[Step by Step] How Can My DTC Brand Compete with Established Brands?

Phillip: [00:00:15.84] Hello and welcome to Step by Step, a podcast by Future Commerce presented by Omnisend. Welcome to Season 4 of Step by Step. You are listening to Episode one of four. Today it is tougher than ever to attract an online shopper. It really feels like everywhere you turn, you have to spend more money. More money to acquire the customer. Then more money to earn back their loyalty to bring them back to the website. How do the big brands do it? How can a startup compete? How to direct to consumer brands get their feet under them when there's so many channels for customers today? And how do you make sense of all those channels? That's what this podcast is all about. If you're an independent retailer, if you're an eCommerce startup, if you're in direct to consumer, or you're a business that's bootstrapped that has no intent to exit... If you fall into any of those categories, this podcast series is for you. In this four part series, we're speaking with the founders of small and medium sized eCommerce brands to help you craft the ultimate multichannel customer journey to help leverage automation and take your marketing to the next level. You're going to acquire some customers, and we're going to teach you how. We're going to take you from zero to hero, Step by Step. Joining us today on the first episode of Season four of Step by Step is Rytis Lauris. Rytis is the Founder and CEO of Omnisend, and he's going to tell us how a DTC brand can compete with an established brand. It's a question that I've had for a long time. How do you fulfill every customer expectation in the modern age and do it when you're just getting started? It's a fascinating listen. I can't wait for you to hear it. So let's join Rytis as he teaches us how DTC can stand toe to toe with established brands Step by Step.

Phillip: [00:02:13.55] Today with us is the CEO and Co-Founder of Omnisend who is helping host this series. Mr. Rytis Lauris. Welcome to the show.

Rytis: [00:02:31.71] Hey. A pleasure to be here. And really great to talk to your listeners.

Brian: [00:02:36.24] Welcome.

Phillip: [00:02:36.53] Well, thank you. And we are going to answer a bunch of burning questions that I know businesses of all sizes have today. I mean, one of which is how can you use marketing automation to get more done with less? That's something we talk about all the time. How can you keep customers coming back for more and how can you retain customers? Those are things that I think Omnisend has a particular view in the world, particular viewpoint about, and don't want to take for granted that our listeners know who you are or what Omnisend is. So maybe you can give us a little bit of insight into both of those questions.

Rytis: [00:03:09.92] Yeah, absolutely so as you have already introduced me, I'm Co-Founder and CEO of Omnisend, and an entrepreneur myself. So I was running one or another business since I was twenty one. So for more than 15 years already. And the never actually was employed. So now Omnisend provides a service and help and money and run the business for people like myself. So that's what makes me super happy. And what Omnisend is, so we are marketing automation tool built for eCommerce. So anyone who's selling online, we help you to communicate with your customers while sending more relevant messages at the right time, right messages to your customers with email, SMS, or push notifications. So we're using different channels to better communicate with your customers.

Brian: [00:04:06.76] And a long time partner of Future Commerce. Thank you. We've loved working with you. The tool is super cool, and I just really applaud what you've been able to accomplish as a part of your business.

Rytis: [00:04:19.30] Likewise, Brian, it's a really great pleasure to work with you guys. And we believe, strongly believe, in the power of cooperation. So it's really great to work with you. And thanks for your kind words.

Phillip: [00:04:31.25] There's an interesting thing that we keep hearing about, which is this 2020 has been challenging for businesses everywhere, but in particular, we've seen the growth of eCommerce, but the overall sort of troubles in retail. I'm curious, from your vantage point, what do you think the biggest challenges that merchants face today in 2020 and maybe by way of which maybe that takes you into what can we automate to overcome some of those challenges?

Rytis: [00:05:04.39] Yeah, that's true. So 2020 is just absolutely unusual, and that's a fact and I believe with 2021 will be similarly challenging year for everybody. Doesn't matter when you are actually based. So it's a global challenge. And talking about the merchants or eCommerce businesses of online commerce businesses... So I would say there are three main challenges. First one is already existing businesses. The supply chains. The supply chains are broken at some time. And this is the challenge which already established eCommerce businesses still face. At the beginning with 2020 that probably was the peak. But currently, once we recording, the world is going into second wave, third wave in the United States, second wave in Europe. So definitely there will be more challenges like this that you have customers, you have people who are willing to buy from you, but you don't have what they want. So probably this is the first big challenge. The second big challenge is with demand. For certain categories the demand just got extremely, extremely down. Those who are serving all the hospitality industry. Those who serve in travel. We have some customers who reached out to us and say, look, we are producing backpacks for travelers. I mean, our turnaround went down dramatically. So this is probably the second challenge that not everyone is facing, but some are. And then we saw like this year, we have an account freeze, like at the record high rates when some of our customers are really growing because we sell online and eCommerce is growing. But at the same time, we have the record high account freeze attempts. That means that the customers are just freezing their accounts and not canceling. They're not going out of business, but they are pausing it. So this is the second challenge. And the third challenge I would see is really what you have mentioned already a bit. So a lot of traditional retailers are only now finally coming online and emphasizing their online presence much more, comparing to what they used to do. So definitely this finally transformation from offline retail, from standard retail or old school retail is happening currently. Before COVID, I was estimating that it's going to happen in seven to ten years. So now it's being super accelerated and it's going to happen in the coming two to three years. So that's what I'm thrilled to see. But at the same time, it's definitely a challenge for some of those who are selling online.

