The DTC edge: Innovate CPG brand from within

Today’s CPG brands face a significant (but exciting) challenge. You want more information about your customers and ownership of the shopping experience, and they want more personalized experiences with greater control over their privacy. The solution? A direct-to-consumer model.

The DTC edge: Innovate CPG brand from within

So, whether you’re just starting to think about DTC or have been considering making the move for a while now. We’ve taken industry leaders DTC—and sharing insights. This article can help you better understand:

  • Why DTC makes sense now (and how to convince your team)
  • How to leverage a strategic innovation process for DTC success
  • 10 insights to accelerate your DTC journey
  • With these learnings, you’ll be ready to innovate and go DTC.

Content Summary

Introduction: Embrace the shift
Why Your CPG Brand Should Go DTC Now: You have what it takes
A Guide for Direct-to-Consumer Innovation: Here’s the secret sauce.
10 Insights to Accelerate Your DTC Journey: Go further, faster.

It can be really hard to keep up with ideas that our competition is coming out with. Getting the confidence and insights to get moving and get to market is huge for us. – SEAN CUTHBERTSON, Mars Petcare

Introduction: Embrace the shift

At this very moment, there’s a shift happening in the way consumers want to experience brands. Big companies are seeing the opportunity to take control of their narratives and own consumer journeys in ways that aren’t possible in retail alone. They’re going direct-to-consumer.

Maybe you’ve asked, or been asked, these same questions. Here’s the answer: your brand is uniquely positioned to create what your customers want, leveraging assets your competitors don’t have. As an innovation and creative agency, we’ve spent years perfecting an innovative process that propels brands forward with low-risk solutions.

We’ve helped industry leaders like Mars go DTC, and we’re sharing our learnings. In the coming pages, you’ll not only find out why a direct-to-consumer model makes sense (and how to get your team on board), but we’ll also walk you step-by-step through our proven innovation process to help you get started. And we’ll even share insights from firsthand experiences to help your brand grow forth.

Clients come to us all the time with questions like:

  • “How can we reach a whole new audience?”
  • “How can we go head-to-head with disruptors?”
  • “How can we do something Amazon can’t?”

Why Your CPG Brand Should Go DTC Now: You have what it takes

Brands looking to accelerate in the CPG space have to diversify their sales channels and meet customers where they are—online. Whether you’re just starting to think about going direct-toconsumer or have been considering making the move for a while now, here are three reasons why your brand should turn to DTC today:

  1. You have assets to leverage.
  2. You’ll own the shopping experience.
  3. You’ll have access to customers.

We’re going to dive deeper into each of these reasons, and then we’ll share ways to approach the subject with the rest of your team.

You have assets to leverage.

Leaders at CPG brands often worry about disruptors, that there’s some “little guy” who will nimbly take a big bite out of the market. When Mars Petcare came to us to help them innovate and go DTC, they cited increased competition from startup brands like Farmer’s Dog and Ollie. And we’ll tell you the same thing we told them: as an established brand, you have a unique advantage over any newcomer—you have all the assets to create something new, more so than any disruptor entering the market.

When you make innovation a true priority, you can own the competition—by inventing it yourself. Best of all, you can do it using assets that you already have: manufacturing efficiencies, in-house talent that is diverse in skills and expertise, a robust database of consumer insights, and much more. Everything that fuels your business now can drive what’s next. Unlike much of the competition, you’re not starting from scratch.

Mars Petcare

The asset that gave Mars Petcare the biggest edge against disruptors? Data. We began assessing the pain points dog owners experience when purchasing pet food, and realized Mars was a step ahead because of the enormous amount of data they had collected over the years—data that startup competitors didn’t have. Food scientists, DNA and activity insights, vet experts, and artificial intelligence could all work in tandem with Mars’ enormous database of historical customer (pupstomer) information in order to reach customers with the dog food solution they needed, before they even knew they needed it. More on our DTC journey with Mars in the pages to come.

Mars Petcare

You’ll own the shopping experience.

When you have a DTC channel, you’ll be able to get more personal, speak directly to your audience, and own the entire shopping experience. The DTC channel can serve as an added value to the on-shelf experience in a retail store. Take Function of Beauty shampoo. Consumers can find out which product will work best for them on the Function of Beauty website and purchase it either online or at a local Target.

An online DTC presence also gives you breathing room from your competition. When shopping direct, customers are no longer looking at your product within direct eyeshot of your competitors’ products. Plus, DTC gives you the ability to upsell and/or bundle products that wouldn’t typically be displayed next to each other in retailers (ex: coffee grounds and mugs). These factors help reinforce brand loyalty amongst your customers.

