As technology transforms and enables the customers' purchase journey, the concept of "top of funnel" awareness building and "bottom of funnel" transactions is becoming blurred, causing somewhat of a collapse.
Customers have information when and as they need it and -- thanks to search, social and digital media in its entirety -- they're moving through the funnel faster than ever before. With the rapid growth of online options having accelerated over the past few years, traditional promotion and advertising approaches have been disrupted, requiring rapid response and innovation from marketers. Words like these may seem like Henny Penny, who cried "The Sky is Falling," to those who have been warned before of imminent change in an industry that has traditionally responded to new technologies only after they have been adopted and embraced by consumers.
The key difference today is that marketers have been more proactive in adapting their advertising and promotional strategies in sync with changing consumer needs and behaviours.
Rise of Retail, Global and Local Retail Media: At the Epicenter of Marketing 3.00
At the intersection of this shake up is retail media. As quoted by eMarketer's Andrew Lipsman, retail media is digital advertising's third big wave. For the foreseeable future, retail media will grow at a faster rate than all other media, including search and social media.
Dozens of retail media networks have launched over the past few years and according to Forrester's Predictions 2022 report, retail media spend will grow to $50 billion globally in 2022. eMarketer predicts U.S. retail media spend alone will surpass $50 billion in 2023, representing 20% of total U.S. digital ad spend, with 2021 retail media surging 53.4% to $31.49 billion, following a nearly identical growth rate in 2020. They expect growth to begin tapering this year, rising 31.4% to $41.37 billion. Global growth rates are comparable. In Australia, for example, the retail media market is expected to reach $1bn by 2025.
While Amazon has dominated retail media globally since the launch of their ad marketplace in 2012, brand advertising and promotion budgets are now flowing into the growing market of leading retail media partners. Rich Lehrfield, Senior Vice President and General Manager for Walmart Connect, says "As a closed loop omnichannel media business of America's largest retailer, we are working hard to innovate and move faster than ever before to deliver distinct omni solutions and accelerate growth for advertisers of all sizes."
One of Australia's leading players in the space, Cartology, is advancing local growth as part of the nation's third largest and "most trusted" company -- the Woolworths Group. At Woolworths, says Brad Banducci, Woolworths Group CEO, "We've been watching closely how other large-scale retail businesses internationally are better engaging customers along the path to purchase." Banducci points out that "our suppliers are looking for simplified ways to engage with customers, and Woolworths is well placed to provide a platform for them to engage potential customers." As customers shift their shopping behaviour to an omnichannel journey, retail media is positioned to reach customers both on and offline at crucial moments pre, during and post their shop.
The Market Response Is the Collapse of the Funnel
Luke Kigel, head of Walgreen's Media and Advertising Group, told Mark Stewart of the Association of National Advertisers (U.S.) that, "Most funding for retail media networks still comes from Shopper Marketing budgets, with many retail media networks saying they aspire to access [brand awareness] budgets. These are industry constructs that limit the value potential of a brand-retailer relationship and reinforce a more traditional and outdated purchase funnel. It doesn't reflect how consumers actually discover, engage and shop brands and products.
"Consumers don't see a difference between 'brand' and 'shopper' -- they are fluidly moving through their journey, in their own individualized way. There's an opportunity for brands to disrupt legacy budgeting practices and enable fluidity and agility to best meet their consumers where they are, as that evolves in real time for each individual person," Kigel says.
The recent growth of retail media is being spurred by upper-funnel display and video ads, bottom-funnel goals and mid-funnel retention and customer acquisition priorities. The evolving omnichannel marketing ecosystem requires that brands and retailers understand the role, purpose and performance of every tool in their arsenal, including online search and social, media advertising, sales promotion and in-store presence. This requires sophisticated data and analytics tools that, while still at an early stage, are influencing budget shifts both in response to positive performance results and in anticipation of growing privacy regulations and third-party cookie restrictions.
Retailers are uniquely positioned to help brands understand the relationship among retail media, traditional advertising, digital media influence and offline sales.
Retailers, Brands and Agencies Institutionalize Retail Media
While advertising to consumers at or near the point of purchase is hardly new, retail media fills the vacuum of data that was either limited or non-existent in the past. In the retail media environment, messaging and offers can be targeted to consumers based on their shopping behaviour and purchase history both on and off network. Promotion and advertising investments across the traditional purchase funnel can be directly tied to sales outcomes. And with sophisticated technology now available, many retailers can deliver that data to brands in a secure and privacy-compliant way.
Spark Foundry, a division of Publicis Media, was one of the first media agencies to embrace the opportunity to collaborate with retail media on behalf of their food and beverage clients. Amanda Mollet, Senior Vice President, Director at Spark Foundry in the U.S., advises that while her team always looks at opportunities through a "commerce-first lens," the key performance indicator is not simply a direct response, immediate conversion. There are upper funnel applications as well. "What's interesting about our engagement [in this new offering] is that the budget actually came from a brand budget, not a DR or shopper marketing approach. We are seeing a lot of our Consumer Packaged Goods (CPG) clients rethink the role of their shopper budgets," she reports.
Blending Brand and Shopper Marketing Budgets
As the business goals of retailers and marketers converge around data, highly effective programs and partnerships that deliver on mutual business objectives will expand the role of retail media throughout the consumer journey. For decades, I've written extensively about and forecast the convergence of sales promotion and advertising budgets, a trend driven primarily by the growth of search and social and their direct connection to commerce. Retail media is accelerating that trend by delivering more sophisticated knowledge about the connection between consumers and marketing.
The best partnerships emerge through real customer insight and closed loop reporting that measures effective engagement, purchase influence and transactions. By disrupting traditional planning practices and blending brand and shopper marketing budgets, specific KPIs can be met by identifying the right audiences and delivering the right message at the appropriate moment on the purchase journey. Through these partnerships, both brands and retailers are activating deeper customer relationships, increasing repeat purchases, and generating improved media cost efficiency. Retail media is also uniquely positioned to eliminate cookies and assure customer privacy concerns are met.
The Future of the Funnel in Retail Media
The sales funnel has been a cornerstone of marketing strategy since it was invented by Elias Elmo Lewis in 1898. While it remains relevant in understanding product discovery and brand loyalty, marketers now operate in a reality of collapsed purchase funnels and personalised purchased journeys.
While the word "journey" may have less application to purchase decisions made from inception to transaction within seconds, which can occur online and in-store, consumers are engaging with retailers on a near continuous basis. Technology and data will continue to empower brands to think less about the role of retail media networks as a bottom-of-funnel investment and more about the role of retailers across the entire marketing budget.