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In part two of our blog series exploring some of the common challenges in setting up a Retail Media operation, we take a look at the building blocks of a strong business case.
In July last year, we estimated that grocery Retailers in the UK could be missing out on as much as £1.7bn in unrealised media revenues – equivalent to some £11bn across EMEA. While those numbers might give us an indication of the overall scale of the Retail Media opportunity, they tell us a little less about its potential on a business-by-business basis.
One way to start working that out for your own organisation is via the creation of a business case. Not only will this help you evaluate your current capabilities around Retail Media, it will give any other stakeholders involved a clear analysis of the benefits, costs and risks involved.
The good news is that, for many Retailers, the key components needed to turn Retail Media into a profitable reality will already be in place. And where they aren't, many options exist for augmenting your existing activity to maximise the value it can deliver.
Let's take a look at some of the most common considerations, and the questions that will need to be addressed in an accompanying business case.
Channels
Every Retailer today owns valuable, engaging advertising inventory. From in-store space to apps, websites and more, Retailers have an opportunity like few others to reach Customers with relevant, timely content across the duration of their shopping journey.
Many Retailers, of course, already utilise these channels for advertising to some degree. As a result, the biggest question that needs to be answered as part of a business case here is not "can we do this?", but "can we do this better?".
Historically, most Retailers have included advertising opportunities as part of trade negotiations with consumer packaged goods (CPG) suppliers. But with access to Customer data on an unprecedented scale, Retailers now have a gigantic opportunity to offer those brands a more targeted and personalised way to reach out to shoppers – maximising the value of their media inventory in the process.
The major questions to answer in your business case around channels are:
- Does our store portfolio give us the ability to execute consistent advertising campaigns in partnership with or on behalf of our CPG suppliers?
- How many customers can we reach out-of-store through channels such as websites, apps, email or direct mail?
- Is there a strong enough financial incentive for us to offer this service to CPG brands?
If the answer to those questions is yes, then you may also want to consider maximising the effectiveness of your channels by:
- Providing your CPG partners with insight and measurement solutions that prove the value of data-driven, personalised campaigns.
- Adapting your primary ecommerce channels to take advantage of banner ads, search-led promotions and other non-intrusive advertising techniques.
- Offering CPG partners the ability to book, execute and optimise media campaigns across your inventory using self-service tools or via a dedicated managed service.
Data
As is the case with media inventory, Retailers are in a unique position in terms of their ability to gather and analyse data on Customers and their purchasing habits. If digital media revolutionised advertising by introducing unseen levels of precision and measurability compared to traditional media, Retail Media makes a similarly evolutional shift by allowing Retailers to add real purchasing behaviour into that equation.
As vital as this data is to Retailers for their own planning and loyalty purposes, it can be just as invaluable to CPG suppliers looking to maximise their own return on advertising spend. Put simply, the easier you can make it for them to target, reach, and influence the Customers they care about, the more likely they are to spend on advertising with you.
Monetising data in this way isn't just about pure profitability either. For your stakeholders with an invested interest in loyalty and satisfaction, they'll no doubt be pleased to hear that around two-thirds of Retailers who do monetize their data see an improved Customer experience as a result[1].
The major questions to answer in your business case around data are:
- Do we operate a loyalty card scheme or have customer-level transaction data that allows us to track the relation between delivery of promotions and purchase behaviour in-store and online?
- Do we capture enough information on our ecommerce channels to be able to make data-driven decisions about Customer behaviour?
- Is the quality of the information that we hold on Customers as accurate, current, and complete as it could be? Do we hold the right permissions to use it commercially?
If the answer to those questions is yes, then you may also want to consider maximising the effectiveness of your data by:
- Applying advanced data science to create a deeper understanding of your Customers' needs.
- Linking and packaging this data in a way that makes it useful and valuable to CPG suppliers – i.e. by helping them identify target and high-intent audiences or set pricing strategies.
- Exploring the possibility of using this data to help CPG brands target customers across digital, social and physical channels.
Other considerations
While effective use of data and channels form the backbone of an effective Retail Media operation, some other issues are worth addressing as part of your business case. As with the above, few of these questions should prove difficult to answer.
