Essentials to building a successful retail media network

How retailers offering online advertising can strengthen customer and supplier ties

In the rapidly evolving retail landscape, retail media networks (RMNs) have emerged as a pivotal platform for data-driven advertising, enabling retailers to leverage their digital presence to offer targeted advertising opportunities.

To level set, an RMN is a third-party, retailer-owned advertising platform hosted on a retailer’s website. Think Amazon or Walmart. Online shoppers visit these websites to find access to products, from big screen TVs to grapefruit juice. Ads placed on the site connect buyers to brands directly on any preferred device, where consumers can then complete the purchase. In effect, the RMN becomes a paid influencer, funneling buyers to the brand by leveraging the host’s broader, stable user base. In exchange, the RMN capitalizes its web traffic and ecommerce data to produce income beyond its own direct sales.

As McKinsey forecasts, RMNs could amount to $100 billion in ad spending in the U.S. by 2026. The fusion of RMNs with data and analytics heralds a new era of consumer engagement, offering a plethora of benefits and untapped potential. Here are just a few of the benefits:

Enhanced loyalty: The foundation of RMNs is built upon the rich data ecosystem that retailers possess, encompassing customer behaviors, preferences, and purchase histories. By harnessing these data through sophisticated analytics, retailers can create highly personalized advertising experiences that resonate with consumers and drive engagement. Such interactions foster a deeper connection between consumers, retailers, and suppliers, and enhance loyalty across multiple dimensions.

New revenues: RMNs can identify and nurture new revenue streams by aligning consumer affiliation with brand objectives, thereby driving both online and in-store traffic. The measurement of incremental return on ad spend (iROAS) in a closed-loop system ensures that advertising investments yield tangible, measurable results.

4 key traits of a superior RMN

In light of advertisers’ high expectations and fierce competition, the key challenge for RMNs is differentiation. To stand out, RMNs must unlock the full potential of their first-party data, delivering actionable insights that provide real value to customers, brand partners, and suppliers. Based on marketplace observations and more than 25 years experience in data, analytics, AI-driven audience targeting, and direct marketing, I’d like to emphasize four key traits of a successful RMN:

• Cross-functional team alignment: An RMN serves as a platform for brands to engage with shoppers at various touchpoints throughout their shopping journey. So, the first order of business is to align cross-functional teams with the brand’s unique identity and mission. When teams across different functions, such as data science, analytics, marketing, product development, sales, and customer service, are aligned with the brand's unique identity and mission, they work cohesively toward common goals. This consistency ensures that analytics workstreams contribute to delivering the best products and services to ensure that every advertisement, promotion, or sponsored content within the network accurately reflects the brand's values and messaging. It helps build trust and credibility among both advertisers and shoppers, enhancing the overall effectiveness of the network.
   
• Customer-centricity: According to Wharton Professor, Peter Fader, in his book Customer Centricity: Focus on the Right Customers for Strategic Advantage, “Not all customers are created equal.” Customer lifetime value (CLV) demands that you make effective decisions on how to allocate marketing resources across the customer base, with close attention to how much is spent in acquiring a new customer. Targeting high-value customers as defined by CLV is one of the bedrock ideas behind customer-centricity. Indeed, it may be the most effective way of tuning your RMN toward reaching its top-producing customer base. By prioritizing high-value customers, you can create strategic advantages throughout the value chain, better target brand-customer and retailer-customer relationships, and direct the network toward serving consumers who demonstrate the greatest likelihood of making a purchase.
   
• Seamless marketing execution: The outcomes of analytics—such as accurately profiling top-producing audiences, segmenting a target audience based on training your RMN through deep learning models, and arriving at the best recommendations—must be integrated seamlessly into your marketing execution. Collaboration between data science, analytics, media insights, and ad sales teams is essential for effective implementation. For example, data insights can be leveraged to deliver relevant and targeted advertisements to shoppers, making their shopping experience more enjoyable and rewarding. This personalized approach increases shopper satisfaction and encourages repeat purchases, ultimately driving higher revenue for retailers and advertisers.
   

• A closed-loop infrastructure: A closed-loop infrastructure, linking data, analytics, campaign execution, and measurement, will not only safeguard customer information and privacy, but also enable robust testing, learning, and comprehensive omnichannel visibility.

  Establish a rigorous testing and learning agenda to measure the effectiveness of analytics and advertising. Through ongoing testing and learning, network innovation and adaption can be accelerated. Over time, your RMN will increasingly deliver exceptional value to all stakeholders in what has always been a highly competitive and dynamic retail landscape.

  Lastly, a closed-loop design can generate a comprehensive omnichannel view of online and offline activity, easily tying media exposure to each variable purchasing channel for effective iROAS measurement.

It comes down to data-driven insights, leading to measurable success

The synergy between analytics and RMNs represents a transformative force in the advertising domain. To fully harness this power and differentiate in the marketplace, a successful RMN must not only focus on data-driven insights that support brand identity and mission, but also on identifying the right customers, best marketing resource allocations, and seamless execution of marketing strategies. The enabler of all of these is a closed-loop infrastructure of data, analytics, campaign execution, and omnichannel visibility, leading to measurable success.