Siddharth Dwivedi
D2C brands are killing it.
If you’re reading this, I assume you already know what a D2C business is. Or you have heard about the term and are trying to understand how it works. So, before we even begin, I’d like to tell you what a DTC brand is.
What is a direct-to-consumer brand?
A direct-to-consumer (D2C or DTC) brand is a company that create, advertise, sell, and ship their products themselves, without the use of middlemen.
How’s a D2C business different from a regular consumer brand?
A D2C business makes and transports its goods directly to customers. No distributors, no other retailers–they ship their product directly to the customer.
To get more sales, a D2C brand also leverages marketplaces (think Amazon, Nykaa, Myntra, Flipkart, etc) to reach more customers. The sales process is low in complexity, less reliant on third-parties, more focused on direct marketing, and more tailored to the final consumer.
But if I have to summarize everything in a sentence, here’s what it will look like:
D2C companies manage and own the entire customer experience from beginning to end.
It sounds simple and that’s what makes all the difference.
What marketing strategies does the D2C business model employ?
Manufacturers who go direct-to-consumer have the freedom to advertise their own products (and overall brand) as they see fit — or, rather, as they know would most effectively engage their target audience.
To break it down, even more, D2C businesses have complete control over:
- How they establish ties with their clients.
- What their actual consumers are like.
- And how they provide value to this end-user customer.
One of the main reasons for going D2C in the first place, as we mentioned before, is that traditional retail is failing the modern client. So, it wouldn’t make sense for the D2C business model to simply recreate the same old client experience from the past, would it?
On the contrary, you’ll want to try something new with your marketing strategy and the channels via which you apply them.
Going D2C can help you become more connected and involved with your end-users than ever before, whether that means offering them high-quality, interesting content, giving them more personalized services, or something else.
How can you deliver an end-to-end customer experience while creating a DTC brand?
In addition to customer acquisition, excellent customer relationships must be maintained throughout the customer journey, including after-sales. Conceivably, that’s a well-established rule of the D2C business model.
When Bonobos creator Andy Dunn observed the rise of Zappos, he understood that it had less to do with the items they sold and more to do with providing excellent service.
Bonobos created a culture of super-responsive customer service. They reflect some astounding numbers:
- Respond to 90% of customer queries within 30 minutes.
- The success percentage of “excellent” email ratings is 90%.
- The average email response time is less than 24 hours.
This D2C business model brought a 53.5% increase in direct traffic for Bonobos, which is the highest in the industry, and bagged the Multichannel Merchant’s Customer Experience Leader award for the company in 2015 and 2016.
Numbers that a D2C business must be aware of
As a business entrepreneur, you have a big list of things to accomplish.
You’re a busy individual who’s running advertisements, producing copy, optimizing keywords, managing writers, planning events, and forming partnerships. Most important of them is tracking your KPIs. Whatever industry you might be dealing with, you need to incorporate the following key business metrics in you D2C business model:
- Cost per acquisition
- Average Order Value
- Retention
- The lifetime value of customer
- Referral purchases
- Subscriptions
- Brand mentions & brand searches
1. Cost per acquisition
Cost per acquisition (CPA) is a marketing metric that calculates the total cost of a consumer completing an action that leads to a conversion. It might be a sale, a click, a form submission, or an app download, but in most circumstances, it will be a sale, a click, a form submission, or an app download.
Calculating an effective CPA is essential to any successful client acquisition plan and to your company’s long-term viability.
Comparing your CPA against others in your area of trade is one of the most effective methods we’ve discovered. Keep in mind that this is not a pure science, but it can provide you with an acceptable range of results.
While a lesser CPA is nearly always helpful to your organisation, it’s difficult to define what constitutes a “good” CPA.
CPA bidding appealed to many marketers, particularly those with eCommerce or D2C business models, because it allows them to pay for a particular outcome and compare performance across channels.
2. Average Order Value
Average order value (AOV) is the average dollar amount spend when a customer places an order or make a purchase through your website or in-store.
If the data-driven firms aim to scale their profitability and revenue growth, average order value is a key indicator to keep track of.
Knowing the average dollar spend per order across all of your business channels can help you plan pricing and marketing initiatives to boost that value, which can have a big influence on your bottom line.
The average order value helps companies make better marketing and pricing decisions by offering a window into shopper behaviors.
Businesses can immediately effect revenue growth by boosting their average order value.
