Digital Media Merchandising -- Trade Promotion using Online Media

11/17/2008 05:40:00 PM


I spent my first 4 years at Google aggregating "Retail best practices" and sharing them with advertisers. During this time, the majority of these "best practices" were focused on driving greater cost effective e-commerce. Over the years, retailers and their marketing partners/agencies have become more open to ideas of cross-channel inclusion and testing.

Over the last year, I've shifted my focus a bit. While there is so much that marketers CAN DO in online advertising - I feel like we online marketing enthusiasts sometimes become blind to what we SHOULD DO. In this vein, I've tried to focus on what Retail marketers do in other media channels - so we can apply those concepts to the online marketing channel without re-inventing the wheel.

I've often asked the question - "What works for Big Box Retailer X?" The answer .... "Circulars" Why do retailers love circulars? ... Some (and not all) reasons include:

  • They work! Retailers (and manufacturers) can track on a local level the sales lift of products in circulars and compare to the cost of the circular - which almost always shows a positive return - and most importantly - moves large volumes of product.
  • Consumers find value in them - Research shows that consumers still love their Sunday FSIs.
  • Costs are usually shared between retailers and their manufacturer supplier.

In summary - Circulars over the last 20+ years have been the ultimate merchandising tool. They have put the RIGHT OFFER in front of the RIGHT CUSTOMER at the RIGHT TIME - in a scalable way. Customers read circulars to find the best deals ... the fact that they are seeking this information out pre-qualifies them as being interested in those products, and the retailers offer "deals" on the circulars to help drive these customers into stores to purchase the goods.

Now, we've all probably read the news about declines in Newspaper circulation. And while this is true, Circular advertising still thrives due to the bullet-points above (as it should!) If it works - no marketing, sales, or merchandising function is going to panic.

The conversations I have with retailers are not about how they need to SHIFT marketing dollars away from the circular and into digital media merely because of media consumption trends. Conversations I try to have, especially in these economic times, are about optimal merchandising that will net the best, accountable sales results...and in the online channel - I believe there is TREMENDOUS opportunity...

To paraphrase again - circulars work because they PUT THE RIGHT OFFER IN FRONT OF THE RIGHT CONSUMER AT THE RIGHT TIME. Search Advertising works in the e-commerce equation because it puts the right message in front of the right user at the right time ... So - my question is: How come we can't combine the two?

We have the right user at the right time (someone who theoretically raises their hand to say "I'm in the market for a blender" by searching Google for "blenders"). In the cross-channel merchandising equation -- the online channel is missing "the right offer". While no one has completely figured it out - I can say that a lot of retailers are trying to figure it out. The concept of locally targeted offers to relevant, online customers is certainly an area that most retailers agree is an untapped market. We have examples we are happy to share to those interested...

Getting tactical for a minute ... I urge readers to search for any retail related general query on Google. Example: "Printers" or "refrigerators" or "Men's Suits" or "Running Shoes" (I can go on for a while here). In almost every case - there are National and Local Retailers who promote the general category ("Buy Printers at Retailer X") and there are manufacturers promoting their brands/websites ... BUT ... there are typically no instances of joint co-op marketing.

The paid results you see are what I'm calling "The Virtual Aisle" or "The Virtual Shelf Space." I like to equate this to walking into a store and asking the clerk where they sell printers. In most cases, the clerk will say (for example), "Aisle 7." As you, the consumer, approach aisle 7, you will often be greeted by an "end cap" merchandising display, usually promoting manufacturer brands (that are funded by these manufacturer partners). Additionally, when you walk into aisle 7, the top-to-bottom shelving order is often based on merchandising relationship with manufacturers as well. In the online world - there are very few "Virtual End caps" to point to.

If manufacturers want to reach consumers who come to "aisle 7" - I can't think of a reason why they wouldn't want to reach a much larger audience of extremely qualified shoppers (people searching thousands of variations of the keyword "printers"). Furthermore - when retailers reach the consumers looking for printers - I believe their is an untapped merchandising expertise that can lead them to more creative ways of driving sales than the message: "Find Printers at Retailer X"... For e-commerce - that messaging works, but e-commerce only represents 6% of total sales. The internet effects a lot more than 6% of sales (89% of shoppers say they use the internet before purchasing products*) - but the digital merchandising to date has not matured to this story - and again - this is what I talk about around the enormous opportunity...


Tamar said...

Great blog, Google retail team!

As I see it, retailers have quite a ways to go until their circulars are truly at the point where they offer "the right offer to the right customer at the right time". Yes, people use them extensively (especially these days) and make purchases based on them, but they could still be significantly improved.

To create much more effective circulars, retailers need to be able to create them in many more versions than they currently do, and to customize them on a merchandising and a marketing level to specific groups of shoppers, based on demographics, geography and/or buying habits.

For example, why send ads for walking shoes to runners or promotions for steak to people who only buy vegetarian food? This type of personalization can be (relatively) easily done for online ads, but print circulars also need to approach this level of sophistication in terms of targeting.

To achieve this goal, retailers have to create both print and online promotions by combining the best of both. On the one hand, apply the best online practices to their print ads and, on the other hand, utilize online whatever works well in the print advertising campaigns, as you suggest.

Obviously, ad targeting at the online level cannot be recreated in print considering the sheer number of circulars distributed in the US each week. Instead, retailers need to automate their ad production processes in order to scale their operations to the point where they can target their circulars to the required level.

Meanwhile, retailers need to more effectively utilize the online channel to extend the reach of their trade promotions. This, as you write, requires a way to create locally target offers. But in this case as well, retailers would also need to be able to produce a much larger number of ads.

In short, retailers' print and online practices must learn from each other to make sure each channel is working optimally by itself, while still being kept in synchronization with all other channels. Only this way can they gain maximum effectiveness from their co-op marketing and advertising initiatives.

I write the Retail Advertising, Marketing and Promotions blog ( – I invite everyone to visit us for practical advice geared towards retail advertisers and marketers. I've already linked to a couple of your previous posts.

Sorry for the extra long comment - there's so much that can still be said on this subject.

I wish everyone a successful holiday season (despite all the doom & gloom)!

Damien said...

Our Nielsen research has shown a 24% conversion rate of online to offline sales from Lasoo, which produce the digital equivalent of circulars in Australia. 69% make some sort of further inquiry. said...

We found a similar effect in Germany (will soon come to the US I think): if we promote a brand in our Search by Listings (results) and by branded advertising we drive huge traffic to shops. And the traffic is not only online, we also see huge increases in phone calls, e-Mails and even people running into the local store. Only way to find this out was to implement the same frictionless analytics software across the Media site, in the Promotion, on the landing pages and even in all the different shops we integrate. This was a lot of work, but after 2 weeks of running Google Analytics we now know that really huge Portals don't drive as much traffic as very special sites and even certain placements drive more traffic that leads to sales or other conversions within one special site. Thanks a lot to Google for all this insight - so we can optimize heavily against our final goal: to serve users (buyers), manufacturers and retailers.

The service I mentioned: