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The State of the Direct-to-Consumer Revolution

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This story, The State of the Direct-to-Consumer Revolution, was originally published by Ad Age for the Ad Council’s Purpose of Purpose Series.
On a recent night at the Ad Council’s office, Lisa Sherman, president and CEO, hosted a conversation on the current state of the direct-to-consumer revolution. Her guests were Rita Ferro, president, Disney advertising sales, direct-to-consumer & international, at The Walt Disney Company, which just debuted Disney+, and Kate Huyett, chief marketing officer at Bombas.

Lisa Sherman: Rita, I know it’s still in the early days of Disney+, but what can you tell us so far?
Rita Ferro: We hit 10 million subscribers on our first day of the U.S. launch, and it can only grow from there as we launch in other countries in the coming months. When we’re launching one of our tentpole movies or a significant product or service like Disney+, the entire company rallies behind it. It’s been at the forefront of our creative marketing—we leverage every asset around a project to drive greater engagement and results.

Sherman: Kate, Bombas began in 2013 with an Indiegogo campaign to raise $15,000—and in 2018 you earned more than $100 million in revenue. The rapid growth you’ve seen is emblematic of this direct-to-consumer explosion. What has made the proliferation of direct brands possible?

Kate Huyett: The Facebook ad platform has evolved enormously and has been important for our growth. They’ve done an amazing job making ad formats with which people want to engage. Many direct-to-consumer brands have a real story around why they exist, and I think Facebook and other platforms that have matured during the last decade have enabled brands like us to tell our stories more effectively at scale.

We look at a brand like Disney, which we really aspire to be like—a brand that truly resonates for a very wide audience and that has enduring power. There’s a very clear, consistent brand story over time, and d-to-c brands have tapped into that.

Sherman: Rita, you work with some of the biggest names in d-to-c, like Dollar Shave Club and Stitch Fix, to name just a couple. Are you seeing an increase in that side of business? How are the relationships different than they are with more traditional brands?

Ferro: The growth of the d-to-c category has been 40 to 50 percent year-over-year for the last two to three years. What’s interesting is that it’s not the new brands but some of the first brands in the d-to-c wave that are now stepping up on the advertising side. Brands reach a certain point where the social reach isn’t necessarily incremental, and television allows them to come in with big moments and have a broad reach opportunity with their audience.
There are also brands our creators like to work with. When we go to our showrunners and heads of marketing and tell them who we are working with and why, they get very excited because they’re customers of those brands. They want to engage in telling those stories.

Sherman: Kate, What do you see as the role of TV in the d-to-c ecosystem?

Huyett: About two to three years in, 80 percent of our spend was on Facebook, which we knew didn’t make sense from a risk perspective. We actively tried to diversify, and we needed channels where we could spend multiple millions of dollars and have certainty that they would pay off. We tested direct mail, TV and radio, and all of them worked. Now, depending on the time of year, 35 to 50 percent of our marketing is offline.

Sherman: After the release of IAB’s Direct Brand Economy Report, Randall Rothenberg said, “One of the best ways to boost lifetime customer value … is to focus on community, for community helps lower acquisition costs, foster repeat purchases and increase basket size.” How do you think your organizations are working to foster community?
Huyett: We have a couple of communities that are both equally important to us. One is our giving partners, comprising community programs and homeless shelters and those they serve. We’re proud to say that they help us distribute our donation items to those experiencing homelessness in all 50 states. The other is our paying customers, and the main way we’ve engaged them is through our Customer Happiness Team. Our 100% Happiness Guarantee applies to any issue our customers might experience, and we have fun marketing that. We see great engagement, with people sending us pictures of their lonely sock missing its mate or their dog with a half-eaten sock hanging out of its mouth. People appreciate that guarantee and how our team responds to their needs in a timely manner.

