Evaluating New Growth Channels: 5 Tips for DTC Marketers

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Over the past decade, direct to consumer brands have carved a niche alongside retail incumbents by leveraging innovative growth strategies. When search and social were in their nascency, DTC brands were among the first to give them a test-drive. Fast-forward to today and almost all brands rely heavily on Google and Facebook to amplify their message. What was once the exclusive province of DTC pioneers has become mainstream. 

To survive in this shifting landscape, the average DTC brand is now consistently testing at least three emerging marketing channels at any given time. But what’s the best way to identify new channels to test, and how should you gauge their efficacy? 

At Tapjoy, we’ve had the opportunity to discuss some of these challenges firsthand with experienced DTC marketers. They consistently cite competition as their biggest challenge — notably because DTC brands often compete with other brands that share their business model even if they are not in the same vertical. After all, how many subscriptions is a consumer realistically willing to manage? The best way to counteract the effects of competition, rising CAC, and saturation, is to diversify your growth strategy.

In this guide, we’ll reveal actionable steps you can take to diversify your media mix. Let’s get started.

Step 1: Identify a fresh audience segment

If you’re still spending the majority of your advertising budget on mainstream channels like Facebook and Google, you’re targeting an increasingly saturated market. Moreover, your competitors are playing the same game — talking to the same people — which can lead to audience fatigue. A good first step to diversifying your media mix is always to reevaluate the groundwork. Take a deeper look at the audiences you’ve been targeting, and ask whether there is an opportunity to expand or test an unexplored niche.

Recently, makeup subscription brand IPSY decided to broaden its targeting beyond females for a campaign, and tested its new audience segment on the Tapjoy network. The campaign leveraged our cost-per-action pricing structure to drive subscription sign-ups. By broadening its targeting to all genders, performance radically improved.

Step 2: Find out where your audience spends its time

Once you’ve determined who you want to target, find out where they spend their time most. Because social media channels have a wealth of first-party data, they can be incredibly valuable here. However, it’s important to look beyond the obvious. 

Look at it this way — the average adult smartphone owner uses around 30 apps each month. Social media apps may account for five to six of these, but what about the remaining 80%? Dig a bit deeper and you’ll find that mobile games are the #1 app category downloaded worldwide, across both iOS and Android devices. And they lead by no small margin — mobile games have five times more downloads than the #2 category. That’s a pretty clear indication as to where else your audience is spending their time.

Here’s an example of how you might incorporate new media into your acquisition mix: Say you’re targeting young, high-income professionals. The best approach might be to target them at multiple stages of the funnel. Perhaps first, you run a campaign on social media. However, you may find that few users convert beyond the initial click. This is standard — after all, 67% of social media users say they have not made a purchase directly from or within these apps. So how can you close the marketing loop? Looking at your target audience, you may find that high-income professionals are often avid mobile gamers. Use social media to prime the pump, and mobile-in app to drive down-funnel conversions. In this context, rewarded advertising can be particularly effective because users are incentivized to complete higher friction engagements.

Step 3: Evaluate channels based on these criteria

When you’ve narrowed down your list of potential advertising channels, you’ll want to evaluate each based on the following criteria:

  • What’s their reach? Although virtually no emerging channels can compete with the reach of Facebook or Google, some have a broader range than others. A fresh-on-the scene social platform, like TikTok for example, will likely provide more value than a little-now podcast platform. If you’re interested in exploring mobile in-app advertising, our advice is to work with an established network that can reach upwards of 800 million users worldwide. This threshold will ensure that your ad dollars will generate maximum ROAS.
  • How diverse is their audience? One of the major benefits of exploring an untapped opportunity is that you will likely be speaking to a brand new audience. However, if that audience is too narrow, that channel is unlikely to be cost-effective. Before launching a test, verify that the network you’ve selected can target broad groups such as “moms,” rather than “moms who are obsessive knitters and also own at least three cats.” Do they offer performance pricing? The golden rule of growth marketing is to pay only for results. Forget vanity metrics like impressions and zero-in on things like account sign-ups, completed video views, app installs, and actual purchases. This is the approach that lets scrappy startup marketers stretch their budgets enough to compete with established brands. While brand awareness plays certainly have a place in the broader strategy, prioritize channels that offer performance pricing. For example, if your brand uses a subscription model, you may find luck with a cost-per-action campaign in which you pay only for verified account sign-ups.

Step 4: Run tests on risk-averse channels

DTC brands are unique in that they are digitally mature and agile enough to support comprehensive testing. So play to your strengths! When you’ve narrowed down your list to a few promising channels, get ready to run some tests. Before you begin, assess the risk associated with each channel. Until you see proven results, don’t shift too much budget their way. However, it’s also important to strike a balance — make sure your initial investment is enough to gauge the potential quality of the channel.

Here, again, performance pricing can help offset risk. If you are paying only for completed purchases, every ad dollar is guaranteed to contribute to your growth objectives. Performance pricing can also give you a clearer sense of how each campaign is contributing to your overall ROAS goal, helping you make judgement calls early on.

Step 5: Measure the results

Congratulations! If you’ve made it to this step, that means you’ve gotten out of your comfort zone and explored some new strategies. However, to maximize the value of your insights, we recommend evaluating the long-term payoff of each test you ran. Can you trace the user journey from top-of-funnel brand engagements all the way through to the purchase? How can you close the marketing loop? Next, you should assess the quality of the users you did manage to acquire. How does their LTV compare to users acquired through other channels? Are there ways to optimize the traffic on that channel to increase user LTV? These factors will inform how you allocate your marketing budget moving forward.

We’re here to help

Today’s market is in constant flux. Competitors are always learning new tricks, and sometimes it can feel like consumers themselves are moving the goalposts. As you evaluate new growth channels, remember to stay true to the spirit of innovation that brought you this far. Put yourself in your audience’s shoes, and strive to inject every interaction with value and relevance. 

Diversifying your media mix will be a process of discovery, and there are no safe bets. That said, mobile in-app has become an increasingly strong choice for DTC brands. It enables brands to deliver their message at scale, reach their target audience, and engage new users — all in a cost-effective, brand-safe environment. It’s also been proven to deliver high-quality users with strong LTV and retention. Curious about the latest mobile in-app ad formats? Start with a test! As always, our UA experts at Tapjoy are here to help.

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