With the multitude of avenues through which companies can collect consumer data, it’s become much easier for companies to collect and use this data to drive a direct-to-consumer (DTC) strategy. With DTC, consumer products companies can gather data directly from interactions with consumers to allow for more detailed customer segmentation and ultimately better promotion and personalized product assortment. But with this data comes the need to house, analyze, and apply insights from data to business processes. Consumer products companies can acquire data analytics capabilities in a variety of ways – through acquisitions, outsourcing analytics to trusted partners, or by building it themselves.
Alternatively, for consumer packaged goods (CPG) companies with no direct-to-consumer strategy, collecting consumer data requires a purchase from third-party data insight groups like IRI, Nielsen, Kantar, or InfoScout. These data sources often do not show the whole picture and can be difficult to integrate into proprietary data and systems. As a result, many CPG companies have developed a DTC strategy by creating their own DTC channel or acquiring other direct-to-consumer and data analytics companies in order to access more consumer data and insights.
In competing with digitally native DTC businesses, some long-standing CPG companies quickly transitioned strategies to keep up with direct-to-consumer demands. One of the first movers in this space was Unilever, which acquired Dollar Shave Club for $1 billion in 2016 to gain a strong entry into the DTC shaving market and to gain a plethora of unique consumer and data insights. With this new advantage in unique customer data, Unilever leveraged this data for future product development, packaging design, strategy, and marketing. The acquisition of Dollar Shave Club helped Unilever learn more about consumer behavior and supported the launch of two new direct-to-consumer skincare companies, Skinsei in the U.S. and Verve in the U.K.
In 2017, Proctor & Gamble launched an online DTC service for its Gillette shavers, in which people can buy blades online from Gillette or create a subscription service. Gillette launched this service after conducting extensive research about consumer preferences using data, which it has since been able to gather much more easily thanks to a more established direct-to-consumer presence.
Nike also realized early on how a strong data analytics team can help with direct-to-consumer relationships. In 2018, Nike acquired data analytics company Zodiac and computer vision firm Invertex in order to bolster its insights on consumer behavior. Zodiac gave Nike new predictive tools and advanced analytics to drive targeted growth. As stated by CEO Mark Parker, Zodiac transformed Nike by informing product design and capabilities going forward and while also impacting supply chain management in its manufacturing flexibility. Both of these acquisitions effectively strengthened Nike’s analytics capabilities to support a broader corporate strategy: Nike Consumer Direct Offense – a plan to effectively serve customers on a one-on-one basis.
Outsourcing Data Analytics Capabilities
The expense associated with building a top analytics program – from hosting costs to expensive talent – can be burdensome to consumer products companies of any size. Sometimes companies find it more cost effective to outsource key components of their analytics program by using a long-term, ongoing managed analytics relationship to reduce the cost burden and improve access to data science talent and tools. When looking for a partner to help you with your data analytics capabilities, make sure they can build a platform that is tailored to your organization and will help you achieve the goals you are looking for from your DTC channel.
For consumer goods companies, gaining more detailed insight about consumers is a competitive necessity. Some companies create their own DTC channel, others acquire companies to integrate into their portfolio. No matter the strategy of how to get there, it’s clear that an investment in data analytics capabilities for the direct-to-consumer channel can help CPG companies better optimize marketing spending and create a more adaptable supply chain.
Contributions by Thomas Wang.