One of the most interesting juxtapositions of direct-to-consumer businesses is how much the simplicity of acquisition can be juxtaposed with the complexity of retention.
After all, as Ben Thompson from Stratechery previously wrote, “one of the hallmarks of the Internet is that the entire funnel is often compressed into a single Facebook ad that you might only see for a fraction of a second.”
The net of this, from an acquisition perspective, has been a declining focus on audiences and segments, and a redoubling of focus on channels, creative, and offers. If you can effectively figure out the what, the algorithms can handle who.
Perhaps ironically, though, the promise of DTC has always been the increase in information about the customer—the ability to better grasp who is buying your product.
Retention, at least for brands without broad distribution channels, relies on this. So, what happens when the primary function within a brand’s growth organization skips—or outsources—the “who”?
Largely, from where we sit, it creates a dynamic where retention efforts are viewed inside the brand through the law of diminishing returns. And, so, the solution here often looks like this: Prioritize the lowest common denominator, execute, and move on.
Query, then, why you’d bother to build direct-to-consumer with all the advantages of customer information?
For small brands, who are just gaining a footing in market, this may be a fine approach (though there are trade offs there and would highly depend on desired outcomes). But in larger organizations, where the volume of existing customers is higher, this simplified approach may end up leaving money on the table.
If DTC is going to be a wedge into something greater—wider distribution, more general awareness—then embracing the niche opportunities that exist within a direct relationship with customers means the returns on things that don’t scale, or don’t deliver equally large returns, can be compounding growth levers that, taken together, can lead to longer term success.
The channels, the creative and the offers still need to be prioritized, but, at some point, you have to prioritize the audience, too. It just may be that it’s better to do that after the initial sale.