DTC founders' secrets: What all advertisers can learn from TV's latest force
I hope all direct-to-consumer (DTC) company founders forgive me for violating the first rule of telling secrets because I’m not "telling one person at a time." While better understood now, the DTC founders’ first secret was that they caught their more established advertiser and agency brethren counting the wrong thing: TV’s eyeballs.
While I’ve always listened intently to advertisers, I’m hearing something different from the founders of DTC companies. My company specializes in analyzing TV and video advertising. Since 2014, I’ve worked with our insights team in tracking the business effects of TV spending from over 265 digital-native DTC brands spanning more than 85 categories. We’ve analyzed thousands of pieces of data, leading to the creation of five published research guides to help marketers better understand the DTC category, as well as a series of documentary-style videos.
One of my company's findings was that these new-to-TV advertisers are pouring exponentially more money into TV campaigns based on ad performance outcomes — to the tune of $3.8 billion in 2018, a 60 percent increase from 2017. Among the factors in this unprecedented surge of new marketing dollars to TV is DTC brands’ acknowledgment that relying on social and digital channels to build their business has become both scale-limiting and cost-prohibitive compared to the outcomes TV delivers. According to Digiday, these marketers are "taking a closer look at the relationship between their ads running on TV and the search traffic to their sites and apps."
It’s not just the rise in decibels around their evolved language of acronyms, activations, analytics, acquisitions, economics and (always) outcomes that is part of all DTC company founders’ DNA. It’s also their much quieter acknowledgments that they’ve bested established TV ad spenders. They want more and more TV in all its forms, leading industry ad sales leaders to create specific DTC teams to service the growing demand.
Access to these founders helped me quickly learn that getting a clear understanding of how each individual DTC advertiser tests and evaluates the performance of their media levers is absolutely pivotal to becoming their valued partner. Any 10 DTC advertisers will have 10 different ways of judging a media lever “effective.” It really pays to understand the unique set of tools and toggles a DTC advertiser uses.
We’ve been privy to not only the market actions numerous DTC leaders took, but also how quickly they seized the immediate advantage over existing TV advertisers.
DTC advertisers already had the thoroughly modern TV-investment playbook, with their first-party data precisely tying specific TV ad occurrences to the outcomes generated. Their bona fide results-driven approach has vaulted DTCs past the long-term TV speculators using panel, proxy and surrogate intelligence or softer, directional indicators versus hard outcomes.
If I were to coalesce the dozens of quieter DTC founder insights I’ve heard about the value of adding more TV ad inventory to the future of their sales, I believe it would sound like, "I hope my competitors are distracted by some form of TV uncertainty. I hope they pause and they ponder because I’m ready to pounce. I’ll take their ad inventory. I’ve got my TV advertising playbook, and I know it works."
So, from my perspective, new DTC advertisers are teaching legacy TV advertisers they never had to make a choice between TV’s role as a lever for either long-term brand building (i.e., customer retention, loyalty and escalating value) or short-term customer activation. Going forward, they can simply choose both.
Long before meeting these DTC founders, it was always clear to me the markets in which advertisers function are subject to upheavals generated by some combination of irresistible forces and immovable objects. I believe new DTC TV advertisers are marketing’s latest irresistible force, armed with a nearly transparent playbook from which all advertisers can take several quick tips:
• Craft video ads capable of working the full funnel, from initial awareness straight through to driving site traffic in scale. DTC advertisers never choose between creating “branding” and “sales activation retail” ads; they insist all their ads do both. Using TV, transactional advertising done correctly simultaneously builds brand awareness. DTC company founders get valuable transactional returns from their TV advertising investment, so the big brand lift their ads garner is seemingly free.
• When initial analysis of TV/video advertising data reveals good performance, take the smart next step and put the full range of premium video options to work. These options could include linear TV, mobile TV and video, over-the-top media services, addressable TV, video on demand, online — use them all. I observed DTC advertisers don’t wait on progressive evidence to pull all the levers. They do better moving quickly from a “good test” to implementing a “how high is up” approach. That’s how they best their sales goals.
• Prepare for great surprises for what works. Activating customers using programming and channel choices that don’t feel like self-evident fits are pure advantage to the advertiser. This often helps you unlearn commonly held demographic targeting beliefs and get smart about where pockets of productive consumers have been overlooked by ingrained media targeting assumptions.
• Learn fast, and move on. With an “only pay-out matters” mindset, DTC advertisers don’t practice loyalty beyond reason with any media lever. Nimble objectivity is what optimizes media investment. DTC advertisers move on quickly at any point of diminishing returns on investment.
By demonstrably selling more advertiser goods and services, TV’s demand profile kicked into higher gear during the recent upfront, earning sellers double-digit CPM growth according to Variety. DTC advertiser interest is at an all-time high in buying due to their understanding of how valuable it is for TV’s pictures to tell their story.
As for the immovable objects satisfied to think they are part of a status quo TV ad environment? Think fast — I know some company founders who want all of your ad inventory.