This article was originally posted on michaelsutyak.com.
I wanted to analyze the biggest and brightest DTC (direct-to-consumer) brands to get a better understanding of how they got off the ground, sourced demand and grew into sustainable businesses. Those brands are: Stitch Fix, SmileDirectClub, 23andMe, Casper, AWAY, Touch of Modern, Dollar Shave Club, Bark Box, Everlane, Warby Parker, Bonobos, UNTUCKit, ThirdLove, Hims, Allbirds, Soylent, Glossier, Bombas, Rent The Runway, MVMT, Harry’s and Four Sigmatic.
Supply in the DTC space is fairly straight forward, so it isn’t as interesting to me. Design a product you think people want, source a manufacturer and arrange shipping of your product. Easy.
Ok, I understand it’s not that simple – especially for some of these products. But the biggest challenge in this space stands in building a brand that stands out in the sea of content and products that bombard consumers every day, and driving customers at low enough CAC (customer acquisition cost) to make the company viable. Due to the short attention spans of consumers today, I take my cap off to every one of these companies for building a lasting brand and business with customer loyalty.
Over the course of my research, I noticed several patterns that started emerging in terms of how these companies sourced demand and positioned themselves for brand building.
- Bootstrapping vs. VC investment
- Niching down (but building around a larger theme)
- Hyper personalization
- Using influencers
- Brand partnerships
- Content marketing + UGC (user generated content)
- Organic social (Instagram, FB, others)
- Paid social (Instagram, FB, others)
- Print media & press
- Youtube & other video
My goal was to dig into the “bread and butter” for each of these companies – what they used as the main drivers of their demand growth. It should be noted that many of these brands probably tried many of these different channels. But I worked on finding the core drivers that these companies focused on to go from 0 to 1 and then 1 to many. After reaching a certain scale and taking on a certain amount of VC – every channel is fair game.
- One interesting thing I discovered was that Google Search Ads were not generally used as a primary strategy of any of the companies I looked into. After mulling on this, I think this largely has to do with the visual nature of these brands and how much importance is placed on getting those visuals across. Search ads also generally don’t get across the social proof aspect that DTC brands lean on, whereas social channels are designed around social proof.
- Email was also a channel used to great effect by some of these companies, but I rolled it into referrals. The most notable email campaign was done by Harry’s – but it was largely driven around referrals. I’ll get into that later.
- If you want to grow big fast – you likely take on VC. The only DTC company on this list that didn’t take a penny of VC was MVMT (big props). I’m not sure if this is direct causation (VC funding caused fast success) or reverse causation (these companies attracted VC because they were already successful – and would have been regardless).
- Having the right investor on board (with notoriety of their own) can be a game changer in terms of press and credibility
- A large portion of these companies chose niche products (luggage, mattresses, etc..), but tied themselves to a wider theme (travel, sleep, etc…).
- Organic social and content marketing were the most common “core” channels. Cost-effective, attention grabbing, visual, direct social proof – I’m not surprised that these channels were leaned on.
- Most of these brands were designed around social proof and the ability to tap into mirror neurons, another reason why social platforms and UGC are so popular for DTC companies as growth channels.
Let’s dig into the good stuff:
Right off the bat, we can see some interesting things just from revenues, founding date, VC capital raised and acquisition/IPO status. It generally takes companies time to reach these AR (annual revenue) heights, but 2 companies stand out: Hims and AWAY. Hims was able to reach $100MM AR in under 3 years (founded in 2017). AWAY was able to get to $181MM in 5. That’s incredible and shows that they were able to dive into pent up demand and rethink products that had not evolved in years.
Only two of the companies were acquired – both razor companies Dollar Shave Club and Harry’s. I’m not sure what that says other than razors is a niche filled with deep-pocketed corporations willing to overpay to stop their competition.
Without further ado, here are my findings.
Bootstrapped vs. Venture Capital:
In my research, I was most interested in companies that went it alone, either the whole way or before taking on VC investment.
