With brands and retailers across categories reporting returns on investment ranging from 2%-10% from their digital ad spends, digital advertising is clicking for today’s businesses

New Delhi: A whopping Rs 55,053 crore—that’s the total advertising revenues digital platforms like Google India, Meta India, Amazon India and Flipkart garnered in the financial year (FY) 2023 as per an Economic Times report. This surpassed the revenue earned by the TV broadcast industry in the calendar year 2023.

Digital ads are becoming an imperative for retailers, especially in the e-commerce, D2C space, say retail experts.

“No brand can afford not to run digital ads in today’s era since organic growth is slow and takes time and digital ads can get you immediate reach that every brand is looking for,” said Atul Jain, founder & chief executive officer (CEO), Cybez, which an e-commerce marketing and D2C growth hack company.

And owing to the returns, the digital ad budgets are getting fatter by the day.

How much do companies spend?

Tirupur-based apparel and fashion brand Technosport said that the company’s current spend on performance marketing is less than 10% of its online business.

“We are conscious about building demand both organically via great product quality, and platform experience and inorganically via performance marketing initiatives. We feel having balance is important and hence we decide our budget accordingly,” said Sunil Karthik its head of marketing.

Usually, the amount companies spend is directly proportional to their current sales and stage of business.

“If it’s a new startup, they normally start from as low as Rs 1-2 lakh per month and increase their spending as soon as they start generating revenue,” said Jain of Cybez.

“Other brands who are at an advanced stage and have a ROAS (return on ad spends) of more than three times have no limit since they have worked on their unit economics and don’t mind investing in digital ads,” Jain added. Typically, brands should invest approximately 20%-30% of their overall revenue in digital ads as long as they are above break-even, he recommended.

Gaurav Pahwa, Director, of Lotus Electronics shared that the Indore-based electronics retail chain allocates about 15% of its budget to digital advertising.

For Chalu Aapna Desi Chinese, a Bhopal-based restaurant chain with multiple brands, digital ads have evolved as a key tactic in the digital advertising landscape. The company uses the reach and credibility of individuals with substantial followings to promote products.

“Investing Rs 50,000 in a campaign generates 500 customers with an average order value of Rs 350, customer acquisition cost of Rs 100 and thereby an ROI of Rs 1,25,000,” the company’s founder and chief executive officer Vibhanshu Mishra explained.

Another brand that spends 20%-30% of its revenues on digital ads is Rekhta Foundation, a non-profit organisation that works to preserve and promote the language, literature, arts, and culture of India.

The Company’s Head of eCommerce Hitesh Dhall said, “We spend around 1/3rd of our revenue and we try to keep it as the thumb rule.”

What do they get in return?

A combination of organic plus paid marketing delivers some of the best results in terms of return on investment (ROI).

The ROI of digital ads can be calculated using a variety of critical criteria and parameters. Audience Engagement, Brand Awareness, and Cost Efficiency – Metrics such as cost per engagement (CPE), cost per click (CPC), and cost per acquisition (CPA) can aid in determining the effectiveness.

“We experienced a 10% increase in footfall, and it has helped us maintain a strong connection with our consumer base, particularly among the Gen Z demographic,” added Pahwa from Lotus Electronics.

Technosport, which was launched less than a year ago, was able to achieve an ROAS of 8%-10% consistently over the past few months.

Jain from Cybez gives category-wise data and adds that the ROI depends upon a lot of factors like how well the brand is known, what category it operates in and what are its price points. For a D2C startup in food & beverages, an average ROAS on new customer acquisition can hover around 2%-3%, for a fashion or jewellery brand, it will be around 5-7%.

“A Good campaign ROAS for e-commerce brands hovers at 4-5X,” added Dhal of the Rekhta Foundation.

More insightful and stimulating conversations on technology trends in retail are expected at the Phygital Retail Convention (PRC) 2024.

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Social media platforms like Facebook, Instagram, and WhatsApp business, enable social commerce by integrating a buy button. The predominant format of social commerce that has emerged in India is powered by social reselling platforms such as Meesho, Shop 101, Bulbul, etc.

