P-O-P Trends Report 2007

This year, the In-Store Marketing Institute's annual Trends Survey polled random CPG marketers, P-O-P producers and retail agencies. To varying degrees, both survey respondents and those interviewed for this article see a greater ability to measure return-on-investment, the use of digital signage and television networks, and the use of environmentally sustainable materials as top trends. In addition, P-O-P Times interviewed professionals from these sectors of retail marketing. What follows is proficient dialogue on retail media, measurement and sustainability -- and according to those interviewed, in more and more people's minds, retail is to be considered a mass medium in itself."If you look at the CPI [Consumer Price Index], and you look at retail and technology, you've got to feel very, very excited about our industry, even though it has gone through an enormous amount of change," says Ben Weshler, president of Ovation In-Store, Maspeth, NY. "We're looking at what we think is going to be ... lots of good opportunities in the next couple of years -- strong opportunities for growth."Marketers, producers and agencies largely agreed that in-store marketing would see the same (if not more) investment from consumer products companies in 2007. Of those responding to the Trends survey, more than half (57.5%) said they were placing more budgetary emphasis on P-O-P displays than in the past, behind only packaging (66.1%) and Internet marketing (57.8%), while only 4.3% said they were placing less emphasis. (See chart A.) By contrast, only 11% were placing more emphasis on TV ads (vs. 12.7% who said less emphasis) and 6.6% were buying more radio time (vs. 10.5% who said less).Meg Kinney, executive vice president of planning for The Integer Group, Los Angeles, says in-store marketing may benefit simply by reaching a level playing field with TV and other forms of advertising. Television is no longer the hub of the wheel, with other strands of advertising seen as spokes that revolve around it, she says."In the new paradigm, the idea is in the center -- a relevant, compelling idea about the brand -- and now television is out there as a spoke, just like digital, just like 1-to-1, just like PR," she says. "That shift in thinking ... is potentially the biggest driver of the money moving to the retail space. Certainly, there are all sorts of new opportunities in the store. Retailers are thinking about their store as a media outlet."Under the old paradigm, Kinney adds, in-store budgets tended to come from "whatever money you had left, or you looked at your trade dollars. The store was an afterthought. Now, it's certainly making its way further upstream because the store is a place to both brand and then sell. The store may be the first interaction or touchpoint a shopper or consumer has with the brand. The store may now be that place where they form opinions about the brand. It's not just where purchase decisions happen."Jim Einstein, executive vice president and general manager for Alliance, a division of Rock-Tenn Co., Winston-Salem, NC, sees both greater use of P-O-P and a greater variety of choices. "In-store, in general, is on the rise. There's no question," he says. But Einstein believes the death of television may be greatly exaggerated. "What I don't see is what I think has been touted, that TV is dying and all those dollars are going in-store," he says.Clients of Harvey & Daughters, Hunt Valley, MD, have both increased their P-O-P focus and widened their creative scope, says Jim Perkins, chief marketing officer. "They understand what is happening at the competitive level. They're trying to do anything they can get away with, obviously, within retailer rules," he says. "I'm seeing an enormous movement forward, just within the past year."For Miller Brewing Co., Milwaukee, dollars allocated in-store have probably bumped up at least 5% to 10% in the past year, says Michael Hand, director of marketing services for the company's Hispanic strategy group. "We're shifting a lot more dollars into the retail world," he says. "We're a lot more about effectively merchandising and talking to consumers at the point-of-purchase. It's more of a balance of things. It's not as if the advertising world is going away. There's a really strong need for that. But we're treating in-store on more of an equal playing field."Kraft Foods, East Hanover, NJ, has invested in a test concept, called Mom's Kitchen, which rolled out in three Buehler's stores in Ohio this year. It's a stage set with a custom wooden island, milk cooler, cheese cooler and other props to create an in-store lifestyle vignette, says Patrick Hare, senior director of in-store merchandising."Our goal there is to have the consumer slow down and interact with our products more," he says. "Get them out of that grab-and-go mentality that so many people have right now as they rush through the store." Hare adds that, more generally, P-O-P "is a big part of what we've done traditionally and will continue to be."Measuring UpThe ability to capture more reliable metrics on the performance of in-store marketing could help increase the focus and continue to drive budgets upward. Producers, agencies and marketers see that happening through a varying mix of traditional shoe-leather in-store auditing, emerging technology like radio frequency identification (RFID), and the advances made by the P.R.I.S.M. (Pioneering Research for an In-Store Metric) project, unveiled by the In-Store Marketing Institute in September 2006, as well as the Marketing At Retail Initiative (MARI) study from POPAI and other studies from agencies such as NARMS.But those in the field remain somewhat skeptical of the potential impact of traffic metrics. A majority of respondents to the 2007 Trends survey believed that developing a collaborative, syndicated system with retailers for compliance measurement will be either "extremely difficult and could take years to complete" (41.1%) or "might never happen" (19.6%). The hardware-home center category showed particular pessimism, with nearly three-quarters offering one of those two responses. (See chart E.)That said, retailer compliance is a challenge in every aspect of in-store marketing. Looking at what kind of impact display measurement would have, 37.6% of all respondents said "in-store marketing professionals will have a better sense for deploying marketing messages," meaning that most see measurement as a tool to help roll out better, more sophisticated P-O-P messaging. (See chart F.) Only 8.5% believed the benefit of in-store measurement would lead to a windfall of more in-store dollars, while 47.2% envisioned a combination of the two working together.Measuring return-on-investment remains a murky goal to Jennifer Cintron, marketing manager with Rapid Displays, Chicago and Union City, CA. "Everyone would like to be able to do it," she says, but "it's a real challenge to accomplish that and back that information up. How do you capture that information? How do you support that information?"Most CPG clients of Vestcom, Little Rock, AR, continue to use the traditional shoe-leather method to capture display compliance and results, with RFID a hoped-for future solution, says Tim McKenzie, executive vice president of sales and marketing. "I haven't seen a decrease in in-store auditing," he says. "There are companies that are evolving the RFID in-store to track displays and movement ... Whether RFID ever gets deployed at the SKU level, I think that's in great doubt."Alliance recently made an equity investment in RFID developer Goliath Solutions. "RFID is going to explode," Einstein says. "I don't know if the horizon is two years or five years, but it is going to explode."Weshler believes the Institute's P.R.I.S.M. metric could hold greater promise than RFID, which, while "brilliant" technologically, will have cost-related challenges for some time yet. "There is a big opportunity for [in-store investment] to prove itself out positively. The P.R.I.S.M. formula will help push things forward," he says. "I think RFID can be used as a very, very good measuring device, if it were cost-effective."The P.R.I.S.M. project's extensive, targeted tracking of store traffic aims to generate a universal metric for in-store marketing, much like TV's GRP (Gross Ratings Points). The initiative is the brainchild of a consortium involving Albertsons, Kroger, Walgreens, Wal-Mart, Procter & Gamble, 3M, Walt Disney, Coca-Cola, Kellogg and Miller Brewing.Kinney agrees that PRISM's progress is well worth watching. "The strides the Institute is making in conjunction with ... their multitude of other blue-chip partners, I think that's the most exciting, most demonstrable traction in that area," she says. "I am, with everyone else, in eager anticipation of what kinds of conclusions come out of that." Kinney adds that "a robust point of view on RFID has to be inclusive of getting the costs down, looking at the penetration. Someone like Wal-Mart has to lead."But Aaron Henschel, principal with Henschel-Steinau, Englewood, NJ, believes in-store auditing will continue to provide the most reliable way to measure effectiveness. "Not to be cynical, but I think it's become almost an impossibility to do [measurement] in a basic way that people understand," he says. "I know that the In-Store Marketing Institute has gone out of their way with time and money to develop another protocol. But there's not a simple way for most of our clients to know what works and what doesn't work."Mary DaRif, director of marketing services for Sherwin-Williams, shares Henschel's skepticism about reliable ROI becoming commonplace any time soon. "It's still going to have to get to the point where I can apply it to my daily business, and that's still a very difficult thing to do," she says. "Maybe there really is a way to do this. ... I think we're a long ways from