Part 1: Analyse the academic literature surrounding e-business approaches of accessing a market

The Direct to Consumer business model is one in which producers/ sellers sell products directly to the customer, completely cutting out middlemen such as wholesalers and retailers and advertising networks such as radio and TV (Meyer & Crane 2013). In the context of the modern era, it mainly involves selling products through online/ e-commerce websites directly to the consumer. The model enables sellers to advertise online using descriptions and images based on which customers can make purchase decisions and either buy online or buy off-line (Klaassen 2011), (Chapin 2016).  While it is a good model that makes selling fast, efficient, and with higher margins, the model in the context of the P&G strategy has inherent risks and weaknesses.

In the P&G case, the biggest weakness is in its product line/ types. P&G produces and sells consumer goods, such as cleaning products that are not traditionally sold online. These are traditional store/ supermarket bought products, along with soaps and similar items that would not create much enthusiasm for online purchases.  There are just consumers that will not make purchases of such products online, unless there is a very compelling reason. The ‘feel’ factor is still lacking in the online direct to customer (D2C) sales model (Putnam 2013)

Using established e-commerce platforms such as E-Bay and Amazon will dilute the brand presence of P&G because it has several different brands that consumers may perceive to be just ‘another brand’ or even imitation. People really do not go to buy P&G, but the various consumer products made by P&G and this D2C model will dilute the brand, especially using platforms such as Amazon (Chaudhry 2017)

The model will require P&G to have additional technical investments and systems, in terms of several databases that require personnel and money to set up and maintain. To create a visible online presence with their brand, the firm must advertise extensively, leading to increased costs

The model has a long cycle of sales where a customer selects products from the online portal, evaluates them, and then makes a payment such as using credit cards. The products then have to be packaged and shipped to the consumer; this is unlike the usual model where customers walk into retail stores and select what they need and pay for them instantly with the only waiting being at the checkout counter (Panda & Sahadev 2012).

P&G has over 300 brands that when marketed using the D2C model will result in a lack of focus as this is basically a brand extension strategy that has the potential of dramatically reducing the value of the brand

There are established direct to consumer firms that have been in the sector for long, such as direct marketing companies that usually sell value products, such as organic/ natural products that would pose a significant threat to P&G.

Channel Saturation: There are many and increasing numbers of marketing and sales message channels including smart phones, social media that offer innumerable opportunities for reaching consumers. But this is a double edged sword because customers give less attention to products and messages propagated using the numerous channels. This saturation means that sellers will not have a particular message that can effectively sway consumer sentiments to induce a buying decision, according to Hubner, Holzapfel & Kuhn (2016).

Part 2: Analyse various case studies on accessing consumers through e-Business

Counterfeiting and copyright infringement, where unscrupulous or even criminal gangs use the P&G brand to gain sales at the expense of the company

A case involving brand dilution, which is a major risk in the P7G D2C initiative due to brand extension, involves the Tiffany & Company case in which the firm (Tiffany& Co) succeeded in having 19000 auction sites that were dealing in counterfeit jewelry by auctioning them at E Bay using the Tiffany & Co brand name. Tiffany & Co sued E bay in 2004 based on the claim that E Bay contributed to the Tiffany trademark violations be allowing counterfeiters sell items on the site (EBay). Tiffany had done some background research on the products sold under its brand name and realized that 73% of them were counterfeit.  Tiffany had demanded compensation and the right to police items sold under its brand name, leading to 19000 auction sites being shut down. However, by this time, the company’s brand damage had suffered and been diluted, with reported slowdown in its sales based on fears of buying something counterfeit.  Apart from devaluing its brand Equity the incident had itself cost Tiffany significant amounts of money in lost sales, running into the millions (Marie 2004) .  The result was EBay being ordered to pay $ 61 million in fines for the sale of counterfeit goods through its sites.

