In recent years, a wave of so-called digitally native direct-to-consumer (DTC) startups have burst onto the scene and have grown in popularity. Consumers are increasingly purchasing products and services such as mattresses, shoes, razors, and groceries from the over 400 DTC firms now in operation. Forrester forecasts that online spend by DTC enthusiasts will grow at a compound annual rate of 18% from 2018 to 2022.
The success of DTC companies stems from their development of improved approaches for connecting with their customers, as demonstrated by two new Forrester reports: “Changing Expectations Fuel Direct-To-Consumer Disruption” and “To Adapt To Direct-To-Consumer Trends, Use A Direct-To-Value Strategy.” These approaches are part of what Forrester calls a “direct-to-value (DTV)” strategy.
DTC spending growth will fuel DTV strategies, which will incorporate social advertising. Because digital is the lifeblood of the DTC business model, advertising efforts will naturally focus on digital — particularly social. Many DTC brands take advantage of in-feed ads on social networks, primarily Facebook and Instagram, where relatively low costs and pay-per-click pricing suit these smaller upstarts. The greater precision of social ads allows DTC firms to accumulate and build on audiences with niche interests. And Instagram’s recently launched Checkout feature has the potential to boost conversions, enhancing even more the appeal of social ads for companies whose primary storefront is digital.
DTC firms further benefit from the way social networking’s strengths align with some of the key drivers of consumer interest in DTC brands — community, trust, and novelty:
- Community. DTC consumers often like to experience or talk about products with other people. Think for example about Peloton (group exercise) and Glossier (group discussions about beauty products). Social networks are group-oriented by nature and can help foster feelings of community.
- Trust. Without the benefit of the history that established brands possess, DTC brands engender trust through transparency and a clear narrative around their mission. DTC brands can use social networks to amplify and validate this narrative — getting consumers to “like” them and influencers to publicize them. Although trust in social networks overall has declined, social users still trust their peers and the influencers they follow.
- Novelty. A culture of experimentation is gaining momentum. DTC consumers like trying new brands, and social feeds make it possible for marketers to present consumers with novel products that they didn’t know they needed.
To capitalize on this DTC-social alignment, DTC marketers can employ a variety of tactics on social networks — one of which is social advertising. Not only will DTC brands take advantage of social advertising, but they will also push legacy firms to invest more to remain competitive. This will drive up social ad spending. And DTC growth is only one of many social ad spending drivers. For more on the myriad factors that will propel social advertising over the next five years, see our Forrester Analytics: Social Media Advertising Forecast, 2018 To 2023 (US) report.