Retail media is rising up the agenda, with brands dedicating more spend to performance channels. Cara Pratt, SVP at Kroger Precision Marketing, talks to Alex Brownsell for WARC Marketer's Toolkit 2021 about how the grocer is using customer data to close the loop between ad investment and customer purchase.
What are the key trends that you're seeing in the media and marketing industry post-COVID-19?
Some of the [key trends] aren't necessarily COVID-19-driven. Marketers really want to hold media to a higher level of accountability. Proof of performance has been a long problem in the media industry, and the days of relying exclusively on mix models from an evaluation [perspective] or trying to force a linear connection in what historically has been some softer metrics – whether it's brand recall or intent-to-buy-type metrics – is starting to go by the wayside, frankly.
Another area is around food inspiration. In today's world, where families are moving at such a fast pace, how do we create a tighter connection between content experiences that can happen across so many different domains and create shoppability in commerce platforms? We started down this path over the last couple years, hooking in and creating relationships with the likes of Pinterest, and the same with Meredith, which we announced earlier this summer, connecting the number-one recipe site in the US to the number-one grocer in the US at Kroger.
Specifically on the COVID side, brands are trying to build upon the momentum that they've realised with some shoppers that are new to the category or new to the brand. More often than not [that initial purchase arose from] an out-of-stock or something else. Brand marketers want to understand how they can they continue to create that relationship with a customer that is new to them. Retail media assets have the ability to create meaningful moments across time. [We can] create these experiences where we can unlock a message and sometimes unlock an offer to drive repurchase.
The last thing is flexibility. Brands have had to shift a lot this year. Sports relationships have had to wind down for a period of time. The Olympics got pushed out. Social media platforms have gone through quite a bit change. The Upfront models [have been] completely uprooted for traditional linear TV. That is bringing in a whole new mindset of flexibility for media dollars.
How does Kroger Precision Marketing work with brand advertisers?
- Over 95% of Kroger’s sales are ‘tethered’ to a household identifier. This deterministic, first-party data is enabling CPG brands to target relevant consumers and boost sales.
- The content experience must be customer-led. Kroger Precision Marketing does not allow brands to bid on keywords, as 85% of its most popular 500 searches are unbranded.
- A test with Roku found that targeted consumers exposed to ads spent five times more on participating brands than the average shopper, seven out of 10 of which had not bought the category or the brand before.
We have the ability to create a connection between audience and commerce, and measure that end-to-end. Our commitment into the media industry is driving a higher level of addressability, actionability and accountability on how those dollars are performing, who we’re communicating messages to, and what that does from a brand performance standpoint.
When we engage with CPGs directly – whether it's their e-commerce team, the brand marketing team, their shopper marketing team, or with their respective agencies – what we speak to them about is an ability to leverage our audience intelligence. For over 2,800 stores across 35 states, 96% of our sales are tethered to a unique identifier. That unique identifier allows us to be really tight on who we want to communicate what message to deliver against the brand objective. Maybe a particular brand wants to drive buy rate among an existing base. Maybe they want to drive awareness and support household penetration for net incremental buyers. Regardless of their objective, we're using this really rich intelligence [to] evaluate behaviour change over time.
It all dovetails together in this closed loop: deterministic data on the audience, expose the marketplace across a myriad of channels, measure performance, and bring that accountability commitment back into the advertiser.
One of the big trends bubbling under at the moment is the impending death of the cookie as a means of delivering targeted advertising. How are advertisers changing their data strategies?
The privacy regulation that's coming forward is fantastic, frankly. Work needs to be done to create the right experience and value to the end recipient of content. Bringing more accountability into brand safety, and removing wasted impressions, is really critical in this industry.
From a cookie perspective, first-party deterministic data is the power through that [change]. For over 100 years we have created a trusted relationship with our shoppers, and through that trust we have curated connection points with them. That's given us the credibility to continue to extend into new ways where customers can engage with our assets. When we think about the work that we do in the email channel, we’re getting really specific in what content we want to share with our shoppers that's going to create that energy, that spark and have them action differently. We see really high open rates because we're not flooding inboxes with irrelevant content.
A quick word on the sort of content side as well. How are you helping brands to be more distinctive on the digital shelf?
The digital shelf is really important for brands to both show up in, and to create this inspired connection. We do it in a couple of different ways – one through traditional product listing ads, where personalisation science is feeding audience recommendations and placement recommendations, as well as on the display side.
