The Loyalty Trap: James Hurman on What Really Drives Ecommerce Growth | #582

James Hurman has spent years shaping how the world understands brand building. An award-winning strategist, author and co-founder of Tracksuit, he’s become a global voice for effectiveness at a time when marketing teams are under more pressure than ever. In today’s episode, James dives into the real drivers behind brand growth, and why the industry must move on from its obsession with doing “more with less”.

Today, we're discussing: 

• Why “doing more with less” is the wrong mindset for brands that want to grow
• The Klaviyo research revealing why high retention often equals slower growth
• How to identify the customers who actually increase long-term revenue
• Why loyalty programs rarely drive scale and what to prioritise instead
• How Tracksuit is changing the way marketers prove brand impact
• The role of mass reach, contextual media and cultural relevance in 2026
• Why AI can ideate but still can’t judge creative quality like a human
• What ecommerce brands should focus on to scale confidently into 2026

Connect with James
Explore Previously Unavailable
Klaviyo x James Hurman research
James' books 

Chapters

• 6:15 Marketing Investment vs Efficiency
• 8:44 The Role of CFOs and Marketing
• 11:19 The Shift In Marketing Power
• 16:21 Customer Acquisition Insights from Klaviyo
• 21:15 Identifying Valuable Customers
• 25:15 Targeting and Branding Strategies
• 29:48 The Importance of Contextual Media
• 33:37 Balancing Targeted and Broad Marketing
• 34:34 AI in Creativity: A New Benchmark
• 39:23 The Role of Human Judgement in Creativity
• 46:25 Building Future Demands for Brands

Transcript

SPEAKER_00: 0:01

The companies that were retaining the most customers were growing the slowest. And so loyalty programs do work in helping you retain customers. They don't work in terms of helping you grow the company. Her clear advice to companies is you shouldn't be letting anyone under 35 use AI tools in the workplace. If we are a business that wants to be a really successful, profitable, growing, you know, market leader or big player in our industry, thinking about how we do more with less is just the wrong way to be thinking about it, right?

SPEAKER_01: 0:35

Hey, it's Nathan Bush or Bushy, joining you from the land of the terrible people here in Brisbane, Australia. Do we have a treat for you today? I recorded with today's guest in person at the K Sid event earlier in the year. I've just had to wait six months to re-record with them because the studio we recorded in actually lost our audio. No lie. Not my fault. It was the studio's fault. And I had to wait six months to rehab this conversation. And I've been telling everyone about it, so I'm really, really happy to bring it to you today. Today's episode is something we should all be passionate about. It's about future demand. It's about how do we make sure that we are building a growth engine in our business so that it sets us up not just for next week's numbers, but for next year's numbers for three years later, for five years later, that we're building future demand in our brand and in our business to stand out in a crowded market and to build real brand loyalty that'll stand us in strong stead for the future. And I couldn't think of a better person to bring us this conversation, the last one for the year. We deliberately put him as the last episode of the year because it's going to leave you on such a high and you're going to leave pumped for next year. He's an expert, a global authority on advertising effectiveness, brand strategy, and the intersection of performance marketing and long-term growth. Joining me today is James Herman, a New Zealand-based entrepreneur, investor, and advertising effectiveness expert. Honestly, the amount of places we go in our conversation will make you question how much you do in a day. This guy is absolutely everywhere and is a thought leader on some of the most profound e-commerce topics going around. He's the founding partner of Previously Unavailable, a creative company that partners with and invests into high growth startup brands. He's also co-founded several successful ventures, including Track Suit. You might remember we had them on the show a couple of years ago, which is a brand health tracking SAS. We talk about that in the episode today. And he's also started a non-alcoholic and RTD drinks brand called AF Drinks. We actually don't get to talk about that today, but look him up. Fascinating. So he practices what he preaches. Over his career in advertising, he's won more than 50 effectiveness awards and was once named the world's number one strategic planning director. He's the author of the books, The Case for Creativity and Future Demand, as well as a children's book, and has led major data-driven studies like the Effectiveness Code in conjunction with Cairns Lions and WARC. I hope that sets the scene of why I'm excited for our conversation with James. In this episode, I had to pick and choose the topics that we dove into and we talk about how e-commerce brands can get off the ROAS drug and start thinking about future demand, growth for tomorrow, not just about harvesting today's traffic. We talk about how brand building and performance marketing can and must work together. James gives us some practical metrics, frameworks, and actions you can apply right now in your e-commerce business. And despite his initial objections, we dive into AI and the role that AI plays in creativity for brands. Now, before we get into today's conversation, a big shout out to our sponsors, Clavio, for bringing us this episode and hooking us up with James from their K Sit event and also Shopify, who have supported us since day one. Thank you to them both for bringing us this episode and all our episodes of Ad to Cart this year. That's enough. That's a long intro, but it's the last month of the year. We wanted to hype it up properly. Please welcome James Herman, co-founder of Previously Unavailable. James Herman, welcome to Add to Cart. Thanks, Nathan. It's great to be here. Great to be here again. We were just discussing that we had one of the my favorite conversations of the year straight after you got off stage at K Sid earlier this year. I can't remember what month it was. You unveiled, it was this big thing. You unveiled some brilliant research. You had a packed auditorium. We went and recorded a podcast, energy was high in a professional podcast studio. Got home, no audio. Fuck. Nikes.

SPEAKER_00: 4:37

It would have been great for the lip readers, though. If you've got lip readers in your audience, you know, you could probably you could probably do one for them.

SPEAKER_01: 4:43

Yeah, yeah. I we've still got the video. So if any lip readers are listening to this and want a new task, we've got a great interview that we've got no idea what was said. So you are the busiest man on the planet, I think, when it comes to advertising and marketing. I've been following your journey since we last spoke, and you've been all around the world talking about brand, talking about loyalty, talking about marketing. What are the key themes that you're seeing out there? What's the main message that you're giving to people all around the globe at the moment?

