On today’s episode, Kunle is joined by Mike Stevens, the Bestselling Author of the book, The Direct-To-Consumer Playbook, and a Mentor at Stevens.Earth, a brand focused on giving young businesses the right foundations to help them become old businesses.
Growing a business isn’t easy. It takes many mistakes and setbacks to reach the success you’ve always wanted. You go through different twists and turns before finding the right solution to your problem. It’s a long road but it’s worth it to take. A path you’ll likely take is to venture into the gates of eCommerce.
By unlocking the gates of eCommerce, it opens up an opportunity to grow your business online and therefore gaining traction in the digital world. To help you navigate through the maze of eCommerce, the book, The Direct-To-Consumer Playbook, will be your map and walkthrough in your journey.
The Direct-To-Consumer Playbook is a collection of sixteen brand case studies each with a unique purpose, mission, and strategy in navigating the D2C world. Not every business is the same but one thing is common, every brand must be customer-obsessed to keep high customer retention.
In this episode, Kunle and Mike talk about several case studies from his book, The Direct-To-Consumer Playbook. You will get to hear about how interacting with your customers is a goldmine in knowing what they find important and their needs. This is a great episode for business owners and founders looking to grow their business by taking the D2C route.
Here is a summary of some of the most important points made:
On today’s interview, Kunle and Mike discuss:
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On this episode, you’re going to learn about the stories, the strategies, and the brands that wrote the D2C rules. It’s a great episode you do not want to miss.
Welcome to the 2X eCommerce podcast show. This is the podcast dedicated to digital commerce insights for retail and eCommerce teams. Each week, on this podcast, I interview a commerce expert, a founder of a digitally native consumer brand, or a representative of a best-in-class commerce SaaS product. We give them a tight remit to help you grow growth metrics such as conversions, average order value, repeat customers, audience size, and ultimately your sales or gross merchant value.
This episode is an interesting and special one. I pre-ordered this book called The Direct to Consumer Playbook. It’s written by Mike Stevens. Mike Stevens is the guest on this episode. In his book, which I found quite inspiring, were interviews with about sixteen founders from best-in-class direct-to-consumer businesses. I’d even say they transcend direct-to-consumer eCommerce. They’re more consumer brands based out in the UK and North America.
He did a good job whittling down what were the instrumental pillars for their sustained growth over time. He spoke directly with the founders. He has the interview notes on there as well as his takeaways that validate his thoughts on the key pillars to growth. He’s the founder of a confectionary D2C brand called Peppersmith, a natural flavor brand of chewing gum in the UK that was widely distributed across grocery stores. Prior to that, he had walked through the cult favorite, Innocent Drinks, before they sold to Coca-Cola.
There’s two-decades-long of knowledge of what it means to bring out a consumer brand on the one hand and how that intersects with our world of direct to consumer in 2022. It’s super interesting. We covered a lot. We covered his background. We went into the key threads, the key themes across all of these DTC businesses, and their structures. One thing he said was a lot of them care about their customers. They’re customer-centric and they do it in their actions. They show their customer-centric less so in their words and more in their actions.
Besides that, it’s an interesting conversation I had with him. It was a long one but it was well worth it. If you are looking to get that foundational and collective efforts strategy towards growing an eCommerce business holistically and not saying, “I bought ads on TikTok,” or what have you. It’s more a holistic way whereby the supply chain integrates with product development and that integrates with markets and customer service. If you get all of that together and you’re looking to see how to synchronize all of those core business functions towards growth, you want to read this episode and get the book. I shall catch you on the other side. Thank you.
Hello, Mike. Welcome to the 2X eCommerce podcast.
It’s great to be here.
A quick request, could you take a minute or two to introduce yourself? You’re the author of a book. You have an interesting background in fast-moving consumer goods or CPG. Do you want to give us a breakdown of where you’re coming from?
