D2C Companies Halt Their Ad Expenditure as Budget Concerns Rise


Direct-to-consumer (D2C) businesses have become more responsible with their ad budgets
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Thursday, 3 August 2023, Bengaluru, India

Direct-to-consumer (D2C) businesses have become more responsible with their ad budgets while keeping a careful eye on every dollar spent. These businesses have an aggressive marketing approach and have sponsored high-profile events like the IPL, gaming competitions, and TV shows.

Before, the majority of their spending was done to develop a brand, satisfy vanity, or impress investors. According to industry leaders, they now concentrate on Return on Investment (ROI), much like traditional corporations.

Experts claim that while fintech start-ups continue to primarily focus on performance marketing, personal care, fashion, and gaming firms are now relying on a blend of brand building and performance marketing.

A crisis-hit BYJU’S, for example, hired Shah Rukh Khan in 2017 at a salary of about Rs 4 crore. According to insiders, the seven-year partnership would come to an end this year if the edtech start-up decides not to renew the agreement.

It should be emphasized that BYJU’S and some other companies, including Paytm and MPL, ended their sponsorship agreements for the IPL midway through because they determined it was not financially sustainable.

Several D2C brands see significant growth in the Tier 2 and Tier 3 sectors, particularly in niches like health, wellness, and high-end luxury. The proper use of influencer marketing and localized content is also given a lot of emphasis in this situation, Chadha observed.

According to the number of companies and unicorns, India currently has the third-largest startup ecosystem in the world, behind the US and China. They include a large number of the top 50 advertisers in the nation.

From $5 billion in 2014 to $42 billion in 2021, yearly VC funding to Indian businesses has increased eightfold since 2014. Till H1 2022, the number of unicorns in India has increased from 6 to 105, per an analysis by Inc42. But in the last six months, not a single unicorn has joined the ranks in the nation.

Although venture capital (VC) and private equity (PE) firms raised more than $18 billion in funding to invest in Indian businesses in 2022, they remained mostly cautious about doing so, according to a different Inc42 analysis.

For brand growth during the epidemic, Sequoia-backed personal care company Mamaearth made significant investments in sponsorships of TV programs like Bigg Boss. The reality show’s co-creator Ghazal Alag made an appearance as one of the “sharks” in the first season. After all, half of their business is in tier 2 and smaller areas.

To increase its customer base and drive growth on a little marketing budget, the startup gradually shifted toward performance marketing. Also, it decided to dissolve some of its businesses, including the 2021 acquisitions of Momspresso and MyMoney.

Instead of concentrating only on compensated partnerships with the most sought-after personalities, Suta is more intent on developing relationships with influencers, stylists, and celebrities who are lovers of our brand. According to Biswas, having personal connections and being approachable can frequently lead to more fruitful cooperation.

Certain firms, like CRED, continue to place a strong emphasis on establishing brands. “The corporation first focused on affluent people and established a community called Cred Club. Currently, anyone who has a credit score of at least 750 points is eligible to use Cred’s services and join its club. Aditya Shastri, Lead Trainer & Head of Learning & Development at the Indian Institute of Digital Education (IIDE), states in his post that it now targets Gen Y.

Shastri notes that all of Cred’s current marketing initiatives have been designed to appeal to GenY, who are between the ages of 25 and 40. As a result, instead of Virat Kohli or Alia Bhatt, brand ambassadors like Rahul Dravid and Madhuri Dixit have been chosen.

Shveta Singh asserts that brands for direct-to-consumer enterprises are often developed online first. They take a bottom-up approach to brand development and place greater emphasis on maximizing performance marketing. Much later in the lifecycle, they begin leveraging top-funnel advertising and mass media, like TV, to scale up. While digital spending is ongoing, mass media advertising is typically based on occasions (such as the IPL) or the seasons (festive).

Consumer data and data-driven marketing, which span the omnichannel universe and are essential to effective, efficient marketing, are the foundation of direct-to-consumer (D2C) marketing.

Source- Exchange4media


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