Scratch's Mike Halligan on Why He Was Wrong About Meta: How He Built a Smarter Growth Engine | #607

Five years ago, Mike Halligan joined Add To Cart from a hotel room during COVID lockdown, sharing how Scratch was disrupting the dog food category with a simple but powerful idea: healthier food, delivered on subscription, built on trust rather than tactics.

Fast forward to today, and Scratch is still grounded in that same philosophy. But behind the scenes, the business has evolved significantly.

Today, we're discussing:

• Why Scratch remains subscription-only despite the pressure to drive one-off sales
• What happened when Scratch tried to build a dog-owner community and real-world activations
• The moment Mike finally admitted defeat and embraced Meta ads
• The AI workflow Mike built using Claude to analyse reviews and generate ad concepts
• Why Scratch focuses purely on new customer acquisition on Meta
• How AI now helps Mike build internal tools without hiring developers
• Why the next year at Scratch is about calming the chaos and executing better

Connect with Mike
Explore Scratch

Transcript

Introduction

SPEAKER_01 0:01

So looking back now, I'm like, I was an idiot for not investing more on Facebook ads at the time because comparatively it was like so cheap. So it's really hard when you're in your own echo chamber of like knowing how good are we at this compared to everyone else. Facebook doesn't know who is churning because they no longer have their dog, or who is churning because they are desperate to solve a health issue that food alone can't solve.

SPEAKER_00 0:24

Hey, it's Nathan Bush or Bushy joining you from the land of the terrible people here in Brisbane, Australia. E-commerce has got a lot harder over the last five years. Technically, probably not so much, but in terms of competition, it's more competitive than ever. Less free growth, more competition, higher costs, and a lot of teams have had to raise the game just to stay in the same place. And that's exactly why I wanted to bring back today's guest on Add to Cart. Mike Halligan is the co-founder of Scratch Pet Food, the subscription-only dog food brand that's grown into a multi-million dollar business by deliberately staying focused, lean, and healthily skeptical of growth for growth's sake. When Mike first joined us back in the middle of COVID, Scratch was resisting paid ads, heavy automation, and unnecessary complexity. And they were doing things very different to the rest of the market. In this conversation, we unpack what has held up and importantly, what's changed. We talk about evolving a subscription model at scale, building an in-house creative and meta system. We talk about meta in a lot of depth. And we talk about using AI as a leverage without using judgment. And I think the theme that comes through all of this is how to adapt your strategy without abandoning the principles that got you here. Mike talks a lot around where he's had to change his mind on certain things without compromising the mission of Scratch. If you're responsible for growing or operating an e-commerce business in a tougher market, this episode is a really honest look at how strategy, systems, and simplicity can evolve over time. A massive thank you to Shopify and Clavio for supporting Ad Descartes and helping bring these conversations to the e-commerce community. Here's my conversation with Mike Halligan, co-founder of Scratch Pet Food. Mike, welcome back to Ad Descart.

SPEAKER_01 2:18

Thanks, great to be back. Last time I think I was sitting in a hotel room in COVID lockdown when we spoke. So this is a lot better.

SPEAKER_00 2:26

That is right. It was right in the peak. So you are episode 53, I think, and we're up to about episode 600 now. That seems like a lifetime ago. This is nostalgic. That time of COVID, since then, which has been a good or a bad time from a business perspective.

SPEAKER_01 2:42

I think e-commerce has got harder and more competitive. People have been pretty sophisticated. So I think we've all had to raise our game if we're stuck around and still, you know, growing and dealing with different economy and different level of investment and interest and natural tailwinds and all that kind of stuff. So it's more stable operationally, but harder, I think.

SPEAKER_00 3:01

Yeah. And I see you as someone who's continually raising the game. There's so much that I've seen in the last five years following your story that I'm like, oh, this is new. This is different. You try new things. So I'm keen to jump into that with you today. But for those who don't know, when we talked about Scratch five years ago in that hotel room lockdown, we talked a lot around how you're disrupting the dog food market. Can you share your philosophy on how you approach business and your USP in market for those who might not be familiar with the Scratch story?

The Scratch Philosophy: Simplicity and Subscription

SPEAKER_01 3:32

Yeah, sure. So we always just set out simply just to make the best dog food we could at a really affordable price for just an everyday Aussie. And I guess we from the get-go knew that we wanted just to be subscription only. We wanted a really focused business and one that could be pretty lean. So we thought about it like subscription probably allowed us not to have as many stuff, to not have to constantly be doing email marketing and a million things of churn analysis from day one. We could just focus on kind of building trust and having a great product. And that if people liked that and the dogs liked it and they stuck around, then we'd, you know, over time have a really good business. So simplicity has kind of always been at the heart of what we've done. The food itself is, you know, as good as it started with dry food only, and it was really one recipe for the first 18 months. We did this crazy thing and made it two recipes. We thought that was a great strategy at some point. And these days, even you know, we're seven, seven and a half years in. Uh we've got four dry food recipes now and one raw, I think it's two raw recipes now. So that was a new category we launched just over a year ago. And everything, whether it's raw or dry, is kind of around this ethos of lower processing, great for the microbiome, the gut health kind of food, and that being really the foundation of a long, healthy life for your dog. And we've always tried to navigate this. How do we talk about all the things we are? Is it just subscription and delivery and you know not running out of food? Is it the impact side of the business? Because we're Australia's first B Corp pet brand, you know, we donated a couple million dollars and over 2% of our revenue every year. Is that the main story? Is it the health transformations that dogs are able to get in our food? Is it just, you know, trustworthy business and, you know, a fun brand and everything like that? So we've over the over the journey, we've sort of learned a lot about how to communicate all these different things that we cared about that we weren't sure how to wrap up into a really coherent thing for our customers. But really at the heart of it is just healthier dog food that's great for their gut health over time. It doesn't put all this unnecessary kind of like load on the dog's body just to process it and deal with all of that food.

