In the post-pandemic world, the need for direct to consumer (DTC) has accelerated tremendously as consumer shopping behaviors have shifted. With brands such as Pepsi and Kraft Heinz disrupting the industry and moving faster than ever before to mobilize their DTC strategies, the pressure is on for CPG companies to take action if they want to maintain relevance and thrive in the future.
While the industry has always acknowledged the importance of owning the DTC shift, adoption was sluggish as CPG companies struggled to justify the value of implementing these strategies over other priorities. The COVID-19 pandemic catalyzed the CPG industry into a rapid transition, one in which the only rule is to digitize or get left behind. The direct benefit of investing in a DTC strategy is clear: the creation of additional revenue streams. However, it is also critical to acknowledge the indirect value that DTC can provide CPG companies. These indirect benefits can deliver value 1.4x-1.7x the direct revenue stream and therefore are critical when evaluating which investments should take priority, resulting in fewer missed opportunities for the business. Here are a few key value drivers you should consider:
Getting to know your customer firsthand
DTC allows CPG companies to build relationships with customers through the organic use of first-party data, which was historically difficult or unfeasible to access via traditional retailers and e-commerce marketplaces. Through this direct and more robust communicative relationship, companies could use more tightly focused data-driven feedback to better respond to ever-changing consumer tastes and habits, even to the point of more accurate forecasting.
Also, CPG companies could leverage this access to data to facilitate product development. Current data limitations make the art of mitigating risk seem haphazard at times, which traditionally discourages new product development due to cost concerns. The clarity in the testing and prospecting phase gained through engaging with customers early on, can improve assurance in investment and reduce speed-to-market, which in turn can boost new revenue streams.
Increasing brand loyalty and relevance
The number of products consumers must choose from in any given category has become increasingly expansive in the age of Amazon, making it trickier for established brands to maintain relevance. According to Wikibuys, in 2019, less than half of consumers surveyed said they considered themselves loyal to certain brands. DTC counteracts that by enabling CPG companies to control the end-to-end customer experience and deepen brand loyalty through methods like personalized recommendations and customer reviews. The implementation of curated subscription models is yet another way to help brands maintain relevance. They add value by creating new revenue streams via recurring customizable product shipments and curated items. A deeper understanding of what customers value and how they want to experience goods and services becomes clearer for brands using this model. This is all built on first-party data and creates special offers to help strengthen brand loyalty.
Moving forward with agility
DTC models give CPG companies full rein to adapt and innovate following market changes and consumer behaviors. This can happen more efficiently and quickly without over-relying on other retailers. With the world moving at an unprecedented pace, the ability to move with agility is critical. A brand can implement a digital touchpoint commerce strategy to set the business up for constant innovation. This approach involves evolving by adjusting to market change and consumer behavior shifts. It uses non-familiar channels such as social, IoT, etc. to create new ways for customers to buy products.
Once a brand decides to invest in DTC, choosing the right model is the key next step. CPG companies must consider the benefits of tailoring their approaches and offerings to correspond to tomorrow’s business world and its customers. With brick and mortar posing as the 21st-century’s latest casualty, building a digital store to engage consumers directly has never made more sense. Much in the same vein that American companies heralded their products as individually handcrafted to create a family connection in the 1920s, offering a meaningful one-to-one relationship with attention to customer personalization is still powerful today. The potential value of implementation far outweighs the cost. Businesses that establish a firm foundation digitally will better position themselves to thrive in tomorrow’s new normal.
Ultimately, opportunities lay unclaimed for CPG companies to reinsert themselves into a market that is leaving yesterday’s tactics behind. Testing for market readiness and digital maturity while verifying key components like resource allocation, budget, and overall strategy to determine appropriate stakeholders and prioritize implementation, is key to successfully rolling out new DTC capabilities. With the proper planning and resources, each brand that chooses to invest will be stepping into a sort of “Wild West” adventure of understanding their market in new and more direct ways. With the advent of a post-COVID world where more consumers have made the jump to online orders, the chance to get on the front foot with fresh, scalable DTC solutions seems riper than ever.
Publicis Sapient is a digital consultancy. The firm offers strategy and consulting, customer experience and design, technical and engineering, enterprise platforms, data and artificial intelligence and innovation and digital product management services.