Recent years have reshaped the business world. D2C brands and eCommerce stores are revolutionizing traditional business activities. They directly communicate with the end-buyers, eliminating the tier structure in business. While 82% of buyers admitted to shopping from D2C brands, becoming a D2C brand is good.
However, the growth in the D2C market is challenging. India alone has approximately 800 D2C brands. To purchase your product, consumers must have a demand for your product, trust the brand, and only then sales happen. Let’s understand how to select the right product for your D2C brand.
The heart of D2C branding - Value Proposition
When manufacturers with a fixed client base turn into D2C brands, they struggle to achieve recognition. Their audience treats them as new players in the industry with a generic product as they would be unfamiliar with the brand.
Each product and brand must have a unique value proposition. Unlike traditional markets, competitive pricing alone doesn’t work in the D2C market. Instead, marketers must provide a unique addition that addresses the consumer’s pain point.
Lack of originality and creativity in the product points towards weak market research. Acclimatizing this new era of D2C business requires brands to offer a USP (Unique Selling Point) with their products.
Exporters turned D2C brands... Beware!
Both manufacturers and exporters follow a fixed business model. Exporters don’t undergo an in-depth understanding of the end user or extensive marketing since they cater for a selected client base. The B2B industry needs help understanding the D2C environment.
For D2Cs, research comes before the product. They follow an intricate STP (Segmentation Targeting and Positioning) strategy before narrowing down on their product. The detailed model involves research to understand who you market your product to and how.
A thorough competitor analysis and market demand identification will aid D2C brands in identifying their value proposition. The product should either solve a problem in the marketplace or add to an existing solution with a fresh outlook.
Pricing your product
1. Non-FMCG industry
Non-FMCG D2C brands selling luxury or rare purchases need a 100% margin to survive. High margin is required because these brands face extreme costs in the introductory stage as the Customer Acquisition Cost (CAC) is high along with the indirect costs(logistics, packaging, etc.,) for the brands. The Non-luxury brands take the most hit because, at some point, they have to come up with competitive pricing as well.
Contrastingly, CAC is lesser for brands offering luxury items. Buyers for this market are constricted, and targeting the market is more cost-effective.
2. FMCG industry
Pricing in the FMCG industry is characterized by high margins and increased Average order value (AOV) strategies. Therefore, the product should offer an appropriate value proposition and fulfill significant consumer demand.
Generally, FMCG businesses use attractive bundle offers and pricing to boost the AOV and reduce the CAC. Consumers are more likely to buy these smaller items in a bundle since they use them regularly and hence, for restocking.
Life-saving strategies for D2C branding
1. When introducing a new product
The new product should fall under a sub-category of your existing product. Launching new products this way, the brand doesn’t need to spend much on CAC as it can cross-sell the new product to its existing customer.
Launching products this way is named the Bowling Strategy. Products introduced this way remain in the same market without affecting the sales of the existing products.
Example: If protein powder is in the existing market, the new product can be protein bars or snacks made with protein powder.
2. When holding a market with existing players
Before entering a market with existing players, the product’s life cycle should be carefully noted.
Every market follows the Gartner Hype Cycle. The item meets incredibly high but short-lived demand initially, ending up with a stable, slow rise in demand. D2C brands entering the market, particularly after this stage need a unique Value Proposition not only to stand out but to survive.
Example: Printed T-Shirts. The market was new in the 2010s and had high demand. It followed the curve and increased exponentially, dying before the 2020s. Now, companies are collaborating with different movie franchises to stand out.
3. When diversifying an existing market:
Expert marketers often follow the Blue Ocean Strategy to enter an existing market and open a new demand segment. The model involves stepping into the market with differentiation and lower costs as well. This unique proposition creates a new market space within the existing one.
Example: We, at Onceptual Business Solutions, stirred up a new demand for our client Befli – A Women’s loungewear brand, by identifying a micro-category within their brand. Our experts studied their nightwear collection and discovered the “Plus-Size” market. Since this micro-category has minimal competition and high demand, it turned out to be a great hit.
Want to begin an interesting and profitable journey for your brand too? Let’s connect!