Keith Bergeron

by Keith Bergeron | Business Strategy

The retail landscape is evolving with the emergence of direct-to-consumer (DTC) brands. These are companies that manufacture and promote their products without relying on the distribution means of traditional retailers. By eliminating the middle-man, and as a byproduct competing with them, DTC brands must distinguish themselves by leveraging the direct relationship with their customers to provide a personalized purchase experience.

With regard to the COVID-19 pandemic, DTC companies have experienced various impacts by industry ranging from production and distribution interruptions to a decreased need for their products.

 

Some Background on DTCs

DTC brands cannot rely on a shopper’s affinity toward a retailer or the visibility gained by being present at such retailers. Instead, they must cultivate a relationship with their customers, using direct and continuous engagement to understand more about a customer’s needs, interests, and habits. A deeper understanding of their consumers (along with free reign to choose how they want to advertise without restrictions put in place by retail partners) allows DTC brands to be innovative and creative with their advertising approach.

DTC brands utilize social media, YouTube, podcasts and other advertising channels with more advanced targeting and reporting functionality. These channels allow them to strategize and optimize toward a more defined audience. According to Forbes, DTC advertising increased 50% in the past year. This trend is expected to continue as more businesses explore alternative sales channels with higher profit margins than traditional retail. With so many brands emerging, it is more important than ever to stand out and make sure your advertising budget is spent effectively.

Here are three ways DTC brands can take advantage of a more robust consumer understanding to improve their marketing efforts, learned from top DTC companies.

 

1) Produce high quality content & creative

Having a better understanding of their target audience and purchase habits allows DTC brands to produce higher quality content such as blogs, social posts, viral videos, and ad creative, among others.

The most common example of this is Dollar Shave Club which blew up overnight due to a funny and memorable YouTube video claiming their blades weren’t good, but &*$@ing great.

This is the type of advertising that would be frowned upon by traditional retailers. However, as Dollar Shave Club is DTC and YouTube has less restrictions on content than television, they were able to speak effectively and go viral amongst their young, male audience. The video currently has over 26 million views and Dollar Shave Club was purchased in 2016 for $1 billion.

 

2) Invest more heavily in new customer acquisition

DTC brands typically invest a larger portion of their advertising budget toward prospecting to new customers. Since most customers will not be familiar with your brand, it is important to find unique ways to get in front of your target audience with attention-grabbing content and advertising. The good news is that DTC brands should have a more clearly defined target audience, making prospecting easier.

Most advertising platforms allow brands to leverage first and third party audiences for more advanced targeting, meaning it is easier than ever to get your message in front of the most relevant and likely-to-buy customers.

Let’s look at BarkBox, a dog supply subscription company whose business model revolves around targeting the growing number of millennials choosing to invest their income into pets instead of children or marriage. BarkBox is now able to build a target audience using third party data partners to show their paid social, display or video ads to dog owners under a certain age who are not married. They can even utilize Visa purchase history data to advertise to consumers who’ve purchased dog food in the past 30 days.

This advanced level of audience targeting opens the door for DTC brands to spend their prospecting dollars more efficiently.

 

3) Prioritize building brand loyalty

DTC brands need to dedicate more effort into building brand loyalty. Three areas where DTC brands can stand out and inspire more brand loyalty:

  1. An effective email marketing strategy
  2. A user-friendly and memorable purchasing experience on the website
  3. Exceptional support and customer service

A prime example of building brand loyalty through a memorable purchase experience is the men’s pants company Bonobos. One of the top metrics for measuring the strength of a brand is the amount of direct traffic they get to their website. This is the number of customers who type your website directly into a browser vs. clicking on an advertisement or a Google search result. Past purchasers are often a larger portion of direct traffic. According to SimilarWeb, Bonobos has a direct traffic rate of 53.5%, an industry best and much higher than industry averages of 15%-25%.

Bonobos achieved this level of loyalty by setting out to provide “insanely great” service with specific goals around responding to phone calls and emails within 30 minutes and 24 hours respectively. They also had a focus of having an extremely high number of “great” email ratings. They put a lot of effort into making the website user-friendly and didn’t just want to make amazing pants, but wanted to make shopping for pants online easy.

Even before the COVID-19 pandemic, consumers’ purchase habits were changing. Now, with the closure of many traditional retailers and a forced pivot in their business model to one that is predominantly digital, DTC businesses are presented with an opportunity to further cement themselves in the lives of consumers who are growing more comfortable making all of their purchases online. Using the strategies outlined above, DTC companies can capitalize on this shift to build a targeted and loyal customer base as well as a successful business.

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