The Loyalty Podcast
Pocast 66 - Retail Media - The Essential Guide
In this podcast we explore the explosive growth of the retail media industry which was worth over $128 billion in 2023. With special guests Steve Gray and Katie Streeter-Hurle of SMG we explore the conditions that led to this growth, what benefits it brings customers and brands and provide advice for those considering a retail media strategy.
- Duration:
- 28m
- Broadcast on:
- 04 Aug 2024
- Audio Format:
- mp3
(upbeat music) This week's episode of the Loyalty Podcast is brought to you by Tricycle Marketing. Since 1996, Tricycle Marketing has provided advisory, studios, and technology platform services. Tricycles Insights Outward Platform is proprietary platform as a service loyalty solution, built from the requirements of 100 plus loyalty implementations, and they serve the retail, entertainment, dining, travel, financial services, and healthcare industries globally. For more information, please visit tricyclemarketing.com. (upbeat music) The TV companies when you log in, and increasingly most of us do log in now, know what we're watching, but they don't know what we're buying, whereas the supermarkets do know what we're buying, but they don't know what we're watching. And so it's really quite exciting for marketeers to have those two data sets combined. (upbeat music) Retail media is one of those categories of advertising that can achieve both mass reach and incredibly granular targeting, kind of at the same time. And so it can be used in a multitude of different ways. So you think the kind of average audience size of the supermarkets in the UK combined is huge. (upbeat music) Hi, I'm Ian Pringle. This is the Loyalty Podcast from Loyalty Wired, where we help you to make the most of your loyalty strategies while listening to us talk about what we like to talk about most, which is loyalty and loyalty programs. Since the grocery brands have emerged from COVID, customers cannot help but notice the growth of member-only offers in supermarkets. From London to Auckland, customers who are members of loyalty programs have been bombarded with generous offers, only open to loyalty members. According to Grocer magazine, the global retail media market is expected to grow another 10% this year after reaching an astonishing $128 billion in 2023. So what has led to this explosion of value that is now worth hundreds of millions per year for our grocery brands and can all loyalty programs benefit from this bonanza? To help answer this question, I'm joined by two leading experts on this topic, so please could I welcome Katie Streeter-Hurl from SMG. Hi, Katie. - Hi. - Hi, thank you for joining us. And Steve Gray from SG retail. Hi, Steve. - Hi, Ian. - Well, thank you very much for joining us. So to get us started tonight, can you each give us a brief introduction to yourselves and your experience in this area? - And Katie, do you want to start with that one? - Yeah, sure. So yeah, my name's Katie Streeter-Hurl. Current role is as Chief Strategy Officer of SMG. Prior to joining SMG, I started my career client side at Procter & Gamble. So big FMCG business, who I'm sure many people have heard of. And I joined the SMG organization about 13 years ago, just to briefly introduce who SMG are. We're a specialist group of commerce advertising agencies. We have a part of our business that runs retail media networks on behalf of retailers. And so they're with a company behind brands like Boots Media Group, the Morrison's Media Group, Co-op Media Network. We run the very media group and then also more recently launched LS11 Media Services on behalf of Astor. We also have a brand side advertising agency within the group where we plan, manage and measure retail media on behalf of brands like General Mills, Moebay, Pladdis, and Kenvy. And then the final part of our business is we have a piece of retail media technology called Plan Apps which we describe as being the operating system for retail media. So if brands want to self-serve a lot of their expertise and data that we have on retail media, we have a tech solution called that as well. - So it's no mystery to you then. - No, retail media has very much been my bag for the entirety of my career. So yeah, about 15 years in retail media. - Perfect, and Steve, how about you? - Yeah, it's probably been a constant theme through my career which is probably a bit longer than Katie's but began in the same place. I also was at Procter & Gamble 10 years, left as a sales director, joined PepsiCo as UK sales director on the software inside and became a general manager at PepsiCo and then set up a business for Burilla, the Italian food company in the UK. Well, it was kind of the first half of my career working for FMCG brands. The second half has been working more for retailers. I was the MD at Dunhumbi and had the task of monetizing clubcard data. And then from that, we built out probably what is and was the world's first advanced retail media network because we created new channels to market directly to consumers using the clubcard and then merged that business with Tesco's then mainly ambient retail media business and that business is still flourishing and the business models expanded throughout the world. We worked with Proge in the US and that gave birth to '84, '51 and Proge precision media. And I've stayed in that space, worked to pay back the big loyalty program in Germany, worked with retailers all over the years, had all of the world, had a stint with BCG and set up SG retail back 10 years ago and were a small advisory consulting business and we've got, I guess, two propositions. One is helping retailers who want to get into this space to get started and then those that have started, we can help them to get bigger and get better. And then we also work with brands to help brands think about how they can grow and how retail media can be a key part of that. - And so how would you describe, someone new doesn't haven't had retail media, how would you describe what retail media is, Steve? - Well, it's on