Sprinters and Marathoners: yellowHEAD’s Digital Innovation & DTC Recap

yellowHEAD’s latest webinar shows that CPG businesses find success in DTC when they treat it like a marathon, not a sprint.

 

On top of being a remarkably disruptive year for almost everyone, 2020 transformed the relationship between consumer packaged goods (CPG) verticals and DTC markets, perhaps permanently. The lesson for businesses and marketers is clear: powerful DTC opportunities exist for brands that are willing to look beyond short-term actions and invest in long-term business goals. To better understand these changes, yellowHEAD’s Aviva Telias hosted a webinar with our own Guy Bauer (Head of Paid & Organic UA for P&G at yellowHEAD), Facebook’s Guy Snir and Nitzan Evron, and Procter & Gamble’s Augusto Marolla to discuss short and long-term e-commerce opportunities and the best practices for implementing DTC infrastructure.

Our webinar consists of three core segments:

1. A presentation from Facebook’s Guy Snir titled Turning a Sprint into a Marathon.
2. A live-panel discussion on the disruption of CPG industries and how COVID-19 accelerated DTC trends.
3. Finally, our panel responded to questions from the audience.

You can view our webinar in full, but in the meantime, here are some of the lessons CPG marketers should take with them:

Build, Partner, or Buy

COVID-19 didn’t start the DTC trend, but it has accelerated the adoption timetable within CPG verticals. After all, businesses already have many reasons to engage with DTC markets: it reduces reliance on retailers, grants access to first-party data, and gives traditional brands a better footing when competing with DTC-exclusive companies.

According to Snir, most businesses have three avenues to implementing DTC capabilities:

• Build: Create an e-commerce storefront and DTC infrastructure in-house to sell products directly to consumers.
• Partner: Forge a partnership with an existing digital storefront. This process is much like getting your product onto retailer shelves and is usually the quickest way to drive digital sales.
• Buy: Acquire an existing digital storefront outright and sell your branded products within it.

As COVID-19 disrupted shopping patterns, CPG verticals overwhelmingly turned to the “build” approach to enter DTC markets. The pandemic made it clear that brands must step up to embrace e-commerce — building that infrastructure ensures that these capabilities will remain in place once the crisis ends.

Sprinters vs. Marathoners

As we move into the post-COVID landscape, Snir sees two types of CPG companies enter the DTC economy: he calls them “sprinters and marathoners”. While both now have e-commerce storefronts, the similarities stop there.

• Sprinters are businesses that seize short-term opportunities to increase their revenue immediately. In this model, brands focus on speed while minimizing their cost per customer (CPC). Sprinters’ overall goal is to protect their market share during COVID-19 without falling behind their competitors. The immediate need for safety drives them during a disruptive and uncertain time.
• Marathoners, on the other hand, build on short-term goals to pursue long-term opportunities. Their focus is on expansion, which they achieve by investing in new technological capabilities and DTC infrastructure to enhance consumer lifetime value (LTV). The overall goal of marathoners is to increase consumer share, not just protect it. They accomplish this goal by addressing convenience and the customer experience as part of a high-quality service.

At this time, most CPG brands entering the DTC space do so as marathoners. Some enter the market as sprinters, either intentionally or because they do not have the resources to invest in robust infrastructure. In either case, CPG businesses must prioritize the average order value (AOV) to ensure their initiative is cost-effective. Snir notes that the most effective strategies are to implement subscriptions that allow for ongoing revenue or personalized marketing and purchases that drive consumer engagement.

Cultivating Marketing Innovation

In the second segment of the webinar, our panel noted several additional best practices to make entering the DTC space — and thriving within it — feasible.

• Clear objective: If CPG businesses want to succeed, they need to determine a clear objective or vision that guides their processes.
• Management support: Whether developing DTC infrastructure or working with marketing to design high-quality creative, you need support from leadership to succeed. This support can take the form of funding but requires the autonomy to experiment with different approaches and processes to find the most effective solutions.
• Aggressive iteration: Your teams need to aggressively iterate on DTC infrastructure and marketing campaigns to determine which strategies are effective. It’s vital to cut any process that limits your progress as soon as possible. Marolla suggests we challenge ourselves by asking the following: Are you adding processes for the sake of adding processes? What value does each element bring? Is there a more effective way to achieve your goal?
• Lightly-structured organizational framework: While CPG teams can achieve a great deal with freedom and autonomy, there needs to be a loose framework that prevents team members from getting off track. This structure can take the form of measurable goals. Marolla notes that a project doesn’t need to be successful right away, but it does need to make progress towards the core objective to show its value.

CPG verticals are traditionally slow to change, but COVID-19 shows us that businesses have many opportunities to adapt. If you’d like to hear more insights and best practices from expert voices in the CPG and DTC fields, don’t forget to check out the full webinar! We’d like to thank our participants for taking the time to share these insights.

 

Looking for more insights to enhance your DTC marketing? yellowHEAD can help. Our proprietary Alison platform unifies data and creatives by identifying key elements that drive successful campaigns within your vertical. Once our experts verify these results, yellowHEAD’s creative studio produces the most effective assets for your target market. Let’s talk!