“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Bryan Wiener, CEO at Profitero.
Hardly a material line item a year ago, retail media is the new black – capturing the attention of brand marketers, and getting them to open their wallets in numbers that were unimaginable this time last year.
The accelerator is more shopping online due to the pandemic. EMarketer has ecommerce advertising growing nearly 40% year over year in 2020, representing 12% of all digital ad spend. Further, nearly every major retailer has launched or announced the launch of an ad solution, the most recent being Walgreens in December.
And brands incorporating this new channel into their media mix can get a turbo boost by applying lessons learned from the early days of search. There are eerie similarities to many of the growth inhibitors faced in early stage search marketing, albeit with some new twists.
Two of the biggest challenges are ecosystem alignment and data connectivity. Solving for both could give retail an opportunity to take search marketing to heights that Google can’t.
Ecosystem alignment: Getting all stakeholders on the same page
Brands must adopt an extra efficient retail media strategy to stand out on the crowded digital shelf, especially since ecommerce has generally less attractive economics than brick and mortar for brands (an article for another day).
Yet, at too many brands, maximum efficiency is impossible because traditional shopper and consumer marketing are siloed, with separate agencies, analytics and chief experience officer oversight for ecommerce and media teams. This structure doesn’t work in the ecommerce era where the lines between consumer and shopper have blurred.
Established brands already are taking a hard look at organizational structure by realigning teams to better connect the dots between sales and marketing. To be successful though, budgets and service providers also need to be fluid between channels and managed by stakeholders who have the necessary expertise to execute superbly in each channel.
This dynamic is playing out in real time between full service ad agencies and specialist retail agencies. When search and social started to gain steam well over a decade ago, the Dentsu agency 360i where I served as CEO or Chairman for 14 years, succeeded first by competing against full service agencies and then, to avoid commoditization, by becoming fully integrated.
I expect the same dynamic to play out in ecommerce.
Each brand must evaluate the cost of simplification versus the benefits of specialization. Brands must factor in the importance of ecommerce to their business, the size of their ecommerce budgets vs. other media, and conduct a capabilities evaluation of their current agency compared with specialist offerings.
Data Connectivity: Integrating product and advertising analytics
Retail media is far more complex than search. It requires buyers to understand the dynamic changes and interconnected relationship between supply chain, competitive pricing, and consumer ratings and reviews that drive conversions and organic impressions. All of these levers go well beyond making a brand discoverable.
And the real-time nature of all these metrics are a key consideration. Too often, media buyers making minute-by-minute retail media decisions don’t have the totality of information at their fingertips to make optimal decisions.
When search was less mature, brands optimized keywords based on historical data rather than looking at how real-time analytics could expand the addressable market for profitable revenue. This created opportunities for smarter and scrappier brands. Take for instance, Red Roof Inn, an early 360i client. Even with a smaller budget than its competitors, it drove huge performance gains by using flight tracking data to auto adjust creative and bids for mobile search in areas where flights were cancelled or severely delayed.
In-stock rates represent the simplest example of how real-time analytics can blend with retail ad strategy to improve campaign performance. Putting ad dollars toward out-of-stock products creates damage beyond the lost sale. Brands lose, on average, 42% of their online sales when in-stock rates drop to a low level (sub 30% in-stock rate). It also takes several days for sales to fully recover after being out of stock for even just one day.
Flipping to offense, brands significantly boost their ROI by monitoring competitors’ availability rates and aggressively increasing bids and spend on products that are out of stock elsewhere, a strategy known as conquesting.
Finally, that real-time data must be constantly tested. Running analytics tests on the optimal relationship between SEO and SEM to drive ROI was a differentiator in early search days, but now it’s table stakes. The same phenomenon exists in retail media, which demands bringing together, and looking at, the right data in real time, and then setting up test and control groups to deliver optimal volume and efficiency: two practices that are still far from standard operating procedure today.
Complexity and fragmentation are enemies of the weak, yet present monster arbitrage opportunities to the best and brightest. The best way brands can position to win? Align budgets; deploy advanced media buying strategies that leverage product and advertising analytics; and facilitate collaboration across internal and external service providers.