• by Bill Gerba , March 15, 2006

As in-store marketing and media gradually increase their profiles to become the centerpiece of many retailers' marketing and brand-building strategies, more retailers are experimenting with digital signage (DS), a technology that delivers video, news, and advertisements to plasma and LCD screens in retail venues. While it remains challenging to separate the hype from reality in this rapidly evolving industry, massive DS deployments by retail giants like Wal-Mart, Target, and Albertsons have given the nascent medium some much-needed credibility while setting expectations for strong growth in 2006.

The "Experience Is King" Model

The common thinking among DS providers is that our products should generate a measurable and tangible return on investment for retailers and brands. On paper, the process seems straightforward: Show a product advertisement on the screens in your stores, correlate playback frequency with sales data, and determine your overall sales lift. This is the model that many retail firms have adopted, and the one that produces the most direct and easily recognized return on investment for DS stakeholders. But some retailers have taken the stance that brand experience, not ROI, is paramount. For them, retail fixtures, point-of-purchase displays, and DS exist solely to enhance the in-store experience and improve brand reputation.

This doesn't sit well with many stakeholders in the ROI-focused DS camp, who believe there must be a way to calculate each sign's exact value amount. After all, there are mountains of playback and sales data to count, compare, and correlate. Yet these firms hold fast to the notion of brand euphoria, and value DS for its ability to bring motion and visual impact to store environments.

But how is "value" defined in this scenario? I wondered that myself while listening to Pat Hellberg, director of the Brand Design Media Group at Nike, speak at a DS seminar earlier this year. Hellberg's group handles Nike-related DS projects at corporate-owned Niketown and Nike outlet stores, as well as partner stores like Dick's Sporting Goods and The Athlete's Foot. For Nike, digital signage is considered part of retail marketing, though Hellberg notes that Nike's brand-centric approach doesn't make much distinction between "marketing" and "merchandising." Instead, Nike's internal marketing team briefs the Design Media Group on an overall brand message, and Hellberg and his team then create content that combines the relevant brand message with an aesthetic appropriate for the target location.

Nike measures results by conducting periodic in-store research, but DS is only one of several aspects of the retail experience studied. Nike also does split-testing for ad campaigns but doesn't figure its in-store efforts into these experiments. Instead, Hellberg's team relies on other implicit measurements and observations to assess their progress. Since the goal is to "define and amplify the brand through innovative, meaningful, and impactful media," Hellberg and his colleagues often sit down to discuss the overall impact created by the DS. They ask questions like, "Does the content add energy to the store environment?" and "Does it make the brand more valuable?" Assuming the answer to both questions is yes, Hellberg says the exact numbers aren't important: "We don't have empirical goals. We constantly judge our effort subjectively, and our colleagues in marketing do the same. It does come down to gut and instinct, which has served Nike well over the years."

The Sales-Lift/ROI Model

Nike isn't alone in using DS to enhance the store experience, as other chains like Best Buy and Nine West have employed similar strategies. But most retailers still attempt to correlate DS playback data with sales data to determine the effectiveness of in-store ads. Take, for example, one of WireSpring's customers, which we'll call "MexGrocer" due to its reluctance to disclose sales data to the public. MexGrocer is a 100-plus-store retail chain in Mexico, with stores similar to a SuperTarget or Wal-Mart SuperCenter in the U.S. In May 2005, it began a DS deployment with one channel of content fed to about 20 screens per store. Fifteen- and 30-second ads for products sold in the stores were combined with two to three-minute instructional videos and cooking tips produced exclusively for the DS network. The videos created a 20-minute content loop.

Not surprisingly, most products that appeared in the ads and videos saw a jump in sales. The impact that DS can have is so dramatic that everyday, low-cost items like eggs can see substantial gains. That's right: Even eggs enjoyed sales lifts when advertised on the in-store network. Prior to the DS network, there were three brands of eggs sold in the stores. Brand A, considered the high-end brand, was heavily advertised on TV and promoted with shelf-danglers and toppers. Brand B, the lower-end brand, didn't do any TV advertising, but did use limited point-of-purchase advertising. Brand C, the store's generic brand, didn't use TV or point-of-purchase promotion. The brands commanded 76 percent, 21 percent, and 3 percent market share, respectively. During the study period, only Brand B opted to advertise on the network.

At the end of the three-month test period, the sales results were tallied. While the generic Brand C held steady at 3 percent share, Brand B grew from 21 percent to 39 percent, entirely at the expense of Brand A, which fell to 58 percent. Notably, overall egg sales grew by 3 percent. Sales in stores without DS were generally static during this period.

A 3 percent net increase in egg sales probably isn't going to cover the cost of the DS network (unless you sell a lot of eggs), but for MexGrocer, the implications were hard to ignore: Across the board, sales of advertised items were lifted. While much of the growth came at the expense of one brand over another, there was some overall lift in every featured category. This additional sales volume easily offset the cost of the DS systems, leaving a net positive ROI. And this doesn't even consider the revenue derived from selling the DS advertising time to Brand B.

While many marketers continue to focus their sales and marketing efforts on the explicit ROI and direct accountability that DS brings to retail organizations, there is no denying the implicit value it has for brand-building and improving the in-store experience. While my commitment to ROI metrics isn't quite on the wane, the example of Nike's DS network clearly shows that there is more than one way to define "value." As Hellberg says, "Digital signage business models are like snowflakes: No two are alike."

Bill Gerba is cofounder and CEO of WireSpring Technologies, a provider of software for digital signage and kiosk networks. (billg@wirespring.com, www.wirespring.com/weblog)