Why brands are going to spend more ‘on consumer’ than ‘for consumer’?
Ever since the evolution of civilization, mankind has been buying and selling. Cost of consumer acquisition (Say A) has always been a part of the product cost. In the early days, a major cost of consumer acquisition was spent on the consumer directly itself as the markets were small and there were very few mediums of communication. Discounts, Add-on benefits, more quantity for the same price, allied or add-on products have been always around, in some form or the other. But this cost of acquisition started bloating up (Say A+B) over the decades and centuries with the advent of newer mediums, larger market size (many times global), retail formats, and for various evolved marketing reason. This is because all Brands, products, and services needed a voice in the market for gaining a fair amount of market share, brand loyalty, repeat purchase, top-of-the-mind recall, competing differentiator, and a lot of other attributes to succeed. All of this and similar experiments were much needed till we started overdoing it.
It was then that the brands and marketers started to evaluate the marketing spend and the overshoot. The cost of consumer acquisition has gone up as much as 70% of the total cost, in a few product lines. This is an open secret. Consumers even in tier 2 & 3 markets know well how huge budgets are spent in the form of Celebrity Endorsements, expensive Advertisements, ‘paint the town red’ media budgets, Exclusive Marketing Properties, expansive BTL engagements campaigns, and whatnot. None of these huge budgets benefit the consumer directly, other than entertaining them for a moment and passing on the required message. Out of 700 Billion rupees spent by all brands in India in 2020, Indian consumers got nothing more than watching some good Ads and experiencing some good campaigns. Nothing reached their pockets. Two Ps (price and promotions) out of 4, need to be balanced better as the pressure is back on brands and the marketers to make consumers feel smart, again!
Consumer acquisition cost needs to be built intelligently. While we can’t afford to take the fizz out of various brands and their campaigns, we need to ensure consumers don’t feel that they are the ones who are ultimately paying for all the ‘noise’ the brand is making in the market. This is catching momentum and we see more campaigns that focus primarily on giving direct monetary/non-monetary benefit to the customer. It is no news that campaigns like ‘Big Billion Sale’ by Flipkart/Amazon, ‘Pocket Saver Meals’ by McDonald’s & BurgerKing, and Loyalty benefits like ‘Free Drinks’ by Starbucks are a huge success amongst the consumers. So much so, that one of the most celebrated brands in the world, Apple, also offers its customers benefits in the form of add-on/allied products which are directly advantageous to the customer. However, this phenomenon caught higher relevance as the pandemic struck. With the retail stores barely functioning, the biggest of the lifestyle, fashion brands- from Vero Moda to Zara gave heavy discounts and cashback on purchases to keep their market afloat.
There are various reasons and benefits why spending ‘on consumers’ is catching momentum.
During Covid, brand loyalty took a serious beating’. More than 72% of consumers have changed stores, brands, or the way they shop since the first lockdown, and the majority of these changes are for good. Almost 85% of those who tried a new brand are planning to stick with it. While those who lost these customers are changing gears and dishing out big discounts, cashback, and ‘come back home’ offers, those who gained these new customers seem to have an edge as largely this is why the shift happened. So spend ‘on consumer’ is here to stay!
Even though there is so much content being created recently to catch the attention of the target audience, as much as 50% of the online content is going unseen. So if analyzed well, all the investment going unseen can be diverted to benefit the consumer directly. That money can be spent on them to keep them coming back to the brand.
While spending ‘on consumers’ the brand gets into much closer interactions, leading to better understanding and valuable data that helps the brand devise more effective marketing strategies & campaigns in the coming time. Better quality of data also improves the chances of better consumer engagement as you understand your consumer better.
Spending ‘On Consumer’ also helps brands depend less on the retailer and retailer’s push. It creates brand pull and increases footfall. While benefiting from spending ‘On consumer’, consumers feel much more genuinely benefited by the brand and stays with the brand for longer.
Taking a leaf from spending ‘on consumer’, BuyingEngine has redistributed the flow of money between the brand and the consumer to work out a never before the feature of ‘Buy Anything, Free’. This will possibly change the landscape of e-commerce to free commerce.
It is only wise to accept and expect an increase in the ‘spend on consumer’ in the coming times. This trend is here for good and will go places in various seen and unseen forms of innovation.
About the author:
Ranjan Das, MD, Apppl Combine