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Retail Marketing Models

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Title: Retail Marketing Models


1
Retail Marketing Models On the Brink of Change
  • October 2005
  • DWOConnor_at_Mventures.com

2
Discussion Points.
  • How Leading Retailers Are Going to Compete
  • How Brands Are Going to Win

3
Shelf of the Future?
4
Shopping Basket of the Future?
5
Retail Environment For BrandsIs Deteriorating
Quickly
  • Retailer differentiation strategies make me
    different everyday does not fit well with large
    brands
  • Shelf compression
  • New categories
  • Private Label
  • SKU rationalization
  • OPP Pricing strategies
  • Shelf conditions
  • POS and other signage execution

6
Advertisers Want Change
  • Advertisers want
  • to increase effectiveness or reduce
  • mass advertising outlays
  • Trade promotion
  • Conversion - in store - to better influence the
    moment of truth
  • 11 relationship marketing with consumers
  • Localized marketing/promotions
  • Optimized content/campaign investments
  • Target-ability
  • Equity enhancement
  • Measurement

7
Shifting Dollars to In-Store
Media Consumer Promo, Custom Retail Programs Trade Spending
Out of store Too fragmented and therefore inefficient ( - cut spend) Effective on tactical level, but not brand building ( - cut spend) N/A
In-store Efficient, effective, contextually relevant ( increase spend) For promotions and brand building ( increase spend) -
In-store examples In-Store Broadcasting Network, PRN, Sign Storey, NAM, FloorGraphics, etc ICM, Catalina, retailer cook books, cause related programs, signs, banners, etc Feature, display, TPR
Source Retail Media Link, LLC
7
8
The last 20 yards has become FMOT for retailers
and brands
Total Target Market
80
Aware
Traditional Marketing
Understand
Believe
Want
Retail Marketing Merchandising
Find
Buy
Like
Prefer
4.8
Source Tesco
9
Key Trends That are Impacting theNorth American
Market
  • Market Forces
  • Shopper Lifestyles Behaviors
  • Technology
  • Globalization
  • Speed need for
  • Capital markets
  • Retail Industry
  • Competitive Forces
  • Consolidation, Concentration, Substitution
  • Saturation
  • Impact of Discounters
  • Margin compression
  • Labor relations productivity
  • Demand Driven Supply Chains

10
Chain Retail Share of North America
0 51 100
Chain Retailers
Organized Local Retail
Formal Retail
Note The market size would be _at_ least 10 larger
if the informal market were included here. And
the Chain Retailer market share would decrease.

11
Only 89 Retailers in North American will Gain
Share!(North America Ops only, Period Evaluated
2003 through 2008E)
Gainer Segments
Source www.mventures.com
12
Share Gainers Key Initiatives.. Examples
  • Re-engineered revenue streams
  • Clear differentiation strategies
  • On-going Brand enrichment Strong brand stand
    (positioning), right marketing messages
    platforms
  • Right format positioning targeted or mass
  • Innovative merchandising, products
  • Right people and capabilities
  • Right Market Development models
  • Demand driven supply chains
  • Credible, timely information across the value
    chain
  • Strong financial performance and capital
    structures

13
(No Transcript)
14
Retailers Want to Monetize Their Shopping Trips,
Improve Own Messaging
Source Tesco
15
Brand Enrichment
Shopper Insights
Communication /Marketing Platforms
Brand Guideposts
Organization
16
Shopper InsightsThey are what they buy
Source Ahold
17
Brand Guideposts
18
Brand Enrichment Strategies Require New Operating
Paradigm
  • Right Assortment
  • Fresh
  • Ancillary/SWAS
  • GM/HBC
  • Apparel
  • All other Food
  • Right merchandising
  • Department
  • Category
  • Strategies for
  • Private label
  • Pricing promotion
  • Localization
  • New
  • Right marketing
  • Clear consumer target
  • Clear positioning
  • Marketing Overlays
  • In out of store media platforms
  • Vendor tie-ins/co-marketing

