Wayfair CMO Paul Toms

PAUL TOMS: I think the answer, a lot of it in D2C eComm is about brand. It is about that long-term value. It's about that direct relationship with the customer. Are they coming to you again? Once you came and you navigated, was it easy when you decided to make a purchase? Did it get to you with an item that you liked and in a way that you liked? And were we respectful of you and did we continue to build new things that offer you value that'll keep you coming back?

GREG STUART: Paul Toms, welcome to Building Better CMOs.

PAUL: Thank you. Thanks for having me.

GREG: You bet. You bet. So Tom — Paul — I knew I was going to do that, right? I kept looking at your name. Well, it's funny, your name would show up too. I'd see the second part of your name. I mean, I'm sure you get called Tom ... I get called Stuart a fair amount, right?

PAUL: All the time.

GREG: Yeah, exactly. It's the parents who —

PAUL: At least once a day.

GREG: It's the parents who ruined our lives and gave us two first names.

PAUL: I know.

GREG: It's just rude of them. Yeah, not very funny of them. Hey, listen, I was looking here ... So listen, first off, just in case the listener wasn't paying attention, you're the chief marketing officer at Wayfair.

PAUL: Yes.

GREG: Of which there are many brands. So I want to get to some of that a little bit. Paul, how long have you been at the company?

PAUL: Almost 19 years.

GREG: Wow. That's crazy. So how many, I dunno, give me a guess. How many employees now, how many employees then? Can you remember?

PAUL: Full-time employees? About 12,000. And when I joined, probably about 100.

GREG: Wow, that is so crazy. What a ride. I mean, that's like, it's got to be the most ... You're a guy who knows where ... Well, not just where all the bodies are buried. That gives the wrong tone to the thing, but there's a lot ... You know what I've come to appreciate, the older I've gotten, is the value of people with long-term institutional knowledge.

PAUL: Institutional knowledge, muscle memory, context. Yeah. Yeah.

GREG: Totally. You see the whole —

PAUL: It helps, for sure.

GREG: For sure. And I'm sure you get a lot in the company. Are you the longest-serving employee still there? Besides the founders?

PAUL: No, there's actually two or three more folks who have been there longer than me, but maybe by a year or two. We have a couple who are over 20 years that aren't the founders.

GREG: Wow, that's crazy. According to ChatGPT, trailing 12-month revenue here is around 12 billion. And I think if it calculated it right, when you got there, it was under 500 million.

PAUL: Yeah, it was actually, it was less than that, probably just at about 100 million.

GREG: Wow. You know, kind of ... Is this is the first job you've ever had?

PAUL: This is the first job I've ever had.

GREG: Wow. What made you go there originally?

PAUL: So the truth? Yeah, it was called CSN Stores at the time. And the honest truth is I was in school at Boston University and I'd just graduated in December of '06, and my girlfriend at the time — now my wife — was still in school, so I needed something to do while I was waiting around for her to finish up. And I got plugged in at CSN Stores. I had a friend that worked there. It's just been the best fit. It's been a great place to work and good fit for me, and I think I've been a good fit for them.

GREG: Yeah. That's great.

PAUL: 19 years later.

GREG: To the best of your ability, what are the different roles that you've done there?

PAUL: The first role was literally just entering product data into our catalog and answering the phones because that's what we needed and that was what most people were doing. Over time, though ... So I would say my real career started, I moved into business intelligence and built out reporting for all the different parts of the organization. I really fell in love with performance marketing when I was doing that. There was all this data and so many problems to solve. And then I moved into paid search, I moved into email marketing, then I moved on to Joss & Main, which was our flash sale brand at the time, which had just started and really kind of needed to grow that. So put together that whole strategy and plan and executed it for the next few years. And after that, had a chance to move into more general management, so was responsible for marketing, but also merchandising and operations and product and engineering, and ran that for a bit and then did some other things. Had a rotation in HR.

GREG: I was going to say, I see here chief people officer at one point.

PAUL: Yup.

GREG: You weren't just in HR, you were the head of HR, it looks like. [laugh]

PAUL: I was the head of HR for about 18 months, and then I moved back into marketing about two years ago. So it is kind of a return home for me. Like I said, marketing was the first thing that I really fell in love with from a subject matter perspective. And so to be able to do that now on all of our brands and geos? It's a fun problem to work on every day.

GREG: Yeah, no, I'm sure always evolving and changing, the complexities. I mean, geez, you even had to go through a pandemic, which I mean really dramatically changed your revenues of the company, the whole thing's sort crazy. Exactly. By the way, who was the previous CMO? What was his name? I knew it.

PAUL: Bob Sherwin.

GREG: Yeah, Bob Sherwin.

PAUL: Bob was the prior CMO, who I think you've spoken with in the past.

GREG: I've spoken to him. Yeah, no, he's great. Yeah, we had actually tried to get him involved with the MMA. He was very highly recommended. Very sharp guy. I mean he was a real marketer. Yeah, exactly.

PAUL: Yeah, he was great. And then Ed Macri before him, and I think that's pretty much it.

GREG: Wow. Wow. Okay. So the listeners maybe understand too, there's five total brands? Four brands under the Wayfair name. Is that right?

PAUL: Five total brands in four countries. So the five brands are Wayfair, which is in the US, Canada, the UK, and Ireland. And then we have four specialty or luxury brands in the US. So AllModern, Birch Lane, and Joss & Main are what we would call our specialty retail brands. And then we have a luxury platform called Perigold, which we launched in 2017, and I was a part of that.

GREG: Yeah, I like that Perigold brand. I mean, I like all the brands and I've obviously had, with a couple of homes in my history, I've sort of had to fill them up. But Perigold, it's a really well-done luxury online brand, is that right?

PAUL: We noticed a gap in the market of folks who were missing selection in the high end of the market and we have the infrastructure to be able to offer that and we have the supplier relationships, so we said, Hey, we should build a brand here. And it's been a hit. We actually just opened our first store.

