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Retail Marketing Models… On the Brink of Change. October 2005 [email protected]. Discussion Points…. How Leading Retailers Are Going to Compete How Brands Are Going to Win. Shelf of the Future?. Shopping Basket of the Future?. Retail Environment For Brands Is Deteriorating Quickly. - PowerPoint PPT Presentation
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CCONetwork.com ... The most valuable network in retail This is a “Confidential Work Product” intended for WPP’s Store AttendeesFor Re-use rights email [email protected]
Retail Marketing Models… On the Retail Marketing Models… On the Brink of ChangeBrink of Change
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Discussion Points….Discussion Points….
How Leading Retailers Are Going to Compete
How Brands Are Going to Win
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Shelf of the Future?Shelf of the Future?
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Shopping Basket of the Future?Shopping Basket of the Future?
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Retail Environment For BrandsRetail Environment For BrandsIs Deteriorating QuicklyIs Deteriorating Quickly
Retailer differentiation strategies – make me different everyday does not fit well with large brands
Shelf compression New categories Private Label SKU rationalization OPP Pricing strategies
Shelf conditions
POS and other signage execution
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Shifting Dollars to In-StoreShifting Dollars to In-Store
MediaConsumer Promo,
Custom Retail Programs
Trade Spending
Out of storeToo fragmented and therefore
inefficient
( - cut spend)
Effective on tactical level, but not brand building
( - cut spend) N/A
In-storeEfficient, effective, contextually
relevant (+ increase spend)
For promotions and brand building
(+ increase spend)-
In-store examplesIn-Store Broadcasting Network,
PRN, Sign Storey, NAM, FloorGraphics, etc…
ICM, Catalina, retailer cook books, cause related programs,
signs, banners, etc…Feature, display, TPR
7Source Retail Media Link, LLC
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The last 20 yards has become The last 20 yards has become “FMOT”“FMOT” for retailers and brandsfor retailers and brands
Total Target Market
Aware
Understand
Believe
Want
Find
Buy
Like
Prefer
Traditional Marketing
Retail Marketing &
Merchandising
4.8%
80%
Source: Tesco
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Key Trends That are Impacting theKey Trends That are Impacting theNorth American MarketNorth American Market
Market Forces Shopper Lifestyles &
Behaviors Technology Globalization Speed – need for Capital markets
Retail Industry Competitive Forces
Consolidation, Concentration, Substitution
Saturation Impact of Discounters
• Margin compression Labor relations &
productivity Demand Driven Supply
Chains
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Chain Retail Share of North AmericaChain Retail Share of North America
“Chain Retailers”Organized
Local Retail
0% 51% 100%
Formal Retail
Note: The market size would be @ least 10% larger if the informal market were included
here. And the “Chain Retailer” market share would decrease.
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Only 89 Retailers in North American Only 89 Retailers in North American will Gain Share!will Gain Share!
(North America Ops only, Period Evaluated = 2003 through 2008E)(North America Ops only, Period Evaluated = 2003 through 2008E)
Source: www.mventures.com
Gainer Segments
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• On-going Brand enrichment … Strong brand stand (positioning), right marketing messages & platforms
• Right format positioning – targeted or mass• Innovative merchandising, products
Right people and capabilities Right Market Development models Demand driven supply chains Credible, timely information across the value chain Strong financial performance and capital structures
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• Merchandise 80%• Services 15%• Marketing Svce 5%• Media 5%
Services Lifestyle Financial Small Business Services/Installation
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Retailers Want to Monetize Their Shopping Trips, Retailers Want to Monetize Their Shopping Trips, Improve Own MessagingImprove Own Messaging
Source: Tesco
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Brand EnrichmentBrand Enrichment
Brand Guideposts
Communication/MarketingPlatforms
Shopper Insights
Organization
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What days what times do they shop?
What brands do they prefer?
Will they substitute when OOS?
What other items do they buy?
What sections do they shop?
Which promotional vehicles do they respond
to?
How promotion responsive are they ?
How price sensitive are they?
Which items drive price sensitivity?
What are theirchurn rates?
Who are my bestcustomers?
What’s my share of their wallet?
What do mycustomers spend?
