Marketing and Research Consulting for a Brave New World
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Retail media is now at least $40 Billion in US advertising revenue (about 60% of the size of TV) according to Forrester, growing to $100 billion over the next five years (BCG, Google), making it one of the fastest growing media channels for advertising. Amazon has turned the big two into a big three and, based on available data, appears to be comparable in ad revenues to a goliath such as Disney (ABC, ESPN, Disney+, etc.).  A dozen or more retailers now offer Ad Tech capabilities helping to fuel its growth as an advertising channel and don’t forget the consolidated frequent shopper data providers…IRI, NCS, Catalina who can push audience lists for activation. And it doesn’t end with CPG…Best Buy is now an AdTech player in a deal with Criteo as their DSP and an offering Criteo calls “Commerce Max”.

What is retail media? The term refers to retailers offering marketers the ability to serve advertising based on their shopper profiling.  

And it is a winning play for both the retailer and the marketer. What does retail media offer that makes it so attractive?  For the retailer, it is very high margin revenue. For the marketer, paid search advertising is obvious…when a consumer searches within Amazon or other sites it is with shopper intent and my work with DISQO shows that the conditional probability of search leading to an add-to-cart event is significant.

However, if you think retail media is just another way to buy search advertising, you are undervaluing the opportunity.

There is so much more…Amazon and other retailers offer access to inventory across the web. Amazon for example has a DSP that a marketer can use with audiences created from the first party data based on shopping behaviors, demos, and viewing patterns (Amazon Prime).  I’d anticipate that Walmart, Target, Kroger and others are going down similar paths.

What has me so excited about retail media is the power of targeting based on shopper history. White paper research I helped to conduct has shown that the Movable Middle (those with a 20-80% probability of choosing the brand of interest) repeatedly respond to advertising at rates that are 5-15 TIMES HIGHER vs. other consumers.  I am collaborating on accumulating in-market case studies where the Movable Middle theory is batting 1,000!

Retail media gives the product marketer a new way to win via addressable advertising.  The whole idea in addressable marketing is that you bid for the opportunity to serve an ad to a given ID because you know something about that ID that makes the consumer behind it more valuable to you. So, for a moment, let’s organize media channels based on the knowledge advantage they offer for targeting and bidding.

  • Search: target based on what people want to know about
  • Social: target based on what people like to talk, hear about, and share
  • TV content: target based on what entertains them
  • Retail media: target based on what shoppers are interested in buying.

Clearly retail media offers a new dimension to “knowing” a consumer!

Other benefits of retail media… their data are first party, highly accurate, coming from opt-in enrollment, on-site behaviors. You can execute multiple ad units including video. Also, retail media offers good scale…who doesn’t shop at Amazon, Walmart, Target, Best Buy, or Kroger?

So, what’s the catch?  “Retailer as AdTech” is likely to be more walled garden than not, where ad serving data will be shared in limited ways, encumbering reach calculations and multi-platform effectiveness measurement.

So, to fully embrace retail media, you will have to shift your media planning thinking. Retail media are a “bottom up” play.  If test vs. control measurement shows that a given Retail AdTech play delivers high ROAS, keep playing that card.

Think of media planning in a new way; metaphorically, as making piles of sand.  You keep adding sand to your best pile until it spills over (saturation).  Then focus on the second -best pile and add sand there…and so on.  This is the type of “marginal utility” approach an economist would favor for budget allocation. For product marketers, retail media will probably be in your top 5 sand piles!

I’d love to work with anyone interested in developing a media plan that is created “bottom up” and designed to perform. Let’s develop a behavior-based, math driven targeting plan and activate it across retail media, open web, CTV, online video, even linear TV.  I’m interested in seeing how high we can drive ROAS and turn advertising into a profit generator, instead of being viewed by the CFO as a cost of doing business.

Who’s in?

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