Marketing vs. merchandising: How to let go and grow

Marketing departments are spending more online than all other channels combined to drive qualified traffic to their websites

There’s a chasm between UK retailers’ use of AI for marketing and the adoption of AI by UK retailers to optimize merchandising opportunities on their websites.

Marketing departments are spending more online than all other channels combined to drive qualified traffic to their websites. In the process, they are embracing artificial intelligence (AI) in the form of machine learning and predictive analytics, to automatically sniff out and signpost the most likely converting customers.

Making the case for AI in online merchandising

Read our full report, written with Apptus, about how AI can supercharge your online merchandising and transform your internal team.

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I find it baffling that once those marketers have taken the horses to water, their merchandising colleagues are limiting the amount of water they are allowed to drink. Many merchandisers are just too concerned about handing over the heavy lifting to a computer – they crave control.

AI in marketing – reaching, acting, converting and engaging.

There are many examples of how AI is supercharging the marketing function: programmatic media bidding, ad targeting, lead scoring, chatbots and predictive customer service are all enhancing the marketing function.

A perfect example is given by a marketing colleague who explained to me how AI was affecting his Google Ads campaigns. He told me that when he first took on a client account, the figures were scary: a click-through rate (CTR) of 1.05%, a conversion rate of 0.1% and a cost per conversion of £366.64 for a product that averaged around £70. Bad.

He applied his knowledge and skills to the account and managed to increase the CTR to 32%, the conversion rate to 9% and the cost per conversion to £4.11. Great!

Because he now had a good set of conversions, he decided to test Google’s ‘Conversion Optimized Ads’. At the risk of oversimplifying what happens, Google Ads uses historical data to identify who is most likely to convert and therefore how and to whom to apportion your ads.

The results were stellar. While the CTR went down (no bad thing if you are delivering the right traffic) Conversion rate doubled to 18% and the cost per conversion reduced to £1.25 – literally "quids in".

While my friend was delighted with the results, he felt a bit odd that a ‘computer’ could so stunningly outperform a digital marketer of 20 years’ experience.

Merchandising and conversion optimization

The technology and tools exist to do for online merchandising what Google is doing for PPC ads. And the results are just as impressive.

In an A/B test by Nordic beauty retailer Kicks, a home page was manually produced by merchandisers using their experience and knowledge. This page was pitched against an automated page completely delivered using AI and machine learning.

The automated page produced an eight times higher click-through rate than the manual version, eight times more add to basket events and where the manual version generated one sale transaction, the automated version succeeded in generating 101 sales transactions.

If you can combine the great results from traffic generation and the results that AI merchandised websites deliver, it is clear there is an opportunity not only to take the horses to water but to allow them to drink all they want.

Let go and grow

Maybe it’s not surprising that in a nation of shopkeepers, with a proud heritage in visual display, online merchandisers are reluctant to let go and hand over the heavy lifting to a computer - particularly as there is no accounting for a computer’s taste in apparel.

Throw into the mix a plethora of solutions claiming to deliver AI-based solutions and it’s no wonder many UK e-commerce merchandisers have difficulty letting go of what they know and feel safe with.

The Smart Insights and Apptus report Making the case for AI in online merchandising - Why AI must cross the chasm from digital marketing to trading teams, explains the differences between traditional and AI-based merchandising, explores the benefits of machine learning and reviews the organizational changes that are needed.

Crucially the report will allow you to take the first steps to letting go, so your business can grow before all your competitors wake up to the opportunity.