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Global industries are currently confronted with economic uncertainty, as well as the challenges and potential opportunities resulting from market volatility. Brands in the retail industry are no exception, as they face rising acquisition costs, supply chain issues, and pricing pressures. Furthermore, as retailers work harder than ever to increase consumer loyalty, they must be aware of rising competition, such as Direct To Consumer (DTC) brands that are thriving in their respective fields.
The global eCommerce market is constantly expanding, reaching a value of $5.2 trillion in 2021. With a 56% increase expected over the next few years, it is estimated to reach approximately $8.1 trillion by 2026, with no signs of slowing down. Marketers must reassess their strategies as consumers face more complex decision-making amid a cost-of-living crisis and a myriad of brands to choose from. In a cookie-less world, marketers must develop a more relevant environment for their customers. As the cost per acquisition continues to rise, it is vital to seize every transaction opportunity and treat all visitors with the same high level of care and attention to detail.
First-party data is information about a company's customers that the company collects and owns. Customer information is compiled using software and systems owned by the company. These digital interactions, purchase history, and behaviour preferences can be used by the company to create ads, content, and experiences tailored to an individual's interests. Marketers can use first-party data to support customer journeys with more relevant advertising, leading to higher conversion rates and customer loyalty in the long term. Implementing various marketing strategies to outperform the competition entails raising the cost of a campaign while focusing on maximising owned retail media and leveraging the power of first-party data to help increase return on investment (ROI).
Developing A North Star Metric
When no other landmarks are visible, explorers rely on the North Star. In business, the same relationship exists. A North Star Metric (NSM) is the source of truth that demonstrates how well a company meets the expectations of its customers and executives. The right NSM is critical to a company's strategy because it defines the relationship between the pain points it solves and long-term business growth. In essence, it captures the fundamental value that a business creates.
Retail businesses generate a large amount of data during the course of their operations. Many business scenarios can be optimised using data analytics recommendations, such as how the average transaction value affects overall turnover and whether active customers play a positive role in it. Data analysis is essential in assisting retail businesses in making informed decisions to improve their day-to-day operations. Average Transaction Value (ATV) is an excellent roadmap. While it may appear to be a complicated mathematical equation, it is actually a simple calculation. A company's ATV is the average dollar amount spent by a customer in a single transaction.
Operational approaches must be user-centred in order to increase average transaction value and consolidate active customers. Since the pandemic, retailers have struggled with rising costs and customer retention challenges. Some retailers have focused on expanding their product portfolios to increase average transaction value. Others concentrated on up-selling their current offering. This necessitates the use of data from the customer's product selection as well as other items that are similar but more expensive. The idea is to demonstrate to a customer that by spending a little more on a higher quality item, they will receive a lot more value and a better product.
Communication is essential for increasing ATV. In addition to having associates who are familiar with product selection, training to provide best-in-class customer service is critical. With a positive customer experience, there is an opportunity to increase sales. Customers will not only trust a brand to complete their purchase, but it will also give them the incentive to return at a later time. It is difficult to attract customers, and winning each customer's business is costly. Companies that can increase their ATV with each customer will see a higher ROI on their sales and marketing costs.
Leveraging Retail Media
Retail media is a type of digital retail marketing that allows brands to advertise on retail websites and applications. It's a powerful method of interacting with customers by delivering targeted messages in an engaging format. Brands can deliver advertisements directly to shoppers while they browse the web or shop online. This means that marketers can target the right customers in the right place at the right time. It allows them to optimise their campaigns and get better results without investing a lot of time or money in creating campaigns.
Retail media already accounts for 11% of global ad spending and is expected to grow by 60% by 2027. Spending on retail media advertising was $101 billion in 2022, with a projected increase to $160 billion by 2027. Because retail media placements are positioned within a shopping environment on the host eCommerce site or app, brands can easily track the impact of their investments. By employing consumer data, organisations can see which products sell, and which customers buy, enabling them to confidently calculate ROI.
The more data brands have at their disposal when planning and placing retail media ad buys, the more effectively they can target spending to relevant audiences. Email subscription offers, interactive profile builders that collect information on preferred styles or solutions, loyalty programmes, feedback surveys, and customer service interactions can all help brands improve their existing customer data.
Managing retail media campaigns necessitates more than manual spreadsheet updates. Monitoring and bidding engines can identify high-intent audiences to target and optimise spending across retail media networks, whereas real-time reporting tools can track results and send alerts when campaign adjustments are required. While large corporations may try to build these capabilities in-house, others may require more sophisticated solutions.
Building A Data Strategy
As the end of third-party cookies approaches, the importance of increasing the collection of first-party data becomes critical. As the retail industry shifts away from third-party data and towards more privacy-focused approaches, investing in a first-party data strategy is critical to the success of any brand. According to a recent survey, 82% of brands are looking to increase their collection and use of first-party data this year. Creating a first-party data strategy entails creating a plan to support the collection and use of customer information. The challenge is unique because first-party data is defined, collected, and owned by the brand, and it is frequently more accurate and timely than data from external sources.
With first-party data, diversifying marketing strategies is critical, as is capitalising on every transaction opportunity in a crowded market. While diversification may slightly diminish returns, it reduces risk even more. Therefore, if an organisation diversifies its marketing strategies to increase its leverage to a risk level equivalent to that of a non-diversified competitor, its returns will probably be greater. And because of easy-to-track metrics, brands can easily calculate ROI on each marketing channel to optimise strategies for maximum profitability.
Of course, retail media's key focus is increasing sales. However, this method of advertising also assists in other types of marketing objectives such as increasing brand awareness or building brand loyalty. To achieve these various goals, brands will need to adapt their segmentation and personalisation methods. Basket-modelled audiences are critical for determining which shoppers can be grouped based on what they purchase in the store. Loyalty programmes can help replace third-party cookies. Customers that consent to share their data with the retailer assist in identifying target audiences using the retailer's wealth of data from existing customers.
Retail media is without a doubt the most effective web marketing advertising solution for reaching relevant audiences. eCommerce site advertising networks provide their advertisers with massive amounts of customer data. Companies can gather both online and offline transactional, declarative, and behavioural data, such as shopping cart content, location, product type, buyer profile, purchase mode, and purchase frequency. They can then employ the information to create programmatic ads and improve the performance of their messaging.
The Value of Data
A good retail marketing strategy assists brands in selling their products to their target audience. First-party data strategies should begin with business objectives. Data can only be used to its full potential in the context of a larger enterprise. Retail media can assist brands to advertise in spaces where customers already spend their time, places where customers are more likely to convert because they are close to the point of sale, and actively looking for products. The best strategies enable shoppers to make accurate and timely decisions. Data guides leaders by clearly defining top priorities and the entire organisation by describing the paths to achieve them. As businesses expand their data goals, their strategy should address how data will be collected, stored, managed, and used in the short and medium term.
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