University of Southern California

Why In-Store TV Advertising Works
November 19, 2010
Category: 
Marketing

Whether you're shopping for turkey for Thanksgiving or holiday gifts, you may be unaware of how much your purchases are affected by the TV you watch--- that is, the TV you watch in the store itself.

About 70% of shoppers make their purchase decisions in the store itself. That fact prompted USC Marshall marketing professor Anthony Dukes to study retail advantages to manufacturers and retailers who use in-store TV advertising.

Ten years ago, Walmart installed 100,000+ screens in 2,650 stores, creating a vast network of in-store media (ISM) where manufacturers like Kraft, Gillette and Frito-Lay market products to 336 million shoppers each month. Walmart TV isn't unique in its adoption of ISM: Best Buy, Costco, Albertsons, CompUSA, Borders and Kroger have all implemented similar networks in retail stores.

Dukes and colleague Yunchuan Liu's 2010 article published in the prestigious Marketing Science journal found that in-store TV advertising offers key advantages to manufacturers over commercial media like print, radio and television:

  • It's effective. Brand recall among Walmart TV viewers was 65%, a significant improvement over the 23% average recall among in-home viewers."
  • It's cheap. "[W]hile the advertising rate is $412K for 30 seconds on Survivor Vanuatu by CBS, and $620–$650K for 30 seconds on American Idol by Fox," they say, "Walmart TV charges only $50–$300K per four-week run."

Retailers also benefit. Not only to they boost sales, they earn money by getting manufacturers to advertise on their in store-network (as opposed to using traditional networks). Their research also suggests retailers can optimize these earnings by:

  • Raising rates relative to single suppliers when offering ISM to competing suppliers. "By internalizing the advertising decision, the retailer raises ad prices to mitigate the business-stealing externality prominent in competitive advertising."
  • Charging higher rates to suppliers with lower brand awareness, counterintuitive though it may seem. "A lesser-known brand's advertising message is more likely to influence a consumer with knowledge of the well-known brand than to generate a new sale," they explain. "Discriminatory pricing in favor of the well-known brand, therefore, partially mitigates wasteful advertising."

The bottom line: ISM nurtures a win-win environment. Manufacturers reach customers where they shop; retailers gain new revenue streams and more influence over product sales.

Dr. Dukes is an expert in retailing and distribution channels. To read this article or learn more about Dr. Dukes and his research, visit his website.