Back in the spring of 2020, when we first isolated ourselves and wondered how long we could endure the disruption of our cherished routines, we had no idea we were actually participating in the next chapter of an ongoing revolution. Now, as the weeks have become more than a handful of months, we see the results of the pandemic’s forced seclusion on a great many brick-and-mortar businesses. A growing list of local, national, and international businesses have fallen into bankruptcy.
On the other hand, if there is one group of businesses that seems to be thriving, it is those that are selling products direct-to-consumer (D2C). When there weren’t too many vehicles motoring through neighborhoods in 2020, the ones you were never surprised to see were delivery trucks: FedEx, UPS, and Amazon Prime. The reality that so many retailers faltered and aren’t coming back compared to the profitability of many emerging direct marketing companies signals the latest chapter in the permanent restructuring of merchandising. That doesn’t mean D2C businesses are automatically going to succeed. Indeed, as we’ll see, many are facing uphill struggles. In this post, we’ll take a closer look at the emergence of D2C marketing, see its potentials and trends, and view some of the marketing errors that undercut these companies. Above all, we’ll grasp the importance of staying atop of this rapidly evolving form of marketing.
This Isn’t Your Great-Grandfather’s Economy
When we drive through the retail district of a community and look at the brick-and-mortar stores that line the streets, as modern as they may seem, they are actually a throwback to a pre-industrial society. The country store became the general store, which became the department store, which became the strip mall, which became the shopping center. The format changed in appearance and sophistication over the centuries, but the model remained the same: customers traveled relatively short distances to purchase goods from a limited variety of options.
There were some modifications over time. Rapid transit made it possible for customers to travel greater distances, a development that coincided with the specialization of stores. To expand variety, some merchandizers—notably Sears & Roebuck—offered catalog sales. Still, regardless of the distance or the mode of purchase, you were buying from a brick-and-mortar store.
A couple of benefits accompanied this type of marketing. The customer built a relationship with the merchant. Jobs were provided locally by the merchant.
Several negatives were also inherent. First was a lack of choice and little control over price. The merchant could only stock so many goods and the customer’s selection was limited. Another drawback was the inability of the customer to interact with the manufacturer. Of course, unless one was a wholesaler, there was no way to avoid paying retail. You had to cover the middleman’s expenses.
Throughout the last fifty years a form of alternative distribution and marketing was created that had been called “direct marketing”. With improvements in the mail system and the evolution of UPS and FedEx it was possible to establish relationships directly with customers and send them products through the mail. There was a sizable and growing industry of companies that sold products direct to consumer that offered either a broader assortment or distinctive products that were not commonly available at your local store or mall. The main methods of offering products and marketing to consumers mirrored the evolution of media over time—first print and catalogs, and then the explosion of direct response television with the deregulation of the cable industry. Database technology was growing in sophistication and was critical for data-driven marketers to build databases of customers, storing their preferences and purchase behavior as critical clues for targeting, tracking, and improving future marketing results.
As the Internet began to find its way into the homes of the average individual in the 1990s, the trends of direct to consumer selling established by the direct marketing industry exploded and a new wave of merchandising came into being. Suddenly, it became possible to sell thousands of items in real time directly to the consumer without involving a brick-and-mortar merchant. While it may seem as if the transition to a predominantly Internet marketplace has taken a long time, in actuality, it happened virtually overnight: hundreds of years of storefront merchandising supplanted by the digital marketplace in less than 20 years.
Marketing Has Always Been the Key
Even from the first days of Direct to Consumer Brands on the Internet, the success of merchandizers was dependent upon their marketing. Not many companies had the ability of Apple and Dell for television ad campaigns to drive consumers to their websites. Over the years, online companies tried many different marketing strategies to bring people to their websites:
- Social media marketing: The growth of social media and D2C are roughly parallel, as are the evolutionary lessons both are learning. There are a variety of ways to advertise on social media: display ads, continually uploading new quality content, building follower lists, coupons, giveaways, and other sales promotions.
