Digital Signage 2: This Year’s (Business) Model
This is the second in a multi-part series of RetailWire discussion articles on the growth and deployment of digital signage and kiosks at retail.
Within the digital signage community there is a very real debate going on as to the nature of the beast.
Many see the medium through the lens of media buyers believing that its business proposition is ultimately about bringing brand advertising to store level. Members of this school express themselves in measures such as CPM, frequency, gross rating points and reach.
Others see digital signage in a transitional stage where the medium is moving from impression-based ad networks to merchandising networks focused on moving product.
Chris Riegel, chief executive officer of STRATACACHE, recently told RetailWire, “Retailers have come to understand that this technology has a much more direct impact on their product sales than they had originally thought.”
Instead of using the technology to allow others to advertise in stores, retailers, said Mr. Riegel, are beginning to view digital signage as “a critical system they want to own, manage, control and use for merchandising.”
Mike Abbott, president of ADFLOW Networks, said digital signage and touchscreen kiosks provide retailers with “a tremendous opportunity to influence customer behavior at the point of purchase (POP), measure it and adjust marketing at POP to optimize the customer experience and maximize the return on expenditure.”
Accurate measurement, whether in ad or merchandising networks, is critical to the success of digital signage in stores, according to Linda Hofflander, chief marketing officer at Wireless Ronin Technologies.
“Proof of play is of interest to those with an advertising revenue model,” said Ms. Hofflander. “Most advertising agencies and marketers are used to getting some kind of documentation that says this is what happened and it’s verified because that is historically how it’s been done through broadcast and radio. So they’re looking at it, if I’m spending my marketing dollars on this, what are you going to give me to document that it’s been done? It’s the reason that Arbitron, Nielsen and others have gotten into digital signage measuring because they see it as a growing medium.”
Developing a merchandising based network speaks more directly to the real needs of retailers, according to Mr. Riegel. “There is lot of fuzzy logic out there where vendors will say there is organic value in the technology because the customer looks at it. Counting the impressions is something I want to know but to a retailer, what I want to know is how does that affect the sale of products. At the end of the day retailers are there to sell the product. Unless I’m helping you sell a product and continuously sell a product, I’m expendable.”
Discussion Questions: Do you see digital signage as more of an ad or merchandising medium? Are the two features mutually exclusive or do you see a way to balance the two business models with in-store networks?
Clutter is the number one characteristic of communication in most stores, recognizing that packaging itself is the #1 communication device. Talking about digital media as if it is suddenly providing the opportunity to communicate with shoppers is a tragic mistake. The second prominent characteristic of in-store media, possibly related to the first, is that it must work with blazing speed, most likely seconds.
To me, the only reason people are turning to brand building as a role of in-store media is their abject failures to promote immediate sales. And this failure is due to very poor understanding of the shopper IN THE STORE!!! If you can’t close the sale, you are part of the clutter–stop kidding yourself.
The two features, ad and merchandising, are not mutually exclusive, in fact they are very compatible. Consumers are bombarded throughout the day with brand messages. Reinforcing and reminding the consumer about brand attributes at retail can help sales. At the same time, using digital signage and kiosks to merchandise can drive sales. The key is to provide consumers with quick, compelling messages that enhance the shopping experience. Advertising and devices that make the shopping easier and faster are what is needed.
Brand marketers need to adapt their messages to this new medium. Their messages should be immediately actionable. Retailers should combine complementary messages to create a theme. Again, all communication should be focused on the shopping experience.
As a vendor of digital signage systems and services, I can tell you that less than half (about 45%) of our 120 or so clients that have screens in retail settings do any 3rd-party advertising. However, ALL of them show some kind of merchandising-related content, and I’d say fully 1/3 of them are exclusively used for merchandising-oriented purposes.
The two are not mutually exclusive, and the trend is hardly new–our very first retail network with Bass Pro Shops way back in 2002 followed a 70/30 merchandising/advertising formula that many of our other clients continue to find ideal today.
