4 Retail Marketing Challenges. (and how to rise above them)

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1 4 Retail Marketing Challenges (and how to rise above them)

2 4 Retail Marketing Challenges Many retailers find themselves in a precarious position as they look to acquire and foster relationships with consumers. Communication starts with capturing critical information about your potential buyers to deliver personalized communication. In fact, according to the 2014 State of Marketing report released by ExactTarget Marketing Cloud, 29% of respondents said that collecting, measuring, and using behavior-based data was among their top three marketing priorities. In partnership with Retail Online Integration, we surveyed nearly 500 retailers to get a better understanding of the current state of marketing in the retail industry. As you can see from the graph below, the majority of our survey respondents are omnichannel retailers, with almost half operating brick-andmortar locations. Mobile websites saw a 35% penetration and catalogs are used by 28% of those surveyed. Through which channels do you currently sell? has grown exponentially, making it a challenge to discern which information will be most valuable to best direct their marketing efforts. From the simplest data capture techniques which must include mobile options to data sophistication and attribution strategies, unfortunately the majority of retailers are not as prepared as they should be when it comes to providing relevant, targeted marketing messages. There appears to be a growing divide between the retailers that are tapping into personalization and managing their data to drive purchases vs. those retailers that are not. The slow pace of adoption in the retail industry of personalization techniques is startling. In many ways, retailers are simply not as sophisticated as their customers when it comes to leveraging data and technology. Brands need to address these gaps and ensure that they have a multi-year plan in place that positions themselves for marketing success. Testing can serve retailers well in determining which tools and attribution models are the right fit for their business. It s challenging enough for brands to simply have the right products and promotions, but it s the personalized marketing and promotion and subsequent manipulation of the data and attribution that will allow even the savviest of retailers to realize incremental gains. This report will explore the findings of our survey in detail, as well as the top takeaways for retailers in four key strategic areas: 81% E-Commerce site 49% Brick-and-mortar stores 35% Mobile website 34% Social media I. Communication starts with data capture II. State of data access and capability III. The personalization factor IV. Attribution 28% Catalogs 5% Television Though the concept isn t new, retailers are pressed now more than ever to better target consumers. Truly knowing your customer is essential to key performance indicators (KPIs) trending in the right direction. At the same time, the depth and breadth of data available for retailers to sift through 2 4 Retail Marketing Challenges

3 I. Capturing Customer Data Sign-Ups are Mission-Critical The majority of retailers (59%) ask for visitors addresses on their homepage, though one has to wonder why that number isn t higher given the effectiveness of the channel for retailers. Those who know the value and marketing power of are even using behavior-based light boxes as a tool to drive sign-ups on their site. Interestingly, the website footer has also assumed a greater role in acquiring addresses, with one in five retailers taking advantage of this extended real estate. Some have opted to evolve footer treatments, presenting oversized areas to attract visitor attention, while others are offering incentives for providing that information. What type of data do you request on your sign-up form? Where on your website do you ask for sign-ups? 99% address 80% First name 72% Last name 44% ZIP code 18% Gender or title 15% Mobile phone number 15% Country 15% Shopping preference or interest 59% Homepage 26% Checkout page 20% Footer on every page of site 18% Product pages 15% We don t ask for sign-ups 13% Sign-up pop-up box 9% Header on every page of site According to the 2014 State of Marketing report by ExactTarget Marketing Cloud, usage of pop-up boxes to acquire addresses has proven to be a polarizing issue among marketers. However, those brands that aren t afraid to ask for addresses via a pop-up box (13%) are taking advantage of this hard-to-ignore tactic. Perhaps most surprising is the 14.5% of retailers that don t ask for addresses at all on their website. Given that 68% of marketers believe is core to their business, this lack of online promotion seems disproportionately high. 13% Date of birth 7% Frequency preference Retailers make choices about what information to capture on their sign-up forms. Full name and ZIP code are the most popular fields to be included. Beyond that it s up to individual merchants, with gender most asked among the optional selects. The chosen approach is often a reflection of the types of products the retailer sells, where the value of the information changes under each scenario. For instance, a fashion apparel retailer places a high priority on segmenting by gender, while this information is likely of less importance to a consumer electronics brand. Comparing survey results with a similar study conducted in 2012 by ExactTarget, Retail Touchpoints Exposed, reveals that sign-up forms have become much more sophisticated. With every metric, retailers are twice as likely to be capturing data e.g., address capture has grown from 50-99%; first name capture has grown from 37-80%. 4 Retail Marketing Challenges 3

