Print and Digital Marketing Challenges for Retailers
In April, Affinity Express commissioned industry research to better understand the challenges and goals of retailers because we serve this segment with our advertising production solutions. Our investigation included a series of in-depth interviews and a written survey with more than 80 respondents across a range of retail categories such as grocery, home improvement and sporting goods stores.
The functions we targeted were print advertising, marketing, creative services and production services. In terms of level, 43 percent of the respondents were vice presidents or directors, 35 percent were manager level, 4 percent were CMOs and the rest fell into the "other" or C-level category. Thirty-eight percent of these contacts are given an advertising/marketing budget, 32 percent manage the budget, 11 percent set the budget and 10 percent influence it.
For 64 percent of the retailers, print circulars and digital advertising are not part of the same marketing budget. The budget for print circulars is managed by the vice president of advertising 45% of the time and the director of advertising 22 percent. The vice president of marketing is responsible 20 percent of the time and the director of marketing 9 percent. When it comes to the digital advertising budget, it is managed by the vice president of digital marketing (31 percent) and the director of digital marketing (30 percent). The vice president of marketing is accountable for the digital ad budget in 19 percent of cases and the director of marketing 7 percent. The vice president of advertising and the director of advertising are responsible in 4 percent and 2 percent of the cases, respectively. With print and digital in separate budget silos and under different management, it is likely workflow is inefficient, assets are not being shared and costs are high, as 60% digital ads are being produced by outside ad agencies.
The advertising and print circular budgets remained mostly stagnant year over year. Digital advertising budgets increased but not at the expense of print budgets in the retail segment. In a different research study, Gartner found that the marketing operating budget as a percentage of company revenue for retailers in 2012 was 10.6 percent and net expected growth in 2013 was 7 percent. The digital marketing budget as a percentage of company revenue was 2.5% for retailers. The largest percentage of the digital marketing budget is allocated to digital advertising (12.5 percent), followed by content creation and management (11.6 percent) and search marketing (10.7 percent). Fifty-nine percent of marketers in retail organizations—the highest percentage for any segment—report that they are reinvesting savings from digital marketing into more digital marketing.
In contrast to what we found, a survey by the Duke University Fuqua School of Business survey of U.S. marketers in February 2013 found that the digital marketing investment will expand at the expense of the traditional print budget. The increase in digital ad spending was projected to be most dramatic in the business-to-consumer (B2C) product category, which was expected to see a 14.6% bump over the 12 months following February 2013. B2C and business-to-business (B2B) services were forecast to see similar increases in digital ad spending.
The top challenges faced by retailers based on the Affinity Express survey are:
1) Growing sales and revenue
2) The decline in basket size
3) Advertising effectiveness and ROI
4) The decline in in-store traffic
5) Increased competition from online "stores"
6) Reduced marketing budgets
By a large margin, the number one challenge for these retailers was growing sales and revenue, followed by increasing shareholder value and increased competition from online "stores".
When asked about the top challenges related to print circulars, retailers said:
1) Decrease in distribution channels
2) Competition with digital marketing channels
3) Decline in ROI
4) Ineffective workflow
5) Increased cost of creative production
6) Last-minute pricing/promotion changes
7) Reduced budget
The number one challenge for circulars is the decrease in distribution channels, followed by reduced budget. Keeping creative fresh and decline in ROI were tied in third place.
The top challenges for digital marketing were:
1) Explosion of distribution channels
2) Competition with print circular channel
3) Ineffective workflow
4) Ability to measure ROI
5) Cost of creative production
6) Last-minute pricing/promotion changes
The number one challenge for digital advertising was the explosion of distribution channels, the need for more budget dollars and the ability to measure ROI.
When it comes to outsourcing, for about 37 percent of retailers the production of print circulars and/or digital advertising is done internally. Twenty-five percent are using ad agencies. Only about 13 percent use a marketing services company onsite and less than four percent employ an offsite marketing services company.
This is not to say these respondents are new to outsourcing. In the past, approximately 20 percent of respondents have used a marketing services company onsite and 10 percent have used an ad agency for marketing production. About 4 percent have either used a marketing services company offset or never outsourced the production.