One of the benefits of a DTC business is the lack of need for a large team (generally). Unlike technical products, DTC products can be bootstrapped fairly easily. The major expenditures come from stocking your initial product. But with the rise of drop shipping, even this upfront cost isn’t entirely required (you pay for the products you sell).
That is why I found it interesting that almost every single one of the companies on my list took VC funding – and heaps of it. Save one – MVMT. The founders of MVMT didn’t take a dime from VC and were able to scale up to $90MM AR in ~ 7 years.
Here are some other honorable mentions that went it alone – at least part of the way:
The Casper founders were turned down by VCs (“No one is ever going to buy a mattress online”), so the founders funded the operations themselves initially. They collectively plunked down $100K in credit card debt to get things off the ground.
Four Sigmatic is another company that, as far as I know, did not receive early VC investment. Similar to VC’s assessment of Casper early on, the initial thought that consumers would “drink mushrooms” was met with derision and skepticism.
Bark Box was launched in 2011 while its founders kept their day jobs. The company took on VC funding to forge out into different product lines and areas (once they had achieved significant scale with subscribers). The Bombas founders also kept their day jobs while they were honing down their product.
Everlane was operating for 5 years before taking $1.1M in seed funding.
Warby Parker, which some consider to be the original company that kicked off a DTC craze, incubated their product and company at Wharton before taking on funding (they even enlisted friends and family to fulfill orders in the early days and only spent money on press, inventory and web development).
Founder Andy Dunn cashed in his 401K in order to float Bonobos and build the initial website before taking funding.
College friends Chris Riccobono and Aaron Sanandres raised $150K for their UNTUCKit business from friends and family before taking additional funding.
You can build an exceptional brand with huge AR without outside funding (shout out to MVMT). But the odds are against you. The biggest winners ($300MM AR+) took at least $180MM in VC funding.
This could be the alluring effect of reaching a certain valuation in the marketplace. It appears that once a company reaches a certain size or revenues, investors come circling. And DTC companies have a hard time turning down the term sheets. The press from reaching “Unicorn” status can also be extremely valuable.
This is also largely dependent on your product. For instance, Smile Direct Club requires orthodontic staff to lend credibility and for FDA approval. A drink like Four Sigmatic doesn’t necessarily require anything but relatively cheap ingredients purchased in bulk. Understand your product and your team needs – and address funds accordingly. Don’t just raise money because you think you need to.
Niche Down – But Build Around a Larger Theme:
Successful DTC companies tend to niche down with their products, but live in a larger industry or theme. Interestingly, Peter Thiel came to a similar conclusion when assessing the best way to find success as a start up. In PayPal’s early days, the company served eBay sellers with a better solution to collect payments. They didn’t tackle all of the internet’s financial transactions until later.
In ways of examples, Casper built their brand around sleep, but their initial product was mattresses. AWAY built their brand around travel, but their initial product was luggage. Four Sigmatic built their business around the mushroom, but found success early with a coffee drink (knowing that the US market loves coffee). Stitch Fix designed their initial offering around women’s clothing, but expanded into clothing in general later.
These products are not trying to satisfy every need of the sleeper or the traveler. But they do fit into those larger themes.
23andMe: Built around the larger theme of preventative health.
DollarShaveClub: Built around the wider theme of men’s grooming (as a “club”).
BarkBox: Built around the theme of pets in general.
ThirdLove: Built around the theme of the “anti-Victoria’s Secret” – built for all bodies.
Hims: Built around the theme of telehealth and solving men’s (and now women’s) health problems.
Soylent: Built around healthy, nutritionally optimized food (meal replacements).
The take away here is to build a beach head into a wider industry with a niche product. Then build out new product lines to satisfy wider needs in that industry.
Don’t try to be everything to everyone on day 1. Know your consumer and their pain points, serve their needs, and make sure you have a wider theme. This will make your story more impactful.
Another aspect I noticed across some of the products I researched was this idea of “hyper personalization”. The fact that some of these DTC products would be so personalized was surprising to me at first. I generally think of DTC companies as having a uniform offering to keep costs down.
