What Brands Can Learn From DTC to Weather the Current Storm

The “new normal” is a popular term in marketing right now, but the truth is, we’ve dealt with similar seismic shifts before and found our way through them.

Following the 2008 recession, direct-to-consumer brands sprung up out of hardships similar to those faced currently during the Covid-19 pandemic: an economic downturn, decreased consumer spending and a decline in job opportunities.

Savvy entrepreneurs found smarter, cheaper ways to bring quality products to niche audiences looking for a better exchange with brands. The ability of DTC brands to translate product and service needs into greater value for the price ensured their early adopters became loyal followers.

Now, after nearly a decade of watching consumers abandon traditional brands in favor of DTCs, the pandemic has accelerated how legacy marketers must adapt and acknowledge that DTCs have hit on something powerful. With more unpredictable months ahead, what can marketers  learn from DTCs about gaining consumer trust, driving brand buy-in and maintaining relevance? 

Pandemic or not, your product can’t suck

First and foremost, there are too many choices for products or services to fall short of expectations. Brand loyalty is fleeting. There’s no chance of surviving if you don’t get the product right, and perhaps more importantly, you need to be able to adapt and execute within days as opposed to years.

“It all starts with creating a great product. Because no matter how clever or visually pleasing your Instagram feed is; if your product sucks, you’ll be out of business within a year,” says Greg Shugar, CEO and creative director of Beau Ties of Vermont. “And now more than ever you have to be flexible to reinvent. When Covid-19 hit, we moved quickly and started making masks in March, which was far earlier than most other companies. We now offer the largest selection of face masks sold anywhere in the U.S. Innovation and flexibility are core to the DTC model, and both of those are needed in these times.”

In the end, product still rules. Always look for areas to innovate, and don’t miss an opportunity to give customers what they really need.

Prove growth through personalization at scale

The “growth at all costs, profitability as a nice-to-have” mindset—highlighted by NYU professor Scott Galloway’s finding that Casper loses $349 on every mattress it sells—isn’t sustainable for any brand, traditional or DTC. Not every DTC brand is perfect, but those that prioritized personalization to fuel their growth strategy have come out ahead.

Increased frequency, retention and acquisition are crucial as brands look toward recovery, but it requires a proven formula: Data + identity + machine learning + activation = personalization at scale = growth.

Take DTC brand Swanson Health, for example.  The wellness and nutrition brand has long used first- and third-party data to better understand current and potential customers and deliver personalized messaging. While individualized creative is not new, the novelty was how the messages were tailored to each person’s unique preferences, brand interactions and life events. This focus on identity allowed Swanson to efficiently match tailored messages and products to drive 5:1 incremental ROAS.

But just having consumer data isn’t a strategy on its own. The measure of success lies in how you activate it to build personalized interactions and, ultimately, growth.  

Convenience and choice are the top commodities

Consumers don’t care how big a brand is anymore; they want extreme convenience with products and offers tailored to them. Consumers expect tedious and complex activities—like recognizing their basket items across devices so they don’t have to re-add them—to be a seamless experience.

At the same time, consumers have more choice. Trust and loyalty are what is truly setting brands apart—and both are fleeting. Adapting and connecting at a more emotional level, beyond trying to sell your products, becomes much more important.

For example, L’Oréal took a page from the DTC playbook and redefined “essential” when stay-at-home orders went into effect earlier this year. L’Oréal sent an email with the subject line “Skipped a haircut?” with messaging about products that help with split ends, prioritizing what consumers need to survive and thrive at home.

Consumers are all being trained to expect more from brands, whether by  Uber, DoorDash or boutique hotel experiences. Convenience and speed are commodities, and moving fast and connecting at a deeper level sets a higher bar.

Measurable outcomes beat made-up metrics

The currency of marketing needs to evolve to be closer to what we are seeing in the DTC space. Persistent execution beats big budgets. Measurable outcomes beat made-up metrics. 

DTCs are really a new generation of performance marketers with proven success driving measurable online and offline sales. In “Lessons from the DTC Revolution,” Terry Kawaja, CEO of LUMA Partners, shares that DTCs take a formulaic approach to customer acquisition. “If DTC brands know lifetime value, they can calculate an appropriate bounty for qualified new customers,” he says. “This is a double-edged sword: While this provides for rapid growth when the economics work, the converse is also true. Should customer acquisition costs exceed the bounty, the DTC brand has nowhere to go or grow.”

Marketers are at a key inflection point. Consumers are voting with their dollars. Performance transparency in marketing is becoming a must-have, and brands need to optimize and prove the impact of marketing spend across a growing list of complex channels.

The fundamentals of marketing have never changed; it’s always been about getting people to pay attention, care and make a purchase. Or, more succinctly: act. DTC companies don’t have all the answers, but they have gotten a lot of it right. You can learn more about how DTC brands are making their mark from this joint CMO Club/Epsilon report: Direct to growth: What all brands can gain from the new DTC world.