Direct to Consumer Marketing – An Expert Guide
An overview - Consumer behaviour and buying experience has gone through a radical shift during the last few years. Why? They don’t want to be the buy-and-forget-about-the-brand customers anymore. In fact, most consumers have shown inclination towards building meaningful and long-term relationship with brands. And manufacturers leave no stone unturned to enhance their online shopping experience. They want to be the proud custodians of their brand and have an absolute control over everything from manufacturing and packaging to marketing and brand positioning. And that’s how the big wave of D2C ecommerce kickstarted.
In November 2019, Nike announced that it will stop selling its products on Amazon as a part of its revamped retail strategy. There are several reasons as to why the sports giant withdrew from the deal including a missed opportunity to gain power over how their products were being positioned and sold. Also, they realized they are losing to competition. With this move, Nike aims to redirect customers to their own channels, which will allow them to collect more customer data and Amazon’s retail scale along with data patterns like search history and product preferences.
Not just Nike, a lot of other smart companies and manufacturers like Kellogg’s have been jumping on the bandwagon to connect directly to customers. Not to forget, a lot of manufacturers also bearing the brunt of low to no sales during the ongoing COVID 19 crisis and want to adopt directly-selling-to-customer strategy to maximize their presence. Earlier, when it was announced that only essential goods can be sold at the physical and online grocery stores, that’s when a lot of direct-to-customers (D2C) brands went into overdrive and began to experience growth and profit. The soda giant Pepsico proactively took a big dive into direct to consumer playing field by launching pantryshop.com and snacks.com during the big lockdown. Additionally, Pepsico is actively engaging its customers on social media to build personal connections.
“Research shows that the consumers have shown ease and comfort in buying directly from brands during COVID crisis and the buying habits they have developed during this time are likely to continue well past the lockdowns”
In this guide, we will take a deep dive into D2C marketing, why D2C business trends are accelerating, and how D2C marketing can help generate more profits and brand loyalty.
What is Direct to Customers (D2C) Business Model?
Just to clear the air, let’s first understand what is Direct-to-Customer Business Model. Manufacturers who sell their products directly to the end customer without the help of the middle men who are usually wholesalers and retailers. For example, Walmart, Amazon, Ebay, and Alibaba are some of the world’s largest retailers that sell products from different manufacturers.
However, D2C brands reduce their dependency on these third-party distributors and trying to side line the age-old supply chain model of supplier, manufacturer, wholesaler, distributer, and retailer. They build their offering around digital marketing channels, including website, app, social media as well as physical stores.
Selling directly to customers allows companies to enhance brand voice and control almost every aspect of customer journey. Customer experience is at the core of D2C marketing which heavily thrives on data-focused consumer market. Going D2C not only allows brands to directly connect with consumers and understand their behaviour but it also gives them the freedom to experiment with new products and market it to a relevant segment to gain their feedback. However, the traditional retailer model delays the process of product launch as the sales model involves lengthy negotiations and there is even longer wait for the feedback loop to kick in.
However, Going D2C isn’t easy as the manufacturer takes the responsibility of retail-related business, product marketing strategy, brand positioning apart from production and fulfilment responsibilities. You might just think to yourself that why would a manufacturer want to overload himself with added responsibilities when they can simply sell their products via wholesale retailers? Well the answer to this revolves around the evolving needs, buying behaviour and expectations of the modern day customers. And this is pushing traditional retail business owners to become direct-to-consumer sellers and marketers.
So here’s why D2C ecommerce is on the rise like never before
Customers these days are super smart. They are cautious and love to take informed decisions about every purchase they make, thanks to the internet and social media. Before they spend money on any product, they want to gain in-depth information about the product so much so that if they can’t find that information on a seller’s website, they might just end up choosing another brand. In fact, “more than 50% of consumers opt to visit brand website rather than retailer website because they offer more comprehensive information and guides”. So to give customers what they want, it’s important for manufacturers to sell directly to customers in order to take full control and ownership of the end-to-end customer experience.
Additionally, we can’t ignore the fact that consumers have started gravitating towards the source brand. They prefer to buy directly from the brand, and as mentioned before they want to build a relationship with them too.
