Scaling up Marketing- The Biggest Challenge for a Digitally Native Brand

The last 10 years have seen the birth of massive consumer brands across the world. Riding the wave of increased e-commerce penetration and smartphone/internet penetration, these brands grew rapidly. And because of the billion-dollar acquisition of Dollar Shave Club, VC money in the sector wasn’t too difficult. These brands have sprouted across categories- CPG, mattresses, electronics, fashion, beauty- name any sector and you will find these disruptive brands. Caspers, Beyond Meat, Everlane etc are few examples. Closer home, we would have Raw Pressery, Epigamia, SleepyOwl Coffee, Sugar Cosmetics, Wakefit, Bombay Shaving Company, Boat and Atomberg

Most of these brands(if not all) are digitally native brands. They are all digitally native omnichannel brands(or will become so soon). In India if you sell only D2C, you limit your TAM massively. Most of these brands today will be doing a revenue somewhere between Rs 10 crores to Rs 100 crores. But would be aspiring to grow 10x in the next few years.

Being a founding member of one of these brands mentioned(Atomberg), I know the playbook very clearly to growing to this level from scratch. In fact, if you have just launched a great consumer product and have some seed capital, this will work like a charm across most sectors.

Step 1: Create a good website and list on all top ecommerce portals in your sector.

Step 2: Focus on SEO for highly relevant keywords and start very narrow targeting on E-Com platforms(The first monies you spend should be on Amazon Advertising if Amazon sells sizeable number products of your category. No one gives the ROI that Amazon gives)

Step 3: Focus excessively on customer service and getting genuine positive reviews for your product across platforms. This will increase conversion rates and also help in word of mouth.

Step 4: Once you have a decent amount of customer data, get insights on your existing customers, and start top of funnel ads on Google/Youtube/Facebook to target similar audience as your existing customers. Create kick-ass landing pages( specific to each ad/medium), have lead magnets in your landing page, integrate a good CRM and then let Facebook/Google do their magic. And all this while, never forget Step 2 and Step 3.

Step 5: Once this is sorted, start creating the offline distribution. Hire a kick ass sales team. Start with the low hanging fruits( premium counters, organized trade etc). You focus a lot on your sales processes, POS branding and trade schemes. Some brands also open their exclusive counters at this stage. Again, that is a function of the sector you operate it and the money you have. And you continue and keep scaling up steps 2, 3 and 4.

Step 6: Sort out your brand strategy and make it cleaner from all the learnings of the last few years

So far so good. You have a brand strategy in place, a booming ecommerce business, a decent D2C business and a fast-growing offline presence. And because we are digital first brands and we understand e-commerce, digital media and analytics to the core, the media spends as a percentage of sales will be under control.

Now comes the first problem. One day someone asks you, why don’t we scale our performance marketing spends? The answer is we can’t scale digital only marketing spends beyond a point.

Unlike most things in business, there are no economies of scale in performance marketing. In fact, the opposite holds true. The more you decide to spend, the wider you targeting has to get. And the wider your targeting gets, your ads are being shown to more people who are not in the purchase journey/not your TG. And as per marketing 101, your CAC starts going up. And to add insult to injury, the cost of real estate on Google, FB and Amazon are increasing month on month as more and more legacy brands understand their virtue and starts spending on these platforms.

And then the second problem. Your early customers were early adopters. They couldn’t stop talking about your product, they kept writing reviews and they kept coming back for repeat purchases. They are the ideal customers. Low CAC, high LTV and brand advocates. But these kinds of people are limited. And as you scale, you will encounter fewer and fewer of these people. The adoption life cycle is a reality. Most consumers you will meet now will be early majority/late majority. And all of a sudden you find customers who do not care a lot about your brand despite you working so hard in customer service and community building.

These 2 problems suck out the very soul of your marketing till date. And then you remember your basics. There is no alternative to awareness at scale(read mass media). Not only does it reduce your cost of reach significantly, but it also gives you the much-needed brand trust which most early majority/late majority customers need to purchase a brand. Being on mass media(TV/print) means you are a trusted brand for this early majority/late majority segment.

But you are handicapped. The glory days of growing without giving a fuck about profitability is long gone. And after COVID, it would be unthinkable. EBITDA profitability is the new GMV for any investor/founder. So venture capital will not fund your marketing. And if you are not named SYSKA or a brand from a big conglomerate, you will not have the cash reserves. So yes, your marketing budget is decided by the projected P&L. And invariably, it will be 8-12% of your topline.

It’s a classic catch 22 situation. You want to spend and capture a significant market share before the big incumbents come up with copy products and fight you with media money muscle power and a 10x stronger distribution. But at the same time, your P&L doesn’t allow you to go full fledged on awareness. And creating awareness and sustaining awareness(aided as well as unaided) at scale doesn’t come cheap. One time burst is never enough in the long run.

This would be the biggest challenge in the growth phase a brand will face. Because once you reach a certain scale, your 10-12% of your topline will be enough to sustain your marketing. But the question is, how do we reach there?

P.S. We are trying a few things to help us cross this chasm. Open to discussing/sharing notes with like-minded people