Direct-to-consumer (DTC) disruption is fueled by many factors, including changing consumer preferences, democratization of technology, and the continued advancement of search trends and artificial intelligence.
The early history of e-commerce-driven DTC marketing brought brands like Dollar Shave Club, Warby Parker, AllBirds and others into the mainstream via traditional marketing efforts. Those days are gone. Now the general consumer space has transformed with influencers-as-brands and innovations in social commerce. Opportunities abound, as more than $200 million of consumer spending is forecasted to go DTC brands in 2023, according to Statista.
Post-pandemic economic changes mean that DTC companies are putting a greater emphasis on brand building while doubling down on established methods like extra-mile customer service and a personalized, shareable customer journey.
In 2023, the following trends should be top-of-mind for marketers across all industries and categories. We’ll highlight how DTC brands can use artificial intelligence, SEO trends, pricing strategy, sustainability, brand partnerships and brand communities to stay ahead of the competition.
Changing search landscape and the rise of AI
As search behaviors change, brands will shift their dollars away from Google and Meta to Amazon and TikTok, where consumers are increasingly beginning their searches.
Voice search technology is advancing with greater nuance, including integration with generative artificial intelligence tools like ChatGPT. Now brands can optimize their DTC marketing for voice assistants like Alexa and Google Assistant. These SEO-driven strategies include using natural language and answering frequently asked questions to improve search rankings and provide a better customer experience. According to Statista’s report, the future of voice recognition, 35 per cent of the US population currently owns a smart speaker, and by 2025 the number is expected to rise to 75 per cent. In 2023, it’s expected that 50 per cent of the US population will use some form of voice search every day.
Brands that can create voice-enabled shopping experiences that are seamless and a website that’s mobile-friendly and optimized for voice recognition are more likely to succeed.
On-site chatbots, now germane to consumer-facing websites, can leverage advancements in AI tools that streamline communication with potential customers. Whether it’s using generative AI tools to create content or to leverage tools that automate communication, the latest AI developments mean that marketers can respond to customer queries with information and recommendations at any time.
In March, Modern Retail reported that Instacart is one retail brand that’s working with Open AI to help customers create optimized grocery lists and interact with the massive product catalogues that grocery retailers maintain. This can help businesses to engage with their customers even when their customer service teams are not available, leading to increased customer satisfaction and brand loyalty. (Caveat: Make sure your bots aren’t too bot-like in how to they talk and react. That’s just awkward.)
These tools can also generate leads by engaging with potential customers and providing them with information about products and services. AI tools can also gather information about potential customers, such as their contact details, preferences and interests, which can be used to create targeted marketing campaigns.
DTC brands can increase customer retention by providing personalized recommendations, responding to queries and concerns, helping provide an overall positive customer experience. They can also analyze customer data to identify trends, preferences and behaviors that can be used to improve marketing strategies and campaigns.
At the end of the purchase cycle, AI tools can help by dissecting customer feedback to identify areas for improvement in products and services, helping businesses to optimize their offerings and enhance customer satisfaction.
Pricing and Promotion
A textbook marketing example writ large for DTC brands is how they maintain their price control and promotion capacity. The economic whiplash of the past few years that has intensified in 2023 with Silicon Valley bank runs means the general consumer is looking new and compelling promotions.
DTC brands often experiment with pricing and promotions to attract new customers and drive sales. Offering limited-time promotions, such as discounts or free shipping, creates a sense of urgency for customers to purchase. Tracking those campaigns, however, is the crux for DTC brands. Using trackable promo codes that are channel-specific is the key to optimization and analysis. Trying dynamic pricing involves adjusting prices based on supply and demand or other factors, such as time of day or seasonality, an in turn attract customers who are price sensitive.
Subscription plans can provide a steady stream of revenue for DTC brands, as well as offer convenience for customers. DTC brands can experiment with different subscription options, such as frequency of delivery or offering discounts for longer commitments.
Price anchoring involves setting a high price for a product, then offering a lower price to create the perception of a good deal. DTC brands can experiment with price anchoring to see how it affects customer perceptions and purchase behavior.
Lastly, as new products are launched or new categories are created for a brand, bundling products or upselling customers to a higher-priced option can help increase average order value and drive sales. DTC brands can experiment with different bundling and upselling strategies to see which ones resonate with their customers, especially when new concepts enter the market.