that point."Harvey & Daughters looks to in-store auditing to measure ROI, Perkins says. "I can show you that, with the launch of a particular merchandising system -- not only with tests but with a national rollout -- we see immediate sell-through," he says. But "there's a lot of intuition that goes on, there's a lot of common sense that goes on. A lot of it is gut feel."George Weston Bakeries, Tampa, FL, is intrigued by both P.R.I.S.M. and RFID, but for now, "We rely on in-store audits, be it third parties or through our own in-store data gathering," says Patrick Snyder, director of retail accounts. "We have independent operators in our stores every day. We rely on them for data collection.""It'll be interesting to see if we can really start quantifying some of that stuff," says Dave Milka, consumer insights manager for S.C. Johnson, Racine, WI. "A lot of time and money are spent on putting displays into the store. How do we evaluate that?"Technically SpeakingNew technology not only could transform how return-on-investment is measured, but could change the nature of in-store marketing itself. Digital signage has gained traction during the past several years, and Wal-Mart and other retailers have begun experimenting with in-store television as a way to expand the options of the new in-store medium.Respondents to the Trends survey saw small, shelf-edge digital signs as the technology with the greatest potential to transform in-store marketing. (See chart I.) Nearly half (44.3%) pointed to signage as the greatest driver, over "smart" shopping carts (24.1%), large network monitors at the store perimeter (17.8%), and interactivity with cell phones and wireless PDAs (13.8%).But the survey showed some resistance to digital signage: 31.3% said they purchased an ad on a signage network only to satisfy a retailer mandate or increase their chances of display placement. (See chart G.) Nearly two-thirds (64.3%) rated such ads as merely "somewhat effective" in increasing sales, and 78.5% said retailers had not provided them with the data to measure any resulting lift.With the emergence of in-store television, the traditional advertising model and traditional promotional model essentially merge -- or perhaps collide, McKenzie says. "I see it taking a big step forward," he says, adding that a "trend-setter statement" was Wal-Mart's announcement that it will bring its media more eye-level and closer to the merchandise being advertised. "Digital technology, in terms of both video and print, allows you to brand a specific message to a particular retailer, or a particular store, or a particular audience."Ovation In-Store has begun to invest in digital technology but as a mid- to long-term proposition, Weshler says. "I think it is expensive," he says. "We have a very serious investment in that aspect of the business. But the jury's out. We believe in it, or we wouldn't have invested in it. But it's a long road."Henschel does not see digital signage as a medium that his clients -- most of whom sell products that cost under $10 -- will be able to afford. "You have to be in a particular market strata to afford something like that," he says. "It doesn't appear on our radar screen as an area that will enhance our business."Kraft is watching developments from Wal-Mart TV to News America's new digital on-shelf product and is "bombarded all the time with different suppliers pitching different forms of digital in-store media," Hare says. But the company needs "to be able to go to 12,000 to 15,000 to 20,000 retailers at one time. Very few of those in-store television networks have that scale at this time."Figuring out the right message is another reason for watching and waiting, he says. "I don't think consumers want to watch 15- or 30-second TV spots in-store," he says. "The vehicle is a wonderful thing. People are still wowed by a flat screen television. But the message on the screen is what's critically important. I don't feel we have solved that yet, nor do I think the people who are selling the technology have necessarily solved that."Figuring out how to get the best digital bang for the buck remains the great challenge in Kinney's eyes. "Nobody is talking about, 'What do we seem to be saying on these screens. That is the great, interesting, unexplored terrain," she says. "It's not just a 30-second television spot edited differently. It's a new creative unit. It's a new intellectual space. The art piece of communication needs to catch up with the science."When that happens, national advertisers, who are struggling with how to reach a mass audience in an age of media fragmentation, will have found a new solution, Perkins says. "Supporters believe that marketers who rely heavily on national advertising will need to learn how they can work through these channels, so they can get a more diverse set of tactics to reach that national audience."Such networks won't truly take off until retailers relax their controls