Purchasing Directly from a CPG Versus a Distributor
We have provided six insights into the value of a consumer purchasing directly from a consumer packaged goods (CPG) brand versus a distributor. The insights include collecting customer data, strengthening brand loyalty, creating personalized products, faster introduction of new products, controlling the user experience, and implementing omnichannel marketing and sales.
COLLECTING CUSTOMER DATA
- Having an e-commerce site will enable a CPG company to have direct access to its customers’ data. The collection of customer data such as email address, social profile, psychographics, demographics, and geography enables CPG brands to have unfiltered access to their customers as well as purchasing behaviors which can help in growing or introducing new product lines.
- Selling directly to consumers (D2C) can provide a CPG company with a more comprehensive perspective of its consumer behavior at every phase of the consumer journey.
STRENGTHENING BRAND LOYALTY
- The opportunity of freely connecting directly with customers provided by D2C can result in better support and customer service, more robust personal relationships, and more targeted marketing to boost customer retention and loyalty.
- Retail distributors view their customer data and insights as competitive advantages and are not likely to share them with CPG companies. Hence, they keep customers loyal to themselves rather than to the CPG brands.
- P&G's Gillette on Demand subscription service includes a loyalty program with rewards for customers. The loyalty program offers customers a free product on every fourth order.
- L’Oreal is another CPG brand that has a loyalty program through its D2C platform. It offers five points to its customers for every spent dollar.
CREATING PERSONALIZED PRODUCTS
- "Going above and beyond or offering some uniquely customized products" through D2C gives CPG brands, especially for key customers, a competitive advantage when compared to the old CPG landscape.
- A wide and unique categorization that features exclusive offers, premium products, and personalization, can provide customers with a distinctive value proposition.
- A CPG company could combine categorization strategies with a subscription service to differentiate its D2C site from the site of distributors in order to attract and retain customers and also control channel conflict.
- Consumers are now expecting their favorite CPG brands to provide them with a subscription experience.
- P&G created its own D2C e-commerce site as well as a number of subscription services like Gillette and Tide Wash Club and that has added value to their customers.
FASTER INTRODUCTION OF NEW PRODUCTS
- In the CPG industry, innovation is risky and time-consuming. It takes 18 to 36 months to introduce a new product to the market. D2C helps CPG firms to reduce the risk by enabling them to "launch their new products on a smaller scale".
- Brands can create specific products for specific customers, and consumers can choose the products they prefer when they make purchases. This enables CPG brands to understand what is attractive to their customers about their newly introduced products.
- The brands can then use customer feedback to modify the products and marketing strategies.
- In this way, they can implement rapid product testing, iteration, and education of consumers.
CONTROLLING THE USER EXPERIENCE
- CPG brands can use D2C as a way to directly disseminate information and content like videos and narratives on the features of their products to their customers. With D2C, they can aim to satisfy the increasing expectations of their customers and offer positive and memorable customer experience.
- D2C allows a CPG company to take complete control of its “brand image from the moment it first engages with a consumer until the customer has the brand’s product in their house”.
IMPLEMENTING OMNICHANNEL MARKETING AND SALES
- Through D2C, a CPG company can influence how its consumers engage online with its products, not just on its own D2C site but also within a more extensive ecosystem that could include retail distribution sites like Amazon as well as social media networks.
- The Honest Company offers subscriptions and sells its products through its D2C site, honest.com. However, the site has a “retail locator” to help its customers to locate stores that also sells its products.