July 5, 2009

Major Media in the Shopping Aisle

Marketers are using digital and video technology to reach shoppers at the moment that matters ‎most.

Today’s marketers face enormous challenges in getting their message to the right consumers: ‎today, no single TV show, newspaper, or website offers widespread access to consumers. The ‎last bastion of prime-time mass marketing may be the retail shopping environment, an advertising ‎vehicle that many would not consider a communication medium, according to a new study by ‎Booz & Company.‎

“Everybody has to shop, so the store is the last place where mass marketing exists. Even better, ‎you are reaching people who are declared shoppers. They’re there for a purpose,” explained ‎Karim Sabbagh, a partner at Booz & Company.

Marketers, retailers, and media companies have attempted to make in-store advertising a bigger ‎part of the marketing mix with more sophisticated vehicles than traditional cardboard displays or ‎coupons. Today, video ads in stores are more targeted than ever, with programming aimed at ‎particular shoppers, on the basis of where they are standing in the store, the promotions on ‎nearby displays, and the time of day. ‎

Some stores have intelligent shopping carts that direct customers to specific products, based on ‎what they scan into their cart; while next generation in-store advertising will allow shoppers to ‎request information via their mobile phones or kiosks that provide product advice, help ‎consumers make choices, and make it easier for people to find what they’re looking for.

Most of these in store experiences currently only exist in prototypes. To become ubiquitous, the ‎media and marketing ecosystem—marketers, agencies, media companies, and technology ‎companies—must address three important challenges. Marketers and retailers must find the right ‎mix of creative content and technology to reach consumers in a meaningful way. Second, the ‎metrics that measure in-store advertising effectiveness need to reach the same level of ‎sophistication and standardization that exist with more established media. Finally, marketers must ‎integrate in-store advertising programs with other promotions and media campaigns. ‎

“As these are addressed, in-store advertising will transform the retail environment and the ‎advertising industry, and will reconfigure marketers’ advertising budgets, their overall approach, ‎and some of their strategic assumptions about reaching consumers,” explained Gabriel Chahine, ‎a partner at Booz & Company. ‎

The State of the Store 

Advertising spending in traditional media grew by less than 2 percent annually during 2006/ 2007 ‎while online advertising spends grew by more than 20 percent annually. The Web takes more ‎advertising dollars than cable TV or radio, demonstrating marketers’ desire for greater targeting, ‎interaction with consumers, and measurability. A similar trend is the move from so-called ‎measured media, such as advertising, to “below-the-line” marketing categories, which already ‎tops spending for most product categories in the US, and is growing more than three times as ‎quickly, with 6 percent annual growth. ‎

In-store advertising promises to attract substantial marketing investment as it transforms the way ‎brands interact with consumers. Since people make most purchase decisions at the shelf, in-‎store advertising will reach them just before the “moment of truth”. “In-store advertising can ‎increase the effectiveness of a marketing campaign by “activating” promotions and sponsorships ‎by making them click in consumers’ minds,” stated Sabbagh. ‎

Today, marketers can advertise on in-store video networks spanning thousands of screens that ‎reach more consumers than major broadcast networks. These ads can increasingly be targeted ‎to a specific aisle or a specific time of day, while targeting by geographic market will allow more ‎granular delivery of marketing messages, reaching specific sets of consumers with the greatest ‎likelihood of buying the product, based on income and demographics. ‎

In-store media could equal (or even exceed) the growth rate of online media, especially since the ‎rate of growth for newly introduced media is accelerating. Nearly half of consumer packaged ‎goods (CPG) manufacturers plan to increase their investments over the next two years. ‎

Tracking the Transition

In-store advertising’s growth will come from marketers seeking to develop integrated campaigns ‎in terms of overall “video spend”. For other marketers, “alternative out-of-home spending” will ‎continue to increase as media in outlets like health clubs or transportation hubs become more ‎prominent, and more digitally enhanced. Shopper marketing budgets that tap into promotional ‎spending to drive consumer behavior in the store will increasingly include video ad networks as a ‎component. ‎

‎“In-store advertising often signifies an expansion in the overall marketing mix, with most spend to ‎date coming from below-the-line budgets, rather than taking from above-the-line media spending," explained Chahine. ‎

Some media companies are already benefiting from the rise of in-store advertising by supplying ‎content, and in-store media can become an important component of the editorial portfolio. ‎National cable and magazine players in some categories can extend their brands and deepen ‎their position across multiple media platforms, while creating richer opportunities to develop ‎integrated campaigns with leading advertisers. They can offer advertisers ways to reach ‎consumers across a variety of digital touch points at once: in the home, store and on the go. ‎

Today, a number of in-store video advertising networks are available to marketers. They range ‎from large-scale multi-channel operations, to smaller video networks focused on particular retail ‎sectors or technologies. ‎

Smart, Engaged, Accountable Networks

For in-store advertising to succeed; several challenges need to be addressed:‎

  • Targeting: “Some retailers are experimenting with in-store video advertising that achieves a level ‎of personalization and focus unmatched by broadcast and cable TV,” said Sabbagh. These are ‎achievable by in-store ad networks’ switch from broadcast, satellite-based technologies to ‎Internet protocol television (IPTV). ‎

    With IPTV, thousands of different videos are instantly available at any kiosk or screen within a ‎store. IPTV systems tailor video ads to locations within a store. Tests in 2007 demonstrated that ‎product sales in stores using this technology were at least 10 percent higher than sales in those ‎that used a less targeted approach. Other in-store video advertising networks are also likely to ‎make the necessary investments to migrate to a more targeted approach.‎

