The term ‘unprecedented’ has become very familiar in the last few months – and certainly in the world of ecommerce, the changes and accelerations we’ve witnessed have been astonishing.
With the restricted movement brought on by lockdown, more and more companies that normally sell through third-party retailers are adapting to the ‘next normal’ by going direct-to-consumer (DTC).
Not only does this mean they have a more diversified revenue stream, it’s also an opportunity to build new value and offer more authentic brand experiences based on an intricate knowledge of their consumers.
While going direct to consumer represents a big change for many brands, with the right consumer insights, you can ensure your journey not only delivers at scale, but will forge new long-term relationships with customers.
What is direct-to-consumer and why are brands doing it?
With direct to consumer marketing, brands promote a product or service straight to their target consumers, bypassing intermediary channels such as third-party retailers, whether that’s the bricks-and-mortar or ecommerce kind.
It allows businesses to own their entire purchase journey, rather than just the product, and to behave more like a tech operator, testing and learning with valuable new first-party data.
While direct to consumer is nothing new, it’s picking up new speed in 2020. And it’s not just young, digitally native brands that are adopting; Kraft Heinz and PepsiCo are some of the largest CPG brands we’ve seen take the plunge in recent weeks (more details below).
Direct to consumer marketing truly puts the consumer at the center of all strategy and activity, meeting their increased demand for authenticity and power from brand relationships and marketing.
And we know why this approach is becoming an increasingly efficient retail strategy.
Why consumers value the direct approach
From our research conducted in Q1 2020, here are some key insights into why direct to consumer works from a customer perspective.
Consumers are taking charge of their purchase journey: Search engines were still the primary discovery channel, with a third of consumers finding new brands this way, and 51% using them for brand or product research.
They want authentic brand experiences: 34% wanted their favorite brands to improve their knowledge and skills.
They love to use brands’ own sites: 48% visit a brand’s website each month, and 32% carry out research on product or brand sites before making a purchase.
Brands’ online reputation is crucial for driving purchases: 33% said good customer reviews would increase their likelihood of buying a product, with 22% citing lots of likes and good comments on brands’ social media profiles.
Social commerce is on the rise: 28% said researching or finding products to buy is their main reason for using social media, and around 1 in 4 followed brands they’re thinking of buying something from.
The big benefits of a direct-to-consumer model
There’s no doubt consumers are open to a direct to consumer model from their favorite brands. But beyond side-stepping the challenges brought on by coronavirus, what’s in it for retail brands and services?
1. Meet consumers’ new expectations.
Behaviors, attitudes and motivations have changed and will continue to do so. Any brands looking to create a truly engaging experience need to meet consumers in the right way, at the right time, in the right place.
2. Collect more data.
When you remove the middleman from your sales funnel, you have the opportunity to collect more granular user data from throughout the customer journey. This data is a goldmine of information, guiding your marketing strategy, and giving you the tools to streamline the buyer journey.
3. Cut down on costs.
There are no guarantees, but a direct to consumer model may well decrease running costs for your business.
By removing external middle men, you can focus more budget on your own brand communications and offerings.
4. Have full control of the purchase journey and supply chain.
By taking the power of the entire sales funnel into your own hands, you know you’re getting the most out of your efforts. And by using a reliable source of behavioral and psychographic data you can ensure your purchase journey exactly matches what your target consumers want.
This is exactly the steadying force businesses are looking for in a turbulent economy.
5. Build and own consumer relationships.
Giving them full access to your brand story and products without having to use a third party allows you to build and nurture relationships. And since over a third value positive customer reviews, broadcasting positive UCG is a great way to generate new fans and potential buyers.
7. Take charge of your customer service.
According to our data, 34% of consumers are most likely to advocate a brand when they’ve received great customer service, and 21% when they have a personal or one-on-one relationship with a brand proving the importance of open communication.
Anyone can make a mistake, but by allowing customers to engage with you directly to solve the issue, rather than a third-party solution, you’re proving yourself as an authentic brand.
8. Challenge new, digitally-native brands.
While legacy brands may have firm roots in a non-digital world, the acceleration we’ve witnessed in online shopping presents challenger brands with the chance to be part of the online atmosphere from day one.
Joining them in their own space is the perfect way to compete, by meeting consumers where they’re getting used to seeing brands, in the right way.
Two wholesale giants that made the switch
Heinz has launched its first DTC website, created in less than three weeks by ecommerce agency Good Growth.
The tinned food giant’s site, Heinz to Home, provides deliveries of core products to locked-down customers, with free shipping to NHS staff and emergency workers.
The site is straight-forward, offering bundles of either tinned food or a selection of table sauces. There is a delivery charge of £3.50 per order for those who don’t qualify for discounts.
On pantryshop.com, users can order tailored bundles of PepsiCo products (including owned brands such as Quaker, SunChips and Tropicana) with specific categories for ‘workout recovery’ or ‘snacking’ to align with consumer behavior in lockdown.
“Over the past few years, PepsiCo has been working to be a faster, stronger, better company, one that is laser focused on meeting consumer needs and winning in the marketplace.
