that we got was so strong that people started repeat purchasing and that was a lot of the source of our growth. Not that we did exceptionally well, but it was a good source of orders for us.

Chase Alderton: There's a really interesting conversation going on now of the sustainability aspect of these brands, is it for real or is it for show? Because like you just mentioned, it definitely decreases margins. You obviously have to put a little bit more money into this to make it happen, but there's a lot of people that see these kinds of things and think, oh, okay, that's great. I'm going to reorder. Or there's just some talk in the atmosphere about people wanting things to be sustainable, but they won't actually purchase a product that is in sustainable packaging or something like that. Do you have any experience with that or do you have any kind of preference on how that works or anything?

Kevin Marvinac: Yeah. What you described is the big question, is it greenwashing or is it real? And I think, unfortunately it depends on the brand, but I anticipate us moving in a direction as a society where the regulatory environment increasingly favors the real thing. And whenever you have, this is more philosophical and maybe economics related, but whenever you have an industry that is at risk for being regulated, like ecommerce is, so for example, those of us that ship to Europe, we have a phone center near Germany on the Poland border, Germany just introduced a new packaging waste law. And there are a lot of nuances to this, but it really increases the cost of doing business for folks that aren't already sourcing sustainable packaging and knowing what to do about it.

Chase Alderton: Interesting.

Kevin Marvinac: I think what will happen and by the way, the UK is about to do the same thing from what I've heard. So I think the best thing brands can do in environment like we're in where it's pre-regulatory, not a ton of regulatory pressure, is start to self-regulate. And so when you self-regulate, you reduce the risk that there's punitive regulations later that can really, really impact the cost of doing business. And now this is very, again, I'm at the very philosophical level, but that's something that I see as a trend in the next five to 10 years, there will be increased regulation. The best thing brands can do now is start getting ahead of it. Now, when we talk about sustainability in general, this is the thing that, to be honest as a consumer and as a citizen in the world, it scares me the most. ecommerce is a massive contributor of carbon emissions. Consumers do want it. The question is how much they want it, how much are they willing to pay for it? I think looking at apps on Shopify, like EcoCart, for example, are you familiar with the EcoCart at all?

Chase Alderton: Yes.

Kevin Marvinac: Yeah. They've had a crazy growth story and actually, I think Shopify just rolled out in the last few days or so their Shopify Planet app, which [inaudible 00:16:42] allows you to do carbon emission offset. So there's companies in this space testing this hypothesis of do customers really care and will they pay and they're actually being successful. So I think that's a really, really nice narrative and that supports my belief or at least the trend that I see more than my belief that this is going to become a real thing.

Chase Alderton: So you're thinking and maybe urging is too strong of a word, but you're suggesting and hoping brands take this economical approach before it's done to them before they're forced to do it. And then I think that might even create some more headaches for brands in the future as well. Because we're going to hit some supply chain issues. Everyone's going to be ordering the same things again, we're in a world where supply chain issues already exist. So you might as well take that next step forward on your own and make a little better place, do everything you can for your brand and push the word forward.

Kevin Marvinac: Yeah. The whole pre-regulatory action thing, that's primarily for the big brands, but as a small brand what's really cool right now is we have so many arrows in our quiver. If you want to get better at sustainability, it doesn't have to be, first of all, it's not a one size fit all approach. And second of all, you don't have to do everything. It's a laundry list. You can just start checking the boxes on the things that are most, either impactful for you, or maybe they're the easiest lift for you or both. And just start going down that list. You're not going to be perfect overnight, but no one's asking us to be perfect overnight.

Kevin Marvinac: Even consumers typically aren't asking us to be perfect overnight. So I think about it as a journey more than a destination. And it's certainly not like a switch you flip, it's just something to be cognizant of and start trying. So EcoCart is a great example, tactically, if you don't use EcoCart today and you're selling on Shopify, go explore it. I guarantee you at least testing it will do nothing but benefit you. At worst it'll be neutral.

Chase Alderton: What do you do at ShipBob to offset some of this? Do you guys have plans in place?