One of the key reasons for brands to go D2C is that the traditional retail is failing the modern customers, who always seek personalized and seamless shopping experience. D2C frees you from the traditional business model and allows you to treat your customers the way they want to be treated. For example, if your target user likes to buy from an app, you can always build an app and create a contextual and personalized experience for him or her. So whether it is creating engaging content, providing individualized recommendations or just being available on their preferable social media channel, D2C model allows you to get up close view of your end users to become more connected and engaged with them.
Is D2C long term business approach or just a passing fad?
Before we dive right into this, let’s first take a look at some important customer statistics and trends.
“Over 1/3rd of consumers report that they bought directly from a manufacturers website in the last year”.
“55% of customers prefer to buy from brands rather than multi-brand retailers.”
“78% of DTC brands increased their marketing budget compared to 60% of traditional retailers”
Considering the statistics above, the evolving needs of customers and the rise of D2C marketing does not seem to be a clothing style that goes out of fashion. On one hand, the retail stores have failed to keep up with customers’ expectations over the past few years. And on the other, customers continue to seek more authentic engagements and individualized experience with brands.
Also, the accessibility of consumer data is the most obvious reason why D2C brands and D2C marketing is growing. Marketers these days can leverage advanced marketing technology solutions to track almost everything about their customers and this gives birth to highly data-driven marketing. Brands can find more information about consumers who show interest in their products to drive more personalized and targeted campaigns. They can even identify their frequent and premium buyers, provide them with special offers and services to improve their lifetime value.
Apart from strong data insights, the statistics also suggest that emergence of D2C is fuelled by consumer demand. The success of ecommerce has inspired brands to rethink their relationship with their customers. Most consumers, especially millennials, resonate with particular brand values and love searching about their favourite brands online. D2C brands know they have a low-barrier-of-entry into e-commerce (D2C Ecommerce), can develop strong digital presence, and engage these consumers directly.
“According to statistics released by Shopify in 2019, worldwide retail ecommerce sales are going to hit a USD 4.9 trillion mark by the year 2021”. This shows that D2C is gaining a lot attention in this sector. The only difference is B2C brands sell products from other manufacturers and D2C brands are the manufacturers and marketers of their own products. And that’s what gives them a separate recognition of D2C Ecommerce. So the decision for D2C brands to inflate marketing budgets to meet their customers’ needs is anything but arbitrary. And this does not seem to change until traditional retailers evolve and regain their footing.
Top 5 benefits of D2C Ecommerce
Some of the benefits we have covered in “why D2C ecommerce is on the rise”, but we have not looked at it from sales perspective and definitely not from brand awareness perspective. So here are the top 5 reasons for brand to adopt D2C ecommerce approach.
1. Higher control over margins
Let’s understand this with the example of Glossier, a US-based chemical-free cosmetic and skincare brand. Glossier positions itself as “people-powered beauty ecosystem” which puts skin first and makeup second. The brand sells its products, promise and morals only via its website and social media. With 2.8 million Instagram followers, Glossier is leveraging social media and reaching vast audience to sell its products.
Glossier has cut out the complex network of resellers which does not cut its profit margin. They have predominantly invested in their online presence, bypassing merchandisers and buyers of the traditional retail model. Also, their website has a great organic growth which isn’t the result of backlinks from resellers but their tremendous work on brand awareness. The company valued at 1.2 billion dollar, reports Wall Street Journal.
Lesson – D2C model allows to have a complete control over your marketing strategy and ultimately your profit margins.
2. Access to first-party and more targeted data
D2C business model means you can gather massive amount of first-hand data at every step of production and distribution. But the question is what sort data you need to look into and what kind of data is useful? Well, to start with, your customers’ reaction towards your products is always useful if you have an offline store. You can always track the journey of your customers and observe their behaviour on your online store. The data-driven insights from Facebook, Instagram, Twitter, and Google Ads can help you gain access to granular demographics and deep understanding of your customers. And you can also retarget them via email marketing.
However, when you sell products via third-party retailers (offline or online), you don’t usually get access to any of that useful data. The good news is all of this data is first-hand and behavioural-based, which will help you create detailed buyers persona.
Lesson – Third-party retailers (online and offline) possess important data insights about your brand but they won’t necessarily share the same with you. With D2C model, you are the owner of your data and use it as efficiently as possible.
3. Improved brand awareness
From razor blades to tampons and mattresses to eye glasses, a lot of pure play brands are foraying into D2C ecommerce and filling their virtual shelves. The reasons is that they know they can put in optimum efforts to create their brand voice and maintain brand positioning that third part retailers cant.
