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“Tell me who your audience is. Don’t tell me about your products. Just tell me who your audience is and what your message is as a company.”
You’d be shocked at how many people get stumped and can’t answer that question. That’s why so many will fail, especially right now with what’s going on. Unfortunately, they won’t be here at the end.
Once they start growing, oftentimes companies see the scale come very easy. However, it’s getting the first 5, 20, 100, 2,000 followers to get on the list.
Things start to snowball as it gets larger and one person tells another, and two people tell their friends and it just snowballs from there.
CBD vs. Merchant Processors
One thing we’ve seen that’s really changed over the last six months is how the merchant processors are starting to open up to the idea of accepting payment for CBD-related products, which for many years was a major problem. Or you’d have to find an alternative payment provider who was taking 10% to 18% in some cases to process those payments.
As an industry it’s come a long way. But as far as the challenges, banking still needs to catch up a bit. We still see issues with corporate bank accounts, even now. Some people in the industry are still looking for corporate accounts because they keep getting turned downed by different banks.
And yes, merchant processors have loosened up a little bit, but they’re still very tight. Square had a beta program that was approving people in the industry, but they recently they stopped taking some CBD business.
There are still always going to be challenges, and you will able to find another. You just have to be really quick on your feet. And in any business, you can say that but it’s especially true in the world of CBD.
Yes, CBD is legal in all states, but it’s still very strange to many people. There’re a lot of gray areas and a lot of loopholes. And banking still needs to come up and loosen up a little bit.
Margins for Marketing
You’ve got to have the right margins in order to do a lot of the marketing. During the startup process, some CBD companies don’t have their own brands. Instead, they just create a marketplace of multiple brands. Therefore, some of the pricing they get won’t have the greatest in the margins. Thus, they definitely won’t able to have a large advertising budget.
So, they really have to just grind and put a lot of hard work in. Anyone who is an admin of a Facebook group, or who has a large social media following, knows how much work actually goes into it.
For every new member who joins, you should personally send them a message. That’s not something that you can automate. It’s something that you personally have to do.
The Right Perspective
You should always want to be of service to your members and followers. Don’t think of making a sale. That’s just a setup to fail. Sales are just kind of a byproduct of everything else.
Education is always first, especially in the CBD world. You’re always here to educate when people have questions, and to improve their quality of life.
The Challenges of What You Can and Can’t Say
There are so many challenges of things you can legally say versus the things you can’t. It’s constantly changing, and you have to stay up on it.
There is so much competition in the CBD space and there are so many products out there. It’s pretty hard, without a lot of research or some kind of educational resource, to even know what’s good quality. Most people will go to a CBD website and they’ll just be lost. They won’t know where to start. There’s a lot of misinformation that makes it difficult.
The goal should be to become a knowledgeable authority about CBD. If you say something is a good product and the company really does the right thing, people should be able to really believe and trust that you have their best interests at heart.
The amount of misinformation is a problem in general that a lot of people are facing, in many industries. Consumers continue to get more tech savvy and older generations can more easily decipher what’s legit versus what’s not.
Trying to filter through all the junk just makes it so much harder to be able to rank organically and get your presence out in front of people. Using these alternative channels like Facebook groups or email lists really help people stand out.
It’s something that’s often overlooked when trying to grow a brand. People are so concerned about traffic or the number of visitors they have. They just lose track of the fact that it’s still a customer and it’s still a human interaction. An automated sequence can’t duplicate it.
You can do a lot with automation, and automation has benefits. You can implement AI and really understand the right message to send to the right person. But that human touch just can’t be duplicated.
Facebook created their groups for a sense of community, to bring likeminded people together. They share their interests and it’s about trust. People want to feel like they’re a part of something.
No one wants to be sold anything. They want to be educated, steered, and led in the right direction, but they don’t want to be sold.
