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 stand¬ing 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 eas¬ier 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 in¬clude video ad networks as a component.
“In-store advertising often signifies an expan¬sion in the overall marketing mix, with most spend to date coming from below-the-line budgets, rather than taking from above-the-line media spend¬ing," 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 advertis¬ing networks are available to marketers. They range from large-scale multi-channel opera¬tions, 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. Previ¬ous online shopping lists linked to their loy¬alty 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.