SPEAKER_00 5:28

And we're going to talk about your subscription smarts, your tech setup, and your marketing efforts here. But from a loyalty perspective, I've had so many conversations with people. I don't have a dog, but I've had so many conversations with people who have dogs over the last couple of years and who have naturally brought up scratch as like something that they could never move away from because it works for their dog so well in ways that other pet food can't. So you've almost got this amazing loyalty play just in your product itself. Has that moat stood up over time?

Building Loyalty Through Quality and Trust

SPEAKER_01 6:02

Yeah, for sure. Though it kind of hits this period a few years in where people take stuff for granted. They forget kind of what their dog was like before switching to something different, or there's a new, you know, much like health, you know, um, human health in terms of like all of a sudden everyone needs to be having creatine, and then this year it might be fiber, and then everything's high protein, and there's always some trend that brands or the market will sort of move to to try to give themselves a little window into having people reconsider their purchase decisions. So for a brand like us who just tries to be as honest and really just like being a really trustworthy voice for what they should care about, we do have brands that heavily discount 30, 50% with uh a lot of scare tactics and different health messages that, you know, seem to be on trend at that point in time. So we know our customers kind of end up getting faced with this kind of like, oh, here's the new shiny thing to think about. And you know, it's easy to take a subscription that doesn't have a lot of product change for granted over time. So, you know, we held up really, really well. But yeah, you know, it's not like most dogs are there for 10 years. You know, after a few years, we see people who love scratch just go, oh, I might try something new. Yeah, and there's a guilt factor of like having a dog and wanting them to always, yeah, we like spoiling our dogs and giving them different things. So that's also something we've sort of built in and evolved our business around product offering-wise too. You mean you haven't done the the protein dog food yet? Well, I mean, we're always high protein, so there's not really many places to go from that. But uh creatine's one step too far for us so far. Maybe the humans should start eating scratch for their protein intake.

SPEAKER_00 7:32

Exactly. Well, great for fiber as well, keep everything flowing. Today, are you still subscription only? Because that was another interesting part of your model in that you couldn't just go in and buy a one-off product that you had to actually and and you put a lot of thought and effort into profiling your dog and understanding your dog's needs to get the right product. Is that still the model or have you started offering those one-off purchases as well?

SPEAKER_01 7:56

Still the model. So we've we've really built everything from our UX flow and our funnels and trying to be as good as possible at that because there's sort of customers that we don't want. We don't want the customer who just wants to buy a bag and then move to another recipe, you know, a month later. There are people who just like to just move around food to food that just love the shopping aspect of food. They're not for us and we don't want to try to be great at absolutely everything. So yeah, we've we've still stuck with focusing on subscription. We do have like a secret link to buy one off if you reach out to customer service and ask, or if you're about to cancel, you know, you're cancelling because you just really don't want subscription. We've got a place that you can kind of go and buy. But it's not a user pathway that anyone can just stumble upon. It's sort of the secret door we'll show you.

SPEAKER_00 8:41

Is that hard? Because I feel like in the last two years there's been this real focus for e-com businesses around new customers as a revenue metric. Obviously, you could get a whole new bunch of new customers as one-off purchases to start driving that metric. Has it kind of put a bit of pressure on you at any point to go, there is that opportunity?

SPEAKER_01 9:01

Yeah, it definitely does because I mean if I if I think about Facebook or, you know, all the money we spend and everything like that, we can no doubt get more new customers by not doing that. But I do think we'd be having to expand our team and so we'd probably pay for it in wages and the scramble of all the things we're trying to do. And you know, maybe there's a case for that being actually the best thing for the business, but again, we look we like simplicity and it's a much more enjoyable company to run when you sort of have a bit more of a singular focus, and you know that people who appreciate that will do really well out of it too.

SPEAKER_00 9:33

Suppose it makes it easier too from a forecasting and a margin perspective.

SPEAKER_01 9:37

Oh, absolutely, yeah. Yeah, that's that's uh God's end.

SPEAKER_00 9:40

Last time we spoke, you know, simplicity was at the core, so I'm stoked to hear that that is still the case. You also were very much around organic growth and I'd say anti-meta advertising, even pushing emails too hard, like growth for growth's sake. Has any of that changed in the last five years?

SPEAKER_01 10:00

Definitely. I had to admit defeat on a few things that we tried. So we still don't really do any email marketing, a few emails a year, and they're basically, you know, to our customers. And then it's just if we're launching a new recipe, then we'll we'll sort of target these kind of lead lists that didn't end up signing up. We've got our email funnels, which is probably the the thing that we try to make sure we do as well as possible. So once you sort of go through and build a plan for your dog that we follow up afterwards, there and we say, okay, if you get through the funnel and you haven't purchased, then we'll respect that. We've we sort of gave it our best shot. It's not for you. You know, we're not gonna just constantly be making emails and uh inventing reasons to buy and this kind of fake urgency kind of stuff. So that hasn't changed.

SPEAKER_00 10:40

But if we've thrown the stick and you don't chase it, then that's not for you.

Adapting Marketing Strategies: From Community to Meta Ads

SPEAKER_01 10:44

Exactly. Some of the the bigger bets, so you know, I think probably when we spoke, we'd been trying to build community. We made our own media property for dog owners called Off the Leaf and really wanted to kind of have our own audience, whether it be forums, email lists, really content, heavy playing community. We really wanted people it to be a self-sufficient community too. We saw kind of this future of having like moderators from the like of dog lovers helping bring good vibes and everything. But what we learned in our category is that people research dogs a lot when they've got a puppy and they're trying to deal with behavioral issues and make sure that they look after them right. And then they hit a point where they're like, the dog's good, we're settled, and I don't need to make my life, I'm busy, I don't need to make my life about dogs. So community for dogs we admitted to feed on. We tried a lot of events and experiential stuff, thought stuff that we thought would do well in PR and online. And we learned the media loves talking about dogs, but the brand integration's really hard with stuff like that. So, like we did a pop-up dog park in Melbourne. We built all this custom stuff. It had pools, it had ramps, it had everything like that. It was it was fun for humans. And we got all over the news. They did the weather report from there, they did all this stuff, but you know, as a brand, they just cared about showing dogs and this dog park. They didn't care about any scratch messaging. In fact, they were like, we don't want to mention your brand. Can you like very make sure you don't turn this newsread into an ad kind of thing? Yeah, okay. And then, you know, our traffic would sort of go nowhere, and we're just doing this really heavy, people-intensive thing. And the other thing with dogs is you can only have so many people at a time there or so many dogs at a time before it's unsafe and everything like that.

