Most business owners understand they need to advertise in order to make an impression on their target audience. One could even say that advertising is another word for business growth. This basic fact is especially true for direct to consumer businesses. Back in the day, manufacturers relied on distributors to get their products to retailers. They also worked with distributors and retailers to develop ad campaigns. Digital technology allows manufacturers to sell directly to consumers. Manufacturers stand to make plenty of money through this channel, but they also face challenges when it comes to advertising.
Advertising: Another Word for Business Growth for Direct to Consumer Businesses
Direct to Consumer Businesses Defined
Brian Wieser, at GroupM, has long tracked the advertising industry. In his latest report, he takes an in-depth look at the direct to consumer industry. Wieser highlights recent concerns about the direct to consumer industry, specifically that some operators aren’t doing as well as planned. But he also points out, that for now, the industry is still growing.
The definition of direct to consumer, in Wieser’s opinion, encompasses businesses that are:
- Less than 10 years old
- Operate independently
- Sell products instead of services
- Not part of a marketplace
Some of the better-known direct to consumer businesses have already gone public. Think Peloton and Blue Apron. Other companies are still expanding — such as Harry’s and Casper. In looking at the industry overall, Wieser researched businesses in this sector with revenues that exceed $100 million. Together, direct to consumer businesses account for $7 billion in revenue.
The advertising budgets at these businesses, assuming they spend about 20% of revenue on the activity, likely amount to $1.4 billion. It's no wonder considering that advertising is another word for business growth. Wieser reasons that 20% is a good estimate. He’s likely right. These businesses are in the high-growth part of their life cycle and, to increase market share, they need to position their brands and develop promotions.
In addition to buying media, these businesses must use marketing tactics that resonate with consumers. As Wieser points out, these businesses engage in ‘growth-hacking’ strategies that can help them succeed. We can expect them to build databases of customer data over time. This information will help them effectively use email promotions to strengthen loyalty and boost sales. They can also build businesses based on subscription models and tout the convenience of doing business with them, both key factors in engaging consumers.
While some direct to consumer businesses may be experiencing a slowdown, others are not. And local companies in your market may be looking for the best way to break into the direct to consumer market. Help them target their best audiences by checking out the AudienceSCAN profiles available on AdMall by SalesFuel.