Brian: [00:07:56.39] Those are quite a set of challenges. My goodness, and some of them are opportunities, some of them are things that they have to be overcome. And I think that looking ahead and looking at what we've seen from Omnisend and other tools and different spaces, do you see automation being a way to help address some of these issues? For instance, the demand issue, being able to to sort of spark up additional demand or find additional audiences or markets or just the growth online. Do you find automation's going to be a solution for some of these things?

Rytis: [00:08:41.63] Yeah, definitely it will be. And it is. Mainly for two reasons. First, the first one is, as in times of uncertainty, from a business perspective, what happens is you want to be more conscious about your spending and about your expenses. So that automation is what allows you to eliminate, to minimize the need of manpower. And it's much more predictable. The cost for the tools are not going up that much. And you can cancel at any point. And it's much easier comparing to firing people. So that's the first thing where automation helps a lot. And then secondly, you asking about demand can increase demand? So what do we see from the customers, our consumers, end consumers, those who are buying from our customers during crisis, and this crisis is not an exception... People are willing more to buy from the brands they trust and they know. What does that mean? Communicating with your existing customer base is really what helps you increase and grow or at least keep the same demand level. It's becoming more and more difficult to attract new customers. But definitely retention is where you have to focus on. And marketing automation mainly is being used to retain your customers and to communicate with your existing customer base.

Phillip: [00:10:08.99] I think that there's been a lot of conversation around attracting new customers. Retention is often heralded as a great place to make some investments because you don't have to reacquire another customer or spend money to acquire a new customer. But you do spend money, right? To have tools that accomplish automation. There's a wealth of platforms that say that they do this. Without overselling Omnisend, you really focus on three types of engagements with the customer. And that's email, SMS, and notifications. Is that really all you need to have that sort of long recapture of the customer interest and have a relationship with the customer a lifetime, or is this just the beginning?

Rytis: [00:10:48.31] So again, those channels are kind of the most convenient now and the most effective now. And that might be more American channels and SMS was kind of seemed to be dead five years ago. And it was kind of a super spammy channel and there was no way to actually properly opt out and opt in to that channel. And now it's kind of becoming more and more popular, and the same with push notification. So we can really cover all of those channels one by one. But what I want to say, to react to what you said, but you have to both invest into retention, pay for tools, pay for channels, sending messages as well as for acquiring new customers. But I would like to emphasize what you have mentioned as well, like re-acquire customers. So it's way cheaper, way more cost effective once you communicate with your existing customers and once you have the permission from your customers to do that, comparing it to trying to acquire your customers through public channels. Facebook ads, Google ads, et cetera. So it's kind of way, way cheaper, like many times cheaper. That's why you have to focus more on really retaining your customers with the channels which are meant to retain customers, not to acquire new ones. It's a first thing. And definitely those free channels, email, text messages, and push notifications, which we are working on, are the most effective. And I'm super confident to tell that because we have delivered it to other channels, which we had. It was WhatsApp and Facebook Messenger, but we have discontinued supporting that because we saw those channels are not anyway closely effective to those free channels for those who do sell online for eCommerce marketing purposes. So that's like email, text messages, and push are the most effective channels. And I have some stats. So maybe it could be interesting for listeners. I can share.

Phillip: [00:13:05.26] Yeah.

Rytis: [00:13:05.26] So average click rate, which we see, we don't see open rates due to technical limitations, but click rate average rate for the basics, like almost 15%. And the conversion rate is more than 2%. So it has increased from 10% to 15% in one year. 2020 compared to 2019. So that's a huge uplift. And comparing to, let's say, campaigns, email campaigns. So average open rate of a campaign is somewhere around like 10%. So definitely SMS is more effective. That's great. And it's growing, effectiveness is growing. And what's good is that the list of subscribers is growing, which usually was the biggest challenge for the businesses, all of those who sell online. They have a huge subscriber list of email subscribers, a very tiny list of SMS subscribers and very timely stuff push notifications subscribers. So now businesses are more and more working equally to grow their subscriber base across different channels. And that's why they get better and better results from those different channels. And, of course, combining those channels on a single automations on customer life cycle journey, it's really what drives the best results.

