How e-commerce scale-ups can survive economic uncertainty in 2023

Image-by-Pete-Linforth-from-Pixabay

With consumers battling serious cost of living pressures from all sides, it’s little wonder that marketing budgets are increasingly under review, not least those in the e-commerce sector.

It doesn’t take a rocket scientist to figure out that if consumers have nothing left to spend, they don’t spend, no matter how enticing the marketing messages are around them.

So how do CMOs prove that the hard won budgets they are responsible for are delivering a decent return?

Martijn Zoetebier, Group Director Business Development at Dutch marketing collective Linehub, offers up some sage advice on how e-commerce firms might survive the current economic straits we’re all in…

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Martijn Zoetebier, Group Director Business Development, Linehub

The looming global recession will undoubtedly hit marketing teams and their budgets. Indeed, we are already seeing signs of increased pressure on CMOs to prove ROI.

According to new data from LinkedIn, 77% of CMOs feel under pressure to prove that their campaigns are providing short-term return on investment and long term impact on their brand.

Furthermore, 30% of CMOs believe the current uncertainty will force them to become more reactive, while 31% fear they will need to reduce their marketing budgets.

E-commerce businesses are likely to be hit hard by this situation in 2023 – and to explain why, we need to look back over their changing fortunes during the last few years.

The pandemic and the rise of PPC

The pandemic was a boom time for many e-commerce businesses. To capitalise on the captive homebound audience, brands invested a lot of money in PPC (Pay-per-click) and built their customer base with Google and Meta’s advertising services.

These platforms helped e-commerce brands to drive very predictable levels of customer acquisition based on the investment pumped in.

As the results were so predictable, brands kept investing more into PPC, which became a solid foundation for success.

PPC: Pay Per Click did well for businesses during the pandemic, but what’s next?

But during the pandemic, a problem arose. Businesses grew, they reached an impressive level of scale, but then they hit a performance plateau.

Whatever investment they made into performance marketing, they couldn’t increase their performance significantly. Over investment in this channel was driving the price up, but not necessarily the results.

There was something missing from this marketing strategy. Brands had forgotten that it’s not all about the bottom of the funnel – driving demand to the e-commerce store and converting visitors into customers.

They also need to think about the top of the funnel too, and invest in the early stages of the customer journey. The old adage remains strong – invest 60% of budget in branding and 40% in performance marketing.

Some brands had become very profitable very quickly during lockdown, and had grown their headcount and salary costs significantly.

And, while the growth in e-commerce triggered by the pandemic is here to stay, the online space became overcrowded with many traditional retail outlets shifting their operations online during the pandemic.

This combination of factors resulted in higher prices as well as increased competition for consumers in a crowded field.

Don’t leave all your eggs in one basket

Against this backdrop and as they face a future of economic uncertainty, marketers are now trying lots of ways to ensure their brands stay profitable.

Many are continuing to invest in their performance marketing channels, but too many are still focusing on Google and Meta – and as PPC costs have inflated, it’s a lot harder to be profitable with those than it was two years ago.

The answer is not to leave all of those performance marketing eggs in one basket.

By investing in other solutions and becoming less dependent on the major players, marketers can spread their risk while enhancing their brand – to fulfil that 60:40 requirement.

Image by Couleur from Pixabay
Manage risk: Zoetebier urges firms not to put all their eggs in one basket.

Consider options like affiliate marketing and checkout marketing which both offer an outcome-based pricing model and contribute to a significant amount of new customers at the same time.

Cross selling, offers and discounts

But it’s not just about proliferating platforms. E-commerce brands are still not making enough of their opportunities for cross-selling, offers and discounts.

PPC campaigns alone don’t stimulate repurchasing, which puts a huge pressure on acquiring customers at break-even levels.

Having spent so much money acquiring customers, it is crazy that so many do not have a good CRM marketing programme to stimulate repurchasing.

Brands must get much better at focusing on the relevance of their products for specific parts of the customer base. They need to look at their acquired customers and see what kind of products they have bought, and what kind of similar products are relevant for them.

Simple example – when people buy toys, they need batteries. Any brand that doesn’t provide an automated prompt or send an automated email to offer batteries, is missing a trick.

Using external data to understand market position

If brands want to be best prepared for economic uncertainty, this is the perfect time to get a clearer picture of their market position. After all, marketing is about understanding the needs of customers and aligning products and services to those needs.

However, many e-commerce companies are only measuring marketing success based on their own internal campaign data.

Once they’ve run a campaign, they will evaluate the campaign results in Google Analytics or Facebook Business Manager to see where to invest more.

That’s all well and good, but if you ask marketers how much general online demand there is for their products or services, they won’t have an answer.

Image-by-Micha-from-Pixabay
Clear picture: Real time data can give valuable insights on brand position.

And if you ask them what needs consumers have as they travel through their customer journey, they don’t have a very clear view on that either.

Generally marketers only have a static snapshot of their customer needs as they travel through their customer journey, it is a very specific moment in time which only allows brands to react rather than anticipate a customer’s needs.

That’s the problem with evaluating and steering based on internal data alone – it doesn’t provide a picture of a brand’s position in the entire market landscape.

Platforms that deliver real time insights can help marketers to achieve this. They can even build a connection between an advertiser’s internal and external data, to give a total overview of market demand and changing customer needs and compare your sales peaks with the overall demand.

This kind of overview can help marketers to see and anticipate trends before they are trending, optimise their campaign planning (and performance as a result).

Forget the business-as-usual

The next 12 months will be challenging for e-commerce businesses and marketers. But by investing in their brand, spreading investment across performance marketing tools, cross-selling, and using external data, they will stand a better chance of surviving this tumultuous period.

A final thought for e-commerce brands facing economic uncertainty with trepidation: forget the business-as-usual. It’s time to unlearn all of the things we thought were true.

Forget how your Google and Facebook campaigns are running, stop staring at your internal data, and start thinking about how you can take a bigger slice of the overall pie of consumer demand.

2023 is the year to get unstuck from those old routines.