GREG: I was just going to say, and there are no stores, but you opened one recently, is that correct?

PAUL: That's right. So we have stores, each of those brands has stores. Wayfair opened a store last year outside of Chicago and Wilmette, and then Perigold opened stores in Houston and West Palm in the last few months.

GREG: Why the move to doing retail when you've been so successful without, or that's the next frontier? I don't know.

PAUL: That's the next frontier. For as much as we're leaders in online and in furniture and decor in general, more than half of it is transacted offline. And so if you're going to be where your customers are, at some point you got to be physical. So we're getting going on that.

GREG: Wow. Wow. That's going to be a big foray to go into retail. And do you know what kind of change that's going to have with the company or how does that affect a company when they end up going retail after so many years of not being?

PAUL: It affects every part of the company, I would say in almost all good ways. I haven't found a bad way yet, but I'm sure there's something in there. But I think it's just a totally different discipline, running a store, having to have the inventory there and on the floors and cleaned up and laid out just so, having to run a store staff, having to run local marketing. These are all just different muscles that we haven't had to have as an online selling platform. We're a two-way marketplace. We don't take inventory, we never have. Even all of our stores, that's not our inventory, that's on consignment, but the challenges of showing up physically every day are just fundamentally different than building software and running a website. So it's been good. It's been great learnings for sure. We're seeing a lot of exciting stuff. And I would say, not on the operational side but on the consumer side, what we're realizing is that the halo of this experience is so significant. Sometimes people just want to know that you have a store. That's a big part of driving trust.

GREG: Makes you feel more legit, I guess, right, at some level. Yeah. That's very funny.

PAUL: A hundred percent. I mean, we sell items that are hundreds or thousands of dollars and so it's like, Hey, am I really going to trust you with my money if you don't even have a store? So these sorts of things are huge benefits that we're seeing as we launch in new regions, and it's been fun to be a part of it.

GREG: What is the real dynamics or challenge of doing what Wayfair does? Furniture's a complicated category, like I said, I've set up homes, you sort of pick all you want, then it shows up like three months later. It's kind of a pain. There's a lot of complexity to that and so on. Are you merchandising others and presenting a portfolio to consumers? Are you solving the problem of ... What's the real consumer benefit?

PAUL: It's all of it. I think you said it, but what we would say is shopping for furniture is hard. It is both a very emotional purchase, right? It's a reflection of you. It's a reflection of your family and your needs. It's a very expensive and considered category that you don't buy —

GREG: Can be, yeah.

PAUL: — with great frequency. It's not branded, so you don't come into the space and know, "This is the Toyota of furniture. This is who I trust."

GREG: Yeah, you really don't have any idea.

PAUL: And so folks are not looking ... And then I would add on top of that, it's a fashion category. So you're not looking for your home to look like the home that's right next door. And so everybody wants something that's a little bit different. We've been at this now for 23 years. We're only focused on home. And I think a big part of what we do and what we solve is it's about having access to all of these items, having the selection and the supplier relationships with 20,000 or more suppliers who make these items. It's about the presentation of them. So you don't have the words, you know what you're looking for visually, but how you might type that into a search box is not clear. So how do you navigate those categories? And then finally, and you did mention this, but the delivery is ... It's a bear.

GREG: It's a bear.

PAUL: This is not something you can ship FedEx or UPS. It requires specialized understanding from pickup to drop-off. And so we actually have our own — we don't talk about this much — but we have our own delivery network that's fully owned and operated by us from pickup to put-down.

GREG: Really.

PAUL: We're one of the largest shippers of what we would call large parcel goods. So things that are hundreds of pounds.

GREG: So the truck that picks it up from the furniture factory or wherever or warehouse.

PAUL: Yeah, warehouse.

GREG: Then there's a truck that actually delivers it to me. You own both of those?

PAUL: So Wayfair's handling the pickup, we're handling the middle mile, we're handling the delivery.

GREG: Wow. Wow. That's a massive, massive undertaking,

PAUL: But it's required in this space. So at some point you say, Hey, if you're going to be successful and scaled in this, you're going to have to do this. And that's what we built for those big and bulky items. Sofas and dining tables, bedroom sets. So yeah, that's ...

GREG: It's so funny you say ... Somebody brought me something some number of years ago, I don't remember, and I'll never forget, they dropped it out on the lawn at the end of the driveway. And I think, if I remember right, it was like 400 pounds. And I was kind of like, What the f —

PAUL: [laugh] Yeah.

GREG: What did you expect me to do with that? I remember like, oh my God. And listen, you do that once with me, then I guess I don't really remember who it was, but I would never buy from you again because I just don't need that hassle in my life.

PAUL: Totally. And so certainly outdoor dropoff is an option, but we want to provide options for in-home delivery and setup and assembly and all those things. That's the mousetrap we're building. That's what we're working on.

GREG: I'm curious — and again, if this is a question ... I don't know that ... If you guys don't like to get into this, it's fine with me — but where are you sourcing all of this from? Is it sourced all over, all over the world? Is that what you're doing? Something like that?

PAUL: All over.

GREG: Yeah.

PAUL: So interestingly, we're different than most retailers in that we are not sourcing the product specifically ourselves and then cutting a PO and buying inventory of that product.

GREG: Understood that.

PAUL: So what we're actually doing is working with suppliers who are to us a second customer. So we build software for them to sell on the internet and sell on Wayfair. So they really handle the sourcing decisions. By the time they're listing on our site, the sourcing decisions are decided by them, but they're from all over, certainly China and Vietnam and India and Turkey and Mexico and the US and all over. And that also evolves. So this is definitely an evolving landscape right now. And you do see their sourcing moving around as things change.

GREG: I'm curious, how many suppliers does it take, then, to run this? Give me some sense of scale here. I don't know if you want to do SKUs or you want to do number of suppliers. I don't know. Is there something out there you can share?

