Transcript:
Peter Crosby:
Welcome to Unpacking the Digital Shelf, where we explore brand manufacturing in the digital age.
Peter Crosby:
Hi, everyone. Peter Crosby here from the Digital Shelf Institute. There may be no more rapidly evolving element of consumer marketing today than retail media. At the forefront of that evolution is Kroger Precision Marketing as America's largest grocer innovates to create a retail media platform that drives a delightful experience for the consumer and attributable results for their supplier partners. Things are moving very fast over there so Lauren Livak and I invited Cara Pratt, SVP at Kroger Precision Marketing, to bring us up to speed. Cara, thank you so much for joining Lauren and I on the podcast today. Kroger is such an important and vital retailer and we are so excited to have you here.
Cara Pratt:
Absolutely happy to be here. Thanks for having me.
Peter Crosby:
So you've been working with many brands around retail media, and it's been, you know how explosive the space is right now, and it's difficult for brands to feel like they have a cohesive strategy. But I think you think this is shifting and so what do you think is happening that's making this sort of a more understandable and focused environment for brands?
Cara Pratt:
What a great opening question, because honestly, I don't think there's a better time to be in the industry, driving change, driving connection, and creating really impressive brand impact and brand outcomes. I don't think it's lost on anybody for the rationale by which e-marketer have declared officially that retail media is the third wave of digital advertising. Following search advertising, following social advertising, this is now fused into full investment strategies for brands. And we see this playing out primarily for three different reasons.
Cara Pratt:
First and importantly, there's a renewed focus on shopping behavior. We think about this path to purchase journey that brands have been looking to influence for many, many decades, and the reality is today, because of the opportunity to connect with customers at any point in time so quickly, this journey, which perceptively is kind of a long pathway of influence to change behavior, is turning into a sprint. Retail media can shorten the gap between inspiration and purchase. Full stop. I mean, people are discovering recipes and in an instant, in a click they're adding to basket, and they're checking out, and this is an opportunity for brands to really kind of disintermediate right in a moment's notice.
Cara Pratt:
And so we're really excited about the opportunity for these shoppable moments to come forward. So first and foremost, this renewed focus on shopping behavior. Then it quickly connects for us into a renewed focus on accountability. RAM budgets are under tremendous pressure and retail media, and certainly a commitment that we've had since we launched four and a half years ago, was really to cement a new level of accountability with every dollar that's getting invested across the media funnel. And again, this is an opportunity to focus on brand outcomes. It's about Omni outcomes, not just about eCommerce outcomes, just a massive opportunity exists to sharpen outcome based KPIs. Are we driving change behavior for brands, no matter where, traditionally, that dollar was placed across linear TV, across out of home, across eCommerce investment strategy. Talking about outcomes based throughout that funnel is really critically important.
Cara Pratt:
And the third way that we really see this change influencing strategy productively is a renewed focus on consumer trust and how critically important that is at a time when trust is eroded, unfortunately, for customers. We have to create this value exchange and loyalty programs like what Kroger has brought forward provides that opportunity. We're earning trust, we're creating connections, we're helping solve customer problems, helping put food on the table, driving inspiration in a moment's notice. Why is this so important? A year ago, the IAB outlook released a study talking about consumer trust and frankly, the problem that we have in this area as an industry, as a country, frankly.
Cara Pratt:
76% of consumers called sharing personal information a necessary evil. 36% were less comfortable sharing at that moment than they were a year prior and 85% wish there were more companies they could trust with their data. That is a problem. That's a real problem that as an industry, as we're trying to create these meaningful moments for customers, we have to get a handle on them. And we're seeing that elevated now, appropriate privacy adjustments that are happening within a pretty OPIC media supply chain, and we think that's going to really continue to amplify and augment the role that retailers can play. So renewed focus on shopping behavior, renewed focus on accountability, renewed focus on consumer trust, all of those are coming together and really influencing the role that retailers can play to fuel a new strategic imperative with investment choices.
Peter Crosby:
And I thank you for that overview and that survey, and I think one of the pieces of data we've seen that also add to the necessity to do something about trust is that a Salsify recently did a consumer research study and in North America, we asked this question, in last year in 2020 and then again in 2021, are you willing to pay more for products from a brand you trust? And in 2020, the answer was 30% of consumers said yes. In 2021, 45% of consumers said yes. So you can see this trend where people are uncertain in their lives and they are wanting to place their faith and their dollars towards brands that they believe in that will protect them, will give them the information they need to know what they're buying, and I feel like investing in that is an important thing.
