Future-Proofing Retail Media: The Customer Connectedness ModelMarch 5, 2020
by Peter Moustakerski
How retailers can re-architect their systems and data infrastructure to successfully build lasting personal customer connections – and become media companies
Though the Internet has upended the way consumers research and buy almost everything, according to U.S. Census data, a full 90% of transactions still take place in brick-and-mortar stores – especially when shopping for groceries and everyday household products. The physical store offers the kind of engagement that virtual venues simply cannot
replicate – a tangible, tactile and personal experience. Marketers have long understood this unique quality of the store environment, and they jockey for positioning inside the store in the same way they bid for premium broadcast placements. “Winning at the shelf” is a core marketing strategy for brands. They’ve learned to treat the store as a defacto media channel.
They’re not wrong. The store is a medium, and it presents unique benefits for retailers and marketers, particularly in today’s world of shrinking attention spans, time-starved consumers, and increasingly fragmented media channels. In the store, retailers and marketers encounter consumers directly and personally, fostering strong connections that translate into loyalty and increased sales. At a time when brand managers worry about the incrementality of the next TV ad, the viewability of digital media or contextual relevance of out-of-home signage, the store presents an attractive alternative – a medium that can deliver a relevant, personalized message in the right context at the right moment. This is why we believe the time is right for retailers to collectively transform their stores into a mass-media network that can rival the reach and impact of TV and digital, while offering real-time personalization and performance accountability.
In this series, we will discuss how retailers, as the supply-side “publishers” in this future media model, can effect this transformation – the practical steps individual chain operators, as well as the industry as a whole, can take to seize this unique and timely opportunity.
We believe three factors are necessary for any system to develop into a mass media network (see Figure 1):
Interconnectivity. Unifying fractured channels and pools of data into a universally connected ecosystem powered by customer intelligence. For retailers, this means integrating disparate systems, vendors, identities and channels into a flexible, open-platform customer communications architecture. That is the focus of this article.
Engagement. Providing valuable and contextually relevant utility to customers. This means redesigning the retail store to incorporate digital and analog touchpoints consumers are likely to engage with, and connect these in-store experiences with the rest of the shopping journey. We will cover this topic in an upcoming article.
Standardization. Removing unnecessary friction by adopting standards for buying, activation and measurement of retail media. This means creating a consistent taxonomy of standard retail media and shopper marketing tactics, and providing uniform performance measurement data and KPIs across the industry, ultimately integrating retail media into
existing mass-media planning and buying networks. We will cover this topic in an upcoming article.
For retailers and consumer-goods marketers, driving sales by offering customers personally engaging experiences is the primary goal. Loyal shoppers not only drive revenue growth – they also become a valuable first-party audience that retailers can monetize as media. The key to succeeding at that in today’s fragmented world is: personalization.
The marketing industry is already making notable advances toward meaningful personalization across popular digital channels, such as web browsing, social networking, and e-commerce. Amazon has perfected the art of personalizing ads, offers and product suggestions based on its customers’ actual viewing and purchasing actions. And thanks to the broad deployment of tracking pixels, data management platforms (DMPs), and third-party data onboarders, digital marketers can create online and mobile campaigns that leverage customer activity data to deliver personally targeted messages along their customers’ digital shopping journeys. But this kind of contextually relevant and personalized
messaging has thus far remained elusive for offline marketers.
Retailers have the unique opportunity to bridge online to offline personalization. Retail audiences rival the reach and frequency of major mass media, with the added benefit of physical presence and buying mindset. Furthermore, retailers capture vast amounts of data about the consumer’s needs, preferences and actions. Their loyalty and transactions data hold deep consumer insights that can be leveraged for real-time one-to-one personalization at significant scale.
So why hasn’t this happened yet? What’s holding the industry back? In a word: disconnectedness.
Disconnectedness exists within individual retailer’s systems and databases, and more broadly between different retailers’ datasets and their knowledge of shared customers. The former is within the power of each retailer’s leadership to solve. The latter requires an industrywide mind-shift away from walled gardens and toward greater willingness
to share insights and touchpoints. In this article, we’ll focus on how we believe retailers can tackle the first form of disconnectedness, within their own walls.
