As the holiday season approaches, I can feel the tension in the air: how do I make my gifts stand out?
Thankfully, there are so many fun direct to consumer (D2C) categories — from bath salts to plants, to even organic fertilizer.
A New York City-based VC firm once asked us, “there are so many products that are getting launched in the direct to consumer route. It’s good that you track them. But can you tell us which segment is likely to go direct to consumer?” In other words, they were asking us to be psychics.
We aren’t, but I never let that question go.
There are many reasons why a brand can go D2C. You could unbundle every category on Amazon and there could be a case made for going direct to consumer. Several brands that do just that, but Amazon is not the obvious place to look for all answers.
Let’s take the example of plants and fertilizer. I want to gift a plant this holiday season, but I have two problems: I don’t know which plant to pick for my friend because I don’t know his preferences, and even if I find the right plant, I don’t know whether he’ll be able to keep it alive.
Generally, when people consider purchasing a plant, it’s not because they woke up after having a startling dream about a fern or a ficus that won its heart — it’s more likely that they looked at an empty balcony while sipping their morning coffee and thought it needed a touch of green. People aren’t buying plants; they’re buying better visuals, and a potted palm tree is a vehicle to their preferred emotional state.
But what if he’s unable to take care of the plants? Should I just buy some really good candles instead? Rooted, an online plant store, sorts its offerings using criteria like the amount of light required and how frequently a plant needs to be watered. As a result, I found Tim, a snake plant that’s “virtually indestructible and adaptable to almost any conditions.”
Some products are complex. No two plants are the same, and no two plant buyers are identical, either. It’s complicated. You can walk into a nursery and get the plant you are drawn towards and read the instructions wrapped inside, but the onus is still on you to help it thrive.
Companies like Rooted and Bloomscape
By going direct to consumer, brands can personalize the buying experience, optimize customer enjoyment and use, educate them at the right cadence, and ultimately, help them successfully harvest the emotions they were seeking.
This approach works for any category that is perceived to be complex. Whether it’s coffee, wine, food supplements or plants, these products are complex experiences that need to be tailored to customers, and the education process could be overwhelming. Brands that get it right can achieve the right experience by going direct to consumer.
People are generally resistant to change, but they love brands that can help them find a better version of themselves. Fear of the unknown and making the wrong decision ends in post-purchase dissonance; bad brands introduces dissonance, while a good brand attenuates this fear. The good or the bad is determined by the onboarding experience, intuitive design, content, online support, customer reviews and after-sales experience.
Like batteries that store power, brands store emotional states, positive and negative; a consumer’s interaction with Comcast taps into a different range of emotions than a visit to an Apple Store.
Creating comfortable footwear, for example, requires complex engineering; with unique types for walking, cycling and running, how do you figure which one is right for you? Nike Fit, an app released this year, uses AI to help customers find the optimal fit for their foot.
“Three out of every five people are likely to wear the wrong size shoe,” the company said in a statement. “Length and width don’t provide nearly enough data to get a shoe to fit comfortably. Sizing as we know it is a gross simplification of a complex problem.” The AI even tells you if your right foot is larger than your left and recommends the best sneaker; emotions unlocked! It’s no wonder Nike’s doubling down on its D2C channels.
Ultimately, a brand that performs well is a brand that has recognized and solved a customer’s problem; ecommerce and D2C are mediums that to do precisely that. A good brand offers good experience design that brings simplicity to a complex product, magically making it seem familiar.
We’ve seen our fair share of shocking headlines recently: tenuous IPOs, the “retailpocalypse” and a fickle market have reset the way we size up subscription businesses. Recurring revenue models have their pitfalls, and 2019 has certainly taught the industry a few lessons.
Next year, retention is set to be a top priority for companies looking to keep customers engaged and drive growth. From niche products to personalization, how companies deliver on and measure the success of their customer experience will separate successful subscription businesses from the next unflattering news story.
These seven trends will emerge to shape the way companies delight and retain customers in 2020.
We’ve all seen articles detailing the financial fall of many brick-and-mortar stores. The retail crunch predicted years ago is coming to fruition as we’ve watched household names like Sears, Toys R Us and Barney’s consider bankruptcy or go up for sale.
Consumers aren’t letting up in their preference for convenience; they want easier ways to buy, and that means stores must develop better online experiences and offer subscription options or risk losing revenue. We’ll see big brands like Nike and Ikea continue to experiment and expand innovative subscription offerings.
For struggling brick-and-mortar businesses, subscription services could very well be a lifeline to retain a dwindling customer base. The shifting retail industry presents an opportunity for traditional companies to fully embrace recurring revenue models next year — smart organizations will do so.
We’ve experienced a rapid period of subscription adoption, with more options launching everyday. And that’s led us to a point of max fragmentation where companies and consumers alike are subscribed to so many niche products and services, they can no longer manage or afford new offerings.
Because the proliferation of subscriptions are so vast, specialized products and services will need to do prove their worth or risk being replaced. B2B (project management, martech, ecommerce) and B2C (clothing, streaming, meal delivery) companies alike must offer far better experiences in 2020 than in years past. For B2B organizations, products must be integrated with larger systems to justify their existence. One-off point solutions that silo information and create broken customer experiences will no longer be accepted. And for B2C companies, pricing will have to be spot on as more competition vies for the budgets of consumers who haven’t budgeted for increased spending.
Ultimately, not every company will be able to compete in the age of subscription fatigue, so we’ll see more consolidation, partnerships and mergers occur in the coming year.