Cara Pratt:
I agree a hundred percent.
Peter Crosby:
And then secondly, one of the things that really stood out from what you were saying to me also was the importance of Omni. And Kroger, so much of your business is, thankfully now, once again, people walking into stores and doing their shopping, and it sounds like you really have a sense of the importance that digital plays in that journey. Can you just talk a little bit more about that?
Cara Pratt:
Yeah.
Peter Crosby:
Because I think sometimes brands still have their silos up where they're seeing those two experiences as largely separate, but I think that's really going away.
Cara Pratt:
Yeah. Listen, the vast majority of our shoppers are looking for convenience and they're shopping and buying from Kroger multiple times a week, and so typically it's not either or. It's how we show up and we provide access points and ease of convenience of shopping, no matter how they want to shop. And again, most of them aren't stuck in one modality. They're not always coming in store. They're not always buying online and having it delivered to home or buying online and picking it up in store, whatever it may be. Now, the vast majority of our Omni shoppers are just that, they're splitting how they shop across both an eCommerce modality and walking in our stores. There's different trip types, of course, that are fueling that and different needs. And for us, it's about how we show up and we create the right access point for customers based on how they want to shop.
Cara Pratt:
And I'm sure you and others listening in have seen the really intentional investment that Kroger has made, and we're a retailer and America's grocer. We're a retailer in 34 states, across 2,700 stores, and now we're building robotic sheds to create a more automated kind of fulfillment center and a great experience for folks that want to access through eComm and have food delivered to their door in a really timely manner and a really great experience. And we're getting ahead of that and we've been investing in that pre-COVID and certainly it's continued to accelerate, but Omni customers are our most valuable customers. They absolutely are the most valuable customers that we have and so for us, it's not about dictating shopping choice and shopping modality. It's about offering these different convenient modes based on what that customer needs.
Peter Crosby:
Yeah. We all know who's in charge these days, and unfortunately it's no longer us. And also I love the idea of robotic sheds. So I'm now having a picture in my mind that I can't wait to see what they look like. Lauren?
Lauren Livak:
I was just going to say, I love the focus on the customer and it's very clear that Kroger is really positioning themselves that way. And with what you shared in the beginning about those three reasons and how to think about partnering, I think another critical element is the brands and the retailers need to collaborate in order to be successful, right? You have provided all of the amazing tools and all of the opportunities, but where do you see that brands should be focusing on better collaborating with retailers like you?
Cara Pratt:
That's a great question, Lauren. It truly is around collaboration. It's around thinking differently. It's about being open into these new experiences and how we can, again, focus on the outcomes that we want to drive. And every brand's going to be in a different situation, as they're thinking about the different investment choices that they have, and whether they're entering new categories, they're entering new kind of forms of food or whatever it may be, how we can create these moments of delight, engage and connect with consumers at the right time with the content and the experience that they have. That's where it really comes together. I think importantly, we all need to be at the table. We need to dissect problems together.
Cara Pratt:
And it's not just retailers, advertisers. It's retailer, advertiser, CPG, or excuse me, retailer, advertiser, agency, right? The CPG is like the connective tissue across how we all come together. And we're one team that's focused on solving customer opportunities, brand opportunities, and of course, through retail media assets, those that are most sophisticated have access points well beyond owned and operated investment choices. The access points then scale into how we can drive a more performant off property media experience as well through the likes of what we're doing with Pinterest and Roku and other places. This is an opportunity, again, to thread that full funnel, kind of collapse that if you will, but it is about dissecting problems together. Retail data can no doubt help brands define their challenges and importantly define the plans forward, to build against the challenges that they're facing and create a new opportunity to connect with shoppers at the right time.
Cara Pratt:
With that, we talk about having agency, CPG, and retail at the table. You're planning across silos. You have got to plan across silos. Now media budgets are converging in different places. Gone are the days of an eComm budget, a trade budget, a shopper budget, a national brand investment budget. We've got to plan across that because guess what? Customers are looking at and getting hit and getting exposed to content across where all those budgets play. How do we think differently, drive the maximum value out of those dollars? Less about where that dollar's coming from, more about the KPIs of what we're solving for. And so really we want to think outside of a channel or a historical mindset of this channel then feed into these budgeting practices that I have and more focus on solving the customer problem, which then moves back to accountability.