Kevin Marvinac: Yeah. Logistics is a huge source of the carbon emissions from every ecommerce order. I think it's about 40% typically. So even when you take in manufacturing and co-packing and all that other stuff, logistics is a big part. And so we need to do our part too. I actually lead a task force at ShipBob called Green Bob, which is our internal very employee led but of course with our executive buy-in, attempt to get a little bit more green. And so we look at it around four areas. Number one is reducing our packaging waste. We already do that. And we support native eco-friendly packaging. Two is reducing returns.

Kevin Marvinac: We don't typically get into that game, but there are a lot of things you can do to reduce returns at the point of purchase, or pre-purchase that we are happy to consult folks on. Number three is actually offsetting our carbon emissions, which typically takes the form of looking at our utility bills for our fulfillment centers, obviously trying to reduce those first, but then whatever we can't reduce, trying to offset that by investing in afforestation projects and things like that. So we do that natively. That doesn't cost anything to the merchant. That's an institutional decision we've made.

Chase Alderton: That's amazing.

Kevin Marvinac: And then the fourth thing is of course the last mile. We cannot control, we're a 3PL, we cannot yet control whether or not UPS rolls out a fleet of carbon neutral trucks. We hope they do. And when they do, we will avail ourselves of them, but we can't control that today. And so what we do to help that last mile delivery, when it leaves ShipBob is we have an app that you install on your ShipBob account if you want. And it just calculates the carbon emissions based on the type of transit and the distance and the package weight size, of course. And then it automatically invests in these same projects that we invest in. So it invests under our umbrella account for these same projects and it makes you carbon neutral for the last mile.

Chase Alderton: Interesting. So there's a feel good component to it as well.

Kevin Marvinac: Yeah. And you get a marketing page, of course, if you want to showcase that to your customers, not everyone does. Some people do or some merchants do, I should say, but yeah, exactly. If it's just something you want to do to be a better steward of the Earth, great. If you want to market it, you can do that too. It's up to you.

Chase Alderton: Interesting. Definitely sounds like this is a passion project for you personally. Sounds like ShipBob-

Kevin Marvinac: Could you tell?

Chase Alderton: Definitely owns this as well and is doing as much as they can. I think it's really cool. Off topic question before we hop to our last topic of the day here. Is Bob a part of ShipBob? Is there a reason why is this Green Bob? Why is everything Bob?

Kevin Marvinac: Oh my gosh. Why is everything Bob? I've been asking that since day one. So the story here is that, when I first started at ShipBob, I am in my orientation. This is years ago. We were 40 employees at the time. And our COO walks in. One of our co-founders today. And he's like, hey, you might be asking yourself, what is ShipBob? What does that even mean? Who's Bob? And we're like, yeah, we actually are. And he goes, well, it's not a name, it's an acronym. It stands for bend over backwards because we want to bend over backwards for our customers and embedded into our psyche and just our mission statement and all this other stuff is customer first creative problem solving period. We'd much rather do something to help one customer, even if it doesn't scale than saying no, because we have some product roadmap or whatever.

Kevin Marvinac: And then he sat there and let us sit with that for 10 seconds or so. And then he looked at his dead pan and goes, that's all made up after the fact. Honestly, it was the cheapest domain name at the time. And we were poor entrepreneurs, starting a business in our apartment. And we just wanted the cheapest domain name with the word ship in it. And I was like, we all laughed at that, but now it's become something more than that. Because like I said, we've gone back and said, this is part of our ethos to bend over backwards.

Chase Alderton: That's amazing. I love that you can align that after the fact.

Kevin Marvinac: Yeah, yeah. It was so funny because-

Chase Alderton: Had me going though.

Kevin Marvinac: Yeah, exactly. It had all of us going. We were like, oh, it was so intentional. And then he was like, no, actually it was $9 a month on godaddy to buy this domain.

Chase Alderton: That's pretty great. Hey, if you're going to go cheap initially though, find something to validate the story a little bit later. All right. Kudos to the ShipBob team for that one. Final piece here. We've talked in the past. I know that lifetime value is a huge piece for Recharge. That's the big value that we always push for our merchants [inaudible 00:22:47]. What is it that ShipBob constantly looks at? Do you work towards average order value? Do you work towards lifetime value? What's the big value for your merchants who use ShipBob?

