Amazon introduced its annual Prime subscription program in 2005, kickstarting a growth trend that would see the company accounting for more than one third of retail ecommerce sales in 2015 and nearly half of ecommerce sales in 2023. And in doing so, they both destroyed existing notions of branding and opened the gates for a wave of new competitors - lean operators who could leverage digital channels to market and sell directly to consumers, bypassing the need to compete for shelf space at grocery stores and big box retailers. Brands like Dollar Shave Club, Warby Parker, Casper, and Everlane rose to prominence as consumer buying habits switched to digital, opting for a no-frills, seamless process.
Over the last decade we've seen D2C brands mature and grow, fall and become acquired, then rise again. And through that we've seen a similar marketing story repeat itself, both in terms of D2C growth and also in terms of how the marketing and advertising strategies for those brands evolve.
Starting in Search and Social
For most D2C brands, the marketing journey starts in Search and Social. This is for a number of reasons, but the most common are:
Easy to buy from. The barriers to entry on Search and especially Social are low; you can set up a credit card with an account and get paid advertising into the field within a day.
Easy to create for. While it certainly helps to have strong creative for Social advertising, you can get by in both channels without hiring a creative agency, and an in-house marketing person can help whip up creative without having to go external.
Easy to measure. Measuring success in these channels is easy - you track clicks and site visits directly from your advertising to your site. No fiddling around with attribution - the last click is all you need.
Easy to understand. Entwined with being easy to buy and measure, search and social are easy to understand - everyone "gets" how these channels work, what they're doing, and how they provide value.
Low risk/barrier to entry. It's cheap to get started in search and social marketing, and you can have a relatively junior person handle those channels without incurring much risk to your brand.
These factors combine to make search and social the easy first step for D2C brands looking to start their marketing journeys - figure out or hire someone to do SEO, get some paid search going, and start running ads on Meta and Instagram. It's the perfect pair of channels to start with, and for D2C brands who are also tech brands, an easy pair to understand and integrate with.
There's no denying that search and social are effective channels for D2C brands: A Yotpo poll in late 2022 suggested that 61% of D2C marketers said social was among their top 3 acquisition channels, followed by SEO, direct traffic, and SEM. And consumer surveys have shown that social media and online search tend to be the first place most consumers hear about the D2C brands they buy - but there's also a risk of saturation in those spaces, diminishing returns, and the fact that some audiences just can't be effectively reached in those channels, leading to a need to eventually branch out to sustain growth.
It's worth noting that some additional expansion in social is still possible after spends get high - collaborations and influencer marketing also fall into this space, and they'll be part of a mature social strategy for D2C brands.
Moving to Television
While you'd think other digital channels would be the next step for D2C advertising, that ends up not being the case, and TV is a much more likely next step for D2C brands looking to expand past social. In 2020, many D2C brands were spending more than $100 million per year on TV ads, led by pet products retailer Chewy. TV ad spending by D2C brands has continued to increase year-over-year despite the costs involved.
As with search and social being the starting points, there are a few reasons for this. The first is one of brand image: TV ads are flashy and visible, and they bring a sense of legitimacy to a brand that you don't get from social media. Brands which only show up on your Facebook feed run the risk of feeling like they're low-rent or fly-by-night operations; brands with slick TV ads on cable still feel like big players. The second is channel-related: Although everyone is online, when it comes to ad exposure there's likely to be less overlap between your digital and TV audiences than say, your social and programmatic audiences. That makes it easier to justify a TV spend when it comes to driving incremental reach.
But what of measurement? While digital-first marketers have always hated the way they're asked to justify every click and conversion online, the reality is that people just tend to not question whether TV works. If you're buying TV spots, it's because you believe that they work, and even if you can't quantify the impact, you're not wrong. And anyways there are ways to do some TV measurement through promotional codes and QR codes so it's not a complete black box.
TV ads have a high cost of entry, but the perceived benefits and lack of audience overlap make linear a common next choice for D2C brands, particularly those who have just secured an influx of funding after a promising start. As with search and social however, eventually the call for continued growth requires broadening the acquisition strategy.
The Expansion to Programmatic
What usually happens next is an expansion to other digital channels, and this is usually when programmatic investment starts. And it's worth noting that "programmatic" here has a wide meaning, covering everything from display to CTV to audio and even digital out of home. According to eMarketer, digital spending outside of search and social makes up around 18% of D2C ad spending, and that makes sense for a set of channels with surprisingly high barriers to entry - programmatic channels typically require custom technology, expertise, and in the case of RTB, a seat on an exchange. But through programmatic D2C advertisers gain access to the rest of the internet, including a larger share of customers browsing on non-mobile devices - and as a result who are more likely to make an online purchase.
The other big advantages? Data and targeting. Programmatic ad buys give advertisers unparalleled access to targeting criteria and with it the ability to learn about customers and identify what data drives positive campaign response. This can be valuable for planning future campaigns and understanding customers. Programmatic channels also allow for easier retargeting and customization than social, acting less like walled gardens.
The big downsides here are attribution and overlap - proving success in the programmatic space can be a hassle, particularly if you either don't believe in view-through attribution or have the tools to do cross-channel attribution. Consumers may see ads in CTV or display on a website but then end up clicking on an ad on Facebook later, and that can be where all the credit goes. This also underlines the challenge - your digital and social audiences will necessarily overlap, and so acquisition in the programmatic space is going to be expensive and you'll need to avoid existing customers.
Going Outside
Of course, there's also the real world to consider and for D2C brands both out of home and pop-up stores and physical locations can be major acquisition sources. These are again reach plays designed to extend a D2C brand's reach outside of the digital space, and with hyperlocal targeting DOOH can put a brand front and center even at retail stores. With DOOH measurability is always going to be the biggest challenge but many of the same tricks for TV work for OOH ads.
Whatever steps the journey takes - and regardless of the order - Direct-to-consumer brands need to be mindful that acquisition costs will necessarily increase as more channels are added; growing the audience beyond the lowest-hanging fruit always becomes more expensive over time, and each incremental customer will cost more to add. What isn't guaranteed is customer value - good targeting and acquisition strategies can mitigate rising costs by helping ensure that acquired customers have higher lifetime value, and as a result offset their acquisition costs. Expanding channels can be difficult and scary, but with the right partner you can ease that transition and mitigate the costs.
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