It’s impossible to ignore the IPO press around WeWork, Blue Apron, Uber, Peloton and others. If 2020’s tech and consumer unicorns have poor unit economics and aren’t turning a profit, they need to prepare to be the next ugly headline. Marketers can be a force for change by focusing on the long-term retention of the customers they acquire. And I believe they’ll do so happily. Why?
Cities have always been America’s centers of power, driving the economy forward through competition. But now, they’re ceasing to lead the country’s innovation.
As jobs and talent have clustered, expertise has spilled over urban boundaries. In locations like the Gulf Coast, Texas Triangle, Great Lakes and Southern California, metropolitan areas are cooperating across borders to share new ideas. Eleven of these have earned the title of “megaregion,” and they host some of the continent’s cutting-edge centers of technology.
The Cascadia Innovation Corridor — the strip of land down the West Coast from Vancouver, Canada to Portland, Oregon — is perhaps the best example. Home to powerhouses like Microsoft, Amazon, Nike, Lululemon, Boeing and Intel, the area has seen large investments from companies hoping to encourage further cooperation. Over the past five years, state and provincial governments have signed formal agreements for collaboration, and executive-filled conferences are being held to encourage new partnerships.
Why are businesses and government organizations investing so much into the region? Challenge Seattle CEO and former Washington State Governor Christine Gregoire believes it’s the evolution of a trend that’s been unfolding for decades.
“For many years, a number of international companies from Seattle have been putting Canadian headquarters in Vancouver,” she says. “So without anybody deliberately thinking about how we could work together, it was already actually happening. These organizations have decided to capitalize on [what] was happening from the ground up, and build out a vision, and bring us all together so we can really magnify the success of what’s already happening on the ground.”
The West Coast’s urban centers are linked by more than shared geography and, as Gregoire jokes, a love of the Seattle Seahawks — the Pacific Northwest is characterized by an open and inclusive culture, heterogeneous populations and creating technology with a focus on social good. Economically, too, there are similarities. West Coast cities have historically turned to Asian and South Asian markets for trade, as well as looking to each other. Washington State exports more to British Columbia than it does to all other Canadian provinces combined, and if Washington State were a country, it would represent B.C.’s third-largest international export market.
For Bill Tam, a member of the Cascadia Innovation Corridor steering committee and former president of BC Tech, Vancouver, Seattle, and Portland have different reasons to support the megaregion.
“In Vancouver, which has a great startup ecosystem, a lot of those companies and a lot of the research organizations have really bought into this idea of being part of something bigger and more substantive,” he says. “I think on the U.S. side, what was interesting was that we saw the impetus come from larger companies — particularly Microsoft, but they’re not the only ones. Everyone from the Nordstroms to the REIs really see the value in learning and working together to try and build leverage, and to accelerate the things they want to do.”
Tam’s hope for the region’s success comes from its ability to share resources across cities. Vancouver, for instance, is known for its highly-educated workforce: the location’s nature-filled setting and welcoming immigration policies attracts many qualified tech employees. With its industry focused on startups, though, it lacks larger brands and anchor companies that would help propel it onto the global stage.
The Seattle area, however, has the opposite problem. America’s tight immigration regulations make it hard for companies to secure qualified talent, but the influence of tech giants like Microsoft and Amazon mean the city is a hotbed for international investment and innovation. By joining forces — and by integrating Portland, which sits somewhere between both poles — the Cascadia region, Tam believes, can emerge as a powerful global competitor.
“I think the long-term vision for Cascadia is to feel like it is an economic region that is not only the best place to build new innovations, but also a cohesive area that understands the values of collaboration,” he says. “It ties together all the responsible aspects of how we live — whether it’s on the sustainability agenda, the environment agenda, and how we actually treat each other as an open and diverse society.”
Photo: Lee Robinson/Unsplash
Aside from giants Amazon and Microsoft’s dominance in ecommerce, software, and cloud-based computing, the area has spawned niche areas of expertise. President and CEO of the Business Council of British Columbia Greg D’Avignon believes those sectors will help elevate Cascadia’s profile.
“There’s a myriad of interesting companies here in British Columbia that are driving innovation,” he says. “In the quantum space, there’s D-Wave Systems, 1QBit, and others. D-Wave is the first commercial quantum computing company in the world, and it’s driving significant and complex computations on datasets to try to resolve issues that are endemic to challenges we have in terms of climate, personal health, aging, and growing populations. Life sciences is another important sector. There are some very interesting companies in the personalized medicine and health business — we’ve got Zymeworks […] and a myriad of other companies [that] are changing the nature of population-based healthcare.”
The region is also well-regarded in the virtual and augmented reality (VR/AR) space. Microsoft developed one of the leading AR headsets — the HoloLens — in the Pacific Northwest, and Vancouver has since been recognized as the world’s second-largest VR and AR ecosystem. More than 230 companies are located in the city, drawing on its history of gaming and visual effects to develop everything from surgical-training software to AAA-aspiring titles.
As well as individual successes in the consumer blockchain space with viral game Cryptokitties and data aggregation with Hootsuite, Cascadia is known for technical apparel, with the likes of Lululemon, REI, Eddie Bauer, Arc’teryx, and Nike choosing the region as their home. With Amazon’s monopoly on online retail, the West Coast leads North America in merchandizing tech.
“When we talk about some of the foundational pillars in the corridor, we’re talking about the movement of people and goods across the border,” D’Avignon says. “We’re talking about bringing together postsecondary in a way that is important. That’s all rooted deeply in how we look at making this region better. And then as we learn, how do we share that learning and those commercial opportunities with the rest of the world?”