PAUL: Yeah, we have 20,000-plus suppliers and they have hundreds of thousands or tens of thousands of items in their catalog. Each.

GREG: Wow. It's one of those, I'm an early dotcom guy and we looked at it, you look at business, the whole dog food delivery business was not really a good idea.

PAUL: Not a business most people would think, We should go into this.

GREG: Yeah, well, the whole thing didn't make any ... I remember looking at the economics, I remember one of those I looked at as they were looking for a head of marketing. I looked at the thing, I said, boy, this is a dumb idea. There's no way you could fix that pricing, was my impression, so I stayed away from it. Obviously, many did, but I don't know that we would've thought ... And listen, Jeff Bezos set up, going after books to start, and then CDs, I mean, it was smart. Whether he got ... It now does everything. But there really is a real ... There's a real need for what you do that's differentiated than almost anybody else would be able to take care of. So both you're providing, it's a real value in addition to, I'm assuming you feel like you have some moat around what you do that protects you in the service and business you provide. Very interesting.

PAUL: Yeah. I do think you establish a moat the longer you chip away at it and others aren't in the space. To me, the physical infrastructure is the thing that's probably the most daunting for anyone that's looking at it. But the other that is —

GREG: You mean the delivery infrastructure.

PAUL: Yeah.

GREG: I totally agree.

PAUL: How to handle 150-pound boxes to show up in a way that's acceptable is tough. But I would also say, from the consumer side, just 23 years of figuring out how people navigate and search and ultimately find what they're looking for in these categories is probably where we see the biggest difference and probably the biggest moat.

GREG: What does that mean? Go one more step on that. What's that mean? Yeah, what's that look like?

PAUL: Well, just visual similarity or intuiting what price point you're really looking to spend without you telling us or understanding what goes with what. So a lot of times when you're outfitting a room, you're buying multiple pieces and you know don't want 'em to be matchy-matchy, but you also don't want them to collide with each other. And so how do you think about that? Or for the longest time, the number one issue when you were buying a sofa is that it would show up, it looked exactly like you wanted, and it wouldn't fit through your door. And so how do we help folks navigate that as part of the shopping experience when you're in these categories?

GREG: Yeah, listen, it's funny on the design thing you say, so listen, my wife and I are relatively ... We live in New York City, we're dare I say, maybe fancy people now. Didn't start that way, but fancy people now.

PAUL: Good for you.

GREG: Well, yeah, our design sense though, oh boy, really bad. We basically decided neither one of us can choose anything and never should.

PAUL: So do you have a designer? You work with a designer?

GREG: We do have a designer we work with sometimes. Exactly. Yeah. We just don't trust that ... But you're right, it's not a skill that other people have, but it's interesting to hear them talk. There's a real science and some art to that, obviously, so very interesting.

PAUL: For sure. We also have a business working with designers, so we have a B2B arm that's there as kind of an assistant for designers, like the ones you work with.

GREG: I'm pretty sure a lot of the stuff here is from Wayfair. I think a lot of it, Perigold in particular, I kind of recognize the brand, so I've seen it come in here. Yeah. Good, good, good, good.

GREG: Okay, well listen here, let's get more to some other fun of this thing. Well listen, it's a complicated business you guys are doing there. It's sort of interesting and I think careers and business are sort of complicated too at some level. I'm just curious — and listen, you're interesting in particular because you've had so many different roles within the company. What's the best advice that you've been given? And it might even be advice that you pass along to others today. I'm just curious what you've learned.

PAUL: There's a very specific moment, and it was Ed Macri, our first CMO, who gave me this advice, but I was really spun up around the axle on a decision I had made that really was not leading to the best outcomes and I was torn about changing my mind on it. And he said to me, he's like, Hey, nobody cares about anything that happened before today. All we care about is that we make the smartest decision today. I use that all the time. I think for me what that means and why that's been so empowering for me is it lets you just engage in the present and in solving for the future without over-rotating on a prior decision, worrying about what somebody thinks about whether you failed or not, whether ... It's like, all of this stuff is just learnings and a current state of affairs and really our job in running the business is to do the best thing for tomorrow.

And so I think it also gives you ... We're in an interesting business. Like I said, we don't take inventory and a lot of our decisions are actually not — even though they're big business decisions — they're also decisions that we can change. We can change our mind. The idea of making the smartest decision today means that I can also do that tomorrow. And so I don't have to be perfect, but I do need to move, right? I need to move forward and advance this. I use that advice and I reflect on that advice every day, truly.

GREG: Part of the point of that is — just to repeat what you said there — is that ... Make. A. Decision.

PAUL: Yeah. Yes.

GREG: Yeah.

PAUL: Make a call.

GREG: It's funny you say that. I would say — I'm going to take a sidestep here, we'll come back — I've had this ... Listen, in all parts of your life, I have these different themes or thematics or things that I think about that seem to dominate my thoughts at some level. One of them has been the dynamics of leadership and leadership's ability to make a decision. Yes. Even when it's a tough decision and just how important I think that is over time. I think that's a variation of what you're saying is to demonstrate a sense of leadership and make a committed decision.

PAUL: To do that and be a great leader is to also then bring the team along on it to provide the context, Hey, we're going to take this decision and this is a forever decision or we're going to take this decision and this could change tomorrow. But I do think, certainly in the context where we work, it's about incrementally getting better and smarter every day. And if you do that consistently over a long-enough period of time, you will win. Incomplete information and just needing to make a call and move forward and revisit when the time is right.

GREG: Maybe what process — I don't know if you've thought it through in your mind — but do you have a process you go through in making a decision on what you do? Or what are some of the steps you take to try to make decisions?