SPEAKER_00 12:19

So it didn't even drive traffic, let alone sales.

SPEAKER_01 12:21

You know, you're looking at Google Analytics when you're on like live news and you're thinking, all right, here we go here. And it's like just a little spike, and you're like, well, that's incredibly underwhelming.

SPEAKER_00 12:31

Yeah, okay. And so has that put you off doing anything around community or activations in the foreseeable future?

SPEAKER_01 12:39

It has actually, yeah, it has. And it's one of those things that I feel like it's either a thing the founder does or you gotta hire for people who are doing these kind of events and really people and time intensive kind of things. And we've always struggled just to commit to to hiring someone to do it. And you know, it's probably not a great use of my time at a certain point in growth of the business and things like that, too. So one of those ones we usually do one or two things a year and then try to do as little as possible outside of that because yeah, it's harder, it's time intensive.

SPEAKER_00 13:06

It's a really interesting point because we just had Tara from Proud Poppy on and they've got an incredible VIP community, but it does take a lot of Tara's time to drive that and be authentic in there to make that engagement happen. And we even talked about, you know, as she's handing it over to some of her team, she's gonna be super careful around who she lets in there, how they, you know, interact to make sure it stays authentic. So if you don't want to tie a community to you as the founder, it's a hard play.

SPEAKER_01 13:32

Yeah, hard to scale. And people, events, you know, it's kind of like hospitality. You need someone who really cares and is on the details and trying to make it the best experience possible. And it's not always easy to find that in staff members, too. So even if you put out an advance manager kind of like role, like getting someone who cares about it to the degree that I would want it done or that it needs to be done is uh is tricky. It's a definitely like a love and energy kind of thing.

SPEAKER_00 13:55

And it feels like it goes up a notch too when it's a real life activation because you're like, oh, this is my brand in the real world. Whereas if it's online, you can kind of make the change quickly, or you can but if it's happening in real life, you need all of that detail down.

SPEAKER_01 14:08

100%. But it's so exciting for the first half an hour, and then once you take the photos, then it's like oh, we've kind of got a lot of what online needs about this. Yeah, but we've still got to run it for another however long. So it could be something in shorter, sharper events. Maybe, yeah. Well, I'd say unfortunately, because I really wanted to avoid this. Yeah, we do spend a lot of time, effort, and money on meta ads these days. So that's probably been the biggest change in the business. And it look, it has helped us scale a lot, but it's very different than how I wanted to build our marketing program.

SPEAKER_00 14:36

What was your original objection to it?

Understanding Customer Acquisition and Retention

SPEAKER_01 14:38

I really wanted to have our business learn the hard things, to have a sort of this moat around really understanding our customers and really having a lot of trust. And, you know, if we owned our own dog community, like it's very hard for someone to create media properties and audiences that are thriving and I guess authentic too and just full of advocates. And we thought if we did that, then the business would be in an incredible place. It's such a you know high value kind of bet. So it was kind of like I'd wanted to do that to keep cacks down as well. Sort of even when we spoke five years ago, like I remember people saying then, like Facebook ads just keep going up, the CPMs keep going up, fast forward five years, and it's probably up what 2020.

SPEAKER_02 15:19

Yeah.

SPEAKER_01 15:19

So looking back now, I'm like, I was an idiot for not investing more on Facebook ads at the time because comparatively it was like so cheap and so few advertisers, but yeah, stubbornly wanted to do the hard thing.

SPEAKER_00 15:31

But it did sound like from a strategic perspective, if you could nail that community, if you had a subscription model where you did have that walled garden, I suppose, where you didn't have to pay people for that, those extra sales, then that's an ideal strategy. But I love how you've adapted. So, how did you approach that expansion into meta? Did you go out into agency land? Did you learn it yourself? How did you get started?

SPEAKER_01 15:53

Well, we brought in a head of growth who'd done Facebook and media buying in the past. And we had an in-house designer, and at various points we sort of had in-house video people. I guess back then, and this is probably four years ago when we first brought in the head of growth, they were much more like media buying, you know, like clicking the buttons in Facebook and not so much creative strategy. We at certain points thought, no, we're underperforming here and it's not worth us spending this much money. And then even while we had him as head of growth, went out to an agency, brought them on to see if there was anything we could learn by just having, you know, having it outsourced. We've done that a few times where we just bring, bring agencies in to say, hey, challenge us, do it differently, see what we learn about this, ultimately with the intention of like, if you kill it, like we'll stick around. If not, we'll learn something, or at least be able to benchmark ourselves. Because it's really hard when you're in your own echo chamber of like knowing how good are we at this compared to everyone else? They moved on a bit over a year ago, and then I sort of took over Facebook ads and just wanted to learn it as deeply as I could.

SPEAKER_00 16:53

And then Is that because you felt like you needed to understand it before you spent more money in it? You didn't trust the results, or you felt like as a founder you could find more creative opportunities. Where did you think you investing your time in getting deep in meta would give the business value?