3. Retention and Repeat Purchases
If you want to grow a successful business, you must look after your most valuable asset: your customers.
Unfortunately, most organisations are preoccupied with lead creation but neglect customer retention. What a pity!
Of course, generating new leads is important, but keeping current customers should be your first priority. Because, according to various studies, current customers account for 68% of sales.
User retention is not only less time-consuming than customer acquisition, but it also increases customer royalty and lifetime value.
Building your business model around customer expectations by building trust through quality service, getting to know the pain points of customers, active complaint addressal system, and keep them updated and informed of your new initiatives, are few of the places to start with.
4. The lifetime value of customer
Customer Lifetime Value (CLV) is one of the most important key performance indicators for determining the value of your customers over time.
Suppose, if you sell online courses and charge a monthly fee, for example, you’re more concerned with the lifetime value of each customer who buys from you now than with new customers.
Obtaining a customer necessitates a significant investment of time and money. As a business owner, you’ll want to know how much each of your consumers contributes to your bottom line. It’s known as consumer equity.
Some of your consumers would have contributed more value to your business than others. Some people will always want to buy again from you. Your VIP customers are those who buy from you on a regular basis.
These are the same clients who will spread the information about your company through word of mouth.
The value you place on your clients helps you project revenues and set a budget for consistently offering relevant content.
5. Referral Purchases
Let’s play “Who Do You Trust?
Those top-of-the-page bought results, or your sister? That YouTube banner, or recommendation by your college best friend?
I think I have made my point.
We all have a higher level of trust in our family, friends, and even strangers than we do in marketing and companies. Recommendations, reviews, testimonials, social media chatter, and, most crucially, referrals all have an impact on us.
When it comes to doing business based on referrals, trust or lack of trust, is the most important factor to consider when deciding whether or not to suggest a firm or its services.
There are many methods for businesses to earn or lose their customers’ trust, and the majority of them are founded on the principle of honesty.
Keeping commitments builds trust: this refers to the obvious phrases like timely delivery, honest marketing messages, completing obligations, and providing respectful services. If promises are not kept, confidence will quickly be lost.
Referral marketing can help you stand out from the crowd in your industry—as long as you do it correctly.
6. Subscriptions
The subscription business model is a concept in which a consumer pays a recurring charge for access to a product or service at regular intervals.
This is, however, more than a simple financial transaction between a customer and a company.
Companies are changing the way they do business, and there has been an explosion of new business models in the last decade.
Netflix, Amazon Prime, Uber, Spotify, Salesforce, Zendesk, and Box are all geared to keep customers engaged in long-term partnerships.
However, you can’t merely sell a product for a low monthly fee and call it a service if you want to succeed in the Subscription Economy.
Companies must reconsider what they deliver and how they deliver it entirely. Subscription based business model is centered around building relationships.
Customers are choosing to become subscribers because those subscription experiences are based around the types of services that better suit a consumer’s demands in a way that static services or a single product offering can’t.
7. Brand mentions and brand searches
All that said and done, we circle back to something that is obvious and of paramount importance- your online presence. In broad spectrum of things that revolves around your brand mentions and brand searches.
Even without a hyperlink, when other bloggers and sites mention your product or service, such mention helps your website rank. The more often this happens, the more likely you are to rank higher than your competitors.
Keeping your brand mentions at the top of the page eliminates bad PR, allowing you to maintain a positive image and identify potential contributors. A well-placed reference increases the amount of attention your company receives.
More customers will feel secure in using your solutions and services if your brand is very consistent and clearly recognized. It is that simple.
When it comes to increasing your brand presence, practically every entrepreneur has the same question: should I bid on my branded search terms?
The answer is usually the same: branded paid search is critical since organic listings cannot generate the same volume of traffic on their own.
Brand search advertisements boost a brand’s authority while keeping competitors’ advertising at bay.
Users that search for brand terms are, on average, the most knowledgeable buyers and thus the most inclined to buy your product.
We’ve discovered time and time again that when sponsored and organic listings appear together, both the ad and the organic listing receive incremental clicks.
Conclusion
Pandemic has contributed most in shaping markets and consumer behavior more towards online shopping. Customers prefer online shopping and more from the brands themselves directly. This is what forms a base of the D2C business model.
D2C brands leverage customers’ insights, their purchasing patterns, and demographics to drive up sales by providing a more personalized shopping experience. This helps them align their marketing and product plans with the needs of their customers. Above all, success in this field will rely heavily on technology and innovation.
