Interviews, insight & analysis on digital media & marketing

Optimising a strained marketing budget for the upcoming shopping season

by Karel Schindler, CEO at ROI Hunter

Retailer John Lewis recently reallocated marketing budget to support its staff as a result of the cost-of-living crisis. To add to marketing teams’ woes, back in June, even the UK Government pushed for organisations to consolidate costs by cutting the marketing budget. Pressure to reduce spend has also been reflected in slowed expenditure on ads in the second quarter of 2022.

This means marketing departments are under immense scrutiny. With cash flow to promote products at a premium, wastage and inefficiency must be avoided at all costs. However, recent research from ROI Hunter discovered that the average large retailer is wasting a worrying £19,000 a month, which is being pumped into ineffective digital marketing. As the busy shopping season dawns in for the run up to Christmas, making better use of the budget and data available will be key for retailers.

Dynamic advertising drawbacks

Retail marketing teams are frequently targeting people with the wrong products when it comes to dynamic advertising. In fact, ROI Hunter’s research revealed over four-in-ten (44%) retailers said that they lack control over these ads.

It’s a growing concern as organisations shift marketing budgets to digital channels, and find themselves held back when optimising dynamic campaigns for SKU-level profitability. Lacking a common layer of product performance data to see margins, return rates, stock levels and ad spend per SKU, retailers are unable to find the best products for their margins, let alone ensure they are being promoted.

Marketers are instead left to make decisions based on their gut feeling as opposed to being driven by any data-based evidence. This means, for example, that dynamic ads frequently promote already-discounted items or low performers with high return rates, while products with true selling potential are unintentionally ignored.

Optimising a restricted budget

Marketers can avoid wasting precious budget by informing their campaigns with individual product performance data insights. This is where emerging technology increasingly has a significant role, creating a common product performance data layer that connects every department, from purchasing all the way round to customer service.

Such a platform-based approach makes insights actionable in real time. It enables marketers to integrate their product performance data from across channels so they can filter their catalogue by metrics that Meta and Google may not have access to. These include ad-spend per SKU across channels, margins, stock levels, engagement on Meta (for Google), search data from Google (for Meta), return rates, and so on. Marketers can employ this data to enhance the algorithms of Meta and Google Shopping, ensuring their budget is spent promoting only the items that grow the company margin.

Having this visibility and control in one place gives retailers important capabilities, like revealing which products they should exclude from promotion due to a low return on ad spend, or finding which products have a high number of impressions but not enough ad spend and therefore need more budget behind them.

It is an approach that delivers significant gains in different ways for retailers. Marketing departments, for example, understand individual margins, providing them with the true costs of promotion for every product. The end result is a very significant increase in return on ad spend (ROAS).

Commercial teams, on the other hand, can increase the marketing push for a SKU that’s not selling, rather than simply decreasing its price. And with the ability to factor in data about the cost of promotion, purchasing departments can buy more products that have demonstrably high ROI. Budget spend is more efficient by significant percentages as organisations achieve clinical focus on what works best.

Planning with confidence

This platform approach is well-suited to the approaching economic turbulence. The cost-of-living crisis is likely to create a unique and challenging market for professionals over the coming months, and perhaps, years. But right now, to best navigate the fast-approaching shopping season, marketers must understand the details of their campaigns and refine them to match organisational goals.

Rather than being viewed as an optional extra, marketing can take centre-stage in bringing the right products to the right people in an era where it’s more important than ever for companies to spend their budget wisely.