As Tesco approaches the first anniversary of its digital media network trial it is clear there is still some way to go to convince marketing directors to put the medium high on their agendas.
But while there is no doubt that the UK’s largest retailer has stimulated interest in the concept, it is the UK’s largest convenience retailer that has stolen a march and shown the true potential of the channel.
A six-store trial of promotions-based screen advertising at Spar produced impressive results. Many brands taking part in the three-month trial experienced double-digit sales increases. A three-week bogof on I Can’t Believe It’s Not Butter achieved a weighted sales uplift of 44% in both value and volume. A rise of 18% was sustained afterwards.
A Spar lemonade promotion in the last three weeks of the trial resulted in value and volume growth of 16% for the regular version and more than 12% for diet. The soft drinks category as a whole grew by 6%.
Other participating suppliers, including Weetabix, Birds Eye Wall’s, Diageo, Scottish Courage and News International, saw sales increase. Price promotions were the favoured option, although BEW chose not to go down this route. It tested a general brand message in the price-sensitive frozen category, but still achieved sales growth. Alcohol had the greatest increases overall.
Spar is now planning a wider trial. Network operator IQ Group is working on a
proposal to roll out the system to another 50-100 stores and is to hold detailed discussions with brand advertisers to make available sufficient budgets for action.
According to Spar managing director Jerry Marwood, the trial achieved its objectives, although “there are big stages to go through before full roll-out”.
“We started with three questions: can we do this without massive capital investment; can it improve sales; and will retailers accept it?” he says. “We have ticked all three boxes.”
On the first point, the deal was structured so that IQ Group bore the costs, together with the suppliers, which invested a few thousand pounds each. In return they received objective research conducted by RMS and sponsored by industry association Point of Purchase Advertising International.
The research took place in four control stores and the six pilot stores, four of which were Blakemore and two were Capper. A four-week base period provided a benchmark to compare the effects of the screens in the test period, while during the test period other factors influencing sales, such as product range, siting, price and promotions, were taken into account. A number of shopper behaviour and acceptance measures, such as instore filming and exit interviews, were used to gain customer insight, while EPoS data and staff were also researched.
Marwood says: “It has clearly improved sales. There are some startling numbers in the mix, in most cases double-digit increases. And these were sustained increases.”
However, he cautions that the sample was quite small: “It raises more questions so we are not getting carried away.”
Hence the decision to undertake a larger scale test before committing to a full roll-out. The area that has been most surprising to Marwood, however, has been retailers’ acceptance. “I didn’t expect the level of positive feedback we received,” he says. “Usually with new things such as instore radio or plasma screens, the first couple of days they are popular with retailers and then they become unpopular. This time at the end of the trial they were saying, ‘You aren’t going to take it out, are you?’”
The research backs this. Managers from all the stores in the trial said they were pleased their store was chosen to participate and five wanted to continue with the screens, the remaining manager giving the proviso that he wanted to see the results first. All strongly agreed that the advertisements were useful to customers and store staff and all thought
they were likely to increase sales. The recall of brands using the screens was high, with one manager saying it had helped to educate staff about a particular product.
Exit interviews have shown that customer recall was also strong - another surprise for Marwood. “There was high double-digit recall. I expected single-digit recall,” he says.
Spar now needs to find a cost-effective way of rolling out the network. The investment required to install a digital network into Spar’s 2,800 stores will be hefty. While the first phase was funded by IQ Group and brand manufacturers, the scale of Spar’s estate may mean capital investment by the retailer.
“We need to look at how to make it pay and to do so with the co-operation of our retailers. It is about coming up with a plan to facilitate roll-out without drawing on individual resources,” says Marwood. The sales increases will help to persuade suppliers and Spar members of the potential of this new medium, but Marwood is already thinking of other ways of generating revenue. Advertising from local services is one possibility and he is keen to explore deals with TV stations.
“Our footfall and transaction numbers are similar to those of Tesco. We have 12 million consumer transactions a week and customers who visit frequently. Retailers spend a fair amount on TV advertising. Perhaps there is room for some reciprocal marketing. We could market programmes such as The Bill, The Big Match or News at 10 in return for saving money. Our stores are located near to home and therefore near to the point of consumption for such programmes,” he says.
The potential of digital advertising is yet to be fully exploited. Proponents talk about its ability to eliminate promotional compliance issues and flexibility to update messages immediately, as well as saving on printed POP costs and reducing instore clutter. But it is difficult to convince marketers to buy in to this new medium.
IQ Group founder David Williams has been involved in instore advertising for many years and knows how long it takes to break through. “I question whether the media market is mature enough yet,” he says. “No marketing directors have yet got a column headed digital media. At the moment it is about brave marketers putting in nominal amounts.”
However, he is convinced that digital media will have its day.
“By the time we have completed phase two of the trial and by the time Tesco has done further work, media buyers will accept the medium more and be better prepared. This will encourage roll-out in retail.”