Many brands are getting excited about direct-to-consumer marketing – but many are also getting it wrong. Here’s why: as with almost any trend in business, there is something to it, but there is also lots of hype.
With many trends in business it often goes something like this. First, the trend is misunderstood by various journalists and commentators, who write too generically about it. Companies with a vested interest in selling a product or service associated with the trend then do their best to whip up even more excitement. At this point, senior leadership at all sorts of other companies start asking questions of their teams about what their strategy in relation to the trend is – and marketing and sales people often end up confused, trying to identify what will drive business value.
Does this sounds familiar to your business in relation to DTC? And how do you know whether DTC really is right for you?
The first thing to note is an obvious, but often overlooked, point: DTC is nothing new, although it may well be to many businesses considering e-commerce for the first time.
The starting point for any DTC brand is that it should deliver on a specific problem or consumer tension point that the DTC business model helps to resolve. Graze, for example, was addressing the issue of unhealthy snacking during the working day. The DTC solution was to send healthy snacks to your office or home.
Hello Fresh takes the pain out of cooking after a long day at work, assembling all the ingredients and the menu and sending them to your home. In other words, they make something easier and pain-free, and save time on shopping.
As with all brands, the best DTC brands are clear on their proposition. The starting point for getting this right is always the consumer. If it is not, DTC may not be the solution.
What’s more, don’t underestimate the challenge of building DTC business models. It’s a unique skillset within the broader field of digital commerce, for which traditional consumer goods companies may not have the right resources. The team needs to include growth and retention marketeers, for example.
If you don’t have a team with an entrepreneurial mindset, which is willing to ‘fail fast, learn fast’, then DTC may not be right for you either. You need to be able to work in a ‘lean’ manner, remembering that your competition will likely be startups for whom this is their modus operandi.
Supply chain is also key. Is your product suitable for posting? Will it fit through a letter box? If the product is chilled, how will you manage the cold chain without significantly increasing costs?
Finally, does your profit and loss work? What margins are you delivering with a DTC solution? Do you understand what your customer acquisition cost is, or at least know how to find out?
‘Fail fast, learn fast’ doesn’t mean you can’t learn from others in the first place. Some upfront thinking will maximise your chances of success so that you can avoid the cyclical “trough of disillusionment”, and will prove very helpful if your wider organisation hasn’t yet caught up with that mindset – as most larger corporates haven’t.
Alex Tait is the founder of Entropy, which offers consultancy in digital commerce.