Creative Strategies in Meta Advertising

SPEAKER_01 17:11

Being able to plan our marketing and understand its potential as well. And probably a key one is felt that kind of at the time there was this real shift in the media buying side of growth to then the creative strategy and essentially a creative production side, being able to make great ads, being able to make uh understand customers deeply and the types of customers deeply, and then make ads for all of those little pockets of customers and the different levels, stages they're at in awareness and how close they are to wanting to purchase dog food or having a puppy or whatever it might be. And so the role was changing a lot to be more creative and strategy-led, which I thought actually was one of my strengths is kind of like bridging the strategy and the creative side. Yeah, I and I'm I'm super general, so I can edit videos and design statics and everything like that. So I could sort of be a one-man band trying to work out how we should resource this in the future. Do I want ahead of growth? Do we stop doing Facebook? How does it compare to other channels? I guess there were so many unanswered questions when you're just used to like one person running it and you don't have that much domain expertise yourself. It's sort of like relying on moving some numbers in Excel for your budget next year and thinking, is that the right way to do it? What's actually possible? You know, what should CAC be? I don't know. It's hard, but it, you know, because it ends up even at the time where I sort of took it over, it was a really significant line item kind of on our budget, but not something that I knew how to be great at. And we didn't have anyone in the company who knew how to be great at it either. And to be honest, I just didn't trust, didn't think that many Australian agencies were at that level from speaking to them either.

SPEAKER_00 18:36

And was it less daunting because 12 months ago was really when Meta started becoming a lot more automated in campaign setup and ad placements? So getting in there and using the tools probably wasn't as intimidating as it was three years ago.

SPEAKER_01 18:50

Yeah, yeah, 100%. It's a lot easier now to navigate your way around and to to launch an ad.

SPEAKER_00 18:55

Yeah. All right. So where did you start? So you've you've taken over the reins. Did you go straight into the creative angle in throwing as many different creative formats up as possible, or did you take the time to look at what's worked historically?

The Evolution of Ad Formats and Creative Messages

SPEAKER_01 19:08

A lot of taking the time to look at what's worked historically and then probably changing too much stuff and being comfortable. You know, when you're the founder, you're a lot more comfortable spending or losing money that other people might not, which is sort of counterintuitive. It's like it's your money and and future, but like you're okay with failure. So it changed a lot in terms of just how we were buying media, doing exclusions, how much we were giving Facebook incentive to find new people rather than just retargeting old people that thinks are closer to purchasing. So a lot of them to kind of like working out the setup. And then actually, then a lot of it was just strategically trying to understand how to build a system of what creative we should be running, how to analyze what type of our customers we're serving or what type of messages we're putting out there, how much spend those messages are kind of getting. What's the cack on making ads for someone with a sensitive dog versus a puppy versus someone who's happily enough with their dog food, but this is just a general all-around great option. UGC versus like high production stuff. Where should I be having our creative team producing assets as well? So there's a lot of kind of building the system and testing as we went. And then now we've ended up with full-time creative strategists just essentially working out what we should be making and how those are going on Meta. They don't launch any ads or anything themselves, they're just thinking and prompting and all sorts. And we have a video editor and a content creator in-house as well, and then we do more UGC than what we did in the past as well.

SPEAKER_00 20:32

So everything serviced in-house. Yeah. Okay. And you may not want to give too much detail on this away, but I'd love as much as you can. How do you set up your strategy for MetaRads? Are you after acquisition? Are you after reactivation? How do you weight what goals you're giving it?

SPEAKER_01 20:51

Yeah, it's pure new customer acquisition for us. So we try to, you know, as best we can, try to have it exclude anyone who's purchased before. Business like ours, like there's churn and there's preventable churn, and they're sort of two separate things. And there's a lot, you know, Facebook doesn't know who is churning because they no longer have their dog, or who is churning because they are desperate to solve a health issue that food alone can't solve, or you know, whatever it might be. And then, you know, like a good majority of our churn is kind of like things that we can't prevent. It's just the way it is. Or the dog doesn't like our food. And, you know, they're a fussy dog and they always need to try different food every, you know, every month or two. Otherwise, they just you know throw a hunger strike. And so the owners forever-changing brands. Like Meta doesn't know that. Now, meta is also very expensive. So the cost of reacquiring someone at the cost of Meta these days, having you know lost money on them in their first order originally, as well on top of it, just means it doesn't really make sense. So we're all about trying to, you know, get a mix between volume and sustainable, you know, cost on brand new people who have never shopped at the brand before.

SPEAKER_00 21:52

Okay. But is it picking up and helping people through the journey, say that if they've discovered Scratch but aren't close to converting yet? Is it picking up Upon those initial signals.

SPEAKER_01 22:02

Yeah. Yeah. And look, there's a lot of trusting the algorithm that they know who is at what stage. Let's say when we're when I'm launching an ad, we will tag every ad. We've got a list of like our four personas that we target, the four main kind of like reasons for buying emotional states that they're in kind of thing. So we'll tag every ad with that. And then we'll tag it also with what awareness stage, how close they are to purchasing or realizing they've got a problem or looking around for something we think that ad is targeted at. And then so we'll run reports every week and every month on how much money was spent at the different levels. So that helps us also go. Are we making too many ads for people who are already close to buying and we're just not serving people who weren't intending to buy dog food? But you know, essentially are we looking after the now and the future or just the future or just the now? So that sort of like building that thought into who is this for, rather than just like, that's a cool format, we'll make an ad, which is you know what I would have done a year ago before kind of learning this more deeply and then having good people take it over. Um, everything's got a lot more thought as to who it's for and at what stage of awareness they're for. So they're probably the two big strategic things that we think about when we work out what should we be making.

SPEAKER_00 23:07

So when we come to what should we be making, what ad formats or creative messages are you finding that are working best for your audience at the moment?

