Direct to consumer marketing (D2C) is a strategy in which a company promotes and sells a product or service directly to consumers, cutting out the need for any intermediaries. The number of businesses that independently manufacture, promote, sell, and ship their own products is rising, and growing popularity of this strategy is rapidly changing the business landscape on the whole.
At a time when millennials are at the forefront of driving change in the economy, customer expectations are shifting with preferences for more streamlined purchase experiences, maximum convenience, and an authentic brand experience. Companies that embrace direct to consumer marketing have risen to answer the call. Keep reading to learn more about the direct to consumer marketing model or jump right to our infographic to learn the best D2C marketing strategies from companies that are currently winning in the space.
D2C differs from traditional B2C (business to consumer) in that manufacturers sell directly to consumers in D2C, while B2C usually relies on a retailer stepping in between a manufacturer and customers. In standard B2C models, intermediary retailers (think Walmart) typically sell products of several manufacturers. Customers are faced with several options, so an individual manufacturer can’t control whether their product is chosen over a competitor’s. This lack of control extends to the overall customer experience, engagement, and brand positioning, which retailers instead handle.
Direct to consumer marketing isn’t a brand new concept. Mail-order catalogues, the first-ever of which was published in 15th century Venice, gave customers a first taste of the potential of D2C. Customers would receive a pamphlet of products (initially just books) they could purchase directly from a particular merchant for mail delivery. D2C marketing is essentially the new and improved mail-order catalogue. Consumers purchase directly from online suppliers and receive their purchases in the mail, bypassing the need to go into a physical store in most cases.
Direct to consumer marketing allows suppliers to provide an end-to-end brand experience because they retain control over the entire process. The company is responsible for making a winning product, attracting and marketing it effectively to customers, delivering the product or service, and owning customer communication and experience. This direct interaction with consumers from start to finish means that suppliers can collect customer data and address issues that arise without messages being warped by an intermediary retailer.
Because they enter the market directly instead of going through a third-party vendor, direct to consumer brands most often arise as online stores. An ecommerce model is not only a cheap, easy-to-launch option for D2C brands, the fact that eight in 10 Americans regularly shop online gives suppliers good cause to focus their efforts on digital commerce for the widest reaching impact.
In fact, direct to consumer marketing has even been disruptive across several industries, as it has changed the way we buy a wide variety of products, from razors to contact lenses, to mattresses, to household goods.
For millennials, the highly scrutinized generation born between 1981 and 1996, direct to consumer marketing holds substantially more appeal over traditional B2C marketing models. Millennials have no problem opting for alternatives to large traditional retailers in favor of brands that speak to their priorities: convenience, low cost, authenticity, and a seamless shopping experience. Companies that focus on direct to consumer marketing happen to do just that.
The fact that most D2C brands are e-commerce focused holds extra appeal for the generation that makes over half of their purchases online. As online-first companies, D2C brands offer the most streamlined, convenient, and straightforward shopping solution, an attractive alternative to going into a physical retailer.
Nearly 70% of millennials take into account company values before making a purchase, compared to 52% of all US adults. This helps to explain millennials’ warm embrace of Casper, the mattress brand which currently stands valued at $1.1 billion. Beyond profitability, Casper prioritizes radical customer satisfaction and social responsibility by offering a risk-free 100 night trial of their mattresses, and then recycling or donating unwanted products. Casper also champions convenience with its straight-to-your-door delivery that takes the stress out of in-store mattress shopping.
Though Gen Y shoppers generally prioritize product affordability over quality, direct to consumer brands stand apart because they can easily offer both. Traditionally, wholesalers and retailers mark up product prices after buying from manufacturers, but when suppliers market directly to consumers, they make the same profit while simultaneously saving their customers money. Quality isn’t sacrificed in the process, because D2C brands actively innovate their products to create a stand-apart product that beats other market offerings.
D2C marketing also allows companies to easily collect customer data and refine their offerings to address customer pain points. With 60% of millennials drawn to make purchases that are expressions of their personalities, direct to consumer brands can tailor their messaging and products to match customer preferences. Take loungewear startup MeUndies, which allows its customers to select unique underwear prints, styles, and matching sets with their subscription model. The direct line of communication with consumers ultimately allows for an improved customer experience. In traditional B2C models, the manufacturer would just supply the product, and the retailer would control the customer experience without giving the producer direct visibility into customer insights.
Direct to consumer marketing undoubtedly speaks to millennials, but is it worth pursuing for a small business? Before committing to this strategy, carefully evaluate the pros and cons of D2C marketing.
More Control. D2C brands have maximum control over their product, reputations, brand messaging, and customer service.
Access to Customer Data. Direct to consumer marketing makes it easier to acquire customer data to get a clear picture of buyer behavior and create more conversions while delivering unique, personalized experiences.
Easier to Build Customer Relationships. Because manufacturers that use direct to consumer marketing directly interact with people that buy their products, brands can make improvements on their offerings based on customer feedback, ultimately improving customer loyalty.
Supply Chain Issues Can Be Tough to Coordinate. Best illustrated in the case of D2C brand Glossier struggling to keep its product in stock, brands that use direct to consumer marketing can face challenges in managing their own supply chain.
Conversions Can Be Tricky. Direct to consumer brands often stand apart because they feature exceptionally low costs and/or free trials. Though free trials attract potential consumers, D2C brands run into problems with consumers frequently canceling at the end of the trial or paying for no more than a couple months of service.
Requires Expertise in Several Areas. Beyond just worrying about creating a product, D2C companies have to know how to acquire customers, have an understanding of shipping logistics, and devote more time and resources to processes that could otherwise be outsourced to intermediaries.
Given that millennials are set to become the largest generation in 2019 and are powerful trendsetters for other consumer age groups, business owners have good reason to consider opting for a direct to consumer marketing strategy in order to stay relevant. D2C is easy to implement for first-time business owners, as there are few barriers to entry and a potential high ROI.
If you’re wondering how to put direct to consumer marketing into practice, check out our infographic for lessons from top D2C companies.
Meredith Wood is the founding editor of the Fundera Ledger and a vice president at Fundera.
Meredith launched the Fundera Ledger in 2014. She has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending and financial management.