GoToddler

In the grocery business, you can only go so long before the sector’s big gorillas come after you. And so it proved for GoToddler, an online retailer selling baby essentials such as nappies and wipes, and toddler gear such as car seats and baby chairs.

Three years after the business started, Coles and Woolworths started competing hard on price in GoToddler’s key category of nappies.

“We experienced a sharp growth slowdown with serious implications on cashflow,” founder Francesco Percopo says.

But he admits the company’s response wasn’t right.

“At the beginning we thought the best thing was to protect profitability and we limited marketing investment.”

“This proved to be wrong. We started growing fast again, in a turbulent environment, when we started to invest in marketing again.”

Percopo says the episode taught him some important lessons.

“Do not scare. Be conscious of your limits, but do not scare. Work as hard as you can, do not lose sight of your goals, and you will get there.”

Percopo has developed what some might see as a different view of the marketing spending by developing a clear idea of the “lifetime value” of each customer.

“We have doubled sales again this year because we are investing in new customers and retaining repeat customers. When we invest in marketing we have a very clear ROI technique which suggests to us how and where to invest in customers.

“Our business is divided in products which generate repeat revenue and other areas which are more dominated by one-off buying behaviour. We are investing more where we see the potential for a customer to stay longer.”

“It’s the same for retaining repeat customers – we know that a customer to become loyal must order multiple times from us. We focus efforts in this delicate phase of converting a customer who bought two or three times into a really loyal customer.”

With average annual revenue growth of 86% over the past three years, it’s an approach that clearly pays dividends.