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Warby Parker's latest DTC marketing lesson: Spend less
Cutting marketing spend helped to drive gains in revenue and profitability at the eyewear brand in 2022.
A decade ago, Warby Parker was among the pioneers of direct-to-consumer marketing tactics that helped to show the way for a new model that made it possible to start a brand without having to go through traditional retail or marketplaces such as Amazon.
Today, Warby’s marketing prowess is still bringing eye-catching results.
The brand is different now, with publicly-traded status and a growing fleet of stores that are making up a greater share of revenue each quarter.
Yet Warby Parker is still demonstrating a willingness to make bold marketing moves that unlock new efficiency and build on the direct-to-consumer model.
This time, it is driving big results by spending less.
This latest frontier underscores a metric that has been in focus for marketers over the last two years: Customer acquisition cost (CAC). With more brands advertising on social channels and the privacy-oriented changes of Apple’s App Tracking Transparency that made attribution more difficult, CAC has been going up.
In 2022, Warby Parker made a move to bring those costs down by reducing marketing spend.
“Over the back half of 2022, we purposefully brought marketing spend as a percent of revenue back to pre-pandemic levels,” co-CEO Neil Blumenthal told analysts on the company’s recent earnings call.
Warby reduced marketing spend from close to 20% of revenue to “low double-digits,” Blumenthal said. With this change, CAC was down 36% year-over-year in the second half of 2022.
Overall, the brand reduced marketing spend by 15%, but still grew revenue by 10.6% for the year.
So how does a brand reduce spend but still find gains? Co-CEO Dave Gilboa outlined three key drivers of these results:
Focus and refinement. While there are a growing number of channels, Warby is investing in what works. “As we pulled back on spend, we've allocated those dollars to the most efficient channels,” Gilboa said. “And as a direct-to-consumer brand, we get immediate signals from our customers around what's working and what's not, and we can constantly optimize our tactics and strategies.”
Find savings in media buys. In the advertising market, media rates have declined. Warby is reaching more customers on video, display and search engine marketing for the same dollars.
Get creative. Remember, marketing isn’t only about spend and performance. “I think our team has just done a great job on the creative front with new interesting collections, new collaborations that generate a lot of excitement and ensure that we're finding efficiency as we're spending dollars to promote those new products and collabs,” Gilboa said.
The move underscores how brands are approaching marketing at a moment when consumers are reducing discretionary spending, and costs continue to rise. With capital less plentiful, businesses are focused on profitability over growth.
“While lower spend will be a headwind to top-line growth in the first half of 2023, especially for our ecommerce channel, we believe it's necessary as we aim to drive sustainable, profitable growth over the long term,” Blumenthal said.
The results are showing up, as the fourth quarter of 2022 brought the most profitable end-of-year result to date.
Warby Parker plans to continue this approach in 2023.
“This year, you'll see us deploy a more balanced marketing mix and focus more on our younger customers,” Blumenthal said. “We'll also continue to launch unique partnerships, collaborations, and campaigns to fuel awareness and brand affinity. We believe the power of our brand and our ability to surprise and delight customers continue to differentiate us within the industry. The opportunity in front of us to tackle the large and growing eyewear market feels as exciting as ever.”
One of the keys to this approach is Warby Parker’s physical stores, which now number 200. In 2023, it will open 40 more, with 36 located in the suburbs.
While this fits in line with a trend toward in-person shopping, the stores also serve as a marketing tool. Warby is intentional about how it designs the exterior and interior of the stores, with an eye toward showing “striking representations” of the brand, and ultimately drawing traffic.
“Our stores not only enable us to offer great experiences for our customers, they also serve as a highly efficient customer acquisition tool,” Blumenthal said. “New physical locations are very effective at driving traffic and conversion in the month following new market penetration. We believe the combination of the 40 stores opened last year and the 40 openings we have planned for 2023 will significantly contribute to increasing awareness.”
Warby's approach today demonstrates how brand and marketing coincide. The stores raise awareness, while a more focused approach provides targeted digital marketing.
The DTC marketing playbook was designed to drive growth. Now, Warby is showing how the tactics it helped invent can be applied to finding profitability, too.
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This Week in Commerce: Nike earnings, Fed rate decision
Check out the agenda for March 20-24.
Welcome to a new week. Earnings offer a bellwether for the consumer economy this week, as key brands like Nike and General Mills will report results. Elsewhere, all eyes will be on the Federal Reserve as it announces its latest decision on interest rates.
Fed interest rate decision: The Federal Reserve Open Markets Committee announces its decision on whether and by how much to hike benchmark interest rates following its two-day meeting. The Fed has been hiking interest rates rapidly in an effort to bring down 40-year-high inflation, but slowed the pace at the February meeting with a 0.25% increase. (March 22, 2 p.m.)
Durable goods orders: The U.S. Commerce Department releases data on orders from manufacturers for goods that are designed to last more than three years. This is considered an indicator of business activity. In January, orders dropped at the steepest rate since April 2020. (March 24, 8:30 a.m.)
Monday, March 20: Boxed, Foot Locker
Tuesday, March 21: Nike, GameStop
Wednesday, March 22: Petco, Chewy
Thursday, March 23: General Mills, Express