More and more brands are looking to escape margin pressure and take control of the rich customer experience through direct-to-consumer marketing – hoping to build new value, offering a more authentic brand experience based in intricate knowledge of their consumers.
And it’s not reserved for new, agile startups. Legacy giants like Nike have picked up on the trend and put significant emphasis on becoming more direct-to-consumer in 2019.
But to succeed, brands need clear purpose and a realistic path to scale.
The KPIs and metrics are different, as are some key skills. Most of all, brands need really deep consumer insight to create a truly differentiated value proposition – and then have the ability to drive the right kind of high lifetime-value consumers through digital channels.
Here, we’ll delve into the DTC trend, exploring not only how brands can grab a piece of the pie, but why it can be such a successful strategy to reach today’s consumers with exactly what they expect.
What is Direct-to-Consumer Marketing and Why are Brands Doing it?
With DTC marketing, brands promote a product or service straight to their target consumers, forgoing traditional 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 DTC is nothing new – in fact, it traces back to catalogues distributed in the 15th century – it’s picking up new speed in 2019, and many brands are joining the fray.
Traditional retailers are struggling to adapt to provide a unique and valuable experience.
According to Digital Commerce 360, 2018 saw “nearly 5,000 store closures from well-established brands including Sears, Kmart, Victoria’s Secret” and, as a result, businesses are looking elsewhere to market and distribute their products.
But that doesn’t mean it’s an emergency solution.
DTC 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 latest wave of research, here are some key insights into how global consumers feel about DTC marketing in 2019.
1. Consumers are taking charge of their purchase journey.
Search engines are now the primary brand awareness and discovery channel at 37%, and 52% use them for brand and product research.
2. They want authentic brand experiences.
27% want their favorite brands to improve their knowledge and skills, and 22% use ad-blockers as they feel too many ads are annoying or irrelevant.
3. They love to use brands’ own sites.
55% visited a brand’s website last month, and 32% carry out research on product or brand sites before making a purchase.
4. Brands’ online reputation is crucial for driving purchases.
36% say customer reviews would increase their likelihood of buying a product, with 21% citing lots of likes and good comments on brands’ social media profiles.
5. Social commerce is on the rise.
29% say researching or finding products to buy is their main reason for using social media, and 25% follow 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 DTC model from their favorite brands. But beyond hopefully-increased direct sales numbers, what’s in it for retail brands and services?
Meet consumers’ expectations.
What your shoppers wish to see from you isn’t stagnant. Behaviors, attitudes and motivations continuously change and anyone looking to truly engage needs to meet consumers in the right way, at the right time, in the right place.
Collect more data.
When you remove the middleman from your sales funnel, i.e. cut out retailers, you have the opportunity to collect more granular user data. This data is a goldmine of information and can enable you to have complete confidence in your marketing strategy.
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 motivational data, you can ensure your purchase journey exactly matches what your target consumers want.
Build and own consumer relationships.
With more than half of consumers visiting a brand’s site last month, giving them full access to your brand story and products without having to use a third party allows you to build and nurture these relationships. And since over a third value positive customer reviews, broadcasting positive UCG is a great way to generate new fans and potential buyers.
Take charge of your customer service.
According to a CEI survey, 86% of buyers will pay more for a better customer service experience, proving the importance of opening the communication channels with consumers. 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.
Cut down on costs.
There are no guarantees, but a DTC 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.
Challenge new, digitally-native brands.
While legacy brands may have firm roots in a non-digital world, challenger brands are 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.
Brands Doing it Right
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 and has since moved into the wider men’s skin and beauty care vertical with products like toothbrushes and towels.
The ecommerce businesses was initially unveiled by way of a fun, quirky video that soon went viral, having netted over 26 million views to date.
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.
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.
The company forecasts its DTC sales will be $16 billion by 2020 – a far cry from the $6.6 billion they netted in 2015.
According to Marketing Week, 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.
The average consumer spends just 15 minutes in a mattress showroom.
Digitally-native sleep brand Casper took insights like this and ran with them, creating a service where customers can order a mattress online that’s delivered to them rolled up ‘burrito-style’, which they can try out at home and easily return if it doesn’t suit them.
While it’s a business idea that’s worked, in a strangely revolutionary move, the brand has decided to expand into the more traditional retail space.
Casper mattresses are now available through retail outlets like West Elm and Target, and there’s a permanent New York City-based Casper store as well as 18 pop-up or temporary stores.
So with a successful direct-to-consumer strategy already in place, why did the brand decide to sell its product both online and offline?
“We discussed that we should offer the customer a full experience of both worlds, online versus offline, and I think that is something where everything needs to be flawless for the consumer,” says Constantin Eis, Co-Founder and Global Managing Director at Casper.
“If they want to pick up the product at the store, great; if they want to have it delivered to their house, great. This is helping us manage the whole market.”
The Steps to Going Direct
1. Look to the right data.
Every brand needs insight into its consumers, but it can’t be any old data.
GlobalWebIndex conducts a global survey 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, like GlobalWebIndex, 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 market straight to their consumers.
With consumer insight and journey maps, it’s easy.
Use them 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.
Personalization is absolutely key in 2019, and especially so for DTC brands.
The beauty of direct-to-consumer 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 become completely personalized in a way that will have an impact.
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 Big Commerce, DTC ecommerce KPIs should focus on:
- Repeat purchases
- Average order value
- Lifetime value of revenue
Becoming DTC in 2019
Direct-to-consumer marketing is fully set to take off to an even bigger extent this year than last, with legacy brands like Nike grabbing a piece of the pie alongside younger, perhaps more agile challengers like Glossier and Casper.
Industry leaders postulate this trend stemmed from a natural digital evolution, giving consumers the power to choose how they’re marketed to and where.
According to Oliver Hansard, VP Sales, EMEA at 4C, “The availability of data has democratised marketing for retailers. Legacy retail brands that once were the main point of contact for consumers are now competing with emerging direct-to-consumer brands that are typically digital natives who have come of age with data-driven marketing.”
It shows 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.