"Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Sara Livingston, head of operations at Narrative.
Right now, everyone in marketing and media has severe direct-to-consumer (DTC) envy.
Those in marketing circles, in particular, are enamored with DTC companies because they have a direct relationship with their customers. They seemingly have all the data they need.
But that’s not close to being the truth.
From mattresses to razors, fitness equipment to video streaming services, the hype for this category is justified and represents a more macro trend around disintermediation. By cutting out the middleman, these brands have been able to enjoy not only larger profit margins, but a direct relationship with their customers.
And from these direct relationships, these brands are thought to be data rich. That perceived data comprehensiveness has inspired many to try to launch the next Warby Parker of numerous categories.
Of course, DTC brands are at an advantage over companies that must rely on distributors and have little knowledge of who their customers are.
But talk to someone who seems to have lots of data and they always want more, even DTCs.
It’s true, for the most part, that DTC brands are masters at calculating how much it costs to acquire a consumer and their projected lifetime (LTV).
Yet those LTV projections are solely based on how the user was acquired and the actions they took within the brands’ sites and apps. Frequently missing is a broader view and everything else their customers are doing.
A few years ago I built out Seamless’ digital acquisition strategy, where I saw these challenges firsthand.
You might think that Seamless, a DTC food delivery startup, had it made, since people register to use the app, provide their credit cards and their locations.
Yet in practice, we had some gaping data holes. We knew which customers ordered a lot, which meal they ordered for, and we placed them into LTV tiers based on that.
But we didn’t know who had the most potential to increase frequency and spend more because we didn’t know where else our customers ordered from and shopped. Who should we upsell to? Who should we leave alone? Were these users going out to eat, ordering from a competitor or cooking? We didn’t know.
It was difficult to allocate resources (people and budgets) to enrich our current customer data and answer these questions.
We didn’t know what we didn’t know. So we treated everybody the same based on their in-app actions.
And, surprisingly or not, this is still happening across many DTC brands.