Online consumer startups, mostly VC-backed, which began outreach by targeting customers on Facebook, Instagram and other performance marketing platforms, are expanding their reach to more traditional channels in order to capture audiences that may not have run into the brands’ ads on social media, or aren’t willing to buy from an online brand they’ve only seen on Facebook. And as the cost of customer acquisition on channels like Facebook and Google continues to climb, DTC brands are spending more on traditional outlets like TV. In 2018, according to a Video Advertising Bureau study, the top 125 DTC brands spent a combined $3.8 billion on TV ads, up 60% over 2017.
Customer acquisitions costs consider a number of variables — like targeted audience, category and timing — but competing is getting costly. According to one mattress brand, cost-per-click on Google reached $15 this year for search terms like “best mattress,” up from $10 the year before. Home goods brand Parachute estimated it would have had to spend $20,000 on Facebook alone in one month to reach the number of customers it reached through a diversified media mix when it launched its mattress earlier this year.
Those costs are pushing brands to consider other pastures in order to take advantage of the trickle-down effect from broad-reach channels, which in turn lowers those costs.
“Companies that started with digital-first and performance marketing are seeing that the moment they go out-of-home, their online campaigns became more profitable,” said Marcel Hollerbach, the CEO of e-commerce platform Productsup. “When a user browsing online sees a Google ad for a brand she already recognizes, you end up paying less for their click, and the whole marketing spec becomes more efficient and less expensive.”
The move to traditional channels, then, is inevitable. But in the same way that DTC brands are opening stores or selling through wholesale retailers, the goal is to take on these channels with a modern, digital-brand spin: With so much customer information and insight under their belts from launching direct-to-consumer on data-rich platforms, these brands have the opportunity to update the approach to more analog channels.
In stores and wholesale, that’s meant rethinking the customer experience and working with retailers to figure out better data-sharing and brand presentation terms. But brands transitioning their marketing strategies to account for broad awareness-raising channels — which yield little to no insight into attribution or customer data — have to navigate an awkward growing-up phase that requires a reallocation of resources, navigating partnerships, new methods for tracking results and back-end preparation to meet a new level of customer response. It all amounts to a complex maneuvering across ad channels that sends a message to any brand founder still under the guise that the barrier to entry for launching brands is low. As it turns out, you can’t build a brand on Facebook alone.
Grappling with resources
“These brands need to be diversifying their channel mixes earlier,” said Matt Rednor, the founder and CEO of Decoded Advertising. “DTC brands flipped the funnel — they’re starting with Facebook and then moving onto TV. The runway for DTC brands is under pressure though, and there are so many competitors that can rip of riff off your ads. So brands have to move to these channels faster.”
The first barrier is budget. According to Hollerbach, brands should be accustomed to spending around $1 million a year on performance marketing — ensuring they’re covered on those channels — before considering others like out-of-home and TV, channels that quickly top a $100,000 a month budget.
According to Travis, pulling off an out-of-home campaign, an investment starting around $100,000, is a much more considered move than a $5,000 podcast spot or a Facebook ad buy, which lets brands turn on ads for as little as $5. Automatically, this down payment separates the brands that can fund a big TV or out-of-home campaign from the ones who can’t, giving faster-growing brands the advantage to stick in customers’ minds. Carolyn Rush, the co-founder of Worn Creative, the agency that worked with Andie on the campaign, said the brand was smart about resources.
“For DTC brands, out-of-home feels out of reach because it’s a huge spend. Andie was smart — we took over [the MTA station] 59th and Lexington, and not Bedford Avenue in Williamsburg, and then did a mural in Brooklyn instead. That saved a ton,” said Rush.