I am an author now that I’ve written this book. Primarily, I’m an entrepreneur and a founder. My journey started in CPG. CPG, food, and drink are where I’ve had the most experience. It all started in 2001 when I joined a brand new startup in Shepherd’s Bush in Southwest London which was making fruit juices. I was asked to come along and help the founders with their operations at the time.
I joined them as a fresh grad who had a real interest in startups and entrepreneurial businesses but did not know a lot about this business because no one had heard of them and that business turned out to be Innocent Drinks. I was always grateful and fortuitous that I joined one of the best and most iconic startups within the past several years.
The reason I went along and joined the startup is that I always wanted to have my own things and become a founder. My plan was to be in Innocent for 2 to 3 years to see what the startup was all about because I hadn’t worked on one before and then apply those learnings and do my own thing. As it turned out, it was eight years at Innocent because it was such an incredible business to be involved with. It’s such huge growth, all sorts of projects, and some fantastic people I’ve worked with. It was always a matter of when and not if.
I went off to do my own thing. Me and another chap who I met at Innocent was called Dan Shrimpton. In 2009, we found the Peppersmith, which was a good-for-you confectionery company. The reason we went into confectionery is that the insight was that the food and drink industry as a whole was changing rapidly led by the likes of Innocent where products were more natural, more healthy, and more sustainable. Also, some great brands tell the story and explain to consumers why these products are different than what had come before.
This was changing all across food and drinks and not only in fruit juice. One category seemed to be left behind and that was confectionery. Confectionery is still dominated by huge multinational companies who had been doing the same thing for decades, if not centuries. Primarily, it was a high volume of sugary crap made cheaply and they were good at that. Our belief was if the rest of the food and drink industry was changing, consumer demands were changing around natural, sustainably, healthy, and better brands, why wouldn’t that be the case in confectionery?
We launched Peppersmith. We started with chewing gum. We grew that business. We made mint chewing gum and other sugar-free products. It was available in all the mainstream retailers, we’re talking bricks and mortar. Waitrose, Sainsbury’s, Morrisons, WH Smith, and Boots all carry the product. I was the CEO of Peppersmith and grew the business over an 8 to 9-year period.
Eventually, I exited in 2018. We sold the business to essentially one of our biggest health and health food customers who wanted to buy brands. It was the right time for me to make some changes in my own life. It was a good time to sell the business. I worked with a brand for a couple of years before I stepped away. One of the big things I was going to do with the time after I moved away from running the business as a CEO was to write this book. I can tell you about the genesis of how I came to write a book about D2C.
Before we jump into the genesis of how you went about writing the book, it’s exciting to know that, first of all, you were at drinks. They were the pioneers in the consumer packaged goods space of how to rethink a boring vertical or a boring line. They’re looking at the bottles at the time with their happy faces. It was invigorating from a consumer standpoint. You’ve been part of it. You were the head of operations for over your tenor there so that speaks volumes in terms of the exposure there. Were you there at the point of their exits or did you leave prior?
I left at the time when Coca-Cola was looking at the business. Coca-Cola took a minority investment before they eventually bought out the majority stake of Innocent. I left at that first point. It was hard for me to leave because Innocent was such a great business to be involved with. However, I had this desire to be a founder. I was lucky. I was on the startup team at Innocent. I worked with the founders closely but I wasn’t the founder. It was a time for me to do something for myself and that’s where we started with Peppersmith.
That’s a great segue to Peppersmith, which was an all-natural mint confectionery. Did you do D2C there first or did you say, “This is a pick-and-go confectionery product. We need to get into grocery stores.”
Back in 2009, D2C had started to happen or eCommerce was a thing. D2C as a strategy was still early on. The strategy and what we knew is that if we’re going to make a successful business, we’re going to have to get to all the shops. It’s about retail distribution. We built the business and the strategy around that. However, from day one, we had a little webshop. We were able to serve customers who wanted to put an order. We had a little website and we cobbled together some basic off-the-shelf free PrestaShop at the time with a WordPress website. The big thing was we could hook that up to PayPal and people could use PayPal and place orders.
