The CMO’s Guide to the Current and Future State of Retail Media Networks

You’re not imagining the influx of brand advertisements when buying groceries online at Target.com or seeing sponsored options in the search results when surfing Amazon Prime for a new bathing suit. Those are retail media networks (RMNs) at work. New RMNs are popping up left and right every day. As of 2022, National Retail Federation (NRF) found that 9 of the top 10 retailers worldwide (by dollar revenue) offer media and advertising opportunities for brands, often promising the capability to target shoppers using full-funnel data they collect through their point-of-sale interactions. RMNs present an opportunity for CMOs to boost brand awareness, drive conversion and increase revenue, especially those in the consumer goods space. In Gartner’s 2023 CMO Strategy and Spend Survey, consumer products CMOs allocated 7.4% of digital paid media budgets to retail media networks, affiliates and co-op advertising. The benefits of retail media such as first-party data sourcing, precision targeting and quantifiable ROI are apparent, supported by sufficient budget allocation to optimize conversion rates (see Figure 1). As new retail networks launch, more first-mover advantages will occur for brands that invest early and often in these new networks. Figure 1. CPG Budget Growth Bounces Back Concurrently, the rapid expansion of retailers launching retail media advertising networks requires CMOs to navigate many siloed systems to optimize media buys. Previously, retail media advertising only supported on-site sponsored search results to improve product page visibility on retailer websites. However, it has since expanded to include everything from social media to over-the-top (OTT) advertising of retailer websites. Networks provide unique insights to brands based on consumer purchase history. Networks are highly valuable now due to recent privacy law restrictions, and the planned Google deprecation of third-party cookies makes for an uncertain digital media landscape. Retail media advertising has expanded outside of brands that only sell products on retailer websites, as other industries are able to target highly valuable retail customers with their own services. CMOs must be the driving force to develop their organizations’ retail media advertising capabilities and strategy, especially as the need for differentiation continues as the market gets saturated. Prioritizing retailers, establishing internal team responsibilities and having proper agency support will enable retail media advertising to become a reliable growth channel. Retailers are running toward RMNs, but challenges persist Retail media offers greater purchase conversion tracking advantages compared to mass media, but it can be more difficult to scale. Retail media audience size is limited to each retailer’s customer database, which pales in comparison to the audience that mass media sources can provide. From agency partners to ad buyers to creative marketers and more, there are a lot of hands in the pot. Retail media can be complicated to manage because more cross-functional teams are involved in retail media decisions (e.g., sales teams, shopper marketing, etc.) compared to traditional paid media strategic decisions (see Figure 2). Figure 2. Example Retailer Media Workflow Structure Staffing and upskilling an organization to effectively leverage retail media networks has its challenges. Only 19% of marketing leaders stated retail media advertising is an effective sales driver in the last year for physical third-party sales channel partners, according to the 2023 Gartner Multichannel Marketing Survey. The same survey revealed that almost half of multichannel marketing leaders said that not having the right mix of specialists and generalists is a major impediment to successfully executing retail media advertising. Retail media advertising is also new for media agency partners. Gaining new skills to evaluate performance by retailers and navigating a fragmented network ecosystem take time to learn. Consumer goods organizations can support their agencies by establishing clear internal processes and workflows on retail media advertising that make adding or removing an RMN more seamless. Then there’s the complication of measurement. Cookie deprecation is driving indirect consumer brands to seek new sources of ad targeting and measurement data from channel partners closer to the point of sale. RMNs are structured to operate differently than marketers’ traditional channels. At present, there is no standard RMN measurement mechanism for brands to leverage, with every RMN operating as a walled garden. Concerns over walled garden power provide brands with incentives to explore media alternatives even when they can’t match the scale and efficiency of the largest retailers. A consumer goods perspective RMNs create expensive digital shelves for consumer goods companies, requiring more resources and budget. Paid media took up the majority of consumer product goods' (CPG) brand budgets in 2023; adding retail media to the mix requires multiple decision-makers, which complicates the process even further. Many consumer goods companies could use outside help, yet agencies and services receive the lowest percentage of the budget. Many CPGs are having trouble scaling RMNs. CPG marketing teams will need forward-thinking strategies to become better stewards. Identifying the retailers most critical to supporting organizational goals with their corresponding media spend can help consumer goods CMOs make strategic investment decisions on what retail networks to use and how much resources (both personal and budget) are required to support them. RMNs primarily benefit CPGs by reaching consumers on retailer websites at the point of purchase, yet more off-site media capabilities will continue to emerge as retailers seek to monetize their own channels. Placement in retailer emails or special programs like holiday promotions will challenge consumer goods leaders to determine what programs offer the best results. RMNs appeal significantly to the CPG industry because products are sold directly on the retailer websites, but other industries are beginning to test media on networks. Industries ranging from automobiles to insurance providers are testing ads on these networks to reach valuable consumers. As retail media capabilities scale and improve, it will become easier for non-CPG brands to participate in these networks for improved targeting and audience-building. Retailers try to grow private-label brands and retail media networks Retailers must endure the push-pull challenge to grow private labels (aka, store brands) while continuing to support national brands that consumers covet. The growth of private-label brands can clash with initiatives that retailers have to grow retail media. On one hand, the increased competition of store brands encourages national brands to increase investments in retail media. RMNs also provide new tools to show store brand ads to consumers. However, the downside results in fewer advertisers if store brands replace national brands. Multibrand retail CMOs who oversee RMNs in addition to private-label brands have the advantage of setting clear goals for both. CMOs who do not have responsibility over RMNs must work together with their counterparts to ensure the company’s overarching goals supersede any specific department goals. Private-label brands are critical for many retailers to differentiate their offerings and keep their pricing competitive as many consumers are trading down to combat inflation and higher pricing. How CMOs can get started on leading their teams through the realities of RMNs CPG CMOs can lead their marketing teams by engaging with cross-functional team leaders to better define the roles and responsibilities each has in retail media. To more efficiently spend and effectively structure your organization to participate in retail media advertising, CMOs should evaluate their organization’s current maturity level. Do this by assessing the current state across five dimensions: retailer prioritization, team and role structure, media measurement, budget optimizations and audience segmentation. Start this exercise at the senior leadership level and obtain cross-functional team feedback in your discovery assessment. Include key internal stakeholder teams responsible for media advertising types like social, programmatic display advertising and OTT. External agency partners can be looped in after your organization has defined budget and strategic objectives for your agency to help build your retail media advertising strategy. Different steps are required, depending on your organization’s internal and external retail media maturity. For example, if your organization’s internal RMN knowledge is low but your media agency's RMN experience and ad-targeting capabilities are high, focus on internal organization buy-in and strategic direction before building an RMN priority list. This story is part of Adweek’s Beyond the Transaction special feature, which spotlights the people and strategies driving business growth and brand awareness.

Voice

The CMO’s Guide to the Current and Future State of Retail Media Networks

As new retail networks launch, more first-mover advantages will occur for brands that invest early

Greg Carlucci

Brad Jashinsky

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