SPEAKER_00: 5:09

There's always so many themes floating around. You know, I tend to not say much about AI, to be honest, because everyone else is, but obviously that as a theme. I think the theme of sort of, you know, budgets getting smaller or tighter or people kind of being really focused on how can we do more with less. And one of the things that I've been really trying to, really trying to impress on people is that's the wrong way to be thinking about it, right? If we are a business that wants to be a really successful, profitable, growing, you know, market leader or big player in our industry, thinking about how we do more with less is just the wrong way to be thinking about it, right? Marketing is an investment that we make that pays off better than most other investments a business makes. And if we view it in that way, we see it as an exciting investment that's going to help us become a really big, profitable company rather than a sort of, you know, unfortunate cost that if we could just manage it down as much as possible, that would be great. I think that's super important. Les Burnett, one of the sort of advertising and marketing effectiveness greats, was uh talking at the IPA F Works uh conference in London a few weeks ago. And he sort of he managed to do this really interesting piece of research where he could show that the explanation for profitable growth in a company was about 11% focusing on marketing's efficiency and 89% focusing on marketing scale. So if we spend more money at an average level of efficiency, we'll do way better than if we spend less money at a really high degree of efficiency. What do you mean by efficiency? I mean kind of like going, how do we make our cost per acquisition as low as we possibly can, right? How do we kind of make all of our performance metrics look fantastic? And the quickest way to do that is to lower our spend, right? Performance metrics get worse the more we spend. So if we just lower our spend, our metrics will improve. But of course, that's a crazy thing to do because spend is a competitive act. We're competing against others in the market. If we spend less than them, we're turning up to a gunfight with a knife. You know, that's how it works. So I think I'm rambling now, but you know, that's kind of that's one of the main themes I see. How do we do more with less? It's a crazy kind of a that's that's the wrong thing to be doing if we want to grow a big, profitable business. If we just write want to run a really little business, then fine. Think about how to be most efficient. If you're heading towards being a big, profitable business, you don't think about efficiency. You think about investment. How do we invest a lot, compound that, not be stupidly inefficient, but we think more about how we're gonna win the battle, not how we're going to, you know, show up to the battle with the smallest possible, cheapest possible weapon. Yeah, yeah, yeah.

SPEAKER_01: 7:47

I saw that you on LinkedIn put out a post saying that you're going to do, I think it was research or a course or something along those lines to bring CMOs and CFOs together. Let's bring those worlds, you know, unite them. Because do you think this is a unique thing for marketing, doing more with less, or is that just a business thing at the moment?

SPEAKER_00: 8:03

That's an interesting question. I'm not sure what the answer to. I've got I've got no sort of evidence to suggest it is or isn't unique to marketing. But I think, you know, the CFO thing, I think, you know, a good CFO is in charge of two kind of areas of their PL and their balance sheet, which are capital expenditure and operating expenditure. And the idea with OPEX operating expenditure is you do want to sort of be as efficient as you can be with the day-to-day costs of the business, right? You know, it is often better to find a less expensive cleaning firm who can clean the office every day and save 10% on that. That's often a good decision to make. It's good to review suppliers from time to time to make sure you're getting good value. When it comes to capital expenditure, which is, you know, expenditure that goes on the balance sheet and it's meant to pay off over a longer term. CFOs look at that really completely differently, right? It's not about how cheaply can we get it, right? Yeah. Now, like what's the return on this spend going to be? How much can we make off this investment? And so one of the peculiarities about marketing spend and particularly brand marketing spend is that it's an operating expense, not a capital expense. The reason I say it's unusual is because when you're spending on brand marketing, you're going to see the payoff from that happen over two or three years, not just happen over the time that the company's running. So it should really be capital expenditure. And it should be assessed in that way. But because it's OpEx, you know, there's an accounting treatment problem, which means that, you know, CFOs are incentivized to kind of try and make that part of the operating expense more efficient, not use it as an investment lever to create lots and lots of future value. And so that's what I'm trying to do with the CFO community is really trying to figure out the right way of kind of making that point and educating them and getting them to think of uh brand investment in particular more like they think of CapEx rather than they think of OpEx.

SPEAKER_01: 10:01

Do you think it's more of a problem on the side of CFOs, and we're talking very generalist now, around the treatment of that investment? Or is there a real skill gap around marketers being able to explain marketing as an investment?

SPEAKER_00: 10:14

Yeah, both. So the accounting treatment problem is definitely a real problem, you know. And there are some of us in the world that think that problem ought to be addressed, although it's quite hard to change those accounting standards. But yes, there's definitely a real lack of effort that's been put into marketing, marketing, marketing.

SPEAKER_02: 10:32

Right.

SPEAKER_00: 10:32

So, you know, I spoke a few years ago with Dara Treseter, who's a great American CMO. She was CMO of Peloton at the time. And she said to me, Marketing has not done a great job of marketing marketing. And it's really true, right? It's very pithy, but it's really true. We've done a great job of marketing the products and brands that we need to market, but we haven't done a great job of marketing our discipline to other stakeholders in the organization so that they see real value in it. They understand why we're doing the things that we're doing. We under they understand the sort of payback period on those things, and they judge marketing and marketing's results in the right way. So yes, we've been useless at that.

SPEAKER_01: 11:04

I actually see too that there's this real divide at the moment in that marketing teams are losing power, and I hate the word power because I hate corporate politics and shit like that. But they're losing power because all of a sudden you've got these digital teams who are actually doing marketing or getting a lot of the marketing dollars to pump through the performance metrics and the technology and everything else that is essentially marketing, but has been taken off the marketing plate, and thus they've got less to play with. Are you seeing that?

SPEAKER_00: 11:30

Oh yeah. I mean, that's bananas. It's like the balance sheet being taken off the accounting department and given to the marketing department. It's like one part of their job is to manage that. And so, yes, that is bananas. It shouldn't be that way. You know, marketing, digital marketing is a form of marketing, surprisingly enough. And so and and the CMO's role should be to balance the very important short-term performance-oriented marketing that they do with the uh longer-term brand marketing. That should be a marketing leader's role is to balance those two things under one ownership. Absolutely. Yeah. Well, you can only balance something if you can control both sides of it, right? So if you can't, you can't. Yeah, that makes a lot of sense.

