Growth Model Design project | ShopDeck
Objective: Create a growth strategy and action plan for a hypothetical D2C brand, ABC, which specializes in eco-friendly home decor products.
Revenue Target: Increase ARR from $500k to $1M
Constraint Metrics:
1. Avg CAC: $60 -> $35
2. Conversion Rate (Website): 2% -> 4%
3. Monthly Subscription (New introduction): $0 -> $50k
Given:
Monthly Revenue: $40K
Customer Base: 3,000 repeat buyers and 8,000 one-time buyers
Key Channels: Shopdeck storefront, Instagram & Fb
Assumptions
1. The D2C brand is in the early-scaling stage and has achieved PMF
2. Resurrection rate for the business - 2%
3. Churned user ?
4. User growth MoM?
Growth Equation
NSM: Revenue
Total Revenue = Product Revenue + Subscription
Ideally, suppose I assume that the product is at early-scaling stage considering the revenue. In that case, the NSM should be focused on monthly orders, which truly signifies growth as a transactional business.
Why? As it shows that we are getting a good repeat, and that our product is truly in demand.
Total Monthly Orders = # monthly users * Avg monthly orders/user
Total Users = f {New, Retained, Resurrected}
Product revenue = Total Paying Customers * AOV
=> Total Paying Customers = f {New, Retained, Resurrected}
=> New - Paying for first time = f (organic, referral, paid}
For new users
Breakdown:
⇒ Organic users = f{WOM, content/social, PR, SEO}
Orgnic→ users landing on play store → % store conversion rate → installing swiggy → %activation rate → # users placing order
⇒ Referral = f{%users hitting the aha moment} → %referral discovery rate → f{%users discovering the referral program} → % referral link click through (CTR) → f{%users sharing the referral link} → %app store conversion → f{%users successfully signing up}
⇒ Paid = f{#impressions served} → % CTR→ f{#clicks on ads} → % clicks to store land → f{#users landing on play store} → % app store conversions → f{%users successfully signing up} → %activation rate → f{%users placing order}
=> Retained - Constantly pay you at the defined natural frequency = f {total existing cust * retention rate}
=> Resurrected - A churned user who comes back = f {churned base * resurrection rate}
=> Given:
- Monthly revenue = $40k
- Total Paying customers = 3k + 8k = 11k
- Hence, AOV = $3.6
The user definition can further be divided by casual, core, power, and basis that their frequency can be considered.
New Revenue Lever
Subscription revenue = No. of paid subscribers * avg subscription value * avg no. of payments in a year
=> Given: Target revenue = $50k
I would question the requirement of a subscription model at this stage of the business and if this is the most suitable solution for the given product.
Calculating Nuke Scenario
What is nuke scenario?
-> It is a hypothetical scenario to understand the condition of the business if there is no further acquisition in the business. This helps us understand the health of the business, and validate, if we have good retention in the product or not.
Given:
-> Current user base = 11k
-> Monthly Retention rate = 3k/11k are repeat users = 27%
Churned user count?
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