It’s plain to see, but commonly overlooked — if you don’t have the product in-stock, why bother promoting it?
Pick up any CPG or retail media playbook and you will notice overwhelmingly the focus tends to be on the target audience, media channels and various levers you can pull — like promotions, bid optimizations, retargeting and so on.
However, the data on what’s actually driving marketing performance suggests a major blindspot: media dollars are being spent without any regard to availability.
There are three things you should know if you’re not currently optimizing media & shopper marketing around item availability:
1) Your KPIs are hurting — as you waste media dollars at the top of the funnel on shoppers of OOS product, it hurts nearly every downstream KPI
2) You are frustrating shoppers (more than you might think) and probably losing sales if you are showing them ads for OOS products
3) You can fix this by applying data you already have — and working with partners that have retailer inventory API integrations
Out-of-Stocks Erode ROAS
Every marketer knows that the key to the right ROAS is managing all the KPIs across your funnel. Ignoring out-of-stocks can completely undermine the economics of your media objectives and KPIs.
Here is a case study that highlights how eliminating media waste directly impacts your KPIs and ultimately lifts ROAS.
Now consider what that means for ROAS… suppose on your $1M campaign without out-of-stock optimization that you drove $2M in incremental sales. That’s a 2:1 ROAS.
Compare that to your $1M campaign with OOS optimization. In this scenario, you eliminated media waste and redirected that spend towards available items. As a result, you spent the same — but had a 59% increase in conversion. Assume the same 59% increase for sales lift and you’re looking at $3.18M in sales and a 3:1 ROAS.
That’s a whopping 50% improvement in ROAS. This is where the blindspot of out-of-stocks should finally catch your attention, if it hasn’t already.
Out-of-Stocks & Shopper Frustration
Media waste from out of stocks is about a lot more than media economics.
When you look at the top consumer pain points when shopping for groceries online, out-of-stock inventory takes the cake. Our team at The Stable recently released the Path to Pantry 2021 study and found that out-of-stocks are by far the #1 most frustrating aspect of shopping for household essentials.
This shopper frustration has a direct impact on sales. According to Adheer Bahulkar at Kearney, when your product is out of stock you have a 33% chance of completely losing the sale.
We have all experienced the “out of stock” frustration, so it’s not too hard to relate. But here’s a comparison of two user journeys to bring it to life.
In the first user journey, no work was done to optimize for item availability and as a result, shoppers saw ads for out-of-stock products resulting in a poor user experience. In the latter journey, the shopper experiences a seamless path from ad to checkout.
When you eliminate friction, you get more happy shoppers and that means more sales.
Use Retail Data to Solve Out-of-Stock Situations
While we recommend working with a partner like The Stable to leverage existing capabilities, there are some things you can do to start addressing OOS media waste.
First, get your data & understand it:
Tap into the data your replenishment and ops team members look at every day, for both eCom fulfillment, DC and store trends. Bring your ops team members to the table in media planning discussions and brainstorm ways they would improve media waste. You may be surprised at the creative perspectives they offer.
Most retailers have APIs for tracking item availability at a very timely and granular level. Yet this data goes largely unused today.
Then put the data to work:
Most importantly, stop running media when you’re out of stock. Use daily data pulls or real-time APIs connected to your DSP to suppress/exclude or downbid out-of-stock locations. This means unused budget reroutes to in-stock inventory — before your ad even runs.
If you have a custom landing page, DTC site or shoppable media destination that features a wide assortment of products, explore how you might create simple rules on the product load order or even substitution products that are displayed. If your media targeting doesn’t perfectly suppress OOS, there is still a lot you can do on the landing page to eliminate media waste by reducing unnecessary bounce rates.
If you have trouble getting your media to dynamically exclude OOS product locations, consider analyzing in-stock/OOS data and patterns across your target market as you plan campaigns.
Maybe you have stores that consistently struggle on item availability. Could you put these into a cohort and segment them out with a lower budget or bidding strategy? There is a lot you can do manually as you plan your campaign to incorporate past OOS insights that can improve waste.
Those are a few steps you can take, but we’ll admit it is not always easy. That’s why we made it simple with Hyphen — a complete end-to-end solution to eliminate media waste and boost your ROAS.
If you would like to talk more in-depth about OOS media waste and what Hyphen can do for you, we would love to hear from you.