The retail sector is facing a complex economic environment in 2024. Inflation rates remain unpredictable, consumer confidence is fluctuating and supply chain disruptions, including the geopolitical environment, continue to affect inventory levels and pricing. These factors have made it challenging for retailers to plan and execute effective marketing strategies. As a result, many retailers are adopting a more conservative approach to their marketing spend, focusing on efficiency and return on investment (ROI).
Some of the key challenges brands face in the latter half of 2024 include:
- Budget constraints: With economic uncertainty, especially in an election year, many retailers have tighter budgets and must prioritize spending on initiatives that offer the highest returns. For example, some retailers are decreasing their affiliate commission payments in Q3 in order to “save” budget for the holiday shopping season;
- Shifting consumer behavior: Consumer preferences and shopping habits have evolved, requiring retailers to follow suit and shift strategies. “Digital fatigue” is a real phenomenon, according to Deloitte, and it may lead to diminishing returns from traditional digital marketing channels such as PPC, search and display ads as consumers seek more authentic connections with brands, enabled by smarter marketing and leveraging loyalty programs; and
- Increased competition and a pullback in consumer spending: The competitive landscape continues to intensify, with more brands vying for the same consumer attention and dollars. Meanwhile, consumers themselves are pulling back on spending slightly in Q3, as Morningstar notes.
However, brands can overcome these hurdles by developing and executing strategies to optimize their marketing budgets. Four of these strategies include:
1. Leveraging affiliate channels.
Affiliate marketing can be a cost-effective way to drive sales and increase brand awareness. Unlike traditional advertising channels that require upfront investment, affiliate marketing operates on a performance-based model, meaning retailers only pay for actual conversions or sales. With affiliate marketing, brands pay only for performance, reducing the risk of wasted spend.
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Retailers should focus on building strong relationships with high-performing affiliates, even considering higher CPAs (cost per acquisition) where the publishers are performing well to ensure continued conversion through their audience and ensuring maximum volume at a cost-effective ROI.
2. Reassessing Pay-Per-Click (PPC) advertising.
While PPC advertising was a staple in digital marketing strategies of the recent past, its effectiveness in driving direct conversions may be waning due to increased competition and rising per-click costs. Retailers should carefully evaluate the performance of their PPC campaigns if they are conversion-focused and consider reallocating funds to more cost-effective channels if their spend in PPC isn’t meeting ROI goals.
Retailers may also want to consider limiting their PPC shopping feed tactics only to full-price items or items they know already have a high margin. Discounted or clearance products, while potentially more likely to drive a conversion after a click, might have a slim or negative margin and drag on the performance of the channel.
In addition, retailers should assess their brand PPC advertising — if they are already ranking well in organic search results for brand-related terms, they can consider pulling budget back from branded paid search ads. And they should take advantage of free tactics to improve their placement in organic search results, such as optimizing product pages and using structured snippets to help search engines crawl and rank their site. This can result in improved site speed and performance for mobile devices. Additionally, including user-generated content, such as reviews on product pages, can help further drive engagement and time spent on site.
3. Maximizing email marketing.
Email marketing remains one of the most effective and efficient channels for driving engagement and incremental sales from customers who have opted in. With its relatively low cost and high ROI, retailers should prioritize building and maintaining a robust email marketing strategy.
With that said, it’s critical for retailers to work hard at personalization to customize each recipient’s email content and offers. Modern customers will no longer settle for “batch and blast” emails that have no personalized content. Keep in mind the axiom: “If you’re selling to everyone, you’re selling to no one.”
Brands should divide their email list into segments based on criteria such as customer behavior, preferences, past purchase history and demographics to deliver personalized and relevant content. They also should lean on their email provider and in-house data team to begin developing a personalization strategy in Q3 that can really be applied in the critical fourth quarter. For those just getting started, this guide from Campaign Monitor may be useful.
4. Enhancing the customer experience.
Investing in customer experience (CX) can lead to increased customer satisfaction, loyalty and ultimately, higher sales. Retailers should focus on creating seamless and enjoyable shopping experiences both online and offline. One of the core tactics for improving CX is mentioned above in the section on email: personalization. In the same way that you can customize content for each email recipient, you also can use data to personalize the shopping experience for customer segments or individuals, from product recommendations to tailored marketing messages on the site.
Multi-channel marketers also should ensure good CX via a consistent and cohesive experience across all possible consumer touch points, including the online, mobile and in-store experiences. Every interaction by every customer should reinforce the brand and leave the customer feeling positive, which fosters better customer engagement.
To that end, another key element of improving CX is to invest in customer service training and technology in order to provide prompt, consistent and helpful support. Every customer service interaction also reflects on a brand’s reputation and the experience it delivers, and each customer service “touch” also can feed back into a personalization engine to improve the customer’s future interactions.
As retailers navigate a still uncertain economy, optimizing marketing budgets for maximum efficiency and effectiveness is crucial. By leveraging affiliate and other performance marketing channels, maximizing email marketing and enhancing the overall customer experience, as well as reassessing PPC advertising, retailers can stretch their budgets further. Brands that take a fresh look at their current marketing strategies and associated budget allocation will be better positioned for success during the busiest shopping season of the year.
Michelle Wood is a results-driven sales and marketing leader with 20+ years of experience propelling ecommerce companies to new heights. She is currently the VP of Merchant Business Development at Wildfire Systems where she has built and now leads the Merchant Development function.
