Loco Coffee Case Study: A Pivot to eCommerce and 7.5X ROI
The Power of the Pivot
When we started working with Loco Coffee in January 2020, they were driving most sales of their canned cold brew coffee through retail stores such as Whole Foods and Wegmans in the greater Boston region. Once COVID-19 hit, we flipped the script and pivoted to a national eCommerce strategy. We had already been testing digital ads and had the foundations in place, so we hit the ground running. For the two and a half months since mid-March, we returned revenue to Loco Coffee more than 2X our ad spend.
By The Numbers
The ROAS (return on ad spend) represents immediate return as defined by revenue divided by ad spend. However, ROAS is a short-sighted metric because many customers buy more than one time. So with a product like canned cold brew coffee, we paid once to acquire a customer, who then pays dividends for us over time through repeat purchases. This reality is better represented in the ROI metric above, which is calculated as customer lifetime value (LTV), which takes into account repeat purchases over the lifetime of a customer, divided by customer acquisition cost (CAC). On average, our customer LTV is 7.56 times our CAC, from the time of the pivot to national eCommerce.
In addition to pivoting to eCommerce sales during COVID, we also began testing user-generated content (UGC) in ads. Loco gets a lot of UGC from their customers, who post photos and videos enjoying their Loco coffee, primarily on Instagram. Reviews are also a form of user-generated content, and we overlaid positive reviews on top of UGC in our ad content, as shown below. In recent campaigns, we saw a 16% improvement in average order value (AOV) from UGC ads compared to ads that did not leverage UGC. That amounts to more than $5 per order, which is a lot at scale. Additionally, cost-per engagement of UGC ads was $0.05, compared to $0.21 for non-UGC ads. This means that UGC drove engagements (likes, comments, shares, etc) more cost-efficiently than non-UGC ads, indicating more organic interest and “shareability” through UGC.
We saw a 16% improvement in average order value (AOV) from UGC ads compared to ads that did not leverage user-generated content.
