Monetha: White paper

Market overview

Key challenges that marketers are facing today:

• • Escalating customer acquisition costs through standard paid channels such as Meta, and Google, leading to inefficient marketing budgets and low conversion rates.
  • Subpar retention rates due to a lack of personalization and complex retargeting, exacerbated by stringent privacy requirements.
  • Diminishing revenue margins due to generic discounting schemes used to stimulate initial purchases.
  • Insufficient customer insight due to a lack of understanding of customer preferences and desires.

 

Ecommerce is growing

Global eCommerce sales are expected to total $5.545 trillion worldwide in 2025. This number is expected to continue growing over the coming years, proving that eCommerce is becoming an increasingly lucrative business option. 

Of the total global retail sales in 2022, 21 percent is expected to come from online purchases. That is, $0.21 of every $1 spent on retail goods this year will be done over the internet. 

Online sales will continue to rise, taking a larger piece of the retail pie. By 2025, world retail eCommerce sales will exceed $US 7.3 trillion, and the overall eCommerce share of retail sales will hit 24.5 percent. 

The divide between online and in-store transactions widened significantly in 2020 and 2021 due to the coronavirus pandemic. With brick-and-mortar stores shut to curb the spread of the virus, consumers flocked online to make their purchases. Experts say the pandemic has accelerated the shift to online shopping by as many as five years.

But that’s not the only reason eCommerce is on the rise. The infiltration of technology into consumers’ lives significantly impacted growth. DataReportal’s latest Global Overview Report shows the number of people shopping online worldwide grew by ten percent in 2022 to hit $US 3.78 billion. Up to 60.1% of all online purchases were attributed to mobile devices. 

It’s no surprise that online sales will continue growing as consumers feel increasingly comfortable with the ease of shopping on mobile devices.

 

 

Challenges in Retail

Consumers are Choosing Multichannel Buying Experiences

With more complete e-retail experiences available, and shipping times greatly reduced, it is little wonder around 96% of Americans utilize online shopping in one way or another.

However, those same Americans spend about 65% of their total shopping budget in traditional brick-and-mortar locations. In other words, while almost everyone is shopping online, Americans still make more in-store purchases. 

Customers are moving seamlessly between online and offline experiences and are open to retailers who can best facilitate these transitions. The explosion in mobile retail means in-store research, and access to loyalty is now more common than ever. Customers are looking for retailers that they can trust to deliver exceptional service time and time again.

The right customer data can help them by creating an omnichannel customer experience that allows consumers to interact wherever and however they wish by incorporating real-time feedback across channels and devices – engaging the customer wherever they may be.

 

To Attract Customer Loyalty, Retailers Need an Experience That Stands Out

Customer experience is the biggest contributor to brand loyalty, with a negative experience being the most significant factor affecting a customer’s likelihood to make a repeat visit. While promotions and offers can certainly contribute to helping customers feel like they are special, the real key to an outstanding experience is personalization. Getting to know customers from their previous purchases and interests can help retailers drive loyalty. These insights can be gleaned from data.

Personalized content and offers can be delivered via the customers’ preferred contact method – even a personalized email subject line can make a world of difference – anticipating their wants and needs and guiding them down the sales funnel towards their next purchase.

 

Privacy is a growing concern

Privacy is becoming a growing concern for consumers, eShops, and publishers. We can draw the following conclusions from the KPMG report on data collection practices:

• • Over the past year, 70% of the companies analyzed by KPMG expanded their collection of personal consumer data. Some 75% of the business leaders polled said that they’re comfortable with the level of data their company collects. 29% of companies admitted that their company has sometimes used unethical means to collect private data;
  • People are becoming even more skeptical and wary about their data being collected on the consumer front. 86% of the respondents said they are concerned about data privacy, while 78% expressed fears about the amount of data being collected. Some 40% of the consumers surveyed don’t trust companies to use their data ethically; 
  • 51% of consumers were worried about data being sold. Ironically, only 17% of the business leaders surveyed said their company sells data to others, a sign that businesses need to be more transparent about this practice to try to alleviate consumer fears.

McKinsey and Ernst and Young also share this vision:

• • Monetizing Data: A new source of value in payments
  • When all our data can be monetized, will privacy be a luxury for the rich?

 

Europe’s GDPR

Europe’s GDPR is leading the charge in customer privacy protection. Since the enforcement of GDPR in May 2018, numerous privacy acts have been voted on globally, such as California’s CCPA in January 2020, Brazil’s LGDP in September 2020, Virginia’s CDPA in March 2021, and more are on the way. 

The overall goal of these acts is to put a frame around first, second, and third-party data and their definition. Previously data was collected without the user’s consent and kept for an undetermined time.

In a nutshell, “personal data” protection becomes a fundamental right. These regulations now require companies to inform users about the data collected about them and get explicit consent for its processing. The term “personal data” extends to any data considered PII (Personally Identifiable Information). The PII status for a data point can be quickly achieved as two parties crossing their databases will identify a specific user. For example, an action recorded from a particular IP address and collected by a website is PII. This is because the user can be personally identified if crossed with records from their ISP (Internet Service Provider). 

Essentially it created a risk in the Ad (tracking) industry, which relies heavily on crossing and matching first, second and third-party data coming from thousands of sources to generate an extremely accurate user profile, sometimes expanding to over 50000 data points for a single user. Typically, each user will have hundreds of data points associated with them. Enacted privacy acts essentially limit this process, forcing companies to request and receive user consent for collecting their data, informing them of the purpose of any data collection, and limiting the storage time of this information.

 

Apple’s ATT (App Tracking Transparency)

Adding to the Privacy Regulations, Apple released a feature in iOS 14.5 in September 2021, obliging the consent from users to be tracked in the applications. The objective was to limit ad tracking: only 20% of users opted-in and gave their permission to be tracked.

