Retailers' approach to holiday season marketing is changing, with a shift away from trying to buy consumers' loyalty and a move toward earning their loyalty, according to the '2006 Online Retail Holiday Readiness Report' from marketing performance management firm WebTrends Inc.
The survey of 300 internet and multi-channel retailers examined the trends and online strategies retailers are focusing on for the upcoming holiday season. Overall results suggested that retailers are shifting away from trying to use price-based promotions to engage customers, and toward relationship marketing initiatives (including personalised e-mail marketing and search engine marketing), which better allow retailers to understand shopper intentions.
Change of approach
Nearly one-quarter (23%) of the retailers surveyed said that they will not be using price-based promotions to generate online revenue from loyal customers during the 2006 holiday season, compared to only 11% in 2005. Even the most popular holiday marketing promotion - free shipping - has dropped in popularity, from 62% of retailers using it in 2005 to only 45% in 2006.
Similarly, while suggested items, gift idea centres and featured sales item pages remain the most popular site features to generate revenue from loyal customers, the percentage of businesses using these has also fallen since 2005.
The only features that received a boost year-on-year were personalised promotions and live chat. In fact, three times as many retailers (18%) are opting to use no special web site features in 2006, compared to only 6% in 2005.
Top marketing priorities
Overall, retailers ranked e-mail marketing as being the most important demand-generation activity for their holiday season campaign, followed by search engine marketing and optimisation techniques.
Accordingly, the biggest increases in marketing spending for the holidays are expected to be in e-mail marketing (52%), search engine marketing (46%) and search engine optimisation (38%).
The biggest decreases in marketing spending for the 2006 holiday season will be in online banner ads (17%), print advertising (16%) and broadcast advertising (14%).
Of the retailers surveyed, 80% said they use regular customer e-mails to build relationships, and the activity that the highest percentage of retailers plan to do in the future is to develop a database of "clickstream-based information" for campaigns that accurately target customers' individual interests.
Retailers are also becoming more sophisticated as they look toward web search and e-mail marketing as methods for identifying consumer intent. However, 27% of respondents said they don't consistently measure demand generation activities, and 63% still evaluate campaigns using less informative response metrics (e.g. e-mail to web site click-through rates) and activity-based metrics (such as web site page views and visits).
The survey found small gains in the number of retailers using online best practices, including a 1% increase in retailers using "true first-party cookies" (25%) and a 1% decrease in the number using "vendor's first-party cookies" (9%) and "third-party cookies" (12%). However, a worrying 44% of retailers said they didn't actually know what they were currently using to identify unique visitors (up from 32% in 2005).
According to Greg Drew, president and CEO for WebTrends, "As retailers focus on online marketing initiatives to reach qualified prospects and convert them into loyal customers, they need to use more integrated, visitor-centric performance metrics to gain accurate campaign evaluation and optimisation, as well as the insight necessary for relationship marketing initiatives."