This idea of personalization was spurred by looking into Stitch Fix. Their entire business model was driven by the idea of using a data driven approach and predicting with accuracy the fit and style for each of their consumers.
It’s fairly obvious that Smile Direct Club requires a hyper personalized approach – everyone’s orthodontia treatment is very different. The same goes for 23andMe, that returns very personalized results looking into consumer’s genetics.
ThirdLove was founded on the idea of serving a wide variety of body types with their bra and underwear line. MVMT & Warby Parker also provided a wide variety of styles (as would be expected for wearables of that nature).
Personalization is entirely product specific. But as a rule of thumb, it appears that health-based solutions and specific wearables should prioritize personalization.
Eyewear and watches already have consumer bases that expect personalization. Health varies extensively – and personalization is almost required in that arena in the majority of cases.
The main takeaway here is to understand your consumer expectations when it comes to personalization. It’s difficult to form new consumer behavior. Ride the train tracks that are already set. Having a standard offering is far easier and cheaper to manufacture. But personalization can create a bond with your consumer and create deeper loyalty. Stitch Fix proves that with $1.6B a year in revenue (the biggest DTC on this list).
Social proof and building an audience are extraordinarily important when it comes to building a DTC brand. Well guess who can provide you with both? Influencers. Love them or hate them, there’s no denying that influencers have extraordinary power in the modern economy. They can make or break a brand.
Casper saw a huge boon in orders when Kylie Jenner posted a picture of her unpacking one of their mattresses. They also saw investments from celebrities such as Leonardo di Caprio, Ashton Kutcher, Nas and 50 Cent. All helped provide extra credibility, social proof and press to their brand.
AWAY primarily designed their growth strategy around their Instagram account, which makes sense given their foray into the travel space. Instead of partnering with celebrities with extremely large followings, they opted to partner with smaller travel influencers on Instagram (< 1MM followings).
Travel is visual, and AWAY also opted to partner with influencers that created a certain aesthetic with their feeds/pictures.
It is pretty well known that Smile Direct Club counted NBA player Draymond Green as an investor. And they used him in a slew of commercials. If you’ve watched a NBA game in the past year or two you have likely seen the commercials:
23andMe held “spit test” parties at star studded events such as Davos and New York Fashion Week. Well known celebrities such as Naomi Campbell, Diane von Furstenberg and Rupert Murdoch all used the product in an attempt to attract similarly affluent customers (while the price tag was still $999 per test). Having Sergey Brin involved (co-founder of Google and ex-husband of the founder Anne Wojcicki), also helped to get 23andMe into the public eye.
Allbirds leverages influencers by including images of models and others wearing the allbirds shoes. They feature the content on their social profiles and their main website. Providing this social proof within their web experience gives social proof credibility to the product right as intent is highest.
Glossier, like many fashion brands, makes extensive use of influencers. Founder Emily Weiss, who started her career deeply tied to the fashion industry working for Vogue, Conde Nast, and featuring on the show “The Hills”, became an influencer herself. Glossier also started as a blog looking at how the fashion elite tackled their makeup regiment.
Weiss also uses her personal social profiles to show her hanging out with models and others in fashion circles to lend additional credibility to the Glossier brand.
Glossier has more recently focused on their common customers in their social profiles, choosing to feature predominantly UGC (user generated content) from their fervent customers (talked about later).
Bombas was able to get press through their appearance on Shark Tank, and an investment from Daymond John. John used his influence and notoriety to get Bombas press, coverage and early traction. Like others on this list (23andMe, Smile Direct Club, etc…), having a “celebrity” investor on your side can be extremely valuable in gaining social proof and credibility as a brand.
MVMT partnered with an agency, Mediakix, to broker their influencer marketing. The founders of MVMT, Jake Kassan and Kramer LaPlante, were extremely scientific with their influencer marketing, choosing to focus on micro-influencers to get the most bang for their buck.
MVMT also features profiles of certain influencers on their web page. They create a window into their lifestyle – a great way to build a lifestyle brand. It ascends the product to more than just leather and glass.