the one hand, something that's been around forever. I mean, as long as there has been shops, there's been brands who've wanted to advertise in and around those shops. So it's been something that's been around forever but I guess would describe it as advertising on assets that are owned by the retailer, whether they're in their shops or on their website or using the retailer's audience data to reach those customers outside the store, which might be through loyalty marketing, it might be through open web marketing or it might be on connected TV. So that's how we would describe it. - And Katie, how does it, so you've both been the market long time, how come it's grown so massively in the last two years? What's been the rocket fuel that's changed that? - Yeah, I think there's been a few key changes that have led to this kind of explosion of growth within retail media and interestingly, those things have all kind of happened at the same time. So the first one is that consumer behavior has changed kind of fairly dramatically in terms of the way that we actually shop for products. So I guess if you just think about the last time that you bought a product, it probably involved a really large number of touch points. So anything from online price comparisons, social media platforms, traditional and digital advertising influences, peer reviews, physical stores and so on. And the way that we buy is changing very rapidly. And I guess what's interesting from an advertising perspective is that we spend a lot of time navigating back and forth switching between sites and platforms and shops. And as shoppers, we're kind of now switching modes almost instantly and we can buy even when we weren't really intending to do so. So, you know, one minute, you're kind of browsing updates on Instagram, the next minute you're on a website buying. And so that means that being present during the shopping journey, wherever that might be, is absolutely vital for brands. And so brands are needing to be present in a much broader now suite of channels in order to convert that demand into sales. I think the kind of second factor that's driven a lot of this growth and change is where the kind of the importance and also the value of retailer loyalty schemes over the last couple of years. So clearly retailer loyalty schemes are not new. We definitely don't need to kind of talk about that for your listener base. But I think what is interesting is that retailers have found new ways of maximizing the use of those loyalty cards. So loyalty card pricing, for example, being a kind of key driver of that. And as we're using our loyalty cards more to access those prices, retailers are collecting ever larger and richer sets of data on us. And that data has got massive appeal to advertisers who are looking for ways of making the targeting behind their campaigns even more effective as well. And interestingly, thanks to kind of new technologies, so things like clean rooms, which are being provided by companies like LiveRamp and InfoSum amongst many more, that data can now be used in the targeting of campaigns in a very different way. So now it's possible to use all of that loyalty data to inform the targeting of a campaign that might be happening on channel four, or it might be happening on Facebook or on TikTok. And so that loyalty data can now be activated in a completely different form than advertisers have ever been able to use it previously. And I guess the kind of speed of that transformation has been accelerated by the fact that this type of advertising is completely measurable. And I guess that's really been the kind of holy grail for a lot of marketers who are looking to understand the effects of their advertising actually at a one-to-one basis and retail data, so retail media, is absolutely possible to measure in that way. So I can understand because I've targeted someone using that loyalty data, whether or not they were exposed to an ad, and then laterally, whether or not they went on to buy. And so really understanding the direct link between campaigns that brands are running and their impact on sales is now totally possible. So I think for me, that growth is driven really by those three things. So changing consumer behavior, the real importance and growth in the value of retail and loyalty data from an advertising perspective, and then also the measurability of it, which is of course the thing that everyone is really looking for. - And so can you describe how can you use the law to programs to target the offline media? Or things like the TV you said, how does that work? - Yeah, so essentially you can use new bits of technology, which are called clean rooms to allow you to do that. So clean rooms are essentially data collaboration platforms where retailers can put that data into that platform in a privacy safe way. So it's all pseudononized data, which means that it can't be tracked back to that customer on individual level. And then from that data, advertisers and agencies can build audience groups off the back of it. So they could find existing customers, lapsed customers, perhaps they want to target lookalikes or high intent segments. They can build those audiences and those audiences can then be pushed into media platforms for that audience to be activated against. So essentially this clean room technology means it's possible for that data to be handed into the kind of clean room platform. It's anonymized and so it's kind of handled very safely and then it's pushed out into those different media platforms. So it means you can go from kind of retailer data to technology into that platform and then activate against those audiences. - So in effect, you're creating targeted segmented audiences that have been informed by data in another data set. - That 100% is so old world. That data would have been used for a loyalty program. So you might have activated those types of audiences through direct mail or through couponing schemes. The principles of that targeting from an audience planning and activation perspective are very