SPEAKER_01: 12:10

I had a great conversation with Matt from TrackSuit, a company that you co-founded uh a few years ago now. And it was in the early stages, I think we're about two or three years ago. And I love the idea because Traxuit, and I'm going to butcher the explanation of it, is a way for brands to measure brand impact in real time, essentially, or as close to real time as brand can get. I absolutely love this idea because it's starting to give marketers real metrics around that investment that you spoke about. Since launching, you've obviously got some great traction with big brands all around the world with that platform. Do you think it's made a significant impact to how brand is perceived as an investment now that they've got real numbers behind it?

SPEAKER_00: 12:49

In general and the world, not yet, because we're really, I mean, we started in 2021. So we're still a pretty young company. You know, we're now working with well over a thousand companies around the world. So it's a, it's a, it's a really good business for the stage that it's at. But, you know, making a dent in in business's sort of feelings and attitudes and behavior toward marketing will take us longer than three years uh or four years. But on an individual level, absolutely. So the work that we do with our community of client partners, arming them not only with the metrics, but ways of displaying and describing those metrics to their, you know, executive teams and their boards, you know, making simplifying things, making things comprehensible to people that aren't necessarily in marketing, and then providing, creating research studies and doing things that arm those marketers with more and more evidence that what they're doing is of value, and that value will certainly pay off. So I think on an individual company basis, I think, yeah, we're really moving the needle for a lot of brand marketers. We're really helping them do their jobs more effectively and really cement their value in the role that they're in in their company. So yeah, I'm really proud of how Tracksuit's helping those individuals. And I hope that, you know, as we scale, as we get bigger and bigger and bigger, you know, one of our key kind of objectives over the long term is to get tracksuit metrics into every boardroom around the world. And so, you know, that's all about being able to influence that scale and really change the, you know, change the the thoughts and feelings and attitudes towards brand marketing.

SPEAKER_01: 14:24

Oh, I had the pleasure of being with a company for a short amount of time as an interim head of and using track suit. And it was phenomenal in just facilitating the right conversations because all of a sudden brand conversations weren't wankery talk. They were real metrics, real numbers, real graphs, which we could see and respond to in real time. And this isn't a plug for you. It actually helped us shape our investments and remove some catalogs, remove some, you know, still talking physical catalogs, remove some catalogs, reduce the amount of emails that were sales or transactionals, and reinvest in some above-the-line media. And we could see the shift month on month on what that did for brand awareness, brand perception in the markets we were in.

SPEAKER_00: 15:04

Yeah, when we when we started track center, one of the observations was that, you know, like it or not, we live in an era where performance marketing is a daily trackable thing, and you see you have your dashboards and you see your charts and graphs and things going up and things going down and all of those sorts of things. So if that's the visual language of marketing now, we need to match that visual language on the brand side, right? You've got to have an always on tracker. It's got to be like a simple dashboard, not a thousand page presentation from a research company. All those sorts of things. Like we had to meet marketing where marketing was and sort of say, well, this is how you do things, this is how you present things, this is how you visualize things. And that's really important. And so a big part of the visual design of TrackSuit was going, how do we make this feel like a performance dashboard? Yeah, it does feel like that. It feels like that.

SPEAKER_01: 15:52

And it feels responsive because what a lot of people don't realize, even with brand tracking, historically, that's every six months if you're lucky, and it's got a huge lag on it, 12 months in most businesses. This is a month-to-month update, which I think is pretty revolutionary in helping marketers. I want to talk about the research that you did with Clavio because I think it was really interesting. And the buzz around the room, like I mentioned at the start, was huge after you got off stage earlier in the year. Can you summarize for me? You might have to cast your mind back now because you've done about 20,000 projects in between then. Your key findings around customer acquisition for e-commerce businesses. What were your main findings there?

