Retail media networks are having a moment, because they’re positioned to add relevance in a cookieless world, says Luke Kigel, VP of Walgreens integrated media and head of the Walgreens Advertising Group (WAG).
Walgreens put a bow on its retail media network, dubbed WAG, in early December.
But the launch is part of a larger ongoing transformation. Walgreens is in the midst of evolving from a “traditionally minded” retailer to one that’s both “digital first and audience first,” Kigel said.
“In many ways, this has all been part of a multiyear macro transformation of Walgreens towards digitization,” he said. “And from a marketing and communications standpoint, it’s enabling us to unlock the value of our first-party data – which is easy to say and not so easy to do.”
Even so, most of the biggie retailers, including Walgreens, believe that the juice is worth the squeeze. Over the past few years, Walmart, CVS Pharmacy, Target/Roundel, Kroger, Best Buy and The Home Depot have all rolled out media networks of their own.
Here are the top six things you need to know about the Walgreens approach to retail media.
1. First-party data
The myWalgreens loyalty program, which has more than 100 million members, forms the foundation of the first-party data set that Walgreens uses to underpin WAG as well as its own marketing and co-marketing activities.
Walgreens also has a large physical footprint of more than 9,000 stores spread across all 50 states, Washington, DC, Puerto Rico and the US Virgin Islands.
But sitting on rich first-party data assets is one thing – and getting to the sort of scale that can attract advertisers is another.
There’s no denying that Facebook, Google and Amazon are responsible for nearly two-thirds of all digital investment, Kigel said, but they don’t have the same omnichannel first-party data access as a large retailer.
“I come from CPG lands where we can create segmentation that’s based on real purchase behavior,” he said, “and our relationship with the customer is channel agnostic.”
Walgreens also has a team of in-house data scientists that can run advanced modeling against its first-party data set, which enables Walgreens to expand an advertiser’s reach and deliver custom audience segments as part of a brand’s broader audience strategy.
“We see anything from a 50% potential improvement to more than 2x when incorporating first-party data, either as an audience segment or as a seed to do modeling,” Kigel said.
3. The tech
In addition to its owned-and-operated channels, Walgreens has direct relationships with Facebook, YouTube, and Pinterest to match customers on offsite platforms. It recently struck partnerships with Adobe and Microsoft to enhance and personalize the drug store experience.
Walgreens also has a partnership with Epsilon to house all of its loyalty and SKU-level transaction data, and Epsilon powers the Walgreens DSP, which allows for real-time execution and optimization tied to dynamic creative capabilities, audience segmentation and campaign reporting. Brand partners can activate media on Walgreens O&O, on third-party partner sites, and in Walgreens store locations.
Available formats include display and video, with connected TV activation on the road map.
4. Match rates
Because WAG operates as a closed loop system and through direct partnerships, there’s no independent onboarding required, and that helps boost match rates.
Although Kigel declined to share specific numbers, he said that Walgreens brand partners see match rates that are higher than the industry standard for digital media buying.
5. The service layer
For the moment, WAG is a managed service, although Walgreens is “actively pursuing mechanisms to make it easier to work with us,” Kigel said.
Expect more self-service components over the next three to six months.
Like other retail media networks, Walgreens offers reporting thanks to its large retail footprint.
Since its analytics is based on a first-party data set, Walgreens has a good sense of ad effectiveness and incremenality based on campaign execution.
“Like everything else in this industry, there’s nuance based on the data that’s available from different partners,” Kigel said. “But because we have a direct relationship with our consumers – and because we’re agnostic in terms of stores versus ecommerce – we can attribute direct purchases back to media activation.”
And that capability ties directly into why retail media networks are popping up right now.
With third-party cookies on the way out, advertisers are looking for first-party data access wherever they can get it.
“First-party data – and the ability to use it – is a big part of the value we bring to the table in the conversations we’re having with brands and media agencies,” Kigel said. “And from a targeting, measurement, and performance standpoint, we know that it performs better than third-party targeting.”