Kevin Marvinac: Yeah, totally. So, LTV is one of those things that as a business owner you're going to care about the most. I would say probably between it's conversion and LTV. Also or CAC and LTV, which conversion's part of CAC. But we do think about it a lot. What's interesting is not all of our merchants look at us as a lever to help with LTV, but we really can. And so the merchants that are a little bit more savvy in the past who have come to us and said, hey, I'm trying to increase my LTV. Here's some ideas I have. What have you guys seen that's successful? We actually can help them. And so I'll break a couple of those down and we can go in further. If you think about LTV, really what it is, it's a function of two things. It's a function of AOV and it's a function of repeat order rate.

Chase Alderton: Spot on.

Kevin Marvinac: And we can help with both. So on the AOV side, the most significant lever we've seen, that's withstood the test of time and AB testing and everything with our customers on average, every business is different of course, but on average is offering free shipping or fast shipping thresholds. And so what I mean is you look at ShipBob's rate cards and the things that we would offer you as a customer and you say, okay, cool. Well, it costs me maybe $3 more to have two day shipping than standard shipping and standard shipping average is three to five days, okay, I'm going to on a banner maybe on my product page or maybe nested right under the product description, right under the buy button or maybe even in the cart level, I'm going to have all these things in there about if you get to $50 or if you get to $100 on this order, I'll give you free, fast shipping.

Kevin Marvinac: Or I'll give you fast shipping for the same price as standard shipping, or I'll give you free shipping entirely, whether it's fast or not. And experimenting with those dials actually has significantly increased AOB for some of our customers. I've seen 30%. So, again, it's all going to depend on your business. For a lower value item you're going to see a bigger bump than a higher value item, of course, but in the beauty space, this works really well. In the health and wellness space this works really well.

Chase Alderton: Supplements [inaudible 00:24:53] for sure.

Kevin Marvinac: Supplements. Yep, exactly. So try it. AB test. That's the beautiful thing about Shopify is you can just fiddle around with things and try them so that's number one.

Chase Alderton: I absolutely love that. I want to dig into that one [inaudible 00:25:05] I'm a big supplement guy and that's my favorite thing that I see, or maybe even least favorite, to be honest, but I'm ordering and I have $10, $20, $30 in the cart and it says just get to 50 for free shipping. I'm thinking, shipping's going to be $4. So I might as well spend the extra $20 to offset that four, which is a weird philosophical mind trick. But it increases average order value. It totally does. So I totally agree with you. AB test it. Play around with things, see what works, see what doesn't work, but that's an awesome way to test that out.

Kevin Marvinac: Yeah. And there is a psychological thing component there that we've tested and it's proven to be true where customers care more today. This might change in the future with consumer mindset shifting, but customers today care more about getting free shipping, even if they're paying more overall than they would've paid for the shipping. I don't know why. It's this wacky thing. Maybe it's a millennial thing. I don't know. But yeah, customers love free shipping. So that's one component. If you want to raise your AOV, think about thresholds and think about rewards for those thresholds, whether it's fast, free and fast or free, I would try all of them.

Chase Alderton: Yep.

Kevin Marvinac: So that's number one. And then as far as repeat rate, where we really love to see brands go here, especially if they're using Recharge for subscriptions or something, we like to see them building some custom logic, which you can do easily with Recharge and ShipBob combined. We like to see them build custom logic into that first order versus the end order. And the first order, typically the thing that works best is when they get it really fast. When they order that first item of their hopefully longterm subscription, you want to get it to them as fast as possible. And you want to have the pretty box and you want to have the really nice experience. So spend a little bit more money on that and program the tool, whether it's Recharge talking to Shopify and then talking to ShipBob or Recharge direct to ShipBob, whatever you do, program that tool to treat the first order differently, which is very possible.

