Many companies in a range of industries have started to pivot to DTC because of the benefits that the direct-to-consumer model can provide. During the COVID-19 pandemic, we saw many packaged food manufacturers enter the DTC e-commerce market.
PepsiCo, for example, created Snacks.com and PantryShop.com, both DTC websites. This was a way for them to circumvent selling certain items through their traditional B2B means. Another company that started a DTC business recently was Heinz. The company started to provide home deliveries in the UK for beans, soup, and other shelf-stable products. Of course, food manufacturers are not the only ones that are turning to DTC, and the pandemic was not the only reason for the change. Many other companies are making the change, as well, and you can follow suit regardless of the current size of your business.
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Many benefits can be had by choosing the DTC model. One of the first and most important of these benefits is that you can more easily collect customer data. Brands will have access to data that can allow them to more easily accomplish the steps discussed below. The DTC model allows for a better connection with digital marketing efforts and for brands to be in more control of the relationship they have with their customers. They have more of a direct connection that they don’t have when they are selling their products through retailers.
The 2020 Direct to Consumer Purchase Intent index from Diffusion found that 25% of people in the United States are making DTC purchases as part of their overall shopping. The report also says that 43% of people in the U.S. are familiar with DTC brands. People often perceive products that come directly from the manufacturer as being of higher quality and having a better price point. The number of consumers interested in DTC purchases is growing. Companies that want to thrive in the coming years will want to follow suit.
Many benefits can be had by choosing the DTC model
Of course, for those businesses that have been choosing the traditional route of supplying retailers with their goods to sell might be at a loss on how to proceed. The following are the most important basic steps that a company will need to take when they pivot to DTC.
The first thing your company needs to do is to start owning your brand. Although you have likely been working to build your brand since the company launched, things are different when you want to pivot to DTC. You are talking directly to the consumer with your brand at this point. You are working toward building a strong overall connection with the customers with your brand. There is no retail buffer any longer. Just as the name suggests, it’s you and the customer.
Start to personalize offers for your customers
Know your purpose and the personality that you want your company to have. Put it in writing and make it part of your business statement. Know what makes your company and your products stand out from the competition and utilize that in your branding. Know your target customer and what they want and expect not just from your products, but from you as a brand.
Remember, when you are selling directly to the customers, it’s not just about selling your products. It’s about selling your company to them. You want your customers to be loyal and branding is essential for this. The branding that you’ve been doing for your products and business when you are selling to retail will not be enough to help you stand out when selling DTC in most cases. Step up your game.
Where do most people today find out about products and businesses? The same place they are doing a lot of their shopping—on the Internet. Therefore, you need to have a strong online presence and you need to provide the customers with a great experience.
How do you do this? You start with your website. Your site needs to be branded well and it needs to be easy to navigate. People should not have trouble finding what they want to buy, and the checkout process should be simple and secure. They should also be able to find out more about your company through the site. Not only will you want to have an “about us” page but consider adding a blog. This will help with your branding and SEO, and it can give customers a deeper insight into your company. This can help to produce more loyalty.
Having a great website that makes it easy to shop and order is just the start, though. You also have to think about all of the other online locations where your potential customers might congregate, namely social media. Make sure that you have branded accounts on all of the major social media sites that make sense for your brand. This would include Twitter and Facebook at a minimum. Social media is a good way to connect with consumers, and it can be a fantastic way to market to them through posts, as well as purchased ads.
Depending on the types of products you are offering, there is the possibility of upselling and cross-selling to the customers. This can be a good way to earn more profit since you will be selling more, and it can allow you to move stock that might not be selling as quickly as you might like. However, you do need to be careful about using these practices.
When you are using the upsell and cross-sell strategies, make sure the products being suggested make sense with the purchase the customer is making. The products should be items that are typically sold together or that would go well together. They shouldn’t be disparate products just because you are trying to get a sale.
