“We have entered a new era of brand creation—one in which ‘Direct Brands’ are not just nipping at the heels of traditional brands, but forging strong customer relationships, winning meaningful marketing share, and reshaping the way startups and incumbents alike are taking consumer goods and services to market,” Interactive Advertising Bureau (IAB) CEO Randall Rothenberg said in a statement earlier this week announcing their 250 Direct Brands to Watch.
In addition to that report, the IAB released a lengthier research report called “The Rise of the 21st Century Brand Economy.” The gist of this report is that today’s consumers are seeking companies that are centered on direct consumer relationships and agile supply chains. The Internet and social media allow these direct brands to have one-to-one conversations with consumers. According to the study, two-thirds of all U.S. consumers expect direct connectivity to the companies from which they buy goods and services.
Thank You, IAB
The IAB’s research validates what we at Pixlee have championed since our inception. That being the notion that brands who embrace digital and social as a means to build a direct relationship with consumers, and to give them a voice often expressed through visual content that can also serve as the voice of the brand, will win. These are not by definition direct brands, but those are often the companies leading the charge and succeeding. This is simply, to use Rothenberg’s words, “the code of the new consumer economy.”
Per the IAB’s Press Release, this new research declared “that companies like Warby Parker, Glossier, and Away are not ‘interesting curiosities,’ but instead represent an enduring shift in the way the consumer economy operates.”
Often referred to as “digitally native vertical brands,” these direct companies are characterized by their reliance on digital storefronts that sell only their own branded goods, product development cycles continuously enriched by first-party data from their consumers, expertise in social media communications, and a marketing mix that blends highly scaled and targeted programmatic advertising with lifestyle-focused content marketing.
In our Top 25 Digitally Native Vertical Brands report of 2017, we quoted Andy Dunn, CEO of Bonobos, who said “Digitally native vertical brands are maniacally focused on the customer experience and they interact, transact, and story-tell to consumers primarily on the web.”
Much like the IAB research, our report outlined the four trends that were driving the success of these brands as direct sourcing of materials, enhanced brand experience, alternative distribution methods (direct-to-consumer), and increased engagement on social media. It’s also worth noting that 76% of our Top 25 DNVBs appear on the IAB’s 250 list. This is not to say our report was ahead of its time, but if the Warby Parkers fit…
Key Takeaways from the IAB Report
During his keynote session at the IAB Annual Leadership Meeting, Rothenberg discussed how direct brand upstarts like Dollar Shave Club, Glossier and Warby Parker are grabbing market share at the expense of Gillette, L’Oréal and Lens Crafters. He summed up their Direct Brand research with these four key points:
- The world is awash in capacity for producing, marketing, and delivering goods and services to consumers – and drawing first-party data from those interactions. That “stack your own supply chain” is generating thousands of new companies, and changing the competitive requirements for all companies.
- To succeed in this new economy, you must become a Direct Brand, or serve the needs of Direct Brands – and what they need more than anything else is to create more, and more enduring, two-way relationships with their consumers.
- Creating those data-enriched relationships most certainly requires technology, but it also requires story, for there are three last mile gaps that must be closed: to the head, to the home, and to the heart.
- Maintaining and growing enduring two-way relationships between brands and consumers requires authenticity and trust. For trust equals data equals growth.
As a company dedicated to building the engine that helps brands develop a more authentic marketing experience and create stronger relationships with their most passionate customers, hearing the IAB commit to adapting to and embracing these concepts is music to our ears.