How to use customer data to reduce cost per acquisition and increase customer lifetime value
Madison Ruggieri is the co-founder of Onekind, a beauty brand dedicated to fighting the pink tax (aka that arbitrary amount of money added to products just because they’re made for women) and doing so in a way that provides amazing skincare products to consumers that are clean, work as well as top of the line luxury skincare and are built by and for the customer from day one.
In 2010, Madison and her brother Matt set out to change the men’s skincare industry by creating a luxury line of products that was priced above what was traditionally being done in men’s skincare. This led to the discovery that even on the highest end of men’s care, women were spending on average twice as much and in many cases far more than men on products that didn’t tout better ingredients or efficacy, but in many cases were the same quality, just at a higher price point. Now, she and her brother Matt are now the masterminds behind not one, not two but four skincare brands upending the traditional skincare market, and making their own rules.
I’m personally obsessed with OneKind and exclusively use their Dream Cream & Midnight Magic PM Serum, aka the PM Power Couple, plus I am head over heels for their Mega Multitasker All-day Moisturizer. It was such an honor to be able to sit down with Madison Ruggieri on this episode of PM School.
If you love this episode or recipe for success in business, then you will probably love Madison’s actual recipe for her family’s homemade marinara sauce, perfect to go atop of your favorite pasta and served right up to someone you love.
The Challenge —
In brand marketing, we talk a lot about Customer Lifetime Value (CLV aka how much money a customer spends with you over the course of the time they buy your product) and Cost Per Acquisition (CPA aka how much you have to spend in marketing dollars in order to acquire that customer for the first time).
Any good marketer (or entrepreneur) knows you want to spend as little as possible (low CPA), in order to gain as much as possible (high CLV). One of the things many venture-backed over-funded DTC businesses of yesteryear to this day struggle with was is having too high a cost to acquire new customers, and too low of lifetime value.
During the pre-IOS update, direct-to-consumer (DTC) boom (think Outdoor Voices, Away, etc.), it felt like pretty much every single DTC business was going to the moon, valuations were sky high and VCs pumped money into these companies, only making the bubble (and the appeal to start your own DTC biz) bigger.
When the Apple IOS update happened, the DTC bubble quickly burst, as the cost of digital ads went up, because if you didn’t have 1) a great, sticky, product, and 2) the money to keep pumping ads, you were quickly forgotten, and as a result, customer lifetime values plummeted.
As a business, when your CPA:CLV ratio gets out of whack, you are forced to reckon with some tough business decisions:
make a better product that consumers actually want, which takes time
raise money so you can pump dollars into advertising in hopes that the law of averages will bring your customer lifetime value up to what you projected on paper, which if your product isn’t great, good luck
raise prices to offset the cost per acquisition, which may ostracize your existing customer base
or, reduce costs while trying to sustain product quality, which layoffs and other cost-cutting measures can impact your brand equity negatively
We saw the cost of this reckoning on aforementioned brands, like Outdoor Voices (once the darling of the DTC movement), as they fell from grace due to over-inflated inventories, fickle customer loyalty, and the sky-rocketing cost of digital ads.
Okay, so what does all this mean for you? That leads me to Madison’s recipe for success. Her and her brother took things slow and steady, and they’ve built an incredible, profitable, and growing business as a result.
Madison’s Recipe for Success —
First — Madison and her brother built a small e-commerce site that sold a curated selection of affordable luxury skincare goods. In building this curated e-tail business they accomplished a few things: 1) they learned what customers bought and didn’t buy, 2) they learned what customers liked and disliked about what they bought, and 3) they built relationships with influential people in the affordable luxury skincare market, relationships they could lean on as they moved into the next stage of their business.
Next — With all the customer data they collected from being an e-tailer, they identified whitespace for a product that neither they, nor their customers could find on the market, a hand cream that was moisturizing and nourishing but which didn’t leave a residue nor scent on hands. They then formulated their own version of this product, by leaning on the key industry relationships they’d built to help formulate, as well as their existing customers to try and give feedback on the product they were formulating.
Then — With a great product created from customer feedback and an existing customer base to market to, they launched their first product to people they already had sold product to, and customers loved it. With customers gushing over the quality of the product, the product “stuck” and revenues grew as word-of-mouth marketing spread. With growing revenues, Madison and her brother were able to re-invest profits into the business, formulating and launching additional products to a growing customer base of brand loyalists.
Finally — The duo continued to rinse and repeat this process, over the course of time launching 3 additional brands based on customer feedback and growing profitably through COVID, the IOS update, and still to this day. They’ve built trusting relationships with customers, like me, who’ve been on a monthly subscription with the brand since 2019 and will try virtually every new product they launch at least once. I don’t even want to know what my customer lifetime value is — yeesh! Lol! An incredible success story for a bootstrapped skincare brand.
So what can you learn from this story?
Enjoy —
Enjoying the spoils of a well-built, profitable business that delivers insanely good products to customers who need them is more rare than you’d expect.
If you’re thinking about building something, think about how you can leverage consumer data to make the best product possible.
How can you let customer data and consumer feedback confirm or deny early hypotheses you may hold about the space you are building in?
Are there ways you can get customers to vote with their dollars sooner rather than later to help you understand what they will actually buy?
… Customers are fickle and many times what they say and what they do (when $ is involved) are very, very different things.
I hope this recipe for success gave you something to noodle on as you think about starting your own business or helping the one you work for optimize their go-to-market strategy.
Cheers!
Stef