PAUL: I think first you have to approach the decision with humility. And what I mean by that — and maybe humility and curiosity — is just a willingness to have your initial hypothesis be disproven. Hey, we're going to crack open this thing and it's going to come with whatever it comes with, and that's going to inform on what we then do next. I think then the second is like, what are the principles with which you would make a decision? So if I'm looking at something and before I ever look at the data, it's like, okay, let's structure how we're going to, if it looks one way, if the data says one thing, we're going to take this decision. If the data ... Maybe even before that, what is the outcome we're trying to drive by way of this decision? And then as you build that structure and then you work with what you have and then you say, okay, I have this amount of information that tells me this. Maybe I have a huge gap in the information. So then the next is what's the range of outcomes in that number or those numbers? And ultimately, but what we're going to do is make a call.

And then we're going to, as part of that call, communicate it, operate against it, and as part of that, also pick a time when we pull up and revisit and maybe change our mind. But that'd be, I think, a little bit off the cuff, but structurally probably how we approach most problems and how we get to quick decisions.

GREG: What guidance do you give to others, maybe, in that regard? How do you help them?

PAUL: Where I find opposition or disagreement most of the time is actually more in just wanting a perfect answer rather than being comfortable making a call.

GREG: Ah, okay.

PAUL: Feedback that we get often is, I can't believe you're willing to just move forward this early. And I think there's ... Certainly some of that is the industry that we're in. If I were in health care, if I were in medicine, I would not do that.

GREG: [laugh] It might take more time to be ... We might get a second opinion maybe, right?

PAUL: If I was cutting a huge PO to buy inventory, I would certainly want to have more information that would give me more confidence. In our use case — and I think in many marketing use cases, particularly online — I think you can move pretty quickly and you can continue to iterate and evolve.

GREG: I find, too, it's funny, on some of that you mentioned, when people are at odds, I usually say if I can roll back through the process, I can usually find common ground that then gets us to a common point. It's a very funny thing.

PAUL: Absolutely.

GREG: I don't know that I did that early in my career. You kind of leapt at that one there. You agree?

PAUL: I gave that advice yesterday.

GREG: Oh, you did?

PAUL: We had a couple of folks — I wasn't in this disagreement — but a couple of folks who were really at loggerheads and one side was asking me what to do about it and it's like, Hey, my first advice is you should climb up the decision tree until you find what you agree on.

GREG: Yeah. For me, I feel like I'm kind of almost going down. Funny. I was going down, I go, okay, we'll go back to base. Okay, why do you believe that? Oh, okay. Oh, we're not aligned there. Okay, keep going. And then you get back here to aligned. Okay, okay. Now are we aligned on the goal and what we're trying to accomplish? If we get aligned there, then off ... And then what inputs do you have to that then we can get to what is the ...

PAUL: Exactly.

GREG: I don't know. I've almost never not found that we get agreement to then go forward. It's very funny to me. I don't know.

PAUL: A hundred percent. Usually when you're in the work context, it's like are we trying to make the company better? Yes or no?

GREG: Yeah. Would the customer be happy? What's the thesis of the company? What's our mission statement? Right, exactly. Yeah.

PAUL: Right. And then let's climb up the decision ladder or go down — either way — but yes, yes, certainly. That's funny that you mentioned it.

GREG: People don't stick with something long enough to see it to a point of understanding or completion or to get it done or they give a ... I wonder if that's a reflection of their lack of commitment to making the decision and really moving against it, or if it's second-guessing. I don't know if I know.

PAUL: I think there's also ... I would add there's a lot embedded in making calls, particularly as you get deeper into a team. There's a lot of pride in work. I feel like my job is maybe less outcome-oriented but more how you achieve the outcome. So if I feel like now you're going to change how I work, I'm going to resist that rather than I think what you'd ultimately prefer is that we all have complete context, we all see the total picture, we all know how to drive the outcomes, but often I think that gets lost. So that's when you start to see people starting to dig in more on the process than on the goal.

GREG: Right. Yeah. Well, that's my other one too, is that I think process is always the answer. I don't care what the problem is, it's always process. What were we doing that got us to that point, then go, Hm, that maybe wasn't right. Now let's go back, okay, there, fix this process, fix that. We had the right inputs, we get it done right. So that's often the case.

GREG: Let's go on to the big question here for Building Better CMOs. So as we said in email, I talked a little bit here and stuff that the podcast of Building Better CMOs is all about trying to find stuff in the industry that needs to be better addressed. And so we tend to focus on the problems. What do we think that we ... And you could go at this in a couple of different ways. What do we as marketers not maybe fully understand? Maybe where do we have imperfect data? Where do you think we missed the wrong ... Where do we have the wrong orientation sometimes? I mean, there's a number of different ways you can go out there, but it's really about trying to appreciate what a modern marketing should look like and ultimately for us then what do we need to be aware of that maybe we as an industry, collectively ,maybe need to go address? So I don't know, what do you think we don't get?

PAUL: The thing that comes to mind for me first is just that connection between the work that we're doing and the business outcomes that we're driving. Where I see a gap often is in our ability to understand and really tie that back directly. There's the old saying that we all know that gives space to not know the answer, about the 50% of marketing.

GREG: Which was a retailer who said that, by the way, John Wanamaker, right?

PAUL: Yeah. Well, hopefully we've advanced higher.

GREG: Hopefully digital retailers have gotten better.

PAUL: It just gets referenced so often, honestly, that I do think sometimes it's holding us back or honestly giving us an out. And what I see often is just there's a disconnect sometimes between the business outcomes that we are driving and our responsibility, frankly, to be able to articulate them with confidence.

GREG: Do you feel like in your mind, do you have any clarity about why that is? Is it sometimes because people have different backgrounds, they come it at from different .. But you and I were talking about it, both you and I have degrees in economics, so I tend to look at cost benefit, I tend to look at supply/demand dynamics, pricing dynamics. That's how I look at the world often, and there's a lot of different experience in marketing.

