Over the last decade “direct to consumer” brands (DTC) have become the new upstarts in retail. They first began as stand-alone e-commerce companies, relying primarily upon digital marketing and word-of-mouth to grow their businesses. As e-commerce matured and evolved, so have these brands. Many have begun opening their own retail locations in order to continue their growth trajectory. Eyewear brand Warby Parker, mattress brands like Casper, and apparel brands like Allbirds started selling exclusively online, but they now operate retail stores.
Unfortunately no business, no matter how innovative, is immune to market forces and increasing competition. These DTC brands now face the rising cost of customer acquisition. Early on, they acquired customers through Facebook and Instagram, but those channels grow saturated and make the return on ad spend less favorable. They need new approaches to mitigate and reduce their customer acquisition costs.
They also face the same challenge all retailers face: How can they effectively show that digital campaigns result in new foot traffic and sales? They frequently lack the big budgets and data science teams that the entrenched, massive retail players have on staff.
These challenges contain numerous potential solutions, nuances and pitfalls. The intelligent use of privacy-compliant location data empowers DTC brands to address these issues in unique ways.
Tackling Rising Customer Acquisition Cost
By measuring and understanding the audiences that visit their retail locations, as well as their competitors, DTC brands gain valuable and actionable insight. Their marketing teams will be capable of different campaign strategies for first-time visitors, repeat visitors and their most loyal visitors. They will know which competitive audiences will be most likely to also visit their own locations, and drive them towards both in-store and online purchases. These relevant audiences convert at better rates, pushing down their customer acquisition costs. These location-powered audiences also allow the brands to have more effective one-on-one relationships at scale, maintaining higher brand loyalty.
Measuring Campaign Impact
Demonstrating true online-to-offline attribution remains extremely difficult to solve; however, location-powered foot traffic attribution reporting gets DTC brands one step closer. By analyzing foot traffic before, during and after a campaign, they’re able to determine if their campaigns do drive increased foot traffic compared to their baseline visitors. They can understand the impact of their campaigns on winning market share from competitors and which competitors are most susceptible to brand swapping. Foot traffic attribution reporting will also show them which of their retail locations are most and least impacted by their advertising efforts, whether digital or traditional.
Retail Site Selection
There’s also growing usage of location data to help brands determine optimal sites for new retail locations. Companies like SiteZeus combine location data and many other data sources to predict the market impact that opening new locations will bring. Brands use these solutions to determine how much of their own business will they cannibalize from their existing nearby locations. They also measure the competing locations nearby and determine the forecasts for winning business from those competitors in individual markets.
When these DTC brands deciding upon their location-based marketing strategy, they must first determine how sophisticated they want their strategy to be. The simplest way to start with geotargeting is to use the included tools companies like Facebook and Google offer. These tools allow marketers to create campaigns based upon broader location categories, such as state, city, zip code and county. They can also filter those down to audiences that visit these areas and live or work nearby.
The next layer of sophistication is to work with companies that provide pre-built audiences based upon historical location visits, such as grocery store visitors or Walmart shoppers. There are several audience marketplaces where marketers can purchase pre-selected cohorts of people that fit their target audience.
Organizations can also work with a location-based marketing provider. These companies allow marketers to have greater control over the locations and dates ranges. Marketers can then build their completely custom audiences based on real-world visits to the locations they care about, creating the most relevant audiences possible.
If a DTC company chooses to work with a provider, their increased control and the accuracy of their data will sometimes reduce the scale of those audiences. While it’s relatively simple for digital marketers to create an audience of 5 million users with cookie tracking, location-based audiences may be smaller when done correctly.
Given their disruptive roots, DTC brands have been willing to test and experiment in ways that their more established peers have yet to embrace. The simplest way for them to begin utilizing location data is to build campaigns that reach the audiences visiting their own locations and competitors’ locations. From there, they should continue to expand into foot traffic reporting to gain deeper understandings of the audiences visiting the locations most relevant to them. These marketers are already accustomed to working with data already for personalization, and location data will provide a new edge.