Cara Pratt:
It's not just on a short term return on ad spend element. It's really about marrying up short term and long term together. Efficiency and effectiveness can coexist. It absolutely can coexist and we're seeing that opportunity to help brands think differently about that, help agencies think differently about the KPIs that are fueling a short term lift to a long term, the ability to convert a new shopper that has X lifetime value into the brand. What an incredible opportunity just to think differently about how we connect and drive a really meaningful customer experience. And I think, importantly, through all of this, the retail media industry is going to continue to grow because we're doing things to solve customer problems, drive media accountability, but we have to do it in a way that's removing friction. It's a complicated space within media buying practices today, before even retail media over the last couple years really elevated its presence and its impact in advertising dollars.
Cara Pratt:
So it is about removing friction. It's about leveraging the best of the best for Kroger and 96% of our sales are connected back to households. We can longitudinally evaluate that behavior over time. That allows us to get really specific and performant on pre optimizing these audiences and measuring brand outcomes. We have to do it in a way that's removing friction across all these different platforms that different media buyers and CPG direct are engaging in. In fact, just recently, folks listening in may have seen that we made a big announcement specific to our owned and operated search, and we've got integrations with three leading ad management platforms that are coming in to drive efficiency and optimization across the Kroger ecosystem within search. And that's through Peck View and Sky and Flywheel, and we look forward to how we're creating more easy access points into taking advantage of the opportunity we have to drive inspiration and drive conversion for folks that are in buy mode, on our website, and in a way that they're doing so more scalably across other retailers. They have interest in doing so as well.
Cara Pratt:
So it really is about this three-legged stool, advertiser, retailer, agency coming together, dissecting problems, planning across silos, focusing on short term and long term impact and removing friction in that entire buying process. So early days, no doubt. The whole industry continues to evolve, and for the right reasons. And when we do that for focused business outcomes on driving household penetration gains, share growth, buy rate increase, good things happen. Advertising dollars work harder, consumers see more relevant content, and ultimately, we're driving bigger baskets for brands at retail. So awesome question, Lauren, and I'm really excited about the continued evolution that's going to take shape within the industry and driving the right collaboration across retail and CPG as retail media networks continue to mature and grow.
Lauren Livak:
Super exciting announcement. Really great to hear that the reduction of the friction, I think, is great to even encourage more collaboration between the brand and the retailer. I just want to go back to one thing you were talking about in terms of the silos. I'm curious, who did you used to talk to at the brands maybe a year ago? Meaning what role? Was it the eCommerce team? And then have you seen a shift now as retailer media has changed a bit that maybe you're talking to the eCommerce team and the marketing team? I'm just curious how your communications with the brands have changed to try and help reduce the silos.
Cara Pratt:
Yeah, that's a great question. Every CPG is in a little bit of a different state from a structural side. I said we've been really intentional across the building blocks of our four and a half years or so in the market. Early days, before we extended our portfolio in full and announced our private marketplace, which we announced it advertising week in October of '21, before we extended into advanced TV relationships with the likes of Roku, which we announced in the summer of '20, we were engaged with a heavy amount of shopper marketers in early days, with agencies and then through shopper marketers and then extending into the brand teams. Now we spend an incredible amount of time, really productively, with agency teams and the investment teams, programmatic and core investment teams, to drive more awareness, education, and understanding about the role that retail media can play to deliver on the business outcomes they're committing to the brand.
Cara Pratt:
And so that's where we've seen that evolution shift, but it's partly been very connected to the portfolio evolution that we've had, particularly over the last two years. And again, I think that's just a really important part. You see agencies, most major hold codes, have commerce COEs recognizing how critical it is to make sure that they're pulling forward in end to end recommendation. If commerce isn't a part of that plan, they're going to be missing out on an opportunity to most productively invest those dollars to drive brand outcomes. So again, it's such a dynamic time in the industry with what retailers have kind of curated and created these opportunities for, how agencies are structuring themselves, the role and expectations that brands have back into how they plan their media choices. And I think that this is just still the very beginning of more maturity, more clean optimizations end to end that help these brand dollars work harder.
Peter Crosby:
So Cara, case studies always help sort of bring things to life, I think, for our listeners. So I was wondering if you have an example of an organization or even a category that's doing particularly well at this and sort of what that package of work, and planning, and strategy, and outcomes looks like.
Cara Pratt:
Yeah, listen, there's so many great examples that I want to pull in, not super shine a light on just one, because we've got thousands of brands in our store. We have nearly 2,000 brands invested within our assets in calendar year '21 with an 89% retention rate. So we're engaging with a myriad of brands. We're clearly driving the right outcomes for them, because they're coming back. They continue to have interest in exploring, and exposing, and activating within our asset base. So that's the reality at the starting point, Peter. I think we've got some great examples of business outcomes that have happened across different parts of our portfolio. If you look from an O and O search site, a lot of people think about the lowest part of the funnel, very convergent down at that low part of the funnel.
