Four in five (80%) traditional B2C brands believe direct to consumer (DTC) brands are impacting their market and that this development stems mostly from DTCs’ performance-based digital marketing.
Specifically, B2C brands say their DTC counterparts excel in digital media buying (43%), social (41%) and delivering curated experiences (31%) and consequently, by changing what consumers expect from brands, 81% of B2C brands now believe DTCs have changed consumer expectations of their own brand.
These are some of the key findings from a new report produced by industry body The CMO Club and data marketing firm Epsilon-Conversant, which explores the challenge posed by DTCs. For example, Proctor & Gamble’s Gillette razor brand has seen a 20% drop in US market share over the past decade.
Based on a survey of CMO Club members, including 74 responses from CMOs or heads of marketing at non-DTC brands, the report stated that DTCs have been able to fill a need that traditional brands didn’t see or acknowledge as channels and platforms fragmented.
“DTCs have the power to win market share with any audience, based on the product and their ability to build a deeper brand relationship with customers,” the report said, while also noting that 82% of B2C brands are concerned that DTCs are more popular among millennial and Gen Z consumers.
However, B2C brands are taking steps to meet the challenge with more than half (53%) now more focused on ensuring their marketing budgets tie directly back to ROI.
“Scaling both customer acquisition and retention to increase overall lifetime value is the new battleground that will drive continued growth,” the report noted.
As traditional brands seek to catch up, 88% say they are now more focused on offering personalised experiences and 42% say DTCs have influenced how they use their data to achieve better customer experiences.
Furthermore, established B2Cs expect their DTC counterparts to struggle with copycat competitors (58%), customer retention (34%), product variance (32%), consumer privacy regulations (30%), audience diversification (27%) and scaling growth (23%).
And in an additional finding, the report said the majority (71%) of DTCs expect challenges with scaling their businesses and retaining customers, leading to more of them adopting a mixed approach, even including the option of bricks-and-mortar stores.
“As both traditional B2C brands and DTCs realise the benefits of effectively reaching customers and the need to switch up approaches and activities, the line between the two is going to increasingly blur ‒ there will likely soon come a point when we no longer make the distinction,” concluded Elliott Clayton, SVP of Conversant.
“What all these brands need to remember is the importance of being where the customer is, delivering that desired personalisation across all channels and throughout the whole customer journey.”
Sourced from The CMO Club, Epsilon-Conversant; additional content by WARC staff