D2C marketing is a relatively new phrase and space occupied by challenger/disruptor brands but it’s growing enormously, particularly amongst B2B manufacturers. Why? Well as supply chains are disrupted, inflation grows, margins are squeezed and customers increasingly adopt digital channels – the gap between ‘traditional B2B’ businesses and B2C closes.
Brands that primarily rely on supermarkets, retailers, marketplaces and distributors to sell their products are really at the mercy of these partners. D2C means as a business you have a ‘direct relationship’ with your end user/customer, you acquire these customers yourself and have a customer database - ultimately you have more control of your own destiny.
BUT…D2C (particularly E-commerce) is not for the faint hearted. Amazon (90% of UK shoppers used it in 2021) has made consumers expect the Amazon slick online user experience (UX) and quick + cost effective delivery from every supplier.
Many business sectors are experiencing significant growth in D2C sales.
Source: Statista- Projected growth in D2C sales in the United Kingdom (UK) in 2023, by goods category
The most significant change with the D2C model is the economics. The cost of acquiring customers online can be relatively expensive. This will improve as the operation scales and your marketing mix is refined but brands that just rely on ‘paid channels’ like Google ads and Social media will typically fail as competitors react and it’s a race to the bottom. You also need lead generation and web traffic from low cost sources which is where earned social media, SEO and marketing to your existing customer base all play a critical role. As a general rule, you are likely to have a better chance of success with D2C if your margins are already pretty high and where there are opportunities to significantly reduce your CPA (cost per acquisition) over time and really grow your customer lifetime value.
Be prepared for a more demanding customer, Amazon has raised the expectation for all consumers. We now expect competitive prices online, great service, really quick delivery (at a time that suits me), easy returns and responsive after-sales support.
As you develop real D2C scale, you need to ensure that every aspect of your operations is slick and efficient, otherwise you simply won’t deliver the benefits which the customer demands, and at the cost profile that you need. These logistical and fulfillment parameters can often be very different to the B2B relationships you have previously experienced, eg no minimum order quantity, smaller pack sizes, relevant packaging. You have to manage logistics, technology, payments etc., in addition to all aspects of marketing.
Automation and AI will be an integral part of this for many businesses as you track prospects and customer behaviour and automate decision-making to drive customer convenience, eg. replacement coffee pods before you run out, maintenance contracts on appliances.
If you are adding D2C to existing channels (eg. phone, retailers, marketplaces, distributors etc.…) then you are adding more complexity into your business. Customers may expect to order online and collect in-store and will seamlessly browse between channels comparing prices, delivery options and overall value, but surveys suggest that the choice and information is becoming overwhelming and can stifle sales conversion. The provision and transparency of aggregate competitor data presented to customers in ‘simple comparison tables’ ensures your D2C option always represents ‘best value’ and representation of your brand and negates the need for customers to ‘shop around’.
Conversely, developing a new D2C channel can enhance ‘traditional routes to market’ with the benefit of increased brand awareness and ‘customer pull’ that influence B2B leads and improved negotiations with retailers or distributors.Many of the early pioneers of D2C have gone full circle and are now introducing retail flagships to demonstrate the brand experience such as, Hotel Chocolat, Harry’s shaving, Apple’s Genius bar. Putting the end customer at the heart of your business and having a laser focus on driving ‘Customer Lifetime Value’ is the key to a successful D2C strategy. However, the additional challenges it places on your business are not to be underestimated.
If you are looking to transform your business, make it more resilient and ultimately grow profitability, you may benefit from the advice and guidance of experienced marketers who have trodden the D2C path many times. The Marketing Centre offers proven board-level Marketing Directors to facilitate your growth path without the fixed overhead of a full-time resource.
To find out more about the Marketing Centre and how we can support your business, contact: info@themarketingcentre.com. Or reach out to Authors, Tony Orme or Lindsay Ball.