Not every single Direct to Consumer ( DTC) brand is worthy of both my fascination and ire. When I speak about my love-hate relationship with DTC brands, I'm mostly referring to the giants of the land. The Caspars, Quips, Glossiers, Brooklinens of the world.
The power of the DTC brand is also what brings the hate part into the equation. It's a world where you wake up on your Caspar mattress covered in Brooklinen sheets. Each brand's offerings take on an identity and life of its own. Often, it's selling a vision of the new urbanite that is slightly whitewashed and I say this as a woman firmly committed to her Quip subscription.
However, conflicted feelings aside, my greedy strategy-nerd mind loves to understand the DTC landscape. I love dismantling the impeccable branding, cracking open the spines of their business models, and discovering what makes them so innovative.
So, when COVID-19 forced us all to live in a low touch world, who better to help us understand how to navigate the low touch economy than the brands who have mastered the digital consumer relationship.
Lesson 1: Innovate The Way You Create, Capture and Deliver Value.
How do you increase your competitive advantage in a challenging climate ? You innovate various sections of your business model. DTC brands are innovative and disruptive because they innovate multiple sections of their business model lego-style.
Modified from Larry Keely's 10 Types of Innovation
Where many of us may be excelling in 1-2 innovation tactics DTC brands like Warby Parker and Quip are excelling at using a combination of 3-7 innovation tactics to beat out their competitors.
As Larry Keely points out, there are three categories and ten building blocks to create a breakthrough business.
Audit the way you create, capture, and deliver value to your consumers using the categories below as a guide.
Configuration:
Is the way I make my profit different from my competitors?
Have I created a network that supports my operations, processes, or delivery methods that will outpace others and bring more value to consumers?
Is there something unique about my process that differentiates me from competitors?
Offering:
Am I offering a unique product or a product with a set of unique features and benefits?
Experience:
How does the way I service consumers, use my channels, build my brand, and engage with my community differ from my competitors?
One guaranteed innovation tactic you will need to perfect is how you deliver your product or service.The innovation playbook used by most DTC brands is not the actual product but how they will deliver the product or service to you.
A few examples of small businesses taking a page out of the DTC playbook:
Famously, Warby Parker lets you try on glasses from the comfort of your home.The try before you buy method will grow as a go-to consumer strategy. It’s already growing in the real estate industry where companies like Matterport helps realtors to make photorealistic scans of properties to offer clients virtual tours.
Restaurants are turning all their assets into build meal delivery services a la Hello Fresh
DC’s Best Restaurants Are Grocery Stores Now and changing the way your supply chain looks.
What used to be considered disruptive will eventually become our new normal.
A Look At Quip
Service + Profit Model
Quip uses automation not only to find a low-cost way to continue giving me value but to keep me engaged with its brand through it's disposable toothbrush head.
In a COVID-19 world, we are not only battling the inability to be in close contact with our consumers, but we are also facing new spending and behavior motivations.
In times when consumers lack the time or motivation to evaluate all options, helping your consumers make fewer decisions while giving them more options will increase their overall lifetime value.
With automation, you remove the burden of repetitive tasks from users to simplify their lives and increase the lifetime consumer value from consumers that have already purchased.
Lesson 2: Empowering consumers to now be the doers through self service
For service-based businesses, you’re essentially getting involved in the customer service business. Service automation for you looks like additional support and enhancements you provide around your core offerings.
You'll have to get comfortable in helping your clients do it for themselves.
Care/Of a health and wellness brand started by two doctors who give consumers the ability to make their own supplement regimen. This, in the past, would require a visit to a nutritionist or a primary care physician.
As a consultancy, a big part of our work is hands-on workshops. I had to decide how to bring the same high energy of an in-person workshop into an online environment. Specifically, the prototyping segment that I would typically lead participants through the process. In response, we created sprint kits. Once a design sprint starts with our team, we ship a big beautiful box full of odds and ends that help our clients still have that hands-on physical feeling of a workshop without being in the room.
Lesson: Sell. One.Thing .
You want to limit what you are offering while managing tough decisions and figuring out where to cut costs. The right path for you may not be remixing and offering new products to the market.
If you look at the brands that have mastered the DTC business model, you will notice that not many of them have diversified. They choose a single category and focus 100% of their time there .
Offering a “core” product or service allows you to manage your supply and demand chain better and conserve resources in every part of your business, from operations to your marketing mix.
From there, using the attention you've already won from consumers, you can cross-sell additional products, services, or information that will enhance their purchase in situations where consumers are likely to want to buy them.
Bevel created by Tristan launched primarily as an opportunity to sell a razor explicitly made or curly, kinky beard hair of black men. It's Bevel's razor that broke through the market and caught the attention of consumers. Over the years, Bevel has been able to add beard oil, conditioners, and more. But, not before reaching massive market penetration for its razor.
Through the “sell one thing” model you’ll be able to:
Reduce waste and cost in your manufacturing process and other operations.
Reduce operating costs and increase productivity standardizing your assets.
Reduce complexity and focus on delivering specific experiences.
Simply Put :
Save on Time + Save on Expenses + Focus on Delivery
DTC brands also show us what not to do
It's not all sunshine and roses being a DTC brand facing a global pandemic. Many DTC brands have not been able to survive the rapid loss of revenue. For example, the newer DTC brand ThirdLove experienced a 39% revenue drop in March.
The hero stories of massive seed funding rounds and blown out marketing budgets that allowed your subway, metro, or taxi ride to be inundated with advertisements have cost DTCs .
Lesson 4: Watch Your Marketing Spend
The pay to play strategy is more than dead. Casper’s IPO filing revealed the company was losing $157 on each mattress, in part because it spent $305 in marketing to make each sale.
This is not the time to push your paid marketing efforts to the brink. In a morbid silver lining of the COVID-19 marketplace, more prominent brands have to fight just as hard, and possibly even harder for the time, attention, and dollars of consumers.
Tips:
Employ super conservative margins on your acquisition cost for the next 12 months.
Invest in marketing and in developing products and services.
Despite the governors' plans to ease social distancing and open up their cities until health officials release vaccines into the world––this is how our world will look for now.
All in all, this is our new reality,characterized by health and safety measures, new consumer behaviors, and permanent shifts in all industries.
And that’s okay.
Incorporating frameworks of experimentation, with an adventurous, hopeful spirit, is how you play the long game. While also consistently and intimately understanding your consumer and their evolving needs.
This is how you move from surviving in a post pandemic world to thriving.