Peter Drucker’s famous mantra that “what gets measured, gets managed” is even more true today than it was when he wrote it more than six decades ago. With so much data at our fingertips all the time, it’s as important to know what not to track as it is to know which metrics are critical.
Below, a handful of our successful D2C retail clients share what metrics they pay the most attention to when they’re evaluating new direct-to-consumer sales channels.
Prioritize first-order value …
“I try to stay away from lifetime value and talking about it,” says Public Rec founder and CEO Zach Goldstein. “I look more at average order value, and if we’re profitable on the first purchase.” He says that, in the future, his team may take into account things like repeat purchases and subscriptions, but for now, the short-term focus (and immediate metrics) has helped his business stay lean and evaluate performance partnerships in near-real time.
“I get nervous around the idea of looking at lifetime value before you look at the average order value on the first purchase,” he says. It’s more sustainable for his young business, he says, because he isn’t forced to make predictions far into the future. That has helped him keep his operations nimble while avoiding an institutional capital round.
Erin Gregory, director of marketing for eBags, agrees. “We typically look for marketing profitability on the initial order.”
… but have a plan to gauge lifetime value (LTV) too.
Gregory says that, despite first-order value being a primary KPI, her team tries to shift consideration to LTV for longer-term planning.
“There are some difficulties in measuring, defining, and quantifying that,” she admits, although her team pays attention to it when allocating budgets between channels.
“When we think a particular channel is bringing customers who show signs of higher LTV, we’re going to allocate a little more, versus a lower-funnel channel that doesn’t provide the same lifetime ROI,” she says. “It’s just a matter of looking at a longer-term window or a short-term window.”
Don’t underestimate the importance of seasonality
vuori customer acquisition manager Bret Fredrickson says that his cost per acquisition (CPA) ebbs and flows throughout the year, because luggage sales have a seasonality to them. “Understanding that has helped us weather some storms,” he says. “It’s also helped us understand that the spend will be more efficient at some times of the year than others.”
If your D2C business has a strong seasonal component, try to establish baseline CPAs for various times of year – and across various channels – to help determine if you should reallocate a portion of your budget to different parts of your calendar or emphasize different channels during different months.
Looking for more valuable insights for tackling the challenges of scaling a D2C business? Watch the complete webinar with the leaders below. It’s free and available on-demand here.