PAUL: There are a few things that stick out to me. One observation that I've had now as a CMO for two years and someone who didn't maybe grow up in just the marketing track is that every CMO job is different. My job on a D2C eCommerce business is fundamentally different than a CPG business. And even though we're both trying, the constraints that I operate within, the data that I have, the data that I don't have, is very different. And so there's not a standard answer. I think two, like you said, I do think the path upwards in the space is filled with completely different profiles. So I'm an economics profile. I was a GM on our business. I was more on a generalist track. There's obviously a lot of communications professionals, there's a lot of creative professionals that are in CMO roles, and so I don't think necessarily that measurement and P&L management are always skills that have just been developed organically in one's career.

To me, I view marketing as a growth driver. I view it as a profit driver. It's something that you invest in and something that generates outcomes for the business, particularly, obviously, if it's done well and successfully. But I don't think many companies necessarily look at it with that lens.

GREG: I don't think there is any common ... In fact, I'll validate that for you. As a guy who runs a trade group of an industry body, of a bunch of CMOs, the diversity of opinion about the role of marketing is pretty dramatic. Some see it as the voice of the customer. Some think they're there to build demand. Some think that ... We've started, I will say, the industry started to aggregate around growth, and you've seen a few CMOs take on the chief marketing and growth officer dynamic, although growth could mean other things, because growth opens the door. I think when I've seen chief growth officers, they're often out looking for new areas to go into, new businesses, new product lines, new extensions of product lines. They look at it that way. How do they expand the portfolio?

PAUL: Particularly in digital, the chief growth is often, I think, marketing and the product, the user experience is one that I see a lot. And then in B2B cases though, it's more like marketing and sales, right?

GREG: Yeah. How does marketing support lead generation in that case sometimes? Right. Hey, Paul, lemme ask you a really hard question for direct--to-consumer companies. You ready? I don't know, maybe I'll say it later.

PAUL: Fire away.

GREG: Maybe this will just be cut out later. We'll see.

PAUL: I don't know.

GREG: I think what D2C companies ... Now listen, I'm going to separate you guys a little bit because Wayfair has been a well-established company for a lot of years and grown dramatically. Now, that said, there were a whole raft of DTC companies that became big in the teens, in the 2012, '15, wherever it was, I don't know. It was all the rage, the D2C companies.

PAUL: For sure.

GREG: Most of them got washed out, many of them got washed out. Okay. So the question I'm going after is that when I would talk to those D2C companies, they were incredibly transactionally oriented. They were like, if I had $50,000, I'm going to invest in getting 10 new customers. Whatever the numbers were, it doesn't matter. Or 100 new customers, they were just very focused on it. So how do you — Wayfair or even the sub-brands, however you want to look at that — how do you guys look at that balance between brand-building and then transactionally oriented dynamics?

PAUL: I see the same thing that you see, and we grew during that timeframe, and so I think we've got lessons learned.

GREG: Yeah. Yeah. Well maybe share the lessons, that would even be better. Yeah. Yeah. Because you survived.

PAUL: I wouldn't confuse saying "what outcomes are we driving?" with "what short-term outcomes are we driving?" I think that's the trap that a lot of folks fell into, and particularly when you're on your up —

GREG: They got focused on the short-term outcomes, just to be clear, right? Is that what you meant?

PAUL: Right. Short-term outcomes, transactional outcomes, quantifiable outcomes, and a very narrow window with click-based tracking. When we talk about outcomes that we're driving, we're talking about brand outcomes, we're talking about customer loyalty outcomes. We're talking about recognition of our logo and colors. We're talking about recall of our ads. I think really what we're here to do is grow these businesses over a long period of time, so nobody really cares if I just hand over all of my gross profit to a publisher and I have an order that otherwise makes no money. I don't think that actually necessarily solves that problem any better either, right? So I think the answer, a lot of it in D2C eComm is about brand. It is about that long-term value. It's about that direct relationship with the customer. Are they coming to you again? A lot of, we would say in brand-building, is certainly marketing is a component of that, but the experience is the biggest driver of that.

It's once you came and you navigated, was it easy when you decided to make a purchase? Did it get to you with an item that you liked and in a way that you liked? And were we respectful of you and did we continue to build new things that offer you value that'll keep you coming back? I think that's where you got to put the focus. When I reflect on the D2C boom, it was kind of like you could throw anything up on the internet, give it a cool name, invest all your gross profit into media, and then basically you're left there holding a bag because you had a customer lifetime value assumption that didn't pan out because you had nothing else to offer them, and all your PE money was gone.

GREG: Does customer experience sit under your remit, by the way?

PAUL: Parts of it, not the entire ...

GREG: Not through the distribution chain, I assume, right?

PAUL: That's right.

GREG: It's funny. I'll just tell you, I'd love to repeat this data point. We've done a bunch of research around marketing org and the dynamics of marketing org and what really drives value when you get the org right. And one of the things that we noticed from that research is that when the CMO owns customer experience, the company is financially better off. Isn't that crazy?

PAUL: Yeah.

GREG: Yeah. Now, not all CMOs are trained to be customer experience people so that's part of the complexity of that particular statement, but very interesting that that would be the case. It seems intuitive, but we proved it with real numbers.

PAUL: I think it makes good sense. I mean, there's a few things that are wrapped up in that. One is just understanding the customer. One is engaging and facing off with them often, whether that's research and insights or just empathy from having worked with them for a long time. The site experience provides a tremendous amount of empathy back. Like, oh, this is how they're using this. This is what they're actually trying to solve. Here's where they're getting stuck. Here's what they like, and here's what I can go then tell everyone else and get them to come to the site. And then the reverse is, I think from an economic standpoint, is also just the media buys and what people are seeing off of your site is one thing, but what they experience when they land and that pull-through and that consistency make all the difference in the effectiveness of your investment. So it doesn't surprise me at all.

