Why is it such a big deal all of a sudden?
It's getting harder and harder for brands to make a sale. Given that, brand teams are scrutinizing every dollar spent and working to ensure that all significant expenditures are strategically based.
Additionally, the amount of money spent in store has climbed markedly over the past years. Decades ago, the ratio of ad to in-store spending was heavily weighted to the ad side. Companies spent the bulk of their dollars driving awareness and brand liking among consumers. As retailers consolidated and became more sophisticated, and as the number of brands and products within categories grew, the balance of power shifted. Today, retailers demand a larger portion of the pie, and they can get it because:
- More than half of brand choices in many categories, including consumer packaged goods (CPG), are made in store. (Source: Booz and Company)
- High quality store brands have put further pressure on brand differentiation, pricing, and the need for deals.
- Retailers view "slotting allowances" and promotional vehicles like features and displays as a major revenue profit source and demand brand participation "or else."
- The 2009 economic downturn made consumers more deal conscious and more willing than ever to substitute brands.
If a category spends 30, 50, or 80 percent of marketing dollars on in-store activity, those dollars need to be enhancing brand imagery as well as selling product.
Finally, our hyper-fragmented media market has contributed more indirectly, but perhaps no less significantly. Brands cannot reach consumers as efficiently as they used to. In some categories, a large portion of a target audience might never see any marketing element for a brand beyond store walls.