The Retail Media Play
As retailer-operated media platforms grow in number and prominence, manufacturers must decide how best to use them — and who should pay the tab.
Retailer media platforms may have only emerged in recent years, but they’ve already had a profound effect on the discipline of shopper marketing, blurring the lines between trade, shopper and media spending.
Taking note of the success at Amazon and even the advertising dollars amassed by Google and Facebook, retailers such as Walmart, Target and Kroger have worked to build up their digital media assets in recent years to better establish themselves as legitimate and powerful options for national brand advertising, not just trade and shopper programs.
“I think two years ago, maybe you would have said, ‘Yeah, this is something we’re going to test out. This is something that, you know, we’re not totally convinced about yet,’” says Michael Schuh, director, product strategy and innovation at 84.51, Kroger Precision Marketing. “I think the perception now is that, ‘Yes, retailers are here to stay.’ They have the scale – especially the top sort of three or four media platforms – to support large CPG or agency investment teams and can be really impactful channels.”
Key Players & Benefits
Walmart Media Group, Kroger Precision Marketing (KPM) and Target’s Roundel are among the top retailer media platforms, offering brand marketers various options and capabilities aimed at reaching a large audience in a very targeted way to deliver customized messaging that drives traffic. For example, at Kroger, where 96% of all transactions are captured via the retailer’s loyalty card, shoppers can be served targeted digital coupons and emails. KPM can also work with brands to target shoppers with ads elsewhere on the internet based on their purchase behavior or even flavor preferences (e.g., chocolate lovers).
For Laura Moser, director of business leadership and client development at HMT Associates, retail media platforms offer incremental solutions for CPGs to continue to evolve how they are developing more seamless solutions for shoppers that allow for better personalization and customization of the message, content and offers. “Retailer-owned media platforms and additional activation vehicles are providing the type of targeted audience we have always hoped to evolve to as part of achieving the promise of strategic shopper solutions,” Moser says.
Google, Facebook and other national media platforms can, of course, deliver plenty of consumer eyeballs, often in numbers much larger than even Walmart.com can deliver. And, depending on their business model, they have collected plenty of personal behavior data that lets advertisers target specific consumers. What’s missing, according to proponents of retail media platforms, is the actual sales data, as well as the proximity to purchase mechanisms; a visitor to StopandShop.com (one of the chains united by Ahold Delhaize through its Peapod Digital Labs platform) is far more likely to be in “shopping mode,” ready to make a purchase.
“The biggest piece is sales, right?” says Lindsay Pullins, director, product strategy and innovation at 84.51. “It’s really difficult for folks outside of Kroger to have that sales data. They simply don’t get it. … Retail [media] platforms have that advantage because they are so close to purchase. We see what’s actually happening in our stores.”
For April Carlisle, vice president, shopper marketing at Coca-Cola Co., there’s no better time to be in shopper marketing. “The pace of change with how we do business with our retailers from a media perspective has never been more interesting in that we are truly focusing on what is the marketing objective and what is the return on investment that we’re going to get,” she says. “What’s exciting about the retail media networks is that now there’s the ability to measure everything that we’re doing to be able to do real-time adjustments to the messaging [or] to the creative and really hold ourselves accountable for every dollar that we spend.”
Retail media networks have had a profound change on shopper marketing, because the discipline sits at the center of this new retail ecosystem, says Robert Rivenburgh, chief executive officer, North America, at The Mars Agency. “I’m finding that shopper marketing in many instances is kind of the ringleader to make sure you’re creating a holistic experience that’s cohesive across the platforms that drives sales and, ultimately, brand loyalty,” he says. “It’s been very positive and I think it’s the discipline that is going to continue to push to have that shopper-centricity.”
Where there is tension right now, Carlisle and others explain, “is the amount of spend levels that each of our customers want us to spend with them. And the expectation is that we are directly moving media dollars that we would have spent [elsewhere] on general awareness and reach into driving to their specific audiences.”
At Coca-Cola, marketers are thinking about all the ways they can reach the right shoppers with the right message, Carlisle adds. Thus, there are dollars that are assigned to building broad trial, awareness and reach for the company’s brands through mainstream media, as well as dollars earmarked to do that with their retailers. “But, definitely we are thinking about it holistically and ensuring that our retailer networks are part of the media mix that will enable us to get to that target shopper in the most efficient way,” she says.