4 Mobile Matters Mobile has come into its own in 2014 as consumers have become more comfortable shopping and buying on their smartphones and tablets. The following statistics alone should inform retailer positioning on mobile data capture: Eighty-four percent of mobile consumers purchase as a direct result of a brand s on their mobile device (Mobile Behavior Report, ExactTarget Marketing Cloud, 2014). Mobile e-commerce grew 50% year-over-year, and it accounted for 29% of holiday e-commerce sales (Custora, 2014). More than one in four US e-commerce orders this holiday season was transacted on a mobile device (Custora, 2014). Sixty-five percent of marketing s were opened on mobile devices during the fourth quarter of 2013 (U.S. Consumer Device Preference Report for the fourth quarter of 2013). Do you optimize your sign-up form for mobile users? Despite these telling statistics, less than half of the retailers surveyed (43%) said they optimize their sign-up form for mobile users. Retailers must address this if they want to compete in today s mobile environment. One way is through the use of a responsive website design, which ensures that visitors get an optimal viewing and shopping experience no matter the device they re using smartphone, tablet, laptop, or desktop. Consumers are hungry to browse and buy online, therefore retailers should seize every opportunity they have to add them as a customer no matter the device they re using. Store Capture Imperative for Database Growth While e-commerce is the fasting-growing retail channel, the vast majority of purchases still take place in-store. According to the US Commerce Department, more than 90% of retail sales in the fourth quarter of 2013 occurred in brick-andmortar stores. Therefore, it s imperative to tap into these customers as well. The omnichannel customer is known to be a retailer s best customer, so capturing their data and behavior at the point of sale (POS) is invaluable. One out of every two store-based retailers today collects customer data at the point of purchase. For those brands that don t, they re missing out on a valuable opportunity to capture crosschannel customer data in-store. If you sell via brick-and-mortar stores, do you collect customer data at the point of purchase? 43% Yes 57% No 49% Yes 50% No Retailers can decide what data to capture in-store based on their individual needs and systems. address is the most popular data point collected in-store at the POS, followed by mailing address and home phone number (similar to website sign-up). While some brands may have limitations when it comes to data collection, it s wise to be forward-thinking in 4 4 Retail Marketing Challenges

5 what you collect rather than missing out on an opportunity. Conversely, be sure you re not overburdening customers by asking for unnecessary information that you ll never use. In the end, it s a balancing act where choices should be carefully weighed. What POS data do you collect in-store? customer information was robust. Knowing that using data is fundamental to marketing performance, there are certainly opportunities to bolster current efforts to drive performance. If your to-do list doesn t already include the following items, take a second look: Collect both explicit and implicit customer data, and integrate with third-party data sources to build unique behavioral profiles for each customer. Observe real-time behavior and leverage social profiles to create a single view of the customer. 95% address 74% Mailing address 63% Home phone number Prioritizing a powerful database solution and allocating the right resources will allow your internal teams to take advantage of the new customer data that s flowing in. What s more, adding predictive analytics capabilities will allow you to make real-time decisions at any point of interaction to determine the most appropriate piece of content for each customer at any given time. How do you store and share customer data within your organization? 53% Mobile phone number 21% Other 14% Loyalty program number Key Takeaway Take advantage of every opportunity to capture customer data in a thoughtful way that supports marketing initiatives. II. Analyzing Customer Insights Your best marketing campaigns are deeply rooted in what you know about each individual customer. In short, relevance sells. That said, collecting addresses alone is easier than collecting customers behavioral insights, preferences and habits not to mention then using that data to inform your future marketing efforts. 26% Data is stored based on the channel collected. Each business unit has access to its own data. 74% Customer data is stored in one system of record from all communication channels ( /social/mobile/in-store/e-commerce) and is able to be shared among business units (store, online, mobile, call center). When asked to describe their level of sophistication leveraging data, 42% of retailers surveyed graded themselves as average. According to findings from the e-tailing group s 2013 Annual Merchant Survey, just under half of retailers (48%) said their data was capable of being leveraged to effectively segment customers, while only 40% felt their 4 Retail Marketing Challenges 5

6 Which of the following most accurately describes your company s use of data to market to customers and prospects? 42% Average 21% Above average 21% Below average 9% Rudimentary first step. From there, assessing the many ways personalization can be used ensures that it receives due attention. Retailers have a variety of personalization programs available for . Triggered campaigns (e.g., welcome message, abandoned cart, back-in-stock, or shipping confirmation), long known for their significant return on investment, top the list for most popular content personalization programs (62% claim to use). This adoption is likely due to the strong performance of triggered s, as well as the ease with which they can be sent via a retailer s service provider. While 52% of retailers send personalized offers, only 41% use data for on-site product recommendations, long a staple of sophisticated retailers. Beyond these tactics, usage of all other options is below 30% penetration. Are you leveraging content personalization within your digital marketing programs? 7% Sophisticated Key Takeaway Prioritize how you want to analyze your data in order to create 1:1 relationships with customers. III. Delivering Personalized Experiences Content personalization is leveraged by just over half of the retailers we surveyed. It s imperative that those who aren t using a personalization engine evaluate opportunities to augment existing digital marketing programs with more targeted and personalized campaigns. Having a champion within the organization to focus on personalization is an ideal 45% No 55% Yes 6 4 Retail Marketing Challenges

