Guest Post: 7 Pillars to Consider to Grow Your DTC Business
With the rapid rise of technology and various business channels, you can efficiently run an e-commerce business from anywhere in the world. And you don't have to follow the traditional distribution channel of selling through retailers and wholesalers.
You can directly engage your customers and control all facets of your business using e-commerce platforms like Wix, Shopify or WooCommerce.
This is the basis of the Direct-to-Customer e-commerce business model. With a product at hand, you can sell directly to the end users without going through third-party platforms like Amazon or traditional distribution channels like Walmart.
Relating directly with your customers gives you first-hand access to customer data, better control over your business, a higher revenue margin, and an improved customer experience.
But this is not the whole picture. Growing your business can be quite challenging. Managing all business operations from production to shipping, marketing, lead generation, and sales can be intimidating without outsourcing.
But these challenges are not insurmountable. Read on if you currently run a DTC business or want to diversify and directly engage your customers.
How to Grow DTC E-Commerce Brand in 2022 and Beyond
Creating standout products, staying ahead of trends, and managing change through innovation and creativity are the fundamentals of growing any business brand.
1. Product Differentiation Is a Must
Why does your brand exist? What peculiar problems does your product solve? How is the product different from the competition? The better you answer these questions, the better your chances of creating quality products that solve real problems.
Creating unique products is the foundation of successful DTC brands. They find creative ways to solve problems, tell inspiring stories customers relate with, or appeal to cultural and environmental awareness.
Away is a notable brand that combines these elements to differentiate its products from competitors. The founders, Steph Korey and Jen Rubio, set out to reduce the high cost of quality suitcases and other travel luggage.
They portrayed the company as a travel brand, not the traditional luggage business, to stand out from the competition and mark their uniqueness.
They also invested massively in creating a narrative for their brand and cutting down the distribution cost. This gives them a good market appeal and allows them to sell quality luggage without the high markup price.
So, invest in your brand narrative from the onset. The more unique your narrative is, the better the product differentiation and the more resilient your competitive advantage and customer buy-in.
2. Omnichannel Is About Value Addition
Depending on a single channel for traffic can be fatal for DTC brands. This is because customers' preferences are diverse, and so are their purchasing habits. For example, while some customers prefer an online experience, some prefer walking into a retail store, and some prefer a mix of both experiences.
Each of these experiences has multiple layers and how customers react to them. For example, speaking of online shopping, customers can engage with a brand via social media platforms, mobile apps, websites, SMS, or established retail brands.
This is where brands can leverage omnichannel marketing and distribution for growth. It's a strategy that helps brands unify online and offline experiences for customers. The goal is to create a seamless shopping experience irrespective of how customers approach your brand or what channels they use.
Omnichannel offers more options for customers to explore. It also creates a better experience for brands and shoppers alike. The BOPIS(buy online, pick up in-store) method is an example. It can be cheaper for customers and allows retailers to show more products in-store.
One brand that excelled at using an omnichannel approach is Warby Parker. The brand disrupted the sales of prescription glasses by sending multiple samples for customers to pick the best fit. After the initial success, it transitioned from an online-only brand to also opening physical shops.
As a growing brand, you can also partner with physical stores to display your products or create a special section for your products to facilitate offline sales.
3. Increase Conversions
There is no better way to grow your DTC brand than through increased conversions. As a DTC brand, you can use several strategies to increase conversion metrics and get more sales.
Focus on Quality Traffic: lead generation is essential to boost conversions. But you can generate high traffic without making corresponding sales. This is why you have to focus on generating quality leads. Use the 80/20 rule and direct more efforts to customers with more buying intent.
Improve Web Architecture and Load Speed: customer experience is the basis of increased conversions. With good architecture, shoppers should take no more than three steps to move from the home page to the product page. On the other hand, a poorly designed storefront and slow loading speed are critical factors for online shoppers.
Optimize Sales Pages: your landing and product pages should contain all the necessary information for customers to make buying decisions. Optimize each page for SEO using tools like SurferSEO, keywords with buying intent, meta descriptions, and quality images. Also, optimize sales by writing rich product descriptions and using social proof like reviews and testimonials to convince the doubting shoppers.
