GE 131: The Structure Babak Azad Used To Help Beachbody Grow To 10M Customers & $1B+ In Revenues [podcast]

Babak Azad Beachbody

Hi everyone, today’s interview is with Babak Azad, Former SVP of Customer Acquisition at Beachbody, who joined Beachbody in 2007 when they were a $100M company and since then managed over $500M in media and acquired more than 10 million customers.

In today’s interview we talk about the importance of smart analysis for any business, the framework he used to grow Beachbody, and how to become a better marketer without having to get an MBA.

The Early Years

Babak Azad had a fairly traditional background, so before he joined Beachbody he hadn’t done anything in direct marketing or direct response. He was a math major at MIT, did investment banking, and then went to Stanford Business School. He soon discovered that banking was not for him and started a free fitness magazine in LA targeted at gyms and yoga studios. He ran it for a year and it wasn’t successful, but it was the best $25,000 he ever lost!

For a few years in his late 20s/early 30s he floundered and worked at the legal and public version of Napster for a couple years, until a headhunter in LA called him with an opportunity which turned out to be Beachbody. He came in on the finance route where there was a CFO and Babak—and that was the finance department.

The Best $25,000 He Ever Lost

Babak had a rude awakening about running his magazine, and that was that he’d been very naïve about the concept “if you build it they will come.” One of his friends put it like this: “Starting a business is like reviving the dead.”

When he graduated business school, one of his professors, Irv Grousbeck (co-founder of Continental Cablevision and part owner of the Boston Celtics), made a great point to him: being a math major, investment banking, analyst work—there’s a lot of analysis in those roles, but not a lot of doing. But if you want to be entrepreneur, you have to go out and do.

2002 was not the best year to start a business, especially in print advertising, and even though he and his team were all working for free, it went under after a year. Luckily $25K in the magazine world is actually quite low, but even so, everything was on his credit cards and he never recouped the loss. He did, however, learn a lot about sales, managing people, and ownership and it was a really humbling experience for him in which he saw that when it comes to running a business, you have to work really hard.

Growing Beachbody from a $100M Company to a $1B Company with Smart Analysis

Beachbody was a $100M company when he joined, which is a pretty good-sized business, and there were about 100 employees, so they had a decent infrastructure, but they weren’t doing a lot of analysis, especially quantitative.  They had one guy overseeing IT, finance, and operations, but because they didn’t have a dedicated group of folks digging in, that’s where Babak really found a place for himself.

Quite frankly, he didn’t really know what to do half the time, so how he got started was by being self-directed and just digging in. When companies start to scale, at about $10-15 million, he feels that you really need to have someone dedicated to not just reporting but deep analysis.

For some companies, that might be as simple as “Do you know your base KPIs?” or “What were your sales by day or by product?” or “Do you know what your media spend is?” And, more importantly, are you looking at the analysis? He’s met a lot of people who don’t even have a core dashboard to manage the business, so when you talk about fundamentals of sales—media spend, conversion rates—these people don’t have answers.

Once you have that, you can start focusing on the next layer down of your metrics, such as: by campaign, by day of week, by time of day, operational expenses, etc. He knew what their fulfillment cost was overall, so he could look at it by various campaigns because different products had different cost structures.

Some Business Intelligence Tools He Recommends:

They did a lot of stuff in Excel, and then added the Oracle Business Intelligence Tool which was a larger scale product. You can put some high-level stuff on dashboards, but there’s a lot to be said about putting data into Excel and being able to spread it. A lot happens in the details. Tableau and other tools can be helpful, but at the end of the day someone’s got to be slicing and dicing the data.

People try to automate too quickly (or sometimes wait too long), but when you’ve figured out how to do something manually—say an analysis or an information flow—and you’ve learned the process and done it a few times, that’s when you iron out the kinks. Because once you’ve programmed in billback or a similar system, it’s a lot harder to change. So you really need to find that balance point between manual and automation.

The Path to Acquiring More Than 10M Customers for Beachbody

His team of about 50 people, plus managing agencies and call centers, all helped to grow the business. And the reason Beachbody has grown the way it did, especially on the DR (debt) side, is that it is a phenomenal acquisition vehicle—the creatives are excellent, the production value is high, and they have great messaging that really hits people.

They were also really good on the operations side, not just on the customer acquisition side. In terms of analytics, they knew their numbers well, built up a brand leadership organization whose goal was to increase the ROI, and kept an eye on the targeted customer acquisition costs. So they weren’t just relying on the front end, but rather ensuring that all the revenues and upsells were maximized and the returns and expenses were decreased.

Margin models and customer lifetime value models are the core of the business from the DR side and helped to drive action. It’s important to be really strong on both the front and back end–and he sees many folks who are really great on front end but not on the back end, which is where you can really add maximum value.

Back end means different things to different folks: it could be what happens on the website or phone call, or what happens on day one after an order has been placed or months later. It’s “sexier” to work on the front end, but if you don’t have sales or an efficient business how are you going to maximize business?

The Framework He Used To Manage $500M+ in Media

He was focused mostly on the front end, i.e. revenues, so it was really about breaking it down, step by step, through the funnel. A lot of people think this process is magical or mystical, but Babak emphasizes that it’s just about breaking down the experience. Analytics and reporting should be driving action, not just nice spreadsheets to have sitting on your desk.

The six categories he breaks it down into are:

  1. traffic & media
  2. conversion
  3. offers
  4. non-converting leads
  5. post-transaction
  6. retention

Read his full post about these six categories on Digital Marketer here.

How to Get Better at Marketing Without Having to Get an MBA

Many people shy away from analytics because they think they don’t understand it or they just don’t want to deal with it. But most of the metrics Babak was looking at was not considered high-level statistics and the math was not that complicated. It’s just a matter of getting comfortable and familiar with the metrics. Basically, you just have to look at sample reports, break down your business, understand what happens at each stage, and decide what info you really need to understand.

To get better himself, Babak started reading Seth Godin, the Digital Marketer blog, and Neil Patel. He also joined some mastermind groups, Facebook groups, and started listening to podcasts (like this one!). It’s as easy as just Googling ‘learn digital marketing’ and there’s a lot of free information and opportunities out there to learn about digital marketing.

See ‘Resources’ below for some of his favorite groups and blogs.

One Big Struggle They Faced While Growing Beachbody

When your business starts growing, you need people—whether that’s internal, external, agencies, vendors, etc. And there are two important points Babak reminds us of.

The first thing is that you have to average up, not average down as you scale. A lot of people don’t do that because they think that as they grow it’s harder to find better people, but he says you have to make sure your standards start going up.

And the other point is: how you deal with B and C players (or vendors) not only affects the work that they’re doing, but if affects the A players in the organization. When you allow B and C players to remain, what you’re essentially saying is this is what you tolerate in your business, which demotivates the A players, who are not going to last very long when they see that you are keeping people who aren’t pulling their weight.

Advice To His 25-Year-Old Self

If he could give his younger self some advice he’s learned along the way, it would be:

One Must-Read Book

Resources from this interview:

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About Eric Siu

Eric Siu (@ericosiu) is the CEO at Single Grain, a digital marketing agency that focuses on paid advertising and content marketing. He contributes regularly to Entrepreneur Magazine, Fast Company, Forbes and more.

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