The goal is to offer both education and entertainment — “edutainment.” You should try to educate, but also try to entertain through infographics, live feeds through Facebook, etc. Just try to be creative and keep it fun, but also educational.
It’s about providing a great product or service. Like in our business, web development, we don’t look at it as, “Oh, let’s go make another sale of X amount.” It’s about, “Let’s provide the best quality service that we can.”
Money is a byproduct of quality work and caring about the client and staying in touch. Ask yourself, “How can I be of service to my members and my followers?” Sales will come.
Unfortunately, a lot of CBD companies out there don’t have that mindset. But the end, the ones who will be left standing are the ones who care more about individual members.
Low Barrier to Entry
The barrier to entry for a CBD startup is quite low. You can go yourself and white label a product, then have it shipped to your door, and call yourself an authority. It’s a business that you can enter relatively easily, compared to a lot of businesses, and at a low cost.
But then once you get into it, it can be a challenge to really stand out from the rest. It can be tough if you don’t have the marketing budget, especially if you’re not super tech-savvy and you don’t know how to navigate your way through different issues.
The amount of money you need in a marketing budget really just depends on the overall strategy of what you’re trying to accomplish.
If you want brand presence, then you need to be able to have enough marketing spend to be able to get your name out in front of people. That can be done very inexpensively through Google, or specifically Facebook, or influencer marketing. But if you care more about making sales, it’s a very different plan than just spending on branding with no measurement of ROI.
One of the biggest variables for people getting into the CBD space, is whether they’re developing and making their own product with their own brand. This is different from throwing a label on someone else’s brand and trying to sell it off as their own.
Borrowing someone else’s brand is much harder because it’s not going to be unique. You won’t have a story behind it to get someone to buy your product versus another product. And customers can’t really figure out which products are different or unique or going to help them.
At the same time, it’s not just about the story or the brand. You still have a medical component where you need to be able to convince people that it’s actually going to help them.
What’s the End Goal?
A lot of people who get in, maybe it’s their first business, maybe they like it because it’s cool. You can start a store for a couple grand and you’re in business. But to be successful, it’s really a matter of asking yourself, “What’s the game plan? What does my end goal look like?”
For people who start up these websites, if the goal is just to get acquired, there’s nothing wrong with that. At that point, it’s all about growth. They just need the volume of sales.
But it’s different for someone who’s trying to build something sustainable that could last five or ten years or transition into something else. When someone like that is building a community, they are really onto something.
And you don’t have to start off the business knowing, “Okay, I want to get acquired in eight months.” But you should have a goal of what you want to do because there are different ways to start.
And the biggest thing, when we talk with our clients in the initial onboarding phase is, “Okay fine, you want to move forward with ads, great. But what is the end goal? At least right now, you can always shift it, but what do you want now? Is it purely just to get eyeballs? Do you just need influencers to push the product?”
But it can be a very expensive journey, especially when people don’t know their numbers, or they don’t have any clue of where the margins are. Regardless of what it costs to get started, how much can you afford to invest in the business if you have no clear direction? This is where the biggest disconnect usually occurs.
Go back to, “Who’s your audience and what’s your message?” Forget about what your product is. You have to have a story, something that’s going to set you apart.
What’s the Value of an E-Commerce Business?
At the end of the day, when you start evaluating an e-commerce business, what is the actual value?
Possibly, a decent domain will carry a couple of dollars’ worth of value. If you have inventory, potentially that could have value if someone’s going to keep it. But overall, there’s not a lot of value.
So, it’s really your customer database and who’s in your network and on your email list. That’s the only thing that you’re going to be able to sell. It’s not a brick-and-mortar business where you have real estate and you have assets and other elements. Those businesses are valued very differently.
Don’t try to be all things to all people. In CBD, it’s a lot of the same product, and it’s marketed the same way. Instead, you can market your product specifically towards an ailment or towards a specific market.
For example, golf is seeing huge explosion of CBD right now with some of the golf pros. The PGA has done a lot for CBD recently. So, are you marketing towards golfers?
