Telaria's James Young believes that DTC brands haven't yet unlocked the full benefits of CTV to reach audiences, and with COVID-19 changing consumer patterns, there are now even more synergies between the two.
Connected TV (CTV) and direct-to-consumer (DTC) have more in common than just their catchy three-letter acronyms. They are both popular among digital-first audiences, which makes the former an ideal advertising channel for the latter.
This overlap was evident long before COVID-19 disrupted lives across the globe, but the pandemic and subsequent lockdown reinforced this relationship. Let’s take a closer look at what makes CTV advertising and DTC a good match, examine the impact of social distancing on this relationship, and explore what DTC brands should be mindful of when leveraging CTV.
CTV ads drive DTC sales
Digital-first consumers are driving two concurrent trends. The first is a rise in DTC, which involves a direct transaction between manufacturer and buyer. The second is an increase in live and on-demand video streaming via CTV, which enables convenience in TV viewing. As these trends converge they build a strong connection between streamed TV content, DTC brands and connected consumers.
Research into how CTV viewing is increasing opportunities for DTC brands in the U.S. reveals DTC shoppers spend the majority of TV time streaming video, and 85% watch streamed content every week. The stats may be slightly different in Australia, but the commonality between DTC and CTV audiences remains. DTC shoppers seek out brands that offer value, convenience and choice, and they choose TV viewing platforms the same way. CTV combines TV’s big-screen sight, sound and motion with digital’s precision targeting and transactability to deliver a relevant and engaging experience that drives performance, with over 80% of U.S. DTC shoppers taking action after seeing an ad for a DTC brand on CTV.
Marketing in the COVID-19 crisis
This article is part of a special WARC Snapshot focused on enabling brand marketers to re-strategise amid the unprecedented disruption caused by the novel coronavirus outbreak.
The impact of COVID-19
General TV consumption has increased during the lockdown, but video streaming is seeing a particularly steep rise, with broadcaster video-on-demand (BVOD) still currently up nearly 10% compared with pre-COVID consumption according to Think TV. This increase in CTV viewing provides DTC brands with a golden opportunity to reach receptive audiences. Some may be reluctant to spend on advertising, but those that invest during this time will enter the recovery period in a stronger position, with a greater share of voice. A global Kantar study warns a six-month absence from TV advertising could result in an almost 40% reduction in brand communication awareness, inevitably delaying post-pandemic recovery. With confidence already returning to the market, now is the ideal time for DTC brands to explore CTV.
COVID-19 is also benefiting DTC brands, with their established e-commerce models, by impacting shopping habits. Online retail was already growing 10% year-on-year but the pandemic has accelerated this growth. A shift to online grocery shopping that began during the lockdown is becoming even more pronounced even as restrictions are gradually lifted. In addition, lockdown has been compared to a major life event, when consumer perceptions change dramatically and people are 75% more likely to try new brands. DTC brands may find consumers are more receptive to their products, and CTV advertising can be used to make the most of this trend.
How DTC brands can leverage CTV
DTC brands are typically digital natives, used to performance-based digital marketing, so there are a number of things they should be mindful of when leveraging CTV advertising, starting with how they view addressability.
Just like other forms of digital advertising, data can be applied to every single CTV buy to ensure ads reach specific audience segments that are likely to convert. But by focussing too much on addressability and restricting their activity just to niche buying as they would with display advertising, DTC brands risk-limiting scale. CTV is often pigeonholed as either TV or digital but in reality, it bridges the two, enabling both broad reach and addressability.
Because CTV enables broad reach, it is as well suited to branding activity as it is to performance, and DTC brands should make the most of this. Binet and Field’s 60:40 brand building to sales activation ratio demonstrates how brands have to invest more in upper-funnel activities than in lower-funnel activities, so DTC brands can use CTV both to reach prospects and fill the funnel, and to convert niche audiences further along their purchase journey.
Finally, just because CTV is delivered through an internet connection, DTC brands shouldn’t lose sight of the fact it is still TV. Consumers don’t distinguish between different delivery mechanisms such as linear and BVOD. Anything that is served to the TV screen is seen as TV, which brings certain expectations around user experience. As well as requiring high quality, professionally produced creatives, CTV ad campaigns may need to focus less on products and more on engaging storytelling. At this time more than ever, CTV viewers will expect DTC brands to be sustainable and ethical, with a strong brand purpose, and their ads must reflect this. DTC furniture brand Koala recognises this need in its latest TV ad which encourages consumers to spend local during the recovery phase.
CTV and DTC already have a strong bond, with significant audience overlap making advertising on CTV a smart move for DTC brands. The seismic changes to consumer behaviour in recent months, such as increased online purchasing and streaming video, further reinforce the CTV-DTC relationship and will likely persist even after lockdown ends. Consumers are more conscious of their resources (time and money) and the benefits conferred by CTV/DTC sync well with those desires.