The ongoing buzz around direct-to-consumer (DTC) brands is well-deserved. Disruptive companies are identifying gaps in traditional retailers’ offerings and delivering solutions around desires consumers didn’t even know they had. DTC brands – also known as digitally native vertical brands – are shaking up markets, from cosmetics to cleaning products, and giving legacy brands a run for their money.
There is a lot to admire about DTC companies, and their success isn’t a fluke. It marks an “enduring shift in the way the consumer economy operates,” according to research published by the Interactive Advertising Bureau (IAB), as growth in most consumer categories moves toward brands focused on customer relationships and agile supply chains.
DTC brands are finding new ways to provide solutions and establish relationships with their customers, helping to drive awareness and market share. Mature brands are now pivoting to learn from their DTC competitors, striving to be more customer-centric and creative in both their products and marketing.
But there is also a lot that DTC companies can learn from their predecessors. Brands that have been in the market for decades know their customers well and have stayed relevant with the changing times. Here are five lessons that DTC and legacy brands can learn from each other.
What legacy brands can learn from DTC brands
1. Increasing nimbleness
DTC brands are innovative and entrepreneurial by nature. They have a high tolerance for taking risks and testing new platforms and ideas. Because they generally have flexible supply chains and design processes, they can tap into industry trends to bring products to market faster. The typical product launch time is four months for DTC companies, compared to 22 months for CPG companies, as noted in data from IAB and McKinsey.
Legacy brands may not have the same agility in their supply chains, but they can learn from DTC brands’ nimble communications tactics. When budgets and resources are lean, DTC marketers turn to novel marketing efforts. They need to test new media formats, messaging and audience targeting quickly so they can pivot toward what is working.
For example, Dollar Shave Club kicked off its exponential business growth with a humorous branding video that cost less than $5,000 but earned millions of YouTube views. Mature companies can experiment with media in a similar way, dedicating portions of their larger budgets to testing and analyzing inventive marketing strategies.
2. Prioritizing digital channels
DTC companies are leveraging digital channels to create more direct relationships with consumers. Over 60% of consumers surveyed in a recent white paper from Catalyst and ClickZ claim that they purchase via various social media channels. And brands aren’t afraid to spend money to reach customers. In 2019, 78% of DTC brands increased their marketing budgets from the previous year. This is in contrast to only 60% of traditional retailers who increased their budgets, according to data from CommerceNext and Oracle.
Instead of funding large traditional advertising campaigns, many digital native DTC brands focus on cultivating small groups of passionate followers. By paying a significant amount of attention to their core followers, brands are able to build strong engagement and loyalty. Fans often become emotionally invested in brands that listen to their feedback and create personalized experiences for them. They feel heard when their comments help shape a brand’s new products or change features to better suit their needs.
Legacy brands should follow the example of their DTC counterparts and use digital channels to engage with dedicated followers. Large companies may not be able to interact with every customer, but they can give individualized attention to small segments of their audience, seeking their opinions and using their feedback to make changes.
3. Integrating internal teams
Since DTC companies tend to have lean marketing teams, these marketers have learned to roll up their sleeves and wear many hats. Unlike larger legacy brands, their marketing teams are more integrated with their branding, digital strategy and activation teams. This encourages cross-functional collaboration to drive business results.
Mature brands would be wise to emulate this model, eliminating silos and supporting collaboration across departments. This also allows for a shortened feedback loop, incorporating customer comments and insights into branding, product development or media plans.
What DTC brands can learn from legacy brands
1. Engaging customers in the research phase
Most DTC companies start with social media and marketing campaigns lower in the sales funnel. But legacy brands know that the upper funnel provides a valuable opportunity to engage customers before they even know they want a certain product. They are adept at creating editorial content that targets consumers in the research phase – offering helpful information, answering FAQs and guiding them toward a solution to their problem. DTC brands should develop a similar strategy, putting themselves in their customers’ shoes to address their concerns earlier in the funnel.
P&G’s Pampers has been taking this approach for many years with a content-rich hub of resources for parents-to-be, including a baby name generator and informational pregnancy stage articles. By engaging their target audience before they need to purchase, they’re taking the first step to building a long-term relationship.
2. Scaling digital strategies
While DTC brands have had initial success through social media and influencer marketing, many are looking to reach a more broad base of consumers through traditional methods, such as TV advertising. In the first half of 2019, DTC marketers grew their spend on TV by more than 50 percent compared with the same period in 2018, as detailed in a report from Interpublic Group of Cos.’ Magna.
To expand their reach, younger brands should follow established best practices for growing into multi-channel marketing. DTC companies have already targeted younger consumers, but by observing how mature brands diversify their marketing, they can also connect with older demographics.
DTC companies make the most of their agility and creativity, and mature brands capitalize on their experience and longevity. By learning from each other, they can strengthen their businesses and create more value for their customers.
