Narrowcasting: Reaching hard-to-get shoppers
Elsevier food International, Vol.8, No.2, May 2005 Vincent Hentzepeter
‘Narrowcasting’ using web-enabled technology is the latest trend in the retail arena. While traditional TV ads are easily zapped away, narrowcasting works like a search ad on the Internet, a major advantage for advertisers who want to reach target audiences right on the shopping floor.
Customised marketing at the shopping floor using digital multimedia systems is the new trend in the retail arena. Flat screens at Tesco and Wal-Mart show commercials, provide nutritional information, display step-by-step cooking instructions or promote weekly offers. Targeted at the shoppers at the right place and time, 'narrowcasting' has great potential to stimulate shopping behaviour. Sales increases up to ten per cent or more have been reported for specific products in certain categories.
Traditional mass media blast uniform messages randomly. Ads that are broadcast by traditional TV networks are easily zapped away. Narrowcasting in contrast works like a search ad on the Internet. People who are actively looking for the exact thing for sale only see ‘narrowcasting’ messages. This is a major advantage for advertisers who want to make sure they reach their target audience on the shopping floor in order to leverage product sales.
No changing tapes
Narrowcasting as a concept is nothing new. What is new is the web-enabled technology that brings in new applications for retail stores. Thus far, the installation of television monitors in the retail sector has not really taken off. Scepticism prevails after experiences with former generation in-store TV networks. Aside from pitfalls like inflexibility, poor quality and performance, in-store TV networks were not very user friendly to operate. However, times have changed. Digital techniques have greatly improved over the last few years. Changing tapes, as was common in the nineties, is a thing of the past. The newest digital media are fully software operated, can be fine tuned to the needs of an individual store or store department and yield high-quality messages on high-resolution flat screens that can be elegantly integrated in the supermarket environment. Systems can also be equipped for interactive communication with the customer. Moreover, the revenues of narrowcasting can now easily be measured by real time computer analysis of sold items. This in-depth monitoring makes it possible to attribute changes in shopping behaviour to certain promotional activities on a day-to-day basis.
Food is a laggard
Experts believe the speed of innovation in information and communication technology will lead to a rapid adoption of 'narrowcasting' concepts by the retail sector in the next couple of years. Over the last two years, display technology, network infrastructure, components, and software for creating, managing, distributing, and displaying digital images and video content have shown dramatic advances, according to Norman McLeod, associate director at Cap Ventures. In January this year, InfoTrends/CAPV announced the release of a new study that focused on the growing opportunities for electronic displays and narrowcasting networks in commercial environments. 'The North American Commercial Digital Display Market' provides detailed research, forecasts, and analysis on the commercial market for display technology and services. According to study data, narrowcasting revenue is currently valued at US$452 million. This includes network operation fees and advertisements, system integration and installation, software, display screens and other hardware. Trends/CAP Ventures forecasts for this market a growth rate of over 20 per cent, reaching US$1.3 billion by 2009. About two-thirds of this amount comes from external advertising revenues. A sign that advertisers are willing to pay for technology that is still in its infancy. McLeod: "What has become very commonplace in US food retailing is running promotional video on a portion of the colour LCD screen at the check-out point - the same screen that displays the items and prices as they are checked through."
According to McLeod, the main benefits for the retailer are the opportunity to enhance revenue by causing traditional sales lift and by steering customers to higher-margin selections. This could be especially true for the food sector where impulse is an important purchase factor. Still, it is still a case of wait-and-see for most food retailers. "I would say that the food sector is definitely a laggard. They are very cost-conscious and quite conservative even compared with other retailers."
World of Wal-Mart
In food retailing, several retailers have experimented with in-store television but none of them as extensively as Wal-Mart. The retail giant operates a TV-network that is available in almost all of its 2,600 locations. According to spokesperson Karen Burk, Wal-Mart started this project in 1997 and since then the network has expanded and is currently being upgraded. Scattered through the store, are 42-inch high-definition LCD monitors. For example, a monitor hangs above a massive pile of bananas in the produce sector. Wal-Mart's in-store programming includes typical PR-type corporate messages from the World of Wal-Mart, previews of soon-to-be-released movies, snippets of sports events and rock concerts. More importantly, there is a constant stream of commercials that create an increasing cash flow. Companies like Kraft, Unilever, Hallmark and PepsiCo are eager to purchase precious minutes from Wal-Mart's TV-network to beam their product ads right before target shoppers. After all, 75 per cent of the purchase decisions are made in the store. Burk: "The in-store TV network gives Wal-Mart and its suppliers the opportunity to speak to customers about products and services when they're ready to make their purchase. Our TV network is a unique way for us to communicate with our customers, whether it's to entertain, educate or inform them about new, fun and exciting things on the horizon. Where else can customers do their shopping, learn about upcoming events, food safety tips, new merchandise, see a concert or watch the FLW Outdoor Bass Fishing Championships?"
