The Value of a Direct-to-Consumer Strategy

We’ll cover how companies implementing a direct-to-consumer (DTC) strategy can simultaneously benefit all parties — their business, their channel partners, and their end customers. The results can be dramatically positive and encompass accelerated sales growth, increased customer loyalty and lifetime value, and a more dominant and differentiated competitive position in the market.

Understand your DTC options to clearly define your strategy

Going DTC can range from engaging with end-users before to gather data and insights to actually completing customer orders. Knowing where on the spectrum your business would benefit the most is important for defining and communicating your strategy with all key stakeholders.

Setting proper expectations begins with a clearly defined strategy that begins with knowing what outcomes you want to achieve. The image below represents the spectrum of outcomes and approaches to implementing a DTC strategy.

For businesses with a traditional B2B business model (e.g. manufacturer to wholesaler relationships), anticipate potential channel conflicts and find ways to mitigate them in advance. Managing this well will ensure you’re able to strengthen your partner relationships and the customer experience. A few considerations have been listed below:

• The added values to the end customer is clear
• Ensure the customer experience is free of added friction
• Communicate your goals to stakeholders (increased sales is only one example)

Different forms of value across the spectrum

As you move from insights to sales on the DTC spectrum, the benefits grow and change, but so do the considerations.

Insights & Innovation

Capturing customer data allows you to create a more responsive and adaptable business. You’ll have access to new forms and quantities of data that can be used to optimize various aspects of your business from new product development and R&D to sales and marketing.

Example considerations:

• Resource and capability requirements
• Who will use the data (and how) once it’s obtained

Brand control & user experience improvement

Directly interfacing with customers allows you to have control over the customer experience and how they experience your brand. You’ll be in a position to share insights with partners to help them grow sales, plan, and execute which further strengthens your relationship.

Example considerations:

• Resource and capability requirements
• How will the customer experience be enhanced?
• What value does the organization place on owning the customer data?

Sales channel

Lastly is going direct-to-consumer with the intent to generate sales. There are numerous advantages, but also some key considerations. Generating sales through a new channel created revenue diversification and distributes risk, enables you to own customer data, build customer profiles that can be used to provide other value-add offerings (e.g. cross-sell, up sell, etc.). One example of managing risk strategically includes using your existing retail partners to act as fulfillment centers.

Example considerations:

• Resource and capability requirements
• What are the risks to partners and how will they be managed?
• How much lift in sales can be exected and how does the customer lifetime value change over time?
• How will the new revenue channel help with risk management and competitive differentiation?

What keeps leaders from taking action

There are many reasons for inaction and some can be nuanced. Many leaders don’t entertain the idea of a DTC strategy for a few common reasons:

• Fear — Paralysis and inaction because of fear (justified fears or baseless fears).
• Complacency — “No need to change because our business is doing just fine.”
• Timing — Conflicting commitments and priorities and/or an inability to reprioritize initiatives.
• Lack of direction — Inability to contextualize new opportunities due to a lack of strategy or guidance.
• Unfavorable economics — The numbers simply don’t pencil (rare but reasonable).

Ultimately, the decision to pursue a DTC strategy should align with, and be integrated into, the overall business strategy with support from the highest ranks with appropriately allocated resources.

As the future of B2C and B2B commerce evolves, it’s clear that the writing is on the wall — all industries and business models must adapt or risk being left behind. The rate of change is accelerating as consumer expectations continue to grow. The best leaders will take action to position their businesses for success while refining what has worked in the past and combining it with what will work in the future.