Shopper Insights:Shopper Insights:They are what they buyThey are what they buy
Source: Ahold
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Brand Guideposts Brand Guideposts
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Right merchandising Department & Category Strategies for:
• Private label• Pricing & promotion • Localization• New
Right Assortment Fresh Ancillary/SWAS GM/HBC Apparel All other Food
Right marketing Clear consumer
target Clear positioning Marketing
Overlays In & out of store
media platforms Vendor
tie-ins/co-marketing
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Brand EnrichmentBrand Enrichment
Brand Guideposts
Communication/MarketingPlatforms
Shopper Insights
Organization
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Major Retailers Spend at Considerable Levels Major Retailers Spend at Considerable Levels and on Media of Declining Effectiveness and on Media of Declining Effectiveness
Ad Age Rank Retailer
Measured Advertising TV/Cable Newspaper Radio Internet
Total Top 16 Retailers 5,945,616 2,877,493 2,075,977 330,455 89,999 571,692 All Other 10,259,284 3,122,507 4,609,023 419,545 1,025,001 1,083,208 All Retail 16,204,900 6,000,000 6,685,000 750,000 1,115,000 1,654,900
Source: AdAge
Repurposing just 10% of the leaders TV/Cable Spend to an in-house network will add $288 Million to RMN Revenues / Media Value
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Retailers Have A Increasing Retailers Have A Increasing Number of Captive Marketing Platforms…Number of Captive Marketing Platforms…
MassMedia
In-store POP
RetailMedia
NetworksCustomer AcquisitionPersonal
Relationships
Community Involvement
TargetedMedia
Targeted Publications
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Digital Signage to Retail Media Networks:Digital Signage to Retail Media Networks:An Industry Evolving RapidlyAn Industry Evolving Rapidly
BasicRMN
Integrated RMN
AdvancedRMN
2010
ShopperMarketing
Capabilities
OperationsFocus
BackroomDigital Signs
Digital POSSignage
Today 2001
Retail Media Networks (RMN)
Source: Intel, Premier Retail Networks
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Historical Business ModelsHistorical Business ModelsOperations/Employee Communication Solutions: Primary role in-store operations, training and communication. These are
especially useful to merchants and store operations people communicating new programs, initiatives, for personnel focus as well as for training and policy communication.
Digital Signage – Initially a traditional Point of Purchase (POP) alternative substitution strategy for printed POP signage, which competes on efficacy and cost. Extends to in-store navigation and announcements. Transfers greater control and resources to the retailer over in-store conditions and shopper communications. There are two basic approaches for these sales oriented networks:
Electronic POP – static networked screens replace the high cost and sometimes ineffective printed point of purchase (POP) materials. This ranges from relatively static brand image screens to electronic shelf tags which can also deliver promotional messaging. They enabled central control over store level signage, pricing and related merchandising messages. They save labor, simplify complex product messages for shoppers and remove most of the work at the retail store and improve execution.
Digital Displays Networked together to simply make physical product comparisons. These networks are especially prevalent in categories such as TV departments, where consistent content displayed across the available products help the shoppers “see” the difference.
Source: Intel, Premier Retail Networks
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Retail Media Networks (RMN’s)Retail Media Networks (RMN’s) distribute various digital content including paid advertising, instructional content and
news through a network of digital displays.
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New Model: Retail Media Networks (RMNsNew Model: Retail Media Networks (RMNs Retailer or Advertiser sponsored digital advertising and media
networks targeting specific zones or “customer viewing areas” (CVA’s) with digital content to engage and activate shoppers.
RMN’s use broadcast and/or narrowcast in the store. Expanded capability for greater in-store targeting, interactivity, tracking
and integration with parallel customer development systems. Devices and displays configured with high quality, directed sound and
interactive capabilities – with centralized control over the content and device operations.
Ultimately RMN’s will include multiple network platforms (wired, wifi, cellular etc). RMNs can be utilized in three distinct ways:
• Broadcast - transmitting a message over a wide area or to everyone connected to a network or service
• Narrowcast – transmitting a message to a group in a specific target area. Sectional LCD panels are common in an RMN’s that address specific products @ the modular level
• Interactive (1:1) – Devices that allow for consumer interaction, often including input to obtain product recommendations. The most common form of interactive system is a touch screen or buttons on a kiosk type display device
Source: Intel, Premier Retail Networks
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RMN Decisions Development and Deployment RMN Decisions Development and Deployment Considerations: Retail Network ConfigurationsConsiderations: Retail Network Configurations
Business Model – Backroom, Digital POP, RMN (as discussed above) Network Options (ie the medium the content will travel through) and Operation and op–
Wired or wireless, owned or leased for example are important choices. RMN’s operate the same hours as the store – retailers may choose to operate in-house or outsource to companies such as Premier Retail Networks (PRN).
