Over the past decade, direct-to-consumer, or DTC, brands have become the newest upstart method in online retail. Starting as stand-alone organizations, these e-commerce companies have relied on the power of digital marketing to grow and nurture their business. As e-commerce evolved, these types of brands followed, with some even opening their brick-and-mortar retail locations.
However, despite their innovative nature, DTC brands are facing a new threat: rising customer acquisition costs. Customer acquisition costs, or CAC, refer to the total amount companies have to spend to reach, engage, and convert a new customer successfully. To obtain maximized profits, companies must decrease their CAC expenses, thus improving profit margins and ROI.
Well-established DTC brands will often have an optimized marketing strategy in place to ensure CAC expenses are kept at their lowest. But for businesses that are just starting, increasing competition has made this more difficult. With channels like Facebook and Instagram becoming more saturated, return on ad spend is less favorable.
Though these challenges are proving to undermine the efforts of many DTC companies, there are new and improved methods to address CAC expenses and ensure maximum profits.
1. Re-Direct Online and Local Shoppers
Organizing digital ad campaigns on social media can be extremely effective in targeting and acquiring new customers. However, directing those campaigns with the wrong set of parameters can result in costly CAC expenses. By redirecting ads and pairing them with awareness ad campaigns, DTC brands can create a compelling strategy to attract new customers and educate them on your unique brand proposition.
With a special line of code to your website, you can target those who are already familiar with your brand, or those who have visited your store. Thanks to new technology, a business can geofence, which allows marketers to explore new areas of broader advertising. This tool offers granular targeting parameters, enabling marketers to use geographic, demographic, and psychographic data to be hyper-specific in their ad direction.
Some DTC brands have gone a step further and created custom audiences by leveraging unique customer data points such as brand affinities and high-value purchase intent. With custom audiences, marketers can launch ad campaigns that not only reach an existing group of customers, but also a similar subset of customers, thus boosting ad quality scores, improving higher click-through rates, and lowering customer acquisition costs.
2. Boost Targeted Email Marketing
While some online businesses deem email marketing to be obsolete, the value prospect of this marketing method should not be overlooked. Obtaining a prospective shopper’s email is just the first step. Next, your marketers must nurture them into consistent purchasers.
The answer lies in building quality automated email campaigns …
Successful DTC companies will often set up email systems that automatically enable customers to opt in, which they can then personalize further, selecting customer preferences, demographics, household income, and more.
This targeted email marketing allows potential customers to select relevant content based on their interests, nudging them closer to an eventual purchase. Then, you can begin sending subscribers automated email campaigns and informing them about your products.
With more than 80% of marketers agreeing that email is effective to attract and convert new customers, email marketing is surpassing SEO, social media, and online advertising as the most selected customer acquisition channel. And by sending unique and relevant content in targeted emails, you won’t have to spend much of your CAC budget to convert subscribers into customers.
3. Build an Organic Following
In 2020, a brand-led community became a highly advantageous curve to have over the competition. Now, it’s enabled marketers to engage with their customers on a more personal, meaningful level, making customers feel more attached to the company and more likely to immediately purchase products upon release.
Now more than ever, people want to connect, voice habits and preferences, and engage with other like-minded people. Doing so invokes a sense of belonging and attachment, in turn spurring the creation of a community.
More than 70% of brands have active communities, and that number is still growing. Especially in the DTC world, cultivating a loyal following of customers is vital to long-term success.
A simple step would be allowing your customers to have a say in the brand. Conducting polls and surveys, inviting customers to test new products, responding to social media posts regarding the brand, and enabling two-way communication through email, SMS, and social media direct messaging are just a few mutual interactions that allow customers to contribute to your brand’s story.
For loyal customers, you can also provide product updates and exclusive deals, incentivizing them to do the selling for you. Organically cultivating a brand-led community will allow your customers to re-market for the company over time.
Gathering feedback throughout the process can also help direct your product planning and guide you in modifying, removing, and creating products that they love.
4. Non Time-Sensitive Content
Though user-generated content (UGC) is all the rage amongst online brands, creating content that can drive new customers to your site while also holding a timeless lifespan should be a top priority.
Also called “evergreen” content, this type of marketing targets search engine optimization using high-ranking specific keywords. The goal is to use keywords that have no particular expiration date or only requires slight updates every few months. As evergreen content isn’t time-sensitive, it can be an invaluable tool for your business and exponentially grow your brand by guiding relevant leads to your site, lowering your CAC in the long run.
While there are still many other methods to reduce CAC and maximize ROI, the saturated nature surrounding DTC companies makes it difficult for new companies to select the most advantageous method. With the four solutions we’ve mentioned above, you can start lowering customer acquisition costs and creating new channels for growth.