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Advertising strategies amid supply chain shortages

As supply chain issues create out-of-stock scenarios across industries, some brands are cutting their low-funnel ad spending to their detriment. In contrast, others are taking advantage of the opportunity to grab new customers, shift loyalty, and promote other products and services.

It’s no secret that the brands with ongoing advertising campaigns are the most successful. They’re the most well-known and best positioned, and often because of that, the most purchased. Still, when some brands have stockouts or low stock, they reduce their advertising efforts and risk damaging loyalty and future sales for that product and the brand.

Instead of disappointing customers, savvy marketers use shortages as a catalyst to maintain sales, develop customer relationships, and build brand loyalty. When your low-funnel ad performance is in jeopardy, don’t throw consumer interest out the window too.

Supply chain shortage issues

Since the pandemic, supply chain shortages and increased shipping costs have hampered brands’ ability to get products on the shelves. It started with factory closures, then delays in delivery when shipping ports closed. Further setbacks occurred when stores closed at the beginning of the pandemic. Then manufacturers cut production to make up for the shortfall. Now demand is surging, but the backlog in production, staffing, and shipping is causing a lack of product availability across industries from skincare to automobiles.

Some advertisers, fearful of losing customers due to stockouts, are curbing their low-funnel advertising efforts for their most in-demand products, but they’re not replacing their lost ads with anything helpful for future growth. Some brands also raise prices to offset volume revenue loss or increase margins against high demand. This risks the long-term loss of loyalty as consumers find comparable goods with other providers.

Pivot your communication strategy

Being flexible and proactive in your long-term marketing and advertising strategy should build loyalty with your customers throughout the funnel instead of leaving them feeling rejected. Shoppers understand supply chain bottlenecks and will be more loyal to brands that communicate and offer solutions. Going out-of-stock without providing alternatives or relevant information can leave customers with a bad user experience and lead to missed sales now and in the future.

Instead of cutting advertising entirely, you can use the opportunity to reposition messaging throughout the funnel. Work on building loyalty, promoting other products and services, and fostering brand preference into the future. By continuing to advertise, you’ll be able to capitalize on the availability of cheaper inventory and better ad placement.

Why continue advertising?

Build first-party data

Businesses need first-party data to create marketing that fosters more meaningful engagement and better personalization – advertising helps build those lists. Some marketers have used advertising and stockouts as an opportunity to drive consumers to their owned channels and develop their first-party marketing lists from there. With the looming deprecation of third-party cookies, it’s never been a better time to deploy a first-party data strategy.

Grow loyalty and maintain sales

Develop your loyalty strategy and promote other products or bestsellers with more supply while still retaining that customer. Customers will appreciate the recommendation and it gives brands a way to encourage shoppers to explore their portfolio and increase their average order value.

Keep your customers away from competitors

If needed, most customers will substitute a product with something comparable by the same brand or another. Savvy advertisers are taking advantage of the opportunity to steal share, increase loyalty, and grow their businesses. While you’re considering cutting a vital demand source, your competitors are amping up to grab your dejected customers. Just because one brand is out of a product doesn’t mean all brands with similar products are also out of stock. Grab audience where you can.

How brands can adjust their strategy

Offer signups for alerts and discounts

You can ask shoppers to opt in to email lists for notification when the product is available. Consider promising a discount when the product is available, weighing the loss of some short-term profit over the customer’s lifetime value.

Comparable product recommendations

Try promoting and recommending a comparable product in stock, maybe even one at a higher price point. Consider focusing on a higher count or pack size to increase average order value. Packs of products that contain what a customer was initially interested in are another opportunity.

Let shoppers pre-buy

As consumers notice the lag in shipping going into the holiday, brands can use advertising to drive early shopping and pre-orders so that when inventory is in stock, they can be first to receive the items and you won’t lose them to competitors.

Our recent data shows that shoppers are already checking off their holiday shopping lists. Many brands will offer early promotions to beat the competition during the holiday rush. Some will even use scarcity and upper-funnel awareness ads as a tactic to create a sense of urgency for early purchase.

Campaign considerations

When you advertise on the Microsoft Advertising Network, you reach people in an environment where they aim to get more things done across work and life. This translates into an audience with higher purchasing power, a greater propensity to make purchases online, and engagement with ads to try new products more frequently. Understanding this audience value allows you to allocate advertising so you can optimize your return on investment. Being on the right platform and using the best ad types from awareness through conversion can help keep customers despite temporary shortages.

Revisit your ad copy

When you know products will be out of stock, focus on showcasing your portfolio in messaging and imagery. Instead of a single focus on one product, service, or offering that may not be available, consider adjusting copy to showcase several options. Also, consider Dynamic Search Ads and assign keywords that will be helpful if someone searches for an out-of-stock product.

Ensure your feeds are optimized

Your product feed attributes are the lifeblood of your shopping ads. They should be constantly updated to reflect your products and include custom fields that display additional information, such as comparable products or additional product recommendations.

Consider creative ad options

Ad Extensions are a great way to promote specific products, services, and callouts for your customers. Grab their attention and position your messaging in a way that’s helpful and easy to find.

Planning for the future

The out-of-stock issue isn't going away as supply chain woes are expected to last well into the new year. Trying to win back lost customers is much harder than keeping them, so instead of cutting your advertising, use it to position your brand for the future.

Out-of-stocks don’t have to be feared or result in lost sales or customers. Reframing your response with a strategy that puts the consumer at the forefront can make them loyal for years to come. It’s an opportunity to build customer relationships, find out more about them, and have an excellent reason to stay in touch.

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