Three marketing principles for challenging retail conditions
It’s a great time for putting the boot into retail in the UK. With sales growth down year-on-year and 85,000 job losses across the sector, negativity is on-trend. Much of this pressure is being felt by high street retailers: increasing overheads and declining consumer confidence have led to a situation where more than 11% of Britain’s town centre shops are now vacant, partly thanks to 7,500 store closures during 2018 alone. John Lewis has seen profits slump by 45%. The only person doing well at the moment seems to be Mike Ashley.
By contrast, it’s easy to see results around the growth in online retail sales and assume that e-commerce is immune. In reality, the rapid growth of digital brings its own challenges. An increasing amount of spend is being channelled through big players like Amazon, who are applying pressure on the market with discounting and sophisticated logistics.
According to Hitwise, product searches on Amazon rose by 31% during Q4 2018 compared to the previous year, with only one in five people in the UK not visiting the site. That means stretched margins, either by discounting to compete or by jumping on the bandwagon: in the US, both Calvin Klein and Tommy Hilfiger now sell more apparel on Amazon than through both Macy’s and JCPenney. In the UK, Q4 saw record levels of discounting, with more than half of all clothing on sale in the run-up to Christmas.
As a result, budgets are squeezed, targets are increasing and demands upon direct response channels are elevated. More than ever, it’s important for retailers to stay focused on a series of key digital marketing principles.
Principle one: Think bottom-up
It’s easy for any under-pressure retail marketer to hone in on revenue as the most immediate way to measure success, but this doesn’t acknowledge the real costs of designing, manufacturing, shipping and marketing a product. Similarly, including only digital marketing costs in the reports on ROI is unlikely to fly with any self-respecting Chief Finance Officer. Instead, retail marketers need to focus on the metrics that matter; that is on the bottom line, not the top line.
Retailers need to work with their marketing teams and agencies (and vice versa) to ensure they communicate the real margin made on each product to ensure marketing spend is driving profitability. Not only will this give the marketing teams confidence when speaking to the CFO, it will empower them to make informed decisions about spend too.
Principle two: Integration is key
Marketing is at its best when all activity across channels is planned in alignment with work that’s happening throughout the business. Any activity happening in isolation can at best be ineffective and at worst counterproductive. For example you might have incredible click-through rates on your pay-per-click (PPC) advertising, but if you’re sending out different messages on email or in store then you’re failing to be consistent and missing an easy opportunity to amplify your messaging across the board.
Understanding the products that sell well regardless of paid support also avoids wasted effort and a reduced ROI: in challenging times, it pays to focus on the incremental opportunity. For marketers and agencies, all of this means working harder to integrate with teams beyond marketing: merchandising, product, brand, even production. For retailers, it means opening doors for your agencies and setting the expectation that they engage.
Principle three: Focus on long-term goals
When the chips are down, there’s always a temptation to focus on quick wins and it takes discipline and confidence to stay focussed on long-term objectives. Though you can be seduced by the next discount or the cheapest possible customer acquisition, constantly changing direction means you won’t benefit from understanding what really works and what doesn’t.
Retailers should continue to concentrate on long-term marketing principles that will ultimately pay off: build your brand equity, encourage loyalty from customers through providing excellent customer experiences across the board, and increase conversions by personalisation. In short: avoid the race to the bottom.
Marketing is too often a tempting cost to be cut. Sometimes this is due to how it is perceived by the business – perhaps as a luxury, or a nice-to-have. Sometimes it’s the result of poorly communicated performance, or lingering uncertainty around effectiveness.
John Wanamaker probably expressed that doubt best when he said “Half the money I spend on advertising is wasted; the trouble is I don’t know which half”. But even in challenging times, consumers are still looking for positive experiences: helpful, relevant advertising, consistency of message and seamless purchasing. Base your strategy on products that contribute margin, or cross-sell well to those that do, and test relentlessly to refine your approach. Build your successes into compelling narratives and become your CFO’s best friend. But most of all, try and ignore the endless negativity.
Duncan Nichols, director of strategy and planning at Croud
