When we think of direct-to-consumer (D2C) brands, we automatically default to disruptors such as Dollar Shave Club, Hello Fresh and Eve -- brands that have rapidly gained massive market share in established industries over a short amount of time.
Where traditional businesses have played the middlemen, challenger brands are adopting a D2C strategy. But what we perceive as D2C is actually part of a wider trend that is seeing more brands that were not born in the digital economy beginning to apply the same strategies to connect directly with consumers.
The goal is to make their own websites and apps the consumer’s first port of call.
Everything from air travel to energy provision is becoming D2C, so brand marketing teams and agencies must evolve accordingly.
Anatomy of a D2C brand
Disruptor D2C brands share some common characteristics. With smaller marketing budgets, they must ensure their message is not overwhelmed by established brands and therefore seek innovative ways to stand out amid the noise in order to drive direct action.
Effective marketing is also facilitated by extensive customer knowledge. The information that a brand such as Silentnight has about consumers buying a mattress from a high street store is not comparable with the data Eve has about shoppers buying a mattress directly through its website.
This in-depth knowledge of the customer – combined with low costs achieved through simple supply chains and low overheads -- helps D2C brands to flourish. But there is an additional hand D2C brands are playing exceptionally well, and that is their focus on performance marketing.
A performance-first approach
The performance-first approach is a key factor behind the success of disruptor D2C brands, and one that mature brands must adopt as they move in this direction. Whereas traditional brands focus their budgets on digital channels -- using vague metrics such as reach, impressions or viewability -- D2C brands buy media on measurable, ROI-positive (return on investment) business outcomes such as conversions, sales or subscriptions.
Contrary to common practice, every touchpoint throughout the funnel can be tracked, measured and optimised to drive tangible business success.
There are plenty of proxies for how consumers engage with marketing messaging and even upper-funnel tactics can be measured using metrics such as high-quality engagements (HQE) that take into account video completion statistics, view counts or shares to infer intent.
With budgets increasingly squeezed and marketing teams required to be more accountable, performance marketing is the ideal way to track the efficacy of every penny spent and do more with less.
Breaking the brand-led tradition
Because the D2C customer journey is effectively the same for all brands--– reaching the consumer online and driving them to take direct action -- established brands can apply the performance marketing tactics that disruptor brands have used to scale rapidly. This strategy is especially beneficial for medium-sized brands that are being squeezed from both sides by their category leaders and the emerging challengers.
What is often holding such brands back is a fixed mindset and misconceptions about performance marketing.
When we work with disruptor brands, we are usually talking to performance marketers who are focussed on return on investment with their media spend, whereas with more traditional brands we tend to be in discussion with CMOs and their marketing teams who may have a more traditional brand marketing mindset.
There is often a misperception that performance marketing is all about search or just reaching those bottom-of-the-funnel consumers that are about to convert, when in fact brands can apply it throughout the entire funnel.
Marketers need to break away from traditional brand-led TV or out-of-home campaigns and shift toward more performance-oriented marketing strategies that can be measured, tracked and optimised.
Scale requires external expertise
When a disruptor D2C brand launches in the online world, there is a relatively streamlined route to market that encourages brands to keep marketing activities in-house. And to a certain extent this is an effective strategy in the early days, where push-button solutions from the likes of Google and Facebook allow brands to buy media with a very small team.
However, if brands want to accelerate growth and scale, they will need far more resources to track, measure and optimise end-to-end campaigns.
Established legacy brands moving to a performance-led D2C approach will probably require an enormous amount of resource from the start. The sheer volume of data that must be analysed to optimise performance, including ongoing creative testing, lifetime value (LTV) modelling, and regression analysis, to name but a few, make it difficult to execute effective performance marketing in-house.
Most brands will not have multidisciplinary in-house teams of the size and experience an agency can offer so, to really achieve scale cost-effectively and efficiently, brands need agencies to add value above what they can achieve themselves.
In the digital age, most brands are shifting their focus to forming direct data-driven relationships with customers and engaging them through a performance-led approach with the help of their agency partners.
As we head into a new decade, everything is D2C -- and all brands need a performance focus and strategy to achieve scale.