The boom in direct to consumer businesses, such as Made.com and Casper Mattresses, is causing more traditional brands to lose out, new research has revealed.
According to a new report from the CMO Club and Epsilon-Conversant, 80% of B2C brands believe DTCs are impacting their market and forcing them to adapt their marketing strategies. Big consumer brands like Gillette have even recorded a 20% drop in market share due to emerging rival DTCs.
“Marketers are now seeing huge fragmentation across different channels and platforms but the popularity of direct to consumer brands shows they are filling a gap and need in the industry,” says Elliott Clayton, SVP, Conversant. “With DTCs continuing to gain market authority, other brands need to be taking action.”
It is direct to consumer brands’ ability to excel at personalisation that means they are bettering other brands. This is in contrast to a recent Gartner report that predicted personalisation in marketing is on the way out. The new Epsilon-Conversant report reveals that DTCs’ appeal lies with being more customer centric, offering products to solve customer needs and delivering better buyer experiences, with 81% of B2C brands believing that DTCs have changed consumer expectations of their own brand.
This appeal is also extending beyond digitally native millennial and Gen Z audiences, as DTCs increasingly target older generations who have more disposable income.
Swanson Health is an example of how DTCs are better understanding and effectively reaching both current and potential customers with the right messages at the right time. Following a 5:1 incremental return on ad spend and a 20% increase in messaged site traffic, President Corey Bergstrom comments: “Given we know our customers, we have the ability to make a more personalised conversation through our touchpoints rather than a generic one-size-fits all offer… We’re trying to have conversations that pick up from the prior conversation and create the relationship rather than just be a place for them to purchase.”
This increasing competition is not necessarily bad news. As traditional brands seek to catch up, 88% are now more focused on offering personalised experiences and almost half of B2C brands (42%) say DTCs have influenced how they use their data to achieve better customer experiences. Moreover, 47% of traditional brands are actively working on incorporating more of the personalised experiences that DTCs excel at.
This emergence of challengers is also causing B2C brands to look beyond general awareness and to push for more performance-driven marketing (53%). B2C brands are looking for real measurable success and to connect marketing spend with measurable sales outcome to demonstrate ROI.
However, it is not all plain sailing for DTCs, with the majority (71%) of these startups expecting challenges with scaling their businesses and retaining customers. Traditional B2C brands (58%) also believe that DTCs will be increasingly threatened by a rise in copycat competitors. As a result, the research reveals that more DTCs will be moving away from a purely DTC approach, even opening up more brick and mortar stores like Made.com’s Tottenham Court Road high street store.
“As both traditional B2C brands and DTCs realise the benefits of effectively reaching customers and the need to switch up approaches and activities, the line between the two is going to increasingly blur ‒ there will likely soon come a point when we no longer make the distinction. What all these brands need to remember is the importance of being where the customer is, delivering that desired personalisation across all channels and throughout the whole customer journey,” concludes Conversant’s Clayton.