Brands and product manufacturers are increasingly turning to direct-to-consumer (DTC/D2C) marketing in e-commerce to transform the way they sell. In 2022, Statista estimates that DTC e-commerce sales will reach $151 billion in the U.S. alone. While traditional retail provides reach, it comes at the price of severing the relationship with your consumers.
Direct-to-consumer marketing enables suppliers to advertise their products directly to consumers, without any retail chains or other intermediaries. In simpler terms, it means sitting in the driver’s seat and steering the e-commerce wheel to sell direct to consumers without the middleman.
Initially, D2C was purely about increasing profit margins. But D2C brands see the benefit in product presentation, and customer service is no longer left to third parties. It gives them complete control over their own offering and product advertising.
By managing production and supply chains as a DTC brand, you’ll find it easier to better enforce and communicate your values and ethics without compromise. This creates a positive impact on how consumers perceive your brand. Social responsibility also increases the basis for developing exceptional customer experiences that emotionally engage and activate consumers. This, for example, can lead to the long-term strengthening of your brand.
Retailers, on the other hand, face the challenge of reconciling the ethical requirements of various brands and manufacturers, which can dilute the value proposition.
When setting up a D2C marketing strategy, you may find it bewildering to know where to start. How can you best draw attention to your product? How can you retain customers and involve them in product development? You’ll find your answers and much more by building a data-driven customer experience (CX) strategy.
There is a wide range of unique selling points that make direct customer relationships valuable to become your core focus. The essential bedrock for all of them is first-party data: the core of a data-driven customer experience strategy that determines the success of your D2C offer.
To save marketing budgets, your “own” onsite channels such as websites, apps, and email newsletters are essential. Besides the significantly lower cost per order, you’ll be independent of advertising networks and other third parties. Instead, successful targeting based on first-party data becomes highly relevant and personalized.
Central contact profiles can give you a 360-degree view of consumers. It aggregates information such as socio-demographic characteristics, transactions, and interactions, to create holistic profiles with order and engagement information. This is essential for targeted marketing and service activities, as it can help you understand who your customers are.
But how do you get hold of valuable first-party data? Usually, highly qualified data professionals are needed to achieve this, and they’re currently in high demand, making them difficult to recruit. If you’re a start-up D2C provider or manufacturer entering the D2C business for the first time, you’ll know precisely how difficult it can be.
But an alternative to recruiting your highly qualified ideal data professional does exist. Adopting new generation marketing tools can drive your direct to marketing strategy. Deploying these may sound challenging, especially for young DTC brands, but some solutions make it easy for you. They often bundle all essential functions, simplify integrations, and support dynamically growing teams. These solutions mean the right insights can be filtered out of the vast amounts of data created.
For example, the data is automatically collected, analyzed, and segmented as a first step, making it easy to identify the relevant target groups. In the process, purchase and payment options, price, and services are converted into target group segments. These are essential for targeted direct to consumer marketing activities, particularly when building brand awareness.
It pays off to contact consumers regularly to give inspiration and convince them to buy again. But to do this, brands need to know their customers to manage the customer journey and build long-term brand loyalty. Customer insights are the basis for this. Constant communication that’s adapted to the customer journey’s individual phases is essential to encouraging brand loyalty. It’s much more cost-effective to encourage customers to buy again than to acquire entirely new customers in the direct to consumer business. In most industries, experience shows that 80% of turnover is generated from 20% of customers. Existing customers expect – and deserve – privileged treatment. Appreciation is a valuable asset and establishes customer relationships for the long term.
Successful D2C business models are based on a critical mass of high-quality existing customers. Therefore, it should be your goal as a D2C brand to turn casual shoppers into regular buyers and brand ambassadors. To achieve this, your business needs to understand its customers and their needs. The basis for this and long-term customer loyalty is through a positive customer experience.
In addition to retaining existing customers, you’ll need to identify consumers who signal churn tendencies, e.g., declining repeat purchases or unsubscribing from newsletters. By identifying this, they can be targeted and incentivized in an individual manner. For D2C brands to target consumers at risk of termination, the value of each customer must be identified, and targeted insights derived. The purchase history as well as comparative cohort analyses not only enable predictions on the churn probability but can also be used to react automatically to specific customer behaviour.
Brands and manufacturers in direct sales can also establish personalized, long-term customer relationships through customized products and packaging. Since complete control over product development remains with you, creating an individual look and feel becomes straightforward. You can also dispatch products sustainably and use interactive packaging strategies. For example, invoices can be sent by email to save paper resources, and QR codes can be placed for product activation, re-ordering, gamification, or VR experiences.
Interactive packaging also enables customers to give feedback, after receiving the package directly. As a D2C brand, you can efficiently respond to feedback at short notice, which is particularly important in the case of negative reviews. In addition, customer feedback can, in turn, provide information to optimize processing, packaging, shipping, and product development.
There are many ways to begin the journey towards an effective direct to consumer marketing strategy. Achieving success with D2C relies heavily on the use of first-party data. Implementing a data-driven D2C strategy doesn’t need to appear daunting as it seems and can be achieved through targeted key activities. One thing, however, is for certain – with consumer behaviour changing rapidly, brands will need to move swiftly to determine how best to connect with their customers online and enjoy the benefits of D2C.
Our new D2C guide “Retail vs DTC – An Informative Guide to Direct-to-Consumer Marketing” addresses your fundamental questions around:
Successful DTC business models
Building up and increasing your brand awareness
How customers can be acquired, nurtured, and retained through targeted DTC marketing