Sub header: DTC brands have demonstrated tremendous growth since the pandemic hit us. From convenience to personalization, purpose-driven growth to newfound enthusiasm among consumers to support local businesses, DTC brands have a lot going for them. But as the world opens up, quickly yet cautiously, these brands will need to invest in new areas for sustainable profit. This blog post is all about that last bit. Read on to find out more.
"We are great at making things, and we are good at managing partners. But when it comes to selling directly to consumers, we don't really know where to start." McKinsey Report, 2020. Yet, DTC ecommerce sales have skyrocketed, with major markets like Europe and USA shifting to online channels at breakneck speed.
Digital adoption in Europe jumped to 85% in the wake of the pandemic. In the US, DTC ecommerce sales have been pegged at 151.2 billion dollars by the end of 2022. But the concern about not knowing where to start or how to streamline marketing and CX is not premature. Many DTC brands, especially those that are not offshoots of conglomerates, are now finding it difficult to penetrate the market. This is especially true as the initial kick of supporting homegrown businesses in the peak of the pandemic starts to die down.
This blog post explores five critical areas your DTC brand needs to focus on for enhanced CX, customer retention, and profitability. These interventions are sure to catapult your brand into hyper-growth mode.
Growth Area 1 - Embracing new-gen marketing automation and technology
Marketing and CX automation are at the core of new-age DTC growth. From personalizing the entire customer journey to automating advertising interventions, DTC brands that invest in technology will be the ones that thrive in the cluttered market. Further, the shopping experience is set to undergo even more transformation with the explosion of the Metaverse. DTC brands are already considering options like "virtual trial rooms" or behind-the-scenes VR tours of their manufacturing set ups.
A DTC brand using these new-gen technologies to their benefit is Allbirds. Its standard Shopify store is boosted with a very on-the-ball AR-based try-on app working independently to deliver a near-real and confident shopping experience to its customers.
UK’s Meerson Watches, though a traditional Swiss watch manufacturer and retailer, is keeping up with the times. Given the premium costing of its custom watches, Meerson uses AR and 3D to co-create watches with customers, engaging them deeply in the process. The brand also gives customers the option to go through detailed simulation of the design and manufacturing process, an element that most watch connoisseurs would love. Not surprisingly, these connoisseurs form premium Swiss watches’ primary cohort.
But AR, VR, and Metaverse could be exorbitant investments for DTC brands that are just starting out. Before you get there, focus on more achievable goals. Like welcoming your customers into the fold with actionable automated emails or reducing cart abandonment with well-timed nudges. Automation can help you do a lot more, a lot better.
Growth Area 2 - Prioritizing CX because that's what will get you the "second date"
With predictive analytics tools at your disposal, charting the ideal customer journey is getting easier.
Every touch-point can be optimized to nudge the customer to pay attention and eventually act. It is time to let go of traditional CX measurement tools like post-purchase surveys. Instead, focus on studying how and when a customer springs into action (either to buy or to abandon their cart). Then, use these insights to tweak the customer experience.
Are there particular pain points you can address as the customers’ most important pain points in the buying journey?
A detailed and comprehensive CX strategy that relies on data can help smoothen the pre and post-purchase steps and the buying journey for your consumers.
An excellent example of a DTC brand achieving growth on the back of CX innovation is US-based paint brand, Clare. The task was cut out for them - reinventing the shopping journey in an industry where offline continues to dominate. Going beyond product listings, Clare incorporates several contextual elements for each paint color, including insights like how a color would look in a specific kind of room or even usage details for new-to-market products like Quarts.
Growth Area 3 - Investing in retention over acquisition
While selling to a new customer has a 1:20 probability, the chances of selling to an existing customer are 60%-70%. Once you have a sizable roster of customers, redirect your attention on retention.
You can use strategies like upselling and cross selling or simply rope them in with loyalty programs and gamified offers that inject excitement, achievement, and action.
