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- Retailers should use a data-driven approach to develop their marketing strategies to succeed in today’s volatile economy
- Current tumultuous economic conditions are disrupting the retail landscape by forcing store closures and forecasting bankruptcies
- Marketing intelligence for pricing, advertising, and promotions is critical in gaining an edge against competitors
- Managing director at GrowByData, Prasanna Dhungel, shares ecommerce strategy tips for 2023 to attract, convert and retain customers
The economy in 2020 was in a volatile state, primarily due to the pandemic. In November 2020, despite rising Covid cases, retailers were providing SALE offers on 13% of ads and special promotions on only 7% of ads. On the other hand, consumer spending growth was recorded at 9%.
Fast-forward to 2021 – The economy was recovering from COVID that was evident in consumer spending growth of 13.5%. With a slightly eased supply chain and better economic conditions, November holidays in 2021 saw 14% growth in special offers, which had grown twice as much compared to 2020. Furthermore, SALE offers were seen on 12% of ads which was slightly lower than the previous year.
However, in 2022, the Russia-Ukraine war coupled with unfathomable COVID rise in manufacturing nation like China impacted the economic indicators once again. With rising inflation, consumer spending had fallen drastically to mere growth rate of 6%-8%. For this year’s November Holiday, 60% of consumers mentioned discounts and promotions playing a huge role in their purchasing decisions.
Surprisingly, during November 2022, there was a drop with only 8% focused on special promotion ads. However, SALE offer was in a rise visible in 15% of ads.
A similar trend was seen in average pricing in Google Shopping ads that is, turbulent economy was reflecting in lower average price in 2020 and 2022 compared to 2021 – when the economy was flourishing.
Heading into a deeper recession in 2023
As we enter 2023, we expect to continue heading into a recession.
According to a monthly survey conducted by Bloomberg, the likelihood of a US recession in 2023 jumped to a whopping 70% – as a series of Federal Reserve interest hikes drove fears of a stagnant economy. To make matters worse, a rise in US unemployment throughout the year has also been predicted to cause more pain in the labor market.
On the contrary, to remain competitive in the market, gross margin in retail is expected to go down. In this paradigm, pressure will rise on spending like advertising. Consumers will start scouting for cheaper products causing retailers and advertisers to provide low-priced products to win market share. Therefore, the road ahead for retailers is going to be bumpy. Per UBS analyst report, 50,000 store closures in the US is expected over the next 5 years. News of mega-stores like Bed Bath & Beyond potentially going to bankruptcy has emerged.
Based on our 2020 and 2022 economic analysis, retailers most likely will have unsold inventories to clear during the 2023 November Holidays. That said, consumers will see more SALE ads over special promotions, alongside noticing a drop in average pricing in shopping ads.
Consumer spending, which has been decreasing in the last 3 years, will most likely fall in 2023 as well. Discounts, Promotions, and cheaper prices are the only ways to attract customers to stretch their wallets.
Despite the bleak outlook, retailers utilizing marketing intelligence for their pricing, advertising, and promotions will most likely survive and gain an edge in 2023. Here are a few tips for retailers and advertisers to succeed in 2023 –
1. Optimize ecommerce trustworthiness factors to boost conversion
Trust plays an integral role in converting business. To ensure a high conversion rate, it is imperative to build a customer’s trust in your eCommerce ecosystem. It is fair to say that online shoppers are often reluctant to make a purchase due to uncertainty on an unfamiliar channel or brand or product. For an eCommerce business, gaining trust is crucial as customers are unable to physically see the product. Businesses must focus on optimizing trustworthiness as it will have tremendous impact in the conversion. That being said, trust is a psychological state that can be easily influenced.
Here are the ways to optimize your ecommerce trustworthiness.
