Retail marketing is undergoing its largest transformation since the dot.com boom. The ongoing decentralization of retail and retail marketing is forcing CMOs to embrace new strategies in the media world to compete, especially amid more ephemeral brand affinity.
By now we are all aware of the impact the internet has had in reshaping marketing, dating back to the adoption of the world wide web in the 1990s. The dot.com bust in 2001 slowed, but didn’t stop, the inexorable move toward consumers shopping and buying online. As we have grown consistently more accustomed to having the world at our fingertips, online shopping has only grown. Amazon’s market cap is around $1.345 trillion dollars and it’s no surprise to hear that 92% of Americans claim to have purchased from the online retail giant.
However, according to the latest U.S. Census data, ecommerce still represents only 15% of retail sales, but is only continuing to grow since the pandemic forced us all to navigate retail in new ways. Despite the increase in demand and the proliferation of specialty online brands, spending on ecommerce as a percentage of companies’ overall marketing budget is oddly less than 10%, according to Gartner.
To compete in a retail landscape featuring a sea of propagating consumer feeds, five growth solutions are emerging.
Advertisement
1. Micro-segmenting.
The first challenge is to address the increasingly decentralized media landscape. As algorithms continue to organize media around an individual’s interests online, consumers are becoming less homogenous. This makes the traditional profiling of “Buffy the Cultural Trendsetter” and “Bob the Factory Worker” less effective.
Takeaway: It’s time to dig deep. Rather than investing in generic ads to large consumer segments, brands should surgically spend against a series of micro segments. Focusing on niche markets with a series of different and unique messaging based on an individual’s demographics and spending habits allows you to continuously A/B test messaging impact.
2. Finding creative ways to scale content production.
The next challenge becomes customer consideration. The downside to having the world at our fingertips is that consideration is now won and lost as quickly as a swipe right or left online. Just ask anyone who has made an impulse buy on Instagram or TikTok how long it took them to go from zero awareness to purchase.
Takeaway: We have to adapt, and quickly. Retail brands cannot feed the internet enough content to satisfy consumers. The more breadcrumbs we source and distribute, the more likely a consumer is to take a bite. Retailers produce only 10% to 15% of the content, on average, that is required to market online effectively, and now is the time to step it up. Check out Claire’s, which dedicated interns to create TikTok content, connecting authentically with their community in unique and exciting ways, but a fraction of what the community will consume. We need more scale.
3. Rebuilding trust with micro- and nano-influencers.
Perhaps the largest trend in retail today is the collapse in consumer trust. Consumers increasingly distrust corporations, the media and studio-produced ads. As a result, brand loyalty is at an all-time low. In the face of consumer distrust, purchase decisions are increasingly made through peer recommendations — more specifically from peers that share a similar set of identities, affinities and geographies.
Takeaway: Strategic CMOs are over-investing in content from micro- and nano-influencers ranging from 1,000 to 20,000 followers. These advocates can be sourced at great precision based on affinity, lifestyle, ethnicity, age, location and even profession. The ability to source creators from more diverse and niche communities makes their suggestions, recommendations and advocacy that much more relatable, thus rebuilding trust among consumers.
4. Chucking the expensive commercials.
In a recent study, Meta reported a 63% higher conversion rate from lo-fi (low-fidelity) content in comparison to studio-produced content. Consumers increasingly want something real from their entire retail experience, including marketing. We have found that peer-to-peer assets from micro-influencers average 3X the average engagement rate on organic content and result in 4X higher click-through rates for paid advertisements. Understanding this, savvy marketers such as Floor & Decor have begun recruiting contractors and installers, the real decision-makers in a renovation, to advocate for the brand. Their campaign saw significantly higher performance with an average engagement rate of 5.54% across organic platforms.
Takeaway: Retail brands should eschew expensive commercials, especially if they aim to reach Gen Z and growing niche markets. Instead, retailers should simply invest in TikTok and partner with community members to create relatable lo-fi advertisements. As an example of the right approach, the Sephora Squad has done exactly this, elevating genuinely diverse people to advocate for the brand and their shared causes in their own voice and vernacular.
5. Taking an interdisciplinary approach.
Retail brands have ongoing discussions on the idea of omnichannel marketing, but so far the majority of this has only been in theory. While they are beginning to understand that the customer journey is non-linear and increasingly digital, this reality is often not reflected in the actual structure of the marketing enterprises within companies. Oftentimes their media — digital and creative — are still too siloed, with television creative adapted to social and media divorced from editorial.
Takeaway: Don’t be afraid to take a red marker to the organizational chart and actualize interdisciplinary pods organized around clusters of consumers. Upon taking this leap we can begin from an outside-in, customer-centric perspective, rather than an inside-out, brand-forward perspective. We have seen i-Health generate high ROI by eviscerating the line between CRM, social and creative by rooting their marketing in the patient experience and applying it across channels.
The ever-changing retail environment requires brands to be adaptable. By considering these key takeaways brands can continue to see growth by meeting consumers where they are, thus building back trust from the outside-in.
Curtis Hougland is the Founder and CEO of People First, which sources authentic content from specialized creators based on affinity, geography, profession and condition. He has been leading the charge for retailers to build advocacy campaigns online reflective of their customer bases. He founded one of the first new media agencies in 1991 and social media agencies in 2003. Hougland helped pioneer micro-influencer campaigns in politics and advocacy and remains active in public health and safety.
