Direct-to-Consumer Marketing During a Recession

Direct-to-Consumer Marketing During a Recession

You’ve no doubt heard the doom and gloom around the economic downturn headed our way. Financial guru and prognosticator Jamie Diamond has been leading the chorus, predicting an almost-certain U.S. recession in the next six to nine months.

We’ve been here before, just a few short years ago. In 2020, the U.S. experienced the worst recession since the Great Depression. You may have blocked this out, but recall that in March 2020, the Federal Reserve lowered fund rates to virtually 0%. The U.S. economy shrunk a record 31.2% in the second quarter after falling 1.5% the previous year, prompting stock markets to plummet.

In April 2020, our country saw 20.5 million jobs disappear, ratcheting the unemployment rate up to 14.7% where it stayed in the double digits for months. All of which compelled the U.S. Congress to come to the rescue with billions of dollars in aid. And while the economy did rebound with a 33.8% growth in the third quarter, it wasn’t enough to fully recover from the tremendous hit it had already taken.

When confronted the threat of another recession, businesses naturally respond by tightening belts and slashing budgets — including their marketing budgets. They certainly did just that during the Great Recession of 2008, when the U.S. ad market declined by 13% as businesses reduced their ad spends. All indications point to companies doing the same this time around.

A new survey from the World Federation of Advertisers (WFA) and Ebiquity reports that nearly 30% of the world’s biggest advertisers are planning to cut ad budgets in 2023. We’re already seeing signs of this, with a 4.6% drop < https://www.mediapost.com/publications/article/378942/us-ad-market-falls-for-fourth-consecutive-month.html > in the U.S. advertising marketplace in September compared to the same month last year — rounding out four straight months of decline.

To Cut or Not to Cut

While cutting ad budgets may feel like the safe move to make, research and experience say otherwise. Previous recessions show that companies who reduce their marketing spend during a slump are also likely to see a drop in incremental sales as well as customer acquisition and engagement. Marketers who decide to spend less on advertising must rely on existing customers, in place of reaching new ones.  None of this is good for business — in the short or long-term.

And while marketers may be inclined to slash ad spends significantly during a recession, consumers reduce their spending at a much lower rate. In other words, your customers are still buying products — just not from you. Brands who disappear from view for 12 to 18 months in an attempt to wait out a downturn usually see sustained losses in market share. Once a customer leaves you for another, who’s to say they’ll ever come back?

A Case for Continued Ad Spending

While it may go against every instinct you have, continuing to invest in marketing during a recession can mean the difference between struggling, surviving, and even thriving. In fact, research shows that 60% of advertisers realized a higher ROI by actually spending more during past recessions.

But wait, there’s more. Research done by Harvard Business Review indicates that companies who did not cut their marketing spend, and who even increased it, during a downturn have bounced back with more strength post-recession. And, products that are launched during a recession have a better chance at long-term survival and higher sales revenue.

Believe it or not, recessions present unique opportunities for innovative marketers. This is especially true for direct-to-consumer brands, for a number of reasons. First and foremost, customers want direct-to-consumer products. In fact, 50% of consumers prefer to buy directly from the manufacturer. During the pandemic, 52% of direct-to-consumer brands saw demand for their products soar. The same trend can be expected during a recession.

In our experience, we’ve weathered two recessions as well as the pandemic. In these downturns, we’ve seen direct-to-consumer brands fare well and even grow. Remember that 2020 recession we mentioned earlier? During this time, River Direct clients ran at an average 13% higher profitability compared to the same time frame pre-pandemic. This performance can largely be attributed to the fact that our clients spent on average 34% more on advertising, while running on higher ROI.

Another reason our clients made gains during tough economic times? Simple: Their products we sell on TV actually save people money. Pay less for skin and hair care products, and save on the cost of a salon visit. Purchase cooking equipment and cook at home rather than going out to eat. Stock up on home cleaning products instead of hiring a housecleaner. Invest in exercise equipment and cancel that expensive gym membership. You get the idea.

Your audience is out there, ready and willing to buy your products even — especially — during a recession. How you reach those direct-to-consumer customers in terms of creative messaging and medium will be key. While other marketing firms may focus on digital and omnichannel marketing, there’s a powerful case to made for linear TV, streaming TV, and a convergence of both.

Reduced Ad Rates

Rather than halting your ad spend altogether, consider how best to redirect those funds to get more bang for your bucks — like into TV. When economic downturns cause sales and profits to fall, one of the first things general-rated advertisers slash is their advertising budget. During COVID-19, we saw a wave of general advertisers pull away from linear and streaming TV. When this happens, stations then turn to lower-paying advertisers like, you guessed it, direct-to-consumer brands. Intrepid direct-to-consumer marketers snap up those available slots at lower costs.

