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Retention-Driven Growth: How D2C Brands Can Keep Customers Coming Back For More

16 Feb'23 | By Inc42 BrandLabs

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India’s booming direct-to-consumer (D2C) segment, making way for many disruptions to accelerate the country’s startup ecosystem, is home to more than 50K digital-first brands and is estimated to cross $300 Bn by 2030, growing at a CAGR of 24%, according to an Inc42 report.

As these brands fight for market share, many continue to pigeonhole growth to customer acquisition. But with the CAC going through the roof in a highly competitive market and the investment inflow drying up due to a harsh funding winter, most businesses are now compelled to redefine their expectations. Startups at all levels have scrapped the idea of growth at any cost, and profitability remains the top priority.

The shift in growth parameters may not hinder the D2C momentum, though. Umair Mohammed, founder and CEO of New Delhi-based martech platform Wigzo, thinks D2C brands are ignoring an underrated but obvious growth channel – customer retention.

“This can account for 45-50% of revenue, but many D2C brands spend only 5% of their marketing budget on retention marketing,” he pointed out.

Again, retention marketing usually costs one-fifth of the traditional CAC. Hence, D2C brands would do well to give customer retention their best shot, said Umair.

“You want customers to keep coming back for more. That is the whole hypothesis of spending on acquisition costs greater than your average order value,” he emphasised. “In pure business terms, it doesn’t make sense except when you realise that the customer can end up shopping more than once with your brand,” he added.

But how can D2C brands boost customer retention in a retail space dominated by discount-seekers and impulse buyers who may not return the next time?

Inc42 and Wigzo recently held a masterclass titled Retention-Driven Growth: How D2C Brands Can Keep Customers Coming Back For More to spotlight this growth challenge. Conducted by Wigzo’s Umair Mohammed, the masterclass covered many critical aspects, including:

The importance of retention marketing
Key customer retention metrics to be tracked by D2C brands
Deep diving into strategies that will positively impact a D2C brand

Unlocking The Secret Of Customer Retention For D2C Brands

Growing up, we often accompanied our parents when they went shopping and found that they usually went to the same shop. The reason: The shop owners/salespeople made them feel special, which helped build trust over the years.

That was the retention strategy then. In today’s digital-first landscape, marketing automation solutions built around user data and personalisation by Wigzo and its ilk are crucial to acing customer retention.

As several D2C brands have opted for an omnichannel business model to make the best of online and offline markets, consumers today can engage with brands across multiple touchpoints. These include company websites and apps, ecommerce marketplaces, email and messaging, social platforms and in-store interactions.

D2C brands can collate and map customer journeys across all contact points by leveraging Wigzo’s smart solutions. AI-driven data segmentation and cohort analysis are then carried out to derive actionable insights to send the right message (read personalised) to the right user at the right time.

“Creating a personalised user experience based on where they are in their brand journey can create a lasting effect on retention and reduce churn,” said Umair.

According to him, D2C brands must keep an eye on the repeat purchase ratio (RPR). This metric calculates the ratio of repeat customers to the overall customer base or the percentage of repeat customers (two or more purchases).

“A good RPR for D2C brands is about 30-40%,” he added.

Additionally, brands should push user-generated content (UGC) such as customer reviews, comments or social media posts when they send personalised messages.

“Sometimes, it is not about making a sale or directly impacting your revenue. UGC will improve consumer perception and build brand trust to drive growth [in the long run],” concluded Umair.