Birch Box, a growing Direct to Consumer company that ships cosmetic samples in a box to consumers, talked to entrepreneurs at XRC LABS about selling Direct to Consumers online. Kavin’s experience is all about direct to consumers in a variety of companies.
First Takeaway: He acknowledged that he knows nothing about bricks, but he does know about customer acquisition—which in his case is email acquisition, so that he can communicate with his customer base. Kavin is in charge of product at Birch Box, but he has to know what products support customer acquisition.
We at Rug News andDesign are only now learning about email acquisition. This is a business process not unlike any other business process. The direct to consumer marketing business’ life cycle depends on email acquisition. I didn’t know that.
When I told my wife about the life cycle, she said that a number of years ago, while on vacation, she bought $200 worth of things at a retail store, and they said that as a result they would give her a membership card that would entitle her to a 5% discount on any future purchases.
Now she gets email offers on sale items with the offer that her membership entitles her to an additional 5% off. As she said when she told me, that doesn’t mean 5% off the full price, but 5% off the reduced price. She remembers the 5% but not the dollars off.
So the question Kavin raised was how do you determine how much to pay for email acquisition? When you are a start-up entrepreneur around the age of 30 (generously), and you are asking an investor for millions, you need to know the life cycle value of each customer, and how to get that customer to give you their email, and to buy something from you so you can project the cash flow that will offset the cost of goods and acquisition.
To have a steady cash flow, particularly in direct to consumer, you have to have a replacement customer for every one you lose over time, and a surplus of new customers on whom to base or meet your growth predictions.
By now you are asking: How does this apply to a bricks store selling a product, say rugs, within, say, a one hour drive of the store location (if that far)?
A number of years ago, Roz Rustigian of Rustigian’s in Providence, gave us the answer in an article in Rug News andDesign. I did not look up the article because I have never forgotten it, so I may take some liberties with the details.
She has, within a specific radius of her store, identified the high rent districts. She buys lists of recent sales from some list broker, cleans and qualifies the list, then—horrors of horrors to the Millennials—sends a series of postcards through the US mail making them some offer.
It must work—she keeps doing it, and she survived the great recession with it.
As an aside: If you think the young marketing people you know have an attitude towards print media, try bringing up the word ‘print’ in a group of young entrepreneurs trying to fund a direct to consumer online business.
Only a neanderthal like me would even think of trying, but then again, I didn’t think Restoration Hardware’s four pound lifestyle catalog would make them the home fashions force they have turned into.
A print postcard isn’t spam. So the question isn’t ‘does it work,’ but ‘what is the offer.’
And that takes constant testing, online and in-print.
And that is why we are talking about the bright young entrepreneurs’ efforts to bring design to the global marketplace online, working with XRC Labs, www.xrclabs.com and the Parsons School of Design.
Come, explore the future with us, together.
