Tracking 'Ghost Demand' This Holiday Will Inform Future Marketing Decisions

November 4, 2021

By Polly Wong

Unsplash

With the low inventory and supply chain issues many retail brands are currently facing, the ability to fulfill product this holiday season and the potential lost sales has everyone on edge. Quantifying the sales impact, managing inventory, and future merchandise planning are just a few of the challenges brands will have to deal with moving forward.

While the performance of all marketing channels is impacted by inventory levels, for digital channels like paid search and paid social, there are metrics that can be monitored to understand if the channels are still delivering demand (if not sales).

Understanding metrics for visitors from each channel like average traffic per day, average click through, average time spent on site, and average number of page views. still helps to evaluate performance — even if conversion rates and sales are down because product levels are low.

Tracking "ghost demand" is especially important for channels like direct mail that rely on buyer and sales match backs (not clicks) to measure performance. In this case, campaigns could inaccurately appear weak or ineffective if all the buyer demand is not captured.

The marketing campaign may have done its job driving eager consumers to the brand's website to make a purchase; however, when those consumers learn the product is out of stock or won't be available in time for holiday, many will walk away. This misrepresentation of the true marketing effectiveness could lead to poor planning decisions in the future.

The concept of "shadow" or "ghost" demand is important to recognize, as these are sales that would have materialized if the product were available. Consider tracking the hits to functions like Notify Me when Available and/or Pre-Order Options and applying a typical conversion rate and product sales value, to start to calculate lost sales. However, it's important to factor in that only a small percent ask to be notified later.

For brands who don't have these functions, they can look at how traffic versus items sold has fallen off from a product page to see what the average conversion rate was in stock and what it looks like out of stock. Looking at what percent of sales this was during the campaign in home window, a performance factor can then be applied to results for a more complete picture.

For example, if a brand determines 20 percent of product was not available during the campaign in home window but was able to capture $1 million in sales at a four times return on ad spend (ROAS), then accounting for a 20 percent hit to demand because of product levels, the sales would have been $1.2 million, with a 20 percent higher ROAS.

This assumes that the product not available would have had the same level of value/sell-through as the rest of the product and that the consumer didn't decide to purchase something else. (Hopefully the brand has a robust cross sell plan.) While there are several factors that need to be considered, this can at least provide a starting point to better determine the driven the true marketing impact.

The important piece to remember going into 2022 is that there have been several factors impacting business this year that have to be accounted for next year. Accounting for "ghost" demand to get the truest sense of marketing ROI may be critical.

Also, given the impact from COVID-19, it's important to look at year over year-over-year trends (yes, three years!), not just current data. Reducing marketing in one channel because of decisions made on incomplete data could limit future growth. Keep in mind, the primary purpose of your marketing channels (including that beautiful, inspiring catalog) is to drive targeted consumers to your website to make a purchase. Converting them into actual customers largely depends on what they experience when they get there.


The views and opinions expressed in Marketing Maestros are solely those of the contributor and do not necessarily reflect the official position of the ANA or imply endorsement from the ANA.


Polly Wong is the president of Belardi Wong.


You must be logged in to submit a comment.