The reason we did it is that we knew as a brand new company and a new brand without a huge marketing budget, it was going to take us a long time to build up distribution. What we didn’t want to do is disappoint anyone. We were lucky. We had a lot of PR early on. If anyone has seen or heard about us, we wanted to make sure that they could get hold of the products. I always imagined a sleepy little village in North Scotland, which didn’t have a supermarket for miles around.
If someone reading Peppersmith wanted the product, we’re not Coca-Cola so we’re not in every store, how do they do it? They can jump on the internet and read about us. If they like the sound of it, they can get their credit card out and place an order. That was the idea. It worked well, particularly when we had some good PR. We had a steady stream of internet orders every week. Packing up orders and a trip to the post office was a regular thing, normally on a Friday. We had a couple of good bits of PR.
All of a sudden, it wasn’t dozens of orders a week, it was hundreds if not thousands. It’s like, “Holy mackerel. This is a thing.” We built up a bit of a presence on D2C. We were one of the first food and drink products on Amazon. Amazon started to become quite an important customer for us. We were like, “The internet is a thing.”
What year roughly was Amazon starting to play a noticeable role in the delivery of orders?
Probably 2011 when we first got into Amazon as our awareness grew. Because we weren’t in all the shops, Amazon was the place that people were visiting. People were buying the product and putting up reviews. This was before the days of Amazon ads and stuff. Doing 80-plus pages, that didn’t exist at the time. It was products on the Amazon website. Over the years, we had to get better and better at understanding Amazon and what we need to do to stand out. That was the same with D2C.
For me, the big inflection point on D2C was that D2C was growing organically without us putting a huge lot of effort into it. As we grow as retailers, it’s becoming harder and harder. All the stories you hear about the supermarkets and how hard they are to deal with are 100% true and probably worse than you can imagine. It’s demanding. They don’t always do everything they can to accommodate a smaller supplier. We were getting successes. It wasn’t a failure. We had some good listings.
In terms of scaling up, it’s like, “This is quite a hard graft.” At the same time, D2C was growing without us trying very hard. My thought was, “Why don’t we invest more time in D2C because it’s growing and it seems to be a good way of doing things and may divert some of the efforts from retail?” As we were growing our D2C channel, we were quite successful.
By the time I sold the business, about 30% of all the sales were coming from D2C and Amazon, which is pretty bananas when you think about it. Selling mints and chewing gum primarily, which are our main products, that’s a very much grab-and-go product. This is a product you want to pick up at the checkout. We were selling cases online. The reason we’re able to do that is that we have some active health benefits within the product and that meant if you wanted to enjoy those health benefits, you should have it all the time. D2C was a convenient way of getting products to our customers. They had it all the time.
We were putting more effort into D2C but it occurred to me that there was so much to think about in terms of D2C. There was pricing, distribution, markets, tech, and all of the things that we all think about. All the readers and people who watch these podcasts think about it on a daily basis. For us, it was all new. It was also incremental. It was on top of all the things we had to do in the retail space. My observation was there are lots to think about to get this right so let’s figure out how to do it.
One of the first things I did is I went around asking my founder’s peer group primarily in food and drink and some other CPG products as well and I asked different brand owners, “What are you doing in your D2C strategy? What’s working for you and what’s not?” The answer was pretty much uniform, which was, “we’re giving it a go. it seems like a good channel but we’re learning on the job.” There were a few people who were focused on this like Graze.com who are down the road from us and who I knew quite well. They were all over D2C.
For the rest of us, it was incremental and we were coming at it from a place where there was little knowledge. We were learning as we went. What always frustrated me as we were building our D2C channels was that there wasn’t more best practice out there. I want to learn quickly and one of the best ways to learn quickly is you read blog posts, listen to podcasts, and also read books. My observation and frustration in the past several years are there is not a book out there or not many that explains, as a brand owner, this is how you do a good job in D2C.
