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RETAIL MARKETER INSIGHTS: THE CURRENT STATE OF DIGITAL AND THE FUTURE OF PERSONALIZATION

A research study by Conversant

RETAIL MARKETER INSIGHTS: THE CURRENT STATE OF DIGITAL AND THE FUTURE OF PERSONALIZATION

A research study by Conversant

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The study, conducted in December 2013 and January 2014, solicited information and opinions from leading senior level retail marketers. The digital opportunities and challenges covered in the study varied from the current role that digital plays in marketing programs to the burgeoning interest and importance of personalized one-to-one marketing.

For the retailer, this study provides a benchmark for today’s attitudes and efforts compared to those of a cross-section of other retail industry leaders.

In addition, retail is often the “first mover” in digital when it comes to programs with a strong likelihood of ROI impact. Thus, these findings are very relevant to marketers outside of the retail/e-tail sector.

Table of Contents

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EXECUTIVE SUMMARY

DIGITAL SPENDING

ROLE & EXPERTISE

PERSONALIZATION & RETAIL DIGITAL MARKETING

VENDORS, COMPLEXITY & INTEGRATION ISSUES

ATTRIBUTION PLATFORMS & METHODOLOGIES

COOKIE BLOCKING & DELETION

RETARGETING & RETAIL

DIGITAL MARKETING HOT TOPICS

FIVE THINGS RETAIL MARKETERS SHOULD DO NOW

METHODOLOGY

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As digital spending plays a progressively more important role for retailers, senior leaders have strong opinions about the opportunities and challenges they face in the digital space.

Strong evidence supports that senior leaders are “doing their homework” and understand the key importance of data management, personalization and measurement.

PERSONALIZATION: Personalization is clearly a hot button for this audience. Nine out of ten acknowledge that personalized messages work better than mass communications. And while many recognize the cross-device and omni-channel issues associated with executing personalized marketing, the vast majority are convinced that personalization represents the future of the industry.

VENDOR GLUT: Many senior leaders appear to struggle with “vendor overload.” Respondents indicate they work with an average of 12 digital marketing vendors, and many find it increasingly difficult to engage with the right partners and to integrate with those they already have.

PASSION FOR MEASUREMENT: For this group, interest in measurement and attribution platforms appears to be high, versus the industry average. And while the most common measurement utilized is the “last click” attribution approach, responses indicate many retailers are looking to change their attribution methodology in 2014. Further, a majority of retailers express concern about the potential impact of cookie blocking and cookie deletion on measurement and user identification.

PASSION FOR LEARNING: These senior retail leaders express a strong desire to learn about many of the key topics and issues that will affect their digital marketing efforts and success rates in 2014. Prime topics that interest these respondents include cross-device marketing, ROI measurement and mobile marketing.

EXECUTIVE SUMMARY

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DIGITAL SPENDING: AN INTEGRAL COMPONENT OF RETAIL MARKETINGYears ago, digital represented only a few percent of total marketing spending, but with consumers devoting more of their time in digital platforms and expanding digital marketing capabilities, there has been a dramatic shift.

The digital retail leaders we surveyed reported an average of 39% of their total marketing spend is devoted to digital — 111% higher than eMarketer reports for US marketing as a whole (18%). What’s more, 39% of these senior leaders also report that digital represents half or more of their total spending, proving that retail tends to be “ahead of the curve” with regard to digital.

“About what percentage of your company’s overall

marketing effort is invested in

digital marketing?”

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

40%

0-24%

22%

25 - 49%

20%

50 - 74%

19%

75 - 100%

Average digital allocation

39%

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DIGITAL EXPERTISEGiven the importance of digital in the overall marketing mix, it’s not surprising that marketers have placed a huge emphasis on developing understanding and prowess in digital marketing.

When asked, senior level retail marketers assess their understanding of digital marketing strategies and tactics quite favorably. Almost half rate their digital knowledge as “expert” or “high.” Another 42% rate their understanding as “medium,” and only 10% rate themselves as “low” or “very low.”

DIGITAL’S ROLE: GOING BEYOND DIRECT RESPONSEHistorically, marketers have primarily used digital in a direct response (DR) role. Today, that’s no longer the case. Nearly 60% of senior level retail marketers disagree that digital is better for DR than for branding. Recent eMarketer data also supports this enlightened view of digital – with almost 42% of total digital spending now devoted to branding versus DR.

“Digital marketing is better for driving short-term sales than long-term brand building”

“How would you rate your personal expertise using digital marketing to deliver on your business objectives?”

