DTC brands are doing more than disrupting physical retail. They’re changing the way advertisers think by leading by example.
One place the effect is being felt in how brands work with agencies. Many direct-to-consumer brands are eschewing agencies. While some of them continue to work with them for the odd television campaign, most are doing their marketing entirely in-house. For example, Nectar Sleep has armies of freelancers who can be brought on and cycled through whenever big projects are needed. Others are using external vendors like Contently to find content creators. And some, like luggage brand Away, have giant in-house marketing teams that do everything for them, from social posts to even television commercials.
One reason is a need for control. Emma Grede, CEO at Good American, said recently that the brand now has one person managing marketing in-house with plans to add more in the future. “We can’t let much of our marketing go to agencies.”
Cost savings are another factor. Direct to consumer brands also much more aware of those costs, and often have to deal with higher customer acquisition costs, which means they’re cognizant of what they pay external partners. “We need to control our budgets and we need to control our insights,” said Grede.
Another impact DTC brands are having is in how brands spend on social media. For a recent story on Digiday, reporter Ilyse Liffreing spoke to 10 DTC brands who all said one thing: Marketing mixes is de-emphasizing Facebook for other alternatives online. Facebook ads are becoming incredibly expensive, and cutting through the noise in a crowded online marketplace is getting really hard. Because DTC brands are essentially direct marketing companies, Facebook used to be the obvious place, but effectiveness is going down, multiple DTC brands have said to me.
Meanwhile, in other industries that have no physical presences, like online-only banks, companies are trying to figure out how to create experiences online the way DTC brands have done.