I’ve seen similar Walmart data before, but always in private meetings, so now that the data is public I can comment… Here is why you shouldn’t believe it.

Contrary to Spicer’s article, Digital Merchandising is already widely used in retail merchandising.  But the majority of deployments are NOT delivering paid ads.  The video based displays are used to enhance shopping experiences, communicate complicated value propositions, and drive incremental sales.

Retailers make money by selling products and services for a profit.  Not by capturing an audience to deliver paid advertisements to.  Yes, retailers do try and get their supply chain partners to share in the cost of operating the store through the use of co-op advertising, slotting fees, merchandising accrual systems, etc…  But at the end of the day, retailers don’t want promotions that merely shift sales from one brand to another, they want great experiences that drive incremental sales.

Walmart has a major initiative underway called Project Impact.  The goals are to focus on the most strategic product categories and reduce their efforts in less important ones.  They are also trying to dramatically reduce store clutter, and improve the shopping experience.  Project Impact is being implemented in the form of major remodels to 1000’s of stores.

Because of Project Impact, there is now less shelf space and fewer promotional opportunities available to non-strategic brands.  If you’re one of these brands, you are at risk for getting a smaller piece of the pie.

So because Walmart is offering viewer promotional opportunities,  won’t they generate less co-op dollars?  Not if they charge more for each opportunity… and that’s where the Walmart Smart Network (aka Walmart TV 2.0) comes in!

For the brands that still have shelf space at Walmart, you can now buy a promotional slot on the Smart Network (that includes promotional content on a digital merchandising system and premium product placement on a Walmart endcap). 

The Walmart Smart Network actually has three different types of digital signage.

1.   Welcome Signs – 57” LCDs w/o audio that hang over the front doors of the store and are (potentially) seen by all shoppers as they enter.  Typically running 5 second spots.  200 million people go by these signs weekly (106 million people watched the superbowl where ads sold for $2.6M).
2.   Category Signs – 57” LCD signs w/ option for audio that hang in strategic departments (Health Grocery, Electronics).  These signs are sometimes mounted in landscape and other times in portrait. Typically running 10 second sports.
3.   Digital Endcaps – that include a smaller portrait format display with product specific content and includes product placement on end-cap.  Screens appear touch-capable although I haven’t seen an interactive one yet. You’ve got to wonder how much the digital sign is helping shoppers with the $0.48 ramen noodles.

Walmart has a team of people that sell these new SmartNetwork promotional opportunities and they are more expensive than brands are accustomed to paying for in-store co-op.   Those Ad-Sales people need to demonstrate a good return on investment for the brands.  And that’s why Walmart has published data on the efficacy of the SmartNetwork, to sell ads, not out of some sort of altruistic gift to the digital signage community. 

Walmart hired Candance Adams a very credible Customer Insight exec with a PhD, and she partnered with DS-IQ which is full of ex-Microsoft rocket-scientists.  So I’m sure the research methodology is very legitimate.  But here is the rub… the raw data get’s interpreted by people tasked with ad sales, and it’s there output that Walmart publishes (don’t we all know better than to trust ad men?).

So when Walmart says that a food item that buys a spot on their network get’s a 13 percent lift in sales, or a health/beauty product gets a 28 percent.  What they don’t point out is that in their program is not just a spot on a digital sign, but also a product placement on a scarce end-cap!  How much of that 28% lift is a result of the end-cap vs. the digital component?  Walmart doesn’t say and there is no (published) DS-IQ study on the sales lift of the end-cap w/o the sign.   When the SmartNetwork was launched, Stephen Quinn the CMO at Walmart said the goal was a 30% lift for the endcap products, which he said would typically result in a 5% lift to the entire category the product was in.  As you can see, Walmart now says that even the most successful product is not achieving that goal.  Further, Walmart doesn’t even try to claim to that the Category signs or the Welcome sign have a measurable effect on sales of a particular product.

The bottom line is that the Smart Network is all about keeping Walmart’s co-op revenue flowing in, while reducing the visual clutter and making Walmart a more pleasant place to shop.  It’s a great strategy for Walmart but it’s far from evidence that digital signage advertisements drive retail sales.

I’d love to hear from Brand Managers that have bought into the program (even privately).  What are you’re thoughts?

