#1: The Milk Problem

Hi everyone,

Welcome to the inaugural edition of my weekly newsletter! I’m Alex, Founder of RetentionX , where we specialize in transforming raw data into actionable insights that help your brand thrive in a competitive market.

Each week, we’ll dive into key strategies, industry insights, and practical tips to help you grow your brand. Let’s get started!

Featured: The Milk Problem

Most DTC eCommerce brands are missing the "milk" and that is why they cannot scale! ??

Ever wonder why milk is always at the back of Walmart or Target?

This isn't by accident, but a clever marketing strategy I call "the milk problem."

Picture this: You enter a store to grab a gallon of milk, but on your way to the checkout, a string of enticing merchandise catches your eye. By the time you reach the register, your two items have suddenly morphed into a full cart. Familiar?

Walmart and Target have perfected this art. They lure you in with high-demand items like milk, but their wide selection often convinces you to pick up a few extras. The result? Bigger profits on your visit.

However, where does that leave Direct-to-Consumer brands who don't have "milk" to draw you in?

They're left in a never-ending cycle of investing time and money trying to bring customers back to their store. Let's say you sell designer bags—Facebook can display your designer bags to potential buyers. But acquiring profitable repeat customers when you have to pay to convince them to return can be a mammoth task.

DTC brands often inflate their prices to cover heavy marketing expenses. The more they hike up prices, the more they end up spending on marketing efforts to justify those prices... It's a perpetual cycle.

Walmart and Target sell everything. They use high-demand items, selling them at or below breakeven as part of their marketing strategy, then upsell with high-margin items. This strategy has allowed these retail giants to outperform many grocery stores with their supercenters. They lure you in with essentials and enchant you with an array of merchandise. And the result? You walk out with more than just cheaper milk.

So, what is your "milk"? And if you lack a "milk" to draw in customers, how do you plan to break the cycle and thrive in the competitive DTC terrain?

Let's chat!

Social Media & Influencer Strategies

This Influencer Tactic for DTC Brands is Going Viral:

Those who identify with your brand and products are your best influencers.

DO THIS:

• Use RetentionX to find your top 100 high LTV customers that are still active.
• Search their Instagram to see if they have an open profile.
• Send them additional free goodies or samples of upcoming products and set up a collaboration.

This will result in authentic UGC content and a real collaboration. This content and the messages shared by these people will be the perfect advertisements for your UGC campaigns.

How Much to Pay the 6 Different Types of Influencers:

1. Product Seeding ?? Cost: Only the product & your time
2. Customer Activation ?? Cost: Discounts of 10% - 20% on your products
3. Affiliate Partnerships ?? Cost: 10-15% commission on all sales directly traced back to them
4. UGC Content Creation ?? Cost: $100 - $250/video, ad rights included forever
5. Influencer Dark Posting ?? Cost: Roughly $100 per 10,000 followers for monthly ad content, rights, and whitelisting
6. 360-Degree Partnerships ?? Cost: About $150 per 10,000 followers for organic posts, ad rights, and whitelisting monthly

Time to set your influencer budget and kickstart that hype machine!

P.S.: Dark posts are social media posts that are not publicly displayed on an influencer's main feed or timeline but are used for targeted advertising to specific audience segments without appearing on the influencer's profile.

Subscription Strategies

We ran the numbers: Brands that offer a subscription have a 45% higher customer retention rate, and subscribers spend 30% more annually than individual purchasers:

Key takeaways:

→ Subscription models are effective in improving customer retention.

→ Flexible subscription options are indispensable to meet your customers' needs and to reduce churn.

→ Subscription models generate predictable, recurring revenue, contributing to the financial stability and growth of your brand.

Don't Need a Multitude of Hero Products to Succeed in Subscriptions:

The strategic use of other SKUs for bundling, upselling, and gifting increases long-term value.

DO THIS:

• SKU Diversification: Identify secondary products that complement your hero SKU and can be incorporated into subscription plans to enhance value.
• Dynamic Bundling: Offer flexible subscription options that allow customers to choose additional products as part of their recurring deliveries.
• Upsell Opportunities: Use customer purchase history data from RetentionX to identify upsell opportunities at different stages of the customer lifecycle.
• Continuous Engagement: Keep subscribers engaged by varying the products included in their subscription, using feedback to refine offerings.

?? To all subscription brands out there: What strategies have you employed to enrich your subscription model beyond the hero product?

CPG Special

Achieving Profitability in DTC CPG Requires Repeat Orders:

With all the brands we've worked with, we've seen that it's nearly impossible to be profitable at scale with low AOV products.

DO THIS:

• Focus on Product Quality: Ensure your product stands out in terms of quality and uniqueness to justify a higher AOV and encourage repeat purchases.
• Customer Retention Strategy: Develop a strong post-purchase engagement plan using RetentionX to encourage second and third orders, which are crucial for profitability.
• Data-Driven Insights: Analyze customer feedback and repeat purchase data to continuously improve the product and customer experience.
• Cost Management: Be vigilant about controlling costs to maintain a profitable AOV.

?? What challenges have you faced in trying to become profitable on first orders in the DTC space, and how have you addressed them

That’s it for this edition!

Any questions or topics you'd like to see me cover in the future? Just shoot me a DM or an email!

Cheers,

Alex

P.S.: Don't forget to check this out ??

Maximize your Profits per Customer with RetentionX!

Ready to take your DTC brand to the next level? Book a demo with us today and discover how RetentionX can transform your data into actionable insights that significantly enhance customer retention, optimize acquisition, and increase the profit for per customer. Visit the Shopify App Store to download the RetentionX app.