These days, you can’t step foot into an industry conference without hearing the phrase “Direct to Consumer” also known by the industry moniker, D2C. It is quickly becoming the new industry buzzword, and with good reason. Brands are finding incredible success in connecting directly with their consumers, creating brand loyalty and social media evangelism.
Winterbridge Media has been helping brands go D2C since before it was a buzzword.
Recently their President, Paul Thau sat down with us to discuss how they have used Quantcast’s machine learning capabilities and insights to help D2C brands accurately pinpoint the stage at which they should be engaging with consumers and the exact consumers they should be engaging with.
Why is D2C a relevant strategy for brands in 2019?
Paul Thau: We are starting to see product categories that were not traditionally sold directly to the consumer to test the waters of D2C marketing. Marketers of products ranging from razor blades to mattresses have unearthed this new model (to them) that enables them to remove the margin of the middleman (the retailer) and invest these funds into marketing directly to the consumer. A goal of this shift is to establish a customer with a longer lifetime value than is typically attainable when their products are sold at retail. This expanded LTV revenue curve is essential, and required for success, since these marketers are faced with a component they don’t experience when their products are sold at retail – that their investment in media to support the D2C model often exceeds the margin recognized in the first transaction. Thus, highly efficient media optimizations are required to lessen this upfront loss, and methodical CRM is essential to ensure future revenue from these newly acquired customers.
Can you share some examples of D2C success from clients on your roster?
PT: Sure. We have a client that sells a product that has traditionally been sold in over 80 percent of supermarkets, drug stores, and big box retailers for the past 100 years. They developed a considerably better version of the product at a cost to the consumer of two to three times the version currently sold at retail. Even though the margins would be greater, retailers weren’t eager to test the product because they feared that the purchase rate would decrease as a result of the price increase, thus working against the shelf space they’d need to assign it. This was exacerbated since the new and improved product didn’t have consumer demand yet due to the lack of awareness and education of the benefits of the improved product.
Our solution, once faced with these challenges, was to help the client realize the benefits of the D2C marketing and bypass the retailer. The D2C model enabled them to invest in creating the awareness around the product, touting its benefits over the traditional version and establishing favorability and recall, while simultaneously soliciting a direct sale to the consumer. Although each new customer that came on board was initially acquired at a loss, something they had never experienced, but by experimenting with a continuity model and implementing a comprehensive CRM program leveraging both digital and offline touchpoints, they achieved profitability in month eleven from the acquisition date. They now have a robust database of proven buyers for future marketing efforts to promote their full product catalog, which requires no additional acquisition costs and yields sales at a 30 percent increase in LTV compared to the retailer model.
Do you think that the idea of “Direct-To-Consumer” is in danger of becoming the next “bubble” or buzzword?
PT: Absolutely not. If anything, I think D2C will continue to steal market share from traditional marketing approaches. When consumers are presented with benefits from D2C offerings that they perceive as more valuable than their current options, they’ll continue to respond to, and therefore, continue to increase demand for, the D2C model. If a shampoo manufacturer feels they can offer the consumer a better value than they’re able to when a retailer is in the equation, both the consumer and the manufacturer will benefit. The consumer gravitates toward the benefit of getting a new bottle of shampoo in the mail once a month so that they also never run out, and at a savings in comparison to the price at the drug-store. The manufacturer benefits from being able to sell the product at a retail price versus wholesale, and now has more ability than ever to control the user experience with the goal of increasing brand loyalty and lifetime value.
In what ways can D2C marketers improve response rates throughout the conversion funnel?
PT: Wow, technically I could write an entire book on this one question alone! The answer to this question is multi-faceted and complex. To summarize, each component of the conversion funnel has a myriad of enhancements and optimizations that can be made to positively impact the end result. Each of these enhancements has to be tested, and also compared against other enhancements (the multivariate effect). To start, a marketer must dissect each of these components (the main ones being the media channels, multi-channel impact measurement, creative, offer, and the landing page conversion process). The next step is to develop a test plan for each with the goal of determining what triggers within each contribute to improvement on its own merit, and then what the impact will be when integrated throughout the full conversion funnel.
How have you worked with Quantcast to help D2C marketers better reach and target their audiences?
PT: We find that the Quantcast programmatic buying engine is unsurpassed in its ability to find users and segments of users that are most likely to respond to our clients’ D2C offers. Quantcast has access to proprietary data unavailable on the open exchanges that we find provides a different level of targeting than is commonly available through other programmatic models. This pinpoint accuracy enables quicker optimizations to be made which increases program efficiency and reduces waste, enabling us to increase spend in reaching those users most likely to show interest in our DR offers.
As an example, we have a handful of clients that market to parents of children under the age of 18. While this segment does periodically visit websites intended for parents, the vast majority of the time these users spend online is not on sites that would provide any indication that the user is also a parent of a school aged child. Quantcast’s technology is able to predict with high confidence the likelihood that a user matches this target demo, and can overlay additional demo, behavioral and lifestyle attributes to further ensure that its bid on the impression opportunity is warranted based on a calculated prediction for response.
What does the future hold for D2C marketers?
PT: The future looks very bright for D2C marketers! Continued advancements in precision targeting will enable D2C marketers increase the efficiency of their media buys and therefore, reduce the cost to acquire a new customer. Further refinements to multi-channel attribution measurement will help to eliminate the waste in media programs that fail to produce the level of contribution required to warrant their share of the media budget. And finally, the consumer’s continued shift toward acceptance of D2C offers will contribute to increases in response rates and yield healthier lifetime values.