Digital activation

Digitalization has important implications for shopper marketing. The introduction of RFID (radio frequency identification) technology in the 1980s made it possible to track products and to make the supply chain more efficient, an important ingredient in the evolving ECR collaborations between retailers and suppliers. With the expansion of the internet, online searches and presentation of products and services became possible in the 1990s and 2000s, as well as e-commerce, direct to consumer sales, omnichannel, and brokerage platforms. The next phase is hyper-connectivity through the internet of tilings (loT) and artificial intelligence (Al), which will change the mechanics of shopping. Changes will include entire connected shopping ecosystems and moving from checking out to checking in through cashierless technologies, inter-connection between mobile devices and shopping, as presented by Alibaba at its 11.11 shopping events. This development is a clear step from channel focus to consumer and shopper centricity. Instead of marketers determining the when and where through one-way communication with broad messages for all, the consumer and shopper will determine the when and where through a more interactive dialogue of personalized, relevant and contextual messages.

Digital activation increases the opportunities for activating consumption need states beyond just categories, products and services. If it is not a fully planned search or purchase for specific products, shoppers are increasingly looking for solutions and adjacent

Figure 5.21 Strategic shopper-centric category management model Steps of a strategic shopper-centric category management model.

Source: Author based on Deloitte & Winston Weber and Associates, 2015; ECR, 2009

Figure 5.22 Consumption need states activation by H&M

Example of how H&M (Hennes and Mauritz) defines and activates its consumption need states.

Source: H&M, 2014; Author

Figure 5.23 Shopper activation by H&M

Example of how H&M (Hennes and Mauritz) activates shoppers in a brand-coherent manner.

Source: H&M, 2014; Author

services. One example is the rise of meal kits for home delivery; full food solutions rather than individual products. Digital gives the freedom to break the shackles of physical category shelving, the limitations of brick-and-mortar stores, and offers the opportunity of a shopper- and consumer-centric organization of products and services. Categories can be organized within broader consumption need states in a digital presentation that allows for multiple searches and combinations, e.g. breakfast, back to school, and not solely one specific, which is often the case in the physical environment of brick and mortar. These consumption need states can span multiple product types, storage requirements and even services. One example is the collaboration with aggregators that can be activated on two levels. Firstly, through partners, e.g. by promoting combined solutions. One example could be beverages with the partners of food aggregators. The other level is a shopper activation directly with the aggregator. One example is the joint promotion of Uber Eats and Coca-Cola of free delivery dining Christmas 2018 in France.²⁷

The approaches toward digital and e-commerce activation depend on the objectives and the stage of the shopper in the shopper journey, whether it is to attract new shoppers; whether the shoppers are browsing or already in the choosing mode; or whether it is to develop and engage existing shoppers. When it comes to attracting shoppers to e-commerce, the strategy is to build traffic, normally with a wider scope of potential shoppers targeted. Attracting potential shoppers or light users normally means a broad approach across digital media channels, using SEO, paid searches, banners, presence on retailer, brokerage and social media platforms.

For shoppers in browsing mode the objective is to facilitate the purchase, increase the desire to purchase, by helping in the search and purchase process. This is especially important for categories and solutions with lower e-commerce penetration and percentage of sales. On retailer and brokerage platforms, next to SEO in general content management is key to building higher engagement and providing information to shoppers in active browsing mode and comparing different solutions. Supporting activation includes paid searches and product promotion with banners and digital ads on websites in line with the shopper targeting.

When shoppers are already engaged in the category or in a specific solution mode, the challenge is to ensure the purchase and focus on the benefits of products and services. Content management is a key dimension, as are reviews and videos explaining the product and service. The classical approaches of SEO and paid search product promotions and digital ads are still help fid activation tools.

For shoppers who have already added products and services, or entire solutions to their cart, the challenge is to expand the basket, normally by adding adjacent or complementary products and services. Activation includes paid search recommendations, content management, reviews, digital coupons, digital ads, email marketing, etc.

Shopper engagement approaches are used for shoppers who have already purchased. The objective is to drive a return to sites for future purchases by increasing satisfaction and building an ongoing relationship. Social marketing, loyalty programs, and email marketing all play a vital role, next to the more general approaches of digital ads, videos and directing shoppers and consumers to the brand website.