Unique Experiences for Unique Shoppers

As consumers, we don’t all shop the same. For a recent project with a jewelry brand, we held multiple consumer insights studies and interviews to explore all of the ways people shop for jewelry. What we found was that different people filtered or searched using different criteria: type, occasion, inspiration, influencer, etc. Luckily, in the DTC world of ecommerce, there can be multiple paths to the same product, ensuring the right product gets in front of the right customer, no matter how they choose to shop.

Unique Experiences for Unique Shoppers

You’ll have access to customers.

When you have a DTC channel, you’ll have a direct line to your customers. Not only will this help you build stronger relationships, but it will also give you the data you need to better target your marketing efforts and ultimately create the products your customers want.

If you rely exclusively on retail partners to sell your products, you may miss out on gaining information about your customers that can help you better serve them. When you sell DTC, you not only have access to first-party data, but you own it. This will set you up for success as privacy regulations phase out third-party cookies, limiting access to data from outside sources. Owning first-party data will give you a competitive advantage and give you information to fuel research and development— and growing your database will allow you to drive down advertising costs.

Christie Cookie Co.

We helped Christie Cookie Co. gear up for 2020’s busy and unpredictable holiday season by leaning heavily into first-party data. Historical email data provided the CPG brand with a gold mine of information their competitors didn’t have, during the industry’s most competitive season. What’s more, we didn’t keep that information in a silo. We took learnings from their email messaging strategy and applied them to the brand’s paid media efforts—running messages and creative that had been tested on an owned channel and were proven to resonate with the target audience. This not only drove down media costs, but ultimately resulted in increased campaign performance and web traffic as well as Christie Cookie Co.’s highest-earning day for email sales…ever. Pretty sweet.

Christie Cookie Co.

How to convince your team to take the plunge

Now that we’ve covered why your CPG brand should go DTC, it’s time to get the rest of your team on board. Here are some ways to approach the subject and get folks excited about the opportunity:

“Let’s increase the quality of the customer experience.”

Customers today want to feel a connection with the brands they buy from, but it’s difficult to create this connection when a third-party retailer is in charge of the transaction. Going DTC allows you to own the customer experience— from personalization to packaging, from ease of checkout to customer service—you control the entire path to purchase and can improve the overall experience for those who buy.

“There are so many benefits to first-party data—we need more of it.”

When you have access to first-party data, the world is your oyster. You can survey customers, explore what actions customers take, target existing customers with new products and promotions, and ultimately create a stronger relationship with the customers you serve. It also gives you the opportunity for more targeted marketing efforts, which can help to reduce advertising costs. Plus, the more data you own outside of reports from retailers (which all of your competitors get), the more you can provide a unique experience for customers.

“Imagine what we could do with a whole new sales channel.”

For many CPG brands, DTC is a whole new sales channel with an incredible amount of potential. In fact, even before the pandemic, CPG companies were seeing around 70% growth from DTC ecommerce efforts.

“We want to be nimble and able to adapt, especially as new competitors emerge.”

In a competitive marketplace where it’s easier than ever for a small competitor to set up a brand and a website, you want to be able to adapt quickly. Quick access to data can enable a faster pivot. And the more you own the customer experience, the easier it is to make changes.

“Let’s increase our profit margins!”

Ultimately, you can increase your profit margins with DTC because you are cutting out the third-party retailer. This is an opportunity to save costs while delivering a stellar experience to customers new and old.

A Guide for Direct-to-Consumer Innovation: Here’s the secret sauce.

Our step-by-step process for taking your brand DTC

So you’ve noticed the writing on the wall, and the benefits of a DTC model are lookin’ pretty good (we think so, too). Now it’s time for a game plan, and luckily, we know just where to start. Our innovation process helps leadership teams reduce risk and arrive at the right solution—in fact, our process has proven so successful that it’s now taught at Vanderbilt University. We could write a book on this process (and maybe we will), but for now, we’ve condensed it for you below. Promise not to give away all of our secrets? All right. Read on.

Step 1: Identify your constraints.

Before diving headfirst into innovating a DTC solution, let’s talk about your mindset. What do you see when you close your eyes and picture innovation? You might be thinking about shiny new inventions or never-before-seen technology. But really, innovation is any disruption of the status quo. It’s the application of a valuable insight that helps you solve a problem or meet a need in a different way—and we can help you do it at the lowest risk.

The biggest hurdle you’ll find when you get started is not going to be a lack of desire to improve, but a network of resistance. There is going to be a whole web of circumstances in place that stonewall innovation. When we partnered with a jewelry brand that was exploring an entirely new way to sell after 25 years using the same channels, the question they needed to consider was not “How do we get better at innovating?” Instead, in the words of our friend/partner Dave Owens (Professor of Innovation at Vanderbilt University), they needed to ask themselves, “How can we stop the stopping?” Well, the first step is to identify those stopping points, or constraints, and tackle them head-on.

