Special Report - February 2005

2/1/2005

Assault on the Senses
In-store televisions and other electronic media tools are transforming the consumer/brand relationship

As traditional mass-marketing outlets continue to provide a dwindling return on investment, companies are beginning to rapidly seek out alternate outlets for sales and marketing efforts. In-store TV and other electronic media, for example, are allowing retailers to entertain, inform and market to their shoppers in new ways. Will the traditional method of buying expensive TV air-time soon disappear as more of these alternate forms of branding begin to emerge as viable marketing tools?

The Consumer POV
The problem with the traditional model of marketing, from the consumer's standpoint, is that they are bombarded with a myriad of marketing messages, many of them irrelevant, often at inconvenient times. "Consumers want more control," says Lynn Fantom, chief executive officer of ID Media, a leading direct response media company whose clients include Johnson & Johnson, L'Oreal and Nautilus. "On the other hand, marketers -- who are increasingly challenged by their managements to demonstrate a return on investment from every advertising dollar -- can't resign and abdicate control to the consumer, who may only wish to access messages on their own terms." Despite this Catch-22 scenario, Fantom believes an important trend in the marriage of direct response television and the Web will address these conflicting needs. Direct Response Television (DRTV), bought on a preemptible basis, provides the same audiences for half the cost and delivers the sight/sound/motion so valuable to branding. "When response is directed to the Web, rather than a telemarketing center, we turn the control over to the consumer. At the site level, they pursue what's relevant to them, how they want, when they want. And it's all trackable and measurable. It's an effective response to the challenges facing marketers today. And tomorrow these two media will morph into interactive TV applications that will, at long last, get their day in the sun."

The Growth of Narrowcasting
Narrowcasting, another form of digital marketing, is also poised for explosive growth. A new study from InfoTrends/CAP Ventures revealed significant growth opportunities for electronic displays and narrowcasting networks in commercial environments. The study entitled "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 $452 million. InfoTrends/CAP expects this market to experience a CAGR (Compound Annual Growth Rate) of over 20 percent, reaching $1.3 billion by 2009. An additional $161 million in advertising revenues were generated in 2004, and this amount is expected to increase at a CAGR of 40 percent to reach $857 million in 2009. The surveys from this study were conducted between September and December 2004. InfoTrends/CAP received responses from 882 managers working at advertising agencies, media companies, retailers, consumer goods manufacturers and related companies, as well as corporate/IT managers. Other key highlights from the study include:

Sales of hardware, software, installation and integration services, and support for all commercial display applications totaled nearly $1.7 billion in 2004.
For networked display systems in retail and public spaces, network operation/management services and advertising revenues generated an additional $413 million.
This industry is expected to demonstrate a CAGR in excess of 25 percent over the course of the next five years.
Over the next five years, cost-effective LCDs will be the most popular technology for digital signage applications because of their longevity, reliability, low power consumption and attractive price point.

Wal-Mart Leads the Way
Food retailers, especially mega-stores like Wal-Mart, are ramping up their in-store TV capabilities in order to market to their perpetual flow of customers. Wal-Mart is a trailblazer in the TV space, as its Wal-Mart Television Network has been beaming to shoppers since 1997. Currently, the Wal-Mart Television Network reaches a whopping 138 million customers each week on more than 100,000 in-store television screens combining a mix of promotions and entertainment. On its network, Wal-Mart is able to drum up sizeable revenue from the 15 to 30 second spots it sells through its advertising partner Premier Retail Networks (PRN).

The power of in-store televisions is not lost on Stu Armstrong, chief operating officer of Digital View, a connectivity solutions provider for the flat panel digital display market. Armstrong says that consumer goods firms and retailers alike want "All the media fit to play," to paraphrase from the New York Times tag line. "That is how brands, and retailers who have their in-store brands to market, are looking at the advent of in-store digital media networks," says Armstrong. "Understanding that they have different constituencies to serve up communications they utilize this medium to advertise the brand, promote product, 'edu-tain' consumers, and educate sales associates."

Armstrong says the first two areas are familiar territory for brand marketers, while the last two are not, even though tremendous upside exists for marketers of complex products and services. "An interactive digital display at the point-of-decision can serve up information that you need to make that the right decision and subsequently proceed with the transaction," says Armstrong. "The media units are a communication portal for brands and retailers to get messages and information to consumer at the moment of truth. How powerful is that?" Digital Display helped launch Starbucks Interactive Units (see picture), a joint program between Starbucks and Kraft Foods, Starbucks grocery sales and distribution partner. The units were installed in 1,000 grocery stores during 2003 and 2004, with planned use for 2005. The at-shelf units provide pre-programmed content, to give consumers the ability to learn more about various Starbucks products. They also offer tips for making coffee at home, how best to pair with desserts and other helpful information. Digital View provided the screens and the technology for this program, working with a number of other vendors that developed content and advertising.

The Future For Consumer Goods
According to Jack Gordon, chief executive officer of AccuPoll Research, a global brand building and research firm, consumer goods firms want to see alternate forms of media work so they can become less reliant on TV. "In the short-term, they may create a budget to explore alternate forms of brand building but in the long-term it is going to change the way companies spend money," says Gordon. "Consumer goods firms are only going to spend so much money on marketing and it's either going to stay within traditional forms of advertising or it's going to be invested in these new outlets."

Gordon points out that it has always been difficult to gauge the effect of brand marketing that is projected on national TV. If a brand is growing while a campaign is on the air, then perhaps the campaign is successful. This is the only way to assume that TV is supporting the brand. Factor in trade and consumer promotions, which always happen concurrently, and the extreme difficulty in measuring the marketing lift of national TV becomes glaringly obvious. Gordon is also quick to point out that the retail environment is a tough place to get an advertising message across. "I don't think anyone has the answer to make in-store marketing a true success just yet," says Gordon. "Companies will continue to search for the answer because if they ever find the solution, it's obviously the perfect place to make it happen."