Rolling forward, four or five years, eventually, the time has come to exit Peppersmith. It occurred to me that no one has still written this book. I was still passionate about D2C and the opportunity. I console on mentor and advise and all those stuff with lots of brands and all of them were still thinking about D2C. The best practice was still hard to find. I took it upon myself to spend the best part of two years interviewing the founders of the best D2C brands that I can find so I could ask them all the questions that either I didn’t know the answer to or I wasn’t sure about. I was asking them about product development, product market, scaling, operations, customer service, and economics.
All the things that everyone does, I’ve been thinking about. I wanted to find out from those businesses who have made this work, what have they done to make D2C a success knowing what I know. The one thing I didn’t know was that it was hard. There are brands out there who’ve cracked this. What are they doing that maybe we’re not or other brands are not?
It was about those founders and those businesses that have worked this out and trying to extract from them their knowledge, their strategies, their wisdom, and then put it all in the book. It’s the book that I wanted years ago and no one had written it. I knew if it was going to be helpful to me, it would certainly be helpful for lots of other people. That’s why I’ve written this book.
I have a copy of the book. I started reading it. It features about fifteen case studies from best-in-class consumer package D2C brands, one of which is Graze.com. They’re not too far from you. Huel has huge and fast growth. I don’t know Snag. I know Bloom & Wild and Cornerstone. There’s a lot like Who Gives A Crap, TRIBE, Lick paints in the UK, Ugly Drinks in the US, Allplants, Casper, and Hiut Denim. Hiut Denim is not a CPG brand, it’s more apparel but that stands out. It’s interesting.
You’re a strategy and top-level growth-oriented in the way you’re thinking because you’re a founder. Is there any recurring theme you noticed across all fifteen case studies every founder should have when thinking about going on this journey or if you’re already on this journey, what to have in place as a foundational cornerstone to growth?
I met some fantastic people. These founders got some incredible backgrounds. They’ve done some interesting things before they set up their businesses. It was great to understand who they were. One of the huge themes that came out of those conversations was all the founders were problem solvers. They wanted to help and serve people.
In my observation, in my world, there are two types of successful entrepreneurs. There are those entrepreneurs who see a gap in the market. They’re like, “There’s more demand than supply in a particular area. I can exploit that opportunity and I can make some money from it.” That’s one type of entrepreneur. That’s not to be dismissed because there are some hugely successful individuals and businesses out there following that strategy.
There’s the second type and this applies to pretty much every founder that I met. Right in The Direct to Consumer Playbook, they want to solve problems and help customers. They do it in a customer-centric way. There are examples of that there. Bloom & Wild is a fascinating business. They sell flowers. The reason Aron set up Bloom & Wild is that he noticed what a frustrating experience sending flowers was or trying to give someone a bunch of flowers.
If you think about buying and sending someone flowers, it should be a joyful thing but it wasn’t. It was poor quality products. It wasn’t a high price and inconvenient. It wasn’t a great experience. He figured it out. This was something he wanted to do better. He did all the things that worked out, “How does the supply chain work? How does the customer service work? What do people want?” He set up Bloom & Wild and his big innovation was sending flowers through people’s letterboxes. Several years on, that’s the thing. It wasn’t back then. It was a way of doing things bigger.
Snag is a brand that you hadn’t heard of. Snag is a tights company. They sell other products as well now. When I interview Brie, the founder who’s fantastic, a of couple years ago, she was focused on tights. The reason they went into tights is that Brie had an experience walking out the high street where her tights fell down. She had the conversation in the pub, “I’ve had this embarrassing experience. My tights fell down. Why are tights so rubbish? Does anyone else have problems with tights?” Our mate said, “Yeah. Whatever size, shape, or age they were, we can’t get good tights.” She was like, “I can solve this problem.” She went out and set up Snag.
Heights is another good example. Heights was set up by Joel and Dan, who had a business before and the business didn’t go that well and had quite a tough time. They were having some problems with mental health. They were struggling. It was through those experiences in terms of looking after their own health, they discovered that there were opportunities in supplements. They call it Brain Care, which is how to look after yourself a bit better. They took that and learned from individual pain and applied it to a wider market. The whole thing is about not selling as many bottles of pills as possible. It’s about helping as many people as possible. This was a big thing. It says, “How can we best help our customers?”
Also, as a founder and strategist, one of the other things that all these brands do well is cover all the bases. They do product development, marketing, finance, supply chain, data analysis, and customer service. They have to do all of these things because if you don’t execute these things well, you’re going to suffer. Particularly in the D2C space, it’s competitive. You’ve got to do everything well to get it right.
It goes back. These businesses have a mission and purpose. They want to serve. Also, another example that comes out of that is the amount of incremental product development. They want to get better every day and data is a big part of that. Taking products and making them a little bit better each time they make them so they can serve their customers better is a huge part of what they do.
From what I took from everything, every one of them is customer-obsessed and that rains down into their entire organization. Because they’re customer-obsessed, they want to listen to customers and want to get a pulse on how customers feel about the experience of delivering. They take those insights to feed into their product development and research and then they amplify that message into their marketing. It’s a rinse and repeat.
TRIBE, who make sports bars and nutrition, have what they call a flywheel where they run events that creates a community of customers and they sell their products to their customers. What powers that whole business is that they have a foundation, which is all about eradicating modern day slavery. With the foundation, the community, the events, and the products, it is fed. They call it flywheel or you could call it rinse and repeat. It’s a bit of a cruder way of saying it but it’s the same thing. Yes, all of those things are happening.
You have the foundations. Every single one of these companies has a unique way of doing things and their motes. It is important to read through the case studies so you have a wide breadth of the individual nuance based on their time to market, their products, and a lot of things right in the markets. You get a broad overview and see what applies to you and what you could take from each of them. Is that how to approach the book?
That’s a good way to do it. In the book, there are sixteen case studies. There are fifteen chapters of case studies. The reason there are sixteen is there’s one chapter that has two brands in it. The reason that chapter has two brands in it is that it’s all about launching in 2021. That’s the chapter with Lick, who’s a US paint relief company.
The reason I wrote sixteen case studies and not 1 or 2 or even focusing on my own experience is that every business has got a different story and different areas of expertise. What I also wanted to show is if I can pull out the commonalities between all those businesses, there’s a good chance that those lessons will apply to any successful D2C business. I want to make sure I had a decent sample size and not just 1 and 2 so I ended up with sixteen plus my experience at Peppersmith.
You mentioned Lick. I was almost a customer of Lick. Their ads are on my Instagram. They use people like me in their ads from an age demographic. It seemed fresh, a new way to rethink painting. Although I eventually ended up with one of the other brands. Looking at Lick, they have a CrunchBase. They have two founders who have realized, “We’re changing an industry. For us to build this challenger brand, we’re going to need finance.” In their CrunchBase, they do have investors.
In all sixteen case studies, how important was showing proof of concept, going to raise, and implementing growth stature? Do you need to raise in D2C to do it well? It’s not to diminish the strategy, it’s not about money, but for you to build a D2C brand, what camp are you? Team Bootstrap or team raise and try and scale quick?
You can do both. There are examples in the book of both. Most of the brands in the book have raised significant amounts of money. One of the interesting things about talking to Lick and Clear in the same chapter is they both raised multiple millions at seed level and then went in favor of a Series A, some significant rounds. The reason they felt they had to do that is that we are living in a world where it’s much more competitive. D2C has been normalized, especially during the pandemic. Most people would consider D2C as a valid place to go and do their shopping to buy the products.
also, for people who like D2C, there are so many brands out there who are competing for clicks and orders. The reason that these two particular businesses felt that it was the right thing to invest in their business, in their offer, in their capabilities, and their marketing is because they knew the world had moved on. Cheap digital ads don’t exist anymore. They know that if they’re going to get any serious traction, they have to appeal to a lot of customers and they have to draw customers to them.
