By Hayley Strang, Senior Marketing Manager, Mapp Digital
Brands and product manufacturers are increasingly turning to direct-to-consumer (DTC) ecommerce, where products are marketed directly from the supplier to the end customer – without any retail chains or other intermediaries. It is entirely understandable that companies are taking this approach. Traditional retail offers reach, but can also create barriers between the supplier and the end customer.
Originally, DTC was purely about increasing profit margins, but DTC providers also benefit from the fact that neither product presentation nor customer service is left to third parties, giving them full control over their own offering.
By controlling production and supply chains, DTC brands will also find it easier to better enforce and communicate their beliefs, values and ethics without compromise, with a positive impact on how their brand is perceived by end customers. Social responsibility is increasingly the basis for developing exceptional customer experiences that emotionally engage and activate end customers. This in turn leads to a long-term strengthening of the DTC brand. Retailers, on the other hand, face the challenge of reconciling the ethical requirements of a wide variety of brands and manufacturers, which can often dilute the value proposition.
When building a DTC strategy, brands may find it bewildering to know how to start. How can they best draw attention to their product? How can they retain customers and involve them in product development? The answer to these, and so many other questions, lies with building a data-based customer experience strategy.
The basis: Valid customer insights
There are numerous unique selling points that make direct customer relationships successful – and on which DTC providers should focus. The most important bedrock for all of them is first-party data. This is the basis for a data-based customer experience strategy that will determine the success of the DTC offer.
To save marketing budgets, “own” channels such as websites, apps and email newsletters are particularly valuable. Besides the significantly lower cost per order, DTC brands are also independent of advertising networks and other third parties and successful targeting based on first-party data is highly relevant and personalised. Central contact profiles give DTC providers a 360-degree view of their end customers, aggregating information such as socio-demographic characteristics, transactions and interactions. This creates holistic profiles with order and engagement data that are essential for targeted marketing and service activities.
But how do you get hold of valuable first-party data? Highly qualified data professionals will be required to achieve this and these professionals are currently in high demand and, therefore, very difficult to recruit. This is especially true for start-up DTC providers or
manufacturers entering the DTC business for the first time.
An alternative to recruiting data professionals could lie in the new generation of marketing tools. Deploying these may sound challenging, especially for young DTC brands, but there are solutions that bundle all the necessary functions, simplify integration and support dynamically growing teams. With such solutions, the right insights can be filtered out of the huge amounts of data all companies now create. As a first step, the data is automatically collected, analysed and then segmented and the relevant target groups identified. In the process, purchase and payment options, price and services are converted into target group segments, which are so important for targeted DTC activities – particularly when it comes to building brand awareness.
DTC for long-term brand loyalty
It pays to contact end customers regularly to provide inspiration and to convince them to buy again. To do this, brands need to know their customers in order to manage the customer journey and build long-term brand loyalty. Customer insights are the basis for this. Regular communication, adapted to the individual phases of the customer journey, is essential to encourage brand loyalty. In the DTC business it is much more cost-effective to encourage customers to buy again than to acquire entirely new customers. Experience shows that in most industries 80% of turnover is generated from 20% of customers. Existing customers expect – and deserve – privileged treatment. Appreciation is a valuable asset and ensures long-term customer relationships. This is especially true in direct customer business.
Successful DTC business models are based on a critical mass of high-quality existing customers. It should therefore be the goal of every DTC brand to turn casual shoppers into loyal fans and brand ambassadors. For this, brands and manufacturers need to understand their customers and their needs. The basis for this and for long-term customer loyalty is a convincing customer experience.
In addition to retaining existing customers, DTC providers should identify end customers who signal clear churn tendencies through declining repeat purchases or unsubscribing from newsletters so they can be targeted and incentivised to purchase. In order for DTC brands to be able to target customers at risk of termination, the value of each individual customer must be recorded and targeted insights derived. The past purchase history as well as comparative cohort analyses not only enable predictions on the probability of cancellation, but can also be used to react automatically to customer behaviour.
Brands and manufacturers in direct sales can also establish personalised, long-term customer relationships through customising products and packaging. Since full control over product development remains with the manufacturer, it is very easy for them to create an individual look and feel and DTC providers also have the opportunity to dispatch products sustainably and to use interactive packaging strategies. For example, invoices can be sent by mail to save paper resources and QR codes can be placed for product activation, re-ordering, gamification or virtual reality experiences. Interactive packaging also enables customers to give direct feedback directly after receiving the package. DTC providers can therefore 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 optimise processing, packaging, shipping and product development.
There are many ways to begin the journey towards an effective DTC strategy. Achieving success with DTC relies heavily on the use of first party data. Implementing a data-driven DTC strategy need not be as daunting as it seems and can be achieved through multiple key activities. One thing, however, is certain – with consumer behaviour changing so rapidly, brands will need to move swiftly to determine how best to connect with their customers online and enjoy the benefits of DTC.