Kevin Marvinac: And a lot of our customers do. The second thing is the nth order. So whether it's the fifth or 10th or 15th, have these milestones to give these surprise and delight moments to your customer, it is amazing how long that goes. My wife, for example, subscribes to, I think it's called [inaudible 00:27:11]. It's semi-customized shampoo brand. And it's very expensive. And every quarter we talk about our budget and we're like, oh, should we cancel this? It's expensive. And then they'll send us this just nice little hey, you get a free extra whatever it is on this fifth order of your subscription, because you've been a customer for five months. We're like, oh, we'll keep it for a while.

Kevin Marvinac: That stuff goes such a long way. So test that. And I want to underscore one thing here, because sometimes when I talk about these things, they sound aspirational. They sound like only the Allbirds of the world can do this. The big brands. This is not super complicated stuff. This is not black diamond slopes off piece. This is if you have a modern 3PL or modern warehouse in WMS, and you have a modern solution for subscription management, this should be just field mapping during onboarding. This is not an insanely complicated thing.

Chase Alderton: I totally agree with you. And the surprise and delight gifts don't need to be over the top. I think actually one thing that we've talked about in the past on the podcast is that it's a good way to get rid of inventory actually. So it's opposite ends of the spectrum actually, you can get rid of some older inventory, maybe skews that didn't sell super well, that you want to just give away and say, here's a surprise, or you do new skews in either a smaller quantity or a sample size or something like that. And you say, hey, check this thing out, free gift, enjoy it totally on us. And that actually may convert into a full size product, which would again, then increases average order value, increases lifetime value. So there's really easy, simple ways to do this without overthinking it. The term surprise and delight sometimes feels like a giant milestone in people's minds. It's not, it's really simple.

Kevin Marvinac: Totally. And you think you're going to pay more for shipping when you have an extra item in the order and honestly, with products like that, typically you won't because unlike an FBA, for example, most 3PLs price per order. So it's just how big the item is. And so, maybe you'll have a marginal increase by throwing in a freebie. Maybe you'll have a marginal increase in weight. Maybe it'll raise your price 50 cents, $1 but it's not crazy. It's not going to break your business by any means.

Chase Alderton: Yep, absolutely. Let's get into a couple closing questions here. I'm really excited to hear some advice from you. Advice to a subscription brand who's just getting off the ground, just launching.

Kevin Marvinac: Oh gosh. Okay. So I'm going to do a two for on this one. One is just advice I would give any entrepreneur. As a recovering entrepreneur myself, we alluded to this. One thing that really helped me as an entrepreneur was 1% improvement every day. So a lot of times I thought in terms of rocket launch type releases and changes where you have to do all this prep work and you have to make sure everything's perfect. And then only then can you press that big red button and launch the thing. I really quickly wanted to get that out of my brain once I realized that was a super stressful way to operate a business and it's probably not effective either.

Kevin Marvinac: So I would say instead of that approach, try to get that out of your mind, unless it's really crucial for some specific reason and try to get into this approach of 1% improvement every day, because those things compound. 1% improvement every day, times 30 days is actually an 80% improvement because it's compounding, so focus on the things that you just do a little bit better every day. And it's a very freeing feeling. That's number one. And I'd give that to any entrepreneur.

Chase Alderton: I love that.

Kevin Marvinac: The second thing specific to e-comm entrepreneurs is really focus on the product market fit and specifically the marketing and messaging component of the product market fit really early on. When I started positive partum, my little side brand, I focused so much on the product and the tech aspect because that's what I'm good at and the sourcing for manufacturers, all the backend stuff. And I barely spent any time on marketing and I regret that massively, I should have started with marketing. I should have said, hey, I'm going to buy these. I'm not even going to worry about my manufacturers right now and worry about contract management and worry about whatever minimum order quantities. I'm just going to go to Target and buy the things that I'm going to put in this box whenever the order comes in. And what I need to focus on is that message that's going to resonate most at the point of the ad click or at the point of someone seeing my website for the first time or whatever. So I would really recommend just focus on the marketing aspect really, really.

