Ep 545: How Lovevery Built a 9-Figure Subscription Engine—Then Rebuilt It to Unlock Even More Growth

0:00Rod Morris:We're uniquely about serving not just the child but also the parent. We started the business with the idea in mind that we would make products that were the quality we would want and that customers would be willing to pay a price premium. Any business that is acquiring people to subscribe doesn't work unless you can have churn be very, very low by really paying attention to our customers. With every single product that we made, we were able to have the kind of high loyalty we wanted. Our strategy in this business around growth is focused on three levers to grow lifetime. So expand the years that we serve to grow our spend with our customer, launching more SKUs within the lifetime that we're already serving.

0:41Rod Morris:And then the last is to grow our footprint, expanding internationally. You're going to continue to see all three from us.

0:52Rod, welcome to the D2C podcast. Super excited to have you here as a parent. I've been following Lovevery for a while. I was wondering maybe if you could just kind of walk us through the hero's journey with this product.

1:04Rod Morris:Okay, gosh. I mean, it's been a while now. You know, we launched eight years ago, give or take, with a single product. And we've grown to, you know, a little over 150 products today. Our audience has swelled to, you know, 5 million plus across 34 markets. And we've shipped more than 40 million playthings. But if we go to the very beginning, it was when I was still working in tech and I got a call from my wife's best friend, Jessica. And I've known Jessica for more than 20 years at this point. But she was telling me about this new business idea that she had. She'd previously started a baby food company.

1:41Rod Morris:I'd always worked in tech. But we shared business ideas. And she was telling me about this notion she had of taking all the science that she'd become aware of when she had her first child and turning it into an early learning program for children based off of a recurring model of a subscription. I instantly got it. You know, I had just been going through, you know, kind of like all the, you know, I think like most exciting, but also maybe most challenging in some ways years of parenting with my two kids. I have twins, boy and a girl. and it just totally resonated for me what she had in mind. And so instantly I was like, hey, let's do this together and be 50-50 partners and work on it.

2:26Rod Morris:And that was a couple of years before we launched. I was thrilled that she also thought that we would bring something complimentary to the table and could maybe build a big business together. And so we started working on it. First, sort of testing these ideas that we had. And it started with testing out this whole subscription concept and what should go and what would end up being called a PlayKit, but also testing some other ideas. Like our first product that we launched with was actually the PlayGym. So we were testing that alongside the ideas for the PlayKits. And then we were finding manufacturing, finding design, working on the brand, naming, all of that.

3:03Rod Morris:And then we launched. And at first, nobody was buying. Nobody was buying the products. But quickly, people became familiar with the products and we got smarter about how to market it. And it grew from there to the point that I described before, which is a pretty expansive brand across a lot of markets. When I was in those early days of parenthood, I remember looking at my daughter, Sophie the Giraffe. And I looked around at all my other friends and family that had kids in the same age, and they all had a Sophie the Giraffe, you know, binky or whatever. It's like when you can get into that market, when you can become a fixture for parents, like how did you crack it, I think is my one question.

3:43How did you – what was your first really glimmer of hope that, okay, we can really crack this market?

3:47Rod Morris:So for us, you know, I mean like any entrepreneurs, capital is like a big constraint, right? I mean you only have so much money that you can spend and people are only willing to invest so much early on when it's just an idea. So while we had this vision from the very beginning of having a subscription with all these years of play kits, and we even thought we would have a mobile app for parents, we knew that probably we wouldn't be able to afford to do everything at once. We needed to start with one product. And so the first product that we launched was our baby play gem, which covered a year's worth of play.

4:22Rod Morris:it was the most, Playgems at the time were the, I think they still are, the most registered for developmental item on baby registries in the US. And so we said, okay, well, let's see if we can create in this one product an encapsulation of everything we're trying to do. Because there were some unique things we were doing there. We were incorporating a lot of elements from early learning early childhood science around high contrast images, around how children develop by stages and how that happens physically and how that happens with the eyes, we incorporated a play guide. So we incorporated content to a degree nobody else did.

5:02Rod Morris:We were incorporating both wood and fabric in a way nobody else was at the time. We had a different look. That different look cost a lot more than the other products on the market. People would question us and say, I don't know. you know you're competing against products that cost uh 50 what your product costs 30 what your product costs do you really think people will buy this and buy your brand are you really sure and and we believed in it um because of the the feedback we've gotten from customers we believed in the research behind what we were doing and so you know we we raised enough to be able to launch that play gym and also you know continue to develop our play kits for launch about six seven months after we launched the Play Gym.

