February 10, 2023

The ASYSTEM growth playbook: high-performance margins, retention, and AOV

The ASYSTEM growth playbook: high-performance margins, retention, and AOV

With the uncertainty surrounding paid media, DTC brands are turning to a safer game plan: acquire customers organically. Then, focus on keeping them around for as long as possible. 

This playbook has been hugely successful for ASYSTEM, the science-forward supplements company that scaled into a multi-million dollar brand with a team of three full-time operators. 

One of them is Arsh Sidhu, Director of eCommerce at ASYSTEM. Arsh recently sat down with the Windsor team to let us pick his brain on topics including: 

  1. Why most brands consistently misinterpret customer LTV
  2. ASYSTEM’s tried-and-true playbook for boosting retention
  3. How merchants can invest in fully owned channels like email
“As a digital-first brand, most of our go-to-market focuses held up, even through COVID. It’s about building the right infrastructure and finding the right partners.” 

Unpacking ASYSTEM’s Playbook: Margins, AOV, and Retention

After almost a decade in eCom, Arsh has repeatedly seen one misconception about LTV: When brands think of lifetime value, they only consider retention. 

In reality, LTV factors in gross margins, AOV, and then retention.

That’s why when ASYSTEM set out to drive their LTV substantially, they zeroed in on those three metrics. 

Here’s how they did it. 

1. Gross margins

Fortunately, there are tons of varied routes you can take toward improved margins. For the ASYSTEM team, those looked like: 

  • Switching warehouses
  • Improving their packaging
  • Optimizing picking and packing costs
  • Setting a higher threshold for shipping

2. Average order value

Increasing AOV can start as early as product ideation. 

Focus on developing new SKUs that complement existing inventory or that would pair well in bundles. You can, in Arsh’s words, tailor releases so customers feel like every product truly belongs in the same world or system. 

He’s seen more and more ASYSTEM shoppers buying or subscribing to multiple unique products at once, as well as newer customers tending toward larger basket sizes. 

3. Retention

Arsh frequently comes back to Lenny Rachitsky’s Racecar Growth Framework to break down components of startup growth. 

Essentially, if you’ve got a functioning growth engine, great user retention is a lubricant to keep things functioning and powering forward that much faster. 

Below, Arsh unpacks some of ASYSTEM’s tactics for boosting retention. 

“When people think of LTV, they often only think about retention. But, if you consider the whole LTV equation, it’s actually about gross margin, AOV, and how often someone buys over a certain period of time.”

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How ASYSTEM successfully drove customer retention

Increasing retention can start, again, as early as product dev. 

1. Be open to experimenting with your product offerings

At an early point in ASYSTEM’s life, the company was a men’s wellness brand dabbling in skincare and supplements. 

Today, they’re a unisex brand focused largely on supplements. 

That pivot toward a broader ICP enabled them to release and test a far greater diversity of products. From there, they came to two realizations: 

  1. Customers loved repeat-purchasing gummies and supplements
  2. Customers tended to purchase their skincare products once — and then never again

So, ASYSTEM responded accordingly. They’re already in the process of discontinuing lower-retention supplements and skincare altogether. 

See which products strike a chord – hone in on what does, and pull back on what doesn’t. 

2. Push subscriptions on high-retention SKUs

Once they identified their high-retention products, the next step was setting up customers to repurchase more often. 

The clear solution? Pushing and incentivizing supplement subscriptions. 

Today, ASYSTEM’s PDPs are subscription-first because: 

  1. Their retention numbers were already so impressive
  2. More and more customers were clearly down to subscribe

Overall, pushing subscriptions also became a big initiative to boost LTV down the line, which also boosts ASYSTEM’s total profitability. 

3. Understand the trade-off of margins vs. retention

At the start of 2022, ASYSTEM ran a significant promotion to experiment with pricing vs. ultimate retention. Their standard discount went from less than 10% to 20%. 

“It definitely worked,” Arsh remembers. Those savings pushed more customers to either subscribe or repurchase down the line. 

You may momentarily lose that margin, but you quickly make it back in retention. 

“Because we were able to release a bunch of SKUs, we could gauge which products simply showed the best retention and drove repeat purchases.” 

How to leverage owned & organic acquisition channels

Owned channels had generally been undervalued in DTC eCom — that is, until iOS 14 turned paid marketing on its head. 

Arsh unpacks how owned and organic channels have been vital to ASYSTEM’s growth. The team at ASYSTEM was focused on evolving their branding, identifying new directions they wanted to pursue with products, and more — when a global pandemic hit. 

Right as they were trying to define their business and where they stood in the market, it seemed as if everything about the market had been turned upside down. 

Fortunately, as a digital-first brand, they didn’t need to overhaul most of their GTM plans. 

However, like most other DTC operations, they still had to figure out how to combat sinking ROI on paid avenues like Facebook. 

So, they chose to double down on owned and organic channels — to great returns. 

  1. Facebook — ASYSTEM keeps things minimal with organic Facebook content. They’ll largely experiment, leave the engine running, and then try to find ways to scale it. 
  2. SEO — These days, roughly half of ASYSTEM’s web traffic comes from organic search. It simply comes down to identifying keywords that work for your brand and ranking even higher with them. Arsh says anyone can get started through Ahrefs
  3. Keep owned channels educational — A lot of their email or SEO content is educational, linking out to other blogs and the occasional product. Users want real value-add (not to be sold to), so start with education and then slowly introduce them to products. 
  4. Social & influencers — They’ve focused on scaling their influencer network, growing IG and TikTok audiences, and working directly with creators for UGC. Arsh emphasizes the benefits of having multiple influencers in one subcategory posting about your brand. 

Ultimately, Arsh believes paid media could work for ASYSTEM in the future. 

There’s just a significant investment that has to happen behind the scenes. The dollars typically add up for bigger payback periods than what they currently invest in organic social and search. 

For now, owned and organic channels – like email – are simply cost-friendlier than paid channels for growing, profit-conscious brands like ASYSTEM. 

“A notable part of driving LTV is, of course, having your own channels. These days, about 50% of our traffic comes from organic search.”

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