#4 What is “Digital Brand”?

Part 1: Three main criteria differentiating “digital” brand from “loyalty” brand in CPG.

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Traditional global brands are facing strong competition online. Do you see it as well? A decade ago, big manufacturers ruled the game and invested tons of money in their brand recognition, strong supply chain, distribution, TV ads, and sales. Big brands are still powerful. However, the internet and big eCommerce marketplaces destroyed industrial CPG companies' monopoly in the supply chain and retail. It gave fair opportunities for any entrepreneurial idea to reach the global market. 

❓ How do private labels use this opportunity for explosive growth? - Let’s discuss this in the article. 

Really, there are plenty of young & "hungry to success" private labels creating new niches and categories pushing “big guys” out of the eCommerce game. Want evidence? - just check-out Best Selling Rank (BSR) in the main CPG categories on Amazon. How many global brands did you find there?

Today, we may see the rise of new generation brands coming from eCommerce. What is the secret sauce of these “digital brands,” and how could other entrepreneurs benefit from this experience?

Let’s take a moment and try to answer these questions. And at first - let’s clarify the difference between traditional “loyalty” brands and “digital” brands.

❗Three differentiating criteria of digital brands.

☝️ Criteria #1 - Social proof  ⭐⭐⭐⭐⭐ 

“Social proof is weakening the influence of a brand, with product reviews leveling the field. Products with more and better reviews are more appealing to consumers than specific brands, which means smaller brands can emerge on Amazon and stir up the competition, squashing the idea of traditional brand loyalty” - Greg Mercer says, Founder and CEO Jungle Scout. 

❗ This is the main insight. The rules of building a brand in e-commerce are different to traditional retail. 

Brand loyalty is getting replaced by social proof. It means a famous brand name will get lower sales on the marketplace than a private label with better ratings and reviews. It’s crazy, but I love it! This is a real democracy. Online consumers are paying green dollars to better satisfy their needs, not to have a better brand name! :-) 

How can digital brands influence this? - here, we come to criteria #2.      

☝️ Criteria #2: “Virtual Client”  📱📱📱📱📱

Each online purchase can generate the seller one set of relevant client information. Digital brands may even know all their buyers individually (like Apple knows all iPhone users) and engage them in collaboration. Let’s name this buyer a “virtual client” who can contribute some relevant information back to the business: 

➡️ personalization (email, social media account) 

➡️ reactions to seller’s content (views, likes, shares, comments, etc.)

➡️ own content (feedback, product review, use cases for other clients, etc.)  

A virtual client will only make his input in response to the noticeable efforts of the seller. It makes collaboration mutual, pragmatic, and manageable. 

This is a significant difference from traditional loyalty brands collaborating with customers at the level of emotions.

❗ Important to remember! 

Emotionally loyal consumers of the traditional market pay in one way: giving money. Pragmatically connected consumers of the digital market pay in three ways: by giving money, by giving time, and by giving reactions & content. Digital brands can monetize from all three sources.

❓ What can digital brands contribute to this collaboration to strengthen the “social proof’?   

➡️ educational and engaging content 

➡️ prompt online client support and additional services

➡️ connecting users based on their interests and more. 

Here we come to the next criteria.

☝️Criteria #3: Talk to a consumer at a personal level  👥👥👥👥👥

Would you agree that the best service is a custom service with a uniquely individual experience? The unbelievable opportunity of e-commerce is that brands can speak to consumers 1-on-1, learning and addressing their unique dreams, needs, and pains. 

Listen, I want to make it clear! Here, I don’t mean the scenario of getting client’s email addresses and bombing them with stupid irrelevant ads. This will be the way to a disaster.  

I mean making the purchase transaction a bridge to consumer research, discovering what matters for the client! The purchase transaction is a starting point in the funnel of generating knowledge, followed by converting it into relevant free content, products, and services so that everyone will mutually benefit from this collaboration.  

❗ In today’s reality, we can reasonably define four levels of online collaboration between business and client: 

🪜 Level 0: “Zero” interaction

Online purchase doesn’t give the seller virtual clients or any meaningful consumer information (shipping address doesn’t count, as not actionable). What does it look like? - Order placed, product delivered, done! Noone takes further action. 

This is the worst scenario ever. I wouldn't even consider it, but I wanted to make a warning.  

What is "OK" or in-store check-out is NOT acceptable on the internet.

🪜 Level 1: Purchase transaction inconsistently converts buyers to virtual clients. 

This is the first level of capability development. When does it happen? 

➡️ sales are split between the physical store and digital channel (in-store check-out doesn’t give consumer information). 

➡️ sales funnel wasn’t maintained well (doesn’t provide the exact path to become a virtual client) 

➡️ sales funnel doesn’t connect clients to seller’s social media. 

An example here is a small local business with a physical store and selling online via the website or Instagram. Business owners have to focus on improving the process of converting buyers to virtual clients.

This scenario is relevant for many “loyalty” brands that cannot move 100% sales online.  

🪜 Level 2: Each online purchase gives sellers 100% meaningful consumer information. 

1 purchase = 1 virtual client. We can consider this situation as a solid performance in the online channel. Indicators are: 

➡️ client provides contact details during the transaction

➡️ client gets engaged in interaction with a seller after the transaction complete via social media

➡️ seller gets relevant insights on what to improve and develop for the future. 

➡️ virtual client is engaged in collaboration and returns reactions to the sellers’ social media content (views, likes, shares, comments, reviews, etc.). 

A good example is an Amazon store with a web-site, pages in social media, and CRM, actively communicating with clients and giving them free value on all platforms.    

🪜 Level 3: The business manages to collect relevant consumer reactions continuously. 

This is an advanced level when the client is intentionally engaged. It includes planned repeated interaction after the initial purchase. For example:

➡️ subscription service, when collaboration happens each delivery period 

➡️ planned updates on product capabilities and/or new ways of intended use

➡️ a strong community built around a product, when clients are willing to share their experience regularly. 

➡️ existing followers can invite new “virtual clients” without a sales transaction. 

The enhancing communication with a client requires a digital brand creating a connected platform of relevant tools. 

❓ What are the necessary elements of the digital brand' platform?

There are three components responsible for mantaining a close cooperation with virtual clients, and for success the digital brand online: Product, System, Infomercial.

Let’s have a closer look at each element and a few examples in Part 2 of the article.

end of Part 1

Cheers ❤️

Niko