How Retail Media Network Success is Changing the Brand-Retailer Relationship

Brands and retailers have a long history of working together, but the advent of retail media networks (RMNs) is changing the retailer-brand relationship in many ways, including how brands fund their investments in retail. The clear-cut lines between budgets are now blurred, with RMN benefits justifying funds from different areas across the brand organization. This article will explore the evolution of common funding sources, but first, it’s important to understand a few key definitions.

Brand Funding Sources, Defined

There are four core funding buckets that are relevant to conversations around brand investments in retail:

• Trade and Shopper Marketing typically supports merchandising, promotions and co-branded retail marketing initiatives to help drive a brand’s sales through a retailer — think in-store displays, temporary price reductions, and retailer in-store and digital marketing assets.
• Brand Marketing encompasses a wide range of brand content and marketing mediums meant to drive brand awareness, consideration and/or conversion.
• E-Commerce Media generally focuses on driving online conversions. Sponsored search, paid social, programmatic display, and other similar mediums generally fall under this bucket.

Retailers Have Historically Received Siloed Funding From Brands

Historically, brands paid retailers through trade and shopper funds. These costs were/are often essential for a brand to have a seat at the table with a retailer. While there was some value inherent in these costs, it was/is challenging to fully measure. With minimal ability to confidently determine return on investment, brand media and e-commerce media dollars weren't typically part of the funding conversation.

How it’s Evolving: Various Brand Funding Sources for Retail

The emergence of the RMN has started to change how brands fund some of their retail investments. Today, through RMNs, retailers offer brands a host of new benefits. They have powerful media assets to promote products to highly relevant audiences to drive awareness and conversion. They also have extremely valuable first-party data, collected through loyalty programs, point-of-sale systems, and other touchpoints. And, unlike the days of old, retailers can directly tie their media placements to purchases through closed-loop reporting.

Historically, retailers have taken a pay-to-play approach, often forcing brands to invest trade and shopper funding to begin and maintain a relationship. Now, with so much rich data, diverse media offerings, and a meaningful value exchange, the brand investment is becoming more attractive. Brands are starting to view retailers as publishers, which has opened up the sources where funds can come from. In fact, according to Merkle’s 2021 survey data, brand media is now the budget source brands use most frequently to fund their RMN investments.

How it Needs to Evolve: Breaking Down Silos Across Funding Sources

Being able to pull funds from new budget sources is helpful for expanding brand-retailer relationships, but it also presents new challenges. Oftentimes, budgets for trade and shopper funds, brand media, and e-commerce media are managed by different folks across an organization, and breaking down silos can be difficult. What can retailers and brands do to start thinking (and working together) in a more integrated way?

Retailers should come to the table with a holistic total commerce plan that demonstrates how they can drive the brand’s business forward using their tools and platforms, whether that’s retail media, in-store signage, promos, or other means. They can set high-level performance goals that span and resonate with the team members managing shopper, trade and media budgets.

Retailers also need to think long term when considering funding sources. With brands increasingly pulling funding from media budgets, many retailers are worried about losing trade dollars and cannibalizing their own funding sources. However, it’s important to push past this short-term concern and recognize that the only way to grow the funding pot is to expand reach into these less-tapped funding areas. It may mean sacrificing some trade dollars now, but it will ultimately open up new funding opportunities if the value exchange is there.

Brands can make sure they’re putting the right people in the room to make investment decisions effectively and efficiently. Longer term, it may behoove brands to combine shopper, brand media, and e-commerce media dollars to better fund initiatives in a less-siloed marketplace.

Conclusion

For retail media to grow at the rate it’s projected to, at least 50 percent of funding will need to come from sources outside of trade and shopper funds. RMNs need to capture funding from brand media and e-commerce media, meaning they must continue to demonstrate positive ROI and incrementality. With robust first-party data and closed-loop reporting, the value exists; now it’s just a matter of communicating it appropriately and reaching the right stakeholders.

Joe Hammond is the digital media vice president, monetization at Merkle, a customer experience management platform.