Marketing in challenging categories

Many marketers are nowadays managing brands in markets with slow growth and high competition (low entry barriers), which we define as challenging categories in this research. What are the best practices to thrive in such environment? Leveraging Amazon.com data, Vivian Qin's Learning White Paper, presented this week by Zee Shah at the Marketing Analytics Symposium Sydney (MASS), analyzed the advertising and retail actions associated with brand success:

This analysis includes over 122,000 U.S. brand/category combinations at the weekly level from 1/1/2021 to 5/16/2022. The seven categories (classified as browse nodes according to how consumers browse Amazon.com) are Electronics, Home & Kitchen, Tools & Home Improvement, Clothing, Shoes & Jewellery, Beauty & Personal Care, Health & Household, and Grocery & Gourmet Food. The challenging categories are Electronic, Pet Supplies, Clothing, Shoes & Jewellery, and Home & Kitchen. Next, we categorize brands as thriving or struggling based on their sales and consideration rank, and investigate which retail and advertising actions set them apart. In order to isolate the effect of advertising, we use Propensity Score Matching (PSM) with K-Nearest-Neighbours (KNN) to match brands categorized either as thriving or struggling on brand retail actions (such as product launches, review rating and volume and the 'ad readiness score' that summarizes retail best practices including product page, shipping and pricing to qualify a product for being ready for the shopper). Finally, we estimate a random-effect panel model to test the relative importance of each marketing action on consideration and revenue rankings.

The results are insightful. First, brand advertising strategies matter much more for their performance than whether the category is challenging. Indeed, thriving brands are adopting similar strategies in both the more and the less challenging categories. However, middle and upper funnel advertising strategies are even more beneficial in challenging categories, including Sponsored Brands, Sponsored Brands Video and Sponsored Display:

Second, the importance of advertising holds even when we control for retail actions. Specifically, the high-impact advertising actions are: the total number of ad campaigns, their impressions, and High-Value Actions related to Sponsored Ads, such as starting Sponsored Brands and always-on ads. Consistent with the informative power of advertising, a higher number of above-median investments in Sponsored Ad campaigns was associated with a higher consideration rank:

Third, more focused and measurable audience strategies, such as negative keywords and retargeting campaigns, are especially beneficial in a challenging category. Negative keywords allow advertisers to exclude keywords not directly relevant to their products. These strategies were especially associated with higher revenue rank:

Fourth, major shopping events, especially the Prime Day (PD) week and its lead-up period, can build strong demand momentum. Using non-PD’s effect on all product categories as a baseline, ad investments in the PD lead-up week have 170% higher effect in challenging categories.

CHALLENGE ACCEPTED

In sum, while the most effective advertising investments and strategies are shared across product categories, many are even more effective in challenging categories. Specifically, the Learning White Paper recommends brands in challenging categories to:

1) Use Sponsored Ads for an immediate performance boost;

2) Prioritize measurable and focused audience strategies such as negative keyword and retargeting campaigns to find the most relevant potential shoppers;

3) Leverage (the lead up to) major shopping events for demand momentum;

4) Continuously improve retail readiness, equip new products with prime shipping, optimize pricing, and launch new products when applicable.

Hoping you enjoyed this deep dive into a specific Learning White Paper, please let me know what you would like to see in my next Newsletter!