If you’ve ever wanted to build or sell a brand, read this. It’s not as simple as “make sales go up”.
This content was originally published in the No Best Practices newsletter on 04.30.2023.
“How many emails should I send a week?”
“How deep should I go with my BFCM offer?”
“Should we start selling to wholesale accounts?”
I see these questions frequently, and they’re often the subject of debate on DTC Twitter. Like most business questions, there is no definitive “right answer”. But there is a right answer for your specific situation. To find it, you need to understand what’s going on beneath the surface.
If you want your brand to grow, you need to acquire new customers. When your brand is small, you can do this by paying to place yourself in front of in-market demand. As you get bigger, you’ll probably have to start creating demand–doing higher funnel marketing. You have to grow both your Total Addressable Market and your Current Addressable Market.
But there are other ways to “make sales go up”–you can make a tactical move that unlocks pent up demand. This can result in a temporary sales surge, or it can help you bust through a plateau…just to smack into another plateau.
These moves are single use only. And that’s why you need to be very, very thoughtful about how you use them.
Would You Rather?
Imagine that you were offered two different businesses to purchase. Each business generated the same amount of cash each year, and the “bottom line” was growing at the same rate for each business.
Business A:
- Only sold through its eCommerce channel.
- Runs two promotions per year that last exactly five days.
- Sends out four emails per week to its email file.
Business B:
- Sold via eCommerce, wholesale and 3rd party marketplaces.
- Runs one promotion per month that lasts between 3-5 days.
- Sends out at least one email per day, sometimes two or three.
Which business would you rather buy? Which business would you pay a higher price to purchase?
Probably business A–you’re paying for the privileges of some fairly easy unlocks to drive profitable growth:
- Expand distribution to wholesale (and maybe physical retail)
- Build out a promotional strategy (and maybe an outlet/off price strategy)
- Send out more emails, and pull whatever other ~performance marketing~ levers there are to pull
Promotions, channel optimization and distribution strategy typically unlock peripheral demand. The more existing demand there is for your product and your brand, the greater the value of the unlock. And if total demand is weak or product-market fit is bad, none of these tactics will do much.
Thinking Like An Acquirer
If you’re trying to sell your brand, “the sales went up” is only part of the story. You need to convince potential buyers that there are repeatable systems in place to keep sales going up. Ideally, there should be some obvious ways that an acquirer can bust through some growth plateaus of their own.
The Acquisitions Anonymous podcast talks about this a lot, and they even talk about DTC brands and online businesses from time to time. (h/t to Ben for sharing this pod in his newsletter)
Of course, there are very few brands that make it into an acquirer’s hands before pulling on some of these incredibly tempting growth levers. Supreme is one–the original owners received $500 million for a 50% stake, then cashed out further when the brand was wholly acquired by VF Corporation for $2.1 billion.
Supreme is one of a handful of what I would consider “unicorns” in the consumer brand space. Of course, the founders operated Supreme for 23 years before they cashed out. That is a very long time to maintain growth and desirability while selling primarily through owned physical retail and doing almost zero “performance marketing”.
Supreme is also the product of a different time–a time when subcultures still existed in a meaningful way. Their longevity is partially a product of the brand’s underground status in its first decade of existence. Again–not something most founders today are interested in, if it’s even possible anymore.
Pull The Lever?
Now that you have the context (and my opinions, lol), I want to explore the specifics behind each of these burning questions/tempting growth tactics.
Email Frequency
Sending more emails is a probability game. The more you send, the more likely you are to land in someone’s inbox when they happen to be looking at it.
There is also a mental availability element at play. If I’m in the shopping mood and I get an email from Brand X every day, I’m more likely to browse their site when I’m ready to pull the trigger.
So yes, sending more email does drive some incremental revenue. But it makes new subscribers less likely to stick around (overwhelm!). It also requires a huge operational lift for most brands–almost no one has enough meaningful announcements to fill 14 (or even 7) emails per week.
The drawbacks of high frequency emailing are hard to measure–lost sales from new customers or subscribers, the opportunity cost of doing something more valuable, etc. So, when the pressure is on, many brands pull this lever. But once you make this move, it’s hard to walk back.
Promotional Strategy
I wrote a post about the ideal promotional strategy here. TL;DR–if you’re using promos solely to make sales go up, you’re not realizing their full potential in terms of customer LTV.
Discounts and promotions between 0-50% off generally unlock peripheral demand–conversions from folks who were aware of your brand, or in market for your category, but unwilling to shop at full price.
Discounts and promotions greater than 50% off generally create net-new demand…from a bad crowd.
There are people who are die-hard discount hunters who let the depth of a promotion guide their tastes and preferences. These are usually the folks most likely to scream at your customer care team and act indignant because they placed ten margin-dilutive orders with you.
A healthy business does not run “up to 70% off!” publicly, unless it’s an outlet business model.
Distribution Strategy
Selling to wholesalers (WalMart, Macys, etc.) actually can drive incremental demand. For CPG companies, this type of distribution is often the only way to be profitable. For other categories, it’s a bit murkier.
If the wholesaler’s own business is unhealthy, they will attempt to siphon off your in-market demand. Enter, the classic bidding war over branded terms. Or they’ll pull the promo lever for you, with no consideration of your long term goals.
If you’re in a space like fashion, where very few national wholesale accounts have profitable and growing businesses, proceed with caution and get an experienced negotiator to review your contracts.
No Best Practices
There are three “worlds” when it comes to eCommerce:
- Brands who generate the lion’s share of their demand “IRL”. eCommerce is a distribution channel for these brands, and channel “best practices” do not override brand goals.
- Brands who primarily capture in-market demand. Most new customer acquisition is done via paid digital channels, and channel “best practices” guide brand decisions. Brand follows channel.
- Mature companies, usually publicly traded, who do both things half-heartedly. Their IRL demand is often driven by legacy awareness and distribution/ubiquity. And their eCommerce strategy is optimized around legacy tech, people and processes.
You need to determine which world a brand belongs to before you evaluate a strategy or tactic. The actions of brands living in one world often make no sense to denizens of another world.