It’s time to say goodbye to a bad e-commerce advertising strategy

At the height of the Covid-19 pandemic, the power of e-commerce was revealed. According to Statista, there were a total of 321 million e-commerce transactions in the UK in November 2021. This represents an increase of 19% compared to November 2020.

With such a huge number of conversions, companies in this industry have collectively achieved huge revenues with relatively little effort. But that’s just one side of the story; the e-commerce boom has also led to a significant increase in return rates, with significant logistical and cost implications that negatively impact the bottom line.

In recent times, economic and political uncertainty creates a delicate balance for the e-commerce industry. As the cost of goods rises while consumer confidence declines, companies must rethink their marketing strategy and achieve incremental profits.

In a digital environment built on data, separating the signal from the noise is crucial. However, this is something that organizations often fail to optimize. Instead, the cacophony drowns out the key note you need to identify to make profits.

Connect your marketing and business goals

One reason for this is the tendency for companies to view marketing goals and business goals in isolation, when combining them should be high on the company’s agenda. Marketing is rarely held accountable beyond the initial purchase, and many advertisers still optimize for revenue.

The shift to more automated campaigns has changed the marketing landscape. Artificial intelligence plays a key role in powering digital advertising campaigns – and we can be sure that there will be many more innovations to come – but its black box nature means that many advertisers struggle to optimize campaigns like Performance Max. This makes bidding for the right signal even more important, as it becomes a key performance lever.

Google recently announced that advertisers will soon be able to optimize for profit and switch between profit and revenue optimization without impacting performance. This allows advertisers to get one step closer to connecting marketing effectiveness with business goals and make smarter strategic decisions. I’m sure it won’t be long before Meta and TikTok offer a similar solution.

Three ways to improve your digital advertising performance

Bidding on the right signals will help increase your profits. In addition to profit, there are three other ways to use first-party data in bidding algorithms:

Beyond average rates of return: High product return rates can reduce your margins. While many platforms suggest adjusting conversion values based on average return rates, the approach is simplistic and ignores differences across markets, product categories, and even seasons. Instead, train your algorithms on detailed return rate data so they can make more accurate adjustments to conversion values.

New customers matter: Customer loyalty is valuable, but neglecting new customer acquisition is a recipe for stagnation. Traditional strategies can unintentionally prioritize existing customers based on their conversion history and propensity to purchase. Tell the algorithms that new customers are worth more by adjusting their value.

Supplies management: Algorithms love good sellers, but they can overpromote low-stock items. This hurts both sales and customer satisfaction. Conversely, overstocked items can eat into profits. Early detection and proactivity are key. Integrate data into your algorithm, which will identify potential inventory issues and adjust your bidding strategy accordingly. Reduce waste on low-stock items while helping to eliminate high-stock items.

Send a signal and watch the results

Data is the catalyst for more effective algorithms. In a world powered by artificial intelligence, high-quality data and the insights it generates can be the difference between beating or falling behind the competition.

E-commerce marketers must learn to use first-party data effectively or risk being outmaneuvered.

To get started, the first ingredient is to create a solid data foundation that makes your data – your unique strategic asset – ready for deployment. The second ingredient is your imagination, which is the only limit to how far you can go in activating data to maintain your marketing impact and business growth, ahead of the competition.

Jess Dickenson is Managing Director Precise digital and is responsible for leading the development of the agency on the British market and providing clients with innovative and integrated marketing solutions. Precis, a data-driven digital marketing agency founded in 2012 by three former Google employees, keeps its global clients at the forefront of marketing with an integrated approach to strategy, media buying, data activation and creativity. Its digital experts act as strategic partners for growth and digital excellence, and its proprietary technology called Alvie includes some of the most important solutions in a marketer’s toolkit for use by the agency and internal teams: from data export and reporting to forecast modeling, bid signals and attribution . Precis works for major fashion brands such as COS, Arket, &Other Stories, Acne, Reformation, Alexander Wang, Anine Bing, NN07, Nudie Jeans, Fjällräven, as well as many other industries.