Over the past decade, digital marketing has evolved at breakneck speed.
Innovations like artificial intelligence and big data have fundamentally shifted the way retailers interact with customers. Big-box retailers have lost relevance, forcing an unprecedented number of store closures. Meanwhile, digitally native startups are doubling down on their direct to consumer (DTC) marketing strategies. Direct to consumer trends are reshaping retail, and even established brands are paying attention. In fact, Nike reported that its DTC strategy was responsible for 29.6% of its overall revenue in 2017. The brand predicts its DTC sales will grow to $16 billion by 2020.
The direct to consumer trend isn’t disappearing any time soon. In fact, it has catalyzed fundamental changes to the nature of retail, marketing, and customer engagement. DTC marketers have their fingers directly on the pulse of consumers, and this dialogue is shifting consumer expectations. They are asking for personalization, authenticity, and convenience. Here are three direct to consumer trends that are driving big shifts in digital marketing in 2019.
Emerging performance channels come first
Quantifiable marketing has always been central to DTC strategy, but maturing digital channels, such as social media, aren’t delivering the same ROI that they used to. According to data averaged from various market research studies, 67% of users have not purchased “from” nor directly within social. Impressions simply aren’t translating into customers, and customer acquisition costs are higher than ever. In light of these shifts, DTC marketers now see a bigger impact from emerging channels than existing ones. However, even testing comes with risks — that’s why DTC marketers favor performance marketing. In a performance model, advertisers pay only when they achieve a specified result — not for clicks or impressions.
When marketers are able to measure their Customer Acquisition Cost (CAC) in real-time, they can focus on creating high-value offers to get customers in the door, such as:
- Free trials
- Coupon codes
- First-month discounts (for subscriptions)
- Limited-time offers
While these offers are certainly effective for reducing the friction involved in a purchase, rewarded advertising takes this one step further. Instead of being forced to watch ads, users choose the offers they’re interested in and are able to unlock in-app content in exchange for real conversions. In the rewarded in-app environment, users are engaged and open to trying new products, which results in record-breaking conversion rates and a consistently high number of new customers.
Prioritize long-term returns, not short term sales
One of the biggest differentiators between DTC brands and traditional retailers is their focus on maintaining relationships with their customers over a lifetime — not just for a one-time sale. Without distributors acting as middlemen, DTC brands don’t need to focus on creating massive quantities of inventory at the lowest cost possible. Instead, they focus on how they can overdeliver for their customers and make sure they are happy and loyal to their brand. Because of this shift in goals, DTC brands are not just selling products online, they’re providing value on a regular basis through recurring subscriptions.
The rise in subscription offerings is one of the most prevalent direct to consumer trends we’re witnessing today. Consumers are always looking for convenience, and subscriptions are the best way to achieve that. Rather than needing to run to the store when you run out of a household product like laundry detergent, subscription services permanently eliminate this type of occurrence. DTC services like FREY, for example, provide a unique line of products to meet every laundry need you could have and automatically ship it to you based on your laundry habits.
Subscriptions aren’t just convenient — they’re highly profitable. This combination of quality and convenience helps DTC brands maximize customer LTV and enables them to offer high-value promotions where you can try out products for as low as $1. They also offer special promotions and free merchandise for loyal customers. The end result? These brands create profitable businesses that customers can’t wait to tell their friends about.
Rather than trying to maximize the margins on an individual sale, today’s DTC brands create a win-win situation for their customers and it’s certainly paying off. This method of consumer engagement is mirrored by the value exchange behind rewarded in-app advertising. Successful app developers no longer need to force as many ads as possible on their loyal users — instead, they’re able to allow users to choose from hundreds of offers and complete an action of their choice to receive rewards. Because advertisers only pay when a specified action is completed it’s a win-win for app developers, mobile gamers, and DTC brands.
Experiential engagement wins hearts (and ROAS)
According to Fab Dolan, Head of Marketing at Google Canada, “The brands that are winning are the ones that understand and own the fundamental interplay between experiential and transactional.” If direct to consumer trends are any indication, personalized experiences have become a hallmark of modern marketing.
Experiential engagement goes beyond personalized messaging or dayparting. The most successful marketing experiences actually add value to the daily lives of consumers. It can take many forms, including the following:
- An AR experience that allows consumers to test products before they make a purchase
- Branded content, either hosted on a blog or displayed natively by a third-party
- A custom gamified experience which illustrates the brand’s value
DTC brands like Function of Beauty and Gainful take customized experiences one-step further by using a personalized quiz as the entry point to the customer journey. Based on their responses, these brands formulate products with a unique blend of ingredients to help them achieve specific results. Unsurprisingly, this personalized approach is highly alluring to modern customers.
Personalized ad experiences are the best way to promote personalized products. This is true both because they showcase the brand’s value up front, and because they generate the most return on ad spend (ROAS). That’s why direct to consumer brands increasingly leverage cost-per-action (CPA) campaigns to target KPIs like quiz completions. These campaigns are especially effective in the rewarded in-app environment, where users are highly engaged and more likely to proceed with the purchase.
Direct to consumer trends are driving the future of retail
Direct to consumer trends have already shifted the digital marketing landscape, and they will continue to do so as more brands embrace the model. However, it’s already clear that consumers want authentic brand experiences. In a society that is increasingly defined by our reliance on technology, this preference for authenticity is meaningful. The future of retail will, undoubtedly, be decided by consumers themselves, as they search for brands that share these values.
For more digital marketing insights, including how DTC brands can drive maximum ROI from their mobile strategy, contact Tapjoy’s mobile advertising experts today.