19
Brand Enrichment
Shopper Insights
Communication /Marketing Platforms
Brand Guideposts
Organization
20
Major Retailers Spend at Considerable Levels and
on Media of Declining Effectiveness
Repurposing just 10 of the leaders TV/Cable
Spend to an in-house network will add 288
Million to RMN Revenues / Media Value
Source AdAge
21
Retailers Have A Increasing Number of Captive
Marketing Platforms
Retail Media Networks
In-store POP
Mass Media
Targeted Media
Customer Acquisition
Personal Relationships
Community Involvement
Targeted Publications
22
Digital Signage to Retail Media NetworksAn
Industry Evolving Rapidly
Retail Media Networks (RMN)
Shopper Marketing Capabilities Operati
ons Focus
Integrated RMN
Advanced RMN
Basic RMN
Digital POS Signage
Backroom Digital Signs
2001
2010
Today
Source Intel, Premier Retail Networks
23
Historical Business Models
  • Operations/Employee Communication Solutions
    Primary role in-store operations, training and
    communication. These are especially useful to
    merchants and store operations people
    communicating new programs, initiatives, for
    personnel focus as well as for training and
    policy communication.
  • Digital Signage Initially a traditional Point
    of Purchase (POP) alternative substitution
    strategy for printed POP signage, which competes
    on efficacy and cost. Extends to in-store
    navigation and announcements. Transfers greater
    control and resources to the retailer over
    in-store conditions and shopper communications.
    There are two basic approaches for these sales
    oriented networks
  • Electronic POP static networked screens replace
    the high cost and sometimes ineffective printed
    point of purchase (POP) materials. This ranges
    from relatively static brand image screens to
    electronic shelf tags which can also deliver
    promotional messaging. They enabled central
    control over store level signage, pricing and
    related merchandising messages. They save labor,
    simplify complex product messages for shoppers
    and remove most of the work at the retail store
    and improve execution.
  • Digital Displays Networked together to simply
    make physical product comparisons. These
    networks are especially prevalent in categories
    such as TV departments, where consistent content
    displayed across the available products help the
    shoppers see the difference.

Source Intel, Premier Retail Networks
24
Retail Media Networks (RMNs) distribute various
digital content including paid advertising,
instructional content and news through a network
of digital displays.
25
New Model Retail Media Networks (RMNs
  • Retailer or Advertiser sponsored digital
    advertising and media networks targeting specific
    zones or customer viewing areas (CVAs) with
    digital content to engage and activate shoppers.
  • RMNs use broadcast and/or narrowcast in the
    store.
  • Expanded capability for greater in-store
    targeting, interactivity, tracking and
    integration with parallel customer development
    systems.
  • Devices and displays configured with high
    quality, directed sound and interactive
    capabilities with centralized control over the
    content and device operations.
  • Ultimately RMNs will include multiple network
    platforms (wired, wifi, cellular etc). RMNs can
    be utilized in three distinct ways
  • Broadcast - transmitting a message over a wide
    area or to everyone connected to a network or
    service
  • Narrowcast transmitting a message to a group in
    a specific target area. Sectional LCD panels are
    common in an RMNs that address specific products
    _at_ the modular level
  • Interactive (11) Devices that allow for
    consumer interaction, often including input to
    obtain product recommendations. The most common
    form of interactive system is a touch screen or
    buttons on a kiosk type display device

Source Intel, Premier Retail Networks
26
RMN Decisions Development and Deployment
Considerations Retail Network Configurations
  • Business Model Backroom, Digital POP, RMN (as
    discussed above)
  • Network Options (ie the medium the content will
    travel through) and Operation and op Wired or
    wireless, owned or leased for example are
    important choices. RMNs operate the same hours
    as the store retailers may choose to operate
    in-house or outsource to companies such as
    Premier Retail Networks (PRN).
  • Consumer Viewing Area (CVAs) Configurations
    The number and location of screens (in a fixed
    network)
  • Device Options/Consumer Reach Strategy The
    output device that will be used to view the
    advertiser and store related content. These can
    range from very simple screens to more complex
    11 interactive devices and will depend on
    consumer acceptance.
  • Content Objectives There are at lease six
    common objectives for the content
  • Branding Establishing or re-enforcing the brand
    with the shopper with intensive in-store
    advertising
  • Merchandising Merchandise and Promotional call
    outs (Features)
  • Attraction To draw people to departments and
    categories
  • Direction To help shoppers navigate the store
  • Enhancement To support and create store
    environment
  • POS Enrichment To improve and enhance the
    checkout experience
  • Content Development and Acquisition Process In
    an RMN, much of the content is advertiser
    provided. However, it is not effective to simply
    re-purpose existing 30 second spots. 15 seconds
    or less is often the most effective message
    length. This requires development capabilities
    including talent acquisition and digital rights
    management.
  • Computing Power Where the business intelligence
    resides in the network
  • Key Applications These include content
    management tools that guide how content is
    managed with the Networks.

