Consumer Strategies Report January 2005/Trade Events

In March 2003 (1), we explored how retailers and cpg companies want to ideally leverage their distribution channels and packaging (respectively) to function like media. Since then, companies like Blockbuster and especially Wal-Mart have been spotlighted for their ability to reach more consumers than network television via their in-store television networks. Their goals weren't simply to drive sales of in-store products; they wanted to exploit their in-store media as a source of ad revenue. Now, many other chains have jumped on the bandwagon and this must prompt the question - why spend $9 billion a year on network television when you can get more bang for your buck from a cheaper ad at the point of purchase on equally broad-reaching media?

No other technological development should scare network TV more than cheap flat plasma displays - not TiVo, not pirating, nothing - since now anyone can effectively steal their ad dollars. Sure, they'll argue until they're blue in the face that nothing is more effective at reaching consumers than being on their air, but this sea change isn't about TVs overall effectiveness; this is about TVs effectiveness for its cost when compared to in-store alternatives.

And sure, the argument exists that one has to get shoppers to the store before you can sell them anything. But lower cost alternative media, mere location in heavy traffic areas and basic human needs can take care of that problem.

Much to the dismay of networks, in-store media makes financial sense for retailers and vendors, leaving no one in the network's corner. At Monday's (January 17, 2005) NRF session, retailers like CompUSA, Federated Department Stores, and Musicland all presented compelling evidence of in-store TV's success at driving sales and awareness, in-store associate training efficiency (for better customer service), and, the real whopper, continued enthusiasm to enhance their networks with better on-screen graphics and more regular fresh content (beamed directly from satellite).

With unlimited variations - hourly promotions with on-screen arrows pointing the way to merchandise areas, service associate pictures for customer convenience, digital menu boards at restaurants to change by meal occasion, etc - network TV advertising will continue to diminish in value at current ad rates. With a dwindling pool of advertisers convinced that TV is still irreplaceable, if network TV doesn't adjust their business model (and we're certainly not the first to suggest such a course of action), TV will absolutely lose its place in media plans.

Disclaimer: The recommendations, commentary and opinions published herein are based on public information sometimes referenced via hyperlinks. Any similarities or likeness to any ideas or commentary from any other sources not referenced is purely coincidental. al berrios & co. cannot control any results occurring from advice obtained from this publication nor any opinion(s) conveyed by any reader of this publication.

(c) 2005. All Rights Reserved. al berrios & company, inc. Published by al berrios & co. This Report may not be reproduced or redistributed in any form without written permission from al berrios & co., subject to penalty.

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