Retail–at the Crossroads
Will New At-Retail Tools Be Brought Forward, or Retreat, in Tougher Environment?
By Laura Davis-Taylor
At year’s end/new year’s beginning, I’ll cut to the chase. Numbers are being crunched, and budgets are being honed for 08. What will happen, or should happen, if the writing on the wall or in the books points toward tougher going in 2008 due to economic fluctuations and spending cuts? Will new at-retail tools, including in-store digital media, make further progress against stumbling older tools? Or will they too become budget cut victims?
The retail outlook and 2008 budgets
As we are being hit by some analysts with a panic-laced outlook on retail spending and the 2008 economy, many are concerned about the impact on our industry and what has appeared to be steady progress towards strategic innovation. It doesn’t help that 2007 is not panning out as a banner sales year for most retailers, the holiday quarter is being viewed with some trepidation and the effects of the 2008 election year are upon us.
A Consumer Reports study published in March recognized that consumers are tightening their wallets—so retailers will need to sharpen their pencils. In response, many retailers and CPG’s are going all out with their marketing to let consumers know that there are great holiday deals to be had. But what happens to those budgets after the Holidays, particularly if consumers continue to batten down the hatches on their wallets? Will retailers and brands embrace the financial challenges and forge ahead with innovations or will they fall back into past behaviors and retreat into their comfort zone?
The Old vs. the New
Not many would disagree that change and uncertainty are the two things that all retail constituents can count on as we look towards the future. While in the midst of economic uncertainty, this holds particularly true. This said, the “right” approach for CPG’s and retailers when they have to cut spending is to get smart and fearless and weed out the old, ineffective spends while increasing investment in areas that can garner the most return for their money. When this happens, belt-tightening might lead to an increase in support for at-retail marketing if the activities can prove their worth. But, let’s not bank on this quite yet.
The above approach is intellectually sensible, but the fact is that when the going gets tough, this has rarely played itself out in the past. Corporations too often cut spending with an ax, not with a scalpel. They typically cut across the board and all departments/initiatives suffer. Further, cuts are often calculated not by elaborate formulas of ROI for different programs, but during quick meetings and calculator-driven afternoon discussions. These decisions are often rooted in what’s been “comfortable” for the authority figures’ past efforts and not many have the appetite to get behind new investment ventures that could be seen as risky—which is where Marketing at Retail strategies could be affected.
New at-retail media tools, particularly the digital ones, should be making the cut against the stumbling older tools. But human nature and a lack of comfort with the unknown are big hindrances for us to get decision makers past. Other factors? People are creatures of habit and find comfort in initiating the activities, processes and procedures that they know. They don’t like to be responsible for trying new things that may or may not pan out; their C-level executives are not known for rewarding their staff for taking risks that may or may not pan out. Another key factor is that many leaders are now close to retirement and want to “get by” the current challenges and let innovative ventures with uncertain outcomes rest on someone else’s shoulders down the road.
If this happens, there’s a price to pay. It takes years for retailers and brands to innovate new tools and strategies appropriately. Many will only be flushed out via learning the good, the bad and the ugly. Consumers have already begun to expect more from their retail experiences and the longer we hold off on meeting their needs, the more pain we’ll encounter in the long run when we have to meet them in a reactive manner.
So what should be driving the budget cuts in times of crisis? Return on investment—period. Smart retailers understand this and are holding all feet to the fire on backing up spend recommendations with a solid ROI and analytics before giving the green light. This makes sense, as they need to keep overall expense management in line with revenue expectations. This gets fuzzy with marketing dollars allocated to media channels with limited analytical support (like broadcast TV and billboards), but this is why Marketing at Retail initiatives need to be smarter.
The impact on in-store digital initiatives
Emerging in-store digital media initiatives are particularly susceptible to cuts as we stand at a critical juncture in store evolution. Why?
Retailers have rightfully been skeptical about the ROI promised by technology because, frankly, it’s been tricky to prove. Too often, projected profit improvements either disappoint their sponsors or are very hard to point to conclusively. Also, many have been “a cure for no disease” and activated for their “cool factor” rather than rock solid strategic utilization. Finally, evolution in measurement and our ability to attach digital initiatives with actionable data mining has been very slow to advance.
These points are backed by a recent survey of sixty-five retailers by Retail Systems Alert Group (RSAG),“Technology-enabled Customer Centricity in the Store Benchmark Report”. In it, they state that while retailers are moving toward adding "technology-enabled touchpoints" to stores, cost, complexity and overstated value often inhibit adoption. Among the biggest barriers to in-store investments were the durability and costs of the technology, the need to simplify technologies due to high employee turnover, and difficulties of quantifying ROI.
So what do we do about this? Two things: retailers need to get more strategic with budget decisions but we need to give them faith that investing in Marketing at Retail initiatives can—and will—pay off.
Why measurement matters more than ever
Malcom Gladwell’s concepts in “Blink” have great merit. But gut instinct alone cannot be the basis for strategic budget decisions in a time of critical decision making. We must embrace the challenges, expense and risk that go hand in glove with any good strategic roadmap—and supporting technologies—that we unveil to impact our shoppers. These initiatives need an empowered project owner, experienced resources guiding each project phase and the tools to clearly understand what's working (and what's not) to hit the bull's eye for all stakeholders.
In a nutshell, return on investment should be the basis of all decision-making, but we have to work together . If we solve it, then we have no reason to be victims to the budget chopping block. The challenge is that many retailers don't know how to make a simple return on investment case for these decisions so they cut them due to perceived expense rather than working on building the business case for funding with proven playback.
To get around this, the business case must start with a clearly outlined strategy to support competitive differentiation; up basket size, product or services sales; support employee empowerment; or a combination of many goals. Once this is identified, it should be applied to the brand’s bottom line, as only then we can put an ROI to it, create success factors for it, and come up with ways of measuring and making sure that they are operating as they should. Is this hard to do? Yes. But, it’s not impossible and we are simply not going to be able to forge ahead as an industry as a critical budget line item if we don’t commit to this now.
The potential for Marketing at Retail tools is thrilling if we can focus not on the technology or the Marketing at Retail strategy, but on the proven value that they provide. We’ve come so far as an industry—let’s work together to pave the way based on smart “future thinking” rather than leaning on broken models that decision makers find comfortable. Only then can we ensure that precious budget support and truly impact our retail futures.
Retail–at the Crossroads