I had a wide-ranging trends discussion recently with the leadership of the Association of National Advertisers’ business-to-business (B2B) marketing excellence group. We discussed the surging hype of direct-to-consumer (D2C) brands. This was prompted partly by investment banker Terry Kawaja’s awesome “Fire Your CMO” presentation, given at the ANA’s own Masters of Marketing conference in October 2018.
That conversation prompted my own observation: Great B2B marketers are not unlike great D2C marketers. That led to an invitation to present “D2C lessons for B2B marketers” to the ANA’s B2B member group. Following are key concepts from this talk, including one major lesson.
D2C Companies Driving Growth & Performance
Given the ongoing buzz around Kawaja’s somewhat controversial presentation, delivered to a big group of old-school big-company marketers, I thought it would be fun to analyze his narrative and react through the lens of a B2B marketer.
I encourage you to absorb Kawaja’s presentation firsthand (pdf here and video). In summary, he described a trend prompted by digital-native gaming companies (recall Zinga or, more recently, Riot Games and Supercell). They mastered four things: a single product category, customer demographic, marketing channel and closed-loop data (linking identity through customer acquisition to service delivery to lifetime value). With marketing and customer acquisition prowess on par with product development, the great gaming companies of the past decade moved an extraordinary share of their marketing spend from the discretionary category on the balance sheet, to cost-of-goods sold. With keen understanding of marketing investment’s impact on results and customer lifetime value, these performance marketers adopted always-on investment models that had no limits so long as profit ensued.
This digital-native performance-marketing model evolved to a broader range of consumer apps and services like those from Google, Uber and Airbnb. Eventually the model evolved to a broad range of demographics, consumer verticals and channels, like Bonobos, Dollar Shave Club, Allbirds and Stichfix. The common denominator was the closed-loop data that captured consumer identity and enabled visibility and mastery around customer acquisition, service delivery and lifetime value. With the meteoric rise of some these companies, venture money followed suit.
The DNA of D2C Brands
Kawaja listed seven characteristics that comprise “the DNA of D2C brands”:
- Digital native; mobile centric
- Focus on product design / UX
- Disintermediation (agencies, retailers, etc.)
- Identity-focused customer relationship
- Performance-oriented media spend
- Content marketing for brand storytelling.
- Growth-focused marketing talent
Importantly, several conditions enabled the breakout of digital-native D2C brands: VC funding; smart phones; low-cost cloud computing; e-commerce platforms like Shopify; and large audience platforms like Google and Facebook for customer acquisition. At the same time, online peer reviews fostered trust, the services offered convenience, and brand loyalty is less relevant today, according to Kawaja.
But Wait, There’s More! “Brand” Mysteriously Missing from Kawaja’s D2C Brand DNA
I agree with Kawaja’s seven characteristics of DNA among D2C brands. Some of the past marketing companies I worked at played big roles in the rapid growth of some of the biggest brands. However, brand is an important omission. Indeed, some companies invest in their brands (and branding) more deliberately than others in their early stages. Regardless, it is no coincidence that the most successful D2C companies tend to have very strong, distinctive and valuable brands — and they realize this pretty quickly. High-growth performance-oriented companies, with good and personalized consumer experiences, will yield valuable brands as they scale their prospect and customer footprints. One must consider brand as one of the major assets to sustainable growth; failure to do so is neglect.
Consider one rapidly scaling D2C women’s fashion service, now with millions of customers. I don’t have permission to disclose the company, as my conversation with the founder was private. She shared with me a fascinating insight: Originally her team thought they were “just a subscription box company,” and that they’d eventually hit a growth ceiling. Instead, the insight that prompted the box company later revealed and fostered a large community of women interested in the company’s values of empowerment. This led the executive team to elevate their purpose and aspirations and become a much bigger omnichannel company, with more brand extensions and customer segments — all led and held together by the core brand. “The brand turned out to be the most valuable and important asset we have,” this founder claimed. “It is our foundation to sustainable growth.”
5 Pillars Of Brand Performance in D2C
If you think about the brand in a D2C framework, (at least) five key concepts emerge:
- Brand equity scales with acquisition footprint
- Strong brands fuel acquisition performance, customer experience and LTV
- Brand plays offense, and defends, amidst crowded consumer product categories
- Brand enables stronger omnichannel performance
- Data loop informs brand evolution, extension and growth
In essence, a strong brand reinforces everything about an otherwise performance-minded company.
The DNA of B2B Brands
Now that we’ve covered Kawaja’s framework understanding D2C brands — along with my addendum of “brand” itself –let’s turn our focus to B2B brands. As someone who’s invested his life in both B2B and conventional consumer advertising, I conclude five key characteristics that form the DNA of B2B brands:
- Experience selling directly to their customers
- Performance minded in sales, demand generation, customer acquisition
- Know identity very well, and able to map complex decision networks
- Expert in content marketing for sophisticated, high-consideration products
- Deploy specialist talent in customer acquisition and customer journey
But where is “brand?” Indeed, some B2B companies — particularly ones with a large consumer marketing side of their business, i.e., IBM, GE, Verizon, etc. — have invested significantly in brand equity. Some of my favorite B2B brands are Slack and Google, and they are powerful, though I believe these brands are exceptions. While I have no scientific data, my heuristics tell me that consumer marketers deliberately prioritize brand investment. The proliferation of useful, friendly and personalized consumer app brands have played a major role in shaping everyone’s expectations of consumer experience and brand.
Brand Less Appreciated, Though Critical To B2B
From personal experience managing the brands of some top B2B companies, I’ve found the core brand architecture to be critical to the operations and existence of the respective companies. Ideally, your brand differentiates you from your dozen competitors! Your cool brand and all the attention to detail will make customers, partners and talent want to associate with you! With lengthy enterprise sales cycles and complex customer relationships, a strong brand helps advance presence and momentum in between sales and delivery transactions.
This all starts with a clear articulation of the mission, vision, values and value proposition. It also includes an aligned understanding of the company’s stakeholders, the competitive landscape, history, direction and character and reasons to believe. Then comes key messaging. Consumer marketers often start with the brand brief. Being that most of our decisions are more emotional and less rational than we care to admit, attention to design and context really matters. Like the world’s top restaurants, every little detail adds up to something spectacular, or a forgettable experience, or a let-down.
That’s my experience from the trenches. But the big consultants agree. According to a 2013 McKinsey study, branding is among the most critical pillars that drive B2B business. Among the report’s conclusions:
- Brand is on par with sales in driving customer decisions
- Strong brands drive 20% greater margin
- Buyers pay premium for simple value prop, reduced risk
- Buyers pick brands representing honesty and expertise
- Brand fosters more seamless product extensions
In other words, it is irresponsible to not manage your brand for performance.
D2C Lesson For B2B: Invest in Brand
While top B2B companies hold many of the same strengths as D2C, I argue that brand is the biggest D2C competency where the B2B category can flourish. McKinsey outlined in its B2B branding report several reasons why brand is imperative. Further, each of the brand performance pillars I outlined for D2C brands hold true for B2B.
Category leaders tend to actively invest in — and manage — strong brands for greater performance. The rationale is not to look pretty, but to impact the bottom line.
Managing brand performance should be the final check on the list of characteristics that comprise the DNA of B2B brands.
I thank two collaborators for educating me and pushing my thinking: Ben Seslija, head of commerce at Resonance Brands, a fast-growing D2C fashion company; and Raman Sehgal, VP of marketing, at TVision. They also participated in our lively discussion at the ANA.