Brands are from Mars, Retailers are from Venus: Getting Inside the Head of Retailers (Part 1 of 3)

Part 1 - Brands are from Mars, Retailers are from Venus: How Brands Can Get Inside the Head of Retailers
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[00:00:00] Kiri Masters: As a brand, it can feel like your retail partners are from a different planet. They speak a different language, they have different goals. But the truth is retailers themselves aren't monolithic organizations. They're complex ecosystems [00:00:15] where merchants. Retail media teams, brand and trade marketing often operate in their own internal universes.

[00:00:23] And if you don't understand how these internal dynamics work, you're essentially flying blind over the [00:00:30] next three weeks, I'm speaking with Cody Berg, EVP of Connected Commerce and Retail Media Services at a Costa Group. Connected Commerce at a Costa Group is the sponsor of this series.

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[00:00:43] Kiri Masters: Now, Cody has a unique [00:00:45] vantage point. Acosta has been working with retailers for over a hundred years on the trade and merchandising side, and now the Acosta group's connected Commerce team is deep in retail media, so there's no better person to jam with on the [00:01:00] question of how brands can engage retail media networks beyond what we'll call the big five ACOA group has seen firsthand.

[00:01:09] How these retailer organizations really operate, and more importantly, how brands can navigate them [00:01:15] successfully. Welcome, Cody.

[00:01:17] Cody Tusberg: Hey, Kiri, nice to be here.

[00:01:18] Kiri Masters: So let's talk about first the role of the merchant in retail media and how a retailer's org chart affects retail media. We've seen some retailers like Costco say that their merchant org really [00:01:30] calls the shots with retail media revenue being kind of secondary. To actual product sales and member value.

[00:01:37] I've also heard that trade marketing is incredibly lucrative for retailers. So if I were a merchant at a traditional retailer, maybe I wouldn't want to give [00:01:45] up what I've controlled forever and just hand it over to this new retail media org that's popped up in the last few years.

[00:01:51] Cody Tusberg: . I mean, it's a great point and I think, the way that I always talk about it is I ground myself in the fact that when we talk about retail media, we're never gonna take the retail portion out of that.

[00:01:59] [00:02:00] It's the genesis of what makes it exciting. It's important to remember that merchants, for the vast majority of organizations out there still, the heartbeat of that retailer and their primary KPI is product sales and margin. It's not necessarily media revenue. So when retail media enters the picture, it's office seen as [00:02:15] additive, but not really gonna be at the expense of the core merchandising goals.

[00:02:18] In many cases, merchants control trade budgets and promotional calendars while the retail media teams manage ad inventory and digital activations. The challenge for brands and folks that are managing this is that those teams can operate in [00:02:30] silos some retailers. Merchants Absolutely call the shots at other retailers.

[00:02:35] Retail media is gaining influence, but it's still a negotiation. Understanding who owns what and how the decision flow is critical for brands to understand.

[00:02:43] Kiri Masters: Well, let's jump right into that. How does [00:02:45] that structure, when there is more of a church and state division, if you will, how does that typically impact brands?

[00:02:51] Cody Tusberg: Well, for brands, sometimes the structure can feel like it's navigating two different planets. You've got trade marketing conversations happening with the merchant, and you've got retail media conversations happening [00:03:00] in a lot of cases with a completely different team. If you don't connect those discussions internally, you're gonna risk duplicating that spend.

[00:03:07] Or missing opportunities. Brands often are gonna come through and sometimes think that the retailer is fully aligned internally, but we found that in a lot of cases [00:03:15] it's just not happening. So, you know, compare the brand orgs where the shopper brand and e-commerce teams often have their own budgets and KPIs, and it really is a mirror image of the complexity of the retailer side.

[00:03:25] Kiri Masters: Mm. And if you were to put an average on it, what percentage of the time do you [00:03:30] see it be this really, um, divided, org structure versus the merchant sort of coming more into those conversations? Is that changing?

[00:03:39] Cody Tusberg: It is starting to change and I, when you look at some of the more mature.

[00:03:43] Retail media networks, you know, your Amazon [00:03:45] ads, your Walmart connects, our friends at Round Dell. Um, you do start to see merchants and buyers start to get involved in those conversations. I think as you get into the, either the emerging retail media platforms that are new, that are someone not fully understood by the merchant organization.

[00:03:59] That's where you can [00:04:00] sometimes see the disconnect. And remember, your brands typically have one bucket of money. There's not this magical, 10 buckets of money internal at a brand. So you have to think about how you're making those investments to put a percentage on it.

[00:04:12] It's a little bit tough, but it's pretty high. I'd say it's over [00:04:15] 60 or 70% of the time. We sort of have to help brands connect those dots.

[00:04:18] Kiri Masters: Yeah. And you mentioned Amazon and Walmart, that already accounts for 80% of retail media spend. So like,, um, what kind of mistakes do you see? Brands [00:04:30] make when they don't understand a retailer's internal politics and how this merchant, uh, organization works.

[00:04:36] Cody Tusberg: Yeah, I think one big mistake that we see is, is treating retail media as really its standalone channel completely disconnected from trade. You know, for example, I've seen brands [00:04:45] commit to large retail media buys. Not even looping in the merchant, only to find out later that the merchants expected a portion of those dollars go to support in store promotion.

[00:04:53] That creates some friction. That can sometimes hurt the relationship. You know, another mistake I see is, assuming that retail [00:05:00] media on its own will automatically unlock incremental merchandising support, it doesn't work that way unless you've aligned with the merchant upfront. That early alignment, that partnership between what you're spending, the KPIs that you're looking at to measure and the incremental support that investment brings is [00:05:15] absolutely critical to make sure that you're aligned on all fronts.

