Marketing Dilema: Flipkart Vs D Mart, an analysis
The question that bothers most businesses and startups: What is an ideal marketing campaign for a business and how do we arrive at that?
Here we analyse the answer through two simple and known cases, Flipkart and D Mart, simply because of their starkly different approach to their marketing.
Do you know that an average Indian startup in the e commerce sector like Flipkart, spends about INR 600-700 crores on Advertising every year, which is more than 50% of their annual turnovers too and much higher than their profit share?
On the other hand, we’ve D Mart’s marketing budget is highly negligible when compared to today’s ‘new age’ companies.
Customer Retention Vs Customer Acquisition
E commerce giants like Flipkart or Snapdeal have an average Customer Acquisition Cost of about INR 1100, despite the fact that an average purchase rate per customer is only about INR 900- INR 1000.
Comparatively, D Mart’s average CAC is just about INR 100 while the average purchase amount falls in the range of INR 500 – 1000. While both the companies fight it out in their highly competitive market, why do their CACs vary so much?
The reason is simple. While Flipkart has concentrated on Customer Acquisition, offering huge one time or festive discounts to tempt a person to make a purchase, D Mart has concentrated on Customer Retention, by offering quality products at a cheaper price than anyone else in the competition consistently.
Essentially, a D Mart customer more often than not sticks to the brand and even gets his near ones to a D Mart store through word of mouth. This seldom happens with Flipkart, where a customer simply makes a choice on the basis of pricing and discounts.
This brings us to our first important rule of Marketing:
A long term successful Marketing Campaign gives more importance to customer retention than to customer acquisition.
It’s important to keep in mind the future of the company while designing a marketing campaign and not just concentrate on increasing the present sales.
Realise that marketing is only to let people know about you. If you have to keep spending money to retain your customers, something’s definitely wrong.
The amounts spent by e commerce companies during festivities, on advertising and then on huge discounts is massive. On the other hand, D Mart only advertises initially in any city to gain visibility. A few print Ads and they are done. Their own customers get them the flow they need.
D Mart’s marketing expenditure over time is a downward curve while their sales is an increasing curve, while in the case of Flipkart, it’s a wave. This means every time Flipkart cuts it’s expenditures, by either not advertising or not offering discounts, it’s sales decrease.
This discussion brings us to another important rule coined by us for Marketing:
Your Marketing Strategy should be such that over time, your expenditure decreases while sales increase, for smooth and gradual scalability.
To sum it all up, the need of the hour for any business is a holistic approach towards marketing where we take into consideration all parts of the business while designing your promotional campaign, from the procurement of raw material to the distribution to the final sales.
The best example would be D Mart itself. As seen above, D Mart only spends on advertising in the initial phase to gain initial visibility.
The study of their approach begins with the products on sale in D Mart. Clearly, D Mart has stayed away from electronics or jewellery product and has stuck to food and grocery products that are consumed on a daily basis by the consumer. It doesn’t even sell a private label product, which would have given them higher margins, but pose more inventory problems than necessary.
Our next focus is on consumer capacity and demographics. 75% of it’s stores have been opened in existing states and markets, clearly not experimenting with it’s customers.
D Mart then concentrates more on the volume of it’s sales, putting up huge stores and buying the products in bulk, at a much cheaper price than anyone else. It then sells it to the customer at a marginally lesser price than MRP, which is loved by the consumer.
At each step from procurement to sales, they have planned up everything carefully to pull in the customer, a completely holistic approach.
If you look closely, it’s all marketing in the end.
How has it paid off? Well, while buzz is so strong around India’s e-commerce industry and companies like Flipkart, the best-performing IPO in recent corporate history is a brick-and-mortar supermarket.
The Best Marketing Doesn’t Feel Like Marketing.