SPEAKER_00: 16:31

Great. So you are you are testing my memory a little bit now that a few months have passed. So I'd encourage anyone, you know, if what I'm saying sounds interesting and full of holes, then um please do go and search the Clabio report. It's called It's What You Do With Them. And it's a report from earlier this year. If you search Clabio, it's what you do with them, you'll no doubt be able to locate it on the internet. We really wanted to understand the interaction between the sorts of loyalty and short-term kind of sales and customer metrics with companies' top-line growth and revenue and really understand what's helping companies grow and and what's not. And whenever I go into these sorts of projects, I go in quite open-minded. It's really about kind of getting as much data together as we can and then finding what are the interesting patterns in that data, as opposed to going in with a particular thesis and then trying to make the data match to that, which is kind of a spurious thing to do. So anyway, when I looked in this data, one thing that was really super interesting was that the companies that were retaining the most customers were growing the slowest. The companies that are retaining the most customers are growing the slowest. Yeah. So the companies that were retaining like a lower percentage of their customers year to year were actually growing much faster. And that sort of it flies in the face of how we think things work, right? We've sort of been taught that retaining customers is one of the most important things we can do. You know, hold holding on onto those customers year to year is is a really important underpinning of growing a healthy business. And so to sort of see that was, you know, at at first sometimes when I do these, like I'll see, you know, I'll create a chart from the data, and then I'll go, I must have done something wrong because that chart just doesn't look like it should look and just completely breaks with, you know, what how we think things should work. And so I produced this chart and it was like this really kind of relatively, you know, linear correlation between negative correlation between the amount of customers retained and the growth rate of the company. So and where are you getting your data from? Sorry. So that's all coming from Clavio and Clabio's agency partners. Okay. So Clavio work with a number of agency partners around the world who have access to lots of kind of client data. So we studied sort of can't remember exactly what the numbers were now, but it was sort of like dozens of different brands across a few markets, you know, millions of customers and billions of dollars of customer transactions. And so, you know, a relatively big data set. We're not sort of working with small numbers here. And so it was really, yeah, that was really interesting. And then when you go, well, hang on, what's this this chart looks completely wrong? What what on earth is going on here? And so digging into it, what we found was the companies that were, they might have been retaining fewer customers, but the customers they were retaining, they were growing the spend of over time. Sure. And so that's why the report's called It's What You Do With Them. It's not the customers that you retain. Like just retaining lots of customers isn't the important thing. Retaining the ones that will spend more with you over time is the important thing. That's where the growth comes from. And so we then looked at kind of uh we looked at loyalty programs. So, you know, about half of the companies in in the set that we were using used a loyalty program. By the way, they're all e commerce, um, e commerce retailers, about half of them used a loyalty program. We found the growth rate of the companies using a loyalty program was much lower than the growth rate of the companies not using a loyalty program. Again, you kind of go, well, that's weird. You know, the loyalty program should help. James, are you sure you got the data right? Yeah, totally sure. Yeah. And when we look Looked into that again. What we found is the companies that we're using the loyalty program, yes, they retain more customers, but again, customer retention isn't the most important thing. And so loyalty programs do work in helping you retain customers. They don't work in terms of helping you grow the company. And actually, you know, in marketing, we've got a finite amount of time and resources. If we spend too much of that time and resource trying to retain customers and drive loyalty, we spend too little of our time and resource growing the customer base by going out and driving penetration, doing the marketing that brings new customers into the brand. So it's all about like a, you know, again, we were talking before, it's all about a balance. We need to balance the stuff that we're doing in loyalty with the stuff that we're doing to grow the penetration of the brand over time. If we spend too much on loyalty and too little on penetration, we don't grow. If we spend a little bit on loyalty, which of course we should, we want to retain some customers and we want to do the types of things that make customers happy and make them want to come back to us. Absolutely. It's not that we should abandon that altogether, but we should spend a small amount of our time on that and a much larger amount of our time getting the brand out into the world in big ways, bringing new customers into the brand, penetrating the market. That's how we grow. Is this the the Byron Sharp How Brands Grow philosophy? It's definitely linked to that and definitely at least, you know, complements and conforms with certainly the thinking around uh how brands grow, for sure.

SPEAKER_01: 21:24

Yeah. Were you scared that when you got this data back and this research back that Clavio were like, well, thanks for that.

SPEAKER_00: 21:30

Uh that's no good for us because we're about retention. I think, you know, Clabio were we're actually amazing partners on the project because they were very supportive of let's find something which actually helps our community understand better how marketing works. And let's be quite, you know, let's be genuine about that. You know, let's not go and try to provide a message that's that's gonna help, you know, Clabio sell a few more things. Let's do something that's truly in the interests of our community, and that's gonna pay back to us a lot more than sort of doing some kind of sales tactic on them. Actually, you know, when with Clabio, because they are developing or have developed, you know, they're in the business of a sort of B2C CRM product. And actually what you can do with that B2C CRM is you can get much better insight into which of your customers are growing, which are the ones that are worth retaining, right? So actually, you know, in a funny way, even though we think of sort of you know CRM as being about retention and in a really interesting way, you can use a really good CRM like Clavio to actually help you diagnose who are the right customers and the wrong customers to keep nurturing, really focus on that. And that's something that is going to help you grow.

SPEAKER_01: 22:35

Yeah. And those are gonna be my next question to you is so if we're saying that retention isn't the be all and end all, it's actually retaining the right customers for growth and letting the other ones go. Do you have a framework or a a way of working out who the right customers are?

SPEAKER_00: 22:50

Yeah, I think very simplistically, if you've got enough data, like if you if you're right at the start of your journey and you've only got you've only been in market for a few weeks, this is really, really difficult to do. If you've got two or three years data, you can look back on that and go, let's like if we take all of these customers and we separate them into two groups, ones who increase their spend year to year and ones who decrease their spend year to year. And then you look at those two groups and you start looking at what's similar about people within these two groups. What are the characteristics that hold them together? Then, you know, if you're lucky, you'll find that, oh, we can see that the ones that tend to spend less over time, they tend to be these sorts of customers. So you might find that they're a certain age group or there are a certain gender or they're a certain type of business if you're a B2B business. And the ones that tend to grow over time, they tend to they have these similarities about them. They tend to be this age group or in this region or that, you know, whatever it might be. And so that can help you kind of, you know, isolate who you're, you know, in in startup terms, we talk about ICP, ideal customer profile. And so, and you start to be able to isolate who what that ICP looks like, you know, and then that means that when you're marketing, you can go out and sort of speak to more people like that, or really have a focus on when those customers do come in the door, really spending extra time with them, really nurturing them. So that's kind of the simplistic way that I'd advise going about figuring out who the right customers are.

SPEAKER_01: 24:13

So, in that model, I mean the RFM model is the old, you know, the one that everyone goes to when it working out your most valuable customers, but you're effectively, tell me if I'm wrong here, striking out the R and the F and focusing on the M, whether that's going up or down.

SPEAKER_00: 24:27

Yeah, I think um the real tell is not how much they spent, it's how that spend is is going or shrinking. Yeah. Because you can get a customer who comes in and spends an enormous amount with you and you never see again, right? Yeah. You can get a customer who comes in and spends half the amount of that other customer, but the next year they spend 10% more on top of that, and the next year 10% more at the top of that. You know, the total value of that customer is way higher.

SPEAKER_01: 24:50

Yeah. And then I love that link that you've got there from understanding your customers and your most valuable customers that you want to retain and then using them as a cohort or an insight pool to be able to then find your new customers that are look-like audiences. I think from e-commerce, we're all like, well, great, we've got a database here, we can put it into Facebook or whatever as a look-alike audience, and we can go let the machine do its thing to find more customers like these ones. How else can you do that? If we take it out of the meta algorithm bot, how do you bring that into the real world from a branding perspective to find more like-minded customers like the the first party data that you've got?