SPEAKER_01 23:17

We've actually got a lot a a really big spread now. It's been a while since we've had a dominant ad or a dominant format. There's definitely a lot of a more native UGC kind of thing using creators. We haven't got too many mashups or anything like that. Usually our best performing UGC things are single creators with a really good, interesting kind of hook and opener. And actually, we've had a lot of luck in as well, simpler static images. And sometimes they're even as simple as like a screenshot from the video with the UGC creator with just some really natural text on the top of how they would talk about essentially maybe what they've even said in the script and being able to run that. So whereas in the past we might run an ad and we get given it by edited by the creator and put that live. Now we'll get lots of B-roll from them, we'll get a few versions, we'll cut it up our own ways, we'll make a bunch of different variations, and then we'll try to, you know, use that footage and other ads, and then we'll try to make static ads from that if there's really good frames within that. And often it's just those tiny little afterthoughts, the things that took two minutes to get more out of an asset or to look at it in a different way. They're actually a lot of the stuff we've had success with, which it's kind of like creativity and how you use good content that has really excelled for us and I think shows the value of having a creative strategist, someone full-time thinking, all right, how do I make you know get the best bang for buck out of every little bit of creative? Because it's so easy just to have lots of video files, put them live, they don't work a week later, you move on to something else and you know, rinse and repeat.

SPEAKER_00 24:41

Is that frustrating for you? Because I know you're a very creative guy. We talked about your agency background in the last app. Is it frustrating to you like, no, I thought that was the piece, but it's this still over here, which is part of the B-roll. It's actually working.

SPEAKER_01 24:53

We yeah, we have it all the time. Like it it's funny, the creators that we generally think, oh, the nail this, they're often the ones that don't work for us. And we, you know, it's humbling because it it shows that how little you know as marketers and how much you think you know stuff. Yeah. But it's also nice when you're like, you know, I'm glad we did that. I'm glad we were creative enough to to just bulk out how we're doing things, not just like do the lazy version.

SPEAKER_00 25:16

Yeah.

SPEAKER_01 25:16

It feels like you really worked for it then.

SPEAKER_00 25:19

And I noticed you said creators, not influencers. Are you focusing more on people who are natural storytellers and creators but might not have an audience and you can amplify the audience? Is that the strategy?

SPEAKER_01 25:30

We haven't done too many, I guess, proper influencer buyers, like probably under 10 in our whole existence as a brand, you know, of posting on their feed and tagging us and everything like that. Even UGC creators, look, we've probably only worked with under 20, 25. So in the scheme, particularly compared to beauty brands, you know, we're we're nothing. But we are very like, no matter what, we are high trust, high authenticity as a brand, and we only really work with people who really bring that tone to their audience and they're creative as well. So, you know, there's a lot of UGC creators and there's a lot of people who love the idea of building a lifestyle out of creating content these days. But yeah, unless we want to loosen the reins of how we work or put more budget into it, yeah, it kind of limits the amount of people we work with. But you can be so creative in using content in so many different ways. And even content we shot or had made for us a few years ago, when now, you know, with the benefit of clearer thinking and full-time creative strategists, we're using that stuff in completely new ways without having to go out and get, you know, heaps of new content every month.

SPEAKER_00 26:31

That's awesome. Booty prides itself on making some of the most comfortable underwear on the planet. Soft, breathable, no bothersome steams. But behind the scenes, their marketing stack, well, it was a lot less comfortable. As Booty scaled across Australia, the UK, and the US, customer data was scattered across email tools, on platforms, and paid platforms. Getting clear insights, let alone taking action, was slow, funky, and as pleasant as a webinar today. So they simplified everything and unified their channels in Clavio. With one view of the customer, Cody could finally understand how people browse, abandon, and buy, and then trigger first type messages across email on type paid and estimates without adding more tools or manual work. The result, an 87 times ROI from Clavio year to day, a 10% lift in retention year on year, and a 34% increase in high-intend customers in just 90 days. Turns out when your marketing platform is as comfortable as your product growth feels a whole lot better. If your stack is causing friction, head to Clavio.com forward slash AU and see how brands like Booty are scaling comfortably. You mentioned before that you've got a system of creative. Can you take us behind the scenes? Are you using AI? How are you pulling this system together to create as much as you can and to test it and to continually learn?

SPEAKER_01 28:12

Yeah, so it all started with this book I read. You know, like you ever read a book and you're like, how did I not read this five years ago? This has sort of changed kind of everything. And it's like, it makes you feel stupid for not having had that knowledge previous.

SPEAKER_00 28:24

Especially when heaps of people recommend it to you. You're like, Yeah, yeah, yeah, I'll get to it. Like, oh yeah, that's why they were recommending it. Oh, they were they're on to something there.

Understanding Customer Personas Through AI

SPEAKER_01 28:31

I read a book called Breakthrough Advertising probably midway through last year. Actually, I didn't even read the book. I had AI basically take me through the book and then just went deep dives into certain chapters. So the book's called Breakthrough Advertising, it's written decades ago. It's not in circulation. It only really exists as a downloadable, like a hacked PDF, essentially. You can buy copies on eBay, like there's these marketing nerds who sell them on eBay, like original copies, like 1200 bucks. So it's like a Bible to some people. Okay. I'd never heard of this Bible. Came across it and then ended up saying, you know, like just like a million back and forth with Claude saying, like, hey, take me through this book, take me through the concepts.

SPEAKER_00 29:10

So you literally just uploaded the PDF and then went back and forth.

SPEAKER_01 29:12

Well, I didn't even do that. It knew the book. Like, you know, it loves reading copyrighted stuff. So it had read the book, it knew all about the book, and I could just go back and forth prompting it, like having this live coach. And so for a few weeks there, I spent majority of my time just really deeply understanding it through this and then being able to personalize that to my brand, my industry, what I knew about my customers. And that book really starts from this place of like every person has like master's eyes, how they see themselves, how they feel, what emotions they carry. Do they want to be seen as the smartest person? Are they a very secure, safe kind of carer kind of role? Like people see themselves differently and maybe differently at different stages in their life. And it's basically the the view of the book is you can't invent force someone to feel a certain way. They have to have that within them. And and you should be identifying what emotional states you want to market for and type of people. And there can be multiple ones. So we have different personas that have different emotions that they hold and that we try to amplify and then speak to and whatever. And then from there, it kind of breaks down, you know, the five awareness levels is like an original thing from I don't know if this author came up with it, but it's a heavy part of their book. So there's kind of understanding the people, the mass desire, there's communication techniques depending on the math, depending on the emotion they feel, and then there's the awareness stages. So that really has gone into these personas and these awareness stages and the language we use for each of them. So if we think we're writing or if you're in a funnel for a certain type of persona or a certain landing page, that landing page will be written quite differently and the content of it will be quite different than another landing page. So sort of, you know, one of those things that practically takes you from one a one or two landing page company to a 15 landing page company with a lot more nuance and and you know, ads are going to all these different pages and your email funnels are different. So it really has unlocked a different way of thinking and then systematizing how much we're making creative for each of these things. And we build our reports off that so I can see exactly how many ads we launched for that persona and then each of the awareness stages, how much spend they got, how they performed comparative to other personas and other awareness stages and things like that. So you're gonna really spot gaps in your production and also quality as well.

