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Direct-to-consumer (DTC) brands are facing a critical situation. Venture funding has nearly evaporated, and inflation is skyrocketing costs related to raw materials, manufacturing, and shipping. Privacy updates and cookie deprecation have severely hampered the efficiency of digital advertising. Shockingly, over half of the 22 publicly traded DTC "darlings" have experienced a 50% or more drop in share price since their IPO. Now headlines scream that direct-to-consumer does not work.
However, some brands continue to win and grow with the direct-to-consumer model.
What are they doing differently?
They have focused on three key strategies: profit-first, systems-driven, and have a culture of strategic nimbleness.
💰 Profit-First Approach
The profit-first approach to performance advertising is a crucial strategy. It involves prioritizing profitability over rapid scale, setting clear financial goals, managing customer acquisition costs, and ensuring each marketing dollar spent drives a positive return on investment. This data-driven strategy uses advanced analytics to identify and target the most profitable customer segments, streamline operations, and continually test and refine marketing strategies for maximum efficiency.
⚙️ Systems-Driven Operations
Systems-driven operations optimize processes using constraint theory and systems thinking. This approach involves mapping processes, identifying bottlenecks, and focusing on resolving key constraints to improve efficiency and output. Systems thinking promotes a holistic view, understanding interactions between different business parts to make informed decisions. Continuous monitoring and testing address new constraints, fostering ongoing improvement and sustainable growth.
🚤 Strategic Nimbleness
Strategic nimbleness is a crucial attribute for DTC brands. It's about embracing change and adapting quickly. These brands can stay ahead by rapidly experimenting with different platforms, tools, creatives, targeting strategies, and messaging. Implementing a robust performance marketing strategy allows for quick adjustments based on audience feedback and engagement metrics, giving them the power to shape their success.
🚫The biggest mistake a high-growth consumer brand can make is expecting a big agency to implement these strategies successfully. Big agencies are not structured to be nimble and profit-focused.
✅ That's why we started H Street Digital —to provide the experience, systems, and adaptability required to profitably scale 8-figure consumer brands to $1M+ in monthly revenue from digital advertising.