Phillip: [00:14:40.71] So it's a combination of channels. Certainly there's no one channel that should be the center of all of the activity, but there does seem to be a lot of interest in SMS right now.

Brian: [00:14:52.17] Yeah.

Phillip: [00:14:52.38] I'm curious to what would you attribute the success of SMS adoption when so many folks were saying that SMS shouldn't be used for marketing purposes just four or five years ago? Are customers just more open to it now?

Rytis: [00:15:10.26] Yes, so much more confidence in ability to unsubscribe, and they think this is the key thing that has changed. Yeah, four or five years ago, it was technically no way to really unsubscribe. And it was really being used as a spam channel. Once you just acquire a list of phone numbers and you just start sending messages for the customers. So for the receivers, which have no clue from who they are receiving this message, and they have never subscribed. So once it has been converted to be used more like an email where you opt in. And it has been regulated throughout the world that just send text messages without the permission to receive is illegal. So [00:16:00.06] regulation, I would say, really helped in this case because customers are expressing proactively that, yes, I want to communicate. I want you as a brand, as a store to communicate with me. And I'm OK to do it by SMS. This is the first thing. And the second thing is that technical ability in the United States and Canada just reply "Stop." And that's how you unsubscribe. In a lot of countries, let's say, at Omnisend, we mandatory put the unsubscribe link in each and every text message you send out. So for the customer, for consumers it's so easy to unsubscribe, so they are much more confident in leaving a phone number for you as a marketer, for you as a brand. [00:16:40.65]

Brian: [00:17:57.34] Something you said a little earlier that I want to come back to you as well, which was you said reacquiring customers and retaining customers, this sort of absolutely key. This makes me think customer lifetime value is really where you're headed with this. And so as we look at the different industries and so on, how would you go about measuring and customer lifetime value? And you've brought up a bunch of different channels that are good for retaining and reacquiring customers. How would you say they play into that sort of like larger view of the customer?

Rytis: [00:18:36.20] Yeah, that's a great question. I like those questions. So lifetimes customer value is just a monetary monetary expression of what do you expect to earn from one specific particular customer or average customer of your business, which is important. But I would say kind of for a marketer what is even more important, which is attached to lifetime value, is lifecycle of your customer. So what does your customer actually do while he or she is with your brand? So once customer lifetime value is let's say one thousand bucks or so, and it's being spent in five purchases throughout 12 months or 24 months. So when does actually that happen from the moment that your potential customer lands to a website for first time till the time when he or she actually never gets back, which usually happens sometimes. It can happen after ten years. But the customers change and that turnaround exists. So lifecycle is very important. And I would say that's what we really advocate here at Omnisend. And I myself, I do that as well, that instead of as marketers... I mean, instead of thinking in campaigns, we have to think in customer lifecycle. So it's not me who wants to tell something. It's about what my customer, that individual customer, wants to hear from me now. And that's when automation gets in as well. That automation is [00:20:17.12]... The only effective way is actually to listen to the signals which your customers are sending and then send marketing messages at the right time because you just received the signal that your customer is interested in something. And that's how you personalize the content. That's how you make your messages much more relevant for the customers and then open rates boost and conversion rate boosts because those messages are much better received by your customers. [00:20:47.33]

Phillip: [00:20:49.97] I think this is the core of what every marketer is looking for, and I think the question always comes back to, especially in small and medium sized businesses, how can you be truly adept at marketing and speaking one to one with a customer when you wear so many hats or when you balance so many things? It's one thing if all you do is think about full time, just playing devil's advocate here. But the idea that if that's all you could think about is how you create and craft the right message for the right customer at the right time and put it into a platform that automates all of that, certainly it's possible... The capabilities out there. There are plenty of ways that we've done that over the last 10 years as eCommerce has grown. But what if that isn't your full time job? What if you have other things you have to do? How are you trying to solve for that when building a brand new automation platform? Because someone could say, hey, I have tools that do this today. I also have people that I pay to plug that stuff into those tools.