- Showcase customer reviews and ratings, use trust badges and seals, offer secure payment options, display contact information prominently, maintain a strong presence on social media – all these attributes gain trust from your customers. Additionally, have good shipping & return policies, and enhance your website’s user experience. This will reassure your company’s transparency and guarantee customer satisfaction. All these should lead to increased customer loyalty and sales. For instance, Google rewards the “trusted store” badge to stores offering fast shipping, good return policies, a high-quality website, and good ratings – all the factors that signify a good customer experience.
- Shopping ad extensions is another great way to improve the trustworthiness and effectiveness of your shopping ads. Ad extensions allows you to provide additional information about your product/business in your ad, which will help increase the credibility of your ad and the likelihood of users clicking on it. For example, you can use the “product review & ratings” extension to display the average rating your business has received from customers. This can help potential customers feel more secure during their purchase journey.
- Offer competitive shipping and return policies to add a layer of trust and credibility for your brand. Customers generally prefer to shop with brands that offer free shipping or expedited shipping options. A hassle-free return policy will not only help build trust with customers but also create a good brand image since you have taken that extra step to ensure the customer’s satisfaction. For example: if you offer a 10-day return policy while your competitor is offering a 3-day return, customers are more likely to choose your product vs your competition. Additionally, having a local presence in the market is also a plus point. Customers will know you exist in their market. Offer 24/7 customer helpline and chat for your customers to get feel like they can contact you easily.
- If you are a brand, you should have a MAP policy in the US and Canada. Having a MAP and channel policy helps ensure your brand’s product’s price and channel consistency across the digital shelves. You must clearly communicate your MAP policy to your retailers & partners and provide them with the necessary guidelines for selling your products. Setting up a MAP policy and ensuring its enforcement helps brand maintain their value and ultimately improves trust and credibility amongst resellers and ultimately shoppers.
2. Optimize ROAS by lowering advertising cost
Here are six ways to achieve this –
- Pursue Holistic Search Strategy to mobilize budget across SEO and SEM to dominate Google SERP. In 2022, our top Auto retailer client increased 20% revenue by redirecting ad spending from keywords where they were doing well in Organic.
- Improve your keyword quality score to boost impressions and CTR with lower CPC. We have noticed retailers not utilizing special offers during this adverse time. We humbly disagree with this strategy as it is imperative to offer discounts through special offers over dropping prices. This simple tactic can improve your ad quality and reduce your CPC.
- Optimize your product experience by focusing on product title, price, quality, color, description, promotions, reviews, etc. This will not only increase your chance of conversion but also help improve your keyword quality score.
- Ensure affiliate compliance to reduce revenue churn and better partner with your loyal affiliates.
- Monitor violations in your brand term that are inflating your CPC.
- Enforce MAP Compliance to avoid pricing wars reducing your margins and brand value.
3. Dynamic pricing optimization to maximize margin
To be on top of the game, retailers must have insights into current market pricing to ensure optimum pricing to beat competitors. The approach taken for dynamic pricing strategies to penetrate while maximizing margin from the market will be critical for growth.
4. Strategic promotional planning to attract consumers
Consumers will always be gazing for promotions. In this adverse economic situation, a strategic promotion plan will help optimize advertising and conversions.
As the pandemic-riddled period comes to an end, innovation becomes a key factor for survival in the volatile market of today. Furthermore, with a shift in the retail landscape consumer expectations and demands will be a leading force in 2023.
Retailers and advertisers must remain flexible, adaptive, and affordable to get an edge against competitors to maximize their market share. They should use a unified marketing intelligence solution that showcases them versus competition in the eyes of the shoppers on the digital shelves. We recommend retailers use a data-driven approach to developing their marketing strategies to improve their chances of success in 2023.
Prasanna Dhungel co-founded and runs GrowByData, which powers performance marketing for leading brands such as Crocs and top agencies like Merkle. GrowByData offers marketing intelligence for search, marketplace, and product management to win new revenue, boost marketing performance and manage brand compliance.
Prasanna also advises executives, board & investors on data strategy, growth, and product. He has advised leading firms such as Melinda & Bill Gates Foundation, Athena Health, and Apellis Pharma.
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