For ecommerce brands to succeed, effective ecommerce marketing spend is a must.
As noted by research firm Gartner, however, the last few years have seen a steady decline in marketing budgets. While 2022 saw 9.5% of revenue assigned to marketing, this number dropped to 9.1% in 2023 and 7.7% in 2024.
According to Gartner, this marks the beginning of an “era of less,” where budgets aren’t assured but rather earned. If ecommerce marketers can’t show that current efforts drive sales and keep customers engaged, they may leave next year’s budgets with even less room for error.
This evolving market means that marketing teams must clearly demonstrate that they bring in new customers and encourage repeat purchases. To accomplish this goal, two components are critical: A strategy to effectively manage ecommerce marketing spend and a return on investment (ROI) analysis to ensure metrics match marketing expectations.
Ecommerce marketing is the practice of promoting products and services in digital spaces. These products and services may be physical or digital — what sets ecommerce marketing apart from its traditional counterpart is that ecommerce marketing takes place online.
Here are three common approaches to ecommerce marketing.
Search engine marketing (SEM) includes pay-per-click (PPC) ads, banner ads, and “sponsored” search results that improve the visibility of your brand.
Email marketing campaigns may target your entire audience or specific segments, depending on the goal. For example, messages announcing a new product line would go out to all users signed up to receive emails or newsletters. Deals on specific products, meanwhile, could be sent out to smaller subsets of your audience who are most likely to buy.
Content marketing includes online resources such as articles, images, or videos that provide value for consumers. As a result, these efforts typically focus more on delivering relevant or actionable information rather than directly promoting your brand.
Even infinite budgets won’t produce perfect results.
This is because marketing efforts are inherently human — for campaigns to succeed, they need to connect with potential customers and encourage them to act. This action could be signing up for a newsletter, visiting an ecommerce website, or reaching out with a question.
Money makes this process easier, up to a point. For example, bigger budgets can help teams craft better email campaigns more quickly — whether this means hiring more staff, upgrading IT infrastructure, or purchasing new tools and technologies.
Once emails have reached a certain level of quality and saturation, however, more money spent delivers diminishing returns.
And some cases, more money can actually lower ad efficacy. For example, one growth area for ecommerce marketing is social media sites like TikTok. By partnering with social influencers, brands can capture organic customer interest and drive brand sales, especially if they go viral.
The caveat? Part of what brings users to sites such as TikTok is the authenticity of its creators. If brands spend too much trying to orchestrate and direct video production, the result may hurt rather than help brand engagement.
As a result, companies must find a cost/benefit balance. In theory, this is simple: Spend enough to engage customers but not so much that engagement is a diminishing return. In practice, this is more challenging, given the dynamic nature of customer demand and inventory supply.
Here are four best practices to help your organization find balance with your marketing spend.
First, identify your current goals and budget. Define these goals as key performance indicators (KPIs), such as the number of unique website visitors, click-throughs on ads or sign-up links, or sales conversions.
If you’re a new brand in the ecommerce space, you can expect to spend more on marketing to get noticed. Existing brands, however, may allocate just over 7.5% of their revenue to create marketing campaigns, and new companies may need to spend 10% or 12% upfront.
Your ideal buyers are your target audience — the customers who are the most likely to respond when they see your ads. To find your target audience, it’s worth asking questions such as:
Are campaigns working as intended or falling short? Is ecommerce marketing spend balanced out by new customer and returning buyer revenue? If campaigns are just getting underway, what’s the expected time for ROI?
Answering these questions helps marketing teams and brand leaders determine what’s working, what isn’t, and what needs to change. For answers, companies need to carry out an ecommerce ROI analysis.
Here’s how.
To assess the impact of marketing campaigns, you need to define clear objectives and identify KPIs that support these objectives. Common metrics include click-through rate (CTR), customer lifetime value (CLTV), and total conversion rates over a set period.
Ideally, objectives and KPIs should be SMART: Specific, measurable, achievable, relevant, and time-bound.
Great KPIs won’t help balance marketing budgets if you have no way to measure them. Free analytics tools such as Google Analytics are a great place to start; there are also fee-based third-party options that may include additional features.
Part of measuring campaign effectiveness is assigning weight to consumer actions using what are known as attribution models.
Two of the most common are first-touch and last-touch attribution. In a first-touch model, higher values are assigned to the first touch point customers engage with on their purchasing journey. In a last-touch model, the highest value is assigned to the last touch point they interact with before they purchase.
The ultimate goal of marketing campaigns is conversion. If ads meet all other KPIs but aren’t generating conversions, campaigns aren’t working. Conversion tracking tools show you which ads generate leads and which produce sales, allowing teams to prioritize campaign investments.
Testing — and testing again — helps provide clear campaign data.
If results show that you’re generating more revenue than you spend on marketing, this is a good sign you’re on the right track. The caveat? Marketing isn’t the only relevant cost. Brands must also account for the cost of producing products, shipping goods, and providing customer service.
Consider a brand that spends $20,000 on a new marketing campaign for the quarter. If the outcome is $40,000 in sales that can be tied to the campaign, the effort demonstrates positive ROI. If, however, the costs of producing and shipping products total an additional $25,000, the outcome is an overall negative.
Worth noting? Moment-in-time snapshots are not the end-all, be-all for ROI analysis. If this same campaign continues to convert customers after six months, a year, or more, its overall ROI will increase. As a result, regular testing is critical to see both the immediate and long-term results of marketing campaigns.
Thriving in the increasingly competitive ecommerce landscape requires brands to manage their marketing spend. With marketing budgets shrinking each year, teams must prove campaign effectiveness by highlighting how each drives sales and customer engagement across the digital shelf.