As usual, retailers aren’t being shy about touting their platforms to brand partners and asking for increased overall funding. They don’t view their media platforms as an alternative vehicle for the trade and shopper dollars they already receive, but as a place for brands to redirect some of their national digital media spend. “The new challenges moving forward will be around identifying where the funding comes from within organizations,” says Moser, adding that retailers expect brands to fund retail media platform initiatives with national media dollars as opposed to trade funding.
Thus, the lines are truly blurring when it comes to budgets, Pullins says. Now more than ever, e-commerce and shopper teams are bringing their agencies and national media teams “along to make sure that there’s a full cohesive holistic strategy at play, so we’re seeing some really unique opportunities – retail media, specifically – around those budgets blurring. Brand teams across shopper, national, e-commerce are really playing together to come up with a holistic strategy. So [spending is] across all. I think there’s heavy investment from shopper and e-commerce teams, but it’s certainly growing across the broader [organization].”
Moreover, brands and agencies are creating specialized teams for operating with retail media platforms, which Pullins says is almost creating a new ecosystem. There might be teams dedicated to search, display, audio or TV but “now there’s a heightened focus on taking those core skill sets from all of those teams and really elevating it in the retail media space.”
Brand marketers are being inundated with asks, Rivenburgh says, “and now you have another thing that the retailers are looking for, so they’re a little overwhelmed.” While there are some first movers who really believe in retail media networks and are seeing positive results, Rivenburgh notes there are others that are more skeptical, seeing it as a money grab or profit drive on the part of the retailers.
There may be some truth to that, and the history of brand-retailer trade partnerships certainly has a fair share of “pay for play” negotiations for funding that never really pays out. Still, industry experts only see retail media platforms as a money grab if retailers are forcing brands to buy tools that aren’t any more effective or efficient than the ones that exist elsewhere. And most of the leading retailers in the space are devoting significant resources to building out legitimate media platforms, buying solutions (as Sam’s Club did recently by acquiring proprietary technology and some staff from its vendor, Triad) and extending their services beyond their own assets (as Target’s Roundel did by offering ad placement outside of the retailer’s own assets).
Where Moser is seeing evolution for CPGs is stronger integration of media and connections planners into shopper marketing groups. “The goal,” she says, “is to determine where the most efficient and effective reach can be obtained for shoppers and this may require brand, shopper and sales teams to take a new look at how they are annually funding calendar initiatives at retailers with established media platforms.”
When asked to compare the effectiveness of retail media platforms compared with other digital media, 84.51’s Schuh said it’s challenging because of their newness. “We’re tying media exposures to sales in different ways than the industry has in the past, so it really is kind of hard to compare … because there isn’t the same level of accountability for results [elsewhere],” says Schuh, noting that it also depends on the KPIs being applied and what exactly is being measured. “But, [from] our standpoint, I’ll say that we’ve actually found our platform to be very effective and advertisers would largely agree with that. … I think that’s evidenced by our high retention rates and continued growth.”
Brand marketers appear to agree for the most part. Participants asked to rate Kroger Precision Marketing – as well as eight other retail media platforms – for Path to Purchase IQ’s annual Trends Report generally gave the platform “good” or “excellent/very good” scores for its targeting and measurement capabilities, although they suggested that it might need to improve as far as creative freedom and ROI. (See charts in Related Content below.)
Regardless of the budgeting obstacles they might present, these media platforms will only continue to grow in importance for retailers as well as brands as both groups continue working toward reaching the right shoppers with the right message at the right time.
How much will it grow? If Microsoft chief executive officer Satya Nadella has his way, every retailer will invest resources in building out their own platforms. “There’s death, there’s taxes and there is ever-increasing online advertising spend,” Nadella joked during a keynote session at the National Retail Federation’s “Big Show” in January, before basically challenging retailers to free advertisers from the “oligopoly” that currently dominates the digital media landscape.
“You have as retailers, the most valuable asset, which is commercial-intended consumer behavior data. The question is, how can you convert that, through your marketing efforts, into effectively new online advertising channels for every brand, every supplier. This, to me, is perhaps what’s going to reshape retail business models.”
It could very well reshape brand budgets as well.