- How many CPG suppliers do we work with, and how strong are our relationships with them? How best will we generate demand and become their marketing partner of choice?
- What percentage of my product sales are own brand compared to CPG lines? In which categories are the greatest opportunities?
- What does success look like, and how will it be measured? Is it purely revenue-based, or will we measure improvements in Customer loyalty, satisfaction, and the strength of your relationships with CPGs? How will you measure the contribution of Retail Media to these criteria if so?
- Which departments within your organisation will have a role to play, and are there any skills or areas of expertise that you should invest in?
- Ultimately, when putting together a business case around Retail Media, the majority of grocery chains will likely discover that they already have many of the fundamental elements in place and running well. The challenge will be not in making sweeping changes or justifying grand expenditure, but in fine tuning existing processes in order to maximise their value – something that external expertise can really assist with.
Next in this series, we'll be looking at building the perfect Retail Media blueprint.
[1]The Future Of Retail Revenues Must Be Data Led, Forrester Consulting, November 2019
With great customer data comes great opportunity. Today's retailers have access to more data than they've ever had before, and smart use of it can give them an invaluable competitive edge in challenging conditions.
But if you're thinking of developing a new data monetisation strategy, or overhauling an existing one, it's worth assessing your starting point first. Understanding the critical components of good data monetisation can make all the difference to the success of your strategy.
You'll also need to understand how your data will support the decisions you want to make and execute against, plus the role of CPGs in key decisions like ranging, promotions planning and in-store and online media.
The most effective data monetisation strategies are built on four key pillars. Get these in place and you can move forward with confidence.
1.Data
The best strategies are driven by insights into customer behaviour, not just sales data. Everything from how often they're shopping and how much they're buying, to how many premium products they're opting for. The more you know about what your customers are doing in-store and online, the more customer-centric the resulting recommendations will be. You can't build a data monetisation strategy that will transform your business on transactional sales data alone.
This means that the first thing you've really got to get in place is the right data. Ideally this will have been collected through a CRM programme, such as a loyalty card with a coverage of at least 50% of customer base.
Once collected, you'll get the most from your data by merging it into a single database. This means information from different categories and locations can be analysed together, creating a consistent data-driven customer language. You and your CPGs can then use this consistent language when talking about category and brand performance, and use consistent KPIs to track and measure success.
Used correctly, your data will provide a framework for shared workstreams to better meet the needs of your customers.
2.Culture
As we've discussed previously, the retailers competing most strongly at the moment are those who are putting customer needs first. If you have a customer-centric culture embedded from the top of your organisation to the bottom, you'll find it significantly easier to get the most out of data monetisation. This is because your whole organisation – including buyers, category management and insight teams, and merchandisers – needs to focus on understanding customers, not just sales and margins. It can't just be the responsibility of one team.
Monetisation strategies are successful when they equip the retailer and their suppliers with the insights to work together to achieve category level objectives. As a retailer, if your working relationship with your suppliers is already based on trust, transparency and collaboration, rather than the traditional 'them vs us' dynamic, you'll find this comes easily.
Some retailers have concerns about transparency – not wanting to share category insights with CPGs or fearing that doing so reduces their power in the relationships. But at dunnhumby, we always argue that the CPG needs to see the insights for the whole category, not just their product. This enables them to really understand how they can support the performance of the category and align their brand portfolio to meet this objective.
Together, you can collaborate to:
- Ensure trade planning focuses on promoting products that generate sales uplift for the category, instead of negotiating the funding of promotions
- Ensure range planning meets the needs of customers, rather than focussing on increasing space for margin-driving SKUs for a single brand
Processes are another area where retailers can give themselves a head-start. If you have a properly documented category management process in place that's compliant and used across your category teams, the tools of data monetisation will be much easier to use.
If you also bring CPGs into the process, you'll benefit from an external view, category expertise and a competitor retail perspective. Empowering one or two key suppliers in the category as 'category captains' can ensure you're making full use of their experience, resource and knowledge. When customer data is embedded into a work plan supported by an end-to-end, 'insight to execution' process, your successful customer-led category strategy will be easier to realise.