StronglyDisagree

30%

Very Low

1%

Low

9%

Medium

42%

High

27%

Expert

21%

SomewhatDisagree

28%

SomewhatAgree

27%

StronglyAgree

4%

58%

Disagree that digital is better for DR than branding

48%

Say they are expert or have high expertise

35%

30%

25%

20%

15%

10%

5%

0%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

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PERSONALIZED MARKETINGLeveraging personalization as a marketing strategy gives retailers the opportunity to tailor content and media delivery of brand advertising and messaging at the individual level. It takes into consideration things like demographics, lifestyle, past shopping and browsing behaviors, as well as predicted future behaviors, and uses that data to personalize communications and pinpoint the best method of delivery to that individual.

More retailers appear to be interested in the potential power of personalized one-to-one marketing as part of their efforts to drive stronger results and ROI.

INDIVIDUALIZED MESSAGES ARE MORE EFFECTIVENearly 90% of senior retail marketers “strongly agree” or “somewhat agree” that individualized messages can be more effective than mass messages.

Personalized communications tend to be more effective because they tailor brand messages to precisely suit the needs, lifestyle, life stage and preferences of an individual consumer.

“Individualized messages and offers

can be more effective than mass messages

and offers”

SOMEWHAT AGREE30%

STRONGLY AGREE60%

NEITHER DISAGREE OR AGREE4%

SOMEWHAT DISAGREE5%

STRONGLY DISAGREE1%

90%

Say Individualized Messages are More Effective

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OMNI-CHANNEL CONSUMERS MAKE PERSONALIZED MARKETING MORE DIFFICULTFifty-nine percent of senior level retail marketer respondents “strongly agree” or “somewhat agree” that omni-channel consumer behavior, where consumers access digital experiences across multiple channels and devices, significantly complicates the delivery of personalized communications.

PERSONALIZATION IS THE FUTURE OF MARKETINGThere’s little doubt among these senior level retailers about the importance of personalized marketing for the future. In fact, 72% agree that one-to-one communications represent the future of digital marketing for retail.

“Multi-channel and multi-device consumer behaviors make personalized marketing much more difficult”

“The future of marketing is in synchronized personalized communications tailored to every individual”

2+26+46+12+14Strongly Agree

Somewhat Agree

Neither Agree nor Disagree

Somewhat Disagree

Strongly Disagree

2%15%

26%

46%

11%

StronglyDisagree

7%

SomewhatDisagree

SomewhatAgree

47%

StronglyAgree

12% 12%

50%

40%

30%

20%

10%

0% 70% Agree personalized communications are possible

59%

Agree omni-channel behavior complicates

personalization

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“Approximately how many marketing vendors and solutions providers do you do business with during the year?”

On average, marketers are working with 12 digital vendors

RETAILERS RELY ON MANY PARTNERSSenior retail marketers face the challenge of working with multiple digital partners. Sixty-five percent work with six vendors or more, while 35% work with five or fewer vendors.

0 - 5

6 - 10

11 - 15

16 - 20

21+10+35+35+15+56% 10%

35%

35%

15%

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CHALLENGE: FINDING THE RIGHT PARTNERNearly half of respondents reported that finding the right digital vendor is “somewhat difficult” or “extremely difficult.” This trend will likely lead companies to opt to work with fewer, more versatile vendors.

CHALLENGE: INTEGRATING WITH MULTIPLE PARTNERSMore than half of the senior retail marketers surveyed reported “It’s difficult to integrate the large number of digital vendors we work with.”

“How easy or difficult is it for you to find the right vendor to address your digital marketing challenge?”

48%

56%

Say finding the right vendor is difficult

Say integration is difficult

41%

7%

Somewhat difficult

Extremely difficult

StronglyDisagree

6%

20%

SomewhatDisagree

Neither Agree norDisagree

18%

SomewhatAgree

45%

StronglyAgree

11%

50%

40%

30%

20%

10%

0%

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MARKETING ATTRIBUTION PLATFORMS Given their focus on driving sales and revenue, it’s not surprising that this group has a high interest in measurement. Of the senior retail marketers surveyed, 57% reported that they are using, or plan to use, a marketing attribution platform in 2014.

LAST CLICK IS STILL KINGMore than 2/3 of retailers reported using last click measurement as their preferred methodology.

“Personalized creative and media that are tailored to the specific behaviors and interests of each individual in your target audience”

“Does your brand use the following approach to digital marketing attribution?”

Use, or plan to use, an attribution platform

57%

FIRST CLICK17%

LAST CLICK68%

LAST VIEW43%

MULTI-TOUCH47%

INCREMENTALITY38%

(Responses add up to greater than 100 because respondents were allowed to report more than one methodology.)

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“How concerned are you about recent developments like Firefox/Safari third-party cookie blocking and cookie deletion?”

