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Grow Your Clothing Line With Data!

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Growing your brand goes so much deeper than just tracking metrics. Knowing what to do with that data that you collect is imperative. These are the metrics that we used to grow our clothing line from $0 to five figures with zero cash infusion or credit!

There are real examples of ads we have run, so you can show this to your boss, your coworkers, your clients, or anybody who needs to learn the value of driving business results with metrics!

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Grow Your Clothing Line With Data!

  1. 1. GROW YOUR CLOTHING LINE WITH DATA
  2. 2. WHAT TO EXPECT FROM THIS DECK • Learn which metrics drive actual business results • These are the metrics we use for WeArePR Clothing to determine how successful we are • All the data provided here are real examples from analytics and ads ran by WeArePR Clothing
  3. 3. TABLE OF CONTENTS • Metrics 101 – The Basics • Customer Acquisition Costs • Conversation Rate • Average Order Value • Margins • Product Margin • Gross Margin • Contribution Margin • Real World Examples • Example 1: Lowering CAC • Example 2: Increase Margins
  4. 4. METRICS 101 – THE BASICS TRACK THESE FROM DAY ONE
  5. 5. 1. CUSTOMER ACQUISITION COSTS • Commonly referred to as CAC • This is how much it costs for you to get a customer
  6. 6. CAC EXAMPLE 1 • We were running an A/B Instagram Swipe Up Test
  7. 7. CAC EXAMPLE Reach 634 Clicks 12 Purchases 3 Total Spend $23.04 We spent $23.04 to acquire three new customers. CAC = Total Spend/ Customers CAC = $23.04/3 CAC = $7.68
  8. 8. CUSTOMER ACQUISITION COSTS - NOTES • We do not use an agency, but if an agency was used do not forget to include the fee into the amount spent • CAC is effected by many different inputs, here are a few to keep in mind • Marketing • Creative • Budget Allocation • Product • Site Optimization
  9. 9. SO WHAT DOES ALL THIS MEAN?
  10. 10. CUSTOMER ACQUISITION COSTS - EXPLAINED • Let’s break down the split test that we used earlier • The late CTA had a CAC of $11.54 • The early CTA had a CAC of $5.75 • In this situation we cut our CAC in half just by giving a call to action (CTA) in the first three seconds of the video… That’s huge!!!
  11. 11. 2. CONVERSION RATE • The percentage of people who move to the next step of the funnel • PAY ATTENTION – this percentage is always relative! • This is a means to compare how many people finished vs how many started Reach 634 Clicks 12 Purchases 3 Total Spend $23.04
  12. 12. CONVERSION RATE EXAMPLE Let’s use the data from earlier: Reach 634 Clicks 12 Purchases 3 Total Spend $23.04 Let’s compare the first step of the funnel: of 634 people who saw the ad, 12 clicked Conversion RateC-R =100(12/634) Conversion RateC-R =100(.0189) Conversion RateC-R= 1.8927%
  13. 13. CONVERSION RATE EXAMPLE Our conversion rate of clicks to reach is 1.8927%, let’s look at purchases to clicks Reach 634 Clicks 12 Purchases 3 Total Spend $23.04 Let’s compare the second step of the funnel: of 12 people who clicked the ad, 3 purchased Conversion RateP-C =100(3/12) Conversion RateP-C =100(.2500) Conversion RateP-C =25%
  14. 14. SO WHAT DOES ALL THIS MEAN?
  15. 15. CONVERSION RATE - EXPLAINED • Let’s compare the two steps of the funnel right here • Conversion RateC-R= 1.8927% • Conversion RateP-C = 25.0000% • In this situation we know the people who click the ad have a high conversion rate • This data would suggest we would get a higher return on our time if we focused on increasing the 1.8927% reach to click step
  16. 16. CONVERSION RATE - EXPLAINED • The other conversion rate we focus on besides paid ads is the overall site • This again will give you data to support what part of your site you should focus on first • Typically we focus on the lowest converting part first and use problem solving/ testing to improve this • Here are our conversation rates on the site from the past 30 days
  17. 17. 3. AVERAGE ORDER VALUE (AOV) • Very straight forward, the average amount of money spent per order • We track AOV of our lifetime customers/ purchases as well as AOV of each release • AOV can easily be calculated by taking total sales/ # of customers • Example: $10,000 in sales made by 500 customers • AOV = $20
  18. 18. WHY WOULD AOV EVER CHANGE? • Certain months traditionally have a higher spend from consumers • Consumers order fewer shirts • Consumers favor lower priced items • You run a sale & lower the price
  19. 19. AVERAGE ORDER VALUE - EXPLAINED • Certain months traditionally have a higher spend from consumers • Consumers will spend more around “holiday season” typically around November - December • Consumers order fewer shirts • Consumers do not prefer some seasonal items that you are selling • Consumers favor lower priced items • Consumers would rather spend $20 on a tee rather than $60 on a hoodie • You run a sale & lower the price • You are now selling your product for less
  20. 20. AOV - NOTES • We do not put a huge emphasis on trying to change AOV • More importantly is how AOV relates to you CAC and other metrics we will cover later • Your online store should provide this data and calculate AOV for any window of time • Here is a snapshot from our Shopify storefront:
  21. 21. MARGINS • There are three different margins to consider • Product Margin • Gross Margin • Contribution Margin • Each one of these margins build off each other to give a deeper understanding
