What's E-Commerce Media, and Why Do I Need a Strategy?
Cooperative marketing between retailers and their suppliers has been highly successful for decades. It's an integral part of today's shopping experience. Make no mistake, the brands of toys, electronics and other gift purchases featured in endcaps every holiday season are not randomly selected. Marketers are paying retailers a premium to ensure their products are visible at key points in the shopping process.
At its best, this type of in-store promotion is so relevant, logical and helpful, particularly when the displays are offering a discount or other promotion, that it's not easily recognized as marketing. Ultimately, shoppers benefit, brands benefit and retailers earn revenue both from the sale of goods and the marketing value of their real estate.
More and more retailers are realizing that their e-commerce site also represents very valuable real estate. Tens of millions of shoppers visit online stores each day, showing interest in different types of products and creating countless opportunities for brands to interact with a highly concentrated target audience. Brands are also beginning to realize that a majority of shopping decisions are now made online, even if purchases are ultimately made in a physical store, making e-commerce sites an increasingly critical part of their marketing mix.
E-commerce media, just like in-store marketing in the offline world, allows marketers to target consumers while they're shopping, and enables retailers to unlock new profits from their valuable digital real estate.
The obvious difference with offline programs is the variety of options the digital medium makes possible. The moment a retailer begins viewing its online store as a media property, a number of questions and dilemmas arise. The web is full of online publishers and thousands of different ad networks, technologies, media formats and gimmicks that help them make money. At first glance, most of these seem incompatible with a retail business focused on creating great customer experiences that promote conversion and repeat business. The promise of high-profit media revenue is too big to be ignored. Could the wrong approach risk alienating customers and hurt your business?
The stakes are too high to take a tactical approach, so embrace an e-commerce media strategy. That strategy must begin with your shoppers — who are they, how do they shop, and what kind of experiences do they expect and value. Every element of your strategy should be challenged with the shopper in mind. A media program that keeps shoppers happy will also be exponentially more effective for the brands that participate — i.e., higher returns for both the retailer and the brands.
From that basis, there are many choices to make. Should the program target vendor co-op funds, vendor brand-budgets, third-party advertisers or a combination of these? What types of media placements and programs should be created, and how might these placements appeal to different types of marketers? How should paid placement be balanced with unpaid merchandising? Should paid placement be contingent upon value-adding discounts and promotions for consumers? Should there be a dedicated person responsible for the program? Who will sell the media — merchants, a dedicated in-house team, third parties or a combination?
A successful program also depends on having clear goals and metrics. While it's important to have annual media sales goals, the fundamental goal of any business is profit. Media revenue is highly profitable, often yielding 60 percent to 90 percent margins after factoring in cost of sales and service. The contribution to the bottom line will likely be disproportionate to its total revenue contribution.
An excellent way to normalize media and product revenue is to make profit per shopper a key performance metric, essentially dividing the net revenue from both sources by the total number of visitors to the online store. A successful media program should significantly increase profit per shopper over time by adding new media revenue while also contributing to the growth of product sales.
With competition growing fiercer and consumers shifting their decision process online, an e-commerce media strategy is quickly becoming a necessity for retailers. Soon it may even mean the difference between profit and loss.