SPEAKER_00: 25:25

Yeah, so I think I mean there's so many different ways of sort of targeting or groups that you can target. The algos are actually really, really good in many ways of sort of figuring out who's most likely to be in market right now and interested in what you've got to sell. So they play a really important role. At the other end of the spectrum, you've got really untargetable or, you know, um mediums like say outdoor, right? You look at a billboard, right? It's really hard to place a billboard in a place that only this sort of person is going to see it, right? Really hard. But it has another potentially more valuable effect of reaching lots and lots and lots of people. And all of those people knowing that each other have seen that billboard. And so when we're building brands, we're actually trying to build a sort of a shared meaning of that brand in the heads of lots and lots of people. Because the way that we the way that our brains work being a herd species is we like to buy and wear and use and be associated with things that we think other people think are good things, you know, aspirational things or valuable things or good things to be wearing or doing or whatever. And so at one end of the spectrum, you've got like highly targeted, how do we kind of get the right person to buy today? At the other end of the spectrum, you've got highly untargeted, how do we build broad meaning out there in the world? Both of those things are important things for a brand to do if it wants to grow into a big profitable brand. What's in the middle, I think, is what in media planning is known as a contextual buy. And so contextual media is, I'll give you an example. If you're advertising nappies and you advertise in a early parenting magazine, right? You're advertising to someone who's reading that magazine who's probably thinking a lot about early parenting. And chances are someone who's not an early parent isn't reading that magazine, right? So you've got two things going for you. That magazine ad that you've placed is really likely to reach, at least mostly, early parents that are in the market for nappies. And also it's reaching them at a time when they're interacting with lots of other content, which is sort of in the same part of their brain as your nappies, right? It's all this early childhood stuff. So what's been shown in the media effectiveness studies is that contextual buys are the tend to be the most effective way of media planning and buying. If we can do that, you know, if we're if we're nappies, we contextual buy around that. But you can sort of do it for just about anything, really. Like if we think about this this microphone, right? We could advertise this microphone in, I don't know, this the sports section of the newspaper that's not a very contextual buyer, we're unlikely to be reaching sort of audio heads. If we advertise this microphone on a website that's all about podcasting, for example, then you're likely to be reaching people who are likely to want to buy a microphone or interested in that in a space where they're thinking about podcasting and doing great podcasting. So that's the way to think about it. Like, how do you how do you choose media with it has already got a kind of baked-in community of interest which matches your target? And uh yeah, so that's another way to think about it, which is just as good as using algorithms and another part of the probably overall media strategy.

SPEAKER_01: 28:25

Ever feel like your emails and SMS have been dressed by two different fashion designers with wildly different tastes. That was the problem for sheep, the iconic Aussie fashion label with over 50 stores and a growing e-commerce channel. Their emails were powered by Clavio, but SMS was stuck on a separate platform. Reporting was inconsistent and they couldn't see the full customer journey. So they brought it all together. By consolidating SMS and email, under Clavio's roof, Peak got an 81% jump in SMS subscribers, a 51% increase in click-to-order rates, and a huge 113% ROI on the Clavio platform. If you're ready to get your email and SMS in order, head to Clavio.com forward slash AU to see how brands like Sheik are creating consistent messaging. But do you think there's part that performance marketing has almost fucked traditional marketing because there's a perception that everything has to be so targeted now? Where if you take your nappy example, we're targeting parents of kids between zero and six months, potentially. They're real people too. So they have other interests, they have other hobbies, they show up in all sorts of different ways. They're not just outside. So if you take the outdoor example, where we're not just placing billboards outside baby stores, because these people live lives and they're part of our communities and they're everywhere. It's just that they might not always be thinking about nappies. Is there part of that shared meaning when you go, actually, this is our audience? We know exactly who we're talking about, we know their pain points, we know what motivates them, we know what they care about, their beliefs and their values. That creativity needs to do the job, and we have to be willing to go, actually, 95% of the people who see this will not even register. Like they'll glance at it and they'll go, Yeah, it's not for me. It's not for my life stage. But the 5% that we really want, the creativity and the messaging on it is so targeted and so pointed that it really cuts through. Is that an okay of way of marketing?

SPEAKER_00: 30:22

It is. I mean, if you think sort of yeah, puristically about what you're saying, you know, that the where you get to is there's an awful lot of wastage in there, right? And wastage is not not a thing, but we tend to think about wastage far too puristically. So yeah, I'll give you one example, which is uh commercial trucks, right? So if you think about it, there aren't many people in the world who are gonna procure a commercial truck. Most of us will never do that in our lifetime. It's not on my list. No. And so and so you would think, well, the best way if we're gonna run commercial truck advertising, the best thing to do would be run it to run it in contextual media like trucking magazines or trucking procurement magazines, or target directly the people that buy trucks or what have you. About 10, 11, 12 years ago, an agency in Sweden had a brief for a commercial truck brand and and they went into their research and they part of their insight was that when commercial truck buyers are buying a truck, they actually like they talk to lots of other people around them, and they do take into consideration, like if you run a private trucking business and you, you know, you're a one truck guy, you know, running a truck, you're kind of gonna like the decision's kind of gonna be made with a bit with your wife and a bit with your kids and a bit with your friends, and you're kind of taking all of them into consideration. And so they formed this strategy, which was at the time like actually, you know, very kind of brave of them to go, why don't we why don't we market this commercial truck to as many people as we can, right? So, yes, we want the truck drivers to see it, but actually we kind of want everyone else to see it as well. And they made an ad with Jean-Claude Van Damme doing the splits between two reverses. I remember that, right? And that ad got sent in its first year, it had a hundred million views on YouTube. Like everyone in the world world saw it basically over time. It was very, very broadly spread.

SPEAKER_01: 32:04

I also remember it was that the time where you used to like send YouTube links to people via email. Like that was how we shared our YouTube videos. Totally. Yeah.