Rytis: [00:22:03.92] Yeah, yeah. That's a very good question. So once anyone is kind of launching the business, so actually it's where the automation could help. And we see now nowadays a lot of people, all very small, very, very nimble, very tiny teams which are launching and running and growing great businesses. And probably the best examples like the boost of Shopify and the explosion of how many. There are millions of online stores, which you could not imagine began five or 10 years ago that everyone could start their business as a side hustle maybe initially, but a lot of them become successful and that's what they convert into their lifestyle business or maybe even into the company. So this is where actually automation helps a lot. And just a simple example. In order to prepare proper email campaign, you need visuals, you need copy, you need maybe a segment of customers. So, of course, you can send to subscribers, but at least copy and visuals you need and you have to spend some time to set the campaign. But you need almost at the same time to launch automation. And you do it once and you forget it. You just set and forget. And you sleep, and tools like Omnisend or similar to us do the job. You don't need to to kind of every day, every week to run a new campaign and new campaign and new campaign. So [00:23:51.38] of course, initially you invest a bit more of your time and maybe effort to launch those automations, but then you get much better results. And the revenue being generated through automated messages like emails, text messages, push notifications is like increasing dramatically. [00:24:09.83] And we ran a bit of research about our customers. So in the past 12 months, 26% of email conversions were generated by automated emails. And the lift of this was huge as well. I mean, so it was around 90%. So automation is becoming more and more effective. And for some comparison, a standard campaign, once you send manually on average across our customer base, it has around 11% open rate. As like product abandonment has 51% open rate. Car abandonment has 30% open rate. And browse abandon rate has 26% open rate. For purchase campaigns, we have 25% open rate, etc., etc.. So what does that mean? That you just automate throughout customer lifecycle, starting with welcome, birthday greetings, abandonment, browse product abandonments, plus purchase campaigns, customer activation campaigns. So you invest a bit of time initially and then you just forget and you earn money. Well I mean tools are earning money for you while you are taking care of first making the best product.

Brian: [00:25:48.28] Man, it sounds like automation is like king here, like the machines are taking over. {laughter} But actually my question there is I mean, it's clear there are certain things where, like automation makes a ton of sense. And it's resulting in a lot of really, really beneficial things for SMBs and even large businesses. But are there things that shouldn't be automated versus like... What should be automated versus what shouldn't be automated?

Rytis: [00:26:18.90] Yeah. So I would say you should automate the timing and then and segments, to whom to send what. So that's what should be automated at a high level and what should not be automated is probably creativity. Like copy, design, look and feel, what actually your brand, what your product, what your service stands for. How do you position yourselves? How do you communicate with your customers? So that's what could not be automated, probably that sort of thing.

Phillip: [00:27:03.69] Wow.

Brian: [00:27:04.35] Makes a ton of sense.

Phillip: [00:27:04.35] So I have never heard a company that focuses so, so much on automation, talk about not automating creativity. I love that because I think that's the human piece of the story.

Brian: [00:27:18.48] Yeah.

Phillip: [00:27:18.63] And we're going to speak with so many people who have done this in this series. I think of of Kaylin, of Jiggy Puzzles and how she's taken all of that wealth of creative and she has created a way for her to continue to be in front of the customer while she is away developing new partnerships and developing new products and supporting artists. And so she's doing the things she wants to do and not necessarily the things that a full time marketer would have to do. I find that so fascinating.

Rytis: [00:27:51.58] Yeah, they're a good example. And and kind of even more and more people like her in the market and that's true. And even large companies more and more operating like individuals. And one of the examples we have a customer like Unilever, which you would say, OK, Unilever, it's a giant corporation, probably so bureaucratic, et cetera. But what they have done, they have launched separate but very autonomous DTC brands. And those DTC operations are being run by small, nimble teams. And they have a lot of autonomy. They make their own decisions. They have a separate profit loss, and then they make decisions on where to invest time and money, et cetera. And the idea it really is small teams of small businesses. This is just the trend which is going all the way from from like creative nomads to even large corporations, which are trying to de-corporate themselves and start behaving more like getting closer to the customers and to the natural human behavior and becoming humans again instead of just corporations.

Phillip: [00:29:15.02] So, I mean, I was going to ask you, who is the ideal customer? It sounds like you've given two extremes there. It sounds like ideally it's somebody who is looking to focus more on creative and less on a day to day sort of menial tasks, putting more into the marketing channel that can be driven on a more intelligent schedule or more intelligent channel, even channel selection.

Rytis: [00:29:45.14] Yeah. Yeah, so that's true. And for us, how we define for Omnisend, like [00:29:50.19] our ideal customers are those who are willing to get 80% results while putting 20% of effort. [00:29:55.94] That's how we define it internally. So we simplify things. We bring to value, but of course if you want to accomplish like 100% of the results, hire data analysts, go with complicated tools. And that's what you can do for sure. But our target is those who always have not enough time to do everything and they are ok with getting like 80% of potential results based on the data we have about their business, about their customers and the best practices we collect throughout our customer base and then codify and bring into a product.

