Under $50M: Half the Trade Budget Goes to Retail Media | Harness the Halo 3/6

0:00What we can say very emphatically is that the return on retail media has been really strong, oftentimes exceeding the ROI that you might see on other tactics. Brands have a need to diversify more. Diversification can be expressed in a lot of different ways. How am I going to spend my money? Oftentimes it ends up being more bottom of funnel search tactics. But what we often see is the larger opportunity is in the upper funnel, longer term impact. That's what's going to give your brand longevity if you're thinking about it at more at a macro level. As far as ROAS goes, I think it's important to sort of acknowledge there's two different flaws there.

0:45Hello and welcome to D2C Podcast. This is Harness the Halo, our series with Keen. So as a quick catch-up if you're new, for a long time, growth ran through a couple of channels that handed you a number the same day. Whether or not you fully trusted that number, you could act on it. That's gotten harder. The channels got more expensive, the easy attribution is getting shakier, and building a brand now means putting money into more places, some of which would pay you back slowly. The bet of this series is that better measurement is what lets you make those moves with some confidence instead of guessing.

1:13The first two episodes set the table. We had Justin Jefferson, who gave us a wide view of what's working across brands in the Keen portfolio. And then more recently, we had Jennifer Berglin from Once Upon a Farm, and she took us inside one company's messy question of who actually earns the sale. Today, we get specific about a part of the map that's grown into its own category, retail media. A few years ago, that was mostly Amazon and Walmart, and now a lot of retailers run their own ad networks. The marketplaces are their own game, and there's real money moving through all of it. The questions are where that money is actually going, how much of it is genuinely working, and how a brand decides which piece is chasing.

1:49To get into this, I've got Mike Chasen back on the show. Mike's a solution engineer at Keen, so he spends his days helping brands decide where the money goes. He was a great guest last time. Welcome back to the D2C podcast, Mike. Thanks a lot, Eric. Happy to be here. Retail media is an area that I'm a little bit less familiar with. The original trifecta of Google, Meta, and Amazon is what I'm most familiar with. So maybe set the scene. And when we talk about retail media now, what does that actually cover? And how has that evolved in the past few years? Yeah, for sure. It's changed a lot over the past few years.

2:20And companies that are pure D2C, they maybe grow into it eventually first through Amazon. And then if there's a retail strategy that follows, retail media becomes sort of part of the game. And you can think about it almost as like a different sort of lever than what trade has been in the past with retail partners. It's certainly a revenue center for retailers, right? But it also becomes a means of building stronger relationships with them and with their shoppers. And as retailers have just become much more adept at understanding their shopper behavior and figuring out how to monetize that, Of course, that has a lot of value to brand marketers, and it creates a great synergy between finding ways to get in touch with your consumers and doing so in a very, very surgical way with those that are shopping at specific retailers where your product is carried.

3:09Does retail media only come into play for brands that also have a wide retail footprint? Or are there people that are leveraging the retail media networks for D2C more specifically? It's going to be generally corresponding with where your distribution footprint is. And so Amazon often becomes the first stop. And as you think about smaller businesses that are more likely to be focused on Amazon, that's where the lion's share of their spend goes. But it really becomes more of an accelerator for driving demand in the places where your product is distributed. Makes sense. I just did a podcast yesterday with our head of Amazon, and we talked about the squeeze that brands are feeling on Amazon right now between increased service fees as well as the table stakes nature of what ads are becoming on Amazon.

4:00And I'm curious about your view on retail media in these retailers. Is it following a similar trend where there is a real pay-to-play aspect to succeeding with retailers? I'd say it's very optional, but from the way that we're looking at it in terms of the payback on it, it's a very smart decision to make. In fact, we actually see a lot of upside in it, even though we've seen a lot of evolution in how retail media has responded or how consumers have responded to retail media. We've done some optimization across our client base, and we foresee room for 30 % increase in investment versus where retail media is at today.

