The Branding Effectiveness of In-Store Retail Media

What Walmart Connect’s Non-Endemic Advertiser Push Tells Us About the Power of In-Store Ads

AdWeek’s Kathryn Lundstrom recently broke news that Walmart Connect is courting non-endemic advertisers for its in-store retail media network. This is a huge step for the next major media channel because the largest brick-and-mortar retailer—one that boasts a monthly in-store audience of 200+ million—is setting its sights on national media budgets.

I’ve argued consistently that national media budgets should migrate to in-store retail media. But it’s an almost heretical idea to endemic brands who still think of in-store displays as shopper marketing. It ends up being an easier sell, oddly enough, to non-endemic brands.

To be clear, non-endemic advertisers should be Walmart Connect’s priority because the retail giant’s primary in-store ad inventory—the TV wall and self-checkout kiosks—is well-suited to non-endemic advertisers. The TV wall is ideal for Telecom, Auto, Entertainment and other non-endemic advertiser categories. Self-checkout kiosks may be too late in the purchase journey to influence a grocery purchase, but it’s a great time to promote the QSR nearby or the new TV show premiering on Netflix.

Walmart’s eventual introduction of digital screens in other areas of the store—like the entrance, endcaps, or in-aisle—will bring endemic advertisers onboard and drastically accelerate the market.

“[In-store is] going to be the next major ad market,” I told ADWEEK. “I see Walmart as the linchpin for this market to materialize.”

What Apple—and Other Non-Endemics—Understand About In-Store Retail Media

One of in-store retail media’s current quirks is that it’s heavily driven by non-endemic brands. You can’t go into a grocery store or drugstore with digital screens and not see ads for Apple—perhaps the most iconic brand advertiser of all. You’re also likely to notice plenty of banks and other financial services advertisers.

What they understand—and which endemic advertisers often miss—is that in-store ads are fantastic vehicles for brand advertising. They deliver mid- and upper-funnel effectiveness according to time-tested measurement approaches like brand lift studies.

When brands are being sold on the shelves, it’s easy to fall into the trap of believing any in-store media should only be about driving sales. Unburdened by this bias, non-endemic brands view in-store retail media through a different lens and value it based on more traditional marketing principles like reach and brand-building.

Most brands are familiar with the Ehrenberg-Bass Institute’s framework for How Brands Grow. Professors Byron Sharp and Jenni Romaniuk discuss the importance of advertising building lasting memory structures so that the brand is recalled by a consumer when they’re in the market for a purchase within a category.

They point to top-of-mind (i.e. unaided) awareness as a key branding metric to establish this brand-building effect. A Grocery TV study evaluated this for a non-endemic Telecom brand lift study and found that exposure to an in-store campaign drove a 4.4 percentage point gain—a notable increase for a high awareness brand.

In-Store Retail Media Drives Branding Effectiveness Across the Funnel

Of course, branding effectiveness isn’t limited to non-endemic brands. CPGs are major national advertisers as well, so it’s unsurprising that they also see branding effectiveness from in-store ads. An Mfour study of a national ice cream brand advertised on Cooler Screens’ refrigerator aisle digital screens found measurable brand lift at all phases of the funnel. Brand consideration increased 4 percentages points, brand opinion (favorability) rose 7 points, and purchase intent jumped 12 points.

Some customers open the door and grab a carton of ice cream. But even for those that don’t, seeing the ad in-aisle at the moment of consideration is likely to forge lasting memory structures around that brand.

Full-Funnel iROAS for In-Store Retail Media

If in-store retail media is to be properly valued by advertisers, measurement will need to be full-funnel. Capturing the branding and performance effects together in a single metric could be an interesting path forward.

In the next two sections, I’ll discuss a couple of innovative approaches that represent a step in that direction. In the first example, I can’t directly speak to the validity of the research since it’s a bespoke methodology—but in my estimation uses a defensible approach to account for upper- and lower-funnel effects.

The Looma Project, which provides shelf-integrated video displays, believes that in-store retail media “blurs the lines between branding and performance.” Their methodology calculates a full-funnel iROAS metric across four key stages of the funnel: awareness, discovery, conversion, and loyalty.

The values for each phase of the funnel are calculated based on the media value of non-converting impressions (awareness), incremental first-time customers (discovery), incremental sales during the campaign (conversion), and incremental sales for three months post-campaign excluding first-time customers (loyalty).

The results of a metastudy of ~400 campaigns found that nearly half of the impact of these displays is driven by mid- and upper-funnel effects.

“The fact that nearly half of their total value still comes from upper-funnel KPIs is a testament to the overall value of advertising in-store,” said Cole Johnson, Founder and CEO of Looma. “It's the best of both worlds in being both high-traffic / high impression count and as contextually relevant / high intent as you can get.”

How to Value In-Store Ads’ Short-Term vs. Long-Term Effectiveness

BERA, a research company specializing in branding effectiveness measurement, has an approach for combining short-term sales effectiveness and long-term branding effectiveness into a single ROI metric—which they have computed for most measured media channels.

Since in-store retail media is such a nascent channel, this calculation does not exist yet. In its absence, I propose below my own back-of-the-napkin estimate for the channel by comparing it to similar ad formats, as measured by BERA. From BERA’s data, there are four media channels that exhibit the most similar characteristics to in-store retail media: Out-of-Home, TV, Digital Video, and Sponsorship/Promo.

I believe these four combine to account for the key elements of what make in-store retail media unique—dynamic video content on TV-like screens found in the physical world with proximity to the point of purchase and the ability to carry promotional messages.

By doing a simple average of the long-term effects (branding) and short-term effects (sales) for these four channels, I derived an estimate for in-store retail media—71.5% short-term and 28.5% long-term.

My estimate isn’t going to be perfect, but it’s a starting point for discussion. And experts see the channel’s natural potential to deliver both upper-funnel and lower-funnel effects.

“In-store retail media has a high likelihood of being pretty effective,” said Kraig Schulz, Chief Customer Officer of BERA. “It is addressable in the sense that you are clearly catching someone at who is in the market, it is about as recent as you could possibly get in terms of evoking the memory structures your brand has seeded over the years, and it can be situationally tailored—for example, by season or occasion.”

How In-Store Retail Media Measurement Must Evolve

The analysis above is my rough sketch of how in-store retail media should be measured going forward. The considerable mid- and upper-funnel effects that cultivate long-term brand equity can no longer be ignored. And they must be calculated alongside short-term sales effects and incorporated into a more holistic picture of iROAS.

When that occurs, three things are likely to happen:

1. It will begin to engage national media teams who speak the language of branding metrics

2. It will attract more investment as brands are able to quantify their full-funnel iROAS

3. It will require more integration between media and merchandising teams to capture the opportunity

When this happens, the physical store will then begin to realize its potential as the next major media channel.