Preaching to the nearly convertedAn Advertisers’ Guide to online retAil MediA

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Do you know what you are going to have for lunch today? Will it be the same thing you always have or is there a chance you might try something new? When you enter a shop to get your food are you absolutely clear what it is you are going to buy?

The answer is probably not. In fact, depending on what you read between 20%–60% of all our purchases are unplanned1. Every business knows that marketing and advertising do not start and end at the shop door. As a result there is currently a £25.6bn in-store marketing industry in the UK2.

Much of what we read about in the marketing and advertising press concerns the activities that get us to that shop door. Above-the-line media spend in the UK is around £19bn3. This is a considerable amount but it is still far less than in-store marketing.

Online advertising spend in the UK has been growing at a rapid rate. From a 3.6% share in 2004 to 23% by the first half of 2009, it has now surpassed TV as the top advertising media4. Of this revenue, around 40% goes to portals and ad networks, 45% to social networks and just under 15% to mainstream publishers. Less than 1% goes to e-commerce businesses. Is that in the interests of brands or simply those that act on their behalf?

On eBay alone over £100m worth of goods are bought each week, which is a huge number of purchase decisions that could potentially have been influenced.

There is a real art to retail in the high street. Location, merchandising, store layout and even smell are employed in almost an exact science when it comes to selling. However, what is the equivalent in an online situation?

The purpose of this paper is to highlight the opportunity for marketers, advertisers and brands in retail media online, and examine consumer behaviour and purchase patterns to outline the potential for advertisers. We look to draw some parallels with the offline world and offer advice to brands looking to improve their online retail performance.

In order to market effectively to consumers, brands have to understand the market. Not just who your customers are or even what they do, but more importantly, why they do it.

introduction

1 The Wharton School, University of Pennsylvania http://knowledge.wharton.upenn.edu/article.cfm?articleid=21322 Institute of Sales Promotion http://www.isp.org.uk/news.php?pid=6233 Advertising Association http://www.adassoc.org.uk/aa/index.cfm4 BBC http://news.bbc.co.uk/1/hi/business/8280557.stm

In 2009, eBay Advertising conducted two detailed research surveys across UK, Germany and France. Over 7,000 people were questioned about their online retail habits, decision making processes and motivations. There were a number of significant findings:

1 online shopping is on the increase

This may seem like an obvious point; however, it’s one worth clarifying. 80% of our respondents across all countries stated that they were looking to spend more online. This figure increased across vertical sectors when it came to the festive season, with both entertainment and grocery shopping showing a 90%+ intention of increased spend online.

There are obvious conclusions to draw as to why this might be so. Firstly, there’s the evident impact of the recession. In the current economic climate, people go online to find value for money and great deals. Just as importantly there is also continuous organic acceptance of online as a bona fide channel on which to shop. This is down to growth in access (penetration of broadband), trust (secure payments have come a long way) and selection (fulfilment infrastructure has also improved). We’ll touch upon this later.

If we look at areas of strongest growth over the last year, we find that they are in goods that have both tactile and emotional components in the decision making process. Online is not supposed to do this very well but purchasers of categories such as clothing, shoes and accessories, and groceries would beg to differ. The breadth of goods also continues to grow within each category, suggesting that online shopping is no longer confined to very specific items.

Making retail Media work harder:understAndinG the e-BuyinG consuMer

“ i compared all the prices that came up on my google search, and clicked on the cheapest price for the same product, only after making sure the website was secure.”

online shopper France

What products are youbuying more of online?

0

20

40

60

80

Mobile /

home phones

Home and

garden item

s

Groceries

Electronic

s

(DVD, MP3s, T

Vs etc)

Entertainm

ent

(DVDs etc)

Shoes, clo

thing,

accessories

■ UK

■ Total■ Germany

■ France

2 Motivations for shopping online vary by category

Some of the reasons behind the growth in online shopping lie in the changing motivations for doing so. Historically, online shopping was about getting a bargain such as finding the cheapest CD player you could. It is not like that anymore. Trust, selection, and convenience are now just as important. The idea of getting a bargain has been replaced with ‘value’ and that is an important distinction as the variety of goods gets ever wider.

The prominence of trust as the key motivating factor when choosing where to shop online can be correlated with the strong belief that branded goods are better quality. Some might say that the democratic process of the Internet has diminished brand value. Yet our findings, whilst supporting the notion that price has become less impactful on brand value, suggesting that branded goods still occupy a higher status than non-branded items.

