It’s an exciting time to be in marketing with changes happening faster than ever. Its also a challenging time for marketers because you must adapt. New technologies in digital marketing are changing the way we target shoppers and how we match ads to the target audience. Then the pandemic hit, causing shoppers to change how they consume media, how they shop and how they buy goods leading to accelerated adoption of these marketing technologies.
In the last 3 years, grocery e-commerce sales have tripled, all the major grocery retailers added or expanded retail media network capabilities and digital ad sales increased by 50%. This has left marketers rethinking their strategies and having to change their marketing mix. More money is flowing into digital ads, especially through retail media networks (2020 Marketing Spending Industry Study, Cadent Consulting Group). This increased spending is coming at the expense of trade promotion and traditional advertising leaving marketers with tough choices. In fact, e-commerce, digital media and retail media networks were the top three most important concerns among marketers in the 2022 P2Pi Trends Report.
Retail media networks promise to bring useful capabilities to marketers through first party data targeting, which is becoming increasingly more important due to the retirement of digital cookies. It’s also a natural linkage to e-commerce marketing as it delivers ads right at the point of purchase. However, these capabilities are coming at a hefty cost with marketers having to pay premium CPM prices. Reaction from marketers so far is mixed with 33% saying it’s a simple money grab by retailers and 43% saying it is effective but no more than other digital media (Trends 2022: Retailer Media Networks: Ratings and Challenges, P2Pi). So, many marketers are awaiting the definitive proof of its value. Most marketers will say, if the medium creates a higher return on investment because these advantages, then the higher costs are justified.
The confusion is coming from what is being measured and reported on. The primary marketing performance metric being reported is Return on Ad Spend (ROAS). While there are variations of the of this metric being used, the core definition is the amount of sales from the shoppers who were exposed to the ad per dollar spent on the ad. This makes it a useful diagnostic metric but is not providing the value assessment marketers seek. Marketing Return on Investment (ROI) is very different because it quantifies the value of marketing by measuring how much incremental sales were generated as a result from the marketing. In the example below, the value of the marketing is $200, which represents the incremental sales caused by the marketing. The $700 in sales in the ROAS metric includes $500 of sales that would have happened even without the ad, so you cannot give the ad credit for causing those sales.
Confounding this issue is that each retail media network has its own ROAS definition and measurement methodology leaving marketers with a mix of ROAS metrics that are not comparable and thus cannot be used in making marketing mix decisions. So, the industry is in dire need of a measurement standard so that marketers can make effective informed decisions about the marketing mix changes face. The P2Pi put a group of marketers and retailers together to solve this issue. This Commerce Executive Network (CEN) group recently published their measurement recommendations for retail media networks and developed the metrics that matter. Their work included a shopper marketing tactic return on investment (ROI) guide and heat map illustrating the ROI by marketing tactic across select retail channels, product categories and retailers. It is efforts like this that will provide the types of information marketers need to make sense of the many changes in marketing today. Then, like all other marketing disciplines before it, retail media networks will undergo the financial scrutiny needed for marketers to continue to increase their investments in them. Marketing ROI will be an important metric to assess the value of these networks and help marketers to optimize this exciting new channel.
Foresight ROI, the leading provider of shopper marketing ROI measurement and software solutions, helps CPG companies and retailers increase their shopper marketing effectiveness. Foresight is totally dedicated to shopper marketing ROI measurement, has a full-time dedicated staff of shopper marketing analysts that have measured over 35,000 shopper marketing programs. Shopper Foresight is the industry leading shopper marketing ROI measurement solution with standards for data collection, data cleaning and transformations so that the model inputs are homogeneous and best represent how the marketing exposure converts to purchases. To learn more about our measurement, software or industry ROI benchmark solutions, contact us at: contact@ForesightROI.com