3.People
Is someone in your organisation leading the commercial workstreams related to your customer data? Your chances of success will be greatly helped by having people dedicated to the workstream.
Within retailers with successful data monetisation strategies, we're increasingly seeing Heads of Marketing Strategy or Heads of Monetisation being appointed to lead the initiatives. Whatever their title, to drive a successful strategy you need someone in charge who is less focused on getting product to shelf and more aligned with innovative revenue streams.
Once your monetisation strategy has been defined, it's crucial this is led by the head of buying or category management and executed by every category buying and management team. It's here that the day-to-day working relationships with CPGs will be formed, shared work plans created, KPIs for success defined and the insight to activation executed.
You may also need to look at your skillset within data management. Customer data is much more sophisticated than sales data. Your staff may not have the skills right now – but upskilling them will help you cut through the noise in the data and ensure the right insights are used.
4.Technology
Assessing your organisation's technology against a few key questions will decide whether you are better off bringing in an external specialist:
- Have I made the right investments, in CRM or loyalty programmes, to generate the data I'm going to need? Am I therefore collecting the right data?
- Am I managing the data I've collected effectively by storing it centrally and enabling analysis and other value-add insights?
- Is my business able to access the data and output of analysis, and use it to make better business decisions?
If you're not confident that your in-house technology meets these criteria, outsourcing to a specialist can save you considerable time and money. That way, you'll also benefit from the best-in-class tools.
When you're building a monetisation strategy and assessing your capabilities against these four pillars, it's crucial you keep your CPGs in mind. How will you embed them into the process? Which insight solutions will you make available to them? And what decisions would you like your CPGs to be involved with?
Having a clear understanding of who your customers are and how they behave doesn't just support better in-store execution of category and promotional workstreams. With this knowledge, you'll be able to activate more relevant, personalised and timely media, both in-store and online, to support your new in-store execution. This means your customers will experience more personalised, relevant offers, your CPGs will benefit from highly targeted, clearly measured campaigns and you'll benefit from the category sales uplift generated from a seamless coordinated multi-channel campaign.
Person shopping in grocery store with empty shelves
In our latest look at the Coronavirus' lasting impact on global Grocery Retail, we examine eight emerging trends that are set to redefine the industry's future.
1.Value becomes a decision maker
As global economies tighten, financial strain will prompt certain behaviours from shoppers; not only will they become more frugal in their spending, they will also make greater use of existing food stores and become less wasteful in their quest to reduce outgoings. As a result, value will become an increasingly vital factor in store and product choice.
This has major implications for Retailers and CPG brands:
- Private labels and discount brands will experience strong growth amongst value-centric shoppers.
- Non-grocery spend will fall as budgets tighten and non-essential purchases fall away.
- Discount stores that can deliver a "one-stop shop" experience could make significant gains.
2.Localized shopping means new challenges ahead
Even as lockdown measures ease in some countries, many shoppers are likely to try and stay as close to home as possible. Hypermarket-sized stores may have provided shoppers with bulk-buying opportunities during the initial outbreak, but sales volumes in those formats have now tapered off significantly. Instead, smaller and convenience format stores are now the de facto choice for consumers who would prefer (or are still mandated) to stay local.
As a result:
- Spending patterns are changing, with Customers choosing to carry out full shops closer to home.
- Cross-shopping has fallen by the wayside as shoppers limit the number of stores they frequent.
- Strong action will be required to retain new shoppers and regain lost custom as the situation evolves.
3.Food adventures will continue to happen at home for the foreseeable future
One in five British shoppers are now cooking every meal from scratch, up from just one in eight before the pandemic began. While restaurants, cafés, and bars will slowly begin to open up as social distancing restrictions ease, many Customers – particularly higher-risk individuals – are likely to continue their food adventures in the comfort of their own home rather than risk potential exposure.
For Retailers, this means:
- Meeting greater demand for fresh and frozen products in favour of pre-prepared lines.
- Educating and inspiring shoppers to try new recipes via online platforms.
