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Retail Media Mythbusters – What Would You Believe?

Retail media is booming. By the end of 2021, retail media is set to account for one in eight digital ad dollars in the US, with investments expected to increase by nearly 28% this year. But with all the new retail media platforms and ad types, what’s myth vs fact? Let’s take a look at the cold hard facts and bust open some common misconceptions in the retail media industry today…

Myth #1: If something is a driver of sales, I can quantify and measure it.

Attributing every dollar of sales to a specific input is what everybody aspires to achieve, but of course the reality is that there’s no perfect way to measure most inputs. One of the main limitations is human psychology and the inability to get into the mind of all consumers and assess their purchase decisions. Even if you could conduct a survey of every customer, you would never get the entire truth behind what percentage of their decision to buy a product was based on price versus ratings and reviews versus image quality.

Some components are more easily measured than others: price elasticity, for example, which is the measure of how consumers react to the prices of products. Sales attribution models can also be useful, but you need to know that you should use them directionally and acknowledge that they have limitations.

How do you measure sales drivers? Let’s look at the sales growth attribution waterfall below. What it tries to rationalize is the overall impact that all these factors have in leading up to a sale. When you have this many variables, it becomes nearly impossible to have an overall perfect way to measure impact because the digital shelf is constantly changing.

Content is incredibly important – it’s one of the overall fundamental pieces of retail readiness. When you look at measuring the impact of content, it’s crucial to conduct A/B testing on your product images, titles, and bullet points. The challenge is that other variables that impact conversion are not static, such as pricing & fulfillment (Buy Box), ratings and reviews, and variations changes. Just on the detail page, there are numerous factors that convolute sales attribution methodologies.

Other challenging variables to measure at scale would include Brand Equity & Trust and Retailer Trust. How do you get into the head of a consumer and decipher if they made a particular purchase on a certain platform for your product because of trust? It’s simply impossible.

Myth #2: Incrementality is measurable and is a crucial metric to success.

What’s true is that measuring incrementality is the holy grail for advertisers. If you could measure perfectly what’s driving each conversion, then you could be very impactful and drive incremental sales for your company. Understanding incrementality could enable your advertising team to spend where there’s the biggest lift for your business, so you could double down on investments and drive additional sales and share for your company. Ultimately, incrementality attempts to measure the probability that a customer would have bought your product had you not advertised.

There are some key limitations and challenges to incrementality:

  • Share of Voice (SOV) is useful but can’t cover every single listing placement on an eCommerce marketplace.
  • As more and more consumers convert from a past purchase list or Subscribe & Save, an incremental sales metric may miss out on the total Customer Lifetime Value (CLV).
  • Price differentials between products mean that an upsell strategy is still an incremental sale – not just a “yes / no” for a new conversion.
  • Platform nuances result in differences in incrementality between paid and organic listings. For example, on Amazon if you have an organic listing, you could also boost that product to the top of paid results, so you could have paid and organic on the same listing. In contrast, on Instacart if you were going to show up organically but instead you invest in Paid Search, your organic results are now a paid result.

How Does Pacvue Think About Incrementality?

We execute against paid search strategy tenets that will maximize top-line sales, grow share, and facilitate your brand objectives.

Core Strategies:

  1. Promote products with low organic visibility
  2. Ramp up new distribution
  3. Drive strategic profitable mix – any good paid strategy is really a portfolio of micro strategies

Myth #3: DSP isn’t right for my business.

Customers who are exposed to both Amazon Demand-Site Platform (DSP) and Sponsored Products Ads are 5 times more likely to purchase than customers who are only exposed to Sponsored Products Ads. When we talk about Search vs Display, it’s not about one or the other – they’re different tools and used for different objectives, all with the goal of acquiring new customers and growing incremental sales. However, they’re better used together and should not be considered as mutually exclusive products.

Not every consumer starts their shopping journey by searching for a product. The consumer might not even know that they wanted to buy a particular product. But they were surfing online and then served an ad that brought them into the funnel, which is best achieved with Display media.

Make sure you understand your business goals and objectives, what ad products are available to you to accomplish those goals, and then how to best leverage those together to have a full funnel approach.

In a full-funnel strategy, ROAS is no longer the only metric that matters. Search & DSP have different KPIs, and thus should be managed differently. Display is a little bit longer of a consideration vehicle. If you’re searching on a keyword, you’re likely to have stronger purchase intent than just browsing around and stumbling on an ad and clicking into it. Display is predominantly used to drive more brand awareness and meant to be more upper-funnel, bringing in new-to-brand customers and targeting customers in-market already searching for similar products that haven’t experienced your products just yet. Display is also complementary at the bottom of the funnel through remarketing.

ROAS should really be used as a guardrail. By leveraging a set of data points to triangulate the efficacy of your advertising investments is critical because you could be missing opportunity if you get too honed-in on one metric and you’re not seeing results.

Myth #4: I don’t need to invest in OTT because I’m already investing in TV

Over-the-Top (OTT) advertising is any ad served via on-demand platforms like Netflix and Prime Video.

In a rapidly changing landscape, OTT is growing fast and fueled by a fundamental shift in consumer behavior, sped up by younger demographics having more spending power. Trade Desk announced a 101% increase in revenue growth for Q2, citing a 50% increase in connected media advertisers over linear cable tv advertisers. According to eMarketer, 24.1% of US households in 2020 were “cord cutters”, projecting another 11% increase to 35.4% by 2024.

The retail media industry is moving quickly with innovation happening every day. From new advertising products to new marketplaces, we’re hearing rumors circulate on social media, through word of mouth, and from other vendors that continuously need to be debunked. Are you interested in learning more about retail media? Download Pacvue’s Retail Media Flight Plan today!


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