Update:  It appears Walmart may be re-thinking project impact.  Also, you can find more photo’s at http://photos.retailgeek.com/Retail/Project-Impact/.

Last week they published a new study, Gone in 2.3 seconds.   This study, surveyed 1000 consumers about the influences on their purchase decisions, and concluded amongst other things that in-store marketing is very effective, and that more than 60% of purchase decisions are still made in the store.  The study is certainly interesting, and I frankly agree with many of it’s conclusions.  You can read more about the study at Ad Week or at the Experiate blog.

However, I have to ask….  is this kind of research methodology remotely valid? Basically they are asking customers to fill out a survey about what effected their purchase decisions.  But psychologists have proven time and time again that human beings aren’t aware of many of the factors that effect their decision making.  Study the work of psychologists like Twitchell, Kahneman, and Tversky to see how bad we really are at understanding and predicting our own decision making.  In fact, it turns out that when you tell a person in advance that after making a decision they will have to explain it, you dramatically influence the decision they will make.  We’re even worse at predicting what will influence our future decisions, and how we will feel about those decisions.  I’m confident that if we could survey every apparel shopper who has an unworn, expensive item hanging in their closet for over a year, just before they made that purchase, most would say they expect the purchase decision to make them very happy and could even give you reasons why it would.  Yet the item hangs in closet as a trophy to buyers remorse.  When the survey respondents said that they were more influenced by in-store communications than advertising, does anyone really beleive that the respondant thought back through the 3000 advertisements a day she was exposed to, before concluding that the fact tag in the store is what compelled her to own an item?

I’ve used this type of research countless times in my career, but I don’t put much stock in it anymore.  We ask people for subjective opinions, often when we know that those people can’t possibly give us accurate answers, and then we tally up their answers and call it “Quantitative” data (usually to imply it’s more credible than the more fuzzy “Qualitative” data of other research methodologies).  It’s a great methodology for proving that a tactic or strategy we already want to follow is the right one, but I don’t think it stands up to much scrutiny.  These days, I far prefer research methodologies that observe the shoppers actual objective behavior, it’s usually slower and more expensive, but it it’s worth it.

I have no problem believing digital signage can be an effective tool in a window display (see my recent Harrods post).  But most successful windows displays are designed to draw you into the store.  In this case, these windows need to drive you someplace else.  Worse, the overwhelming majority of closed stores are in less than desirable real-estate where the shopper has already migrated away.  If I were an out of home advertiser (happily I’m not), I’m not sure I’d be too excited about buying sub-optimal locations and then hoping to change a hundred years of consumer behavior by using the windows to drive traffic to some other shopping venue.

Since the inventory of advertising locations is likely to be pretty liquid, it’s going to be a challenge for the network operator to have capitol equipment available to set up ad-hoc digital signage displays.

Does digital signage offer some special opportunity in these empty windows that some form of static advertising does not?  (other than all the usual intrinsic advantages of digital sigange).

All and all I just don’t get excited about this.  Am I too cynical?

Ad:tech is an interactive advertising and technology conference and exhibition. They do a number of events each year at a variety of international venues. The primary attendees are brands, agencies, publishers, portals, and service providers.

I’m not sure if it’s the intention, but the bulk of exhibitors and content are primarily focused on web based activities (media buying, search, e-mail marketing, web analytics, affiliate marketing, blogging, etc…). There is not (yet) much of a presence for Digital Out of Home, much less retail environment specific content.

Obviously, their oversight willingness to let me in, shows they have some interest in retail. The exhibit floor has about 300 exhibitors, mainly with 10×10 or 10×20 booths. The anchor exhibitors were Yahoo and Google. It felt like the overwhelming majority of exhibitors were focused on some element of the web advertisement delivery supply chain.

The only Out of Home or Retail focused exhibitor was SeeSaw Networks. SeeSaw is a what I like to call a network aggregator for DOOH advertisers. Meaning, they allow an advertiser to buy spots that play across multiple DOOH networks. They also partner with LocaModa to do some interesting marketing campaigns to mobile handsets.

As for my panel, I found my fellow panelists pretty interesting. Our moderator was Lori Schwartz for the Interpublic Groups Media Lab (I’m looking forward to visiting her lab in Los Angeles next week).

