Paul Jauregui first appeared on this podcast in September 2020. He and Lisa, his spouse, had launched BK Magnificence, a direct-to-consumer cosmetics model, the yr earlier than to nice success.

Since then, many DTC manufacturers have suffered as a result of iOS 14.5’s affect on Fb promoting. However not BK Magnificence. Jauregui “pulled the plug” on Fb advertisements in late April 2021, simply earlier than the iOS launch.

He advised me, “There was a whole lot of mud that wanted to settle with Fb advertisements, a whole lot of questions. I needed to focus elsewhere.”

“Elsewhere” for BK Magnificence is online marketing. He and I lately mentioned that channel — getting began, recruiting associates, assigning commissions, and extra.

Our whole audio dialog is embedded beneath. The transcript is edited for readability and size.

Eric Bandholz: BK Magnificence is among the few DTC corporations that wasn’t damage by iOS 14.5 and Fb advertisements.

Paul Jauregui: It didn’t have an effect on us. We scaled up Fb advertisements by way of March 2021 to roughly $50,000 a month. Then issues began getting rocky, and the reporting wasn’t giving me confidence. So we pulled the plug in late April.

Bandholz: Proper about when Apple launched iOS 14.5.

Jauregui: Sure. I speak to a whole lot of owner-operators. There was a whole lot of mud that wanted to settle with Fb advertisements, a whole lot of questions. It was a distraction, and I needed to focus elsewhere.

Bandholz: Beardbrand had the identical downside. We reached roughly $120,000 a month in Fb advert spend through the summer time of 2021. We began wanting on the numbers and realized we had been simply giving Zuckerberg cash with nothing in return. We ended up blowing a half-million {dollars} in 2021 in advertisements that didn’t drive gross sales.

Jauregui: We acquired prospects profitably by way of Fb earlier than iOS 14.5, however it wasn’t the ROI we wanted. Plus, the purchasers coming in didn’t join with the model as a result of we had been centered on chilly prospecting. Customer support emails had been ticking up.

Our return price has all the time been low —  just below 2%. However it began to creep up, too. There have been many indicators. They weren’t the perfect prospects I needed to be bringing into the fold. We had different alternatives — some model partnerships and product collaborations. Online marketing with content material creators on YouTube was our first flywheel and nonetheless is at the moment.

We’ll revisit paid social and paid acquisition, however not for now.

Bandholz: Many people thought we had to make use of paid social, however there are numerous methods to develop a enterprise. Inform us about your associates program.

Jauregui: We arrange an associates program fairly early. Right here’s the context. We launched the enterprise in August 2019. However earlier than that, my spouse had a preferred YouTube channel round make-up and cosmetics for about eight years. She did model partnerships and included affiliate hyperlinks in her description field about merchandise she loves. So we had a great deal of perception into the mindset of content material creators and the way they function.

So my spouse had relationships with people who supported the model and our launch. We opted to ship compensation to these supporters for the gross sales that they had been producing. That was the beginning of our associates program.

Many creators in our area of interest use rewardStyle, which is a sub-affiliate community. It’s now known as LTK. I didn’t know a lot in regards to the house, however I knew I wanted to be on rewardStyle as a result of that’s the place the oldsters we needed to interact with had been working from. So I reached out to rewardStyle to get extra data. They pointed me to different affiliate networks that needed to be the first platform.

Sub-affiliate networks piggyback off of major platforms, equivalent to Shareasale, which is the one we’re on. CJ Affiliate, previously Fee Junction, is one other.

Bandholz: All of that’s complicated. Beardbrand simply launched an associates program utilizing AvantLink. How does a service provider discover the proper affiliate platform?

Jauregui: Affiliate networks and platforms maintain the again workplace and the transactional nature of a service provider and its associates with payouts, reporting, hyperlink monitoring, and comparable. I didn’t assume Shareasale would carry creators or relationships to us. Actually rewardStyle and one other sub-affiliate in our class, MagicLinks, have packages to attach with influencers and creators. However now we have all the time sourced our personal associates. We attempt to develop genuine human relationships.

We do a whole lot of product seeding. We meet new content material creators, ship them our assortment, and difficulty a custom-branded 10% low cost code that they’ll share with their viewers. We’ve got no expectations. As a rule, they use the product, like it, and discuss it. After that, we introduce them to our associates program. We’ll point out, “By the best way, now we have a 15% off fee by way of Shareasale and rewardStyle.” We will look of their YouTube description field and see what affiliate platforms they’re on.

Bandholz: So let’s discuss value. How a lot are these platforms taking? And the way a lot fee do the associates obtain? Do you provide them a reduction code for his or her viewers?

Jauregui: I’ll begin with the final one. Sure, we sometimes difficulty a ten% low cost code to the creators. For the platform value, I’ll break it out by working backward from Shareasale to us. In my expertise, most major platforms cost comparable quantities, though it’s typically calculated in a different way. Shareasale takes a 20% lower of payouts. And we’re operating a 15% fee.

So on a $100 sale, $15 goes to the affiliate. And 20% of that — $3 — goes to Shareasale.

That mentioned, the sub-affiliate networks, rewardStyle and MagicLinks, take one other lower of the creator’s payout. Creators who join instantly by way of Shareasale get the complete 15%. However creators who join by way of rewardStyle would obtain the web quantity — as a lot as 40% much less. Plenty of creators will not be conscious. Sub-affiliate networks take cash from associates, not the manufacturers.

Bandholz: Why pay a 15% fee plus a ten% coupon versus a 25% fee and no coupon?

Jauregui: We difficulty coupon codes for 10%. That’s our baseline. It gives the creators with a branded low cost code to entice their viewers. By way of the 15% fee, we needed to ensure our content material creators are getting honest compensation. They drive our enterprise. Fifteen p.c is an effective center floor when it comes to commissions.

Bandholz: What number of associates do you’ve gotten?

Jauregui: We now have over 100 people who we work with or have some degree of engagement. Past 100, it’s tough to handle.

All are within the magnificence house. Many individuals, together with coupon websites, apply to our program instantly by way of Shareasale.

Bandholz: Coupon websites — they’re basically stealing cash from you. A buyer prepared to purchase will search on Google for a coupon.

Jauregui: Past that, they’re stealing cash from our content material creators and our associates. I sometimes don’t approve coupon websites. I’m very selective.

Bandholz: Many listeners are in all probability on the fence about stepping into online marketing. What are lifelike expectations? How a lot enterprise can an associates program drive?

Jauregui: Each enterprise and class is exclusive. For us, associates drive 20% of gross sales, however I can see that rising. It’s a whole lot of buyer acquisition and lifelong worth. Many content material creators give attention to magnificence and make-up. It’s limitless.

We’ll attain out and interact and seed product to people who possibly solely have 2,000 to five,000 subscribers. However our candy spot is 10,000 to 50,000. We will get an early begin with content material creators in that vary. We will are available in early, give them a whole lot of direct consideration, and assist develop their channel with commissions, product, and help.

Bandholz: How can listeners attain out to you?

Jauregui: Our web site is BKbeauty.com. I’m on Twitter and LinkedIn.