4:38So everyone pictures Amazon and Walmart. Where else has the spend going? And what's grown faster than people expect? Generally, the way that we see it, a lot of the big retailers are tagged, right? So we know the Amazon versus the Walmart, Target, Kroger, and so on and so forth. And then there's this big bucket of other. And that other group continues to grow. When we looked at it last year, it was growing. Looking at it just before this conversation with you, we're seeing it's continuing to grow. So that long tail of smaller retailers that are getting more adept at understanding their shopper and building up their shopper marketing sort of know-how and their retail media know-how are getting the attention of brand marketers.

5:18So that's sort of one aspect of it in terms of the breadth of retailers where this is a possibility. But the other aspect of it is in the breadth of the types of channels or tactics that they offer. And so in its infancy stages, retail media was really more of a bottom of funnel conversion sort of tactic. And we're increasingly seeing more top of funnel offerings available through, especially through the larger retailers like Walmart. And then you mentioned DSP. That's actually where I started my career on a demand side platform, real time bidding way back in the 2010s, which seems like such a long time ago now.

5:54Are these ad networks, are these ads for people that are on the retail site or did their ads extend out into their own like web wide DSP that kind of lead them back to these marketplaces? Yeah, that's a great point. And I think maybe a common sort of misunderstanding for people that hear the term retail media networks, it's so sort of integrated into the media landscape where a lot of times a shopper of a retailer could see an ad for a brand and they don't necessarily even see the association with the retailer itself. It's really just a means of targeting, not so much an affiliation between the brand and the retailer.

6:33That's not true in all tactics, but it's certainly the case many times. So incrementality is what everyone is looking for when evaluating a new channel. So when brands add retail media, how much tends to be genuinely new demand versus budget that might be moved out of a meta or Google into a different box? I guess there's a couple of ways to think about that. First off, just by design, the way that market mix modeling works, of course, it's going to attribute the incrementality associated with that particular tactic. But I think what you're getting at is if there's dollars that are moved from a different bucket into retail media, is it sort of a net neutral effect or not?

7:10And two points I would make on that is, one, we've determined that a lot of the investment that goes into retail media is net new. It's not generally being sourced purely from other media. I suspect some of that may be related to where those dollars are coming from within an organization, right? So if you think about trade spending budgets, oftentimes that might sit with a sales team or a trade marketing team, and it's distinct from the media bucket that's handled by a marketing team. And that potentially creates opportunity for the retail media to be more sourced from trade because it's meant to foster stronger relationships with strategic retail partners.

7:54So working with a lot of brands that have kind of cracked into these spaces, what are brands looking for when they're trying to assess whether a given retailer's network is worth it? You know, I think some of that is led by pressure, right? Because it's a sort of like a, maybe this is what you meant by pay to play, is it's part of the tax of working with retailers. And that's hard for me to answer in absolute terms, but it's something that comes up from time to time, that it's more like we feel like we're obligated to put investment towards this retailer. and maybe it creates some sort of reciprocity along the way.

8:31Maybe not. It's hard to really say that. And of course, that sort of reciprocity is not directly captured in the way that we think about the modeling. What we're really looking at is purely what the consumer response is from that retail media investment. And what we can say very emphatically is that the return on retail media has been really strong, oftentimes exceeding the ROI that you might see on other tactics. So even if the money is borrowed or sourced from some other sort of demand driving investment that the brand was already making, more often than not, we're seeing that as being a net positive impact on the business.

9:09And when I talk to brands about retail, a lot of the ones that really succeeded tend to focus, really focus in on a key retailer and really maximizing the growth potential that you have with say a Target or a Walmart or something like that. Is the same thing true on the retail media side where you really want to like, or are people kind of going omni-channel? How do you, when you see brands moving into retail media, what's the best approach to do it? Is it a one by one style thing? Generally, what we find is that brands have a need to diversify more. Diversification can be expressed in a lot of different ways, but it does apply to retail media as well.

