Direct to Consumer (D2C) How To Build a Strong Business

24th February 2021Business Development

building-d2c-business

If you are a manufacturer of consumer durables, building a strong direct-to-consumer (D2C) business should lie at the heart of your business development strategy.

Today’s consumer expects a direct relationship with your business. In fact, the more recognised your brands, the more your consumers crave contact with you.

And this applies to pre-sales, point-of-sale and aftersales.

A flurry of recent research underlines why now is the right time for direct to consumer.

Clearly, the pandemic has dramatically accelerated trends that were already taking hold throughout the last decade.

The key question now is:

“How do you build a strong D2C business?”

1. Build D2C on solid foundations

Firstly, ask yourself these 2 critical questions:

  • To what degree do you own, or could you own, your brand’s relationship with the consumers you ultimately serve?
  • To what degree could you monetise this relationship over time with a differentiated value proposition?

If you can answer these questions strongly in the affirmative, you have the basis on which to build a strong D2C business.

However, ultimately, to be successful, you have to build on solid foundations. These include:

  • Constructing a dedicated D2C infrastructure to include marketing, sales, logistics, and customer service
  • Implementing a first-class CRM system to manage consumer data and connect disparate touchpoints into a single customer view to optimise service and sales
  • Putting the consumer at the heart of your operations. And, monitoring the heartbeat constantly through customer experience metrics such as net promoter score and customer effort score

At this point, please do bear in mind that there are a number of significant D2C blockers to overcome

Above all else, if you are not fully committed to owning the customer experience, you will fail. Not only that, you’ll harm your brands and likely damage your B2B relationships in the process.

Clearly, D2C sales and service are not for the half-hearted.

Are you ready for step 2?

2. Develop your pre-sales capability

Even if you’re not currently selling directly to consumers, you should already have D2C pre-sales processes in place.

For example, inbound sales teams that take marketing-generated enquiries and pre-vet them before passing them onto trade partners for nurturing and conversion.

Or branded websites with complete product listings that connect consumers to retailers where they can find and purchase your products.

These direct to consumer pre-sales channels provide valuable insights into the kind of questions that consumers have about your products and their propensity to engage directly with your brands.

Very likely your trade partners are not providing you with detailed information on the outcome of the leads that you provide them.

Nor are they feeding back in an objective way actionable data that will help you to improve your products and services.

Use pre-sales for D2C feedback

You should therefore close the loop directly with consumers that contact you at the pre-sales stage through:

  • Call backs where the consumer has made a telephone enquiry
  • Email surveys where the consumer has made a pre-sales enquiry by email or through a web contact form
  • Browser pop-ups at the point of transferring the consumer from your website to your retailers’ e-commerce site

Your objective will be to gain consumer intelligence which will help you in advance of progressing to direct product sales (see point 4 below).

Finally, please note that even if you decide to sell directly in the future, providing the option for consumers to buy as well or instead from your authorised dealers may increase your overall sales.

3. Monetise aftersales

As a manufacturer of consumer durables, you have an aftersales responsibility for the products that you place into the market.

Your customer care team already provides support, at least during the guarantee period, and very likely, throughout the entire product ownership cycle.

High quality product support can be costly to deliver and is often outsourced to third parties.

As part of your D2C strategy you need to take control of your consumer contact from the moment that your customer buys your product to the point that they replace it with a new model.

This requires your consumers to self-identify by registering their purchases with you.

There are 3 main reasons to register:

  • Safety – Free repair or product replacement in the event of a recall
  • Better service – Registration data is already on your system making consumer contacts quicker and lower effort
  • Additional benefits – For example, tips to help your customer use their product more effectively, an extended guarantee, or money-off vouchers for future purchases

Moreover, registered consumers are effectively buying into your brand. When opted-in to marketing, they give you permission to deepen their relationship with you. Which in turn enables monetising throughout the ownership cycle.

Aftermarket D2C sales

Examples of D2C sales during the ownership cycle include:

Of course, aftermarket sales not only defray the cost of delivering customer care during the guarantee period, they also enable you to bundle aftercare into your primary product sales.

This has the additional benefit of differentiating your offering from retailers as well as strengthening your consumer value proposition.

