Beyond ROAS: Cultivating Success in Retail Media Through Relationship Value
The convergence of trade and media in the realm of retail media calls for a strategic and holistic approach, transcending traditional boundaries between marketing and sales. As brands and retailers navigate this complex landscape, they are increasingly recognizing the need for integrated, collaborative strategies to achieve collective success and seamless interactions.
Retail media's rapid evolution introduces complexity, particularly in measurement — a crucial aspect that shapes strategy and execution. While the intricate nature of retail media measurement cannot be entirely simplified, adopting best practices can demystify the process, enabling brands to grasp the true value of their retail media investments. This transformation has led to a reevaluation of team structures to address the unique challenges and opportunities digital commerce presents.
Central to this evolving landscape is the concept of "return on relationship" (RoR). While RoR is a powerful concept embodying trust, transparency, collaboration, and co-creation, it is important to clarify that RoR is not an objective metric. It cannot be easily quantified or translated into a numeric output for straightforward financial analysis. Instead, RoR should be viewed as a guiding principle for fostering robust partnerships and collaborative growth within the retail media ecosystem.
To optimize the benefits of retail media and maximize the conceptual value of RoR, brands need to intricately weave it into their joint business planning, which involves continuous alignment and fostering transparent, productive dialogues with retailer partners. This strategic alignment helps cultivate robust relationships, driving collaborative growth and establishing a thriving partnership ecosystem within the retail media landscape.
Fostering Collaboration Between Retailers & Media Teams
Retail Media Networks (RMNs) have become crucial for retailers in harnessing the potential of retail media. The integration of RMNs with other key departments is essential for optimizing both revenue generation and category growth. This includes enhanced campaign development through merchant involvement, a shift towards omnichannel team management and active merchant participation in ad sales and revenue forecasting.
- Enhanced Campaign Development: By involving merchants in campaign development and execution, retailers leverage category expertise to improve targeting and measurement. This approach ensures that advertising strategies are closely aligned with the nuances of each product category.
- Omnichannel Team Management: The shift toward omnichannel buying teams reflects an integrated approach to managing both in-store and online categories. These teams are responsible for ensuring a cohesive strategy across all consumer touchpoints, enhancing the shopping experience regardless of the channel.
- Active Merchant Participation: Merchants are increasingly involved in ad sales pitches and revenue forecasting. This involvement fosters a deeper sense of ownership and accountability in the success of retail media campaigns.
“Retail media thrives on collaboration, making it a true team sport essential for success," says Vin Lay, director of audience science & measurement strategy at Albertsons Media Collective. "It relies on the collective effort to establish shared long-term goals, foster synergies in planning, and align on measurement objectives. By doing so, we can provide the best experience for our customers and drive the most optimal outcomes for our business."
By fostering collaboration and aligning goals, retailers are positioning themselves to maximize the impact of retail media on overall category growth.
Enhancing Cross-Functional Coordination Among Brands
Leading CPG brands are enhancing cross-functional coordination among marketing, sales and e-commerce teams. This involves integrating multiple functions within their retail media strategies, shared budgeting and planning, and incorporating retail media in joint business planning with retailers.
“As we transition from a data-drunk (driven) to a data-informed mindset, the involvement of other key functions becomes paramount: industry players and agencies must integrate comprehensive strategies encompassing shopper marketing, shopper insights, and digital shelf analytics,” said Priyanka Jha, commerce transformation Lead at Accenture. “This holistic approach is essential for the development of a true omnichannel strategy, ensuring a seamless connection with shoppers at every touchpoint along their path to purchase.”
- Leadership and Collaboration: The strategy is often led by heads of e-commerce or chief marketing officers, emphasizing top-down collaboration. This leadership is crucial in driving cross-functional coordination and ensuring that all departments are aligned with the retail media strategy.
- Integration of Multiple Functions: Successful brands are integrating three to five functions within their retail media strategy. This integration might include marketing, sales, e-commerce, data analytics, and customer experience teams, emphasizing the importance of a comprehensive approach.
- Shared Budgeting and Planning: The pooling of funds from various departments for retail media underscores a shift toward shared budgeting and open planning. This approach facilitates a more holistic and inclusive strategy, ensuring that all departments contribute to and benefit from the retail media initiatives.