similar, but the channels by which we can reach those customers are now massively more diverse. So it does mean that anything that is a programmatically viable channel can be using a loyalty data in its activation now. - And it's quite likely to be spacey in actually because if you think about it, the TV companies when you log in and increasingly most of us do log in now to watch our TV stations know what we're watching, of course that's highly valuable, but they don't know what we're buying whereas the supermarkets do know what we're buying but they don't know what we're watching. And so it's really quite exciting for marketeers to have those two data sets combined so that you can see what people are watching and what advertising they're watching and then see how that impacts their shopping behaviors. That is quite exciting. - And with the risk of sounding like Mrs. Merton asking Debbie McGee what first attracted her to millionaire Paul Daniels, is this all about the money or are the wider benefits? - Well, you know, obviously they want growth to grow retailers, need brands. And increasingly with discount is taking a large share of the market, then branded retailers need to, you know, work closer with branded suppliers. One of the areas that's really driven this has been the growth of what's called sponsored products which was pioneered by Amazon. And I mean, Amazon are making 40 billion plus from largely from sponsored products. And so I think that really was an initiative that gave the whole market massive momentum. - So could you just describe how you would recognize a sponsored product in Amazon? How would that be recognized? How would that manifest? - Yeah, so I mean, I guess if the three of us were to log on to Amazon and shop for trainers, we probably would all type in trainers and we would be shown a different array of trainers and that would be based on what Amazon know about us on the one hand, but it would also be informed by the extent to which brands like Annie Das, Nike, Under Armour want to put their brand or products in front of us and they might do that for a number of reasons because they think that we're a prime candidate for a particular type of, I don't know, tennis shoe or any kind of shoe that's relevant. And to have done that, they have bid it in real time, you know, chunk of money and Amazon have used that to inform the selection of products that they show. When somebody's types in trainers on Amazon, Amazon are probably highly likely to make a sale. They don't really mind which brand it is, but of course it matters massively to Under Armour or Annie Das or Nike. And so these brands are bidding significant sums of money to put themselves in front of the customer and it's really, really effective if you think about it. - But I guess going back to the question about for the retail brands, is that bringing more revenue to the retail brands than we'd have had before? Is it more advertising revenue? - Yeah, hugely so in the 10 millions and all the major supermarkets are now doing this. It's a really big thing. And for brands it can be quite transformational as well because particularly for smaller brands, you know, customers tend to shop by subcategory. They will type in trainers or in a supermarket context, shampoo or toilet roll or detergent, but they never type in very hardly ever a brand's name. So the customers looking to shop the category and many, many brands will, even though they're stopped, will be invisible to the customer because there's just so many in a category and only the first ones are shown. So it's massively important for brands to make themselves visible to customers when the customer is indicating that they're gonna buy within a particular subcategory. - No, interesting. And what role does Katie, what role does loyalty play in this? I mean, how much of the loyalty data do you use to make these decisions? - Yeah, I guess an increasingly very significant part of kind of retail media is driven by loyalty data. And I guess as, you know, we talk a lot now about retailers using first-party data in order to drive their retail media networks. That first-party data is anything from the data that's collected through loyalty cards, but it's also transactional data. It's also browsing data on their websites. And retailers really do have some of the sources of some of the richest data that it's possible for a CPG brand to access. And so it really does play a kind of massive role. The only piece I guess I would say to offset all of that is that retail media is one of those categories of advertising that can achieve both mass reach and incredibly granular targeting kind of at the same time. And so it can be used in a multitude of different ways. So you think the kind of average audience size of the supermarkets in the UK combined is huge. So if you wanted to do a very big mass reach campaign for a new product launch, for example, you could put your advertising in the majority of those supermarket stores, whether that's bits of cardboard or digital screens in those stores. And you could reach a very significant proportion of the UK population within a two or three week period. But equally, if you wanted to do some incredibly granular targeting where you were building audience sizes of very micro groups of people and you wanted to kind of activate them again on and off site or you wanted to acquire new to brand customers, that's absolutely also possible. So retail media is one of these kind of unusual channels in that it can play both of those roles to kind of mass awareness and very specific granular targeting using the loyalty data. - But I guess my question is about retailers as sometimes more efficient than others or more experienced than others are they using skew level data, but are you using absolute skews or are you using categories mainly? - A skews or customer level data is both absolutely possible to use. Whether or not those things are right to use, I guess it's a kind of different question because I think one of the kind of challenges with the activation of retail first party data is that it does add costs into campaigns for brands. And it's also expensive for the retailers because they're having to buy in the technology to be able to do this. It requires big data science team in order to actually mine and farm this data from an advertiser perspective, you're having to pay additional CPMs on the cost of all of your campaigns. So every audience that you buy is kind of adding cost to that campaign. So you've got to kind of try to work out what is the right use of this data? What are the use cases for it? And where's it good to kind of add it into campaigns? 