Why Connected TV & OTT is the New Customer Acquisition Channel for DTC Brands

The explosive growth of direct-to-consumer (DTC) brands is disrupting virtually every consumer category and we’ve now topped 400 brands across sectors, according to LUMAscape of direct-to-consumer brands. From the onset, these digital-first brands have been obsessed with leveraging data to acquire and own the customer relationship: they utilize first-party data to understand and effectively target their consumer. 

DTC marketers prioritize performance and ROI in their ad spending geared towards customer acquisition. To break through the clutter, savvy DTC brands are taking bold, fresh approaches to product design, content marketing and are relentless in delivering the best customer experience.

Most DTC brands have largely relied on marketing through social media platforms like Instagram and Facebook because of the ability to target specific audiences and measure response. Television advertising has been the natural progression and maturing players such as Peloton, Chewy and Smile Direct Club are investing heavily, according to data from the Video Advertising Bureau. It offers national scale with a lean-back media experience for brands to tell their full story.  CTV/OTT is now providing DTC brands with an ideal blend of digital marketing capabilities with the quality viewing experience of television.

The emerging confluence of CTV viewers & DTC consumers 

According to the Emerging Alliances Report, DTC shoppers spend the majority of their weekly TV time watching streaming TV (live and on demand) – 13 hours (nearly 20% higher than cable, 70% higher than social). Furthermore, 82% of DTC shoppers take action after seeing an ad on CTV/OTT and find it to be more effective than linear alone.  

Most DTC brands are focusing their strategies to cater to the demands of Millennials and Gen Z audiences, and this demographic has embraced OTT viewing: many are cord-cutters and cord-nevers. In essence, DTC and OTT audiences are one and the same demographic. This audience alignment is incredibly powerful for connecting with existing customers over a new channel and reaching new audiences with CTV/OTT advertising.

The DTC performance marketing imperative

DTC brands are laser-focused on marketing investments that can prove measurable results. CTV/OTT is appealing for DTC companies as it combines the precision of digital in targeting with the big screen experience of linear TV in scale, premium content and brand safety.

Furthermore, DTC brands can leverage their first party data that they’ve collected since inception to target TV audiences with customized accuracy. Today, we’re able to close the loop on viewer conversion as CTV/OTT attribution reporting provides campaign metrics beyond just impression volume and verified completion rates (VCR) but can prove added value through website and in-store visits.

The power of CTV/OTT for location execution 

While most DTC brands were born online, they’ve since launched pop-ups and brick-and-mortar retail experiences specifically designed to attract more shoppers. As more DTC brands expand into physical retail locations, local execution is an important consideration. This is where CTV/OTT comes to play. DTC brands can use CTV/OTT advertising to reach audiences in specific geographies that are most relevant for their business. This allows DTC brands to break out and track campaign performance by market beyond their national campaigns.

A winning CTV/OTT media plan for DTC brands

The scale and pure growth of CTV/OTT present significant targeting opportunities for DTC brands of any size. To seize the opportunities, it’s important for DTC marketers to understand the varying capabilities and differences in solutions among video content providers.

Key considerations:

• Focus on closed-loop attribution and don’t forget the power of brand building:  New capabilities with CTV/OTT attribution provide the insights to prove the effectiveness of campaign performance in driving outcomes, whether it’s website or footfall traffic. While outcomes-based measurement is critical, don’t forget about the benefits of brand building. OTT provides the opportunity to effectively drive measurable results, while also gaining a lift in brand awareness.

• Tailor creative and messaging to the audience:  The addressability in CTV/OTT allows DTC advertisers to leverage richer datasets to target audiences by location, income, education level and many other interest categories at scale. By leveraging dynamic ad insertions in CTV, advertisers can tailor creative to deliver a personalized advertising experience.  Furthermore, new innovations with CTV device graphs give advertisers tremendous reach to run campaigns against first, second and third party data. 

• Prioritize the consumer ad experience:  As DTC brands are obsessed with the customer experience, frequency capping is an important consideration for delivering a positive consumer ad experience. When you place buys with multiple siloed providers, ad spots will likely run with high frequency. DTC brands should work with a provider that can deliver partnership scale to ensure that their ads reach multiple platforms with the right frequency.

• Focus on content quality: It's important to understand the structural differences in media buying models and the interpretations of quality being delivered.  For instance, open exchange platforms with lower CPMs present greater fraud risks due to unknown content sources and blind bidding. Working through a provider who directly sources inventory with upfront and secured deals in brand-safe, premium content is the best bet for the most effective ROI on ad spend.

CTV/OTT is gaining momentum as an advertising channel for DTC brands and its measurement has evolved beyond just verified completion rates (VCR) to confirm business outcomes – which is now table stakes for today’s DTC marketer.

By Justin Gutschmidt, Head of Sales Strategy of Premion, TEGNA

Header image via Leio McLaren (@leiomclaren) on Unsplash + modifications