Pinpointing the constraints stopping you from innovation is tougher than it might sound—big questions that need solving will bubble up, and that will feel tedious. But innovation lives in the answers to those daunting questions. Constraints can come from all over, but here are the 6 main types according to Dave Owens (and questions to help you move past them):

  1. Individual Innovation Constraints: How do I have better ideas?
  2. Group Innovation Constraints: How do we support experimentation?
  3. Organizational Innovation Constraints: How do we execute and scale?
  4. Industry Innovation Constraints: How do we compete in the market?
  5. Societal Innovation Constraints: How does it make us better?
  6. Functional Innovation Constraints: How do we make it function?

Ask yourself: Do any of these categories sound familiar? Maybe one of those questions has been keeping you up at night—trust us, anyone who’s ever attempted to innovate has been there. But getting a clear picture of what’s causing your “stopping” is a critical first step to starting.

Step 2: Inventory your assets.

Now for the good news. There’s a really good chance that you already have all the ingredients necessary to innovate. And as an established company with experience on your side, you probably have more tools in your box than you realize. We bet you’ll even realize that no one is more equipped to disrupt an industry than its own leaders.

What does this look like in action? redpepper is a longtime partner to Mars Petcare, having worked across their dog food portfolio to help them innovate from within. When we partnered with them to launch DTC brand Puppo, it quickly became clear that a company of their size and stature had the unique assets needed to set them apart from competitors. From brand recognition and an established customer base to an extensive database of historical data and advanced technology, this industry leader had all of the ingredients necessary to add a DTC brand to their portfolio—it just made sense.

Corporate Performance Discipline must be exchanged for Innovation Discipline. The ingredients necessary to innovate are your own—the people, processes, and assets you already have. Innovation Discipline is all that’s missing. When you remove Corporate Performance Discipline, bigger questions can be explored free of constraints, ideally leading to more new solutions, faster. Ideas can be born and tested in days, not months or quarters, meaning the risk of innovation is lowered.

Corporate Performance Discipline must be exchanged for Innovation Discipline.

Mars Puppo

Easy and efficient access to Mars’ packaging process allowed us to prototype different solutions that best aligned with the evolved DTC shopping experience. Goodbye, bulky, hard-to-carry bags designed to be stacked on shelves. Hello, smaller packages shipped right to your door through a shopping experience tailored to your needs. Plus, Mars’ experts, data, and cutting-edge technology made for precise and efficient personalization that left competitors drooling.

Mars Puppo

Step 3: Establish your goals.

If you’re going to commit to innovation, especially when it involves adding a DTC sales model to the mix, your team will need to get really honest and clear about your goals. The definition of successful innovation isn’t a fail-free pet project that changes for the sake of change. Spoiler alert: sometimes the answer you need to achieve your goal is “don’t do it.” Saving money and reducing risk can be as valuable for the organization as revenue goals.

Instead, successful innovation looks like a longterm commitment to a process that guarantees valuable learnings, which will guide your brand to disrupt the status quo at the lowest risk possible. And it’s ok to fail along the way—in fact, experimentation and iteration are key components to a successful innovation process.

Mars Petcare came to us with a goal to create a unique shopping experience without alienating their retail partners—after all, successful omnichannel sales means that your strategies should work in tandem. We helped them break down their true goals even further to make sure we never ended up with a flashy, expensive solution that wasn’t going to solve their core objective.

These steps are relevant for innovation goals beyond DTC as well. We used the same exact process to help the world’s largest coffee chain create next-generation in-store retail experiences—making use of their robust network of locations to cater to customers with different needs and desires. Wherever your brand is headed, this innovation process can help you get there.

Step 4: Identify the white space.

You’ve inventoried your assets, and you now understand the cards in your hand. Use your direct and indirect competitors as inspiration—is there an audience, channel, or experience being ignored?

In the early stages of Puppo, the Mars team scanned its room of competitors and asked themselves this same question. While the market was growing when it came to high-end, niche dog food brands attempting next-generation, personalized shopping experiences, the same couldn’t be said for dry dog food products aimed at a mass audience. There was only one big competitor attempting to innovate in the dry, premium kibble space, and they weren’t attempting a next-gen DTC experience. Lightbulb—that’s a white space.

Focusing on personalization and a unique use of owned data, we helped Mars create a next-gen experience for Puppo that helped them enter a way bigger market than any of their innovating competitors. Quizzes provided tailored nutrition recipes unique to the dog’s needs and created a feeling of individuality with every bag. We even tested and optimized the length of the quiz so customers felt that level of personalization without feeling overwhelmed. And we used natural language AI to pull off unique communication— taking that personalization to the next level.