According to marketing professor Scott Galloway
“We’re seeing the ‘nicheification’ of traditional categories. A variety of trends have converged to enable breakout products. Small players can get global reach and instant credibility without the massive budgets and the distribution constraints that used to limit them. The long tail has new life.”
Away, an American luggage designer, manufacturer and retailer is another popular D2C brand that ended up pulling in 125 million dollar in revenue by creating a unique brand positioning. The co-founder Jen Rubio says
“Even before we were like ‘let’s choose luggage,’ we were talking about editorial content and all we can do in the travel space. We see the long-term potential for Away to be much, much more than just selling luggage.”
Away knew that the luggage market was saturated and thought that it was easy to generate brand awareness without relying on retail stores as middlemen. The created brand awareness by positioning themselves as a travel company and started churning out travel-related content.
Dollar Shave Club, a US-based D2C brand that delivers razors and personal grooming products for men, has been doing rounds in the D2C sector. The brand saw that men’s razors are unreasonably expensive, created an affordable opportunity, cut out the middlemen and started selling everyday grooming products directly to customers at affordable prices.
The brand first identified its target audience, convinced them to join its exclusive subscribers-base and started sending them personalized set of shaving tools. Dollar Shave Club became a popular multi-billion dollar brand by identifying its ideal customers and started focusing its marketing campaigns towards them.
4. Test New Products
A lot of times manufacturers want to launch new products but due to lack of customer data and direct connection with them, they are wary of what their consumers want and need. However, having your own ecommerce store will give you an access to genuine customer reactions and feedback. And all that rich data makes it easy for manufacturers to test and launch new products. Moreover, you can directly ask you customers about their needs and meet them using different marketing approaches.
Bombas, a sock manufacturer, is another good example of brands leveraging D2C model to a great success. Launched in 2013, the D2C sock start up increased its revenue from 4.6 M to 47 million in 2017 to 100 million in 2018. They kept making their sock better and better and ended up joining the 100 million club. All they did was identified with their customers’ problem of uncomfortable and ill-fitted sock and incorporated technical features like honeycomb arch and blister tab to distribute pressure and reducing chafing. They wowed their customers with the technical aspect of their sock and justified the price of 10 dollar per pair.
So the lesson is testing and introducing new products always pays off once you know what your customers need, which is only possible when you have a direct and close connection with customers.
Fundamental Elements to consider before going D2C
1. Make sure you are 100% ready to make a shift
If you are a well-established retail set up, then venturing into D2C isn’t as easy as putting up a ecommerce website and starting to sell. There will be a radical shift in the way your business is being operated. Just be ready for a lot of internal friction and resistance. You will require new people, new skillset, new departments and most importantly re-organization, and possibly change management. You can’t give new responsibilities to your existing employees and let them handle your business. And yes, this can’t do this half-heartedly.
There is a reason D2C e-commerce wasn’t a great success a decade ago. Manufacturers these days have a plenty of examples, models and ideas to get inspired and innovate from. Many retailers failed to figure out ecommerce before because they weren’t organized properly. So it is important for you talk to everyone, align every department and ensure that they are ready for a D2C sale structure. You also need to process transactions, start shipping and return facility, optimize checkout experience, handle accounts and so on. Poor execution can lead to bad customer experience which can cripple your ability to sell D2C.
2. Get your data in one place and manage it well
We discussed before that venturing into D2C business model will give you an access to a lot of first party data. Make sure you collate customer information from various channels you are using to engage with your customers with product data and customer profiles. The most important thing is to break data silos within the departments and allow your marketing team to access every database and data point to execute your D2C marketing strategy seamlessly.
“74% of customers say they get frustrated when a website does not show them content specifically tailored to them.”
Not only do you need a seamless website, stunning imagery and well written descriptions for your products but you also need to combine all your data including customer interactions, customer purchase history and customer personal information and put it on one platform to manage your data flow eventually for your marketing automation campaigns.
3. Break out of channel mindset
68% of customers wish to have consistent brand experience across all the channels they use to engage with the brand. It’s imperative to understand that customers are not looking at your brand as channels. They only look at you as one single brand. Marketers or channel managers need to align themselves and ensure that they offer seamless brand experience to their customers across all digital touchpoints. This means you need to constantly monitor all your channels and keep an eye out for inconsistencies in product descriptions, pricings, availability and so on.
