The Q2 2019 Megaphone Report investigated paid Facebook & Instagram ads for 53 brands and retailers, which ran a total of 8,299 different ads during the survey period of May 15-June 11, 2019. It also surveyed the email marketing campaigns of 55 brands and retailers, which sent a total of 1,928 emails between April 1-June 30, 2019. 

This Megaphone Report is exclusively available to Plus, Team and Premier Members.

Our research calculates and classifies marketing via two different channels: email marketing and paid digital marketing, which includes Facebook and Instagram. Our analysis of these channels gives you an inside look at how consumer brands and retailers are navigating the marketing landscape, while allowing you to benchmark your own company’s marketing efficiency.

Surveyed companies are identified by Origin (Traditional, meaning it started either offline or both offline and online; or Digital, meaning it started online only) and Type (Brand or Retailer). When relevant, brands and retailers are analyzed separately.

Facebook and Instagram advertising

Loose Threads surveys all active paid Facebook & Instagram advertisements during the middle of each quarter. For special reports, data is captured during the pertinent week, such as during the Black Friday long weekend.

As Facebook and Instagram ads run on the same ad manager, they are surveyed together.

Email marketing

Loose Threads receives emails from each brand and retailer in the Megaphone roster. Our current approach is grounded in surveying how these brands market to a potential customer, versus an existing one.

Methodology update 08/19

Between Q1 and Q2 2019, Facebook discontinued its previous ad manager tool and launched the Facebook Ad Library. The methodology of the Ad Library counts more ads than the old tool, drastically increasing the number of ads to such an extent that certain time-based comparisons (e.g. the number of ads that a company ran in Q1 2019 versus Q2 2019) are not statistically accurate. As a result, we have not included these comparisons in the Q2 2019 Megaphone Report, relying instead on percentage comparisons that are both precise and accurate. Going forward with the Ad Library as our baseline, we will bring these comparisons back once the data is consistent.

Q2 2019 Superlatives

?Social Butterfly Award: Sephora

Sephora ran 972 ads during the survey period. 

?Most Promotional: Primary

98.11% of Primary’s ads during the survey period included a discount, promotion or exploding offer. 

?Most Boastful: Brandless

37.5% of Brandless’ ads during the survey period featured a media reference. 

?Most Old-School: Four-way tie between Comme des Garçons, Dover Street Market, Outlier and Supreme

None of these brands ran any ads during the survey period.

Sephora made the largest investment in paid digital advertising through Instagram and Facebook—focusing on promoting individual products.

For the third quarter in a row, a traditional company ran the highest number of paid ads on Facebook and Instagram (Nike ranked highest in this category in both Q1 2019 and Q4 2018). Sephora’s strong emphasis on paid advertising (over 270 Marketing employees according to LinkedIn) correlates to the company’s main use of ads as product promotion—95.6% of ads were product specific. A greater investment in paid ads reflects Sephora’s need to have its marketing strategy cover a lot of ground—many different products and brands requires marketing to many different demographics. This was likely the case for Sephora as the company published 972 ads across 1003 segments this quarter. Investing in paid digital advertising with a focus on product ads makes sense for Sephora, which also has the financial support from LVMH to invest a significant (though unknown) amount in paid digital ads, ideal for a product assortment-heavy business model. 

At the same time, other cosmetics brands focused heavily on product-based ads this quarter, including Goop and Fenty Beauty—all of which have much more limited product assortments. The focus on letting product lead the way signals the high competition in the sector as the market continues to grow. However, regardless of ad spend, these beauty brands and retailers are missing an opportunity with storytelling, which can help set them apart given the crowded market.

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Playbook: Brand mission and editorial 

  • Despite highly publicized Sephora store closings for inclusivity training in Q2 2019, Sephora dedicated little of its paid Facebook & Instagram advertising to its brand mission. How can you incorporate your brand mission into your paid digital advertising strategy in a more robust way? 
  • How can you incorporate more editorial ads that build on your product-based ads? 
  • Compared to other brands in your category, what types of editorial based ads are underutilized that you can take advantage of?

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Net-a-Porter’s minimal paid digital ad output in Q2 2019 fails to balance paid digital advertising with organic marketing—particularly as the majority of brands and retailers continue to market products first.

