Monday, January 26, 2004

What if retailers ran their own newspapers?

from Media Guardian, January 19, 2004

Something fascinating has been brewing in the retail trade over the past 10 years as retailers have gained control and started to exercise leverage over two extremely powerful concepts, which could enable them to offer a new range of products and services.

The first is retailers and their retailing environments being media channels. This idea has gained increasing currency as retailers have evolved from being a physical amalgam of aisles and shelves to stack and store products, to providers of catalogues, magazines, coupon-books, websites and emails which customers can browse. No self-respecting retailer is not multichannel, or planning to be, and their stores are often just one of their addressable channels for product and service distribution.

The second concept is the recognition that, with point-of-sale systems and managed loyalty programmes, retailers are in the key position not just to optimise margins and profitability, but also to mine the golden seams of customer databases. Creating retailing platforms based on the endless segmentation and analysis of purchase behaviour is a strategy that has not escaped some of the retailing greats of the past 20 years such as Wal-Mart, Amazon, Tesco and eBay.

The union of addressable distribution channels and segmented customer databases is a heady cocktail. No wonder retailers who have mastered the arts of mixing these two ingredients have been able to profit from their ability to extend their brands into new product lines, service areas and markets. We started out believing that Amazon was just a place to buy books and eBay a flea-market, but now we'll happily buy new PCs from either and in the case of eBay people even buy first editions of Shakespeare. No one thinks twice about buying clothes, DVDs, magazines, petrol, insurance and even phone services from supermarkets.

So if you are an advertiser and want to reach consumers, what makes a media owner really stand out, really be any different when the retailing giants have started to do something that few - if any - media owners can do, which is to develop the ability and vehicles to address consumers not only based on their buying habits but also at the point of purchase?

For magazine-style media, the line can be hard to hold. The media-savvy readers and viewers of the 21st century know that stories and products can be placed and the lines between advertising and editorial are very thin.

Do radio station playlists and MTV rotations really get picked because producers just love that latest track? Do movies gain theatrical distribution because programmers really believe in the director's vision? Even the rarest media brands like the BBC and New York Times, both traditionally the voices of record for their respective nations, have been rocked by brand indiscretions in the past year alone.

So it's not impossible to understand why, in recent research by Redwood and the Henley Centre, customer magazines - which often have much broader reach and distribution, than their more traditional peers - are in many cases better read and more highly valued. These brands, who study their customers and have become the quiet listeners to their wallets, score so highly perhaps because the agenda they appear to serve is not that of the editors, the proprietor or the advertiser but the practical values of the customers' themselves.

Trusting editors and publishers to filter out the irrelevant is still a central issue, but it's hard to judge nowadays where trust lies with a media-savvy consumer, who is as likely to browse weblogs and subscribe to news alerts from Google News. For years we've been told that traditional news media and in particular newspapers will be the last bastions of trust and for those news-brands that can rise above the tide and fashion a trustworthy branded interface for people who are faced by the torrent of the daily information flow, there is no doubt a pot of gold at the end of the rainbow, but why should that not be one of the new breed?

Some of the most successful new media launches of the past 10 years - Yahoo!, Google, Metro and The Week - have all followed a relatively similar recipe: one part re-usable content, one part highly targetable, segmented audiences and then stir with a dash of highly addressable or regional distribution. These successful media brands have an awesome control of customer data, addressable distribution and reusable content but still none of them can unite purchase information with addressable distribution in the same way as successful retailers.

Just imagine what would happen if a multi-channel retailer like Wal-Mart, which has 130 million shoppers a week passing through its doors, mixed the magic ingredients of addressable distribution channels, segmented audiences and reusable content and gave it away for free as a newspaper - would we trust it? Maybe not, but we'd almost certainly still read it and if we were a media planner, we'd want to advertise in it.