Developing a Marketing Enterprise in Three Simple Phases
In the digital age, harnessing the power of first-party customer data is crucial for small retailers looking to monetize their data and build an advertising business. This approach, similar to Amazon's retail media model, can be achieved through alliances or federations that pool audiences and standardize offerings, thereby gaining scale to attract brand advertising budgets.
The First Step: A First-Party Data Audit
The first step in this journey is a comprehensive first-party data audit. This process involves identifying where data resides, access to it, usage restrictions, and the level of segmentation. The goal is to increase the value of first-party data, build customer intelligence, and potentially start a new revenue stream.
Forming Retail Media Federations or Alliances
To aggregate shopper profiles and offer advertisers national or regional scale with fewer operational challenges, small retailers can form or join retail media federations or alliances. Examples include consortiums like Rippl involving multiple regional grocers with millions of customer profiles.
Building Strong First-Party Data Capabilities
Effective audience segmentation and targeting are essential for advertisers seeking detailed shopper insights. Building strong first-party data capabilities is, therefore, a key step in this process.
Developing a Mix of Ad Formats
A successful retail media business requires a mix of digital and physical ad formats. This could include on-site product ads, in-store screens, connected TV ads, and partnerships with platforms like TikTok or Google to extend ad reach across the customer journey from awareness to purchase.
Establishing an Operating Model
An operating model that aligns retail and media teams, incorporates real-time measurement tools, and uses data clean rooms for secure data collaboration with partners is essential. This model should also link ad spend directly to incremental sales through programmatic retail media platforms that allow real-time bidding, targeting, and measurement using verified purchase signals.
Implementing Self-Service Tools and Managed Services
Self-service tools and managed services for campaign planning and execution, as well as testing platforms to optimize campaigns with A/B experiments, are invaluable in this process.
The High-Margin Potential of Retail Media
Retail media can offer a high-margin business, surpassing traditional retail margins and providing a significant revenue stream beyond transactional sales.
While many smaller retailers lack the ad tech sophistication of Amazon, collaborating through federations or alliances and adopting programmatic techniques can help them compete effectively by scaling their first-party data assets and media offerings.
This approach also addresses the fragmentation problem in retail media, making it easier for brands to run campaigns across multiple smaller retailers through a unified platform rather than managing many isolated campaigns.
Privacy Considerations
Privacy is a paramount concern in this process. Configurable privacy controls should be available to tailor access based on trust. The technology partner should engage with IT, infosec, and legal teams to explain how their technology protects consumer privacy while preserving data utility.
The term "privacy actives" refers to a highly valuable cohort that prioritizes transparency and choice in consumer data collection and use. Every company has valuable digital real estate, and recognizing and catering to this cohort can lead to fundamental improvements in the core business.
The report titled "Collaborative Data Solutions: The Evolution of Identity in a Privacy-First, Post-Cookie World" by the Winterberry Group emphasizes trust as a key factor in evaluating data collaboration solutions.
Examples of Success
Starbucks could serve as an example of a company that started small and grew into a media entity. Amazon's advertising business generated $7.95 billion in Q4 of last year, demonstrating the potential for retail media to be a lucrative venture. Even a small coffee roaster in Brooklyn has displayed links to direct-to-consumer startups, suggesting potential growth in this area.
Brands are creating differentiation and value by prioritizing transparency and choice in consumer data collection and use with the emerging cohort of "privacy actives." Improving data and customer intelligence can lead to a better understanding of the target audience and the ability to build direct relationships with them, safeguarding the ability to understand the target audience and build direct relationships with them.
The lifecycle of building a retail media business starts with a first-party data audit, followed by forming or joining retail media federations or alliances, building strong first-party data capabilities, developing a mix of ad formats, establishing an operating model, implementing self-service tools and managed services, and recognizing the potential for retail media to be a high-margin business. By following these steps, small retailers can compete effectively in the retail media landscape.
- To make the most of first-party data, it's essential to conduct a comprehensive first-party data audit, identifying where data resides, access to it, usage restrictions, and the level of segmentation to increase the value of the data.
- Small retailers can team up by forming or joining retail media federations or alliances to pool shopper profiles and offer advertisers national or regional scale with fewer operational challenges.
- Effective audience segmentation and targeting are key for advertisers seeking detailed shopper insights, making building strong first-party data capabilities a crucial step.
- To create a successful retail media business, a mix of digital and physical ad formats should be developed, such as on-site product ads, in-store screens, connected TV ads, and partnerships with platforms like TikTok or Google.