Improve Website Credibility: Trust is an essential factor that affects conversion rate because people only buy from businesses they trust. You can do this by adding customer reviews, testimonials, original product videos, etc. Another way to show credibility is to include your physical address; this tells the audience you have a solid base. If you don’t have one, you can consider a virtual mailbox. This lets your prospects and customers know you are real.
4. Increase Average Order Value (AOV)
The average order value is the average amount customers spend when they buy from your website. AOV is an essential metric for understanding sales patterns and customer behavior. It gives you correlated insights into the demographics of shoppers, the amount spent, and products that drive sales.
By increasing AOV, you can drive up sales, and here are some tactics to help you do that.
Optimize Product Categories: aside from optimizing individual sales pages, consider grouping similar or complimentary products under the same category. It makes single product buyers more likely to buy other items too. For example, a customer purchasing a shirt can see other apparel and easily decide to buy them all.
Offer Incentives for Bulk Purchase: You can use other discounts or freebies to drive bulk sales and improve AOV. For example, buy three pairs of sneakers and get the 4th one for free. Another incentive for bulk purchases is to set a "cart minimum." You can offer free delivery if the order reaches a certain amount. With this strategy, customers may be inclined to add more products to their cart to qualify for the offer.
Create Customer Loyalty: Customer retention is one of the crucial metrics for increasing AOV. According to a market study, 65% of a company’s business comes from existing customers. Therefore, building customer loyalty through quality products and an excellent shopping experience can help drive AOV and increase customer retention.
5. Improving the Checkout to Post-Sales Experience
The overall business experience is vital to customers. It is one of the metrics that turns a random visitor or one-time buyer into repeat customers and brand ambassadors.
While considering every touch point in the customer journey, the checkout experience and what happens after are also important. Here are some tactics to implement to drive return sales and improve AOV with good checkout and post-sales experience.
Create a Seamless Checkout Process: Considering 70% of customers abandon their carts, there is no reason not to pay attention to your checkout process. Make the process as transparent as possible using clear-cut CTAs and simple payment forms. Also, provide clear instructions on shipping policy, delivery dates, and possible next steps.
Automate Your Process: Automation should not be an afterthought. If you are yet to automate your core operations, now is the best time to do it. It improves customer experience and helps avoid mistakes like wrong delivery or delayed shipment. With a fully automated process, you can see the position of all products from checkout to final delivery. So, consider systems that let you track sales, manage inventory, and see the real-time status of all products.
Manage Your Logistics: established retail brands excel at quick delivery and fast shipping. Customers are assured of getting their product promptly as ordered. This is also non-negotiable for DTC brands seeking to scale up. A bad shipping experience or wrong delivery can lead to a lost customer and create a bad reputation for your business. There is no gold standard for DTC brands. You can manage logistics and supply chain in-house or outsource the whole or part of the process.
6. Increase Consumer Lifetime Value (LTV)
Customer lifetime value is the total of all purchases a single customer makes from your business throughout the entire span of doing business with you. This metric focus on the long-term value of each customer and not market spikes or random trends. Also, it helps you plan long-term growth strategies and gives insights for future diversification.
Now let's look at some practical tactics to increase your LTV:
Provide Excellent Customer Service: customer support is essential for any business growth. For traditional retail businesses, measuring the direct impact of customer support can be pretty challenging. But the story is different for a DTC brand. Customer experience starts from the initial query about your business long after a customer makes a purchase. Each part of the journey offers a unique opportunity to engage, educate and enlighten your audience. Direct engagement, easy accessibility, and fast response time make the difference for most customers. Positive customer experience and prompt support build trust and encourage shoppers to continue patronizing your brand.
Meet Evolving Customer Needs: Customer needs are ever evolving. This can be attributed to rising technologies, changes in the marketplace, personal taste, age factors, and general consumer trends. For example, the choice of apparel in the teenage years may likely change during adulthood. So, brands must stay ahead of these evolving needs to increase customer LTV.
