Retail media is exploding. Retail media's global advertising revenue is forecast to exceed television revenue by 2028, accounting for 15.4% of total ad revenue. The growth is luring more retailers to launch their own advertising networks both globally and down under.
However, it is creating a minefield for brands to content with. With more networks than ever before, brands are faced with an increasingly complex and fragmented environment to reach shoppers. And despite its growth and hype – brands are facing a growing conundrum - with many unsure if their increasing investment is paying dividends. Equally, however, they can’t afford to not be there when competitors are.
In this post, we’ll examine why retail media measurement is somewhat broken and some of the metrics that matter to effectively measure value and return.
Why retail media measurement today is flawed
Emphasis on ROAS is too high for certain verticals
ROAS has been one of the key performance metrics of choice to measure return on performance-based activity. It has been a way for agencies and marketing teams alike to be able to demonstrate a commercial outcome and demonstrate value. But in certain categories like grocery, beauty and health and others where repeat purchase is common, ROAS falls well short of demonstrating incrementality and value from investment.
The maturity of networks today means that determining who was going to buy an item anyway vs who has genuinely been influenced is challenging, and therefore ROAS can often be over-inflated.
Lack of standardisation in metrics and attribution
As brands invest across networks, comparing like-for-like is not an easy feat. It is well documented that as the industry evolves, measurement standards need to mature in order to help brands to compare and contrast value and return effectively. The way each network measures and attributes performance is different and nuanced, and if brands don't have the expertise to ask the right questions, they are making decisions on face value of the metrics provided.
Understanding attribution approaches and windows (e.g 1, 7 or 14 days) - whether the revenue/return is based on sales of the particular product that was marketed or any branded product from the range - are some of the key aspects brands need to get in and under to be able to effectively interpret performance data. As many of these networks are also offering off-network solutions to combine with on-network, this creates further complexity in the RMNs ability to provide consistency in their reporting approach.
Connecting instore and online sales to quantify value as a customer not channel level
The allure of retail media networks is the ability to close the loop on the sale and understand how media influenced the consumer to buy. However, networks are having to contend with how to stitch together their data in a way that allows them to report back on the full/accurate performance across the ecosystem (in-store, online and mobile).
Whilst many retailers have aspired to build this level of sophistication into their own-brand campaign reporting, being able to connect customer and media data and measure with precision is still something retailers are building towards. If the capability hasn’t resided in the organisation before, then the retailer is playing catch-up to build and deliver it for their retail media customers.
Measurement frameworks often skew to short term
In late 2023, the ISBA in the UK released the Responsible Retail Media Framework to guide the industry on key components which allow brands to more effectively measure retail media and provide a view on best-practice. Off the back of rigorous auditing, the ISBA found that measurement frameworks across different networks were limited in their ability to demonstrate longer term impact of retail media investment. Customer lifetime value, new to brand or basket and other key measures, tell a very different story to ROAS and reach, and for CPG and FMCG brands these are the metrics that matter as they influence market-share.
Elevating your retail media measurement approach
Retailers and CPG/FMCG brands alike will be looking to evolve their retail media measurement approach in the years ahead in order to demonstrate return and value on both sides. For retailers, this is mission critical, as they seek to capture a bigger share of spend from brands. For CPG and FMCG brands, this is also vital, as their ability to drive growth in a lacklustre economy will be dependant on how they choose to invest their finite resources and budget. So how can brands elevate their retail media approach?
Measuring beyond the sale
Contingent on the availability of data provided by RMNs, brands need to move to a more balanced approach to retail media measurement: one which combines longer-term performance metrics that measure the shift in customer behaviour and contribution of those shifts to share and profit (as opposed to simply measuring media and the transaction associated with the media buy).
Customer lifetime value, add to basket, and new to brand are some of the many customer metrics that allow us to begin to see the true impact of retail media investment over time, and moves brands away from a sole focus on short term performance measures.
Performance vs objective
It is not uncommon to see less mature CPG brands measure performance and outcomes based on the same set of metrics - even though the campaign objectives may be different. If a campaign is designed to reward loyalty and encourage retention, for instance, then we can’t measure its impact in the same way that we would for one designed to drive awareness and trial. Those goals are fundamentally different and therefore the measurement approaches we need to adopt need to be tied to the objectives we sought to achieve from the outset.
Democratisation of data
For brands to be able to mature in their reporting and measurement approaches, retailers need to enhance the availability and immediacy of performance data. The static nature of reporting on campaigns makes it impossible to optimise and adapt the approach. It also creates a lack of transparency between the retailer and the brand. For CPG and FMCG brands, the ultimate goal has to be to streamline its data and proactively adapt their retail media strategy and investment approach in near real time.
Measuring incrementality
The holy grail for brands is to be able to measure incrementality. Whilst metrics like new to brand help us to understand the influence of our activity and the value that it delivers over-time, it is also not a silver bullet. What is important to consider, but harder to measure is the incremental sales that came from existing customers, who weren't necessarily planning to buy your product but did so because of advertising efforts. In areas like search, understanding keyword intent helps to further understand incrementality. A consumer who has searched for dog food is likely to be more incremental as a sale vs Pedigree dog food. Understanding search intent helps us to further understand how we can influence over and above sales and then drives us to consider if we have the right SOV and positioning within our search activity.