SPEAKER_00: 32:12

It went viral on email. Yeah. And so so anyway, that was you know one of the most sales effective campaigns in the world. That year it won the creative effectiveness grand prix at Cannon Lions, did wonderful things for the Volvo business. And also over the next many years, because after that I kind of tracked Volvo's market share over several years following, and they just kept growing in market share. And a lot of the reason was is that they had talked to a bunch of future buyers of trucks, like every person who would come into the category over the next five or six years also saw that ad with Jean-Claude Van Daminen, right? And it made people notice, you know, learn a little bit about the you know dynamic steering of Volvo's trucks, if you're into that sort of thing. And it gave people a positive emotional kind of warmth towards Volvo. And that paid back over many, many years as that brand grew. And so, so sometimes it's about being, you know, sometimes being targeted as a good thing, sometimes being very broad. Like if you're a young mum, maybe you do want your mother-in-law to have seen the really cool ad for the brand of nappies you're buying, so that she feels good about you buying those. You know, do you know what I mean? It's like There's the trust markers and the the social validation. Yeah, our perception of brands is partly what we directly think about them and partly what we think everyone else thinks about them. That's that's what informs our decision. So that's why mass branding is so effective, even though we have trouble thinking logically why that should be the case. And our minds we go, well, shouldn't we just target the people that we want to sell to?

SPEAKER_01: 33:42

And yeah, society works a little differently to that. I think you've unlocked something that's been bugging me for a long time. I'm a mad Canberraid's fan. And our sponsor, our jersey sponsor for the last few years has been Toyota forklifts. And it drives me freaking insane because I'm like, why can't we have a cool sponsor? Like, what have we got forklifts on our jersey?

SPEAKER_00: 34:00

Yeah, I see your point. Yeah, I think it's probably a really good media opportunity for them, albeit you might prefer to have like a cool beer brand or something on your. Yeah, I I hear you.

SPEAKER_01: 34:13

You hear me. Uh, you know what I'm on about. I want to talk a little bit around creativity because I know that at the start you said that you try and steer away from AI, but Jesus, 2025, how can we have an hour-long conversation without talking about it? You released this year, as part of your work at Springboards AI, a creativity benchmark to kind of measure how creative our AI agents and our AI tools are right here, right now. What did you find out of that?

SPEAKER_00: 34:40

Yeah, I mean, this is a super interesting study. It was sort of initiated by the founder of Springboards, a guy called Pip Bingerman, who is a great Australian AI entrepreneur. And he sort of got a little group of us together and said, I really want to create a way of benchmarking AIs on creativity. The reason for it was that when LLMs are being benchmarked in their development, they're benchmarking against a whole lot of uncreative stuff, right? They're benchmarking against how accurate they are, how well they can do equations, how well they can do this and that, right? And they're trying to eradicate hallucination from from models, right? Not get them to like go off pieced into weird places. And actually, creativity is is actually quite dependent on things like hallucination. You know, we actually do want to make like, are you trying to justify drugs in Udland? Yeah, exactly. That's the kind of the hallucinative unlock. Um, no, he he was like, none of these benchmarks that the LLMs are being put through in their testing give us any sense of whether they'll be good for creative stuff. And so why don't we create a new set of benchmarks that that help us assess LLMs? And so he built that out, did a really interesting piece of research. It's quite technical, so I'm I'm gonna try not to sort of go too deep into it. But what he effectively found out is that LLMs are really useful for some things and not very useful for others. So uh I remember working with a creative partner a really long time ago now. So he was like the creative director in the agency. He said, What I look for in young creative teams is I look for, I want them to be prolific but not accurate. And what he meant by that is he wants them to have lots of ideas and lots of different ideas, but because they're young, they're not gonna know which of the ideas is is the right one or is a good one. So he doesn't want a young creative team to like find their way towards the one idea they think is right, because it's not gonna be. He wants them to create lots and lots and lots of different ideas and then sit with him and the other people working on the business so they can figure out, well, out of all of these ideas, these are the ones that are really interesting and really could be the right ideas. I love that. Yeah, that's what you're looking for. And then as you of course, as you grow as a creative person, you become more experienced in actually what does a really good idea look like, what is going to solve the business problem for the client, what's gonna be really effective, those sorts of things come with age and experience, right? But not when you're really young. What Pep in Springboards is that AI can be a really good young creative. So it can be really prolific, come up with lots of different ideas. But when it comes to judging those ideas, and he ran this really interesting test comparing human experts judging ideas with the AI's ability to judge those ideas, the AI was terrible. It was way off. So it couldn't judge quality of idea like an expert at all. And then some AI, uh some AI platforms, some LLMs are really good at coming up with a lot of idea variants. So lots of different ideas, not sort of like the same-ish idea over and over again. And some LLMs were terrible at that. They would just come up with the same sort of idea over and over again. So what he's sort of managed to find is like a way to kind of go, well, if you're a creative person, if you use these LLMs, they're more likely to give you great creative stimulus. But you definitely don't want to let any of them yet sort of tell you what a good idea is. You need experience and mastery and you know, expertise and all that kind of stuff to be able to do that. So I think what I took out of that was, you know, we're at a stage that if we're using our AI, if we know the right models to use, we can get going quite well. We're not at a stage where you can put someone without good creative judgment, give them an AI to use, and they're gonna come up with great effective marketing. They're just not. Will we ever get to that stage? I don't know. Maybe we will, maybe we won't, but we're certainly not there yet. So we still have, you know, there is still a place for human judgment in the process. And yeah, so it was a really interesting, interesting piece.

