What Are Five Marketing Strategies That Retailers Spend Half Of Their Annual Budget On (2025)

The U.S. retail media spend will hit $62 billion by 2025. Retailers typically allocate half their annual budget across five key marketing strategies. Digital advertising takes the biggest slice at 25-30% of retail marketing budgets.

Social media and influencer marketing comes next at 15-20%. Local SEO marketing and traditional advertising, including in-store promotions, each claim 10-15%. SEO and content marketing round out the top five, using 5-10% of the budget.

The retail marketing landscape has changed radically. More than 200 competing Retail Media Networks now shape how retailers direct their marketing dollars. Digital channels now command the largest share of retail spending.

The digital marketing budget process has evolved to match stock market trading complexity. It demands deep analysis and forward-thinking strategy. This piece breaks down these five dominant retail marketing strategies and shows you how to optimize your marketing investments for 2025.

The Five Core Strategies Retailers Invest In

Smart retailers split their marketing investments across five key strategies to get the most out of their reach and ROI. These strategies are the foundations of retail marketing budgets and usually make up 65-75% of total marketing spend. Each strategy plays a unique role in the marketing ecosystem and works together to attract customers throughout their shopping experience. Let's take a closer look at these five core strategies.

1. Digital Advertising

Digital advertising is the life-blood of retail marketing. Amazon shows just how powerful it can be - they made $46.90 billion from advertising revenue in 2023 alone. This revenue is bigger than Coca-Cola's annual global earnings and makes Amazon the third-largest advertising platform in the US, right behind Google and Facebook.

Retail media networks have become powerful platforms. Brands can utilize a retailer's first-party data and inventory to connect with relevant audiences when they're ready to buy.

These networks are growing faster because:

1. Two-thirds of online product searches now begin on retailer sites instead of search engines

2. They offer clean, reliable first-party data that stays valuable in a post-cookie world

3. They reach shoppers right when they're making purchase decisions

Retail media formats work really well in different ways. Sponsored products blend naturally with organic search results - you'll only see a small "Sponsored" tag. On-site display ads use familiar formats but show up strategically on retailer pages. Off-site display helps reach shoppers earlier in their experience.

Retail media is now becoming "commerce media," which experts call it the fourth wave of digital advertising after search, social, and retail media. This bigger model now includes broader publisher networks across the open internet. Non-retail advertisers can now utilize commerce data and AI to connect with audiences better. As AI-powered platforms shape more product discovery journeys, marketers are beginning to explore Generative Engine Optimization to ensure their products and content are featured in AI-driven search and recommendation engines.

2. Influencer & Social Media Marketing

Influencer marketing has grown from a small tactic into a major marketing channel. It delivers an impressive $4.12 in earned media value for every dollar spent. This success explains why 51% of brands that work with influencers now run e-commerce stores.

The retail world has changed completely. Modern brands now utilize influencers to reach target customers everywhere - both online and in stores. This strategy controls the real connection between influencer and consumer, which works like modern word-of-mouth marketing.

Several key trends shape retail influencer marketing in 2025:

Content-first creator campaigns are picking up speed. They work better than traditional ads, and retailers see double-digit engagement increases when they use creator content for offers and awareness. So there's a bigger need for creator content in brand advertising and for boosting creators' placements.

The numbers tell an interesting story - 92% of Gen Z shoppers trust influencers to guide their purchases across almost every category. This makes Gen Z partnerships vital for retail brands. Video content works especially well, with Instagram, Facebook, YouTube, and TikTok leading the way among influential shoppers.

Even with 2025's economic challenges, retailers haven't cut back on influencer marketing. They've just changed their approach to focus on value and being relatable. Big budget-friendly retailers like Dollar Tree now partner with creators who have built followings by sharing affordable solutions.

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How Retailers Allocate Budgets Across These Strategies

Retail companies typically put 65-70% of their yearly marketing budgets into five core strategies. These numbers tell us a lot about what retailers value and what results they expect from their marketing efforts.

Typical budget percentages by strategy

Retail companies spend roughly 15% of their revenue on marketing and advertising. Digital advertising takes up the biggest share, and search engine marketing alone made up 47% of total retail ad spending by late 2020 [44, 45].

