The Marketer’s Toolkit: what marketers need to know to succeed in 2023 

Ninety-five percent of marketers globally expect to be affected by economic recession, according to a survey for WARC’s Marketer’s Toolkit 2023, an annual report that identifies the most important market trends that marketers should focus on to help drive their business in the year ahead. 

Context 

End-of-pandemic optimism at the start of 2022 faded quickly as the war in Ukraine turned the world on its head. The invasion has had a transformative impact on energy prices, inflation and the cost of living around the world. The IMF is forecasting the weakest growth in twenty years, except for the global financial crisis and the worst phase of the COVID-19 pandemic. 

Five themes for 2023

The following key themes emerged from WARC’s survey of 1,700 marketers worldwide for The Marketer’s Toolkit: Global Trends Report:

1. Marketing in a cost of living crisis: While almost all marketers are concerned about the impact of the economic crisis, more respondents are planning to increase spend than last year, across both brand and performance. However, 36% are planning to cut marketing investment, despite evidence from prior downturns suggesting they should maintain spending levels.
2. Price vs. planet: a false dichotomy: 37% of represented companies expect to continue with their sustainability objectives despite the economic situation, while 35% foresee only “some small compromises.” Brands are also challenging the idea that eco-credentials necessarily result in price increases, with examples of local sourcing and use of the circular economy potentially lowering costs.
3. A reckoning for Big Tech: The majority of advertisers (62%) agree that a range of changing market dynamics are forcing strategic shifts from the tech giants, and respondents concerned about the dominance of the ‘duopoly’ have halved over the past two years. More respondents plan to decrease investment in Facebook than increase it for the first time in six years, which suggests that brands are resetting their relationships with Big Tech.
4. The clash of demand, delivery and disruption: Supply chain disruptions are expected to hit brands in 2023, but not evenly. Sixty percent of marketers anticipate non-trivial supply chain disruptions, but just 26% expect they will be significant or severe. This rises to one in three amongst European respondents. And 52% felt challenger brands would be the hardest hit, as they struggle for profitability. Marketers have an important role to play in managing and minimizing supply chain disruption
5. The era of ‘bubble up’ culture: Media and audience fragmentation was the second biggest concern in our survey, with 34% of respondents picking it. Among North American respondents, it was the highest ranked. Two-thirds of marketers expect to focus more on platforms that allow them to stitch together interest-based communities to create reach in a fragmented media world. Other channels with deeply embedded communities such as gaming and influencers/social media content are also set to attract more investment from advertisers next year.

A sample version of the global report featuring the first chapter, is available to read here.

The full series, available to WARC subscribers, will include the following reports:

• The Future of Digital Commerce (launching December 2022)

• The Future of Media Report (launching January 2023)

• The China Toolkit (launching January 2023)

The reports will be complemented by a series of podcasts. 

Foot Locker backs e-commerce and loyalty for omnichannel growth

Foot Locker, the sportswear and footwear retailer, sees a major opportunity to level up its omnichannel strategy in 2023 with a strong loyalty programme at its core. 

Why it matters 

According to executives at the company, Foot Locker is shifting its approach from being product-led to consumer-led in an effort to create a consumer-driven demand engine that grows its market share, customer base, and share of wallet. 

Focusing on omnichannel ecosystems

In a Q3 earnings call, president and CEO Mary Dillon said the company will be focusing on its omnichannel presence and capabilities, the loyalty programme, digital marketing strategies and the technology platform enabling those efforts. 

The role of e-commerce in its omnichannel ecosystem is one major area of focus, added Dillon: “Without having a specific target in mind yet, I believe at 16%, our e-commerce penetration is below where it should and can be, which means there's an opportunity to capture more online-only sales; and, more importantly, build our omnichannel customer base.” 

By the numbers 

• Foot Locker's current omnichannel customers in the U.S. spend nearly four times the amount of its single-channel shoppers.
• Yet they represent only 6% of Foot Locker’s customer base, which leads to a vast opportunity to improve engagement with customers across channels and attract more of their spending dollars.
• 80% of Foot Locker’s best customers already buy three or more brands.

Leaning into loyalty

The CEO sees tremendous opportunity to further refine and evolve the FLX loyalty programme as part of its omnichannel offering.

