Direct-to-consumer (DTC) brands have experienced meteoric rises over the past decade. Many have rapidly scaled from fledgling startups to household names worth billions. However, the breakneck growth of DTC companies often comes with a sobering reality check down the line.
In 2022, the average year-over-year revenue growth for DTC brands dropped to just 16.9%, compared to over 45% in prior years1. For brands accustomed to hockey stick growth trajectories, this sudden stagnation sends leadership teams scrambling for answers.
While external factors like supply chain bottlenecks and rising digital advertising costs contribute, many DTC brands overlook internal issues choking their growth from within.
Here are five hidden culprits commonly sabotaging DTC growth:
DTC Growth Challenge #1: Overdependence on Paid Media
For fast-scaling DTC brands, paid advertising provides rocket fuel during the early blitzscaling phase. However, an overreliance on paid ads sows the seeds of stagnation over time. There comes a point with all brands where sustained growth can’t be achieved with ads alone… especially, at an affordable cost per new customer.
Warning signs of an unhealthy reliance on paid advertising include a sense that the market is “tapped out.” Your team may be struggling to spend all of the ad budget while achieving the same results as before—the cost of acquiring a customer (CAC) keeps rising and conversions decrease. Another sign is that your team’s ability to iterate on new creative or ad hooks targeted at the same audience doesn’t improve results.
There’s a simple test to estimate your dependence on paid ads… turn them off and measure the drop to your revenue.
Brands who rely primarily on ads face a disadvantage in todays’ performance plus brand-building (“brandformance”) environment. In order to continue to scale, your brand must cultivate a community of engaged buyers. They will extend your brand’s reach far beyond paid media into organic and influencer marketing.
Here are a few approaches to consider:
- Invest more in owned and earned media content that nurtures awareness, consideration, and loyalty over the long-term. Think organic social content that educates and entertains, emails that keep your list up-to-date on trends in your market, and blog content that provides solutions to their problems (… and the solution shouldn’t always be your product.)
- Develop a retention strategy focused on increasing your customers LTV(lifetime value). Try to drive repeat purchases, upsells/cross-sells, engagement incentives, and loyalty programs. Remember, the customers that you have are more valuable than the ones you don’t.
- Allocate at least 40% of your ad spend towards brand building and consideration campaigns that establish trust and affinity. Be patient with their ROI timelines.
- Diversify your paid media mix to include emerging social platforms and more contextual/brand suitable channels. Don’t just rely on Google and Facebook.
- Set targets to gradually decrease cost of acquisition and improve retention rates over time rather than purely chasing scale.
With the right balance of long-term brand building and short-term direct response marketing, DTC brands can support sustainable growth fueled by an omnichannel strategy.
DTC Growth Challenge #2: Lack of a Holistic and Customer-Centric Marketing Strategy
The second growth challenge is a lack of a holistic approach to marketing. Many DTC brands operate in marketing silos, with different teams managing individual channels like email, social, and paid ads—some even have separate teams for each ad platform. This fractured approach fails to consider the entire journey a customer goes on. This leads to a disjointed and confusing customer experience.
One sign of this challenge is that departments sometimes “surprise” each other—and not in a good way!—with new products, campaigns, or ideas without collaborating with other departments. Here are some other signs.
- No documented customer journey map guiding marketing initiatives.
- Campaigns optimized for channel-specific metrics vs. cross-channel goals.
- Creative and messaging differs wildly across channels and steps in the customer journey.
- Critical stages of the customer lifecycle are underserved.
- Poor transitions for customers across channels.
- Relying on separate agencies or specialists for each channel vs. a unified strategy and collaborative team
To drive growth, DTC brands need to align marketing around the end-to-end customer journey with:
- An omni-channel strategy mapping the entire customer experience.
- Building cross-functional teams to align on strategy and insights, and share learnings from one channel back to the others—”This message worked on Tiktok, maybe it’ll resonate in email.”
- Investing in brand building and retention, not just acquisition.
- Selecting agency partners that provide integrated strategies vs. channel specialists.
- Creating seamless transitions for customers across touchpoints.
With a truly customer-centric approach, marketing becomes a powerful growth driver instead of a fragmented set of disconnected teams.
DTC Growth Challenge #3: Outdated Customer Avatar
Every DTC brand starts out with an avatar assumption: who they think is a good avatar for their products. But over time, the perceived avatar and the actual customer avatar begin to diverge, and if your team doesn’t pivot when your audience does, you risk missing out on sales and facing stalled growth.
- Seeing an increase in testimonials, UGC, and reviews from “outside” your target audience.
- High product return rates from customers saying they didn’t receive what they expected or what they wanted.
- Seeing the higher growth from peripheral segments vs. your core avatar.
- Competitors pivoting their targeting and messaging to audiences and segments you aren’t focused on.
To sustain growth, DTC brands need to continuously update their actual avatar to reflect reality:
- Regularly analyze your CRM data and customer feedback to identify emerging and high-value niches.
- Survey your audience to check if messaging is resonating across demographics.
- Test new personas beyond your original core target.
- Incorporate your customer’s pain points, desires, and language into your advertising and marketing messaging.
By consistently aligning your avatar with actual buyers, DTC brands can craft relevant experiences that fuel sustainable growth.
