What D-to-C Brands Can Teach Legacy Retailers About Personalization and Data

Legacy brands carry legacies for a reason. They have the history, heritage and name recognition associated with brand longevity, but sometimes all those years of experience can be a hindrance rather than a help when it comes to re-evaluating tactics to attract a new audience. This is where studying the strategies of direct-to-consumer (D-to-C) brands can give legacy retail marketing a refresh. Here are four tenets that have given disruptive D-to-C brands their edge.

They Listen to the Data

Online shopping is an always-evolving, many-headed beast. The trends are fast and furious, but if you chase too many, you’ll find that you’re always behind. In the early days, the question most brands had was, “How do I get my ads on that channel?” Consumers were (and continue to be) overwhelmed by the volume of unwanted and irrelevant ads they encounter daily (heck, hourly!), and just getting ads in front of people became less and less effective. So, the question then shifted to, “How can I tailor my offerings to the customers who care?”

D-to-C brands often have technology built into their DNA to leverage customer data and personalize experiences with sales, special offers, free shipping, etc. When you properly leverage customer data, you can spend less on ads and get more in return because — using the data — you’ve found the people who most value what you’re doing.

These capabilities were born from the “disadvantage” of being online only. However, not having physical retail locations has its advantages. Not only does it mean lower overhead, but by limiting purchase channels, D-to-C brands have a much more manageable data stream. Once they develop their strategies around how to use this data, they can very effectively scale to include physical locations without losing that personalized, data-driven edge.

A proper view of the data will tell you who likes what, who responds to discounts, who prefers free shipping, who buys most often, who has the biggest carts, and more. Personalization starts as examining the data, segmenting based on the variable you want to optimize for (e.g., purchase frequency), testing, learning, and doing it all over again.

They Focus on Value Over Volume

Legacy brands also carry a legacy in operations, which can make it difficult to adapt to changing practices at such a large scale. Meanwhile, digital-native companies that look at customer data and user behavior from the start place more emphasis on every stage of the individual customer lifecycle.

It takes time and effort to shift the mind-set around entrenched practices that don’t revolve around the customer. The marketing team is hyperfocused on well-established key performance indicators (KPIs) like return on ad spend (ROAS) and cost per acquisition (CPA), while the C-suite wants same-store sales year-over-year (YoY) reports or product SKU YoY reports. While these metrics are important, D-to-C brands recognize that there are other metrics, such as customer lifetime value (CLV), that see the customer relationship behind the channel or product metrics.

The reality is that no single lens of reporting — customer-, product-, or channel-centric — will suffice on its own. You shouldn't follow any single metric at the expense of the rest. If a brand knows who its most valuable customers are, it can evolve and shift to adapt to their needs. Rather than serving the largest slice of the pie, customer-centric brands focus on the highest-ROI slice. Because D-to-C brands enter the playing field with far fewer resources than legacy brands, they have to be smarter and more nimble, which means they have to know their customers better than anyone.

They Listen to Their Customers

Finally, what was once a mostly D-to-C-brand trend has become the mainstream in all realms of retail: the social media experience. What initially started with a wave of startups now includes omnichannel and even legacy brands that have caught on and are using clever copy and video content to engage with their customers. By training your team to engage with and respond to customers on the fly, whether that’s replying to an online review or reacting to a current event in culture, your brand will have a better chance at growth and relevance that can only come from staying social and creating a one-to-one connection with customers.

Custora customer Winky Lux is a great example of an organization that balances being data-driven and conversational in its customer relationships. Through brute force research, the Winky Lux team had a hunch that a matcha lip balm would be successful. But rather than just rely on a hunch or (going far in the opposite direction) investing in expensive market research, the CEO opened up Instagram and shot a video asking Winky Lux’s massive following if they’d be interested in the brand's new product idea. The matcha lip balm hit Winky Lux’s digital shelves as soon as possible after that.

It’s hard to take a step outside or scroll through social feeds without seeing D-to-C ads, and for good reason. They’ve made being customer-obsessed the norm through marketing tactics including personalization, social media and data acquisition. They’ve set the model for today’s most effective retail practices. Now it’s time for legacy brands to keep up.

More Touchpoints, More Data

D-to-C brands that are succeeding — and there are many in 2019 — all operate with a data-centric mind-set. To bring this tenet to life, they use multiple touchpoints and platforms to interact with the customer and gather data.

Take Glossier, for example. In addition to its wildly successful online store, Glossier also has an engaged social media following, an active blog (especially known for its comments section), and physical pop-up shops. It gathers data from these channels to target the right demographic at the right time, and also helps propel its product development.

If there’s certain information you want on your customers, you have to give them the opportunity to tell you. Customer data is the bedrock in this strategic analysis for both D-to-C and legacy brands.

Corey Pierson is co-founder and CEO of Custora, a provider of advanced customer analytics for retail.