CTV will be the savior for DTC brands in 2023
Marketers, who have always valued performance, are looking to CTV as the answer to their ills. For our Data & Privacy Deep Dive, Digital Remedy’s David Zapletal explains why this nascent channel must now be a go-to for DTC brands.
DTC brands: Go where the audience is. / Adobe Stock
As the direct-to-consumer (DTC) marketplace becomes more saturated and competitive, marketers are under constant pressure to understand campaign performance and to explore new channels for their brands. They’re concerned with cost and convenience. It’s a challenging proposition, especially for DTC brands that don’t have gigantic budgets. And DTC marketers are increasingly recognizing CTV allows them to address those challenges.
Many of the reasons why DTCs are increasingly upping their CTV investments are straightforward – even intuitive. DTCs, from already doing so much business digitally, have access to the first-party data that enables efficient CTV targeting. CTV is high-quality media, with low levels of fraud relative to many other digital channels, and with 100% viewable inventory. They can use similar KPIs in CTV that they use in online campaigns – online conversions, site visits, and the like. And they can target very specifically, allowing them all the benefits of consumers’ engagement with the TV screen, without dealing with the cost of reaching all viewers of a program via linear. DTCs are seeing the value of developing compelling creative for CTV, and shifting spend to the extent that Drizly now says CTV is its top advertising channel.
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Mobile and social fading from the marketing mix
Mobile and social have long been preferred channels for DTC marketers. But it’s becoming increasingly difficult to capture ROI in both: newer privacy measures affect campaigns in mobile and brands face the prospect of social campaigns becoming more siloed than ever as third-party cookie deprecation challenges holistic targeting and measurement. Channel saturation and rising mobile CPMs lead to diminishing returns for DTCs. CPMs increased on iOS by 19.5% and Android by 17.4% in 2021, after Apple implemented ATT. In short, all these factors have led to diminishing returns on traditional performance channels like search and social and heighten the urgency of finding new channels that can deliver on their campaign goals.
DTC marketers need to focus on customer acquisition, and they need to measure performance accurately. The former is an expensive prospect. Leading DTC brands may spend upwards of 30% of their entire revenue on digital advertising. The cost of acquisition in digital has only grown in recent years and shows no signs of leveling out. Given these stakes, DTC marketers must be able to gauge incremental lift, to recognize their best-performing audiences and channels and to avoid wasting budget on strategies that don’t boost incrementality. Clearly, DTCs need more options if they’re going to meet their campaign objectives while keeping the cost of media from gutting their overall revenue.
CTV and OTT services are such options. CTV is where the growth is, in terms of consumer adoption. Streaming services are proliferating and viewers have demonstrated they like variety – 33% of streaming viewers in the US subscribe to four or more streaming services today. Among DTC consumers specifically, approximately 70% say they spend more time watching streaming services than on social media. And DTC marketers recognize CTV as a highly engaging channel, with an inherently ’lean-in’ UX and non-skippable ads. Those marketers also appreciate the ability to reach audiences across multiple devices in a fragmented media environment – and the efficiencies CTV offers, compared to linear TV, with campaign activation, ad insertion, and real-time insights.
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New channels, new opportunities
New media channels are always of interest to DTC brands. Larger DTCs in particular have been advertising in linear TV and OOH for ages, and more recently on public transit and even retail stores. These are essential acquisition tactics. And unlike those older channels, CTV offers robust options for data-driven optimization and measurement. Not a lot of DTCs have the budget to try out an evenly distributed media mix. The rest must prioritize making the most out of interactions with consumers, to truly drive incrementality – when it comes to both engagement and showing ROI.
Indeed, today, a growing number of DTC marketers use insights from CTV and OTT campaigns to inform their linear strategies. Those insights can help address some of the difficulties marketers have traditionally had in understanding how linear TV drives outcomes along the entire funnel. CTV allows marketers to define outcomes and choose a sophisticated attribution model – important, as a custom attribution window allows brands to define their conversion window, methodology (for example, first and last touch, but also more advanced methods like linear and time decay), and performance or outcome KPIs.
From there, they can optimize towards the interactions that drive performance – and to measure that performance. DTC marketers are under a great deal of pressure to find the most valuable channels and strategies for their brands and budgets, and CTV offers exceptionally broad insights to help meet their goals. Impressions and video completion rates don’t tell the whole story of a campaign. Marketers need to look at user actions all along the funnel. And CTV advanced reporting considers factors including site visits, on-site purchases, in-store visits, and incrementality – not just brand lift and awareness.
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When making a push into CTV, DTC marketers will need to consider the metrics and outcomes that are important to them and understand where and how to get insights on those metrics and outcomes. Defining outcomes and understanding attribution models allows marketers to better measure incremental lift – based on specific media placements that are shown to influence outcomes – and optimize toward media sources and audiences driving incrementality.
CTV isn’t simply the next emerging channel for DTC marketers to explore. It’s a powerful channel that can drive performance metrics where previously ’tried and true’ channels aren’t cutting it and can inform cross-platform campaign optimization. And it represents a natural expansion of their existing digital strategies. DTC brands that understand the power of CTV – and how to get the insights they need from it – will gain real advantages over their competitors.
David Zapletal is chief innovation and media officer at Digital Remedy.