Out of all retailers, Net-a-Porter had the lowest number of Facebook & Instagram ads this quarter, further confirming the company’s minimal focus on paid advertising. The two ads it ran promoted its end-of-season sale in May. Despite the lack of paid content, Net-a-Porter uses Facebook & Instagram exclusively for advertising that features glossy, editorial images and celebrity endorsements, preferring organic marketing and influencer campaigns to paid social. Pouring too many resources into paid digital ads could come at the expense of an organic social presence. While a stronger emphasis on organic Instagram content aligns more closely with Net-a-Porter’s customer base and brand ethos, a more even-handed approach to organic and paid social advertising could be beneficial.

As a digitally-native retailer, Net-a-Porter’s minimal paid digital ad output is striking in contrast with a retailer like Sephora, a traditional retailer, which ran the highest number of paid Facebook & Instagram ads this quarter. In fact, the five retailers with the lowest number of paid social ads this quarter were all digitally-native. When it comes to speaking authentically through advertisements, the digitally-native brands have a better starting point. From the beginning, they have had to do more with less, building their brands online without the support of widespread physical footprints, whereas stores give Sephora an advantage.

Sephora’s product-focused paid marketing strategy speaks to a broader trend: Product-specific paid social ads rose from 41.5% in Q1 to more than half of all ads in Q2 2019.

For retailers specifically, the percentage of product-based ads rose to 77.7%. While this speaks to the continued reliance on transaction-based marketing, especially for retailers, generic brand ads were the second most frequent type of ad in Q2 2019 among both brands and retailers. The increase in brand ads is a positive trend for companies to connect with consumers beyond the purchase of a single product. However, brands are more adept than retailers at using storytelling in their marketing: in Q2 2019, 28.3% of ads from brands spoke to the brand in general, in comparison to 22.5% of ads from retailers. Meanwhile, the majority of retailers continue to advertise based on the variety of their inventory and their distribution power, further degrading their value prop.

Notably, ads featuring promotions and discounts comprised just 10.3% of total ads in a quarter when major Mother’s and Father’s Day sales events, as well as when Memorial Day, Pride month and school graduations, take place. However, this is only slightly lower than holiday-specific Facebook & Instagram advertisements in Q4 2018, which comprised 11% of all paid ads. 

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Playbook: Paid vs. organic marketing

  • As with Net-a-Porter and Sephora, what can traditional retailers learn from digitally-native brands’ approach to social media? 
  • How can you balance your organic social media strategy with your paid social media strategy in a more effective way? How does your content for each differentiate and how can the content overlap?
  • How can you encourage user-generated content, in order to increase the impact of your organic social efforts?
  • What percentage of your paid digital advertisements features non-product-specific ads? What other focus areas can your company build out in its marketing strategy to differentiate from other similar brands or retailers? 
  • What aspects about your mission, values, personality or purpose speak about your brand best? How can you highlight these elements through brand advertisements?

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28.3% of companies featured retail stores and events in their paid digital ads. Rebag featured retail stores and events in 20.3% of its ads—more than any other brand or retailer—followed by Michael Kors and Ulta Beauty. 

Rebag taking the top spot reflects its aim to use digital marketing to bring shoppers offline. Since only 9% of luxury shopping occurs online, Rebag’s business model, which operates stores as hubs not only for retailing, but also for consignment and authentication services, give its physical stores additional importance. While customers can initiate a consignment deal online, they can avoid shipping their items by visiting a physical store and selling their bag within the hour. Convincing more shoppers to visit a store also means that the company has greater opportunity to connect with them, thereby strengthening brand loyalty. 

As Rebag seeks to grow its fleet of stores from seven to 30 within the next three to four years, using digital ads to support traffic-driving efforts can ensure that the retail channel is profitable. It’s highly likely that it’s running campaigns based on geographic data and is building its new stores based on clusters of existing online customers, a virtuous cycle. 

Michael Kors’ high percentage of retail and event-specific ads is also notable given the company’s notoriously swollen store count. The brand closed 125 locations in 2017 because of low sales and its focus on marketing the remaining stores is a useful way to incentivize customers to visit and make purchases in person, giving the rest of the fleet a fighting chance.

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Playbook: Using digital ad data to fuel in-store traffic 

  • How can you use digital marketing to drive customers into stores on a local level? Further, how can you use digital marketing to inform your offline retail strategy?
  • Similar to how Michael Kors is using paid digital ads to highlight its remaining physical stores, how can you adjust your online marketing strategy to improve an element or elements of your business that need improvement?
  • How can you highlight in-store events to both capture customer data (i.e. RSVP collection) and create a community of highly engaged customers?
  • How can you analyze the performance of your product-focused digital ads to inform in-store product assortment?