Create a Fan Community: Continuous communication with customers helps improve mind share when they need particular products. By creating and nurturing a large following, you can continue to pitch your products to drive sales from community members. Consider creating a value-based newsletter or an interactive blog where you can communicate with your audience and market your product. The Dollar Shave Club is one brand that uses withy and humorous communication to engage its audience and drive feedback from its online community.
7. Reduce Customer Acquisition Costs (CAC)
One of the challenges of DTC brands is increased customer acquisition cost CAC. You have to build your customer base from scratch, often involving significant marketing and paid advertisement investment.
To estimate your CAC, divide the total cost of all marketing and advertising efforts by the total number of acquired customers through those efforts.
There is no clear-cut standard on the ideal CAC. It varies by industry, average sales per customer, and customer LTV. So, before any marketing campaign, define a target CAC based on your industry and previous sales statistics. This will determine how much to spend on marketing and what to expect.
Three things you can do to lower CAC irrespective of your industry or budget include:
Leverage Data to Drive Marketing Efforts: Access to consumer data is one of the benefits of the DTC business model. The insight from customer data can help you learn more about customer behavior and what marketing strategies they best respond to.
Create a Personalized Marketing Experience: Speaking the language of customers using the right channel drives conversion and reduce marketing cost. For example, you can group your email list based on customer interests and pain points. Then send targeted emails that resonate with each customer.
Produce Valuable Content: Providing informational content that educates your audience is an excellent way to market your products, attract new customers and reduce CAC.
Bonus: Find a Way to Implement the Subscription Model
Subscription eCommerce is rising, and subscription sales are set to hit $32.65 billion this year. It’s a subtle way for DTC brands to accrue monthly recurring revenue and increase customer retention.
No matter what you sell, now is the best time to incorporate a subscription-based plan into your business model. However, if you think you are not in the food, beverages, or personal care niche where creating a subscription package is easy, get creative.
Take a cue from Shopify-based Lovevery, a DTC brand for kid’s toys. The brand aims to develop with children and provide toys that match their changing needs. With this in mind, they created a subscription package for toys that evolve with children's development.
The result is that more than 70% of customers who start from the newborn section remain active after a year, and more than 50% after two years. This creates a customer retention pool that serves as the lifeblood of the business.
Here’s Where You Can Start From
Now you have all the fundamental pillars to grow your DTC brand. I know the information can take a while to digest thoroughly, but here are three vital steps to start with.
Understand Your Customers
A key aspect of running a DTC brand is selling to customers directly and not outsourcing the retailing part. Therefore, to increase sales and rapid growth, you must understand your customers, their pain points, needs, desires, and where they hang out.
Understanding these facts about your customers helps you create standout products and direct marketing efforts through the proper channels.
Define Your Differentiation
After understanding your customers’ needs, the next step is to create a unique narrative for your brand. This may require critical thinking and creativity as the competition is rife across many differentiation points. For example, several brands offer exclusive, earth-friendly, affordable, and easy-to-use products. So, consider sub-niches that serve unique needs.
Product Market Fit and Offer Market Fit
No matter the quality of your product, you can't grow your business if there isn't enough demand. Thus, understanding the market dynamics and how your product fit in are vital elements to growing your DTC brand. Conduct an A/B test to know how customers react to specific products, landing pages, and ad copy. Then, use the insight to optimize your product market fit and drive sales.
The other side that also needs equal attention is how you offer the product to the market. If customers like your product, they might not buy from you if the offer does not seem right. So, consider packaging, communication, and customer incentives to create the right offer.
Nothing Is Stopping You
Despite the competition and operational challenges in the DTC space, the possibilities for growth are limitless. You can create several growth strategies around the pillars I mentioned in this article.
Start from the steps I discussed last, then explore more options as you grow your business. But remember, growth is a continuous effort and not a one-way stop. So, you must continue to evaluate your offer, study your customer, perform A/B testing, follow trends and improve your products.
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