Influencers can be extremely powerful if used in the right way. This is especially true in DTC where the product is front and center. Consumers must not only be convinced that the product is great, but also that others desire it as well.
A large part of building a DTC machine is a funnel problem. Influencers with a built in audience can help build the top of funnel with overall awareness. They can also improve conversion, as consumers are more likely to buy products that people they admire do.
Our mirror neurons make us want to mimic what others are doing. This makes an investment in influencers provide cumulative gains as more people use the products. This is actually why large influencers may not be as effective as micro-influencers, that the average consumer finds more relatable. This is also why UGC from average consumers can also be very powerful (which I’ll cover later).
An interesting thing to note is that having a well-known investor can be huge in terms of garnering press, credibility and social proof. Making sure to bring on the right investor that can add value beyond a cash infusion is definitely something for young companies to consider.
Brand partnerships are more involved than using influencers for marketing purposes.
Casper was almost bought out by Target, but instead the large retailer invested $75MM in the company and started including the mattresses in their stores.
Smile Direct Club made an early partnership with Align Technology, the makers of Invisalign, to get early distribution. This ultimately led to a law suit from Align over patent infringement. However, the damage was already done. SDC achieved huge distribution and awareness, and Align could not compete on costs. A note: partnering with a brand early on does not mean your fates are intertwined forever. You can use another’s brand equity to boost your own.
In a bid to expand its business and take advantage of the treasure trove of genetic data they have amassed, 23andMe has partnered with GlaxoSmithKline to identify new drug targets. 23andMe has also made partnerships to focus on preventative health and coaching. Companies like Lark Health, that focuses on diabetes counseling, count themselves amongst 23andMe partners.
UNTUCKit partnered with marketing agency BVAccel in order to expand their operations.
Soylent expanded their product offering to Walmart stores.
It is somewhat ironic that some of these brands (Casper, Soylent, etc…) that cut out distributors like Target and Walmart by leveraging the web, ended up partnering with those same distributors to expand their businesses.
The main take away I can see here is that the best way to use brand partnerships is to:
- Early-Stage: Use them initially to get early traction or increased distribution
- Mid-Stage: Augment distribution
- Late-Stage: Expand into other verticals or products and maximize distribution by going into brick and mortars.
Content Marketing + UGC:
There has been an explosion of content over the years with the ease of distribution across social apps and the web. In order for yours to stand out, it has to provide value: either being useful or providing entertainment.
There are many benefits to going the UGC (user generated content) route. First of all – it gets your audience engaged. Second – it is far easier to repost content from your audience than it is to create new content yourself. Third – referring back to the mirror neurons I mentioned earlier, people are far more likely to buy and use products they see others like themselves using.
In addition to their influencer play, AWAY created an instagram feed that reposted user generated content that used its hashtag: #travelaway.
Bark Box uses their Instagram feed to lay out a variety of content, including dog memes and videos/pictures of other people’s dogs. Let’s be honest, there is nothing people like more than seeing pics and videos of other people’s dogs.
Everlane had the unique strategy of creating infographics that were highly shareable on platforms like Tumblr (while it was around and booming). These infographics were easily parsed by the younger audience they were trying to reach, and did exceptionally well on social profiles.
Warby Parker had a unique way of increasing word of mouth (in addition to their heavy focus on PR). They had unique promos that included different kits for their customers (such as a “Make-A-Snowman Kit” during the Holidays). Customers reposted these kits all over social media, leading to a deluge of UGC for Warby.
UNTUCKit definitely saw the value of social proof through UGC – specifically reviews. Alberto Corral, director of marketing, explains, “When shoppers are looking at user-generated content it definitely helps them make the decision to purchase. This relatable content enables them to look at other shoppers like them and understand: ‘How does it fit them? Do I relate to this person?’”.
Again – mirror neurons at play. UNTUCKit specifically focused on reviews in their UGC play.
Hims knew that content would be a corner piece of their strategy early on (and it’s telling that they are the fastest growing brand in DTC history). They have a central portal that provides answers to health related questions that people don’t always feel comfortable to ask.