GREG: Yeah, yeah, yeah. Well, and yeah, for you, it would be making sure we do the follow-up emails right, if we give 'em notifications of shipping, are we doing all those things that they have a sense or help them with other parts of it.

GREG: Hey, you mentioned earlier though, earlier on there, I want to come back to that. You mentioned that one of the things that you use to watch for what you do is brand outcomes, and then you started to define some. Could you just spend a little more time, though, with what brand outcomes for you that you all look at, that Wayfair looks at? What's the awareness of the brand? What is the awareness of the brand, by the way?

PAUL: So the awareness in furniture and decor, unaided awareness is somewhere like 88.

GREG: Is it really that high?

PAUL: Wow. It's between 80 and 90%.

GREG: Okay, good for you.

PAUL: The unaided awareness, I don't know that I'll give that number out, but I'll say on a relative basis, we're in the top one or two brands that are top of mind for folks.

GREG: And you're right, nobody else understands furniture brands, right? I mean, nobody knows that. And I can't even think of all the brands I've bought over the years right now. But yeah, you tend not to know those. You might know a store if it's close by, you walk by a lot. I think it would have some familiarity, so Wayfair does become that uber-furniture brand that I would understand, right? That's powerful. That's a good position to be in.

PAUL: So we do track those. I think for us, a lot of focus is on consideration. It's one thing to know the brand, it's another to make a purchase like this online in the actual execution of our, as we're getting down to brass tacks, we're looking at recall and we're looking at action intent.

GREG: Uh-huh.

PAUL: But I think once you put something into market, what we're looking for [is] longer range outcomes. Are we seeing lifts in engagement with the brand? Are we seeing lifts in searches for the brand? Are we seeing quantifiable differences? Maybe not in purchasing, but in some sort of reflection that you're thinking about Wayfair a little bit more.

GREG: You guys spend ... Do you have a brand ... You're not doing Super Bowl ads? No? No Super Bowl ads?

PAUL: No, no.

GREG: No, not yet. Okay.

PAUL: Not yet, at least.

GREG: How do you guys look at the, oh, okay, there we go. How do you look at investment into brand-building versus getting the transactions you need at the time that you need them? How do you look at the split between budgets in that? Do you know?

PAUL: The truth is, our answer evolves, but in general, what I would say is if you go back to first principles, if we're going to invest in media, it's because we believe that there's a profit-generating ROI for the business at the end of it. Over some timeframe.

GREG: Over a timeframe, right. You might not know, though, short term. That's the challenge you run into.

PAUL: But I think you can do enough to basically extrapolate and make assumptions out. First of all, you can measure out on pretty long windows, just to be clear.

GREG: What do you mean you can measure out long windows?

PAUL: You can run experiments and you can set up ways to know the impact of your brand marketing —

GREG: Over time?

PAUL: Over longer time windows. Now, you might not be able to say, Hey —

GREG: Wait, Paul, are you guys doing that? I'll tell you, I've talked to a lot of CMOs and I've never found anybody able to do that.

PAUL: I think the question is more in how, again, how much certainty am I going to have? How much ... But yes, I could say ... Let me go back. On first principles, I think our media investment is like, we wouldn't spend any money if we didn't think that it was generating long-term business growth and profitability. Now it happens that buying certain types of ads, you see that the next day and others you see over a year or more. So that's on the investment side. But I would also say there's a ton that you can do in the execution in terms of consistency of your brand, in terms of your word mark and your logo and your colors and your consistency of your brand system and your auditory components.

GREG: Appreciate the importance of that. Absolutely. Right. Brand consistency. Right.

PAUL: There's a lot that you can do in testing, then, in terms of creative testing to say which is going to be more effective at driving some of these outcomes. And then, like I said, you can then layer measurement on top of that. That does come — going back to incomplete information — with assumptions on, okay, here's what I see in the short term, here's what I believe I get over the long term. By the way, here's what ... I would consider my TV, I don't ever view TV on its own. I view TV as the impact that it has on our entire ecosystem and all of our other paid media. And you can kind of back into, okay, what do I believe this is actually generating for me and how do I think about that? So how that nets out is in the ... But it's in the double-digit, low-double-digit percentages of our budget. It's not the overwhelming majority of our budget, but we're also a large-catalog online-only retailer, so transactional, lower-funnel marketing just comes with that territory too.

GREG: Yeah, it tends to be the providers in that [who] often do. Well, let me ask you this. So you mentioned earlier that the awareness is high — aided awareness is high and a little bit lower — and then consideration is going to be some degradation for that, whatever, it's going to be lower just by its nature.

PAUL: Sure.

GREG: Okay. Would you have any idea, if you moved consideration up, what that would generate in sales over time? Do you guys know it that well?

PAUL: I mean, we have rules of thumb on them, but honestly they're ... No, no. I would love to. Those are conversations we have, but I don't think we've found something that's really bulletproof or that we'd say this is high conviction. This is the exact value of a point here.

GREG: You guys run multitouch attribution or media-mix modeling or both or neither?

PAUL: Both.

GREG: Oh, you do both. Okay.

PAUL: Really though, I think our ground truth is just always on large-scale experimentation across most investments to kind of keep us honest.

GREG: Give me example. Give me example. Just play that out a little bit.

PAUL: We just want to be running lift studies and geos studies and just constantly across our entire investment to keep us grounded.

GREG: Right. Listen, part of the reason I ask those questions is because I had heard from my board and other marketers prior to 2020 somewhere, the real conflict and tension between brand versus performance. So we had taken a step back, this is what we as a trade group could have the latitude to do. We said, well, is that an answerable question or is that cold fusion? Do we need new science that we don't have today or can we answer that? So we said, no, that's a mathematical problem. If we can collect the data, then we can do the math around it easy enough. And so we took a step back and we built the methodology to do that. So we've now started to run studies, and we're in our fourth study on that now with AT&T, we've done Kroger's, we did Ally and Campbell's, and we're starting to get a sense of what is the relationship between brand and performance marketing. What's an optimized level? What does that mean? And even more importantly, what is the financial benefit of brand long term? We can now tell you, those who changed their ... Consumers who changed their brand attitude, we can track them — 12 months out is as far as we've gone so far — as to exactly what their sales is over that time.