At the same time, viewership during COVID-19 soared as socially distanced households hunkered down in front of TVs and screens. As such, direct-to-consumer marketers were also capturing more eyeballs for their spend. While pandemics and recessions may have some differences, we expect to see much of the same opportunities and behaviors should the economic downturn become a reality.

Tracking ROI

In the midst of a recession, you want every cent you spend on marketing to do the most work for you. Linear TV, streaming TV, and converged TV that combines both offer built-in metrics that let you track lead generation and sales to determine ROI. This in turn allows you to focus your precious marketing dollars on programs that are demonstrably working, and eliminate marketing waste.

Direct-to-consumer advertisers know how their commercials are performing, with the ability to see if the rates are low enough and if people are in fact purchasing their products. This measurability is key. Like we’ve always said at River Direct, we have our finger on America’s pulse, and can tell you if customers are buying or not buying.

Mind the Gaps, and Fill Them

As companies cut their marketing budgets, you have a fantastic opportunity to fill the void and boost your market share. Your competitors may very well decide to pull back from linear TV and streaming TV, leaving you perfectly positioned to swoop in and scoop up their customers. With fewer competitors vying for attention, your ads are also likely to stick around longer in consumers’ minds. And once they do have money to spend, they’ll remember you.

Adjust Your Messaging

The success of your direct-to-consumer marketing efforts during a recession will rely heavily on having the right creative and message. People turn to direct-to-consumer products in large part because of their pricing. A cost-savings message becomes especially attractive to discount-seeking consumers during a recession and inflation market.

So be sure to capitalize on that driver, by emphasizing the value of your product. Consider focusing on a cost-savings offer, rather than a branded message, but proceed with caution. Companies will often cut their pricing only to increase prices again to make up for the loss in margins, then yo-yo back and forth between the two. Being consistent versus erratic in your pricing will do more to drive consumer confidence.

Keep Calm and Market On

As the threat of recession looms, remember that this too shall pass. The economy will eventually bounce back, and you’ll want to be well positioned to ride that recovery to increased sales and growth. What you do now with your direct-to-consumer marketing can have a huge impact on how well you weather the downturn, and how well you succeed on the other side of it.

Looking for more tips on building your direct-to-consumer recession-proof strategy? Take a moment to subscribe to The Current newsletter below! 

The Rating Race – ViacomCBS Partnership with VideoAmp to Challenge Nielsen

The Rating Race – ViacomCBS Partnership with VideoAmp to Challenge Nielsen

It seems like every month, groundbreaking and industry-altering shifts are occurring in the media and advertising world. In last month’s blog, The Future and Fate of Nielsen Ratings, we discussed the changes affecting the industry leading to a need for a more diverse, accurate, and omnichannel measurement system. In that article, we dove into the challenges Nielsen faces and the efforts media giants like NBCUniversal are taking to develop new measurement alternatives to better understand and interpret their audiences. Still, NBCUniversal will not be the only one attempting to create a new measurement system. ViacomCBS has recently announced their deal with the advertising data company, VideoAmp, that aims to change how media measurement is done. In this article, we will dive deeper into what these major players are aiming to do as they pave the way for the future of media measurement.

Status of Nielsen

As a brief recap, Nielsen has long been struggling to adapt their traditional rating system to evolve with the changes in media amongst the rise of digital, streaming, and more. Subsequently, their image to advertisers has been under major scrutiny as agencies and media buyers reexamine the reliability of Nielsen’s data that guides major business decisions. This issue has recently worsened as Nielsen lost its accreditation for local and national TV measurement by the Media Rating Council (MRC) after “the measurement firm undercounted national TV household viewership during the pandemic, sparking pushback from TV networks,” according to an article written by Alison Weissbrot for PRWeek. This move has only energized other companies to search for new alternatives.

ViacomCBS’s Move

With longstanding pushback, media companies are realizing they cannot wait for Nielsen to evolve with the market. This has led to the most recent development by ViacomCBS and their partnership with VideoAmp, an advertising data and software company. According to Wayne Friedman’s MediaPost article, “ViacomCBS, VideoAmp Cut Deal For ‘Alternative Currency’ Measurement,” this partnership aims to create a new “alternative currency” used for measurement. A key differentiator in VidoeAmp’s technology, compared to Nielsen, is its “proprietary data/methodology coming from set-top-box and smart TV Automatic Content Recognition (ACR) data for traditional TV, streaming video and digital media.”

In a multi-channel media landscape, advertisers and media companies are searching for solutions to understand how their content connects through various mediums and consumer touchpoints. While this is still early in emergence, John Halley, COO of Advertising Revenue at ViacomCBS, says that they are predicting many partnerships with marketers across the automotive, insurance, and fast food industries as well as other advertisers who are needing a more evolved audience measurement system.  