Allbirds: Use UGC showing their customers wearing their product.
Glossier: Use UGC showing people using their makeup products.
Bombas: Bombas uses a hashtag, #BeeBetter, that they encourage customers to post with when they make a donation (they are a mission driven brand) or a purchase. Bombas compiles them on their social profiles.
Rent The Runway: Like other clothing companies, RTR leans on their instagram to feature their customers wearing different pieces from their packages.
MVMT: In addition to their influencer campaigns, MVMT leans heavily on reviews and feature them prominently to create social proof with potential buyers. In a more unique move, MVMT also leans on their most loyal customers to answer the questions of first time buyers.
Content, especially UGC, is almost essential for a brand and DTC company trying to build social proof. There are many directions a company can go here, but here are some of the best:
- Create a method of collecting UGC that demonstrates social proof: users wearing or using your product in the wild, user reviews, knowledge-base created by users, etc…
- Playful promos that encourage users to create content and spread your message for you
- Create different content types that are highly shareable (infographics, videos, etc…) and provide value: entertainment or utility
Shameless plug: If you’re interested in taking your content strategy to the next level, try Format Agency.
Organic Social (Facebook, Instagram, Etc…):
Organic Social (Facebook, Instagram, Etc…):
When it came to audience building, the majority of the brands I looked at chose to do so on Instagram. This makes sense – it’s a visual platform, and consumers are most easily swayed by visuals. Instagram also has the highest average purchase value of all the major social platforms. Consumers there are engaging heavily with content – and buying, a lot.
It’s no surprise that clothing brands like Stitch Fix, Everlane and Rent the Runway are represented here as leaning heavily on the platform.
Stitch Fix also made heavy use of Pinterest, where they found their audience interacted with their products and pieced together UGC.
I would put Glossier in a similar category as the clothing brands, showing their makeup products being used by their consumer base on the social profiles (primarily Instagram).
AWAY, BarkBox, Bombas, and MVMT all made use of Instagram as well – albeit in different ways. AWAY has a very clean aesthetic, that is more indicative of a travel influencer feed. BarkBox is much more light, putting more emphasis on memes and fun. MVMT exudes cool, and makes their watches look like they are a luxury item in their feed.
Soylent is interesting in that they had amazing traction within the technology community that specifically lived on and interacted with Reddit. This was how Soylent was able to build a fervent base that spread the product through word of mouth. Reddit also has incredible SEO that likely played into further spreading the Soylent message.
Building a large social following organically is one of the most cost effective ways to market your products. Visually oriented social platforms, such as Instagram and Pinterest, can be great ways to feature DTC products. Instagram is still the best platform to find buyers – due to the format of their Instagram stories that are highly engaging and have high purchase conversion rates.
The Instagram platform is well positioned for commerce – and is almost entirely designed around the idea of social proof and lifestyle design. Ideal for DTC brands. This is likely to expand as Facebook deepens its e-commerce muscle.
Platforms like Pinterest and Reddit can be great for specific types of audiences. They both have incredibly engaged audiences that can be vocal champions for your brand. These aren’t one-size fit all – they don’t have robust ad platforms or reach that can lead to lower CACs like FB/IG.
It is yet to be seen what the purchasing power of the new kids on the block like TikTok are (their ad toolset is yet to be built). But it is hard to argue with their reach. Maybe the DTC brands of tomorrow will live there.
Paid Social (Facebook, Instagram, Etc…):
I was actually quite surprised that more companies didn’t rely heavily on paid social to churn out their large revenue numbers. The vast majority focused on organic channels and word of mouth/buzz to expand their customer bases.
That said, some DTC companies on my list definitely made paid social a cornerstone of their growth strategy.
Touch of Modern focused initially on Facebook ads (on desktop – then moving to mobile; two-thirds of their orders come through their mobile app). Touch of Modern has also expanded into Google ads and SEM. Now as a larger company, they are experimenting with direct response television ads.