DTC Growth Challenge #4: Outdated Creative Strategy
Another growth challenge we see is DTC brands that hold onto an outdated creative strategy long past its usefulness. Relying on the same creative styles and formats year after year leads to fatigue, even if they were once wildly successful. Creative stagnation causes rising CAC (Customer Acquisition Costs) and slowing growth. If your team isn’t staying up-to-date, then you are likely missing out on well-earned growth.
One early sign that this is or will be a growth challenge for your DTC brand is the presence of resistance to new ad creative types. For example, we’ve seen resistance to trying short, 15-second videos (or videos at all!) or to use a less “polished” style.
Other signs include…
- Low experimentation velocity – There are minimal creative tests launched.
- Benchmarking your competitors reveals your creative lagging behind in innovation.
- Repeatedly tweaking the same ad creative and not testing new angles or styles.
Above everything else, your team has to stay up-to-date with what’s working now, and incorporate that into your strategy.
- Frequently look at your competitors and channels to identify fresh creative trends to test.
- Send team members to conferences, trainings and workshops to spark ideas—like this one from Meta.
- Set monthly goals for the number of new creative concepts to develop and test.
- Give creative freedom to try wildly different approaches and not just optimizations.
- Ensure an ad testing budget to learn what resonates with new and existing audiences.
DTC Growth Challenge #5: Data Disorganization
A final and critical challenge that hinders DTC growth is having misaligned or inaccurate data—it prevents ad campaigns from reaching their full potential. Without a complete picture of customer interactions and responses, targeting algorithms are shooting in the dark.
- You’re getting sales… but have no idea where they came from – Indicating poor visibility into how ads are converting across online and offline touchpoints.
- You don’t have a unified customer view – Relying solely on platform metrics within Facebook Ads Manager rather than third-party reporting tools like Wicked Reports.
- Low Event Match Quality (EMQ) Scores in Meta’s Events Manager – Meaning information you’re sending does not match well with the events recorded on the ads platform.
- Absence of Conversion API (CAPI) Integrations – Restricting real-time data sharing between your website and the ads platforms.
- Highly variable performance between seemingly similar segments – Suggesting hidden data discrepancies skewing algorithmic optimizations.
- Frustration explaining why some campaigns work and others don’t – With inaccurate data, success becomes hard to reproduce and scale.
To unlock the full potential of ad campaigns, DTC brands need to align first-party data across platforms for accuracy:
- Implementing unified event tracking across all channels
- Checking for and resolving any EMQ or data validation errors
- Integrating CAPI to share conversion events in real time
- Auditing your 1st party vs 3rd party data overlap and accuracy
- Using multi-touch attribution models to fully understand conversions
- Giving algorithms enough time and data to learn and optimize performance
- Setting up Offline Conversions to capture in-store and non-digital interactions
- Comparing analytics platforms to identify and fix data discrepancies
- Use third-party reporting like Wicked Reports for impartial measurement and insights.
With a data foundation that captures a true single-source-of-truth customer view, DTC brands can realize the full potential of their ad campaigns over time.
How Your DTC Brand Can Keep Growth Going
Other than the solutions mentioned above, here’s how you can ensure your team’s marketing efforts continue to drive short-term and long-term growth.
Proactive Step #1: Know the Hidden Causes of Slowed Growth
In this article, we mentioned five common growth challenges which keep DTC brands from growing like they should. Knowing the pitfalls is one of the best ways to build a strategy so your team can overcome them when they creep into the business.
Proactive Step #2: Stay on Top of the Broader Industry Trends
As mentioned earlier, it’s absolutely critical that your team stays on top of broader industry trends. Here’s what you can suggest they do:
- Follow industry leaders on TikTok, LinkedIn, and Twitter/X
- Attend industry conferences like Traffic & Conversion and AdWorld
- Attend platform webinars and summits like the Brand-Building Summit Meta put on in October 2023
- Listen to podcasts such as Perpetual Traffic and The Customer Acquisition Show, which highlight what’s working now and what’s new in advertising and marketing
Also, actively talk with your team about what they see in the marketplace. If they’re doing their job correctly, they will be following your competitors, attending training on their own, and bringing ideas to the table.
Proactive Step #3: Continuously Evolve Your Customer Avatar
As your DTC brand grows, so does your customer base. Make evolving your customer avatar a priority to ensure messaging always resonates. Analyze your data for emerging niches. Survey customers directly for feedback. And test new personas beyond your original targets.
Proactive Step #4: Adopt a Data-Driven Testing Culture
Don’t rely on assumptions or past wins when making decisions. Champion a culture of rigorous testing and optimization across your marketing. Test new formats, platforms, creatives, audiences and campaigns continuously. Let data guide your evolution, not opinions.
Proactive Step #5: Balance Short-Term and Long-Term Investments
While performance marketing drives essential sales, over-optimizing for conversions can starve brand building. Maintain a balanced 60/40 budget between brand and direct response. Build an audience that sustains growth through changes in the market.
Permanently slowed growth isn’t inevitable IF you know the signs to watch for. And when you’re ready for an expert perspective on your DTC marketing strategy, then check out how we’ve helped others.
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