Cara Pratt:
The reality is, even with search and even with our personalization sciences, it's fueling the kind of visibility of the listing ads that show up. Two things that are important to note. One, in our experience for grocery, 85% of the top 500 keyword search terms are unbranded search terms. That means customers are coming, looking for cereal or ice cream or cheese. They're not coming in looking for a specific brand. So we have an opportunity to use personalization sciences and also understand where brands want to up weigh some of their views in search grids to influence conversion. Now we have an opportunity to inspire through those PLA placements as well. Nearly four out of 10 of our clicks are from households that are new to the brand. What an incredible opportunity for brands to expose themselves in really meaningful ways.
Cara Pratt:
We have released some case studies of late through different parts of the relationships that we have and if we think from a private marketplace standpoint, again, national brand investment dollars coming in, leveraging the best of what retail media provides with our incredible audience optimization and meaningful measurement standards that can come through and break through traditional vanity metrics. Meow Mix through Smuckers, they recently publicized a campaign and they talked about the 8x return on ad spend they got by optimizing on our audience segments and placing that within their private marketplace buys within their DSP of choice. We've also been working with Roku for, like I mentioned, nearly two years. Neutrogena, which Johnson and Johnson owns, just published a campaign where, through our audience recommendations on Roku's content portfolio, they realize an 8% increase in household penetration. So we are making these budgets work harder, driving brand outcomes, and it's happening full funnel across the full stack, off property, on property, across nearly 2,000 brands.
Cara Pratt:
So early days through all this still, but that explosion is really because it's driving more performant media, right? Consumers are looking for relevancy. We can drive relevancy. Consumers are looking to create these special moments of delight and convenience. We can drive that. Advertisers are looking to influence shoppable moments and focus on media outcomes. We're going to drive that and look at the change happening in the marketplace. Appropriately, privacy regulation is going to change how media is bought and sold. The cookie deprecation will happen. All of these are different forces, really distinctively different forces that are influencing buying behavior, but they're all doing it for the right reason. And they're all ultimately helping the media get to a more accountable nature. So, great question. There's a litany of great examples. Those are some that the brands have been public on of late and so happy to spotlight that here for your podcast as well.
Peter Crosby:
Appreciate it and I wish you were more passionate about what you're doing. It must be so amazing. You were saying that Kroger's been at this for four and a half years. It's now really starting to take off, right? It must be so exciting to be at the nexus of figuring out what this new relationship with the consumer, between the brands, the retailer, and the consumer can be.
Cara Pratt:
It is and people ask me all the time how far into it we are, and using, I'm a big baseball fanatic and...
Peter Crosby:
Who's your team?
Cara Pratt:
Fan for anything that matters. Cubs.
Peter Crosby:
Cubs.
Cara Pratt:
We're going to get back to the World Series again. So just using that, I mean, we are still so much in the early innings of this. First, second inning. We are so early, right? The maturation that's happening, both within platforms, the recognition and the value. Again, retailers that have the ability to tether first party data, rich first party data consistently, to avoid holes in the longitudinal view of data, that's where that unlock happens. Because you've got this opportunity to use this first party data, not just because it's a consented first party, then that we can then advertise with to create these relevant moments. But when we're building these optimization models, we can do it with a high degree of predictive accuracy. We have tested models with third party data. Only 30% of the model outcome was predicted on third party data, 30%. I mean, that's worse than a coin flip. It's terrible.
Cara Pratt:
And then when you flip to first party data, 90% of that outcome was predicted within the meaningful change. And again, I think the learning journey that so many parts of the media ecosystem are a part of, the whole media supply chain, on how to use first party data, the transition out of third parties, and then the impact that it's going to have on consumer buying behavior and media returns. We're just in the early days and it's also kind of not lost on any of us that the first digital ad is less than 30 years old, right? I mean, look at what's happening within a longer tenured linear TV behavior and now the addressability that's happening through advanced TV streaming. Reach that can happen through streaming is nearly as great as the reach that's happening in linear and we can drive addressability so we can reduce wasted impressions.
Cara Pratt:
So I'm super passionate about it. I'm super passionate about the incredible team that we have at Kroger Precision Marketing across all functions that are really creating this possibility for brands. And ultimately, the customer's the one that's going to win on this because they're going to be able to consume and connect with content that matters for them. So we can just break through the noise in a much easier way.