Here's how retailers plan to split their marketing budgets in 2025:

• Digital Advertising: 25-30% - This has paid search, display ads, and retail media networks

• Influencer & Social Media Marketing: 15-20% - This covers creator partnerships and platform-specific campaigns

• Local SEO & Listings: 10-15% - This involves Google Business Profile optimization and local targeting

• SEO & Content Marketing: 10-15% - This contains website optimization and content creation

• Traditional Advertising & In-Store Promotions: 10-15% - This covers print, TV, radio, and in-store activities

Monthly spending varies based on company size. About 54% of retail companies put between $1,000 and $10,000+ into marketing each month. These numbers show how competitive retail has become, where brands need to be visible on multiple channels to stay alive.

The monthly digital marketing budget in 2025 breaks down like this:

• Paid Advertising: $100-$10,000 (includes Google Ads, social ads, display ads)

• Search Engine Optimization: $2,500-$7,500

• Social Media: $100-$5,000

• Email Marketing & SMS: $50-$100

• Content Marketing: $5,000-$10,000

• Amazon Marketing: $5,000-$20,000

Marketing experts suggest putting 5-10% of total revenue into marketing. They also recommend keeping another 5-10% of the marketing budget to try new strategies.

Retail budget allocation trends in 2025

The retail world in 2025 shows new patterns in budget allocation. Many retailers are being more careful with their budgets because of economic uncertainty. The National Retail Federation (NRF) expects retail sales to grow between 2.7% and 3.7% in 2025, reaching $5.42 trillion to $5.48 trillion. This growth is slightly slower than 2024's 3.6%.

Digital channels lead the growth projections. Online and non-store sales should grow 7-9% year-over-year, hitting between $1.57 trillion and $1.60 trillion in 2025. These numbers reflect how comfortable people are with online shopping and retailers' investment in omnichannel capabilities.

Retailers are changing their budget allocations in several ways:

1. Increased technology investment - Three in 10 retail executives want to make big technology investments to modernize their supply chain. This includes bringing together merchandising, supply chain, and store operations.

2. Greater M&A focus - About 53% of retail executives plan to invest heavily in M&A in 2025, up from 30% in 2024. This change might be due to bankruptcy concerns and rising costs of running complex digital operations.

3. Optimizing vs. cutting costs - Retailers want growth in 2025 by making their costs more efficient rather than just cutting them. They're putting saved money into better productivity and new revenue streams.

Budget planning now focuses more on incrementality - knowing which investments bring in new sales instead of just moving existing ones around. Many brands put too much money into conversion tactics because they seem to bring the highest return on ad spend. This often means they're just targeting the same customers instead of finding new ones.

Retailer support budget considerations

Retailers need to balance different types of operating budgets beyond marketing. These budgets work together to support business goals while keeping department managers accountable.

The operating budget serves as the core, covering product sales, cost of goods sold (COGS), and selling and administrative expenses. Company executives and team leaders in sales, inventory, and marketing use this budget regularly.

Cash flow budgets track planned money coming in and going out. This helps ensure enough cash for things like payroll and inventory. Monthly cash flow breakdowns help businesses spot when they might need extra financing during slow seasons.

Overhead budgets plan for business support costs. These include admin expenses like rent, insurance, taxes, store maintenance, and technology costs such as point-of-sale systems and security.

Labor costs need their own budget attention. Two-thirds of retail executives plan significant investments in workforce hiring, retention, and future-readiness in 2025. Labor budgets cover hiring, training, pay, uniforms, and benefits.

Retailers usually split their overall budgets this way:

• Store facilities and rent: 10-12% of revenue

• Labor costs: 10-15% of revenue

• Marketing expenses: 3-5% of revenue

• Admin and technology: 4-5% of revenue

The retail budgeting process needs a clear approach. This includes setting financial goals, looking at past data, predicting sales, estimating costs, creating detailed budgets, and watching performance. This careful method helps retailers handle common challenges like inventory management, supply chain issues, and changing profit margins.

Why These Strategies Dominate Retail Spend

The five marketing strategies that dominate retail spend—digital advertising, influencer marketing, local SEO, content marketing, and traditional advertising—have proven their worth in today's complex shopping world. These approaches take up about half of retailers' yearly marketing budgets. They work because they offer measurable returns, create smooth customer experiences, and match perfectly with how people shop today.

