Atticus LeBlanc of PadSplit on what a customer really costs

Atticus LeBlanc

Thank you, Etgar, a pleasure to be here, always good to see you again, my friend. For me, my journey started as an entrepreneur almost 20 years ago now, 2005, and I've been in the real estate, housing, construction and private lending space for most of my career. I really started at the ground level, was a solopreneur for much of that time, then found a partner, and it was just the two of us for most of my career, all non-technical. Then in late 2016, early 2017, I had an idea that could translate some of my housing experience into a marketplace model that I thought could scale and really address the affordable housing shortage across the country.

Of course in the US that's a major problem we're facing, I know it's a major problem internationally, and I felt like I had some unique insights and experience into how that problem could be addressed, by housing providers and would-be providers, on a small scale but done at scale across the country and potentially across the world. So we've been running PadSplit. We've been reasonably successful so far, we're still alive at least, and operating, one room at a time. It's been quite a journey for me, both from an educational perspective, personal and professional, but it has truly been a labor of love, and yeah, happy to be here today and to be able to share anything that I might have learned with you and your listeners.

Atticus LeBlanc

Well thank you. Yeah, as you know, none of these journeys are easy, and you almost never go as fast as you would like, but when you look in the rearview mirror it's nice to be able to see that we've come quite a long way. Let's dive into our first question.

Atticus LeBlanc 03:39

Yeah, so for us it's really about business performance. We are a marketplace, PadSplit, that exists between renters who need housing and housing providers who have spaces they need to fill in order to generate a financial return. So our marketing KPIs are not significantly different than our overall business KPIs, which are: are those rooms filled, and how quickly are we filling those rooms with people? How many, how many heads are we putting in beds? Is our occupancy at or near capacity?

And are we generating leads, and funneling those leads into individual rooms fast enough to be able to meet the goals of our host community, the people who have individual homes or apartments on the platform. So it's both: on an ongoing basis, what is our occupancy, and then separately, what are our net move-ins, the difference between individuals that are moving in versus individuals that are moving out. I'd say net move-in is probably our single, if we could pick one KPI for the marketing team, that's probably it. And then separately, we don't rely on our marketing team too much to generate supply leads, that's more of an almost B2B, sales-driven process now, and networking relationships, but that could certainly come into play more as we continue to grow in scale. Right now, it's very simply: how are we filling rooms quickly for our host customers, because that's what they're expecting from us.

Atticus LeBlanc

It's a great question. At the end of the day, the journey for our customer does not end when they book a room, or even when they move into the room. It's important for our marketing team to think about not just how efficiently can they move a lead through the funnel, can they attract a lead, move that lead through the funnel into that individual room, but also who is that lead, the overall customer segmentation piece, and to evaluate on the back end, did that lead stay for one day, did they book a room and never move in, did they book a room and stay for years? Those outcomes are extremely different.

So I think it's dependent upon the marketing team to determine: is there a way that we can identify, when we first try to capture those leads at the very top of the funnel, do we have any way to predict if they are going to actually book and move in, if they're going to stay for one day, ten days, or if they're going to stay for the rest of their lives. There's extreme value in understanding, from an overall CAC versus lifetime value perspective, if you can segment those individual users. And then separately, are there other questions, some on the operational side but also on the marketing side, expectation management for those users, so that when they are feeling anxiety about potentially moving in, literally into this new situation, can we quell some of those feelings and build trust and comfort.

That's still very much a marketing function, and of course we see, not surprisingly, that there are much better outcomes for those individual users when they feel comfortable and trusting about the environment. So, to the long-term vision of building out a scalable marketplace: for us, it's we want to create a world-class marketplace that provides the fastest, most effective solutions for the affordable housing shortage, specifically for low-income earners. And what that really means is, when you look at not just fastest but effective, are the rooms or the living spaces that we are matching these users to, do they work for that customer, and will they work longer term, and will that user go and tell all of their friends, everyone in their network, this is an amazing option that you should go book today, and that you should really consider the next time you have a variety of choices, or a situation where you need to move somewhere. Because if they actually do that, and that's truly a successful outcome, that creates a flywheel which ultimately drives down CAC and is likely to increase lifetime value as well, and ultimately just brings you closer and closer to realizing that vision of a scalable, world-class marketplace that's both fast and effective, for any of those customers.