Consumer Viewing Area (CVA’s) Configurations – The number and location of screens (in a fixed network)
Device Options/Consumer Reach Strategy – The output device that will be used to view the advertiser and store related content. These can range from very simple screens to more complex 1:1 interactive devices and will depend on consumer acceptance.
Content Objectives – There are at lease six common objectives for the content:• Branding – Establishing or re-enforcing the brand with the shopper with intensive in-store advertising• Merchandising – Merchandise and Promotional call outs (Features)• Attraction – To draw people to departments and categories• Direction – To help shoppers navigate the store• Enhancement – To support and create store environment• POS Enrichment – To improve and enhance the checkout experience
Content Development and Acquisition Process – In an RMN, much of the content is advertiser provided. However, it is not effective to simply re-purpose existing 30 second spots. 15 seconds or less is often the most effective message length. This requires development capabilities including talent acquisition and digital rights management.
Computing Power – Where the business intelligence resides in the network Key Applications – These include content management tools that guide how content is
managed with the Networks.
Source: Intel, Premier Retail Networks
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A Number of Important choicesA Number of Important choicesDimension Basic RMN Advanced RMN
1. Network Option Wired Wireless2. CVA’s (#zones) Digital Dept’s only (Consumer
Electronics)15-16 food/non-food departments & Promotional Space
3. Device Options Single Display type Multiple device platform (Broadcast, narrowcast, 1:1 Shelf edge tablet or cell phone/PDA)
5. Content Acquisition 70% Retailer provided 70% Advertiser provided6. Network Configuration Single Store Server Central Server7. Applications Content Management only Content management plus
business intelligence8. Network Operations Primarily internally managed Generally outsourced to
Solutions Provider9. Capital Retailer sponsored/funded Shared Cape with outsource
provider10. Retailer Profit Model Budgeted Expense/Cost
ReductionStrategic Profit Center
Source: Intel, Premier Retail Networks
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Multiple Networks in Any given StoreMultiple Networks in Any given StoreWith Ability to Target In & Outside the StoreWith Ability to Target In & Outside the Store
IN
IN
WiredMedia
Networks
Store
ModeOUT
OUT
Cellular
Wifi/Bluetooth
Activation
Activation
Awareness
WiMax
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Retailers have natural dwell zones in Retailers have natural dwell zones in their stores.. Which are really valuable?their stores.. Which are really valuable?
2m 39s
5m 18s5 m
3m 03s 3m 55s
21m51s
2m 44s
5m 18s
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Content: The MOST important Content: The MOST important considerationconsideration
5 to 10 second spots… VERY captivating for the shopper
Content development complex • Acquisition/ re-purposing• Talent acquisition• Digital rights
Future: digital libraries – standard content• DIY for shoppers - Menus, patterns, building plans
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ContentContent
Attention grabbing Pertinent vs. entertaining Recognition vs. recall to
• Retailers own overlay programs – Hispanic, Health & Wellness, Trend
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A Number of Important choicesA Number of Important choicesDimension Basic RMN Advanced RMN
1. Network Option Wired Wireless2. CVA’s (#zones) Digital Dept’s only (Consumer
Electronics)15-16 food/non-food departments & Promotional Space
3. Device Options Single Display type Multiple device platform (Broadcast, narrowcast, 1:1 Shelf edge tablet or cell phone/PDA)
5. Content Acquisition 70% Retailer provided 70% Advertiser provided6. Network Configuration Single Store Server Central Server7. Applications Content Management only Content management plus
business intelligence8. Network Operations Primarily internally managed Generally outsourced to
Solutions Provider9. Capital Retailer sponsored/funded Shared Cape with outsource
provider10. Retailer Profit Model Budgeted Expense/Cost
ReductionStrategic Profit Center
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Retailers Can Ramp Up TheirRetailers Can Ramp Up Their CVA’s Over Time CVA’s Over Time
Initial Final
# of
CVA’s
25
20
15
10
5
Big Stores – Hypers,Club stores
Medium size (ChainDrug, Supers)
Small box (c-store, Value discounters)
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RMN’s face numerous challenges RMN’s face numerous challenges Shopper Adoption
Understanding –.
Measurement –
Advertising agency readiness..