Lauren Livak:
So Cara, in terms of what's coming next in the retail space, it's completely evolving and I know we talked a little about the silos and how the teams are changing. There's a clear focus on KPIs and how to measure it. How do you see organizations shifting towards that to focus more clearly on what to measure and kind of what success looks like?
Cara Pratt:
The exciting part through all this change is there is a distinctively different dialogue that's happening with brand teams directly, as well as agency teams that obviously have commitments that they're providing back to brand advertisers. The reality is there's still inconsistency that happens across channel investment strategy and channel KPIs. I think it's really critically important and I think everybody cemented on a real need to move away from the vanity metrics of an effective CPM, or just CPM generally, or viewability standards, or click through rates. We've got to move beyond that and I think everybody in the industry really craves that need and recognizes that opportunity. At the same point, unfortunately today, those are still the only consistent metrics that exist for brands to be able to use, and agencies to be able to use, to reflect back on.
Cara Pratt:
So we recently joined the Interactive Advertising Bureau at their annual leadership meeting to talk about what an opportunity for a continued leadership position that the IAB can provide, because it truly is about standardization, again, across the ad tech ecosystem and across brands and across now retail media players, because there's inconsistency there with what retail media providers are willing to dictate and to showcase from performant nature. And so I think it's just important today to have a standard view, standard aligned understanding about what's expected and that we need to be looking at that in a wider kind of aperture of channels. We certainly need to move beyond a viewable impression being a key measure that folks are looking at, reflecting on the efficacy of media buys. 50% of pixels being on screen tagged as a viewable impression, we've got to get better than that. There's way too much data. There's way too much connectivity and understanding about behavior and it's just time for the industry to move forward.
Cara Pratt:
Now that is an easy statement to make, but it takes all players around the table to show up, to think differently, to be more open minded, and to commit together. So I think the fastest path to that, candidly, is for brand partners, the buy side, to hold the sell side more accountable. Once you do that, and you do that consistently, it's going to make all boats rise, everybody show up differently. So we just have to start with setting higher expectations, make those expectations clear, make those expectations consistent, and persist across all different channels. So I do fundamentally believe, back to e-marketer declaring retail media is the third wave of digital advertising. That rationale really connects very much to the accountability layer and so I do think that retail media players can force a faster move on this change as well. And I look forward to making sure that Kroger's sitting at the table there too, and driving change within the industry.
Lauren Livak:
I love the focus on accountability and would you also agree that transparency is needed on both sides? I hear that a lot from brands holding accountable to the retailers and I see Kroger doing a lot of that, being transparent in terms of the data you can provide and the services. And would you agree that's another critical element to the success of this overall?
Cara Pratt:
Absolutely. I mean, transparency has to fuel accountability, right? People need to understand, they need to believe, they need to see the different performant nature of the media investment choices, and you can't drive media accountability unless you bring a new layer of transparency to the forefront. So I think that there's a huge opportunity, but it takes all players. It's not just the sell side, buy side. We do need the ad tech companies at the table through all of this. There's just a massive opportunity end to end across the media supply chain to make sure all parties are there, but the only way that we're going to be able to deliver on accountability, and consistently, is if we do it transparently across all channels. So fabulous overlay, Lauren, I couldn't agree more.
Lauren Livak:
I feel like we all need to kind of put our hands in on the podcast, brands and retailers and agencies and all go, "Woo, let's do it together."
Peter Crosby:
Kumbaya, my Lord, Kumbaya. Yes. Well, I mean, it's so interesting. I know you're talking about it as the second inning, but the major shift in sophistication and clarity in the retail space that I think is being driven by retailers like yours. To me, just in the last couple of years that we've been talking about this on the podcast, it feels already dramatic and so what's coming is super exciting. And Cara, I'd just like to thank you so much for spending- I mean, your days must be so busy. For you to come and join us on the podcast and talk us through this is really valuable and we're grateful.
Cara Pratt:
Absolutely, lovely to be here. I'm very passionate about this space and appreciate what you're doing to bring more visibility, and understanding, awareness into this ecosystem, because again, we're in the early stages and when we get this right, which is a when, not if, it's really going to drive amazing benefits for consumers, most importantly, and of course, brands as a fast follow.
Peter Crosby:
Thank you.
Lauren Livak:
Thank you so much.
Cara Pratt:
You bet.
Peter Crosby:
Thanks again to Cara for filling us in on the rapid evolution of retail media. Please share this episode across the silos at your company and thanks as always, for being part of our community.