- Endorsements: In the age of the “influencer,” there are many creative ways to partner with a well-known person who can help market your goods via social media, blogs, websites, emails, and so forth.
- Data-based marketing: The Internet doesn’t just dispense information. It collects it as well. Ever wonder why you investigate purple sneakers on the Internet and a few minutes later, a plethora of ads for purple sneakers begin to appear? There are those in the online world who can help you target very specific subsets of the population who will be quite interested in the merchandise you wish to market.
- Make a brand name for yourself: This is simply creating a specific, consistent Internet image that resonates with consumers and defines your company and merchandise. Is it possible for you to think of a six-inch green gecko without thinking of car insurance?
- Develop a personal relationship with your customers: Amazingly, the Internet and all its little algorithms have made it simpler to identify and interact with individual clients. Ironically, it is possible to individually customize sales marketing at scale. The goal is to retain customers, which is much less costly than acquiring new customers.
- IRL (in real life) marketing: The attraction of the Internet is the potential to reach vast numbers of potential customers. On the other hand, maybe you want to use some traditional advertising methods: flyers, mass mailers, presentations, and the like.
- Email marketing: This was the first form of Internet marketing and it is still possible to use it to good effect.
This just scratches the surface of the various ways a company can market D2C. Using varieties and variations of these and other techniques, many companies in the last 20 years have started up and succeeded with very little reliance upon a middleman. The Internet is rife with stories of the astonishing successes of D2C startups. On the other hand, there have been some crash-and-burn stories of companies trying and failing to market straight to consumers. That’s what we need to discuss next.
Common Marketing Mistakes of Direct to Consumer Startups
According to Ben Lehrer, the Managing Partner of the venture capital firm Lerer Hippeau, when D2C companies first began, theirs was a novel enough idea to grasp the attention and the purchasing dollar of potential customers. Those days existed, he said, but they have passed. “Back then it wasn’t too hard to succeed as a smart person with a mediocre product in a big, sleepy total addressable market. Direct to consumer was an insight 10 years ago. . . That simply isn’t the case anymore. . . It’s about how you do it now that’s innovative.”
As the Direct to Consumer Brands marketplace was flooded with more and more marketers—you knew those brick-and-mortar sellers had to go somewhere, right—it has become all the more imperative to stay current in marketing strategy and, especially to see the possible pitfalls and to avoid the common mistakes made by so many D2C startups.
For starters, it has become much more difficult to raise investment capital for a D2C startup. Even a dozen years ago, the was more venture capital available, there was much less competition, there were fewer ad platforms and advertising come-ons, and what Internet advertising there was cost substantially less.
Many startups enter the D2C field without awareness of the data that is available and necessary to plan a marketing campaign. There is a general lack of awareness about the nuances of Internet advertising and how much revenue one can expect to generate. Many startups allocate their precious resources to helping the company survive, not for recognizing the necessity of spending wisely to build a lasting, loyal consumer base.
There is a multitude of other mistakes startups can make:
- One is not being realistic about the performance of your company. It’s so enthralling to hear about the successes of Casper Mattresses, Dollar Shave Club, and Wayfair that one doesn’t plan for moderate revenue and a realistic growth plan.
- Another is targeting too broad an audience.
- Poor presentation—in the form of a badly designed website or marketing pieces that are unpleasant to the eye—can result in lackadaisical sales regardless of how good the product is.
- Discounting SEO work. The best website in the world does you no good if people don’t know it’s there.
- Ignoring the importance of retention.
- Becoming to enamored with CAC (customer acquisition cost) metrics without thinking more fundamentally about product/market fit and TAM (total addressable market) of your product
- Forgetting that content is king. Fresh, pertinent blogging is a way of saying to the whole world that you are present, alive, and ready to do business.
- Finally, don’t try everything all at once. Often D2C businesses get discouraged because something doesn’t seem to work immediately. Planted seeds take time to germinate and fully grow. Plus, if you have several marketing programs going all at once, you won’t know which one is working for you and which needs to be discarded.
