D2C - opportunities and possibilities for the healthcare market
21. December 2022
Reading time: 8 min
Direct-to-consumer (D2C), direct sales from the manufacturer to the end customer, was booming even before the lockdown era. The digitalization boost provided by Corona was then an additional tailwind with gale-force winds - which have not let up to this day. In the spring of 2022, a much-cited study by ECC Cologne in collaboration with Publicis Commerce Germany impressively reaffirmed this thrust. The study authors see enormous D2C potential slumbering in German markets and attribute an immense control function to digital brand stores in brand management. The fact alone that 49 percent of the German population currently has experience with D2C purchases makes it clear: thinking about this sales model is worthwhile. We think so: This also applies to the healthcare market.
Of course, the healthcare industry plays by its own regulatory rules in many respects - and this is also the reason why it tends to lag behind when it comes to revolutionary innovations rather than boldly forging ahead. For this very reason, however, there is still an opportunity to be among the first to use D2C for your own benefit - and thus to generate a decisive competitive advantage. Because D2C models will certainly establish themselves in the industry in the coming years - many aspects speak for this.
The most obvious point in favor of D2C: wholesalers and other intermediate stations can be bypassed in this model - and thus higher margins can also be achieved. In this context, potential savings from a leaner sales force is also a possible further aspect. A generally greater independence from retail is then a further factor: This can concern points such as the increased pressure on margins in retail, the danger of new products not being listed or also the growing competition from private labels. But external shocks can also be mitigated - for example, more difficult physical access to retailers for customers, as was the case during lockdowns. In the case of consumer healthcare products, which are also sold in pharmacies, there is also the fact that the number of pharmacies in Germany is slowly but surely declining. Although current figures are not yet dramatic, the trend is there. In summary: The option of reaching potential customers digitally and directly results in immense cost efficiency.
Overall, the growing popularity of D2C on the part of customers also seems to be transferable to the consumer healthcare sector - especially if the trust factor is taken into account: Especially with regard to health issues, customers tend to be cautious and skeptical about possible product counterfeits when buying online. A point that can be defused by direct sales through the brand. Overall, the issue of trust in direct purchases can hardly be underestimated, especially in the healthcare market: Direct customer relationships also contain the opportunity to create loyalty in the long term. Consumers who make important (purchasing) decisions regarding their own health on the brand's own online store are evidence of genuine trust and brand loyalty.
More than cutting out the middle man - better customer understanding through digital value creation via D2C
In addition to eliminating cost-intensive intermediate stations, D2C holds much more potential for conquering and expanding market share - and for keeping control over the perception of one's own brand in one's own hands. If the latter concerns all possible aspects of brand staging, it is above all another point that offers companies undreamt-of possibilities: The collection and beneficial evaluation of first-party customer data.
If companies follow the D2C path consistently - and consistently means digitally - opportunities to generate data via stores, services and tools such as newsletters arise almost automatically. D2C providers benefit directly from insights into customer behavior and preferences - product improvements and increased efficiency in marketing can be the medium-term benefit. This is because D2C enables a 360-degree perspective on the customer journey. The decisive factor then is the ability to evaluate this data in a way that adds value - for companies and also for customers! Linking and leveraging this data is key to the entire D2C model. Derives that break down the needs of customers to improve products or inspire the development of new ones: Such insights ultimately fulfill the promise of Patient Centricity - one of the biggest topics in healthcare marketing in recent years.
Strategically and digitally well equipped towards D2C
The opportunities offered by D2C are therefore numerous and complex. Just like the challenges that undoubtedly exist. Basically, anyone who has done their homework in terms of digitization and customer centricity is in an excellent position to play in the D2C concert. Decision-makers facing these considerations should realize that certain efforts and new approaches are required - but the opportunities outweigh the challenges. The key is a thorough analysis followed by a stringent strategy. To catch up with the long-established system of wholesalers, suppliers and retailers, creative business solutions are needed in all areas, from logistics to marketing - and the key lies in focusing on consistent digitization of the relevant processes.
Of course, such a process is also associated with a reorganization for every brand, for which there is usually a lack of experience within corporate structures. This makes it all the more advisable to take these decisive steps with a partner who has proven experience in this area - and knows both the pitfalls and the treasures along the way. The successful path to the D2C model is, of course, individual for each brand. In principle, these six points can be taken as a rough outline of a creative D2C business solution:
- Analyze the business strategically and purposefully
- Identify suitable solutions for individual challenges - with a focus on customer centricity
- Create real added value for products, target group and brand via D2C
- Establish/expand brand and enable direct sales via the new sales channel
- Drive and permanently develop the business through constant impulses
- Digitization of the business
Article was published on 21.12.2022