'Cause for some brands, that's not the right thing at all. You know, if you're trying to sell more Mars bars, loading your campaigns with very, very expensive data that's incredibly grander is probably not the right thing to do. But if you're in the baby care category and you're trying to do a point of market entry programme to get people to buy nappies for the first time, actually buying into an audience where you can identify the right people, makes absolute sense. So I think it's about choosing the right use cases and scenarios for all of this, 'cause it's not necessarily the kind of perfect solution for everyone. - No, I get that. And I also think that, you know, if groceries are bullseye for retail media, then how far away from that bullseye can you get? Because what sort of retail environments are suited to this? So Steve, do you want to cover that one off? - Well, I think it clearly works where the retailer is selling branded products. So a retailer, if we think say a fashion retailer that's selling its own label, a unique lower to take that as an example, is not gonna have the advertiser base. So really you're looking at supermarkets, drugstores, health and beauty, head electronics as the main categories, because, you know, you've got the Samsungs, Unilevers, Proxial and Gamble's, L'Oreal's that are supplying into those markets and they're amongst the world's biggest advertisers. So that's clearly where it works best. It helps to be big. Clearly the bigger you are, the greater the share there's gonna be. And the more you can defray, you know, what is not an inconsequential cost in setting up and operating a network or you obviously amortizing that across a bigger base. To your point before, I think you don't have to have a loyalty programme. You know, there's many retailers who have good retail media businesses without a loyalty programme, but it definitely does help if you do have one because it then opens up all the things that Katie was talking about earlier in terms of reaching certain audiences. And then obviously for measurement, it brings, you know, a completely new dimension because with the EPOS data, you can see how much you've sold and where you've sold it. But with the loyalty data, you can see who's bought it and what else have they bought and link, you know, what that customer actually did. - And what are the sort of lessons learned from this? So can you give examples, especially you Katie, about ones that have worked really well, but equally am equally as keen to ones that haven't worked or lessons where you think you've seen people make big mistakes. Can you, do you have any of those? - Yeah, of course. So I guess in terms of people who've done it badly, yes, we've seen examples of that, particularly in some of our kind of consulting work that we've done with some retailers. I think there are two mistakes that it's, well, actually maybe three, there's three, I think, three mistakes that you can potentially make. The first is thinking that a retail media network is just plugging in some ad tech to a website. Retail media is far more than that and it can be an incredibly effective way of getting started, but it's not a long-term way of creating an advertising solution that works for suppliers. So I think retail media networks are far more than just kind of plugging in some ad tech and they take big teams, they take expertise, they take working with suppliers in a way that retailers historically haven't done. I think the kind of second mistake that people mistake is restricting performance data and not sharing that back with brands. I think there was a kind of world, perhaps 10 years ago where it was very, very commonplace for retailers to take money from suppliers, to promise to put advertising on their websites or in their stores and as an advertiser, you weren't 100% sure if it was even gonna go up and you certainly didn't get performance data off the back of it. I think we're operating in a very different world now and we're still working with some retailers on some of the projects that we've run with them who are unwilling to share that performance data. That's a very, very bad choice now. So it's a competitive marketplace now for retailers. They're competing for advertisers spend. If you choose to restrict that data, you will absolutely lose your share of that advertising spend. It will go to the places that are transparent where advertisers have trust. And even if you share results from campaigns that have been terrible in terms of performance, that transparency is the thing that advertisers are now absolutely valuing the most. And the other mistake that I think we still see people mistake is creating different front doors into their retail media networks. So businesses who kind of have different companies selling different channels, so someone selling promoted products, someone else selling the in-store advertising, say someone else doing the display activity, it just creates a situation whereby you end up with different people competing for spend from the same advertisers. And it means that a lot of the campaigns that people run not truly connected advertising campaigns, all that happens is that advertisers move spend into lower margin channels over time. It's not the way to kind of grow or set up for success. So I think those are definitely three mistakes that we've seen people make that just don't work if you want to grow in this space. In