A professional guide to optimizing your D2C business

A robust D2C model needs a differentiator that encourages customers to establish a direct connection with your business. The customer’s needs should always be at the center of the unique selling proposition (USP). Take for instance; if you intend to develop a new sales channel, you’d need to ensure it offers significant value to the end customer.

Consider a manufacturer in the construction industry. Their end customers are always busy, and every administrative task may be considered a burden. They have a strong demand for direct connection and prompt help. The device that is always at hand is most probably their mobile phone.

Therefore mobile communication, for example, Whatsapp Messenger can satisfy their identified needs. However, if existing channels already provide these services, you should reevaluate your investment or find a special way to use the new channel to meet critical demands. Whatever USP you choose to fuel your D2C approach today, remember that it will need to be constantly enhanced with new USPs tomorrow. USPs have, unfortunately, a short half-life because the market is rapidly progressing. Consequently, you must continually equip your target customer with ‘new USPs’. The following parts will cover appropriate examples of D2C add-ons, recommended practices, and additional advice.

Our expectations for how we make purchases have fundamentally shifted as a result of the democratization of technology. Today, we are accustomed to accessing anything, anytime, and from any location. The evolution of commerce has moved on to Quick Commerce, which comes after e-commerce (with its larger order volumes and extended delivery periods). Just-in-time has been an established standard in many B2B industries. Quick Commerce may be considered the overlap of the B2C trend with this concept.

Quick Commerce blends the ease of e-commerce with immediate access to goods through neighborhood or online retailers. It is designed to supplement physical or online stores when there is an urgent demand for a specific set of goods, but not to replace them entirely.

Quick Commerce is vital when a need for a product arises at short notice, and the lack of it could cause serious harm to a company’s operations, such as losing money or delaying a construction project. It could be extra equipment and parts, necessary to keep on hand but are frequently overlooked. For instance, Würth supplies automotive chemicals, fasteners, hand tools and electrical supplies to businesses across the globe. Similarly, Bex a provider of specialized industrial accessories also manages the quick delivery of industrial supplies to job locations. Although this case is more B2B than D2C, it illustrates how fast delivery may become a significant differentiation as long as there is demand.

Another similar company is RenoRun which primarily provides construction products to contractors who own small enterprises. Materials and supplies are delivered on the same day to job sites and project managers don’t have to leave the site to source missing materials.

An organization can use Quick Commerce in various ways depending on the sector, consumer behavior, and fulfillment infrastructure already in place. They can either function as a merchant on pre-existing platforms, or they may develop their industry-specific platform and take on the operator role. Platform owners naturally control the customer connection and profit from first-hand consumer information and third-party transaction fees. Again here the lines between D2C and B2B overlap.

Lastly, ultra-fast delivery can offer clients an exclusive premium service. Given the high cost to set up and maintain the infrastructure, from a technology, staff, and logistics standpoint, the profitability of such a business model would only be possible at a large scale or an additional fee. Businesses could potentially establish the service as a premium customer satisfaction and retention tool that is not meant to be profitable.

The emergence of connected products and digital services has profoundly altered how we think about ownership and purchasing. Pay-per-use or flat rate business models are becoming more common in all industries. With Product as a Service business models, businesses offer access rather than actual goods or services. Customers must pay a set charge based on usage levels or a set recurring fee, rather than the entire purchase price. The product is therefore rented, not owned.

That model is already more prevalent when it comes to entirely digital products (e.g., software), where access can be granted at the click of a button, and the actual usage can be easily tracked. Think of training & development as an example. Companies can also use telemetry data to conveniently offer pay-per-usage business models for those innovative products as more physical products become fitted with sensors and are connected to the internet.

Pay-per-use is essential when there is occasional demand for goods or services, and full ownership wouldn’t be appealing, for instance, because of the high acquisition or upkeep costs. Another common use case is when high acquisition costs make pay-per-use more attractive for cashflow reasons, even though the customer might pay more over the product lifetime.

Another, more conventional type of pay-per-use is equipment rental. Renting can be a good option for large machinery, where storage and maintenance would be difficult or costly during downtime. It is also essential for managing the consumption of raw materials because the equipment can be offered to another user rather than lying dormant. Ultimately, Pay-per-use business models can draw in new client segments because of their improved flexibility and lowered entry barriers.