SPEAKER_01: 38:25

Expanding into new markets isn't just about selling more. It's about selling smarter. Every region has its own rules, currencies, and customer preferences. But with Shopify, global expansion is simple. Localize storefronts, tailor experiences, and build trust, all from one unified platform. Shopify removes complexity so that you can focus on growth and deliver tailored shopping experiences for every market. In store and online. Accept over 100 currencies with Shopify payments for fast, familiar checkouts and use built-in analytics to identify your most profitable markets. One platform built for global adaptability so you can scale without growing pains. Visit Shopify for Enterprise to learn more and start selling worldwide. It is really interesting because it says a lot around talent too. So if I think about the reverse of that, when you say, you know, young creatives are great at generating a bunch of ideas because they don't have the experience, they might not have the scars or the barriers that we give ourselves as we get older because we think we know what works and what doesn't. So we're kind of a bit more focused. I love the idea that if you're a mid to senior manager, that you can use AI to help generate these independent ideas and challenge your own thought process to give you options that you might not think about. If this trend continues and LLMs replace the idea generation, throwing stuff at a wall, essentially, is there going to be a real gap in skills there as that junior team comes through, which we won't have that junior team into more experienced marketers. Are we facing into a big skills gap here?

SPEAKER_00: 40:05

That's certainly something that's on a lot of people's minds. So a a friend of mine, Dr. Michelle Dickinson, she does a lot of work in in this space and she's like a proper scientist who actually knows things about these things. Proper scientists. And her clear advice to companies is you shouldn't be letting anyone under 35 use AI tools in the workplace. Because they're going to miss out on accumulating the kind of skills and expertise. They also don't have good enough judgment to be able to use that you know that tool well and understand whether it's providing them good output. So there's you've got perspectives like that. I think that you know if you think about an LLM's ability to generate ideas and the sort of data sets that it's working with, it can only generate a certain type of idea. What I mean by that is when you're a human in the world, you're walking around and you're sort of like your everyday experience, you're kind of feeling culture, right? You kind of know you can see and read the vibe of things. And a lot of great creative workers that connects with that vibe. It connects with culture in a moment, right? It's the sort of thing that you know you know because of the 15 different conversations you've heard in the last three weeks that this thing is going to be really funny because it's tapping into a sort of insight that you've heard lots of you know AI like LMs don't know that. Right. Will they at some stage like what there may be a point where we have just like we've got the Google cars that go around like you know doing all of the all of that stuff. We might have LLMs just running around the street and running into meetings and out of meetings and listening to everything and seeing everything. And at that point it might be able to do something like that.

SPEAKER_01: 41:42

But I think we're a long way off that the worst thing you can ask an LLM is to tell you a joke at the moment or to make something funny.

SPEAKER_00: 41:48

Yeah totally it's really it's really really hard to do that. Yeah. And so I think for the time being like if I was a creative leader in an ad agency I would be focusing my young creatives on understanding culture, understanding the mood of things, the vibe of things, bringing the ideas that tap into that because it's very unlikely you're going to get that from an LLM. By all means also have you know Claude doing its work sort of you know giving you a hundred ideas off this brief. Yeah. But sure go for it. But I think where the the very human aspect of creativity will remain is in humans understanding one another and understanding the culture around them in a way that a machine you know certainly can't get.

SPEAKER_01: 42:25

I think that's great advice not just for managers but for people coming through in the industry if you're junior and you're worried about a job you're worried about the future you've just given the perfect doorway to making yourself valuable.

SPEAKER_00: 42:36

Yeah. Totally yeah and it is increasingly going to be like what can I do that an LLM can't you know being sort of self-aware of that and going well this is my sort of unique thing. And yeah I also think the future of I was on a South by Southwest panel a couple of weeks ago on this and and it was like we were talking about you know will AI be able to be as creative as humans and I and I think I sort of took the non-obvious side and said I think maybe they will be able to but does it matter right when as human beings as creative humans we often pretend to be doing creativity to drive great business results and to make things more efficient and to solve unsolved problems all that kind of stuff. Creative people are creative because the act of being creative is something that they have to do right very enjoyable. Creative people are really creative don't stop being creative until they die right I've had enough of this creativity I might go being a camera for a bit. It's not like you retire from creativity. You keep being creative right because we have to like that's how our brains work in a way where we just like there's such an enjoyment of being creative such a care for this things that we're creative that we do creative because we have to and then we commercialize that by saying and the benefit of that is I'm gonna come more effective here's my truck suit board. And so LLMs are always going to be like goal oriented right really goal oriented they're using their creative skills in the service of achieving a particular goal not because the LLM loves being creative. Because we love being creative and we care about being creative we always will be right just because LLMs are gonna might become as creative as us doesn't mean we're gonna stop being creatives. We're always going to find ways for humans to have creativity express creativity and make money from that creativity. That's not going to go anywhere even if all the LLMs in the world can do it just as well as us.

SPEAKER_01: 44:30

Oh my goodness I love that so the message that I'm getting out of this is that if you are creative and if you are really practice that and it's the core of your being don't shy away from LLMs don't shy away from AI because they're gonna be here they're gonna get better this is the worst they'll ever be blah blah blah blah blah. But lean into them to enjoy the process not shortcut your way to an answer.

SPEAKER_00: 44:49

Yeah I mean I think yeah the process for sure they can help with the process what they can shortcut is is the time between sort of having an idea and seeing it brought to life. So I don't know about you but I've gotten into vibe coding I've really enjoyed using the lovable platform. I've built some super cool things and what I love about it is I can go from an idea to actually having a fully working piece of software, you know, sometimes in a matter of a couple of hours right and one thing that creative people love is when you can reduce the length of time between having the idea and like seeing it out in the world. Like we love that. We hate it when we have an idea and it never gets out into the world. Or it takes forever and ever and ever to do so. Right? We love it when we can have an idea and then make it really well and put it out into the world. Like that's that's Nevada. Yeah. And so what AI is enabling is it's kind of it's massively collapsing that time that it takes between our idea and seeing the value that the idea creates or the reaction that the idea gets or or whatever. And so I think that's where it gets really exciting for creative people. It's kind of like you can just be you can have and execute so many more ideas than you could before. And I think that's just like super duper exciting.

SPEAKER_01: 45:59

That doesn't scare me that just makes me really really happy because you've got me excited too well I'm glad we didn't talk about AI in this podcast. We did well there.

