How retailers offering online advertising can strengthen customer and supplier ties

In the rapidly evolving retail landscape, retail media networks (RMNs) have emerged as a pivotal opportunity for data-driven advertising, enabling retailers to leverage their first party data and digital presence to offer highly targeted advertising.

To level set, RMNs are retailer owned channels that serve paid advertising to their first party customer data. There are many established RMNs in the marketplace today, with Amazon and Walmart being amongst the largest. Shoppers visit the retailer platforms in-store and online across all product categories. There, relevant ads connect buyers to brands and promotions which could lead to a conversion in sales. In effect, the RMN becomes a paid influencer, funneling buyers to the brand by leveraging the retailer’s first party data. In exchange, the RMN capitalizes its web traffic and ecommerce data to produce income beyond its own direct sales of products.

According to a forecast from McKinsey, RMNs could amount to $100 billion in ad spending in the U.S. by 2026. The fusion of RMNs with data and analytics heralds a new era of consumer engagement, offering a plethora of benefits and untapped potential. Here are just a few of the benefits:

Enhanced loyalty: The foundation of an RMN is built upon the rich data ecosystem that retailers possess, encompassing customer behaviors, preferences, and purchase histories. By harnessing this data through sophisticated analytics, retailers can create highly personalized advertising experiences that resonate with consumers and drive engagement. Such interactions foster a deeper connection between consumers, retailers, and suppliers, and enhance loyalty across multiple dimensions.

New revenues: RMNs can identify and nurture new revenue streams by aligning consumer affiliation with brand objectives, thereby driving both online and in-store traffic. The measurement of incremental return on ad spend (iROAS) in a closed-loop system ensures that advertising investments yield tangible, measurable results.

4 key traits of a superior RMN

Considering brands’ high expectations and fierce competition, the key challenge for RMNs is differentiation. To stand out, RMNs must unlock the full potential of their first-party data, delivering actionable insights that provide real value to customers, brand partners, and suppliers. There are certain success factors to execute a measurable and impactful RMN strategy:

• Cross-functional team alignment: RMNs serve as a platform for brands to engage with shoppers at various touchpoints throughout their shopping journey. So, the first order of business is to align cross-functional teams with the brand’s unique identity and mission. When teams across different functions, such as data science, analytics, marketing, product development, sales, and customer service, are aligned with the brand's purpose, they work cohesively toward common goals. This consistency ensures that analytics workstreams contribute to delivering the best products and services and that every advertisement, promotion, or piece of sponsored content within the network accurately reflects the brand's values and messaging. It helps build trust and credibility among both advertisers and shoppers, enhancing the overall effectiveness of the network.
   
• Customer-centricity: According to Wharton professor Peter Fader’s book Customer Centricity: Focus on the Right Customers for Strategic Advantage, “Not all customers are created equal.” Customer lifetime value (CLTV) demands that you effectively allocate marketing resources across the customer base, paying close attention to how much acquiring a new customer costs. Targeting customers with a high CLTV is one of the bedrock ideas behind customer centricity. 
  
  This may be the most effective way of using your RMN to reach its top-producing customer base. By prioritizing high-value customers, you create strategic advantages throughout the value chain, build better relationships between customers and both retailers and brands, and serve the consumers most likely to make a purchase.
   
• Seamless marketing execution: The outcomes of analytics—such as accurately profiling top-producing audiences, segmenting a target audience based on training your RMN through deep learning models, and arriving at the best recommendations—must be integrated seamlessly into your marketing execution. Collaboration between data science, analytics, media insights, and ad sales teams is essential for effective implementation. For example, data insights can be leveraged to deliver relevant and targeted advertisements to shoppers, making their shopping experience more enjoyable and rewarding. This personalized approach increases shopper satisfaction and encourages repeat purchases, ultimately driving higher revenue for retailers and advertisers.
   

• A closed-loop infrastructure: A closed-loop infrastructure, linking data, analytics, campaign execution, and measurement, will not only safeguard customer information and privacy, but also enable robust testing, learning, and comprehensive omnichannel visibility.

  Establish a rigorous testing and learning agenda to measure the effectiveness of analytics and advertising. Through ongoing testing and learning, network innovation and adaption can be accelerated. Over time, your RMN will increasingly deliver exceptional value to all stakeholders in what has always been a highly competitive and dynamic retail landscape.

  Lastly, a closed-loop design can generate a comprehensive omnichannel view of online and offline activity, easily tying media exposure to each variable purchasing channel for effective iROAS measurement.

It comes down to data-driven insights driving measurable success

The RMN opportunity continues to grow by offering new revenue sources for even smaller retailers and brands. It now becomes critical to focus on the potential synergy between analytics and RMNs, delivering the ability to transform how we sell to our consumers. To fully harness this power and differentiate in the marketplace, a successful RMN must not only focus on creating data-driven insights that support the brand identity and mission, but also on identifying the right customers, the best marketing resource allocations, and the most appropriate approaches for seamlessly executing marketing strategies. All these goals are possible using a closed-loop infrastructure of data, analytics, campaign execution, and omnichannel visibility, leading to measurable success.

Authors

Lucy Zhu
SVP of Data Analytics & AI

Sangeetha Chandru
Senior Vice President Analytics