Source Intel, Premier Retail Networks
27
A Number of Important choices
Dimension Basic RMN Advanced RMN
1. Network Option Wired Wireless
2. CVAs (zones) Digital Depts only (Consumer Electronics) 15-16 food/non-food departments Promotional Space
3. Device Options Single Display type Multiple device platform (Broadcast, narrowcast, 11 Shelf edge tablet or cell phone/PDA)
4. Content Goals Attraction Promotion Callout Branding, Product Callout Service/Support Information
5. Content Acquisition 70 Retailer provided 70 Advertiser provided
6. Network Configuration Single Store Server Central Server
7. Applications Content Management only Content management plus business intelligence
8. Network Operations Primarily internally managed Generally outsourced to Solutions Provider
9. Capital Retailer sponsored/funded Shared Cape with outsource provider
10. Retailer Profit Model Budgeted Expense/Cost Reduction Strategic Profit Center

Source Intel, Premier Retail Networks
28
Multiple Networks in Any given StoreWith Ability
to Target In Outside the Store
Store
IN
Wifi/Bluetooth
Wired Media Networks
Activation
WiMax
Cellular
Mode
OUT
IN
Awareness
Activation
OUT
29
Retailers have natural dwell zones in their
stores.. Which are really valuable?
30
Content The MOST important consideration
  • 5 to 10 second spots VERY captivating for the
    shopper
  • Content development complex
  • Acquisition/ re-purposing
  • Talent acquisition
  • Digital rights
  • Future digital libraries standard content
  • DIY for shoppers - Menus, patterns, building
    plans

31
Content
  • Attention grabbing
  • Pertinent vs. entertaining
  • Recognition vs. recall to better connect
  • More promotion, frequency
  • Tie active messaging to all brand points
  • Demos
  • Shelf signage
  • Floor graphics
  • Packaging
  • Associate program educate them on the message
  • Retailers own overlay programs Hispanic, Health
    Wellness, Trend

32
A Number of Important choices
Dimension Basic RMN Advanced RMN
1. Network Option Wired Wireless
2. CVAs (zones) Digital Depts only (Consumer Electronics) 15-16 food/non-food departments Promotional Space
3. Device Options Single Display type Multiple device platform (Broadcast, narrowcast, 11 Shelf edge tablet or cell phone/PDA)
4. Content Goals Attraction Promotion Callout Branding, Product Callout Service/Support Information
5. Content Acquisition 70 Retailer provided 70 Advertiser provided
6. Network Configuration Single Store Server Central Server
7. Applications Content Management only Content management plus business intelligence
8. Network Operations Primarily internally managed Generally outsourced to Solutions Provider
9. Capital Retailer sponsored/funded Shared Cape with outsource provider
10. Retailer Profit Model Budgeted Expense/Cost Reduction Strategic Profit Center

33
Retailers Can Ramp Up Their CVAs Over Time
Big Stores Hypers, Club stores Medium size
(Chain Drug, Supers) Small box (c-store, Value
discounters)
25 20 15 10 5
of CVAs
Initial Final
34
RMNs face numerous challenges
  • Shopper Adoption
  • Understanding .
  • Measurement
  • Advertising agency readiness..
  • Advertising Sales Force
  • Media Plan Integration

35
Most Important Shopper Acceptance! What We
Know About Today and the Future
  • What is currently measured is aggregate
  • Viewer-ship
  • Gross impressions
  • Department traffic
  • View Times
  • Recall
  • Attitude
  • A good thing to offer customers
  • Informative
  • Entertaining
  • Provides relevant advertising
  • These are sorted by
  • Aggregate
  • Demographics
  • Selected CVAs - Interactive Usage
  • What may be measured in the future
  • Retail GRPs
  • Data synchronization with traditional media
    planning tools
  • Whatever tools metrics that planner uses
  • Predictable reach frequency
  • Copy optimization how to optimize the message
    for retail
  • Frequency
  • Respondent level data enable aggregate and
    segmented analysis
  • Demographics, CVAs

