New Omnichannel: Clicks, Bricks and Everything in Between – Look at Amazon Paid Advertising

ROI Genome Marketing Intelligence Report: The New Omnichannel – Clicks, Bricks and Everything in Between, documents the rise of “omnichannel” – the effect of consumers being exposed to marketing in one channel and buying in another. The analysis also measures the drivers of store traffic and drivers of web traffic. The findings include a look at Amazon paid advertising, showing that up to 70% to 90% of the impact of Amazon display ads actually drives non-Amazon sales.

Source: Analytic Partners
Source: Analytic Partners

The report’s message is clear: holistic measurement is a must as no channel is a vacuum. Online media can drive brick and mortar sales, offline media can boost online sales and Amazon advertising can drive sales beyond that platform.

Key Takeaways:

  • Use a balance of online and offline media to drive growth
    • All media has omnichannel impact
    • Online media drives brick & mortar sales
    • Offline media drives online sales
  • Leverage brick & mortar presence to boost online business
    • Where relevant, physical locations and instore efforts help drive incremental sales both offline and online
  • Utilize Amazon advertising for growth beyond Amazon
    • Prioritize Amazon Search for businesses heavily reliant on Amazon as a sales channel
    • Complement AMS with Amazon Display for businesses with large offline sales
  • Break down any organizational silos to address today’s omnichannel world
    • Plan cross-functionally and measure impacts holistically to drive the greatest business impact and growth

Content Summary

What is ROI Genome?
ROI Genome Highlights
The brave new world of omnichannel
The new role of media in an omnichannel world
The symbiotic nature of ecommerce
Amazon media: a driver of offline commerce
Conclusions and takeaways
Notes on this report

What is ROI Genome?

Over the past two decades, Analytic Partners has collected a vast quantity of marketing intelligence across industries and countries. This intelligence lives and breathes in ROI Genome. ROI Genome has been an evolving endeavor that goes beyond traditional “you are here” benchmarking to understand and quantify the drivers of ROI and marketing success at a fundamental level to establish principles and truths for marketing success. By understanding and quantifying how factors such as brand health, marketplace and country dynamics, and competitive landscape all impact performance for each type of offline and online marketing activity, Analytic Partners provides context and perspective for our clients.

The mission of ROI Genome is “to create marketing wisdom from accumulated numbers and knowledge.”

ROI Genome Highlights

In depth understanding of how marketing works, including:

  • Hundreds of billions in marketing spend measured
  • More than 2 million marketing metrics
  • Global footprint – 45+ countries
  • Collected since 2000, 700+ brands
  • Cross-section of industries & tactics

The brave new world of omnichannel

For the past 25 years the advertising industry has discussed “online” or “digital media” as being distinct from media as a whole. The same holds for ecommerce vs. retail in general. But the reality is that all media can now be digitally delivered and commerce can take place anywhere. With the rise of mobile phones, broadband, wi-fi access and IoT devices, consumers live in a world that is largely connected. This connected world has seen the rise of “omnishopping”: researching, or experiencing the product in one channel, but converting in another. Correspondingly, the physical store is not dead, but in a state of transformation driven largely by both ecommerce and the demand for new ways to experience products.

As marketers navigate this omnichannel world, long-held beliefs about the ROI of media used to drive sales or conversions no longer apply. Television and radio drive search and online commerce as well as in store. Online channels drive in store traffic, while real-world presence can drive ecommerce sales. Adding to the complexity, Amazon has become not just a competing retailer, but also a media company with its own proprietary advertising formats. In order to truly understand this omnichannel world, marketers need to think, plan and measure holistically: How does paid search on Amazon impact sales at real world retailers? How do in store experiences impact online shopping?

In this very complex environment, data from the Analytic Partners ROI Genome offers informed perspectives, benchmarks and insights for an omnichannel world.

The new role of media in an omnichannel world

Let’s begin by dispelling some myths: Online media drives both online and offline sales and offline media drives both offline and online sales. In fact, the amount of impact that media has spanning channels and various KPIs is significant. Savvy marketers are well aware of this fact, but the degree of omnichannel impact often remains a surprise. It’s also important to remember that the majority of media’s effects aren’t immediate, and in fact are delayed by days or weeks. Media exposures can drive immediate conversion but a large part of their influence includes medium and long term impacts. This is true for all media, even digital channels such as video, display, social, and search. Similarly, offline media channels such as TV and radio can be just as effective at driving online sales as digital media channels, and in some cases can be even more effective and efficient. The amount of indirect impact – across channels and time – is significant and important to consider when planning. Considering only what can easily be measured is misleading and can result in poor marketing decisions.

All media has omnichannel impact:

Below we have examples from two different businesses whose online presence is larger than their offline presence, with both selling roughly 70% of their products online. Despite heavy online activity, online and offline marketing have significant impact on both online and offline sales.

