September 25, 2018

CMOs are Moving $2.9B Away from Digital Advertising

Written By
Brad Brodigan

As marketers we all struggle with a paradox: we love to advertise our brands yet we have trouble understanding what is effective at reaching our target customers. So why do we continue to justify our investments in advertising when we know we are wasting large amounts of money? Because we don’t have anything better.

This challenge is especially difficult for retailers looking to drive in-store traffic and purchases. Digital advertising accounts for 1/3 of all ad spend in the US, yet marketers struggle to correlate clicks to in-store transactions as digital ROI becomes harder to measure and continues to decline. What marketers can measure isn’t impressive either. Display ad click-through rates hover around 0.35% while only 40% of ad spending is seen by consumers and over 38% of US adults are using computer-based ad blocking software.

Even though providers continue to advocate for the same digital advertising channels, the data shows that it’s too hard to measure, and consumers continue to find ways to reduce or eliminate advertising content from their experiences. In response, CMOs tell Forrester they are shifting $2.9B in advertising budgets away from interruptive display advertising in favor of consumer-first strategies that connect brands to consumers in more meaningful ways.

Will ad-blocking software lead to the demise or re-invention of digital advertising?

Consumer-first strategies that build customer loyalty

CMOs are driving massive changes and the rise of a new digital marketing era. Marketers are turning away from talking at consumers and shifting their approach to building more meaningful connections through personalized, consumer-first marketing. The strategies that are emerging now will change the course of advertising.

Examples of these shifts are prevalent across several industries from casual dining to grocery and retail. CMOs are shifting ad budgets to several key consumer-first strategies:

Actionable data to unlock more insights and value | SophisticatedCMOs are investing more in tools and systems that let them better understand the lives of their customers cross all phases of the customer life cycle. CMOs are spending more on tools- like Affinio, AnyRoad and UserVoice - that can gather the preferences and tastes of customers to provide actionable insights and opportunities to improve product value.

Surprise and delight tactics | Research shows that consumers disproportionately recall the high and low points of brand interactions more than each individual aspect of the journey. Brands that are able to provide a high point at the end of a customer journey, like automatic rewards, see a positive response in customer loyalty and repeat purchases. Retailers like Sam's Club saw a 29% increase in customer frequency using a "surprise and delight" cash back loyalty experience (cash back through a card-linked mobile app).

Experience-driven relationships | Creating meaningful experiences for customers can differentiate a brand from its competitors. Experience-driven relationships are created by omni-channel strategies that uniquely engage customers through online, mobile, and offline touch points. IKEA's virtual reality game is a another example of technology being used to drive customer experience. These types of unique experiences can create far more brand engagement than traditional media.

Voice-controlled device partnerships | Brands are beginning to understand the urgency to shift marketing strategies to better fit how consumers find information today. With voice-controlled devices, consumers are participating in less interruptible actives, so brands are find a way to incorporate themselves better into customer's lives using voice. Domino's was an early partner with Amazon's Echo platform and has seen promising results in their search to connect with customer's beyond desktop and mobile devices.

This evolution will not be met without some friction. For advertising services companies and technology platforms that rely on ineffective ad dollars, there will be a fight to hold onto budgets. Forward-thinking CMOs understand the urgency of change as they plan where to invest over the next two to five years, and are quickly shifting their budgets to customer-first strategies that drive deeper relationships.

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