Building a D2C business that scales more profitably

As brands look to build deeper relationships with their customers and reinforce their brand equity through more differentiated experiences, one of the areas they are investing is direct-to-consumer (D2C) business models. This not only provides a strategic opportunity to capture 1st party data and enable greater influence over the end-to-end customer journey, but it also provides defensive value as others gain power in the journey. For example, in travel and hospitality, the growth of online booking agents such as Expedia, Travelocity, and Kayak has led airlines, hotels, and cruise brands to invest heavily in D2C business models. Consumer brands in categories that enjoy favorable category dynamics (e.g., higher margins, higher value to weight ratios, ongoing replenishment and habit building dynamics) such as entertainment, apparel, beauty, and personal care are leading the pack. As the costs and complexity of building D2C business models become more manageable, however, brands from a broader set of categories are getting into the D2C game, too, taking their investments in ecommerce a step beyond collaboration on digital shopper marketing and subscriptions with retailers.

Crafting a successful D2C business involves more than merely setting up an online storefront though that is certainly getting much easier. It requires innovating the customer experience in three key areas: personalization, always-on immersive experiences, and communities of interest. Let’s address each of these in turn.

Scale Your Personalization Efforts

Personalization is no longer a novelty but an expectation as consumers have grown used to the experiences provided by early digital innovators in ecommerce, entertainment, personal finance, and digital fitness. As a D2C business, the direct connection you forge with your customers provides a unique opportunity to understand their wants, needs, and preferences intimately. Leveraging these insights, you can create personalized experiences that resonate with each customer, fostering an emotional connection and sense of shared values that creates habit building loops and reinforces loyalty.

Personalization in a D2C model transcends basic personalization strategies. It's about harnessing data to tailor the experience design in ways that meet and exceed individual customer expectations at every touchpoint. Personalization can take numerous forms, from customized product recommendations based on a customer's browsing history or past purchases to personalized interfaces that align with a customer's preferred way of shopping. 

Ultimately, personalization is about content-based experiences to deliver the right content to the right customer at the right time in the customer journey. By delivering content that aligns with each customer's interests, challenges, and goals, you position your brand as a valuable solution provider and a trusted advisor. For example, if you sell fitness equipment, providing personalized workout routines, nutrition advice, or wellness tips to your customers adds value along their customer journey, making the peaks on the journey more emotionally engaging and memorable. 

Integrating advanced technologies like AI and machine learning can elevate personalization to new heights. These technologies can analyze vast amounts of customer data in real time, uncovering deep insights into customer behavior and predicting future needs. In an earlier blog in my Accelerate Value series here, I wrote about the opportunity to turn your personas into micro-segments and better engage your “moveable middle,” a great growth framework developed by MMA Global, the trade association where I’m acting as a CX subject matter expert. This allows you to tailor experiences to each customer's evolving needs, thereby delivering a level of personalization that truly differentiates your brand. Companies such as Optimove, for example, help you tailor the right content with the right calls to action through the right channels across your micro-segments, allowing you to deliver personalization at scale. For more on personalization opportunities, challenges and how to overcome them, see also my video discussions with Greg Kihlstrom here and our blog series “Are we really ready for an AI-driven CX” here.

Curate always-on, immersive experiences

In an age where customers demand instant gratification and their expectations from your brand are driven by their last, best interaction with other digital innovators, an always-on approach ensures your brand is consistently accessible and adaptive to your customers. It eliminates barriers of time and location, enabling customers to interact with your brand whenever and wherever they choose.

D2C commerce is by its very nature “always on.” But the experiences you deliver go beyond helping your customers browse a broader assortment, check out, and enjoy a quality fulfillment experience. There are a growing set of immersive experiences along the customer journey that you can curate to provide solutions that help you win the trip, grow the basket, and deepen customer loyalty.

In this context, choosing the right immersive content-based experiences to design provides a fantastic canvas to paint on for your innovation efforts to get “beyond the product.” They allow you to deliver robust experiences that transcend physical limitations, thereby creating opportunities to engage with customers in novel and memorable ways. For example, virtual pop-up stores or showrooms, or virtual edutainment events can provide immersive experiences that bring products to life for customers. Similarly, voice-based AI, augmented reality, or virtual reality experiences enable you to engage consumers in entertaining and informative ways that go well beyond reducing friction in customer service and lowering your cost to serve. Additionally, always-on virtual models create more touchpoints with customers, providing opportunities to collect customer data. Each interaction with your customers along their journey provides an opportunity for experimentation to optimize what converts your “moveable middle” into more engaged and loyal customers.

Nurturing communities of interest

As brands transcend the historical role of media companies to engage customers in a category and deliver solutions to them, they have an opportunity to do more than provide content to differentiate their brands and reinforce a deeper emotional connection. They have an opportunity to reimagine category leadership in a mobile and social-first digital landscape. This is something that I wrote about more than 10 years ago when I collaborated on my article Social Life of Brands, which was one of most fun cover features that I’ve written for strategy + business magazine. The core idea in the article - which takes a neuroscience lens to how social media is impacting the practice of marketing - is that consumers have four equally powerful drives (the drives to acquire, defend, bond, and learn), and that the digitization of marketing is providing a way for leading brands to better tap into the drives to bond and learn. As you’ll see from my Reimagining Insights blog series that I’ve been collaborating on with Lou Carbone, I’ve continued to focus on the power of unconscious thought and emotion for delivering a better customer experience.

This has profound implications for marketing, and it amplifies the strategic importance of investing in D2C business models. The drives to bond and learn are, at their heart, about community. Brands have an opportunity to engage more directly in nurturing and supporting communities of interest, increasing the trust and emotional attachment that consumers have with them along the path to purchase.  This goes beyond generating digital word of mouth through ratings and reviews. Brands that win the race to engage social influencers and more directly curate content-based experiences and communities of interest will be the brand leaders of tomorrow.

Up Next

In the next blog in this Amplify Innovation series, we will tackle the fourth problem statement in the exhibit you saw upfront: How can we reimagine the way we deliver B2B expertise given the shift to more virtual, always-on engagement? If you missed the earlier blogs teeing up all of the problem statements, you can find them on our leadership coaching page here.

Stay tuned for more insights, and as always, feel free to DM me on LinkedIn to start a conversation, or reach out to contactus@journeysparkconsulting.com.