CHALLENGE:THIRD-PARTY COOKIE ISSUESSixty-two percent of respondents reported some level of concern about cookie blocking and deletion and the impact on user identification and measurement. Only 11% reported they are “not at all concerned.”

Very concerned

Somewhat concerned

Not very concerned

Not at all concerned

11%

11%

51%

27%

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26+74+R 44+56+R 28+72+R 26+74+R74% 44% 28% 26%

Retargeting is an important tactic for

driving close-in/impulse buyers to make a

purchase

Retargeting takes more credit for sales than it should because the

lower funnel audience is more likely to respond

Retargeting could hurt brand due to consumer

privacy concerns of being followed

on the web

Retargeting misses the majority of my audience

by only focusing on recent site-abandoners

Percent who strongly or somewhat agree with the following statements

PROS AND CONS OF RETARGETINGRetargeting remains a popular marketing tactic among 74% of senior level retail marketers. That said, nearly half of our respondents believe that retargeting takes too much credit for sales due to the response rates from the lower funnel audience.

More than a quarter of respondents agree that retargeting may actually damage a brand due to consumer privacy concerns and they also acknowledge that retargeting often misses the majority of the ideal audience by focusing only on recent site visitors.

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DIGITAL MARKETING HOT TOPICS: CROSS-DEVICE MARKETING AND ROI MEASUREMENTInterest in cross-device marketing is high, with 60% of senior retail marketers expressing they are “extremely interested” or “somewhat interested” and 53% expressed interest specifically in mobile marketing. Nearly 58% are “extremely interested” or “very interested” in learning more about ROI measurement, while integrating offline and online data and social media round out the topics in which they appear to be most interested.

70%

60%

50%

40%

30%

20%

10%

0%

60% 58%53%

44% 44% 43% 42%37%

27%22%

Cross-Device or Omni-Channel

Marketing

Marketing ROI Attribution and Measurement

Mobile Advertising/Commerce

Integrating Online/Offline Marketing Data

Social Media Marketing

Website Personalization

Behavioral Advertising

Online Video RetargetingDisplay

Advertising

“How interested are you in learning about the following topics in digital marketing?” (Percent “Extremely” and “Very” Interested)

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FIVE THINGS RETAIL MARKETERS SHOULD DO NOW

1 PURSUE PERSONALIZATION IN A BIG WAY: Even with the challenges of

omni-channel consumer behavior, it’s clear that personalized marketing will be big in 2014. For those retailers who acknowledge and understand the power of personalized marketing, they should quickly prioritize the planning, testing and implementation of personalization into their plans. Identify partners who can speed up implementation and deliver personalized marketing in pay-as-you-go formats.

2 CONSIDER FEWER, BIGGER VENDORS: Today, many retailers are working with an average of 12

digital vendors, and with that comes the challenge of multiple partner integration. Retailers should identify fewer partners with broader capabilities to reduce or eliminate these integration issues.

3 GET A HANDLE ON MEASUREMENT: On one hand, our survey indicates that many retail

marketers have a strong interest in measurement, yet the data also shows that simple measurement methodologies, like last click, are among the most popular. Retail marketers should task their teams and partners to identify measurement approaches that provide a more accurate picture of ROI impact. They should also explore alternatives to third-party cookies for their omni-channel measurement needs.

4 APPROACH RETARGETING WITH HEALTHY CAUTION: While retargeting can play a

role for retail marketers, it’s important to allocate the appropriate resources to this tactic. Be sure to consider alternative methods that will address opportunities for growing the funnel.

5 CONTINUING EDUCATION AND LEARNING: Retail marketers tend to view themselves as very

knowledgeable about digital, yet many express an interest in learning about emerging topics and staying on top of trends in 2014. Digital mastery is a journey and marketers should commit to learning to stay ahead of developments that could impact their business.

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METHODOLOGY

From December 11, 2013 to January 31, 2014, senior-level marketers from Conversant’s internal databases were contacted via phone and email to take a 10-minute survey. Contacts were informed that the research was sponsored by Conversant (then ValueClick, Inc.), Bovitz, Inc., and Edelman; they were also informed they would receive a monetary incentive and a copy of the aggregated research results. N=81 respondents completed the survey.

ABOUT CONVERSANT, INC.

Conversant, Inc. (Nasdaq: CNVR) is the leader in personalized digital marketing. Conversant helps the world’s biggest companies grow by creating personalized experiences that deliver higher returns for brands and greater satisfaction for people. We offer a fully integrated personalization platform, personalized media programs and the world’s largest affiliate marketing network – all fueled by a deep understanding of what motivates people to engage, connect and buy.

For more information, please visit www.conversantmedia.com

Copyright 2014 Conversant, Inc. All Rights Reserved.16