As Global Head of Paid Media at H&M, Kristoffer Ullenius leads the fashion retailer’s performance activities across the world. Katarina Ahlner, H&M’s Global Paid Search Channel Owner, is in charge of the global Paid Search strategy.
The last few years have been transformational for H&M. Like many retailers, we’ve had to reinvent the way we operate, whether that’s through accelerating our online operations, breaking down organisational silos, or finding a balance between measurable results and branding.
As performance marketers, we’ve both been at the forefront of this transition. Historically, H&M focused on optimising all paid activities for short term revenue, but analysis by our measurement and CRM teams revealed that this wasn’t the way to drive incremental revenue and long-term brand value. To make more impact with our performance marketing, we needed to start taking a customer-centric, value-based approach.
At an organisation as large and complex as H&M — we have over 4.2K stores and more than 100 million members across 75 countries — making such strategic shifts can take time. However, thanks to our global centralised setup, we could be agile and collaborate with partners like Google and our search engine marketing (SEM) agency, iProspect, to revamp our Search strategy within six months. It wasn’t always a clear-cut process, but looking back we can tailor our work to four key steps.
1. Measure up: Set metrics that fit your marketing objectives
Our initial goal was to optimise our Search campaigns for revenue and return on investment (ROAS) — an obvious choice for a retailer as it drives strong short-term results. But as we tried to better understand the impact of paid Search activities on overall sales data, we saw that optimising for short-term revenue made the algorithms focus on consumers with a higher conversion rate, such as existing customers. It didn’t make sense to put the majority of our marketing budget towards those who would probably buy from us anyway, so we decided to change strategies.
To make more impact with our performance marketing, we needed to start taking a customer-centric, value-based approach.
Where we previously didn’t optimise our paid Search campaigns towards acquiring new customers, we now started actively thinking about ways to reach them. We wanted to focus our Search strategy on attracting customers who wouldn’t buy from us unless we impact them with our marketing, which is why we added a new key metric last year: ‘new customer share’. This gives us a better, more holistic view of customer splits across channels.
To further boost overall online sales, we also wanted to put a stronger focus on the individual customer by tailoring Search ad copy to different audience segments, including new versus existing customers.
2. Get the basics right: Drive your key metrics with custom data
To achieve these goals, we first needed to create a comprehensive understanding of the value of each customer segment. We based this on a customer lifecycle model built by our CRM team, using first-party data from our H&M Member’s club.
Once customers become frequent buyers, we aim to put less emphasis on them in our paid Search campaigns. Only if we see them become less frequent again, will we step back in with Search ads to remind shoppers of our brand.
Search isn’t just an effective revenue driver, but a great way to connect with new customers as well.
But more importantly, putting values on the different segments that we have within our existing customer base allows us to provide the algorithms with signals that better reflect our objectives. For example, by saying that a purchase from a new customer is worth more than one made by a frequent buyer, we push against the general rule that new customers have a lower conversion rate or average order value than those who have purchased from us before. This helps us position Search as both a retention and prospecting channel.
3. Dress for every occasion: Activate automation on all channels
While we strive to automate our activities across all performance channels, Search has been our main priority as it’s where we can make the most impact. Adopting automation can initially feel like giving up control, so the crucial first step is to lay a strong data foundation. By including signals such as CRM audiences, cookie based audiences from Google Analytics, and location data, we were able to automatically tailor ad copy based on customer segments through Dynamic Search Ads. This allows us to promote different products to different audiences without having to make manual adjustments.
We also moved from a more keyword-focused bid strategy to the user-focused Target ROAS. This value-based bid strategy analyses and predicts the value of each potential conversion and automatically adjusts bids accordingly, which meant we had to change both our campaigns and mindsets. Where we previously focused on very specific keywords such as ‘men’s skinny jeans’, we now include the broader ‘men’s jeans’ and pair it with other signals such as location and user interests. The algorithm then uses these signals to predict the value of each person searching for that keyword and subsequently distributes bids to best match our goals.
4. Launch in style: Adopt a test and learn approach
Every year, we set out clear test-and-learn agendas for each of our performance channels. We establish priorities based on how much they will impact our shared KPIs set by the wider organisation. For example, when H&M’s media team decided to start focusing on incrementality and customer-centricity, we set ourselves the goal of adding a more local voice into our Search ad copy, which we’re currently testing by working closely with local teams.
Enabling this culture of experimentation in an organisation as large as H&M requires strong collaboration between various internal teams and partners. You can only have shared KPIs if there’s consistent measurement across the board, which, in our case, meant we had to change mindsets and break down silos between online and offline. We’re still working on it, but we always aim to collaborate with different markets and sales teams whenever we set up a test. Another important factor is education. We often have to make changes based on test results, so it’s key that the whole team is flexible and has an open mind towards learning.
Following these four steps helped us alter our strategy and increase online revenue from paid Search by more than 70% year-on-year. The number of new customers also increased by 65% year-on-year — at a higher and more efficient ROAS. Not least, adopting a value-based approach to performance marketing showed us that Search isn’t just an effective revenue driver, but a great way to connect with new customers as well.
As the whole business moves towards being more customer-centric, it’s been rewarding to see how much impact we can make by focusing our paid efforts on value. It shows we’re part of something bigger, and that makes it a very exciting time to be a performance marketer at H&M.