  • Quality of engagement: Video is preferred for delivering emotional impact and building brand ‎equity but to date, only TV and cable advertising can consistently deliver high-impact campaigns ‎to large audiences. To make brands look better than retail store displays ever could, in-store ‎video ad networks will need to develop research that demonstrates the ad recall and influence of ‎their campaigns and will need to show that the ads have an impact on consumers; that they are ‎complementary to broadcast and cable TV ads and that they can be an essential part of an ‎integrated campaign. ‎

    In-store video advertising offers advantages over TV ads. With just one channel—it’s less likely ‎the consumer will be multitasking across media platforms and is likely to pay more attention to the ‎messages while shopping, than when watching TV or surfing online. “It can also help stop ‎consumers being confused in complex categories e.g. digital cameras, when many walk away ‎without making a purchase,” commented Chahine.‎

    The transition needed for the new advertising environment is yet to happen, and still follows ‎traditional practices of mass-market television like producing video segments that are too long. ‎Networks and their partners will need to invest in creative work that is fully customized. ‎

    Other forms of in-store advertising could become as targeted and relevant as the ads that appear ‎today next to Internet search results. MediaCart has designed shopping carts that take in ‎consumer data when shoppers scan their loyalty cards into handheld scanners in Wakefern’s ‎ShopRite stores. Previous online shopping lists linked to their loyalty card will help consumers ‎find listed items more easily, and will inform them when items they bought in the past are on sale. ‎

    “Interactive systems will link promotional displays and kiosks to consumers’ mobile phones, and ‎people interested in learning more about a product could text for additional information,” said ‎Sabbagh. Information on a product might show up on the phone when a consumer moves past a ‎‎“smart” display. ‎

  • Accountability: Initial trials on the impact and effectiveness of in-store video advertising suggest ‎it can significantly increase sales. Until recently there were no standard metrics for audience ‎delivery that could help negotiate ad sales contracts or optimize the performance of campaigns. ‎Traffic data is available only at store level, not shelf or aisle level, and existing research efforts ‎don’t provide the systematic, standard sets of metrics available for established media. ‎

    A consortium of CPG manufacturers and retailers banded together in 2007 through the In-Store ‎Marketing Institute to create a new joint initiative called Pioneering Research for an In-Store ‎Metric (PRISM), selecting Nielsen as the preferred research partner. PRISM is ready for ‎commercial rollout as a syndicated data service from Nielsen’s new in-store media unit. ‎

    PRISM provides reach and frequency metrics for brand messages across a set of retail media ‎touch-points including endcaps (displays at the end of each aisle), pallet displays and display ‎packaging among others. Brand advertising messages on TV can be tracked by time of day ‎‎(“daypart”), media type, and geographic market; similarly, PRISM enables tracking of in-store ‎media at the brand level by “store part,” media type, daypart, and region. PRISM enables the ‎comparison of in-store media with other media and links in-store media back to POS results. ‎

  • Brand integration: There is significant potential for CPG manufacturers to integrate brands more ‎effectively into the store. Video ads may refer consumers to other products and marketers can ‎also weave product placements into programming to provide indirect celebrity endorsement. “The ‎greatest potential, however, lies in using in-store video ads to activate sponsorships and ‎promotions, and thus get more leverage from them. Ad campaigns linked to sponsorships can ‎represent one-third to one-half of paid media spending for some companies,” explained Sabbagh. ‎

Covering New Ground 

Some factors inhibiting the potential of in-store advertising are already being addressed through ‎the PRISM initiative. But for an in-store revolution, the entire marketing and media ecosystem ‎needs to tackle three key priorities. ‎

  1. Marketers and their partners must create a programming model tailored to the retail ‎environment: Timing, technology and the way messages are framed need to be improved. A ‎solution lies in creating programming specifically for retail stores combining the entertainment ‎value of television with the benefits of in-store sampling and counseling. ‎

  2. Marketers and their partners need to better use in-store marketing efforts to upgrade ‎promotions and analytics: In-store media of choice are still circulars, coupon dispensers, ‎customized displays, and product packaging, but there is enormous opportunity to enhance ‎the effectiveness of these through in-store advertising formats. Achieving a marketing ROI ‎will be a top priority for chief marketing officers for years to come. ‎

  3. Integrating in-store media with the broader marketing mix will require some ‎organizational change: Marketing organizations need to work more directly with a diverse ‎set of agency and media partners and need to build new capabilities in both advertising and ‎shopper marketing, including better metrics to make it easier to gauge the impact of in-store ‎ads as part of any campaign. Marketers must additionally be able to buy ad inventory by ‎region, rather than by store or chain. ‎Media and marketing players must find a common way to track and demonstrate results, and ‎more standardized platforms will make for easier analysis and execution, as will ad networks that ‎integrate inventory across many players of various sizes. “In-store advertising will then become a ‎more valued and widespread component of marketing campaigns, and leaders who take the ‎initiative and invest in the right combination of assets and capabilities stand to reap significant ‎rewards,” Chahine commented. ‎

All parts of the media and marketing ecosystem are presented with a variety of opportunities and ‎there will be a growing emphasis on large-scale providers. “Place-based media” will reach out to ‎consumers in different locations with relevant ad messages and efforts to extend the core video ‎content business into new venues; will reach consumers on the go in less-cluttered media ‎environments. ‎

With the right push, in-store video advertising can achieve its own form of hyper-growth with its ‎unique potential to reach customers in a way that no other form of media can.‎