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GUEST COMMENT Driving growth: Approaches for retailers to amplify Retail Media Network profitability

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As retail media networks (RMNs) continue to surge in popularity, they’re poised to become a dominant force in the digital advertising landscape. Projections indicate that by 2028, RMNs will claim 15.4% of total ad revenue, surpassing traditional television advertising.

Saba Arab, managing director Publicis Sapient

Saba Arab, managing director Publicis Sapient, considers how can retailers leverage this evolving trend and seize the emerging market advantages? Here’s four strategies for retailers to optimise their retail media networks and drive profitability:

Venturing Into Untapped Markets
While some markets are already reaping the benefits of RMNs, some regions have yet to fully embrace this trend. This opens up a significant opportunity for global retailers to position themselves as trailblazers in these markets.

In Europe, for example, many retailers have been hesitant to invest heavily in RMNs due to uncertainties about the returns and risks around data privacy regulations. However, there is a growing need for technological advancement in this market, particularly in terms of improved targeting and data strategy.

We are increasingly hearing from retailers in Europe about the need to leverage their first-party data to implement more sophisticated data targeting strategies. A retail media network offering allows retailers to further capitalise on the first party data by offering advertisers with reliable data at customer transaction level, closed-loop measurement, and proven performance for their ad spend.

In 2023, Albertsons Media Collective proposed new industry-wide standards for RMNs, including transparency of RMN capabilities. As the industry starts to offer more clarity and transparency around RMN metrics and their calculation, retailers with first-party data capabilities in Europe and globally will benefit.

Developing Data Co-ops Through Retailer Partnerships
A significant challenge with RMNs is the increasing number of retailers that are adopting this strategy. This can lead to confusion for CPG brands – whose RMN should they put their hard-earned money on and why? Advisors for these brands often suggest placing the media where it will perform best, which typically leads them to major retailers like Walmart and Amazon.

However, there is a potential solution to this challenge – the creation of data co-ops. This involves grouping a variety of retailers and/or grocers into a consortium-like structure and integrating the data from each to develop a more comprehensive view of the customer. These data networks can be more powerful and capable of competing with giants like Amazon and Walmart as they garner scale and reach.

The development of data co-ops holds significant potential for boosting retail media network profitability. By pooling resources and data, smaller retailers can collectively offer a more attractive proposition to advertisers, leading to increased ad spend on their platforms. This not only levels the playing field but also opens new revenue streams for these retailers. Additionally, the rich, diverse data from a consortium of retailers can lead to more effective ad targeting, driving up ad performance, and, consequently, ad rates. Without such a strategy, the RMN landscape risks becoming a winner-takes-all scenario, dominated by a few major players.

Forming Strategic Partnerships to Create Value for Consumer-Packaged Goods (CPGs)
Retailers can also form non-endemic partnerships and create data co-ops which could provide even more value for CPGs. This allows them to merge smaller, disparate data sets in real time, providing a more detailed view of consumer behaviour. Picture a scenario where purchase history from a grocery retailer is combined with a customer’s music streaming data. This could help a CPG brand to pinpoint new customer segments for more targeted advertising. For instance, a CPG brand selling energy drinks could target ads towards customers who frequently listen to high-tempo workout playlists, or a brand selling relaxation teas could target those streaming calming, meditative music.

Increasing Engagement Through Tailored Ad Experiences
While customer loyalty programs are a crucial component of successful RMNs, retailers can achieve more by further segmenting loyalty members to test new offers and targeted advertising. Loyalty program segments are typically defined by recent spending and/or points earned. However, RMNs that segment their promotional offers within their loyalty programs experience higher engagement and repeat business.

For example, a universitystudent who frequently visits a fast-food chain for late-night snacks would appreciate different offers than a working professional grabbing a quick lunch. A discount on late-night meals would appeal to the former, while a lunch combo deal would be more attractive to the latter.

Retailers also can engage less active members of their loyalty programs through the use of service marketplaces. Consider a customer who buys home appliances; they may only need to replace these items every few years.

However, retailers can provide additional services such as installation or offer related home goods via third-party partnerships. This strategy transforms an otherwise inactive loyalty member into a valuable customer profile abundant with useful dataGiven the high-margin nature of retail media networks, the potential for increasing profitability by driving higher efficacy is substantial.

To stay ahead of the curve, retailers must leverage data and technology to their advantage and explore partnerships to create stronger data networks while prioritising their customers’ needs and preferences. By doing so, they can enhance the reach of their retail media networks and secure a strong foothold in this competitive landscape.

Saba Arab, managing director, Publicis Sapient

Retail Media Networks are the focus of a brand new RetailX Events conference this June. 

MediaX explores the experiences of well-established retailers in this space to new entrants and the agencies who are helping make things tick. For the full list of speakers, agenda and to register – click here.

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