Direct-to-Consumer, also known as D2C or DTC, has completely changed the retail industry. Think of direct-to-consumer retail brands as superheroes with the ability to “multitask” who independently create, market, sell, and ship things.
What Exactly Does “Direct-to-Consumer” Mean?
Let’s begin with an analogy of direct-to-consumer sales to comprehend this concept further. As an illustration, think about the stock market. Investors formerly had to use a stockbroker to make investments with their money.
The development of online trading platforms has eliminated the necessity for brokers for investors today. Brands that sell directly to consumers function similarly.
By communicating directly with clients, they eliminate the middleman and do not rely on conventional methods of “selling” through stores. This kind of marketing tactic is quickly gaining enormous popularity.
According to CBInsights research, despite significant setbacks brought on by COVID-19, direct-to-consumer businesses like HelloFresh successfully capitalize on disruptions and position themselves for long-term growth.
According to additional McKinsey research, companies like PepsiCo and Kraft Heinz successfully introduced new direct-to-consumer (DTC) strategies during the pandemic. According to the survey, Nike’s digital sales increased by 36% in the first quarter of 2020 due to coming online.
Why Go for the Direct-to-Consumer Approach?
The DTC strategy is best for businesses that prefer to be in charge of every step of the typical consumer lifecycle, from product production to delivery to the customer. This strategy offers many advantages for firms that like to maintain complete control. These benefits consist of:
- Lower costs and higher profits: According to Deloitte, direct-to-consumer firms can build personal connections with consumers, increasing engagement and conversion rates. Furthermore, companies don’t need to outspend rivals to secure a better in-store placement or bargain down prices (and split profits) with retailers for goods that already have razor-thin margins. All these initiatives help to cut expenses and increase profit.
- Freedom to try out different distribution strategies: The Direct-to-Consumer strategy dramatically expands the options available to companies, whether they want to ship directly to customers, collaborate with celebrities to make product drops, or establish pop-up shops. To increase sales, brands might experiment with different distribution strategies.
- Greater consumer acceptance: Research shows that 55% of consumers prefer to buy directly from brands than multi-brand merchants. Shoppers may relate to the stories that brands tell. There is a large market for direct-to-consumer selling. Additionally, the study indicates that 50% of customers prefer accessing a brand’s website to a retailer’s since it provides more thorough information and guides.
- End-to-end control over products and marketing: The Direct-to-Consumer approach is a godsend for brands that are particular about North Star metrics like excellent customer service, compelling storytelling, and flawlessly built/packaged products. It places the brand in control and emphasizes the idea that the onus for customer excellence, quality, and service solely rests with the brand. As the brand controls the operations, it can work to improve the manufacturing, shipping, marketing, and customer support operations with greater agility and flexibility and in a genuinely customer-centric way.
In conclusion, the DTC strategy ensures that a brand’s identity isn’t lost amid a sea of rivals vying for shelf space in a shop. Additionally, organizations can aim to drive hyper-personalization by spending the necessary time and effort to understand their consumer base thoroughly.
Why Is It Important for Direct-to-Consumer Brands to Understand Their Audience?
Any DTC methodology’s effectiveness primarily hinges on how effectively the brand comprehends its target audience. After all, the brand needs to understand the customer’s motivations, pain points, goals, demographics, hobbies, personality traits, causes, etc., to develop a “direct” relationship with them.
In plainer terms, the success of Direct-to-Consumer depends on customer centricity. By utilizing solid data and analytics stacks, brands should be able to produce in-depth customer insights. The goal is to create a shared data lake by real-time gathering and ingesting data from many sources. Following analysis of this data can draw the following practical insights.
- Customer interaction preferences and channels of choice
- Key purchase drivers
- Customer satisfaction levels
- Potential signs of customer churn (especially for subscription box companies)
Consumer Direct-to-Consumer brands may create a complete and accurate buyer persona by compiling all these data. Here’s an excellent illustration of a consumer character we recently discovered: “Brandi Tyler,” a consumer seeking the ideal shoes who want to move to internet retailers.
The writing is clearly on the wall: Before brands join the DTC bandwagon, it is critical that they thoroughly study and conduct their due diligence on their target demographic. They must comprehend their target market and the motivations behind users’ desire to buy goods directly from a company. The Direct-to-Consumer brand can use consumer profiling to inform data-driven decisions.
Trying to shoot while wearing a blindfold is useless if you don’t know what works (and doesn’t) for the customer. It won’t be simple for marketers to rely on third-party data if Facebook tightens its ad restrictions due to Apple’s arm-twisting and the growing demand for privacy. Internal solid data and analytics stacks are now considered standard.
