Brand Connection > Brand Discounts, the Rise of Retail Media, and AR for DR

In a world full of constantly changing technology and information, this monthly newsletter keeps marketers up-to-date on the latest trends that will impact their business. I hope you enjoy it!

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Ok, so let's get the recession part of this newsletter out of the way. Rising inflation, consumer confidence, and supply chain issues are contributing to headlines about an impending recession. However,?GroupM and Zenith's?forecasts paint a rosier picture. Yes, ad spending will decelerate (note, I didn't say decline!) in 2022 but continue to grow. GroupM predicts digital ad spending will grow 11.5% in 2022, and Zenith predicts a 16.6% increase.?So why so much confidence? They site low unemployment and high household savings, which will continue to drive consumer spending. So while both groups agree there will be a deceleration, it's a deceleration from record growth vs. a decline. So I'm saying that yes, we should be cautious, but brands should not make decisions based on scary headlines. The other thing this says to me is if you were hoping to see ad prices come down because of a recession, don't hold your breath. Consumers are still spending, and brands are spending even more to reach them, so we may expect a rise in ad prices (we are seeing it in CTV already…more to come on that). Despite the confidence of GroupM and Zenith, it still makes sense to prepare for a less than stellar year - you can check out some tips?here.

Despite consumers continuing to spend, it is clear that they are being more cautious with where they spend their money. Many brands have looked to expand their buyback and resale programs to capitalize on a newly thrifty consumer base.?lululemon?expanded its Like New trade-in and resale program nationwide. The notoriously anti-sale brand allows shoppers to trade in lululemon clothing for a gift card. Lulu will also feature gently used lululemon items online, allowing consumers to buy previously owned lulu attire at a lower cost.?Dick's Sporting Goods and its Public Lands?launched an in-store buyback program for outdoor items in a handful of markets. In addition, REI is expanding its Re/Supply trade-in program to all of its stores by mid-year. With a focus on thrifting and increasing interest in sustainability by a younger audience, this is a great way to reach a new demographic and appeal to a new audience while offering pricing flexibility. eMarketer expects this year to be a banner year for online fashion resale, with year-over-year sales growth of 46.6%, reaching $15.50 billion.?

The other thing consumers will be more interested in over the next few months is additional payment flexibility. Klarna and Affirm have been capitalizing on this trend for some time, but now Apple has joined. Apple is launching a new feature for Apple Pay to let you pay for purchases in four installments over time without interest and is calling it Apple Pay Later.?It will be built into Apple Pay, so its potential reach is massive. Despite the Buy Now Pay Later?growth, one of the issues they had was with adoption, especially among older consumers. A BNPL service in Apple Pay will make it easy for consumers (even those uncomfortable with BNPL) to adopt. Once this is more widely adopted, it will be interesting to see how it affects shopping behavior, conversion rates, and eCommerce.??

Consumers aren't just more cautious with their eCommerce spending but with all of their spending habits, including their entertainment and streaming budget. Data from?Morning Consult?found that almost 40% of adults would rather subscribe to an ad-supported streaming service than a more expensive, ad-free one.?Consumers have been trending in this direction for some time now, which is why we are seeing many of our favorite streaming platforms offer (or talk about offering) ad-supported options.?

Now that we are all on the same page (AVOD>SVOD), there is a new fight brewing which is the one for consumer experience and?the lightest ad loads. Every major streaming company has been touting ultra-light ad loads because they know they will lose subscribers and viewership (and advertising dollars) if they have too many ads. Even with light ad loads, many streaming companies have to offer incentives to retain users and provide more value in the crowded market. Peacock, for one, has a?promotion?for premium subscribers offering a free $15 Fandango movie ticket or a $7 Vudu movie rental monthly. Low ad loads (along with better targeting) may be one of the reasons certain streaming companies have higher CPMs than others. Lower ad load means less inventory but hopefully a more engaged audience. Disney+ will carry about four minutes of commercials per hour?The Wall Street Journal?reports. Compared to its other streaming competitors, that seems pretty in line.?HBO Max?said its new ad-supported tier is at four minutes per hour;?Peacock?has about five minutes, and Hulu more like eight.?Linear?commercials are closer to 18 minutes per hour. As major players have started rolling out ad-supported options streaming services are pushing for higher costs to account for more advanced targeting, use of first-party data, and lower ad loads than linear. Disney+, for example, is starting?CPMs?in the $50 range. If they get that remains to be seen but overall, it appears most CTV CPMs are on the rise. But don't fear; streaming companies have come up with other ways to make money that are not traditional ad units. For example, Amazon offers a virtual product-placement tool that inserts products directly into shows. One of the benefits is that Amazon can then connect your watching habits (did you see the product placement) with your purchases and offer attribution.??I'd expect to see more interesting ad units from streaming companies to try to monetize their inventory in a less obvious way. I'm particularly interested to see what Netflix rolls out as the options for non-traditional ad units are endless. Streaming companies have the opportunity to create something integrated and non-disruptive which could really set them apart.

