Retail Digital Signage Models

By Richard F Trask, Director of Public Relations, Scala

Retail digital signage networks have implications for both the retailer and the consumer package goods company (CPG). In certain instances, the considerations will be similar for both. For example, digital signage networks represent a new advertising medium available to retailers and the CPG industry. Digital signage networks impact upon the consumer shopping experience, the retailer’s brand in-store, shopper loyalty, etc., on the other hand, represents issues that are mainly confronted by retailers. This article addresses the issues faced by both groups as advertisers as well as those considerations mainly of importance to retailers, as gatekeepers of the store. As it is the retailer who ultimately adopts or forgoes installation of digital signage networks in it stores, an understanding of the three business models being adopted by retailers is instructive.

Three different business models of digital signage networks are currently being embraced. Each has advantages and disadvantages to a retailer. These include the following:

1. Advertising Network Model: The generation of ad revenues is a major motivating factor for this system deployment. An incremental lift in retail sales is, of course, important as well. In this case, the system’s cost, advertising sales and content creation are generally managed by a third-party on behalf of the retailer. Examples include Pharmacy TV in Warsaw, Poland and Imperial Oil (ESSO) service stations in Toronto, Canada. Ad revenue and airtime are divided between the retailer and the third-party provider. Variants on this model, such as in the case of Tesco TV and ASDA Live, reflect the retailer bearing the digital signage network’s infrastructure cost, while working with third-party providers to sell advertising and produce content.
2. Captive Network Model: In this instance, the retail digital signage network is purchased and managed by a retailer without accepting third-party ads. Examples include Nike Town and Rabobank. A slight variant on this model, finds merchandising vendors assisting the retailer in the production of content, such as a segment on “how to”, which is paid for by the CPG and may also contain brand promotional content. The generation of additional sales, control of the customer experience and of the messages delivered in-store are primary motivational factors for adopting this model of digital signage networks deployment.
3. Outsource Network Model: Generation of advertising sales is not a primary motivator for retailers adopting this business model. This business model is characterized by portions of the system being controlled or managed by third-party vendors on behalf of a retailer. An example is Weis Market TV Network, where the third-party owns the hardware and software and manages ad sales and content on behalf of the retailer.

With respect to digital signage networks as a new advertising medium, marketing spend decisions have been plagued by a lack of adequate methods to gauge their impact on consumer purchases. While the results from some promotional tools, such as coupons, may be easier to qualify than those of various advertising vehicles, such as advertising in newspaper and on television, the fact remains that marketing metrics have, to a great extent, failed to keep pace with technological advances. This issue is significant because of the dollars involved. Consider that for 2006, US advertising spending is projected at $280.6 billion, and worldwide spending is projected at $553.4 billion. In addition, as marketing channels continue to fragment, advertisers will seek new platforms to deliver their message.

Marketing professionals are charged with allocating communication dollars among five broad communication platforms. These include advertising, sale promotion, public relations, personal selling and direct marketing. Each of these promotional tools has a unique set of characteristics. Yet in the final analysis, the justification for such expenditures rests on having an impact on sales. However, in the majority of cases, the impact of such marketing investments is either unknown or, at best, determined at a later time. The inherent flaws in marketing measurement have been well documented in both the scholarly research and by the firms investing these marketing dollars.

An advertising medium is defined as one of the various mass media that can be employed to carry advertising messages to potential audiences or target markets for products, services, organizations, or ideas. The audience for these messages tends to be mass market in scope, with limited capabilities to segment the market. Ad-based digital signage networks are clearly capable of carrying messages, the issue is not one of being classified as a new media per se, but rather whether they are effective media for achieving targeted retail store-level marketing objectives. This is a function of whether digital signage networks can influence consumer-buying behavior in a measurable way relative to other media.

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Great knowledge of the digital signage model and how people do retail.