Choose the Right Firm to Help You Set up and Administer Your Company’s Direct to Consumer Marketing Plan
Two things are abundantly clear as we reflect on the current state of direct-to-consumer businesses in the digital marketplace. The first is that success—abundant success—is completely possible for the D2C startup. The second is that there is a real and growing danger of startups experiencing failure.
Beyond having a well-reasoned, realistic business plan, adequate venture funding, and an attitude of persistent determination, the most important thing a startup must possess is the advice of those who have been there—wisdom from experts who have been part of the digital marketplace from its inception and who have successfully mastered the twists and turns of Internet D2C marketing. The proper advisor can help your business stay nimble, adaptable, and profitable.
Those Direct to Consumer Brand companies that listened to the insights of experienced consultants were able to anticipate changes in the digital marketplace. This forced adaptations that contributed to even greater profitability. Those businesses that have pursued the wisest marketing choices and have experienced growth and profitability all have several important things in common:
- They care about their customers. They want to build long-term relationships. This is something that brick-and-mortar customers never had with the manufacturers of the goods they purchased.
- They never stop learning. Marketing on the Internet has gone through several distinct chapters. To succeed as a D2C marketer, one must have a willingness to continue learning new strategies and models. One of my favorite quotes is from the great ad man David Ogilvy, “Never stop testing and your results will never stop improving.”
- They are patient. Building a business clientele is like planting a vineyard or an orchard. The seeds planted today may result in the most beautiful fruit, but it won’t happen tomorrow. Plant, cultivate and wait.
- They possess great integrity. Standing behind one’s products, delivering what is promised, satisfying one’s customers are as important today as they were in the days of the general store.
- They are persistent. They do not get distracted by the latest, greatest idea or abandon a marketing plan without giving it the requisite time to succeed.
- They are not afraid to act. They understand that taking well-considered risks is sometimes required, just as being decisive about a course of action is required.
- Above all, they are good listeners. When a business is ready to step out and enter into D2C marketing, their most important ability is to be able to hear the input and reviews of consumers and to be able to hear and heed the insights of those who can help them achieve their dreams.
Through the history of Western civilization, there have been several revolutions that transformed our society and the world: the Industrial Revolution, the internal combustion engine, electrification of homes and businesses, heavier than air flight, the interstate highway system, the personal computer, and now direct-to-consumer sales. While we may not feel like revolutionaries, truth be told, we are each playing our part in reforming commerce. Our successes and failures will set a new standard and leave significant examples for generations yet unborn.
To the extent your business wishes to join this evolving digital marketplace and participate in D2C marketing, it is essential that you acquire the most current skills and use the best digital tools for success. Key among these is finding and relying on those who have the acquired ability to use Direct to Consumer brands marketing to its fullest.
About the Author
For over 25 years, Jay Sung has been a passionate leader in driving sustainable growth through direct-to-consumer, e-commerce, and customer acquisition strategies. Mr. Sung oversees corporate branding and growth initiatives utilizing a continuously evolving toolkit of digital marketing strategies and technologies to drive innovative direct marketing programs for portfolio companies – from startups to Fortune 500 organizations.
Previously, Mr. Sung served as the Chief Marketing Officer for Guthy-Renker, a $1.3 billion industry leader in the direct-to-consumer health and beauty market. He is best known for developing consumer acquisition and marketing strategies for leading brands such as Meaningful Beauty® with Cindy Crawford, Wen® Haircare by Chaz Dean, IT Cosmetics™, and many others. In addition, he served as the CEO of such well-known brands as The Proactiv Company and Lot18.
Mr. Sung lives in Los Angeles, enjoying all Southern California has to offer. You’ll frequently find him reading the latest business journal, cooking or practicing the piano to relax. Mr. Sung earned his Bachelor of Science degree in economics with a double concentration in marketing and accounting from the Wharton School at the University of Pennsylvania.