and adopt a more partnering stance with CPG companies, Perkins says. "I myself, as a marketer, am cautious at this point in time, only because I don't think the CPG [marketers have] as much control as they'd like," he says. "The retailers are driving this, and they're going to come to a point where, if they want it to be successful, and to continue, they're going to have to bend to some of the brands' needs and wants."Another reason for hesitation is the employee "nuisance factor," according to DaRif. "Anything that makes noise, the store people can turn it off if it's annoying to them," she says. "There's a lot of new, interactive stuff that's trying to break in, but I think it's just way too much noise for everybody to consider at this point. A lot of it's cool, and a lot of it makes sense in a total environment where you're immersing yourself. But a lot of it is just busyness when you're getting into mass retailers."Snyder believes retailer persuasion accounts for many instances in which CPG companies decide to try out networks like Wal-Mart TV. "I don't know that they necessarily believe in that as a medium," he says. "They're [buying advertising] because retailers are asking for it.""You're going to spend all this money for what?" asks Roger Schur, director of merchandising and procurement for Revlon, New York. "I'm not sure how much you want to invest. You want to tell a story ... but you don't want to tell too much of a story, a Gone With the Wind type of deal."Earth FriendlyPlayers all along the supply chain hope to save money -- and the planet -- with the move toward environmentally sustainable P-O-P. Wal-Mart's push for greener processes -- more recycling, use of reusable materials, use of less material and investment in details like biodegradable inks -- has kicked this issue into high gear.Slightly more than half (51.4%) of respondents to the survey said they had employed practices to promote environmental sustainability during the past year, and that figure was noticeably higher (62.4%) for mass merchants and club stores than for other classes of trade. (See chart J.) Using recycled or renewable materials was by far the most commonly employed method, at 60.1% of respondents, while designing packaging with less waste (16.6%), using organic or less environmentally damaging materials (11.8%) and saving fuel via shipping efficiencies (11.5%) were cited less frequently. (See chart K.)Sustainability has gained more momentum because it's now a business proposition, Kinney says. "Using the environment as a centerpiece for marketing and communication has had several coming-out parties," she says. "None of them, to date, has seemed to gain traction. It does feel, at this point, like it's for real. Not the old 'green marketing' that we used to have in the past, with images of crunchiness and tree-hugging. When Lee Scott of Wal-Mart attaches his legacy to sustainability, and you know he's in Washington talking about sustainability, it's a sign it's here to stay.""Wal-Mart's sustainability initiative will have a domino effect throughout retail, if for no other reason than that it makes economic sense," says Bill Zurynetz, principal at the Lost Boys Consortium, Garfield, NJ. "Wal-Mart gets a great gain environmentally, public relations-wise, and, at the end of the day, economically. They're going to be the first to tell you that. They save billions of dollars on the back end."Although recycled and renewable materials might be the most obvious way to go greener, Alliance sees reduction as the most promising avenue, Einstein says. "Material reduction is every bit if not more important than the types of materials you're using. That's the approach we're taking," he says. "The Wal-Mart initiative is going to push this, with the clout they have, into all your CPGs who supply into Wal-Mart. It's just going to become a part of everyday life in display and packaging development and design.""There isn't a client we have that Wal-Mart isn't their biggest [retail] client," Henschel says. "They are on a major bent for sustainability. Most of our clients have people on staff that have been given the responsibility to manage the sustainability efforts of their own corporations."S.C. Johnson stopped the use of fluorocarbons in its products "before they were even an issue," and uses biodegradable inks. "We are taking as much weight out of those prepacks of display pieces [as possible], so it's not a lot of cardboard being thrown away," Milka says."All of us are more conscious of recycling. I can't say it's necessarily being mandated," DaRif says. "Wal-Mart's overall global message is being heard by all of us. It's better for us, long term, to be able to recycle or reuse a display for a different product launch, or refresh it. If it's economical for us to be able to reuse it, absolutely we will."

P-O-P Trends Report 2007

P2PI MEMBERS

JOIN P2PI

Related Images

Business Topic

Company

Market Segment