3 Foundations for DTC Disruption in the Modern Age

How would you describe disruption in one sentence? At the core, I think it’s simple: It’s giving people what they didn’t know they wanted, in the ways they always wanted it.

Over the past several years, we’ve seen the most well-known disruptors succeed because they remove friction for consumers and deliver value in new ways. What are these disruptors doing to be so successful? It’s about more than just having a great product or service. These companies have a different mentality when building their businesses.

Before they even open their digital doors, there are a few critical pieces they think about. For all their differences, they share 3 foundations in common: they embrace AI & Machine Learning, are purpose driven, and they are built around community. For all the ways that customers are changing, these pillars are helping disruptors succeed today and adapt to whatever the future might bring.

We call these the building blocks of disruption. Let’s take a look at each one and see how leading disruptors are putting them in action in exciting and innovative ways.

Embrace AI and Machine Learning - Free your time to focus on strategy

The first foundational trait we see is that the best disruptors build with tools that help them automate. As digital natives, Direct-to-Consumer disruptors are built for the modern age and cater to today’s consumer. They have been quick to use mobile-first approaches, lean in to data to make informed decisions, and most importantly, leverage machine learning to automate and scale faster. From day one, each has given disruptors a competitive advantage.

Going forward, machine learning will play an even bigger role for disruptors. I’ve written previously on its impact on driving new growth opportunities in marketing. It’s also delivering better customer experiences and even impacting the way brands operate on a fundamental level.

At the core, machine learning is about using automated technologies to process large amounts of data and make informed decisions. In doing so, it’s augmenting human capabilities in exciting ways, and freeing up disruptors to focus on what they are best at—from the strategic to the creative. Brands that have embraced machine learning are seeing some powerful results.

The apparel company, ThirdLove, is a great example of machine learning at work. Since the beginning, ThirdLove leveraged machine learning to enable virtual fitting without tape measures or a store visit. The entire experience is done through their website or app. Customers use the company’s Fit Finder—a series of 10 online questions that can be answered in about a minute—to help find the right bra fit and style for their body.

By using machine learning, not only did the company create more satisfied customers, but ThirdLove also discovered something really insightful about their customers. Through the data gathered, they discovered that more than 1/3 of women fell between bra sizes, something that no company in the industry was accounting for—as other brands only offer full sizes.

ThirdLove saw a huge unmet consumer need and a significant business opportunity. They expanded their bra offerings to offer half sizes, so they now offer over 70 sizes compared to the 35 most bra companies offer. And it’s clearly paid off. As of February 2019, they’re valued at $750M and are on Forbes’ next billion dollar company list.

ThirdLove has also been using machine learning to power their marketing capabilities. According to Megan Cartwright, Director of Data Science at ThirdLove, “The machine learning models we’ve created at ThirdLove not only inform and optimize our marketing spend, they play a key role in our cross-channel marketing strategy.”

Machine learning is transforming how leading disruptors deliver and optimize ads—based on hundreds (even thousands) of intent signals and customer actions. It’s faster and more efficient for gathering insights, testing ads, learning what works and optimizing for the best result. It’s freeing their marketing teams to focus on brand building and customer experiences. Check out the Power 5 Hub to see the outstanding revenues and sales disruptors are achieving. 

?Being purpose driven - Consumers care about more than just the product

The second pillar of disruption is about building a company around a core purpose beyond just making money. The digital era has put corporate transparency at an all-time high: Consumers are noticing what business do now more than ever before.

For example, 62% of consumers said they want companies to stand up for issues they’re passionate about, such as sustainability, transparency and fair employment practices.[1] In a 2018 Cone/Porter Novelli study, 88% of Americans said they’d buy a product from a purpose-driven company, and 85% said they’d support that company in their community.[2]

Many disruptors have made important social issues like these a big part of why they do business. By building their business around a social purpose, they are doing good for the world while creating loyal and satisfied customers. Oftentimes, their purpose revolves around 1 of 3 areas: sustainability, giving back to society or supporting social issues. Let’s look at a great example.

In Spring 2019, the shoe and apparel company, TOMS, launched the Stand for Tomorrow campaign. With a TOMS purchase, customers could choose an issue area that’s important to them, and help direct giving efforts and dollars to the issue area of their choice. Stand for Tomorrow initiatives include giving shoes, ending gun violence, safe water, equality, mental health and homeless services. In just a few months, they reached over 18 million users and have received 98,000 new submissions for these causes.

Like TOMS, brands that explore issues that matter most to customers can find opportunities to make their voices heard and grow their brand. A few other great examples of companies built around purpose are Bombas, Thrive Causemetics, and Pura Vida Bracelets. 

For these disruptors, donating a big portion of their proceeds is fundamental to their business model. They often go further. Bombas directed donations to homeless LGBTQIA+ youth during Pride month 2019. The campaign was so successful they ran out of the promotion’s special-edition socks and shifted all creative to a donation message for the campaign.

When it comes to demonstrating values, standing behind something with purpose creates opportunities for growth—where deeper customer connections create new PR and marketing opportunities, where setting a positive example improves reputations and where ethically-sound practices can differentiate your business. 

Brands have to be thoughtful about trying to make a real impact. It means starting an internal discussion about company-wide values, identifying top issues where you can help and executing with authenticity. 

Being built around community - A competitive moat

The third foundation is about building a community around a brand. It’s not just about selling products to customers. Building a strong community around your DTC brand can also create a significant competitive moat around your business. This is very hard for the largest companies to replicate. The best disruptors also create connections between consumers through their products, and their brand is at the center of it all. This is one of the most efficient and authentic ways for disruptors to build loyalty, develop better products and drive business growth.

By investing in community, marketers can focus on driving loyalty and retention. Community can create word-of-mouth, which makes a big difference. Research tells us that content from friends and family has the highest impact in driving purchase decisions[3]—and that the response is even higher among Millennials. To make progress, disruptors can invest time and resources to build community, start a group to extend the brand where people spend time and be active in both the physical and digital world. 

Peloton is a best-in-class example of community in action. This exercise and media company is built on principles of community, allowing users to simulate the gym workout-class experience from the comfort of their own homes through live-streaming. Their products integrate things like social feed, sharing workouts and taking classes with friends.

One interesting way the company is building community is how they use their Facebook group. The group was started in 2015 by a Peloton customer as a way to connect with other riders. Peloton took notice and asked if they could help actively moderate the group. Since joining, Peloton has used the group to help facilitate deeper connections between users. People often post about success stories, new personal bests and also for product feedback. The company has launched several new product features as a result of listening to their consumers.

Investing in this community has paid off big time for Peloton. In just four years, their Facebook group has grown to over 200,000 members, which represents 146X growth.

The next steps: Building on the foundations

All 3 of the foundations we looked at are important for Direct-to-Consumer brands to thrive in the modern age. Doing each one well puts disruptors in a great position to succeed. For me, each of these will be a big theme that I’ll be exploring in the months ahead. So stay tuned for more posts that will explore each foundation in more detail.

If you’d like to learn more now, check out our Disruptor Annual Report for more keys to disruption and a deeper dive into the 3 we’ve covered. It’s packed with insights on the current state of disruption and on what the best disruptors are doing to win with today’s ever-changing consumers.

[1] Accenture (2018), “To Affinity and Beyond: From Me to We, the Rise of the Purpose-Led Brand.”

[2] Cone/Novelli Porter (2018), “2018 Mission Social Good Purpose Study.”

[3] Stakla (2017), “Consumer Content Report: Influence in the Digital Age.”