- Defining a solid value proposition
- Clear communication internally and externally
- Operational excellence
- Customer focus
1. Set Clear ObjectivesWhat is the expectation for direct sales? Is it possible to define a revenue target, or number of customers served? Around the table (and in private discussions) several revenue numbers were mentioned, in the EURmillions. But without the ability to control all the marketing mix a solid target is tough to achieve (more on mix later).A more common way of starting is to set a target of a proportion of sales in a category, or country. Example: "5% of accessory sales to be sold direct in 2 years", or "1.5% of high end 'X' to be sold direct by 2010, without cannibalising channel sales". The last phrase implies that direct sales can be incremental, which was accepted and agreed by the group (of course, retailers might disagree!).Key to consider: How to bonus internally. Best practice is to include direct sales in same organisation as channel sales - then the channel sales manager can balance apparent conflict, and still meet revenue targets.Once the targets have been defined, it should be clearly communicated internally.
2. Create a real value propositionManufacturers are not able to compete in the same way as retailers. Of course there are advantages of web traffic, brand name, and trust - but one delegate likened D2C selling as "fighting with both arms behind your back"The traditional "4P" marketing mix components of Price, Product, Promotion, Place should be used with care.
Price setting: Sell at low "internet prices" (to discounter levels), and the result is punishment by high-street retail partners de-stocking lines. In fact nearly all of the delegates reported that their pricing policy is "recommended price" (where allowed in law), which in practice means at, or above retail prices. This mitigates any accusation of price-cutting. Some delegates admitted to occasionally dropping prices to boost sales, but usually got around the issue by putting together premium bundles - a collection on products with slight discount.
Product range: Best practice seems to be to work towards stocking ENTIRE product range. Stocking in depth is a key value proposition. This translates to:
- wide range of accessories, especially hard-to-find items for 'end of life' products;
- latest products (sometimes available for pre-order)
- Limited product editions (colour, spec variations, bundles)
- Stock highly available
Products in short supply should not unfairly be only available in the D2C store, but should also be sensibly rationed among ALL channels.
Promotion: D2C stores are normally on separate platforms to manufacturer "catalogue" sites. Best practice is to include channel partners in a "where-to-buy" box on a catalogue page, with one of the options "buy direct". Sensible monitoring of traffic can help predict channel sales.
"Place" - for this part of the mix read convenience, and premium customer care. Some of the organisations use call-centres to provide concierge services.
Interestingly, the D2C channels had adopted generous and flexible Terms and Conditions - well above those demanded in the EU Distant Selling Directive. The leading companies are making it easy to buy and return, after the statutory minimums.
A new trend here is widening use of personalization: Engraving and gifting, plus software or image/music pre-loading.
Services are becoming more important: Installations, extended warranties and insurance.
3. Clear communication internally and externallyThe most advanced D2C organisations had spent time and energy consulting with channel partners, had explained strategy, value proposition and looked for ways to work more closely with retailers. However, progress towards joint ventures like "collect in store" was slow, or had stalled (even though this has been talked about 5+ years) so maybe it was not a real objection or need for retailers.
4. Persistence"Not giving up" was the message from both keynote speakers. One organisation had tried, failed, tried again, failed again many times before hitting its stride. Pushback had not been as a result of sales, but perceived channel conflict. Winning over internal politics was seen as most essential to succeed.
5. Operational excellenceThe steepest learning curve is in perfecting the operation. Manufacturers struggle to build the consumer distribution systems that retailers nailed years ago. Typical weaknesses are in logistics, returns, cash collection (and fraud prevention), and credits. One keynote speaker noted: "Nice website is good, but great back office is key".Monitoring metrics is the first step. "If you can't count it, you can't get better". See our article "77 Essential Metrics" for a few hints...Best way of improving the operation: Listening to customers, measuring Net Promoter Score®, which leads us to...
6. Customer focusBiggest surprise of the round table session was the emphasis on customer feedback and Net Promoter Score as measure of success. One keynote speaker held the room in thrall as he outlined how they act on EVERY customer feedback, DAILY, and reply to every comment. Success in customer focus had been due to understanding Net Promoter Score. All staff in the department had been schooled in NPS, including call centre staff, to the extent that team managers had asked their boss to be bonused on NPS. Bonusing managers on Net Promoter Score helped to improve scores. After two years of tracking NPS they had ramped up score by 100%. They also attributed their significant growth to using the Net Promoter Score.Some useful stats from one company:
- Web conversion improved +40%
- Contact centre conversion improved +25%
- Revenue ratio from returning customers increased +100%
- Daily monitoring of customer feedback helped reduce support issues later - Ratio of goodwill funding reduced 50%
Some other learnings:Customer direct contact had produced some surprising facts, namely that customer profile can be completely different to previous assumption. The thinking was that hip young things were the main buyers. Reality was that the typical customer had been retired three years.Final soundbites from the round table:
"Speed and trust are the most demanded products" Agents should not be upselling, but rather "Right-Selling" Arguments with resellers over "who owns the customer" should be combated with "No one owns the customer"