This abstract talks about how some groundbreaking companies are finding new ways to market their products directly to consumers, mainly starting in social and digital channels. By definition then, this discussion might seem unconnected to business-to-business marketing, but stick with us for a moment.
Companies like Allbirds, Casper, Allswell, ThirdLove, and Bombas are nearly unavoidable for social media users these days. The firms promise a different kind of product, one better aligned with customers’ needs. Although the focal products range from shoes to mattresses to bras to socks and so forth, their marketing claims tend to be similar, working to get consumers to shift from buying in their traditional channels and toward buying direct from the company. Thus, rather than actively seeking to get their products into conventional retailer channels, these firms are cutting out this retail step and redefining the supply chain.
In this sense, they are pursuing direct-to-consumer (DTC) sales, with relatively little help from other businesses in the supply chain (except maybe logistics firms that ship the products). But this view ignores another key marketing actor: the agencies that help the producers get their advertising in front of customers.
In the business relationship between product companies and advertising agencies, the growth in DTC selling has initiated a new era. Agencies are seeking out these DTC companies to attract more of their advertising budgets, both initially when they start appear on social media feeds and then later, when their growth enables them to adopt more conventional advertising methods too. That is, the growth in DTC selling has been so great that it is affecting not just digital marketing realms but also traditional advertising markets.
According to one analysis of the 13 largest DTC players, advertising spending grew by 35 percent between 2018 and 2019. The approximately $378 million they spent on advertising included $137 million on television advertising. In expanding their marketing, these firms also are replacing more familiar advertisers, such as personal care companies, whose overall advertising spending decreased in this same period.
In response, advertising providers such as NBCUniversal and Google are revising their offers to help small firms get going though direct advertising to consumers, then ensure that they remain an appealing option as these firms grow and expand their advertising and marketing efforts. In addition to hiring dedicated salespeople to seek out and pitch their services to DTC firms, NBCUniversal developed an algorithm to enable the firms to identify particular locations and channels where their advertising might be most appropriate. If for example Rebecca Pearson (Mandy Moore) complains about her feet being sore on an episode of This Is Us, Allbirds might want one of its spots to follow immediately thereafter, whether it is being aired on NBC, streamed several weeks later through Hulu, or discussed on a dedicated social media podcast.
Nor are companies and advertising agencies the only ones taking note of these developments. In one of its latest experiments, Walmart created the DTC firm Allswell to sell mattress toppers through social media and quirky in-person interactions (e.g., a tiny house tour with Allswell products dominating the minimalist décor). Walmart’s name does not appear anywhere on Allswell’s branding, products, or marketing communication. Nor are the mattresses stocked in Walmart stores. In this business-to-business relationship then, the two parties are actually part of the same company, even if their marketing and supply chain operations remain totally separate.
1. How can advertising agencies improve their offers to convince DTC sellers to rely on their services?
2. Removing a step in the supply chain means that someone else has to perform the function. Who is performing the functions traditionally served by retailers in DTC sales channels?
Source: Nat Ives, “The Ad Industry Has High Hopes for Direct-to-Consumer Businesses,” The Wall Street Journal, June 17, 2019; Christopher Mims, “Walmart’s Semi-Secret Effort to Become Internet Cool,” The Wall Street Journal, July 27, 2019