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Direct-to-Customer Advertising and the New Brand-Customer Relationship

Nov 14, 2019

Unless you’ve been living under a rock this past year, you have been exposed to the Direct-to-Consumer Brand movement (DTC), in some form or another. Maybe you receive a monthly delivery from the Dollar Shave Club or have spotted ads for Casper Mattress while riding the New York City Subway. Let’s be clear, communicating directly with consumers, which is at the center of the Direct-to-Consumer movement, is certainly not a new concept. Companies, brands, and marketers have been communicating directly with consumers (or potential customers) since the introduction of the Uniform Penny Post and modern Mail Orders way back in the 1800s. So what has caused this sudden resurgence? Why does every brand suddenly want to be Direct-to-Consumer?


The Emergence of Direct-to-Consumer Brands

Prior to the internet age, the core strategy of “Modern Marketing” centered around brands’ ability to communicate to consumers en masse through broadcast television. Prospects were neatly aggregated through appointment viewing of shows like Mash, Seinfeld, or the Super Bowl. Brands strategically placed their products on shelves in high volume physical stores for consumers to buy. And the cycle continued.

But the combined rise of the internet, e-commerce, streaming services, and social media completely disrupted this cycle. Shopping is now accessible from anywhere at any hour, and media consumption is fragmented across streaming services. Giants have risen: Amazon, Google, and Facebook. And Shopify and other big enablers have emerged to democratize e-commerce. It’s also become possible for consumers to interact directly with brands more than ever before.

In 2018, the retail space saw nearly 5,000 store closures from well-established brands including Sears, Kmart, and Victoria’s Secret (Digital Commerce 360). To adjust, 57% of consumer brand manufacturers have now embraced and launched their own DTC initiatives (Ally Commerce Study). Nike is one: DTC represented 29.6% of its overall revenue in 2017 and it predicts its DTC sales will grow to $16 billion by 2020 (Digital Commerce 360). Some CPG manufacturers are instead scooping up other DTC brands: see Unilever’s $1 billion acquisition of Dollar Shave Club and Campbell Soup’s $10 million investment in meal-kit company Chef’d. Now, 40% of US internet users expect D2C brands to account for at least 40% of their purchases within the next five years and 81% say they'll make at least one purchase from a D2C brand within the next five years (eMarketer).


The Fuel for Direct-to-Consumer: A Long-Term Customer Relationship

Without the burdens of legacy infrastructures and data silos, emerging DTC brands have been able to leverage data to discover and acquire consumers faster and more efficiently, communicate messages more precisely, and maintain and develop ongoing relationships with their customers. Through these relationships, DTC brands have been able to control the experiences consumers have with their brand from beginning to end. Consider Peloton, which not only sells their products (bikes and treadmills) directly, but provide the white glove delivery, setup and training, an engaged community on a connected platform featuring friendly competition, and a variety of content that resonates strongly with their community.


How Native Advertising Fits in to a Direct-to-Consumer Content Strategy

Great storytelling has never been more important to break through today’s noise. Having a content strategy that aligns a brands’ messaging across all touchpoints is critical to telling that story and building a loyal following. When done well, consumers are organically pulled in and become passionate advocates for the brand and help spread the word to create an early majority of consumers critical to its growth and sustainability. One of the original modern DTC brands, Dollar Shave Club, built an audience through the snarky content they developed and delivered on YouTube, which resonated mightily with their target consumer.

All of this great content cannot live in a vacuum. Content is King, but distribution is King Kong. The technology and tools exist today to enable marketers to leverage data to effectively tell their stories at scale. This is why Native Advertising, ads that look and feel like they belong, is the vehicle for a successful distribution strategy of great content. DTCs are proving it.

Below are three reasons why Native and DTC Brands are a good match and primed for continued growth:

1. It’s Already Working, But Needs to Break Out of Social

The largest DTC brands have been built off of the backs of the scaled distribution platforms of Google, Facebook, and Instagram. Brands like Allbirds, Chubbies, MVMT, Madewell, and Hubble Contacts have all had success in building their business leveraging the power and distribution of Instagram. Kylie Jenner built a billion-dollar business promoting on Instagram alone. The Ad Format that makes this possible is Native, and it is the only type of ad format that you will find on Instagram and any of the scaled social platforms. These platforms recognized long ago that Native ads are not only the best vehicle to deliver a brands’ content in a way that consumers find valuable but also drive engagement with the brand.

But competition has grown. Social platforms are oversaturated, and CAC (customer acquisition cost) has skyrocketed, forcing DTC brands to look at other media channels including Audio, Out of Home, and even traditional television for distribution. For brands to take their DTC business to the next level, they must utilize Native Advertising in platforms that can distribute outside the walls of Facebook and Instagram. It is the perfect way to amplify the messages already developed for Social channels, and leverage the scale of the open web to reach an incremental audience.

2. Context Drives Mindset

Native advertising is inherently contextual by design, as it’s closely assembled to match the content on the page that is being consumed. With the onslaught of privacy regulation and further limitations in collecting user data for the purposes of ad targeting, there’s a big opportunity for DTC brands to leverage context to reach consumers in a privacy-friendly way.

3. Marketing Tech Meets Ad Tech

Brands’ content marketing initiatives are now far more measurable than they ever have been. Coupled with a direct relationship with consumers, DTC brands now have a completely holistic understanding of the entire lifecycle of their customers from the first impression.

Better still, utilizing Native advertising formats to distribute content that is intended to build a longer-term relationship with consumers can now be better attributed to a brands’ customer acquisition efforts. The rise of DTC has signaled a change in the relationship between customer and brand in advertising. The future of advertising is a more symbiotic relationship between paid, earned and owned media with a content strategy at the focal point intended to deliver continuous value to consumers. Something everyone can get behind.

Story by Craig Aron

SVP Strategic Business Development, Bidtellect New York, USA

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