BarkBox has 11 million+ followers across their social profiles, and they primarily use organic tactics to reach them. But they do follow up with direct marketing across those channels, in addition to retargeting, to supercharge their purchase conversions.
Bonobos (founded in 2007) took advantage of a relatively new Facebook advertising platform to reach their customer base and feed their automated selling engine with demand.
Hims has made extensive use of advertisements across Facebook and Instagram. They often use unique and very eye catching text overlays to speak to their target audience. Their ads also attempt to dispel the taboo around some of the rarely spoken about conditions that they are attempting to solve for their potential consumers.
ThirdLove is a big buyer of Facebook ads to source potential buyers, and then uses a holistic customer experience and their “Fit Finder” to make sure that the buyer finds a perfect fit the first time.
Allbirds makes great use of Facebook and Instagram video ads, making sure to get across all of the pertinent information to sellers about a potential purchase.
Paid media can be a great way to get the fly wheel going or pour gasoline on an already raging fire. But it should not be relied upon as the sole method of customer acquisition. Setting up a machine that utilizes organic social, referrals through word of mouth and press is a more sustainable long-term strategy.
If you do run with paid, make sure you understand your customer behavior extremely well, develop an accurate LTV model and only spend CAC what you know you can bear with a positive ROI.
Instagram still yields the highest average purchase price and the lowest CAC across all platforms (due to incredible reach and ad units like Instagram Stories that lend themselves well to ads). However, the Bonobos story (as well as others) shows that finding platforms that have not been saturated yet can be a way for a company to build a very profitable paid machine.
Print Media & Press:
Given the rise of the internet and the ease of distribution of a message through social channels, one might scoff at the use of “antiquated” demand levers like print media or the press.
However, these channels can be incredibly effective for certain industries. Press in particular still wields a lot of power in our modern world, as they have reach and credibility on their side.
Here are some online press publications and how many visitors they bring in through SEO alone a month:
- Forbes: 46.7M monthly visitors
- Inc: 3.6M monthly visitors
- CNN: 105.3M monthly visitors
- CBS: 10.8M monthly visitors
- Entrepreneur: 3.8M monthly visitors
- CNBC: 25.2M monthly visitors
These publications also distribute their articles widely and share them on their social profiles (which have millions of followers). Finally, getting press mentions can be a stamp of credibility for your product, as these brands are known far and wide (from being widely disseminated through TV and print for years).
AWAY experimented with putting out their own travel magazine that fed into their wider brand.
23andMe made extensive use of the press to spread brand awareness (which came through demoing their product at heavily press-oriented events like NYFW and others). The founder’s (Anne Wojcicki) connection to Sergei Brin also helped to garner press.
Warby Parker made the very concerted choice early on to focus on PR. In fact, in their early days, the founder Dave Gilboa mentioned that they only spent money on PR, web development and the purchase of inventory. Their PR agency made sure that Warby launched with credibility, which is extremely important for a fashion brand.
Bombas garnered great press by utilizing their mission of providing socks to the homeless population and partnering with non-profits that were darlings of the press.
Press can be an exceptional channel, if you can swing it. However, the one issue with PR is the inexact science of attributing lift to the channel. A startup on a budget is more likely to prefer paid social ads that deliver very exact figures on budget and return.
Another way to garner press, other than going through a PR agency, is to put out promos that are press worthy. Bombas’s built in mission made it very easy to cover for press (a feel good story).
Using Print Media, such as AWAY did, can be a unique way to gain interest with your audience while social channels get saturated. When it comes to e-commerce and DTC, print can be a powerful channel to counteract the law of shitty click-throughs.
During the rise of a number of these major DTC brands, podcasts were not as prominent as they are now. But there were a few companies that jumped on podcasts earlier in an effort to boost their followings (and create more content).
AWAY created their own podcast, Airplane Mode, and experimented with it in order to disseminate their message further.
Four Sigmatic is fairly well known for being endorsed by Tim Ferris and being featured prominently on his podcast, the Tim Ferris Show. Four Sigmatic also provided deals to listeners of other podcasts, such as the Ultimate Health Podcast.
