The trend towards selling goods and services directly to consumers is transforming consumer brands and the world of shopping. Companies are learning how to interact directly with consumers, using new marketing techniques and a vast amount of data to influence their behaviour. However, the relationship between brands and consumers is fragile, and allowing trust in a brand to erode can be fatal.
Direct-to-consumer (D2C) is a business model that allows companies to sell and ship their products directly to buyers. It is part of the general trend towards buying more online, whether from Tesco, Amazon or Walmart.
D2C brands don’t rely on traditional marketplaces and retail sites to make sales or gain exposure. This means they can reduce their costs and maintain full control over the making, marketing and distribution of their products.
Building an audience quickly and the ability to create online content that will go viral are particularly important for brand and product launches. But so is delivering a faultless client experience across the lifecycle of the customer relationship, from the first click to doorstep delivery.
Brands increasingly need to communicate a sense of social purpose as part of their overall value proposition
Meanwhile, to build trust, brands increasingly need to communicate a sense of social purpose as part of their overall value proposition.
A survey by the consultancy Accenture found that purpose is at least as important as customer experience for eight in ten global consumers.1
The challenges involved in building a D2C brand include:
- Expanding the business rapidly from its first few customers, and maintaining a viable offering over the long term.2
- Embracing an entirely new form of marketing. Consumers have become active participants in a two-way relationship spanning offline and online advertising, social media, influencers, product co-creation and, most crucially of all, data collection and analysis to deliver personalised products and communications.3
Personalise and engage
Consumer data is “the new oil”, giving brands valuable information about their customers, including their personal preferences. Pure D2C brands will retain more control over their customer data, which they can then use to enhance the client experience. But this must be done skilfully, as using data ineffectively can hinder relationships and jeopardise the entire brand. There is a fine line between personalisation and intrusion, and companies must find the right balance.4
D2C companies are also using techniques from behavioural science to sell their products
D2C companies are also using techniques from behavioural science, the study of human behaviour, to sell their products. This can be as simple as predicting when consumers will run out of their favourite products and sending them a reminder to renew, or as complex as asking customers to participate in new product development.
However, it is important that firms use behavioural science to help people do what they want to do, rather than simply manipulate them into buying more. This will help build trust in the brand.
Would I lie to you?
Counterfeit or fake goods can tarnish a brand’s image and put people off buying its products. The threat from hackers also keeps evolving, meaning that D2C companies must monitor all online content related to their brands and continuously educate their customers about what genuine products look like.
Regulation is being considered to help protect companies and consumers
Encouragingly, regulation is being considered, at least in the US, to help protect companies and consumers.5 Technologies to embed authenticity markers into online content are also progressing.
Three points to remember
- D2C is a business model that allows companies to sell and ship their products directly to buyers. It has developed from the trend towards buying more and more goods online.
- D2C brands don’t rely on traditional marketplaces and retail sites to make sales or gain exposure. This means they can cut their costs and maintain full control over the making, marketing and distribution of their products.
- D2C looks set to grow exponentially, with far-reaching implications for advertising, traditional offline brands, “middlemen” such as supermarkets and consumers themselves. Companies that can establish and maintain trust with their client communities should win out.