Taming Fragmentation: The Customer Connectedness Model
Retailers have a unique relationship with their customers. They reach them often – sometimes daily – via traditional and digital media and in-person interactions. To manage these multifaceted communications, retailers rely on a plethora of systems and tools – some developed internally, some provided by third-party vendors. These have emerged over time, often focused on individual applications or channels, such as loyalty cards, emails, in-store messaging, load-to-card coupons, receipt coupons, etc.
For most retailers, this infrastructure was built ad hoc with no overarching design, resulting in fragmented data and overlapping systems. The legacy media model therefore has left retailers with a siloed view of their customer – the email marketing list is not connected to the loyalty card database, which is not connected to the segments
in their digital media DMP, which is not connected to the Catalina coupon customer database, etc. As a result, customers receive disjointed communication, irrelevant offers, and often outright annoying messages. Relevance and personalization remain elusive for most retailers.
News America Marketing (NAM) works closely with some of the largest grocery, drug, dollar and mass chains in North America. We developed the Customer Connectedness Model (see Figure 2) to help them classify the systems and vendors they rely on based on their respective functional specialty in order to re-architect their customer
The Customer Connectedness Model allows retailers to strike a balance between centralizing key functions to achieve consistency and interconnectivity, while creating an open architecture that allows applications and channels to be plugged in when they emerge, thus effectively establishing a future-proof marketing platform.
OUR MODEL ORGANIZES SYSTEMS AND VENDORS INTO 5 FUNCTIONAL AREAS:
Identity: Systems that unify, harmonize and connect all IDs, data and insights about the customer.
Signals: Tools that capture and deliver all data points and streams pertaining to the customer’s profile, preferences,
actions, location, etc.
Brain: Decision engines that analyze customer data to recommend what content is served where and when, and via which touchpoints.
Channels: Communication and media vehicles through which a connection with the customer can be established.
Content: Platforms that generate, aggregate, house and personalize all content and messages that can be delivered to the customer.
Identity: There’s only one you
Identity resolution is at the core of successful personalization. This requires an IT infrastructure that can present a single view of the customer – and thus a deep understanding of who they are, what they need, what they are buying, when and where. Connecting all data sources, decisions, messages and touchpoints to a central “single source of truth” for the customer is the keystone of cracking personalization.
This is already a hot topic in media and marketing. The emergence and increasing popularity of Customer Data Platforms (CDPs) is one manifestation of this trend. According to the Customer Data Platform Institute, the industry’s revenues are on track to hit $1 billion in 2019 (up from $640 million in 2018). CDPs capture and organize all information on a given customer, and associate this knowledge with a unique individual identity. They are distinct from DMPs, which anonymize and aggregate customer data in digitally addressable audience segments.
We believe retailers are best served by selecting one centralized identity-management platform and routing all customer information and interactions via that single view of the customer. The chosen centralized CDP should be flexible and sophisticated enough to connect to all customer and environmental data sources, receive algorithmic decisions and recommendations in real time, connect to a dynamic library of marketing messages and offers, and deliver personalized content across any channel that’s relevant to the customer.
Major enterprise software providers, like Salesforce, Adobe, and Oracle, are aggressively entering this space, adding comprehensive CDP modules to their marketing cloud offerings, and targeting a broad spectrum of industries and use cases. A number of smaller pure-play CDP players have also emerged, e.g. Optimove, Tealium, and Arm Treasure Data.
One vertically specialized player, serving major grocery and drug retail chains, is Eagle Eye Solutions. Founded in the United Kingdom in 2012, Eagle Eye’s investors include Tesco’s former CEO, Sir Terry Leahy. Former Tesco CMO, Tim Mason, is Eagle Eye’s CEO. Its AIR Platform provides a comprehensive ID-management solution for FMCG retailers that enables high-scale personalized marketing and communications with individual shoppers in real time and across all channels. The platform is deployed by some of the largest grocery retailers in the world, including the top three
supermarket chains in the UK – Tesco, Sainsbury’s, and Walmart’s subsidiary ASDA – and the largest retailer in Canada, Loblaw Companies. Eagle Eye connects to over 45,000 stores worldwide, and last year, generated over 150 million personalized offer permutations per week and managed the redemption of nearly one billion promotions.
