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Don’t Let ‘Fear of Missing Out’ Drive D2C Decisions: 4 Questions Every Brand Must Ask

The global pandemic prompted an accelerated shift to online shopping, with consumers looking to digital channels to purchase goods across more categories than ever before.

Benchmarks and expectations have increased for seamless convenience, delightful experiences and unique offerings. In response, consumer goods companies are running direct-to-consumer (D2C) experiments across brands to protect market share against their established peer competition, rising start-ups and e-commerce players, like Amazon.

While experimentation can be an effective way to bring new products and services to market, it’s easy for brands to lose sight of the best opportunities for their business, making D2C decisions based on new trends or competitor success as opposed to objectively determining the right path based on their unique position in the market or the state of the market itself. What worked for one brand may not always work for others, and this approach increases the risk of D2C endeavors gaining little traction or falling short of return-on-investment expectations.

“On one hand, it’s good that brands are doing experimentation and getting things done in an agile way – but experimentation needs to be guided and structured,” Jana Kasper, senior principal, management consulting, Publicis Sapient, said. “There needs to be a standardized approach across markets that brands can apply to determine what’s right for their business and what will make them stand out in the market.”

As brands begin their D2C journey, it’s important for them to start with an assessment of their business readiness, defined by key parameters that will enable them to test and validate their strategy in a holistic way. By evaluating both external and internal factors, brands can confirm their top-down D2C strategy by identifying the most attractive combinations of markets and brands.

“It’s really looking at the business from both the inside out and the outside in,” Jana Kasper said. “Outside in is about observing the market, customer habits and market dynamics as selected driving forces. Then, you have to understand your specific brand to see if there is a match.”

For example, a product or brand may not be right for D2C if the engagement across digital channels is weak or if overall brand strength is low. A particular product may be more suited for other channels, challenging brands to examine their offerings and define which categories will allow D2C to deliver the most value for both customers and the business.

At Publicis Sapient, we’ve defined four questions every organization must ask as they determine the right path to launching a successful D2C initiative.

To what extent are customers engaging with
digital touchpoints in a given market?

To determine the attractiveness of D2C, start with the customer and their behaviors. Parameters to consider here range from broad-scale insights (like mobile penetration) to focused aspects, such as digitally influenced internet retailing per capita that can be benchmarked across different markets for a direct comparison.

Are consumers buying though
these digital touchpoints?

To answer this question, we refer to proxy data on a category level across markets that illustrate the likelihood of a customer to adopt D2C. Consider current e-commerce sales (for a respective category) or the overall penetration of e-commerce for the given market in comparison to others.

How is the brand positioned
in the market today?

D2C is certainly easier to establish in a market where the brand has already a strong foothold and share of mind. It’s important to understand and compare a brand’s market share against its leading competitors within a category. Another parameter for consideration can be net promoter score to add the qualitative strength of the brand to the equation.

How strong is its foothold across
its digital channels?

Similar to market attractiveness, a brand’s competitive position across digital channels can be determined through a series of parameters that benchmark the brand against the market and its competition. This includes the brand’s e-commerce sales, its growth trajectory or the level of engagement across its existing digital channels.

Global CPG Firm

While D2C is undeniably growing, a structured approach at the beginning of the journey can help to set it up right from the get-go. But this assessment is only the first step in the D2C journey.

After understanding a chosen market’s attractiveness, companies need to determine the optimal D2C model based on their business and customer objectives, capabilities and risk. Then a brand must look at the chosen D2C model’s financial viability and operating model options to create a strategy that unlocks the most value for the business.

To read more on the next steps on creating a winning D2C strategy, download our D2C guidebook and follow our series in the Related Reading section.

D2C Handbook

Download “Six Steps for Building a Winning D2C Strategy,” a complete guide to the challenges and opportunities for CP brands as they approach or improve their direct-to-consumer offerings.

Jana Kasper
Jana Kasper
Senior Principal, Management Consulting
Saba Arab
Saba Arab
Managing Director, Management Consulting