Digital signage works best at store level as in-store merchandising. If there is a brand message that works with the category, it will underscore the value proposition for the brand, and lift the category as well–and be welcomed by retailers.
But at the end of the day, it is retailers that decide what will be on their store shelves. The retailer determines the store experience–including selection, package preferences, product placement, shelf set and Private Label positioning. As the power of digital media becomes understood, retailers will find increasing ways to further differentiate with in-store merchandising.
“Both” is such an appealing answer–particularly to an ex-CPG marketer. And there is a case to be made for that. But this also comes down to semantics in the end.
Like POP of any sort, in-store digital media fundamentally provides a message to consumers. It can be a brand equity oriented message, a value oriented message or simply an “announcement” of some kind.
What makes in-store communication so impactful is that it lives at the point of final consumer decision. What makes it work is whether or not it communicates something that is relevant to the consumer at that point. Whether you believe 30% or 70% of “purchase decisions” are made at the shelf, we all know this is just part of a larger purchase decision making process. So the compelling message at the shelf is the one that will “close the deal.” Telling me TIDE will get my clothes whiter and brighter may only be relevant if I just stained my only dress shirt. Telling me TIDE is triple concentrated and will do three times as many loads as that huge private label bottle sitting beside it may be relevant more often–particularly if I’ve never seen 3X detergent before. But telling me TIDE is on sale BOGO will almost always get my attention. That’s why dunnhumby and other tracking studies show 10 second communications of concrete offers to be the most effective for moving product off the shelf.
So, in typical long-winded fashion and with some remorse, we must conclude that the pendulum tips in favor of merchandising.
Digital signage in retail stores
Must be controlled and not be eye bores.
If there’s overkill like in campaign ads
Their merchandising value could be sad.
By virtue of its location, the ability to correlate its behavior directly to sales and the transactional nature of retail, I believe digital signage is fundamentally a merchandising medium. Creative, metrics and execution should focus on driving sales in the near term for customers in the store. While exposure and awareness are good, the shopping environment isn’t the best place for traditional advertising: shoppers are focused on executing the tasks they need to get done and the environment can be extremely cluttered and chaotic.
However, creating a firm line between merchandising and advertising does set up some challenges: merchandising tends to focus on the specific offer rather than the brand benefits and brand messaging tends to ignore closing the sale. Digital signage offers the chance to create a branded message that puts the offer in context and closes the deal and it will be interesting to see how that plays out. However, at the margin I believe necessary to prove its value, digital signage needs to have a direct, attributable link to sales and not be afraid to ask for the order. With real time metrics we’ll then be able to find the right balance between brand and direct that drives the highest value over time.
Retailers are selling themselves short if they are not using their in-store media networks for both categories. Obviously a way to optimize the content is to split ads and merchandising 50/50. New product launches and exclusives benefit from the splash they get when flashed across screens. Ads can be optimized to reflect what is currently on this week’s flier or to overstocked product that could be cleared out at retail instead of an aggressive markdown. Either way, there has to be a healthy mix of ads and merch so the consumer doesn’t get bored.
I would second Lisa–if you take the approach of merchandising first, with ads as a “bonus,” then I think you capture the best of both without selling the merchandising portion short. Right now, particularly in verticals where there are a lot of brands at play, like grocery, there is too much emphasis on the ad model, to the detriment I believe of the industry overall. Verification and traffic counts or “eyeballs” lead everyone to focus too much on the wrong things. This isn’t about CPMs–this is about selling stuff. Moving product.
While it is true that you can learn some really interesting things by looking at it through an advertising lens–things that could be transported back to TV and even online, it is a fundamentally different space. The distance between message and consumer response is MUCH shorter, and strategies should be developed that take that into account much more than a straight ad strategy ever could.
This discussion is perhaps the best collection of commentary I have yet read on this topic. Congratulations to Bill, Ben and others above who have added clarity to the dialog. We have evidently come a long way in understanding the impact and value of shopper media.
