In an industry where consumers are tired of jaw dropping markups, cutting out the middle-man and selling directly to consumers by offering products that are equivalent to or better quality than the branded counterparts at affordable prices seems like a sure way to emerge as a winner.
Direct to Consumers (DTC) brand customer acquisition strategy is primarily reliant on paid marketing across Facebook and Google ecosystems -- Facebook, Instagram, Google Search and YouTube.
With the escalating click costs imposed by these platforms, over reliance on these marketing machines may not be sustainable.
Take Facebook for instance, the average cost per click (CPC) was $0.31 (RM1.27) in 2018. When more businesses hopped into the Facebook advertising bus in 2019, the CPC rose to $0.45 (RM1.85). It was a different case in 2020 when businesses cut their ad spend, bringing the average CPC price down to $0.39 (RM1.60).
Going by the average landing page conversion rate of 2.35%, it will take about 43 clicks before a sale is made online. That would have cost about RM68.80 per acquired customer assuming that the CPC was RM1.60. Throw in discounts and sweeteners to influence buying decisions, the customer acquisition cost (CAC) could easily rise up to RM80 per customer acquired.
As the costs of online marketing escalates, the brand would have no choice but to increase its sale price to offset the high CAC in order to still make a profit if it was to rely solely on online marketing. Hence, it may not be very sustainable for the business in which the model was built upon eliminating middle men costs and to return the value to its consumers.
To reduce the reliance on just one paid marketing channel, a smarter solution would be to adopt a multi-pronged marketing approach to reduce the CAC. This consists of social media marketing, marketplace expansion, brand innovation and co-brand marketing.
Online marketplaces, a natural progression to attract new customer base
With average monthly page visits of 47.33 million on Shopee and 14.77 million on Lazada, marketplace expansion is not something to be ignored by DTC brands in their efforts to secure a new customer base and reduce CAC.
DTC brands such as Oxwhite could stand to benefit by expanding its presence into these platforms provided that the partnership mechanics is done right. The products need to stand out when consumers search for specific product keywords on the platform. This includes using products names and descriptions that contain the most searched terms within the category, adopting the right price strategy, getting good reviews from customers and having the right product mix.
Oxwhite explored selling on the marketplace for the first time in August last year by setting up its official store on Shopee. Between August to December 2020, it generated more than RM1 mil revenue from the official store. Not a bad range considering that it was revenue from just one platform in a few short months. In March, the brand expanded into Lazada.
Marketing cost reduction through brand innovations
As a DTC brand, in which customer base are typically value hunters and savvy shoppers, it is expected that the customers will remain cautious in their spending habits especially in a post pandemic situation.
Brand innovation is key in such situations in order to keep revenue streams sustainable and Oxwhite had done it right through meaningful customer engagement.
It was through the engagement that the brand learnt that customers are still spending on the basic necessities. As such the brand created a value proposition to fulfill customers’ basic needs rather than creating new novelty products to encourage impulse buying.
With such direction in place, Oxwhite created more variety to its existing product range instead of creating new product lines. Its revenue saw a 120% growth in December 2020 compared to the year before and repeat customer rate hit a high of 58% on 1st March 2021 compared to 48% the year before.
About Rachel Tan:
Rachel is the Head of Business for Oxwhite overseeing its strategic growth, offline marketing, Ecommerce strategy, PR and Partnerships. She has over 12 years experience in social media, advertising and marketing. Prior to Oxwhite, Rachel was the Marketing Lead for Shopee between 2016 and 2019. There, she oversaw all marketing efforts from its infancy to Shopee being recognized as the #1 Shopping App today. Rachel was awarded Best Marketer in eCommerce in the Malaysian CMO Awards by Marketing Magazine Asia. Before that, she was instrumental to the growth of Nuffnang (under NCL listed in ASX) and led the company towards IPO in 2015.
