How Can Retailers’ Digital Advertising ‘Fuel the Funnel’?

There is still a conundrum for retailers when they think about digital advertising: If the majority of purchases still happen in the physical store, why should they increase investment in digital? eMarketer’s Tricia Carr spoke with Courtney McKlveen, Yahoo’s vice president and industry lead of retail, travel and quick-service restaurants (QSR), about the underlying opportunities that digital advertising has for retailers.

eMarketer: What is the biggest challenge for retailers in the digital space?

Courtney McKlveen: It's important to take a step back and look at what’s going on right now in retail. The evolution and growth of ecommerce is happening fairly quickly and is driven by consumer behaviors. This massive ecommerce growth is a challenge, because these marketers with a brick-and-mortar presence have approximately 90% of purchases coming from the physical store. Yet their ecommerce growth needs to keep up with the opportunity that exists in the marketplace.

eMarketer: How should brick-and-mortar retailers who face this challenge approach digital advertising?

McKlveen: That challenge has actually created an opportunity around data that can help drive results and measurement. Retailers want to understand the value they get back, whether that’s return on ad spend [ROAS], key brand metrics or conversion metrics—that’s where the opportunity is.

Now that we have access to so much data, marketers are grappling with the question, “What data is most interesting to me?” Data is awesome insofar as it drives results. Then, how do you use that data to make better decisions about measuring your media? It’s about the decisions you make and if they drive against your metrics in digital.

eMarketer: What are the key performance indicators (KPIs) most widely used by retailers?

McKlveen: From a broad perspective, it’s ROAS: If I spend a dollar, what do I get back? We also spend a lot of time with marketers fitting together how to efficiently drive traffic to their site, and also increase favorability with and connect with customers. You can’t just have an ROAS metric and not fuel the funnel.

On the other side of the KPI spectrum is understanding consumer behavior across platforms. To us, omnichannel means truly understanding the consumer journey and making marketing decisions that help serve your customer and drive business results.

But understanding the omnichannel consumer experience is hard. The tools and services available in the marketplace are fragmented. There’s no one-size-fits-all for measurement and cross-device understanding. We’re getting into the execution phase: How do you leverage the data you have and make better decisions that are customer-focused?

eMarketer: You mentioned that retailers need to fuel the funnel. Do you have any insights on how to keep consumers engaged at all phases in their journey through digital advertising?

McKlveen: We did some research through the tail end of 2016 about understanding what actually happens with the shopping cycle. Historically, there are big shopping seasons that cause spikes. Although there are strong seasonal identifiers, the shopping cycle for consumers is much longer than it used to be. People are starting the discovery cycle earlier. Millennials, specifically, are purchasing later.

That means marketers have to change the way they talk to consumers, especially to engage with an important segment—millennials. What does their omnichannel journey look like and how do you address that?

eMarketer: Do retailers think about foot traffic as an outcome from digital advertising?

McKlveen: We are talking to marketers a lot about how to have a connection with customers in both places—you want them to come into your store, but you also want them to buy things online. How do you make that connection for them? It’s about understanding how to best engage with consumers to keep them coming back and—on the other side—how to provide value and utility online so that people want to transact with you in an omnichannel fashion. Consumers ultimately want both value and utility.

Interview conducted by Tricia Carr on March 23, 2017.