The market share of Direct-To-Consumer (DTC) brands has grown significantly in the last 10 years. There were several new brands that challenged and disrupted the market of existing and established ones, that have enjoyed high market share and profitability throughout their history. A compelling example in this space is the early success of Dollar Shave Club.
In short, Dollar Shave Club produce and sell affordable razors and claim their quality is comparable vs. more trusted but also more expensive razors in the market. As a company, Dollar Shave Club started their operations in 2011 and then started to climb their way up to becoming a well-recognized challenger in the man grooming business as of 2012, when their hugely successful video Ad came out. The Ad went viral and has currently 26 million views on YouTube only. Together with the creation of this piece of content, which helped the company grow its reach (as people often thought the video was worth sharing further) and generate significant curiosity around the value proposition of their products, another of the keys of success for Dollar Shave Club initial growth (till their acquisition by Unilever) was their ability to generate consumer engagement on social platforms. Dollar Shave Club clearly leveraged some of the newest opportunities coming from the new digital advertising world.
Changes in the advertising industry
With the rise of the internet, advertising became much more driven by technology. Statistics on average time spent by consumers on media show some very clear trends i.e. (1) time spent on TV is decreasing significantly (-18% between 2010 and 2019) and (2) time spent on Digital is increasing exponentially (+129% between 2010 and 2019).
This technology disruption created opportunities and risks for advertisers. More specifically, while advertising performance pre-digital was highly dependent on budget/company size (largest advertisers had scale benefits in TV deals and access to specific opportunities), in the new digital world there are no scale-related entry barriers in reaching consumers. In fact, platforms like Google and Facebook flourished exactly with small advertisers being able to run digital marketing campaigns in simple ways. Similarly, as the pricing on these platforms is auction-driven, there is no advantage in having large budgets, vs. having the right technology and media understanding.
Dollar Shave Club leveraged changes in the advertising industry
Dollar Shave Club is one of the best examples of companies that leveraged all of these dynamics to their own advantages. Their success would not be possible without their ability to ride the wave of transformation of media, with digital becoming a tool that can help reach consumers at a fraction of the cost versus more traditional channels. On top, they were able to craft a message and create a community of people that is always engaged in social platforms and via targeted CRM initiatives. As a use-case, if a member posts about the brand on Instagram or Facebook, Dollar Shave Club share their favorite posts and reward members with merchandising. Or similarly, the power of speed and scale of digital was used to run word-of-mouth campaigns among users. Said differently, they could leverage all forms of digital advertising to talk to users in a targeted way and with relevant content.
Importance of relevance and engaging content
Relevance was in fact one of the key components of such a fast grow. Recent statistics reveal that “today Americans (and most folks in modernized countries) are bombarded with advertisements”, with people exposed to 4,000 to 10,000 ads per day. In such environment, as quoted also by Forbes, “At some point, we start a screening process for what we engage with and start ignoring brands and advertising messages, unless it’s something that we have a personal interest in”. Relevance is becoming of utmost importance for advertisers, with the ability to target consumers in more sophisticated ways, so that the right messages are delivered to the right people, with a higher likelihood to be interested in the products/services, and consequently express higher propensity to buy.
Dollar Shave Club leveraged the digital advertising disruption to disrupt the grooming industry. They developed a much stronger relationship with their audiences, as internet traceability enabled such long-term connections. The ability to master such a complex digital advertising ecosystem made a difference for the Dollar Shave Club ability to become a credible challenger in an established FMCG space.