Indian retail brands Chumbak is a perfect example to explain brand consistency across channels. Chumbak, which started online and then ventured into offline retail stores later, is known for its consistent customer engagement across all digital touchpoints.
Founder and CEO, Vivek Prabhakar says “Each channel including the brand website showcase the brand philosophy #MakeHappy even while retaining their distinct role in the content strategy and overall brand communication.”
A distinct brand voice on social media, consistency with its vibrant visuals, brand theme and high energy engagements has helped Chumbak widen its community of loyalists. In fact, the Chumbak loyalty program boasts of 1.3 lakh customers. Whether its Twitter, Instagram or website, the brand maintains its quirky tone across the channels and perfected the art of delivering consistent customer experience. Also, Chumbak keeps experimenting with its designs and product lines and keeps refreshing its merchandise every 2 to 4 months, a great advantage of being a D2C brand.
4. Prepare your partners
If you are a successful business that has developed a great rapport with retailers over the years, it’s imperative for you to plan how you want to strike a balance between your retail partners and your own marketing channels. And most importantly, how you would want to address your retail partners about your plan to venture into ecommerce. Technically, you are going to be their competitor. But going D2C does not mean you want to become insensitive toward your existing partners.
You are simply opening yourself up to more avenues to increase your profits and build deeper relationships with your customers. Take the time to consider the potential fears of retailers and make sure you communicate your goals and how it will shape your relationship with them in future.
One way to avoid channel conflict is choosing the right inventory. You can always ask your retail partners which products are performing well and which ones aren’t. You don’t want to be counterproductive by diverting sales and traffic from the products that are already performing well. Some D2C brands have seen that limiting the number of products on their site ensures that retail partners’ profits don’t go for a toss.
So you can always choose specific products to sell directly to customers or you can give shipment of high performing products to specific retailers or make your retail partners agree to market or promote your products proactively.
How to build brand loyalty and customer intimacy with D2C
1. Create a website that speaks to your customers
Your website should always be eye-catching, especially the homepage. All Birds, a New Zealand-American sustainable shoe brand, is a fantastic example of a website that instantly connects with its customers. The minimalist and easy-to-navigate homepage clearly conveys the brand motto – how their shoes help you tread lighter by emitting least amount of carbon footprint. They claim that they make world’s most comfortable shoes and their website clearly exudes this confidence, which works pretty well for them.
Most importantly, brands should strive to make everything simple for their customers, which is the whole idea of going D2C. The reason everyone goes to Amazon and Alibaba is that they have eliminated the hassle of searching and going through thousands of products.
Around 48% of online shoppers choose large retailers for they have wide reach into the market, provide terrific user experience, easy navigation, proper segmentation and categorization of products. Also, according to a recent report by Statista, there is a 67.57% cart abandonment rate worldwide. Factors such as easy payment methods, chat or customer support, reviews, ratings, and easy return policies help reduce high cart abandonment rates.
2. Capture and streamline customer data
To find success in D2C segment, you need to tap into your treasure trove of customer data. However, having an access to first-party data, which includes email addresses and social profiles in CRMs, geographics, demographics, cross-platform data, and customer support information, isn’t enough. You need a Customer Data Platform to streamline the process. CDP can easily collect and manage the first-party data to automate marketing campaigns for your D2C brand.
Read in detail about How Customer Data Platforms can Power D2C Brands Deliver Omnichannel Personalization
3. Build 1:1 Personal relationship with customers
In the times of hyper-personalization, tone-deaf marketing and mass merchandising can wreak havoc on your brand reputation, and ultimately sales. The whole idea of understanding your consumer persona through data-based marketing is to offer them a shopping experience tailored to their preferences and online behaviour. You can’t just put off your customers by blasting emails to them based on the fact that they tried a particular sample or bought something from you.
Marketing is way past batch and blast, especially during the crisis times of COVID 19 when brands are trying to build loyal relationships with customers who are seeking personalized shopping experience.
On the SnapApp blog, Justina Logozzo elaborates:
“It’s no longer about getting the most leads into the pipeline, it’s about getting the right leads into the pipeline. It’s not just the shift toward better leads that’s shaping demand generation efforts today, either. Modern prospects are expecting more from the brands vying for their attention, forcing marketers to rethink how they go about raising awareness and demonstrating value.”
