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Navigating a slow growth environment: strategies for direct-to-consumer brands to remain competitive and recession-proof

It is important to take the brand’s current stage of growth into account when determining the best marketing strategy. 

The direct-to-consumer (DTC) business model has become an increasingly popular way for brands to reach their customers. In this digital age, consumers can now purchase products and services directly from the brand, instead of through a retail store or other third-party platform. This shift has allowed DTC brands to become more agile and innovative, but it has also come with some unique challenges. 

With many markets experiencing a slower growth environment, DTC brands must be strategic to stay competitive and ensure their long-term success. In this article, we will explore the challenges of a slow-growth environment and discuss strategies for DTC brands to thrive.

Despite the challenges of a slow growth environment, there are several strategies that DTC brands can use to stay competitive and ensure their long-term success. It is important to take the brand’s current stage of growth into account when determining the best marketing strategy. 

The following are some of the most effective strategies for DTC brands to thrive in a slow-growth environment.

Strategies for DTC brands in early stages of growth

In terms of tactics, DTC brands that are in the early stages of growth should focus on building their brand, establishing a strong online presence, and creating a loyal customer base. As they grow, they can then focus on expanding their product offerings, diversifying revenue streams, and exploring new market opportunities. 

Digital Ads

While digital ads have experienced declining efficiency over the past 18 months due in part to ad privacy tracking changes, they are still an essential component of an acquisition strategy. Early-stage DTC brands should review advertising budgets and strategies, and pare back low-performing, last-click media. 

We utilize an incrementality framework for managing digital ads, leveraging detailed analysis of KPIs to determine which areas to reduce spending in, and which to continue investing in.

UGC And Influencer Content 

Beyond paid acquisition, we believe early-stage DTC brands should focus on maximizing creator relationships through their brand, including via UGC and influencer content. This strategy allows brands to pare back from expensive creative production and efficiently capture content that often yields strong ROI.  

Note: This does not mean you shouldn’t invest in your branding at all. It is important to evaluate efficacy and efficiency on a case-to-case basis.

Short-Form Video

While brands have a variety of ways to capture content efficiently, static photos aren’t enough anymore. Short-form video content and in-platform ad placements continue to be some of the best tactics for brand awareness and conversion. This has proven true across TikTok as well as Instagram Reels and YouTube Shorts. 

A Focus On Customer Retention

Customer retention is far less expensive than new customer acquisition. DTC brands of all growth stages can benefit greatly from improving customer retention and cultivating a loyal customer base.

Some of the best ways to do this are through providing excellent customer service, investing in remarketing campaigns and up-sell opportunities, and implementing repeat purchase strategies like subscriptions (where organic to the sales cycle). 

Limit Internal Costs 

Internal costs can take a huge bite out of a company’s budget. To guard against tough economic times, DTC brands should minimize excessive internal headcount, focus on utility resources, and lean on flexible labor where possible.

Strategies for DTC brands in mature stages of growth

On the other hand, mature DTC brands should focus on optimizing their operations and processes, as well as continuing to invest in marketing and customer retention efforts. They should also be constantly evaluating their product offerings and identifying new growth opportunities.

Fine-Tune The Sales Funnel

As DTC brands mature, it is important to fine-tune performance throughout the sales funnel. Brands should focus on developing robust lifecycle marketing campaigns and increasing efficiencies and conversions at each step of the cycle. 

Review, Test, and Make Changes

There is often a lot of waste in brand awareness campaigns. Mature DTC brands should frequently review data, pressure test awareness media and brand efforts regularly, and make strategic changes to improve performance and conversions. We often see significant cost savings through the rationalization of low-impact advertising channels such as display and programmatic media.

Diversify Revenue Streams

Diversifying revenue streams is a key strategy for DTC brands to remain competitive in a slow-growth environment. This can help reduce the risk associated with relying on a single income stream, and can help increase sales and maximize profits. 

For many brands, this may mean introducing a new distribution channel, such as an online third-party marketplace like Amazon, or expanding into a retail or wholesale relationship. For other brands with a robust number of revenue streams, the focus will turn toward ensuring its resources are optimally allocated to the channels with the greatest ROI. We often work with brands to find ways to better allocate advertising dollars to the tactics with not only the greatest per-channel ROAS but the most impactful marginal profit.

Strategies for DTC brands in all stages of growth

In addition to the above tactics, DTC brands can take steps to find operating efficiencies in their marketing departments through a variety of strategies:

  • Run incrementality tests on media to determine the precise impact of media tactics on revenue and profits, and avoid inefficient spend.
  • Implement delivered product margin analysis to better hold ad spend to clear profitability thresholds.
  • Focus on rationalizing unnecessary tech solutions and reducing waste, while being careful to not let technical debt build up.
  • Prioritize retention strategies to maximize LTV, focusing on re-marketing strategies, upsell opportunities, and subscription models.
  • Reduce and/or reallocate marketing resources from low-margin activities to high-margin/high-growth activities.

Agile, Efficient Brands Thrive in Any Market

Overall, DTC brands must be strategic in their approach to marketing and operations in order to continue to grow in a slower growth environment. By following the most important strategies for their growth stage, and being willing to change and adapt plans as needed, DTC brands can stay competitive in a slow-growth environment and keep their business competitive.

Originally published on fastcompany.com.

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