9:46Of course, it's sort of capped off by what your distribution footprint is. But the more that you can take that retail media and spend it across multiple retailers, that diversification is important in terms of the impact that it has on the consumer behavior, as well as just the sort of spreading the risk or spreading your investment across all the retail partners that you work with. So diversification is really important in that respect. And then what kind of budgets are we talking about for retail media? Like, I guess it obviously depends on your footprint with these retailers, but just for brands thinking about going into retail media, maybe in comparison to a percentage of their overall marketing budget, what are the successful brands earmarking for retail media when they move into it?

10:31The way that I'd answer that, one thing that I was looking at before this conversation is, if you cluster together, let's say, retail media, trade, and shopper marketing, all the things that are sort of designed to truly drive behaviors at the shelf. Smaller brands, and I'll describe them as maybe below$50 million in revenue annually, they're putting about half of that entire bucket of investment towards retail media. And as you look at larger organizations, that number starts to get much, much smaller down to 30, 20, 15%. And so there's a very meaningful difference in how smaller brands are choosing to allocate their retail-oriented sort of investments as compared to larger brands.

11:17And then when talking with brands about their moves into retail, there's often a lot of things that people do to maximize, whether that's end caps or displays or things like that. How should people think about when it comes to a particular retail media source and the placements they offer? You mentioned there's a lot of evolution in the placements and in the innovation that these individual networks are doing. So what are some of the strategies within a platform in terms of the placements that you want to be able to maximize your attempt there? Yeah, I think a lot of this is guided by an organization's ability to think and plan short-term versus long-term.

11:57And this is a really important component for particularly smaller brands that have a smaller distribution footprint and success at the shelf and with those retailers is incredibly important to their long-term livelihood, right? So there's an interesting sort of balance there where they have to achieve certain velocities at shelf, making sure that they have longevity on shelf. And that might have them focusing more on bottom of funnel tactics, particularly on search. And just as an extension of that, we see a lot of gravitation towards bottom of funnel tactics with smaller brands. Sometimes it's because their history is in D2C they've had sort of the blessing and the curse of having performance marketing or the ability to truly measure the impact of their marketing investments, right?

12:47And that tends to be more on shorter term sorts of tactics. When you extend that into the retail space and you're thinking about how am I going to spend my money? Oftentimes it ends up being more bottom of funnel search tactics. But what we often see is the larger opportunity is in the upper funnel, longer term impact. That's what's going to give your brand longevity. If you're thinking about it at more to macro level, it might not pertain to that one retailer where you have to make sure you have a really great start and you're going to have distribution there next year and the year after and making room for line extensions and that sort of thing.

13:23But ultimately we see that as really the most important pivot as brands are evolving and growing into retail is making sure that you're dedicating a good chunk of your investment towards upper funnel. And this is the halo, The idea that you can create awareness at the top of funnel that really helps the rest of your channel succeed. Can you give me a sort of example of a company that turned on a retail media channel and was really blown away by the results it was able to achieve? I don't know if I have a specific example of that. It's more like this is something that we speak about with a lot of our clients about following where the marginal ROI is.

14:04And oftentimes we see that retail media is an untapped opportunity, particularly an upper funnel. Can you talk about how Keen as a platform helps give brands the confidence to spend into that upper funnel in the retail media environment? What is Keen doing that gives people the confidence to expand into retail media? Yeah. One thing that I would say is sort of a core part of how we're differentiated is, and I'm going to geek out on a little bit of the statistics behind it for a moment, if that's all right, but our modeling approach is Bayesian, meaning we're able to build in priors as a starting point for a model.

14:44And those priors are built off of the$45 billion of marketing investment that we've analyzed over our history. And by doing that, not only can we create a stronger starting point for how we understand the consumer response for a given tactic. If a brand has never done, let's say, you know, retail media at Target before, we're able to introduce our priors into their planning without them ever having tested retail media at Target to give them conviction that this is the response that they're going to get. This is the incremental volume that they're going to generate by turning on that lever at Target.

