Brands should start with a top-down approach for their pricing strategy and then do bottom-up planning: Vahdam India CEO Bala Sarda
While top-down strategy involves pricing a product based on the differentiation it offers, a bottom-up approach involves costs and margin: Sarda at Inc42’s ‘The D2C Summit 3.0’
The D2C brands need to find an ideal mix of the two strategies to price their products in the global market, the founder said
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Brands should use a mix of bottom-up and top-down strategies to price their products in the global market, said Bala Sarda, founder and CEO of indigenous tea brand Vahdam India, while speaking about the strategies for global expansion of D2C brands at Inc42’s ‘The D2C Summit 3.0’.
He opined that the brands should start with a top-down approach for their pricing strategy and then do bottom-up planning.
Elaborating further, Sarda said that if a brand is looking to sell a personal care product and there is competition at a $10 price point but the brand believes that there is a strong differentiation in the product, then it can potentially command a 20% to 30% premium. Next, the brand needs to make bottom-up planning around the costs or margin structure to make that differentiated product.
Hence, it is ideal to find a balance between these two approaches, Sarda said. After that, it’s a matter of data points. “(There is) an MRP sort of regulation in some of these markets, so you can do a lot of A/B testing to discover the right price in these markets,” he added.
Vahdam India, founded in 2015, is a vertically-integrated, online-first tea brand, which has expanded its global footprint to several markets including the US, the UK, Canada, and Germany.
Speaking during the session, ‘D2C Brands’ Global Expansion Playbook’, at The D2C Summit 3.0, Sarda also shared his experience regarding the scope and challenges in taking an Indian D2C brand global.
He also said that D2C brands need to put 5X efforts to plan their inventory for global markets and not doing so can result in a 5X increase in costs.
As per an Inc42 analysis, the D2C brands in the country raised $1.3 Bn in the first six months of 2022, the highest among all ecommerce sub-sectors. Meanwhile, the total funding amount in the segment currently stands at $4.2 Bn, while there are over 180 total funded startups in the ecosystem.
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