Brian: [00:30:40.61] Mm hmm. Let me ask you a question. So you're a Founder and you've worked in startups. And so I was curious, what challenges do your customers, particularly your SMB customers and startups, face? What is similar or what is dissimilar for the challenges that you're facing versus some of the ones that some of your customers are facing?

Rytis: [00:31:06.96] So that's probably running or starting any business, there are a lot of similarities here and that's for sure. And then, of course, once talking about probably from the business side, we have a lot of similar challenges. And probably the key challenge is really finding product market fit to tell if you are building something unique. So really to find who is willing to use your product? Is there a need in the market for the product or service you are offering? So I would say this is probably the biggest challenge any business has to overcome at the initial phase. If we're talking about marketing, probably, again, retention is a huge similarity for our customers who are eCommerce businesses, as we have already emphasized. It's way cheaper to retain existing customers competing to acquire new ones. For us as a software service business, as a sales business, it's exactly the same. We really love seeing our customers spending years and years with our platform instead of trying to acquire new ones every month without losing old ones. So kind of focus on existing customer base and their retention and their repeated purchase. I believe that's a huge similarity as well. And personally myself, I believe that this is a huge potential success factor for the future. Just have happy customers and solve their either problems, if you're a serving the business. Just like bring them some joy if you are selling for end customers, maybe you're selling something which is creating some joy for them, which actually makes them smile.

Phillip: [00:33:03.63] Wow. OK, making people smile through more automation. I love this idea. Brian, we have a lot of ground we're going to cover in this series. What are some of the other questions that you anticipate that we'll be answering with more interviews here?

Brian: [00:33:20.37] Yeah, I'm super excited. Obviously, we're going to be talking a lot about how to use automation to get more done with less. And I'm really excited looking ahead, like you mentioned to Jiggy and To'ak Chocolate and a bunch of other merchants that I think are going to have really, really, really cool things to say. Naked & Famous. We are also going to ask questions like, how do you build a marketing budget while maintaining a healthy margin? How and when should you start to partner with agencies or consultants? And how can I retain my existing customers and keep them coming back for more? These are questions and many more like them that we're going to be diving into with just an incredible set of merchants. And I'm really, really looking forward to these conversations.

Phillip: [00:34:07.86] Rytis, I'll give you the last word. Any other thoughts or advice that you might have for listeners who are embarking on this journey for the first time or are part of a new initiative inside of their larger organization who are trying to get more done with less?

Rytis: [00:34:25.39]  [00:34:24.93]Start small. I would say, for those who are starting. And then go from there. I've seen kind of many, many times, it doesn't matter if it's eCommerce or other kind of business, it doesn't matter if it's about launching a product or starting marketing campaigns, automating things... We sometimes, by we I mean human being, we convert it into very, very huge initiatives. So huge projects. So I'm a huge fan of iterative approach, of an agile approach. So we just start doing things, start small, and then you take from that and you learn a lot of lessons down the road. And then each other step you make brings you closer to the dream, whatever you want to launch or accomplish. [00:35:17.42]

Phillip: [00:35:18.18] Well said.

Brian: [00:35:19.56] Yeah.

Phillip: [00:35:20.37] Awesome. Well, thank you so much, Rytis, for joining us. Thank you for starting on this journey. This series is going to be amazing and will be such a great time to hear from businesses of all sizes that are learning how to do more with less.

Phillip: [00:35:38.79] Well, thank you so much for Rytis for joining us. And thank you for listening and getting started on this four part series, I want to know, what are you doing to automate the next level of your business? How are you going to engage with customers and do more with less? Drop me a line. Let me know how you're doing that at hello@FutureCommerce.fm. If you want more Step by Step, this is the fourth season. You can go back and listen through the whole of the archives by visiting FutureCommerce.fm/StepbyStep. And as always, we want to thank our sponsor, our partner in Omnisend, who is helping you take your automation to the next level. I want you to give them a visit and get your marketing on autopilot. Do more with less. And you can do that right now by visiting Omnisend.com/FutureCommerce. Stay tuned for Tuesday's episode, our very next episode, where we sit down with Bahzad Trinos, who is the Chief Denim Otaku at Naked & Famous Jeans. It's going to be an awesome listen. I can't wait for you to check it out. Well that's it. Thank you for listening to Step by Step, and we'll see you in Episode Two of Season Four.

‍