How to profitably sell direct as a direct-to-consumer brand
If you are selling online or launching a new DTC Brand, you might be wondering about performance marketing and how to maximize it. Performance marketing is the type of advertising where you pay only when measurable results are achieved. In this kind of marketing, you tend to optimize your ads for CAC (Cost-to-Acquire–a-Customer) or CPL (Cost-Per-Lead).
Most Big Companies think that startup Brands are doing performance marketing really well. However, a new study from CommerceNext and Oracle shows that D2C companies are outspending everyone else in marketing. They are taking their VC funding and pumping it into performance ads on Facebook, Instagram, and Google. Additionally, they’re also spending big on influencers and on TV. This big-budget spending drives trial and customer acquisition, but it makes profits VERY hard. This posed a problem, because ultimately, the reason businesses exist is to make a profit.
So what can companies do to smartly drive performance marketing?
I view the performance marketing formula as three levers that work together to maximize marketing ROI:
- Focus on optimizing Google/FB ads to the lowest CAC. You can do this through continually A/B testing copy, images, and videos to find the best performers.
- Drive increased basket size of the initial purchase through value bundles, prompts to add products, free shipping or x% off over $75 or $100, etc.
- Drive lifetime value (LTV) through repeat and retention. Your plan should include a personalized email/text plan to drive repeat purchases within the first year. A base + cartridge repeat model or subscription models help if the business model allows for it and it solves a consumer pain point.
Now that you know the three big levers, you’ll need to develop a strong content plan that tells your Brand and product’s story. The content will need to visualize the product and its benefit. The quality of your content will make or break your acquisition cost. It’s important to A/B test and optimize, optimize, optimize! Check out my post on how to create content on a small budget here.