How Does DTC Retail Work? Best Advice, Tricks, and Techniques
Have you ever wondered how to communicate directly and digitally with customers in retail? We’ll provide some tried-and-true advice in this area to help you advance your Direct-to-Consumer strategy:
- Ask the right questions to create a DTC strategy focused on the customer’s needs. A strategic DTC strategy must first come up with a solution to the following significant problems:
– What sort of people do the brand’s ideal target market seem like in terms of interests? What are their sufferings and objectives? To what feelings does the brand appeal?
– How can the brand increase customers’ feelings of worth, hearing, and appreciation?
How can the brand interact with consumers more directly, personally, and non-intrusive way?
– How can the company grow its fan base while ensuring that its core customers share its values?
– How can the company use its current user base to its advantage to make them brand advocates?
How can the brand acquire insightful, real-time customer feedback to introduce innovative items that enrich customers’ lives?
- Adopt the maxim “less is more” and concentrate on selling fewer goods: An intelligent strategy for DTC brands would be to focus on quality, manufacture fewer goods, and get feedback from early adopters to make modifications as necessary. The goal is to keep making improvements until the product is almost flawless.
Casper achieved this by initially just offering a one-bed model at a low price, restricting the customer’s options, and selling $100 million worth of mattresses. In addition, the company provided to transport the mattress right to the client’s house. The brand’s sales reached $100M in just two years. It was easy to “determine the level of firmness that would be the most pleasant to the biggest possible market” with just one product on display.
- Monitor social media to maximize marketing expenditure and spur content innovation: In 2011, BarkBox noticed Facebook unpacking videos where delighted consumers shared films opening the boxes with their cherished pups. The company used this as a marketing chance and established an exclusive Unboxings page on YouTube:
This prevalent content technique reduced marketing expenses, gained “social proof” for the company, and increased customer mindshare. Direct-to-consumer brands must understand organic word-of-mouth marketing in the era of rising CPAs and inaccurate targeting.
- Prioritizing the individualized client experience is crucial: A hyper-personalized client experience must be provided, at the risk of appearing repetitive. Consider the startup Care/Of as an illustration:
The brand requested customers who logged in for the first time to fill out necessary information via a quiz to personalize the customer experience and create the framework for a frictionless vitamin-buying experience. Customers had to enter information about their age, gender, health conditions, dietary preferences, and other factors.
However, habit-forming, high-conviction/considered-purchase categories can do this without worrying about drop-offs, but brand marketers are reluctant to ask customers to fill out forms.
The algorithms give a list of acceptable customized vitamin packs once this data has been collected, saving the consumers valuable time from having to hunt for the desired products. As Warby Parker demonstrated with its home try-on function, brands may experiment with cutting-edge technology to make the process quicker, more practical, and more accessible:
By releasing the Prescription Check app, which enables users to check or assess their eyesight from the comfort of their homes, they also upped the ante in terms of the customer experience:
The takeaway? Direct-to-Consumer brands should go back to the drawing board to comprehend the main problems that customers are experiencing and apply technology to solve those problems. The future is a digitally enabled product, sales, and marketing model.
- Use influencer marketing to increase online sales: This strategy is here to stay. Think about how Dirty Lemon collaborated with Pia Baroncini to increase Instagram sales:
The company has tried a novel tactic, selling only via text messages. By limiting the distribution approach, the company increased sales and brand recognition by evoking a feeling of “mystery” about the product.
This tactic enabled them to successfully generate demand for the product organically, which would have required years of costly advertising and consumer dependence. Successful brands with influencer marketing initiatives even turn their most essential consumers become influencers.
Back in the day, Dove was the pioneer in this. Even smaller firms may now quickly launch influencer marketing campaigns thanks to micro-influencers with thousands of Instagram followers, new-age fitness gurus on YouTube, and chefs with specialized audiences.
Can implement a successful Direct-to-Consumer approach can be implemented in countless different ways. Retail brands cannot use a predetermined template or a general strategy.
Developing an effective DTC strategy requires experimenting with the newest trends and changing customer needs. Instant gratification is, in essence, the primary draw of a business-to-consumer sales approach.
Regarding business, brands can sell their items directly to consumers without going via retailers. In addition, marketers may cut through all the clutter between them and the end customer by creating a direct line of communication. On the consumer side, customers may easily and quickly obtain their preferred products, which benefits everyone. As a channel strategy, the DTC model may be highly effective at both launch and scale—but only if businesses use it while understanding their stage and keeping the end user in mind.