Brand X Relative Sales Impact by Channel. Source: Analytic Partners ROI Genome
Brand X Relative Sales Impact by Channel. Source: Analytic Partners ROI Genome

The white line on the graph above denotes “fair share”: the amount of impact driven by a tactic based on relative amount of offline to online sales.

As one would expect for this client X example above, the vast majority of digital retargeting impacts online sales – though there is an impact onto offline sales. However, paid social actually over-indexes in driving offline rather than online sales.

Taking a look at the second brand, we see that despite selling 70% of its business online, TV has among the best return on investment with most of the impact occurring online.

Brand Y ROI & Impact by Sales Channel. Source: Analytic Partners ROI Genome
Brand Y ROI & Impact by Sales Channel. Source: Analytic Partners ROI Genome

The analysis for this business also included measurement of key leading indicators: We measured the drivers of store traffic and drivers of web traffic in addition to sales. Through this exercise we’re able to see that for this brand almost half of all web traffic is driven by TV advertising, emphasizing the importance that offline advertising plays in driving online behavior.

Client Y Example. Source: Analytic Partners ROI Genome
Client Y Example. Source: Analytic Partners ROI Genome

Brick & mortar presence boosts business. Each location helps drive incremental sales both offline AND online.

Contrary to the oft-stated premise that ecommerce is killing off retail, recent market developments and the successes of Analytic Partners clients indicate a solid future for “bricks” (physical retail), in addition to clicks.

In 2017 Amazon bought Whole Foods, their biggest foray into retail to date. By the end of 2018, they had opened 17 retail stores to do the very thing they were accused of killing off: selling books in a physical space. DTC brands like Casper, Modcloth, Bonobos, Warby Parker, and Allbirds have grasped what Amazon desires: a physical footprint to experience the brand, demonstrate products and enable try on.

What we have seen is that consumers are more likely to purchase a product or service if they have the opportunity to experience the brand. Brick & mortar presence also serves as branding in and of itself, particularly when supported with forms of PR, marketing and promotions. The benefits of having a physical presence tend to outweigh any potential cannibalization of online sales for many growing brands. We’ve seen this phenomenon across a variety of clients, with a few examples of brands benefiting from a lift in online sales following the opening of a physical store shown below.

Lift in Online Sales from Physical Store Openings. Based on primarily online businesses. Source: Analytic Partners ROI Genome
Lift in Online Sales from Physical Store Openings. Based on primarily online businesses. Source: Analytic Partners ROI Genome

The symbiotic nature of ecommerce

For companies that started with an offline retail focus, developing a thriving online presence that is incremental rather than cannibalistic is one of the great challenges. It’s imperative to develop a holistic measurement strategy that considers the omnichannel nature of all marketing tactics.

For traditional brick & mortar companies, establishing an online retail presence for research that also serves as a sales channel helps grow the business and typically does so at an increasing rate over time. Naturally this will depend on the brand strengths and innovation areas, but online plus offline should lead to growth. This is true whether we’re talking about physical presence or media presence. Our research confirms this, as seen in the chart below: even as online sales grow and offline sales decrease, the overall sales growth is positive.

Example of Online & Offline Sales Growth Interaction. Source: Analytic Partners ROI Genome
Example of Online & Offline Sales Growth Interaction. Source: Analytic Partners ROI Genome

For businesses that are primarily offline we see that marketing is generally effective in driving online sales, but somewhat surprisingly, even offline channels such as TV and print can be particularly effective in driving online business.

Client Z Relative Sales Impact by Channel. Source: Analytic Partners ROI Genome
Client Z Relative Sales Impact by Channel. Source: Analytic Partners ROI Genome

As noted earlier in this report and prior reports, the online and offline worlds are converging. This is true across tactics, but also across retail environments. Look for this trend to grow as DTC brands and online-focused retailers like Amazon build out stores, and social media platforms like Instagram begin to offer ecommerce functionality.

Amazon media: a driver of offline commerce

Amazon, the company that defined ecommerce, is now a brand competitor (with the growth of their house labels) as well as a very successful media selling company. eMarketer cited them as the 3rd largest digital media company in the US at the end of 2018. With brands spending more dollars on Amazon advertising, how does it impact both online and offline ROI?

Advertising on Amazon drives significant sales across other retail channels

On average, we see that more than half of the impact of Amazon advertising is actually onto non- Amazon sales channels – in other words, advertising on Amazon helps drive Amazon and Brick & mortar sales. In fact, up to 70-90% of the impact of AMG (Amazon Display Ads) is onto non- Amazon sales channels. Even AMS (Amazon Paid Search) drives offline sales – up to half of the impact of the impact of Amazon Paid Search is onto non-Amazon sales channels.

Businesses who advertise through banner ads on the Amazon platform not only drive sales on Amazon, but also drive offline and online sales through other retail channels. Our results consistently show that advertising’s impact goes well beyond the immediate time, place, and channel. This means that advertising on Amazon (or Walmart or Best Buy) has a lasting effect and impacts sales outside of that platform. Naturally, the largest effect often tends to be on the retailer at hand, but the impact onto other retail channels – online and offline – is significant as shown in the following charts.

