At a time when millennials are at the forefront of driving change in the economy, more and more businesses are going in the direction of removing intermediaries and the growing popularity. This strategy is changing the overall business landscape.
We recently hosted Bharat Sethi, Co-founder of Rage Coffee for an online meetup on D2C marketing strategy.
This blog highlights the key takeaways from the meetup to help you understand what goes behind implementing a D2C marketing strategy, how Rage Coffee did it & how you can adopt this strategy for your brand too.
But before we go ahead, let’s understand how D2C has evolved over the years.
What was D2C five years ago?
D2C wasn’t an easy option five years back. Producing in-house was more expensive. Marketing and distribution of the products was a challenge as most people did not trust e-commerce channels.
Because of the boom in e-commerce (thanks to Amazon, Shopify and eBay), individual businesses were able to make the best out of it.
2020 saw the biggest jump in e-commerce sales. The USA saw its online sales increase from 16% to 27%(of total retail sales) in just 8 weeks.
This wouldn’t have been possible 5 years back even if there was a pandemic around.
Looking at India’s retail sales, e-commerce sales in 2015 accounted for less than 1%. And this number is expected to increase in the coming times as most people will consider online shopping compared to going out.
Rage Coffee is building the next generation of packaged coffee products and is the first mover in India to introduce flavour infused coffee.
Since they adopted a Direct to consumer marketing strategy, it allows them to be highly customer-centric and sustainability-driven.
Choosing D2C over the Traditional Supply Chain
In a traditional supply chain, companies partner with producers, warehouse owners, distributors, and retailers to deliver their products to the end customer.
Whereas a Direct to Consumer brand has none of them. They produce and distribute the products by themselves.
Direct to Consumer marketing is a way of directly reaching out to the consumer, usually through an online medium. In other words, it removes the intermediaries which give the brand full control over production, supply and end to end customer experience.
From the production to delivery, Rage Coffee controls their end to end process.
They have their own production plant, warehouses and delivery agents and also do their own marketing and advertising.
Removing the traditional barriers gives them the freedom of producing, branding, marketing and targeting their customers in their style.
Benefits of D2C
By cutting the complex network of resellers, your brand gets more control over its margins.
D2C brands market their products online to reach a wider spectrum of audience. Their focus is on leveraging their social media presence which builds brand awareness.
Higher brand awareness ultimately results in higher margins.
Rage Coffee markets its brand vigorously on social media platforms, especially on Instagram. They believe having a focus on one platform and nailing it is more important than having a presence on different platforms and being average.
Rage Coffee also uses a lot of user-generated content that helps them in increasing their online presence and customer engagement.
The absence of middlemen results in acquiring customer information directly. Customer data is extremely important in D2C as it helps in knowing the geographical and socio-economic data.
Having more data, helps you improve your marketing techniques and product placement.
Rage Coffee did this by directly going to potential customers and making them try free samples at first. Now they have shifted to collecting data through online channels (website, Instagram).
This is directly related to collecting customer data.
The more information you have about the customer, the better you can design your product around their wants and needs.
Here’s how Rage Coffee used this to their advantage.
They recently came up with an innovative packaging by launching portable coffee tubes (that look like test tubes) with a single shot of instant coffee.
Now their customers can carry their coffee anywhere with ease which was not possible with the big coffee bottles.
Understanding their users’ needs helped them to come up with a better design for their product.
The Pillars of a D2C Brand
Without customer data, no D2C brand can be successful. Data is the strongest asset a new brand can have when it comes to competing with big established brands.
As mentioned earlier, Rage Coffee is highly focused on collecting qualitative and quantitative data that helps them better their product.
Superior customer experience
Another pillar that makes D2C brands stand out is their customer focus.
Giving customers an experience that they haven’t had anywhere else makes D2C brands automatically stand out from their competition. Customers value the product and brand more and eventually become brand loyalists.
Rage Coffee gives high attention to customer wants, making sure their customers are satisfied with the product.
It’s their policy to refund the customer’s money (without question) if customers don’t like the product.
This combines data, customer experience & marketing. The way you narrate your brand’s story and engage customers is all in your control.
You set the voice and tone of your brand and decide the way you want to control all the steps in the customer journey to give them the best experience.
Looking at Rage Coffee’s example, you can see that they’ve maintained a consistent tone and personality of their brand on all their social media channels.
Having consistency on all platforms is essential when your brand's strategy is focused on being digital.
How can you make your brand stand out?
Introducing just another product in the market will not make your product stand out. The market is already filled with different versions of the same product.
Your D2C products have to be ‘fundamentally differentiated’ and have a USP or customers won’t value them.
Rage Coffee not only came up with different flavours infused in their coffee, they also launched brand new travel packs. Both of which are first in the Indian market.
The cost of D2C products is relatively low, as the complex networks in the middle are eliminated and the business directly deals with the customers.
With more businesses shifting to D2C the cost is said to reduce further.
Rage Coffee is unique in the Indian coffee market as no other brand produces the same type of coffee. Yet, they have kept their pricing reasonable to target a mass audience.
High customer focus
D2C brands get direct feedback from the end customer which can help them in improving the product and offerings. This strengthens customer relations, making them loyal customers.
How Rage Coffee acquired its brand loyalists?
Rage Coffee acquired their loyal customers even before launching their product.
They gave out free samples to people in malls and asked them for customer feedback. This helped them in direct customer interaction and collecting customer data.
Doing a Market Research
Before launching their product, Rage Coffee did market research for one year.
They studied consumer behaviour when they gave out free samples and analysed their reactions.
Focusing on the following points is important for a D2C brand:
Before bringing any new product in the market, understand where your product stands.
This is critical for the business’s success.
Market understanding not only includes R&D but also how to go about the production, packaging, marketing, channels of distribution and product placement.
LTV & CAC
Understanding consumer acquisition cost (CAC) and lifetime value (LTV) of your potential customers are very important for the early success of a business.
Nailing these will result in the creation of long term wealth for your brand.
Understanding Consumer behaviour
Analysing how consumers react to the new offerings will help your brand to make changes before you have invested a lot in a product that is not liked by customers.
Fundraising for your D2C Brand
Fundraising for a D2C brand is no different than fundraising for a tech venture. But there should be a lot more focus on sales and profitability from the get go for D2C brand owners if they're chasing venture capital.
According to Bharat:
“If you can stay away from fundraising in the early days of your brand journey, it will be better for you and the business."
D2C business owners should choose this strategy to have a more in-depth understanding of their customers, their offerings, their cost structures and market size.
As we see more and more companies and businesses shifting towards D2C business model, we will also see how the current businesses will be disrupted and how the value of intermediaries will decrease.
As consumers become more aware about the products, they will demand more transparency. D2C strategy is preferably better for this compared to the traditional strategies.