The retail media framework

Martin Saunders, Maira Saleem, May 30, 2023

The stakes have never been higher for eCommerce leaders: uncertainty in markets coupled with a higher cost of capital has made profitable growth an imperative. With retail media advertising forecasted to make up over 20% of total digital ad spend in the US in 2023, totaling over $45 billion (Insider Intelligence), it will play an essential role in the marketing strategies of advertisers who want to win in an environment where balancing top- and bottom-line performance is essential.

The power of retail media advertising lies in the positive feedback cycle that it creates. An initial ad investment drives traffic to your products, leading to more sales. In turn, those new sales bring in more high-quality, first-party customer data that will deliver insights into how your advertising and products are performing and how they can be improved. Finally, turning data-backed insights into action increases efficiency and frees up budget to invest in retail media advertising platforms, driving further sales.

We break retail media up into four key components:

• Before you advertise: lay the groundwork with market awareness and retail readiness
• Capturing demand: on-site ads win sales from existing demand, driving your organic rankings higher and maximizing organic sales (and thus improving profitability)
• Creating demand: external traffic and off-site ads drive branded searches to attract new customers and inspire loyalty among shoppers who’ve already purchased
• Intelligence and analytics: retail media’s first-party data, based on actual sales, unlocks insights around seasonality, advertising, and product positioning, enabling quick and effective decision-making

Before you advertise on a retail media platform

Each brand’s situation is unique, so there are some fundamental questions that need to be considered before making an investment in retail media advertising. These considerations fall into two categories: market awareness and retail readiness.

Market awareness

Market awareness takes market and competitive dynamics into consideration when crafting your advertising strategy. The characteristics of the market you plan to enter with your product (and ads)—e.g., new categories or established, competitive categories—should guide goal setting, planning, and optimization for your ad campaigns.

Below are some of the questions you should take into account:

• How strong is the demand for the product category?
• How mature is the competitive landscape?
• How is market share dispersed?

The answers to these questions will vary from brand to brand, and sometimes from product to product, but they should guide your approach to building and capturing demand and shape your expectations upon entering the market.

Retail readiness

Retail readiness is a prerequisite for advertising performance. It ensures that your product is well-positioned to deliver traffic and conversions once it appears in the search results and in sponsored ads.

A few of the most important questions you’ll need to consider are below:

• Have you optimized the product listing (title, product description, bullet points, etc.)?
• Do you have enough inventory to ensure that your product remains in stock?
• Do you have a well-thought-out pricing strategy?

A retail-ready product will be more likely to win sales. The more sales you get and the higher your conversion rate, the better your organic rankings. The better your organic rankings, the more profitable your business will be. It all begins with retail readiness.

Capturing demand: on-site retail media advertising

The appeal of retail media ads is intuitive because, at its best, all parties involved win. The customer wants to buy a certain product, the brand wants to sell that product, and the retailer wants to facilitate the transaction (and collect its commission).

To that end, on-site ads are a powerful demand-capture tool that offers scaled distribution, access to premium placements within the SERP and product pages, and unique advertising formats like video and display ads.

Account structure: orchestrating campaign and targeting types

Crafting an account structure that balances control with efficiency is the top priority. Advertisers need to effectively allocate and pace through budget while ensuring that campaign performance goals are met.

Targeting types

We recommend creating separate campaigns whenever a product’s ads have unique objectives, like driving awareness, targeting a specific customer segment, or clearing inventory.

Below are some of our recommended best practices when segmenting by targeting type.

• Branded targeting: Branded targeting is not just for playing defense. It’s also great for cross-selling and up-selling other items in your product portfolio, and for supporting new product launches.
• Category: Relevance and the competitiveness of your offer are key here. This campaign structure is best for products with specific strategies in place and strong brand presence.
• Competitor conquest: Targeting by ASIN relevance, and by the competitiveness of your product offer, will drive the best results.

Campaign types and target harvesting

Within your account, each campaign type has its own function. The automatic PPC campaign performs target research, harvesting successful keyword and ASIN targets for use in manual keyword and ASIN campaigns.

As targets are moved from campaigns that encompass a wider swath of targets to those that are more refined, negative targets are often used to stop the flow of traffic to source campaigns. Negative targets can also be used to cut off traffic coming from irrelevant or unprofitable keywords.

There are, however, a couple of problems with this strategy:

• It puts some natural limits on the scale you’re able to achieve with your campaigns.
• It ignores the dynamic nature of the marketplaces.
• It can be very time-consuming for large accounts with many ASINs.

Perpetua’s approach: we give superpowers to eCommerce advertisers

Perpetua empowers advertisers to scale up their business—without scaling up human resources.

Perpetua’s goal-based campaign creation allows you to create a high-performing campaign structure in a matter of minutes. Our best-in-industry playbooks are built right into our product, giving users the time-savings of customizable automation combined with the flexibility of granular controls to streamline keyword, bid, and budget optimization across segments.

Creating demand: external traffic and off-site ads

External traffic refers to any shopper that arrives on your product page in a retail media platform via a channel outside of the retailer’s website. Search engines, social media, and the Amazon demand-side platform (DSP) are all examples of external sources of traffic that can direct buyers to your product listings.

External traffic represents an extra layer of the upper funnel that can help you outperform your competitors by introducing your brand to a new audience and inspiring customer loyalty.

Analyzing performance: where the advertising flywheel comes full circle

In a highly competitive retail market, the ability to leverage data and analytics often determines the success or failure of an advertiser’s retail media advertising strategy. Measuring the effectiveness of demand capture and creation shines a spotlight on the strategies that are working and those that aren’t.

Gauging incrementality

On retail media platforms, advertisers only have limited space to vie for shoppers’ attention with ads. Therefore, to bring in incremental sales—i.e., those that wouldn’t have happened without a customer interaction with an ad—it’s crucial to understand how and where your ads and product listings are showing up.

With Perpetua, we can easily map and measure the incrementality of our advertising performance. Perpetua makes us smarter and helps us optimize our ads to improve our bottom line.

Validating ad performance data

Ad performance is the cornerstone on which successful retail media execution is built. Every practitioner knows the numbers they need to keep an eye on, but few know how their KPIs compare to their competitors.

The free Perpetua Benchmarker Report puts your performance in perspective by providing you with Amazon performance benchmarks on country, category, ad-format, and individual-product levels, for ~20,000 Amazon product subcategories.

Actionable market intelligence: the key to retail media execution

Retail media advertising platforms are more competitive than ever. From the search results page to product detail pages and advertising placements, shoppers are presented with a dizzying array of products to choose from.

To win in this environment, advertisers need to understand their competition and what is happening in the larger market around them, and use this information to optimize their advertising.

Summary

Retail media advertising is a powerful way to generate and capture demand while garnering the reliable data advertisers need to fine-tune their advertising and product strategies. When used to its fullest potential, it will be a continual driver of sales and insights for your business, your engine for profitable growth.