How to use your customer data to make your brand attractive to DTC investors
For years, investors have been attracted to DTC brands that can tell a strong story. A story that can translate into good products which will inspire a loyal community. A story that connects consumers to their ideals and how they want to see themselves. But increasingly so, investors have started to look for more. Yes, the story and the product are critically important. But a great brand image with a vision and perfect market fit is no longer enough. Especially as competition grows and customer acquisition becomes more challenging and expensive.
Over and over again, we’ve seen brands with great storytelling grow to high heights without becoming profitable (or without becoming as profitable as expected). With a few years of experience to lean on and the frenzied pace of investment slowing down in general, investors are getting pickier.
Today, strong metrics and financial projections might be as – or even more – important than the more emotional aspects of what makes a DTC brand stand out. The thing is, brands in this space that have a good enough handle on their data to create a really solid view of their KPIs and create really accurate forecasting are few and far between. Whether the brand grew quickly without putting growth-minded infrastructure in place first or whether the team is just tapped out running day-to-day operations, the data stack has likely been pieced together as different needs became immediate. And because of this, data is siloed and under-used.
Still, DTC brands do have all of the customer data they need to truly understand the potential for their brand. Which, of course, is exactly what investors want to understand. It all just comes down to tapping into that data and using it effectively.
Report on verified KPIs
If there’s one thing investors care about, it’s cash flow. But second to cash flow, there are a bunch of other really important metrics like lifetime value (LTV), repeat purchase rate (RPR), customer acquisition cost (CAC) that show the health of the brand and the potential for growth in the future. If your brands’ CAC/LTV ratio isn’t right, it will never scale. Undoubtedly important. Or maybe your brand doesn’t cover the cost of customer acquisition with the first sale, but relies on a high repeat purchase rate to bring up customer lifetime value. Vital information.
At the heart of things, these are all just projections. Projections that are really good at forecasting success, but only if the data going into them is telling the truth. (Spoiler alert: it’s likely not.) Unless the data informing the projections has been cleaned and verified by an independent third-party, there’s a really good chance it won’t show potential investors the truth that you already know exists. California Cowboy took this step when raising a recent round and their investors were impressed, to say the least.
Maintain a close relationship with customers
As a brand grows, maintaining a close relationship with customers becomes a challenge. Personal interactions become nearly impossible when your brand has hundreds of thousands of customers. So what does a DTC brand do when the customer relationship is one of their most precious assets and key differentiators? With their customer data and all of the different personalization tools available, it’s still possible to create a really personalized customer experience.
A data warehouse is a good step in getting all of the disparate data sources in the same place. Then cleaning, verifying, and unifying the data around IRL shoppers makes it possible to create really specific and useful cohorts for relationship building. With a full and accurate view of your customers and their interactions with your brand across every channel and platform, it’s possible to have personalization at scale.
Even though Digital Dream Labs had 3 million customer records in their customer database, they knew that many of their customers were engaging with them across formats and platforms. In fact, only half of those 3 million customers were actual shoppers who were in the market for the product. Once their data was unified around real people, they had the ability to create really effective customer cohorts for marketing and relationship management.
Use data to expand your marketing campaigns
Of course, a really big marketing push is one of the primary ways a DTC brand will seek to scale. But making this investment on a smattering of information or insights spit out of an analytics engine is still daunting. Especially when you’re spending investors’ money and there’s intense accountability and high expectations for effectiveness. There’s not really a lot of room to make a big push like this – a push your business is depending on – without some level of confidence in the outcome.
If you’re raising a round for the purpose of a big marketing campaign, it’s important to show investors the data that’s driving your customer acquisition and retention plans. For example, knowing from the data that the product you’re going to feature is really good at winning first-time buyers who come back and become repeat customers.
Not only does this information inspire confidence in making the right decisions, but it also creates effective results. This is the information that Caire Beauty relied on when evaluating their go-to-market strategy and planning their next big marketing push.
While none of these tactics will replace a solid product with strong financial projections, they can help your brand put its best foot forward when seeking that next round of capital. If your brand is preparing to raise your next round, reach out to see how we can help you show your best self.
