As a DTC brand, there are go-to metrics: customer acquisition cost, conversion rate, average order volume… you know the list. But we wanted to dig deeper into those metrics and what they actually mean for your business today and in the future.
In this 60-minute webinar, four executives from various industries share how they view DTC metrics and what brands can do to take themselves to the next level. You’ll hear from:
- Robin Li, Principal at GGV Capital
- Michael Rubenstein, Co-Founder and President at OpenStore
- Matthew Cohn, Senior Merchant Success Manager at Shopify
- Bob Strachan, Co-Founder at Metacake
Here are some of the key takeaways.
Metric scorecards are similar at a top-level overview.
Bob Strachan: The exec dashboard, number of orders, average order value, item for order conversion rate. Sometimes where they’re looking next, some of the marketing performance, return on ad spend from the different channels. Typically, at a very top, high-level glance, it’s probably a lot of the usual suspects would be the first ones that we would be going to.
Matt Cohn: I think it’s no surprise that the rising acquisition costs and retention are top of mind metrics-wise, but I think there’s more granularity and intentionality behind certain moments of a customer’s journey. So as opposed to just looking at customer lifetime value, what I’ve found recently is a lot of merchants are looking at the milestones moments in terms of firsts — not how many purchases they can extract out of a given customer but the specific milestone before. Metrics tend to be the same in terms of the overarching goals between merchants, but the success factors or criteria or definition of success are vastly different. And that depends on the size of the business, industry, and a whole other host of factors.
Michael Rubenstein: We’re trying to determine, ultimately, do the customers love the business and are the unit economics positive? And do we think there is meaningful upside here — are there things that we can bring to the table, things that could unlock the next level of growth for business? We want to understand our customers. Do they like the products? Are they coming back and buying more? Are the basic unit economics healthy? Do we think it has a bright future?
Diversifying your channels will impact your metrics and give you more data to improve your business.
Matt Cohn: Being where your customers are. Stay on top of the trends and be attuned to where customers are, and how you can take your amazing brands’ product catalog and translate that across the board.
Michael Rubenstein: …It’s fascinating for me to see how relevant [permission-based email marketing] still is as a channel today. Obviously, other messaging mediums like SMS and other permutations are the same idea of one-to-one very messaged-oriented marketing. But especially today with all the privacy and targeting challenges online, I think that those mediums continue to be as powerful as ever for merging. On the advertising side, we don’t have a standard preference. We just happen to see that most people are buying on Facebook, Instagram, and Google, but the amount of spend concentration is pretty notable. I rarely see people spending on the independent, DTC merchant side.
Bob Strachan: I think the cost of acquisition is going up. It’s getting even harder to target customers on Facebook now. We’ve been having a lot of conversations around some of those owned channels and putting more effort and budget into email and SMS at a very basic level. And focusing on, how do we build first-party data? How do we maximize the data we have and the customers we have? When we get customers to engage at any level, how do we maximize capturing as much of that data as possible? The emphasis for us over the past two years has been email and SMS. How do we drive a conversion rate? How do we drive the growth of those channels for the merchants that we’re working with?
Investments in technology can be a differentiator for your brand.
Robin Li: [Technologies in] inventory management and inventory optimizing: What they are doing is syncing your inventory in real time to make sure that you’re not selling products that are about to run out. You’re able to foresee… not only do you have things that are going to be out of stock, but what are the tradeoffs you’re making when you have overstock. Other tools I found really helpful sync advertisements with your inventory. Being able to say, “I’m running my ads and pushing my ads on products that are actually in stock.” Because the worst thing that can happen is a consumer looking and loving your ads, then finding out it’s out of stock. The third thing is how to incorporate fun ways to engage a customer while they’re waiting for a product. Community is really important around the brand. It’s not just about the tools. Anyone can have tools, but it’s the soft things around it that enable these tools to be successful.
Matt Cohn: [AR technologies] are exploding. They were this thing in the distant future, but they’re here now and our merchants are already doing amazing, incredible things with them… The notion of the bundle of the physical good with a digital good is something that’s definitely a hot trend right now. Because it’s still an uncapped space that there’s so much hype around, a lot of merchants are curious about taking and running with it in terms of implementation and marrying it into their brand image.
Bob Strachan: What will differentiate DTC companies at a similar stage is investment in technology. If they can streamline their supply chain or if they have something on the front end of their store. I do think that is a factor. We definitely see a lot of interest from merchants in [technologies and AR]. It seems there’s a fairly high bar in terms of cost for smaller merchants to implement a lot of these technologies… I can only imagine the costs are going to come down over time and become more accessible. I think those can become important investments and a way for us to collect more first-party data. If we want to engage our customers more, build out a better brand experience, learn about our customers — some of the tools are going to become increasingly critical in the future.
Michael Rubenstein: How prescriptive do you want to be and how creative do you want to be? Whatever tech stack people use is fine with us when they come to OpenStore. Having said that, we do see commonalities on a category-by-category basis. Our goal is to have a standardized technology platform but to also differentiate on a category-by-category or merchant-by-merchant basis.
Optimizing growth in the long-run can mean forgoing metrics for the short-run.
Robin Li: The biggest metrics that we look for and want brands to optimize for is the ability to attract customers without dumping a lot of marketing dollars. It’s around, “Do you actually have a brand that people want without spending to make people buy your brand?” Because the reason to raise money is really about powering growth behind it, right? As we talked about earlier, CAC is getting more expensive. In the beginning, being able to make money first-purchase is extremely important. But the second piece is, is this a sustainable brand that can stand on its own legs? And the third piece is that we look for brands that aren’t only tied to having traffic directed to their own website and being reliant on a single platform. Be on all these other plugins to meet customers where they are. What matters is reviews and how much people love your brand. In the early stages, it’s all about that. In the later stages, it’s all about numbers… If you are losing money on first order, it is very hard to pull yourself out of that over time.
Bob Strachan: It’s very easy to get caught up on conversion rate and spend a lot of time analyzing and digging into it. I believe it’s very complex: You can pull two levers and nothing happens. You pull three more, then maybe it changes. We often find that many merchants focus a lot of time and energy on conversion rate and don’t understand lifetime value. If you understand lifetime value, then you can understand what you want to spend to acquire a customer for their first milestone. You can build out those milestones and figure out what you want to pay for them. Understand your funnel and your costs you have there.
Matt Cohn: You need to protect the customer experience because every merchant has a story. It’s “how do you amplify that voice?” When you look at the essence of what a DTC brand is, it’s differentiated from the marketplace. You have a sandbox in which to communicate and convey that story with your customers. It’s obviously a very tough time from a supply chain perspective and not letting customers in on the latest updates as it pertains to when they can get their orders, can be very damaging to the business. I think, conversion rate: I don’t want to say that merchants will go as far as being willing to take a hit on it, but I think it arguably has been a little bit de-prioritized and looking at the longer game. As retention becomes more and more prominent, there are more under-focused or under-examined metrics, like loyalty points or loyalty member conversion, that may be taking priority right now.
Clearly, there are many metrics and tools that need to be considered when building a brand. A key one (to us) is decreasing your refund rate so you can retain revenue. And we have the tool to do just that.
If you want to talk returns metrics with us, book a demo with us today.