Rather than just creating a CBD for all, realize that you can’t be all things to all people. Just have a specific target market in mind and go after it.
Even when you’re in such a niche vertical, you still need to have a target clientele. You only need a small percentage of whatever industry you’re in, and you can easily sustain a very good business from that.
But by spreading too far too fast, you’re just another retailer at that point. It’s a challenge people often see when trying to enter into the CBD market.
The CBD Industry Pulls Together
It’s an amazing industry with a lot of people who care a lot about other people. You just have to ask for help. Those who are in the industry are always willing to help other people.
A lot of people, when entering this CBD market, might be detoured away from asking for help. Many people, not knowing where to start, think they have to have all the answers first, which puts them at a disadvantage.
Some of the best clients we’ve worked with have come in looking for help. At the end of the day, if you have all your answers, what do you need us for?
Start Small and Wonderful
One of the favorite brands that we’ve come across in the CBD industry is a brand called “Elevation Hemp.” They started with two products — two tinctures — which are the oils that you put under your tongue. And they have one for daytime they call “Awake,” and one for nighttime they call “Calm.”
And the level of details they put into branding their product looks like something Apple created. It’s just very sleek and amazing. It’s a beautiful product. And what’s inside the bottle is even better. It’s a fantastic CBD.
They could have taken the startup money that they had and created three or four different strengths of tinctures. They could have done a topical, they could have done all these different things, but they decided to do two products really well. And they are succeeding because of that.
Keep the Quality Amazing
So do a few small things very well, especially on the e-commerce side. Sure, you have your initial cost to get the business up. You have your advertising costs, and how much it costs to acquire a customer.
But then, people don’t always think about the actual product. Or they get so hung up on, “I’m getting all these negative reviews. How do we hide them?” And sure, there are ways to work around negative reviews.
But customers are very good at understanding a good product versus a bad one. And when they buy a bad product, sure you’ll get a handful of negative reviews, but that’s not the worst part about it. The worst part is that you ruin your relationships.
You’re not going to get someone to come back and buy from you a second time. Even when you have people buying from you two or three times, if you sell them one bad product, it could ruin the whole relationship.
The Lifetime Value of a Customer
People put all this effort into getting the customer and getting the store to look nice, and then someone buys from you and it’s not a great experience. Sure, you made a couple of dollars, but how are you going to optimize that customer lifetime value where you actually make money for the long term?
Fine, you might not make money on the first one order. Best case scenario, you make a little money. But is it reasonable to break even on the first order? Absolutely.
Especially if you’re a third-party retailer and you have minimal margins, and your cost of acquisition is high and in competitive markets. Having a subpar product — it’s just not sustainable.
And often, when you look at the ones with the negative reviews, it’s not so much “How do you get rid of the negative reviews?” Maybe it’s time to start reevaluating the actual products they’re selling online because the customer is the market.
Customers Appreciate Sincerity
Just be honest with customers. They appreciate sincerity a lot more than beating around the bush. Just tell them like it is, basically.
In our industry, when we have a sales call with somebody new, we’re pretty much saying why we don’t think it’s a good fit, why we don’t think it’s a good idea.
Not because we don’t believe in it, but we really want to be the devil’s advocate. We want to make 100% sure when someone is going to invest money into some kind of a new process, that we’re 100% certain that it’s with eyes wide open.
The Truth about Moderating a Facebook Group
Group moderating is challenging and it’s not something everyone can do. As the group grows, you need help from people. It’s better if you never want to control the narrative too much.
If people disagree with each other, let them disagree. Don’t try to control what people can and can’t talk about. There comes a certain point where you have to step in if they become disrespectful, but you can leave other areas open.
For example, you could let other people sell their own products in your group. If they want to talk about a product they love or they represent themselves in the comments, great. Let them go ahead if they’re passionate about it. If you created this platform, then let it be of service to others.