Remember, it’s not so much about Instagram ads. It’s about what they do and what they post. The reason Lick did such a great job on Instagram is that they want to put great content out there that gets people to engage in the brand. Lick has this challenge if they just sell paints. People don’t buy paint every week. It’s like a subscription model for paint.
They need to keep their customer base engaged with the brand. The way they do that is to put lots of helpful and inspiring pictures about, “This is a great look for a room. You could have that.” Even if it doesn’t involve repainting, it’s moving things around. They also have lots of handy guides about decorating, wallpaper, paint, and all sorts of things. They know they have to be helpful.
An even better example of this is Hiut Denim. Hiut Denim makes high-quality jeans out in west Wales in a place called Cardigan. They have fantastic products. The backstory behind Hiut Denim doing what they do is fascinating. You can read about that in the book. The point I’m going to make with Hiut Denim is that the vast majority of their marketing is not about digital ads. It’s about high-quality newsletters, yearbooks, and events. Pretty much all of that content doesn’t talk about jeans or their brand. It talks about other things that it knows are going to inspire and engage the customer base.
By doing that, they keep that customer base connected to their brand. What it means is purchasing jeans. Most people don’t buy jeans on a particularly frequent basis as well. You can interact with that brand and then still only buy products from them once a year and that’s fantastic. They know that if they can serve great and relevant content to you that’s going to be interesting and inspiring, when you do get around or when you need a new pair of jeans, they’re going to be the first place that you come to.
Top of mind. That strategy is community-centered if anything else. They‘re creating all this content to attract certain persona and big segments at the top of their mind. Earlier on in our conversation, you were decrying retail distribution as to how difficult stores are particularly serving smaller brands, which typically would meet the D2C profile. At Peppersmith, how did you solve that problem? You were retail-first. What was your retail team like? How did you get into retail at the time?
Retail, that’s all we knew. Coming out of Innocent, we knew retail. We had a lot of retail expertise. The strategy to start was, let’s get into a few high-end delis, coffee shops, and health food shops and we can make that success. That’s a bit like a market test. Are people going to buy this product? If the answer is yes and we can prove sales, we can get into some of the bigger independents. We can get to start getting some change. Our whole foods market, they were one of our first customers. If you can prove it works from there, you can get to Waitrose and you build on that but it takes a long time.
One of the things I learned and came to love about D2C is you can do that testing and brand building so much more efficiently and quickly. You can do it on a bigger scale as well. When we were going around with our rucksacks for the products in London trying to find the best new deli or the best new coffee shop, we were having to visit everyone on foot. On the internet, anyone can find you as long as you you’ve got a product that stands out. We love the internet.
Interviewing Anthony Fletcher, who was the CEO of Graze, he put this best, “Start D2C. Build your brand, build your products, iterate, learn how to serve your customers, and learn what your customers like. You then can think about going multichannel.” A lot of the brands in the book do D2C or started D2C but there are many examples of multi-channel and even omnichannel out there where bricks and mortar come into play.
What Anthony told me and he’s right is if you can get things right in using your D2C channel and then you can apply it to retail, you’ve got a much better chance of success. The retailers are pretty unforgiving. If you mess up on deliveries, maybe you haven’t got enough products available. If you get your pricing wrong, if you put products on the shelf that people are not going to buy, you’re not going to be in that customer for long.
The other hard thing about retail is that if you do get it wrong, it can take you years to get back into those stores. You’ve lost your opportunity. Using D2C as a way to build up awareness to get your products right and build up a community is a fantastic way. Furthermore, what Graze also managed to do is take took a D2C mentality into retail. For Graze, that meant rapid iteration. They were the masters at looking at customer data and customer feedback and working out what products were popular, what wasn’t, and what needed to be improved upon. They’ve been doing that for years.
