Have performance marketing costs made DTC too pricey for brands to pursue?
Changing customer acquisition strategies was a big area of discussion last week at The Lead Innovation Summit in Brooklyn, NY, particularly as it relates to direct-to-consumer (DTC) performance marketing.
Attendees listened to executives from brands with established wholesale distribution operations discuss a more cautious approach when it comes to DTC.
Justine Mohr, chief revenue officer of 3.1 Philip Lam, said, “The margins of DTC are attractive, but the key lesson is learning how to be smart on digital. How much do you spend? How do you allocate and attribute? The ability to change allocation and target messaging quickly is a distinct advantage, but must be tempered with a data-driven strategy.”
For many brands, the data isn’t so positive. According to MediaPost, social media advertising cost per mille (CPMs) are up a whopping 41 percent YoY. Google and YouTube CPMs are up 108 percent, according to Hunch.
With monopolistic market dynamics, prices have gone through the roof and nearly half of marketers believe they will be priced out if ads continue to become more expensive. Cathaleen Chen, correspondent for The Business of Fashion, said, “The biggest issue of going DTC is the rising cost of performance marketing.”
So some brands are getting creative about organic techniques and content creation on new channels and revisiting old ones.
“The window for winning organically on Instagram has closed,” said Heath Golden, chief commercial & strategy officer of Marquee Brands. “There still is a window that’s closing rapidly on TikTok. … We have syndication deals on Roku, iHeart and TikTok. Content and embedded commerce is the future.”
Jill John, chief customer officer of Interior Define, said, “We are finding alternatives to performance advertising. Now we are sending catalogs. Now we are advertising on CTV.”
This is good news for new offerings like retail media networks as well as channels that have been overlooked or undersubscribed — even the much-hyped metaverse.
Rachel Wyatt, head of digital & customer experience at Signet Jewelers said, “You have to be where customers are at and you are missing an opportunity if they are spending time in the metaverse.”
- More Evidence That Ad CPM, CPC Prices Keep Rising Worldwide – MediaPost
- Are Facebook Ads Getting More Expense? (+How to defeat rising CPMs) – Hunch
DISCUSSION QUESTIONS – Have performance marketing prices on mainstream channels like Facebook, Instagram and Google hit their peak? Will rising costs slow DTC strategy adoption for incumbent brands? What new techniques are brands using to achieve a performance advantage?