36
Consumer Response is Impressive
  • Viewership
  • From 35.8 viewer-ship
  • 120 million gross impressions per 4-week flight
  • View Times
  • Duration/viewer Growing!
  • of time viewing 14
  • Recall
  • Unaided 42
  • Aided Unaided 65
  • Attitude
  • A good thing to offer customers 84
  • Informative 80
  • Entertaining
  • Provides relevant advertising 78

37
Qualitative Shopper Feedback
  • Do not interfere with me getting shopping done-
    if you get my attention fine, but dont get in
    the way
  • Highlights prevalence of precision shopping and
    need to incorporate in-store navigation
  • Provide more relevant, useful and practical
    information in terms of better navigation
    assistance and product information.
  • Makes sense given shoppers time compression they
    appreciate concise, clear and to the point
    information,
  • Provide new/unique entertaining advertising
    content that fits me and the shopping
    environment, rather than a recycle of what I can
    see at home on the television.
  • Content counts Make it new, make it interesting
  • Provide a blend of content that makes the store
    environment more relevant and feel like my store.
  • Make it local. community news, weather,
    announcements, sponsorships, initiatives, etc

38
Measurement Advertisers Want Balanced Scorecards
  • Goal Accountability through consistent
    measurement impact on cases equity
  • Measurable value vs. alternatives
  • Advertising/brand development scores
  • Retail execution (in store media forces execution)

Balanced Scorecards
Brand Equity PLs Customer Brand
Brand Advertising Metrics
Trade Spend Metrics
Impressions (CPM) Recall Reach frequency
Retail Execution Cases (Sales )
39
Funding Shopper Marketing Funding
Equity Advertising
Trade Spend
Shopper Marketing
Re-purposed and/or reduced
Mining
Retailer A Retailer B Retailer C Retail D
Reporting
40
RMNs face numerous challenges
  • Shopper Adoption
  • Understanding .
  • Measurement
  • Advertising agency readiness..
  • Advertising Sales Force
  • Media Plan Integration

41
RMNs face numerous challenges
  • Shopper Adoption
  • Understanding .
  • Measurement
  • Advertising agency readiness..
  • Advertising Sales Force
  • Media Plan Integration

42
RMN Forecast
  • Some form of a RMN will be right for up to 65
    major US retailers covering over 100,000 U.S.
    stores(2004)
  • This is based on a combination of factors
    including scale, consumer traffic, retailer
    marketing orientation and product strategy, and
    growth viability.
  • There will be many more attempts unlikely
    successful outside of these 65
  • Once fully installed there will be over 1,100,000
    CVAs.
  • In the US, RMNs will provide consumer
    impressions greater than all but the largest
    television networks using the most conservative
    estimates. The reach is impressive, repeatable
    and measurable.
  • Advertising revenue will reach 3.3 Billion a
    major revenue opportunity for these retailers and
    third party providers yet still less than 10 of
    the top advertisers annual media spend.
  • The capital investment required to support this
    system is in the magnitude of 2.5 Billion. This
    will require greater commitment by retailers or
    capitalization of third party providers.
  • ROA will always be a focus and plans will
    change with the returns

43
Retail Media Forecasted Penetration of 9.1 for
at the highest levels of participation
  • Retail Media Forecasts represent a small portion
    of the total TV (broadcast and cable) Industry
  • Advanced and Intermediate Networks represent
    4.7 penetration

60.7B
Source AdAge 2005 Adfacts
44
Summary Implications
  • Environment for brands weakening while
    traditional media weakens faster
  • Retail market changing important distinctive
    strategies among retail leaders
  • On-going Brand Enrichment critical
  • Shopper insights
  • Brand Guideposts
  • Organization
  • Communication platforms
  • Retail Media Networks one of many in-store
    options
  • Has some real advantages
  • Retailers have some real choices network
    configuration
  • RMNs face some very real challenges
  • Adoption
  • Profit-ablilty/ROI
  • Measurement

45
Summary Implications
  • Retailers will form business units to manage
    their marketing options including
    RMNs/In-store TV to both monetize their
    traffic AND to improve own marketing
    spend/effectiveness
  • Retail Media Networks/In-store TV will be a big
    part of the market
  • Winners will find a way to test and re-fine
    before they scale any model
  • Retailers will capture about 50 of the marketing
    capacity on their platforms
  • Revenue streams could grow to 5 of typical large
    scale retailer
  • Success is not about technology its about
    getting business model right

46
Thank you . Questions?
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