Sustainability and ethical practices
With consumers becoming more conscious about the environment and social impact, many DTC brands are focusing on sustainable and ethical practices. Potential customers are vetting a brand’s mission and purpose, along with their goods and services. Some DTC brands are adopting a circular economy model, where they design their products to be reused, recycled, or upcycled. For example, some fashion brands are creating clothing that can be easily disassembled and reassembled into different styles or using recycled fabrics, with Patagonia serving as an industry leader in this category.
Quince is a DTC brand that focuses on sustainability and uses the circular economy as its unique selling proposition (USP). The company’s mission is to create high-quality, sustainable products that are designed to last and can be reused, repaired, or recycled at the end of their lifecycle. One way that Quince uses the circular economy as its USP is by positioning itself as designing its products for longevity. The company creates classic, timeless styles that are not trend-driven, so they won’t go out of fashion quickly. This approach ensures that the products will be relevant and useful for many years to come, reducing the need for frequent replacements.
Package Free Shop is a DTC brand that offers a variety of sustainable products, from reusable straws and utensils to compostable cleaning products and plastic-free toothbrushes. They prioritize zero-waste and plastic-free solutions and offer educational resources on how to live a more sustainable lifestyle.
Collaborations and partnerships
Another trend in the DTC space is brand collaborations and partnerships. By teaming up with complementary brands, DTC companies can expand their reach and offer customers a wider range of products and services. Here are a few collaborations from 2022 that show the power of partnerships.
Deckers-owned shoe brand Hoka One One expanded their cultural cachet and grew revenue past $1B through collaborations with renowned designers outside of the running and outdoor industry. Hims, a men’s health and wellness brand, teamed up with The WHOOP, a fitness tracking company, to create a bundle of products aimed at improving men’s sleep, recovery, and performance. The partnership allowed Hims to expand its product offerings beyond its core health and wellness categories.
Ritual, a women’s vitamin brand, collaborated with Jaclyn Johnson, the founder of the popular digital platform Create & Cultivate, to launch a campaign aimed at empowering women in the workplace, a nod to the brand community trend (explained below). The partnership helped Ritual connect with a larger female audience and align its brand values with those of Create & Cultivate.
Dovetailing on the sustainability trends, Outer, an outdoor furniture brand, partnered with Coyuchi, a sustainable home textiles brand, to create a collection of outdoor furniture featuring Coyuchi’s eco-friendly fabrics. The collaboration helped Outer expand its product offerings and appeal to a more environmentally conscious audience.
Brand communities: Back to basics
When selling niche products, a strong brand identity stands out in a crowded market. This includes everything from creating unique packaging and marketing messages to building a community around the brand. For newer brands, simple messaging and identity concepts are winning the day, as illustrated in the rise of “article brands” like The Garment and The Ness covered in the Wall Street Journal in March 2023. This back-to-basics approach demonstrates a desire to get away from seemingly odd brand names that don’t relate to the product or service being delivered.
Copywriting with intention might seem obvious, but doubling down on what’s known as “neuromarketing” means that marketers should consider the psychology of their audience and what motivates them to align with their brand. Building campaigns and messages that influence consumers unconscious decisions is the ultimate behavioral hack for brand marketers. Crafting a confident, unique brand voice is critical for these efforts, and investing in your community should guide that process. Educating customers helps develop their loyalty and lifetime value, which will be a requisite depending on how the economy moves over the rest of 2023.
Community in this era means real-world experiences, specifically in physical retail (eMarketer/Insider Intelligence) and a mix of social commerce features to sell products directly on social media, such as shoppable posts and in-app checkout. Existing trends related to customization can go to the next level with personalization via QR codes and Direct Mail, with a media mix that features offline and online integration that ties your brand community.
Takeaways
The direct-to-consumer space is an area where startups and established brands can find opportunities, especially when innovating around Ai integrations across the customer journey. By investing in brand communities and exploring partnerships harmonized to their niche, up-and-coming DTC brands can find a broader reach to access new customers. With a blend of old and new tactics, like reinvesting in sharp copywriting focused on brand grow or shifting ad budgets away from search, DTC brands can innovate within their wheelhouse with the aid of AI tools that allow greater personalization and customer satisfaction.
