5 growth lessons working in DTC startups 🎓

Dashboards, vanity metrics, hiring and more

I recently passed my 10 year anniversary of working in DTC.

The occasion got me thinking about how much the landscape has changed over the years.

And, it reminded me of some of the lessons that I’ve learned along the way.

Back in the day, Amazon was synonymous with e-commerce and the main player on the block.

Then came brands like Glossier, Warby Parker and Dollar Shave Club who broke the frame of reference for what an e-commerce brand could be.

And, this rate of change has only accelerated as Shopify and other tools have gotten easier to use.

For example, in the past 2-3 years alone we went from a “growth at all costs” market to having discussions around incrementality and contribution margin.

The DTC market is dynamic, which is part of the reason that its fun.

But, it can also be challenging with all of the constant changes.

My aim with this post is to (hopefully) share the timeless lessons that you and your team can apply in the ever changing environment.

Alright, let’s get to it!

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Here are my top 5 growth lessons from working in DTC startups:

1. The importance of a unified growth dashboard

2. The importance of ignoring vanity metrics

3. The importance of understanding incrementality

4. The importance of strong, analytical team members

5. The importance of clarity in a remote first environment

My top 5 growth learnings from the past 3 years.

1) The importance of a unified growth dashboard

I sometimes see marketers operating solely on the data within their ad accounts with little connection to the top line business metrics (the ones that we see in Shopify).

I was no different back in the early days.

I found myself running a lot of disconnected Google Sheets to report on channel performance and the top line business results were reported separately by finance.

One of the first big unlocks that I had was in aggregating metrics into a single dashboard to allow me to see what was actually driving performance.

My typical dashboard now includes the standard e-commerce formula for all of the top line metrics:

• Traffic x conversion rate (CVR) x average-order-value (AOV) = gross sales ($)

But, it also includes those same metrics for all the paid channels and the top organic channels.

This allows me to open up a single “source of truth” each morning and quickly see how the business was performing.

It provides a single view to see how all the key metrics are trending (traffic, CVR and/or AOV).

Then, I can quickly diagnose which channels were helping or hurting the top line results based on fluctuations in those metrics.

I also automate this to run daily via Looker and SuperMetrics API’s.

This was key to avoiding out of date and inaccurate reporting.

It also has saved me and my team a bunch of time, which allows us to focus on higher leverage items like improving the ads.

Tips for growth dashboards:

If you don't have a singular view of your business performance, then I would put this is a top priority.

Here's how I would approach it for a new dash:

1) Build out a template with all of the metrics that you think are key to your business goals. 

This is probably some combination of visitors, orders, conversion rate, gross sales, and AOV for both top line and channel performance.

2) Outline and document where all those metrics live. 

This could be Shopify for net revenue metrics or GA4 for sessions data.

3) Automate those metrics into a single Google sheet via API connectors like SuperMetrics or other free tools. 

A simple Google Search for "automate GA4 data into sheets" will help get you started.

4) Use the SUMIFS excel function to reference the raw data in your sheet and update your template metrics. 

Another Google Search for how to use the SUMIFS function may be needed here, but it's easier than it looks once you get a couple built. 

2) The importance of ignoring vanity metrics

The next big learning that I came across was that I was too focused on vanity metrics like total traffic and gross sales.

As mentioned, gross sales is an output metric that flows from the up funnel metrics of traffic x conversion rate x AOV.

But, not all traffic is quality traffic that converts.

I have learned this the hard way on days when I saw strong traffic numbers, but soft sales.

For example, I know we can easily juice traffic numbers by bumping up Twitter and TikTok ads budgets.

• The ad auctions there are usually cheaper than Meta and Google Search.

• The problem I’ve found is that the traffic from Twitter/TikTok has historically had lower conversion rates.

  • My guess is that this will change over time as the pixels improve.

The key win was in figuring out which traffic sources that we needed to prioritize our budgets towards based on both traffic efficiency (CPC’s/CPM’s) AND conversion rate (CVR).

Traffic alone wasn’t enough to drive growth.

I still like to play in Twitter and TikTok to build top of the funnel awareness and onsite behavior.

But, I now like to find a healthier balance of visitor growth across both high and low converting channels.

Tips for ignoring vanity metrics:

If you have been pumping ads to a number of channels and see strong traffic numbers, but your top line business metrics like sales are slowing, then this might be a red flag that's worth digging into.

Steps to check for quality traffic sources:

The first thing to check for is where the majority of your traffic is coming from by channel and their corresponding conversion rates. 

Then, identify which channels have both healthy CPC's and strong CVR's. 

And, then prioritize ad budgets based on those.

3) The importance of understanding incrementality

Incrementality has been a hot button topic on Twitter (X) and LinkedIn in recent months.

In 2021-22, us marketers were all focused on attribution.

I think this was primarily the result of the data loss that occurred post iOS-14 and the lack of visibility into which channels were performing or not.

Since then, we have mostly resolved the attribution discussions.

Meta has improved its pixel targeting and the launch of multi-touch-attribution (MTA) vendors like Northbeam has helped a lot in this area.

Now, all the top marketers are focused on incrementality.

Haus defines incrementality as:

• The increase in a desired marketing outcome resulting from isolating a single marketing activity, like a new Facebook campaign.

Incrementality testing is trying to understand the lift in conversions that your marketing is driving vs what would have happened anyway.

A common issue that I see a lot of earlier stage brands make is that they are spending way too much on channels with low incrementality.