 

Marketing costs are outgrowing inflation

Over the last several years, you may have stumbled upon many similar articles and reports on the topic: 

• • Higher prices and weaker targeting push companies to rethink digital ads 
  • Merkle’s Digital Marketing Report 2021
  • Digital ads: More expensive but reaching fewer consumers

According to the latest Merkel report, ads are becoming more expensive. Impressions on Facebook have decreased by 1%, while the CPM price has increased by 8% and was as high as 46% during Q3 compared to a previous period. Many offline businesses reached out to the online world due to pandemics between 2020 and 2021, which increased market competition. Additionally, more GDPR-related rules and especially Apple’s privacy updates have seriously impacted retargeting campaigns and lowered the overall CTR performance.

This trend has also affected paid search strategies. A CPC, on average, has increased by 14% throughout 2021, leading to a drop in ad spending by 13%. Simply put, every marketing dollar can no longer drive the same amount of revenue to eShops as it did in the past.

These marketing trends force companies to seek new opportunities to win over their audience. It also forces them to move their advertising to more recent social media platforms like Pinterest, Snapchat, and TikTok. However, experts envision that the price of advertising on those platforms is in the early phase of growing and following the same trends as Facebook and Google. 

In addition, today’s reality is that social media strategies need to be staffed (by you or your team), and ads need to be paid/boosted. There is no way to get around it – whether you do it or hire an agency, the marketing budget needs to be spent. Paid ads aside, the time spent to manage a social media strategy alone costs time (and time = money).

Although ad-spend on Facebook increased by 68% year-over-year in Q2 2021, impression growth did not follow the same pattern and was up only by 14% year-over-year, suggesting increased competition and CPM on the channel. Additionally, as the amount of content flooding Facebook has risen, each post from businesses or individuals is seeing less reach on average. In turn, each post doesn’t elicit the same purchasing behavior from customers as it once did. 

To sum up:

• • GDPR complicated targeting for advertisers. Without knowing the conversion, FB and Google algorithms can’t be trained properly to reach the right audience.
  • Organic social reach is almost no longer feasible for businesses due to changes in the Facebook Newsfeed model in 2018. All social media has become almost purely a paid acquisition channel similar to TV.
  • Re-targeting stops working completely or requires much more effort to set up server-side tracking. This becomes complicated for small and medium-sized businesses that hire marketing agencies to take care of their marketing strategy.

 

Personalization is a key driver

Personalization becomes a key driver in building a loyal consumer base. Emails and social media presence were excellent marketing strategies for digital-native brands to keep a personal touch with their customers. However, the flooding of content on both channels is starting to build up customers’ general frustration, leading to a switch in user behavior trends.

Consumers started to receive so many poorly personalized emails in their inboxes that it became difficult to set your brand apart from your competitors. Emails get lost in the shuffle because people are overloaded. According to a Hubspot survey, 51% of recipients claim to have canceled email subscriptions because of the number of emails received. Even though the unsubscribe rate of eCommerce-related emails is reaching only 5%, it is an alarming KPI for eCommerce-related businesses.

Though social media encounters a different consequence, the increase in spending on paid advertising in social media continues to degrade organic outreach as the platforms get flooded with more business content. Many small and medium businesses rely on social platforms to track their business. They usually have lean marketing budgets that demand a return on investment. Organic outreach on Google and social media decreases due to increased paid advertising costs and the inability to retarget users accurately.

Everything mentioned above makes customer retention a growing problem. According to the latest market research, returning customers lead to 68% of revenue due to a much lower acquisition cost. Losing or missing this additional revenue opportunity would mean losing the competitive advantage in new user acquisition. Affordable loyalty programs that enable you to enrich your customers’ profiles while building gamification to engage with your customers is a new trend in customer retention.

The current level of personalization that most eShops fall back on is limited to what information they have about their customer. At present, this information is strictly limited to their purchase history and comes without having a truly personal affinity with their audience or an understanding of their interests. 

The user profile is often a defining factor for their interaction with an eShop. It includes:

• • the traffic source (what were they doing before finding you);
  • the device the user is on (how much attention do you have from a user); 
  • how they interact with your site and products they’re interested in;
  • are they returning visitors (ones who didn’t purchase) or returning customers? 

This profile is readily available through standard tools like Google Analytics. However, on its own, it doesn’t allow you to learn about the customers’ purchase intentions to adjust marketing activities. A set of data mining techniques needs to be applied by a team of data analysts to crunch the data and convert it to suitable material for the marketer to engage with the audience in a personalized fashion. This is less of an issue for larger enterprises; however, small and mid-sized companies will find it a daunting task due to the complexity of the problem and the lack of resources.

 

Consumers can control the data 

It’s a well-known requirement that GDPR, CCPA, and other privacy regulations entitle service providers to make all the collected personal information available to the user. While this is happening either on request or as an action hidden somewhere deep in the account settings, it’s a matter of time before this data becomes programmatically accessible. Google and Facebook will no longer be walled gardens for users’ data, and consumers themselves will control and utilize the data spread across multiple platforms and services. 

Those who want to prevent tracking or stay anonymous already have plenty of tools to achieve their privacy goals (e.g., starting from a simple non-techy action of not posting their home address to Facebook despite the option being available as a profile attribute :)).

Technology makes it possible for users to control and maintain their digital profile on their devices instead of leaving it solely under the control of Facebook, Amazon, Google, or other tech platforms.

We offer a solution that allows a user to maintain their digital profile with the ability to monetize their information or share it with local and smaller brands or services they already love in order to get personalized offers and better deals.