Direct-to-consumer (DTC) companies significantly accelerated TV media spending in 2018 according to VAB’s new marketer’s guide. Here, Jason Wiese (pictured below), SVP, director of strategic insights, VAB, talks with DTC Daily about the findings from the report, and why DTCs are looking to TV to help scale their business.
What were the key findings from the report?
Direct-to-consumer brands have evolved their marketing strategies and are now making a big bet on TV.
Beyond building awareness, the brands are effectively employing TV to drive both short- and long-term successes throughout the purchase funnel – from skyrocketing website traffic that brings in millions of new, prospective customers almost immediately after a TV campaign launches to double, or even triple, digit lifts in sales seen during sustained TV campaigns.
In Direct Outcomes, we analysed a robust set of 125 DTC brands who collectively spent USD$3.8bn (£3bn) in TV during 2018, a 60% increase versus the prior year. This equates to an incremental USD$1.4bn (£1.1bn) in TV spending by these 125 brands in one year alone.
Why are the largest DTC brands investing so heavily in TV?
Performance measurement and data analytics are the cornerstone of direct-to-consumer brands. With cutting-edge analytic tools and a team of data scientists at their disposal, these brands scrutinise and optimise media channels in real time. Through their own data analytics, DTC companies are clearly seeing business growth from their TV campaigns and are significantly increasing their investment as a result.
Not only have these large DTC brands made a big bet on TV, they’ve actually doubled down on the platform over just three short years. Within the 125 DTC brands analysed, we identified 62 brands that fall into an ‘expanding’ segment. These brands are an average of 13 years old and have been investing in TV for the last four years on average. Their collective TV spend has increased from USD$1.2bn (£960m) in 2015 to USD$2.4bn (£1.8bn) in 2018.
From a revenue perspective, the brands with publicly available sales data showed an average spike in annual sales of 38% when they increased their TV investment.
Smaller DTCs are investing more in TV. What is causing this?
As digital marketing costs rise and scale within the medium maxes out, smaller DTC brands have migrated over to TV where they’ve utilised a ‘test-and-learn’ approach with a limited budget at first. Through their own data analytics, many of these brands saw early success with their campaigns from an ROI standpoint and quickly scaled up their TV investment.
Within the 125 DTC brands analysed, we identified 63 brands that fall into an ‘emerging’ segment. These brands are an average of eight years old and have been investing in TV within the last three years. Within this time period, their collective TV spend went from only USD$156k (£124k) in 2015 to USD$1.4bn (£1.1bn) in 2018. This is a hyper-growth segment for TV as 65% of these brands were either new TV advertisers in 2018 or they were existing advertisers who more than doubled their TV investment year-over-year.
These brands have quickly elevated their TV spend since they’re seeing immediate lifts in key business metrics. Brands like Grammarly, NerdWallet, Poshmark and Zola have seen triple-digit increases in their monthly unique website visitors from the start of their TV campaigns.
From a revenue perspective, the brands with publicly available sales data showed a significant spike in annual sales, 78% on average, after launching their first TV campaign.
How are DTC brands measuring the success of their TV ads? Does this differ for small DTCs and large DTCs?
Direct-to-consumer brands, both large and small, have a relentless focus on ROI measures such as customer acquisition costs, media efficiency, sales and subscriptions or sign-ups. Since DTC brands are inherently digital natives, driving qualified leads and potential customers to their branded digital platforms, whether it’s their website or mobile app, is critical.
Through the use of both first- and third-party data analytics and attribution, many brands look at the relationship between their ads running on TV and the increased traffic coming to their site, either directly or through search. As we have highlighted in our Direct Outcomes marketer’s guide and has been echoed by DTC founders, the mass scale TV ads deliver leads to much larger amounts of volume coming through the major search engines to branded websites. Not only is the volume increasing, but TV is also delivering some of the highest-value customers who are more likely to be using their mobile device to visit a brand’s website right after seeing their ad on TV. This leads to greater media efficiencies and lower customer acquisition costs.
What innovations within TV advertising will make DTCs spend more of their ad budgets here?
Besides the efficiencies realised through their TV buys which aid in lowering customer acquisition costs followed by increases in TV budgets, the continued expansion and evolution of scalable data-driven targeting solutions is already driving DTC brands to migrate more ad dollars to TV. These solutions include addressable TV and video-on-demand, data-enabled linear TV and other programmatic activations with greater extensions into cross-screen platform opportunities, such as full episode players and Connected TV as options, too.