B aimer advertising is a general tool that creates brand awareness, generates leads, and supports retargeting, something that has expanded into Facebook and Instagram sponsored ads. Facebook and Twitter now account for a large amount of spending on online display advertising.

Targeting is key to understanding which activation approach to prioritize depending on the stage in the shopper journey. Digital marketing has the advantage of the availability of vast amounts of data and the possibility of advanced analytics approaches. Still, large amounts of data and advanced analytics do not ensure relevance and effective targeting. It just increases the possibility of robust targeting. Types of targeting can include:

• • Audience targeting that is based on demographic characteristics and sometimes broad interests. This is broad targeting and often available at a lower cost when buying media.
• • Behavioral targeting, based on e.g. websites visited, products searched. Sometimes even offline behavior can be researched, such as stores shopped, products purchased, and media viewed.
• • Daypart targeting, which targets people who are active at certain times of the day.
• • Retargeting is targeting people that have engaged previously with the content of certain websites, from visiting to purchasing products and services.
• • Geotargeting focuses on the location of shoppers. It can be at the zip code level, or more granular, including store locations, and in some cases the in-store location.
• • Device targeting is targeting and retargeting based on specific devices used, e.g. smartphones.

One approach to understanding and predicting shopper behavior is look-alike modeling. It is an understanding of precise shopper characteristics based on specific shoppers’ past behavior. These insights can then be applied to a much wider group of shoppers that have similar characteristics.

Important sources for targeting include first-party, second-party and third-party data. First-party data is a company’s own information from websites and programs, including customer relationship marketing. Second-party data is information from another organization’s first-party data. It is less commonly used due to privacy and data-sharing concerns, but it is sometimes used in supplier and retailer collaborations. Third-party data is information collected,

Figure 5.24 Website visitor demographics

Visitor demographics of health retailer site in the UK compared to the general internet population.

Source: Author

aggregated and sold by another organization. In e-commerce, targeting and analysis of web-scraping data is an important tool. It is generally done with software that simulates human web surfing to collect specified bits of information from different websites. Web data extraction is also referred to as web harvesting and in essence is a form of data mining. Data displayed by most websites can only be viewed using a web browser. Web-scraping software automates the process of analyzing data, which otherwise would need to be copied and pasted in a manual manner. Web-scraping software automatically loads and extracts data from multiple pages of websites based on defined requirements. With search engine optimization (SEO) and keyword research using tools like Google Ads and social listening approaches, traffic flows, drivers and content reactions can be surveyed. SEO reviews of the most critical keywords within a category' can help to drive up products and services in the rankings on search engines and other e-commerce channels. With social listening, commentaries from consumers and shoppers can be distilled regarding their attitude to and relationship with products, services and brands.

Google Ads is the world’s largest entity matching publishers with advertisers. Website publishers contract with Google to place advertisements on their sites, e.g. text, images, videos. Google then suggests the type of ads to run on a given site based on traffic, content and number of advertisers interested. Publishers are paid by cost per click (CPC) and

Figure 5.25 Key online search sources

Top search sources for health retailer site hi the UK.

Source: Author

Figure 5.26 Brand interest online search

Searches of the top four brands of vitamins & supplements in the UK in 2018.

Source: Author

advertisers bid how much they are willing to pay. Google uses algorithms to match publishers and advertisers. The sites with the highest number of unique visitors and that incorporates the most valuable keywords receive the highest CPC. The auction for ads is dynamic and continuous, so the CPC is changing continuously. For smaller publishers it can be difficult to join the program and meet the minimum payout. Peer-to-peer networks and block chains have developed, such as Bit Teaser, which started in January 2015 and charges and pays in bitcoins.