Meaning, they are spending on channels where the sales would have happened anyway.

I’ve been there and its another issue with only looking at the ad platform data.

This usually materializes with too much spend in branded search campaigns, Performance Max campaigns with incorrect exclusions, and/or too much of a focus on Meta retargeting campaigns.

You can use a vendor like Haus to test how incremental your channel mix is by running hold out tests through their platform.

But, I don’t think you need a third-party to test this if you are strapped with cash.

Back in 2022, I needed to trim ~20% of the budget out and retain healthy sales growth.

• Remember, that shift to profitability?

Instead of using an expensive vendor, we tested pausing and/or decreasing budgets on our marketing that we thought was low value in regards to new customer acquisition.

Then, we ran a pre vs post analysis following the changes in budgets to see if there were any changes in the top line and funnel metrics.

Here are the metrics that we checked:

• Top line sales (the Shopify ones, not the ones in the ad platforms)

• Add-to-cart (the rate from your product page to the cart)

• Purchase rates (the rate of orders from your cart page)

We assumed that if those metrics remained strong following the reduction in that campaigns spend, then that channel spend wasn’t that incremental.

It’s not a super scientific approach, but it’s an option if cash is a constraint.

Tips for understanding incrementality:

Be careful on over optimizing what the ad platforms are telling you without questioning if your current campaign setup is actually driving net new business.

They may be taking conversion credit for sales that would have happened anyway. 

Here's how I would start pressure test the campaign mix:

1) Examine your campaigns to see where you are spending the most.

2) Pick a campaign that you think is not driving net new customers to your business (IE: has low incrementality).

This is probably some combination of branded search, PMax/ASC, or retargeting campaigns.

3) Test pausing or reducing budgets on one of those campaigns to see if it materially impacts your top line metrics.

If it doesn't, then great. 

You can now re-invest that savings back into more top of the funnel efforts or enjoy the reduced CAC's (customer acquisition costs).

4) The importance of strong, analytical team members

This one is a bit outside of the typical media buyer scope, but it’s a big one if you are building a team.

The ability to build a strong performance marketing team is crucial to scaling a brand and achieving it’s goals.

This includes leading teams of internal hires, outside freelancers and/or agency support.

I’d also argue that the performance team is one of the most important teams in the org as it directly impacts the top line business performance.

This also makes it a risky area to hire for when a couple bad moves can lead to the business stalling.

I’ve enjoyed everyone that I have worked with, but there were a few filters that I wish I’d applied earlier in my leadership journey.

The first is that employee-culture fit really matters.

You should know pretty early on if the potential candidate or agency that you are looking to hire is going to align with how your company operates.

If you like move really quickly, are lean, and are looking for hands on keyboard doers (not managers or sole strategists), then hiring a manager to do IC work may not be the best fit.

I have made the mistake of hiring solely on aptitude (can they do this job on paper), but the misalignment of what they were looking for and our needs made getting the actual work done more difficult than it should have been.

The second is to be super clear on what you actually need.

This first of culture-fit leads into the second one of clarity on what you actually need.

For example, I have made the mistake of trying to throw more media buyers into the mix in the hopes that it would unlock more growth when in reality I could have used more analysts and more creative support.

It’s super important to understand where the real bottlenecks are and work backwards from there to unlock growth vs blindly throwing more people (and costs) at the problem.

The third is that analytical chops are a must-have in today’s environment.

IMO - Today’s paid media buyers need to have:

• Domain knowledge (knowing what levers to pull)

• Creative insight (knowing how to get the most out of those levers)

• An analytical approach to problem solving (recommendations backed by data)

I made the biggest hiring mistakes when one of those 3 were components were missing.

Tips for hiring:

Hiring is really hard, but it's crucial to achieving your goals. 

Some of the filters I now run during the screening process includes:

1) Will this person succeed in an environment like ours?

Can they work quickly? Are they are do-er? Do they think from first principles?

2) Do I actually need this hire or will support from an adjacent domain provide more leverage?

Where is my real bottleneck?

3) Does this person have the 360 skillset that's needed (domain knowledge, creative insight, and analytical approach) to drive meaningful growth?
 

5) The importance of clarity in a remote first environment

We are now operating in more timezones and locations than ever.

This makes cross-functional alignment harder to come by.

I’ve seen the best teams mitigate these challenges by leaning into written documents and memo’s.

For example, in the past weekly growth calls that I ran we would actually create a written agenda that is sent out to the team the night before the meeting.

The stakeholders (usually leadership), then could add comments directly to the agenda prior to the meeting and then we focus our time in those meetings on the comments.

This written format brings a level of clarity to the presenters and it also allows us to make the most of the time that we do have with leadership to focus on the most pressing items.

Tips for improving clarity through writing:

Try writing out your growth plan in words, not slides.

Use the framework below to get started:

1) What's working

2) What's not working

3) What's next 

The key is to scaling this into a weekly habit is to have the data needed readily available prior to the meeting.

This can come from your automated dashboards (see above) and it will allow you to focus your time on the higher level items like the actions needed to improve performance.

As a recap, here are the top 5 learnings that I took from the past 3 years:

1. Build a unified growth dashboard to view all your key metrics in one place

2. Ignore the vanity metrics that may be misleading you

3. Understand which campaigns are incremental and which aren’t

4. Focus on building a strong and analytical team

5. Bring clarity to a remote first environment

That’s it for this week!

Until next time,

Trent

PS. If you liked this post, then you may like my latest post on how to turn reviews into revenue.