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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
In our two previous blogs looking at the Coronavirus pandemic's impact on grocery retail, we explored themes including the dual challenge of protecting and serving Customers and pricing, promotions and the pressing need to protect employees.
As Retailers around the world work tirelessly to keep shelves stocked and their employees safe, in this latest post we're putting the Customer back in the spotlight once again. With Customer needs changing rapidly as Coronavirus continues to spread, we're turning our focus to the vital issues of loyalty building and communications during these unprecedented times.
Listening to the voice of the Customer
Helping Retailers make sense of Customer behaviour is one of our key areas of focus here at dunnhumby. While we normally do this by using granular purchasing data to deduce what Customers might do next, we're also keen to provide Retailers with a view of some of the bigger issues affecting the shopper mindset right now.
It's with that thought in mind that we created the dunnhumby Customer Pulse, a survey of shoppers from 19 countries across Asia, Europe, Latin America, and North America. Around 400 consumers were surveyed in each market, with online interviews conducted between March 29th and April 1st 2020.
The first survey provided us with a great deal of insight and three key observations.
- We believe that a new value wave is here Customers may be making fewer visits and shopping at fewer stores, but they are buying more when they do, and spending more on groceries as a result. Above all else, though, fears about personal finances mean that Customers are looking for greater value from Retailers.
- Satisfaction with online shopping is outpacing shopping in-store The majority of Customers believe that physical stores have done a good job of responding to the outbreak (54%), but satisfaction with both online delivery and online pickup services both outweigh that of brick-and-mortar stores.
- 'Worried' shoppers provide great insight into differing need states One of the key questions we asked survey respondents was the degree to which they found themselves worrying about the pandemic. 34% of respondents identified as 'worried', and answers to subsequent questions from this specific group allows us to gain insight into their evolving needs, something we plan to explore further in future surveys.
We plan to conduct two subsequent surveys over the coming months, so please stay tuned for the launch of future editions later this year.
Building loyalty in a time of crisis
Amidst all of the challenges facing Retailers and their Customers at present, it can be hard to focus on anything other than the vital tasks of keeping stores open, clean, well-stocked, and as safe as possible. Nonetheless, opportunities to improve Customer loyalty do continue to exist, and those Retailers that can build a greater connection with their shoppers during this time have much to gain.
We believe that the pandemic will be defined by three key stages: Insecurity, Transition and Recovery. At present, we find ourselves somewhere between Insecurity and Transition – uncertainty remains rife, but the world has started to adapt to the consequences of the outbreak.
In speaking to our colleagues, partners, and Customers around the globe, we feel Retailers need to focus on three primary areas when looking to improve Customer loyalty during this phase.
- Reinstate (or maintain) personalised promotions One immediate response to stock shortages by many Retailers was to remove digital and in-store promotions. While this was an entirely sensible reaction during the early days of the outbreak, there is clear evidence that now is the time to reintroduce promotions.With supply chains continuing to normalise, Customers are now acutely aware of the absence of promotions. A third of Customers (35%) in our Customer Pulse survey say that they have noticed price rises, and while a huge number (80%) acknowledge the necessity of basket restrictions, fewer than a fifth (18%) believe the same is true of promotion removal.As the economy contracts, Customers will look to Retailers for continued value in their shop. The reintroduction of promotions is a simple way to make this happen.
- Make reward schemes flexible, clear and easy-to-use Loyalty schemes might not be top-of-mind for many Customers at the moment, but Retailers can help make those programmes work harder with just a few tactical changes. Reminding Customers of the benefits they're entitled to presents a low-level way to demonstrate your commitment to them.Tactics to consider include the waiving of voucher expiration dates, offering additional redemption values for limited periods, and generally helping Customers get greater value from their incoming and existing rewards, particularly as shopping budgets tighten.Finally, consider allowing Customers to divert their rewards towards local communities and charities, or giving them the option to convert points into 'pay it forward' gift cards for local businesses.
- Prepare for tomorrow with lifecycle marketing plans Getting an accurate forecast of Customer behaviour has become much harder, with trends changing dramatically week-by-week. At the same time, keeping track of attitudes as they change is an essential task for anyone who wants to be ready to respond as new patterns emerge.Broadly speaking, this means focusing on a deep understanding of how and why Customer needs are changing. Retailers must strive to understand key indicators like how and why the dynamics of Customer value are changing, whether specific demographic attributes contribute to behavioural shifts, how shopping behaviour has changed, the new need states driving that transformation, and how different messaging can influence Customers on a segment-by-segment basis.A nuanced appreciation of these factors, combined with a consistent commitment to keep listening, will help Retailers develop effective loyalty-building strategies as we move gradually towards recovery.
Recommendations for Retail Media advertisers
For anyone involved in advertising to Customers via Retail Media, the past few weeks have been characterised principally by widespread uncertainty.
Trade uncertainty has seen products disappear from shelves, promotions halted, and a shift in focus from Retailers towards effective operation. Channel uncertainty has been defined by the cancellation of major events, the removal of 'touch-based' media like coupons and sampling, and the removal of out-of-home advertising as social distancing takes effect. At a brand level, advertisers have been faced with the unenviable task of staying relevant while striving not to be seen as uncaring, insensitive or – worse – profiting from a crisis.
To navigate these waters, advertisers need to show that their business is committed to doing right by their Customers. And the only way to do that is to demonstrate a clear understanding of what 'right' means. To us, this requires a focus on three areas.
- Truly understanding Customers These are unprecedented times, and what worked yesterday may no longer work tomorrow. Only granular behavioural insights can tell us what Customers are truly thinking and how brands can help them overcome their fears, worries and needs.
- Tailoring, targeting, and personalising communications to them Huge swings in Customer behaviour are now commonplace, particularly with the pandemic unfolding at different speeds across the world. Communications must be tailored using aggregated insights, deliver the right messages to the right segments, and personalised to provide Customers with the support they need at that moment in time.
- Implementing sensible targets and KPIs With new approaches and new techniques of reaching out to Customers comes the need to implement new targets and KPIs. Advertisers must be mindful not to let the pursuit of their objectives outweigh their focus on helping Customers.
Facing rising costs and shrinking margins, finding new revenue streams should be an urgent priority for grocery retailers the world over. Blessed with volumes of valuable customer data and a rich menu of owned media, this unbeatable combination provides enormous scope for creating sustainable growth. Yet so many grocery retailers are struggling to make this a reality.
To better understand why so many retailers aren't taking advantage of new revenue streams while improving the shopping experience for their customers, we commissioned a global study with Forrester Consulting. Download your complimentary copy of Forrester's research to learn about the barriers holding retailers back from revenue generation and the recommendations to overcome the challenges.
- 85% of grocery retailers have identified creation of new revenue streams as a priority for 2020
- Despite high levels of confidence in their data strategies, only 15% of retailers have the right capabilities, people, technology, and processes to improve customer experience and monetize their data.
- Most are also missing out on lucrative revenue through monetizing their media. Challenges with data, technology, expertise, and culture are the greatest barriers to progress.
- Retailers who are able to successfully utilise data insights, are reaping benefits with 61% seeing an improvement in the customer experience and 56% seeing growth in existing revenues and revenue streams.