According to industry estimates, cost of customer acquisition for digitally native brands which declined to as low as 10-15%, is set to rise as high as more than 50%
As per the estimate drawn by investment firm Avendus Capital, D2C brands could be looking at a $100 billion addressable consumer opportunity in India
Direct-to-consumer brands posted a high growth on the back of lockdown. This further led to a decline in cost of customer acquisition, but that is all set to change now – with offline retail coming back. According to industry estimates, cost of customer acquisition for digitally native brands which declined to as low as 10-15%, is set to rise as high as more than 50%. “It is important to keep the social engagement on an increasing trend, to keep customers engaged. Create communities and conversation around your brand and products. Focus on existing customers and get them to keep coming back and buy more from you and spread the word and refer other users (organic traffic),” Neeraj Shrimali, executive director, Digital Technology Investment Banking Practice, Avendus Capital, said. Also, as return on investments on every marketing dollar has gone up from 1.5x – 2x to 4x-5x, companies need to be prudent on their ad spends. “Google and Facebook marketing have offered increased flexibility of payment structures across the sales funnel from pay per view, pay per click, pay per order,” Shrimali explained.
As per the estimate drawn by investment firm Avendus Capital, D2C brands could be looking at a $100 billion addressable consumer opportunity in India. Over 600 brands have entered the space since 2016. The firm also stated that online spending in India is expected to grow from $39 billion in 2019 to over $200 billion over the next five years. “As more and more brands and categories up their spends on digital post the pandemic, there will be a secular uptrending of costs and that is where brands will have to be innovative — in terms of driving repeat purchases, creating differentiation — both for products as well as consumer engagement as there are limited sets of digital properties where most of the people are congregating,” Shankar Prasad, founder, Plum & Phy said. The company claimed that the D2C segment of its business grew by 3x during lockdown.
For D2C brands constant consumer interaction is a must. In fact, a few brands claim that this strategy has helped in building a loyal customer base. “The only sustainable way to grow is to build brand equity– the more consumers already watch your brand, the higher is the chance they will interact with your ad– the better will be your conversion rates. For us, the focus is on building brand awareness and equity,” Varun Alagh, co-founder, Mamaearth, stated. As per him, Facebook works very well from an acquisition standpoint, Google for remarketing, YouTube for awareness and stories. The company claimed that before October, there was a drop in the cost per mille because of which the CAC had reduced by 30-40%. However, with the festive season, the CPM has gone back to normal.
Furthermore, D2c brands continue to invest in analysing consumer trends and content, in order to drive conversation. “We are continuously tracking consumer trends, geography, their inspirations. Second, we continue to invest in programmatic data-led marketing. That makes your marketing extremely agile. Third, with search trends moving online, the key is to invest in content and things people are looking for,” Anuj Gupta, CRO, Zivame. For Pallavi Barman, head – marketing and operations, HRX, the task of driving the traffic to the website has minimised so the spends have only been recalibrated to focus sharply on performance marketing, geo-targeting, specific segmentation for the consumers, on widening the consumer base, acquiring the consumers from newer territories. “Typically, 3-5% of our spends are allocated towards marketing which has continued even during the last few months,” Barman said.
Meanwhile, industry experts pointed out that the customers are more engaged with companies on social media (Instagram / Twitter) and continuous engagement by brands on these platforms, keeping them excited and engaged among others has helped build a lasting, direct relationship between the customers and the brand.