SPEAKER_00: 46:08

James we have to let you go if we've got one message for e-commerce professionals listening to this as we wrap up 2025 and look towards 2026 what's the one piece of advice you would give them around scaling a brand in 2026 yeah I think I I mean I'll I'll just pick back up on the Clabio piece really and remember that your growth is going to come down to how you identify and nurture the right sort of customers not all of them and how you bring as many new customers into your brand as possible right how are you going to connect with the people that might buy your brand at the end of next year? How are you gonna start connecting with them at the start of next year? How are you going to reach a much bigger group of people than your current number of customers how are you going to kind of go out and get your brand out into the world and start building familiarity of that brand and sort of some emotional positivity towards you. So as those customers come into the market over the course of the year and decide that they need a product from your category they think of you first and they gravitate towards you. That's really the role of brand building is is making people who aren't in the market yet, giving them a sense of familiarity with you so that when they come into the category they gravitate towards you. So do a little bit of loyalty work for sure focus your loyalty and your nurturing if it's on the right customers not the wrong ones and do lots of that creation of of the future demand that you'll enjoy in the future don't shy away from that because you don't see immediate results from that it is an investment that compounds over time.

SPEAKER_01: 47:40

I love it yeah and speaking of future demand I have your book right here which is absolutely brilliant and I saw you've written we've got two books now as well as a children's book. You are a powerhouse of work I reckon there's a whole James Herman chatbot behind you. But we will put links to all of your research all of the books that we've mentioned in the show notes if anyone wants to check out more of that especially the Clavio research as well. James thank you so much for rejoining us I'm sure we've got the audio this time. Nice really appreciate that what an awesome way to end the year.

SPEAKER_00: 48:09

Thanks.

SPEAKER_01: 48:09

Amazing thanks for having me Nathan it's been a pleasure see I told you he was good and it is the perfect way to wrap up the year with those thoughts from James as we step back and maybe as we're sipping cocktails pool side or replanning what we need to do for next year to think about that future demand. Where is our business heading? How do we build a strong scalable model for the future not just to hit results in the next six months? All right here are the three ideas from James that really stuck with me. Number one is the shifting mindset of marketing from an operating cost to a capital investment. Instead of asking how can we do more with less when it comes to marketing what about asking how can we invest to win the category? How do we invest to hit our next milestones? It's a totally different mindset and it needs to be taken on not just by the marketing team but by everyone in the business. Marketing should not be a cost. Marketing is an investment. If it's a cost don't do it. As an investment you expect returns off it. Whether that be immediate and whether that be instantly traceable or attributable that's another question. But for every piece of marketing that you put out there you expect returns. By thinking about marketing as an investment you take the pressure off the immediate sales and you start looking about the future health of your business in the same discipline that you'd use for new tech, new stock or new infrastructure where you're expect it to pay off for you over the next few years. That's it. It's a really important mindset and it can be done with performance marketing as with traditional marketing. Number two, retention isn't everything. Growth comes from the right customers not all customers. So this was really interesting that it was clavio commissioned research and I don't think the outcome was exactly what anyone anticipated especially James as he talked to there. But the brands with the highest retention were actually growing the slowest. And that's because they were focused on holding on to everyone rather than just the customers whose spend was growing year over year. For a long time we've heard that stat that it's more expensive to acquire a new customer than to retain an old one. But what if you're retaining those customers who are actually devaluing over time it starts to make less and less sense as James's research pointed out. Instead focus on your high value cohort and shape your marketing around them. Not only will you be able to find those customers whose spend is growing year over year, but you'll be able to use them to find lookalike audiences of your new customer acquisition base. By focusing on them rather than retaining all of your customer database you're setting yourself up for more growth. And the last idea shared there was AI as the junior creative. Great for ideas but terrible at judgment and I really love this of James calling out to use AI as your junior creative because it's prolific, it's fast and it's full of ideas but it has zero context or ability to prioritize the right ideas. That means that AI can help generate concepts names and variations at scale and do it without the limitations that we give ourselves with the experience that we've got. But humans can still decide what's good. I'm still a little bit torn on what this means for junior creatives if we go down this path and it does worry me that we might start seeing that that skill set of the naive, the ambitious and the big idea thinking that usually comes from the junior team members being outsourced to the machines that does worry me but I totally understand what he's saying around allow the GPTs and the AIs to create as many ideas for you as possible which might stretch our thinking and broaden our horizons when it comes to the humans picking the right ones. Well that's it for this year. That was an amazing conversation to end on. Over the Christmas break we're going to be bringing you the best of and the top episodes from the year both the ones that we think just had the most interesting conversations and also the ones that had the most listens. So you can do your own little countdown if you want to relive some of the best episodes we'll put that together for you in a neat little one episode package for you to get into we'll also be bringing you more playbooks over the Christmas season but that's the last of our interviews. What an amazing year thank you so much for everyone who's listened who's dropped me an email who's just got in touch it's been a fascinating year on Add to Card, especially as we move through all the technology changes and to have the leaders in the industry join us to help you be on the forefront of all these changes has been absolutely phenomenal. We're gonna continue that next year to keep you up to date with everything in e-commerce but for now it might be time for a little bit of rest of relaxation a lot of family time enjoy it you've earned it's been a big year it's gonna be another big year next year but as always thank you for listening and thank you for spending your car your gym your outdoor hours with me on Ad to Cart. Really appreciate it. Now if you haven't already I have to put the plug in still make sure that you subscribe wherever you're listening YouTube, Spotify, Apple, hit that subscribe button and we'll be bringing you brand new episodes in that first couple weeks of January we will be back on your airwaves bringing you the best in e-commerce and if you want a little bit of connection over this Christmas break come and join the Ad to car community. We've got over 500 e-commerce professionals in there ready to shoot the breeze to help you out with any ideas or thoughts that you may have some experts some independent consultants some retailers some tech providers got an amazing mix in there. It's free to join come and join it and maybe start putting some of those big ideas out there and see what happens. Everything's on the table for next year. All right have an amazing Christmas break and we'll see you again soon