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True Classic: Achieving a $700m Valuation in Two Years Without Raising Funds

True Classic: Achieving a $700m Valuation in Two Years Without Raising Funds

Atttribution Framework, Paid Media Efficiency & Testing Ad Hooks

Dev Chand
February 27, 2024 • Reading Time: 10 minutes

Hey 👋

Thanks for joining me for another week! Before I start, a quick shoutout to the team at Shopifreaks for featuring Digital Chapter in its top e-commerce newsletter list. 🙏

Today’s edition is something I wish I had when I was in the weeds of launching and running my startup clothing brand a decade ago, it was super interesting to drill down into the playbook to see what works for a new apparel brand to find success in a saturated industry and achieving an insanely profitable growth trajectory

Let’s dive in. Today, I’m drilling down into True Classic, one of the fastest-growing DTC brands anyone has ever come across. Big statement but you’ll see why.

This is what I’m covering in today’s breakdown:

True Classic’s growth marketing media mix
Importance of attribution & measurement frameworks
Increasing paid media efficiency using Incrementality studies
Getting clarity through unit economics by going further than CAC
How AI and humans can get you closer to your VIP customers
Leveraging influencers strategically
Testing ad hooks
On-page SEO to drive traffic on collection pages

CASE STUDY
True Classic Tees

Context: True Classic is a game-changer in the world of apparel, particularly when it comes to the humble yet versatile t-shirt. They've managed to grow to a staggering $700 million valuation in just two years without raising a cent from investors or VCs. There aren’t many DTC brands that have been profitable from day one and disrupted the fashion industry as aggressively as these guys.

They started from $3k in seed fund money, and in 2022 crossed over $150m in DTC sales, profitably 🤯 . The growth of the brand has been truly meteoric. Some even think it's the fastest-growing DTC brand of all time. After going through a tonne of research and podcasts, I found that ultimately they are always focused on these three things:

Acquiring new customers
Driving sales
Encouraging repeat purchases at a break-even price point.

Budget Flows Where Performance Goes

This brand is all in on being solution-agnostic, backing any channel or tool that nails their three main goals.

Their channel game plan is simple: max out profit per customer. So, they've gone multi-channel, hitting up platforms like Facebook, Instagram, Google Paid Search, YouTube, TikTok, Podcasts, Email, and SMS. A big shift from the old playbook which was all about Facebook ads, solely focused on Return on Ad Spend (ROAS) with a humble daily budget of $100. Times have changed, and so has the game.

Note: In recent, podcasts their president, Ben Yahalom, has mentioned Meta `still serves as the backbone of their paid media strategy despite the noise around attribution challenges and issues.

Implementation: It's tempting to stick to what you know when you read the headlines. Instead, foster a mindset that embraces new channels and tools. Focus on what helps you reach your performance goals (E.g. Profit per customer was their KPI), rather than being tied to particular platforms. Let holistic internal data guide your media buying decisions.

Confidence Comes From Attribution and Measurement

True Classic’s approach to attribution is their biggest superpower and one of the key reasons how they were able to scale using paid media.

They leverage third-party conversion pixels to improve the precision of their customer journey analysis, helping them gain a deeper understanding of their customer's buying behaviours beyond the biased platform-specific data pulled from ad platforms.

To show their commitment to this, they take it one step further by heavily investing in advanced statistical analysis and benchmarking which they use to inform future decisions.

“We’re very numbers-oriented, so the approach we take is rooted in a deep analytical understanding of what we’re spending and exactly what we’re getting from it,” Yahalom said. “That means we can’t stop at CAC [customer acquisition cost] or ROI. We really need to look at the entire cost structure.” - Ben Yahalom, President.

Implementation:

Utilise third-party CAPI for better customer journey insights.

Integrate post-purchase surveys with concise questions.

Use past performance benchmarks for media buying and sales decisions.

Budget Allocation Based on Incrementality Studies

True Classic assesses advertising effectiveness and its impact on net returns. They offer partners detailed insights using specific parameters and key performance indicators (KPIs) to fine-tune the inputs. Using internal data they make decisions through the lens of incrementally driving direct sales.

