Notes and Thoughts on Grocery 2.0

The above IAB Chart does a good job of showing that CPG spending online still lags other segments’ advertising spend. The latest Pew Internet study does a great job showing that 81% of US consumers use the internet for product research and 71% purchase online. If 2/3+ of the online adults are ready, why haven’t we seen a larger corresponding move in media dollars?

Three primary reasons:

1. It is hard to buy digital with many fragmented publishers and to many ad formats.
2. A transparent set of metrics: Is it the click? ROI? Engagement? What drives consumer product adoption and ultimately sales?
3. It takes effort and time to re-evaluate your media mix.

The IAB has done a good job addressing some of the issues with Measurement Guidlines and The Universial Ad Package . Yet, I think what is really pushing us forward is the economic downturn. There is no longer a paper in Denver to buy print ads on. That forces a reexamination and increasingly digital is the winning choice.

Major grocery chains across the country have found a silver lining in recent consumer spending. Financial concerns have not only driven more customers out of restaurants and into grocery stores, they have pushed consumers to question whether their favorite brands are worth the extra cost.

Enter store brand products, which are cheaper than national brands and more profitable for grocers. These lines, often featuring premium ingredients and pleasing packaging, are attractive to consumers not wanting to sacrifice quality to save on groceries.

For decades, grocers thought of private label products as inexpensive imitations of popular brands like Cheerios and Coca-Cola. Consumers, likewise, have been skeptical, that is, except during recessions. As Jan-Benedict E. M. Steenkamp, marketing professor at the University of North Carolina Chapel Hill, says, whereas past recessions temporarily gave consumers a reason to trade down from national brands, this time, the change may stick because the quality and consistency of store brands have improved. “Sometimes, [the consumer experience] will be disappointing,” said Mr. Steenkamp. “More often, it will be better than expected.”

While store brands grow and private label products improve, major branded consumer packaged good companies still insist that their branded products offer better quality through taste and innovation, justifying the higher price. The bottom line is, the only instance in which it matters whether private or branded products provide more value, is in consumers’ perceptions.

As Sharon Frey, a Kroger shopper says, when deciding between private label and branded products, “A lot of it depends on what product it is. If it’s eggs, it doesn’t matter. I would buy Heinz. I prefer Heinz ketchup.”

For grocery chains trying to increase profit in a down economy, private label is the key to continued growth. To compete with popular brands, increase category market share and continue to deliver a sound message of quality for less, retailers need to promote store brand products at every point of purchase. That includes online grocery shopping. Retailers should utilize changing consumer habits by advertising private label lines where cost-conscience consumers can buy with one click.

Rachel

I have been thinking a lot about the so-called “premium sites”; you know … the sites that everybody wants to advertise on. Most buyers will pay above the market value for sites and placements they perceive as premium inventory. I always feel somewhat frustrated when all I hear about is buyers and their ad agencies fighting over “premium/high profile” sites. Cue: Specialized Niche Ad Networks. Though they are considered less valuable than “first tier,” or “premium,” sites, these niche websites and networks may well prove to be where the real action is – the true cash cow, the big ROI, the “long tail”.

Here is why …

What is the real value to a food manufacturer of a photo management and sharing site that has several million pageviews versus a smaller site that sells food related products? You’d think this is a no-brainer, but you’d be surprised at the perceived value these websites get just because they are high in traffic volume. My argument is that niche networks, like the MyWebGrocer Grocery Ad Network, are far more valuable and therefore more “premium” to, for example, CPG companies than say a national newspaper syndicate or a premium social networking site are to the CPGs, as the Grocery Network combines premium -reach, -branding, -targeting and -RELEVANCE.

Why blow your ad spend on large, high-priced, “premium” homepages when you can just as easily and more effectively reach and target the same person during a more relevant experience (while shopping online or browsing a Recipe page or on a Grocery Shopping blog)? It really does matter where the user is reached: if we know that after Jane Doe checks out the latest celebrity rumor and gossip on Us Magazine, she always then goes to update her grocery list on the Nichols’ Supermarket Website? Does that mean if the same ad is shown on the 2 sites it must be valued higher on Us Magazine? Is it really worth 10 times the CPM to reach Jane on Us Magazine than to reach her on Nichols’ Supermarket website or even on her social networking blog? In fact, I think it’s more valuable for a CPG company to reach Jane with a Cereal ad or a Dog Food ad while she is in the act of shopping than while she is reading about A-Rod’s latest flirtations with Madonna on Us Magazine!

Smaller, niche sites are extremely efficient at reaching and connecting to their target audience. MyWebGrocer is leveraging the power of aggregating grocery stores into a powerful large network of highly targeted niche grocery websites. The “long tail” has afforded MyWebGrocer to extend the reach of advertising in an incredibly cost effective and profitable way. The word “premium” needs to be erased from the dictionary, because thanks to the Long Tail such a term no longer exist in this day-in-age.

Charles Rutanhira