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Date posted

18 Jul 2023

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The rise of social e-commerce

The rise of social e-commerce is in full throttle: accelerated during the pandemic and advancing into 2023 with format innovation for advertisers (we’ve covered TikTok and Twitter’s new keyword-based solutions). And, with checkout functionality now integrated on social platforms, it’s no great surprise to hear that nine in ten of us buy from brands we follow

What’s more, as social algorithms pivot towards discovery and earned reach, the opportunity to find your audience across social platforms has never been greater.

Social buying behaviour is all the more prevalent in younger, digital-first generations whose purchase habits are closely tied with social media usage – being up to 3x more likely to have shopped in-platform. Whilst forbearer platforms such as MySpace were built around individual profiles and self-expression, social media nowadays is actively being used to keep up with brands and products. No more so than via TikTok, who is set to gain 9.6m social buyers this year (more than FB, IG and Pinterest combined).

Even traditional buying habits in the B2B world have changed – with 23% of internet users using social media for work-related research. And many of these brands have been taking note, with social marketing and promotions deemed ‘the most important customer acquisition and retention strategy’ for driving growth over the next few years. 

At the same time, retailers can be reluctant to jump on the bandwagon with common fears around proving ROI and creative production ability. In this piece we’ll explore how you can incorporate social media into a profitable, growth strategy to ensure you aren’t left behind in the social buying shift.

The challenge

A common trap advertisers fall into when looking at social media is that they place too much emphasis on short term returns, especially those who have traditionally focused on direct response marketing. 

The ongoing demise of third party cookies has increased the amount of conversions attributed by default to channels such as Brand PPC and direct, with paid social appearing weaker than even just a few years ago. Initiatives that fuel platform data such as Meta’s Conversion API generally help, but the underlying question persists – how much is paid social contributing to a user’s conversion journey? And if we can’t see short-term impact now, how long until our brand will feel the long-term benefits of investment? The most successful brands in the modern social landscape understand that whilst social is a brilliant sales driver, it’s also fantastic at generating new demand for your brand. That might not lead to instant conversions, but it is crucial to preventing the dreaded plateau of rising CPAs and flatlining growth. (We outline best practices brands can take and how our own proprietary solutions (DMM and Incrementality Testing) can go some way to answering these questions here.) 

A closer look at Meta

Despite its benefits, the major iOS 14 disruptions to Meta Conversion tracking have seemingly harmed Return on Ad Spend (ROAS) expectations, and led to some brands reducing investment. But more recent trends are of reassurance, with a recent Fospha study finding that Meta is actually underreporting the sales it claims by as much as 30%, due to the impact the Apple update had on tracking its impression-led media. It seems the initial drop-off felt brutally in July of 2021 has recovered somewhat, with average ROAS up +8% for a selection of Brands year-on-year this April. Another finding is that Facebook ROAS appears to positively correlate with consumer confidence, which has picked up between July ‘22 and the start of this year. 

Meta still remains the most cost-efficient way to reach an audience at scale. With an estimated ‘hundreds of millions more active users’ than its closest competitor, and a long-standing breadth of solutions for advertisers. Whilst the Fospha study found it to have a slightly lower average ROAS compared to other channels, given the scale of ad spend it made up (47%), the return is still impressive. 

What role can social play in your strategy?

The dwell time and audience scale afforded by social media channels differs vastly in comparison to users actively searching for your product or brand. Therefore, your objectives via social are not the same as for search. Efforts via social should be geared to driving brand demand and new customers with memorable creative.

From the offset, it’s essential for agencies and brands to be clear on what they are expecting from investment here. Some of the most sophisticated approaches occur when brands separate awareness-driving investment from sales-driving budget. Social ad formats are configured to deliver both, but brands can become unstuck when measuring social spend to the same efficiency targets enjoyed elsewhere. 

Get strategic with the core KPI that you will measure social media success against. Perhaps the cost of acquiring a new customer is more expensive via social media campaigns, but this user may then go on to spend more compared to a purchaser through search. We can also use social media to reach new people and introduce people to your brand, whilst then relying on search to do the heavy lifting in terms of sales activation. 

This is where Lifetime Value needs to be measured, and incrementality testing should be used. Equipped with this data, a near negative last-click ROI on a customer’s first purchase becomes acceptable, if that customer then goes on to increase their value three-fold in their first 90 days with you. Determining the payback window (or ‘Lifetime’) that is of value to you is the first step in measuring this, and can help you determine the true success of a channel before writing it off. 

And this is where the journey goes full circle: we revert right back to the quality of the actual product experience. After acquisition, marketing efforts should turn to a customer’s actual consumption of the product or service – from follow-up emails to the unboxing experience and beyond. 

How to harness the power of social media

What’s increasingly clear is that social media can be harnessed for a wide range of business goals. E-Commerce brands make frequent use of product catalogue ads to support customer acquisition as well as retention and remarketing efforts. This is as an easy, first-step into social ads, providing an understanding of the scale of opportunity, specific to your brand. If you are already making use of a feed for Google Shopping activity, this won’t be a completely unfamiliar process. 

Driving efficiency

For those with a keen eye on efficiency, clever placement strategy is recommended. For example, research shows that  men typically over index on Reels placements whereas females are more likely to see ads shown through Instagram Shops. By embedding these insights and audience priorities into your media planning, you can increase your chances of optimal return.

Capturing first party data 

Another key tactic is leveraging native lead-generation ads on social platforms. These allow you to obtain more first party data from your target consumer, via a form that doesn’t require the customer to leave the social platform. Offering something valuable in exchange (such as a 10% new customer discount) through these ads can see you boost the wealth of user data you have. Not only does this enrich your existing database; it gives you a wider pool of warm leads to then retarget back to. Such data will also increase the quality of audience signals you can use to fuel your campaigns on other channels.

Driving awareness

With an already engaged audience, awareness-driving campaign objectives are not to shy away from. In fact, such campaigns have been found to have a higher relative ROAS as a funnel stage when compared to more traditional conversion prospecting activity. What’s more, this type of campaign is underutilised – making up only 1% of ad spend in a study of retailer brands. These campaigns are built to improve recall of your brand, and as such are fitting for any retailer looking to drive new customer acquisition. 

Nailing creative 

Underpinning all of this is the need to nail the creative in a format native to the platform (we’ve gone into more detail on this topic here). The right content and creative can anticipate common concerns consumers may have about purchasing via social media. Advertisers have long been applying behavioural science principles to ad creative and social media platforms are particularly fitting for leveraging social proof, and placing content to encourage a purchase. In turn, consumers have now been trained to look to brands for social media content above other formats, like podcasts or videos. Reassurance can be provided by including information on the returns policy, or emphasising the secure payments supported during the checkout process.

Get social media working for you

59% of the world’s population were found to be social media users in 2022, with time spent on platforms higher than ever in January of this year. What’s more, social media now accounts for 33% of total digital ad spend and counting, meaning ad innovation is set to continue. By embracing social media as an investment, you position your brand where your future customers are already making their purchases, guaranteeing longer-term business value.