15:20And so I'd say that's really the first step, right? As in giving our clients the ability to go into new territory without sort of the costly and time-consuming exercise of doing some sort of experiments or some sort of lift test in the market. They can jump right into it knowing that we've got a pretty good idea of how that tactic is going to respond for their brand. And then retail and things like Amazon are incredibly important for demand capture. And And, you know, especially you see a lot of correlation, a lot of halo between things like TikTok shop and pushing to retail or bottom of funnel advertising on meta, making your brand top of mind for people who will find them at retail.

16:03Have you found any interesting interactions maybe between retail media and some of the other bottom of funnel digital channels? Yeah, I mean, in reality, we're looking at interactions across every single permutation of tactics that are out there, right? So there's always some degree of synergy. From a practical standpoint, we know that it's important to have top and bottom of funnel working together, building the awareness, driving the conversion, and that sort of thing. So we know that those sort of interactions exist. And so the example that you gave around meta and how a consumer might respond in a retail environment certainly hold true.

16:37I don't have any specifics on which ones have the higher synergy or that sort of thing. But that's often where we get into like the, there's just so many combinations to know about and to dig into, right? But oftentimes, they're more or less driven by the amount of investment, or of course, the crossover at a consumer level on how much there's exposure to both tactics by individuals. So someone, so Brent, going into retail media, what are, I know ROAS is a very short-term metric and one that I think every time I've asked someone from Keen or in one of these podcasts about a number they've stopped trusting, ROAS, five-day ROAS, you know, short-term ROAS is one of those ones that doesn't really hold up.

17:15What are the, maybe the key metrics that someone's looking at both short-term and long-term to determine whether retail media makes sense for their brand? You know, as far as ROAS goes, I think it's important to sort of acknowledge there's two different flaws there, right? One is potentially the ROAS is measured on the total volume associated with when an investment was turned on. But even if you were able to get to some sort of a true ROI there, understanding your historical ROI really does nothing in the way of helping you plan whether or not you should invest more or less in that particular tactic.

17:52And that's probably the biggest flaw that we see, and particularly those that aren't working with some sort of planning optimization tool, is you see that you got$2 ROI, for example, on a past tactic. And that makes you think, well, I should certainly invest more in that tactic, especially if that's higher than the ROI that I got on other tactics. But in reality, what matters is the marginal ROI, right? What's the return on the next dollar that you spend. And the distinction there is marginal ROI is considering where you are on that diminishing return curve. And even though you got, in that case, maybe$2 ROI on average, the last dollar that you spent may have been 75 cents on the dollar.

18:31The last thing you want to do is put more money towards it. You've already actually overspent in that scenario and you need to pull back in order to actually make your average ROI higher. But more importantly, you need to pull back to maximize what your profit is. So for brands that haven't tapped into this source as an option, what do you see as sort of the checklist that they should go through? Okay. About when they're ready to go into retail media. I think some of that comes down to the strategy of why you're investing in retail media. And do you need more bottom of funnel versus top of funnel support?

19:05Some of that's also sort of learning your way through what is this going to do to our relationship with a retail partner and how is it going to sort of enhance it and maybe open up some doors to how we think about merchandising or what sort of distribution we're going to have at that retailer breadth of offerings and that sort of thing. My understanding with Amazon always was that you can spend all day into Meta and it's not going to have a cumulative effect necessarily on Meta's relationship to your brand. Whereas on Amazon, you are spending money into your listing, which is getting more reviews, which is helping Amazon see it as a better option to surface in its algorithm.

19:46Do you think the same effect is happening with retail media? It may not be a direct correlation of, wow, they're spending money, let's feature them, essentially. But do you think there is a similar correlation happening in retail media where there is some cumulative effect of budget on these platforms helping out at retail? That's a very interesting question because the dynamics of how your investment works in Amazon, there isn't exactly a proxy for that in a brick and mortar retail environment. Maybe on the dot-com side of some of those retailers, it plays out, but it's a little less tangible when you're thinking about, about brick and mortar and what sort of true sort of differences it makes in the execution of how your product shows up.

