How Branding Helps You Breakthrough the Direct Response Ceiling

Bryan Karas

June 19, 2018

BarkBox, every dog’s favorite subscription service, plans to redistribute their spend on Facebook ads to other traditional marketing channels – TV, direct mail, radio, events and retail etc.

And it makes sense…

BarkBox, like some other direct-to-consumer companies, spent around 75% of their marketing budget on Facebook ads – they grew at an astronomical pace and everyone was happy…until they weren’t.

Facebook is an awesome channel to launch your business and see amazing growth, but digital advertising does have a ceiling – there comes a point when the law of diminishing returns comes into play, at that point you need to build a brand.

How do you know you are at the point of diminishing returns? Stress test it…

Here’s an oversimplification… if you put $100K into FB ads with the expectation of acquiring 2,000 customers because you’re used to seeing a $50 CAC – customer acquisition cost – but you only acquire 500 customers ($200 CAC) you’re not getting the same returns.

So, when this incremental budget isn’t seeing the same returns, and you are short on CRO hypotheses, it’s time to put dollars elsewhere.

In the beginning…

Your early adopters want something new and fresh. If you present them with a great solution or product they’ll pull the trigger on the sheer utility of that product. Then you gain significant traction through digital direct response ads – cough, cough Facebook…

Unfortunately not that many people will buy your product with limited exposure and social validation. Most people are complacent. Even if they buy into your value proposition, they simply don’t actually take action without a bandwagon to jump on. That’s when you need to beat them over the head with brand marketing and once they see everyone else jumping on board they finally follow.

It’s like Pavlov’s dog – one day you check your car insurance bill and remember that cute little lizard who’s been telling you how to save 15% on insurance for years…so you finally make the call – which usually takes a lot longer than 15 minutes.

This strengthens the argument for branding – even at the startup or smaller Ecommerce level – and if you don’t think about branding you won’t see real scale in your business.

It’s not a trade off

Everyone wants to find new eyeballs at lower costs but you don’t have to get rid of Facebook. If your company is growing you should be increasing your marketing budget anyway.

A few years back, the CMO of Lyft, Kira Wampler, was talking about brand advertising at a Facebook event. When the topic of marketing spend came up…she said that she was certain every time they spend brand dollars their DR (direct response) numbers go up. When you push brand spending, your conversion rates and all DR metrics get better.

That’s the golden ticket…the combination of direct response and branding that takes you to the next level.

A small time Aussie wine company used clever brand positioning to penetrate the US market

Ever wonder how a new wine company can compete in an industry where the aisles in grocery stores have hundreds of competitors? This case study shows us how a small brand managed to become a big player in the wine industry, especially in the USA, through a very clever marketing strategy.