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Retail Marketing Models… On the Brink of Change. October 2005 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.

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Retail marketing models on the brink of change

Retail Marketing Models… On the Brink of Change

October 2005

Discussion points
Discussion Points….

  • How Leading Retailers Are Going to Compete

  • How Brands Are Going to Win

Retail environment for brands is deteriorating quickly
Retail Environment For BrandsIs 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

Advertisers want change
Advertisers Want Change …

Advertisers want

  • to increase effectiveness or reduce

    • mass advertising outlays

    • Trade promotion

  • Conversion - in store - to better influence the “moment of truth”

    • 1:1 relationship marketing with consumers

    • Localized marketing/promotions

    • Optimized content/campaign investments

  • Target-ability

  • Equity enhancement

  • Measurement

Shifting dollars to in store
Shifting Dollars to In-Store

Source Retail Media Link, LLC


The last 20 yards has become fmot for retailers and brands
The last 20 yards has become “FMOT” for retailers and brands

Total Target Market



Traditional Marketing





Marketing &







Source: Tesco

Key trends that are impacting the north american market

Market Forces

Shopper Lifestyles & Behaviors



Speed – need for

Capital markets

Retail Industry

Competitive Forces

Consolidation, Concentration, Substitution


Impact of Discounters

Margin compression

Labor relations & productivity

Demand Driven Supply Chains

Key Trends That are Impacting theNorth American Market

Chain retail share of north america
Chain Retail Share of North America

0% 51% 100%

“Chain Retailers”




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.

Retail marketing models on the brink of change
Only 89 Retailers in North American will Gain Share!(North America Ops only, Period Evaluated = 2003 through 2008E)

Gainer Segments


Share gainers key initiatives examples
Share Gainers Key Initiatives.. Examples

  • Re-engineered revenue streams

  • Clear differentiation strategies

    • 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

Brand enrichment
Brand Enrichment Messaging









Retail marketing models on the brink of change

Shopper Insights: MessagingThey are what they buy

What do my

customers spend?

Who are my best


What are their

churn rates?

What days what times do they shop?

What’s my share of their wallet?

What sections do they shop?

How price sensitive are they?

Will they substitute when OOS?

What other items do they buy?

Which items drive price sensitivity?

How promotion

responsive are they ?

What brands do they prefer?

Which promotional vehicles do they respond to?

Source: Ahold

Brand enrichment strategies require new operating paradigm

Right merchandising Messaging

Department &


Strategies for:

Private label

Pricing & promotion



Right Assortment





All other Food

Brand Enrichment Strategies Require New Operating Paradigm

Right marketing

  • Clear consumer target

  • Clear positioning

  • Marketing Overlays

  • In & out of store media platforms

  • Vendor tie-ins/co-marketing

Brand enrichment1
Brand Enrichment Messaging









Major retailers spend at considerable levels and on media of declining effectiveness
Major Retailers Spend at Considerable Levels and on Media of Declining Effectiveness

Repurposing just 10% of the leaders TV/Cable Spend to an in-house network will add $288 Million to RMN Revenues / Media Value

Source: AdAge

Retailers have a increasing number of captive marketing platforms
Retailers Have A Increasing Declining Effectiveness Number of Captive Marketing Platforms…




In-store POP







Personal Relationships

Community Involvement

Targeted Publications

Digital signage to retail media networks an industry evolving rapidly
Digital Signage to Retail Media Networks: Declining Effectiveness An Industry Evolving Rapidly

Retail Media Networks (RMN)












Digital POS



Digital Signs




Source: Intel, Premier Retail Networks

Historical business models
Historical Business Models Declining Effectiveness

Operations/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

Retail marketing models on the brink of change

Retail Media Networks (RMN’s) Declining Effectiveness distribute various digital content including paid advertising, instructional content and news through a network of digital displays.