I agree that the “ad medium” vs. “merch medium” discussion is not about either/or but a matter of proportion. Audience measurement may be necessary, but it is not sufficient.
Let’s add another dimension for consideration: How will digital shopper media vary in impact and value in different shopping environments (retail channels) and for different shopper trips?
A digital sign in a grocery store may be designed to promote instantaneous choice between competing detergents using a repeating eight-second spot, while the same hardware located in a sporting goods superstore aisle may play 30 seconds of detailed product attribute content about a premium hiking shoe. The same digital sign in a shopping mall passageway may promote a sale in a jewelry store down the row in order to drive traffic.
Same device–different contexts–different intentions–therefore different required measures of success. This is not one business model, it’s a class of models. There is not one metric to consider, there is a set of metrics to be applied with appropriate discretion. There will not be one winning formula, there will be several.
Oh, and did I mention this is NOT TV?
Almost everyone is right…and everyone is wrong–but that’s because of the way that the question has been framed. Any in-store communication should start and finish with the customer and not with the retailer or advertiser. Customers don’t define communications as merchandising or advertising or whatever. To them it is just stuff that intrudes on their lives but will either make their life easier or harder. By and large, they see the retail environment as cluttered and overbearing (at least in the grocery sector.)
Generally, the advertising model hasn’t worked full-stop for the customer because the only thing they are interested in in-store is, as someone has written, “what’s the deal?” They don’t want to see brand-equity building messages; they don’t want to see beautiful footage of food; they don’t want to know that it’s raining outside.
First, foremost and onlymost, retailers should be asking:
– “how does this medium benefit my customer?”
– “how can it help me fulfill my business objectives?”
If the retailer can answer both of those questions positively, then who pays is clear: the retailer–and then they can make sure they get it right.
I second Graham here. We are debating advertising vs. merchandising as the two key business models but the question should be, “what message is the right message?”–not how it’s categorized and sold. It’s just confusing because we are all trying to make it fit within a current “media box” and the challenge is that it’s a NEW media–and therefore its own thing. We will likely have this same debate as more two-way and personalized in-store technologies become adopted. When we do, my gut is that we’ll see many different uses for each and every store media–hopefully based on an underlying business and shopper strategy that is unique to each retailer’s challenges.
Digital signage is a tool, and its highest and best use in a given environment will always be determined by the objectives of the retailer. Based upon the experiences of our retail customers, I can offer that both approaches, pure retail brand building (merchandising) and ad supported, can be effective. As always, execution is the key.
Interestingly, we have seen that even in approaches that are skewed toward advertising, it is far more effective if the ads run adjacent to the items in question. “Power lanes,” end caps and promotional displays are natural adjuncts to video content. So even ad-based strategies need to consider merchandising to optimize effectiveness, and the need to differentiate messaging based upon store location is clear. To make the analog comparison, printed signs usually appear in two places: where everyone sees them, such as the store front, and adjacent to the promoted item(s). It is probably safe to take a similar approach with digital content, understanding that traffic flow, merchandising philosophies and environmental constraints vary from format to format. Like we have done for decades with merchandise and advertising, retailers should test, assess results and adapt.
I am a little late commenting on this topic, but it is a topic on which I have a lot of experience.
Be assured, every advertiser wants to be able to measure the effect of advertising on the actual movement of product. Despite many models for doing this, the advertisers still scratch their heads and wonder to what degree advertising is really working.
As we are able to move the message closer to the shelf, it becomes significantly easier to make that measurement. It doesn’t matter if the message is considered advertising or promotional. If the effect of advertising can be measured on package by package movement, it will. If the in-store advertising generates a real ROI, more money will be moved from traditional channels to in-store and there will be no discussion about whether this is advertising or merchandising.
The same goes for the retailer. If the numbers show that this is an effective vehicle on moving more product, the retailer will emphasize more participation by the marketers.