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4.5% of paid digital ads from retailers urged consumers to sign up for a membership or loyalty program or download an app, with Rent the Runway leading the way with 32.3% of ads featuring sign ups or downloads.

Rent the Runway’s top spot reflects that the company’s product is membership itself, rather than the clothing available via the membership. 

Curiously, other retailers such as Stitch Fix and Dia & Co.—both of which operate subscription models—did not run many paid ads that featured information about their memberships. Stitch Fix, for example, avoided these types of ads altogether, instead focusing on general brand ads (styling and product selection), rather than directly promoting membership signups. In fact, some of Stitch Fix ran ads specifically marketed the brand with “no subscription” necessary, perhaps speaking to customers reaching the so-called “subscription fatigue.” While all three companies are arguably using paid ads for customer acquisition, Rent the Runway focuses more heavily on selling its membership, while Stitch Fix and Dia & Co. highlight their underlying product offering. Rent the Runway’s strategy may also be part of its larger, rumored plan to file for an IPO—the company may be pouring more funds into paid digital marketing in order to raise acquisition and growth rates, therefore improving its image in the eyes of public investors—whereas Stitch Fix already went public in late 2017.

While memberships are inherent to Rent the Runway, Stitch Fix and Dia & Co.’s businesses, other retailers that are publicly attempting to revamp their own memberships. Nordstrom reported that Nordy Club, which it unveiled last year, included 10 million active members in September 2018 and that its business comprised 55% of the retailer’s total revenue. But the company has struggled in its attempt to both digitize and personalize the Nordy Club; it allegedly terminated out-of-home advertisements in 2019, which caused traffic to plummet from its biggest shoppers—whose absence has outsized consequences for the retailer. Meanwhile, none of its paid Facebook & Instagram ads pointed to Nordy Club in Q2 2019. This may not pose a problem considering that the bulk of Nordstrom’s most loyal customers are of an older demographic—even though they are rather cheap to acquire. Even so, paid digital advertisements help garner new, younger members, which Nordstrom needs to continue building its customer base.

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Playbook: Paid digital strategies for membership programs 

  • If your business includes a membership or loyalty program, what is your paid digital marketing strategy around it? What is the best balance between Facebook & Instagram ads, out-of-home, email marketing, etc. based on your core demographic?
  • What aspect of your business have you yet to feature in your digital advertising strategy like Nordstrom and the revamped Nordy Club? How can you rectify this based on your broader business goals? 
  • How can you use FOMO to your advantage in driving your membership program through digital advertising?

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4.7% of paid digital ads contained written testimonials and 2.1% included video testimonials. Harry’s had the highest percentage of written testimonials, and Dollar Shave Club had the highest percentage of video testimonials.

Harry’s and Dollar Shave Club made up the majority of paid Facebook & Instagram ads with testimonials in the survey period, but in contrasting ways. Harry’s ranks as the number-one brand to use written testimonials (18.9% of ads during the survey period), though none of these ads used video. Dollar Shave Club diverged from this strategy, using three ads for written testimonials and 98 ads featuring video testimonials (testimonials comprised 39.6% of its paid digital ads in total during the survey period). Despite working to recruit a similar demographic, Dollar Shave Club is known to take a humorous tone in its marketing and video marketing allows for the spontaneity and shock value, which put it on the map. On the flip side, the Harry’s brand errs on the side of sophistication, simplicity and modernity—arguably better served by text.

Despite contrasting methods, both subscription-based business models may have elected the testimonial format to acquire new members at a more rapid rate as subscription services struggle to stand out, especially when selling commodity products. Testimonials are the most direct way to digitize word-of-mouth growth, hoping to convince consumers that the service is beneficial via their digital peers.

Dollar Shave Club and Harry’s both market to a predominantly male demographic—people who don’t tend to dedicate time to product research compared to their female counterparts. For male shoppers, testimony is key, allowing the brand to project a sense of authenticity versus everything coming from the brand’s marketing team.

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Playbook: Customer testimony

  • How can you work testimonials into your company’s paid digital advertising strategy? Which types of people have the greatest potential in speaking to your customers? 
  • How can you use testimonials to build your brand personality, attempting to digitize word-of-mouth growth? 
  • How can you use testimonials in your paid advertising in order to drive greater traffic to your website, where customers can experience even more stories about your brand?

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