Should we talk about TikTok in the CTV section now??TikTok announced a new?comedy docuseries?you'll have to pay to watch. TikTok has?said?they don't want to be known as a social media company. People engage with TikTok in a very different way than they engage with social media, and it is much more similar to how they engage with CTV - they are there to consume and watch. The first two episodes of the series will be free for TikTok users, but access to the full eight-episode series will cost $4.99. While TikTok is positioning itself as an entertainment platform, it is an entertainment platform that people watch in between other entertainment platforms.?According to a recent?study?running TikTok and T.V. ads side by side increased the impact of running them alone. There was around a 6-8% lift in aided brand recall when someone saw an ad on TikTok and then viewed the ad on T.V. (CTV or linear). When they saw the ad on T.V. and then on TikTok, there was a 9-16% lift in visual attention to key branding moments. We know that?88%?of people use a second device while watching T.V., so it's highly likely that users are consuming TikTok content while watching T.V. allowing advertising messages to be easily reinforced. As a marketer, I think it's interesting to consider how you can integrate your TikTok and T.V. ad targeting and strategy to capitalize on the lift you may see. I will also venture out on a limb here and say this is probably not unique to TikTok. If T.V. and social are a big part of your media mix, start thinking about how you can integrate those two channels better.

?In other TikTok news, they are really trying to get brands to spend more on TikTok. What a surprise, right? One of the significant issues brands face is creating content unique for TikTok or creating enough content to stay fresh and relevant on the ad platform. TikTok is?launching?a new ad product that lets brands connect with creators and crowdsource content for marketing campaigns.?With the new feature, advertisers can develop a brief and share it with the platform's creator community, who can then produce videos for brands to turn into ads in exchange for a potential traffic boost and payment via TikTok's ad revenue share program. They also keep moving forward on one of their strategic pillars with additional eCommerce integrations. The recent enablement for?WooCommerce?merchants allows them to sync their store catalog with their TikTok profile. So much of TikTok's revenue in China comes from in-stream commerce integrations and shoppable live streams. While this is not as big in the U.S., its been growing immensely, and TikTok is trying to ensure it will be one of the platforms pushing the envelope here. It really is only a matter of time until it becomes a more significant part of eCommerce purchases, so TikTok is smart to lay the foundation now so it will have a leg up in the future.??

Twitter recently announced its latest shopping feature called?Product Drops?which allows brands to tease new product launches and allow users to set up reminders through Twitter. Product Drops won't make sense for every brand, but for those with cult followings, limited releases, or highly anticipated products, this could be helpful. With a deceleration in consumer spending, it's more important than ever to continue to curate a sense of community for your consumers, and giving first access to new products would do just that. Yes, consumers will respond to discounts, but more importantly, they want to feel connected and valued by a brand, and getting consumers to sign up to receive real-time alerts on Twitter is just one more way to encourage the community. 60% of U.S. online shoppers reported that they're more or equally motivated by personal connections with brands as by financial incentives when deciding where to shop, per Meta and Harris X. So for brands, it's not always about financial incentives but continuing to find ways to connect and develop relationships with your consumers.??

Brands have always tried to develop better consumer connections, but with the rise in A.R. technology, it's become a lot more fun. A.R. continues to show consumers how a brand can fit into their lives, instilling additional confidence and lower returns.?Two-thirds of consumers are less likely to return a product after using an augmented reality feature,?according to an Alter Agents survey?

