Strategic planning for 2023: Where should eCommerce brands invest their budget?

Looking back over the last couple of years, one of the only certainties we can take is that eCommerce performance is extremely unpredictable. From exponential rises in advertising costs and a post-pandemic retail buzz, to a looming recession damaging consumer confidence, 2021/2022’s events would have been near impossible to factor into any budget or forecasting plans.

So how do we even begin to tackle 2023 planning? To simplify the process our Head of eCommerce, Emily, has broken it down into in three key strategic steps – focusing on the information that we do have access to.

Before even looking at your 2023 budget, take stock of the key factors holding back your brand’s success. These are the “leaky bucket” items that should be prioritised in next year’s plans before investing in growth opportunities. So, what are the common factors that we come across as an agency?

Over the last year, many brands have made the switch to focusing on profitability, cutting prospecting budgets and focusing instead on capturing active demand through Search. While this approach helps profit margins in the short-term, what it fails to do is grow demand in the long-term. 

To help better understand the value of prospecting efforts, it’s worth looking at all Paid investments holistically, using Marketing Efficiency Ratio (MER) as a KPI, rather than a siloed channel approach.

If you can’t beat them, it’s time to join them – gone are the glory days of the D2C boom. Etailors play an extremely important role in brand exposure by getting products in front of new customers. If your brand is struggling to offer a strong D2C proposition that will entice customers to shop direct, the ROI on paid media campaigns is likely declining.

It therefore might be time to rethink your marketing efforts (and KPIs) and merge P&L sheets, so that Paid Social brand awareness campaigns are supporting both eCommerce and Etailor sales. 

It’s no breaking news that many brands have faced a rise in customer returns, with ASOS reporting this trend having a significant impact on profitability. Whilst this could partly be attributed to a general shift in customer behaviour, there are still many initiatives to help curb this trend – from investing more heavily into customer service, considering charging for returns like Zara, or adding additional pre-purchase educational content on site. 

Every brand will be faced with different challenges, so it’s important to identify what these are and diagnose the underlying reason, before defining the action plan and investment required.

There are a couple of different ways in which brands could approach this:

Limited time and resources mean it’s important to assess the potential impact of any growth opportunity before deciding where to dedicate budget. In a similar mindset to diagnosing your brands’ limiting factors, it’s worth mapping out all the current growth opportunities on the horizon to understand which will have the most impact.

We recommend categorising your growth opportunities into the quick wins that can be actioned, and the benefits felt quickly, versus longer term gains. Doing so will require more resource, but over time will have greater impact, for example:

It’s not uncommon for brands to invest thousands of pounds in prospecting activity, without having an optimised Email channel. Not only is this a missed opportunity in driving purchases from new and past customers in an extremely cost-effective way, but that prospecting activity is less effective due to an absence of CRM segments for lookalike targeting.

Take Emma Bridgewater, for example, who saw a 74% reduction in Paid Social CPAs when leveraging their highly segmented CRM data in audience targeting.

Driving sales from existing customers can be 6-7 times more cost-effective than acquiring new customers. So, you really do want to ensure your marketing is set-up to maximise sales from this segment. Part of next year’s efforts could be about setting up or optimising Loyalty Programs and Paid Advertising campaigns, so that by the end of 2023, returning customers’ purchase frequency – and therefore revenue – has increased.

Whilst it would be great if growing revenue from other markets was a matter of just running a Paid Social campaign in a new market, it comes as no surprise that it requires a lot of time and resource.

What’s required is localisation. And lots of it. From Ad Creative and Customer Service, to translation (where relevant) and international fulfilment; it can take months, if not years, of testing and optimising before you see proper growth. A plan to expand into international markets should therefore be well thought out, with realistic success metrics set for each stage. Find our full checklist for successful international expansion in our ebook.

Once you’ve worked through the motions of defining your brand’s key focuses to drive growth, you’re then ready to begin allocating your budget. Having worked with many eCommerce and retail brands over the years with their annual planning and budgeting, s360 UK have collated a list of tips to guide you:

If your brand has ambitious growth targets for new customer acquisition, it’s important to manage expectations as KPIs will need to evolve in line with these targets. Direct ROI will likely take a hit as prospecting campaigns take a few months before audiences make their first purchase, but this is with the ultimate goal of growing new customer numbers throughout the year.

When dealing with multiple markets, it’s very important to check budget isn’t being spread too thin. As part of this process, we recommend assigning market-specific and channel-specific KPIs, as results will differ based on varying levels of brand awareness and advertising costs. This will then help you understand how much budget is sufficient per market and channel.

For each market, you want to ensure there’s enough budget to capture all active demand (the “quick win” when it comes to revenue generation), before then allocating additional budget to prospecting activity and driving new customer acquisition.

While it can be tempting to simply replicate 2022 budgets, these must consider increased CPCs and CPMs as well as expected changes to performance (e.g., CVR and CTR).

Elements like photoshoots and creative can be undervalued when it comes to budget planning because they don’t provide a direct ROI. However, it’s important to ensure budget is allocated to items and projects that will aid increased performance, such as frequent content production for improved Paid Social CTR.

We recommend always leaving budget aside for opportunities that crop out throughout the year and for testing new channels.

As much as we can prepare for the new year, our biggest recommendation is to keep your plan and budgets flexible and evolve these constantly. Check-in quarterly on progress with your top-level goals, and adjust budgets based on performance and business priorities. 

If you’d like support in defining your 2023 plan and budget allocation, or would like to talk through your current strategy, drop us a message and one of our Reloaders would be happy to jump on a call.