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Are Direct-to-Consumer Brands Really so Different?

Tim Cross  19 December, 2018

The growth of direct-to-consumer brands has been marked both by their disruptive business models which cut out middle-man retailers, and by their marketing strategies. These digital first companies, the likes of Dollar Shave Club, Casper Mattresses and Peloton, have managed to eat into the market share of established brands in a relatively short space of time.

Many have been quick to say that this growth is down to a new way of marketing conducted by these D2C brands, one which differs from the brand-building playbook followed by their established competitors. But given the rate at which marketing blueprints have evolved in the digital age, is it really fair to paint D2C brands as innovators and established brands as stagnant?

There are a few features of direct-to-consumer businesses which mean that they will inevitably operate differently from indirect brands. For a start, the action which the brand usually wants to drive – leading a potential customer to their own sales platform – is different from that of indirect brands, who generally want to lead users either onto a third-party site, or into a physical retail location.

But commentators point to a few specific common features of D2C brands which separate them from indirect brands. The primary points tend to be their access to lots of first-party data, and their direct communication with audiences, usually using social media to talk to potential customers directly.

These two factors were picked out by a report released by the IAB earlier this year, ‘The Rise of the 21st Century Brand Economy‘, and were also raised by LUMA Partners founder and CEO Terry Kawaja in his ‘Fire Your CMO’ speech at the ANA’s “Masters of Marketing” conference.

First Party Data

By controlling sales themselves, D2C companies gain access to a host of sales data which can be used to guide marketing, as well as the wider functioning of the business as a whole. The IAB’s report states that “first-party data relationships are important not for their marketing value independent of other functions, but because they fuel all significant functions of the enterprise, including product development, customer value analysis, and pricing”.

Andrew Hirsch, VP of client services at digital agency YellowHammer, laid out some of the specifics of how this data can be used. “From a marketing standpoint, this data can be used for customer modelling, audience targeting, building conversion paths and evaluating the efficacy of each marketing channel,” he said. “From a business standpoint, this data can be used to project customer lifetime value and acquisition costs. Brands also get real time data on what messaging causes users to transact, what products users buying, the quantity users purchase as well as the frequency at which they purchase.”

Dan Kenger, head of experience and partner at Gin Lane, another agency which has worked with a number of D2C brands, said this approach is spurred by the types of people who tend to lead D2C businesses. “When D2Cs enter the market they have a high level of technical acumen, in terms of being data aware and using data to make informed decisions right from the get go,” he said. “I think that’s something that’s just built into the culture of a lot of these D2C brands.”

But even D2C brands will generally have to start without first party data, so the initial stages of their marketing campaigns will be run data-free (though there are some exceptions – D2C razor company Harry’s collected over 10,000 emails before launch by offering prizes to those who shared the campaign with their friends on social media).

And first-party data won’t be equally useful to all D2C brands. For companies like Casper, the individual data collected when a sale is made will be useful for profiling its customer base, but less useful for targeting that individual – once a customer buys a mattress, they’re unlikely to be in the market for another one any time soon.

Established, non-direct brands aren’t all ignorant to the usefulness of first-party data either. P&G chief brand officer Marc Pritchard, in a response to Kawaja’s ‘Fire Your CMO’ presentation, said his company is investing in data management platforms in China and the US that are populated in-part with first-party data generated by its own consumer-facing properties, and by direct-to-consumer sales run via social channels like Facebook and Instagram.

For P&G, Pritchard says this data is being used to move from “mass blasting” to “mass reach, but still with greater precision”, often being leveraged for more intelligent TV campaigns. This is a tactic which D2C companies themselves are now starting to experiment with, as many are looking to TV to expand their reach.

Social Based, Story Focused

As for the focus on storytelling and social channels, D2C brands themselves do seem to see these as their hallmarks. The IAB’s report lists a series of quotes from D2C executives who say storytelling and social interaction are at the heart of their strategies.

“Storytelling is a central part of our marketing,” Steph Korey, co-founder of D2C luggage brand Away Travel, told Inc. “We think about what stories we can feed to the press and to social media–things that make people take notice, things people want to share and talk about.”

One of the most frequently cited examples of both these D2C tactics is DollarShaveClub’s ad released back in 2012.

The spot gives a clear identity to the company, delivered directly and bluntly by the company’s CEO. The clip spread virally, and generated 12,000 orders in two days.

“D2C brands understand the power of content and storytelling,” said Kenger. “They’ll often go and find their audiences and engage with them in ways that larger companies can’t. That develops a relationship, and when they engage with customers and have their story down, and the right value prop and imagery, customers can feel that difference.” He added that bigger brands trying to use similar tactics can come off as “inauthentic”.

But it’s perhaps unfair to say that these sorts of tactics were invented by this new crop of D2C brands, and that they’re completely unfamiliar to established companies. Back in 2004, Burger King’s ‘Subservient Chicken’ campaign (a website where users could seemingly control a man in a chicken costume by typing in commands) seemingly ticked several of these D2C campaign boxes: it was interactive, it was designed to go viral, and it strongly conveyed Burger King’s off-the-wall brand identity.

Today, some established brands are proving to be adept at using social media to interact directly with their customers, with several having become somewhat notorious for the customer interactions on platforms like Twitter.

One difference for D2C brands according to YellowHammer’s Hirsch is that D2C brands generally have to be stricter on ensuring all content and social interaction adheres to their message. “D2C brands, especially D2C brands with no brick and mortar presence, have to be extremely cognisant of every touch point they have with potential customers,” he said. “Because these brands do not have the luxury of having customers experience their brand at retail stores, they need to ensure that all ad content, the website and ultimately their product is representative of the brand identity they want to achieve.”

Kenger added that D2C brands have the advantage of a blank canvas to work with, which allows them to create an identity and social strategy that feels authentic rather than forced. “By definition, companies that are established have been in the market a while, and customers already have a perception of them and know their story,” he said.

Large established brands can also run into problems since they have larger customer bases, making it harder to understand what resonates with their audiences and leading them to sometimes deviate off-brand, according to Kenger.

But it’s not impossible for established brands to forge themselves new identities. British frozen-foods store Iceland has not historically been associated with social activism, but its virally shared banned TV ad has proven very popular with audiences, and largely avoided criticisms on inauthenticity.

Not a Night-and-Day Difference

Most seem to agree that D2C brands marketing tactics have been disruptive, and we’re certainly seeing non-direct brands sit up and take notice.

But it seems unfair to characterise the difference in strategies as night-and-day. D2C brands’ access to first-party data certainly seems to be driving new marketing strategies, and they’re proving how effective storytelling and social interaction can be. But many brands are trying to emulate these first-party data tactics, and are similarly focussing more on storytelling and social interaction – if they weren’t doing these things already.

Overall, Hirsch said the way YellowHammer works with traditional brands “is not drastically different” from how they work with D2C. “Traditional brands do not have to be as precious with their ad dollars but their marketing campaigns can be run in the same manner as D2C marketing campaigns,” he said.

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