The explosive growth of social media has made direct-to-consumer (D2C) brands rise to success. There are more than 800 D2C brands in the country today. The D2C sector is worth $44.6 billion currently, projected to touch $302 billion by FY 2030. Social commerce sites are emerging as a major sales avenue for direct-to-consumer (D2C) brands. Brand stories on social platforms aided by influencers are significantly increasing discoverability and sales. In the last couple of years, several D2C brands such as mCaffeine, Arata, WOW Skin Science, Plum Goodness, etc. have clocked crores in revenue by occupying unique niches and building a strong brand experience for the consumers through social media platforms.

While many brands are available on the standard e-commerce platforms like Amazon and Flipkart, they don’t allow them to create unique customer experiences for their consumers whereas, social commerce platforms create customer experiences tailored to a buyer’s social media preferences and usage habits. This creates more cohesive brand experiences across channels, driving deeper loyalty and increasing customer lifetime value for D2C brands.

But what has made social commerce platforms so lucrative for D2C brands to adopt them as a medium for their retail operations? Social commerce brings content, community, and commerce in one place which solves for discovery, trust, and convenience for the consumer.

Social commerce in India is still in its nascent stages and shows great promise for growth. While there are certainly existing and emerging companies in the sector, there are still large white spaces that exist that make the sector attractive.

— Sadaf Anjum 

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Hyper-personalisation is a way for brands to forge deeper connections with individual customers by leveraging behavioral data, browsing history, and purchase behavior. Through hyper-personalization, companies can send highly contextualized communications to specific customers at the right place and time, and through the right channel.  This type of strategy not only helps in driving sales but also increases brand loyalty, customer experience, and overall marketing effectiveness. For instance, Cadbury made use of customer information and photos to create a hyper-personalized video ad during Diwali, featuring Shah Rukh Khan, and urging consumers to help local retailers across the country. This campaign used customer data, including age, location, and likes, provided via the customer’s Facebook page (after receiving consent), and it resulted in increased click-through rates of 65 percent and conversion rates of 33.6 percent.

Some brands have already paved their way into hyper-personalization marketing to improve customer engagement. Pantaloons (owned by ABFRL), for instance, has partnered with Bengaluru-based Algonomy, a retail technology provider, to deploy its hyper-personalization solutions across its brands. Pantaloons will leverage these solutions to provide a seamless one-to-one shopping experience across all channels- in-store, website, app, and email. The brand will also use ‘advanced’ merchandising to offer comprehensive recommendations and products to complement a customer’s shopping history.

Data has become central to every business strategy and decision-making and plays a key role in enhancing customer experience. As brands compete for consumer attention in a crowded digital landscape, they should look for opportunities to interact with customers more efficiently and make offers with the highest probabilities of conversion. The advancement in technology allows every interaction to be unique and personal, and consumers expect a personal connection with the companies with which they interact.

–– Sadaf Anjum

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Despite netizens creating a buzz, the undercurrent of these two marketing attempts is of phenomenal importance to the retail industry in India, as these are the perfect examples of ‘Phygital Marketing”, a newer, smarter, and futuristic style of marketing.

Phygital Marketing is a portmanteau, blending physical and digital marketing. With the increasing affinity toward online shopping, especially e-commerce platforms, many retailers are coming out with their own omnichannel strategies to keep up with the dynamics of the market. This is where phygital marketing emerges as an option of exorbitant importance. Customers’ demands from retailers are changing constantly with exponentially growing technological advancements and innovations getting incorporated into retail operations to provide a seamless experience to the customers. For that reason, blending methods and strategies of traditional and digital marketing to create a unique blend of experience is how phygital marketing is going to help bridge the gap between the in-store experience in physical retail and urgency in digital retail.

Companies across the world are using several phygital marketing techniques like Pop up booths or Event booths, creating real-world customer centers, putting the idea of innovation in customers’ minds through the limited supply of innovative products, using AR and VR to create a virtual experience, wearable technologies, QR code marketing and many more.

On the other hand, according to one report, about 82% of the customers who enter a store are likely to check reviews online for their desired products. Hence, it is evident that phygital marketing strategies tap into the reality that customers in this digital era have grown accustomed to. So, the final question that all of this leads us to is whether these two retail verses are going to co-exist in the future or something new is going to replace all of these.

— Sayan Mukhopadhyay

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