Five Keys to Winning the “Direct-to-Customer” Conversation
The Growing Importance of Directly Engaging Your Customers
Marketers across a wide range of industries are actively working to develop Direct-to-Customer (DTC) models that directly engage customers using social, mobile, and digital channels and devices. The number of manufacturers selling directly to consumers is expected to grow 71% this year to more than 40% of all manufacturers. And over a third of consumers report they bought directly from a brand manufacturer’s web site last year.
Direct-to-customer innovation is coming from a wide range of industries – from traditional packaged goods, to apparel, building products, travel services, consumer electronics, and financial services. For example:
- Innovative packaged goods companies such as High Ridge Brands are communicating directly with millions of customers through email, social, mobile, earned and owned digital channels. Their digital direct to consumer prowess has helped the company build a business in five years that was sold to Clayton, Dubilier & Rice for a reported $415 million and provides a strategic asset to drive future growth.
- Service businesses like Hilton are improving customer satisfaction by communicating directly with customers through mobile apps. One quarter of Hilton’s most loyal guests regularly use it’s Hilton HHonors app to open doors, select rooms, check-in, and order services using their smart phones.
- Over 100 insurance providers like Aetna, MetLife, Cigna, and AFLAC are achieving unprecedented levels of customer satisfaction, engagement, trust, and choice by selling through advanced private benefits exchanges like Liazon which offer more direct client engagement, simplicity, and the ability to deliver more personalized client experiences.
- Consumer brands like Nike and L’Oreal are using “portable” ecommerce experiences, mobile apps that in-store beacons, and digital out-of-home digital media networks to continue the conversation started on e-commerce web sites into the store and deliver an expanded choice of personalized offerings at the point of sale.
The goal of all this effort is to more directly support, enhance, or accelerate the customer journey by adapting to changes in customer behavior and differentiating the brand experience. Some brands seek to supplement the retail, partner, and promotional channels they rely upon with education, personalized experiences, and decision support. Others are trying to displace traditional paid media, intermediary, and retail channels that keep them from learning more about their customers. In either case, the results of a well-executed Direct-to-Customer strategy can be measurable and disruptive.
The Winning Formula: Offer Personalization, Simplicity, and Choice
Some of the most important ways marketers are taking advantage of direct customer engagement include to deliver personalized experiences and making it easy for customers to make choices. 94% of senior-level executives believe delivering personalization is critical or important to reaching customers. Direct interaction through e-mail, e-commerce, mobile loyalty applications, social media and in-store media provides an excellent way to turn big data into delighted customers. For example:
- Hilton gives its Hilton HHonors loyalty program members the ability to better control and personalize their stay with a mobile app that offers digital check-in with room selection and Digital Key. “The customer feedback on the digital check-in experience has been overwhelmingly positive, with 93 percent of guests saying they’ve felt satisfied or extremely satisfied with the experience,” reports Geraldine Calpin, CMO of Hilton Worldwide. “And the added value the Hilton HHonors app delivers is leading more customers to sign up for our loyalty program. 2016 Enrollment in the Hilton HHonors loyalty program is up over 100% compared to this time last year, and our app is now being downloaded once every nine seconds.”
- The Liazon private exchange model is helping employee benefits providers to challenge pre-conceived notions of what an exchange is, and how much choice a customer can handle. It’s a lesson every marketer can embrace in world where customers can now choose from hundreds of jeans brands (800 today vs. 6 brands in 1980) and thousands of investment and benefits options. For over a decade, the prevailing wisdom on choice has been the notion of the paradox of choice – that offering more than three choices will paralyze customers rather than delight them. DTC marketers are finding ways to use technology, data and content to create experiences that turn that idea on its head. “There is no upper limit to the number of options you can provide customers. With our private exchange, companies are offering 30 or even 300 choices to customers with a great experience”, according to Alan Cohen. “The real issue is the type of choice you offer. How you package and configure them so customers can understand the differences in value. How you personalize their choices with recommendations and easy to refine options. And the level of education and decision support you provide so customers understand what is important and why.”
- Direct models give packaged goods manufacturers like High Ridge Brands the ability to capture and utilize data about customers. This helps them to improve the brand experience and reduce the cost of sales by optimizing customer segmentation, the effectiveness of media and channels, and the impact of product promotions. “We’re working hard to build deep consumer profiles which enables sophisticated targeting for our marketing messages,” said James Daniels, CEO of High Ridge Brands which markets Zest, Alberto VO5, Salon Grafix and several other hair and personal care brands. According to Daniels, “Warranty cards, mail-in promotions and street teams have long been employed to collect direct consumer contact information and details. But direct digital channels now make this data collection much faster and deeper, and works hand-in-hand with our marketing initiatives. By leveraging analytics, we can deliver promotions and offers more efficiently to our consumers, and build our brands using owned media assets including our millions of Facebook Fans, email subscribers and website visitors vs. solely relying on paid media channels and at-shelf promotions.”