Still, the idea of a one-size-fits-all measurement system is likely not in the cards. Halley notes that they are “not saying VideoAmp is replacing Nielsen as [their] primary currency,” but rather, “reimagining of the measurement ecosystem, the capabilities that could be brought to bear.” With this new partnership, ViacomCBS will use data across Nielsen, VideoAmp, and Comscore to interpret and understand their audience and it is likely many will follow suit.

Final Thoughts 

This latest move by ViacomCBS is one of a trend that will likely continue as other major players search for alternative solutions that can measure and grow with consumer behavior. Michael Bürgi, Senior Editor of Media Buying and Planning at Digiday, notes in his article that alternatives must align with this multi-measurement future. He includes commentary by Nancy Larkin, Horizon Media’s Executive Vice President, that highlights the undeniable fact that “too much time is spent by buyers and agencies having to analyze the data.” Furthermore, in addition to measuring data, there must be a standardized and agreed-upon value that these metrics hold.

While it is still too early to ditch Nielsen and jump to a new alternative, ViacomCBS putting its name in the hat is a big step toward the future. At River Direct, we are sure to look at the media landscape and track the moves of today, tomorrow, and beyond to provide multichannel strategies for long-term success. Learn more about River Direct and be sure to follow us across our socials (Facebook, LinkedIn, and Instagram) as well as subscribe to our newsletter below for the latest updates in the marketing and advertising space.

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How We Shift in a Post-Cookie World

How We Shift in a Post-Cookie World

The internet has redefined how we as a society interact, operate, and connect to one another. If last year has taught us anything, it is that the internet and online platforms have become integral in how we operate everyday life and have changed the way we use the internet. While technologies like Google and Amazon have made online actions easier than ever, everything comes at a cost. In a previous blog, we explored how Apple’s new iOS 14 changes will be affecting the experience for both users and businesses. This month, we are diving into the larger conversation about how major digital giants are redefining the future digital landscape amidst a “cookie-less” internet. Read more on what cookies are, why they matter, how they will affect businesses and advertisers, and more.

What Are Cookies and Why They Matter

According to the Federal Trade Commission, internet cookies are the information that is saved by your web browsers and used to recognize your device in the future. In Layman’s terms, cookies are tools that help websites track activity to better understand you as a user. While there are many benefits to internet cookies, there are also some drawbacks that have sparked concerns, policy changes, and legislation.

Pros:

For Consumers – more customized user experience and increased convenience

With the added knowledge collected from cookies about the consumer’s buying habits, search history, and user activity, websites are better able to identify and suggest content and products that similar users found relevant. Additionally, cookies allow websites to save information such as passwords and usernames to streamline user convenience.

For Businesses – more accurate understanding of consumer habits

Brands have long used cookies to track their website’s visitors to better understand their audience and fulfill their needs. Whether it be what content your favorite websites release to the most popular pieces of merchandise on an online store, this information collected by cookies gives businesses and advertisers greater insight into knowing the consensus of their audience.

Cons:

For Consumers – an infringement on user privacy

Many concerns about cookies surround data collection and whether or not the user knows their data is being collected. Additionally, consumers have mixed emotions around how their data is being managed, commoditized, and sold.

For Businesses – increased risk of losing customer trust

With this change in consumer sentiment, companies must align themselves with consumer shifts to avoid losing their audience’s trust.  According to ClickZ’s article analyzing a study conducted by Publicis Sapient, they found that while consumers had a positive view of technology, they had a negative view on data collection.

What is Changing and How This Affects Businesses and Advertisers

Many of the new national and international policies and legislation combatting excessive data collection center around gaining users’ consent to be tracked and promote an “opt-in” choice. In order for businesses, especially large online platforms, to continue building consumer trust, it is in their best interest to comply with these shifts toward more transparent online interactions.

With the implementation of this newly added “opt-in” choice on platforms such as Google and Facebook, it is likely that there will be a decline in raw information gained from consenting cookie tracking. As user information will become less available from third-party browser cookies, companies and marketing professionals will need to adapt and pivot their efforts in collecting, understanding, and reaching out to their audiences.

What Steps You Can Take

So where does this leave businesses and advertisers? Don’t fret. Sure there are concerns about how this will changing the industry, but businesses and marketers are no stranger to having to pivot and adapt.

Firstly, companies and marketers should both optimize themselves for when major platforms shift their sites. For example, with Apple’s iOS changes, here are 4 steps to prepare your Facebook advertising account for what’s to come. (Note these precautionary measures may not apply to everyone and vary between sites and businesses.) In addition to getting their interfaces ready for the shift, it is key that companies utilize the current cookie information they have access to before it disappears.

