Direct-to-consumer (DTC) coffee brand Trade Coffee isn’t the size of a company one would expect to see advertising on TV.
Two years in business, Trade is at the venture-funding stage and is still growing customer acquisition through ecommerce and social channels. Yet the company, which ships curated coffee from small roasters across the U.S., is also testing commercials on linear channels and over-the-top (OTT) streaming platforms.
“We want people to understand this is a quality product and we want to build trust in what we are offering,” said Melissa Barnes, CMO at Trade. “Video on TV is more of a storytelling medium, and we want people to see what Trade is.”
Trade, with the help of video-specialist agency Quirk Creative, is testing the message, the offer and the target, and measuring whether cord-cutters or linear TV watchers are more responsive to the ad.
“We are definitely still collecting insights, cutting out things that are not working and optimizing what is working,” said Barnes, a former brand marketer at Rent the Runway, and before that, an account director at BBDO NY on the Starbucks business.
Trade Coffee is one of many DTC marketers bringing tried and true tactics from online advertising to streaming TV, such as creative testing, audience targeting and programmatic buying.
“These brands were shaped and forged in a medium where you can track literally everything to the click and to the penny,” said Mike Janiak, the co-founder and ECD of digital design and e-commerce agency Pattern. “You can track your return on ad spend, cost per acquisition, views, engagement. Every conceivable metric is right there on your dashboard.”
As scale on Facebook and Instagram max out, DTC brands need somewhere to grow, said Meryl Draper, CEO and founder at Quirk Creative, which counts Trade, Bombas and ThirdLove among its clients.
“You have DTC companies growing up and realizing they need to reach new audiences,” she said.
TV is the place to do it. And as DTC brands venture into video advertising, they're taking advantage of the ability to target, test and measure on streaming platforms.
Quirk routinely shoots between six-to-12 versions of a commercial, each with slight variations to test.
“Gone are the days of spending half a million dollars on a single 30-second spot and hoping that it works,” said Draper. “We are mimicking digital and social best practices for TV.”
Streaming platforms offer addressability, thereby increasing the amount of premium video inventory available in the market. But DTC brands transitioning from digital must be aware that they’ll have to pay a higher price to run on OTT.
“These channels still come very much at a premium,” said Daniel Weisman, media director at Noble People, a media agency that works with DTC and digital clients including Bumble, Venmo Allbirds and Glossier. “CPMs are usually much higher than what marketers are used to on Facebook, and there is sometimes initial sticker shock there.”
DTC and Addressable TV
Addressable TV buying is opening the door to advertising’s biggest stage to smaller DTC brands.
“Before TV began to transition, we’d tell advertisers if you can’t spend $20 million, don’t bother,” said Tracey Scheppach, CEO and founder of addressable TV consultancy Matter More Media. Now, a brand can make a worthwhile impression on TV for a budget of $1 million, she added.
COVID-19 disruptions are opening the TV market to newer brands as traditional advertisers in such sectors as automotive, travel and out-of-home entertainment pause spending. A recent Zenith report projects that global ad spend by automotive marketers will decline by 21% in 2020.
Meanwhile, ecommerce has boomed during the pandemic. Online spending reached about $200 billion in Q2, up 44.4% year over year, according to data from the U.S. Department of Commerce, accelerating opportunities for ecommerce brands to scale up customer acquisition through mass media. Just look at brands like Peloton and Wayfair, which have become mainstays in the TV upfront.
This evolving marketplace will bring in hundreds of advertisers who had never bought TV before, adding to the roughly 200 advertisers routinely buying TV today.
“My prediction is in about five years, we will have the opportunity to have about 1,000,” said Scheppach.
The ability to target ads to viewers and measure their performance is continuing to improve on linear TV, meeting another demand of DTC marketers. But the real appeal of TV is the prestige it still brings to a brand that other media cannot.
“There is a legitimacy to being on TV that provides a significant amount of credibility to a brand,” Sheppach said.
While digital and social will always be an important tool in the DTC playbook, there comes a point when DTC brands have enough name recognition that TV is worth the investment.
“When you don’t need Facebook for microtargeting audiences anymore, that is when you are ready to scale up,” Pattern’s Janiak said.