Customer Knowledge and D2C Growth: A Virtuous Cycle
By Sonal Gandhi
Chief Content Officer at The Lead
Brands are Increasingly Benefitting from Growth in D2C Business Leading to a Greater Knowledge of Their Customer and Vice Versa
A recurring theme in all of our conversations with this year’s Direct 60 executives has been the length to which brands are investing in truly getting to know their customers, and the myriad benefits of doing that well. As incumbent brands are changing their orientation from product-led to customer-focused, we can see how all parts of the business are being transformed with an improved understanding of the customer. Brands are seeing the need to use as much data as possible on an individual’s preferences to tailor an experience to them. They are looking beyond traditional metrics and trying to ingest as many insights as possible to:
Improve organizational focus and clarity: Many of the Direct 60 executives have used data from direct relationships with customers to clearly define who their target is. They have created new personas and psychographics of their main customer segments. This has helped them to set clear goals, create the right organizational incentives, and use limited marketing resources more efficiently. They are making sure that the whole organization focuses on who the customer is, and makes decisions with those customers in mind. In the post IOS-14 world, having a clear knowledge of the target consumer segment helps brands to reduce their reliance on expensive performance marketing, and create a more efficient full funnel marketing strategy.
Offer the right incentives for desired customer actions based on the lifecycle stage: Direct 60 marketing execs are telling us that having accessible data on the customer has enabled them to truly activate lifecycle marketing. A better understanding of where the customer is within the life cycle dictates which action the brand wants to incentivize. For instance, did the customer make a first purchase, and the brand is going for a second–or is the customer loyal to the brand, and the brand wants to use them to bring more people into the brand? Data is also helping brands understand how to nurture these relationships based on the customer journey – when to ask for reviews versus when to encourage a visit to the store with a birthday surprise. This type of marketing resonates with customers and creates value both for the customer and brand.
Nurture Loyalty Among Best Customers: A brand’s most loyal customers are not only responsible for a large percentage of the revenue, but their behavior is also an indication of whether a brand’s strategy is working. Many on our Direct 60 list are now watching the frequency of purchases, total spend, and other behaviors of their top spenders to keep an eye out for any risks to the overall health of the brand. They are also more effectively testing various incentives and promotions amongst these most loyal customers to promote further brand engagement.
According to Nico Perdomo, Co-Founder & CEO at Catch and a member of the Direct 60 selection committee – “Knowing your customer means knowing their preferences at any given point in their customer journey. What a shopper needs to incentivize retention after first purchase is very different than after purchase number five. Earlier in the life cycle, customers have less brand affinity and are more prone to comparison shopping, versus being more swayed by experiences, exclusivity, etc. after they’ve made many purchases and become brand loyal. We believe that brands can drive new customers to make a second and third purchase by making it easy for them to earn/redeem rewards that stymie the desire to comparison shop and give the brand another opportunity for the strength of their merchandise to shine through.”
A New Approach to Loyalty is Being Enabled by Strong Foundation of Customer Data
A few of the executives on our Direct 60 list have relaunched their loyalty programs in the last year or so. These programs are now sitting on top of powerful customer data platforms, allowing them to offer a precisely customized set of benefits to their members. These new loyalty programs are different than past versions in the following ways –
New Ways to Earn Points – Points earned are not just based on the amount the customer spends with the brand–instead, brands are now using points to encourage other behaviors, such as writing reviews or other types of public engagement.
New Sets of Rewards – Loyalty programs are not just about redeeming points. They are also about exclusive experiences, early access, and special promotions not available to non-members. Many new programs now have different tiers, and brands are targeting folks differently with opportunities to move them up these tiers.
A Means to Control Costs and Outcomes – Many brands and retailers are now limiting benefits which were earlier widely available to anyone shopping the brand–like free shipping and free returns–to loyalty members . They are increasingly moving site-wide promos into the loyalty environment, and testing promos with loyal customers for efficacy before wider roll outs.
Catch helps brands reward and retain young shoppers right from checkout. Brands see 45% higher LTV through increased repeat rates and frequency, while saving on fixed payment costs to drive profitability. Catch works with some of today’s buzziest beauty & fashion brands: OUAI, Summer Fridays, Girlfriend Collective, Everlane, SoulCycle, Pacsun, etc. Learn more at getcatch.com