Definitely an overused D2C buzzword but the reality is that very few brands do this well, and even fewer are able to demonstrate it to investors. Investors are looking for brands that have a community of fans, not customers. A strong community of fans can be an increasingly valuable channel for lower acquisition costs and demonstrate that your brand has real long term value.
To measure your fan engagement, look at metrics like open rate of your emails, the percentage of customers that subscribe to your newsletters, average waitlists for new product drops, average time a customer spends on your website, percentage of customers who input into new product development, perhaps even get analytical with your review content (e.g. what percentage of your reviews say your product is ‘game changing / life changing’ or made them switch from ‘x brand’?). This could also include "social media mentions" i.e. how many times people comment at you or tag you in posts rather than just liking your posts. Get creative with measuring your community engagement!
“We had 20,000 people on the waiting list during the pre-launch period” - Daye, 2020
Beyond numnbers, a visual showcase of demonstrating community engagement is also effective. I love this recent example from the brand Underdays:
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Many brands will state their LTV:CAC ratio in their pitch deck but fail to mention their loyalty metrics (some of the key drivers behind increasing your LTV). These include your repeat purchase rate (i.e. what percentage of your customers have bought more than once, twice, three times etc.) or your 3, 6 and 12 month retention rate (if the product is purchased on subscription). In addition, it’s also helpful to track the percentage of your customers who are buying more than one product type. You can demonstrate much higher brand loyalty when customers are buying 3 different product types versus just one.
💡 Top tip: don’t confuse your Lifetime Value (LTV) with Lifetime Revenue (LTR). Make sure to define what the number represents and over what time period.
Brands that have customers that purchase more frequently, whether it’s due to the nature of the product or because they have a strong affinity with your brand, are worth more. Investors care about loyalty metrics because while CAC’s are difficult to control and are likely to increase as you scale, loyalty driven LTV is a defensible growth lever for any brand.
“Hims has a retention rate of 50% over 18 months..” - Hims, 2021
As paid social becomes increasingly harder to navigate and effectively scale, it’s important not to lose sight of your organic growth channels. Make sure you’re tracking KPIs by paid vs organic channels,(e.g. website traffic, customers, number of order etc), as well as your brands’ search volumes on Google!
What’s more, make sure you understand and if possible, measure what's driving your organic growth. This could include customer referral rates and email marketing. Customer referral rates in particular are a great indicator of customer love, so make sure to invest in this channel from day 1, so you can effectively monitor and measure it!
“70% of online sales and traffic comes through peer-to-peer referrals...” - Glossier, 2017