Performance Marketing: The Missed Opportunity That’s Costing Big Box Retailers Billions

Marketing Innovation

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Performance Marketing: The Missed Opportunity That’s Costing Big Box Retailers Billions

Marketing Innovation

[Editor’s note: Bryan Leach, founder and CEO at Ibotta, is a speaker at this year’s RampUp. We invited him to share his thoughts on data and marketing trends. To learn more about RampUp, check out the agenda.]

Shifting consumer behavior is forcing brick and mortar retailers to innovate. Over the past decade, many iconic retail brands have seen their market values decline precipitously. A wave of anchor store closings this year followed a holiday season that saw store traffic fall dramatically. Meanwhile, Amazon now has more value than all the major, publicly-traded department stores in the United States.

CEOs and CMOs at these retailers often concentrate their efforts on becoming more competitive in ecommerce. This approach is insufficient, not only because their companies lack competitive differentiation from the pure-play ecommerce giants, but also because the vast majority of their revenues are still generated in-store. Using Target and Walmart as examples, less than five percent of their annual revenues occur online and the margins they derive from this business are often weaker. If these companies wish to regain ground quickly, they must find new ways to drive offline sales, where they have valuable and unique assets that create a sustainable competitive advantage.  

How can traditional retailers use technology to beat the online retailers at their own game? By embracing performance marketing like never before. Beginning two decades ago, Amazon and others began providing commissions to large publishers who drove conversion to online sales through an affiliate model. This approach was highly efficient because it harnessed the power of large online audiences and incurred marketing costs only when actual, measurable sales were generated. Today, the U.S. online affiliate marketing industry exceeds $4B. The growth of performance marketing has now surpassed that of email, search, and other forms of digital marketing.

Performance marketing may have fueled the growth of ecommerce, yet remarkably it remains largely untapped by brick and mortar retailers. Innovation in this area can yield store-based purchases and support the successful launch of newer click and collect strategies.

What are the hallmarks of an effective offline affiliate strategy?

First, retailers must acknowledge that most in-store sales are influenced by pre-shopping interactions on mobile devices. Retailers have no choice but to aggressively promote their brands on the top third-party mobile shopping apps because this is where consumers develop purchase intent. For instance, in December 2016, US consumers spent more minutes in the Ibotta app than in the mobile apps of nearly all of the top 50 big box retailers combined.

Second, retailers must make substantial investments in “always on” offline performance marketing rather than continuing to view affiliate marketing as solely an online phenomenon. Companies such as Ibotta have now made it possible for retailers to measure and manipulate the mobile-to-offline conversion funnel with greater precision than ever before.

For example, a retailer can create a specific rebate inside the Ibotta app for a customer, and when that person redeems the offer, the retailer can connect that shopper’s engagement directly to a purchase made at the store. There is no guesswork about the effectiveness of the advertising, plus retailers only pay Ibotta when a sale is made.  

Retailers that prefer to wait until next year to capitalize on these trends fall farther and farther behind their nimbler competitors.

Third, retailers must emphatically reject the current, broken affiliate model which requires them to pay publishers the same flat commissions regardless of whether the sales they generate are incremental.  Last year, in partnership with LiveRamp, Ibotta launched the world’s first Dynamic Segmentation™ offering to fix this fundamental problem.  

Working with LiveRamp, Ibotta leverages each retailer’s anonymized CRM data to tag consumers as new-to-file, occasional, or loyal on a rolling basis. Ibotta applies a different publisher commission depending on the type of traffic it generates. This new approach ensures that the bulk of a retailer’s investment is devoted to building incremental spend and new-to-file growth. By recognizing that not all in-store sales are created alike, Ibotta and LiveRamp have brought an essential innovation to performance marketing and the affiliate world.

Emerging technology is not solely an ally of online retailers. By embracing new tools and techniques that unlock the power of performance marketing for the offline world, leading retailers such as Jo-Ann Fabric and Craft Stores, Best Buy, and Hallmark have developed smarter and more efficient promotions that are helping invigorate their offline businesses.

Secure your spot today to hear Bryan Leach speak in the RampUp panel,Mobile’s Role in the Path to Purchase.” For more about Bryan and the rest of the RampUp 2017 speakers, see our speakers page here.