February 3, 2021

The rise of CDPs and the opportunity for DTC brands

minute read

Leaders in the direct-to-consumer industry are adopting Customer Data Platforms (CDPs) like Lexer to genuinely engage their customers and drive profitable growth. We spoke with ecommerce expert and thought leader Brian Lange of Future Commerce to learn more about the key drivers of CDP adoption and what this means for the future of ecommerce.

Digital commerce, once a mere tool for increasing the reach and convenience of the shopping experience, has evolved both by nature and necessity into a significant component of the human experience. Consumers are increasingly prioritizing digital spaces over physical ones for shopping, learning, working, playing, and living authentic lives.

These new consumer behaviors—accelerated by phenomena like the COVID-19 pandemic—have provided brands and retailers with a massive influx of new customer data. Subsequently, many leaders in the DTC industry have adopted CDPs to make good use of this data for deep customer insights and personalized engagement.

To help understand the rising popularity of CDPs among brands and retailers, we spoke with Brian Lange, co-founder of Future Commerce, a retail media research startup focused on helping ecommerce businesses create strategic vision. The recently-released 2021 Vision Report details some of the consumer trends, cultural phenomena, and modern developments in ecommerce that will shape the industry moving forward.

“Going into 2021, deep customer relationships should be the ultimate goal,” says Brian. “In fact, the customer should supersede the brand every day of the week—and the beauty of a CDP is that it will be one of the largest differentiators for brands in 2021.”

Along with the rise of CDPs, we discuss hidden opportunities for DTC brands, examples of brands offering exceptional customer experiences, predictions for the future of ecommerce, and more.

In an increasingly customer-focused industry, CDPs will be an essential tool for success.

According to Brian, the evolution of ecommerce has grown from basic digital cataloging to proactive and personalized engagement.

Early ecommerce websites acted as product catalogs where customers could browse and buy on their own. Later, brands began investing in the searchability, usability, and visual appeal of their websites. Today, brands have realized that the digital experience needs to go beyond design and usability; instead, the digital experience needs to support genuine, human relationships between brands and their online shoppers.

“The only way to do that online is to have customer information available to you in a format that actually makes it a relationship,” says Brian. “A CDP will empower you to have that sort of relationship with your customer and be able to keep track of the things they care about. That way, you can give them relevant suggestions, they don’t have to repeat themselves to you all the time, and your customers can look at your brand as something that, instead of speaking at them, is actually speaking with them.”

Speaking with—not at—your customers is a critical component of successful engagement, one that’s both constructed and conducted by data. In 2021 and beyond, brands need to evolve into effective wielders of customer data to power two-way connections, conversations, and experiences that look and feel genuinely human.

With greater insight into the psychology and behavior of your core customer segments—including which segments have the potential to become long-term, high-value customers and which segments are more likely to only shop during a discount or a sale—you can improve the relevance and timing of your communications across every touchpoint to maximize engagement.

“I get so many emails flooding my inbox from brands that are speaking at me and I ignore them all,” says Brian. “What I want is information that’s relevant to me. Email, the shopping experience, the customer service experience—all of these things have the opportunity with a CDP to speak to customers in a relevant way as opposed to an irrelevant and impersonal way.”

One brand that does this particularly well is Naked & Famous Denim. Their emails are incredibly relevant and industry-specific, built for true denim “nerds” or enthusiasts.

Brand “nerds” and enthusiasts are your highest-value customers.

These enthusiasts, Brian argues, can be found for any brand in any industry. In a maximalist consumer environment he describes as “the Enthusiast Economy,” enthusiasts are customers who become obsessed with a particular industry and take a vested interest in buying as much of the coolest, highest-quality product as possible.

“Nobody likes to feel inauthentic, especially in 2021,” says Brian. “We’ve all had time to obsess over things. There will be signals that certain customers are the type of customers who obsess over things, so one of the use-cases for a CDP is looking for those signals that demonstrate whether or not someone’s going to become an enthusiast for your brand. Then you can start to get really relevant with them.”

The outdoor industry is a great example of this. Typically, outdoor enthusiasts begin with an amateur-level interest in a particular outdoor activity and slowly ramp up their interests as they gain deeper, more sophisticated expertise. As their expertise increases, so do their needs as customers.

“Usually people don’t start by hiking all the way up Mount Rainier, which requires ropes and ice axes and sub-zero clothing and things like that,” says Brian. “Usually they’ll start with a hike up their nearby thousand-foot climb, so they’ll probably just need some good shoes and clothing to keep them dry. If someone comes to your website and you don’t know where they sit between Rainier and their local nature trail, how in the world are you ever going to sell to them?”

Furthermore, how will you avoid over-selling to them?

Over-selling, Brian argues, is something brands need to be mindful of to properly serve their customers. Instead of just selling to people with the primary goal of growing sales, brands should meet customers where they are and focus on providing products and services that actually meet their needs.