The respondents believe outsourcing can result in important benefits including: saving time/money, faster turnaround of projects, workflow and technology improvement, continuous process improvement and access to fresh creative talent.
Gartner found that up to 50% of digital marketing activities are outsourced. Working with agencies, data providers and external technology providers is an intricate part of marketing processes. Survey responses reveal that digital marketers need help—lots of it—with specialized tasks such as online advertising and mobile marketing. Marketers outsource one-third or more of their work to an agency, digital services organization or other external provider. Gartner concluded that outsourcing digital marketing activities is a smart tactic then companies don't have in-house resources to stay on top of quickly changing technologies and techniques, or need specialized talent.
Based on all of these current challenges with budgets, proliferation of channels, workflow, production of print and digital marketing and measurement of results, what can retailers do?
It is critical that retailers deliver a seamless customer experience. They need an integrated strategy that aligns talent, physical space, processes, marketing and merchandising to meet consumer demands. The strategy should be supported by emerging technologies and partnerships and continually adapted to remain relevant to tomorrow's shoppers.
Deloitte says a robust retail strategy must include:
- A strong vision of the experience the customers desire across all channels
- A nimble operating model that can adapt as the retail environment changes
- A deep understanding of how to support the vision through inventive digital solutions and retail technologies, such as playbooks to operationalize the multi-channel strategy
1. Create a relevant customer experience. Personalize the experience at every point of interaction by leveraging the most appropriate technologies for the physical stores and digital world. Mobile currently contributes 5.1 percent of total retail sales and will increase to 17-21 percent ($628-752 billion) of total sales by 2016. On top of that, customers who access retailers' apps while shopping have a 21 percent higher conversion rate. Experian research reveals that personalized promotional mailings have 29 percent higher unique open rates and 41 percent higher unique click rates than non-personalized mailings. Furthermore, the most successful retailers will maintain locally relevant Facebook, Twitter and other social media pages while looking to the next big development in social media.
2. Invest in the core. Targeting the connected shoppers of today requires structural changes to deliver experiences and compete. The key is flexibility. Retailers have to quickly embrace operational changes brought on by new technologies and anticipate integration of emerging solutions that don't exist yet. A flexible infrastructure should integrate existing and emerging applications and be channel-agnostic.
Experian found that, in a given month, 8 percent of all smartphone owners report having shopped from their phones, whereas nearly 40 percent of tablet owners say they shopped from their tablets.
3. Innovate. Retailers that implement new talent strategies (e.g., position team members as brand ambassadors and empower them to use social media to connect with customers), evolve the physical space (from a primary point of brand contact to one of many points of contact) and adopt emerging solutions early (for example, using real-time data to provide relevant promotions and personalize shopping experiences) will pull ahead of the rest to become category leaders.
Walmart is preparing an enhanced "Print Plus" program that pairs digital "liquid content" from brands with its 80-million-circulation weekly circular. Brands will supply content such as recipes and how-to videos customers will see as they pass their smart phones over print ads. As Senior Director Marketing Communications Client McClain commented, "I'd be surprised if 15 percent of the content comes from us." Suppliers will furnish at least 90 percent.
4. Evaluate performance continually. Change is the new normal for retailers in their operating models and this means constant measurement of performance. Information is king and predictive analytics can help retailers get deeper insight into the value they are providing to customers.
One success story is Lowe's. In 2011, the retailer introduced the loyalty program MyLowe's. It allows online shoppers to set up profiles that keep track of shopping lists, organizes owner's manuals and warranties and consolidates inspirational pictures for upcoming project. All online and in-store orders are tracked and nearly seven million customers have registered for the program. The home improvement retailer boosted e-commerce sales more than 50 percent in 2012, which is estimated to be about 1.5 percent of its total sales in 2012 or $757.5 million.
How prepared is your company to reach today's savvy consumer? Have you invested in a flexible infrastructure and innovation? If we conduct another survey, what do you want to learn from retailers?