Analyze your customer acquisition strategies by calculating the Lifetime Value or LTV of each of your customers. Think about how you can reduce churn.
There are multiple ways to calculate LTV, but the simplest is to calculate the average customer expenditures per visit and purchase cycle (visits/week) and multiply them to find your average customer value per week. Then, contextualize that within the average customer lifespan. When your LTV and retention rates are high, you don't have to worry about high budgets for acquisition at scale.
Several big and small B2C brands have built behemoths on the back of customer retention. We’re no strangers to Starbucks - you can like or hate their coffee but we all love the retention marketing tricks up their sleeve! Masters at using a sharp, insight-led omnichannel strategy for repeat purchases, Starbucks combines its app, email, text and loyalty memberships to keep customers coming back and achieve a legendary customer lifetime value - $14k per customer for a coffee company! Even if we didn’t have that number on hand, we’d know how significant it was, because all of us keep going back to Starbucks every other day. An email offer here, a text message there, a push notification on the app for dropped prices, free goodies and so much more. A lot keeps happening in Starbucks’ retention ecosystem.
Check out this emailer with a special Valentine’s Day membership card. More membership cards, more returning customers. Genius.
Starbucks also frequently uses its loyalty program for gamified deals and giveaways, not only driving repeat purchases but also making their members feel special. The more they feel special, the more loyal they get.
And these are just a few examples of Starbucks’ retention engine. Today, the company is a coffee goliath valued at $96.11B. A significant portion of its growth comes from repeat purchases - Starbucks’ customer retention rate is pegged at 75%, the gold standard. If there ever was a lesson for DTC brands to invest - and invest big - in retention marketing - it’s in the story of Starbucks.
Growth Area 4 - Bidding farewell to monolithic delivery models
Think about the customer who reaches the checkout page but then abandons the purchase because there is no 'pick-up in store' option, the shipping charges are too high, or the delivery timeline is too long.
Adapting to a customer's requirement beyond product benefits is the best way to ensure that you are closing a sale.
With over 75% of shoppers open to trying new shopping behaviors, you can experiment with different delivery channels. Further, streamline this process by offering special delivery incentives to loyalty program customers or first-time purchasers.
Offer flexible delivery mechanisms so that the customer has the opportunity to choose as per their convenience.
Depending on your niche and customer demographic, delineate which delivery experiences are the most suitable for your target audience and offer all of them to increase conversions.
Be transparent with shipping charges and delivery information. For example, would your customer prefer a high shipping charge if it means one-day delivery? Would they want curbside pick-up? Is the wasteful packaging putting them off?
Address these concerns to create unique delivery models that are mindful of your customers' needs.
Growth Area 5 – Leveraging customer data to deliver hyper-personalization
All of the other areas can be improved upon with just one ingredient at the core of your efforts – customer data.
The more you know about your customer, the better for them and you. They will get the experience they want. And you can deliver precisely that without wasteful budgeting for areas that are not valuable to them.
Create a single view of your customer or a 360-degree persona. This will help you understand their pain points and preferences regarding engagement channels, delivery channels, and other processes.
Leverage the data you collect to provide your shoppers with hyper-personalized shopping experiences that are laser-focused on their needs.
This could be through a comprehensive study of their past purchase data, a combination of first-party and second-party data, and hundreds of other data points that you can collect with the help of a robust customer data platform.
A holistic view of your customer is sure to unlock hyper-personalization for your customers and hyper-growth for you.
Moda to your rescue
The five focus areas outlined above may not be easy to navigate and execute, especially for new DTC brands still testing the waters. Embracing marketing automation, focusing on customer experience, hyper-personalizing all touchpoints, retention and higher LTV - there are too many moving pieces to address.
But the latest CDP for the DTC ecosystem – we call it Moda - can help with many of these strategic areas with its ability to generate actionable insights about your shoppers’ real-world needs.
With hyper-personalization and retention automation at its core, Moda will help you deliver an advanced and seamless customer experience.
Sign up for early access and kick off your journey of hyper growth.