Identify the white space.

Step 5: Identify the pain points.

Empathy has a special place in our innovation lab. The ability to put yourself in the mind of your customers—and identify both hiccups and major red flags along their journey—is valuable beyond measure. Too often, brands think they understand their customers, but they’re missing valuable insights that could provide them the opportunity to remedy the real issues keeping their audience from the best possible experience.

As a subscription-based DTC brand, Puppo needed a deep understanding of the most common reasons consumers cancel subscriptions. We discovered that the biggest risk of dog food subscription drop-offs was likely to occur during periods of transition. When a dog’s age, weight, or dietary needs change, the owner is likely to pull the plug on a dog food subscription that no longer meets their pet’s changing needs. Our solution? Ditch the one-size-fits-all recipe, and use Mars’ data to anticipate these transition points—proactively suggesting changes to the formula as the dog grows.

Identify the pain points.

Step 6: Ideate, prototype, and test.

It’s a common misconception that if you simply get creative people in a room, they will be creative. We have found that process is the secret weapon for ideation—and it’s driven by those not-so-bigand- scary constraints we talked about. We operate under a cycle of divergent and convergent thinking that removes as much bias and room for “stopping” innovation as possible.

Once you ideate, it’s time to put those ideas to the test. Prototyping your best ideas doesn’t mean getting them market ready in a day—a prototype could be as simple as a sketch or as complex as a Once you rinse and repeat Step 6, you’re sure to land on a consumer-validated DTC solution that’s best suited for your business and your customers. Not sure you’re ready to make that first step into DTC innovation? redpepper can help—and we’ve been around the block a time or two. If you’re interested in learning more about how we’ve helped CPG brands with this transition, get in touch. clickable wireframe. In order for people to respond to innovation, it can’t simply be imagined. It needs to be experienced. Think about Henry Ford. A faster horse might’ve solved his customers’ problems, but people’s imaginations are limited by what they’ve seen done before (and he proved there is much to experience beyond the status quo).

Take the plunge.

Once you rinse and repeat Step 6, you’re sure to land on a consumer-validated DTC solution that’s best suited for your business and your customers. Not sure you’re ready to make that first step into DTC innovation? redpepper can help—and we’ve been around the block a time or two.

10 Insights to Accelerate Your DTC Journey: Go further, faster.

A huge part of innovation is learning from your own experiences—as well as the successes and failures of others. So, after years of helping big brands innovate, we’re sharing insights that can help propel your DTC strategy forward. Here are 10 quick hits that we’ve gathered from our partnerships with Christie Cookie Co., Mars, Verizon, and more.

  1. Challenge your assumptions: Before you pour time and money into a product or feature you think your customers want, create a prototype and test. Trust us, we’ve saved companies like Verizon millions with this approach.
  2. Get to know your customers and the different ways they shop: Do they search or filter by certain criteria? Make sure your site accounts for their path to purchase.
  3. Sell WITH your influencers: Incentivize them to create full looks or posts that show off your product (and use this as shoppable content on your site).
  4. Be proactive: Leverage data to anticipate the needs of your consumers and guide them to your product before they even know they need it. Bonus points for incorporating this data into your CRM.
  5. Don’t be afraid to be more human: Stay true to your brand’s voice, but leverage tools like natural language AI and gifs to interact with your customers in a way that feels authentic (especially if you’re targeting Gen Z and Millennials).
  6. Personalize but dial in: If you’re customizing a product or the shopping experience, ask your consumers enough questions to make them feel that personalization but not too many to overwhelm them.
  7. Learn from your retail experience: Ask yourself, “What has worked in stores that we can adapt for ecommerce?” After testing over 40 different solutions, we helped Mars Petcare bring sampling into their digital environment.
  8. Reserve a % of your media budget for experimentation: (a new platform, a new ad type, or out-of-the-box creative). Whether your experiments are successful or not, you’re guaranteed to learn something new—and that’s priceless.
  9. Don’t keep your data in a silo: When working with Christie Cookie Co., we had greater success and efficiency when the person creating their emails had direct access to all of the brand’s data. We also saw lower ad costs and higher campaign performance when email insights were applied to paid media efforts.
  10. Treat your email list like your most valuable asset: Because in a third-party cookie-free world, it just might be. But the work doesn’t stop there. Nurturing customers to prevent churn is just as important as getting them to sign up.

Armed with these insights, we believe you’ll gain momentum on your DTC journey. Be prepared to fail forward and grow forth. And remember, redpepper is here to help.