Hard times are good news for retail media

Hard times are good news for the information savvy retail media buyer and so perhaps they are good news for retail media.

'It's only when the tide goes out that you find who has been swimming naked.'

The above quote is from Warren Buffett, officially the world’s richest man according to Forbes rich list, so he’s pretty well qualified to comment on what works in business and what doesn’t.

His quote received widespread global coverage because both the UK and US economies are unravelling fast, exposing many of the myths of a seeming economic miracle where everyone could endlessly enjoy the benefits of low inflation, full employment and cheap credit.

What he’s basically saying is that anyone can make money when times are good, but that many will be exposed when times become more challenging.

The last ten years or so, which constitutes a majority of the average retail marketing firm employee’s working life, has been a very benign environment for consumer facing businesses. Consumer goods inflation has been low, primarily due to cheap Asian imports, food inflation has been muted due to productivity gains and retailer consolidation, unemployment has been low, and credit has been incredibly cheap and easy to come by. All of this has led to consumers feeling generally positive and willing to spend. Even if you were skinny-dipping you could still make a decent profit when faced with such consumer enthusiasm for spending not only what they had, but what they didn’t have as well.

No longer.

The tide has turned, and from here on, gaining growth in consumer facing businesses will be a much tougher game.

Consider the average UK household’s balance sheet:

Average income: £29,000

Average non-secured debt: £8,000
Average total debt (Including mortgage): £ 55,000
Average private sector pay rise: 3.5%
Average public sector pay rise: 2%
Average Retail Price Inflation: 4.1%

(You may like to work out your own household’s rate of inflation using the calculator on the National Statistics website).

There is no such thing as an average customer, but put simply, many consumers are heavily indebted and getting worse off in real terms as their pay lags behind inflation.

Something will have to give.

This is important for retail media buyers because good marketing is based upon optimizing consumer expenditure for our clients. If those consumers have less to spend then it will be necessary to work harder than it has been over the last few years in order to attract their custom.

But this is also a tremendous opportunity for marketing firms to show who is wearing the biggest, toughest most colourful trunks in town.

Clients will be clamouring to understand the circumstances and attitudes of their customers in this new environment, and because things are changing quickly, they will want rapid, granular insights to keep them up to date. Having worked out where the opportunities for growth lie, they will then want to target these customers with relevant communications and offers.

When markets were rising, insight and targeting mattered less, but in today’s environment try telling the clients board of directors that you’ll get back to them with some data in a month or so based on a sample of a few hundred customers. Just make sure you are out of range when you suggest this as they will be throwing things at you in short order; the big retailers and CPGs all know that their access to rapid, granular data, (increasingly overlaid with attitudinal overlays) represents an extraordinary competitive advantage.

The advantage doesn’t end there though. Insight is only truly useful if it leads to action, and any marketing action undertaken in 2008 will have to be ACCOUNTABLE. Brand building activities will be cut in favour of trade drivers and insight based promotional tools and retail media skills are about to have an important year. Any sucker can run a promotion or an ad when times are good, but as budgets get squeezed clients will prefer to run a promotion that gets a 20% response rate rather than the 1-2% that the industry averages.

Whichever way you look at it, hard times are good news for those who are prepared with a wrapping of real information. If you are one of the lucky ones then do try not to point at those without cossies on too much.

dunnhumby