NAM and Eagle Eye entered into a strategic partnership in 2019 to bring the Customer Connectedness Model to life for grocery, drug, dollar and mass retailers who are part of NAM’s media and marketing network. Tim Mason, Eagle Eye CEO, commented: “Eagle Eye and NAM are working together to offer brand owners and retailers market-leading promotions programming capable of delivering data-driven, personalized offers and messages to digitally-connected consumers across any channel in real time.”
Signals: Tell me more, tell me more
We’re surrounded by, and continuously generate, vast amounts of data from our mobile phones and other connected devices. But these data are only as good as the insights they translate into. If marketers can associate this knowledge to a single customer identity, they can create deep personal connections and delightful experiences.
Data signals in the retail environment emanate from a variety of mobile applications, browsing trackers such as cookies and pixels, and location-based signals from smartphones and proximity devices, such as beacons and Wi-Fi networks. Real-time data about the weather, traffic, pollution, pollen counts, etc. can all factor into a consumer’s shopping
Every consumer interaction generates rich behavioral and attitudinal insights captured by retailer loyalty programs and CRM tools. Even more valuable are the insights generated by point-of-sale (POS) transactions systems. The depth and breadth of these proprietary datasets is unparalleled, especially for large retailers – in 2018, Kroger, averaged 11 million daily customer visits, 97% of which were captured with a loyalty card. The power of these customer insights is multiplied by combining and correlating proprietary first-party data with second-party data from panel operators, like Nielsen, IRI or Kantar, or with third-party data onboarders, like LiveRamp and Experian.
The key to harnessing all these consumer data, in our view, is to flexibly connect all signals to the single view of the customer, which requires a CDP designed to accommodate plug-and-play connectivity to new data streams as they emerge.
Brain: A single-minded focus
Imagine what life would be like if every limb and organ in our bodies had a brain of its own and made decisions completely independently from the rest. That’s how today’s marketing systems are wired. No wonder personalization still results in disjointed, and even comical experiences.
A critical component of the Customer Connectedness Model is a single “marketing brain” – a data-science engine that decides who receives what messages or offers when, where and why. This analytical module enables successful, realtime execution of the retailer’s customer communication strategy. It is the nucleus of all strategic marketing decisions and actions.
But these analytics engines are routinely left to outside “channel vendors” to provide. They are often bundled with thirdparty media and marketing systems that only execute across a couple of channels. Leading marketing cloud platforms, such as Adobe, Salesforce, Oracle or Nielsen, which help retailers activate digital marketing via email, social, mobile and programmatic channels, each come with their own embedded analytics, segmentation and targeting tools and algorithms. The Catalina network of checkout coupons comes with its own customer segmentation and targeting logic, as do load-to-card digital coupons solutions by Quotient or Inmar. These “channel-embedded” brains often operate independently, and do not connect to the same data streams or customer IDs. Furthermore, their off-the-shelf targeting and personalization approaches often do not represent the retailer’s own marketing strategy and objectives.
Some large retailers have made data science and marketing analytics a strategic priority, and built their in-house proprietary decision engines. In 2015, Kroger acquired the data-science and technology assets of UK-based Dunnhumby to form its internal marketing brain unit, 84.51. However, that requires significant capital outlay and ongoing investments to keep these data-science and analytics capabilities fresh in a fast-evolving landscape. For most retailers, this is not a feasible strategy. Even the largest retailers are likely to realize they will not be able to build everything internally, and will need to rely on external partners to stay current in the analytics space.
We believe the business case is strong for a retailer to select one specialized provider as their single decision-making engine. Examples of best-in-class retail-analytics companies include Dunnhumby, Precima, CiValue or Quantium. These partners internalize and operationalize the retailer’s marketing objectives and business strategy. And they bear the
ongoing burden of investing in cutting-edge capabilities.