Another counterfeiting case in the e-business realm again involved EBay and LVMH; LVMH had sued EBay for allowing the sale of counterfeit goods on its auction site, bearing the logo and trade mark names of LVMH. EBay being a general and popular site for auctions does not strictly control all products sold on its websites, instead providing inbuilt tools that firms and brands can use to monitor their brand activity on the site. The companies that use the D2C business model through popular auction sites such as Amazon and EBay run the risk of getting their brand name diluted and its copyrights infringed upon as unscrupulous business people take advantage of anonymity possible with-commerce to sell counterfeit goods, exposing customers to danger and devaluing the brand value of firms whose trademarks they steal and use in online auctions (Williams 2014). The French cosmetics maker, L’Oreal also sued E bay, one of the leading sites for online auctions because fake/ counterfeit cosmetics and fragrances were being sold through E Bay under the L’Oreal brand name with litigations in the USA and Europe. The allegations are that E Bay permitted, or did not do enough to prevent the sale and auction of counterfeit products under the company’s (L’Oreal) brand name. While L’Oreal lost one of the cases lodged in Brussels, the pattern is similar; auction sites and other e-commerce trading platforms are used by unscrupulous traders to sell counterfeit products using the trade marks of reputable companies. Effecting controls against counterfeiting in such situations can be difficult since online sales platforms can be used by anyone from any location around the world.  

The aspect of channel saturation can be a challenge when introducing products in the D2C sales strategy for the first time. There is an assumption that brand names are of a higher quality, and so sell for higher prices, yet the belief that higher prices equals higher quality does not hold nay more. Content marketing in e-commerce has been strong especially for new e-commerce sites. Poor management of the two strategies of content and pricing/ branding are responsible for most of the failures in D2C business initiatives. One of the big weaknesses and risks in the model is when the site does not ‘sell itself’; the product detail sites should be able to sell the product else, customers will be lost. Further, the D2C site should be able to acquire new customers in order to increase sales significantly. Because of saturation, companies must have a better strategy for developing content as digital marketing is not that easy when there are thousands of players in the sector, including the counterfeiters. Having too many products under one brand creates confusion and does not really create a niche market for companies. An example is Samsung that has too many products in its smart phone/ mobile phone business. While choice is a good thing, having too many choices becomes pointless at some point with predictions that Samsung may be forced to abandon the smart phone market in the next five years due to too many products and competition from makers with cheaper but similar devices (Hruska 2015). Making several products with minor differences in hardware and having a similar operating system makes it difficult for consumers to fully understand their differences and make a choice, as the Samsung case shows (Leedham 2014). P&G will have a similar challenge with its over 300 products, sometimes with little or no differences between them except the name

Part 3: The Business Plan for Your Solution

The P&G business concept for the D2C initiative will entail selling directly to consumers from a web store run by P&G. Because the products sold by P7G are not that high value, say like jewelry or electronics, the company must find establish critical mass to justify freight costs and ensure consumers are not paying higher for buying directly. One of the challenges identified in the D2C business model is that there is a risk of counterfeiting and fake products sold by unscrupulous people on online auction sites. This threat must be minimized or eliminated by not using such platforms for making sales; instead, using the platforms such as E bay and Amazon to advertise products or the brand and have a back link to the actual P & G e-commerce website. Because of the many products sold by P&G and the availability of several competing products, both banded and unbranded, as well as counterfeits, P&G must maintain and retain its brand name and identity. The proposed model will require P&G customers (existing and new) to subscribe to a bundle of products, such that customers make orders for many different products that are shipped at a go, just like shoppers do during in-store purchases. The subscription service will be undertaken over a period of time so that every month or so often, the company sends the subscribed products to the customer and charges their credit cards directly (Klaassen 2011). This will guarantee the company sales and help with demand prediction and sales forecasting.

The D2C business concept must be done with effective content marketing which implies effective content must be developed to attract new consumers and retain existing ones. One of the best platforms for content generation and co-generation is the use of social media which ha become ubiquitous with the modern world. Apart from P&G creating desirable content, the social media platforms will also allow for customers to create content, a concept known as co-creation. Because social media can help convey messages fast and have the information or message self replication, it will be highly useful for P&G to use it for content development and advertising. Further, P&G will use the social media sites and blogs to gauge customer sentiment, using big data and predictive analytics to give greater impetus to its D2C business model and increase online sales from dedicated e-commerce sites. With back links to its e-commerce website where consumers can subscribe, many clicks will increase the company’s ranking in search engines and enhance its online visibility (Kudyba 2014). Because of eliminating ‘middlemen’ such as retail stores, P&G will provide competitively priced products that does not lead to a price increase even when the costs of freight and handling are factored in. this approach will be attractive to consumers because they will always get their monthly or periodic supply of household goods without having to make the trip to the retail store and benefit from offers given directly by P&G.

