Do Your Company a Favor
Grace Gagnon Jun 15 2020
Looking to get away? Maybe start over somewhere else? I have good news. An entire Swedish spa village is on sale for $7 million.
Who's with me?
But, on a more a serious note—some good news in terms of DTC growth. Check out the index to see what I mean.
1. How is DTC growth trending over time?
2. How are churn and new revenue trending over time?
3. Trends to help you adapt
4. Stock your shelves
5. Do your company a favor and track these metrics
6. 9 most important direct-to-consumer metrics
7. 4 retention strategies to improve DTC metrics
8. Here's what else I'm reading
How is DTC growth trending over time?
📈7 day +1.14% | 📈30 day +4.99% | 📉90 day -0.17%
Up and to the right—that's how overall DTC growth continues to trend.
This week's numbers are only slightly different than last week, still representing positive growth in DTC. As the economy reopens and so do wallets, it appears as though we are continuing on the right path.
How are churn and new revenue trending over time?
MRR Gain +6.46%
MRR Loss +11.89%
*MRR gain is new revenue from either acquired customers or upgrades in a given month.
*MRR loss is churn, or lost revenue from cancellations or downgrades.
Some good news for MRR: both MRR gain and loss are trending positive. Cheers.
MRR gain* is at a positive 6.46%. Last week, MRR gain spiked to almost +16% because it was the beginning of the month and subscriptions renewed. A bit of drop was expected this week. The fact that we are still trending positively is good.
MRR loss* is at +11.89% this week, the first time in a while that we're out of the negatives. More customers are signing on and less are churning.
So...to all DTC companies represented in these numbers I say, keep up the good work.
Be sure to check your subscriber newsletter every Monday morning so that you can kickstart the week with some fresh data on DTC growth.
Trends to help you adapt
Salesforce released its “State of Marketing Report,” offering trends from 900 marketers. This report is a quick but mighty read, jam-packed with data and trends to help you optimize your DTC marketing strategies.
Here are the main takeaways:
- Customers expect highly-personalized experiences and contextualized customer journeys.
- While artificial intelligence (AI) is projected to grow 176% over the next two years, marketers need to balance personalization with privacy.
- Dynamic conversations between brands and customers are the gold standard, and 68% of consumers say consistency across channels is important to win their business.
- Data management platforms (DMPs) are gaining traction for data unification purposes in retail, meaning there are now more resources available to provide a unifying view of customers’ needs.
As consumer trends adapt—your business needs to adapt, as well. Reading the report in full will detail how marketers are pushing for seamless shopper experiences, how AI and trust underpin the customer experience, and how marketers are striving for real-time engagement. Click here to download the report.
Stock your shelves
As the economy reopens, Americans are ready to spend the cash they’ve been holding onto since March. But are companies ready?
A study by the National Bureau of Economic Research found that consumers curtailed spending since March while incomes remained untouched. Researchers say consumers most likely stopped spending because of financial concerns or because the businesses they typically support were closed.
With federal assistance and stimulus checks saved up—Americans’ impulsive buying behavior will work in favor of companies that can meet the upcoming demand.
As Inc reports, the uptick in consumer demand has already started for some companies. Take Yardbird, DTC outdoor furniture seller, for example. According to Inc, Yardbird raked in $4.5 million in sales in May—marking a 400% increase over the same month a year ago.
Source: Yardbird Instagram
There’s a catch:
Co-founder Jay Dillon says the company doesn’t have enough supply. And Yardbird is not alone in this—other, currently high-demand industries like bicycles, are struggling to keep up with demand.
So how can you properly prepare your inventory? I found a resource that may help: The Quick Guide to Inventory Management for Ecommerce.
What you'll learn:
- Understanding basic product category demand
- How to forecast future demand based on past sales
- Setting initial minimum viable stock or minimum stock levels
- How to prioritize products with an ABC analysis
- Gearing up for seasonality
- Why you should implement inventory management software
This guide covers each of the above takeaways in depth, as well as how to address common challenges with inventory management.
