What causes exponential growth? (E156)

• Dr. James Richardson
• Founder of Premium Growth Solutions

Sponsors:

• Prisync
• Spark Shipping

Links:

• Ramping Your Brand
• Premium Growth Solutions

Bio:

Dr. Richardson is the founder of Premium Growth Solutions,
a strategic planning consultancy for early-stage consumer- packaged goods brands. As a professionally trained cultural anthropologist turned business strategist, he has helped more than 75 CPG brands with their strategic planning, including brands owned by Coca-Cola Venturing and Emerging Brands, The Hershey Company, General Mills, Kraft Foods, ConAgra Brands, and Frito-Lay as well as emerging brands such as Once Upon a Farm, Peatos, Ithaca Hummus, Mother Kombucha, Rebel Creamery, zaca recovery, and others.

James is the author of Ramping Your Brand: How to Ride the Killer CPG Growth Curve, the #1 Best-seller in Business Consulting on Amazon. He also hosts his own podcast—Startup Confidential, and his thoughts appear regularly in industry publications such as Foodnavigator.

Transcript:

Charles (00:00):

In this episode of the Business of eCommerce. I talk with Dr. James Richardson about what causes exponential growth. This is a business of eCommerce episode, 157.

Charles (00:20):

Welcome to the business. E-Commerce the show that helps e-commerce retailers start launch and grow the e-commerce business. I’m your host, Charles Palleschi. And I’m here today with Dr. James Richardson. James is the founder of premium growth solutions, a strategic planning consultancy for early stage consumer packaged good brands as a professionally trained cultural anthropologist turned business strategist. He has helped wasn’t 75 CPG brands with the strategic plans. Some of those brands include read them off air Hershey’s general mills, Kraft food. Frito-Lay a list goes on how he’s helped a lot of brands. And he’s super interesting take on growing the business and what to really focus your time and attention on. And I think that’s the big thing here on. If you really want to double down, he kind of talks about here’s the exact segment and here’s how you should find that segment and who should be focusing on. So I think that part’s super helpful on really kind of nailing who to focus on if you want to be able to really scale your business and see that year over year exponential growth. So let’s get into the show and I think he has some great tips. Also, he links to his book at the end that we’ll link in the show notes. So let’s check that out. So, Hey James, how you doing today?

James (01:32):

I’m good. How are you doing Charles?

Charles (01:34):

I’m good. Awesome. To have you on the show to dig into this topic a bit, we’re talking earlier about exponential growth and how there’s some DCC brands that seem to get it and others wish they got it and others never do. And it seems to be this like magic formula people think, but you’ve kind of talked about this a bit. So curious to kinda get your thoughts on that.

James (01:59):

Yeah, so I I do work with a mix Adidas C and retail only brands, but I think what I, what we were just chatting about, I think before we hit record, was that I meet a lot of DTC folks who thanks to the internet itself are well-versed in all the KPIs of D to C business management. And they’re, they’re drowning in data and lifetime value and average order value and all this stuff. They try to measure the health of their business purely within the context of those data points, which are coming in through Shopify essentially. But they’re not necessarily asking at any point, even if they’re doing well, which is actually just as important. And in my view asking why, why are people repeating what behavioral is attracting them to like constant purchase on a monthly basis or weekly basis, if you’re really lucky and you’re able to sell like drinks to people or stuff.

James (03:00):

But I mean, if you’re not asking the question, why are people repeating? It’s going to be very hard Charles to put together any kind of like marketing playbook, whether that marketing is purely online or online and offline that is going to have the right messaging and have the right symbolism to find, to create more of those repeaters out there in the universe. Right? Yeah. In other words, so there’s two basic, there’s two basic approaches to fast growth. And I think D to C you’ve seen it too. I’m sure in your client base is basically they’re sorta raise a bunch of cash and buy a ton of trial through, through newsfeed ads and just, just ramp the trial up through the roof. And if I get repeat well, that’s, that’s okay. But yeah,

Charles (03:50):

That’s the the star, you kind of just juice the numbers and if you’ve got to have people coming to the site, you know, you know, you’re gonna

James (03:58):

There’s, I mean, in Silicon Valley, there’s a whole crowd of investors. That’s the, basically their model. Yeah. Like they don’t actually worry about lifetime value or annual revenue per user. They, they worry about user count, user flow, acceleration of trial, all this stuff, all the front end of the business, the front end of top line. But what’s keeping the top line. What determines of a top line goes exponential is repeat and the quantity of it and how much those repeat people are buying. Because if you can get 10% of your customer base channels to buy you monthly while everyone else is dabbling, the 90% and half of them never come back, but you can get 10% to repeat on a monthly basis. And they’re spending, you know, they’re buying a half a case or case your product. And that’s how they buy online in my world and consumer packaged goods when a case of Spindrift and otherwise I’m not coming to your website.

James (04:49):

I don’t want one, can I want a case of Spindrift. And I want it every bloody month. And those consumers end up creating an enormous amount of annual revenue for that brand. Right. If they can actually pull that off now, Spindrift does it through Amazon, not D to C and that’s smart for logistic reasons, but even if you were doing Adidas, see the question is who are those people and what is it about them so that you can go out into the white space of the population and, and find more people like that by learning the behavior of the people who generate that kind of profitability for you. And what makes it exponential is that you don’t you don’t have to add nearly as many of those people to start to bend your top line up exponentially. And if you can grow that number, like say, you say you have a repeat heavy user rate of like 5% in the beginning, and then you get it up to 10% in a year and then it’s up. And then as you scale that group you can, and scale their frequency as well. You, you actually accelerate your business to scale much, much faster than buying trial. More importantly, you can do it for like far less money.

Charles (06:05):

I say, well, and the thing about that is if you know this, this one type of customer, right, that, you know, you have your customer, your Titus out a hundred percent of them, but you know, this is 5% and they’re the 5% they’re going to repeat. You could spend astronomically more to market on just that 5%, because you know that first sale, you can, you could lose on that, who cares,