How do I know if my DTC product is scalable?

Jump Ventures partner and DTC brand expert Leonardo Caracas has developed a formula for product-market fit that he has successfully introduced to dozens of brands that are looking to scale.

He shared his four-part formula at a recent Affiliate World event, and we snuck out of the hall’s back door before anyone noticed to share these snippets with you.

4 Product-Market Fit KPIs to Determine Scalability

When Leonardo and his team work with DTC brands, they look at four metrics to determine whether a given product is likely to scale successfully: reviews, repurchase rate, average order value (AOV), and conversion rate.
Growth Formula

1. Reviews

For a product to be scalable, the average review score should be at least 4.7 or above on a five-point scale. This ensures that people love the product, but it also indicates a good shopping experience and a high likelihood that those reviewers would make the same purchase again.

Scores that are lower than 4.5, in contrast, indicate a less positive experience. Lower scores might be related to the quality of the product, or the customer experience, or something else — the reviews themselves should give you an idea of where to start. But Leonardo and his team don’t expect scaling efforts to scale if product review scores are below 4.7.

2. Repurchase Rate

In this growth formula, scalable DTC products should have a repurchase rate of 30% or higher. This both ensures profitability and consistently monetizes your current customer base.

Also, instead of trying to acquire new customers every month, which introduces a lot more volatility to scaling and is ultimately unsustainable, you’re keeping existing customers engaged and making sure you’re not leaving any money on the table.

3. Average Order Value

If you’re trying to grow a product or a brand by using paid ads, the product you’re selling should have an average order value (AOV) of $50 or more.

The product value is important because of today’s paid media landscape. In order to compete on platforms like Meta, Google, and TikTok, advertisers need robust budgets that will reach customers even through broad targeting, which require broad targeting because of reduced attribution and user visibility.

4. Conversion Rate

Similar to the $50 threshold for AOV, DTC brands need a product with a conversion rate of at least 3% to scale successfully. Again, if you’re paying for ad placements and only bringing in a conversion rate of 1.5 or 2%, the revenue won’t be there to support profitable campaign growth.

5 Practical Tips for DTC Brands

In addition to the product-market formula, Leonardo shared five useful tips that he and his team have learned from coaching dozens of DTC brands:
Top 5 Lessons
  1. Understand why your customers bought and would buy again. Today, it’s easier than ever to automate this process with AI tools like ChatPDF or Octoparse, which can analyze reviews and customer surveys and return qualitative data.
  2. Optimize fixed costs before scaling marketing. If you’re focused on growth, the first areas to improve are fixed costs like shipping, cost of goods sold (COGS), and payroll. A brand that is positioned to be agile and asset-light is much easier to grow.
  3. Test at least 25 creatives per week. Establish a content creation formula that can produce dozens of creative assets that can be refined and improved as campaign results come in to prevent ad fatigue.
  4. Release something every two weeks. Plan for a product or brand announcement every two weeks. These announcements could highlight a new feature, a new community, or some other upgrade. The key, in this case, is to establish a rhythm in which your buyers expect regular announcements — so that you can anticipate regular revenue bumps.
  5. Test and iterate on pricing. Finding a product’s pricing sweet spot can have a huge impact on your ability to scale. Incremental discounts of 5 or 10%, as well as bundles or upsells, can provide actionable customer information as well as new opportunities to scale.