The core of this business model is Visual Commerce, also known as Configurator or Customization. Essentially, it’s anything to do with the total or partial individualization of goods and services and its corresponding visualization. Personalization is strongly tied to visually mocking up the eventual outcome of the product. Any customization increases conversion and client satisfaction, a phenomenon known as the “Ikea effect.” According to studies, consumers who invest time and energy into a product value it much more than a ready-made one.

A click line that guides the buyer through the many product attributes can easily be used to individualize a product or service. The result of this guided shopping experience is a product recommendation. Expectation management is essential here; therefore, combining guided shopping with visual commerce is the way to go.

A configurator then assembles or exchanges product features and can price and mock-up its appearance accordingly, typically supporting more complex types of individualization. If you have a large variety of products in your portfolio, you might want to start easy and use a product finder to guide clients through your options. Smart filters limit the options based on the customer’s selections, ideally producing just one product. The buyer, however, perceives this as a personalization. Additionally, customization reduces the price sensitivity of the buyer. The customer is already much more invested in the process, even though it might require more time and effort than other products. To use this business model, you need to identify components of a product that can be altered. It also depends on your current production set-up and technical capabilities.

Another crucial task would be calculating the cost and delivery time based on the customization options. As a business, you may create an experience that “seems” customized by simply facilitating a product finder. When your items are naturally fully or partially personalized or if you have a comprehensive product portfolio with numerous variants, you should consider this business model.

Even while customized items of every kind seem to be a big trend in business-to-consumer (B2C), Visual Commerce is even more applicable in B2B because most business-to-business products require some level of customization from the onset.

Increasingly organizations realize the immense potential of subscription models over standard one-time purchases. Subscribers typically receive ongoing access or regular delivery at lower yet recurrent prices.

The key advantages from a customer perspective of a subscription model include lower administrative efforts coupled with great flexibility due to short cancellation periods. Other subscription models even allow customers to commit to a set number of deliveries before the contract automatically expires after the final delivery. A subscription model offers further ease by eliminating the need to reorder for smaller, regularly needed products with predictable usage.

Businesses, in turn, profit from a steady, regular revenue source. Subscription models are great for client acquisition and retention. For manufacturers, subscription means an increase in customer lifetime and a simultaneous decrease of acquisition cost.

By design, a subscription-based business model starts a long-term relationship with the customer. Frequent client interactions enable retention strategies like cross and up-selling opportunities, such as subscription plan upgrades. These are usually more expensive but provide more services in turn.

Subscription models encourage businesses to be more user-centric and maximize user value. Ideally, the hurdles for cancellations are just as low as those for signing up. The good news is that because they would personally benefit from product upgrades and enhancements, members are typically more eager to provide valuable feedback.

Automated Replenishment describes a business model that works similarly to a Subscription but is based on event triggers. An event trigger can be physical–for example, a smart shelf with integrated weighing technology replenishing on demand. The event trigger can be software that tracks data and algorithms like past buying behavior to predict future demand, resulting in custom order events.

This business model allows companies to increase order volume and collect valuable data. Customers can reduce their administrative workload and avoid running out of stock. Designing such event triggers is challenging. This is true no matter if they are triggered by software or hardware.

Whenever events are created through hardware, the devices must be purchased and programmed. This is either an investment for the company, or the devices can be paid for or rented by the customer. In this context, it is vital to consider the created lock-in effect, which is significant when calculating the break-even of such a hardware investment.

Furthermore, it is imperative that the events that result in orders are also fulfilled promptly. Otherwise, the benefits for customers are lost. Automated Replenishment is highly relevant when products or services are regularly needed, and their consumption can be more or less anticipated. Also, it can be attractive in scenarios where out of stock can result in significant penalties, loss of revenue, or additional costs for customers. This is the case, for example, in construction, where one missing item can result in significant waiting times for various parties.

In the B2B environment, supply chains are often designed in a just-in-time setup and have a more substantial financial impact. Therefore, the relevance in B2B can be considered higher than in B2C.