At the recent D2C convention, I presented a session entitled Trend Spotting: Benchmarking the Present and Predicting the Future of Marketing. My intention was a simple one: to synthesize the latest statistics, forecasts, and best practices in marketing from over 100 different sources to save my audience time and to provide insight that will help you today and in the future. In the fifth of this six-part series we take a look at mass retail and its impact on direct marketing. For the purposes of this blog post, the term “retail” will mean traditional bricks and mortar retail. Given the presentation was confined to an hour, I have had to limit my focus, but hopefully the learnings gleaned will prove helpful to the reader.
Let’s Get Physical
According to the U.S. Commerce Department, web sales reached $341.7 billion in 2015, representing a 14.6% increase year-over-year when compared to the previous year. And although that represents a significant portion of overall growth in retail sales, it still only represents about 10.5% of total retail sales if you exclude sales of automobiles and fuel. That means that nearly 9 out of 10 purchase decisions are still being made at brick and mortar retail. With significant category consolidation, that means that the fate of direct marketers often rests in the hands of a finite number of the biggest retailers. The largest of those retailers based upon domestic sales of combined online and offline retail are ranked below.
A review of the most recent top 10 traditional short-form DR products and top 10 long-form DR products as reported by DRMetrix shows that approximately 90% of products listed are sold at the mass retailers above, as well as others. Those that aren’t are offered on HSN or QVC with a single, service-based exception – LifeLock. Given this is the case then, what is the true relationship between direct marketing and mass retail in this modern age?
Knowledge Is Power
Obtaining precious shelf space at these retailers can be extremely challenging. For example, A Wall Street Journal article reported that “about 10,000 new suppliers applied to become WalMart vendors.” Out of those only about 200 or 2% were accepted. Imagine the pressure then on those successful vendors to actually move product off the shelf so they can retain their shelf space! Enter direct marketing – whether it be radio, DRTV, or online. All of these channels are opportunities for marketers to educate their consumers about product superiority and differentiation, benefits and features, and to create a value proposition. Fortified with this knowledge, consumers who encounter your product now know something about it and are in a position to make a more informed purchase decision. As a bonus, direct marketing can also create its own revenue stream, helping to offset the cost of advertising.
Having a presence at mass retail also serves two other critical purposes: the very existence of your product on a retail shelf allows you to draft off of the goodwill, trust and loyalty the retailer maintains with its customers, and it imbues newer brands with a certain level of legitimacy and weight. In simple terms that means that the consumer will assume that the product is good and will do what it claims to do because most retailers today have such liberal return policies, that a given product would not survive on the shelf if these assumptions were not true!
Direct marketing helps fuel retail sales in two different ways: it acts as an effective pull marketing tactic as well as a push marketing tactic. Here’s what I mean: a pull marketing strategy seeks to motivate customers to seek out your brand in an active process. Think of this as essentially demand generation where the customer comes to you via the channel that is most convenient for them. Given the dominance of traditional retailers in overall sales, that means that direct response advertising can be a powerful tool for driving in-store traffic.
A push promotional strategy takes products directly to the consumer, ensuring that prospective customers are aware of your brand at the point of purchase. That can impact several pathways in today’s omnichannel universe because the point of purchase can be the advertiser’s own website, the website of a third-party seller, through catalogue, over the telephone, or at traditional retail. Both of these tactics create consumer appetite that encourages the retailer to purchase stock from the manufacturer as consumers conduct their research and seek out your product. In fact, in countless instances I’ve observed clients who take their commercials and media plans directly to mass retail buyers as a way of convincing them to take on a product, knowing it will be supported with advertising that will drive demand. In some cases, a retail tag (e.g., Available at: <name of retailer(s)>) can even be included in the advertising that directs the consumer directly to a specific retailer or set of retailers that carry the product.
Burden of Proof
Shelf position and point of display have taken on new importance in the wake of “showrooming” – the practice where consumers take out their smartphone in the retail aisle and research products. What are the implications of this behavior? First of all, consumers may not have been exposed to your advertising prior to encountering it in the aisle. They will likely look to reviews to quickly determine whether or not the product is any good. Google reports that 82% of smartphone users turn to their phones inside a store when making a purchase decision and BrightLocal reports that an astounding 88% of consumers trust online reviews as much as personal recommendations. In light of this, just imagine the influence that such social proof in the form of ratings and opinions has on your prospects at the point of sale!
Then there is the matter of price. Consumers now have the ability to price shop literally at the tip of their fingers. That is why many marketers often offer different SKUs or offer configurations at different retailers so that items cannot be comparison shopped on an apples-to-apples basis. It also explains the prevalence of white label or private label goods such as Target’s Up & Up brand which they sell on an exclusive basis and which cannot be comparatively price shopped.
The private label phenomenon is perhaps the best argument for building a meaningful brand. After all, if consumers will pay a premium for water, it suggests they will pay more for just about anything. But in order for that truism to be realized, those consumers need to: a) Know about your product, and b) Believe it to be superior. Direct marketing can certainly prime the sales funnel pump, but it is the collective opinion of your consumers and their experiences that ultimately play a critical role in that final purchase decision.
Clearly mass retail is playing a far more important role for direct marketers these days as the commonness of exclusive direct-only offers has evaporated in the wake of a multichannel realty. Next week in the sixth and final part of this blog series, we’ll explore media attribution and what direct marketers can do to ensure their media is performing at peak levels.
Peter Koeppel is Founder and President of Koeppel Direct, an influential direct response media firm focused on direct response television (DRTV), online, print and radio media buying, marketing and campaign management. He can be reached at 972-732-6110 or online at [email protected] or twitter.com/DRTVBUYER.