DTC Brands See Media Opportunity In Crisis

DTC Brands See Media Opportunity In Crisis

In 1990, someone asked Sam Walton about the recession the country was in at the time. “I thought about it,” he said, “and decided not to take part.” That turns out to be sage advice as the retail sector sets out to recover from an overall double-digit downturn in consumer spending. While it may seem to be contrary to conventional thinking, the best way to avoid a downturn is to increase spend on media. Or, as Walton said, to simply decide not to take part in the recession.

“If there’s a time to do it, it’s right now,” Jason Wiese, SVP, director of strategic insights for media analysis and research firm VAB, told PYMNTS. “If you have the ability, build a holistic media plan and execute on it. I know some marketers have had to peel away some dollars from media, [but] there’s still a big hole where sports used to be, and there are definitely some deals to be had.”

Wiese and his team have put together several reports that benchmark the current crisis and show the media opportunity, especially for DTC retail, in the current environment.

“DTC brands grew up digital,” he noted. “They have flexibility and agility and tend to act very quickly on consumer feedback, where bigger companies take a long time to make changes. They’re not encumbered by distribution systems and will be very opportunistic about media.”

First, the case for media. Wiese and his team compared the current pandemic to several other crises, man-made or financial, across 100 years and 125 brands. While a pandemic is different than a financial crisis, Wiese found that a fundamental correlation between share of voice and share of market still apply. Advertisers who reduce their share of voice during an economic downturn suffer consequences, the VAB study found. Their profits drop and they’re forced to regain share later. Positive examples: During the 2008 financial crisis, Amazon launched its first TV campaign in the middle of the recession and saw a compound annual growth rate of 34 percent between 2008 and 2012. Walmart significantly increased its TV investment in both 2008 and 2009, and saw high single-digit sales increases in each year with continued growth after the recession.

Fast-forward to COVID-19. While VAB doesn’t expect the downturn to last long, it has already proven its depth.

“During this time, some sectors will have no choice but to cut back or go dark, with closures or supply chain issues making it impossible to do business,” says VAB. “However, for the other categories whose sales are impacted but can function, this is a crucial time. In both an uncertain or strong economy, advertisers who decrease their share of voice will experience lower profits and will be forced to spend more money to regain their position. Although this principle always holds true … this correlation is amplified during an economic downturn, meaning it will take advertisers who cut back or go dark longer to recover when the economy rebounds.”

That lesson is particularly applicable to DTC brands. Before the pandemic, VAB analyzed 50 DTC brands that were new to TV advertising, including Shipt, DoorDash, ClassPass and Butcher Box. During that time, the results were dramatic. Brands that spent less than $2 million saw, on average, a 31 percent increase in website traffic the month their TV campaign launched. Thirty-six “emerging” DTC brands saw an average 85 percent lift in their website traffic after they launched their first TV campaign, averaging more than 1.6 million monthly unique visitors.

Some specifics: Frontpoint invested a total of $1.5 million total on TV between November of 2019 and January of 2020, and saw its monthly website traffic build from “not measured” in October of 2019 to 164,000 unique visitors in January of 20. Mizzen+Main invested $800,000 on TV during 4Q between Oct 2019 and Dec 2019, and saw its monthly website traffic build from “not measured” in September of 2019 to 49,000 unique visitors in December of 2019.

Wiese and VAB have done other deep dives into the DTC world. One of them shows that 66 percent of consumers expect DTC brands to comprise at least 20 percent of their purchases this year. It has identified four personas for key DTC consumers: 1) internet idolizers, who are constantly connected and use the web for exploration, 2) technology tastemakers (early adopters who own a lot of gadgets that feature the latest tech innovations), 3) convenience conquerors who have busy lifestyles, and 4) perceptive purchasers who will use their voice as an advocate if they have a positive experience.

As an advocate for more media spend, Wiese cautions against cutting marketing spend during the pandemic.

“A lot of the obstacles to spending come down to the C-suite,” he said. “Chief financial officers will often look for places to cut when sales are down for whatever reason. It’s a short-term way to think, and we’ve certainly heard of some brands that are looking to get out of their long-term media commitments. Brands should look at it as a long-term investment.”