High ROI and measurable impact

These strategies need big investments because they deliver clear, trackable returns that executives can monitor and improve. Companies now need to show results for every dollar they spend, which makes knowing how to link marketing efforts to sales more important than ever.

Numbers tell the story clearly. Companies that use multiple channels to reach customers see their yearly revenue grow by 9.5%. Better customer loyalty and bigger orders across all touchpoints make this possible. Zara's online sales jumped 74% after they started using multiple channels. Results like these make it easy for retailers to keep investing.

Today's advanced retail tracking lets brands:

• Link ad views to actual purchases as they happen

• Check how well campaigns work beyond just clicks

• Adjust marketing spend based on stock levels

• Cut potential markdowns by up to 50%

Retailers can now connect their media spending directly to what customers do—especially in-store purchases. This detailed tracking helps marketers calculate their return on ad spending more precisely and gives marketing platforms better data to improve current and future digital campaigns.

Testing what works represents another powerful tool retailers use. They can measure how much their ads boost sales by comparing people who see their ads with those who don't. This helps separate the effect of ads from things like seasons and market changes.

The popular soda brand poppi learned that people who watched their Amazon videos were 15% more likely to buy their products in stores than those who didn't. Even better, TikTok ads made people 80% more likely to buy poppi soda at stores. Clear results like these show why these marketing channels work.

Omnichannel customer engagement

These five strategies lead retail spending because they help create smooth experiences across all channels—something customers now expect. Research shows that brands using multiple channels keep almost 9 out of 10 customers. Brands that don't use multiple channels only keep 3 out of 10 customers.

Businesses need a strong multi-channel strategy to stand out and make customers happy. A customized experience across channels helps retailers work better and spend less.

Using multiple channels gives retailers:

• Easy customer communication across channels without repeating information

• Custom experiences at scale using data from different touchpoints

• Better engagement and sales through targeted approaches

• Detailed insights to improve customer service

About 73% of customers now shop across multiple channels. They want smooth service both in stores and online, whatever stage of shopping they're in. This pushes retailers to spend more on strategies that support seamless experiences.

The number of businesses using more than two channels has grown from 15% in 2023 to over 25% in 2024. More retail brands now use multiple channels for marketing, building complete customer experiences, and improving service—SMS and RCS make the most popular combination.

Matching customer behavior

The third big reason these five strategies dominate retail spending is how well they match modern shopping habits. Today's shoppers interact with brands differently than previous generations did, and retailers must adapt their marketing.

Gen Z's love for smooth, multi-channel shopping changes retail channels significantly. They value ease and flexibility, which makes retailers combine their online and store operations better. McKinsey says Gen Z cares more about smooth experiences than where they shop.

About 92% of Gen Z will likely buy from brands that feel personal and relevant. This explains why customization is now vital to retail marketing strategy. Epsilon found that 80% of people will more likely buy when brands offer custom experiences.

Social media now greatly influences buying decisions, with 71% of people more likely to buy based on social media suggestions. Platforms like Instagram, TikTok, and Snapchat have become marketplaces where people find, research, and buy products.

Gen Z starts shopping online and social media influences them heavily, yet they spend more in stores than any previous generation. Their combined store and grocery purchases make up nearly 50% of what they spend.

Environmental concerns also drive shopping choices, with 81% of people worldwide believing retailers should help improve the environment. Accenture's study shows 60% of people will pay more for sustainable products. This means retailers must include sustainability in their marketing messages.

Quick service remains essential to customers. Metapack's study found that 96% of people think delivery speed matters when buying online, and 61% have quit purchases because delivery was too slow. This shows why retailers invest heavily in strategies that focus on convenience and flexibility.

Best Practices for Marketing Budget Allocation

Marketing budget allocation needs both science and art. Retailers now rely more on analytical insights to maximize their returns. Marketing budget allocation best practices have changed as retailers try to optimize spending on five key strategies that make up about half of their yearly marketing budgets. The best retail allocation strategies combine analytical precision with strategic flexibility to deliver immediate results and long-term growth.

Use of data and analytics

Smart retailers know analytical budget allocation helps avoid wasting ad money on activities that don't grow their business. Companies that use advanced analytics see a 15–20% boost in marketing ROI during budget planning. Better performance comes from retailers knowing how to spot real growth opportunities instead of just moving sales between channels.

