‘Head, heart and home’: Why direct consumer relationships are changing the marketing rules
From the Koala Mattress to Dollar Shave Club, direct-to-consumer brands are everywhere. IAB Australia's Vijay Solanki considers what the huge retail shift towards a direct brand economy means for Australian brands.
One of the key learnings I brought back from last week’s IAB Annual Leadership Meeting (aside from global interest in the words of Unilever’s CMO Keith Weed) was just how much the shift to a direct brand economy is changing the way marketers are, and will need to operate.
Experts from brands, agencies and publishers discussed how best to operate in a world where digital has made it considerably less expensive for businesses to go direct to the consumer with their product or service.
Permanent changes in the supply chain
As anyone who has spent time in the US and ordered online will be acutely aware, Australia has lagged behind the US (and many other parts of the world) when it comes to order fulfilment. However, this is rapidly changing with the evolution of Australia Post, new start up delivery services and the arrival of Amazon expediting shipping services.
I recently subscribed to Dollar Shave Club and this is a perfect example of the direct brand economy. It is cheaper that Gillette and more convenient – I don’t have to think about ensuring I stock up, it is a set and forget order and they have intelligently mined my data to try and cross-sell me shaving related items that provide utility to me.
During the conference, I had the opportunity to sit down and chat with the Keith Weed about being a responsible business in the digital age (you can listen to the podcast I recorded with him here). He spoke about the importance of e-commerce, noting it is the core area of focus for Unilever.
He admitted that whilst they are still working out the economics of delivering a box of soap powder direct to the consumer, Unilever “will get there”. Another big focus area for him is the race to collect as much first-party data as possible. They aren’t alone – the WoolworthsX project and e-commerce programs at Coles are no doubt also laser focused on how to leverage first and third-party data to make home delivery more intelligent. And I’m sure we’ll all be keeping a close eye on developments that come out of Amazon / Whole Foods operations post-acquisition.
Lower barriers to entry
In the past, the economics of creating, for example, a mattress delivery start-up like Koala were prohibitive. Now with agile manufacture and cheaper shipping costs, batch sizes become smaller and it’s indisputably easier to get up and running. The traditional issues around investment only come into play when you need to scale.
The chief creative officer of ad agency Weiden & Kennedy articulated this very well, noting that a start-up would cost around $5m in 2000, dropping to $500k in 2005. Today you can start with closer to $5000. It’s never been (financially) easier to disrupt any business vertical.
Retail sales growth moving to digital
Retail sector growth is being driven by digital data enriched channels. Indeed, many of the sector growth stories are coming from companies that have embraced the direct brand economy. Companies like REA, Domain and Carsales are enjoying phenomenal growth driven, in significant part, by their ability to go direct to the consumer. This direct touch is enabling them to collect more and more first and third-party data which in turn helps fuel future growth and utility by allowing them to flex their muscles in related areas.
Let’s take REA as an example – the move to sell financial products is an obvious one, but it’s just the tip of the iceberg. Consider the data they already use to show users how close the schools and shops (key factors in a modern-day family property purchase) are to properties they may be considering. In the future why wouldn’t they use this data to do business with the schools and the shops and restaurants themselves? In the right hands, the data could help the school grow its pupil base or even decide where to build the next school.
It’s a classic example of how the direct brand economy will continue to grow. All powered by data.
So what does this mean for Australian brands?
The CEO of IAB USA, Randall Rothenburg summed up the challenge that brands face in traversing the last three miles of the consumer journey as “To the head; to the heart; to the home.”
This is what it’s all about and in my twenty years plus in marketing, I have never seen it put so succinctly.
Digital has already been instrumental in driving purchase decisions (the head), and also driving getting the product to the home – particularly for non-physical e-commerce like finance and travel.
The next frontier is for digital to grow ‘the heart’ phase (as well as driving more physical products direct to the home). Companies like YouTube are also using digital to drive brand connections to the heart, with the promise of connected TV and OTT offering significant opportunity for brands to connect going forward.
And this is where we as an industry need to focus. It’s certainly where the next growth phase for the digital marketing and advertising industry in Australia lies and while it presents great opportunities – I’m sure it will also deliver equal measures of frustration as brands work out how to get to the consumers’ heart, then head, and then their home.
I’ll leave the final words to the VP of marketing at ride-share company Lyft, who was referenced in the presentation delivered by ad agency Wieden & Kennedy.
“World class creative is table stakes. I need a strategic partner who is embedded in our business every day, helping us with product decisions and helping us with the way we design our service experience – not just making ads.”
Vijay Solanki is CEO of IAB Australia.
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topics
direct brand economy
direct-to-consumer
dollar shave club
IAB Annual Leadership Meeting
Koala mattress
Vijay Solanki
These direct brands also need to have the best or equal product to win. Dollar shave club is cheaper than Gillette and more convenient than Gillette, but a far inferior product for mine. I did dollar shave club and really wanted it to work, but even their premium razors were not great. The products need to stand on their own and not just be convenient and well branded.
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Great article. I agree with Bernie. I’ve tried every razor out there. Gillette was the iconic brand, now you’ve got emerging brands… the best I’ve found is Defender Razor.
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