Atticus LeBlanc

Yeah, I think it's probably a two-way street, in that a founder or CEO has to be able to effectively communicate what their objectives are, and how the performance of the marketing team will be measured, and what is the ultimate measure of success for the CEO, and how do the capabilities and performance of the marketing team funnel into that success. So that's the first thing. The second thing is, if they are engaging a potential CMO or marketer, if it's the right person, then that person should be able to communicate effectively to the CEO: these are the levers that marketing can pull in order to achieve those business objectives.

And then from there, I think it's a lot more about just, does each person accomplish what they said they were going to accomplish, do they show up on time, do they communicate well, is there a cultural fit. I think that's a huge part of it, but I've certainly gotten some trial by fire around performance marketing over the time that I've been here, and the relationship is ultimately built on one of trust. Do you trust whoever your marketing partner happens to be, that (a) they understand what the business objectives are, and (b) you have confidence that they know how to go and achieve those business objectives, at least to whatever extent possible, both in terms of the performance marketing analytical side, and then separately in terms of brand marketing and promise, understanding what are the built-in growth and marketing loops in the business that can be exploited or taken advantage of to really propel things forward on brand marketing.

Atticus LeBlanc

Yeah, I think the first thing to clarify is just what is brand marketing, and what does that mean, because a lot of times we throw out that word and people take it to mean one specific type of marketing, typically for a growth-stage or larger company, and you're talking specifically about campaigns, when a lot of people talk about brand marketing. But I think ultimately, as we look at what defines your brand, if you think about any of your favorite brands, what is the consistency of performance, and what do your customers know to expect about your product, over and over and over. It's just meeting those expectations on a consistent basis. And so, aside from any campaigns at all, you can start building that as soon as you sold your first product. Did you ultimately execute on whatever you promised to your customer, and what then is that customer going to say to their friends about you? That's brand marketing.

If you do that a hundred times, or a hundred thousand times, or a million times, that's brand marketing, and you're certainly setting up your future marketing team for success if all of your customers are singing your praises because you have consistently executed on whatever you promised them from the beginning. So in that way, it's never too early to start working on your brand. Something that we say, just as a guiding principle in the company, that we expect not just from our staff but from all of our stakeholders, both on the renter side and the host side, is: care, show it, prove it. And if you just continue to show people that you care, and prove it, meaning execute over and over and over again, it is a matter of time until that becomes its own campaign, and you have your customers who are promoting you on their own, without any cost from you. So if you think about it, like, if that's ultimately the goal of a brand campaign, that you have rabid customers who are singing your praises to the masses, there's one way to do that through a separate marketing campaign, but there's another very straightforward way, which is: you execute and you please those customers over and over and over again, consistently. I think that's probably a key differentiator.

Atticus LeBlanc

Yeah, and this ties in a little bit to the last question as well, because when people think about brand marketing, I can tell you what I don't think will ever work: to sell something that you're not. If you start creating a brand campaign around a promise that you have not fulfilled, it's not going to resonate. You can fool people, you can fool a few people for a little bit of time, but you can't fool a lot of people all the time. So if your brand promise is not real, and you start a brand campaign that is ultimately disingenuous, people are going to figure it out really quickly. And the same is true for, you know, as you think about creative, like, if your message is not authentic, people aren't going to buy it. And for me, there's often this decision between: do you market what sells, or do you market yourself?