Ferro: We have D23, which is an inner circle of our core Disney fans. Every two years, we put on the D23 Expo for them—it’s similar to Comic-Con, and we have 40,000 to 50,000 people a day coming through. These are fans who have a passion for the content, the characters and the stories. We show them behind-the-scenes videos or first looks of our big movies coming up, and we give them special offers. We’ve really worked on building our touchpoints there and we’re communicating with them constantly. It all helps to feed the conversation and build affinity, making sure our core fans are sharing Disney news. They become authentic, multigenerational influencers for us.

Sherman: As respected female leaders in our industry, what’s your perspective on how we are doing on diversity? What needs to change, and how?

Huyett: Bombas was founded on improving the community where we work and live, and that starts internally. Earlier this year, we started our diversity fellowship program, filling the youngest roles at our organization with diverse candidates. Our male co-founders are all very engaged with the topic and see that the issue shouldn’t be something that just lives with the people team—they want to be directly involved in moving toward a more diverse and inclusive place to work.

Ferro: In our advertising and sales organizations, it’s exciting to see that many are women. But in the area of diversity, we have a way to go. We made a commitment this year to move all our internships to summer and to only hire diverse candidates. Diversity includes gender and race, but also backgrounds, education, disabilities, etc. We need that change to happen in our teams, and if you can’t see it, you can’t be it. The industry needs to make the effort to tie these results to compensation and goals. Our highest-ranking Disney leadership supports this, and that’s how it should be, because we can only make it happen if everyone is rowing in the right direction.

Sherman: Kate, can you share the Bombas origin story? And what are you doing now to make a difference and put purpose first?

Huyett: Our founders learned that socks were the most-requested clothing item in homeless shelters, and it was around the time that Toms was getting big. They thought maybe that model could work for socks, so they spent two years developing a better sock and then put up a page on Indiegogo. They honestly just wanted to make a difference in their own backyard.

In addition to donating a specially designed item for every purchased item, our entire team regularly volunteers at monthly giving events—for example, employees may help serve a soup kitchen and hand out socks with The Bowery Mission. Each month, there are about 10 to 15 events from which they can choose.

And at our quarterly employee events, we’ll have a giving partner come and speak about the impact our donation socks have made on their organization. For instance, giving partners have told us that because the socks they needed were donated, they could invest instead in refrigerators or washing machines for their organizations. Customers feel the difference when your purpose is or is not deeply authentic. Brands need to work with purpose in a way that aligns with their audience and their brand’s capabilities.

Sherman: Disney’s purpose is “to create happiness for people of all ages, everywhere.” Who doesn’t love that? Whether we’re talking about a seven-year-old brand like Bombas or a 97-year-old brand like Disney, the best are rooted in values and purpose that connect with people. Can you talk about how The Walt Disney Company thinks about that through the causes the company supports?

Ferro: Each of our business segments—as well as the company as a whole—puts tremendous effort behind our community efforts and how we give back. We have a program called Disney VoluntEARS, where throughout the year, employees are encouraged to take a day off from work and spend time investing in their communities. That’s everything from building parks for kids to spending time at a hospital to creating food packages. The company is also the largest granter of dreams for Make-A-Wish and we are constantly working with children’s hospitals. These are truly team-building moments, and we feel great doing good.

Sherman: There have been several major acquisitions of direct-to-consumer brands by larger, more traditional brands. What can these traditional brands learn from d-to-c, and vice versa?

Ferro: Traditional brands have realized that when you have brands with purpose that connect with your core customer, that’s a home run. Traditional brands have seen major disruption in their industry because others saw an opportunity, connected with their customers and fulfilled a need. It’s the direct relationship with your fans and your ability to have an ongoing dialogue with them that is critical to being successful, so we need to be more nimble and ready to respond to our customers quickly.

Huyett: We’ve doubled our staff size in the last year, so right now we’re going through some transition and finalizing our first five-year strategic plan. As the business gets bigger and more complex, we’ll need to offer people clarity regarding our vision and direction. Something great takes real time and coordination.

Sherman: Thanks so much to both of you for the thoughtful conversation—what’s clear to me is that the d-to-c revolution might just be getting started.