In today’s fast-paced world, the landscape of business and marketing is continually evolving. One of the most prominent changes in recent years has been the rise of Direct-to-Consumer (DTC) brands, which are reshaping the way companies connect with their customers. This transformation goes beyond traditional business models and is fundamentally altering the nature of customer relationship management (CRM). In this comprehensive exploration, we’ll delve into the world of DTC brands, the evolution of CRM, and the impact of this shift on the broader marketing landscape.
I. The Dawn of Direct-to-Consumer Brands
Direct-to-Consumer (DTC) brands are at the forefront of the changing marketing paradigm. These companies have disrupted traditional retail models by bypassing intermediaries and connecting directly with consumers. DTC brands are not limited to a specific industry; they encompass a wide range of products and services. E-commerce giants like Glossier, Warby Parker, and Jet.com are frequently associated with DTC, but the distinction between “direct” and “indirect” brands is more nuanced than just “physical” versus “digital.”
Many DTC brands, such as Allbirds, Casper, and even retail giants like Amazon, have ventured into physical presences, blurring the lines between traditional and digital retail. The key differentiator is that DTC brands prioritize building individualized, ongoing relationships with their customers. This emphasis on personalized interaction is the hallmark of the DTC model.
II. The Evolution of Customer Relationship Management
Customer Relationship Management (CRM) has been a staple in the business world for decades, but it has undergone significant changes in recent years. Traditionally, CRM was primarily the domain of Business-to-Business (B2B) marketers and a limited subset of Business-to-Consumer (B2C) brands, such as catalog retailers and loyalty programs. However, the new era of CRM is not confined to specific niches; it has expanded to encompass various industries, from consumer packaged goods (CPGs) to post-cable networks and coffee chains.
The distinguishing factor of this new CRM is its focus on growth-oriented objectives, such as revenue generation and enhancing the customer experience. Unlike its predecessors, which often prioritized productivity metrics, the modern CRM is championed by front-line business units, typically the marketing department. This shift allows for a more strategic and customer-centric approach to CRM, with a focus on the following key performance indicators:
- Marketing: New customer acquisition, customer engagement, and retention.
- Sales: Revenue growth, cross-selling, and upselling.
- Customer Experience: Customer lifetime value and Net Promoter Score (NPS).
In DTC companies, the leaders of this new CRM have the organizational influence and resources necessary to drive their initiatives across the organization. For example, the marketing team at Gilt successfully measured the lifetime value of customers acquired through different channels by collecting and integrating data from marketing, sales, customer support, and content systems.
III. Success in the New CRM Landscape
To excel in this evolving CRM landscape, companies must adopt several essential principles:
1. Open and Extensible Systems: The old CRM was often built on monolithic vendor implementations with rigid data models, making it challenging to import or export data. In contrast, the new CRM relies on open and extensible architectures. For example, Overstock adopted a modern customer data platform (CDP) with a flexible data model and numerous vendor integrations. This “Smart Hub, Dumb Spoke” approach allows Overstock to use best-in-breed vendors for different aspects of their CRM, creating a one-to-one engagement platform.
2. Multi-Threaded Identity: Unlike the old CRM, which operated with a single customer identifier, the new CRM recognizes that customers engage with brands through multiple channels and devices. Jet.com, for instance, integrated customer records across web and mobile app platforms, enabling them to create a more comprehensive customer view.
3. Data-in-Motion: The old CRM primarily managed customer data at rest, focusing on historical data like phone calls, meetings, and past purchases. In contrast, the new CRM leverages real-time data to deliver relevant offers in the moment. Companies like Chick-fil-A use location data and push notifications to predict kitchen order times, while ride-sharing service Via optimizes vehicle distribution and minimizes rider wait times.
4. Media-CRM Integration: The old CRM was limited to engaging customers through email, call centers, and direct mail. In contrast, the new CRM integrates with advertising technology and people-based marketing platforms, including social media and data management platforms (DMPs). Brands like GOAT use segmentation to target new customers through owned and paid channels, resulting in substantial incremental sales.
5. Privacy by Design: Privacy was often an afterthought in the old CRM, which lacked the capabilities to manage individual customer journeys comprehensively. However, the new CRM places privacy at its core. It enables brands to personalize customer interactions while respecting consumers’ rights concerning data collection, usage, and sharing, in compliance with regulations like the EU’s GDPR.
IV. The Impact on the Marketing Landscape
The rise of DTC brands is indicative of a more profound trend: the transformation of the CRM landscape. While marketers were once content with broad advertising approaches, the fastest-growing brands today are focusing on individualized marketing. The IAB’s research indicates that nearly all growth in consumer brands is being driven by these new DTC business models. As Randall Rothenberg, Chairman of the IAB, noted, DTC brands represent an enduring shift in the consumer economy, supplanting the indirect brands that have long dominated the market.
In the coming years, consumers will increasingly expect every company they engage with to deliver personalized, seamless experiences, akin to what DTC brands offer. Meeting these expectations while upholding robust data privacy standards will be the new standard for all brands. The identity revolution has come to consumer marketing, and brands must be prepared to embrace it.
V. Conclusion
The evolution of Direct-to-Consumer brands and the changing landscape of Customer Relationship Management represent a pivotal moment in the world of business and marketing. DTC brands have redefined how companies connect with consumers, emphasizing personalized customer interactions and experiences. The transformation of CRM principles, characterized by openness, data integration, real-time insights, media-CRM convergence, and privacy by design, is reshaping the way companies approach customer engagement and marketing.
The impact of this shift extends beyond individual brands, heralding a broader transformation of the marketing landscape. As consumers increasingly expect tailored experiences, businesses will need to balance personalization with robust data privacy practices. The identity revolution in consumer marketing is underway, and brands that adapt to this new paradigm will be the ones to thrive in the evolving business world.