PAUL: I think of them as ... I really think of them as the same. I think they have —

GREG: What do you mean when you say they're the same?

PAUL: I mean the same is if you follow that thread of basically the value of brand over time, and then you back into, okay, then how much should we invest in it? You're going, most likely, to back into something that starts thinking about that you should invest at it at a very ... using the same principles that you would for performance marketing. And then all of a sudden it's just performance marketing because you're investing in something that's growing the business. That's what I mean when I say I think they converge and it's definitely how we think about it, right? I would also maybe add that I think where sometimes you get tripped up but I see more people getting better is challenge yourself that they do both, challenge yourself that every impression is a great brand impression.

GREG: Actually, the big question we had when we first talked about this research with a bunch of marketers, they would go through a whole process of understanding the dynamics, what we were doing, how we were looking at it, buh, buh, buh, buh, buh. They would eventually get to a point and say, how do you know if the ad was brand or performance?

PAUL: Yeah.

GREG: And we can measure that. And we did. And so we did two analyses — and we've never really published this — but we did two analyses. One is what the brand thought was brand versus performance. So we'd do the measurement based on theirs, and then we'd go back and see what really was a brand ad and what was a performance ad, and then we would redo the analysis and see what it came up with. Yeah, I think your point, and I think what you're saying here and MMA would definitely agree, which is that brand has to be performance, but it's over time.

PAUL: For sure. That's the only difference. To me, it's the time window.

GREG: Not all marketers agree with that. Some think no, brand is this sacred cow that you can't touch or you shouldn't talk about and you shouldn't measure. And I'm like, I don't know. That's hard to get big budgets when you're acting that way about it.

PAUL: But that goes back to why don't we do it, right? There's just so much, I think ... There's not a common way of thinking about it.

GREG: You want to know something funny? I just said this. I was just talking to a CMO earlier today. I told her ... She did do a brand-as-performance study with us. There's only four brands who've done that so you can maybe guess which one. But I said, the problem with this research ... Actually, I was talking to a professor earlier today and I said this. I said, the problem with trying to understand long-term brand impact is that to do that is a two- to two-and-a-half-year journey. And most marketers, I suspect, don't think they're going to be in their job long enough, which is, I'm sort of embarrassed to say that.

PAUL: It's a shame.

GREG: I know. To be in their job long enough to think that they should have that long-term view. Which means that really what this issue, this issue of what is the right amount to invest in brand — because it's so substantial to the company to know the answer to that question — really needs to be taken over by the CEO or the CFO. The board should be advocating for this.

PAUL: For sure.

GREG: They should be giving latitude to the CMO to say, Hey, we really do need this measure. Can you take the time to go do this research? Don't put it all on the CMO, because if she or he allocates time and energy to something that is so far ... They have immediate needs. Sales have to be done today, most of 'em for most companies.

PAUL: And to the madeup CEO and CFO's credit in this example, it also comes down to execution. It's like, okay, first of all, I got to take that leap that I'm going to invest in this thing that I'm not going to see for two and a half years. Also, it's going to be very difficult to measure. And by the way, if we execute it poorly, it's going to be worth nothing. And if we execute it well, it's going to be worth multiples of what you're putting in your model. And so basically, how do I get there? And then your point on, hey, the team rotates every two years. And that's where I think we go back to, okay, so what are those things that you can use to approximate that this is well executed and that you are onto something and that, sure, you don't have to see the actual value land, but you have to identify that you're breaking the trend. So anyhow, that's a long way of saying I agree with you, but it's a tough nut to crack. It's hard.

GREG: It's a tough one for the industry, and it's our language around brand. I have a board member who doesn't use the word "brand" when he talks internally. He says, I'm focused on maximum multi-year returns.

PAUL: Right. I love that.

GREG: And he's funny becaue he goes, listen, not everybody wants brand, but everybody wants maximum multi-year returns. It's very funny. He's an ex-banker so that's the way he talks about things. It's great. I love that. It's one of my favorite phrases out there.

PAUL: It's good stakeholder management.

GREG: Yeah, exactly. Totally, totally. What is the best marketing you think you guys have done? I'm just curious. I'm looking at the site here and some of what I see here and so on. What is an aha moment interesting that really got your attention about what you've done, what you all have done well?

PAUL: There's a lot of different steps on some of the best marketing we've done, but the thing that sticks out to me and really was our breakthrough moment was really in the generation of 2017 or so, marketing on television, we were really starting to expand our presence on cable and on linear and the jingle, "Wayfair, you've got just what I need," just became an earworm and really took off. I have many different executions that I could point to, but if I had to pick one that I think was the most impactful for our trajectory and for our business, it was really that moment. And it was about having fun decorating your home, very musical in its presentation, and really the jingle of "Wayfair, you've got just what I need" was like, [it] became a hook, and people still reference it. That's what people remember when I tell them that I work at Wayfair.

GREG: So it was coming up with a brand positioning that really resonated, is what you're saying, right?

PAUL: For sure, the brand positioning that resonated was behind that. But I think, again, there's a lot of ... When I think about the execution, and when I think about the thing that became a hook that really landed in folks' psyche, it was the jingle.

GREG: Oh, okay, okay, okay. So the music.

PAUL: But the positioning, of course, was underneath it, and that was obviously very effective, and that was started as "A zillion things home" and then became "You've got just what I need."