  22. 22. PRODUCT MARGIN • Product margin tells you how much you will make on each sale compared to how much it costs you • Time for some math!
  23. 23. PRODUCT MARGIN Below is some data from our product margins: Each shirt on average costs us $3.45 to make Our 2019 AOV from earlier is $48.77 𝑃𝑀 = 100 1 − 𝐶𝑂𝐺 𝐴𝑜𝑉 𝑃𝑀 = 100 1 − $3.45 $48.77 𝑃𝑀 = 100 1 − 0.0707 𝑃𝑀 = 100 0.9293 𝑃𝑀 = 92.93% Making 92.93% on every sale is freaking insane! However there are other factors that go into selling a shirt! How about marketing, discounts, packaging? This is where gross margin comes in at.
  24. 24. GROSS MARGIN • Gross margin considers some other variables that go into making sales • Gross Margin = Cost Of Sales / Gross Sales • Cost Of Sales (COS) is made up of • Cost of labor & other materials • Shipping • Packaging • Fulfillment
  25. 25. GROSS MARGIN Below is some data to calculate our gross margins: COS = $3.45 (average shirt total cost to produce) Shipping = $4.97 (average shipping cost) Packaging = $0.62 (average packaging material cost per order) Fulfillment = $0 (assuming you pack your own products. If a third party does this, add that cost here) Total Cost Per Item = $9.04 AOV = $48.77 𝐺𝑟𝑜𝑠𝑠 𝑀𝑎𝑟𝑔𝑖𝑛 = 100 𝐴𝑂𝑉 − 𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡 𝐴𝑂𝑉 𝐺𝑟𝑜𝑠𝑠 𝑀𝑎𝑟𝑔𝑖𝑛 = 100 $48.77 − $9.04 $48.77 𝐺𝑟𝑜𝑠𝑠 𝑀𝑎𝑟𝑔𝑖𝑛 = 100 $39.73 $48.77 𝐺𝑟𝑜𝑠𝑠 𝑀𝑎𝑟𝑔𝑖𝑛 = 100 0.8146 𝐺𝑟𝑜𝑠𝑠 𝑀𝑎𝑟𝑔𝑖𝑛 = 81.46%
  26. 26. CONTRIBUTION MARGIN • This is the margin that we pay attention to since this is what plays into the bottom line • This is the net profit once every cost is accounted for including discounts, refunds, etc…
  27. 27. CONTRIBUTION MARGIN Below is some data from our contribution margins: Gross Margin (AOV – Cost) = $39.73 Average Discount (from website data) = $0.26 𝐶𝑀 = 100 𝐺𝑀 − 𝐴𝑉𝐺 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝐴𝑂𝑉 𝐶𝑀 = 100 $39.73 − $0.26 $48.77 𝐶𝑀 = 100 $39.47 $48.77 𝐶𝑀 = 100 0.8093 𝐶𝑀 = 80.93%
  28. 28. CONTRIBUTION MARGIN – NOTES • We do not include merchant fees (CC processing) • We view this the same as overhead that is required to run the day to day business • We include discounts in the contribution margin • Some bands classify discounts as marketing and do not include them in margins • We add them in under contribution margin, so every penny is accounted for when looking at the bottom line of margins
  29. 29. EXAMPLE 1 PROBLEM STATEMENT As a brand we have decided it costs too much too much acquire new customers. We want to lower our Customer Acquisition Cost (CAC). IDEAS After a brainstorming session, the team has produced two ideas. 1) Optimize our ads with better targeting 2) Lower the price of shirts to attract more people
  30. 30. OPTION 1: OPTIMIZING AD TARGETING • Conversion Rate Increases • With better targeting we will reach more people who are interested in purchasing • CAC Decreases • We are spending the same amount but getting more conversions • AOV Stay The Same • Our average order size doesn’t change • Margins Stay The Same • We did not introduce any new costs
  31. 31. OPTION 2: LOWER PRICE • Conversion Rate Increases • With lower prices we assume more people will purchase • CAC Decreases • We are spending the same amount but getting more conversions • AOV Decreases • Less money is now being spent for the same amount of product • Margins Decreases • AOV dropped, we are now making less money per sale
  32. 32. EXAMPLE 1 RESULTS OPTIMIZE AD TARGETING We met our goal by decreasing CAC however our average order and margins did not move at all. This appears to be a better idea since two critical metrics increased while two remained constant LOWERING PRICE We met our goal by decreasing CAC. However as a team we need to debate if the loss of profit on the margins and AOV is worth the decreased CAC.
  33. 33. EXAMPLE 2 PROBLEM STATEMENT We have decided that our margins are too low. We want to increase the amount we make off each shirt IDEAS After a brainstorming session, the team has produced two ideas: 1) Increase the shirt price 2) Only ship in poly-mailers to decrease shipping cost
  34. 34. OPTION 1: INCREASE PRICE • Conversion Rate Decreases • Less people are willing to buy since the price is now higher • CAC Increases • We are spending the same amount but getting less conversions since fewer people are willing to pay more • AOV Increases • Same products that are bought on average now cost more • Margins Increases • The cost we put into the apparel is the same however we are getting more back with each sale
  35. 35. OPTION 2: DECREASE PACKAGING COST • Conversion Rate Stays The Same • Packaging does not influence buying decision in most cases • CAC Stays The Same • Still spending the same with the same results • AOV Stays The Same • People are still buying the same amount • Margins Increases • We have spent less on packaging so this drives the amount we make per sale up
  36. 36. EXAMPLE 2 RESULTS INCREASE PRICE We met our goal by increasing margins however our conversion rate and CAC increased. Does the increased cost of getting customers outweigh the benefits gained from better margins? DECREASE PACKAGING COST This appears to be a pure win since everything stayed the same except the increase in margins. What needs to be considered is the customer experience. Are we okay not using custom boxes and do we believe no customers will leave due to this?

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