The 2 Step Playbook to Build a Fast-Growing Brand: Contribution Margin and Exactly How to Strengthen Your Brand

Chubbies was very fortunate to be acquired for 9-figures because we evolved from a high growth, revenue-focused company losing money, to a fast-growing, contribution-focused, highly profitable Brand.

Reflecting on this journey, the two most impactful transitions we made were:

1) Understanding what contribution is, why it matters, and how to track it daily
2) Understand how and why strengthening our Brand would be the single most impactful demand-driving lever to drive contribution dollar expansion, which is what got us acquired.

So without further ado…

1) Why Revenue-focus almost put us out of business, and how Contribution-focus saved us:

To illustrate why Contribution matters, let’s look at what happened 10 years ago with our completely made up company called Blubbies, and our huge new product launch:

* The new product was our first “premium product”. At $99, it was the highest price of anything we’d ever offered.

* When we started running Facebook ads for this product, the algorithm funneled massive budgets to it because the ROAS was way higher than any other ad.

* This new product was much larger than any other product we’d ever sold so we had to get new, much larger, shipping boxes.

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So what happened?

We beat our revenue target by 20%!

…only to later find out our contribution margin was the lowest it had ever been.

Why? Our blended cost assumptions failed us:

* Because this was our first time making this “premium product”, we made some mistakes. Therefore, the product gross margin, even at $99, was 10% lower than anything else.

* Even though ROAS was higher than ever, we spent more money than ever to sell the lowest margin product we’d ever offered.

* And, because of the larger boxes, we hit the next shipping cost tier, which was a huge cost jump

Yikes

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The transition to daily per-order contribution tracking ensured this never happened again.

Phew.

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Great, how do we increase contribution???


2) Exactly how and why strengthening our Brand dramatically increased our ability to generate contribution dollar and margin growth:

Simply put, when we strengthened our brand, it drove specific customer behaviors.

More people purchased from us without having to be convinced by a conversion ad.

They googled us or came straight to the site.

And, because they’ve already decided on us, when they came in-market, they didn’t need a discount to convert.

Therefore, because our marketing had driven more durable, longer lasting impacts, we could start to spend less on marketing and discounts.

🥳

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Takeaways:

1) Contribution enabled us to identify & measure what matters most.

2) Strengthening Brand enabled us to dramatically increase what matters most.

3) This takes time, requiring focus and prioritization. But now that you know the customer behaviors you’re trying to drive, you can create a feedback loop to figure it out


Have fun.

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