Harnessing the Power of Advertising in an Unsteady Economy
At times of economic uncertainty, retailers look closely at costs to ensure they're spending efficiently. Because of how difficult it is to truly assess return on investment, many cost-conscious business leaders cut advertising dollars early and often. While this tends to be a first line of defense against economic headwinds, it's not the most effective. Reducing the advertising budget can have a costly and long-term impact on a business. A recent Nielsen study found that “brands that go off-air can expect to lose 2 percent of their long-term revenue each quarter and, when they resume media efforts, it will take three [years] to five years to recover equity losses resulting from that downtime.”
According to Forbes, those advertisers that maintain or grow ad spending, on the other hand, tend to increase sales and market share during recessions and afterward. Another benefit is that there's less competition when competitors cut their costs and your brand doesn’t. Lower demand decreases rates, meaning the advertising dollar will go further.
Deprioritizing inefficient channels is the right move when times are tight, but retailers must be strategic in choosing which ones to cut. It’s critical for retailers to get an accurate read on ROI by utilizing advanced mixed media modeling with omnichannel measurement of in-store revenue. By understanding which channels are driving revenue, retailers will know which channels are worth increased (or decreased) investment.
A View on Video
The first tactics that retailers cut are often branding focused because the ROI is difficult to measure. Digital channels like direct response, search and social are easier to track and show a stronger ROI when utilizing basic attribution models. It’s common for retailers to overindex against these tactics because of their perceived value.
On the contrary, the branding channels that might appear less valuable on paper will capture consumer attention and make a long-term impact that lasts beyond economic recovery. For instance, TV and video are huge brand-building channels that can reach a targeted audience across screens, whether at home or on the go. These channels’ corresponding technology and measurement have come a long way, so brands can spend on the audiences most likely to convert, more easily and quickly track performance, and optimize in real time if need be.
To increase brand impact, advertisers can now dynamically customize their TV or video messaging to be as relevant as possible to each consumer, such as mentioning their town or city. Brands can reach households that are likely prospects on their TVs and magnify the same ads on their personal devices. Ads can be automatically optimized toward premium TV and video content and desktop/mobile environments, viewable environments, and larger, more impactful ad sizes. Consumers can interact directly with the ads via QR codes or additional impressions served to the same household, boosting engagement rates by 1 percent or more. Brands can also augment their broadcast TV with mid-funnel interactions.
Stretch Ad Dollars Further With Co-Ops
To extend their reach even further and gain marketing efficiencies, brands in certain verticals can also use these channels as part of a co-op or “cooperative” advertising. Co-op advertising is a cost-effective, mutually beneficial relationship between a manufacturer and a retailer partner or distributor because the two parties share the responsibility of marketing. It can also lead to increased sales for both retailers and brands, as the former gets more funds when they purchase larger amounts of the latter’s products. Plus, brands that enlist retailers to advertise their products can reach more localized audiences, which could create higher sales demand.
For example, if you work for a CPG brand, you know that product sales often come from a select group of big-box retailers. You can tie your product's messaging to a specific retail store using co-op advertising. If running a video ad, you can ensure it provides relevant information to each consumer — e.g., the closest store location. This increases the likelihood of the consumer choosing your brand the next time they're in the store.
Amid economic turmoil, brands must reevaluate their marketing strategies and reprioritize how they spend advertising dollars. Adjusting advertising spending towards uber-efficient channels like video and TV as well as models such as co-ops can help brands maintain a strong presence at less cost so they come out of this challenging time even stronger.
Marly Sohr is the lead of industry solutions for retail at VDX.tv, a global video advertising technology company.
As Lead of Industry Solutions – Retail, Marly works with VDX.tv’s Retail vertical team to develop strategic CTV and digital advertising solutions for retail brands.
Prior to joining VDX.tv (formerly Exponential), Marly worked as a Research Specialist at the University of Maryland, where she earned her Master’s degree in Public Health.