And it's like, I come back to the Shakespeare quote over and over again, which is "to thine own self be true." And to a large degree, as a founder, I know what is true. I started this company when it was just me, and so I'm selling myself, and this is my baby, and I can't produce or market anything that is not truly authentic to the identity of the company, of me, of the product that we are selling and creating, and hopefully the opportunity that we are providing for our customers each and every day. So I think the founder naturally has a role in creative, in that they have forged that identity for better or worse from the beginning, and there's always that element in any sort of creative campaign, and whoever the team member is who is generating content for the public has to understand the identity and the background of the company, and what ultimately the founder's opinion, or origin story, has been their stamp thus far, and how does it either need to be communicated,

Atticus LeBlanc

It's your ad spend, plus, right, plus whatever dollar is in salary or contract that you're spending for the people to go deploy those strategies and campaigns, through all the channels that you just mentioned. And then, what's the time and opportunity cost, for where the dollars that you're spending on those people, on those campaigns, could otherwise be going? Are there other campaigns that you should be running with those same dollars, are there operational improvements you could be making with those dollars? So, listen, I mean, the short answer is, I think most of us often underestimate our CAC, to some degree intentionally. If you actually added up the opportunity cost, and I don't think almost no one that I'm aware of factors opportunity cost into CAC, for one, because it's really hard to measure, and two, it's a relative unknown. But you should absolutely be as honest with yourself and your marketing team as you possibly can be, so that you understand if you have a viable, sustainable business.

I mean, people often talk about three-to-one LTV to CAC businesses, and I suspect probably the reason why that works is because CAC is always so underestimated, that it's more of a one, one and a half to one, when you actually factor in all of those ancillary costs that in most cases just aren't included, and you still end up with a business that works. But yeah, it's really easy to delude yourself, simply for the purpose of hitting a metric, or trying to raise money. But yeah, you've got to just be really honest with yourself and with your marketing team, around: hey, let's make sure that we are including all of the people, at a minimum, that possibly go into this number, and not just our ad spend, and then all of our software tooling that goes into it as well, and potentially a portion of your time, or whoever the other people are that are actually spending consistent time on these campaigns, so that you know if it's worth it or not.

Atticus LeBlanc

I think, first and foremost, is you hire for culture fit, and you make sure that whoever this leader is, is someone with whom you share values, and being very clear about what those values are. That's true not just for marketing but for anyone. And then, separately, I think the ability to operate under pressure, iterate, willingness to experiment, I'm counting those as one, even though that's probably three on its own. And then, the last one, I think, is just the ability to shift quickly and grow with the organization for at least a decent period of time, anticipating that your marketing team's needs are very likely to change. So if you're hiring a leader, you need someone who can manage other people, who can work through multiple stages of a company's growth. You may not be able to find somebody who can manage zero to hero, for sure, but from one to ten, and ten to a hundred, I think is probably reasonable. And another reason why I think culture fit is number one is so important.

Atticus LeBlanc

I think it really is, like, a business ends at two points: one, if you run out of cash, and two, if you quit. So you can control 50% of that, but I just never quit. And as painful as that is, it is a real strategy, and I think so many startups today don't think in a long enough time horizon. They're planning for tomorrow, next week, next year, as opposed to how am I going to continue to do this for the next 5, 10, 15, 20 years. Really taking the long view. But it's been really beneficial for me personally, to be able to take a long view, and frankly, just the willingness to deal with pain, and my capacity to deal with pain has probably been the biggest learning for me.

Atticus LeBlanc

[unclear @ 25:26]. You have to know this: be patient, and it will take longer than you expect, but the individual impacts that you see, and that you help create, will be worthwhile.

Atticus LeBlanc

Hm. What question did you [mean] to ask me that you didn't? It's probably related to the last one, is just, what are the things that continue to drive you, or that keep you going, knowing the level of pain that you have to endure. For me, when you hear a review, or a personal experience, from a customer whose life has literally been transformed for the better by your product, that is what fuels you. And ultimately, when you get featured in the press, when you raise a big round, all of the things that we look for in the newspaper or on social media, that get celebrated, very rarely ever make you feel good, or valuable, or fulfilled, for a long period of time. But I can still go back to the individual stories, the personal stories, where we have created massive impacts, and those absolutely still, reflecting on those, fuel me to this day. I think that's why I'm still here, on the grind that I am.

Atticus LeBlanc

My pleasure. Well, thanks for the opportunity.