5:42Rod Morris:And we found pretty quickly that people did like the product, that they were willing to accept the price premium. And in fact, in less than a year on Amazon, the product became the number one revenue generator in that category. And we launched on Amazon and direct-to-consumer about the same time with that product. So we quickly were getting feedback from the market that this idea that started off as this concept Jessica had, and then which we turned into a brand, turned into some beautifully designed product that had legs. Off the back of that success, we were able to raise more money, launch the subscription, and then continue going.

6:17And when you say with your initial go-to-market strategy, was that often, you mentioned Amazon, but was that also through meta ads specifically to generate that demand?

6:24Rod Morris:Yeah, absolutely. I mean, we advertised all the places you would expect, but I think what was more important than that was that there was genuine enthusiasm for the product on the part of experts, on the part of early consumers, influencers. And we did an excellent job, I think, just getting the product in the hands of influential people early on, whether it was press or other influencers. And so we got really good feedback back from that, which we could then turn into ads on Meta. In the early days, our most successful ads would be ones that would actually reference an article that talked about how different somebody's experience was with our product.

7:05Rod Morris:And then that would just sell itself. So I think when we started, I think I was making ads on my phone with an app because we couldn't afford to pay anybody to make ads. And we weren't selling quickly enough. A month or two rolled by. And then suddenly we started seeing more and more sales happening. And it was happening off of ads that were specifically referencing this credibility that we'd gotten in the market. And so we built off that. I think even now today, you'll find that most of our ads are based off of somebody's real experience with the products and how they solve a pain point. Can you talk a little bit about, we evaluated Montessori when we were looking at schools for my daughter.

7:44Can you just talk a little bit about maybe the mission of the company, how it ties to a similar mission that they might have at Montessori and how you built that in the company?

7:52Rod Morris:I mean, our mission is really focused on supporting families. And we try to evolve the company to continue to support families in a way that's going to be helpful as circumstances change. And that means when I say families, I'm saying that intentionally because we're uniquely about serving not just the child, but also the parent. And so to your question, I think Montessori is attractive to many people because it is a philosophy that kind of gives you a structured approach that is rooted in research, that's rooted in things that work, where both the parent and the child are plugged into a system that kind of works across multiple phases of early learning.

8:38Rod Morris:Now, with that said, we were inspired by Montessori. We were also inspired by other schools of early education, and also just sort of research from scientists around how neural development happened. My kids went to a Reggio Emilia preschool, and there are ideas from Reggio. There are ideas from Waldorf that are in our product curriculum. There are ideas that our team have come up with, just brand new play products that never existed before that are rooted in child development science and what was missing before and then proven out through play studies. So yes, Montessori is important. It's a great framework for a lot of people.

9:14Rod Morris:And for us, to give you an example, one area where we depart, Montessori doesn't encourage pretend play as much. It's all about family work and everything is real. Whereas some other schools around early childhood embrace pretend play. And so we do kind of utilize pretend play and elements of our program as an example. But yeah, Montessori was absolutely an inspiration. You've made it work on the Play Gym. Talk to me about building out the subscription program and maybe your biggest learnings of building that. That was really a labor of love that we spent years on. Today, we offer our standard Play Kit subscription, which goes through the first five years of life.

10:00Rod Morris:And then we have new offerings like our early reader club where you can subscribe to books. We also offer skill sets. Currently, we have a whole learn to read set that comes later, and there's other ones that we're working on. But if we go back to the core PlayKit subscription, we didn't know if it was going to work or not. We had great results in our tests with folks, but we didn't really know it was going to work until that first week when we launched. And then we saw instantly that people were adopting it, people were going for it. But even then, there was a question of, well, what's the retention going to be like?

10:36Rod Morris:Are people going to stick with this? Because as you know, any business that is acquiring people to subscribe doesn't work unless you can have churn be very, very low, unless you're just shipping low quality product and you've just got incredible profit margin. And so economically, you're not upside down after even one sale. That wasn't the kind of business we were building. We were building high, high quality product. So we needed people to stay. What's been amazing for us And what we learned is that by being mission driven, by really paying attention to our customers with every single product that we made and every single play kit, we were able to have the kind of high loyalty we wanted.

11:15Rod Morris:So, for instance, like if we look at play kit subscribers today, 96 percent of them last through, you know, they stay beyond the first kit that they subscribe to. If you look at net promoter score, and we look at that across 34 markets globally, our net promoter score is 74. So that compares favorably to companies like Netflix, Nike, Starbucks. It's in the same sort of area as Apple, depending on the Apple product. It's better than or same as Apple products. So very, very well loved. And we guard that with everything that we've got. Jessica is constantly combing through customer feedback on products, thinking about how do we improve a product or do we need to sub out a product to make sure this is a better experience.

