How ITV and Channel 4’s landmark retail media deals fill a 'gap in the market'
UK broadcasters recently launched landmark deals with top retailers Tesco, Boots and Sainsbury’s. We dig deeper into why this TV trend is one to watch.
Retail media/broadcaster deals mean better targeting for niche products
Broadcasters and retail media owners have found common ground and are buddying up to share data and improve advertiser outcomes. Last week ITV joined forces with Tesco’s loyalty provider Dunnhumby and Boot’s Media Group. Just two days later Channel 4 unveiled its tie-up with Sainsbury’s Nectar360. Similar deals have taken place in the US between Walmart and Paramount.
How do retail media networks work?
Using purchase data from the retailer’s loyalty accounts (and therefore email IDs), audiences can be segmented into groups. For example, customers who regularly buy vegan products or crisps. Broadcasters then match IP addresses from video-on-demand (VOD) registrations and match them with the emails collected by the loyalty accounts to serve targeted ads.
In the case of Channel 4, it matched its 24 million All 4 users to Nectar’s 6 million members and carved out 80 audience segments.
Post-campaign the broadcaster and retailer then provide a brand with proof of who then went on to buy that product after being exposed to the ad – a process termed closed-loop analytics.
What is driving TV's friendship with retail media?
These tie-ups are being positioned as privacy-first solutions to cookie deprecation.
The economic downturn also plays a role as marketing budgets get squeezed. Chief marketing officers need to eliminate wastage, and this service guarantees to reach viewers with a propensity to buy.
Liz Duff, head of commercial and operations for Total Media, says: “Retail targeting is a growing channel, as customer data becomes scarcer due to online data deprecation, so this is a really clever move by both the broadcasters and retailers as consumers tend to look elsewhere for better value goods when budgets are tight.”
Sky Media has already been using the retail media model for around seven years, which matches first-party data with millions of Sky’s billing addresses. Sky Media also has deals with Tesco’s Dunnhumby and Nectar, and further tie-ups with Mastercard, Experian Health & Beauty and Game.
Sky Media has been operating this service across 100 channels on Sky and Virgin TV and online devices, and also extends it to partners including Channel 5 and Discovery.
For Channel 4, its deputy head of digital innovation and 4Studio David Amodio says the broadcaster saw a “gap in the market” to cater to FMCG brands that don’t keep their own first-party data. “FMCGs don’t have first-party data, but we [Channel 4] built all of our suite of data products based on All 4 first-party data or brands’ first-party data.”
So, how do you buy it?
Media agencies can go either to the broadcasters or the retailers to purchase, but buyers tell The Drum that they prefer dealing directly with the broadcaster to better evaluate the media buy. Channel 4’s market proposition is to let them handle the entire process from the segmenting right the way through to delivering the results. According to Channel 4, all brands have to do is pick the segment that is most relevant to their campaign.
Channel 4’s programmatic and platforms senior lead David Cottell explains how the complicated and time-consuming bit is what brands don’t have to worry about. “As sophisticated a data product as this is, the experience for a brand is the same as buying any other campaign,” he says.
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How much does it cost?
Advertisers will pay a premium to use the data matching. The more targeting you ask for, the more money broadcasters can charge. Ed Cox, founder and managing director of Yonder Media, explains how a typical linear ABC1 adult buy might be £15 or £25 per 1,000, but data matching can double the cost to £35-£40 or even £50 pounds.
At Channel 4, each of the 80 segments has a price attached, with premiums being set the more niche an advertiser wants to go. Both ITV and Channel 4 are yet to set prices as both are still in the testing phase until early 2023 – prices will be determined on the effectiveness of those segments.
It is a more efficient TV buy though when you consider you are only paying to reach viewers who you know will buy your product. With a mass buy, millions of viewers are seeing an ad without any possibility they will buy. A simple example is only targeting pet food to All 4 viewers who have bought pet food on Nectar – why hit a viewer who doesn’t have a pet?
What do advertisers need to bear in mind?
According to Cox, advertisers need to be cautious of getting “drawn into a cycle of only measuring short-term sales lift and not long-term brand building of light buyers.” Cox is wary of advertisers only using data matching within a media plan as it could lead to a strategy of only reaching a small pool of people repeatedly. “You are paying a massive premium to prove it works, but you also need to do your mass advertising to persuade your light buyers,” he adds.
Yonder previously ran a targeted Sky Media/Nectar buy when it planned a campaign for plant-based yogurt Coconut Collab. The data match generated around 500,000 Sky subscribers who shopped for plant-based products at Sainsbury’s. Cox admits that had it been done with ITV or Channel 4 it might have matched 2 million or 3 million customers due to those platforms being free sign-ups.
To cover all bases, Yonder targeted its ads at 500,000 Sainsbury’s plant-based customers in tandem with a VOD plan that cherry-picked stations that over-indexed affluent or sustainable-minded people and did a mass linear TV buy.
Channel 4 and the buyers we spoke to say this product works best for niche brands that only need to sell to a set group of people.
Meanwhile, Jonathan Lewis-Jones, who is managing director at Publicis Commerce, warns the industry to “be careful” and not get “distracted from the wider digital transformation across retail and the wider opportunities for brands.” He says there is a lot of noise around ‘retail media’ right now, but the rapid advances in retail media are “really just a proxy for retailers becoming more digitally sophisticated.” He claims the announcements from ITV and Channel 4 are a “clear illustration” of this.
How exciting is this trend?
Jon Manning, who is senior investment director at Publicis Media agency Starcom, says from an AV perspective this is an interesting development. It’s worth noting that Publicis Media already owns a service akin to ITV and Channel 4 powered by Epsilon, which was built off of demand from clients for this type of data.
“We’ve historically only been able to target fairly broad demographics. This is the continued evolution of addressing our client’s intended audience and minimizing wastage to ensure every pound is working as effectively as it can be,” Manning says. “Not all brands may see the benefit of this data, but it will certainly be a useful and valuable layer of targeting for some.”