SPEAKER_00 31:18

And in creating those personas, was that obviously you expanded them with the guidance of breakthrough advertising and kind of following those principles? But when it came to knowing those personas, did you and the team do it off your inherent knowledge around your customers and who you've served over the last years? Or did you go out and do any extra research to uncover those emotional triggers?

SPEAKER_01 31:40

We used a lot of our own knowledge and intuition and some surveying of customers too. And then we did things like we're feeding all our reviews into AI and having it analyze what sort of emotional sentiments exist already within these reviews. We added questions to our post-purchase surveys to understand customers and the reasons that they what they're hoping for, the reasons they almost didn't purchase some of these kind of things again. And then again, being able to feed those kind of things into AI, you know, read through them ourselves, but then spot words, like really emotive words within there that represent kind of things. And then we basically say, hey, this is what we think, critique this. You know, better prompting than that, but essentially that. So again, back to that, hey, you're an expert in breakthrough advertising. We're a pet food brand trying to do this. This is what we think, critique this. And then that helped us go from like pretty good to what I think is pretty great now. Awesome.

SPEAKER_00 32:28

And you mentioned Claude there before. Is that your tool of choice, or have you got a library, a plethora of tools that you're you're using for different purposes?

SPEAKER_01 32:36

That's probably the main one. But uh, I definitely use I think I use chat GTP more for random, almost like data analysis admin kind of tasks. Like here's two lists, match up what exists in both things. For some reason, I just think of ChatGTP for more basic stuff and then Claude for more knowledge where we can load it up with all the knowledge of the brand and just go for more, I don't know, continuous tasks, continuous strategy, kind of working Claude and then chat GTP for random stuff.

SPEAKER_00 33:02

Like a business AI asset, essentially, building that knowledge.

SPEAKER_01 33:05

Yeah, we have a lot of projects within there that just have really good context stocks of like these are the personas, these are the breakthrough advertising strategy, this is our brand tone of voice, this is our product line, this is who we don't want to serve, this is what worked in the past, this is what hasn't. And it's got it all so we can just type simple prompts to it and it reads all that stuff automatically.

SPEAKER_00 33:22

I don't use Claude as much, but from a creative perspective, do you get a lot of your variations and your ideation through Claude or do you use other tools to expand those concepts out?

SPEAKER_01 33:33

Use a lot through Claude. We do a lot of like early scripting and analysis of things like reviews, or if there's like a special, I guess, particular need, a thing we want to understand at that point in time, we use Claude. There's a lot of like good specialist AI-based systems coming out that are pretty good. Like we've just signed up for one called Parker, which is like an AI creator strategist kind of thing. All of your reviews and Facebook comment, ad comments and stuff are all in their system. And so it's basically continual, and it also will look at TikTok trends in your category. So it's constantly looking at organic stuff plus your own customer's experience to then generate ideas for you. And then often we'll just take the core of an idea and then go back as a creative team and say, hey, this is something we actually think there's an interesting thing in here. Let's, as a creative team, away from a computer, explore how we could hit that messaging or that pain point or whatever it might be. So a lot of it comes back to humans actually trying to take it to the next level afterwards. But a lot of the early identification, particularly of like what the customer is thinking and feeling, comes from the help of AI.

SPEAKER_00 34:32

I was having this conversation with someone the other day and I've told this story a few times. I don't think I've told it here around the future of ad agencies. And it was actually James Herman. James Herman talked about this on our podcast late last year, and he was talking about exactly what you're saying there is you know, we used to have junior creatives in agencies and businesses who would come up with just a huge amount of ideas, a fraction of them will be relevant, and you needed those senior people in the organization to pick out the ones with context and experience on the ones that work. And it sounds like you've almost cracked that internally around having AI with all the backing of the knowledge within the business and the access to the data to generate all those ideas, but then still having that people element within your business to be able to pick and choose the right ones. Yeah.

SPEAKER_01 35:15

Yeah, 100%. I think probably the key thing for the AI part to be good for us is taking the time to have really good context to it and be able to, you know, not get through that point where we've all used AI, got a result back and gone, well, that's a bit crap. Yeah. And, you know, it's easy to move on and say, hey, that's not good and I just won't use it anymore. But I think being able to push through that and in having this creative strategy is I sort of trained him up to say, we use AI in the workflow from the beginning. Let's persist and let's build a great context stock so that we can give AI these documents that account for all the reasons why it would have given us bad work in the first place and teach it not to give us bad work. It teaches it what good looks like. And then that sort of like takes the success rate of the results you get back from, you know, like 10, 20% of like great stuff to 70, 80% of great stuff, and it makes a massive difference. It was almost like taking the time to invest in it being good, but it doesn't cost money, it just takes time and effort. Yeah. And a creative strategist in particular, like it took over some work I did and made it a lot better and improved it further, and it's unbelievably cheap once you've done that.

Navigating Meta's Ad Landscape

SPEAKER_00 36:15

Are you finding that Meta and the automated placements? I'm not sure how much you're relying on them versus kind of dictating where the spend and the placement goes, but there's a lot of talk at the moment around Meta actually not testing a wide range of creatives that are being uploaded in that it's kind of coming down and doing a fraction and really putting a huge amount of the campaign spend on a small amount of creatives rather than testing the lot. Are you finding that as well?

