Avoiding the DTC Trap: Prioritizing Profitable Customers Over Growth at All Costs

Creating a brand where customers pay back 5+ times your CAC over a few years is a great business.

However, without proper strategies in place, you may fall into the classic DTC trap.

Particularly evident with DTC brands in the US.

DTC brands going 'growth at all costs'.

Great businesses are judged on their ability to create profitable customers, not the hockey stick growth of customers.

Brands pay a lot to bring a customer for the first time (We've been guilty of that at the very beginning too) but they don't stick around.

And the customers that leave our brand's ecosystem, become someone else's opportunity.

Competitors flood the market and eventually, CAC goes up for all players. A combination of problems that you do not want snowballing in your market.

High-growth DTC brands are obsessed with acquisition.

And we've seen the downfall of mammoth DTC brands in recent years.

Placing a blind eye to CVO (customer value optimization).

You need to focus on creating profitable customers.

Focus on CAC, AOV, margin, and retention. Eventually, CLTV will start to improve.

ROAS shouldn't be your north star.

You need to build a proven CAC payback model that is lucrative. Your ability to create profitable customers (a must in DTC) will set your brand apart and attract investors.

For example, if your AOV goes up by $50.

You can afford a higher CAC and great marketing campaigns at the first transaction. (Hence why Paire is launching more higher ticket products to allow us to do so).

We can start layering in OOH campaigns thanks to the increased margin.

Great marketing -> builds great communities -> creates stickiness to the brand.

Food for thought