Advertising Sales Force
Media Plan Integration
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Most Important – Shopper Acceptance! Most Important – Shopper Acceptance! What We Know About Today and the FutureWhat We Know About Today and the FutureWhat is currently measured is
aggregate Viewer-ship
• Gross impressions• Department traffic
View Times Recall Attitude
• A good thing to offer customers• Informative• Entertaining• Provides relevant advertising
These are sorted by • Aggregate• Demographics• Selected CVA’s - Interactive Usage
What may be measured in the future
Retail GRP’s• Data synchronization with
traditional media planning tools
• Whatever tools metrics that planner uses
• Predictable reach & frequency Copy optimization – how to
optimize the message for retail
Frequency Respondent level data –
enable aggregate and segmented analysis
• Demographics, CVA’s
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Consumer Response is ImpressiveConsumer Response is Impressive
Viewership From 35.8% viewer-ship 120 million gross impressions
per 4-week flightView Times Duration/viewer Growing! % of time viewing 14%Recall Unaided 42% Aided & Unaided 65%
Attitude
A good thing to offer customers84%
Informative
80% Entertaining Provides relevant
advertising78%
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“Do not interfere with me getting shopping done- if you get my attention fine, but don’t get in the way”
• Highlights prevalence of precision shopping and need to incorporate in-store navigation
Provide more relevant, useful and practical information in terms of better navigation assistance and product information.
• Makes sense given shoppers time compression they appreciate concise, clear and to the point information,
Provide new/unique entertaining advertising content that fits me and the shopping environment, rather than a recycle of what I can see at home on the television.
• Content counts: Make it new, make it interesting Provide a blend of content that makes the store environment more
relevant and feel like my store. • Make it local. … community news, weather, announcements, sponsorships,
initiatives, etc
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Goal: Accountability through consistent measurement – impact on cases & equity Measurable value vs. alternatives
• Advertising/brand development scores• Retail execution (in store media forces execution)
Brand AdvertisingMetrics
Trade Spend Metrics
BalancedScorecards
Impressions (CPM)RecallReach & frequency
Retail ExecutionCases (Sales $)
Brand Equity P&L’s – Customer & Brand
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RMN’s face numerous challenges RMN’s face numerous challenges Shopper Adoption
Understanding –.
Measurement –
Advertising agency readiness..
Advertising Sales Force
Media Plan Integration
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RMN’s face numerous challenges RMN’s face numerous challenges Shopper Adoption
Understanding –.
Measurement –
Advertising agency readiness..
Advertising Sales Force
Media Plan Integration
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RMN ForecastRMN Forecast
Some form of a RMN will be right for up to 65 major US retailers covering over 100,000 U.S. stores(2004)
• This is based on a combination of factors including scale, consumer traffic, retailer marketing orientation and product strategy, and growth viability.
• There will be many more attempts – unlikely successful outside of these 65
Once fully installed there will be over 1,100,000 CVA’s. In the US, RMN’s will provide consumer impressions greater than
all but the largest television networks using the most conservative estimates. The reach is impressive, repeatable and measurable.
Advertising revenue will reach $3.3 Billion – a major revenue opportunity for these retailers and third party providers yet still less than 10% of the top advertisers annual media spend.
The capital investment required to support this system is in the magnitude of $2.5 Billion. This will require greater commitment by retailers or capitalization of third party providers.
ROA will always be a focus – and plans will change with the returns
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Retail Media Forecasted Penetration of 9.1% Retail Media Forecasted Penetration of 9.1% for at the highest levels of participationfor at the highest levels of participation
Retail Media Forecasts represent a small portion of the total TV (broadcast and cable) Industry
Advanced and Intermediate Networks represent 4.7% penetration
Source: AdAge 2005 Adfacts$60.7B
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Summary & ImplicationsSummary & Implications
Environment for brands weakening while traditional media weakens faster
Retail market changing… important distinctive strategies among retail leaders
Retail Media Networks one of many in-store options• Has some real advantages• Retailers have some real choices – network configuration
RMN’s face some very real challenges • Adoption• Profit-ablilty/ROI• Measurement
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Summary & ImplicationsSummary & Implications
Retailers will form business units to manage their marketing options – including RMN’s/In-store TV – to both monetize their traffic AND to improve own marketing spend/effectiveness• Retail Media Networks/In-store TV will be a big part of the
market• Winners will find a way to test and re-fine before they scale
any model • Retailers will capture about 50% of the marketing capacity
on their platforms • Revenue streams could grow to 5% of typical large scale
retailer Success is not about technology – its about getting
business model right
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