Ahead of ATS London 2022, Liz Salway, principal, business consulting, EPAM Continuum, outlines how CPGs can rapidly capitalise upon the upper- and lower-funnel opportunities offered by retail media.

I have so much to say on this topic that I had a really hard time choosing one story arc.  There is a lot of buzz going around about the opportunity for retail media to add substantial margin to retailers’ bottom line: retailer gross margin is typically 5-8% while the gross margin from their retail media practice (once fully developed) can be as much as 70-90%. Walmart reported 12% of their global profit from just 0.4% of their revenue. Amazon reported 68% of their profit from their advertising business.  This is inspiring and provoking large traditional bricks and mortar grocers to build out retail media offerings. That, coupled with the current climate with constrained supply chains; the global gas price volatility; and Russia’s invasion of Ukraine - aside from generating enormous global political uncertainty is also limiting the global supply of grain; supports the business case for retailers to support diminishing margins trajectories. 

Alternatively, I could expound on what retailers need to think about while developing their retail media proposition – access to data, first-party enrichment, and seamless workflow including crucial processes around reconciliation and billing (just picture the digital shelf to envision the number of brands that would comprise). EPAM Continuum has much experience building these workflows, processes, and technologies for leading retailers in the EMEA market, so that may come across as a sales pitch.  Cue wink emoji. 

Instead, I am going to focus on the significant challenge for CPGs to accelerate fast enough to maximise the opportunity that this blurring of the upper- and lower-funnel presents.  Having spent the last few years viewing this from a global perspective in one of the world’s largest CPGs and having worked closely in the past for other CPGs in a media-buying capacity, I have witnessed the silos that exist both within CPGs and their agency partners which limit the orchestration of a united and seamless consumer experience.  Consumers don’t see the world through a funnel.   They don’t experience a brand through a funnel.  Doesn’t it seem a little illogical therefore to have a separation in brand media buying and “lower funnel” or shopper marketing?  The large holding groups can no longer separate their media buying from e-commerce practice and they are furiously building out an integrated offering, uniting teams and skills, as well as connecting technologies to support brands in this newer media investment channel.

Liz Salway, EPAM Continuum

 And CPGs for their part, are not well set up to capitalise on the integrated offering that retail media can bring to their overall marketing strategy.  Of course, every organisation has silos, with different jobs to be done.  But being agile enough (and smart enough) to recognise when, where, and how to bring these different skill-sets together is where the success will lie. 

The customer development teams within CPG organisations, by which I mean the people dealing day-to-day with their large and important grocer relationships, have been focused mostly on in-store and physical sales, but as the proportion of online sales shifts as e-commerce in CPG evolves and grows, they need to understand and develop a different skill-set within paid media fundamentals.  What is measured and reported on?  How should it be measured and reported?  How do I value this media in the overall scope of the joint business plan (JBP) with the retailer?  Am I paying too much?  How “media ready” are the retailers? The standard between traditional performance media across search and display, versus retailers’ search and display activations vary considerably. Often the search functionality, for instance, doesn’t include basics like day-parting, orchestration between display and search, promo and bid multipliers, as examples.  With display advertising on retailers’ sites, there isn’t any line of sight (excuse the pun) on viewability metrics, yet the retailers position this inventory as “upper funnel” – you can’t and shouldn’t then report ROAS on this execution!  But these media fundamentals are often missing. 

This blurring and fragmentation of media jobs to be done hinders progress in a very interesting and potentially performative environment.  So, what does good look like: Imagine a scenario where the brand and the retailer work as one holistic team, joining up in-store and online data to get an overview of overall performance and how media could support driving better business outcomes.  

In my utopia, the customer team would design a JBP in concert with their media and shopper teams, where media fundamentals are considered, including:

Media Hygiene – Are my display ads seen?  How do I value the investment, what KPI framework should be leveraged to monitor performance? 

Creative – How can brand and shopper assets be more closely aligned – currently the assets within the retailer environment can be limited to pack shots, price, and character defined description.  

Data – Link in-store to online, leverage retailer, and CPG first-party data to enrich targets and segmentation approaches (through clean rooms) back into media planning and buying beyond the retailer as well as within to develop an audience-first approach. 

Measurement and Reporting – With all this data, design a better way of measuring performance, capturing, and reporting on key metrics beyond ROAS: incremental ROAS, new to brand, and lifetime value.  

The next stage would require better orchestration between marketing and shopper teams partnered with a mirrored set-up in the agency.  Plan together and coordinate activation. This is easier said than done, but this is the shape of a future organisation so movement towards this will yield longer-term growth and ability to capture more market share.  Take a staged approach if needed: start with one brand where the number of stakeholders is more manageable.  Encourage teams to sit together, provide training to upskill and career development. Have one strategy, but different tactics to deliver against the same goal. 

The secret ingredient to success, however, lies in the last piece of the puzzle: Developing and orchestrating a test-and-learn agenda with key retailers.  This is how you can measure success over time, run controlled experiments to answer key business questions – what is the interplay between paid media (off retailer) and sales online and instore (remember this is a connected funnel now, I know it takes practice to implement this mindset but bear with me); does display on-site drive incremental ROAS? (the killer question); How does layering audience insights and targeting affect ROAS? What is the optimal depth of targeting: in-market or category?  This, from my experience can have unexpected outcomes bearing in mind the added cost of deeper targeting on the cost per click the retailer charges.   There are myriad questions to ask, and plenty of opportunity to answer considering the increased investments into the retail media ecosystem. 

The key message I want to impart here is that it will take considerable coordinated efforts by CPGs to maximise and control the retail media opportunity – do it wrong and you may be wasting media investments, do it right and you will drive better business outcomes – the ultimate objective of any media activation.

ATS London 2022 will take place on 14th and 15th June at Central Hall Westminster. Tickets and further information are available via the ATS London 2022 event hub.