Will this brand hit a growth ceiling soon?

Is current growth based on strong brand/product fundamentals?

A VC friend evaluating digital first brands raising Series A/B wanted to look at marketing metrics beyond LTV/CAC to answer these questions

10 metrics that can help

1. Total Media Spends

Media Spends as a % of net revenue is a very hard metric without any assumptions and difficult to manipulate

Plot Monthly Data for total Media spends across platforms ( Amazon, FB, Google etc) as a percentage of total Net E-commerce Revenue( Marketplaces, D2C etc)

If this remains constant/reduces as the brand scales, it is a positive

2. Advertising driven Sales

At early stages, brands rely on pure performance marketing to drive sales

But this reliance should come down as the brand scales

Plot Monthly Data for percentage of Sales on e-commerce platforms directly driven by Ecom Ads, and percentage of sales on D2C directly driven by paid media

If both remain constant/reduces as the brand scales, it is a positive

3. Organic Visits and Brand Searches

For consumer brands, it is important to reduce their reliance on performance marketing by working on organic acquisition channels and improving brand awareness

Tracking Organic Visits and brand search volumes are good ways to understand this

Plot Monthly data for Percentage of Visits in Website which are Organic, and plot monthly brand search volumes on Amazon and Google

If both metrics keep increasing, it is a positive

4. Amazon Reviews and Ratings

At scale, Amazon Reviews and Ratings are very difficult to game and gives a very true picture of quality and customer experience

Rather than overall ratings and reviews, plot the monthly data of ratings

Often early adopters are more considerate and rate innovative products highly.

But if the monthly ratings remain consistently high with growing scale, it means the products are really good

5. Conversion Rates

Conversion rates trends tell a lot about product-price-market-fit, and about the future scope of growth

Look at monthly trends on conversion rates. With scale, conversion rates should go up on both Amazon and D2C

A lowering conversion rate often means the in-market audience/core affinity TG is getting exhausted

It is a big red flag if it happens as, it often indicates that future growth by paid media is going to be difficult and expensive

6. Repeats

Repeat purchases are often the difference between the life and death for CPG brands with AOV on the lower side

Look at monthly data on M1 and M3 repeats depending on the consumption cycle

If these numbers keep on improving/keeps constant even when the brand moves and scales beyond its early adopters and core affinity TG, it is a big positive as it indicates product market fit at a bigger scale

7. Discount Driven Sales

Every brand has Gross Margins calculated basis certain pricing. Discounts on top of the MOP are quite common as a lot of e-commerce is deal driven

But the metric of Total discounted sales volume /Total sales volume gives a good idea of the brand’s reliance on discounts to drive sales

This number should remain constant/come down as the brand scales

8. Price Increase Absorption History

This is another thing that tells the brand’s pricing power.

Plot the weekly conversion rate data post every price increase

If the conversion rates get back to old levels within few weeks of a price increases, it highlights excellent brand and product strength which will translate to pricing power and better margins in future

9. Share of Spends/Market Share

Plot the digital media spends for all the players in the category. From this, plot the Share of Spends for the brand.

Since we would have an approximate idea of the brand’s market share, plot the ratio of Share of Spends/Market Share

A ratio of SOS/SOM less than 1 is ideal. If the number is lower than 1, it means the brand can spend more money to capture more customers

If high, then the brand will need to look at other problems to fix like conversion rates etc

10. Total Awareness/Market Share

The previous 9 metrics can be easily pulled out from public tools and different Amazon/Google/Analytics reports accessible to the brand

But this metric will require an online brand track

Commission an online brand track to plot the awareness metrics for the core TG defined for all players in the category

From that, calculate the Total Awareness/Market Share metric for each brand

For Eg in a hypothetical scenario, lets say that the market leader of the category has total awareness of 80% and Market share of 20%

So, the Total Awareness/Market Share Ratio is 4 which becomes a benchmark

For the brand in question, if this number is lower or similar to the benchmark( say total awareness of 15% and market share of 5%), it means there is an opportunity to increase market share easily by increasing brand awareness by increasing spends on media

But if it its other way around( say total awareness of 50% and market share of 5%), future growth will not be straightforward and brand will hit a ceiling soon

Put together, these 10 metrics gives a good idea of the brand’s

– Product Price Market Fit – Digitally Influenced TG Market Size – Customer Love – Pricing Power – Scope of Future Growth by Increasing Brand Awareness – Marketing Execution Effectiveness

These metrics should be useful not just for VCs, but also for founders to track their fundamentals and to ensure they won’t be hitting a growth ceiling without seeing it coming