20:27So I guess it sort of creates a cleaner sort of separation between your marketing and the execution of how your product is available. Whereas in Amazon, those are a lot more intertwined. Can you describe a little bit about like, I'm sure each of these retail media networks has different sorts of placements, but talk to me about what the placement ecosystem looks like. Maybe pick one of them on target. Like what are some of the innovations that are happening with placements in retail media, I guess? Yeah, the main way that we think about placements is in the specific channels or sub channels within retail media.

21:04across the boards, search is going to be the most dominant, right? And that's where we see the most investment, maybe followed by display that starts to start to get into upper funnel. The ones that are really emerging, and I'd say Walmart led the way on this, is in streaming video, right? So when they launched Vizio and they were encouraging a lot of their brand partners, like here's the new platform within our retail media ecosystem that you can invest in. That's where we really started to see a ramp up of upper funnel options available within retail media. And then a more recent one, and this is really small, but it's emerging is within social because it's getting more difficult to just from a third-party data standpoint and getting the cookies on consumer behavior and targeting and all that.

21:50A lot of brands are going to retail partners and their social networks to invest in retail media. That's a very different way for a brand to show up. And the ROI on it is amazing. Again, we might be at the very, very low side of that diminishing return curve, right? So we still have to learn our way through how that curve is going to evolve as brands start to pour more and more money into this. But it's something that's rapidly growing within the retail media networks. And then in terms of how to visualize the funnel here. There's both upper funnel and lower funnel channels or placements within retail media.

22:30I guess, of course, it's going to vary brand to brand, but how should brands be thinking about where their dollars should be allocated in retail media, whether it's top of funnel, awareness driving, bottom of funnel demand capture, essentially? I think that's best handled at a macro level. We do find, I think I mentioned before, that brands have more opportunity to shift their dollars towards upper funnel, whether that's within retail media or elsewhere, right? So I think it's important to sort of look at the big picture in terms of where the upper funnel investment is happening and recognizing where it can have halo across retailers and that sort of thing.

23:12Any closing words? I think we probably have a lot of listeners to this podcast who have been big on meta, big on Google, they're in Amazon, retail, omni-channel. From Keen's perspective, give me some sort of closing words on how advertisers should be thinking about retail media with a partner like Keen. It's a great demand capture sort of channel, right? And the nice thing about it is it's very targeted in a way that a lot of other tactics are not, right? So as you think about where you're trying to build your business and which retailers are your most strategic partners and are going to be sort of a core component of your growth strategy, that plays a really significant role in how you think about your investment across the landscape.

23:58And so now that we're seeing retail media continuing to evolve and it's across more retailers and across more touch points, we believe it's a critical sort of consideration as you're thinking about the overall marketing mix in a way that allows you to be a lot more strategic or specific in where you're driving growth of your business. I think because it's a newer channel without the right tracking or modeling, it's probably also a channel that if you're doing willy-nilly or if you're doing too aggressively or you're not doing it in a measured way, there probably is the potential for you to kind of burn cash with it or be less efficient with it.

24:37You would say that's accurate? Yeah, yeah, I suppose. I actually think one of the important aspects of, this is more specific to Upper Funnel, but an important aspect of how you think about the return you're getting from your investment is patience. And that's often something that brands don't always have, especially if they're cash strapped and, you know, they've got to think about their business from month to month and they can't really think about this year versus next year. but patience is important in that respect when you think about when you're getting the return of that investment. And I'll go back to the point about performance marketing and being able to sort of recognize how investment is associated with closure or purchase.

25:21When you're thinking about upper funnel, that's a lot more ambiguous, right? And you need to lean on capabilities that are a bit more recognizing that generating awareness is also part of the game, right? It might not produce a sale right in that moment, but if you can build awareness, that's going to do wonders for your business in the long term as you're continuing to build up your brand equity and the incremental sales that come with that in the future. Definitely awareness is a big part of the halo that we are here to discuss. So thanks for talking to me about retail media's position in that halo, Mike.

25:55Of course. Thank you so much.