But realize that moderating involves many, many hours per day at no return. Especially when you’re first starting up, it’s not something you’re going to make money with. But it just adds value in the end.
You have to love the group and have passion for it, especially because it’s going to take up a lot of hours of your day. You’re approving every single post. Imagine the time it takes to approve 75 to 100 different posts a day.
There are certain rules that you have to create. There’s a standard that you have to set within the group, and you have to monitor whether people are following those rules.
Realize that you’re probably going to hear negative remarks, and you just can’t let it get under your skin. If you need to, turn off the commenting. Don’t make the mistake of taking it personally because you have to get negative comments to be legit.
Instead, when people say something negative, you could offer to help them. You could show them the steps to building their own groups or starting their own platforms. It’s not an easy task an admin to a group, but it’s definitely rewarding.
Start Your Own Group
First you want to decide, what’s your niche? What do you want people to think about? It could be anything. There are Facebook groups about absolutely everything.
One insider tip that worked for some people to grow their groups, is to create a Facebook page as the same name as your group. Some people ask, “Why would I do that? It doesn’t make any sense.”
Well, the answer is that you can run ads on Facebook pages, but you can’t run ads on groups. Facebook is okay with running an ad about a CBD group, so you might be able to grow your group fairly quickly that way.
There are a lot of other little details or certain tags that you can put on your group. Facebook has their own SEO within Facebook. Ultimately, they just want engagement. So, the more people who are engaged in your group, the more Facebook is going to recommend it to others. That’s key. You want to stay in Facebook’s good graces because they will help you.
What If I’m Not on Facebook?
First, we would ask why? Facebook is king. Instagram works as well, but many people have just seen the most results from Facebook. Nevertheless, everyone has their different strengths and you just need to play on those strengths.
Evolving in the Industry
As you evolve in any industry, it’s like peeling back the layers of an onion. You get deeper into it.
Many people don’t realize that they should be asking for much lower and lower prices below wholesale as time goes on. As your group grows, you can use it as leverage and get much better pricing on items.
Ultimately, people create their own brands, even a white label, just because of the different pricing and the margins. It gives you the ability to have more of a marketing budget.
One goal is to get people to trust your brand enough that when they think of CBD, they’re going to go to your website first just for education. After they build that trust and get that education, you can then focus on selling products.
Word of Warning
It’s important to never answer any medical questions about CBD unless you are a licensed medical professional. You can have medical professionals within your group who, whenever a medical question comes up, you can tag them and let them answer it.
That’s one of the problems with CBD. You have a person who’s maybe a hairdresser by day, but they’re giving medical advice on Facebook about CBD.
This is not to say that laypeople can’t know a lot about CBD, but there’s so much more to it than that. When you get into medical, people are asking about taking other medications and do they contradict with CBD. So, you have to be extremely careful.
Move with the Times
You start at one place and evolve as a business to survive. It’s crucial to move with the times.
You have to be able to foresee, “Hey, what’s happening in the industry? Where is it moving? How can I position or leverage myself or my business in a way that can move with the times and not just be stodgy?”
It’s also really important to have multiple income streams. Think creatively and find other paths that tie into yours. Reach out and ask for help.
This post was adapted from a conversation with Sage Digital and Gino Bongiorno, the founder of CBD 101, who has one of the largest organic social media followings in the CBD industry.
Born and raised in Las Vegas, Nevada, he spent many years at a very high level in the hospitality industry. In 2019, when the farm bill was approved, Gino saw an opportunity to enter the world of CBD. Since Gino’s launch of CBD 101, he just exploded onto the scene and he’s very well versed in some of the challenges you’ll face in the industry.
He started his company on social media, as a Facebook group. He has a good friend who was doing very well with different niches and Facebook groups. And he said, “Gino, you have to start one with CBD.” So, he took his advice and the rest is history. His group exploded to 10,000 members very quickly. It’s a very organic way to start a company, which involves creating the audience first.