They then went into retail and they did the same. They blew the buyers’ minds when they said, “After four weeks, we want to change our products. We’ve got twelve products in your store. We think we can change six of them. Here’s the data. Here are the replacements with data to back that up.” Traditionally, Those cycles took a year or two years to work out if a product or brand was going to be successful. All of a sudden, Graze could do it in weeks.
Ugly was another great example. Hugh, from Ugly, did a lot of his new products launch in D2C, making it D2C first, making it exciting, and then getting feedback on those products. If they’re successful, they can go into bricks-and-mortar retail. What he said to me is that he can learn more in a week from the data and the conversations he has with customers via his D2C channel than he could in a year on a retailer shelf. It’s such an abundance of data.
Remember, we’re talking directly to the end consumer. Retailers are always at that step in the middle. Most CPG brands consider the retailers to be their customers. They are their customers or guests because they pay the bills but it’s about the end consumer. If the consumer is not enjoying your products, it’s not about what your customers think, it’s about the consumer.
Their gatekeepers to access the end-user or the consumer. With D2C, you’re cutting that intermediary fairly quickly. I love what you’re talking about in regards to it being all about the data. I like the fact that you’re taking data from the site but you’re also getting data from customers by talking to them. Do you want to speak a little bit about how to talk to customers and how to get more qualitative data from customers probably through surveys and groups?
I get passionate about data. One of the key things with D2C brands is they have answers over anyone who sells via wholesalers and retail. It’s the abundance of data. When we started out, we were amazed. We started getting orders from customers. There were a few celebrities and famous customers there as well. We’ve got their email. We’ve got their address. It‘s not that we did anything crazy with that. We know who’s consuming the products.
The data comes in two ways. There’s that macro-level data. How many people have said this is a five-star product? How many people are buying it? How many people were returning and coming back again? You can get a sense for trends. Where it gets powerful as well is when you have direct conversations with those consumers. This often happens in the surveys. Also, there are opportunities when customers get in touch with you either via email or phone. Normally, it’s like, “I put an order for delivery and it’s not arrived. Can you tell me if it’s there?” As good customer service, you solve that problem as quickly as you can for them.
While you are solving that problem, it’s your opportunity to interact with that customer, “How did you find out about us? What do you like? What can we do more? What do you think of our packaging?” All of the things that you can discover. It’s the big data stuff. Also, there’s nothing more important than personal reactions. An example of this in the book as well is a business that has got it right now but got it wrong at the start and that is Tails.com which makes lots of personalized dog food. Personalized dog food can be a thing. They make loads of different types of dog food depending on the age, the size, the breed, and the behaviors of a dog.
When they started out, this was in 2014. They came from a background of D2C. It’s got to be about the subscription model and quick transaction. What that meant is that they didn’t have a customer service telephone number. It was hard to find an email. It was hard to get in touch with anyone. They didn’t have an address of their business on their website. What it meant is that those customers are theirs. As a new brand, they were forming no relationships. Those customers needed things from the brand and maybe they were trying to get in touch with them. Also, because there was no interaction, it meant the brand couldn’t understand what was most important to their customers.
This happened early on in their business. They got to a point after 3, 4, or 6 months where it’s like, “Maybe this is not working. Our CPAs are high. Our retention values are low. I don’t think we’ve maybe got this right. This business looks like it might not be viable.” They have a huge factory that has loads of stuff. The data was telling them that things needed to be corrected. If they weren’t corrected quite quickly, they were going to be in trouble.
The correction happened by opening up the business to their customer base, having more customer service people, putting on the telephone number, and making sure it was easy to write an email and get a quick response. What they found quickly is that sometimes the customers didn’t feel loved. Pets are emotive. We love our pets. What their customers are feeling is, “Here’s a brand that doesn’t care. Therefore, they don’t care about their pets. They’re not the brand for us.” It was only when they built up their interaction they could show their customers they did care because they did. They weren’t talking to their customers in the right way.
