Years ago, I remember some retailers boasting that they had no advertising expense. These retailers were charging brands for ad placement and display fees and then applying the funds collected to the cost of printing and distributing weekly ads. Voila—no advertising costs! Wow, what a great business!
Then Walmart came along and upended the industry with its focus on everyday low prices. Supermarket retailers were up in arms, wondering how Walmart could sell products below cost. Sure, Walmart leveraged their scale and logistics expertise. But Walmart importantly did not play the ad money shell game, instead putting all manufacturer monies into cost of goods.
And now the same cycle is playing out again. Many regional retailers are focused on customer-centric retailing—the practice of using data-driven customer insights to improve product assortment, promotion planning, pricing and marketing personalization. Many of these retailers are seeking to sell data to brand manufacturers, looking to create a new revenue stream while pressuring the brands for incremental offers to feed personalization initiatives.
The challenge of funding personalized offers is universal, and many retailers fall back on a time-tested solution: Get the brand manufacturers to pay for it. Every retailer I talk with about marketing personalization inevitably asks, “Where do I go for incremental offers to power my personalization program?” These retailers are asking the wrong question.
Instead, retailers should be asking how they can better use the existing promotional content they have. There are three key areas retailers should be focused on relative to marketing personalization.
- Personalized ad flyer: Rather than force your shoppers to search through hundreds of sale products to find the few that are of interest, retailers should be providing a personalized digital ad to each of their customers. This makes more effective use of existing promotions and helps drive sales by getting the most relevant sale items in front of each individual customer. Retailers doing this include Niemann Foods’ County Market stores, Coborn’s and Foodtown.
- Look to TPRs: Every supermarket retailer has hundreds, if not thousands, of products on sale each week as part of a TPR (temporary price reduction) program, and there are two opportunities here. The first is simply getting the most relevant TPR products in front of each individual customer as in the personalized ad flyer above. But there is a more powerful opportunity to implement a hybrid pricing strategy, providing a discount for all shoppers at the shelf, but a deeper discount to shoppers as part of a strategy to grow shopper share of wallet.
- Look to local and regional vendors: In the Let’s Get Personal: Digital Customer Engagement in Supermarket Retail article, I spoke to retailers putting in place a digital marketing ecosystem. Looking to County Market again, we see the retailer opening up their digital marketing platform portal to local and regional vendors to create digital offers that are then directed to the most relevant shoppers. Everyone wins as the smaller vendors typically do not have access to sophisticated digital marketing, the customer benefits from additional savings on relevant products, and the retailer gains from additional content for marketing personalization and furthering local brands.
Retailers that have built their business on brand manufacturer marketing funds have built on quicksand. Big CPG brands are under increasing pressure as sales plateau or even decline as a growing number of shoppers avoid packaged foods and massive marketing budgets are directed to the best return on investment—increasingly, that means digital marketing and shopper marketing initiatives that encompass shopper insights and targeting.
In today’s digital world, every interaction with the shopper must be made relevant to the individual customer. That means a dedicated focus on what the shopper wants, not necessarily what the brand manufacturer wants. This shift from the ephemeral riches of brand marketing funds to a sole focus on the individual customer is albeit challenging, but necessary for traditional supermarket operators if they are to survive, let alone thrive, in the new world of retail.
Gary Hawkins is the founder and CEO of the Center for Advancing Retail & Technology (CART). He can be reached at firstname.lastname@example.org