New model retail media networks rmns
New Model: Retail Media Networks (RMNs Declining Effectiveness

  • 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

Rmn decisions development and deployment considerations retail network configurations
RMN Decisions Development and Deployment Considerations: 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

A number of important choices
A Number of Important choices Retail Network Configurations

Source: Intel, Premier Retail Networks

Multiple networks in any given store with ability to target in outside the store
Multiple Networks in Any given Store Retail Network ConfigurationsWith Ability to Target In & Outside the Store
















Retailers have natural dwell zones in their stores which are really valuable

2m 39s Retail Network Configurations

5m 18s

5 m

3m 03s

3m 55s

5m 18s

2m 44s

Retailers have natural dwell zones in their stores.. Which are really valuable?


Content the most important consideration
Content: The MOST important consideration Retail Network Configurations

  • 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


Attention grabbing Retail Network Configurations

Pertinent vs. entertaining

Recognition vs. recall to better connect

More promotion, frequency

Tie active messaging to all brand points


Shelf signage

Floor graphics


Associate program – educate them on the message

Retailers own overlay programs – Hispanic, Health & Wellness, Trend


A number of important choices1
A Number of Important choices Retail Network Configurations

Retailers can ramp up their cva s over time
Retailers Can Ramp Up Their Retail Network Configurations CVA’s Over Time

Big Stores – Hypers,

Club stores

Medium size (Chain

Drug, Supers)

Small box (c-store,

Value discounters)






# of


Initial Final

Rmn s face numerous challenges
RMN’s face numerous challenges Retail Network Configurations

  • Shopper Adoption

  • Understanding –.

  • Measurement –

  • Advertising agency readiness..

  • Advertising Sales Force

  • Media Plan Integration

Most important shopper acceptance what we know about today and the future

What is currently Retail Network Configurationsmeasured is aggregate


Gross impressions

Department traffic

View Times



A good thing to offer customers



Provides relevant advertising

These are sorted by



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


Respondent level data – enable aggregate and segmented analysis

Demographics, CVA’s

Most Important – Shopper Acceptance! What We Know About Today and the Future

Consumer response is impressive

Viewership Retail Network Configurations

From 35.8% viewer-ship

120 million gross impressions per 4-week flight

View Times

Duration/viewer Growing!

% of time viewing 14%


Unaided 42%

Aided & Unaided 65%


A good thing to offer customers 84%

Informative 80%


Provides relevant advertising 78%

Consumer Response is Impressive

Qualitative shopper feedback
Qualitative Shopper Feedback Retail Network Configurations

  • “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

Measurement advertisers want balanced scorecards
Measurement: Retail Network ConfigurationsAdvertisers Want Balanced Scorecards

  • 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 Equity P&L’s – Customer & Brand

Brand Advertising


Trade Spend


Impressions (CPM)


Reach & frequency

Retail Execution

Cases (Sales $)

Funding shopper marketing funding
Funding: Shopper Marketing Funding Retail Network Configurations








and/or reduced


Retailer A

Retailer B

Retailer C

Retail D


Rmn s face numerous challenges1
RMN’s face numerous challenges Retail Network Configurations

  • Shopper Adoption

  • Understanding –.

  • Measurement –

  • Advertising agency readiness..

  • Advertising Sales Force

  • Media Plan Integration

Rmn s face numerous challenges2
RMN’s face numerous challenges Retail Network Configurations

  • Shopper Adoption

  • Understanding –.

  • Measurement –

  • Advertising agency readiness..

  • Advertising Sales Force

  • Media Plan Integration

Rmn forecast
RMN Forecast Retail Network Configurations

  • 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

Retail media forecasted penetration of 9 1 for at the highest levels of participation
Retail Media Forecasted Penetration of 9.1% for 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

Summary implications
Summary & Implications highest levels of participation

  • Environment for brands weakening while traditional media weakens faster

  • Retail market changing… important distinctive strategies among retail leaders

  • On-going Brand Enrichment critical

    • Shopper insights

    • Brand Guideposts

    • Organization

    • Communication platforms

  • 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

Summary implications1
Summary & Implications highest levels of participation

  • 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

Thank you questions

Thank you …. Questions? highest levels of participation