Alice Goodwin, our Digital Retail Strategist recently published an article in the latest Retail Times Magazine from Retail Excellence Ireland. If you’ve picked up a copy of the magazine, we hope you enjoyed it and for those of you who would like to know more about eCommerce from our expert, have a look below….
Moving from an in-house eCommerce team to an agency team was both a welcome change, and a new challenge. When you’re used to managing one ad account that you know like the back of your hand, to taking on a number of new retail accounts, it’s an exciting change and a real test of skill.
Having spent some years working between eCommerce, Marketing, commercial and product teams, I’ve come to know the balancing act that is required in order to get the best out of product-led digital marketing, in particular across search campaigns. There are some interesting learnings to take from moving from strategizing across one product-focused account in-house, where pressure from commercial and buying teams can dictate how you market products, to moving to a performance marketing agency.
Profitable Return On Ad Spend
Retail companies, naturally, place such a strong focus on profitability but this approach can get lost when it comes to marketing. Traditional marketing tended to mean that no real return could be calculated. As someone who’s developed their career in a completely digital capacity, I’ll never forget the shock I felt when discovering the formula to calculate the reach of a print advert. Thankfully, when it comes to digital, you can be much more precise.
ROAS is a term we’re all familiar with when it comes to digital marketing, but when you’re working in an eCommerce environment with tight budgets and margins, this is no longer enough to justify the spend. Depending on your business, you may be investing in digital marketing and looking for an ROI of €20 overall. While this is an extremely strong return, across a large account with campaigns spanning a number of different product categories and margin levels this model becomes less and less effective, as you sacrifice control of your profitable return.
The way around this problem is careful segmentation of your products within your campaigns. By spending a little extra time on set-up, you can create an ad account that is streamlined for profitability. To give you an example of this, if you are working across an account with product margins varying from 10% to 40%, it makes more sense to segment these into campaigns product with a split by low margin, middle margin and high margin. If you are working with a lot of brands or product categories, where margins don’t vary a lot within each category, you can segment in this way for the same level of control.
By segmenting in this way, we can track a profitable return on advertising spend at a category level and follow the CPA of each campaign at a much more granular level. By swapping from reporting an overall ROI number, to this category-led, profitability-focused model, we can ensure total profitability across the entire account. We can then report on an overall %CPA and represent cost as a percentage of revenue, allowing us to clearly see how much of the margin is being taken up by advertising costs.
This level of reporting detail allows us to maintain an extremely profitable account, and monitor profitability with ease. We can set budgets/goal CPAs/CPCs for campaigns with profitability and margin in mind, at a product category level.
This same approach can also be implemented, in a more simplified fashion, across google shopping campaigns through the use of custom labels, allowing us to segment these products into high, medium and low margin products. This then allows us to single out and upweight spend across higher-margin products. Through this, we can prioritise these high margin products for relevant product searches, increasing the overall profitability of the campaign.
Matching Budgets With Consumer Demand
The other aspect of maximising conversion & profitability across an account is maximising the performance of campaigns by weighting spend across campaigns seasonally. This can be done by mapping the demand for your product set monthly and weighting your budget accordingly.
For example, within an ad account that has multiple product-led campaigns, we can use consumer demand data to weight a monthly budget across multiple campaigns or to forecast an annual budget.
Through the use of the Google keyword planner, we can identify peaks in search activity for particular product groups within certain months. In many accounts, we would see ‘always on’ activity with budgets that don’t change from month to month, with the exception of peak periods, or budgets that are based completely on the previous year’s spend.
With budgets set in this way, it will be difficult to capitalise on peaks in customer demand, as consumer search fluctuates while the budget remains static. These fluctuations may mean that on some months, search impression share drops as budgets aren’t sizeable enough to match demand & competition, and other months it is not spent as the demand does not exist.
By matching budget to monthly consumer search patterns, we can avoid this capping of impression share due to insufficient budgets on busy months by forecasting the demand based on historical metrics, therefore increasing online revenue. Instead, we re-allocate spend from campaigns that are unlikely to spend budget to months that are likely to require additional budget. This allows us to maximise on impression share over months that demand is high, and cut back budgets over months when we know that demand will be low.
We have endless amounts of consumer data at our fingertips now, and online retailers are obliged to start leveraging some of this invaluable data to start informing their businesses. My advice is to start small. Identify the key product categories you want to pursue as a business and start utilising search demand data to justify investment in these areas, or to identify alternative areas & new trends that your business can capitalise on.
In an increasingly competitive online marketplace, it’s more vital than ever that online retails are leveraging the wealth of data that is at their fingertips and start demanding more profit-driven marketing with stronger results than they’ve been able to achieve before.