Only time and thorough testing will determine if supermarkets can profit from social media, location-based marketing and other budding communication channels.
By Marek Polonski
Coverage of emerging media, from Facebook to Foursquare to Groupon, is on fire. Darlings of the news outlets, rarely a day goes by when visionary, newly minted Silicon Valley multi-millionaires are not featured prominently.
While each emerging media channel, ranging from social media to location-based services (LBS) among others, is unique, they are all oriented around a central principal: offers and coupons can be more effectively targeted when leveraging knowledge about friends or geographic location.
The potential examples of these technologies are compelling: from General Mills using Groupon to sell directly to consumers to opportunities for a retailer to target a coupon for ketchup to the smartphone of a consumer standing in front of the hot dog case.
Grocers continue to rank among the largest spenders on traditional media, such as newspaper inserts, and have been slow to make anything more than token investments in social media. Generally leery of mass-scale deep discounting that can erode already thin margins, grocers do not fit the Groupon model.
Given the perceived promise of new channels, many are beginning to wonder whether grocers will ever find a way to meaningfully move the heavy sales needle using emerging media.
To be sure, the market for emerging media is far from mature. Through the rapid iterations the industry will face, the core questions many of these emerging channels pose for grocers remain remarkably consistent with those posed by more traditional coupons: namely, are the consumers redeeming coupons actually driving incremental purchases or are they just eroding margins by discounting purchases that would have been made, coupon or not?
Grocers are uniquely equipped to use in-market testing of emerging marketing channels to quantify their impact on sales, profit and loyalty. Using test results as their guide, sophisticated grocers are building emerging media strategies based less on hype and more on bottom-line impact. They are using results from in-market tests of emerging and legacy media channels to guide media plans and identify how to best marry emerging media campaigns to traditional channels with far broader reach.
As grocers evaluate how to most profitably manage both the growth and shift in media across channels, whether old or new, three key considerations can best improve the ROI of media investments:
1. Redemption statistics are meaningless in the absence of measuring incrementality. Post-recession survey data shows that more than 75% of consumers already use coupons regularly (most commonly those taken from FSIs). Emerging media campaigns are able to pay back only if they drive purchase behavior from consumers who would not otherwise be using a traditional coupon or offer.
2. Excluding Facebook and Groupon, the reach of most emerging media channels is still limited and its core audience is not representative of the larger U.S. population. Only a fraction of households touched by traditional media channels engage in services like Foursquare. A pre-requisite for the use of any location-based service is a smartphone: usage of these devices varies by more than three-fold across various regions in the U.S., influenced by demographic factors, as well as mobile coverage. Sophisticated grocers are shifting dollars between traditional media and emerging media at different rates in different markets based on local conditions. With the mass exodus of advertising dollars from print media over the last decade, some forms of traditional media can be purchased at a discount.
3. One plus one might equal one, two or three. As with any other marketing channel leveraged in a grocer’s mix, emerging media can have interactive effects with other media, be it print, TV or radio. These effects can vary by market and well-designed tests can aid grocers in determining the best media plan for each market, store type and consumer group. A growing number of brands have started directing consumers to visit their social media or location-based services websites (e.g. www.facebook.com/pepsi) through ads placed in traditional mediums to extend brand engagement. By running radio ads that encourage customers to “check-in” and participate in location-based promotions, brands are not only able to improve engagement metrics from emerging media campaigns, but are also better able to capture and track consumer responses to traditional media channels.
Will emerging media prove transformative for grocers, or are they simply a refinement of existing in- and near-store marketing strategies already deployed by grocers? Only time, and rigorous testing, will tell.