Retailers that are fully e-commerce oriented or omnichannel players are a vital part of e-commerce sales. Category management and ECR approaches have been fundamental in the development of collaboration between retailers and suppliers. With e-commerce, collaboration needs to be adapted to the new digital reality. The Partnering Group together with the Category Management Association have developed an overview of how to organize such collaboration. They call it e-commerce category leadership (ECL), which denotes a collaborative supplier and retailer approach for shopper engagement to drive accelerated business results through e-commerce channels.²⁸ Through a collaborative approach of joint planning, development and testing shopper needs can be better met, and shopper baskets developed, e.g. through better cross selling. One key difference to classical category management is that beyond the category as an organizing principle, solutions that create distinct, manageable groupings of products and services, that consumers and shoppers perceive as interrelated to meet their needs, can be used in ECL projects. The Partnering Group sketches five steps that should be agile, and therefore, although normally sequential, could be changed due to the situation and the specific needs. The five steps are define, discover, design, develop and deliver, referred to as the ECL 5D process.²⁹

For a successful ECL process, suppliers and retailers need first to agree on the process with clear steps, inputs, outputs and metrics. Secondly, they need to re-imagme categories, as the online shopping process is not bound by physical presentation constraints as in the brick-and-rnortar sphere. This means rethinking the categories into wider solutions and how shoppers understand and search for these. Websites are more versatile, as different types of search and decision trees can be accommodated. Some shoppers will have a high level of planning, while others may just be browsing for solutions to their consumption need states.

Figure 5.27 E-coimnerce category leadership (ECL) process Overview of the five agile steps of the ECL process.

Source: The Partnering Group. 2018

Figure 5.28 Digital decision tree

Example of decision tree structure for OTC pharmaceuticals in Europe.

Source: Author

Thirdly, e-tailers and manufacturers need to agree on data sharing and the development of quality insights. E-commerce provides massive amounts of data, including web analytics and shopper databases. Converting data into action requires targeted data sharing, objectivity and specific analytical skills combining retailers’ knowledge of crosscategory and shopper trends with suppliers’ expertise of their product categories and consumers. Fourth, the concept of category captain needs to be reassessed. In a more consumption need state-oriented approach, solution partners are needed rather than category captains. This is a more project-oriented approach involving more partners to tackle cross-category topics.

Digital and e-commerce change the metrics due to the different drivers to the brick-and-mortar sphere, as well as the availability of different type of data. Metrics such as sales, margin, or profit per square meter (or foot), footfall (number of visits), or number of stores lose importance, while revenues and margins across channels in an omnichannel reality, basket size as a metric of cross-category solutions and return on capital employed, due to technological investments, gain in importance. In addition, the cost to serve due to the new delivery reality with last yard delivery has become an important metric to fully understand the profitability across channels and shopper segments. Marketing metrics such as return on investment (ROI), awareness, sales and loyalty are equally important in the digital world.³⁰

When analyzing online and e-commerce behavior, it is important to understand the flow from consumer and shopper awareness to action. Impressions are a metric used to quantify the display of an advertisement on a webpage. Impressions are also referred to as ad views. Counting impressions is essential to how web advertising is accounted and paid for in search engine marketing. Impressions do not measure clicks, only that an ad has been displayed; it measures the occurrence of a web page being found and loaded. Charging for impressions is normally on a cost per thousand impressions basis (CPM, with M for mille). The advertisement is then removed when a daily budget, set by the supplier, is achieved. The clickthrough rate (CTR) measures the percentage of people that saw an advertisement and clicked on it. As internet users are becoming immune to advertisements, click-through rates are normally quite low, often under the 1-percent level. Click-through rates are normally charged as CPC. The CPC method is based on the number of times visitors click on an advertisement. Another measurement is the bounce rate, the percentage of site visits that are single-page sessions with the visitor leaving without viewing a second page. It is usually used as a measurement of a website’s overall engagement.

The final objective of e-commerce is to drive sales and convert shoppers into buyers. The conversion rate is the percentage of click-throughs that lead to actual sales. The conversion is normally charged on a cost per action basis, e.g. a payment for every website visitor who completes a task, e.g. filling out a form, or making a purchase. This is often referred to as cost per acquisition (CPA).

As social platforms are increasing in importance social shares, e.g. sending photos, videos, product recommendations and website links to friends are becoming an important metric for understanding consumer and shopper engagement.

When it comes to email campaigns metrics like open rates, e.g. emails opened compared to those sent, and unique open rates are often used. e.g. emails opened by recipient (if one recipient opens the same email several times it is still counted as one) compared to emails delivered.

Understanding the activation effectiveness and costs of different digital marketing tools is the basis for defining the optimum traffic mix for the e-commerce effort.

Figure 5.29 Traffic mix optimization by targeted volume

Optimization of traffic drivers for e-commerce for vitamins & supplements in the UK in 2018.

Source: Author