4.Health, wellbeing, and humane behaviour become new benchmarks
Not only has the virus prompted Customers to raise their spending on personal and home hygiene products, we've seen it drive a similar rise in healthy eating as shoppers seek to build their natural immunity as best they can. Concerns aren't just limited to their own wellbeing, either; recent weeks have seen debates ranging from the safety and protection of Retail staff, to the need for a wholesale re-evaluation of global meat consumption.
Addressing this heightened awareness around health means:
- Supporting Customers with their renewed focus on health, nutrition, and mental wellbeing.
- Focusing hard on hygiene and humanitarianism – not only with regard to employee and Customer wellbeing, but in terms of animal welfare in the supply chain, too.
5.Online Retail reaches the tipping point
Soaring demand for home delivery and click and collect services prompted many Retailers to ramp up their online operations, and early indications suggest that this change will be anything but short-lived. Online sales now sit somewhere between two and four times those seen pre-outbreak, limited more by Retailer capacity than by Customer demand. The digital tipping point is here, Customers convinced by recent experience that online represents a viable way to shop going forwards.
Retailers looking to optimise their online operations now should consider:
- Expanding capacity via 'last mile' innovations, from offering click and collect in smaller stores to partnering with fulfilment companies in order to expand delivery networks.
- Ensuring that new shoppers become repeat Customers, making first shops easy, reliable and value-laden.
6.Expectations for digital grow in tandem with the online boom
As frugality and wellbeing come to dominate the Customer mindset, their expectations around technology won't be limited to online channels alone. Digital innovations that make shopping easier, faster, safer and lower-contact will all be sought after, with shoppers looking to Retailers to deliver useful and helpful new applications.
Areas of focus should include:
- Pre-trip planning applications that enable crowd avoidance based on levels of in-store custom.
- Touch-free replacements for vouchers, receipts, lists and payment.
- Additional investment in technologies that reduce one-on-one contact such as self-scan and self-service checkouts.
7.Public goodwill must not be misspent
In 2020, stores have become something more. Customers have come to see supermarkets, stores, and employees not merely as a means to an end, but as pillars of their local community – essential services and key workers helping them navigate a period of unprecedented disruption. This social capital will prove to be hugely valuable, but only for Retailers who demonstrate an unwavering willingness to operate for the public good.
Harnessing the power of this deeper connection with Customers will mean:
- Increasing or maintaining activities that benefit local communities such as food banks and charity initiatives.
- Supporting local and national food producers and minimising their overall supply chain.
8.Market consolidation will define the years ahead
As the economy contracts, competition will only get fiercer. As weaker operators begin to struggle, larger Retailers are likely to benefit from their scale, forming global alliances and buying groups that enable them to operate more efficiently and purchase key lines in larger volumes. A period of consolidation is likely to follow, these larger chains scaling up as smaller competitors fall away.
To prepare for this period, Retailers should:
- Focus on resetting and simplifying their assortments, as discussed in our previous post.
- Lay the groundwork for new partnerships that can enable more efficient and productive operations.
For more information on retail strategies beyond the virus, please watch our webinar on demand | Future Outlook: Consumer and Retail shifts for Grocery & Pharmacy post-Coronavirus
The "new normal" isn't really normal at all. Life amid COVID-19 has forced U.S. consumers to adopt new behaviors, dramatically impacting how they shop, work and go about their daily lives. Trips to the grocery store are now once weekly trips to buy essentials and stock the pantry for home cooking. And, vulnerable consumers now rely on online ordering and delivery services they were once reluctant to try.
On average, it takes 66 days for new behaviors to become automatic. The majority of U.S. consumers will cross that milestone under pandemic restrictions very soon. Retailers should prepare now to successfully serve their customers after the "COVID curve."
Join dunnhumby's Jose Gomes, President for North America, and Eric Karlson, Head of Strategy for North America, as they discuss:
- dunnhumby's model of the three phases of the COVID-19 pandemic
- Insights and learnings from retailers around the globe
- How retailers should prepare to adapt their customer strategy for the "new normal" of customer behaviors and expectations
This webinar originally took place on Tuesday, May 5, 2020 as part of an exclusive four-part webinar series with Retail Leader and Progressive Grocer about how to adapt your Customer Strategy now for life after the curve, and possible implications for Customer Engagement, Category Management, and Price & Promotions.