Disclaimer: It was the authors dream as a young adult, to build a brand (had no idea that it would be craft chocolates) that does not need to depend on advertising to sell (or survive!). Since undertaking the Post Graduate Diploma in Advertising Management at Advertising Club Madras, Nitin has conceptualised out of the box olutions. Nitin is a sparring partner/consultant and also provides business incubation services to startup craft chocolate brands. Views are strictly personal and may seem to be subject to some bias.
Back in July 2003, I clearly remember a day when a leading newspaper in India had more ads than news content during festive season and I had to shake off the (mostly) illegal inserts in the newspapers which dropped straight into the dustbin. Today, we see the same overload of digital advertisements invading into private spaces of our digital screens and the discovery platforms have been reduced to discount sites which attract deal seekers. With even luxury products being sold successfully with discounts online, it is clear who is shopping online.
In an era where digital marketing and social media advertising have dominated the world of commerce, it’s tempting for craft chocolate brands to allocate a significant portion of their marketing budgets to platforms like Facebook and Instagram. We see this with the launch of a brand a week! After all, these online channels promise vast audiences, potential customers and specific targeting. However, the reality is that online ads, instead of boosting profits, often make tech giants wealthier, while leaving brands in the lurch. Business continuity (a pillar of sustainability) is critical to any business and dependence on advertising to drive sales, does not talk well about a business model. In this blog post, we’ll explore the trend of returning to physical customers and the benefits this strategy can bring. We recently read a news article which reported how Walmart is handing out freebies since online ads are losing appeal.
The Online Advertising Conundrum
Online advertising is a double-edged sword for small craft chocolate brands. While it offers exposure to a global audience, the costs associated with acquiring customers through these platforms can be exorbitant. Ad spend on Facebook, Instagram, and Google often yields minimal profit margins because, in addition to paying for the ad space, businesses often need to partner with these tech giants, meaning they share a considerable portion of their revenue before a sale is even made AND they make each brand compete (and hence pay more) while targeting the same customer! Further, the skills needed to get a reasonable ROI from digital advertising is not available internally and would mean a retainer to be paid to an agency which a startup can afford.
This translates to, employing someone with no experience working on your brand and increased costs with no surety of any return! I say this because, I have connected with over 100 digital agencies and have not yet come across one which trusts in the brand they work for and are happy to work on a success based fee (100% sales linked). I would like to be proved wrong and meet an agency that can offer the right services with complete ownership for startups. All of this coupled, significantly erodes profits. It is a different debate as to who owns a customer? No craft chocolate brand should think of a customer as their customer. I shall save this discussion for my next few blog posts!
Moreover, most craft chocolate brands observe that customers acquired through online ads tend to lack loyalty. The online marketplace is saturated with options, and deal seeking consumers easily jump from one brand to another, often chasing the next shiny offer. This lack of loyalty makes it difficult for craft chocolate brands to establish long-term relationships with the right customers. The fact is that majority Indian consumers usually look online for price comparison & deals. We must also note that chocolate is an impulsive product category and not many daily shopping lists have them included. They are picked up impulsively. The same cannot be confidently be said about adding to cart impulsively in an online scenario. It is less likely as it takes the same number of steps as any other planned purchase AND there is no waiting periods during online checkouts.
The Return to Physical Customers
The tide is turning, however. Craft chocolate brands are realizing the importance of focusing on physical customers and prioritizing their marketing spends away from online ads. This shift is driven by a range of compelling reasons:
- Direct Engagement: Interacting with customers in person or through non-digital channels allows brands to establish a personal connection. This can include events, tastings, and collaborations with local businesses. These interactions help to create a loyal customer base that values the brand and its values.
- Word-of-Mouth Marketing: Satisfied customers are more likely to recommend a brand to friends and family. Positive word-of-mouth marketing is a powerful tool, and it can be a natural byproduct of in-person interactions and positive experiences.
- Local Support: By investing in the local community and fostering relationships with customers, craft chocolate brands can tap into the support of their immediate geographic area. Local customers often become champions of the brand and provide a steady stream of business.
- Profit Margins: Unlike online advertising, building a physical customer base can have a higher ROI. While the upfront costs of physical events and marketing might seem higher, the long-term benefits can outweigh the initial expenses. Loyal customers tend to make repeat purchases and are less sensitive to price fluctuations.
Crafting a Physical Customer Strategy
For craft chocolate brands considering a shift towards physical customers, here are some actionable strategies:
- Host Tasting Events: Offer tasting sessions, workshops, and events at your factory or store. These create opportunities for direct engagement with your customers and provide them with an unforgettable, immersive experience.
- Collaborate with Local Businesses: Partner with local cafes, restaurants, and artisanal food shops to showcase your chocolate. These partnerships can extend your reach while also supporting other local businesses.
- Frequent Farmers’ Markets: Set up stalls at local farmers’ markets. This can be a great way to interact with potential customers, gather feedback, and build your brand’s presence.
- Subscription Boxes: Create subscription boxes that include a selection of your products. Subscription services can be a bridge between online and physical customers, offering a recurring revenue stream.
- Personalized Customer Service: Train your staff to provide excellent customer service. Building a reputation for exceptional service can set you apart from competitors.
In conclusion, while online advertising on social platforms may seem like a promising and easy way to reach a wide audience, it often leads to diluted profits and fickle customers. Craft chocolate brands can benefit immensely from investing time, effort, and resources in building a physical customer base. It is important to return to genuine, meaningful interactions which can foster loyalty, word-of-mouth marketing, and more robust profit margins. So, let’s make the chocolate industry sweeter by embracing the physical customer experience and turning the cocoa wheel full circle.
About the Author:
L Nitin Chordia has been awarded a M.Sc in Retail Management from the prestigious University of Surrey in Guildford, UK. Nitin is a Retail Business Consultant with over 15 years of experience in Indian FMCG and Retail Domain. He was instrumental in setting up Godrej Nature’s Basket Gourmet Food store as a retail business consultant (sourcing consultant). Nitin has 3 years of work experience in the USA and UK working for various retail food/grocery businesses. Nitin is India’s 1st Certified Chocolate Taster and Judge at the International Chocolate Awards (ICA), London and a Cocoa Post Harvest Professional.
His current consulting focus is Circular/Green Economy, Sustainability, Zero Waste & Net Zero Transitions with specific focus on Cocoa. Nitin is the 1st external faculty at the Institute of fine chocolate tasting (IICCT), UK. He works with the government to implement quality improvement projects with the government. Nitin has represented Indian Cacao overseas for several years and is among the few professionals in India who can evaluate defects in chocolates and cacao. Fun Fact: Nitin has tasted 3000+ chocolates (including bad ones!) in his 15+ years experience with chocolates.