- Joint Business Planning with Retailers: An overwhelming 78% of brands now include retail media in their joint business planning with retailers. This collaboration involves aligning on priorities, investment plans, and strategies, ensuring consistency and effectiveness across all channels.
These steps are vital in moving toward an omnichannel organizational structure, breaking down silos and ensuring consistency across all channels.
Embracing New Organizational Models
Retail media's unique blend of awareness and conversion necessitates a departure from traditional marketing organizational structures. Brands are adopting innovative organizational models that look to enhance collaboration, agility and strategic alignment. Key aspects of these new models include:
- Integrated and Cross-functional Collaboration: The fusion of various teams within an organization, such as marketing, sales, and IT, is critical for a cohesive strategy in retail media. Cross-functional teams, comprising members from different departments, are instrumental in fostering a holistic view and innovative problem-solving approaches. This integration ensures that diverse expertise is leveraged effectively for comprehensive and innovative strategies.
- Agile Structures and Continuous Adaptation: Adopting agile organizational structures enables companies to swiftly respond to market changes and emerging trends. This agility is complemented by a culture of continuous learning and adaptation, where teams regularly update their skills and knowledge to stay abreast of advancements in retail media and shifting consumer behaviors.
- Data-Driven Decision Making: Prioritizing data-driven, decision-making is essential in the data-rich environment of retail media. Organizations are restructuring to emphasize the interpretation and application of data insights into strategic planning, ensuring more informed and effective decisions.
- Strategic Agency Partnerships: The evolving role of external agencies from service providers to strategic partners is crucial. These partnerships now extend beyond traditional services to include deeper involvement in planning and strategy development, aligning external expertise closely with company goals and market dynamics.
- Leadership and Vision Alignment: Strong leadership is vital in steering the transition to new organizational models. Leaders must articulate a clear vision and ensure that all team members understand and align with the organization's overarching goals and strategies.
"Retail media is about driving awareness and traffic to products. Unless those products have great content and reviews, competitive prices and are in stock, advertising ROI will suffer,” said Mike Black, CMO at Profitero. ”Thus, brands should be working toward enabling closer cross functional collaboration between retail media and e-commerce teams and tighter integration of tools and data across their media and commerce tech stack.”
One example he mentioned on how brands can do this is by building programmatic bidding rules from commerce data sets like digital shelf analytics. This allows retail media teams to suppress ads in real time when there is an issue that could impact conversion, like a spike in negative reviews, or to increase bids when competitors are out of stock or increasing prices. Kraft Heinz's Philadelphia cream cheese was able to grow new to brand buyers on Walmart by 28% by implementing digital shelf-powered conquesting rules.
Adapting to new organizational models in retail media involves more than structural changes; it requires a strategic realignment focused on agility, integrated collaboration and data-driven, decision-making.
Redefining the Role of Agencies
Agencies are playing a crucial role in complementing internal brand teams and offering specialized capabilities in retail media. Their evolving role includes specialization in services like search engine marketing, data analytics and creative content development, as well as contributing significantly to campaign measurement and analysis.
- Specialization and Partnership: A significant number of brands are engaging agencies for specialized services, such as search engine marketing, data analytics and creative content development. This trend underscores the agencies' role as critical partners in strategy execution, complementing internal capabilities.
- Campaign Management and Optimization: Retailers and brands increasingly rely on agencies for efficient and effective campaign management, optimizing both resources and outcomes.
- Holistic Measurement for Improved Performance: Brands seek agency assistance in developing comprehensive measurement strategies, particularly for integrating organic and paid media placements. This approach is crucial for new product launches, aiming to enhance visibility and boost organic search performance. A unified approach to measurement ensures consistency across marketing and sales, thereby breaking down silos and fostering collaboration among different teams.
- Adapting to the Digital Shift: The rapid digital transformation over the past decade has led to a significant restructuring of consumer packaged goods (CPG) companies. Many of these organizations are now relying on agencies to help them reorient themselves to operate effectively in a landscape quite different from what existed a mere 10 years ago.