7 How is your organization leveraging content personalization in its digital marketing programs? Which of the following personalization techniques has your brand found most successful at driving conversions? 62% Triggered s based on an event (e.g., abandoned cart; signup; shipping confirmation) 52% Personalized offers 40% Online product recommendations 28% Display retargeting 25% Guided selling 24% Customized landing pages 16% Personalization tools for checkout page upsells and cross-sells 15% Personalization built within the call-center system Only 16% of retailers report using guided selling questions to home in on online shoppers needs, despite the fact that the ROI for guided selling techniques is highly promising. According to igodigital, retailers that deploy guided selling tools can increase category conversion rates, on average, 30-50%; and coupling guided selling with product recommendations can increase average order values anywhere from 10-30%. 55% Triggered s based on an event (e.g., abandoned cart; signup; shipping confirmation) 45% Personalized offers 17% Display retargeting 15% Guided selling 12% Customized landing pages 11% Personalization built within the call-center system 11% Personalization tools for checkout page upsells and cross-sells Key Takeaway Personalization should be a cornerstone of all marketing efforts, including triggered campaigns and website product recommendations. 4 Retail Marketing Challenges 7

8 IV. Attributing Sales to Marketing Understanding which digital tactics produce positive results is a prerequisite for pursuing appropriate marketing vehicles and making the proper investments. Unfortunately, 41% of retailers aren t attributing offline sales to online marketing in any way. Coupon tracking coupled with promotional offers in offline channels has always been the easiest attribution method to track, and is most utilized by respondents (37%). Beyond that, unique 800 numbers have proven effective at attributing offline sales (call center) to online marketing efforts. The opportunity to leverage cross-channel behavioral patterns is a missed opportunity and one that will likely see greater traction in the coming years. Similar to the findings from the previous question (displayed in the chart above), most retailers don t use an attribution model for online sales. Those that do are most likely to employ a methodology that favors giving the last click 100% credit for an online sale. But when s the last time you purchased something online after only one click? This method of attribution also leaves plenty of room for improvement. What attribution model do you use for online sales? Which of these tactics is your company using to attribute offline sales (in-store, call center) to online marketing touchpoints? 40% Don t attribute offline sales to online marketing touchpoints 36% Track the use of unique online coupons, offers, and promotions in offline channels 21% Use unique 800 phone numbers on our website 18% Track people who use our store locator and/or map and directions tools on our website 16% Buy online, pick up in-store, or product lookup 15% Track the impact of geo-targeted and paid search campaigns on in-store sales 10% Matchback to catalog files 10% Use surveys and focus groups to gauge the impact of our online marketing on offline channels 59% We don t use an attribution model for online sales 19% Last click gets 100% credit 9% Linear attribution model (credit distributed across marketing touchpoints) 7% First click gets 100% credit 6% Last AdWords click gets 100% credit 5% Time decay model (touchpoint closest to the conversion gets most of the credit, touchpoints prior to that receive less credit) 3% Position-based model (first and last clicks each get 40% credit, the other 20% is evenly distributed among the middle touchpoints) 2% Last non-direct click gets 100% credit Retailers vary in opinion when it comes to understanding the channel the final transaction takes place in. It s a dead heat for those that believe a sale is a sale no matter the channel vs. those that recognize the varying profit margins seen across channels that ultimately have an impact on the bottom line. 8 4 Retail Marketing Challenges

9 When evaluating sales, how important is it to your company which channel the final transaction takes place in? Knowing that more transactions are going to be attributed to mobile devices, how concerned are you that your current KPIs won t be as relevant in this new climate? 39% Somewhat important (profit margins differ slightly between channels) 38% Not important (a sale is a sale no matter the channel) 24% Very important (the channel where the transaction takes place dictates how we will market to that customer going forward) As mobile devices garner a greater share of consumer browsing and buying behavior, retailers are experiencing heightened attribution challenges in this channel. The majority of respondents (58%) are somewhat concerned that current KPIs won t be as relevant in today s mobile environment a worry we can only assume will grow alongside mobile adoption rates. Historically, similar issues have surfaced as e-commerce assumed a greater market share relative to brick-and-mortar stores. With varying cost structures for each channel, significant marketing implications must be addressed and investments made to properly support each sales channel. 58% Somewhat concerned 22% Very concerned 21% Not at all concerned Key Takeaway Attribution models should be refined to make the right marketing investments that foster business growth. The Bottom Line Truly knowing your customer i.e., attaining the elusive single view is essential to KPIs trending in the right direction. However, the sheer amount of available data can make it difficult for retailers to discern what will best fuel their marketing efforts. Smart data capture across all channels is only the beginning of the solution. Investments in data for access and subsequent marketing efforts are mandatory. From there, personalizing consumers experiences across all marketing touchpoints should yield strong results. Lastly, attribution models should be refined (or implemented) to inform smarter marketing investments and accelerate business growth. 4 Retail Marketing Challenges 9

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