Additionally, you need to think about other tactics being used to market directly to your customers. Customers do not like fear tactics that have often been part of marketing. Instead, all of the marketing and advertising that you are doing should be geared toward how the product can help or improve the lives of the customer in some way. It doesn’t matter what you are selling. Market with the intent of showing the customer the benefits, not making them fear the unknown if they don’t buy the product.
According to the Monetate Personalization Development Study that included 600+ marketers, personalization in marketing makes a big difference. They found that 93% of businesses that use personalization strategies through relevant offers and recommendations have an increase in revenue. Do not miss out on the opportunity to increase your profit and your customer loyalty.
Since you are able to gather data on the customers, it should be easy to start to personalize offers for your customers. This is a strategy that is sometimes overlooked by companies that are trying to pivot to DTC. You don’t want to make that mistake.
Earlier, we mentioned that one of the benefits of DTC is the ability to obtain your customer’s data and to track the metrics. You will find that you can gather a substantial amount of information about customers when you pivot to DTC, including demographics that will give you a better picture of your customers. There are certain metrics that you will want to track, as well.
The most important metrics include the customer lifetime value, conversion rate, average order value, churn rate, customer acquisition cost, monthly recurring revenue, product margin, net promoter score, and net revenue retention.
Do not miss out on the opportunity to increase your profit and your customer loyalty
Tracking these metrics will help you gain a better understanding of how your business is doing overall and the areas that you might need to improve. For example, if you find that your net promoter score is low, it means that your customer loyalty and satisfaction are suffering. Knowing this allows you to make adjustments in your marketing, branding, etc., so you can take care of these issues.
One of the best things about choosing to pivot to DTC is that you have direct access to your customers and vice versa. This gives you the opportunity to start to build a community that goes deeper than the standard business/customer relationship. When you build a community of customers that are more in touch with your business, it will breed loyalty. It can also help you to gain more insight into the things that your customers want and need from you.
When you are listening to the customers and providing excellent customer service, it will create more loyalty. These loyal customers will not only be return customers, but they will also be vocal about supporting your DTC brand. Don’t underestimate the power of a strong community.
This is undoubtedly one of the most important steps and it is one that companies often get wrong. You need to have a smooth means of distributing and shipping the products directly to the consumers. This means you need to have warehousing of your own and a solid supply and delivery model in place. You want to get products directly to your customers quickly, accurately, and efficiently.
Consider the benefits that customers get from ordering through Amazon, for example. They can get items delivered the next day. Those who have Prime can get free shipping. While your company might not be able to compete with those benefits, you can still provide fast and affordable shipping. You can also add more of a personal touch to the packages you are sending. This touch of personality can help to make those customers loyal and more willing to wait a couple of extra days.
Be sure to offer multiple shipping options, too. There should be options for those who want their products sooner if they are willing to pay for the additional shipping costs. Distribution can make or break a company that is trying to pivot to DTC. Make sure you get this step right.
The 2020 Direct to Consumer Purchase Intent index mentioned earlier also found that the reputation of a brand is important when people are making buying decisions. According to the report, 10% of Americans that are familiar with DTC brands will not want to buy from them if the company has developed a bad reputation in the media.
Therefore, you need to monitor the reputation of your business online and offline. Have a pulse on what issues are important to your customers and to society and don’t say or do anything that would tarnish the brand you have been building. The aforementioned report also found that nearly a third of Americans are choosing to buy from socially conscious brands that support social and environmental issues. This should be not just a part of your company’s branding, but your overall mission.
Anyone doing business of any sort today knows that it is important to learn to adapt and to be flexible. Agility is essential, as business practices and consumer needs can and do change. The pandemic was a perfect storm that provides an ideal example of this. You need to learn to be decisive and be willing to learn and make changes as they are needed to support your change to the DTC market.
The decision to pivot to DTC is a big one and it has a lot of moving parts. Before leaping into the fray, take the time to create a solid business plan that allows for the change and that factors in any potential issues that might arise. Be sure to expect the unexpected and be ready to make changes as needed to pivot successfully. Plenty of other businesses have done this effectively, and you can do it, as well.
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.