5 Ways Retailers Can Increase Return on Ad Spending

May 26, 2016

Digital advertising spend has seen significant growth in recent years, and retailers are leading the way. In fact, eMarketer projects retailers in the U.S. will increase spending on paid digital advertising by 15% this year to $15 billion, a number that will reach $23 billion by 2020.

This heightened focus on digital channels only makes sense as consumers turn to e-commerce as an integral part of their shopping journeys. According to eMarketer, 9.8% of U.S. retail sales will take place over the Internet by 2019, an increase from 7.1% in 2016. Additionally, the U.S. Department of Commerce reported that e-commerce sales totaled $341.7 billion in 2015, a 14.6% increase from the $298.3 billion in sales that took place on the Web in 2014.

As the audience of shoppers on digital channels continues to grow, and as those channels become final steps in the buying process, advertisers will continue to funnel dollars where customers are most likely to consume media. However, amid swelling investments in digital advertising, marketers are pressed to prove the value of their efforts. Today, retail marketers can increase their return on ad spend through people-based marketing. Here are five important steps marketers should follow:

1. Recognize Shoppers Across Devices

Cross-device consumers present a real challenge for retailers. [tweetable]eMarketer’s data revealed the retail sector’s investment in mobile advertising is expected to grow 52% in 2016.[/tweetable] Nearly 185 million U.S. consumers will shop with their mobile devices this year, and roughly three-quarters will make final purchases on their phones.  Creating seamless experiences requires the ability to leverage first-party data, resolve identity and turn fragmented, cross-channel information into rich, holistic profiles as customers move from in-store to Web to mobile devices. Retailers that build-out the capability to recognize users will reap rewards in being able to optimize messaging and experiences both on and off their properties.

2. Leverage Addressable Media Campaigns

Cross-device recognition is crucial, but retail marketers must also focus on reaching customers who have already purchased from them. In a brick-and-mortar retail environment, store associates spend the most time with shoppers who are repeat customers, and the same should hold true on the Web. By leveraging their first-party data, retailers can target digital ads toward their best customers – rather than ambiguous segments – who are most likely to make a purchase.

3. Personalize Shopping Experiences

Once retailers have achieved a single view of the customer across channels and are able to target their ads to addressable audiences, personalization is another key step toward improved ROAS. On one level, advertisements should be tailored to the customers they are targeting. On another, the online shopping experience should be personalized. According to research from AgileOne, 79% of U.S. consumers and 70% of U.K. consumers expect personalized experiences online from the brands they shop with, and more than 50% of consumers in both the U.S. and U.K. expect ecommerce sites to remember their past purchases.

4. Take Real-Time Service Online

Addressability and personalization are far more effective if they can be achieved in real time, while the consumer is in buying mode.  If a customer visits a sporting goods store shopping for a new bike, an effective store associate will recommend additional accessories, like a lock, lights and helmet to accompany the purchase. In this scenario, the associate upsells the customer while she’s still in the store, not a week later. This seems obvious, but in the digital environment, customizing interactions in the moment requires the ability to quickly resolve identity while connecting live behavioral data with attribute data – it’s a difficult feat, but think of how effectively Amazon has mastered this with their ‘people also bought’ recommendation engine.

5. Improve Measurement and Optimization

Increasing ROAS in the evolving retail sector requires a more robust measurement strategy, too, especially considering how consumers use multiple connected devices and quickly switch between digital and brick-and-mortar environments. However, research from O Alliance showed 48% of all retailers still lack the ability to measure the success of cross-channel campaigns. Retailers must collect and merge the data between all channels and devices to effectively understand what’s working, what isn’t and how best to optimize their campaigns for the future.

As retailers spend more on online advertising, they must prove digital media is a profitable channel. The use of higher-quality, first-party data can empower retail advertisers to execute addressable media campaigns.  Tying ads to real people rather than cookies will result in more efficient targeting, more relevant ads and better measurement of campaign reach and frequency.  Ultimately, it all adds up to improved ROAS.

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Jon Padilla

Jon is a data-driven marketer who's passionate about using technology to deliver innovative media strategies and create meaningful digital measurement. He the former Director of Product Strategy at Signal.

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