Chase Alderton: Interesting. And I think there's definitely a balance there, because if you have a very, either tech savvy product or a product that really needs to work extremely well, I think that might not exactly work, but it's really interesting to hear that the message is almost as important as the product. [inaudible 00:31:33]

Kevin Marvinac: You know what's interesting? I think it's more important. Maybe this is controversial. We could have another topic about this that we do for an hour, but as a former product person, I'm shocked to hear myself say this, but sometimes I think the messaging actually matters more and that's a little bit sad because of course you want to believe as a consumer that the best products will win out but you have to have the messaging. It has to resonate with the customer.

Chase Alderton: Yeah, absolutely. Totally agree for you. All right. Let's flip the script here. What advice would you give to a subscription brand who has already scaled and is trying to reach that 10,000, 100,000 subscriber mark?

Kevin Marvinac: Okay. So if they've already scaled a little bit.

Chase Alderton: Already moving let's say something that's going to get them over the plateau, get them over the top and keep scaling.

Kevin Marvinac: Yeah, I think there are a couple things. One is it's going to be all about optimization at this point. It's going to be more about optimization at this point than it is about creation and there's lots of things you can do with optimization. But the specific tactical piece of advice that I would say is about data and AB testing and AB testing is just one type of testing. You don't have to do AB tests, but typically they work pretty well. And cohort modeling is another one that works really well. But try to get a little bit more sophistication around your decision making to optimize your major workflows. And so if you're doing, let's say 1,000, 2,000 orders a month and you want to get to 10K or 100K you could almost chunk your business processes into functional areas.

Kevin Marvinac: There's manufacturing and sourcing. There's delivery experience and warehousing, there's marketing and ads management and acquisition. And there's all these things. So do that. Think of a laundry list, do a brain writing exercise, which you can Google, if you don't know what brain writing is, but do a brain writing exercise and generate a ton of ideas. And no idea at this point is bad. And maybe for each vertical, you'll have 10 to 20, 30 ideas. Once you have those get together with a small group of people you trust and like at the organization that you think have good brains for this stuff and just evaluate those ideas and vote on them and then pick three. It doesn't need to be rocket science. You don't need to do everything all at once like I mentioned earlier with the sustainability stuff.

Kevin Marvinac: But just pick three in each vertical and start testing. Again, it takes a little bit of time, but at worst, you're going to be neutral. At worst you go back to the old way when you try something that doesn't work. And I think that optimization, those tweaking the dials that's crucial for growth. Very rarely does an operator wake up and have this brilliant light bulb idea and it's going to help their business. It's not massive unlock or silver bullet, that doesn't really exist in practice or very rarely.

Chase Alderton: And also [inaudible 00:34:04] once you've started to scale everything starts to work. So you have to pick and choose the small things that might boost you over the top a little bit more. There's never going to be a silver bullet.

Kevin Marvinac: Yeah. Yeah. I agree with that. I think maybe they exist in the world, but they're super rare. So my point is use data. Don't be overwhelmed by the sea of possibilities. Narrow, just get a list and then start narrowing it down and just start testing.

Chase Alderton: Final question for you. We're going to hop into subscription products. What physical subscription products do you subscribe to?

Kevin Marvinac: Well, I mentioned [inaudible 00:34:37] earlier. That's my wife. So I can't comment too much on that, but I'm a huge sucker for craft coffee. And I really, I just started subscribing to Blue Bottle based in San Francisco.

Chase Alderton: Love it.

Kevin Marvinac: Great third wave coffee. They just do a really nice job. So I just started subscribing there and it's been a really nice experience. It's like a variety pack where every month I get a different style or whatever. And they include a little note card that says, hey, this is our giant steps blend, which is really, really bold and chocolatey. And here's how you should prepare it. It's really, it's a fun experience. I really look forward to it.

Chase Alderton: Awesome. Variety coffee pack. Most people with their coffee they're very picky. They stick one and keep going.

Kevin Marvinac: Like cigarettes. Yeah, no that's not me. I like to test around and experiment.

Chase Alderton: Well, keep bending over backwards for customers. Thanks, Kevin, for joining us, appreciate your time.

Kevin Marvinac: Yeah. Thanks so much for having me.

Chase Alderton: We want to thank Kevin once again for joining us. If you're interested in ShipBob, you can head over to shipbob.com.

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