The importance of trust extends to the sites that online shoppers will buy from, with recognised sites being preferable. One respondent to our survey stated: “I compared all the prices that came up on my Google search, and clicked on the cheapest price for the same product, only after making sure the website was secure.”

Across many categories, trust, value and selection are interchangeably the top three considerations. However for consumer electronics, phones and entertainment it is

value which dominates whilst in groceries it is much more about convenience.

This behaviour suggests that online shopping has become a familiar and regular behaviour governed by similar motivations found on the high street.

If we dig further into consumer motivations we find interesting differences in how we both look for and choose a supplier.

There are clear patterns that emerge which, in many respects, parallel how we behave in the offline world. In the case of goods and services that are bought frequently (such as groceries), or those that have an element of emotional choice or ego attached to them (such as clothing or entertainment goods), consumers are more likely to pick a favourite supplier – a place they have affinity and trust with – rather than search for them.

On the flip side, for items that are purchased more infrequently such as household goods or items that warrant a more logical decision making process – such as electronics – then search is the preferred channel of discovery.

We can go one step further and produce a matrix (see bottom right graph) where we compare how behaviours such as ‘comparison’ are more prevalent with purchases that are frequent yet logical such as utilities, and research activity is more dominant with purchases that are infrequent yet emotional, such as jewellery.

■ Phones

■ Entertainment

■ Groceries

0

20

40

60

80

Spendmore time

researching

Moreconvenient

Betterselection

Easier tosearch

Better valuefor money

Why do you buy more of these online?

Compare Favourite

Search ResearchEmotionalLogical

Infrequent

Regular

How does behaviour compare with purchase type?

I always get the best

deal I can

I choose siteswith the best

selection

I alwaysbuy from

sites I trust

81%69% 66%

What are key motivations forincrease in online shopping?

% a

gre

e/st

ron

gly

agre

e

3 advertising can be highly impactful

Some would say it’s no surprise that a study conducted by an e-commerce business offering advertising opportunities, should find their placements so effective. However, the findings of this survey continue to support the findings of an earlier one – that advertising in an e-commerce environment is more likely to be noticed by consumers than any other.

But all things considered, this should not be surprising. We visit e-commerce sites to browse, look for inspiration and to shop. Why then should advertising in this context not be extremely powerful when advertising itself is ultimately designed to get us to make a purchase of one good over another? When we think about our own trips to high street stores and our response to in-store offers, sign-posts and on-pack promotions, this feels absolutely right.

What is perhaps unexpected is the poor performance of both portals and social networks, both of whom receive the lion’s share of display advertising revenue.

We think it can be explained thus: we generally visit portals to access information or to pick up email. We generally go to a social network to socialise and share with others. One might argue that these behaviours are not as open to commercial messages as when one is shopping. Think about this next time you are in the pub and someone offers to sign you up to a credit card.

This is not to say that advertising on portals or social networks has no value, but simply that brands may need to think differently about how they use them. Some brands are already adopting new ways of engaging with consumers in these situations. Many however, are not.

In addition, we discovered that online advertising per se has a strong value in influencing purchase right across the media mix. We might be considered foolish to suggest it has more impact than TV, but our findings show it holds its own within traditional media. In particular, targeted ads on e-commerce sites were seen as the most influential of all online advertising opportunities.

“ i would have liked to see some ads whilst searching for used cars in gumtree, this would be a great place to put some ads in the main web page.”

online shopper UK

What types of adsprompted you to buy?

0

10

20

30

40

Mobile phone ads

Video ads

Pop up ads on the internet (non targeted)

Radio ads

Display ads on an e-com

merce w

ebsite

Pop up ads on an e-comm

erce website

Display ads on an e-com

merce w

ebsite (non targeted)

Sponsored links

Newspaper ads

Display ads on an e-com

merce w

ebsite (targeted)

Magazine ads

TV ads

When are you most likely topay attention to an advert?

61%

E-Commercesite

SearchEngine

Portal SocialNetwork

41%

12%7%

You may not have an online business right now: you will in the future. There is not a service or product that at some point in the future will not be sold through the retail channel of the Internet. If you think this is misguided, then consider that in the past few years eBay has sold everything from a $10 broken laser pointer to a $5m Lear Jet. If you are in business, then you are in the business of selling. The opportunities to exploit the online channel through advertising are enormous but we have only just begun.