SPEAKER_01 36:42

Not anymore through just the campaign structure, which is the little bit of the media bot media buying side of things that still remains, is making sure that it's got enough incentive to test new things. So we get about 60 to 70% of our sales from creative that's been launched in the last two or three months. So we've kind of got majority of sales coming from new creative now. And I feel pretty confident. But in our current setup, it's easy for us to overspend more than we planned and budgeted if we get a bunch working well at one time. So we do we're sort of um you're constantly re-evaluating, depending on the business need, you know, can I have limit unlimited sign-ups? Am I testing a new category? And I just want to make sure it spends no matter what, so I can learn. We're always sort of somewhat adjusting, but you know, new creative is majority of our spend now, and that's through having new creative in separate campaigns from the winning creative. So it's not influenced by bias it's got towards data it knows. So once something works, pull it out and then Yeah, we actually there's a lot of stuff that we leave until it stops working. So we'll start it as a testing kind of thing. And if it's working, then we'll just let it work or scale out the budget if that's what we want to do. And then when it stops working, then we move it into the winners sort of like stuff.

SPEAKER_00 37:52

And when you think about what's working, what's not working, are you looking at a single metric or are you looking at a balanced metric approach?

SPEAKER_01 38:00

Yeah, that's that's a challenge. I've come to look at it more as a single metric of everything kind of works coordinated together. Again, thinking through like this awareness stages of like the ad for the you know less aware or the person who knows they've got a problem, but they don't know what solutions or what products you've got. They certainly don't know about your brand, and then they're not close to purchasing. You know, all of those ads helped. So if I look at those ads, you know, in isolation, they'll probably look pretty bad because you know, someone is further away from the sale, whereas the most aware stuff will look really good. Looking at it altogether as a system of like, hey, what did what did this do altogether? How many new people did we bring in? What was the cost of acquisition? How well are we placed for the future based on that? I uh sort of look at. I think I found it really easy to try to over control things a year ago and look at individual ads or individual groups of ads or ad sets. And now just being able to like understand or think of the it as an overall system and this helps that, or vice versa, has led to sleeping better at night anyway.

SPEAKER_00 38:55

Yeah, I was about to say because you you look at too much and you just get decision fatigue. Whereas if you can make quick decisions, that's half the battle, isn't it, when managing it in-house.

SPEAKER_01 39:04

Yeah, and just knowing like quick decisions or too frequent decisions actually probably harms you more than anything else. And being able to leave things sit. So I try to make changes only once a week these days.

SPEAKER_00 39:15

Um and you schedule that in, do you schedule that in?

SPEAKER_01 39:17

Yeah, Monday. Monday is gonna press the buttons.

SPEAKER_00 39:20

Press the buttons, make the machine work.

SPEAKER_01 39:22

Yeah, feel like I'm doing stuff.

SPEAKER_00 39:25

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SPEAKER_01 41:12

Yeah, absolutely. I think that was probably of all the decisions were made, that's still the decision I'm most bullish on being right for us. And I think the more that, you know, keep coming back to AI, but the more that AI has expanded capabilities and what a business can do, the more that having an open source platform has helped because, you know, WooCommerce, it's so open, our platform WooCommerce, which is built on WordPress. It is, you know, all the AIs know all of the code. There's a million people have written stuff and published it online. So you can have custom solutions that might cost 50 grand from an agency that you could spin up in a couple of hours yourself and put it live. And you know, I know how to code. I'm a three out of 10 PHP developer, I would say. But with AI, I can like do a lot, I can do some stuff so quickly to unlock a lot of value and save so much time. Like, so we one of the things we've done the last few years is created this new raw dog food, very, very different from all the other raw dog food that's ever existed. So it's it's just like real chunks of human-grade meat and veggies and stuff like that. It just looks super colorful, like your own, hopefully bowl of food would. But we're making we're manufacturing that ourselves with its own dedicated warehouse. We're doing the pick pack of that ourselves. So all of a sudden, you know, you've got all these different needs for the business. You've got all these process flows for picking and packing and inventory control and analysis of how much of each recipe we need to have made and we're about to ship and everything like that. So your software needs as you increase the complexity of your business and become a bit more vertically inf integrated. You know, we could maybe 10 years ago, we might have three IT people now, but we've sort of got me hacking around on Clawed. Is this what founder life has come to?

SPEAKER_02 42:48

You know, running the Facebook.

SPEAKER_01 42:50

Yeah, if you're a generalist, like you you are IT and you are marketing and you are, you know, all the things sometimes, and it's just what am I today? It's a bit like that. But you know, it's dangerous in a sense because you can just hire the right things, or you can just become a massive bottleneck, or you can just wear yourself into the ground as well. But IT, you know, developers are so damn expensive, and working with companies is so time consuming that it is a massive bottleneck in the business. So it is a bit ridiculous that I'm writing stuff and doing like basically me and Claude doing all of that code, but the amount of time, the speed of improvement and learning, and then data for relevant for decisions, like it pays for itself 10 times over, even though I catch myself going, why am I still doing this? Just you know, I do it for speed.

SPEAKER_00 43:35

Yeah. But it almost feels too like this is a little bit of a reinvention era too. So the past 12 months and probably the next 24 months will be the reinvention of tech and e com and digital. So for you to pull yourself back into that detail will set you up for long term because eventually you'll get all these systems set up and ways of working that you can move out of.

SPEAKER_01 43:57

Yeah, hopefully. Yeah, that's the that. the way like it shouldn't have to be doing this every week, every month, forever. It's kind of like they're big leaps we can take right now. And you don't need to again, I'll have to come back to simplicity at a certain point and go, hey, we don't need any more, you know, like we could do all this stuff super easily, but we don't need to. So we're probably getting close to that point now because we've you know done a lot in the last month, year.

