Why the Nature of the Agency & Retailer Relationship Needs to Change

To say that UK retailers are operating in a difficult retail environment won’t be news to anyone. The bigger issue is that this also somewhat underestimates the problem. In this piece, Ian Tansley (pictured below), non-executive director, Croud, tells RetailTechNews that shopper behaviour – and the relationship between brand and customer – has fundamentally shifted. Retailers are currently going through a period of evolution, as they continue to look for the best way to do business and win over customers in a multichannel environment.

One in every five pounds spent in UK shops is now being spent online and, as the amount of money spent in online stores continues to rise, digital marketing has become an increasingly important part of the marketing mix. The customer journey is now much more complex, when navigating between online and offline, so a successful digital marketing strategy is paramount to achieving success across both channels.

With the increasing reliance on digital marketing to drive sales, it’s important that the digital marketing and online advertising experiences are both positive. The online advertising experience is improving, but I believe that the majority of digital marketing budgets are being used inefficiently and ineffectively. There are still common mistakes frequently made, such as poor levels of personalisation or intrusive remarketing adverts being served to people for weeks on end. This experience needs to be improved for retailers to succeed; not only to ensure it doesn’t negatively impact shopper perception, but so that marketing spend is used effectively, and results in sales and customer advocacy.

With many retailers facing serious financial pressure, it has never been more important to account for every marketing pound spent and the impact it has on the business. I believe that the root cause of poorly executed digital marketing campaigns is a breakdown in communication between digital marketing agencies and retailers. Agencies are not asking for the right briefs and, likewise, retailers are not sharing the right ones. This means that often retailers aren’t being given the right advice from their agencies. There’s little hope that digital marketing will achieve success without both parties clearly understanding what the big picture is and what the goals are. Without this understanding, how does either party even know what success looks like?

Croud, agency brand relationships must change

Ian Tansley, Non-Executive Director, Croud

Clearly communicating goals will go a long way in improving the relationship and results achieved. However, the nature of the agreement between agency and retailer also needs to change. For example, agencies are often incentivised directly or indirectly to maximise advertising spend. The more the retailer spends, the more work required by the agency team to manage that ad spend. The increase in agency hours translates to a heftier invoice for the retailer.

This isn’t healthy, as agencies are financially incentivised to keep pushing ad spend higher and higher, rather than to take into consideration the best possible use of budget to reach their goals. Higher advertising spend does not always mean better return on investment, so often both parties will be working towards different goals.

An increase in digital marketing activity means there is an increase in data available to retailers to better understand the cause of positive, or negative, results. It is important retailers make proper use of the data that is available to them to interrogate results. It provides a deeper understanding of shopper behaviour that simply isn’t available offline. However, we can never be 100% sure whether a customer would have made a purchase anyway, regardless of the marketing content served up to them.

I briefly mentioned remarketing earlier; it can be an effective way of reminding potential customers to go back to a site and complete a purchase. However, it is still very hard to actually attribute that sale to the remarketing. It might be that the shopper would have returned and made their purchase regardless of the adverts, for example.

To assess the success of a remarketing campaign, marketing teams must try to understand how much incremental revenue is being generated. One way to optimise remarketing effectiveness might be to wait for a certain amount of time (24 hours or more) before serving the content. That will give those already intent on making a purchase time to do so organically, whilst still engaging with a captive audience to drive additional sales.

A more advanced option is to use ‘ghost adverts’. These ads help to show retailers what the conversion rate would have been if you took the same potential remarketing customers and didn’t show them the advert. This tactic helps to understand the real incremental results. Some agencies do this already, but it’s not commonplace. However, I believe all agencies should be more transparent and proactive in promoting these techniques.

The huge pressure on the retail sector means that every cost incurred needs to work hard to deliver results to the bottom line. Agencies, as close partners to retailers, need to step up and help brands weather this storm. As retailers navigate this period of evolution, marketing agencies are an ideal partner to help support with innovation and transformation. Yet, for this to be successful, it needs to be based on a transparent relationship built on trust and respect.