As we face this continuing cost of living crisis, there’s genuine concern from brands and marketers alike that consumers will close their wallets come Christmas. With gas prices rising, inflation worsening and a potential recession looming, this year’s holiday season doesn’t look too cheerful.
However, despite these global economic concerns, the research suggests consumer shopping isn’t slowing down just yet. According to McKinsey, consumer spending remains “surprisingly strong.”
With the past two years being impacted by pandemic recovery and supply chain shortages, many are forecasting the 2022 holiday period to be quite the wildcard. Global consumer spending is expected to outdo 2019 levels, but not quite reach the highs seen in 2021. 86% of consumers say they will be shopping online the same or more than pre-pandemic levels. (source)
This still leaves hope for many brands to continue trading successfully and enter the new year somewhat unscathed. However, in response to tightening budgets, many are already slamming the breaks on their marketing spending.
New research from Consumer Next suggests that brands should avoid this, especially facing increasing competition for consumer dollars in Q4.
Their recent report ‘From Digital Sales Cheers to Consumer Spending Fear’ takes a look at both the forecasts for online sales during the upcoming holiday season and strategies marketers are using to maximise conversions.
To help better prepare you for the silly season, we’ve broken down some of the key things brands and marketers need to know for the upcoming promotional periods.
The Quiet Win
2021 was a record-breaking year for many brands. But with many consumers hitting holiday shopping hard after months of lockdowns, that doesn’t come as a surprise.
This year, the atmosphere is vastly different. It’s important for brands to manage their expectations when it comes to their 2022 Q4 goals. With the current global situation, a quiet win for any brand should be considered a big win.
Get In Early
The research shows consumers are looking for deals, and they are looking early. This year, shoppers are prepared to spend more early on, in an effort to ‘get in early’ before inflation surges even higher. 80% of shoppers said they plan to shop the same or more compared to last year, but 45% will start their shopping early to find the best deals and discounts
For brands, this means getting on top of your promotions early too. Expect heavy competition, with more merchants increasing their promotional volume. 32% of respondents are increasing promotions, compared to 13% last year. 45% of merchants are also encouraging consumers to shop earlier.
It wouldn’t be surprising to see a steady stream of promotions from Black Friday and Cyber Week continue into the silly season.
According to Coveo, 42% of shoppers will leave a site if shipping options are limited and restrictive returns policies dissuade 35% of shoppers.
It’s important for brands to optimise for conversion by offering competitive, fast and affordable shipping options that meet customer expectations. Getting your product in your customers’ hot little hands before Christmas should always be your number one priority.
Given many bigger brands have already started charging for returns or steered away from free shipping altogether, this is a key area for brands to look into. Offering heavily discounted items with no-limit free shipping and returns might cause a lot of headaches if returns pick up in the new year.
Instead, brands should look at boosting AOV by incentivising purchases to unlock free shipping and offer flexible options for delivery. During key promotional periods, we suggest leveraging a minimum spend threshold for free shipping, that is above your AOV.
Mix Up Your Marketing
Paid search continues to be the number 1 way to reach shoppers, followed by affiliate marketing. 2022 was a big year for affiliate marketing and partnerships, becoming the second most-used acquisition strategy in 2022, following paid social.
Paid social has been facing tough times thanks to measurement challenges and changing privacy regulations. However, 52% of merchants say they use last-touch ROAS exclusively.
Brands should look to diversify their toolbox with a solid combination of media mix modelling, first-party data and incremental testing. When it comes to paid social measurement, it’s valuable for brands to go beyond a purely performance-based point of view and look further than attribution. Metrics such as MER will give a more rounded insight into the effectiveness of your paid social efforts.
It’s also important for brands to level up creative assets during this time. Use distinctive, eye-catching creatives that keep your brand front-of-mind for the consumer from Black Friday and beyond.
Depending on your category and target market, your high-value consumers might be expecting a certain level of promotion from your brand. While it’s always nice to make a splash with a deal customers can’t ignore, it’s important for brands not to give away promotions unnecessarily.
On average, most consumers will expect a discount of around 20-40%. If consumers are already willing to buy, offering them deals of 60%+ might not be the best move to meet your Q4 goals.
Regarding promotions, it’s interesting to note that 42% of Gen Z are motivated by tailored offers, discounts and promotions. While 51% are motivated by best-seller notifications and 40% by product recommendations. Solid social proof and reviews are key.
It’s certainly shaping up to be an interesting festive season. Which of these tips will you leverage during the upcoming promotional period?
Thanks again for tuning into another weekly roundup with The Graygency. Check out our blog for more Midweek Media Breakdown posts.
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