Here are 5 points to keep in mind when adjusting to the cookies-less future according to Advertising Week 360:

  1. Audit your existing data
  2. Prepare a plan for first-party data
  3. Strengthen marketplace partnerships
  4. Understand your audience contextually
  5. Leverage cookieless signals such as probabilistic data

Of this list, it is important to emphasize the increasing importance of first-party and CRM data. In this new age of data collection, the strongest data a company can use to understand their audience is the rich data they are able to collect themselves from their consenting users. Businesses and marketers will be tasked with creating new offerings and strategies to get the enthusiastic consent of their audiences. With a growing hub of first-party data, businesses and marketers will be able to explore more authentic and tailored targeting and retargeting strategies.

While this transition will be a major shift in how users, brands, and marketers operate online, keep in mind that this will become a worthwhile investment into a greater online experience overall. Though this does mean brands and marketers will have to strategize new ways to identify, target, and reach audiences, this change holds many opportunities to innovate along this unpaved road. All in all, the post-cookie digital landscape is wide open to new tools and strategies that engage in the user-business data exchange while improving trust and transparency along the way.

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How Will Apple iOS 14 Change Digital Advertising?

How Will Apple iOS 14 Change Digital Advertising?

Apple’s upcoming iOS 14 privacy update has many advertisers and app developers scrambling.  In summer of 2020, Apple announced the rollout of their new operating system, iOS 14, which included new privacy features. As part of the new operating system, mobile users will be empowered to decide whether or not they want their data tracked as they peruse different apps and the internet. These new changes, scheduled to take place sometime in Spring 2021, will have a noticeable impact on the marketing landscape for platforms such as Facebook, Instagram, Google, and many more.  In preparation for these changes, platforms and advertisers alike have to rethink how they do business, including implementing new strategies and tactics designed to minimize impact.

One major change involves Identifiers for Advertisers (IDFA) – Apple’s mobile ID that allows advertisers to target and track users within apps on iOS devices and shares user information with ad platforms, app developers, and mobile measurement providers. With the release of iOS14, users will be required to opt in in order to be tracked across apps and websites. As fewer users are expected to opt in, advertisers will have much less data to work with, thereby reducing the accuracy of their marketing abilities and the personalization of their ads.

As one of the most prominent social media platforms, Facebook has been challenged with the adoption of the new iOS 14 policy, as Facebook utilizes their user’s web data to monitor off-platform user traffic via Facebook Pixel and use this information to calibrate targeted advertising demographics, build retargeting audiences, and match users with programmed content. It is important to note that while Apple iOS 14 mobile users will be required opt in/opt out of data tracking, Android and other mobile users will continue reporting third-party data to sites, such as Facebook and Google. Nonetheless, Facebook has been forced to pivot by making changes to their advertising platform in order to mitigate the potential changes that can adversely affect ad campaigns.

Facebook has been quite vocal about the coming changes to their platform, and they urge advertisers to understand these updates which will undoubtedly impact their marketing practices. The big changes for Facebook’s advertising model include strict limiting of Facebook Pixel reporting capabilities from several reportable events down to just one, as well as capping the number of supported events for each domain down to only 8 prioritized events. Facebook will also require that advertisers on the platform verify their website domain and will reduce the accuracy and timeliness of conversion reporting as 28-day attribution windows are scaled down to default 7-day windows.

Google will also be adversely impacted by the changes in Apple user privacy settings, however their approach to the reduction of IDFA access seems to flow better among advertisers and developers. According to Adexchanger, although Facebook has indicated that it will stop entirely collecting IDFA information from its Apple users, Google will implement an AppTrackingTransparency (ATT) Framework, which will allow continued tracking information from Apple users who decide to opt in with minor changes to reporting tools such as Google Analytics.

As we progress into the era of enhanced security, user privacy and transparency, first-party data will be especially important. Actively capturing user information (email, phone, address), will be even more valuable, since their utility will likely increase over time as IDFA privacy protocols become stricter in the advertising space. More than ever, it is essential to develop a viable strategy for maximizing advertising spend and optimizing a results-driven multichannel approach. Perhaps the most viable way to stay ahead of the curve is to stay informed of privacy changes and policy updates for platforms that you advertise on and to be proactive instead of reactive.

To stay updated on trending information in marketing, digital advertising, and direct response media, follow River Direct on LinkedIn, Facebook, Instagram, and subscribe to our newsletter below.

Sources:

https://www.wpromote.com/blog/analytics/ios14-digital-marketing

https://www.searchenginejournal.com/facebook-advertisers-brace-for-ios-14-tracking-prompt-fallout/392012/#close

https://www.facebook.com/business/help/331612538028890https://www.adexchanger.com/mobile/googles-quiet-preparations-for-apples-idfa-change-offers-hints-on-the-future-of-its-own-mobile-ad-id/

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