Follow the Marketing Money

Oak Brook, IL-- The extreme competitive pressures that are driving retailers to "brand" their store experience will profoundly change the way vendors and retailers collaborate on marketing plans in the future, said Dan O'Connor, founder and chairman of retail research consultancy Management Ventures Inc. (MVI), during his keynote presentation at the In-Store Marketing Summit held in April 2006.To take more control of the process, O'Connor believes more retailers will develop and own captive agencies and marketing support teams. Manufacturers will engage with these agencies and the merchandise planning functions inside these retailers. "Retailers are going to want to control their own marketing platforms. The marketing function will have a planning point where you as marketers and advertisers, branded suppliers, can work with their market planners, their media planners and actually begin to think about what you want to communicate and how you'll incorporate your message into their brand stand," O'Connor said.Today, account-specific promotions are generally driven from supplier-side marketing plans. In the future, O'Connor predicts more retailers will develop overall category and market plans that will drive how vendors execute their promotions. Retailers are also turning increasingly to exclusive private label products as a means to differentiate themselves, a fact that has placed additional pressures on brands. "Think about the consumer requirement that retailers are responding to that really caused them to alter the shelf," said O'Connor. "It's a fundamental challenge that each one of us needs to consider as we think about our marketing strategies as branded suppliers."The current models of segmenting retail by format is "dead" and "a waste of time," O'Connor said. "We don't compete format-to-format anymore. We compete block-to-block and for shopping occasions. Real differentiation today is driven not by the box you operate, but how you position your box."O'Connor urged the audience to think about new occasion-based segmentation models that account for different trip types. "Focusing on the nature of the trip and the nature of the 'must-win' shopper gives you an entirely different view of the marketplace."Retailers such as Tesco in the U.K. have made great strides in mining shopper insights and making them the foundation of store development, assortment, pricing communication and customer acquisition. Domestic retailers will likely follow suit with much better understanding of how to communicate and market to their consumers. In-store media networks, with their ability to deliver targeted content to individual shoppers, have the potential to become an essential part of the communications mix, O'Connor said. "While it's easy to criticize what's happened in the last decade, it's important to look forward and understand what the potential is of these networks as we move into the next decade." In-store merchandising will be liberated from past models that relied mostly on merchandising competencies to set objectives. Instead, marketing competencies will become the "core point of distinction in differentiation," O'Connor said. He predicts the rise of an entirely different class of spending called "shopper marketing.""This isn't new money, it's repurposed money. It's more disciplined money," O'Connor said. "It's money that's focused on activity in-store that we know as manufacturers helps reduce the clutter, helps us get over these poor store conditions, and actually activates our brands at retail."

Follow the Marketing Money

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