MediaRadar Blog

Understanding the Direct-to-Consumer (DTC) Market

Understanding the Direct-to-Consumer (DTC) Market

Have you ever taken an Uber, or ordered a pair of Nike shoes directly from the brand’s website? Then you’ve participated in the Direct-to-Consumer (DTC) segment of the market, like hundreds of millions of others.  

The DTC market is not exactly new – Warby Parker, the unicorn among unicorns for digital native brands, was founded nearly a decade ago. Established brands like Nike have been playing catch up ever since, putting Customer Experience executives in place and playing around with their online stores.

The reverberations of shifting customer expectations continue to be felt among digital natives and major retail brands alike. And the growth of the model across industries and markets is stratospheric.

The DTC model is here to stay, no question. And ad platforms need to learn to keep up. According to research from MediaRadar, DTC ad spend is up across almost every product category. In apparel alone, spending rose by $100 million from 2014 to 2018. These numbers should lead ad sales reps to ask (and answer) two questions:

  1. How have DTC disruptors changed the game for advertising?
  2. What’s most important for advertising in the DTC model?

Here we take a deeper dive into how DTC advertising differs from traditional advertising – and which factors remain the same.

DTC Brands 2014-2018

What DTC Brands Mean for Traditional Advertising

A DTC brand is any company that sells their products to consumers, rather than going through a distribution channel or retail store. With that definition, DTC can take on many different forms. Sometimes, it’s a digital native and service-oriented company like Uber. Other times it’s new efforts put forward by major athletics brands, like Nike or Asics. In either case, brands bypass traditional sales models – and many are rethinking otherwise staid marketing strategies.

Much of this shift is due to the customer expectations that DTC brands, in turn, exhibit themselves. In the Amazon age, brands expect direct connection, fast communication and clear expectations. At the same time, marketing and sales have become more experiential than transactional. DTC brands want to reach consumers directly, rather than working through publishers, retailers or advertising agencies.

For more insight, check out IAB’s detailed deck on the rise of the 21st century brand economy.

The response from major advertising platforms has been telling. NBC Universal, for example, has made a recent effort to reach DTC advertisers by pulling them into their online channels. “NBCU is offering DTC brands complete campaign consultation, from audience connections and content creation to cross-platform measurement and placement optimization,” writes Jeanine Poggi at AdAge. Brands will also have access to in-house data and creative teams. The move makes it clear that DTC brands are cut from a different cloth when it comes to advertising.

 

Direct to Consumer Guide

What’s Important for DTC Ad Sales

Sales is no longer just sales; it’s the customer journey. Support is no longer just support; it’s the customer experience. Or so go the main tenets of the DTC model. Ad sales reps will do well to play into the DTC hand.

According to research from the MediaRadar, you can expect to find some (or all) of the following attributes in DTC brands:

  • Mission driven. Many DTC brands believe in the value they are offering their customers. Their message is not about the product only; it’s often just as focused on connection or experience.
  • Younger customer segments. Since most DTC brands are also digital natives, they tend to focus on Millennials & Gen Z customer segments. For example: a DTC brand is much more likely to advertise via Instagram than HGTV.
  • Brand authenticity. Customers tend to be invested in a DTC brand, meaning emotional marketing works better than in other models. Spending for a customer support program may not top ad spend for DTC brands, but it could come close.
  • Quality over price. Many DTC brands take the conversation surrounding benefits vs. features marketing seriously – and product price rarely factors into their marketing strategies.
  • Product specialization. In contrast to major retailers or apparel brands, DTC brands tend to specialize in a single product – or highly defined set of products. The Casper catalog – which started as a mattress and now includes just a handful of sleepytime accoutrement – is a good example of this focus.
  • eCommerce sales. Most DTC brands are digital natives, with sales available only online – from platforms like Amazon to their own self-hosted store. The same goes for most marketing efforts, with a major focus on digital channels like social reach and paid search. It’s also worth noting that about 25 percent of DTC companies have a subscription model.
  • It’s all about the data. DTC brands tend to be highly analytical – they rely on metrics to appeal to their customers, make their sales and follow up with great messaging. Most of their sales and marketing efforts are aimed at making tweaks to optimize the funnel, rather than to make a big splash.

These are the highlights, but they’re not the only elements that make a DTC brand unique for advertising opportunities. Check out our follow up to this piece and our comprehensive guide to find out more specific tips on how to sell advertising to a DTC brand.

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