Are you ready for retail media?

By Julie Jeancolas

Julie Jeancolas is the global head of media and customer engagement solutions for United Kingdom-based customer data science firm dunnhumby. Working out of London, Jeancolas and her team are responsible for designing products and consulting services that will help retailers and brands create exceptional customer experiences that drive sustainable commercial growth.

In the current economic environment, retail media may be a great way to lift margins while getting closer to the customer.  But is it right for you?

If you look back on the first half of this already tumultuous year, a big theme that has arisen is the opportunity for businesses to leverage what’s called “retail media.” According to a recent story in eMarketer, “with one in eight digital advertising dollars now going to retail media, it has quickly become the third-most-popular digital advertising channel in the U.S., just behind paid search and paid social advertising.”

One reason why this is happening: The third-party cookie crisis has compelled both retailers and manufacturers to find greater value for the kind of data that retailers possess — first-party customer data. In fact, first-party customer data, the scientific bedrock of customer engagement, is getting a fresh new look from retailers and manufacturers today, a time when this data can empower retailers to better understand and serve the customer at the mercy of long-term inflationary pressures.

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Rather than crudely pass on the costs of inflation to customers, retailers and their partners can use media to better target and serve their customers based on everything they know about them.

If a lot has been said about retail media, perhaps too little has been said about putting the customer first in all aspects of planning and execution. In the end, retail media is not just about earning greater margins through the creative use of first-party data assets. It’s also a smart and timely way of getting in front of your customers in well-thought-out shopping environments.

The question is, can you — and should you — make the leap? Short answer: Retail media is not for everyone. But if you have access to first-party customer data and a deep understanding of your customers, and if you take the right approach in applying it in ways that further engage the customer, retail media could be transformational for your business.

1. Do I have the right customer data?

There are several considerations retailers will need to factor before deciding to go all in with retail media. First is a solid data foundation. Beyond data volume, the key to success is the richness of your dataset.

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For example, in the hotel industry, even if the hotel chain has a loyalty program, what transactional data is captured to entice an advertiser? Successful retail media businesses are built on a deep understanding of the customer, which comes from frequent interactions. The more you learn about them and capture who they are, their preferences, and what they are about to do and purchase, the more you will be able to personalize the media engagement.

In the grocery sector, a retailer can learn customer behavior by what days they shop, what times of the day, the time of year, the type of products, quantities, etc. Understanding this data is a start of a process that can help your business design campaigns for advertisers with an extraordinary amount of precision. If you are in a sector that lacks that frequency of interaction with shoppers and that richness of data, you would likely need to enrich what you know about your customers through other data sets.

2. Build or buy: Can you design an integrated tech/data stack?

Typically, a good retail media network is built on top of a complex ecosystem of partners to support multichannel execution. You can build the network on your own — as Amazon and retail behemoths have — or you buy it in the form of a platform, like our retail clients do.

In the end, it’s a question of competencies and resources. But the good news is that you don’t need to be an Amazon to compete with them for CPG dollars. Advertisers are spreading their risk across various retail media networks. As McKinsey recently observed, “80% of advertisers currently use at least one retail media network in addition to Amazon.”

3. Can you hire for the right skills?

In the end, retailers are not media businesses. Beyond the technical expertise, they need the right skill sets to succeed — digital, programmatic and search marketing, but also CRM and store media expertise as well as data science capabilities. This creates another instance where the retailer needs to consider the “buy versus build” conundrum. Depending on the retailer and the challenge, a retailer might be better off contracting with a team of experts.

4. Can you gain internal alignment and C-level sponsorship?

Regardless of your size, successfully designing and growing a media business requires that leadership commitment to making media a strategic priority. This needs to be done with clear KPIs, ensuring that the entire organization is aligned to this priority, from merchandising, marketing and technology to e-commerce and stores.

5. Can you monetize with meaning?

Think deeply, meaningfully, about your unique media assets and how you can build media propositions that not only drive sales lift but also enhance the customer experience. Maximizing media revenue shouldn’t be at the cost of customer experience.

In the end, retail media will be judged by customers in terms of the experience. Retail media inventory should be created with the customer in mind. As we have seen in other areas of retail innovation — for example, category management, price and promotions, insight monetization and vendor-partner collaboration — a well-thought-out customer strategy is a must for any media campaign. It should be responsive to all touchpoints along the customer journey. And it should understand what types of media — endcaps, special displays and “digital shelves,” etc. — make sense for timely messages and intervention. Without a well-drawn map, the opportunities are murky.

Think about what touchpoints are most useful to your customers, what information do they need at each point and whether they are shoppable? And Is it helpful? Focus on delivering a select group of channel propositions that are well-crafted and deliver value. If media doesn’t serve the needs of the customers, it cannot meet the goals that retailers have for this new revenue stream. The greater the CX, the higher the sales uplift is for the retailer, the greater the ROAS is for brands, the higher the media investment the retailer can secure from advertisers.

If a lot has been said about retail media, perhaps too little has been said about putting the customer first in all aspects of planning and execution. In the end, retail media is not just about earning greater margins through the creative use of first-party data assets. With recent industry surveys showing that customer loyalty is slipping with the rise of inflation, putting the customer first is becoming a must-have, not a nice-to-have.