So as the e-tail world starts to open up to advertisers, here are some guidelines to get you started:

1 think about your online distribution strategy

Location, location, location is the oft repeated mantra for retailers and it is no less important online. It is not enough to build a shop then expect people to find you. Of course there are ways for brands to improve visibility, with search being perhaps the most obvious one. However, if you really want to build trust and familiarity to your business you need to be not just easily found, but a regular feature of the landscape.

There is much to be written about the success of markets, retail parks and retail destinations. Consumers will visit places like these because they can find everything in one place. Shops will locate themselves there because they benefit from the enormous footfall of people out to do just one activity – shopping.

So, when you build your retail outlet think about where you can put it, not just how to advertise it. Put it where millions of potential customers pass every day, doing everyday activities.

eBay advertising’s guidancefor online Advertisers

2 understand how consumers are shopping for your product

As we have already discovered, the type of purchase being made impacts not only what motivates people to buy a product or service online, but also who they choose to buy it from.

This insight should have a significant influence on your marketing mix. Is it about generating familiarity, or focusing on a search led strategy?

If you are a retailer of groceries or entertainment then it’s very much about the brand. That sounds simple to say but of course it comprises many things. Service is arguably the most important, but selection of goods, trust and familiarity are just as important in an online context. Online is actually a great channel at building brands once we stop thinking about it in pure advertising terms. We refer you to our earlier point about distribution as a key pillar in building familiarity.

If however your goods are more price led, infrequently purchased, or require a more rational decision making process then a focus on your discoverability through search is more important. This doesn’t just mean ensuring you buy the right keywords but that you consider a range of search options available to you. Google may be the dominant player and arguably the most important base of any successful search activity, but there are a range of other options to add to this. Consider eBay’s AdCommerce service with arguably the largest number of product based searches on the web. Other broad range search engines such as Bing, Yahoo and Ask also add good value and vertical search engines and comparison sites such as mySupermarket, comparethemarket and Blinkx represent a fast growing trend that offers consumers more specific searching and advertisers better quality leads.

Whatever sector your business is in, there are advantages to be gained by better understanding how your customers select you online.

3 Make your advertising contextual

The idea of context is not a new one, but with the proliferation of advertising inventory on the web and the measure of success being much more about the ‘click’, one could argue that it is not held in the esteem it once was. The advertising opportunity with online retail media really does change the game in this respect. There is little question as to why someone might be on an e-commerce site and therefore little chance of misunderstanding the opportunity for the advertiser.

With so many online retailers opening their doors to advertising, there are growing opportunities to influence the purchase of your goods and services once inside the store. Brands do this in the high street all the time so why not online? An advert promoting a discount or a special offer or an invitation to purchase is arguably better placed in a retail environment than a social one.

None of these ideas are mutually exclusive. It’s likely that most brands can and often do consider a combination. But there are opportunities here that can be further exploited, and in particular the opportunity within retail media goes a step further. From the car insurer who can speak to consumers who have just bought a car, to the pram manufacturer who can talk to the consumer who has just bought new-born baby clothes: by monitoring and recording purchase behaviour online (same as it is in any high street store) context can be taken to a new level.

The following are our top tips to help you make the most of your online retail opportunity:

1 think about your online retail store the same as you would do offline. Location is key to optimise visibility and reach: there is no point in having the most user-friendly store on the Internet if no-one is aware that it is there!

2 our survey showed shoppers are most receptive to ads whilst on e-commerce sites looking to buy products. So when making key decisions about advertising placement, consider where you will be able to take full advantage of existing footfall of internet shoppers already in the purchase-mindset.

3 clarify how people choose to buy in your vertical and modify your marketing mix appropriately. Do people use your brand for regular, logical purchases or less frequent, emotional purchases?

4 Make sure you look for context wherever you can. Don’t underestimate the power of monitoring purchase behaviour online. This can help you reach consumers with messages that are not only relevant, but are likely to influence a decision.

toPtips

“ as the online retail market grows, so too does the opportunity for advertisers to engage with consumers in this environment. this insight from eBay advertising reflects the growing importance of the internet as a sales channel, and the growing opportunity for brands to influence those sales online just as they do in-store.”

david J. smith director of operations, iMrG.

For further information please visitwww.ebayadvertising.com