Between 2009 and 2011, a batch of brilliant entrepreneurs birthed companies like Birchbox, Rent the Runway, and Dollar Shave Club. Collectively, they pioneered a direct-to-consumer (DTC) business model that revolutionized e-commerce.
Prioritizing customer longevity and lifetime value over any other metric, they relied on social media and digital marketing to foster personalized, ongoing relationships with customers. Since then, this business model has spread like wildfire, and it is proving to be a win-win for all parties.
Unlike traditional B2C brands that sell through third parties, DTC brands enjoy unfettered access to their core audience. Their marketers can research and test different approaches and models to ultimately provide a better experience than any traditional retailer could. Consumers, meanwhile, receive personalized messages, offers, and customer service.
All told, today's popular DTC brands are redefining consumer standards—and in my agency's experience, we've found that B2C brands across the board could benefit from recognizing these changes.
Sixty-three percent of today's shoppers say they want brands to treat them like friends, and 78% will only engage with personalized marketing messages. Instead of one-size-fits-all marketing, they want brands to leverage data and cutting-edge technology to create products, offerings, and promotions that are optimized for their needs.
DTC clothing rental service Le Tote, for example, uses a sizing algorithm to ensure customers only receive items that fit perfectly. In a world where one brand's "medium" is often another brand's "small," this personalized offering shines like a beacon of hope for consumers—and it's a big reason why the company has grown so rapidly.
As Harvard Business Review astutely observed, convenience boosts customer loyalty. People don't love Lyft because the cars are fancy and the drivers dress like chauffeurs; they love it because they can set pickup times in advance, the app remembers their favorite destinations, and it even re-engages them if they haven't used it for a while—something nearly half of all consumers say they want retailers to do.
Even if you aren't a DTC company, you can still learn—and borrow—many business lessons from today's DTC powerhouses. Here are a few:
Promote Benefits Over Differentiation
Many brands elect to emphasize why their products are different from competitors' products. This is an age-old tactic, but for companies in up-and-coming verticals, it's no longer a surefire way to win the long game.
Take the DTC meal kit market, for example. Companies like Blue Apron, Plated, and HelloFresh are combining to create an industry that's expected to hit $10 billion by 2020. However, that's pocket change compared to the entire grocery industry, which is worth upward of $600 billion. There are millions of consumers who still purchase ingredients and cook dinner the old-fashioned way—and these are the people DTC meal kit brands should target with marketing messages. However, campaigns that emphasize differentiation will only cannibalize existing customers in the industry. Messages that emphasize convenience and benefits, on the other hand, will attract new blood to the arena.
What's the lesson here? Especially if there's room for exponential growth in your industry, don't directly attack your competitors in your campaigns. Instead, relentlessly tout the benefits provided by your offering. Focus on selling your category.
At the core of popular DTC business models is the goal of selling multiple products and services as part of a single experience over time. Everything is geared toward lifetime value, which is a far cry from traditional e-commerce.
Dollar Shave Club didn't become a billion-dollar company because it sold millions of razors; the brand earned its astronomic valuation because it attracted millions of regular subscribers. Convincing consumers to pay $1 per month for razors is only the beginning; over time, the company upsells (or cross-sells) everything from shaving cream and body wash to shampoo. It also provides value (and ensures reoccurring revenue) by letting customers "set it and forget it." After shavers sign up, they don't need to take any further action. They'll receive their items exactly when they need them for the rest of eternity.
Similarly, Le Tote provides more value to customers the longer they use the service. Over time, the company collects and leverages data about their buying habits, style preferences, sizing changes, and more.
These DTC startups focus on the long term because they have to. Their business models are designed that way. Even if yours isn't, think deeply about how your brand can build value for its customers over time. Blue Apron teaches people how to cook, and Le Tote provides new styles that are always a perfect fit. What can your brand do?
Because of this strong focus on retention, DTC companies are changing consumer behavior as we know it. Stitch Fix is changing the way people shop for clothing, Blue Apron is changing the way people buy groceries and cook meals, and Ipsy is changing the way people try and buy makeup.
What do these three brands have in common? They have completely changed an existing behavior. Blue Apron, for example, knows that many of its subscribers aren't culinary experts who aspire to be the next Gordon Ramsay. That’s why each box comes with perfectly portioned ingredients and easy-to-understand recipes. The longer customers use Blue Apron, the more they learn about cooking and food. Over time, they enjoy a much richer experience—and, most importantly, they stop going to the grocery store (or at least go significantly less often).
Today's companies need to go out of their way to create seamless, user-friendly experiences that connect the entire customer journey from awareness and acquisition to retention and life-long advocacy with a focus on changing behavior.
The DTC brands mentioned above, along with countless others, are thriving because they create convenient customer experiences that are optimized toward long-term growth. Modern-day shoppers are growing accustomed to this high-touch, personalized approach—and luckily, you don't need to be a DTC brand in order to scratch this itch.
I challenge you to explore how your B2C brand can incorporate these key lessons into its initiatives.