Amazon, among many others, knows this and recently launched a new A.R. tool called Virtual Try-On for Shoes. Taking a page out of the Snapchat playbook, this tool will allow consumers to virtually try on shoes to help people visualize what a shoe would look like on them.?As Amazon continues to invest heavily into fashion, this focus on A.R. will make shopping easier and cut down on the time to convert.?In a recent study,?Snapchat?found that?users find A.R. ads to be more informative than pre-roll ads and also help consumers feel closer to the brand. The study found that world-facing A.R. lenses impact those in the middle of their purchase journey and increase purchase intent by 8%. However, front-facing A.R. lenses help lift a brand image for those closer to purchase with a 5% lift in brand uniqueness and a 4% lift in relevancy.??As brands look for new ways to create immersive experiences and foster better connections with their customers, I'd expect to see more brands partnering with platforms that give access to an A.R. experience.??

Retail media is having a moment, and it feels like there has been a massive influx of new retail media networks launching in the past few months. At its Digital Media Summit, LUMA Partners projected that retail media alone will be a?$60 billion market?by 2024, poised to rival T.V. ad spend. So why the massive increase in retail media networks? Because the brand demand is there. Last quarter Amazon's revenue only increased by 8%, but its advertising services segment grew by 23% YoY. Amazon is turning into (or has already turned into) an ad company, and every retail media network is hoping they can do the same. So, next question is, why are they in such high demand? Well, that's because retail media networks are one of the few places that will have uncomplex attribution since retail media is a mini walled garden where almost everything is still trackable. Despite marketer's understanding of complex paths to purchase and wanting to be where eyeballs are (hello TikTok, CTV, etc.), a straightforward attribution story will hook us every time. While I am also drinking the retail media Koolaid, I want to remind people that many times retail media (like Google) only captures purchase intent and does not necessarily create awareness of your brand. However, many retail media networks are trying hard to create a full-funnel ad platform, with Amazon doing the best job. Influence and action happen in two separate places, and the platforms where a brand or seller can spend to drive action will continue to get a larger dollar share. Please don't forget you need to continue to drive brand awareness and authority, or retail media will get much harder as your brand value diminishes.??

So let's talk about some of the recent launches.

Marriott?has been watching the rise of retail media networks and has decided to get in on the action. Marriott launched the Marriott Media Network with Yahoo allowing advertisers to target consumers using Marriott's first-party data. With access to inventory on all of Marriott's owned channels (website, mobile, email) and eventually on the T.V.'s in their rooms. With the increased focus on privacy, advertisers are looking for more first-party data and contextual targeting to replace the targeting losses. With 164 million Bonvoy loyalty members, Marriott has a treasure trove of first-party data. The launch is perfectly timed with the return to travel and uptick Marriott has been tracking. The data they have access to is a real differentiator, and I'd expect to see other hotels launch their own media networks soon.

Ulta?launched?its retail media network named U.B. Media, backed by data from over 27 Million Ulta members.?Ulta is the largest beauty retailer in the U.S. U.B. Media will allow brands to have ads on Ulta's app, website, and other digital channels, including email. It also lets marketers use Ulta Beauty's shopper data to better place ads across the web. There is even talk about allowing brands to advertise in Ulta's physical stores. It can be assumed that Ulta's biggest competitor, Sephora, is not far behind.???

Not to be outdone by the new launches, many of the current retail media companies continue to innovate their ad products to allow for a more full-funnel experience.?Instacart?announced it would launch shoppable video ads and enhance shoppable display ads allowing brands to drive inspiration, discovery, and purchase. These new ad units will allow brands to more easily make their product discoverable by their target audience. The add-to-cart functionality right within the ad unit will allow consumers to not have their purchase journey interrupted and build basket sizes on Instsacart.??eBay will expand its advertising offerings to support full-funnel ad strategies this year. Even?Dollar General?is revamping its retail media offering, which could be really interesting for brands trying to reach the more rural customer base they offer.??

Finally, Google hosted its Google Marketing Live conference. There is so much to cover, from CTV to more shoppable ad units. If you want a complete list of the takeaways, you can find it?here.??

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Megan Conahan is a 16-year veteran of the digital marketing industry. Over the last 16 years, she’s consulted with fortune 1000 brands on how to best negotiate the ever-changing digital marketplace demands and create unique solutions to set them apart. Megan is an EVP at Direct Agents, an independent and minority-owned digital marketing agency.??