They were also able to fix some problems they had around their algorithms, their frequency, and what products and stuff that every brand goes through. They were only able to correct that when they have proper conversations with their customer base. The data is this huge informational advantage. All brands have D2C. I always go back to the fact that you can talk to your customers and nothing could be better than that.
One question as we round this conversation up is the team. This is important in terms of all the case studies in your book being vertically integrated. Their products are customer-centric and they’re deliberate with their marketing and branding. They’re all optimized to build community and create content that’s relevant to the target market.
Looking internally at the businesses themselves, how would you describe their teams? How are the teams structured? Their teams will evolve over time based on the maturity of their business. Do you want to break down a bit on team size and the relevant disciplines you need in running a substantial DTC business?
The big thing all these businesses tend to have is some have big teams, some have small teams, some employ hundreds of people, and some employ less than ten. It’s important to cover all the bases. You mentioned vertical integration. Vertical integration means that you do everything right. One of the big decisions that these founders have to make or have made is about what they outsource and what they keep in-house.
Especially if you want to be vertically integrated, you have to have as much possible in-house. The reason that is important is that they’re learning how to serve their customers best. You can’t do that if you’ve got important elements of your business that serve other people. A great example is customer service. I don’t think any of these brands that I interviewed outsourced their customer service. The reason they don’t do that is that they want to make sure they got these authentic conversations and relationships with their customers. That’s an important part of it.
Bloom & Wild had a good example around tech. When they started, they outsourced all their tech. They found that it was hard and complicated to build that platform quickly and successfully thinking about so the UX and the journeys that customers have to have when they interact with those brands. By doing it with third parties, they bought it back in-house. Aron admitted to me that he was quite grim when it came to tech when he started.
Now, Bloom & Wild have their own tech blog on their website. They’ve become technology leaders and experts because they bought it back in-house. The reason they’ve done that is that it’s the best way to serve their customers. Going back to Bloom & Wild, what they’ve also done is they have now this thing where you have the ability to opt-out of certain emails. For example, on Mother’s Day and Father’s Day, there’s a good proportion of the customers who don’t appreciate the fact that they get get an email about Mother’s Day. They want to interact with the brand but they don’t want to see that particular message.
They set up a program where customers can opt-out of certain campaigns. This was a huge undertaking in terms of tech. If don’t want to manage, do your marketing list and your customer database. This is a difficult thing to do but they could do it because they have the technology in-house and also the desire that they wanted to do this. Their customers appreciate it as well. That turned out to be such a good idea. It’s been adopted by D2C brands across the world. You’ll see lots of different examples of that now. When Bloom & Wild first started doing it a few years ago, it was a new thing and a big endeavor but they could do it because they had in-house teams who were up for it.
Mike, we can go on and on. For those people who found these conversations interesting, it’s all expanded in your book. The name of the book is called The Direct to Consumer Playbook. It’s available on Amazon and several other book websites. It’s published by Kogan Page. Do you run a blog yourself? Are you active online? Where can people follow you if they want to follow your work and your words?
I’d encourage that. Please do come and find me out and ask me questions about D2C-founded businesses. Particularly, I’d love to hear what people think about the book. I am quite active on LinkedIn. Search Mike Stevens, Mike, or Peppersmith on LinkedIn. Also, on Twitter, my handle is @OpenMikeStevens.
One of the best places you can find out what I’m up to is on my website and that is the consultancy website that I run with my wife who’s a sustainability expert and that’s www.Stevens.earth. You will find lots of information there about what I do and how I help businesses. Also, there’s a blog there as well so you can read about some of the case studies if you want to get a flavor of what’s in the book. Please, get in touch. I love to talk to people about all of this stuff.
I appreciate your time, Mike. it was a pleasure. I was looking forward to this conversation and you didn’t disappoint.
Thanks. It’s been fun being on. Thanks very much.