The market for supplements in the UK has grown exponentially over the last decade, thanks to huge international brands and an ever-expanding customer base. You only have to look at the Google Trends graph below to see the dramatic increase in searches for the term ‘protein powder’. As a result, the industry might seem like a dream for digital marketers, particularly when brands like MyProtein and Maximuscle appear to be thriving.
However, in reality, it’s largely become a race to the bottom, with many brands relying on discount codes to generate sales. Discounts of 15-20% have long been commonplace across many industries, but in recent years, supplement brands have gone as far as offering up to 55% off – often with no minimum spend or product requirements.
In most sectors, offering such huge discounts can be enough to put you out of business within a matter of weeks.
How weak branding leads to a cycle of discount codes
I believe it boils down to two key factors. Firstly, this is an ever-expanding industry with low barriers to entry. From gym owners and personal trainers to venture capitalists and aspiring entrepreneurs, for those with an interest in the fitness industry, it can seem like a safe bet and a solid investment.
However, what now seems to be happening is that the top brands are being pressured into offering products at just above cost price, thanks to the emergence of new entrants with much lower overheads. The response from the dominant players has therefore been to maintain their original prices but offer regular discounts in a bid to compete.
This problem is further compounded by the increased investment needed to attract new customers and keep existing ones. From a social and SEO perspective, the extra competition means more resources are required simply to maintain existing visibility. Combine this with the increasing cost of paid channels and you have to wonder how some of these companies will survive.
The second issue is the lack of differentiation between supplement companies. The market’s idea of innovation often boils down to either diversifying the product range or adding protein to everything from bread to beer.
From an outsider’s perspective, there certainly seems to be a lack of genuine innovation within core products. After all, whether you buy whey protein from MyProtein or The Protein Works, most consumers know that each product essentially does the same job.
The issue is compounded by weak branding. Looking at the two banners below, can you identify which brands they belong to? Herein lies the issue; when branding isn’t distinctive, the consumer’s decision will usually boil down to price alone.
How large discounts are impacting supplement companies’ bottom line
To paint a picture of the cost of acquiring a new customer, let’s assume a potentially generous average order value of £50 and an optimistic conversion rate of 5%. If we take the term ‘protein powder’ as an example, first page estimates indicate a bid from £1.13 to £2.99. We are therefore going to use an average cost per click of £2.
Based on this information, to generate £50 in revenue, you’re looking at a cost per acquisition of around £40. Throw a 20% discount code into the mix and suddenly the picture looks even bleaker. Customer lifetime value can of course work in your favour, but given the lack of brand loyalty within the industry, it’s hard to gauge how advantageous this would actually be.
This is obviously only a very specific example of a fairly generic term through one channel. But if you extrapolate this across SEO, social, email, affiliates, etc., your CPA will have to reduce significantly across the board in order to even break even – let alone make money.
What can supplement companies learn from the sportswear market?
If the above has made you want to throw in the towel, don’t give up just yet. Companies that really fine-tune their brand and carve out a segment within the market will be the ones to rise to the top and thrive.
Supplement companies might want to take inspiration from the sportswear market. From Adidas to GymShark and Nike to Lululemon, the products are often very similar. But the top competitors all differentiate themselves from one another by having strong brand values which help them capture a particular audience.
For many sportswear fans, the clothes you wear come to define you. And this is where Nike’s branding often triumphs. Its recent campaign highlighting Colin Kaepernick’s fight against racial injustice in the USA is a prime example.
Although Nike initially faced a backlash from customers, this quickly turned into a 10% uplift in revenue off the back of an outpouring of support. Nike even managed to cement its future somewhat, by attracting a younger demographic and becoming a voice for both current and future customers.
While the likes of Nike, Adidas and Under Armour have huge marketing budgets to throw behind campaigns like this, newer entrants to the market have instead focussed on a core audience, rather than trying to appeal to everyone. Lululemon have expanded their market share after taking the high end yoga audience by storm and GymShark are thriving amongst a younger audience of gym-goers.
There are also a handful of brands within the supplement market that have managed to find their niche. Rather than simply focussing on traditional supplements, Huel marketed itself as a nutritionally-complete and vegan-friendly food product and successfully hit £45m in revenue just three years after launching.
For a short while, Protein World also managed to seize its own segment of the market by focussing on an Instagram-friendly brand image targeted primarily at women. The strength of the company’s branding even helped it ride out the controversy of the ‘are you beach body ready?’ campaign.
The campaign resonated so well with the company’s core audience that it saw a £1m spike in sales. Unfortunately, it’s since attempted to appeal to a broader market and has succumbed to offering huge discounts on a regular basis.
How to survive a crowded market
By really strengthening your brand and its values, it’s possible to survive a crowded marketplace. However, there are a number of alternative strategies businesses can embrace to thrive in a competitive sector.
For brands still keen to be all things to all people, a complex digital marketing strategy that encompasses best practice across all channels must be embraced. From developing a perfectly optimised paid social sales funnel to implementing a long-tail search marketing campaign, you need to ensure every element works together as part of an overarching marketing strategy.
Either that or you could cross your fingers, close your eyes and hope your next campaign goes viral.