What Is Direct to Consumer Marketing and Its Impact During COVID-19
The direct-to-consumer market has been growing at double digits for several years and is expected to continue to grow by 19.2% in 2021.
These Direct-to-Consumer (D2C) players utilize an innovative marketing strategy that enables them to enter the market directly, without relying on middlemen or third-party suppliers. This eliminates the barrier between producer and consumer, giving these businesses greater control over their brand, reputation, marketing, and sales tactics. From Made.com to Patch Plants to Glossier, D2C players have capitalized on greater levels of data retention and consumer insights which in turn allows for smarter decision making. Given this success, the D2C market is projected to grow by a staggering 19.2% in 2021 alone.
New research shows that 55% of consumers prefer to buy directly from a brand, while 40% would prefer to shop through a direct retailer (D2C) rather than a third party. This is being fuelled by changes in purchasing behavior and customer psychology. While direct models are gaining traction, studies suggest that there is still considerable room for growth.
These results show that although the market is still in its infancy, it is now time for older established brands to break the status quo by offering D2C content that meets the needs of modern shoppers, not just the desired experience.
As Karen Ehrlich, Clinique’s Marketing & Consumer Engagement Director, UK & Ireland, says, “D2C is clearly a win-win for brands and consumers.”
The Customer Values That Are Driving Adoption
The transition to digital platforms has been accelerated by the knock-on effects of the COVID-19 pandemic. D2C provides consumers with a simpler and more convenient customer experience when it comes to meeting their shopping needs.
This transition is nothing new, in fact, D2C players have been capitalizing on this new experience for years, but what sets them apart from other e-commerce strategies is their focus on the customer experience, not just the product or service. To understand how their brands can attract and retain customers, they must first understand the importance of certain values. Research shows that values such as convenience and ease of use come first. 94% of shoppers choose at least one of these advantages as a reason to purchase from a D2C brand. An important driver is the ability to motivate buyers to focus on the brand’s D2C credentials and the value of its products and services.
It is not enough for a brand to simply launch a D2C channel, it must also be relevant. Given the growing preference for direct products and services, older brands need to build values that are more responsive to the needs of modern consumers, not just their existing customers.
Clinique’s Karen Ehrlich, agrees with this, commenting, “It’s about having a one-to-one dialogue between the brand and consumer. This means D2C brands can be in full control over the range of brand experiences they offer. By tailoring communications to the consumer, D2C brands can ensure content is always relevant and personalized, which leads to a better customer experience.”
By applying this strategy, brands can identify which of their offerings and designs are most convincing, and which are more relevant to the needs of the modern consumer and which are not.
A Link Between Purchasing Intent and Category
While the D2C market is still in a growth phase, the category has already established itself as a powerful tool for gaining market share and building relationships. Direct-to-consumer uses advanced metrics and customer data to personalize the entire brand experience, enabling marketing campaigns to be tailored to individual needs and desires. A range of technical solutions optimizes the relationship with customers by automating the process and ensuring sufficient scalability, volume, and distribution across all channels.
James Hughes from the beer delivery company Brewgooder says, “The best D2C brands tap into customer behaviors and how people do things. It’s this personalized approach that has really evolved D2C relationships and processes beyond just direct comms.”
Unlike traditional competitors, these new players are experimenting with distribution models and developing customer experiences that deliver value to buyers. Beauty is one of the leading D2C categories, with brands such as Glossier and Harry’s appealing to customers – with strategies that focus on comfort and individualization.
Food is another thriving category. In our survey, consumers identified this sector as one of the D2C categories in which they are most likely to shop. While this category has had a head start in introducing and applying a D2C model, we are seeing brands increasingly accepting this model in a number of different sectors. The food sector though is changing and redefining the way consumers browse, shop, and buy.
Emerging D2C categories
Alcohol, for example, began to infiltrate the space, with D2C sales up a remarkable 27% before the pandemic. Now the category is on track to win a dedicated and loyal customer base. This development has been driven by companies such as Brewgooder, which offers a subscription-based service model that allows customers to sample small batches of beer delivered directly to their doorstep.
The company’s James Hughes comments on the adoption of the D2C model, saying, “We’re now at a point where everyone feels they can do D2C. The companies that really do it best are the ones that utilize all the strengths of their brand. Our aim is to interlink all of our services, so we can unlock the potential of the online consumer journey and transition effortlessly from online to offline.”
Even industry giants such as Diageo are getting involved, launching their own website in September 2020. As older brands find rich growth areas, it is a compelling opportunity for them to carve out a niche in the market. Achieving this, however, means developing offerings that use D2C as a channel for a broader connected experience.
Here, older established brands have the scope to use their existing customer base to appeal to today’s buyers. By providing D2C offerings that are part of a broader connected experience, legacy brands can make their position in the market more attractive to younger consumers in a way that appeals to them.
Future Growth for D2C Brands
Our analysis of the D2C space shows that the direct-to-customer brands have succeeded in passing on the value that is most important to this new generation of buyers.
With fewer barriers to entry, D2C companies can achieve higher margins while maintaining the same level of customer service as traditional brands. While historic brands had more traditional product offerings, there is still plenty of room for brands to enter this space. More than 50% of buyers have less than two D2C relationships, and this, combined with a more structured and deeper dataset, allows for much more personalized brand experiences.
By creating new customer value, building advanced data tracking systems, and leveraging historical aspects of their brands, companies can develop their D2C capabilities and establish product offerings tailored to the needs of the modern consumer. Although the number of current D2C relationships may be relatively small, traditional brands can expect increased competition in this area will make the coming years even more challenging.
In fact, the key criteria for success can be determined by the behavioral needs of a product rather than the number of D2C subscriptions. The concept of “cognitive maxims” has been widely discussed in recent years, implying that there may well have been a limit to the number of D2C relationships consumers would be willing to have. This makes sense, as a high number of D2C subscriptions could become a logistical burden for consumers.
In a world where there will always be some form of aggregation, it is clear that D2C must continue to be won over by brands that have to consistently justify themselves to the consumers they depend on. Brands that can build relevant, personalized, and connected experiences that meet the needs and desires of this new generation of buyers will be the real winners in the D2C space.
The food box seller Gousto is solving a coordination problem, for example, which consumers do not even know they have. By providing people with menu items instead of buying a long list of ingredients for cooking, they save time, money, and intellectual space.
In a world where there will always be a need for some form of aggregation, it’s clear D2C will remain selective and hard-won by brands that will need to consistently justify their role in consumers’ lives.
This article has been published in accordance with Socialnomics’ disclosure policy.