12:02Rod Morris:And we pay attention to the content that we put out there as well. So, you know, another big learning with our subscription was after we launched our mobile app for subscribers. And what we learned was that, you know, the more accessible we make our early learning content, the better the experience is going to be for our customers and the more retentive they're going to be. So we see a double digit advantage in retention and in contribution profit at 12 months for a subscriber who's on the app versus one who isn't. So it's incredibly valuable. And it's interesting because you set a life cycle kind of at the beginning of the expectation with the subscription where it's like it's for five years.

12:39And so I bet that has a positive effect in that it's like people are knowing that this is the defined term that they're kind of in for. Are you able to say what your average retention is within that five-year window?

12:52Rod Morris:I won't say what the exact average retention is. I'll tell you it varies depending upon what kit they enter on. For all kinds of reasons, it's obviously better for us to get somebody as early on in the life cycle as possible. But we want to make sure that we're compelling as a company no matter what age somebody enters at. I think it's mainly because if you look at behavioral science, there are these pivot points. when somebody is ready to substantially change their behavior. Like when they move into a new house, for example, right? You move into a new house, you go to Home Depot, you start buying new stuff.

13:24Rod Morris:Maybe you rethink like how you're living your life. The biggest or one of the biggest is when you have a child, right? And right when you have them, you're ready to make changes. And so if we have your attention then and we can make you aware of our offerings and you find them compelling for making your life easier, we're going to do a better job like hanging on to you for a really long time because we just become ingrained in that behavior change right when you have a child versus if we get you later. Now, you could still have a great experience with us later and we have lots of very happy customers who join us later, but it's always best for us to get you as early as we can.

13:57You mentioned wood and fabric and it made me think of my first years there with my partner who was very anti-plastic, very sort of like, I think there's like a plastic backlash, right? Where especially when you have a kid, you're constantly being deluged with cheap cheap plastic stuff. And so we just like, just because it was going to be around our lives all the time, we decided, okay, let's buy higher quality things. Let's make a lot of wood and fabric and things like that. Is that sort of a trend that you really notice and have capitalized on as people kind of reacting away from cheap trinkets?

14:26Rod Morris:I mean, I would say that we started the business with the idea in mind that we would make products that were the quality we would want and that customers would be willing to pay a price premium. That meant more fabric, more wood, using organic fabrics or OECOTEX fabrics where we could, using sustainably forested wood where we could. But we also do use plastics and we use bio-based plastics where we can. It's tricky. So I would say we're not, I would say we were maybe like reflective of a trend, but we weren't actively saying, well, let's use wood because people want more wood. It was more, let's make a high quality product that's going to last, which, you know, if we talk about, you know, secondhand market for our products, our products are extremely durable and hold a lot of value in the secondhand market.

15:12Rod Morris:So I think it's because they're built to last, whether it's the wood or the fabric or the plastic. You know, sometimes plastic makes more sense for a product set, right? Like we just launched our bath set, you know, and I think like a wood bath set would probably not be a good look. So we try to use really high quality plastic that, you know, is as safe as possible and put that in the customer's hands. And so when you're really focused on the subscription program, was it still, was Meta still the main growth tool when it comes to driving the growth for subscription program? Or was it sort of an omni-channel approach?

15:44Rod Morris:It was omni-channel. I mean, if we're talking direct-to-consumer specifically, you know, you would see equal parts Meta, you know, Google YouTube, things like, you know, streaming TV, which at different points in time would take up to a third of our spend. And another thing that's been important to us is working with creators. We've had a program where we've seeded product with creators in the business for over five years. It's been an essential part of our business too. I mean, all of that being said, if you look at our post-transaction survey, our Heidi Howe, basically two-thirds tell us they found us organically, 40 % tell us they heard about us from a friend.

16:20Rod Morris:There's this customer love powered element of all of it. That filters into the paid ads. that filters into like getting creators. It's hard to disaggregate it, but yeah, I mean, meta is super important. It's a big component, but it's not the only component. And then recently you've kind of unbundled your subscription offering a little bit to make it more maybe accessible. Talk to me about the decision to do that. Cause it's like once brands have that like scaling subscription program, I think a lot are loathe to kind of move away from it. So talk to me about that decision. What sort of metrics you were seeing that made you want to unbundle?

16:52Rod Morris:So I think the thing that was most compelling to us when we thought about making purchase of an individual kit an option was when we compared the number of people who loved the brand, followed the brand, subscribed to our emails, versus the number of people who actually became subscribers, we said, hey, there's a huge gap. There's a huge gap here between people who love the brand and people who are willing to subscribe. Now, we love our subscribers, and we do everything we can to put as much value into that subscription. A few months back, we made all of our digital courses available for free to our subscribers.