Dollar Shave Club is mostly known for their video content but also had a popular podcast focused on topics that were entertaining and interesting their audience. The podcast also brought a comedic flare to the podcast, including topics like “Why Is Everyone on the Internet so Angry?”.
Podcasts can be a nice augmentation of what you are already doing with other content. They give you an opportunity to engage with your audience regularly and build around a theme. With users tuning in regularly, you have more opportunities to build brand affinity and loyalty – leading to more recurring purchases.
Remember to focus on the two aspects of content when setting up your podcast: utility (AWAY’s Podcast) and entertainment (Dollar Shave Club’s Podcast).
Using other podcasts to obtain reach through advertising is also a great way to go. Know your audience and what they are listening to, and you can blow up like Four Sigmatic did on the Tim Ferris Show.
Youtube & Video:
Using video has proven in recent years to be much more impactful with consumers and perform better as ads than still images. All of these companies I have listed have made use of video content in some form or another – allowing them to disseminate much more information than an image can.
However, there are just two major ones that stand out in terms of their video content from day 1.
Dollar Shave Club blew up almost exclusively due to a viral video on Youtube. The comedy, the absurdity – all speaking to their target market. It was brilliant.
Stitch Fix is another company that made liberal use of video content and benefited from “unboxings” that spread across YT and their other social channels.
Why is this list not longer? Mostly because video content was not as prevalent and easy to distribute as it is now. Almost every social platform today is hungry for video content – so their algorithms incentivize their use. Videos also get more engagement and shares – furthering their boost by social algorithms.
The main take away here is: start with video content day 1, and try to build a following on a major platform like YouTube or IGTV. One viral video could spike your awareness and lead to a billion dollar exit – like it did for founder Michael Dubin and Dollar Shave Club.
One thing that each of these companies relied on heavily in order to grow so fast and consistently is word of mouth. On one level, you get word of mouth naturally from providing an exceptional product. But on another, you can incentivize and engineer word of mouth through a very well put together referral program. Referral programs end up leading to ~ 15% of revenues for many e-commerce companies.
The most famous among them is likely the referral program set up by Harry’s, documented extensively on Tim Ferris’s blog. Before launch, Harry’s set up an email collection landing page for “early access”, and then gave each sign up a referral link to share amongst friends. The more friends signed up with your referral link, the bigger the prize you would receive. This has since been done a lot, but at the time it was fairly novel.
Everlane was also ahead of the curve in creating an account based referral program – featured at the bottom of each page.
MVMT also created a referral program, making people feel part of the brand by becoming an “evangelist”. For every customer an evangelist drives, they will receive $15 credit towards a future purchase. First time customers driven through the program also get $15 off their purchase.
Glossier and Rent the Runway have similar programs. Glossier is offering $10 to referrers and 20% off to the referred. RtR offers $30 off to referrer and referred.
Incentivizing and productizing word of mouth is a major part of getting a DTC business off the ground. As I’ve discussed numerous times in this article, social proof is huge when it comes to building a consumer brand. One is infinitely more likely to make a purchase if they know their friends have.
Referrals are a great way to do that. The referral system has been well tread at this point, offering credit to ambassadors that refer customers. This is table stakes for brand building.
But, if you really want your referral system to move the needle, you need to make it unique and compelling enough for it to take off. You also need to make sure you are hitting potential referrers at the right time in their lifecycle. You want to get in front of your most engaged customers after they have experienced the best features of your product. Experimentation is key.
The Next Wave of DTC:
By being able to leverage channels online for distribution, DTC companies were able to reach consumers without third-party distributors and take advantage of a consumer base that increasingly became comfortable purchasing online.
Now in 2020, due to a confluence of factors – COVID19, WFH orders, Amazon’s greed, people seeking new income sources – DTC is here to stay and bigger than ever. I expect that a number of direct to consumer products and companies will be started during this period.
I look forward to watching the landscape and how it evolves as e-commerce continues to grow.