DTC brands must take a page from the CPG book if they want to grow
Les Binet and Peter Field pioneered research on the value of a 60-40 spend on brand building versus sales activation messaging. This mix has shown the right balance of driving short-term sales for growing the brand as a whole and can lead to sustained revenue growth and acquisition of new markets while simultaneously keeping a brand from tapping out a single customer base.
This is great insight, but many DTC brands don’t have the budget or interest to spend 60% of their marketing dollars on brand growth, something difficult to measure or understand.
The combination of easily optimized, digital sales activation channels with cost-efficient distribution has created a new breed of rapid-growth DTC companies that fill niche gaps left by larger, hard-to-transition CPG organizations. Many of these DTC and rapid-growth companies have found great success prioritizing sales activation messaging alone.
This allows for rapid growth, but eventually depletes core audiences. Cost per acquisition begins to rise to unprofitable levels and a DTC brand faces a looming revenue decline.
At some point, even DTC companies that want to maintain some autonomy in their distribution network must expand beyond their immediate consumer base and engage in more broad, typical CPG activities like mass awareness and brand building. To become dominant in their category, DTC brands must be willing to transform their media, message and measurement.
Media mix: Transition to cost-effective, broad-reach vehicles
One pitfall of only using sales activation channels is that they only represent a small portion of the total potential marketplace. Marketers can leverage existing consumer profile information to build an expanded target that is not overly restrictive. The goal is to capitalize on a new, untouched consumer base.
A transition to 60% brand messaging doesn’t have to happen overnight, as brands can (and should) slowly test into larger mass-reach media channels. One concern with larger channels is maintaining adequate frequency. Brands must find high-reach opportunities that match their budget and consolidate spend within select channels to ensure the frequency and flight of this media into shorter spurts to understand its true effect.
One way to leverage existing audience data is to do an analysis of current buyers. Find which types of people over-index in purchasing the product compared to the population at large. This could be a strong indication that these types of people really enjoy the product and others like them may as well.
Take these insights and expand the target to not just those who are likely to purchase a product (as done in conversion strategy) but those that share similar traits to people who are. This will increase your overall reach without trying to hit the entire national market.
Brands can start with 10-15% of the overall media budget and test into each new channel, funding these efforts enough to get market feedback and slowly grow the budgets over time. Yes, even performance brands can find success in TV.
Message: Transition from sales activism to brand building
Many DTC brands leverage logic-based messages over emotive ones. This works great to drive short-term sales but may limit a brand’s ability for long-term growth. It trains consumers to be sensitive to things like price, promotion or features and fails to drive an irrational love of a brand.
Big brands capitalize on impulsive buying through emotional messaging that builds over time. It’s ideal to create a connection with your audience beyond a transactional relationship.
One place to start is to onboard a team to lead this effort. Brand building and sales teams are typically composed of very different personalities. If that’s not possible, start with your consumers and the relevant category. Find a nonrational reason to love the product.
McDonald’s doesn’t talk about how technically good their hamburgers are, they simply chirp that when a customer eats one, they’re “lovin’ it.” Nike doesn’t go into product specs in a 30-second TV ad, they tell us their products help athletes “just do it.”
Unique selling propositions are for rational sales models. These brands have traded product differentiation for product distinction that helps the brand stand out in the crowd. Find out what is missing in the marketplace and fill that gap.
Measurement: Transition from direct attribution to cross-channel contribution
DTC media channels can be easy to measure and quick to optimize. Last-touch attribution is the bread and butter for rapid growth but only tells part of the story, particularly when it comes to building a brand. Brands must leverage multiple measurement solutions to triangulate results and identify channels, strategies and tactics that are working best.
When moving into offline strategies like linear TV, OOH, radio and podcasts, many DTC brands are exploring marketing mix modeling (MMM) as a comprehensive solution. This is also true for brands that market primarily within digital because walled gardens and the iOS 14 update have made it difficult to directly tie media exposure to conversion.
MMM also has the advantage, when done right, to provide insight into marketing’s impact on KPIs beyond sales, allowing for true war-gaming against short- and long-term goals. Additionally, there are new and innovative multi-touch attribution solutions that can bridge the online-offline divide through things like automatic content recognition to help tie TV exposures to a DTC sale.
Many brands leverage experimentation to try new things and bring learnings to larger campaigns. No measurement solution is perfect, which is why it’s key to leverage multiple approaches and put extra effort into your integration strategy.
Sustained DTC growth: Building a brand
There comes a point when every DTC brand must consider investing in larger brand building activities, and it is important to begin making that transition before fully exhausting cost-per-acquisition media tactics. Brand building requires a large and sustained presence, but one that will pay off in the long run.
There is no such thing as a niche brand, only small ones, and small brands often struggle to remain relevant for long. If you’re wondering if it is time to begin the transition, it probably is.