[00:05:17] Kiri Masters: On a very practical level, it sounds like what you're suggesting brands do is essentially managing up, managing, you know, managing their partners on the other side and, and checking in, Hey, can you check with, [00:05:30] uh, the merchant org on whether this is gonna be counted. Like how nosy do brands need to be about how this all works to make sure they're getting Yeah.

[00:05:38] Credit where they need it.

[00:05:39] Cody Tusberg: Well, you know, brands, I mean, to use your term, they should be nosy, right? This is an investment that you're [00:05:45] making, um, to the benefit of your brand, but you're also making this investment to the benefit of the retailer that you're investing in. Um, we have to drink every time I say investment.

[00:05:53] Um, but, you know, be nosy, right? Understand how those dollars are gonna be used internally, um, and measured [00:06:00] internally, and then be laser focused on what the expected outcome for those dollars are as well. It's your money. You're spending it. You should expect credit and you should expect results.

[00:06:08] Kiri Masters: So Acosta Group has trade marketing deep in its roots as well as retail media. How do you think about [00:06:15] connecting brand trade and retail media spend knowing that the retailer org is often fractured in this way?

[00:06:20] Cody Tusberg: Yeah, and I think this is a really great point where Acosta group's heritage really matters.

[00:06:24] We've been in the trade and merchandising trenches, believe it or not, for over a century. And we're now, deeply embedded in [00:06:30] retail media that gives us a unique ability to bridge those silos. We often talk that we understand these retailers from boardroom to backroom, and that's absolutely true.

[00:06:38] You know, for example, we recently worked with a CPG brand where the trade team and retail media teams. Weren't even talking, and we helped them [00:06:45] build a joint plan that tied retail media activations to key merchandising windows, which actually unlocked incremental display space and drove a double digit sales lift.

[00:06:53] You know, so retail intimacy is, key. You need a partner who knows these ecosystems and knows how they work very well.

[00:06:59] Kiri Masters: [00:07:00] Well, Acosta Group is the sponsor of this podcast. Cody, I'd love for you instead of me doing the aery today. Why don't you tell the audience what is so special about Acosta Group's heritage in the space?

[00:07:11] Cody Tusberg: Yeah, and to reiterate what I stated before, right?

[00:07:13] Acosta Group, has been around [00:07:15] with our agencies for over a hundred years. We span across CPG consumer electronics, we're in stores. Um, in fact, a fun fact is when you look at Walmart, a Costa group has more individuals actually in the physical retail locations. Second only to Walmart itself. So we [00:07:30] really are, when we say we're entrenched with the retailers, we really are, we're entrenched with them on the , digital, and physical shelf.

[00:07:36] Kiri Masters: Amazing. So Cody retailers work on an annual planning cycle with JCPS that dictate the whole year upfront. Whereas [00:07:45] on the brand side, a lot of them are working with their agencies on a monthly cycle. How can brands navigate this tension between the annual planning cycles and real time optimization, which is what retail media's.

[00:07:58] Really, really good at.

[00:07:59] Cody Tusberg: Yep. [00:08:00] I mean, it is a pain point. That we have to navigate as partners and then, you know, brands as retailers are gonna lock in JVPs months in advance. Well, retail media is typically optimized in some cases, and even more so now as technology advances actually in real time, you know, the tension shows up here when a brand wants to shift [00:08:15] dollars midyear based on performance, but the merchant says, Hey, your trade plan is set.

[00:08:18] The best advice that we bring to these negotiations is bring retail media into the JPP conversation early on. But make sure that you're building that flexibility into your agreement so you can pivot, without breaking the trust and the [00:08:30] plans that you've committed to upfront.

[00:08:31] We've helped brands create hybrid models where 70% of the spend is locked in, and, for example, 30% of the spend is reserved for agile optimization. That tends to be a pretty good mix. The break isn't perfect for every brand, but the key is communication, making sure [00:08:45] that you have flexibility built into your agreements, and make sure that you build trust with everybody involved.

[00:08:49] Kiri Masters: this is where on the brand side as well, internal orgs and what they value can, clash as well. You've got the brand dollar being spent and then you've got the retail media dollar. Right. [00:09:00] And we know that the retailers are trying to tap into brand.

[00:09:02] Budgets too. So what do you make of that?

[00:09:05] Cody Tusberg: Yeah, I think that, you know, brands, you know, we have to be empathetic to the fact that brands face the same silos internally. You know, you've got brand mocking, shopper marketing, e-commerce, and now you've got [00:09:15] retail media trying to fill a gap in those areas there.

[00:09:16] And sometimes the goals there without communication can be separate. You know, the brand team wants awareness, the shopper team wants conversion, and the retail media team is trying to prove out, you know. Ever evolving KPIs, you know, we're going from ROAS to [00:09:30] CAC and all these different areas there, you know, if you don't have a unified strategy, you end up with a fragmented spend and most importantly, missed opportunities.

[00:09:37] You know, the value that we bring to the table is we have a global view on all of that. So we often act as the connective tissue helping brands align [00:09:45] internally before they even walk into a retailer conversation.

[00:09:47] Kiri Masters: Well, this has been great, Cody. We are gonna come back next week to talk more about allocating your retail media budget, which retailers, how much when.

[00:09:57] That's what we're gonna be talking about next up on this [00:10:00] series. Thanks for joining me, Cody. I'll catch you next week.

[00:10:02] Cody Tusberg: All right.

[00:10:02] Looking forward to it. Kiri.

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[00:10:05] Kiri Masters: Well, we're gonna wrap it up there for today, but I think if you understand the motivations and hot buttons of your retail partners, we still have the question of allocating [00:10:15] your media budget, which retailers, how much and when. That's what we're gonna be talking about next week in this series, brought to you by Connected Commerce at Acosta Group.

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[00:10:26] Kiri Masters: