After a slower-than-expected 2022 holiday season, many retailers have tightened their budgets in 2023.
While optimizing budgets in times of financial uncertainty makes sense, such times also provide smart marketers with easier opportunities to improve market position. According to research from Analytic Partners, 63% of marketers that increased their marketing investment during the financial crisis of 2008 generated a positive ROI. Furthermore, those that increased their media investments benefitted from a 17% growth in incremental sales.
And in challenging economic times, growth costs less than in prosperous economic times when everyone invests a lot in marketing.
So where should digital retailers focus their investments? Here are a few marketing tactics that should cost-effectively support marketing in this challenging year:
- Turn to a DSP for retargeting – Marketing strategists have proven that it’s at least 5X less expensive to retain an existing user than to bring in a new one. That’s why retargeting, the marketing tactic for re-engaging existing users, is more important, particularly in uncertain economic times. And with retargeting on social channels more difficult due to privacy changes from Apple and Google, marketers are turning to Demand-Side Platforms (DSPs) in order to run retargeting campaigns, using their own first-party data.
Based on internal first-party data about inactive clients, retailers can turn to a DSP to use this data to empower advertising campaigns to re-engage these inactive\sleeping users. Thanks to advanced DSP technologies and the retailer’s data on their inactive users, campaigns can be targeted to reach lookalike users, many of whom are probably that marketer’s inactive users. By utilizing user data from inactive users, retailers can create advertising campaigns that are personalized and incentivized to bridge key user abandonment stages and bring customers back to use their app.
- Invest in video – Andrew Frank, a VP and Analyst at noted technological research and consulting firm Gartner, recommends video ads as a controllable and less volatile ad format for driving traffic and awareness. And this recommendation makes sense, as research from video creator Wyzowl found that 73% of consumers prefer to watch a video to learn about a product or a service.
In 2023, the trend is for vertical videos on Instagram Reels, TikTok, and YouTube Shorts. According to data from social media management platform Hootsuite, Reels is growing fast, and Instagram has 2+ billion monthly users. It’s the preferred app for targeting 16-to-24 year-olds (even beating TikTok). Speaking of TikTok, the app is expected to continue its growth trajectory in 2023 thanks to new functionality including Photo Mode (carousels), TikTok Stories (cloned from Instagram Stories), and new search functionality. And YouTube Shorts hit a milestone of 50 billion daily views in Q4 2022, up from 30 billion daily views in Q1 2022. With TikTok creators disgruntled over the platform’s creator payouts, YouTube’s new revenue-sharing program will only strengthen YouTube as a platform for video marketing while intensifying competition among social video companies in 2023.
- Make sure it’s measurable – Measuring Key Performance Indicators (KPIs) is always important for retailers, but it becomes business-critical during uncertain times. That’s why marketers need to have the right KPI measurement system in place to ensure that they know what outputs are being generated by their marketing inputs.
KPIs that will enable retailers to manage spend are ones that are tied to business results. They include:
- Unique visitors and product revenue by campaign or media source: Enables determining which media sources/campaigns are delivering cost-effective performance, and which aren’t.
- Average order value: Another important business metric to understand order size and compare that with acquisition costs
- Return rate: For ecommerce companies, returns can be very costly. And returns impact other metrics like brand loyalty and customer satisfaction and maybe even product quality. Therefore, it’s important to take note of the return rate to make sure that it remains stable and affordable.
- Customer acquisition cost payback period: In questionable economic times, it’s important to understand how long it will take to cover customer acquisition costs. This could result in changing acquisition tactics to more effectively measure costs and to ensure the focus is on customer lifetime value and profitability.
- BrandFormance – When times get tough, there’s a tendency to stop branding campaigns in favor of performance. Instead, marketers need to maintain a balance between branding and performance campaigns while ensuring that branding campaigns include measurable benchmarks. We like to call this approach ‘BrandFormance,’ the integration of branding and performance marketing as parts of an integrated and KPI-driven marketing approach. This will guarantee that branding metrics like reach and recall are achieved to ensure that the retailer is optimizing marketing spend during challenging economic times. Ultimately, only when branding and performance marketing are aligned do retailers achieve their KPIs. And in uncertain economic times, opportunities exist to win market share from competitors that are too quick to cut their budgets. That’s why BrandFormance is especially important in the economic times that we are currently experiencing.
- Use AI to optimize performance – Unless you live under a rock, you’re aware of all of the buzz around ChatGPT. Though Artificial Intelligence (AI) technology has been used in marketing for years, ChatGPT made AI a topic you can potentially even discuss with grandma. With ChatGPT’s popularity, marketers have no excuse for not utilizing the AI technologies available to optimize their marketing campaigns.
Instead of replacing marketers, we believe that AI is a tool that can serve as an ally to marketers by enabling the analysis of millions of marketing campaign data points in order to uncover actionable insights that improve campaign performance automatically. For example, one ecommerce client achieved a significant increase in Return On Ad Spend (ROAS) thanks to our own AI technology. For this client, the AI marketing platform optimized ad creative by creating the best-performing ads for each target segment on every platform/channel. Optimal campaign performance was achieved because the AI technology selected the best images, colors, fonts and texts from those provided in a method that a human creative director couldn’t achieve. The AI technology even determined when to refresh ads to ensure continuous and optimal ROAS.
The two good things about challenging economic times are: (1) they force us to become smarter marketers, and (2) they don’t last forever. Now is the time to get smarter to ensure that you’re achieving your KPIs while also setting up your marketing for 2024 and beyond.
David Itkowitz is the Director of Performance at Zoomd, a provider of mobile user acquisition and publisher site search solutions.