In addition to taking extra steps to manage inventory, keep customer support at the forefront. If you're noticing a backup in inventory or shipping delays, be transparent with customers. Communicate clearly and often.
Do your company a favor and track these metrics
Buying behavior lately feels like a whirlwind. Just a few weeks ago, consumer spending was so low brands were doing everything they could to stay afloat. Now, we're learning consumer demand is spiking, so high in some industries, supply can't even keep up.
When things are unpredictable, it can feel overwhelming. The best thing you can do for your company is track your growth and performance, so you know what's working and what's not.
Given all the recent change, this dive deep is a change of pace. I'm breaking down the top nine metrics you need to constantly be analyzing.
9 most important direct-to-consumer metrics
Many of these metrics are intersectional with B2B and SaaS because they reveal important data all businesses need to know. Tracking metrics will help you build momentum and unlock growth.
Customer lifetime value is the total dollar amount you’re likely to receive from an individual customer over the life of their account with your product. Lifetime value determines how long a customer will stay with your company and how much revenue may be generated during that time.
Tracking customer LTV is crucial because it dictates how much money you can spend acquiring customers, also known as customer acquisition costs (which I’ll explain in a bit).
Tracking LTV is especially important for DTC companies that follow a subscription model, meaning customers pay them a recurring price to receive products on a scheduled basis. If you notice customers are canceling after a certain period of time—something is wrong. Either you need to adjust the pricing, product offering, features, or all of the above.
Conversion rate calculates how many customers convert to paying users. The conversion rate includes customers who visit your site and make a purchase before leaving. You can also apply conversion rate to trials—when a customer converts to a paid user once the free trial is up.
You spend a certain amount of money on your website to attract potential customers. Tracking your conversion rate will reveal if the marketing dollars spent are resulting in a positive ROI. If you’re noticing a low conversion rate—it’s time to figure out why and how to optimize.
Average Order Value (AOV)
AOV tracks the average dollar amount spent each time a customer places an order.
AOV = Total revenue/number of orders
Focusing attention on increasing AOV can directly impact your margins. One quick hack to improve your AOV—adding a free-shipping threshold that’s slightly above your AOV.
Churn rate calculates the number of customers who leave a product over a certain period of time. Churn rate is extremely important to understand for companies that follow the subscription model, as it reveals the health and momentum of your subscription plan.
Customers who cancel directly impact other metrics like customer acquisition cost (CAC), monthly recurring revenue (MRR), and customer lifetime value (LTV). If your churn rate is high then you need to determine why and how you can retain customers.
Customer Acquisition Cost (CAC)
Customer acquisition cost is how much money it costs to acquire a new customer. CAC is not just an important metric for the growth team. It encompasses the efforts of many teams, like marketing, creative, growth, customer experience, and engineering, working together.
CAC is important to look at relative to customer LTV. You want your LTV:CAC ratio to be about 3:1, meaning customers spend more than it cost to acquire them.
Monthly Recurring Revenue (MRR)
Measures the total amount of predictable revenue coming in on a monthly basis. If you’re offering a DTC subscription and NOT calculating MRR, then chances are you’re miscalculating growth.
MRR is huge in measuring your company’s growth and momentum. It’ll help you understand the health of your business model, set goals, and determine how you’ll reach those goals.
The cost of goods sold (COGS) divided by the gross sale price is your product margin. Product margin doesn’t take into account things like shipping, handling, and discounts. It’s strictly how much you can make relative to what you spent on the product and how much customers purchase the product.
Net Promoter Score (NPS)
Net promoter score (NPS) is a metric used to measure and index customer loyalty. Calculating customers’ net promoter scores is a good way to quantify their strength as brand promoters.
Brand promotion is a growing marketing tactic in the DTC space. Many companies will collaborate with influencers to sway your target audience. They’ll use their social media channels to promote your products, since most of their followers likely trust their recommendations.
Not all brand promoters are hired influencers, sometimes it happens naturally where people will recommend your products to friends. I’ve certainly done it. Calculating net promoter scores and gauging customer satisfaction will reveal what marketing and advertising efforts are happening post-purchase.
