For most DTC (direct to consumer) brands – and especially those targeting affluent consumers- 2020 was an exceptional year for new customer acquisition growth. Sustaining that momentum into 2021 will force these brands to be aggressive in how they expand into new product areas, new brands, and new marketing channels. But at the centerpiece of their 2021 plans is a fundamental question, namely: what to do with all those new customers from last year.
Customer retention is nothing new to DTC brands. But the COVID economy of 2020 was significantly different than any period beforehand, and so too are the new customers that arrived during that period. With radical changes to consumer habits and an entirely altered customer journey, DTC brands can’t assume their 2020 first-time buyers are the same as other new customers. Retaining them and maximizing their lifetime value requires a dedicated strategy that accounts for the unique circumstances.
Let’s take a look at what that should entail.
2020’s first time customers are a unique cohort. Segment accordingly.
The first important step is to segment out new customers who are still one time buyers. This group can be easily identified (as those who have purchased only one time in the past 12 months) and then targeted across multiple channels. But before DTC brands begin targeting them, they should be sure to take a close look at those 2020 new customers who have already purchased again (2x+ buyers) and see what they are buying. Of those who bought again, is there a category of products that stand out as second purchases? Is there a category that is driving new customers with higher repeat purchase activity? Finally, take a look at the demographics of your core customer vs. 2020 new customers. Are there any shifts in age or gender? This type of analysis will give DTC brands valuable direction to guide product messaging, creative performance, and journey orchestration for the unique 2020 segment.
Target “Tryers” Across Channels
Once you identify your one time 2020 new customers and analyze their path to repeat purchases, the next step is to target them across channels. With the channels themselves in flux, it’s essential to cast a wide net and experiment with a diversified media mix.
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Onboard, advertise, and track the one-time buyer “tryer” segment closely on Facebook. In an effort to activate these customers to become 2x buyers, DTCs might want to increase the frequency of impressions they deliver to these customers, test different product categories to see which ones they respond to, and potentially increase their level of spend against this segment in order to make acquisition efforts pay off and increase lifetime value.
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Display can also be effective at activating these “tryers.” They have a relationship with the brand already and a higher awareness level, which makes this type of CRM display pay off much better than display for cold acquisition.
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Isolate this segment in email and SMS as well and test what level of sends, promotions, and product categories they will respond to the most.
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This group is also easily visible in segmentation for direct mail. How do these 2020 new customers compare to 2019 new customers? What products are they buying? Direct mail creative can be easily versioned, like email and social, to feature the products on the covers that these new customers are most likely to buy.
What if they bought something outside of your core category, like masks?
One of the biggest differences in 2020 is that many DTCs launched into new COVID-specific categories like masks that quickly exploded and drove a huge volume of new customers. This complicates the picture even further, and presents DTCs with the challenge of determining who among those first-time buyers represent promising future customers for their core offerings. DTC brands should experiment with co-op databases, where they can model and score these customers to determine which of them are most likely to buy core products. This group can then be targeted by all the channels listed above based on a predictive analysis.
Use Customer Metrics to Compare 2020 New Customers Against Averages
In order to understand if 2020 new customers will be less, equal, or more valuable than previous new customers, it’s critical to establish a baseline. To do this, DTCs should track the following metrics YOY for each of your new customer cohorts:
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% of new customers that repeat in 30 days, 60 days, 90 days, and six months
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Rolling 12 month repeat purchase rate
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Rolling 12 month orders per customer
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Rolling 12 month $/customer
Listen, Learn, and Nurture the Direct Relationship
New customers in 2020 may have a different set of needs or expectations than new customers acquired in past years. At the time of this writing, it’s too early to tell exactly how their needs and expectations might diverge from other cohorts. One of the best ways to find out is straightforward: ask them. DTC brands should consider sending a survey to customers segmented by retained customers vs. new customers in 2020 to see if they have a different perspective on shipping timelines, price points, email frequency, promotions, new products, etc. Such questions do not need to take shape as a formal survey; they could be small questions (1-3 at a time) peppered into email, social, SMS, or other communications.
Resist the Urge to Put 2020 Into the Rearview
As vaccines roll out and sectors of the economy return to normal, it’s tempting for any DTC to train their sights on the road ahead. But for those that grew their customer base in 2020, they should understand that the new customers they acquired during this period will always be different, whether it was because they bought different products, engaged with different messaging, or took advantage of unique one-time promotions. These customers will be uniquely 2020 until DTCs find a way to extend that relationship through repeat purchases this year and into the future.
Polly Wong is Managing Partner, Strategic/E-commerce/Creative Services at Belardi Wong, the leading direct marketing firm in the industry, working with more than 100 retailers and best in class brands.
DTCs stock photo by bangoland/Shutterstock
