As brick-and-mortar sales slow and shift to digital — and digital natives continue to bite into market share of legacy brands — consumer goods companies are re-evaluating their direct-to-consumer approach.
The good news: There’s never been a better to embark on such a journey. Retailers are more accommodating to DTC strategies as long as they still benefit. And with consumer mobile use up more than 45% during the COVID-19 outbreak, brands have a unique opportunity to connect with buyers who are open to altering their purchasing habits.
So how can brands tap into DTC as a new revenue steam?
Step 1: Understand your ‘Why” for DTC
Brands with deflated sales now may want to start a new DTC strategy and launch a consumer goods DTC site for the primary purpose of growing revenue. That’s the wrong approach, because DTC is much more than a revenue generating approach for brands. Brands adopting DTC are venturing in new areas with their end consumers.
Take PepsiCo: PepsiCo launched Snacks.com to fulfill the needs of their snack fans by offering all of their brands in one site. Pepsi’s second site, PantryShop.com, went beyond the snack category to offer bulk pantry bundles for specific occasions such as “Rise & Shine” and “Workout Recovery.” The pantry bulk strategy by Pepsi offers a unique selling proposition that is not commonly offered at retail, reducing channel sales conflict while at the same time generating buzz and interest among brand fans.
Before it launched its DTC strategy, PepsiCo considered its “why” — something other brands absolutely must consider.
There are two main reasons why businesses take the DTC route:
A: Better Consumer Understanding
Consumer goods brands with limited online purchasing behavior data from their retail partners do not know how consumers review, research and purchase online. DTC is a great opportunity to bridge that gap and start to understand what works online and what doesn’t, including product images, marketing copy, lifestyle imagery, blogs, recipes and many other types of rich content.
B: Better Branding and Communications
As more of the product research and evaluation stage of the purchase cycle takes place online, brands need to double down on efforts to develop memorable, authentic and rich experiences for their customers online. DTC can provide an opportunity for the brand’s fans to discover recipes, evaluate new product ideas and become part of a brand community.
Either or both strategies will help brands better understand customers and apply their learnings to the broader marketplace, ultimately enhancing the brand experience for other retailers and driving sales. Additionally, DTC branding done right will generate higher brand loyalty, raising the tide of all retailers that carry the brand’s items.
Step 2: Lay the Groundwork for an Improved Customer Experience
Once brands have figured out their “why,” it’s important to understand that getting DTC right is a lengthy process. While there have been stories about brands creating and launching a DTC site in 30 days or less, this is uncommon. It’s likely that these CPG companies may be risking their brand’s equity with a less than fully operational approach and higher risk of a poor customer experience.
Brands should consider these challenges:
A: One of the most difficult challenges faced when launching DTC is perfecting fulfilment of single products or combination of products. The business is trained to fulfill retailer requests for items in pallets or in full case shipments, so management of individual package product data and ability to integrate to other fulfillment operations may be lacking. Also, consumer shipping information needs to be managed — an entirely new task for CPGs.
B: CPGs start the DTC journey with the intention of driving a better customer experience and differentiating vs. other competitive brands. Unfortunately, the business may not have captured all of the necessary consumer information and lack a 360-degree view of the consumer, limiting its ability to personalize the experience.
A better experience also requires a unique set of images and videos that shape a distinct set of stories for the business. These stories should be consistent with brand guidelines but also richer and more interesting than on a marketplace or omnichannel retail site.
C: Not only do data assets need to stand out, website navigation and search must be more intuitive and more convenient than an average site. The problem is that many CPGs don’t have the flexibility in their data models to manage several different types of hierarchies, even though this is the way that their consumers search for products.
Step 3: Improve Data for a More Agile DTC Operation
While only the slick DTC-focused website and other new digital assets become publicized to consumers, what really enables your initial and continued success is better data management — especially when it comes to consumer and product data.
The accuracy and trusted single view of a consumer’s information is critical, as it integrates with CPG shipping information and conveys all pertinent information to ensure a successful and seamless delivery. Product data is also important, because unique content needs to be created for the DTC website — better romance copy, unique images and more attribution that is not currently on the brand’s other retail sites.
Finally, a high-quality digital business hub is required to ensure product listings are accurate and appealing, data governance is established so data is shared only where it is approved, and efficient data workflows are created so the new DTC-focused website is managed effectively within the brand’s current teams.
Parting thoughts: Keep the customer front-and-center
An increasingly digital economy opens the doors for CPGs to pursue new business models, but brands shouldn’t forget that they’re now responsible for many aspects of the consumer experience that retailers have already mastered.
The key to meeting these heightened expectations is gathering and leveraging data. As brands enter the shallow end of the DTC model, each of their offerings should be viewed as an opportunity to better understand their customers and refine marketing efforts. Solutions such as master data management (MDM) allow CPG brands to track all consumer and product data through a single solution, simplifying data-driven decision making.
In this retail revolution, the consumer goods brands that build stronger customer relationships will flourish — and stronger customer relationships come from stronger consumer and product data!
Brian Cluster is director, industry strategy for CPG and retail at Stibo Systems.