OMG Transact’s Gemma Spence Explains “How Brands Grow” in the e-Commerce Era
This article was originally published by Warc.
In today’s current climate, there’s no denying that e-commerce is big business. Online retail is exploding in penetration and basket size as shoppers are choosing or forced to be isolated.
With this sharp rise in e-commerce, acquiring consumers’ attention has never been more challenging given there’s endless distractions available at a swipe of a finger. In this environment, brands are competing not just for consumers’ wallets, but for their minds. So, how can you grow your brand online in such a competitive landscape? And what will drive that growth; bringing in new to category buyers or improving frequency and basket value of existing customers? Let us explore this in more detail.
When analysing Byron Sharp’s book ‘How Brands Grow’, mental and physical availability are front and centre of his argument. Sharp believes that brands grow by reaching new customers, so marketers need to target as widely as possible and ensure that brands are readily accessible – both mentally and physically – in all buying situations. He argues that a key aspect of a brand’s success, particularly in increasingly competitive spaces, like online, is a brand’s ability to be mentally and physically available for consumers.
It could be argued however that e-commerce, much like shopper marketing, lies far more in physical availability – the breadth and depth of your distribution in time and space. For instance, any brand in a physical retailer would still need to consider how best to maximise value at the point of sale; how can they optimise towards the customer buying a bigger variant, such as a multi-pack, or additional products in a weekly shop. And loyalty schemes, such as subscription services, are an extension of this.
But when it comes to building brand loyalty, Sharp is critical, primarily because it is not a measure that advertising can impact; that frequency of purchase is symptomatic of penetration. He believes that most buyers will be light infrequent buyers. But even with this being true, it is not to say that innovative buying models, such as subscription services, aren’t valuable for those that might be heavy buyers. In reality, even they can be disloyal to a particular brand, so finding ways to lock consumers into a single brand for their category purchasing is still smart. And this, is just part of improving physical availability.
Coincidentally, as WARC has previously reported, the thrust of the Dirichlet laws (which describes variation in individuals’ loyalties across a category-buying group) is that brands compete primarily in terms of mental and physical availability, and this determines the brands that customers are loyal to. Market share will change if a brand secures additional mental and/or physical availability. This may come about as a result of superior marketing or through some innovation that leads to real changes in loyalties and, hence, brand growth.
So, what is mental availability? This is about priming a consumer to disproportionately favour your brand in a buying occasion. In ‘How Brands Grow Part 2’, Sharp and Romaniuk talk about the importance to focus on the consumer entry points or ‘need states’. These can be broken down into five categories:
- Why are you buying a product?
- When are you buying the product?
- Where are you buying the product?
- With whom are you with when buying the product?
- With what are you buying the product with?
In short, it’s about knowing what the most common (and less common) entry points are to your product category to then increase the mental availability for each one. To do this effectively in e-commerce, it is critical for brands to combine both direct and indirect selling channels. This can be through a combination of traditional omnichannel retail strategies as well as new models for growth such as voice, social and visual commerce.
Consequently, direct selling has never been more important for brands as it allows them to collect first party data, manage the brand experience and improve customer lifetime value (CLV). Indeed, we are increasingly seeing brands pivot into direct to consumer (DTC) selling to be able to flex their e-commerce model to customer changing behaviours. It also allows brands to effectively up and cross sell products to increase basket size and deliver incentives to encourage more frequent purchasing. PepsiCo in the US for example, has launched two DTC websites during the pandemic where shoppers can order an assortment of its food and beverage brands for themselves, or as gifts to friends and family.
In fact, Romaniuk and Sharp cite that online brand loyalty is possible because of a range of functional aspects of the online shopping environment. These include searchable brand lists, saveable shopping lists and baskets and automatic recommendations and decision aids that remind consumers of previous purchases and encourage repeat purchase.
Simultaneously however, the reliance on retailers is not going to disappear for selling online. As a result, brands need to be building sustainable partnerships with retailers, pure-players and marketplaces so that they can not only deliver commercial gains for the collaboration but can also co-fund performance media and marketing activity to entice consumers to buy their brand from that specific retailer.
With retailers’ digital shelf becoming so algorithmically driven, brands need to understand how both commercial and marketing factors affect their shelf ranking within the retailer’s digital shelf. Brands can collaborate using ‘clean rooms’ to access their platform and analyse the clickstream data to identify need states and shopper motivations.
And with research from Unliever suggesting that over 71% of online shoppers go directly to retailers like Amazon to start their shopping journeys, it is business critical to have access to these key data points, to manage the auction and ensure products are in the top three positions within a retailer’s listings.
At OMG Transact, we have evolved the proven concept of brand growth through mental and physical availability and now talk to clients about improving their digital availability to maximise the breadth and depth of their distribution in time and space online. The evolution exists as we see e-commerce requiring a true, data-led approach to understanding algorithmic shifts in shelf ranking, testing frameworks for improving visibility and unlocking insights around shopping behaviours. This in turn can fuel new to category acquisition as well as increase frequency and basket size for greater loyalty.
The balance between acquisition and loyalty will always be tricky. Brands therefore need to find the equilibrium of understanding their customer, motivations and need states whilst also being mindful of the value that a customer provides over their lifetime relationship.
By understanding the customer experience and measuring feedback at all key touchpoints, brands can start to understand the key drivers of CLV and really drive business growth online.