With traditional retailers investing more in online shopping and delivery options, smaller DTC brands are struggling to gain the affection of new customers.
According to research from Diffusion’s 2022 Direct-to-Consumer Purchase Intent Index, the number of Americans who intend to make at least one purchase from a DTC brand dropped from 79% in 2021 to 65% in 2022.
The top reasons people say they’d choose a traditional retailer over a DTC brand are:
- Free and quick delivery
- Lower costs
- Better sales
- Physical convenience and accessibility
These challenges are against the backdrop in which new data restrictions are making traditional DTC advertising channels (like Facebook) more difficult to lean into. Like all brands, DTC companies are leaning into their first party data and changing their advertising strategies.
Being a DTC brand is tough—they need trustworthy advertising partners to rely on.
In a saturated field that is marked by change, how are you going to prove that you and your advertising services can deliver results for DTC brands?
Understand your DTC advertising prospects: Get to know the market first
If you are seeking to sell into the DTC market, you need to understand the overall landscape.
Nearly all types of industries—from mattresses to braces—are represented in the DTC segment today. But what was once a field for darling brands with highly compelling creative, is now fiercely competitive.
Take Casper, for example. It was one of a kind in 2014. Today it has more than 200 competitors.
Those brands are funded by investors eager to jump on the gravy train. Venture capitalists invested roughly between $8 and 10 billion in DTC brands between 2019 and March 2020, per TechCrunch. And that was before the pandemic made direct relationships with consumers even more important.
This “direct brand economy” has evolved over the last several years.
MediaRadar saw the most growth within the DTC market take place between 2018-2019, when the market grew 18%. This growth was marked by both companies in the DTC market, as well as the number of products they were advertising.
During the beginning of the pandemic (2020), the number of brands advertised grew by 14% YoY, but the number of DTC companies in the market only increased by 5%. This isn’t surprising: established DTC companies could take advantage of a nation opting for home delivery.
While the pandemic fueled growth in 2020, we saw the market stabilize in 2021. In fact, we saw the number of DTC companies and product lines decrease by 4% and 5% respectively.
We began to see leading brands with significant DTC segments make acquisitions, like when Lululemon gained Mirror. Though, most leading DTC brands remained independent due to their high valuations.
Not all category leaders have managed their brand’s perception well. Away, for example, lost its luster when their founder turned out to be running a cutthroat culture of intimidation.
As brands try to build their brand and hold on tightly to customer love, they are actively buying advertising spots. This makes it an interesting and attractive target for ad sales teams.
Next: Understand DTC media buying patterns
MediaRadar reviewed ad spend of over 3,300 DTC brands in 2021. This analysis took into consideration print, digital and national TV formats.
While some DTC brands expanded into national TV advertising during the pandemic, digital continues to reign as their overall advertising medium of choice.
We also noticed seasonality of DTC ad buying. Q1 and Q4 are when the biggest ad buys take place each year.
Online Video and OTT are new drivers
DTC brands have long favored digital advertising. In 2021, 66% of DTC brands that we reviewed were advertising using digital display ads. Despite data changes, Facebook remains a big source of digital ads for these brands.
Online Video, mostly YouTube, is a driver for digital ad revenue from these brands. 30% of DTC brands used online video to advertise in 2021.
The new kid on the block, OTT also benefited from DTC companies favoring video advertising. This medium grew over 62% YoY with nearly 500 DTC advertisers using OTT ads to promote their products.
In 2020 brands slowed down spending on OTT in favor of other digital channels. However, they changed course in 2021.
Not all categories behave the same.
As the DTC market has evolved, each brand and category of products has created their own niche go-to advertising strategy.
Some DTC brands within categories like Finance, Home Furnishings and Pharma rely largely on their national TV buys. On the other hand, DTC brands in categories like travel, beverages and hobbies are leveraging digital advertising in a bigger way.
The retail category saw the following highlights:
- Growth: An increase of 2% growth in 2021
- Total spend breakdown: 36% digital, 5% print and 59% TV.
- Shifts in digital formats:
- Overall Digital spend: Moved to 36% of total ad buys.
- Video spend: increased 70%.
- Social media increases: Facebook 4% and Snapchat 55%.
- Overall Digital spend: Moved to 36% of total ad buys.
- 1-800-Flowers.com experienced a 465% 2021 growth.
- Their digital spending increased over 800% in 2021.
- Their Facebook grew over 1000%
- Their Video increased nearly 30 times of its 2020 spend.
The finance category saw the following highlights:
- Growth: Finance increased 13% in 2021.
- Total spend breakdown: Digital 30%, print 1% and TV 69%.
- Shifts in Format:
- Digital was up 32%
- Display showed a 25% increase
- Video increased by 88%
- Podcast was up 46%.
- Digital was up 32%
- Intuit was up 102% YoY was a driver in the 2021 digital and TV increases. Their video spend increased 174% and TV saw a 95% jump.
Prospect for individual brands that are a great fit
DTC brands want to increase brand awareness and sales growth. They want advertising partners who understand their needs and can see where their best opportunities lie.
The best way to find brands that you can support best is by doing some homework first.
We have two suggestions for quick ways to segment DTC prospects:
- Use ad sales intelligence software to filter and research individual DTC brands: In MediaRadar, you can specifically choose DTC as a search filter option in your Power Prospecting or Missed Business Reports.
- Review IAB’s list of the 250 direct brands worth watching. There’s a lot to work with here but it will take more manual research.
Once you highlight your brands, take a step back and ask who is leading them and how. Do they value traditional experience, do they only do work with their in-house team or have they publicly announced they’re seeking new partnerships?
Take a look at past work, where their gaps are and be ready to speak to the unique value that you bring. Each brand has its own story and you should bring an elevated level of personalization to your pitch.
Show how your metrics align with their goals
DTC companies rely on metrics to optimize sales, marketing and service. To win over their business, you’ll need to present compelling information on what you can deliver.
After you do your research on your prospects, you should have an understanding of their industry, spending patterns and other profile factors. How do they compare to your current customers?
If you have concrete results from your services with similar clients, share them. Continue tracking and studying how ads running on your platform impact the client’s business.
Basic guidelines for the sales conversation
- Speak to their needs first and foremost: You’re not here to sell ad space; you’re here to help them grow their brand.
- Speak their language from beginning to end: Whether a campaign is built to build awareness or drive sales, DTC brands highly value creativity and great customer experience.
- Give them a chance to speak: The best sales reps are those who listen well and understand the prospect. Truly get to know them and what they want so that you can deliver.
Top DTC brands win in a crowded market by having a laser focus on customer experience. It permeates product strategy, delivery, customer service and – you guessed it – marketing priorities. To sell to these brands, ad sales teams and agencies should follow their example.