“While we're already capturing a considerable amount of our sales through members of FLX, I see more opportunity to improve the value proposition of the program, drive more engagement with our members through personalization and ultimately attract more members and capture more share of wallet of our existing customers,” Dillon said. 

“In technology, we're in the process of reviewing our foundational needs as well as making sure we're building the right tools and capabilities to support those efforts in omnichannel and marketing. Having a stronger backbone and technology enablers will be a key priority for us going forward,” she added. 

Watch out for Generative AI in 2023

Generative AI is a phrase we’re going to be hearing a lot more, not just because of its role in ‘deep fakes’, but because of its potential for cost savings and hyper-personalisation in advertising.

It’s one of the tech trends highlighted in Wavemaker’s recently launched Growth Trends 2023 report.

What is Generative AI?

Generative AI uses artificial intelligence and machine learning to create new digital content (this can be text, video, audio, imagery) with little human intervention beyond a starting input. The output can be believably real or consciously stylised. 

Why it matters

With the tech giants all involved in the sector, Generative AI is about to hit the mainstream. Already it is facilitating new modes of creative thinking and enabling the development of digital assets without long lead times or high production costs.

Ultimately, the report suggests, every digital touchpoint could be automatically customised using Generative AI in response to consumer needs and signals. 

Takeaways 

• Using Open AI tools it can take just seconds and cost as little as three cents to generate an image – offering significant time and cost savings for brands and agencies. 
• Gartner estimates that by 2025, 30% of all outbound marketing messages from large brands will be from Generative AI.
• Spending on AI is growing and the global generative media market is expected to reach almost $400m by 2025.

Sourced from Wavemaker

Urban Outfitters Inc. sees shopper ‘bifurcation’

Urban Outfitters Inc – owner of Anthropologie, Free People, Nuuly, and its eponymous brand – is reorienting its strategy to accelerate growth in premium brands, where it is seeing more demand.

It’s hoped the strategy will offset spending drop-offs in its lower-priced brands, driven by inflation. 

Why it matters 

Companies with a portfolio of brands serving various price points may be able to hedge more effectively against downturn, while using real-time insights to identify consumer spending changes, and responding accordingly.

The ‘bifurcation’ of consumers

According to CEO Richard Hayne, the company has seen its target audiences – mostly younger women – “bifurcate” across its brand portfolio, mostly driven by affordability.

Brands offering higher price points and serving a more affluent customer – such as Anthropologie and Free People – posted better results in the latest quarter, he said on the company’s Q3 earnings call. 

But the outlook wasn’t so sunny across the portfolio of brands, Hayne revealed. 

“Not all our brands, however, serve an affluent customer. Urban Outfitters' customers are younger with less discretionary income and accumulated assets. The current elevated inflation around necessities like rent, food and energy has had a greater impact on them. These customers are transacting less often, and when they do shop, they’re looking for a deal.”

By the numbers

• Anthropologie – which offers premium fashion and homewares – delivered 13% growth (retail segment comp) in Q3. New customers in the quarter increased by 24%.
• This compares to a 9% decline for Urban Outfitters, which offers fashion and homewares at a lower price point. Urban Outfitters recorded double-digit negative store and digital comp sales. As a result, the brand in North America will need to be more promotional to clear through excess inventory in the holiday season.

Next year’s outlook

The impact of high inflation on Urban Outfitters shoppers has left the company less room to manoeuvre on pricing, the CEO said. 

“I think that we’ve made a couple of mistakes. I think that we probably raised our prices a little more than we should have. I think the customer is telling us loud and clear that she doesn’t like that. And she’s buying more when we offer her promotions,” he added. 

While these mistakes were likely an oversight, Hayne also judged it to be the “result of the macro-climate with that particular customer group who is a little bit more challenged economically”.

As a result, the company will lean on more marketing investment to further accelerate growth in its higher-end brands, Anthropologie and Free People.

“Given the inflation environment … I don’t think there’s going to be a lot of room to increase prices dramatically,” Hayne said. 

“So we are going to be spending more money on marketing to get new customers and we will hopefully convert those customers in greater numbers than we did this year.”