When was the last time you truly learned something at a conference? You may hear an interesting fact or a tweetable soundbite every now and then, but it's rare that one comes away truly impressed by a presentation.
Coming out of the IAB's Annual Leadership Meeting, I was blown away with how the organizers were able to so acutely frame the paradigm shift that's rocking our industry. The conference theme was "How to build a 21st century brand" and speakers included industry leaders such as Unilever's Chief Marketing and Communication Officer Keith Weed and Mars' President of Connected Solutions Leonid Sudakov.
However, the IAB also had several digitally native vertical brands (DNVB) present as well, including Away's Co-Founder and President Jen Rubio and Glossier's President and COO Henry Davis. It was clear that these DNVBs were at the IAB for a reason: They were there to show the industry what it looks like to build a 21st century brand.
In his opening keynote, IAB CEO Randall Rothenberg gave a sobering assessment of the marketing industry and how brand growth is in crisis. How technology is disrupting marketing is nothing new, but this analysis was focused on the old model of an "indirect" brand economy where most brands relied on capital-intensive supply chains and had minimal direct interaction with their customers. As a result, the power was in the supply chain, the retailer, or whoever was aggregating customers or audiences.
This indirect model started to get disrupted around 2010, with the rise of a new breed of company like Bonobos, Dollar Shave Club and Warby Parker. At first glance, one might mistake them for e-commerce companies.
Yet, DNVBs refer to this as "vertical commerce," where the ownership of the brand end to end creates two-way relationships versus one-way impressions. As Bonobos Founder Andy Dunn explains, "The DNVB drives a lot more customer intimacy than its competition. The data is better because every transaction and interaction is captured. It's one CRM. It's one store, where everybody knows your name." This is a direct brand.
If capital is what fueled 20th century brands, it's data that's fueling 21st century direct brands–specifically, first-party data. First-party data is the secret behind enhancing every function across the company–from products to content to advertising to customer service. With the cloud now enabling every part of the supply chain to be rented as a service, the value now shifts to the customer experience. In fact, most direct brands aren't in the business to simply make products. The product is really the enabler of the experience. A brand such as Away may have started with luggage, but it has since morphed into a publisher creating content, making recommendations and creating experiences for their customers. And it can do this because it has the first-party data and can see the customer experience from end to end. Even when a DNVB such as Warby Parker opens a physical store, it's still capturing first-party data and learning every step of the way how best to create a deeper customer relationship.
Thanks to first-party data, direct brands are able to take back control of their customers. The goal is to have a customer relationship that is deeper than any other brand–this is what gives them a competitive advantage so they can provide smarter, better and more relevant experiences. These direct brands are obsessed with growth hacking, where they perform continuous A/B tests for real-time discovery to deliver a product that customers will love. The end goal is to create the best possible learning loop powered by first-party data: understand, influence, convert, measure, repeat.
Whether you are a DNVB or a brand that's been around for over 100 years, the key lesson is that direct brands are using real, personal data–intelligently–to build that customer relationship. Technology will continue to disrupt marketing. The rise of AI and machine learning will only make it more important to understand your customer. So, what's your plan to go direct?