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    Ecommerce Strategy: Uncover the Full Revenue Impact of Retail Ad Spend

    7 minute read
    Ecommerce Strategy: Uncover the Full Revenue Impact of Retail Ad Spend

    Marketing leaders want to know the full scope of the returns on their campaigns and strategies: What’s working? What’s the return on investment (ROI)? What needs adjusting?

    The vast majority of marketers are only calculating the most visible, short-term metrics to identify their retail advertising performance. But there’s more than meets the eye.

    Teams are likely measuring the traditional marketing metrics like ad clicks, the amount of online sales ads directly led to, the media value generated by their ads, and so forth.

    These are “the known” impacts — they are the most visible — and they are short-term. But these metrics are just one small part of the complete picture. What about the number of dollars generated on offline channels that stem from the dollars spent on a retail ad with Amazon or Walmart?

    Understanding the full scope of the revenue impacts from your retail ad spend is critical to developing your advertising strategy.

    Molly Schonthal, executive founder of the Digital Shelf Institute (DSI) Executive Forum, and ecommerce expert Chris Perry shared their industry-tested lessons at a recent DSI webinar.

    ‘The Known’ Impact

    The most visible ecommerce metrics are media value and online sales as a direct result of your retail ad spend. Ads on the major retailer sites generate media value much like ads do on print, social media, and online publications.

    The second “known” impact of retailer ad spend is the number of online sales generated as a result of this ad direction.

    Retail media reaches target consumers, engages them with brand messaging, and directs them to purchase. One example of retailer ad spend’s media value: One leading beverage manufacturer garnered more media value from an advertisement during Amazon Prime Day than an ad slot during the Super Bowl.

    Brands need to see the value in retailer ad spend, especially with major online events such as Amazon Prime Day, as they have similar reach value as the Super Bowl — if not more — on a platform directly linked to sales for far less cost.

    The Below-the-Surface Impact

    Media value and online sales are not the only ways a retail ad garners interest for your products and brand. There are several significant impacts stemming from retail ad spend that ecommerce experts have found.

    These impacts form a “rainbow effect” that captures lasting effects across all meaningful categories over time, in which a short-term effect will lead to a longer-term impact.

    For example, more online sales will drive an increase in your repeat rate, which enhances your digital visibility.

    The Short-Term Impact

    The first short-term effect is offline sales. Your ads on Amazon or Walmart may not drive every consumer to purchase directly from that ad, but the impressions can affect the shoppers later.

    Many shoppers also research products on digital channels while shopping in brick-and-mortar stores. According to a Google study, 71% of consumers use their phones while shopping in-store and say that their phones have become more critical to the in-store experience.

    Offline sales can lead to massive impacts over time. One leading laundry brand found that their Amazon paid search campaigns generated a 10% increase in point-of-sale (POS) velocity in-store, according to the DSI "The Full Revenue Impact of Retailer Ad Platforms" report.

    The report also showed a leading household cleaning brand found that their media mix modeling (MMM) campaigns lead to $7 in returns in offline channels for every $1 spent on Amazon advertising.

    A significant short-term — but also long-term — impact is your partner value. Your ad spend will support retail profitability and demonstrate a commitment to that retailer’s shopper acquisition and retention efforts.

    Ad spend creates a win-win scenario for both brands and their retail partners when properly leveraged.

    The Mid-Term Impact

    Another “hidden” metric is the repeat rate of online customers. Retail ads will lead to more online sales, which lead to more repeat customers.

    Repeat customers can also come in the form of retailer subscription capabilities or the digital visibility of shopper’s past purchase history. The DSI study found that 86% of online grocery shoppers look at their previous purchases to add to their basket.

    Both online and offline sales will lead to increased social validation in the form of additional reviews. According to a Power Review study, 70% of shoppers won’t buy online without reading online reviews first.

    But the more shoppers leave reviews on your product detail pages (PDP) across the digital shelf, the more likely that other shoppers are encouraged to purchase it too.

    The Long-Term Impact

    Repeat rates and social validation both lead to increased digital visibility. The more sales, the more your product will be featured in search results. The more repeat customers, the more your product will be featured. The more reviews, the more your product will be featured.

    Your search rank will continue to improve as these factors improve. The “flywheel effect” is real: For every 100% gain in impressions, there is a 92% gain in unit sales, according to the DSI report.

    The increase in sales drives more impressions, and so the cycle continues.

    Social validation and offline sales will lead to increased offline placement opportunities. Proving strong ecommerce performance will provide expanded opportunities to stock your product on physical shelves.

    Putting It All Together

    Each of these impacts will lead to improved cost per acquisition (CPA). Better ad efficiency creates a better marketing ecosystem to further this cyclical pattern. When done well, better ad spend leads to budget efficiency, increased sales, expanded repeats and reviews, and ultimately to more visibility and placements.

    Realizing the full scope of the revenue impact of your retail ad spend helps marketers understand the true return on ad spend (ROAS).

    Download the complete DSI report and calculator to build your understanding of your retail ads' true return, helping you strategize for tomorrow.


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    Written by: Brian Johnson

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