Your baseline decides your Q4

Non-promotional revenue on our own website is up 14% year over year so far this year, and we did it with about 1% less ad spend. Of everything we track, that's the health number I care about most, because non-promotional revenue is your baseline, and everything else is built on top of it. It's also quality of revenue in practice.

Promos multiply the baseline

Promotional revenue is just a multiplier of your baseline. Say your baseline is $50,000 a day. Run 20% off and a good promo day might land around $75,000. If your baseline is $25,000 and you want that same $75,000, you're talking 50% off or something like it. The stronger the baseline, the less discounting it takes to hit any target.

We've seen it in our own history. The years our baseline was strong, Q4 was huge. The years we leaned on promotions to hit targets were the hard ones. When most of your year's revenue is tied up in promotions, you're not actually building demand. That's why I'd call baseline the best predictor of Q4 there is.

Part of how we built the baseline was killing discounting. We cut our discount rate from 33% to 3% and the baseline still grew.

The three things we focus on

Two of them grow the baseline, and the third tells us if it's working.

The first is attention over everything. The job is finding cheaper, more advantageous attention, and then making sure it turns into recall. It's great if an ad makes someone laugh, but if they don't remember the brand, it didn't do much for us.

The second is converting people once they're at a point of sale, whether that's retail, Amazon, or your own site. That part is fundamentals, being empathetic in how you speak to your customer and actually solving their problems. Copy that does that wins tests.

The third is tracking brand lift, which for us means branded search on Google and Amazon. When the baseline is growing, you see it there first.

The money loop

The baseline pays for its own growth. As current demand grows, it kicks off more cash for the business, and that cash funds future brand building, like TV and YouTube. That spend builds more baseline demand, which kicks off more net dollars to reinvest. Every turn of the loop makes the next one cheaper.

It runs the other way too. When the baseline is weak, promos are how you hit the number, discounts eat the margin, and there's never spare cash left to build demand, so the brands that need brand building most have the least money to fund it. Which loop you're in matters more for next year than anything you'll do in November.

What we're seeing is the baseline paying for its own growth. We're spending basically the same dollars as last year and driving 14% more non-promotional revenue on the site. Recall from the ads is better, the ads are converting more efficiently on last click, or it's some of both. Whichever it is, there's more demand built up than a year ago.

Your baseline decides your Q4. The promos just multiply whatever you build between now and then.

If you track your baseline differently, reply and tell me why.