By skipping the middleman and delivering straight to their customers, direct-to-consumer (DTC) brands are in the ideal position for cultivating strong customer relationships, boosting brand loyalty, and increasing customer lifetime value. Mastering the DTC model, however, requires customer-centric tools and mindsets that are new for some businesses.
Competition is steeper than ever, costs are high, and consumers have developed lofty expectations about what, where, when, and how they purchase. The majority of modern consumers want to research products and buy directly from their manufacturers, leading to numerous store closures for large brick-and-mortar chains such as Sears, Macy’s, and JCPenney.
Legacy brands who were once dependent on these large-scale distributors are now recalibrating their traditional business models to focus on direct sales instead. Digitally-native brands like Glossier and Warby Parker are capitalizing on their inborn ability to provide innovative solutions and seamless customer experiences that build personal, one-to-one relationships with their customers.
DTC sales is a beast of its own and many brands at all stages of growth are still struggling with it. Under Armour, for example, is still trying to find its footing with DTC sales, its DTC performance dropping by one percent over the past year.
So what’s the difference between a successful DTC strategy and an unsuccessful one? In this post, we’ll discuss the opportunities associated with direct sales, the main challenge that hinders DTC growth, and how to overcome that challenge.
DTC—and the data collection it enables—lends itself to genuine, emotional, and more profitable customer relationships.
As the name suggests, DTC gives businesses a direct line to their customers.
With this direct line comes a level of control and insight that a strictly-wholesale business can never achieve. That’s because distributors limit brands’ ability to communicate with their customers; for example, if someone purchased your product at a department store chain, that person would be considered a customer of the department store, not of your brand. Customer data—and, subsequently, customer insight—is difficult to access when you have to go through the middleman.
Additionally, distributors may have varied pricing structures, discounting and sales policies, and restrictions on the types of merchandising allowed in the store. If these restrictions are too limiting or too inconsistent, you may lose out to competitor brands either online or in-store. DTC channels, on the other hand, give brands the ability to set and manage their own pricing, merchandising, and advertising strategies.
With this ability to control your brand image and manage customer relationships on a more personal, one-to-one basis, you’re more likely to create brand evangelists and drive repeat purchases. When successful, DTC brands can benefit from both higher margins and higher customer lifetime values compared to wholesale-only brands.
Ultimately, building a DTC business model will provide you with a wealth of contextual information about who your customers are, how they navigate the customer journey, what they buy, where they buy, and more. It gives you the ability to collect both first-party and zero-party data, strengthening customer relationships while powering your personalization strategies.
The biggest obstacle to DTC success: Siloed customer data.
Despite DTC’s emphasis on customer relationships, many businesses still operate with siloed, channel-based strategies. Their retail systems, people, and processes don’t communicate effectively. As a result, the customer experience suffers since siloed data prevents brands from streamlining customer journeys, answering complex questions about the efficacy of marketing and sales campaigns, and presenting consumers with only relevant and engaging information.
This poses a challenge for retail brands whose consumers have begun to expect seamless, omnichannel experiences, putting pressure on retailers to rethink the way their businesses operate, measure success, and communicate with their customers. If you want to offer these seamless experiences, you need to recalibrate your business so that everything is structured around—and informed by—the customer.
This recalibration requires:
- Technical, structural, and operational changes to unify your data and track customer identities and actions across channels.
- Cultural changes to encourage marketers, IT specialists, and business leaders to shuck the siloed mentality and adopt a more holistic, customer-centric mindset instead.
- Behavioral changes to ensure that your team is collecting clean and consistent data, drawing accurate customer insights, and responding to those insights appropriately.
These changes will give you the ability to own the customer journey from end to end and for different teams across your business to access the same invaluable customer data and feedback. In turn, you can offer enhanced, personalized experiences to your highest-value customers, driving exponential growth.
But these aren’t changes you can make overnight. Investing in the right tools, training, and strategic guidance is the first step to optimizing your DTC sales and operations model.
A CDP can help you genuinely understand and engage your customers.
To reap the benefits of a DTC model, retailers need to adopt a customer-centric mindset and use their customer insights to make smart, data-informed decisions. Because of DTC’s ability to develop one-to-one customer relationships, retailers already have much of this data on hand—but often, it’s kept in siloed or inconsistent forms which make it difficult to draw accurate and actionable insights.
A customer data platform (CDP) can help you pull together disparate data sources, unite your customer records, clean up messy or inconsistent data, and enrich that data as needed. With simple, easy-to-use dashboards for visualizing and manipulating your data, you can draw actionable customer insights to boost DTC sales.
Additionally, a CDP can help you track and measure key metrics such as customer lifetime value, churn risk, last product purchased across channels, time to second purchase, next most likely purchase, and more. When you’ve achieved a single customer view and can predict customer behavior based on proven models, you can begin to employ more targeted strategies to increase customer loyalty while acquiring new customers in your highest value segments.
Lexer’s CDP unifies your data and uses advanced analytics models to predict what your customers are going to do next, making it the ideal solution for DTC success. Retailers can use it to create granular, high-value segments and then activate those audiences in any channel in real-time, providing a seamless, omnichannel experience. Along with the technology, we offer training and strategic guidance to help your team adopt the cultural and behavioral changes you need to become masters of your own data.