GREG: Yeah, yeah, yeah. I suspect at some level, maybe music or song creates a emotional tug or reminds them some way of home. Listen, can I tell you a funny story? This is really funny. It kind of gets to the point you did. If you guys can recreate this, good luck. So I have a house that I rent sometimes, that I rent out. You know what I have noticed, is that if I have people come by, a perspective come by to look at the house to rent, you know what is the highest proportion — and I've done this for a lot of years so I've made this my own little study. It's not perfect because I don't have the sample size. If I start a fire in the fireplace before they arrive, it's almost inevitable they choose to rent the house. Isn't that crazy? Because I think what it does is it creates that home feeling, which is a variation of what Wayfair is trying to do for everybody. So if you guys could figure out how to get fireplace smell into in your advertising [laugh], that might be it. I don't know. Isn't that crazy?

PAUL: I don't know about fireplace smell, but we have started to figure out how to get the fireplaces burning with some AI implementation on still images.

GREG: Oh, is that right?

PAUL: So now we can turn these into videos that are fireplaces going.

GREG: We should talk about AI. What are you guys doing in AI? Anything interesting? You learn anything different from AI? How are you applying it?

PAUL: We use it. Really, we put a big focus on making sure that everyone in the company is using it in their everyday. Whether that's we now synthesize and can play back and transcribe — well, transcribe is the baseline — but the synthesis of every phone call that's made to Wayfair so that we can get live customer empathy and identify problems more quickly. On the marketing side —

GREG: I hear a lot of people doing the customer service analysis thing just because massive amounts of data and hard to distill, right?

PAUL: For sure. On the marketing side, like I mentioned earlier, we have tens of millions of items in our catalog. So title testing and naming driven by AI and kind of a experimental, a multi-armed bandit-type framework underneath it has allowed us to really generate better outcomes, like write better copy, attract more folks to the site. So that's one thing we might be using. Another is in our creative. So actually, if you go on the Wayfair app and you go on the Discover tab, which is the second tab, you'll see a lot of inspiration that's all AI-generated imagery. And the point of that is to help you search. You have something in your mind's eye that you're trying to find, but you don't know how to describe it. So how can we use AI-generated imagery to help you navigate to the vibes that you're looking for, and then we can turn it into the actual products that would be associated with that. We have this huge catalog of imagery. So how do you take that and turn that into short-form video or how do you turn that into, just have a nice gentle pan on it, or like you said, have the fireplace going. Those are all things that we're now able to do and use on our site and in our experience and in our marketing that have been big.

GREG: Hey Paul, you mentioned multi-armed bandit. I actually know that is a statistical technique. Are you able to explain what it is? You raised it there. I don't know. I was looking here quickly and see if I could do it fast. No?

PAUL: No, I'm not going to do a good job.

GREG: [laugh]

PAUL: It's like an explore/exploit model where you go out with many, many different, basically, variations and then you start to basically give more and more impressions to the thing that looks like it's winning.

GREG: Yeah, okay.

PAUL: And you find the top performer out of a set of many potential creatives.

GREG: Yeah, more generally a problem which a decision-maker iteratively selects one of multiple fixed choices when the [possible choices] are only partially known. Yeah, so it's kind of a variation of willing down. Right, exactly. Okay. Sorry. I've heard it and I've had my stats guys here use it and I thought, oh, do I really know what he just used? He just threw that in there. Do I know what that is? This is kind of the challenge of marketing too. There's all these different techniques and statistical and other methods that are going on, the science around marketing, that we as marketers don't know. That's kind of what MMA is all about. How can we bring a greater level of science and understanding to what we're trying to accomplish?

PAUL: And I think what's great about what you're doing is you are bringing people with totally different skill sets. So everybody has something to learn from everyone, and I think that's exciting.

GREG: I said to you when we were starting, I've never had ... I've had very few people and the main question, what do you think we need to do better marketing? I've had very few common sentiments. I think what drives that, generally the answer that people give on that or where they go on that is around what their undergraduate degree was. So I had the CMO of Campbell's, Linda Lee, who told me one time, she was a chemical engineer and she had come through engineering, then eventually became a CMO somehow, funny enough. And it was funny, she said, yeah, she goes, A lot of these marketers, they go, they ask me, how big is my budget and how big is my team? She goes, well, I start with, well, what's the hypothesis of what we're trying to solve? That's what a chemical engineer would do. What's the hypothesis? And then can we test and evaluate the hypothesis? Funny, very funny.

PAUL: I like how she thinks, but you could probably tell that.

GREG: Well see, yeah, you and I, that's why what you said is akin to what I would say, how do we connect what we're doing to business? That's where I think marketing wins, ultimately, we get better at that. Okay. Well listen, Paul, super interesting. I love the fact [of] how you've come up through the ranks within the company and been there so long. I've become, the older I get, the more I am a big believer in stick around and really learn something, learn and evolve on it. There's a lot of value and interest to that that I don't think I appreciated younger in my career. I jumped around a lot, so it's really nice. Great to see you've done that.

PAUL: Well, thank you. This has been a real pleasure. Appreciate the invite and yeah, talk again soon.

GREG:  Thanks again to Paul Toms from Wayfair for coming on Building Better CMOs. Check the description of this episode for links to connect with Paul. If you like this episode, you might also enjoy my conversation with Ariel Kelman, the CMO of Salesforce. We talked about how AI has radically changed the CMO’s job, the challenges of accurate measurement, and why we can't afford to ignore qualitative data.

You’ll find that episode and every episode of Building Better CMOs on YouTube, Spotify, Apple Podcasts, or wherever you’re hearing me now. At the Marketing + Media Alliance, we are working to make marketing matter more through conferences, research and education. If you want to know more, visit us at mmaglobal.com or email me directly, greg@mmaglobal.com.

Now, don't forget, Building Better CMOs is on YouTube. Just go to bettercmos.com/youtube to start watching. Our producer and podcast consultant is Eric Johnson from LightningPod.fm. Artwork is by Jason Chase, and a very special thanks to Angela Gray and Dan Whiting. This is Greg Stuart. I'll see you in two weeks.