While counterfeiting can cost brands some pennies, tracking down such counterfeits and taking legal action can cost millions. While it has been a problem for many years, the advent of technology and e-commerce has just made it worse because someone can make and sell counterfeit products from a remote location that is difficult to track down. When using the online e-commerce sites like Amazon and E Bay, P&G must use the available tools to constantly monitor and track any product that is sold online using its brand name. P&G will have to keep a tight leash on this sales channel by ensuring that only authorized entities, such as traditional retail stores, can offer its products from such online sites (Hofman & Keates 2013). Having a dedicated e-commerce site that is well known with effective content for consumers to attain global visibility. The promotion points must be constantly monitored; P&G can afford the expertise and resources needed for big data analytics and use predictive analytics to monitor its brands online and make informed decisions, while also helping develop strategies to prevent counterfeiting that results in brand dilution over time.

The products to sell using the D2C concept include baby, feminine and family care products. A family with a baby and a mother or a family will be able to get most of the stuff they need in one package, delivered to them every so often after they have subscribed to the P&G products, and offers will also be given to make it highly irresistible. Because this product category also have individual websites that can make it a challenge to order, P&G will offer bundled packages based on consumer data (for existing clients) as gleaned for their purchase history and using tools such as predictive analytics and big data analytics. Fabric and home care brand products will also be offered to consumers in the D2C business model because they are products people don’t pay much attention to, compared to say personal care and grooming products that consumers may want to smell. Using an online ‘order filling form’ and using technology, P&G will know from customer feedback what products they use or are likely to use on a regular basis; for instance a family with a baby will use pampers and other baby products regularly. With big data analytics, P&G will know what products the baby and family will be using or need say after a year or two and send targeted content to the family based on these. Using the subscription model, P&G will solve the issues of cost especially because there is an added cost for packaging, handling, and freight/ delivery to the customer door step. Another service will be premium where orders can be made fast for next day or same day delivery based on customer location. The wide global presence of P&G means that product stores and warehouses are located conveniently to reach most customers that will subscribe to the D2C business model.  The existing company warehouses will be used for the D2C business model and existing staff will just be re-trained on handling online orders. Investments will be made in technology and e-commerce systems that are database and big data driven to manage consumer accounts and payments without necessarily disrupting the company’s culture and business systems.

The target market for the P&G D2C business model are households; these are likely to use on average at least 7 different products that P&G makes, including feminine products, cleaning and fabric care products, dish-washing products, and soaps/ detergents. These are consumers that go and shop for such products at departmental stores periodically so the subscription model where they purchase several products will suit them best, with the added advantage of home/ door delivery and competitive prices as well as periodic special offers for regular customers. The first target will be existing customers and then new customers will be obtained. Market research will be done by enlisting specialized firms such as Mintel to undertake preliminary research a=that will be augmented by the company’s own internal research using big data and predictive analytics on existing customers to gauge response. A data base driven website will then be developed for the D2C and content developed using online and social media, as well as some magazines. Undertaking Google and Facebook marketing campaigns will create sufficient awareness. The aims will be for P&G to have an online ecosystem comprising the company official website, the E-Commerce website, online auction portals, social media, and blogs.

Conclusion:

The D2C model entails selling products directly to the customer, completely cutting out middlemen such as wholesalers and retailers and advertising networks such as radio and TV. Its weaknesses in the P&G case include requirements for technical investments in technology, wide product line, brand extension, and long sales cycle. The threats to the model include channel saturation, counterfeiting, and competition from established brands using a similar model. Cases in which the threats have been experienced before include the Tiffany & Company and LVMH firms that suffered brand dilution due to counterfeiting of its products by unscrupulous traders on auction platforms like E Bay, leading to legal cases against E Bay. The proposed solution entails using e-commerce sales incorporating social media for advertisement and customer service using a subscription model for products lines that include baby, feminine and family care products

References:

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