“A key way agencies can help retailers and brands is by helping them develop a deeper understanding of all the levers that drive a connected commerce experience for customers. We help them jointly plan 1-3 year objectives, partner on a scorecard with key metrics that measure if we are meeting our objectives and whether that is being done in the most efficient and effective way possible,” says Kandi Arrington, group SVP of The Mars Agency’s customer development team. "This is done by aligning on key business success metrics then determining the right targets for driving volume, the most relevant touchpoints for reaching them and the right times and messages for engaging them.”
While agencies remain an indispensable part of the retail media ecosystem, it is crucial for brands and retailers to maintain control over strategy and critical retail media decisions, utilizing agencies as complementary partners in execution.
Prioritizing Returns on Relationships
A paradigm shift is occurring in the retail media space, with a move away from an exclusive focus on returns on ad spend (ROAS) to a broader view that emphasizes the concept of RoR.
Regarding metrics, while RoR is an invaluable concept, it's essential to avoid categorizing it as an official metric. Echoing Albert Einstein's quote, “Not everything that can be counted counts, and not everything that counts can be counted.” RoR falls into the category of something that can't be counted, but truly counts. It's crucial to focus on objective metrics for financial discussions, especially when presenting to CFOs or financing joint business plans with customers.
A significant number of brands are now setting specific goals to expand their digital presence, showcasing a trend toward prioritizing e-commerce and omnichannel initiatives. Despite this progress, a notable proportion of brands have yet to fully integrate e-commerce into their JBP discussions, presenting a clear opportunity for enhancement in this area.
The nature of JBP discussions is evolving, with leading brands shifting their focus from simply sharing digital shelf data to establishing specific goals, requirements and budgets. This evolution marks a move away from transactional interactions towards forming strategic partnerships with retailers. This new approach is gradually being adopted, although many brands still primarily share e-commerce data without incorporating it into an integrated strategy. Transitioning to strategic partnerships is becoming increasingly important, with a focus on aligning goals, enriching the customer journey, and obtaining deeper insights into consumer behaviors.
- Data-Driven Partnerships and Shared Goals: In JBP negotiations, there's an increasing emphasis on data-driven partnerships, aligning brands and retailers on shared goals. These goals are further reinforced by the strategic use of retail media investments to strengthen retailer relationships, fostering innovation and collaboration.
- Retail Media as a Collaboration Catalyst: Retail media investments are not just about ad spend efficiency, but also about cultivating stronger partnerships between brands and retailers. Through joint business planning, both parties are leveraging retail media to nurture these relationships.
- Insightful Investments for Long-Term Benefits: Investing in retail media provides brands with valuable data-driven insights, informing future decisions and strategies. This approach extends beyond immediate sales and media returns, focusing on the long-term ROI of these partnerships.
- Unlocking Opportunities through Internal Collaboration: Retailers that effectively collaborate internally — across their RMNs, marketing, and merchandising departments — enable brands to unlock additional opportunities. Investments in retail media, while not always directly profitable through media metrics, can yield significant returns by unlocking other sales-driving opportunities like additional display spaces.
- Beyond Sales and Valuing Relationship Returns: By adopting a broader relationship view, brands and retailers are unlocking the true ROI of retail media. This perspective goes beyond mere sales and media returns, valuing the long-term benefits of strong partnerships and collaborative innovation.
By focusing on both the evolving dynamics of JBP negotiations and the long-term value of relationships, brands and retailers can unlock full omnichannel potential that retail media enables.
Key Principles for Relationship Value
In light of the shifting focus toward relationship value, several key principles emerge:
- Integrate media, merchandise, and supply chain teams for holistic planning and incentives.
- Embrace new organizational models that bridge brand building and performance marketing.
- Maintain control over internal strategy while leveraging agency capabilities as complementary partners.
- Develop joint business planning processes that incorporate retail media investment focusing on objective metrics for financial discussion.
- Adopt unified metrics and reporting across functions to enable coordinated budget allocation.
- Focus on relationship value as a key concept, not an official metric, in retail media ROI.
- Lead strategy centrally but decentralize execution to cater to localized market needs.
The evolution of retail media is fundamentally transforming the relationship between brands and retailers. By recalibrating strategies, fostering collaborative efforts, and nurturing an environment conducive to partnership and growth, brands and retailers position themselves to thrive in the dynamic world of retail media, ensuring sustainable success and shared prosperity. However, it's crucial to balance the conceptual value of relationships with concrete financial metrics for a comprehensive understanding of retail media's impact.
