Unveiling the Path Ahead: Social Media Advertising in the Future
By: Athar Naser, Global Director, Marketing Transformation Consultant, CvE
The current economic and political climate is creating significant challenges for retailers. Material costs are rising, supply chains are stretched, and consumer belts are tightening, meaning that simply passing on the cost to consumers is not a silver bullet. This has led to many retailers looking elsewhere for profits and revenues, and they are finding these in the emergent space of retail media.
Retail media is developing at a rapid rate, with much growth in the channel still to be realised. GroupM forecasts the global retail media market to be worth $160b by 2027, with BCG estimating the gross margin on retail media to be between 70-90% for onsite media, and 20-40% for offsite media, making this a serious area for consideration.
For advertisers, the value is immense, offering a potentially lucrative audience loaded with intent and very close to the point of sale which boosts ROI and gets closer to their target audiences than ever before. What retailers offer uniquely is an intimate knowledge of their customers. This data is garnered from identifiers across web browsing, and engagement with the site such as purchases, loyalty cards, and in some cases purchases in physical stores. These identifiers give retailers access to insights such as shopping habits, purchase history, and brand preferences amongst other such data.
In essence, retail media networks are characterised by retailers (usually larger players) leveraging their first-party data and creating opportunities for advertisers to reach those audiences (in essence, the retailers’ own customers). Opportunities are numerous, and they depend on the retailers’ particular business strategy, technological infrastructure, website capabilities, commercial arrangements etc. This means that every retail media network has an entirely different set-up (this is, in part, responsible for the current lack of standardisation within retail media).
However, the opportunities are a myriad of intersections between the retailers’ own interests, the advertisers’ interests, the data available, and the retailers’ web properties, amongst other factors.
Let’s take the retailer’s own value. Knowing about your customer and managing your data well allows for numerous advantages.
Critically, understanding your own customers allows for much more powerful marketing, as well as recognising significant efficiencies from existing budgets. This is done by:
The above should all form part of a sophisticated, growth-orientated marketing maturation process, but relies on good tech infrastructure and better management of data.
Where the doors are opening for advertisers, is when retailers make their customer data accessible.
Broadly speaking, this is done in two ways – either onsite or offsite.
This relates to the retailers’ websites, where they create opportunities for brands to appear on the retail website in specific, key areas, and search rankings. These opportunities offer retailers the highest possible profit margin, and brands have available the cleanest most immediate data to target. Opportunities can take numerous forms such as:
Monetisation opportunities also exist offsite. Retailers can leverage their data on consumer behaviour and preferences to offer valuable insights to brands, offering them opportunities to build, test and target audience segments. These opportunities exist across the use of data in advertising, and in leveraging the data for business intelligence. Below are some examples:
These are just some of the ways that retailers are monetising their captive audiences and customers, and within them, there is a raft of detail and myriad variables, such as the format of advertising or the type of data.
It’s always worth noting that retailers need to be compliant with data privacy regulations such as GDPR, CCPA and other applicable laws, and obtain customer consent before monetising their data.
These are just some of the ways that retailers are monetising their captive audiences and customers, and within them there is a raft of detail and myriad variables, such as the format of advertising or the type of data. A critical factor for consideration in all of these avenues is scale. And it’s worth noting that scale of audiences (sign ups, web traffic etc), is not the same as scale of data – translating your traffic or CRM into usable actionable data is often a big step with an underinvestment of focus and energy (something CvE are experts at solving!). When scale of audience is what is sold in, but scale of actionable segments are what results are based on, it’s important for those two volumes to be congruent, which is seldom the case.
Whichever route you consider, scale will be your starting point as this will determine the strategy that you should or should not embark on. Keep in mind your starting scale, the audience segmentation possible from this (perhaps run some internal beta tests to determine things like match rates, quality of data, etc to help inform strategy), and from this commercial considerations like modelling your prospective RPC (revenue per customer).
When planned and executed correctly, retail media monetisation carries numerous benefits that can create a distinct marketplace competitive advantage, as well as develop incremental lines of revenue with high margins.
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