At a recent DTC event, leaders from some of the industry’s biggest direct-to-consumer brands discussed their approach to the rapidly growing DTC space, including the DTC metrics they’re leveraging to measure, manage, and improve performance. Some of these are table stakes for competing in today’s CPG marketplace and some are more advanced – but all of these are critical toward establishing an analytical foundation. Once these DTC metrics are established, you can start to focus on additional metrics targeted toward your business and industry.
New Customers vs. Returning Customers
Definition: Measure volume, revenue, and growth for first time customer and returning customer orders.
How You Can Use This Metric: Ensure that your marketing strategy is not focusing on one set of customers at the expense of the other. Understand what’s causing potential variances or fluctuations in the numbers – seasonality, cost of acquisition, etc. – but try to keep the growth rate consistent between these two. You can also track these against previous month and year to make sure you’re continuing at the same trajectory.
Number of Orders and Average Order Value (AOV)
Definition: Number of orders for each customer as well as the average dollar amount for each order submitted.
How You Can Use This Metric: As DTC metrics, order volume and AOV give you insight into the customer experience and allows you to target your marketing campaign more effectively. Are we optimizing our pre-purchase upsells, post-purchase upsells, bundles, etc. to maximize the AOV? Measure AOV for new customers, repeated customers and throughout a customer’s lifetime. Are customers becoming more engaged or less engaged with our brand over time?
Customer Lifetime Value (LTV)
Definition: A prediction of the total revenue that a customer will generate over the lifetime of their interaction with your brand.
How You Can Use This Metric: Measure by cohort of when customers were acquired and track the growth of their LTV over time. This view will show the LTV of customers acquired this year, one year ago, two years ago, etc. If LTV isn’t increasing over time, determine what is causing issues and how to make targeted adjustments to your marketing campaign.
Customer Acquisition Cost per Channel (CAC)
Definition: How much marketing investment is required to gain a customer through each marketing channel – Google Ads, Facebook, YouTube, Display Network, etc.
How You Can Use This Metric: Striving for the right balance of CAC is crucial especially when expanding into new channels. The goal should be to achieve the right balance of spend across channels which resonate most with your target consumers. This will also provide a way to evaluate how successful new marketing investments are.
Sessions + Conversion Rate
Definition: Sessions are the number of users landing on our store (website, app, etc.), conversion rate is the percentage of sessions that turn into paying customers.
How You Can Use This Metric: Track sessions based on where are the users are coming from (emails, search, Google ads, YouTube ads, etc.). Which channels provide the highest number of interactions of potential customers? Which channels provide the highest number of paying customers? Combine these metrics with marketing investment numbers to determine how to optimize spend to attract the greatest number of paying customers with the lowest amount of digital marketing spend?
At Clarkston, we understand that managing, assessing, and acting on data must now be a core competency to remain relevant and grow market share. Clarkston’s analytics team can support the development and implementation of a data analytics strategy and supply the tools your business needs to create and sustain digital transformation.