Investing in e-commerce and digital capabilities has always been a big part of that”, says Gibu Thomas, PepsiCo’s senior vice president and head of e-commerce.
DTC models to learn from
Every product category out there has a DTC offering at the moment. Here are some of the brands that are truly acing their direct-to-consumer strategy.
Dollar Shave Club
Anyone that’s heard of direct-to-consumer marketing has most likely heard of Dollar Shave Club.
Having started as a razor subscription service in 2011, it was acquired by CPG giant Unilever in 2016 for $1 billion and has since moved into the wider men’s skin and beauty care vertical with products like toothbrushes and towels.
And while the brand still battles against legacy competitors like Gillette, its online popularity is enjoying a steady rise, with its UK Google search volume increasing 432% in 2018 alone.
Proudly customer-centric brand HelloFresh has moved into the global top spot in the meal kit product category.
Matt Fitzgerald, VP of Marketing at HelloFresh, told Forbes, “We have this incredible direct-to-consumer feedback loop.”
“We listen to our customers so closely every week, and now we have six years of data on recipe preferences, culinary preferences, ingredient preferences, seasonal preferences, and we’re using that to make the product better and more customizable, to lead to stronger personalization in the future.”
This way, the brand is challenging wholesale retailers like Amazon, proving that customization and having a finger on the pulse of the market goes a long way.
Following accelerated growth from the second half of March onwards, the brand expects full-year growth of around 50% in 2020, up from previously announced targets of around 25%.
Newly-formed Nike Direct is an umbrella for the ubiquitous sports brand’s direct-to-consumer efforts, having been introduced in June 2017 as part of a major restructure to become more DTC-focused.
And the brand is seeing results.
It forecasts its DTC sales will be $16 billion in 2020 – a far cry from the $6.6 billion they netted in 2015.
According to MarketingWeek, disruptive beauty brand Glossier attracts “a legion of hardcore fans with its straight-talking approach to beauty that shuns ‘stale retail’ in favour of complete customer centricity.”
CEO Emily Weiss takes a unique approach to building the business, making each product decision a conversation between the brand and its fans on its website.
This way, Glossier operates a real-time feedback loop with its customers, not only ensuring every product it releases should entice a warm welcome, but that the customers have an authentic, direct relationship with the brand.
And it’s a strategy that works. Between 2015 and 2016, Glossier grew by 600% year-on-year.
Steps to going direct
1. Look to the right data.
Every brand needs insight into its consumers, especially with the consumer landscape changing at such a fast pace.
GWI conducts a global survey every quarter that’s fully opt-in, and its own panel of consumers (the largest in the world), to give marketers a true representation of their target audience.
Relying on a single source of granular, great-quality data like this for your research makes it easier to join the dots and paint a harmonized picture of your target consumer.
2. Get to know your target consumers.
The DTC value proposition needs to be compellingly different, though likely complementary to existing retail channels. Modern data sources allow you to get under the skin of consumer drivers, looking beyond traditional demographic data to:
- Behaviors and actions
When you know not only what your target consumers are doing but why, you can be confident you truly know them and can communicate unique value to them without the need of a middle man.
3. Map their purchase journeys.
There’s no one ‘right way’ to create a consumer journey map. This means you have to find the approach that works for your business.
A great journey map makes use of data to determine the needs, questions and requirements of your consumers when interacting with your brand, and what marketing touchpoints are the most crucial to them.
When you’ve identified what these touchpoints are, you can maximize their impact and guide consumers straight through the sales funnel.
4. Evolve your brand message.
Having an effective message is absolutely crucial to DTC brands, who have the power to market straight to their consumers.
Use your journey maps to find your niche as a brand, and identify a message that will ring true with your target audience. The likes of Dollar Shave Club found sharp humor engages their consumers – what’s the angle that will engage yours?
5. Make the user experience tailored.
As our data above shows, personalization is absolutely key right now.
The beauty of DTC marketing is its flexibility and open communication with customers, and as Glossier’s success story shows, listening to your target consumers pays off.
Look to granular data from the consumers themselves to identify how you can offer them the kind of deals, rewards, personalization, and service they want.
6. Measure the right metrics.
It’s easy to fall into the trap of looking at the same metrics year after year – but when your marketing strategy is changing, you need to revisit why you track the metrics you do.
According to BigCommerce, DTC ecommerce KPIs should focus on:
- Repeat purchases
- Average order value
- Lifetime value of revenue
Moving to direct to consumer in 2020
The DTC model is fully set to take off to an even bigger extent this year than last, with legacy brands like PepsiCo, Kraft Heinz and Nike grabbing a piece of the pie alongside younger, perhaps more agile challengers like Glossier and Dollar Shave Club.
Industry leaders before the outbreak proposed this trend stemmed from a natural digital evolution, giving consumers the power to choose how they’re marketed to and where. Now this evolution has been put into high gear – and so has the incentive for brands to adapt.
There are opportunities for brands of any size, as long as they look to data and insights from the consumers themselves to steer their DTC strategy and offer a truly authentic brand relationship.