In May 2023, Digital Commerce 360 conducted its ninth annual Digital Marketing Survey. Questions ranged from budget to performance. We reviewed various aspects of digital marketing, from the challenges and pain points of the day to measuring campaign success. We surveyed retailers across 25 categories, allowing us to provide a variety of perspectives.
Digital marketing budgets vary widely, and surveyed retailers categorized digital as a percentage of their overall marketing as follows:
- 1-10% of marketing: twenty one%
- 11-50%: twenty five%
- >50%: 46%
- none: 8%
Digital momentum continues to grow, with 59% of retailers increasing their digital marketing budgets in 2023. Meanwhile, 27% of retailers said their digital marketing budgets remained the same, and only 14% saw a decrease. Digging into the numbers for those who predicted an increase, 14% of retailers said their digital marketing budget would increase by more than 21%. On the other hand, 33% said it would increase by 10-20%. The remaining 12% expect their budgets to increase by only 1-5%.
Retailers are adopting a myriad of digital marketing techniques
As part of their digital marketing strategy, 6 out of 10 retailers are embracing email, content, and search marketing, as well as paid search and Facebook. Other tactics used by at least half of respondents had social media in mind. These include Facebook (62%), Instagram (52%), YouTube (52%), and TikTok (30%).
Just under half (47%) also used other influencer marketing and social media. Affiliate marketing rounds out the list of strategies (51%). Other ads worthy of honorable mention were mobile ads at 44%, Amazon ads at 41%, and marketplace ads at 36%. It was insightful to see SMS/text messaging included in the 38% list. Connected TV also accounted for just 20%.
Various budgets depending on your marketing strategy
Retailers spend the most on email, paid search, content, and search engine marketing.
Now that we know what tactics are being implemented, we wanted to understand what percentage of a retailer's marketing budget each tactic represents. From a budget perspective, email and paid search came in at number one with a near tie in terms of spending over 11% of the budget. Content marketing was next at 35%, followed by search engines at 33%.
Most Effective Marketing Strategies: Email, Paid Search Engines, Content Marketing
In the end, what matters most is effectiveness and results, not budget. Looking at the survey results, the top four impacts aligned with budget were email (61%), paid search (55%), search engine marketing (53%), and content marketing (49%). This was followed by affiliate marketing (32%), Facebook (32%), Instagram (27%), and YouTube with the biggest declines at 24%.
Almost 6 in 10 retailers spend more than 30% of their marketing budget on customer acquisition
One question is: how are they spending these dollars? It is interesting to note that 42% spend more than half of their budget on acquiring a customizer. Investment is definitely going on as 28% are spending in the 21-50% range. Most of these retailers believe that new customers are worth the investment since only one in three customers spend less than 20%.
The main tactics for acquiring new customers are paid search, email, search, and content marketing. Research findings suggest that the most successful marketing strategies reflect the effectiveness described above. 56% of retailers say paid search is in their top three effective marketing channels, followed by email at 49% and search engine as their third most important acquisition strategy % was. Others were as follows.
- Content marketing: 37%
- Amazon Ads: 23%
- Affiliate marketing: 20%
- Facebook: 15%
- Non-Amazon marketplace ads: 13%
Highly socially conscious
We'll focus on social media here, as there's a lot of discussion going on in this area. More than half of retailers use social media advertising to increase sales and increase brand awareness. When it comes to social media advertising goals, increasing sales and increasing brand awareness are at the top of the list. Retailers also value increasing traffic and increasing viewership as goals.
From an ROI perspective, most social networks have some success or no success at all.
Facebook and Instagram are successfully driving ROI for 4 out of 10 online retailers. YouTube and LinkedIn seem to be close behind, and the others appear to be successful with less than one in five retailers surveyed.
Retailers employ a variety of methods to optimize social media. Most companies seem to have a single internal person (49%), but 24% have more than one person involved. Only 28% rely on agencies, but agencies may not be incompatible with individuals working in-house. 23% of retailers report that it is difficult to quantify the results of their social media programs. 22% believe their changing nature means they are always in catch-up mode. Surprisingly, only 12% rely on technology to drive their programs.
greatest influence
The role of influencers is multifaceted, but their influence and usage is under scrutiny from online retailers. That's because the effects are definitely underway. The fit-related findings below suggest it can be difficult for retailers to get this right.
- 32% of retailers said they spend time understanding whether and how their business should use influencers.
- 26% said they have difficulty finding the right influencers.
- 22% said influencers are not a good fit for their company.
From an awareness perspective, 27% said influencers are used to increase brand awareness. Meanwhile, 14% use them to increase traffic to their website.
A general consideration from a financial perspective shows that when it comes to influencers, 22% find them interesting but not getting the desired ROI. 19% are concerned that influencers cost too much, and only 12% think influencers help increase sales.
Find the platform that's right for you
Retailers use multiple platforms to support their marketing efforts. First, 73% leverage analytics and data visualization. Other platforms used by nearly half of retailers include email marketing software, content management tools, marketing automation software, and customer relationship management.
58% of retailers have or will continue to implement AI this year and beyond to enhance their marketing. Ironically, only 15% think they are using it effectively, and 5% say it is not meeting expectations. It will be interesting to see the impact on many other aspects of marketing and e-commerce.
Retailers also have challenges when it comes to analyzing marketing performance data and attribution. Our research data shows that retailers vary in their ability to analyze marketing data and attribution. 65% give themselves an above-average rank (6-10) for marketing attribution effectiveness, and the remaining 35% rank themselves below-average (1-5). This is certainly an area that attracts the attention of marketers.
But at what cost?
Cost and profitability are the biggest challenges retailers cite from a marketing perspective. The challenges are many, but he is optimistic that only one of his three retailers faces any remaining problems.
This includes identifying which digital strategies best suit your cross-channel needs and how marketing can directly impact conversions. 26% rank algorithm changes as a challenge, and the same portion of retailers rank effective analysis of data/marketing campaigns as a challenge.
Due to third-party data limitations, one in three online retailers are looking for ways to encourage email sign-ups. Given the challenges in this area, 28% are prioritizing first-party data. 21% admit they are still evaluating the best way to address these issues. We surveyed retailers about other challenges, and the remaining penetration rate fell below his 16%.
Other advertising methods
Retail media networks are not an important factor for the retailers surveyed. Only 10% report having a retail media network that accepts advertising, and 15% advertise on other retail networks. Of those surveyed, 4 out of 3 did neither.
Retailers employ different strategies when it comes to values-based marketing, but many don't. 34% say they don't have a strategy. Of those using such strategies, 27% use them in their social media efforts, 26% integrate them into their e-commerce experiences, and 26% communicate in response to events. Others who expect sustainability to be on the horizon: 16% are testing to see how sustainability resonates, and 7% say they expect sustainability to be on the horizon in 2023. We believe that we are building a cause-based strategy to develop this.
Change from previous year
Finally, we'll take a look at how retailers expect their digital ad spend to change year-over-year. He said 70% of retailers expect digital ad spending to increase next year, while 20% expect it to stay the same and 10% expect it to decrease.
Retailers are using more tactics than ever to stretch their digital marketing budgets. Email, paid search, content, and search engine marketing do the heavy lifting. Social media and influencers are becoming more prevalent, but their ability to drive results varies. The impact of influencers and AI is yet to be written. There is still work to be done in marketing and business optimization in 2023 and beyond to ensure a profitable marketing strategy.
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