The economics of direct-to-consumer brands

Tom Foster writing for Inc.:

The key to making the economics of DTC companies work is balancing acquisition costs with a customer’s life­time value–how much the average cus­tomer spends on the company’s products over the long term. There are generally two ways DTC companies try to do this. Those that offer expensive products that customers aren’t likely to purchase frequently (a $295 suitcase, a $1,000 mattress) must be profitable on the first sale, and try to keep customers coming back by rolling out accessories or new product lines. Those that sell inexpensive items (razors, toothbrushes, socks) must try to lock in customers for repeat pur­chases, which many try to do through subscriptions.

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