For example, you may have some customers who only purchase from your brand when they’re buying gifts, so having information about their loved ones will help you tailor your gifting messages accordingly. In other industries, such as apparel, you may need to know information about customers’ body types and styles in order to make relevant recommendations. Homegoods brands would benefit from information about customers’ homes, and so on.

With a deep understanding of your industry and your customers’ buying motivations, you can take a proactive approach to customer engagement known as clienteling. Offering tailored products and services that fit customer needs, goals, and lifestyles leads to happier customers, higher profit margins, and faster business growth.

Increased access to customer data will transform customer service teams.

This consultative selling approach creates an opportunity for transforming customer service teams into what Brian describes as “customer experience” teams. By empowering customer experience team members to understand customers’ needs and preferences, build genuine relationships with them, and sell them quality products that fall within their budget, you’ll improve not only customer happiness but also customer profitability.

“Customer service is probably one of the biggest opportunities for CDPs,” says Brian. “If customer service reps can become true sellers—especially when we’re in a pandemic and we’re no longer able to sell to people in store and in person—if we can empower them to provide that same level of in-store interaction but online, we’re going to see an increase in sales naturally because we’re doing a good job of selling.”

Care/Of, a custom nutrition brand, is a great example of a brand that puts the customer’s needs first. Their homepage features an in-depth quiz about customers’ bodies and health that helps them understand exactly why their customers are purchasing and which vitamin and supplement packages to offer them.

The responses to this quiz are known as first-party or zero-party data. Zero-party data consists of explicit information about preferences, purchase intent, personal interests, and other details that consumers freely and proactively share with brands in exchange for more relevant brand interactions. In response to growing privacy concerns, brands are prioritizing first-party and zero-party data to improve the customer experience with the customer’s clear and documented consent.

Third-party data is still useful, of course, but brands need to be mindful of which data is appropriate for which types of customer interactions and provide team members with consistent documentation on how, when, why, and where to act on these insights.

“Giving people access, permissions, and documentation of what to do with the data in whatever job role they’re in is really important, so you don’t end up misusing the data in a way that compromises you,” says Brian. “Privacy is really important right now, so you need to create that sense of: We care about you, you’ve provided us with information that’s personally relevant to you, and we’re going to take care of you like we would a friend.”

With an emphasis on privacy, customer care, and consistency across channels and touchpoints, brands can provide exceptional, future-focused customer experiences that drive results.

The future of DTC is elaborate, absurd, entertaining, and digital.

If 2020 taught us anything, it’s that the success of a business depends on one thing: The customer.

Today’s customer wants authenticity, connection, and entertainment from their favorite brands. In the coming years, these customer needs will manifest as dramatic changes to the DTC industry.

One of those changes will be the rise of maximalism, or the consumer behavior of building on interests in bigger, better, more elaborate ways—often to the point of absurdity.

“We’ve been so hyper-focused on minimalism for so long, but what we didn’t realize is that this has only made a tiny dent in our psyches,” says Brian. “Actually, maximalism has never left and it’s back on the rise. So we take things to the extreme and the absurd and we make fun of ourselves for doing it because we know we should be minimalists.”

Along with this maximalist, absurdist movement—exacerbated, like many ecommerce trends, by the pandemic—customers will continue to expect entertainment from their shopping experiences. To meet these expectations, successful brands will need to approach customer communications as a kind of performance art, à la YouTuber-turned-brand-ambassador MrBeast or MSCHF, a brand that “runs on structured chaos” to sell viral products.

The need for these types of performances stems from the isolating nature of digital commerce. Unlike in-store shopping, which can be tactical, social, and entertaining in its own right, online shopping is solitary, monotonous, and, in a COVID-affected market, a little bit depressing. Brands need to rethink both the digital and the physical shopping experiences they offer to emphasize empathy, community, and optimism.

“Brands need to bring people together while they’re entertained,” says Brian. “Shopping while live streaming, shopping with influencers, creating more connection and community as we shop online, and building out systems to do that will be important.”

Ultimately, today’s customers are looking for brands worthy of their enthusiasm, engagement, and money—and acquiring and retaining those customers will be a matter of rising to the occasion. Brands need to give their customers a reason to rave about their products by using data-driven strategies and deep customer knowledge to power seamless, genuine shopping experiences.

Because after all, the act of making genuine, one-to-one connections is the very best of what it means to be human.

Interested in learning more about how CDPs fit into the future of ecommerce? Use the calendar below to book a demo with one of our ecommerce experts.

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Elizabeth Burnam
Content Marketing Specialist
Elizabeth Burnam is a content marketer and a poet at heart. She has a degree in Professional Writing and experience developing high-impact marketing assets for a broad range of industries.Outside of work, she enjoys reading, painting, people-watching, and exploring the natural wonders of Vermont.