Online retailers are analyzing their marketing spend and looking for ways to reduce costs to survive during the coronavirus pandemic.
No brand is immune, as beverage giant Coca-Cola has put a halt on marketing spend. “We’ve reduced our direct consumer communication, we’ll pause sizable marketing campaigns through the early stages of the crisis and reengage when the timing is right,” says Coca-Cola CEO James Quincey on a first quarter earnings call last Tuesday. “These plans will vary from market to market with our earliest reengagement focusing on the recovery in China.”
Amazon.com Inc. (No. 1 in the 2020 Digital Commerce 360 Top 1000), meanwhile, overwhelmed with orders for essential items, is pulling back on promotions for Mother’s Day and Father’s Day, according to The Wall Street Journal, and will postpone Prime Day. Amazon declined to comment for this article.
In his annual shareholder letter, Amazon CEO Jeff Bezos, writes, “The demand we are seeing for essential products has been and remains high. But unlike a predictable holiday surge, this spike occurred with little warning, creating major challenges for our suppliers and delivery network. We quickly prioritized the stocking and delivery of essential household staples, medical supplies, and other critical products.”
In the wake of COVID-19, retailer GiftsForYouNow.com is spending about 40% less on marketing compared with last year because conversion rates are dropping, says Pete Pesce, vice president of marketing.
While it may be spending less overall, it has increased its marketing spend 15% for ads on craft marketplace Etsy Inc. compared with last year. The ads are working; in the last two weeks, sales have increased double digits on Etsy compared with the year-ago period, Pesce says.
“It’s a fluid approach without a doubt,” Pesce says. “As things change, we have to adjust with that and when you see something doing well, you need to put effort into that.”
Traffic visiting GiftsForYou.com from search has decreased, as fewer consumers are searching for gifts online, Pesce says. Therefore, it also has decreased its ad spend on paid search about 40-50%. In addition, the retailer’s marketplace sales on Amazon.com are down 50% year over year.
“This is due to fewer people searching for personalized gifts,” Pesce says.
GiftsForYou.com is not the only retailer to cut or hold steady on paid search spending.
For shopping and retail advertisers, average weekly spend on paid search advertising declined approximately 25% over a 3-week period, March 8-28, compared with the 2-week period, Feb. 23-March 7, says Chris Costello, senior director of marketing research at marketing technology vendor Kenshoo. Starting with the week March 29, paid search spending by shopping and retail advertisers has increased about 10% per week, Costello says.
The question going forward is whether the recent uptick in paid search spending will continue, he says. “As more marketers get back to increasing their focus on growing their programs in this new, changed environment, we expect the recovery will continue but at varying speeds across different retail categories.”
Towel retailer Bare Cotton is spending approximately 25% more on advertising on marketplaces where it sells its goods, including Amazon.com and Walmart, and via paid search on Google compared with this time last year, says owner Sel Belek.
So far, the ads have generated higher conversions, and the retailer has increased its sales 35-40% in April compared with March, Belek says.
GiftsForYou.com also reduced its marketing email campaigns, says CEO Jim Tuchler. The retailer is sending about four to five email campaigns per week, compared with nine emails per week pre-coronavirus, or a 50% reduction in emails sent.
“We did not want to come across as insensitive and overwhelm customers with promotional emails,” Pesce says. “Our messaging within emails have changed—from celebratory and promotional messages to warm, heartfelt messages with more of an emotional attachment to them.”
Overall, retailer ad spending declined about 50% on Facebook in North America between December 2019 and mid-March 2020, according to data from Socialbakers, a social media marketing platform, which tracks thousands of U.S. brands, according to the vendor.
Retailers should avoid the “panic move” of turning off all advertising, says Matt Voda, CEO of marketing analytics vendor OptiMine Software, which has dozens of retail clients, including J.C. Penney, Mattel and Bed Bath & Beyond, covering department stores, housewares and home goods, toys and games, electronics, furniture, apparel and more categories.
“History tells us that advertising [return on investment] does not go down during a recession, the ROI is relatively consistent during a recession as well as recovery,” says Voda, referring to a 2009 study from the Advertising Research Foundation (ARF), “Research on Advertising in a Recession: A Critical Review and Synthesis.”
“If a brand completely stops advertising it guarantees revenue loss,” he adds.
Instead, Voda recommends retailers look for ways to finetune and tailor their advertising.
“When you’re in a pandemic, the effects are super local, so the strategy we’ve been advising is you’ve got to be much more precise and align your marketing,” he says. “If TV is important to the brand, this is a great opportunity to stay in front of your local consumers. Same thing with radio; radio listening is up 28%, it’s a great way to drive through the clutter.”
The cost per impression on social media networks, such as Facebook, have decreased 50% compared with before the pandemic, says Voda, according to a report by Gupta Media, entitled “Understanding the effects of COVID-19 on the Facebook Ads Marketplace.” Because the rates are cheaper than normal, this is an opportunity for retailers to invest in social ads, Voda says.Favorite