Direct to consumer – how cutting out the middleman can give you more
Now if DTC is a new concept to you, let’s start by stating that it stands for direct to consumer. That designation applies to a business that is selling its wares direct to the consumer, without any retailers or middlemen.
There are an increasing number of household names that have successfully built their brand as DTC businesses. Casper mattress, Abel & Cole veg boxes and Made.com furniture are all in the top-ten most recognised DTC brands.
But why is DTC business growing in popularity, why is having a DTC business beneficial and how do you create your DTC commerce model and reach your target market?
Who is your Direct to consumer customer?
The Internet Advertising Bureau (IAB) has released a report, following a survey of 2,000 consumers. It found the vast majority of people (97%) were aware of at least one of the top 50 DTC brands shown to them.
It also found that although the majority of DTC customers were younger and more affluent, it was values and traits that bonded them more than demographics.
A DTC customer is likely to be:
An influencer – Someone who buys direct from a business tends to be an influencer among family and friends. For example, 74% of frequent DTC users say people often come to them for advice when buying new things, compared to 29% of online shoppers generally.
Brand advocate – If they find a brand they love, then they are more likely to shout about it. In fact, 80% of heavy DTC purchasers said that if they find a brand they love they will tell everyone about it, compared to just 52% of the UK population generally.
Less price conscious – Pricing your products is a consideration too, given that 75% of heavy DTC consumers say they are likely to buy a product from a brand they trust without even looking at the price. By contrast, just 29% of online shoppers say the same.
Why is the Direct To Consumer business model better?
There are some clear advantages to being a DTC business but this model isn’t going to work for every business. It’s probably not a clear-cut case of direct to consumer always being a better business model but for some it definitely will be.
The advantages of DTC can include:
- Better communication with your customers
- Better understanding of who your customers are
- Better brand loyalty
- Additional and free marketing options
- Potentially greater profit
- Greater level of stock control
- Better quality control
To summarise; DTC gives you more control, a greater insight into your customers and hopefully more profit.
How to create a Direct to Consumer business?
If you are no longer using a retailer or middleman to sell your product on to your consumers, you will need to create a strategy that addresses all three phases of the customer life cycle: acquisition, sales and engagement.
You will also need to consider any legal requirements that may be required to get you out of agreed partnerships with other retailers. How much notice will you need to give a retailer before you stop supplying the product to them, for example?
Adjust your marketing
Most businesses will already have a marketing strategy and it may even include social media usage. But for DTC, you’ll need to up the ante with personalised marketing.
You will need to decide if the product you’re selling is going to need to change now too. A number of popular DTC businesses such as HelloFresh and Netflix, operate on a subscription basis.
Can you continue to offer clients the same deal or will you actually be marketing something different to a third party? Research has found that people will buy more if they feel they share the same social or environmental concerns. Think about the brand and the values of the business and stay true to that.
Become your own Head of Sales
The sales step is a critical part of DTC. Your website should offer customers a great user experience if it’s to compete with the big ecommerce names. Users should be able to shop safely, have a quick checkout process and be offered a free or cheap delivery method. And you’ll need to provide a good customer service experience for when things go wrong.
To achieve the above might mean quite a change in terms of the skills being used. You’ll need to think about whether all of this is possible in-house. Will you need to hire in the expertise or use the services of a freelancer or another business to provide customers with everything they need?
Find out who your target market is
You’re on your own now and it’s important to spend some time and possibly money, finding out who your target market really is.
Good data is one of todays most sought after commodities, so take your time and get that segmentation done right.
Engage with your customers
Once you know who your target audience is, you can nurture that community. For subscription DTC businesses, churn management and maximising lifetime value are also absolutely critical. And brands have to maintain a dialogue with customers to encourage them to keep seeing value in their purchases.
There may even be a role for a loyalty or advocacy program to reward and encourage customers to maintain ongoing engagement. Either way, the level and goal of consumer engagement for a DTC brand are higher than for the traditional brands.
Personalise the user experience
One of the reasons people like buying direct is that they can get what they want.
Again, making use of the data you collect from customers is key. If you know that a certain number of people really love scented candles and regularly buy from you, for example, send them offers for other room fragrances you have.
Embrace social media
The survey by the IAB also found that heavy users of DTC watch less live TV, opting for on demand alternatives and tend to get their news from social media and online newspapers.
So, if you want to be visible to this audience, you need to have a social media presence.
Will the financial structure of your business change?
When you’re making a big change to your business, it can be a good idea to speak to your accountant. They’ll be able to advise you on any financial implications of the change. They might also have an insight into your customer demographics and their buying habits. Maybe there is a market out there you haven’t even considered yet.
About Jon Pryse-Jones
Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.
An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”
Jon’s appreciation for THP extends to his fellow team members and the board. “They really know how to run a successful business,” he says. He’s keen on IT and systems development as critical to success, and he continues to guide THP to be at the cutting edge and effective.