One of the areas that we think is really important is relevancy. For Kroger, if a user isn't making those [purchase] selections, we're making their buying more difficult online, and they're not going to want to continue with that experience with us. As we think about how CPGs can influence a digitally-constrained shelf, we let our personalisation science lead, and then we let CPGs tailor behind that. A prime example: we don't let CPGs bid on keywords on our environment. From a consumer standpoint, it doesn't make sense in our environment, [as] 85% of our top 500 keywords are unbranded search terms. People in grocery aren't coming in and looking for a particular brand of cookie or brand of cheese, predominantly they're looking for the category and then to explore. We [also] don't think it's an effective use of spend, and I don't think it's appropriate for brands to have to spend dollars to avoid competitive conquesting. We want the customer experience to lead.
The other area is we have a unique understanding about how people shop for innovation. We have an opportunity in this digitally-constrained shelf to create signals on customers that may be more interested in innovation, and will use that [data] to expose them to new CPG offerings. That's where this blended play of content and inspiration can more naturally or natively show up on screen.
We’re hearing that marketers are changing the balance between brand-building and activation spend, with a greater emphasis on performance and short-term KPIs. Is this something you’re seeing from clients as well?
Absolutely. Every dollar invested matters. There are different use cases for investment, and the return on ad spend that brand marketers expect to get for converting a competitive buyer versus increasing buy rate among somebody that's already an existing customer. But, in the end, it's all around performance and conversion. That's why retail media offers a really great lens for brand marketers, not just in what some would look at as lower-funnel conversion tactics, like in the owned and operated space, but also driving that accountability further up the chain that traditionally has been haloed around awareness and affinity-type metrics. Closing that loop and shortening that connection between an ad and a buy is what's critical.
We've been really intentional with some of the relationships that we've come forward with of late, and I'll take Roku as a prime example. We announced a relationship with them earlier this summer. Why? TV viewership is increasing for the first time in nearly a decade. Roku, from a streaming standpoint, is the leader. How can we create an experience that matters in what's traditionally looked at as a brand awareness channel? Some of the early results are coming in and it's been fantastic to watch the excitement coming through from advertisers and their agencies.
In one case, where targeted consumers were exposed to our advertisements through this channel, they spent five times more on the brand than the average shopper that was unexposed. Seven out of 10 consumers that we exposed had not bought the category or the brand before. The ability to work that level of conversion and value together to that investment on that channel really speaks to how performance can happen further up in the funnel, in spaces that didn't provide the right visibility into performance before, or they were doing more of a scattershot approach to their exposing to their advertisements.
Are you able to give any examples of how brands that have benefitted from investing in retail media?
Over a thousand brands have activated on Kroger Precision Marketing over the last three years, many of which are coming back every year. We’re seeing conversion that's 10-20x what [brands] would normally see. From a search perspective on O&O, we’re commonly seeing minimum 3x but often 5-8x ROAS. Why? You're further down the funnel. We've got a personalisation science that's feeding the relevancy to that offer release. That all tethers back to how personalisation and the investment side of search – organic and paid – have to come together in a really cohesive way, where we're focused on the customer outcome and the engagement side. We're not focused holistically on a CPG advertiser manically wanting to exclusively look at net incremental households and cannibalise [their sales], or overplaying the paid search side of it.
What trends do you expect in retail media next year and beyond?
Two things really come front of mind for me. One is around shoppability – more shoppable moments that shorten that connection between an ad and how somebody can actually transact. We're going to see more of that happening in video and addressable TV and social and audio, because you get a double accelerator for that dollar – the best of what [those channels offer], around heavy branding and content, and the best of what retailers can bring, which is a commerce platform with audience intelligence and measurement commitment.
The second is around unified success metrics. Brands have been evaluating media dollars for decades and they look at them very differently. We believe that a dollar invested is going to be unified a bit more consistently across the different buying teams. You look today at an e-commerce dollar versus a shopper marketing dollar versus a national brand investment dollar, the expectation of that dollar invested differs significantly for many organisations. Ultimately, those are the same $3 that the top of the house is making decisions on. We're actively engaged in conversations with CPGs around this whole topic, and we know many CPGs are having that conversation too.
Finally, can you see retail media becoming more commonplace in categories beyond CPG?
I think there's a lot of opportunity for non-endemics to build off of traditional CPG data and use this information to make their advertising work harder. We do work in some other verticals, [but] we purposefully don't speak about it [yet]. These are really nascent spaces that we're exploring, but ones that we think will be important two- to five years from now. Certainly this isn’t a unique space where we can't transcend that learning into other investment verticals.