On March 11, the Wall Street Journal released an article online entitled "Retailers Can’t Shake the Circular Habit." Reporter Suzanne Kapner detailed the anomaly of retailers' continued dependence on circular print ads in the face of digital's burgeoning growth in marketing plan execution. However, from a retailer’s perspective, the real question is: why would you walk away from circulars?
Retailers' loyalty to circulars is largely based on their ability to generate revenue and margin, not because they are high-performance media vehicles. Manufactures support their trade efforts by purchasing ad space from the retailers, providing additional income to supplement the retailers' low product margins. Retail category managers often have incentives based on ad space sales goals. Even with steady declines in circulation, circulars provide reliable and incremental margin flow for retailers' overall annual revenue goals.
From a marketing impact perspective, FSIs/circulars are the definition of marginal contribution media: with the right timing, offer, and placement, retailers can see conservative, positive incremental lift for transactions and sales, albeit with very modest ROI.
So, what is wrong with this picture? The focus on circulars may be mortgaging the future for these retailers. In a nutshell: they’re spending millions to reach a relatively small audience of mostly older consumers, missing the opportunity to connect with younger growth targets.Looking at the Top 20 DMAs, Sunday print circulation equals 15% or less of total adults 18+ in each market. Within this small base, who’s seeing the ads? According to Pew Research, Adults age 45+ account for 74% of U.S. newspaper readership. Thus, retailers are bifurcating their target audience into two groups:
- a smaller, older group of exposed consumers responding to circulars
- a larger, younger consumer group who are rarely engaged through exposure to these retail messages and offers
Today, almost 50% of the US adult population is age 18 to 44. Digital screens are the dominant channel of choice for these younger consumers. Solutions must be found to help retailers bridge the generational media gap, without sacrificing near-term results. How?
Effective use of digital and traditional media can improve sales impact by 20-to-30% or more. The key is mapping smarter approaches through the power of first-party data analytics and audience modeling, reaching key shopper demographics in critical mass with new, blended media strategies:
- Using the customer database to target households within retail trading areas and augment circular/direct mail efforts
- Focus the retailers’ display and digital media to reach high value, “look-alike” shoppers in support of circular ad efforts
- Timing digital support to supplement weekday/weekend circular drops within the retail trading areas
The Age of the Internet is, in fact, the age of data, analytics, and addressable creative experiences. These tools can be effectively applied now to deliver better results, without requiring “cold turkey” marketing shifts that create high-risk scenarios for retail brands.