Retail media networks are booming. Here's how they can do even better

There's been a lot of buzz around retail media networks (RMNs) over the past few years, but is the hype justified, and will it last? We believe the answer is yes, but only with the right data sharing and analytics in place between retailers and consumer packaged goods (CPG) manufacturers.

RMNs enable CPG companies to buy advertising space across retailers' digital channels, therefore allowing enhanced consumer targeting close to point of purchase.

Their popularity is unsurprising when you look at evidence of their effectiveness. A study by the Interactive Advertising Bureau found that 67% of consumers are more likely to make a purchase if they see an ad for a related product or service while shopping online. And another study by Kantar and Profitero found that RMNs delivered an average return on ad spend of $4.70 for every $1 spent.

Now the question is: How can retail and CPG companies take full advantage of the growth opportunities that these platforms present?

Advertising and consumer data is understandably closely guarded by retail and CPG companies for reasons such as privacy and standardization to competitive concerns. However, to increase the effectiveness and efficiency of RMNs and reap a high return on investment, it is vital that retailer and CPG manufacturers establish a framework for data sharing.

As a relatively new concept, these networks are full of potential, but as with all fresh ideas, scalability and momentum are key to ongoing success. With the right data infrastructure and analytics capabilities in place, we know RMNs will continue to flourish. They'll do this through enhanced data sharing, better targeting and analytics, and collaborating on relevant and engaging campaigns.

We've identified three key areas that we believe will skyrocket the success of RMNs and capture even more growth for retail and CPG companies:

1. Enhanced data sharing

There are certainly challenges to overcome to improve collaboration between retailers and CPG manufacturers, especially when it comes to sharing valuable consumer insights. However, the wealth of first-party data between them has the potential to significantly optimize campaign performance and ROI of RMNs to deliver business value. The CPG and retail partners that do this well will have:

• Clear data-sharing goals linked to business plans
• An agreement on the type of data needed to support those goals to enable growth
• A data governance framework with defined parameters such as ways to constantly monitor and measure the effectiveness of the RMN program
• Advanced analytics and quality data to drive the best insights
• A contractual agreement to establish rules around sharing data

2. Better targeting and analytics

RMNs, by their very nature, offer exceptional targeting and analytics capabilities, but they could be even more sophisticated. By sharing data, retail and CPG companies can uncover more insights about target audiences than each party could have achieved alone, such as purchasing behavior, conversion rates, and customer lifetime value. And you can improve targeting efficiency by analyzing which types of buyers interact with your ads.

3. More engaging ads

Consumers are increasingly adept at ignoring all brands' best efforts when it comes to advertising. That's why CPG firms must continually innovate their advertising strategies and formats.

Through collaboration, retail and CPG companies can take full advantage of interactive ad formats offered by RMNs – such as user-generated content, gamification, and personalized ads with targeted offers – to improve customer experiences. Especially with location-based targeting, CPGs can appeal to specific shopper segments.

With the right data and tools, both parties can optimize campaign performance and increase basket sizes.

RMNs will continue to get more sophisticated. Targeting capabilities will get even better, making the customer experience more seamless. But to take full advantage of these opportunities, retailers and CPG manufacturers must prioritize collaboration and data flow between their organizations. Only then can they achieve a win-win situation where both parties can enjoy profit increases and overall business growth.