When DTC brands zig, Daniel Toft zags. He’s built companies from both inside and outside of them. Now, he helps them grow in a more scalable way through advising. In this conversation, he shares lessons he’s learned from all of those experiences.
- Many ways to do many things
- Find the real retention signal
- Growing AOVs for subscriptions
- It’s not about the numbers
- Different problems at different moments
- Lean into experimentation
- Enable insights from data
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Many ways to do many things
Everyone has their value set for why they make decisions and how they do.
“There's a thousand ways to do the littlest things. And everybody has their reason. They have subjective information to prove it. They have objective information to prove it. And at a certain degree, I, as a young parent, new parent, I want to not have to always think about it because you can get into the decision paralysis to a degree, and I want there to be the right things that show up.”
Find the real retention signal
Many subscribers get through month one, but who makes it through month two?
“The thing that I would look at is not month. I would look at it, what's your month one retention, but what's your month two retention? because in my experience, month one, retention, meaning they've made their second, after the first order, they've made their second. And if your month one is when you usually expect the biggest drop off. And what that is usually dictated by is who's in that customer, who, what kinds of people are you bringing in? Or two, how good is your actual product at subs? As a subscription product. And let's put those things on the table. And then month two indicates, is it sticky, in my opinion? because you've filtered through all the bullshit where it's, get all the marketing outta the way, all the promotional strategy stuff. And what we to see is by month two, you want at least 90% of people sticking around at least because that means that whatever size cohort you've brought in is probably gonna retain at about a 90 plus percent each cohort going forward.”
Growing AOVs for subscriptions
Find complementary products that may pair well with your existing subscription.
“It's a unique, it would have to be a unique sort of product set to increase a base. Usually, there's different kinds of products we worked with a company that had a trial. And their first order is $5, but then order two is $30. And then it's then every order after that's $30 we work with other clients wine for example. Wine's interesting because it's you might have a wine subscription, but if someone says, do you want to try this? Try this new wine, it's add that to my cart. I want to try that new one. And that's one where it's the product makes sense with how the consumer consumes it. If I have a skincare routine I'm not all of a sudden gonna buy an extra bottle of whatever formula I'm using. But if I'm drinking wine and I see a new wine, I might buy a new bottle of wine on top of my subscription because I want to try it.”
It’s not about the numbers
DTC growth is about customers and how they consume the product.
“It's not about numbers. I know that people always talk about numbers as growth in data people. It's all we talk about is what's the metric? What's the data point? What's the goal that we're trying to hit? But if you strip all that marketing hoop plot of it, it's you get down to customers. How do people consume this thing? And does that make sense for the way that people do things? Because if it makes sense for the way that people consume and the way that they would look at, and the way that they would behave with it, then the numbers are more likely to back out in terms of how the product and the marketing makes sense with how a real human would.”
Different problems at different moments
Every business is unique and has its own critical area to focus on.
“It is different at different stages, depending on what you're trying to prove out. If you're a subscription company and you have a hundred percent churn going into month two, you got a little bit of a problem. And it's that's a big problem that you need to solve. But let's say all your metrics make sense. You're cool, for this business to let's say the current business, you got speed to payback of month six. And your cash flow is that's anything longer than that, we would not be able to make it. And current CAC is fine. It has some room for improvement. And you were to say great, we're we got, I know I've got a zoo over here. You've got for this business we need to get to month three and the only way to solve that is two things. One, we either need to lower CAC or two, we need to increase the rate at which people use this product. And it's this a product that if you re-merchandise it or repackaged it, you could get to a quicker cycle of someone re using it?or can you change your promotional strategy, your pricing, or can you improve your cac? And if you were a founder going to talk to someone, it's more about identifying the levers that you have to improve what is in front of you. Because what's in front of you is what's in front of you. You, you don't you can't change it. And so it's a matter of putting all your cards on the table and being. What? This product, people aren't going we could, we can't repackage this. People are only gonna buy this once a month and they're not gonna buy it twice a month. And then what are we gonna change? Can we change our pricing? It's but there's some volatility and conversion rate with that. Maybe we increase our promotional offer to improve our CAC. But. That might also increase your breakage on month one retention. And the question is , where are you gonna place your bets and what do you have the most confidence in to improve those metrics?”
Lean into experimentation
Don’t be too precious with your customers.
“I understand why people would feel the way that you communicated where it's we don't wanna do it cause we don't wanna mess things up. But I would say that people feel the same way about any time they put a message out into the world where it's we don't wanna put this message out into the world because we don't want our brand to be associated with that, they like want to be controlled. And there's many people out in the world, and if you have a decent number of subscribers, you choose and then you use that group to signify what the larger group means. And sure, even if you have a hundred subscribers, taking five people, and if you think they're representative of the base, it's let's say five of those people were pissed off that you happened to care about them. It's that's not, if those five people walked away, you still got more people to go talk to, to figure out what their, what is the larger problem. What I would say is It's all upside. If you're growing a business, it's all upside, it's all potential. It's all things that you need to figure out. And it's, it don't treat everyone precious cuz if you can figure out the problems of a subset of people and it's it's all, it all compounds on one another if you can figure it out. And it's go for it. Don't wait.”
Enable insights from data
Without a complete data story, it’s difficult to take the right next data-guided step.
“We don't wanna fracture ourselves. We need to, instead, we need to focus on integrations and making the data available. what I've realized is subscription analytics tools, they don't have a, they don't reflect a lot of the concepts that happen in a subscription lifecycle, whether it's a pause or for us, some of our nuance, some of our own proprietary events that happen. And what's ended up happening is we've had to build out and get deeper into the analytics side, but I've been thinking more and more around. what is the best solution without a fragmenting, a brand's data that they're having to look in a bunch of different places. And the question is, what have you seen brands do that has seemed the best solution to be able to extract insights, what you're talking about of let's find the people who are repeatedly po skipping or cancel or repeatedly resuming.”