Retail

Overview

Retail clients invest heavily in media, spending nearly £1.7 billion in 2017. Previously heavy newspaper spenders, retailer brands cut print allocations substantially in 2015. Although print newsbrands’ share has since stabilised somewhat, low spend in digital newsbrands means that total newsbrand share remains at 2015 levels.

Benchmarketing’s analysis shows that low spending in newsbrand channels is harming the profit return from the campaign. This results in lower payback for the entire campaign and diminishing returns from overinvestment in digital media.

To maximise campaign PROI, Benchmarketing recommend that a minimum of 21.5% of the total media budget is allocated to print newsbrands and 3.7% to digital newsbrands.

Analysis shows that TV-led multimedia campaigns using a wide variety of media are most successful at generating maximum PROI.

Retail clients are losing out on £1.34 billion potential profit through underinvesting in newsbrands, particularly print.

21.5%
Print newsbrands' minimum recommended share of budget
3.7%
Digital newsbrands' minimum recommended share of budget

Adspend patterns

The distribution of advertising expenditure has shifted noticeably in the last five years. TV share is down by nearly 10 percentage points, magazine media have lost a little bit of share and print newsbrands have remained relatively stable since 2015.

In the last couple of years there’s been a jump in online investment, which now accounts for 40% of all spend. Digital display has risen from 16.8% in 2015 to 25.7% in 2017.

Newsbrand spend appears to have stabilised more recently, but at 16.1% is nearly seven percentage points lower than in 2013.

The fall in print adspend is far steeper than the decline in circulation and this sharp fall is also at odds with the growth in the overall weekly newsbrand audience, which now stands at 41.3 million, according to latest PAMCo data.

Campaign PROI: print

Retail advertising campaigns currently don’t generate a short-term profit. However, this could be turned around if the spend in newsbrands was raised by just over seven percentage points to the optimal level for maximum campaign profitability.

Average print newsbrand spend currently sits at just under 14.4% of overall media budgets, so it falls into the lowest third (tertile) of cases analysed. Campaigns in this tertile operate at a short-term loss, with a PROI of 0.55. However, there is a clear opportunity for retailers to increase campaign pay back to £3.87 per £1 spent.

In order to achieve this, newsbrand print spend needs to be fractionally above 2013 levels, with a minimum allocation of 21.5% of total campaign media spend. This brings the PROI multiplier for the campaign to 3.87.

PROI is 3.87
when print newsbrands are at optimum level

Campaign PROI: digital

For the first time, the profitability of adding digital newsbrands to retail campaigns specifically can be quantified.

The findings show that adding digital newsbrands at the current average level of 1.7% of overall budget has a positive impact on PROI for the total campaign, but that this small share is not providing optimal campaign profitability: campaigns utilising digital newsbrands at less than 2.6% of overall budget deliver a PROI of 2.31. Campaign PROI is higher, at 2.43, when digital newsbrand spend allocation is between 2.6% and 4.7% of total media budget.

PROI is 2.43
when digital newsbrands are at optimum level

The profit gap

The current average 14.4% investment in print newsbrands elicits a campaign profit of £132 million. If the average rose to the recommended 21.5% minimum share of media spend to optimise overall campaign profit levels, the additional profit released could be as much as £1.25 billion.

The recommendation is that investment in digital newsbrands should more than double from 1.7% to 3.7% of total campaign media spend. This would elicit potential additional profit of £84 million.

Missing profit
£149.5m - £65.3m = £84.2m
Missing profit
£1.38bn - £131.7m = £1.25bn
Potential campaign profit
£61.5m x £2.43= £149.5m
Potential campaign profit
£357.6m x £3.87 = £1.38bn
Recommended average
investment in online newsbrands

3.7% = £61.5m
Recommended average
investment in print newsbrands

21.5% = £357.6m
Campaign profit
£28.3m x £2.31 = £65.3m
Campaign profit
£239.5m x £0.55 = £131.7m
Current investment in online newsbrands
1.7% = £28.3m
Current investment in print newsbrands
14.4% = £239.5m
Current retail category spend
= £1.66bn
£1.34bn
Total missing profit =

Where should the money come from?

Two pieces of further analysis in addition to PROI calculations have informed the recommendations for budget realignments in the retail category – adstock and response curves.

Adstock varies for different channels in the retail category, with TV, magazines and digital search performing particularly strongly.

Print newsbrands’ adstock is the same as out of home and ahead of radio and digital display, reflecting its strength in promoting action in the form of footfall.

Response curve analysis demonstrates that TV, print newsbrands, digital display and digital search perform well, with diminishing returns only kicking in at higher budget levels. However, digital display’s effect is very immediate, as evidenced by its low adstock. This suggests that the 26% of retail media expenditure currently invested in digital display is not delivering in the long-term.

By contrast channels such as out of home and magazines, which have higher adstocks, are not delivering at higher budget levels which may explain why current investment levels are very low.

The recommendation is therefore to adjust online budgets to allow for a greater proportion of digital newsbrand display (and potentially video) and to reinstate print newsbrands at the most effective and efficient spend level in the overall media budget.