Hi DTC folks,

This week we talk about why low CPMs are nothing to be proud of and share insights tailored for beauty and cosmetic brands.

Let's go.

Featured: Low CPMs are nothing to be proud of.

You might just be burning money 🔥 💵 ...

That's a huge waste of time (and money)....

HOW IT REALLY WORKS

Basically, every ad has a price based on who it is delivered to.

The price for this impression has nothing to do with the expected conversion rate of the recipient. THEIR currency is impressions! No matter what conversion goal YOU have.

But none of your account managers will tell you this ...

So what do low CPMs mean?

Usually nothing other than that you are serving ads to a demographic where there is little competition. In most cases, these are low quality audiences that do not drive purchases from other advertisers.

The more polarizing and broadly interesting your ad is, the more of these users you will reach at low CPMs.

Low CPM campaigns have significantly:

• Lower AOV

• Lower repeat purchase rates

• Lower LTV

• Higher abandonment, cancels & fraud

Many advertisers make the mistake of thinking that the first step is to create a polarizing ad with a high click-through rate at a low CPM, and then fix conversion and customer quality on the way.

But the flaw is that this becomes impossible if the ad is too far away from the brand value you want to sell or the action you want to drive.

For example, many proudly show how many thousands of leads & email signups they get from such campaigns – but the sad truth is that the quality of those leads is disastrous.

The lower the bar, the worse of audience Meta will target.

Another common attempt is to tailor the offer to this audience by creating an loss leader offer and then hoping to educate customers over time.

This approach combined with scaling leads to brands burning millions only to wake up with a bunch of poor quality customers whose costs will never be recovered.→

HOW TO FIX IT

By throwing out all your assumptions and doing a new calculation:

• What is my ICP (ideal customer profile) that resonates with my brand?

• What is the cost of acquiring an ICP customer?

• Will my business model still work with these new assumptions?

• Do I have to make adjustments?

Temu of course can go after that low CPM audience that nobody else wants to target because their barrier to purchase is minimal. They don't care about returns and stuff like that.

Would you rather spend $100 on a customer that brings you $200 in profit, or $50 on a customer that brings you $50 in profit?

Too many brands still act like the latter because they think that's how you scale fast.

But the truth is, scaling comes from repeat business. You need consistently increasing monthly revenue from your existing customer base for customer acquisition to lead to growth, otherwise you are just exchanging money.

So rethink your customer acquisition.

With RetentionX, we can help you answer these questions.

Five key insights tailored for beauty and cosmetic brands 👇

1. Repeat Purchase Behavior

Customers who purchase skin care products are 50% more likely to repurchase within the first three months compared to other beauty categories.

Focus on building skin care loyalty by offering personalized follow-up emails with skin care tips, routine suggestions and product recommendations.

Brands like Clinique use this tactic to encourage repeat purchases.

2. Subscription Retention Rates

Beauty subscription customers have a 60% higher retention rate than one-time buyers, with an average subscription length of 10 months.

Focus on converting one-time buyers into subscribers by offering initial discounts, exclusive products, and rewards for long-term commitment.

3. Customer Lifetime Value (LTV)

Customers who make their second purchase within 45 days of their first have a CLV that is 3 times higher than those who take longer.Implement targeted follow-up campaigns to encourage a quick second purchase, such as offering a discount on the next order within a specified timeframe.

Glossier, Inc. uses personalized email follow-ups to encourage additional purchases soon after the initial order.

4. Impact of Limited Edition Releases

Limited-edition beauty products generate 40% higher AOV and sell 25% faster than regular products

Regularly introduce limited edition products or seasonal collections to create excitement and urgency.

Brands like MAC Cosmetics frequently release limited edition lines that become highly sought after.

5. Effectiveness of Free Samples

Customers who receive free samples with their orders are up to 50% more likely to make repeat purchases within three months.Include free samples of complementary products with every order to encourage customers to try and buy new products.

Brands like Dermalogica use free samples to introduce customers to new products and encourage repeat purchases.

Industry News

🪷 New textured haircare brand LOBIE launched on Shopify

Model Anastasia MacKay has launched her own haircare brand, LOBIE, which is set to revolutionize the textured haircare space. The brand debuts with just one SKU, the Peptide Leave In Mask.

👗 Revolve Group acquires majority stake in luxury label Alexandre Vauthier

Fashion retailer Revolve has acquired a majority stake in French luxury brand Alexandre Vauthier . As part of the transaction, Revolve Group will contribute the acquired assets to a newly formed entity and invest €6 million ($9.67 million) over three years. Additional terms of the transaction were not disclosed.

🧴 Fitness expert Tracy Anderson launches her own fragrance

Celebrity fragrances are booming! Trainer to the stars Tracy Anderson is expanding her wellness empire with the launch of her debut fragrance under her fitness brand, HeartStone.

🕰️ LVMH acquires Swiss clock manufacturer L’Epée 1839

Luxury goods giant LVMH has acquired Swiza SA, owner of high-end watchmaker L’Epée 1839 . The acquisition strengthens LVMH's position in the luxury watch market and complements its portfolio of prestigious watch brands such as TAG Heuer, Hublot and Zenith. Financial terms of the transaction were not disclosed.

That’s it for this week!

Any questions or topics you'd like to see me cover in the future? Just shoot me a DM or an email!

Cheers,

Alex

P.S.: Don't forget to check this out 👇

Maximize your Profits per Customer with RetentionX!

Ready to take your DTC brand to the next level? Book a demo with us today and discover how RetentionX can transform your data into actionable insights that significantly enhance customer retention, optimize acquisition, and increase the profit for per customer. Visit the Shopify App Store to download the RetentionX app and start your journey towards higher customer retention and increased revenue.