Article
Counterpoint: Walmart stats don't prove digital signage maturation
Goldberg, who writes the retailgeek.com blog, offers a counterpoint to a recent DST article on retail digital signage.
July 28, 2010 by Jason Goldberg — Principal, Retailgeek
A recent article on DigitalSignageToday.com, entitled "Retail digital signage coming of age," talks about Walmart's recently-refreshed instore video network (a.k.a. Smart Network) and shares some data on the success of advertisements on the network.
I've seen similar Walmart data before, but always in private meetings, so now that the data is public I can comment … Here is why you shouldn't believe it.
Contrary to the article, digital merchandising is already widely used in retail merchandising. But the majority of deployments are not delivering paid ads. The video-based displays are used to enhance shopping experiences, communicate complicated value propositions and drive incremental sales.
Retailers make money by selling products and services for a profit. Not by capturing an audience to deliver paid advertisements to. Yes, retailers do try to get their supply chain partners to share in the cost of operating the store through the use of co-op advertising, slotting fees, merchandising accrual systems, etc. … But at the end of the day, retailers don't want promotions that merely shift sales from one brand to another, they want great experiences that drive incremental sales.
Walmart has a major initiative underway called Project Impact, the goals of which are to focus on the most strategic product categories and reduce their efforts in less important ones. They are also trying to dramatically reduce store clutter and improve the shopping experience. Project Impact is being implemented in the form of major remodels to thousands of stores.
Because of Project Impact, there is now less shelf space and fewer promotional opportunities available to nonstrategic brands. If you're one of these brands, you are at risk of getting a smaller piece of the pie.
So, because Walmart is offering viewer promotional opportunities, won't they generate less co-op dollars? Not if they charge more for each opportunity … and that's where the Walmart Smart Network (a.k.a. Walmart TV 2.0) comes in!
For the brands that still have shelf space at Walmart, you can now buy a promotional slot on the Smart Network (that includes promotional content on a digital merchandising system and premium product placement on a Walmart endcap).
The Walmart Smart Network actually has three different types of digital signage:
1. Welcome Signs – 57-inch LCDs without audio that hang over the front doors of the store and are (potentially) seen by all shoppers as they enter; typically running 5-second spots; 200 million people go by these signs weekly (note: 106 million people watched the Super Bowl, where ads sold for $2.6 million). 2. Category Signs – 57-inch LCD signs with the option for audio that hang in strategic departments (Health Grocery, Electronics); sometimes mounted in landscape and other times in portrait; typically running 10-second spots. 3. Digital Endcaps – these include a smaller, portrait-format display with product-specific content and includes product placement on endcap; screens appear touch-capable, although I haven't seen an interactive one yet.
Walmart has a team of people that sell these new SmartNetwork promotional opportunities, and they are more expensive than brands are accustomed to paying for in-store co-op. Those ad-salespeople need to demonstrate a good return on investment for the brands. And that's why Walmart has published data on the efficacy of the SmartNetwork, to sell ads, not out of some sort of altruistic gift to the digital signage community.
Walmart hired Candance Adams, a very credible customer insight exec with a Ph.D., and she partnered with DS-IQ, which is full of ex-Microsoft rocket-scientists. So I'm sure the research methodology is very legitimate. But here's the rub: the raw data gets interpreted by people tasked with ad sales, and it's their output that Walmart publishes (don't we all know better than to trust ad men?).*
So when Walmart says that a food item that buys a spot on their network gets a 13 percent lift in sales, or a health/beauty product gets a 28 percent, what they don't point out is that their program is not just a spot on a digital sign, but also a product placement on a scarce endcap!
How much of that 28-percent lift is a result of the endcap versus the digital component? Walmart doesn't say, and there is no (published) DS-IQ study on the sales lift of the endcap without the sign. When the SmartNetwork was launched, Walmart CMO Stephen Quinn said the goal was a 30 percent lift for the endcap products, which he said would typically result in a 5 percent lift to the entire category the product was in.
As you can see, Walmart now says that even the most successful product is not achieving that goal. Further, Walmart doesn't even try to claim to that the Category signs or the Welcome sign have a measurable effect on sales of a particular product.
The bottom line is that the Smart Network is all about keeping Walmart's co-op revenue flowing in, while reducing the visual clutter and making Walmart a more pleasant place to shop. It's a great strategy for Walmart, but it's far from evidence that digital signage advertisements drive retail sales.
I'd love to hear from Brand Managers that have bought into the program (even privately). What are your thoughts?
Update: It appears Walmart may bere-thinking Project Impact.
*
Editor's note: This op-ed piece generated some spirited debate and prompted a conversation between DST and executives at DS-IQ.
DS-IQ says it's not in a position to argue whether digital signage is mature or not because it doesn't know the thousands of networks that populate the landscape. They'll leave that debate to the experts.
But the company says its experience powering the Walmart Smart Network has shown how this network can create a better shopping experience via more relevant and engaging shopper communications.
The "Counterpoint" piece mischaracterizes motivations and understates program performance against Smart Network benchmarks, DS-IQ says, while it notes that it is correct in pointing out that Walmart and DS-IQ share comprehensive campaign results with participants for every campaign on the network.
The reports are private to advertisers and will continue to be so, DS-IQ says. They include sales lift and impressions among other key metrics, and the company says marketers are able to see how shoppers respond to messaging and are able to adjust and learn how to increase relevance over time.
DS-IQ sees this as an unqualified win for shoppers and marketers alike.
From DST's perspective, conversations like this should only benefit the digital signage industry as a whole, and we're glad to see a level of performance visibility from this sector. We're looking forward to seeing more results from the Walmart Smart Network, and hopefully other retail networks as well, since that should help speed the medium's adoption in the retail sector. – ed.
(According to his website, Goldberg has been a shopper marketer, retail designer and visual merchant for more than two decades, during which time he's worked for many of the largest retail and product brands in the United States. He runs shopper marketing agency Retailgeek Consulting LLC and blogs atretailgeek.com, where this article originated.)
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