What we can learn from Casper (6 takeaways)

With mattress startup Casper hitting the key milestone of more than a billion dollars  in market valuation, it’s worth taking a pause to see what we can learn from Casper’s success.

There are two ways to look at this: how up-and-coming DTC brands can learn from Casper’s success, and how traditional brands and retailers can better address the growing DTC threat.

DTC brands looking to grow beyond cult status

Assuming a DTC brand has a core following of loyal customers, addresses a key pain point, and has world-class customer service, there are thee three things to take into consideration in attempting to jump to the next level:

Lifestyle focus – Similar to most DTC brands, Casper initially kept a narrow focus on a single product set – mattresses. While this narrow focus allowed Casper to aggressively address the friction points in the traditional mattress purchasing process, it also left question marks as to Casper’s ability to keep customers coming back and to address competition from other DTC mattress brands that were quick to emulate Casper’s success.

The answer was for Casper to pivot the brand to a lifestyle focus on everything surrounding sleep. The ability of Casper to demonstrate its brand expertise in this lifestyle space allows it to expand the brand exponentially.

DTC brands thinking through their growth path will need to address this similar juncture and determine what lifestyle scope best aligns with their offering. Once this has been determine, a thorough understanding of customer needs within this lifestyle needs to be developed in order to create a product roadmap that will most effectively engage customers.

Physical touch points – Casper is planning to open 200 physical stores by 2021. The mere thought that a digitally native brand such as Casper (or Warby Parker, Away, Everlane) would ever consider lowering themselves to physical retailer would seem to be in direct opposition to their digital genesis. Why embrace the inefficiencies of physical retail given their ability to succeed in digital? The answer sheds light on another one of the key hurdles that DTC brands need to navigate – the ability to shift beyond a small, but highly-loyal core audience.

The core audience represents the honeymoon period in any DTC journey. They love the brand, the brand loves them – it’s like Kauai, Bora Bora, or the Amalfi Coast all over again. In the honeymoon period, highly-motivated customers are drawn to the brand and are willing to seek the brand out. This mode of discovery is highly efficient and allows many DTC brands to grow quickly. The problem is that, like true love, it’s hard to replicate this sort of relationship on a large scale. Depending on the category, type of customer, and specific need a brand is addressing, there is a limited runaway for growth.

Casper was already seeing the end of the growth runway when rumors of its growth slowing began circulating in 2017. Casper realized it had to shift its focus beyond core customer. Casper needed to figure out how to engage customers open to the brand story, but not as willing to seek them out, or trust the brand without getting a better sense of what they were about. The ability to physically engage with customers was the key bridge between the “core” and the “casual” customer set and allowed Casper to demonstrate to investors its growth potential.

DTC brands considering engaging in physical retail need to consider three questions before embarking into the physical retail world:

1. Point in growth trajectory – Have I tapped the “easy” growth within my core audience?
2. Narrative – Have I tested my brand narrative beyond my core customers to make sure it will resonate with casual customers?
3. High vs. low Touch – to what degree is my offering considered “high” versus “low” touch?

Mass Media Exposure – Casper and other DTC brands are spending incredible sums on mass media. This is telling as each of these brands initially, and wisely, focused on targeted digital media. The need to expand beyond targeted media links back to the pain point driving Casper and other DTC brands to physical retail – the need to expand beyond the core “seeking” audience.

Traditional brands looking to compete with DTC disruptors

As DTC brands continue to flourish, traditional brands and retailers can use the successes of DTC to consider ways to rethink their own offerings.

Pain point focus – Every DTC brand was conceived and produced growth through its ability to address a key pain point (friction) in the traditional offering of this category. Brands that have traditionally focused on either competitive offerings or customer evaluation of their offerings (via metrics like net promoter score) are shifting their focus to deeper understanding of customer needs and pain points within the broader context of the category they are focused on. This allows brands to create a value/friction mapping of the customer experience which will point to the best areas of innovation for their brand.

Customer service ­– Over the top customer service is a hallmark of DTC brands and a hard one for traditional established brands to address. The difficult thing for traditional brands to reconcile in this space is that DTC brands are focused on growth, not profit, allowing them to service customers in ways that would not be financially prudent for a traditional brand. Understanding this dilemma and identifying the most pressing customer needs (prioritization) in the service space are essential to traditional brands attempting to keep customers engaged. Chasing every service offering will be a race to the bottom versus identifying the key areas that are most important to customers and are within a brands control.

Brand identity – One of the clearest commonalities among DTC brands is that they have identified and fostered a brand personality that resonates with customers. Traditional brands that have relied on either price/performance, convenience, or some combination of the two are most challenged by this development. Traditional brands wishing to maintain relevancy in the world of DTC need to make sure they have developed a strong brand identity that resonates with key customer segments.  An outgrowth of this is that mainstream brands are utilizing sub-branding more aggressively to create specific identities that resonate with smaller subsegments.  The key to this sub-branding is to “know thy customer” and “how they meet customers’ needs” before embarking on such a branding effort. These base needs are the foundation of creating a brand identity that truly resonates.