It’s Time to Shift Your D2C Strategy.
- Essential brands to continue to maintain reduced ad spend.
- TikTok is seeing the best growth in time spent and engagement.
- At-home comfort & products continue to strengthen.
D2C is a distribution strategy that has played out quite well during the time of COVID. Especially for the Digitally Native Vertical Brand (DNVB), who are typically “mobile-first” and are able to bypass agency costs and target their consumers directly. This improves the bottom line and is increasingly possible through technology and data. Today, these brands have taken significant market share from many of the traditional players. And as 60%+ of traffic is being driven by Google and Facebook, D2C brands have more in common than traditional players because of their go-to-market strategy, customer acquisition, branding style, etc. have begun to look alike. However, COVID-19 is solidifying the rise of TikTok and the format is allowing brands to differentiate themselves and experiment with a fresh marketing approach, which has been realizing monstrous growth in engagement.
D2C brands are well-positioned to ride out COVID-19, and we have seen many positive outcomes from it. Organic traffic has been increasing, despite softening in media spend. Adding a trend where many marketers are pulling back spending, despite increased social media engagement, this has brought lower costs of acquisition (CAC) improving forecasts for DNVB and D2C eCommerce teams. Making digital more important than ever.
- On Facebook & Instagram, Cost per Mille (CPM) ad pricing fell as much as 50% in March.
- Snapchat reported stronger-than-expected revenues in Q1 but said year-over-year growth in March was less than half of the rate in January and February.
Industries such as technology, telecom, at-home products, and consumer packaged goods (CPG) continued to spend to reach consumers whose daily activities shifted once they started spending more time at home. As such, the focus on at-home comfort has spiked. For example, to the left, we see clear growth in the Home Improvement & Referrals Conversion rate in April-2020.
What to Expect?
Expect CPMs to remain depressed through Q2 (and possibly later), subject to the pace of the US economic recovery. There will be significant volatility depending on industry vertical, targeting criteria, and other factors. These declines have continued in April. Expect May and June to normalize these levels; however, do not expect us to return to near-normal pre-COVID levels.
Expect a shift in brand messaging, with reduced performance-oriented advertising — until the US economy starts to reopen. Utilizing social listening, or data trends, marketers are seeing a clearer picture of the consumers’ state of mind. Among US ad buyers who are making short-term changes to ad spending, social ad budgets were expected to decline an average of 28% between March and June 2020.
Expect essential brands to continue to maintain reduced ad spend, as many essential websites saw a 2.5x increase in paid search clicks during the middle of March 2020. This led to groups such as Walmart & Instacart to significantly reduced their acquisition spend as their organic traffic surged — meaning they no longer need to pay for traffic to find new customers.
Expect a shift from where best to drive your web traffic from. TikTok is the clear winner, seeing the greatest increases in downloads and time spent on the app (which has nearly doubled). Companies have started utilizing TikTok sponsoring their own products. Elf Cosmetics has been doing an INCREDIBLE job on TikTok thus far. Chipotle, has been creating challenges for its customers to participate in & post, using popular internet memes at their retail locations, etc. , which have significantly increased their engagement. NBA embraces it by dedicating seven full-time employees to creating content for the platform, showing a lighter side of the organization. For example, they’ll often post videos of players working out dramatically to music, dancing on the court, or adventures of team mascots. All of this helps engage the customer in new, fresh, and creative ways.