Channels: The medium is the message
Marshall McLuhan’s famous maxim rings true in the world of retail media – the marketing message and customer experience is certainly shaped to a great extent by the channel though which it is delivered. Traditionally, the marketing “tools” often ended up guiding the strategy, rather than the other way around.
But this model is unworkable in today’s world of fast-proliferating and fragmenting media channels – it produces incoherent and off-putting customer communications.
Marketing channels utilized by retailers today emerged independently, built by different vendors at different times. Thus retailers rely on dozens of disconnected mini-strategies, each activated in its own channel, rather than one coherent marketing strategy executed across channels.
And channels continue to proliferate – faster than ever. Every new channel presents exciting new opportunities to reach and engage customers in new ways. But they further divide the customer’s attention or fragment the target audiences. Emerging channels can be more engaging, but the audiences they reach are ever smaller. Today, achieving scale in any one media channel is virtually unattainable. An omnichannel marketing strategy is the only solution.
How can marketers broaden their reach, utilize technological innovations and behavioral trends, and provide relevant and timely messages to consumers? How do retailers execute a holistic data-science-driven marketing strategy across dozens of channels, without being constrained by the limitations of any one channel? We believe the Customer Connectedness Model offers the solution.
By selecting a CDP equipped with plug-and-play channel-activation modules and flexible channel expansion architecture, retailers can create a future-proof infrastructure that accommodates constant innovation, yet offers centralized coordination to deliver true personalization and meaningful customer connections.
Content: The medium doesn’t have to be the message
In today’s tech-centric world of marketing, the focus is often on the technology stack, the data science, the algorithms. Yet, content – be it product information, brand stories, consumer inspiration, marketing messages or offers – is the “lifeblood” flowing through the “veins” of media and marketing networks. Oftentimes, the ability to curate, customize, adapt and deliver content across channels is overlooked by marketing executives.
We believe each retailer is best served to select one cutting-edge content partner, such as News America Marketing, to be the “general contractor” responsible for aggregating relevant marketing content into the retailer’s ecosystem, and making it available for dynamic and personalized activation across all channels. A number of key capabilities are required to successfully procure and deliver large and diverse volumes of marketing content.
A best-in-class content partner should first have a large salesforce with access to brand advertisers, and deep understanding of their marketing needs, objectives and challenges. Second, the content partner should provide a broad network spanning retailers, media channels, and geographic market regions, thus delivering nationwide reach. Being part of a broader distribution network has many benefits to any retailer – it creates a multiplier effect and attracts broader pools of content that were not specifically intended for the retailer’s shopper audiences. News America Marketing, with its 300-strong salesforce across North America, is a major industry player in this space and excels at these key capabilities.
The right content partner also offers the ability to manage this content flexibly, providing creative asset management, cross-channel planning and execution tools, performance-measurement analytics and reporting. For example, NAM’s Freedom incentives platform openly integrates proprietary NAM channels, such as Checkout 51 cashback offers, with channels activated by third-party marketing services providers, such as SavingStar, Prodege and Catalina. We even integrate with individual retailers’ proprietary channels, such as the digital coupon programs of Meijer and,
soon, Southeastern Grocers. In this open-platform, interconnected content management environment, NAM is able to offer brand managers differentiated value-added features, such as cross-channel coupon anti-stacking and dynamic campaign-budget management. The Freedom platform also integrates with Eagle Eye’s AIR platform, allowing for realtime delivery of personalized content across all channels.
Finally, a world-class content partner is able to monetize the retailer’s marketing channels and offer a compelling revenue-share model. When working with NAM as their dedicated content provider, our retail partners are able to activate attractive new revenue streams that not only offset the IT costs of implementing the Customer Connectedness Model (happy CTO!), but also generate meaningful incremental profits (happy CFO!).
The Customer Connectedness Model, when implemented well, can flip Marshall McLuhan’s maxim on its head and allow marketing strategy to be in the driver’s seat, and to be executed seamlessly across channels. The Customer Connectedness Model creates a “method to the madness” for retailers – a simple and powerful “how to” roadmap for achieving the kind of IT transformation and vendor rationalization necessary to create a technology infrastructure and marketing ecosystem that allows them to communicate with their customers in meaningful, impactful and personal ways.