Healthy growth for digitally native brands - EcoFinBiz Blog

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Healthy growth for digitally native brands

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How can brands selling exclusively online grow sustainably and without large outside funding?

If you have your own product and are building a brand, you probably ask yourself how you can grow without compromising your core values and niche appeal – because, let’s be frank, all DTC brands are very niche-targeted and growth can feel confined to a small space.

Together with DTC brands, we see the rise in popularity of customer retention as an integral part of strategy. Before ecommerce was focused on acquisition and conversion, one sale and that’s it. Now, more and more brands that want to stay in business longer and do care about profitability (as opposed to hustling), turn to retention and long-term customer relationships to drive sales.

In this article, we look at how retention drives growth.

1. The power of digitally native brands

As a brand that sells directly online without intermediaries, you have the power of autonomy.

Owning all data means you have customer insights, sales records, product performance, revenue trends at your fingertips and are able to make informed decisions fast. No need to rely on middlemen’s discretion and collaboration. Also, no partner can misuse your information for their own benefit.

DTC brands also control all communication and channels. The ability to directly contact your customers at various stages of the journey and influence it is an incredible advantage over Amazon merchants, for example.

Last but not least, your products can get even better with customer feedback. In your direct communication with the target group, you can involve them in new product development and jump forward in terms of engagement, loyalty and community.

These advantages are the key to growth as we will see in a bit.

2. Acquisition vs retention

Why is acquisition so important for DTC brands?

Reseller and dropshipping businesses usually cannot rely on high retention since their products are not differentiated, their customers – driven by price, and there’s no ground for continuous engagement. That’s why they invest heavily in acquisition and first-time conversions, without doing anything post-purchase.

DTC brands, on the other hand, have the necessary setup for long-term relationship building. Retention as a strategy matches the specifics of the business model – to be customer-centric and long-term oriented, driven by values and offering a complete experience, not just an item.

When we say retention is the way to growth for DTC brands, it’s because they have in them and only a little effort brings amazing results. There’s no need to play by the old dropshipperrules when your brand can make waves by itself.

3. Why retention means growth

What are the benefits from increased retention? How do you actually grow through customer retention?

More sales made cheaper and easier. Customers familiar with you brand aremore likely to buy again. Reaching them via email is virtually free, no need for a big marketing budget to score repeat sales.
CLTV determines CAC. Knowing how much you earn from a customer makes marketing spend easy to keep in check so you grow healthily.
Revenue is more predictable. With a steady loyal customer base, you can safely project orders, sales and budget for expansions without significantly risking financial stability.
Own the niche. Retention is connected to loyalty and for many niche DTC brands with a focused appeal this means they are able to grow in sales from repeat buyers without exhausting their niche.
Win more ideal customers. The focus on a pleasant customer experience long-term often results in organic referrals, people telling their friends about you. So investing in one client actually brings more.
Better margins. With lower CACs and higher CLTV, returning customers are much more profitable than one-timers.

4. How to use retention

So can you turn retention into growth for your brand?

Profits open doors

When you start pushing the post-purchase experience, you earn more on each dollar spent on acquisition. The return is greater and you are able to reinvest it in growth activities: more acquisition, expansion into other regions, new products, more staff, etc.

These are things companies in hard acquisition mode cannot afford. They are always in offence and usually lag behind in terms of products, innovations and customer service.

Build a community

Loyal and engaged customers should have a way of open communication with the company – a discussion group is great. You will get first-hand ideas and feedback to improve on and will be able to expand the brand’s thought leadership. A strong brand community would strengthen involvement and prolong the customer lifetime.

Plus, they bring others in and your influence increases. A controlled, safe environment for the brand to present its values and continuously engage brings buyer intent and reorder rates to a whole new level.

Be prepared

With the predictability of sales that comes with loyal customers and much accumulated customer knowledge, it gets easy to prepare for upcoming seasonal changes in demand.

You would know which products to stock up on and when to run your marketing campaigns for maximum effect.

Keep your niche appeal

Retention is wonderful because it means you sell to the same people again and again. This lets niche brands that target a specific group stay in business viably without losing their niche appeal.

If retention is removed, they’d have to expand their appeal to the mass consumer to be able to keep up sales and their differentiation is over.

In conclusion

Retention offers DTC brands an alternative path to growth that turns out to be more financially sustainable. Brand owners should not let the innate advantages of their brands like values, appeal and focus go unused for greater customer loyalty.

Read more:
Healthy growth for digitally native brands

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