Major trends direct-to-consumer (DTC) brands should act on now

Still only a few months into the new year, 2020 is no doubt an unusual one. The global pandemic has made a palpable impact on almost every way businesses operate, not to mention our personal lives outside of work. As we all navigate this unprecedented uncertainty and how it will impact our bottom line, no company will remain fully immune to its impact.

In the case of direct-to-consumer (DTC) brands, having to overhaul business strategy and find ways to accelerate recovery likely feels daunting. DTC brands must not forget however that they are born of nimble, creative and resolute roots.

They can make industry trends work for them when they rethink how they drive sales, cater to customers in the mindset they’re in today and further explore what data-driven advertising has to offer all while meeting consumer-first expectations and making every ad dollar count within the customer journey.

DTC brands already operate digitally and are well immersed in social media, however the (Read more...) of DTC was rapidly evolving well before coronavirus became our current normal.

While born from ecommerce sites predominantly reliant on social media marketing, this cohort has moved on to more traditional retail methods, using established advertising channels like TV and rethinking reliance on social and digital strategies, such as influencer marketing.

Moving forward, strategies that grow more accustomed to measuring traditional ad metrics and incorporating them into existing digital operations will help DTC brands demonstrate resilience as they navigate a path forward, as defined largely by four major trends.

Think twice before hitting the “easy button”

For consumers looking to get everything they need from one place, Amazon serves as that one-stop shop.

There’s no denying the tech giant has removed friction in the buying process that consumers might experience while shopping at smaller or more inexperienced brands. Its influence is widespread and serves as an “easy button” for consumers and marketers alike.

That said, some DTC brands are hesitant to work with Amazon, in order to protect their direct relationship with the end user, much like Nike’s decision to pull out of the largest global retailer.

First-party data is a brand’s most valuable asset. Having this direct line to customers helps DTC brands and individuals cultivate a trusted relationship that can grow over time.

In order for brands to lure consumers outside of the marketplace provided by Amazon, they should focus on streamlining the buying process as much as possible and encourage consumers to go direct.

Brands can offer installment payments to appeal to young consumers without credit cards or accept alternative forms of payment like Apple Pay.

As they consider pulling out of the retail conglomerate, brand recognition will weigh heavily on their success.

It’s important to understand though that smaller DTC companies may face more difficulties in engaging the consumer directly. One way to combat this and entice consumers to the brand’s own shopping site is by providing more value to the customer.

A consumer is more likely to engage directly with a brand if it’s the only place to find custom items or a limited-edition version of a well-loved product. When inventory permits, sample sales are also a golden opportunity to give customers what they want at a discounted price.

Leverage nimble, niche agencies specializing in omnichannel DTC

We can also expect more agencies that specialize in DTC to enter the “shopper marketing” space over the coming years, helping brands go beyond social to incorporate TV—both linear and OTT—and other more traditional advertising platforms into their campaigns.

This style of agile, niche agency has the ability to work quickly across multiple channels and better understand this customer journey, whereas larger agencies tend to be siloed.

Additionally, niche agencies are able to be nimble in the process and take more risks than a larger agency might. And beyond targeting, DTC niche agencies can focus on brand-building and conversion to drive sales.

Shopper marketing, which focuses on the customer at the point of purchase, requires a deep understanding of the customer to positively impact their relationship with the brand.

Dollar Shave Club for example started with social, building the brand from the ground up. With that foundation, it then converged to digital and shopper marketing, and now leverages linear advertising to create more top-of-funnel brand awareness.

As DTC brands of all sizes move into the offline world and programmatic advertising no longer applies solely to digital media, brands should seek agencies that allow them to effectively maximize each channel for success, regardless of size or budget.

DTC, meet CTV

Where linear TV is typically reserved for well-established brands with large budgets, the introduction of Connected TV (CTV) and streaming services allows DTC to play in a new space, outside of walled gardens.

Nationwide social distancing precautions have rapidly shifted more eyeballs to CTV, where paid subscriptions for streaming TV and video have grown upwards of 32% in one week alone in time with shelter-in-place directives.

In a time when every dollar spent must go the extra mile, data-driven TV now more than ever gives brands the opportunity to cut through the noise with relevant, personalized ads.

Data-driven TV also gives advertisers the ability to see outcomes on a weekly basis and adjust as they go, developing a custom ad portfolio without wasting dollars.

DTC brands are also already accustomed to working with data more addressable than just age and gender. With the economic turmoil caused by COVID, every marketing dollar spent must be traced to a measurable outcome.

As the proliferation of advanced TV has helped outcome-based measurement become the norm, and brands remain hyper-focused on keeping their target audiences engaged through valuable experiences delivered through addressable channels, DTC will feel more comfortable spending resources here because it delivers the highest possible ROI.

Due to their addressable nature, brands will begin to take advantage of the big opportunity to reach a broader, people-based audience through CTV and OTT, comparing this new data to their existing first-party and second-party partner data.

Though DTC brands have preferred to focus on social media, they should no longer avoid TV, or write it off as too expensive and difficult to measure.

Research shows shoppers spend 70% more of their time streaming content on CTV than they do on social media apps. Additionally, 82% pursue an action after viewing an ad from a DTC brand while streaming. That’s a hard data point for anyone to ignore.

For DTC brands focusing on younger consumers—including Gen Z and young millennials—ad content is just as important as what they’re streaming.

While many understand their free streaming services require ads, there is an inherent disdain for content that is repetitive, irrelevant, or unengaging to them. For brands jumping into this space, prioritizing premium, compelling content will increase brand awareness in a positive way.

Reconsider influencers’ influence

As DTC brands look for advertising opportunities outside of social media and COVID keeps people physically apart, for the near term at least, it’s not unlikely the budget for influencers could diminish over time. This is not to say that influencers will become obsolete tomorrow, but the relationship is destined to evolve.

As consumers become hip to the pay-for-play nature of influencer social media posts, this once organic marketing arena becomes the very antithesis of brand loyalty and credibility.

The regulatory crackdown that led to the inclusion of sponsored tags, like #ad, further diminished what previously came across as natural. Altogether, these changes are significantly shifting brand credibility—especially with younger generations who value authenticity.

The ecosystem as a whole needs to change, as influencing across social media is almost obtuse and the average consumer can experience influencer exhaust.

Brands should diversify their ad portfolio and consider working with more relatable influencers, even the everyday user.

When brands engage directly with an existing customer by sharing their post, commenting on a status update, or asking them to be an ambassador for a product, they generate loyalty in an authentic way.

Final thoughts

The last decade brought forward an expectation of instant gratification with the rise of Amazon, Instagram shopping and Apple Pay. The new decade emerged with both challenges and opportunity.

The marketing industry has entered a new era of cross-channel, outcome-based measurement and an increased emphasis on earning the trust of consumers, requiring DTC brands to pursue new ways to market to their target customer amidst some bumps in the road.

By making better use of first-party data, recession-proofing now and adapting to keep the attention and loyalty of target consumers, advertisers can navigate any challenge.

Daniella Harkins is GM of LiveRamp’s Strategic and Media Alliances business where she focuses on strategic growth and partnerships with agency clients. In her role, Daniella works with executives to empower growth leveraging the power of identity across the advertising ecosystem. She built her career working with clients at the intersection of data, technology and creative.