After Lori introduced us, I led things off talking about state of in-store marketing, and my often repeated opinion that the goal of in-store marketing activities in the store has to be to drive sales and customer satisfaction, not to sell ad space. I shared a few case studies of our work with context sensitive digital signage, RFID based customer affinity, and SKU Activated merchandising. Lori and the audience asked some tough but insightful questions, and hopefully I didn’t stumble too badly. I think the RFID based customer affinity (aka “the Minority Report” style marketing) was most interesting to the audience.

Alan Schulman, the creative director of IMC2 talked about what was new and cool from the perspective of an interactive agency (Alan was quick to point out that IMC2 is the largest still independent interactive agency out there). He showed a case study of the next generation of proximity marketing experiences planned for deployment in New York City taxi cabs.

Michael Mak, demonstrated bCODEs kiosk/scanner for optically reading a text message from a standard cell phone. This allows a marketer to SMS a textbased eCoupon to a consumers phone, and then the consumer can redeem it in a store by holding their phone up to a kiosk. I’m a big fan of using a mobile phone (or other consumer owned device) as the “physical cookie” in retail stores. At the moment, bCODE has one of the best means of doing so. The minority report style experience we can create with a wireless keyfob is very compelling, but how many consumers will carry a pocket full of electronic tracking devices once the experience really takes off? Clearly consumers need a single device that they already have reason to carry, that lets them opt in to multiple environmental CRM experiences. Obviously an RF based solution would be much preferred to bCODEs optical system but at the moment bCODE is a pretty good cost/experience trade-off.

Last, we had Bruno Uzzan from Total Immersion demo their very cool “Augmented Reality” technology. This was by far the coolest live demo of the four of us, and drew all the oh’s and ah’s from the audience. Basically, they load 3D models of objects into a computer, and plug a video camera into the computer. So for example, Bruno had scanned the physical box that a set of LEGOs comes in, as well as detailed 3D models of the items you can build with the LEGOs inside. When he holds the box in front of the camera, the camera recognizes the box (no mater what angle or orientation), and the computer software superimposes the 3D model on the face of the box and even lets him manipulate the model. So you can imagine setting up a “Magic Mirror” in a LEGO store where kids can grab any box off the shelf, hold the box up to the “mirror” (aka Monitor w/ camera), and see what can be built with those LEGOs. It’s a visually stunning demo. I can clearly see the benefit for large scale presentations and events, but I have mixed feelings about its retail application. I have no doubt that the technology can be used as an effective traffic generating novelty. And I can also see the great benefit to interactive 3D models being used to demonstrate certain products in a retail store. I’m imagining back-yard swing-sets in a toy store that has no room for actual swing-sets, for example. It’s not clear if attaching the 3D model to a physical object and then watching it on a video display is really better than just directly watching the 3D model on the display. I could see it going either way, so I’d certainly want to test it with real shoppers before I made a major commitment of resources. If the price is right, I’d put one in a flagship store without a second thought. This has much more visual impact than say, a MS Surface.

Here’s a few more independent reviews of our panel:

Internetnews.com

techconfidential.com

ad:tech blog

My bottom line… if you are in retail or DOOH you can definitely get something out of these shows, but I wouldn’t skip a major retail show to attend ad:tech instead. On the other hand, if you’re looking for some cool IT services and tools to serve up banner ads, you’ve hit the mother load.

I was recently traveling through the security checkpoint at the San Diego airport, and found this tray provided to pass my luggage through the X-Ray machine.

This ad works for two reasons.

1. It surprised me by hitting me with a message when I wasn’t expecting it. I’ve been watching TV for my whole life, I’ve trained my brain to tune out the advertising noise from that channel. I was completely unprepared for the ad in the tray, so it got by my usual mental filter.

2. The ad for shoes hit me , precisely at the time I’m holding (and slightly embarrassed by) my slightly passed their prime Allen-Edmunds. Not only will I remember that the ad was clever, but I’ll actually remember what product the ad was for. That’s perfect context sensitive advertising.

By the way, if you haven’t shopped at Zappos.com, it’s the best online shoe shopping experience you’re ever likely to find.

What about you? What ads have managed to rise above the noise for you?