The Digital Signage Insider

Digital signage networks: private label merchandising networks

Published on: 2007-02-06

As we talked about last week, private label merchandising networks share many characteristics with experiential and brand-building networks, since both draw strength from the brand they're promoting. However, there is one significant difference between the two: while brand-building digital signage networks focus exclusively on the brand (or the brand experience), the primary goal of a merchandising network is to draw attention to specific products, product lines, and promotions. In that respect, they're more akin to ad-driven networks, though without the multi-brand management and co-op marketing challenges. Today, we'll be looking at the ups and downs of merchandising networks -- and how your company can get involved with these projects.

Who drives the project: Private label merchandising networks go into private label stores -- that is, branded stores that sell same-branded merchandise. Think Gap, Coach and Old Navy, as opposed to Macy's, Lowe's and Wal-Mart. Consequently, like brand-building networks, the motivation for deploying a merchandising network often comes from within the retail organization itself, since these networks can provide advertising and brand building tools as well as sales and promotions capabilities. Unlike store experience networks, though, merchandising networks require advertising and marketing skills that may not be present in-house, so many retailers turn to a trusted third party to help assemble, install and maintain these digital displays. In such cases, while the primary decision to deploy the network will still ultimately rest with the retailer's marketing department, much of the day-to-day decision making may actually be made by an external organization.

Potential benefits: The most tangible benefit to running a merchandising network is that additional advertising messages can be deployed around key items and lines, and specific promotions and campaigns can be deployed deeper into the bricks-and-mortar store than ever before. A merchandising network can take a campaign running in print, on the Internet and on TV and bring the most salient points onto the sales floor. Additionally, the additional flexibility that digital signage brings (such as being able to customize content on a per-screen basis, or show different content segments at different times of the day or days of the week) gives savvy marketers the ability to custom-tailor promotions to best target each store's audience, thereby maximizing its performance and ability to drive sales.

Potential risks: Last week we noted how upfront costs can be high for internally-driven networks, and that concern certainly still exists for merchandising networks. Unlike brand-building and experience networks though, merchandising networks exist to sell more product, and with well-crafted campaigns it's possible to directly calculate the sales lift and ROI for the network. This may make a merchandising network appear less risky to the retailer's management team, since the ability to quantify its performance and tweak the results over time offers a degree of control that can't really be matched by a similar experience/branding network.

Other risks to these networks only become apparent after they've been deployed. While many retailers have effectively integrated their merchandising networks into their overall marketing and visual merchandising plans, some either gradually lose interest in it or allow it to become nothing more than a series of glorified posters. In the former case, failure to produce large gains in the short-term can cause concern, which results in budget cuts that of course prevent the early problems from getting resolved. This is really the worst-case scenario, since the cost to deploy the network has been sunk already, and without proper content creation and management the screens will never really have a chance to shine. On the other hand, we frequently see the latter case (where the system degrades into a series of ineffective, expensive posters) at those retailers where a knee-jerk reaction to a poorly performing network results in cheap, bland and uninteresting content getting displayed. There's nothing wrong with trying to keep production costs under control, but when the content is generated just to fill up the screens and stay under budget, it's often not well-suited to the original task of the network: engaging the shopper and driving sales.

Common pitfalls: As suggested above, the biggest pitfalls for merchandising networks come after the deployment phase, when budget dollars are awarded according to performance and some managers may feel the need to reduce the ongoing cost of the network by cutting corners with content. Make no mistake: this will be the beginning of the end for your digital signage project, so avoid it at all costs. The best way to make sure you never experience this problem is to run a significant pilot project before you even consider a full-scale deployment. A pilot in 5-10% of your venues gives you a lower-cost way to test everything from content creation to audio levels and screen placement in a series of controlled experiments, helping determine if the upfront and ongoing costs of the network (and its accompanying benefits) make sense within your business model.

Another serious pitfall is to go into the pilot with a predisposition for one kind of technology or another. Some marketing groups start a project enamored with the 60" plasma screens lining the cashier's wall, only to find that according to the empirical results, a network of 19" LCDs placed elsewhere performs just as well. While the look and feel of a network certainly can have an impact on performance, if its primary purpose is to sell more product (and in this example, it is), the numbers should make the decision for you. Yes, the screens have to look nice in your stores, but find out what combination of displays work the best, and then figure out how to integrate them into your environment. If this doesn't sit well with you, then you're probably more interested in a brand-building network, where display placement and raw sales lift take a back seat to larger store experience objectives.

How to participate: Most outside firms will find it difficult to drive a deal for a merchandising network, though to a lesser degree than with branding networks (where the ROI is even more nebulous). However, trusted third parties who have had past successes implementing chain-wide marketing or technology projects may be able to introduce the idea to a friendly retailer. The key is to play to your strengths: if you're an IT company excited by the prospect of fitting 100 stores with flat screens, servers and cables, make it clear that you can help the retailer implement this project in a professional, low-cost and low-maintenance manner, giving them the best chance of making it cost effective and ROI positive. Likewise, if you're the incumbent ad agency or marketing firm, pitch the network as a new vehicle for delivering the same ideas that you're already being paid to develop. Regardless of your position, a merchandising network is necessarily going to be a partnership with the private-label retail chain itself. It's their merchandise, their brand and their stores, so while there can be tremendous opportunity to lift sales and improve conversion rates, merchandising with digital signage may still be perceived as a somewhat risky endeavor.

Of course, these benefits and challenges aren't unique to private label merchandising networks. Many of the same concepts apply to companies who want to promote multiple brands in their retail store, shopping mall, or other venue. We'll cover that in next week's article, when we examine ad-driven digital signage networks.


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