By Alex Parmar-Yee, UK Strategy Lead at Awin
The current economic climate is causing real challenges for consumers, with post-pandemic cuts to benefits like Universal Credit, rises in National Insurance and inflation driven by global economic conditions, and changes to UK international trade. Changes like this can lead to shifts in consumer behaviour which, ultimately, impacts brands. However, they also present an opportunity for retailers to refocus and better serve their customers.
The constant amidst crises
The performance marketing channel has historically been one that facilitates the changing behaviours of consumers regarding online shopping. In recent memory, the 2020 lockdowns drove increases of 71% in online shopping for both ecommerce newbies and veterans. The channel helped support this through trusted voices such as mass media brands like Future, Hearst, and Immediate Media, providing information on products and prices, and authentic real-time reviews from social media influencers and content creators. In addition, comparison engine publishers like Kelkoo, Uswitch and MoneySupermarket helped augment online research with code and loyalty publishers supporting with savings. With advertisers able to use the pay-on-performance model to better manage margins during uncertainty, it’s little wonder that both consumer and advertiser activity within the channel has remained high during, and after, lockdowns.
And this is not just a recent trend. The “credit crunch” recession of 2008 saw the channel balance advertiser needs and consumer wants. Improvements to internet access and the online shopping experience in the late 00s meant that consumers adopted digital during the crisis. Online was there to help them shop around for the best prices. As part of this consumers were introduced to the online savings that could be achieved through voucher code and cashback sites. This was amplified by the viral nature of social media at the time and these sites grew on the scale that “hotukdeals” was the fastest growing Google search term in 2008. This climate resulted in the large share that incentive partners still have of the channel today, but also established performance marketing as one that was not to be dismissed.
Online activity debunks industry expectations
So, what does the 2022 cost of living crisis mean for consumers and the brands they shop with? As part of the research for this piece, I looked at several linked KPIs on the Awin platform such as average order value, overall sales volume and conversion rate. And whilst the UK’s chosen inflation measure, the CPIH, has begun to rise and the measure for consumer confidence, the OECD’s CCI, has fallen, there’s not been any correlation evident in our data. However, the lived reality on the street is that people are experiencing price rises, with essentials like pasta rising by 50% and petrol hitting all- time highs.
1. Lag time may be a factor
One reason for the lack of impact is that consumers that tend to shop online are not feeling the brunt of the crisis just yet. As mentioned earlier, the past couple of years has shifted more consumers to online shopping, however, this doesn’t mean that everyone has the privilege of quality internet access, Ofcom reported that 14% of DE social grade households do not have access at home. The comparative incomes of those that do shop online may suggest that behaviour is yet to change noticeably. In fact, pent up demand for travel and leisure is actually causing spend to be higher than what would be “normal” for seasonality and the current economic climate. Wealthier households are also able to get greater access to credit cards and Buy Now Pay Later (BNPL) payments which can help manage outgoings. However, this may purely be an economic lag and it’s right to look at strategies that can support your customers regardless of where they may fall in terms of household wealth.
Loyalty and rewards that enhance or help with future spending will likely resonate well here. Awin has seen a huge number of revamps of loyalty schemes, both in-house ones like Clubcard and Boots Advantage building in savings, as well as ones powered by the partnerships channel which are seeing more brand-to-brand activity.
For those in society who may not have access to the full cost saving benefits of online research and choice, it may also be a chance to use partnerships to help with reach. Utilising better online-offline tracking methods and promotions could help deliver value to those who need it most.
2. Emerging partner types
Another contributing factor to the lack of performance impact in the channel may be that we’ve seen an increase in the value that some publishers are providing consumers in the current climate. Since the cost-of-living crisis has manifested, we’ve not seen huge increases in sales from discount and cashback sites, as was prevalent in 2008. However, we have seen significant increases in sales from Comparison Shopping Site (CSS) partners. Whilst this partner type has seen steady growth for a couple of years now, its continued strength may show how consumers are turning to search-based comparison as a key part of the sales journey. It should be noted that brands need to stay up to date on how consumer shopping behaviours may shift and can’t necessarily rely on BAU strategies of the past. It’s why insights, benchmarking and expertise from your digital providers like Awin are key to navigating change. The performance model’s low risk nature supports test and learn with a whole host of emerging partners.
3. Low-risk payment model
This brings me onto the final reason why perhaps data from the performance space doesn’t show huge impact from the rise in cost-of-living; the performance channel remains a safe space for retailers to invest. The Cost Per Acquisition (CPA) model prevalent across a majority of retail programmes means that margins are easier to control than channels where spend isn’t as linked to sales volumes. In addition, the partners and publishers within the channel are ones that already deliver great additional value to consumers and are helping them to navigate the challenges of today. The affiliate and partner channel has been one that has historically helped consumers shop, save and scrutinise in tough times. Engaging here is a great way for brands to deliver for consumers.