The Payoff: Customer Satisfaction, Engagement, and Profitability
Direct-to-Customer innovators report significant improvement across every measure of customer engagement – awareness, acquisition, satisfaction, mindshare, and profitability. For example, Liazon reports employers who use their private benefits exchange to deliver insurance and other employee benefits directly to employees have been able to triple employee engagement and double customer satisfaction levels by making selecting benefits a simpler, more transparent, and personalized experience. Those are big numbers for an industry historically known for low levels of both satisfaction and engagement.
Leaders like Nike and Liazon have demonstrated that the convenience, personalization and choice that direct channels deliver can improve profits by supporting price with value and improving margins. Nike learned that customers will pay $170 for the option to customize their own gear using their online sites. And employees who use the Liazon the digital exchange to “shop” for, configure, and customize their benefits value the dollar contribution their employer has made in their benefits packages almost twice as much as industry norms. “By delivering customers transparency, expanded choices, and the ability to personalize benefits, progressive employers are effectively doubling the impact of their investment in their employees in terms of the metrics that matters most – employee retention and satisfaction”, says Alan Cohen, Co-Founder of Liazon.
Five Ways Marketing Executives Will Need to Lead the Way
Delivering highly personalized Direct-to-Customer experiences can pay off for almost every brand. But it’s difficult and risky. Shifting to a direct model requires business transformation, not a better web site. Without CMO or CEO level vision, leadership, commitment and ownership it will be impossible to coordinate the business units, customer touch points and enterprise processes needed to execute a Direct-to-Customer strategy. Every business leader will need to figure out how to adapt their go-to-market and distribution models in the face of some common challenges.
- Connecting the dots. It is extremely difficult for large companies to coordinate and manage customer engagement coherently across an increasingly non-linear customer journey using growing mix of direct mobile, social, and digital touchpoints. It will take executive will to put in place new direct-to-consumer processes and systems that get marketing, sales, product, agency, and communications silos working together to align go-to-market programs deliver a superior “anytime, anywhere” customer experience in direct channels.
- Finding practical ways to create value with big data. Finding the right formula for delivering choice, personalized experiences, and relevant content to customers is a key part of a successful DTC strategy. Getting the personalization formula right takes a lot of out of the box thinking, research, and experimentation. According to Randy Bean an expert in big data strategies, most businesses have invested in a big data infrastructure, far fewer have developed a vision for how they will create business value from that data. So it’s no surprise that while business leaders almost universally agree that personalization is essential to driving growth, a recent Digital IQ research data from PwC shows that 60% marketers say they are not effectively delivering personalized customer experiences today.
- Managing channel conflict. Only a fraction of CMO’s are willing to proactively use digital, social and mobile channels to transform their go-to-market approaches the way Hilton and High Ridge Brands were willing to do. In fact, only 1% of executives said their number one expectation of digital was to disrupt their own or other industries. Gillette ultimately had to make the hard decision to shift to a DTC model to protect share from online competitors.
- Supporting direct channels with quality content. Content plays a much different role in DTC channels than in front of the funnel awareness and branding programs. Video content, personalized content elements, education, stories, and thought leadership are critical fuel to the digital experience. For example, Hilton needed to get digital room layouts and pictures across hundreds of properties in order to support their room selection. 70% of the marketing executives understand that the it takes high quality and well organized marketing content to drive top-line growth with digital, social, and mobile technologies. But most organizations lack the publishing processes to support DTC programs at scale.
- Measuring success at the bottom of the funnel. The nature of a direct model defines success in terms of measurable client outcomes – satisfaction, activation, conversion, subscriptions and profitability. To enable a DTC business models, CMOs will need to embrace a “performance marketing” mentality and define success as more than impressions, brand awareness and engagement.
Until executive leadership decides to take on these very thorny challenges as a primary part of their business strategy, only a fraction of businesses will realize the full return on their very large investments in mobile, social, digital and big data platforms to support growth. To learn more about how we have been helping marketing leaders put in place targeting structures and publishing processes to sustainably support personalized DTC experiences that drive top and bottom line results, contact us at 203-227-6020.