Netflix is popular for its personalized viewing recommendations based on the viewers previous actions. Using an AI and ML-powered personalization engine which is constantly being improved, they make their recommendations better and better for their viewers by the day.
Here are some important stats on personalization which every D2C marketer must know
According to an article published in Business2community, 56% of consumers are more likely to shop with retailers who offer personalization and a whopping 74% get frustrated by seeing content that doesn’t match their interests.
- 53% of online shoppers find personalization valuable
- 57% of shopper are willing to give their personal info if it’ beneficial for them
- 45% of customers prefer shopping on websites that offer personalized recommendations
- Personalized ads have 10x better conversion rate than ordinary ads
How to get started with your D2C personalization journey
1. Offer channel choices and create a unified view
There are 3 phases of product purchase
Pre-purchase – where customers seek information about the product before purchase
Purchase – when customers actually make a purchase
Post-purchase – when customer seek more information after buying the product purchase
Unfortunately, your customer isn’t doing this on one or two channels, in fact they use combination of touchpoints to engage with your brand. They might come across your product on the website, research about the same product on the mobile app, look up for the review on one of the comparison websites, click on the ads on social media multiple times, and might eventually end up buying from the store.
All of these channels are your data gathering sources. You need CDP to integrate all these channels to creating a unified view of your customers. Simply put, you can only offer a truly personalized experience when you have customer information or data available from all your channels at one place. To start with, you can make recommendations based on past purchase. But eventually, you will need to go one step ahead and tailor the whole journey and shopping experience for your customers.
This is only possible when you have a CDP and omnichannel personalization engine in place.
2. Implement personalization across channels
When you have a data driven omnichannel personalization engine in place, half the battle is won. A unified customer view will help you tailor the whole website viewing experience for your customers.
- This means, they can see personalized product recommendations on the homepage based on their location, devices, purchase history, search history, add to cart, favourites, viewing history and so on. Personalized recommendations can improve website conversions by 8 to 13%.
- You can also create personalized pages such as “top picks for you” – After tracking and collecting customer eye-ball data and actions, your AI-powered personalization engine can create separate pages or sections where high-intent items can be showcased which boosts engagement and conversions.
- The real-time data and search history helps you dynamically push high intent items right at the top of product listing and purchase pages, which increase the likelihood of purchase.
Based on the rich data and customer information you collect from your online and offline channels, you can send hyper-personalized recommendations on your email campaigns, show hyper-personalized ads on Google, Facebook, Instagram and other social media channels.
AI-powered Hyper-personalization can
- Boost behaviour prediction by 15 to 20%
- Boost revenue by 10 to 15%
- Boost conversions by 8 to 13%
Read in detail about “12 Best Ecommerce Product Recommendations tactics that will set your sales soaring”
3. Map the Customer Journey
Mapping customer journey is the most critical way to drive sales and improve Customer Lifetime Value (CLTV). Since more often than not customers path to purchase is non-linear and complex, it’s becomes imperative for you to map this complex journey.
In simple words, customer journey mapping is all about creating visualization of interactions your customers have had with your brand over the extent period of time across all digital touch points. When you have a clear visibility of this path, you can always zero in your attention on where your customers are getting stuck and dropping from the buying journey. Data-driven analytics and unified customer view has made mapping customer journey easier than ever. Once you know what might be stopping your customer from making a purchase you can always take actions accordingly.
Why millennials love D2C brands?
There is a reason why Millennials go gaga over Starbucks and Netflix. Starbucks offer the ability to customize and order drinks based on purchase history and location to get as personal as possible. And Netflix is well-known for its personalized recommendations. According to Netflix, “80% of what people watch comes from recommendations.”
The fact is millennials often give more importance to brand value than pricing and other common buying factors. They show no hesitation in choosing a brand that addresses their priorities, convenience, authenticity, and offers seamless shopping experience. And the companies that offer direct to consumer services happen to do just that.
The generation that prefers to make half of their purchase online love D2C brands like Ustra, Beardo, Mama Earth, BoAt and FabAlley that offer the most streamlined, straightforward and convenient shopping experience. According to personalization statistics on Instapage, If they get personalized offers or discounts, 63% of millennials, 58% of Gen Xers, and 46% of Baby Boomers are willing to share personal information with companies.
More than 60% of millennials are drawn towards making purchases that express their personalities, and D2C brands can always tailor their content and messages that matches their needs and preferences.
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