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The Importance of Blending Budgets

Libby Stagnaro, Jenny Holleran and Jill Smith

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How retail media platforms are transforming marketing within traditional CPG companies

Once upon a time in the music industry, artists and record labels manufactured music, packaged it into albums and distributed it through various retailers, who were then responsible for driving traffic to their stores and promoting those albums to consumers. Record labels left retailers to their own devices and separately promoted the albums on a national scale using their connections in media and broadcasting.

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However, when streaming services such as Pandora and Spotify materialized, the music industry was suddenly and forever changed. Digitized music was sold directly to consumers, making music much more accessible. And, Pandora and Spotify gained rich insights about music listeners.

Just like the old days of the music industry, many consumer packaged goods (CPG) companies still operate as separate teams, marketing to consumers on a national or hyperlocal level with limited knowledge sharing or understanding of the effectiveness of their marketing campaigns—despite the advent of e-commerce.

E-Commerce: The “Pandora” of Grocery CPG

Before the explosive growth of e-commerce (the “Pandora” of CPG), CPG companies operated similarly to record labels. They produced their goods, sold them to retailers to distribute to consumers and promoted their brands nationally. Meanwhile, retailers worked with local marketing teams to drive product sell-through at the ground level using trade and shopper marketing dollars. Brand and shopper teams didn’t interact much, as brand teams were focused on brand-building at scale, and local teams were focused on individual retailer performance.

But like Spotify and Pandora, consumer packaged goods retailers, as they increasingly ramp up their e-commerce platforms, are now changing the game. In turn, they are helping to solve the problems brand and shopper marketing teams faced (and continue to face) in the analogous “pre-Pandora” CPG world.

For instance, brand teams often don’t know what their media and advertising dollars are truly doing for them when it comes to driving sales. They can only rely on modeled results, often using small sample sizes. They also have more limited access to the consumer purchase behavior and demographic knowledge that retailers have, a treasure trove of valuable information that is growing ever more valuable with the addition of e-shopping insights.

On the flip side, local shopper marketing teams have a good handle on their retail customers’ data and the trends and behaviors driving performance. They also increasingly have more avenues to support their products at retailers with the advent of ever more sophisticated e-commerce media platforms. But limited trade and shopper marketing budgets hinder growth potential, and shopper marketers need to put their money where they know it will drive visibility and immediate conversion closest to the point of purchase. They do that regardless of whether those tactics are strategically building their brands long-term or positioning them well for the digital future.

The Changing World of Grocery Retail

But the paradigm is shifting. At Kroger, the largest grocery retailer in the United States, online sales have increased from $0 to $5 billion per year in just five short years, and growth continues at more than 40 percent year over year. Grocery retailers are now priority media investment strategies for advertisers, regardless of budget source, and even big tech companies such as Microsoft (see acquisition of PromoteIQ) are getting in the game. 

And consumers aren’t just discovering brands through TV ads that then prompt them to pick up that brand in-store at a retailer. They’re also discovering brands through social media influencers and searches, further researching those brands online and ultimately placing more orders within digital storefronts. The once distinct phases of the marketing funnel are blurrier and more shrouded in bits and bytes. In response, brand, e-commerce and shopper marketing teams need to start thinking differently about their budgets and marketing strategies.

Retail Media: The Advertising Platforms of the Future

Retail media platforms can help equip CPGs for this brave new world. By leveraging the power of accurate and complete first party data at e-commerce-enabled retailers, brand, e-commerce and shopper marketing teams can collaboratively harness data and insights to target the right consumers without wasting impressions on the wrong households. This also allows CPGs to truly understand their media performance, down to the incremental sales their media is driving. Brand teams can have access to the data they need to effectively target their media and the e-commerce website click-through experiences to convert their viewers. Shopper teams, by working with brand teams and tapping into brand and e-commerce budgets, can think more strategically about building their businesses in a digital world.

By re-thinking and re-allocating their budgets to retail media platforms, brand and e-commerce teams, in partnership with shopper teams, can repair the once displaced and disparate marketing funnel and grow their brands on an unprecedented scale among their now omnichannel shoppers.

Would you want to be the record label still peddling dusty albums in the corner store? If not, it’s time to start thinking about how retail media can help position you for the future that is now.

Image courtesy of Unsplash.

Libby Stagnaro is senior media account manager at 84.51°.

Jenny Holleran is a director of media and advertising at 84.51°.

Jill Smith is a director of media and advertising at 84.51°.