Point-of-Sale Marketing Hits a Tipping Point

Mike Grimes
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Point of sale marketing is a tried and true customer engagement strategy, one of the most proven ways to deliver targeted messages and offers to customers. Catalina pioneered this medium decades ago. Catalina’s early practice of personalized marketing – which delivered redemption rates far surpassing other promotional media – helped Catalina dominate point of sale marketing for more than 15 years. Catalina’s “mass-targeted” marketing strategy put customized coupons in the hands of every customer. Today, Catalina’s offers reach a majority of all U.S. households.

Yet even with huge market reach and proven results, when an April 11, 2018 headline entitled “Moody’s Raises Questions About the Future of Catalina Marketing” came across my screen, I wasn’t entirely shocked. Here’s why:

  • Retail Consolidation and the Growth of Shopper Marketing Dollars

When Catalina started there were dozens of regional supermarket chains. Today, five companies dominate the US grocery landscape, three of those have national footprints and they have all become a lot more sophisticated with – and protective of – their data.

One of Catalina’s great value propositions was that it tapped national promotional dollars (dollars that went to media like the FSI or spot television) and brought them to retailers. Today, the mega-supermarket companies can command their own significant CPG budgets with less dependence on 3rd party intermediaries. Shopper Marketing – the proper name for account-specific CPG promotional investment – has risen dramatically, and, in the era of national/near-national supermarket chains, the once bright line CPGs drew between brand spending and account-specific spending has blurred.

  • Many New Targeting Options

When Catalina first offered the ability to target consumers based on their purchase, histories brands were elated: CPGs could achieve a level of targeting they only dreamed of. But, in the span of a few short years, targeting options proliferated. Retailers began to tap their goldmine of data. Loyalty Marketing Partners (LMPs) such as Dunnhumby and EYC (now Symphony Retail AI) stepped-in to help retailers “slice and dice” their data with greater degrees of precision and the LMPs applied that data to the benefit of retailers first and brands second.

  • Legacy Systems and High Expenses

The self-serve, desktop-based Facebook Ads Manager or Google AdWords systems we use today are far more robust than the legacy Catalina systems still in operation. In addition, maintenance of separate color printers comes with high cost, but little difference in redemptions.

A Retailer-Centric POS Marketing Paradigm Emerges

Regardless of your opinion on these macro trends, it’s critical to realize that none of them are related to customer demand. Some might claim that I have overlooked a shift from customers appreciating personalization at any level, to requiring a digital-first initiative. Could it be that handing out printed coupons at the point of sale is just “too lame” to motivate digital native consumers? Not at all! Yes, digital is important and growing. But, paper – especially paper issued at POS – still thrives, with more than 1 billion paper coupon redemptions in 2017.

So, what does this mean for the role of POS marketing in a modern, consolidated retail environment in which the leading POS marketing vendor is struggling?

It means that savvy retailers are finding alternative ways to target customers at the point of sale. Their new approach is far more efficient, as it relies on using their own data, their own hardware, and their own offers to target customers. In essence, they are driving the same redemption rates at a fraction of the cost. Let’s explore the reasons why:

  • Retailers Control the Targeting

This means that a retailer’s data scientists and LMP can now apply their own, hard-won customer insights instead of outsourcing their customer relationship to a third party. They can then create a series of parameters around any offer in their arsenal, developed through direct negotiation with suppliers, and set the trigger for delivery. The insights gained from each offer sent and redeemed allows a retailer to provide even more targeted offers in the future.

  • Retailers Sell Programs to CPGs and Create Their Own High ROI Programs

Part of this happens because most retailers’ merchandisers/shopping marketing teams, alongside their LMPs, are now reasonably skilled at selling targeted marketing programs to brands. But the point of sale adds an attractive, efficient and highly profitable in-store medium. Retailers have turned the table on revenue flow, incentivizing CPGs for good offers, instead of paying for access to those same offers.

  • Retailers Eliminate Hardware Costs, Get More Revenue

Using the right tools to trigger alerts is far more economical than relying on Catalina to operate and manage hardware infrastructure. Retailers can deploy campaigns in real time, adjust them based on emerging market conditions and optimize on the fly. In this new paradigm of POS marketing, sending targeted offers costs less than sending an email or text, but delivers redemption rates on par with vastly more expensive and effective channels such as direct mail.

Point of Sale Marketing Is Ready for the Modern Marketplace

All of this highlights the fact that the value of targeted point-of-sale marketing should not be clouded by the murky future of its founder. POS marketing is powerful – and will forever remain powerful – precisely because every customer goes through checkout and, when they do, they can receive personalized offers in real time. The customer demand and business impact has been validated over decades; don’t let one company’s stature change the narrative.

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