The world of direct-to-consumer (DTC) brands has witnessed remarkable growth in recent years, but it hasn't come without its fair share of hurdles.
The rapid growth has led to increased competition in the DTC space, and brands are now challenged with capturing customers' attention and standing out in a crowded market. In this two-part series, we’ll explore why new customer acquisition has become increasingly difficult in 2024 and the role your attribution methods play in this new landscape.
The Changes Affecting Customer Acquisition
From 2014 to 2021, fueled by the rise of the walled gardens, a new breed of brands emerged, effectively marketing, selling, and shipping products directly to consumers (DTC), primarily via in-house operations. This boom was largely powered by eCommerce platforms like Shopify and performance marketing engines like Google and Facebook - clicks and conversions quickly became the name of the game.
But then the pandemic happened, and it was like the roaring ‘20s for DTC brands. Social media usage and online shopping behavior soared, fueled by a captive, socially distanced audience. Fiscal stimulus added gasoline to the fire, and brands were at their strongest performance.
Little did we know that this would end up being the peak of the DTC era so far.
The post-pandemic world experienced an economic slowdown, supply chain disruptions, soaring media costs, and privacy updates like iOS 14.5 that seriously hampered click-based measurement signals.
Marketers who stuck to using these old, insufficient click-based media strategies and success metrics are now very likely harming their businesses. What used to work for measurement simply doesn’t work in an environment where growth and new customer acquisition are much more challenging. Platform-reported clicks and conversions may now be leading your marketing team astray, leading to wasted media budget and inaccurate spend allocation against non-incremental media.
Let’s examine three of the biggest changes marketers need to watch: the rising costs of customer acquisition, AI campaigns in advertising, and the demise of click-based attribution.
The High Cost of New Customer Acquisition
The landscape in 2024 is now a completely different world than what it was just 5 years ago.
One of the biggest brand growth challenges today is the rising cost of acquiring new customers. The cost of advertising on platforms like social media and search engines has been steadily increasing, making it more expensive for brands to reach their target audience and acquire new customers. Simultaneously, it’s becoming harder to prove marketing’s ability to acquire them, especially for brands with consideration cycles longer than the 1-7 day view/click attribution windows offered by platforms in the new privacy era.
The click-based performance marketing complex now increasingly focuses media on "low-hanging fruit," targeting not only existing customers but also high-intent and promotion-responsive purchasers who are overwhelmingly ‘one and done’ purchasers rather than the brand loyalists essential for long-term growth.
The ‘Black Boxes’ of AI in Advertising
To further complicate matters, new AI-powered advertising products like Google’s PMAX and Meta’s ASC have become prevalent in the marketer’s toolbox. Modern Retail states, “Meta's ASC, which it released in 2022, hit a $10 billion run rate in 2023. Most brands have adopted PMax or ASC in some form.”
While offering potential benefits, such as a simplified, holistic, and automated approach to campaign management, many of these operate as "black boxes" - churning out results without offering transparency into who they target or which channels ads are placed.
This lack of transparency creates a level of uncertainty for brands, making it difficult to measure true ROI and understand how these AI-driven campaigns contribute to overall growth.
Before allocating significant media budget to these black boxes, brands should have a trusted solution in place to measure their performance and understand the incremental value they drive.
The Click-Based Marketing Crisis
Put all of this together, and it’s not hyperbole to say that performance marketers are facing an existential crisis. Marketing attribution software has evolved, and the performance marketing playbook built on chasing clicks has become obsolete. What worked just a few years ago is now actively contributing to their decline.
It’s understandable why many marketers, stuck to what had worked for so many years, keep chasing clicks and obsessing over last-touch attribution models. After all, change can be daunting. But these click-based attribution approaches simply don’t hold up in today's evolving market.
To overcome brand growth challenges, marketers must embrace new measurement methodologies and optimization workflows that can help them understand their media spend and accordingly adjust to prioritize long-term growth, customer lifetime value, and genuine brand building.
Moving Beyond Click-Based Attribution and Into the Future
The challenges faced by brands in today's environment are undeniable, demanding a significant shift in approach.
Blindly chasing clicks and relying on black-box solutions simply won’t cut it any longer. Addressing new customer acquisition challenges requires a clear understanding of future-proof measurement solutions.
There are now two worlds: an old, outdated, click-based world of measurement and a new, triangulated methodology based on incrementality and media mix modeling that allows your brand to understand and optimize media spend.
For a better understanding of how a triangulated methodology can help your brand navigate these customer acquisition challenges, stay tuned for part two of this series.