Direct to Consumer Advertising (DTC): What it is, How it Works

What Is Direct to Consumer Advertising (DTC Advertising)?

Direct-to-consumer advertising (DTC advertising) is marketing that is aimed toward consumers when access to a product may require an intermediary. Direct-to-consumer (or D2C) advertising may utilize print, social media, TV, radio, and other forms of media with the goal of informing a customer about a product or reminding them of a need for such a product. The most common example of DTC advertising involves prescription pharmaceuticals, but may also include medical and diagnostic devices or services, as well as financial products and services. Since consumers may not be able to obtain products featured in DTC advertising on their own, such as prescription drugs, the objective is to create a dialog between patients and their doctors with the ultimate goal of increasing sales.

Key Takeaways

  • Direct-to-consumer advertising (DTC advertising) is marketing targeted directly toward a consumer in industries that may require a middleman seller.
  • The prescription pharmaceutical and financial industries frequently employ DTC advertising to reach their customers.
  • Some common types of DTC advertising include product claim ads, reminder ads, and help-seeking ads.

How Direct to Consumer Advertising (DTC Advertising) Works

The first direct-to-consumer print ad in the United States appeared in Reader's Digest in 1981. The Food and Drug Administration (FDA), which is responsible for DTC advertising regulation in America, placed a moratorium on such ads in 1983 so it could devise some basic rules. It lifted the moratorium in 1985, as few drugmakers showed interest in running such ads, though television network CBS issued its own guidelines that same year. DTC advertising was approved in New Zealand in 1981, Hong Kong in 1953, and Brazil in 2008. With the prevalence of socialized medicine, Europe has thus far avoided DTC advertising. For more, see this DTC advertising timeline.

There are several types of direct-to-consumer advertising:

  • Product claim ad: Will name a drug and summarize efficacy and risks. This is the most common type of DTC advertising.
  • Reminder ad: Generally include a product name and provide information about price or dose, but avoid making claims.
  • Help-seeking ad: Includes information about a medical condition and encourages individuals to see a doctor but generally does not name a product.

DTC advertising is also used to promote financial services products, following the success of the pharmaceutical industry. Such advertising strategies may be an effective way to reach middle-market consumers that tend to be underserved by traditional distribution channels. Such advertising, when coupled with the advice of a fiduciary, may be advantageous to savings rates, retirement preparation, and other financial planning.

Direct to Consumer Advertising in the United States

Direct-to-consumer advertising use accelerated in the U.S. after 1997 when the FDA suggested to drug manufacturers that they could comply with the regulations that were in place, while also exempting certain types of ads from providing a full list of side effects, as long as such information was available elsewhere. Over the next two decades, DTC advertising saw significant growth and additional clarification of legal guidelines and best practices. In 2005, the Pharmaceutical Research and Manufacturers of America issued its Guiding Principles on Direct to Consumer Advertisements About Prescription Medicines. The document was intended to act as a means of self-regulation. Direct-to-consumer advertising is the most prominent type of health communication to consumers.

Direct to Consumer Advertising: Pros and Cons

Proponents of DTC advertising claim that it raises awareness of ailments and treatments, which leads to more doctor visits, better engagement, and better and earlier diagnoses of diseases. It may also lead to better adherence to courses of treatment and therefore better outcomes. Such advertising may also enlarge the market for pharmaceuticals, which leads to greater competition, more drug development, and lower prices.

However, there are considerable concerns regarding DTC advertising, such as unethical practices and increased consumer demand for prescriptions that may not be needed. Patients are more likely to request or switch to heavily advertised drugs regardless of need, suitability, cost-effectiveness, or safety. DTC advertising also may lead to a new drug being prescribed far more often before full knowledge has been developed regarding long-term side effects and rare reactions (most drugs see relatively-limited testing in clinical trials).

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