In May 2023, Digital Commerce 360 conducted our ninth-annual digital marketing survey. Questions ranged from budgets to performance. We reviewed many aspects of digital marketing, from the challenges and issues of the day to measuring campaign success. We surveyed retailers across 25 categories, allowing us to provide various perspectives.
Digital marketing budgets are wide-ranging with surveyed retailers breaking out their percentage of overall marketing dedicated to digital as follows:
- 1-10% of marketing: 21%
- 11-50%: 25%
- >50%: 46%
- None: 8%
Digital continues to see greater traction, as 59% of retailers have increased their digital marketing budgets for 2023. Meanwhile, 27% of retailers said their digital marketing budget is unchanged and just 14% have decreased it. Digging into the numbers among those who projected increases, 14% of retailers said the digital marketing budget will grow 21% or more. At the same time, 33% said a 10-20% increase. The remaining 12% expect a limited budget increase of just 1-5%.
Retailers employ a myriad digital marketing techniques
As part of their digital marketing strategies, six in 10 retailers employ email, content and search marketing, along with paid search and Facebook. Other tactics that at least half of respondents used were social-media minded. They including Facebook (62%), Instagram (52%), YouTube (52%) and TikTok (30%).
Just under half (47%) also employed other influencer marketing and social media. Affiliate marketing rounded out the list of tactics (51%). Other advertising that deserves an honorable mention, include mobile ads at 44% and Amazon ads at 41%, while marketplace ads came in at 36%. It was insightful to see SMS/text messaging on the list for 38%. Connected TV also made the cut for just 20%.
Varying budgets for marketing tactics
Retailers dedicate the most budget to email, paid search, content and search engine marketing.
Now that we know what tactics are in play, we looked to understand what percentage of retailers’ marketing budgets each of the tactics represented. From a budget standpoint, email and paid search were nearly tied for the No. 1 position when it came to spending 11% of their budget or more. Next in line were content marketing at 35% and search engine at 33%.
The most effective marketing tactics: email, paid search engine and content marketing
What matters most in the end is not the budget but the effectiveness and the results. In looking at the findings, the top four for effectiveness are in line with budgets, with email (61%), paid search (55%), search engine marketing (53%) and content marketing (49%). There is a significant drop then to affiliate marketing (32%), Facebook (32%), Instagram (27%) and YouTube at 24%.
Almost six in 10 retailers spend over 30% of their marketing budget on customer acquisition
One question is how they are spending these dollars. It is interesting to see that 42% are spending more than half of their budget on customizer acquisition. With 28% spending in the 21-50% range, investments are certainly forthcoming. Only one in three are spending 20% or less, so most of these retailers believe new customers are worth the investment.
The top tactics for acquiring new customers are paid search, email, search and content marketing. The survey results suggest that their most successful marketing tactics mirror the effectiveness mentioned above. Fifty-six percent of retailers said paid search was within their top three effective marketing channels while email came in at 49% and search engine the third most important acquisition tactic at 38%. The others were as follows:
- Content marketing: 37%
- Amazon ads: 23%
- Affiliate marketing: 20%
- Facebook: 15%
- Marketplace ads other than Amazon: 13%
We turn our attention to social media as there is an abundance of discussion in this area. Over half of retailers use social media advertising to drive sales and increase brand awareness. When it comes to social media advertising goals, driving sales and increasing brand awareness top the list. Retailers also highly rank driving traffic and audience growth as goals.
From an ROI perspective, most social networks are only somewhat successful or not successful at all.
Facebook and Instagram successfully deliver ROI for four in 10 online retailers. YouTube and LinkedIn appear to be close behind with the others only successful for less than one in five retailers surveyed.
Retailers take different paths to optimize social media. Most seem to have one internal person (49%), while 24% have multiple people involved. Just 28% rely on agencies, which may not be mutually exclusive of individuals working internally. 23% of retailers report it is difficult to quantify the results of their social media program. 22% find the changing nature means always being in catch-up mode. Surprisingly, only 12% rely on technology to drive programs.
The biggest influence
The influencer’s role is multi-faceted, but its impact and use are under scrutiny from online retailers. And that’s because the impact is certainly a work in progress. The following fit-related findings suggest it can be challenging for retailers to get this right.
- 32% of retailers said they are spending time to understand if my businesses should use influencers and how.
- 26% said it’s hard to find influencers who would be a good fit.
- 22% said influencers are not a good fit for our company.
From an awareness perspective, 27% said influencers are for building brand awareness. Meanwhile, 14% use them to drive traffic to the website.
General reflections from a financial perspective suggest that when it comes to influencers, 22% find it interesting but do not see the desired ROI. 19% are concerned influencers might be too expensive, and just 12% believe they help generate sales.
Finding the right platform for you
Retailers use multiple platforms to support marketing efforts. That starts with 73% leveraging analytics and data visualization. Other platforms that almost half of retailers use include email marketing software, content management tools, marketing automation software and customer relationship management.
58% of retailers plan to or will have AI in place this year or beyond to enhance their marketing. Ironically, only 15% believe they are employing it effectively, and 5% say it is not meeting expectations. It will be interesting to see its impact on marketing and many other aspects of ecommerce.
Retailers are also challenged when it comes to analyzing their marketing performance data and attribution. Our survey data finds retailers are mixed in their ability to analyze marketing data and attribution. 65% give themselves an above average rank (6-10) at how effective they are at marketing attribution and the remaining 35% rank themselves as average or below (1-5). This is certainly an area that warrants marketers’ attention.
But at what cost?
Costs and profitability are the biggest challenges retailers cite from a marketing perspective. While the challenges are many, it is optimistic to see that just one in three retailers face the remaining issues.
That includes figuring out which digital tactics best serve cross-channel needs and pinpointing how marketing directly impacts conversion. 26% rank changing algorithms as a challenge, and the same portion of retailers rank effectively analyze data/marketing campaigns as a challenge.
Because of third-party data restrictions, one in three online retailers are looking for ways to encourage email sign-ups. With the challenges in this area, 28% have made first-party data a higher priority. 21% acknowledge they are still assessing the best way to address these issues. We surveyed retailers on other challenges, but the remaining fell to 16% or less penetration.
Other ways to advertise
Retail media networks are not a significant factor for surveyed retailers. Only 10% report having a retail media network where they accept advertising, while 15% advertise on other retail networks. Three in four of those surveyed do neither of these.
Retailers employ a range of strategies regarding values-based marketing, but many don’t embrace it. 34% indicate they have no strategy. For those who are using such strategies, 27% do so in social media efforts, 26% integrate into their ecommerce experience and 26% communicate as events warrant. Others who expect sustainability to be on the horizon see 16% testing to see how it resonates and 7% are building out a caused-based strategy for 2023 deployment.
Lastly, we would like to look at how retailers expect their digital ad spending to change year over year. 70% of retailers forecast their digital ad spending will increase next year while 20% predict it will be unchanged and 10% forecast a decrease.
Retailers grow their digital marketing budgets using more tactics than ever. Email, paid search, content and search engine marketing do the heavy lifting. Social media and influencers are making inroads, but their ability to deliver results is mixed. The influencer and AI impact has yet to be written. There is still work to do in marketing and optimizing the business in 2023 and beyond to ensure profitable marketing initiatives are in place.
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