4. Integrate pre-sales and aftersales with product sales

One of the major concerns that manufacturers have when considering going direct to consumer is channel conflict.

Channel conflict can of course exist in the aftermarket. For example when a product reseller also sells spare parts.  Or when a retailer also has its own product support program or extended warranty offering.

However, it is generally the primary product market that manufacturers worry most about.

To minimise this conflict, you should start by selling a differentiated offering from your channel partners. At its simplest, this D2C strategy includes:

  • Selling what your retailer partners don’t offer

For example, premium products, range extensions, new lines, clearance products or bundles

  • Adding services around products

For example, installation, connection, or fitting.

  • Integrating subscription services

For example, product support packages, consumables, remote diagnostics, or software upgrades.

Deciding which products and services to sell direct to consumer

Precisely, what to offer and how to offer is informed by data collected by your pre-sales and aftersales teams, consumer research conducted by independent agencies, and financial modelling by your in-house analysts or external consultants

Aside from reducing channel conflict, pursuing this type of strategy should benefit your company by extending your addressable market beyond the artificial boundaries set by the business models of your trade partners.

It also provides utility to your most loyal consumers by offering them additional products and services that retailers and dealers can’t or won’t supply. Either on the grounds of capability or capacity.

As a final point, it is important not to overextend when starting to sell your products D2C.

Indeed, it’s vital that you focus on those product lines and add-on services where the economic attractiveness of your product (i.e. its sales volume and unit profitability) matches the strength of your consumer value proposition (i.e. how attractive consumers find your offering).

EY’s D2C business assessment framework is a great tool to help organisations decide where to focus first.

5. Expand D2C product sales profitably

No sooner than you’ve integrated your pre-sales, sales, and aftersales processes and demonstrated that you deliver value propositions that maximise customer lifetime value, you may find yourself in a position where consumers expect to access not just your carefully constructed D2C offerings but potentially every single SKU that you manufacture.

This presents risk as well as opportunity. You risk competing with your retailers on standard products or disappointing consumers if you withhold these products from direct sale.

In addition, how you price your products can be a minefield with unintended consequences for how retailers and consumers view your policies.

Therefore, as Forrester points out in their recent report

“You should determine your target ratio of direct (brand-controlled) to indirect (retail partner) sales”

Forrester – Branded Manufacturers Master Your Own Digital Destiny

Getting this balance wrong risks stifling your D2C growth opportunities and/or reducing your overall sales volumes.

So how do you get this product and price balance right?

Unfortunately, there are no easy answers. However, it pays to expand the product offering in pre-determined phases and to work with and not against your channel partners.

In the consulting assignments that we’ve done with manufacturers we have found success with the following D2C approaches:

  • Selling products through by invitation only websites and apps

These can be accessed by certain consumer groups only. For example, staff, affiliates, loyalty club members or subscription customers.

  • Setting prices higher than retailers or dealers when the economics work against you or where you observe “showrooming” – i.e. consumers view the product at a retail store but return to buy at a lower price from your branded online store
  • Ensuring that where you are selling directly on a public-facing e-commerce site, you install price tracking to ensure that you are not knowingly undercutting average market pricing even where the economics might allow you to do so and still turn a profit
  • Providing buy now links from your product listings on your brand sites not only to your own checkout funnel but also to alternative retailers
  • Not offering “retail exclusives” in your D2C sales channels

Above all, keep in mind as you expand your product offering and your D2C routes to market, that you’re not attempting to compete with your trade partners but to offer consumers a differentiated value proposition and positively influence the marketplace.

In Summary – D2C can be the engine that powers your business growth

As a manufacturer of consumer durables, you simply must build a strong D2C business.

EY suggests that if 15% of your turnover does not yet come from D2C you are already lagging behind your peers.

If you’re a white goods manufacturer you will already be aware of the fact that online sales have grown 10x faster than offline in the last 5 years.

What you may not have noticed is that some of your competitors are already selling directly to consumers not only on their own dedicated websites but also over the phone and in-person through their service technicians and logistics team.

The 5-step approach set out in this article is proven to work.

For more information, please call us on +44 7927 638711 to schedule a free consultation.

If you found this article helpful you may also like to read:

https://www.chrisdunnconsulting.co.uk/dtc-how-to-overcome-6-blockers-that-stop-you-selling/

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