Hard-to-reach consumers
Quoting last February's New York Times, Wal-Mart's TV operation captures some 130 million viewers every four weeks. This makes it the fifth-largest television network in the US after NBC, CBS, ABC and Fox. It therefore does not come as a surprise that Wal-Mart is upgrading its broadcasting plans and outdated, bulky monitors that look too 1990s. "Just in the past year we've begun to rollout a new format with the Wal-Mart TV Network with new plasma and LCD televisions and some eye-level TVs," says Burk. "About 100 stores have begun to implement eye-level televisions in certain parts of the store. An expanded rollout is planned. The monitors that are placed at eye-level are mounted over or onto a store structure such as a counter or wall to allow easy eye-level visibility but also provide a safe format to prevent accidental shopper contact with the monitor. Some may also be placed above a product display."
Recent research by Nielsen Media Research to evaluate Wal-Mart's network demonstrated that shoppers watched Wal-Mart TV at an average of seven minutes per store visit, 44 per cent longer than in a similar 2002 study. These figures are music to the ears of marketers that increasingly face hard-to-reach consumers. Burk: "Each year, we conduct a Nielsen survey in order to receive measurable results that we can share with the suppliers who are advertising with us. This allows them to see how productive and beneficial it is to be featured on the Wal-Mart TV Network in our stores. Our advertisers reach more than 100,000 in-store televisions and 138 million customers per week in our stores across the country."
A typical advertisement runs between 15-30 seconds and is almost impossible to overlook because of the large flat screen and high audio quality that creates a focused wall of sound around the shoppers. Compared to broadcasting commercials, Wal-Mart's TV network is a relatively affordable way to reach the customer. Advertisers pay US$137,000 to US$292,000 to have a single commercial shown for a four-week period. The exact rate depends on the length of the ad and the number of stores where it is shown. Programming in all stores is controlled from company headquarters in Bentonville, Arkansas where double-digit growth is reported in terms of advertising dollars spent.
Trolley display
Regarding narrowcasting activities, US Wal-Mart is definitely a frontrunner in the US, states McLeod: "Other US food retailers who have digital promotional signage are Pathmark and Ralph's. The Eagle chain has run a pilot project. In Europe, we have been told that the largest German food market chain is planning a system. We do not know the name yet." This largest retailer could possibly be Metro Group that last February exhibited some groundbreaking technologies at EuroShop, Düsseldorf's Global Retail Trade Fair. Metro showed innovations that are undergoing testing and fine-tuning under real-life conditions at the company's Future Store in Rheinberg, Germany. One of two 'narrowcasting' concepts was the Smart Trolley, an intelligent shopping cart that automatically recognises the products placed in its basket and includes a small monitor that can display commercials or alert on special offers. For example, upon loading a bottle of Coca-Cola in the trolley, shoppers are alerted about a second bottle sold at half price. Another in-store media concept on exhibition was the Intelligent Dressing Room - a shopping assistant that shows the customer on a monitor which garments best complement the outfit being tried on. Dissatisfied with the tie colour or jacket? No problem, simply push the button again for a new selection and the same model appears on the monitor wearing the desired combination.
Tesco TV
In the UK, Tesco has been following Wal-Mart's footsteps in the last three years. In March 2004, Tesco TV was launched in its 100 largest stores with the aim to install the service in 300 Tesco stores across the UK by the end of the year. Trials took place in eight stores over a ten-month period after comparison of results of test and control stores. Sales of products that were part of the in-store programming showed an average increase of about ten per cent (see figure). The Tesco TV trials demonstrated, according to Tesco, that customers value its content as an aid to their shopping experience. Advertisers reacted to see it as the first media format to work in the 'last ten feet' encouraging customers to choose their brand at the point of purchase.
Based on the pilot and consumer research, the new form of digital retail media is zoned into seven areas: in the centre aisles or 'power aisle', grocery, health and beauty (including baby), beers, wines and spirits, home entertainment, counters at the deli department and in the Tesco Café. To maximise impact, product ads and informative commercials about recipe ideas and nutritional information last only 10 to 15 seconds and are directly related to the products in the typical store sector. An example of content on Tesco TV in the grocery department is a message that watercress contains more vitamin C per gram than oranges. A few aisles away at the daily department rub-in spices for beef and chicken are promoted as swinging culinary exercise, marinated by a rhythmic drum staccato.
Moment of truth
Tesco TV is synonymous to ‘Communication at the moment of truth’, states JCDecaux, the company that sells digital media on Tesco's in-store network. For this precious moment, advertisers pay a fixed price depending on the location in the store. According to Tesco TV's rate cards (source 2003), the costs of a two-week advertising loop (with ads that start every 2:30 to 5:00 minutes) range from £15,000 (counters and home entertainment) and £30,000 (Power Aisle/Grocery). Highest rates for highest traffic spots. JCDecaux claims that advertisers in the Power Aisle - average dwell time of five minutes - can count on up to 6.1 million shopping trips during this fortnight, rendering 11.5 million OTS (on the spot) within 100 Tesco stores. The last figure is comparable to advertising on television during major national sport events, JCDecaux says. Success story or marketing pep talk? What is telling is that a year after the launch, Tesco does not comment when asked about its evaluation of Tesco TV. What promises no good either is that no recent updates about successes of this in-store media project can be found on the JCDecaux website. And that is strange. After all, was narrowcasting not meant to lure more advertisers by boosting sales and making in-store ads accountable for that?
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