Modern retailers use incrementality testing and attribution modeling to guide their spending choices. A McKinsey study shows businesses that take part in detailed scenario planning outperform industry measures by 20%.

Successful retailers achieve this by:

• Knowing the true ROI of retail media activities and how different funnel stages work together

• Studying category dynamics and shopper behavior patterns

• Using historical performance data to predict future returns

Retail analytics helps make data-backed decisions about customer patterns, demand forecasting, and pricing strategies. This approach transforms traditional intuition-based marketing into a field guided by empirical data and science.

Balancing proven vs experimental tactics

Successful retailers understand they must balance proven methods with new experiments. Industry experts point out that setting aside money for testing lets retailers quickly grab new opportunities without extra budget approvals.

Finding the right mix between brand and performance marketing budgets is vital. Industry best practices suggest 40%-60% of a retailer's total marketing budget should build brand awareness at the top of the funnel. Another 30%-40% should focus on bottom-funnel performance marketing. This split ensures both quick revenue gains and lasting brand value.

Kaitlyn Fundakowski, Sr. Director of E-Commerce at Chomps, notes that channel performance and media mix need constant review: "We are always relooking at the balance of spend as we grow. It is ever-evolving for growing brands". The right balance between breakthroughs and proven marketing tactics remains significant for lasting success.

Retailers can strike this balance by:

1. Reviewing their audience priorities and behaviors

2. Testing small-scale innovative strategies

3. Mixing proven methods with fresh approaches

Marketing budget allocation model examples

Retailers can use several practical models to optimize their marketing channel budgets. The sliding period approach creates a Marketing Mix Modeling (MMM) model to forecast the next three months, then updates it with planned spending and predicted returns. This ongoing process accounts for adstock effects and keeps forecasts accurate over time.

AI-powered tools now drive many budget decisions. CommerceIQ's Media Planner Tool exploits AI and historical data to find the best spending levels for specific sales goals. Specialized solutions like Halo line up media mix with audience behavior patterns, while forecasting tools like Spark predict revenue and spot diminishing returns.

Small retailers benefit from Category Leaderboard tools that build essential category knowledge. These tools reveal top competitors, market position, and branded search percentages in each category. This information helps optimize budgets across funnel stages.

More retailers now use interactive scenario planning tools. These let marketers upload budgets, explore different allocation scenarios, and see forecasts without needing technical expertise. Such tools support a "bottom-up" marketing approach where retailers invest more in targeting the bottom of the conversion funnel. This minimizes risk and boosts potential ROI.

Tools and Models to Optimize Retail Allocation Strategy

Sophisticated tools and models now play a vital role in getting the best returns from five key marketing strategies retailers invest in. These tech solutions help marketers distribute budgets better, measure real campaign effects, and utilize automation to improve performance.

Digital marketing budget allocation tools

Retailers now use specialized platforms to optimize their marketing spend. CommerceIQ's Media Planner Tool stands out by utilizing machine learning from past data to calculate exact spending needs for specific sales targets. The tool uses AI analysis to recommend precise dollar allocations across generic and branded terms, different ad types, and predicts returns on investment.

SAP Emarsys provides a retail marketing automation platform that connects with existing marketing and commerce channels quickly. Retailers can launch campaigns faster and optimize performance live, which works to improve marketing results. Marketers can build automated customer experiences across many channels with this flexible platform - from ad networks like Google and TikTok to integrated direct mail and SMS.

Endear offers user-friendly retail marketing automation tools that make it easy to manage automated emails and text messages that feel personal and timely. Marketing teams can work more efficiently with targeted communications ready instantly by utilizing pre-built marketing message templates called "recipes."

Incrementality and attribution modeling

Retailers need to know which marketing investments drive genuine new sales versus just shifting existing demand. Incrementality testing measures the true value marketing strategies create by isolating and measuring results separate from other business factors. Advanced retailers apply this through Random Controlled Trials, Match-Market Testing, and Counterfactual Models.

Attribution modeling shows what motivated customers to continue toward conversion by ranking marketing channels and touchpoints. Single-touch models still work in some cases, but retailers now welcome multi-touch attribution to report and optimize campaigns across complex customer experiences that can involve between 20-500 touchpoints.

Leading marketers now capture data from every marketing touchpoint and track both online and call conversions to see the complete picture. Companies that use advanced attribution models were 60% more likely to exceed their business goals compared to those using simple models.

Using AI and automation for smarter spend

AI-powered systems have reshaped retail budget allocation. These systems organize and analyze relevant data, detect patterns, and let marketers create and compare different scenarios. This method removes chaos and bias, making the process more efficient and accurate.

AI helps retailers predict likely customer outcomes and forecast purchasing behavior for priority segments. Predictive lifetime value (pLTV) helps marketing teams respond to changing consumer demands. They can now forecast campaign performance within 24 to 48 hours instead of waiting the traditional seven days.

AI decisioning helps marketers find the best offer for each customer - the lowest discount needed that maximizes extra revenue after promotional costs. Best-in-class Marketing Mix Modeling driven by advanced machine learning can improve marketing ROI by 14-38% through quick and detailed optimizations.

Conclusion

Retailers in 2025 split their yearly marketing budgets across five main strategies. Digital advertising takes 25-30%, while influencer and social media marketing gets 15-20%. Local SEO and listings account for 10-15%, with SEO and content marketing taking a similar share. Traditional advertising and in-store promotions receive 10-15%. These numbers show how modern retail marketing needs both digital and physical presence to succeed.

Without doubt, informed decision-making has changed how retailers spend their marketing dollars. Leading brands now use advanced attribution models and incrementality testing instead of relying on instinct or past patterns. Marketing teams can now identify which activities generate new sales rather than just moving existing customers between channels.

Technology offers precise insights, but successful retailers combine data analysis with strategic testing. Smart brands set aside 5-10% of their marketing budgets to find tomorrow's best-performing channels before their competitors do. This strategy recognizes that while data shows the way, breakthroughs stimulate growth.

Consumer behavior changes faster now, especially among younger buyers who want a continuous connection between physical and digital experiences. Retailers must stay flexible and review their budget allocation as market conditions change. Brands that see marketing budgets as dynamic investments rather than fixed costs will lead the pack.

Marketing budgets serve one core purpose: building meaningful customer connections that boost sales and foster loyalty. The retailers who optimize spending for long-term advantage, not just quarterly results, will come out ahead. Every dollar spent on digital ads, influencer partnerships, or store experiences should strengthen customer relationships.

FAQs

Q1. What are the top 5 marketing strategies retailers invest in for 2025?

The top 5 marketing strategies that retailers are allocating about half of their annual budgets to in 2025 are digital advertising (25-30%), influencer and social media marketing (15-20%), local SEO and listings (10-15%), SEO and content marketing (10-15%), and traditional advertising with in-store promotions (10-15%).

Q2. How are retailers adapting their marketing strategies for 2025?

Retailers are increasingly focusing on data-driven decision-making, leveraging AI and automation for smarter spending, and balancing proven tactics with experimental initiatives. They're also prioritizing omnichannel customer engagement and aligning their strategies with evolving consumer behaviors, especially those of younger demographics like Gen Z.

Q3. What role does data analytics play in retail marketing budget allocation?

Data analytics plays a crucial role in retail marketing budget allocation. Retailers using advanced analytics observe a 15-20% improvement in marketing ROI. It helps in understanding true ROI for various activities, analyzing shopper behavior patterns, and leveraging historical data to predict future returns, ultimately leading to more effective budget distribution.

Q4. How are retailers measuring the effectiveness of their marketing strategies? Retailers are using sophisticated tools for incrementality testing and attribution modeling to measure the true impact of their marketing efforts. They're implementing techniques like Random Controlled Trials and Match-Market Testing to isolate and measure results independent of other business factors. Multi-touch attribution models are also being used to effectively report and optimize campaigns across complex customer journeys.

Q5. What is the importance of balancing traditional and digital marketing strategies in retail?

Balancing traditional and digital marketing strategies is crucial for retailers to create a comprehensive approach that reaches customers across all touchpoints. While digital channels dominate growth projections, traditional advertising and in-store promotions still play a vital role in building brand awareness and driving in-store traffic. This balanced approach ensures both immediate sales generation and long-term brand equity building.