Amazon Display (AMG) Marketing Impact. Source: Analytic Partners ROI Genome
Amazon Display (AMG) Marketing Impact. Source: Analytic Partners ROI Genome
Amazon Search (AMS) Marketing Impact. Source: Analytic Partners ROI Genome
Amazon Search (AMS) Marketing Impact. Source: Analytic Partners ROI Genome

As shown in the above charts, the vast majority of the impact of display advertising on Amazon’s site is often onto non-Amazon sales. (The proportion of impact is heavily related to what percentage of a brand’s sales are on Amazon.) Interestingly, while Amazon paid search tends to have a larger impact on the Amazon business, there is still an impact on non-Amazon businesses. This reinforces the delayed impact that marketing often has and the importance of comprehensive marketing measurement.

Looking more closely at Amazon paid search, we observed that bidding on the unbranded (category) terms often has the highest response and can also pay out from an ROI perspective. Paying the additional cost for the category terms can be a smart strategy.

Example: AMS Search Performance by Click Category. Source: Analytic Partners ROI Genome
Example: AMS Search Performance by Click Category. Source: Analytic Partners ROI Genome

Understanding the relative ROI impact of various formats is crucial as more money is spent on them. In the example below, we see how high the ROI of Amazon Search is compared to banners or co-op. There is no “silver bullet” for how to allocate Amazon spend, as levels are very dependent on business priorities and competitive actions. A “test and learn” approach is recommended for any client. Amazon is always changing, costs are constantly in flux, and what works today may not be the same tomorrow, which makes it important to understand not only what works but why it works. Understanding the impact and relative cost to establish ROI is crucial as more money is being spent on these new tactics.

Client A ROIs by Amazon Marketing Tactic 2018. Source: Analytic Partners ROI Genome
Client A ROIs by Amazon Marketing Tactic 2018. Source: Analytic Partners ROI Genome

To keep this in perspective: For many brands, the majority of the impact from Amazon display ads (AMG) is on offline retail – this is particularly true for businesses whose sales primarily come from traditional offline retail channels. Likely reflecting the fact that shoppers use Amazon as a comparison-shopping engine (they check pricing and reviews before buying elsewhere), Amazon search also has an offline impact. So Amazon Search (AMS) indeed drives offline sales, but as one would expect, the impact from search is more direct onto Amazon than display. Typically 70 to 90% of the impact of Amazon Display is onto non-Amazon sales while 10-60% of the impact of Amazon Search is outside of Amazon.

Conclusions and takeaways

Businesses that eliminate silos, plan from an omnichannel perspective and measure holistically have a competitive advantage

From a consumer perspective, today’s world is omnichannel. A buyer may be exposed to a product through a display banner, check out the product in a store and ultimately decide to buy it online. Marketers need to keep up with this behavior by seeing their marketing tactics as not focused on online or offline, but for their holistic impact. Buying ecommerce search? Make sure you capture its impact on “bricks.” The same goes for television: it may be most efficient at driving foot traffic, but it will also increase “clicks.” The most successful marketing programs are those that make sense for the dynamics of the business, rather than the channel. Bricks, clicks and more bricks? It’s all part of the omnichannel world we face – and must leverage today.

Businesses that eliminate silos, plan from an omnichannel perspective and measure holistically have a competitive advantage. Source: Analytic Partners ROI Genome
Businesses that eliminate silos, plan from an omnichannel perspective and measure holistically have a competitive advantage. Source: Analytic Partners ROI Genome

Organizations that structure and plan their efforts in silos – both from an investment standpoint as well as an organizational structure standpoint – are leaving money on the table. Planning and executing online marketing and offline marketing separately is not a winning strategy.

And every brand is different. That’s why an adaptive approach to omnichannel can take you further. Analytic Partners ROI Genome offers the accumulated insights of our data enhanced with our personal expertise. Our clients are empowered to understand the factors driving ROI. Contact us to discuss how we can help you increase ROI as you more fully realize your customers.

Notes on this report

This report seeks to highlight overarching trends identified in Analytic Partners’ ROI Genome and offer insights for marketers based on those trends. We hope to help marketers get to the heart of the matter of what marketing and advertising efforts drive return on investment and what factors influence those returns.

This report is unbiased and independent. It has not been commissioned or influenced by any group or company. This independence is at the heart of Analytic Partners’ philosophy and approach to any insights we provide to our clients.

The intelligence collected within ROI Genome is based on the work Analytic Partners has provided our clients. We take the confidentiality of our clients very seriously, and while they are some of the biggest companies from around the globe with well-known brands across industries, we do not share our client list.

It is important to note that every company is different, and while this report seeks to show overall trends, they may not reflect what is seen in an individual company. This is why an adaptive approach to analytics is important – no two situations are ever the same.

Source: Analytic Partners