effective use of marketing budgets in a new e-commerce world

There’s no question that the arrival of COVID-19 has led to the rapid expansion of e-commerce around the globe. According to separate reports released by Adobe and IBM, the pandemic has accelerated e-comm growth by between 4 and 6 years. In the US, e-comm spend was up 44.4% in Q2. Analysts in the UK expect the surge in online shopping to add £5.3bn to UK ecommerce sales this year. Here at home, Australia Post claims to have seen the e-comm industry grow by 80% compared to this time last year, while Easter weekend alone saw an increase of 135% YoY.

But what does this rapid and lasting shift in distribution mean for the effective use of marketing budgets? WARC recently attempted to answer this question in its e-commerce effectiveness masterclass series, and here’s what we learned:

The gap between awareness and action is narrowing
With the introduction of e-comm, digital marketing channels are now closing the gap between mental availability and action. It can be tempting for e-comm greenhorns to put more budget towards the pointy end of the funnel and closer to point of purchase, where the link between marketing activity and business results is more straightforward than it has been previously. But as more and more brands are entering into e-commerce and upping their spend on performance – as we’ve seen in 2020 – the competition for share of wallet goes up, and with it, cost per acquisition. When that happens, it can be a real advantage to have a strong brand to fall back on.

Looking to China for lessons in live-streaming
Already massive in China, livestreaming e-commerce is a hybrid entertainment plus shopping experience that’s well suited to quarantined consumers. More brands from around the world are giving it a go – like Nike and Loreal – who use it for quick sales with slim margins on products that would otherwise be left languishing on warehouse shelves amidst a global dip in demand. The success of live commerce in China is due primarily to the extreme popularity of mega-influencers. In the West interest tends to be more niche, with micro influencers garnering the most engaged followings. But with the growing popularity of platforms like TikTok, the timing feels right for brands to explore and invest in ‘shoppable’ performance marketing.

Brilliant CX can make up for the lack of physical interactions
This is a lesson learnt early by any emerging DTC brand, which is now being felt across traditional retail. The inability for consumers to physically interact with a product in-store, especially for higher-involvement categories and bigger-ticket purchases, was previously a huge barrier. But this is the new reality for many brands, and investing in stellar CX is the best way to overcome the inability to try before you buy. Koala is a perfect example, where the ‘second moment of truth’ – delivery and unboxing – is treated with the same or more deference than any other touchpoint. What’s important to remember is that money spent on brand-building but with broken CX is money not well spent. (Also make sure you consider good and bad friction when planning CX).

Don’t forget the basics when it comes to brand vs. performance
A marketer can’t do both brand and performance effectively with any one piece of spend. Sure you can do a bit of both, but not effectively. Or as my favourite Parks and Rec character would say, “never half-ass two things, whole-ass one thing”. You don’t always have to be doing both. For some retailers, COVID-19 has presented a market opportunity where investing heavily in performance makes sense. Others, like travel brands or nice-to-have service providers, are better positioned to leverage the cultural opportunity presented by 2020 and focus on brand-building (case-in-point: NRMA), rather than try – and probably fail – to make up for a sudden drop in demand with heavy promo messaging.

One thing is certain – there’s no going back. Once a consumer switches from retail to e-tail in a given category it’s quite rare for them to return. Which means that brands who found themselves rapidly pivoting into e-comm for the first time this year shouldn’t expect a return to the way things used to be. The key is ensuring your e-commerce activity and marketing budgets work together. Maintain spend on brand building, especially as more of your competition gets into e-comm. Investigate new ‘shoppable’ channels when appropriate. Invest in superior CX to offset the loss of in-store interaction. And be willing to pivot to adapt to sudden changes in market conditions.