terms of retailers who are doing it well, I think the things that are really important are firstly having a proper service mentality. So it is really, really important to be working with suppliers in a very different way. This isn't about a kind of trading negotiation and a trading relationship in the retail media world. Suppliers are the clients of that retail media network. So it needs a service mentality and needs an incredibly different approach. And I think retailers who recognize that and set up in a way that allows them to serve as people effectively are the ones that are kind of winning. I think the second one is you absolutely have to have a performance mentality. So the media products and services you're designing need to drive a sustainable return on investment for the advertisers. It isn't about kind of short-term getting cash in the door. The reality is that to have a profitable and sustainable advertising business is a retailer, you need to be making sure that the campaigns that you're running are delivering an ROI in the long-term and that ROI is improving over time. And again, the retailers that we're seeing do this well, are the ones that are getting more than their fair share of that investment growth from advertisers. And then I think the final one is the retailers that are doing this while are also now making capex available for investment. It's not cheap to do some of this. As we said before, there's the tech infrastructure that's needed to do it. There's the investment in things like digital screens in stores, that stuff is expensive to do. A lot of it can be self-funding. You think you're generating income into the business, you can reinvest a proportion of that income in the running of that retail media network, but you now have to make that some of that money available. So the brands, I think, and retailers who are doing that while are making that investment available in order to invest fast, 'cause it is getting very competitive for them out there. - Perfect, well, Steve, Jeremy, anything else you add to those? - Well, there's lots of things to consider. I mean, I think if you sort of take a step back a little bit and look at what's happened over, I guess some decades, is there's been a real professionalization of how retailers are enabling brands to grow with them. And I can remember the time when most of the in-store activity that took place was manufacturer or supplier initiated and retailers would kind of be grateful for the support of promotional materials that the suppliers would bring themselves. There's been a complete turnaround now where the retailers are saying, look, we can do a much, much better, much more professional job of that, and we're gonna charge you for it as we should do because you expect it to pay for premium media assets and the retailers have some of the best, if not the best, media assets that there are. But there are a lot of things to think about, exactly as Katie said, you've got to think about what propositions are you going to put out there? How do they juxtapose with your promotions and your space and your trading strategy? That's really important. The extent to which it's gonna be about on-site or in-store or the audience data that you have. How are you gonna sell it and who are you gonna sell it too? So that could, obviously, will be the suppliers on the one hand. But a lot of suppliers outsource their media spend to marketing agencies and they are a completely different animal who tend to not have much experience of dealing with retailers. There's increasingly a market for what's called non endemic, so that might be, you know, that's things that are not sold in the shop, so that could be troubled brands, that could be automobile of the other markets, that it's relevant to offer to those customers. You've got to think about how you make it all work. You know, there is a lot of technology that is required. You know, it's not unusual for there to be 10, 20, or even 30 different service providers. If you think about advertising on trolleys and poster sites outside the stores, the digital screens on-site, you know, all of these tend to require different service providers that need to be managed. And then there's the topic of how do you measure media, which is a huge topic generally. Katie says, you know, the retailers have probably the best data available of any advertiser, but, you know, they are often criticized in the way that they deploy it, which I find very interesting, because nobody says to, I don't know, an outdoor media operator, or, you know, we've won a big campaign on the side of buses in London, and we want to know to what extent our sales have gone up. It's not a question you ask, because how would the advertiser know? Same when you go on ITV, you know, it's very, very difficult to see a link between the advertising the sales uplift. But the retailers can see that, you know, whether you should be expecting there to be an immediate sales uplift from your advertising is another big, big question, you know, because much of the advertising has delayed effects. And many of the people that see the advert are not in the market, so they're not going to buy there. And then anyway, so the whole topic of media management is a really, really big conundrum. It's, you know, vexed people for a far cleaver of the me, for many, you know, for, well, forever, and probably will continue to do so. But the retailers are in the fortunate position of having, you know, way, way better data than any other advertiser, and the unique ability to link that to specific customers. - Well, on that inspiring thought, we need to draw our first look at retail media to a close. But I'm sure this will not be the last time we returned to this fascinating topic. So please could I thank our guest today, Katie Streetahill and Steve Gray. If you like this podcast, please share your thoughts around the office on social media, and we look forward to a company again soon. Thank you and goodbye. (upbeat music) (upbeat music) (upbeat music) [BLANK_AUDIO]