Implementation: Use analytics tools or programs provided by companies such as Measured to evaluate the impact of a recent campaign on your net sales. Share detailed performance indicators, such as click-through rates and conversion metrics, with your advertising partners. The more you share the better match you can expect with their expansive data sets.

Clarity Through Unit Economics

While most brands are stuck on Customer Acquisition Cost (CAC) or drowning in general averages, True Classic is breaking the mould. They're not just scratching the surface—they're diving into the nitty-gritty. From production costs to shipping and returns, they're dissecting every detail and weaving it into their media plan.

Instead of focusing on Return on Ad Spend (ROAS), which can be misleading (as it doesn't provide a true reflection of the business's profitability and profit margins), they incorporate profit margins with all key metrics to get a complete picture.

They do this by optimising their media buying and conversion rate based on contribution profit rather than relying on arbitrary industry averages.

Examples of how they look at their metrics:

When looking at CAC/ROAS also look at Contribution Profit Per Customer
When looking at their AOV they also look at Contribution Profit Per Order

In short - everything centres around a net positive return.

Using AI and Humans to Scale

Embracing platform changes across Meta and Google Ads has empowered them with a competitive edge. They highly recommend leveraging campaign types like Advantage+ and Performance Max to enable the platforms to efficiently attract new customers into their sales funnel.

Since these platforms leverage machine learning and artificial intelligence, the success is closely tied to the quality of the inputs. This highlights the importance of their team of humans delivering precise data sets gathered from customer surveys, post-purchase feedback, segmented CRM and website data sourced from Klaviyo and Shopify.

Implementation: Creating lookalike audiences enables you to target individuals who closely resemble your existing customers but with a wealth of additional data points you can seriously drive down costs and ramp up sales momentum. Typically, this approach has significantly lowered your Customer Acquisition Cost (CAC) or cost per purchase.

Leveraging Social Media Influencers

True Classic works with influencers in three ways:

Collaborating with influencers for content creation: These guys have mastered the art of creating content that resonates with their target audience, using a mix of positive/negative spins, personal experiences, social proof, questions, and callouts to keep them interested. They have the playbook, and influencers have the offering.
Leveraging UGC: Encourage customers and influencers to share their experiences with the brand's products through social media. This increases brand visibility and a layer of authenticity, which gets people converting.
Influencer Whitelisting: Creating strategic partnerships with influencers grants them permission to True Classic to use their handle, content and audience targeting to create and run paid ads, allowing them to reach new audiences.

Testing Ad Hooks

The reason they were able to cut through to a large TAM quickly was that they pushed the creative boundaries. They do this strategically by using various angles and hooks to determine what will resonate best with the customer. By continuously testing and refining their ad hooks, they ensure their marketing is fresh, avoiding any risk of ad fatigue.

Mapping Keyword-Targeted Collection Pages:

They have also invested in on-page SEO by creating keyword-targeted collection pages, which has allowed them to dominate organic search and drive more traffic to their website outside of paid media.

Examples:

Classic White Collection Page

Everyone loves a crisp white tee, so they created a collection page targeting keywords like "white t-shirts," "classic white tees," and "timeless white tops."

Cozy Collection Page

Understand the importance of being comfortable while looking stylish, so they created a collection page targeting keywords like "comfortable fashion," "cozy essentials," and "comfortable classics."

NEWS

Meta recently suffered a really costly Glitch, causing brands to overspend their budget. Worth double checking your account, if you haven’t already.
Google and Reddit negotiated a $60M content licensing deal to allow Reddit's data to be used to train their AI models, with the mindset of improving its existing products. Particularly search.
Spotify is following in the footsteps of Meta, Snap, YouTube, and TikTok by launching a new program to connect creators with brands. Its newly established in-house agency (AUX) will facilitate connections between brands and emerging artists for various campaigns benefiting both sides.

That’s all for today!

Would love your feedback so I can continue making useful content. Please reply, to this email and let me know.