17:33Rod Morris:That's like a$500 value we gave to our subscribers. We really care deeply about making that subscription valuable. And it's where we can have the most impact on a family because we're with you every step of the way. We want to have as much impact as possible and also make the company as successful as possible. So we wanted to close that gap between people who are willing to subscribe and people who loved the brand, but they weren't quite willing to subscribe. Maybe they would be willing to subscribe if they tried some product though. And so all of that motivated us to start testing, offering, you know, the ability to purchase in a subscribe and save kind of a format where, yes, you can have an individual play kit, but you'd have to spend a little bit more than what you've spent if you just subscribed.

18:16Rod Morris:And what we found is that it basically expanded our audience that was transacting with us. So we didn't cannibalize our subscriptions to kind of a terrible degree, but we acquired a lot more customers who were now engaged with the brand and transacting with us. So overall, if you look at like cost per transaction, if we're looking at like ad spend and things like that, we saw an improvement in our cost per transaction. We saw an improvement in the conversion rate on our site when we did that. Talk to me a little bit about the growth trajectory of the company, because I imagine over COVID, you guys experienced a huge, like I, as a parent who was trying to teach a child over that period or facilitate their classes during that time, talk to me about the growth maybe during that time, and then how you guys have sustained it over time over the past few years.

19:03Rod Morris:Like a lot of companies for us, COVID was an accelerant in that people had more money to spend. And there was just sort of like for a brief period, CPAs were low, for those of you who don't like spend money on ads, customer acquisition cost was lower than it ever was going to be. And so there was a short period where we were able to like really spend aggressively on ads and get payback on those ads extremely quickly because people had budget. We weren't competing with that many other brands for the ad space. So the ads were cheap. So we saw a tremendous growth off of that in 2021. I would say that sort of like opportunity around like ad rates went away relatively quickly because people figured out like, oh, wait, it's not the end of the world.

19:50Rod Morris:Actually, if you're in e-commerce or a direct consumer, you can do really well. So those ad rates came back up and that opportunity went away. People continue to have a lot of willingness to spend. So we saw strong growth in subscription. We knew, however, that that was not going to be something that was going to go forever. And we needed to build a sustainable business and we needed to offer other ways for people to participate with the brand. So even before we launched subscribe and save, which we were talking about with you, we were already thinking of other things that we could do. So we were doing omni-channel expansion, right?

20:24Rod Morris:So we were starting to sell individual products into Target and then since then other places. We also knew that we wanted to maintain a deeper relationship. So we started doing digital products, like our digital courses, which I mentioned in our app, we knew that not every parent was all in on early childhood play things. There were some who were into that, but were also more focused on things like learning skills for school. And so we moved into reading and we're moving into more skills. So I think we always knew that it was going to be about evolving our business, making it more sustainable, also having more ways to participate with the brand, and finally making the brand, the business more profitable.

21:06Rod Morris:And so as we shifted out of that phase, what you saw was a company that was operating in more different channels, different kinds of offerings, and also doing so at an increasing level of profitability. So we flipped to a profitable company at the end of 2024 and have been since then. What were the key changes you made during that profitability flip? I'm sure there was a ton, but are there any that you really point to that allowed you to drill in? Everything other than sacrificing quality of customer experience. So, you know, there's a lot that you can do, especially like if you've started a business and you're just sort of like learning as you go, you make a lot of mistakes in terms of like setting things up for profitability, right?

21:50Rod Morris:So when we started, we had a small warehouse in Idaho. I'm in our Boise, Idaho headquarters. And so it was down the street. Most mature businesses, like they've got warehouses on the coast. They maybe have a warehouse in Canada where you are. Maybe they've got a warehouse in the center of the US, maybe more if they're a really big, big business. They certainly aren't putting their warehouses in Idaho, right? As an example. So simplifying supply chain fulfillment would be an example. Or just getting smarter about how we're handling shipping of our products to us or manufacturing our products in ways where we're not putting money into packaging that's not going to be valued by the customer and instead putting money into the product.

22:29Rod Morris:All kinds of stuff like that. I mean, beyond that, I would say kind of our thinking around advertising has just continued to get more sophisticated. We're not spending money if we don't see good payback on the advertising. You mentioned Canada, but you said, I think it was 40 different countries, 30, 40 different 34 markets. Yeah. 34 markets. That's amazing. Talk to me about how you tackled international expansion, where you probably focused on maybe Canada or other English markets first, but talk about your expansion strategy there. Like everything else with this business, it started with our customers or prospective customers.