Latest / The DTC Marketing Podcast with Fexingo: Direct-to-Consumer Brands, Shopify, and E-Commerce Growth / Why DTC Brands Are Abandoning Broad Targeting
Transcript
- Lucas: Look, if you have been tracking the direct to consumer space closely this quarter, you have probably noticed a strange silence around the big performance marketing plays. We used to talk about scaling audiences based on demographics or simple interest clusters, but by October 17th, 2026, that playbook feels dangerously obsolete. Luna: It feels less like obsolete and more like actively harmful for anyone still burning cash on broad interest stacks. I saw a report last week showing CPMs for general lifestyle interests have doubled year-over-year compared to two years ago. Lucas: Exactly. And it is not just about the cost per mille being high. It is about the signal to noise ratio being so low that your algorithmic models start guessing instead of optimizing. Take Glossier as the primary example here. They spent years perfecting the art of the broad beauty enthusiast tag, but their recent quarterly filings show a deliberate, painful retreat into much tighter psychographic buckets. Luna: I remember when they were everywhere. Now they seem to be focusing almost entirely on specific skin concerns and sustainability values rather than just age or gender. Lucas: Right. And that shift is happening across the board, not just with legacy DTC winners. Even new Shopify merchants who launched in 2024 are finding that broad targeting yields such poor return on ad spend that they are forced to niche down immediately. The data suggests that audiences defined by shared behaviors and deep values outperform those defined by generic interests by a significant margin. Luna: So we are moving from who people are to what people actually do and care about. That requires a totally different creative approach though, doesn't it? Lucas: It does, and this is where most founders trip up. You cannot just take your broad hero video and shrink the audience. The creative itself has to speak to that specific psychographic identity. If you are targeting people who prioritize zero-waste living, your imagery needs to reflect that reality without sounding like you are preaching to the choir. Luna: Yeah, because if you sound preachy, you alienate the very people you are trying to recruit. It has to feel authentic to their existing identity. Lucas: Precisely. Let us look at Allbirds. They had a massive push into broader footwear categories recently, trying to capture everyone who buys casual shoes. But their internal metrics showed that the customers acquired through broad targeting churned much faster than those acquired through specific outdoor activity groups. Luna: That makes sense. People buy hiking boots for hiking, not just because they like walking. The intent is clearer. Lucas: The intent is clearer, but the volume is smaller. So the math changes. You accept lower top of funnel volume in exchange for drastically higher customer lifetime value. For a long time, investors wanted pure scale, but in this current economic environment, profitability per user matters more than total reach. Luna: So the pressure to grow at all costs is finally giving way to pressure to grow sustainably. That is a huge cultural shift for the industry. Lucas: It is. And it forces brands to become better at storytelling. When you target a broad audience, you can get away with vague aspirational messaging. When you target a niche, you have to be specific, accurate, and deeply relevant. One wrong word can make you look like an outsider trying to sell them something. Luna: Which means your product development has to align with those niches too. You can't just market differently if the product isn't built for them. Lucas: Absolutely. This is where product-led growth intersects with marketing. If you are building a shoe for trail runners, your marketing should highlight durability and grip, not just style. The features drive the message, and the message filters the audience. It creates a self-reinforcing loop of quality engagement. Luna: I think a lot of brands are realizing that their customer support teams hold the key to these psychographic insights. They hear exactly what people care about every day. Lucas: That is a great point. Your support team knows why someone returns a jacket. Is it the fit? The fabric? The color? That qualitative data is gold for refining your psychographic segments. Most companies bury that data in tickets, but forward-thinking DTC brands are mining it for campaign insights. Luna: It seems like a much more honest way to run a business. Instead of guessing what people want, you listen to what they say they need. Lucas: It is more honest, but it is also harder work. It requires humility to admit that your initial broad hypothesis was wrong. You have to be willing to cut campaigns that were once your best sellers if the underlying audience has shifted or saturated. Luna: Cutting your best sellers sounds terrifying for any marketing director. How do they justify that to stakeholders? Lucas: By showing the marginal cost of acquisition versus the marginal revenue generated. If your broad audience is becoming expensive and unloyal, keeping it alive is actually destroying your overall margin. It is a defensive move to protect the profitable core. Luna: So you double down on the profitable niche and let the broad traffic bleed out. That is a bold strategy. Lucas: It is bold, but it is becoming necessary. The platform algorithms are getting smarter at finding your ideal customer anyway. If you give them a very specific seed audience, they will find more people like them. Broad targeting actually confuses the algorithm sometimes. Luna: Because the signals are mixed. You tell the AI to find people who like coffee and yoga, and it gets confused between the morning ritual crowd and the wellness crowd. Lucas: Exactly. Those are overlapping but distinct psychographics. By narrowing your focus, you give the algorithm a cleaner signal to optimize against. It stops guessing and starts executing. Luna: This feels like a return to basics. Community-driven brands from twenty years ago did this naturally because they only had local distribution. Lucas: They did. They couldn't scale broadly, so they scaled deeply. Now, technology allows us to scale deeply at a global level. That is the real innovation here. It is not going back to the past; it is using modern tools to achieve that old-school intimacy at scale. Luna: I love that framing. Scaling intimacy. It sounds contradictory, but it makes perfect sense for the DTC model. Lucas: It does. And as we move further into Q4, I expect to see more case studies from brands that made this pivot successfully. The ones that stick to broad targeting are going to struggle with margins, while the nichers will likely show stronger retention rates. Luna: We will definitely be watching those Q4 results closely. It might define the next wave of DTC success stories. Lucas: For sure. And speaking of what keeps these conversations going, we want to be transparent about how this show operates. We do not run ads, and we rely entirely on listener support to keep the production quality high and the research thorough. Luna: If these marketing conversations have sparked something you've actually used, consider supporting us directly. A small group of listeners already chips in monthly through buy me a coffee dot com slash fexingo, and that is literally what funds making this many of these episodes possible. Lucas: It helps us stay independent and focused on the topics that matter, rather than chasing sponsor dollars. We appreciate every contribution, no matter the size. Luna: And with that, back to the strategy. Do you think this niche focus will eventually force bigger brands to split into sub-labels? Lucas: I think it already has. Look at how major apparel conglomerates are launching specialized lines for specific activities. They are essentially creating internal DTC brands to capture those psychographic pockets without diluting the main house brand. Luna: So the big players are learning the same lesson: specificity wins. It is not about being everything to everyone anymore. Lucas: Not in this market. Being everything to everyone is a recipe for mediocrity. Being something vital to a specific group is a recipe for loyalty. That is the trade-off we are seeing play out right now. Luna: It is a brave choice for a founder to narrow their scope, but the data suggests it is the only way forward. Lucas: It is. And as we close out this episode, I am curious to hear from our listeners. Have you noticed your own favorite brands becoming more niche in their messaging? Or are they still trying to cast a wide net? Luna: We would love to hear your experiences. Sometimes the smallest communities have the strongest voices, and your feedback helps shape these discussions. Lucas: Thanks for listening. Keep an eye on those niche signals, and we will catch you on the next one.