How One 8 Figure Business Barely Broke Even

Revenue growth is the primary focus for most companies. These days, brands have access to an amazing amount of metrics, giving companies a tremendous sense of control when it comes to throttling their sales. But digital marketing is a slippery slope - this focus on growth leads to many companies loosing sight of their brand.

I met with Joe, the owner of an apparel brand looking to grow his business. Despite some the huge changes they made in the past year, they had successfully reached over $1 million in monthly sales - not bad.  With approximately $12-15 million in annual sales, majority of their revenue was coming through their website. And while they had a significant fan-base - the primary source of their traffic was coming from social media advertising.

They had recently experienced an inventory issue that left a large number of customers unhappy - so Joe was feeling a bit desperate to “recoup” some of their losses.

Joe had a digital agency; a new web developer to make changes to their website; a new COO to implement new inventory management software; a new creative director to help them with their visual direction, and they were establishing a customer service department.

At first glance, it appeared that he had filled most of the “holes” - so I posed the question - “What do you need from me?”

“I need help with increasing conversion” he said.

Their website was getting significant traffic - but the conversion rate was not so great considering the amount of ad spend.

But this single statement revealed two MAJOR red flags.

FIRST, the primary challenge with this ask was that Joe had already made multiple hires started implementing change for elements that shape the customer purchase process. To put it simply, he was thinking of “conversion” (i.e. generating revenue) in isolation.

Just like the brand experience as a whole, a customer purchase is the sum of all parts. Each element shapes the customer’s perception, desirability, expectation, level of trust, and ultimately their decision to make a purchase or not. 

SECOND, you might be asking - why does he want to drive more sales? Isn’t he already doing great? 

Well, after some significant digging - it turned out that they were celebrating the numbers but not doing the math. 

What does that mean? That means that they while their sales numbers looked great - they were spending so much on customer acquisition that they barely broke even.

Prioritizing sales growth isn’t a bad thing - but it is important thing to understand that (aside from profits not being healthy) compromising your brand is like playing the short game. If you want your business to have longevity, you have to build brand equity. 

Why does brand equity matter when we’re talking about revenue?

Because when you focus on revenue generation - many brands loose sight of developing an emotional connection with their customers.

This means that when you turn the ad spend off, or stop offering that great competitive pricing, you can count on customers having little to no brand loyalty.

Don’t make this mistake. Make sure you build strong brand equity so your customers have more reason than one to coming back.