How 2 very different DTC startups balance paid and organic marketing

Both Ernesta and Tractive are trying to boost their customer bases and grow their businesses at a time of larger macroeconomic uncertainty. Consumer confidence in the U.S. hit a record low in May amid the U.S.-Iran conflict, and higher gas prices could deter some shoppers from making discretionary purchases, like home decor. At the same time, marketing costs are skyrocketing, making reaching customers at various points in the conversion cycle more difficult. Smith and Bleiman, offering two different playbooks, shared how they’re approaching marketing spend during a May 21 panel session at The Lead, moderated by Modern Retail.

Ernesta, for its part, finds that it can take “a long time” to convert a customer, Smith shared. Ernesta sells custom-sized rugs — both through its online website, as well as its soon-to-be 15 stores — and knows that people aren’t buying rugs every day. Oftentimes, customers want to speak with Ernesta’s design assistants, receive samples at home and consult virtual sizing guides. Ernesta’s rugs typically run from $300 to over $2,000, depending on size and material.

In a competitive category like rugs, maintaining margins can be difficult, Smith acknowledged. “You kind of have two choices,” he said. “You could race to the bottom, offer a cheap product, do a lot of performance marketing that maybe isn’t incremental and feel like you’re competing. Or, you could do the opposite, which is, you could build a brand, think about the future customer, keep your prices competitive … and [reach] that customer that is going to be in the market in six months, as opposed to being forced to buy tomorrow.” Following the second path, Smith said, is “how we win long-term.”

To that end, Ernesta has dabbled in both paid and organic marketing, but leaned more toward organic marketing in recent years. It does work with creators, many of whom are interior designers, to show off how its rugs work and be “more educational,” Smith said. Ernesta’s products are different sizes and made to order, so it isn’t a brand that can really “sell [rugs] en masse and give those out [to creators] for free,” Smith shared.

It can be a challenge, Smith said, to cater to both interior designers and everyday consumers, when it comes to content. The first group, he said, “is working for their clients and trying to run their own business.” The second, he said, “just kind of wants the end product.” Both care about design, but may have different motivations, Smith said. Therefore, Ernesta has made sure to diversify its marketing strategy beyond creators alone, including holding events at its stores.

While Ernesta operates in a category driven by infrequent purchases, Tractive is the opposite. It sells a device that attaches to a pet’s collar — with a SIM card inside — and separately sells a software subscription ranging from $5 a month to $10 a month. Tractive says its subscription plan is necessary for accessing functions like heart rate monitoring, geofencing and weekly health reports. Using Tractive’s app, customers can track their pet’s location, heart rate, activity and sleep.

The brand never sells the device and subscription together, so as to have higher margins. On its website, Tractive prompts shoppers to choose a subscription plan after checkout, offering a 1-year, 2-year and 5-year plan. “Every dollar we make on the device itself, from a company valuation perspective, is worth $1,” Bleiman said. “Every dollar we make on a subscription is worth at least $4.”

Still, marketing a subscription product can be challenging, Bleiman shared. “You find yourself in the sticky situation of trying to sing the praise of your product, while also screaming about the fact that you’re going to have to pay for it, perpetually,” he said.

Tractive’s sweet spot is at the bottom of the funnel, Bleiman said. “If people are looking for a solution and they don’t know something like this exists, they’re probably going to find their way to us,” he shared. What gets harder, he said, is the top of the funnel, where Tractive has to explain its product and value proposition in a short amount of time. Thirty-second linear TV ads and Meta ads have performed well, but TikTok has been “a huge challenge,” Bleiman said. “It is not hard for us to sell on TikTok. However, the percentage of people who subscribe falls off a cliff, and that’s even when we scream subscription from the outset.”

One way Tractive has been able to reach consumers is through working with animal trainers and shelter communities. Content that shows “farm lifestyle,” like a herding dog in action, tends to be popular. When it’s possible, Tractive tries to work with veterinarians, but “vets are incredibly busy, and they are not typically attention-seeking,” Bleiman said. Still, he said, “What is pretty universal, with the creators that work best for us, is that they’re smaller.”

Tractive also tries to emphasize that it’s different from Apple Air Tags, which Apple doesn’t market for use on pets. (The two products are also different, in that Air Tags work off of nearby iOS devices, while Tractive devices work off of cellular networks.) More people learning about pet tracking — even if it’s from Apple — has been “a huge opportunity for us,” Bleiman said. “They do have billions of dollars to educate their markets at scale, [and] we can kind of sneak in there.”

Both Ernesta and Tractive are eager to try out other marketing channels this year; Ernesta is open to doing more with Substack creators, while Tractive wants to experiment more with YouTube content. Either way, both say the best marketing spend goes toward educating consumers.

“If you had to put $1 in a product ad or a 30-second ad that tells your brand story, I’m always going to pick a 30-second ad,” Smith said.