With a low barrier to entry, the direct-to-consumer (D2C) business model continues to grow in the world of online shopping. According to eMarketer, in 2020, D2C sales were up 24.3% from the previous year, outpacing total U.S. eCommerce gains. There is potential for companies to become disruptors against their business-to-consumer counterparts—if they can break through the noise that comes with online advertising and marketing to reach their potential audience.
But as more brands flood the space—including a number of copycat competitors—D2C companies can’t solely rely on the quirky, millennial-driven marketing that initially made them stand out.
Gone are the days when high-volume advertising brought in more sales. Instead, D2C companies need technology that helps them process massive amounts of customer data and pull insights for improving their campaigns. With these tools, D2C marketers are better equipped to solve these three key challenges the industry faces.
Learn more about these challenges and solutions by downloading your own copy of the e-book: “How Digital Disruptors are Transforming D2C with Best-in-Class Tech Stacks”
Cost of Acquisition
For D2C brands, social media is their top channel for acquiring new customers. But with increasing competition, the cost per 1,000 impressions on social platforms like Facebook has gone up dramatically. More companies are fighting for the attention of the same people. Furthermore, because the data is not shared in a uniform way across platforms, companies may invest heavily in one channel without realizing that it doesn’t yield high-value customers.
How can D2C brands cost-effectively attract customers? By clearly understanding the path to purchase. If marketers can assess the value of each touchpoint—website, app, emails, and so on—they don’t need to rely on social alone. Instead, they can invest in other channels where customers are also responsive.
To evaluate acquisition sources, D2C marketers need technology that can gather and consolidate user data across a wide variety of channels. Manually gathering this information is too cumbersome and prone to error for most marketers, considering how many platforms a customer will visit.
“There has never been a time when understanding a user’s journey has been more detailed,” says Jasper Radeke, senior director of North America marketing at AppsFlyer. To reduce acquisition costs, D2C marketers should consider using a deep-linking attribution tool like AppsFlyer.
By analyzing how potential customers interact with the brand, D2C companies can find ways to show the value of their products more quickly and powerfully through automated messages or other content. This, in turn, can lower the cost of acquisition by helping D2C brands see which tactics drive purchases.
Customer loyalty has been key to survival for many D2C brands—but several factors are eroding that loyalty. Customers may prefer to do all of their shopping from one source, such as Amazon, rather than from multiple D2C companies. Even D2C shoppers may not remain loyal if their favorite product is out of stock or if other brands offer similar products. During the pandemic, as many as 53% of consumers purchased from a brand other than the one they set out to buy.
To drive retention, D2C brands need to distinguish themselves by offering an experience that customers cannot get anywhere else.
“Customers’ expectations for the customer experience are increasing, and switching costs are lower than ever before,” says Lyndi Thompson, VP of Marting at mParticle, a platform that consolidates all data inputs to a single point of collection.
To meet customer expectations, D2C marketers need a customer data platform (CDP) like mParticle that provides a unified view of the customer journey. It also helps to use a product analytics platform like Amplitude that highlights what user actions are associated with retention. By tracking users across multiple channels, D2C companies can deploy retention campaigns based on the frequency of purchases or specific activities.
Using Amplitude,Calm discovered that customers who used a reminder feature in their meditation app had almost a 3x increase in retention. This led Calm to create a prompt that encouraged users to set a reminder, too. 40% of users who saw the prompt went on to set a reminder, giving a big boost to overall retention.
Unlike wholesale companies, D2C brands need to appeal directly to the customer with marketing. In crowded industries, true personalization is the way to differentiate from large retail stores and competitors. Customers expect brands to recognize them across channels and provide recommendations for products they will love.
“Effective personalization means putting the customer at the center of the narrative and contextualizing the product or service to the priorities, wants, needs, and emotions of the individual,” says Jeffrey Vocell, director of product marketing at Iterable, a platform that delivers cross-channel messaging experiences.
Basic data—like signups and page views—provides a superficial view of how a customer feels about your brand and products. D2C marketers need user information that spans the entire funnel—not just the moment of purchase—to craft individualized campaigns. More specifically, they should use behavioral data to craft targeted messaging for user segments.
Delivery service Rappi used Amplitude to automatically identify their most important user segments and improve conversions through personalized experiences. Rappi pushes audiences of new users to its engagement platform, segmented by the types of services they’re likely to use. Each audience is then served an email with content that matches their interests. By using Amplitude, Rappi was able to increase revenue from first-time orders by 10%.
Of course, developing personalization strategies is not a “one-and-done” project. As D2C brands learn what works, the tactics should evolve over time. Behavior analytics combined with machine learning can help brands level up their personalization efforts and provide a more meaningful customer experience.
Transform Your Marketing with a Best-in-Class Tech Stack
To overcome these D2C challenges, marketers need tools that provide a unified customer view, offer robust analytics, and streamline personalization. In our ebook How Digitial Disruptors are Transforming D2C with Best-in-Class Tech Stacks, you’ll learn about the tech stack D2C marketers use to acquire, engage, and retain customers consistently.