In recent years, direct-to-consumer (DTC) brands have upended the retail landscape by cutting out traditional intermediaries and promoting directly to target audiences.
A number of traditional apparel and footwear companies have started to lead the shift to DTC based on the changing retail landscape:
- Nike has stopped selling on Amazon and nine other retailers, choosing to prioritize its DTC channels. The company expects direct sales to reach 60% of its business by 2025, compared to 16% in 2011.
- In 2021, Adidas announced plans to reach a 50% DTC business by 2025, up from 30% in 2019.
- Under Armour shut down wholesale accounts in 2020 and reported a 52% increase in DTC revenue in 2021.
- Crocs unveiled its goals for digital sales to make up half its revenue by 2026.
The surge in DTC marketing is fueled in part by its simplicity: Brands manufacture and distribute their products without traditional retail channels, which allows them to reduce costs, lower prices, and provide a seamless shopping experience.
And this strategy is working: Diffusion's 2021 DTC Purchase Intent Index report revealed that 79% of American consumers familiar with DTC brands plan to increase their purchases in 2021.
While DTC marketing has existed for decades, e-commerce technologies have given brands more control over marketing strategies, and provides marketers access to deeper insights into each stage of the purchasing journey.
The downside: many DTC marketers have raised concerns about the inaccuracies of ad measurement tools. Bad data means marketers struggle to link media spend to business outcomes.
And yet more than 80% of DTC marketers still rely on the same data to measure performance, according to Measured's State of DTC Marketing Measurement Survey 2022.
Brands are left scrambling for new methods to ascertain the real value of their advertising. We asked MarketerHire's top marketers for their DTC marketing strategies for 2022.
New rules render old methods obsolete
Most marketers rely on last-click data (also known as last-touch data) for e-commerce analytics and reporting attribution. Under this model, marketers assign full credit for a sale to the last known channel that the consumer clicked through.
If a user visits your online store after clicking on a Google ad, leaves, and then makes a purchase after clicking through a Facebook ad, the credit for the sale would be assigned to Facebook.
However, a wave of new privacy rules has curbed marketers' ability to accurately measure ad performance. Apple's new iOS privacy controls, introduced in 2021, have affected Meta's internal attribution by as much as 15%. This is concerning as nearly 3 in 4 DTC marketers use Facebook and Instagram as part of the marketing mix, according to the Measured report.
These new rules, coupled with rapidly changing consumer habits and increasing platform fragmentation, have rendered traditional attribution methods obsolete. Models that connect clicks to conversions are no longer reliable.
Tip: Identify key performance metrics
The top challenge for DTC marketers in 2022 is getting the right data. As marketers work with more platforms and algorithms, they are confronted with mountains of inconsistent figures that limit their ability to glean useful insights.
But that doesn't mean that the old metrics aren't useful anymore. DTC marketers are turning to traditional outcome-based metrics to establish the impact of marketing on sales.
According to Measured, DTC marketers have identified the following key performance metrics as essential to performance evaluation:
- ROI (Return on marketing investment)
- Sales or revenue
- ROAS (Return on ad spend)
- CPA (Cost per acquisition)
- CPO (Advertising cost per order)
- CPC (Cost per click)
- LTV (Customer lifetime value)
- Site traffic
- Net profit
The metrics you prioritize may also depend on the size of your brand: 67% of marketers from brands with more than $50MM in annual ad spend identified LTV as a key metric compared to only 27% of brands under $5MM in annual ad spend. This suggests that larger brands focus on profitability as well as revenue.
Tool Tip: Empower creatives with good data
Creative teams are a critical driver of success for advertising campaigns, so it only makes sense to track creative production metrics. However, many brands fail to go beyond basic indicators such as turnaround time and project costs.
While it's difficult to quantify creativity, creative performance is measurable, and the right tools can boost the impact of creatives on DTC marketing strategies.
Motion puts good data in the hands of the creative team, improving decision-making and eliminating reporting bottlenecks. Empowering creatives by giving them access to performance data has also been shown to increase team productivity and reduce guesswork during the ideation stage.
Tool Tip: Choose the right path with testing
All decisions should be based on the best available data. When faced with a marketing dilemma, A/B testing (also called split testing) is your lifeline for confident decision-making.
The A/B method is almost 100 years old, and it has proven time and again to be one of the most reliable ways to figure out which version of a campaign or piece of content (whether it's visuals, messaging, or product specs) performs better. Instead of relying on guesswork, you can test multiple variations of the campaign in real-time until you find one that works best.
Double-check your source of truth
The Measured report revealed that a staggering 82% of DTC marketers rely on a single source of truth (SSOT) for measuring marketing performance. While there are compelling arguments for having an SSOT (efficiency, consistency, and timeliness to name a few), any deficiencies and inaccuracies in the data create risks for both the marketer and the brand.
That said, it is important to define a single source of truth for all data that drives marketing insights. Identify your key metrics, choose trusted data sources, and ensure that the data is standardized, validated, and properly segmented. Regular audits will also ensure your SSOT remains accurate.
You cannot fight data fragmentation with more fragmentation. Working with different sources of truth can cause confusion and weaken decision-making. Having a single well for insight also frees up time for DTC marketers and executives, allowing them to play a more active role in strategy.
Experiment to get a clearer picture
We have seen that methods that require user-level tracking are no longer reliable and will continue to become less relevant as more privacy restrictions are introduced. It's critical to use solutions that can keep up with ongoing changes in the advertising landscape.
Incrementality experiments are the future of DTC performance measurement.
Due to recent privacy changes, platforms are now unable to track all conversions, resulting in performance underreporting. Tracking prevention and smaller attribution windows also mean that platforms no longer have access to external data. Testing for media incrementality can show the actual conversions that can be attributed to a particular channel.
80% of DTC marketers agree that experiments and testing increase their decision-making confidence. However, most continue to rely on old platform metrics despite their well-documented flaws. It’s important that brands and marketers invest in methodologies that provide better data for a fast-changing business landscape.
Top DTC marketers remain ahead of the curve
It's no secret that the direct-to-consumer model is the primary driver of e-commerce success today. For businesses, DTC is simple, easy to implement, and has a high potential ROI. Consumers also love DTC brands for their simplified shopping experience and lower costs.
But the real driver of brand success lies in DTC marketing analytics and strategies. Digital-driven businesses need a strong command over data, even as the ad landscape continues to shift and traditional attribution methods fade into irrelevance.
Make sure you're ahead of the curve. Speak with a MarketerHire DTC expert who can give you an audit or strategy session to help you excel.