Ten Essential Takeaways from the IAB Direct Brand Summit
From the opening remarks of the inaugural IAB Direct Brand Summit, one thing became immediately clear: a revolution was upon us. The old way of running a consumer business was no longer working, and we were here to understand what was working now.
Sharing and learning between the disruptors and big brand leaders, digital platforms, and media was encouraged, with the goal of learning from each other and building on our successes.
On stage were executives from a range of disruptor companies, from Bonobos to Brandless, Hubble Contacts, Peloton, Purple, SNOWE, and more. During a series of keynotes and breakout sessions, digital direct brand leaders broke down what this revolution looked like day by day. The insights were eye-opening and, in some cases, counterintuitive.
1. It is not about cheaper prices.
Many associate the direct-to-consumer (DTC) shift with the idea that expensive stuff can be cheaper when you cut out the middleman. However, more than half of the direct brand founders surveyed in the IAB Direct Brands 2018 Founders Insights said that they were positioning their products as premium brands. What the majority of today’s direct brands are representing is that you can return margin back to the consumer from your advantaged supply chain – and at the same time create a unique brand experience that transcends the attraction of low pricing. It’s a simple formula: Direct Brands = Value AND Premium. Andy Dunn, Founder of Bonobos, noted that his apparel company was really about making shopping more palatable by offering enough variants so that every man could get pants that fit.
2. It is about brands people love.
Similarly, many would view lower cost DTC products as commodities, because DTC marketing is assumed to be 100% focused on driving sales efficiently, and less about creating brand magic. But the opposite has proven to be true. People love direct brands and the relationships they have with them. A common thread through many of the sessions was that consumers care. David Bell, President and Co-Founder of Idea Farm Ventures calls it bonding rather than branding: “Consumers today are seeking to bond with brands. And Millennials in particular care about a brands’ functional, emotional, and symbolic values.”
3. Brick & mortar retail stores are not dead.
They are morphing into service and experience showcases or showrooms, instead of just big boxes full of merchandise to be taken home that day. Direct brands adopt omnichannel strategies. Over half of direct brands are either selling goods in owned retail or plan to within 12 months according to the IAB Direct Brands 2018 Founders’ Insights. And 100% of respondents said that their owned web channel was core to their retail strategy. Nick Stafford, Chief Operating Officer of the mattress brand Leesa, said that stores provided their bed-in-a-box company a way to tell its story “in a more sophisticated and intimate way.”
4. This isn’t DR… It’s branDR.
Yes, direct brands are data- and performance- driven and use direct response tactics, but they also deploy top of the funnel brand awareness tactics. Half or more use content marketing, editorial, PR, and organic social as part of their marketing mix. 78% use email marketing for their products. Direct brand founders emphasized the critical importance of content marketing and storytelling alongside direct response tactics. It may be because content marketing helps avoid commoditization, and it reinforces community building. Alex McArthur, Chief Marketing Officer, Purple Mattress, spoke about getting a billion views for a long form web video spot. “Storytelling separates DTC brands,” he added, marveling at how “You can create a brand so rapidly now.”
5. Direct brands are not tech-led. They are marketing led.
Although technology has allowed for transformation, founders say marketing is their most critical business function. One-fifth of direct brand founders worked in a tech company before launching their consumer-facing brand, and believe innovation is the main driver of their success. However, surprisingly, they do not consider themselves tech companies. They consider technology as an enabler, but when asked to rank their core capabilities, marketing leads the list followed by customer service, production, and product design. Moreover, the market values them as fast-growing CPG companies, and these disruptor brands are perfectly happy with their non-tech valuations.
6. Create, test, measure, repeat.
Regardless of channel, direct brands measure and optimize all their marketing placements. According to Hubble Contacts’ Co-Founder and Co-CEO, Jesse Horwitz, the principles of advertising have changed in the direct-to-consumer era, especially since the dawn of Facebook and Instagram mobile advertising. Making ads used to be about creative experts spending millions to create TV ads using their instincts. Now, brands that win in the DTC world crank out tons of different ad creative executions on Facebook and Instagram. “It’s about experimentation, measurement, and velocity” said Horwitz. “How many creatives can I spin up? And then you measure on the other side. That’s where the game has gone.” And although half of direct brands’ marketing spend goes to Facebook, they also test other marketing channels. Moderator Dave Morgan, CEO & Founder, Simulmedia, and others also discussed how they approach TV advertising in similar ways to their digital creative by making multiple variations, messages, and calls-to-action. You see what’s working, discard what isn’t, and keep focusing on your successes to move forward.
7. Podcasts give your brand a voice.
Audio marketing options are growing and direct brands are experimenting with those. Podcasts are hot right now because they are both a performance and a branding medium. Podcasts give brands a direct way to reach and grow new audiences quickly. Blue Apron and Dollar Shave Club among others all favor podcasts because their hosts can articulate a variety of details about their products in a very natural way, and add an implied, personal endorsement as well.
8. Follow the media like money.
Jesse Horwitz, Co-Founder and Co-CEO, Hubble Contacts, talked about how careful his company is with media. They watch media spending and move money around like crazy. “It’s like day trading.” “That is, as much as anything, the new paradigm” he says, with flexibility and immediacy defining the DTC difference.
9. Disruption is the goal.
In a roundtable discussion and one-on-one interviews with direct brand founders, Mark Shmulik from McKinsey & Company and IAB CEO Randall Rothenberg shared some key findings from IAB’s inaugural Direct Brands 2018 Founders’ Insights: direct brands are “born to disrupt,” with 97% of respondents listing “category disruption” as their goal.
10. Customer service and community are at the core of brands’ innovation.
Servicing customers is in the direct brands’ DNA. 92% of respondents consider customer service a top three business-critical capability where every role is a customer service role and listening to the customer re-defines the brand’s identity. Transparency means engaging honestly with consumers in a two-way conversation. Tina Sharkey, CEO and Co-Founder, Brandless says that they produce high quality, extremely popular products at simple and fair prices. They let the community tell their story, test their products, and create the next wave of products with other fans of the company.