Net Revenue Retention
There are various ways to look at retention—but at its core, retention measures the continued use of a product or service.
With the subscription model, retention is especially important. It’s not as relevant for one-time purchases unless you’re tracking the return rate of those customers, i.e., how frequently they purchase from you.
4 retention strategies to improve DTC metrics
Now that you know the DTC metrics you need to track—how do you improve them? Let’s go through four strong retention strategies.
Be proactive, not reactive
If you leave retention as an afterthought, your business will most likely fail. Retention needs to constantly be a proactive effort. Even before a customer commits to your brand, ask how you can retain this person for the long-term.
Reach out with personalized emails regularly, rather than waiting for their payment to fail. Constantly optimize how you can communicate with customers to ensure they are happy.
Map out multiple customer journeys
Put yourself in the mind of a customer. Depending on the end goal of each customer, the journey will look a bit different. It’s important to understand all the different types of journeys customers have so you can continuously work to improve them. Then, as you’re going through this journey, discover where customers tend to churn and why.
Creating buyer personas is a good way to map out the customer journey. Buyer personas are fictionalized representations of your ideal customers. They are typically generalized to describe the “types” of customers that find value in your product, but are based on the market research of your current customers.
Buyer personas will help you better understand the motives behind your customers and the different types of customers associated with your brand.
Get direct customer feedback whenever possible
Feedback is crucial for retention. Gather feedback from existing customers and customers who churn. Even if the churn is beyond repair—you can learn from the departure by asking what went wrong.
Also, be sure to gather feedback from existing customers on a consistent basis so you can be sure to continuously improve their experience.
Create a customer loyalty program
Adopting a loyalty program is a no-brainer retention strategy for DTC companies. Reward your most loyal customers with something—a discount, feature, etc. It’s a simple way to express gratitude and entice them to come back
With DTC currently exploding, we want to keep you in the loop with actionable content. So keep a look out, because we have more DTC-specific content coming your way—covering everything from different DTC pricing strategies to growth, and trends.
This initiative helps ecommerce merchants depending on what they uniquely need. For example, if you’re looking to launch your retail business online, Ecommerce Stimulus will set you up with the right tools. Or, if you’re already online, this initiative may connect with discounts and free trials for tools that will optimize your business.
To get started: visit this site.
Here's what else I'm reading:
Look, but don't touch
That's the new mantra for shopping in person. The future of experiential retail—going to a store and trying things on—won't be the same moving forward. Retail Dive goes deep on when experiential retail will return and what companies can do in the meantime.
Remember hopping on the subway and admiring all the ads around you? It feels like so long ago. Since the quarantine, brands have had to pivot their advertising strategies back into the home. But, with everyone trickling out of isolation again, DTC startups are back to reinvesting in out-of-home ads. However, things are different now. And, Modern Retail explains how this standard advertising strategy needs a new approach.
The top-selling coffee brand on Amazon
BLK & Bold, a Black-owned and nationally-distributed coffee brand, is dominating Amazon with a 1,400% sales surge this past month. Of course, the demand for coffee at home increased thanks to COVID-19, but this success also has something to do with the company's early decision to focus on ecommerce. Read how the founders grew a successful online brand and continue to reinvest in it.
Engaging tomorrow's customers
Augmented reality: How to engage tomorrow's customers... A pretty sweet listen from Tech Edit by Vogue Business. Learn from Carolina Arguelles, head of global product marketing for Snapchat's camera and AR products, on the "three Cs" of camera marketing and how you can use AR.
That's all for this week's edition of the DTC Download. For the weekly hook up, straight to your inbox, visit index.profitwell.com to sign up. And, of course, if you have news or ideas you'd like to share, send me a note at firstname.lastname@example.org
This has been a Recur Studios production—the fastest-growing subscription network out there.
By Grace Gagnon
Welcome to the first edition of DTC Download—your weekly data and news hookup. In this week's edition, we've got the latest data on DTC growth, a deep dive into one company's cutting-edge business strategy, and a few extras along the way (hint: Pasta as a Service).Read More