Future Possibilities of AI in Business

SPEAKER_00 44:19

Yeah. As someone who is you're unique because you're incredibly creative and also very technical, even though you give yourself a three out of ten. Where do you foresee the future possibilities of AI in your business when you allow your mind to run in what could be possible? What excites you most? That's a good question.

SPEAKER_01 44:38

I'm sure this is super naive, but I feel like we're getting a lot of the stuff we want out of it already, like that being able to make software super easily and not have to hire developers that we are frustrated with the cost and the time. Being able to keep our business lean so we can have, you know, a pretty sustainable business. We don't have to worry about how much food we're making the next day and things like that. Like in business like ours, you just do a few things really well and the whole thing runs pretty well and you don't always have to reinvent the wheel. So kind of AI allows us periodically just to go in and make sure that the basics are covered. Where I think if we really wanted to put the foot in the gas and turn into a really high growth kind of business, my brain would explode trying to think about all the ways it could possibly be used. But I think we like how we love our team. We love having real customer service.

SPEAKER_00 45:24

Yeah.

SPEAKER_01 45:24

So we're not looking to replace jobs and things like that. I think there'll be companies who can be super lean and if you if you just want to have the most profitable company possible, you know, there are going to be some unbelievably lean there already are in America anyway, some unbelievably lean high growth companies with a few staff members, AI and some outsourced you know, three PLs and manufacturing. I think that future is pretty crazy. Yeah. And there will be companies like us who get disrupted by hungrier leaner companies who can afford to spend more on marketing or discounts or whatever it might be because of how much cost they're cutting out of of their operations. That'll be a pretty crazy thing I think. Yeah. But for us until we feel the threat of those companies I'm I'm really happy with the way that it's being used right now. And you know, I'm not looking to increase it actually I'm loving what we're getting out of it and kind of happy with that. So good.

SPEAKER_00 46:12

And it's funny, you know, at the start of our conversation we talked about the experiments and the difficulties in things like real world activations and building communities from start do you feel like there's opportunities for AI to help you better connect with your customers and their dogs? Or is that still a human thing?

SPEAKER_01 46:30

I think there's a lot of fun stuff you could do but fun and feeling real I mean ultimately people either want a massive laugh with AI or they want to feel real and connected to something at least right now you know culturally that might change. But you know we could have AI as soon as you sign up generate welcome images and take a photo of their dog and make it scratch-fide, you know, in our illustration style and do all this kind of stuff. Some of it could be pretty neat. Not necessarily moving the needle straight away is it? Yeah I don't know if it'll do that much for us as a business. It's sort of like using the technology for for using its sake. I don't I'm sure in the next six months I'll realize these things that I'm too stupid to realise now. But um in the whole customer journey I don't see it being massively helpful right now. Maybe you can scale like we've got an in-house vet. Maybe it can help bring more of their knowledge into more people because they've only got so much time for one-on-one help. Yeah. And so if we you know continue growing we either hire more vets or make that knowledge more accessible. Yeah that's probably something that's cool.

SPEAKER_00 47:25

I love that we've been able to go on the journey with you and you've been so open and honest around what's worked and you've got an incredible business that's growing at a sustainable rate and like you said keeping the simplicity and the joy in it but also things that haven't worked and where you've had to change your mind and double down into areas like meta which has been fascinating to hear.

SPEAKER_01 47:42

If you're thinking about the next 12 months what's the priority for you with all this stuff going on where do you put your effort and your focus over the next 12 months probably I think actually getting kind of nine or 10 out of 10 at the core competencies again and getting back to a just a really comfortable pace and execution just like a really high standard of execution because in launching a new category, making a new warehouse, doing a new product that never existed before bringing on a few new people, you know, bringing on the you know creative strategist and introducing AI and like it's been a 12 months of crazy amount of change and you know with strategy to go with that you know that we wanted to invest in that factory in that new category and more on Facebook and everything like that. But there's a lot of people in our company who don't know a more nice pace. Yeah again coming back to if we do a few things well the business runs pretty well and so we've had lots of change to help us be really well placed for the future but at some point you've just got to like execute really well day to day and not always be trying something different. So I think kind of calming things down and just using those tools just having everyone everyone just nailing their jobs and not always be learning something different is probably the the focus for us this year because business is nice when you go at different speeds, right? Like yeah you know same like life you can do exciting stuff and then you rest and then you know I think we're in that sort of last year was exciting and took a few leaps forward in many ways. And then this year we'll sort of be a bit more restful and just nail those things and be great for our customers.

SPEAKER_00 49:07

Yeah got a feeling you didn't build this business to be a hustle culture business.

SPEAKER_01 49:10

Not quite and every now and then you accidentally find yourself that way and go, oh this isn't right. This isn't what I want but um we'll settle it down.

Bushy's Takeaways

SPEAKER_00 49:17

Oh Mike it was awesome to have this chat. Thank you for joining us how good to come back five years later and just see how your business and how you have evolved over those five years and I hope we can do it again in another five years with more stories to tell and more lessons learned. Thanks Fuji really appreciate it I have massive respect for people who hold strong opinions but loosely held and Mike's a great example of that showing that he had a certain way that he wanted to approach business but that had to evolve as new things came to life and he was very honest around that which I very much appreciate respect. Here are three practical takeaways from this conversation with Mike that I think are worth sitting with number one simplicity isn't something you step once. As Scratch scaled beyond handwritten notes and a single scoop Mike showed how systems had to evolve without losing focus or trust. Secondly paid growth only works when creative leads the strategy. Scratch's shift into meta work because it was ground in deep customer understanding not media and tactics alike. And lastly AI creates leverage when it's given context and judgment. Mike's use of AI as a junior creative is a good reminder that tools don't replace thinking they can amplify it and add context. If any of those sparked questions or debate for you, the conversation continues inside the Ad to Cart community. That's where e-commerce operators are unpacking all of these exact trade offs in real time and with real experiences. You can join for free on adducart.com.au thank you for spending time with me today. I'll see you next week on AdDicard.