Posted on Sun, Feb. 19, 2006

Controlling the video

TV becomes even more inescapable as more retailers tap into the refined marketing benefits of 'narrowcasting.'

BY SCOTT CARLSON

Pioneer Press

Now playing at a Target discount store near you: in-store television.

The Minneapolis-based discounter recently completed the quiet rollout of its in-house TV network in the electronics departments of its 1,400 U.S. stores, according to industry insiders.

That means the banks of TVs for sale in Target stores are tuned in to 'Channel Red,'' showing Target ads and promos for new CD and DVD releases rather than airing reruns of 'Hawaii Five-O' or the latest episodes of 'Lost.''

Whether suspended from ceilings or posted at check-out lanes, in-store TV is gaining momentum as a growing number of retailers — from Wal-Mart to Best Buy — tap into "narrowcasting,'' closed-circuit-type networks aired across their chains. These networks broadcast a steady stream of commercials that include weekly specials, new product releases and, increasingly, image and brand advertising.

But Target's in-store network is noteworthy because it makes the discounter one of the first retailers to operate and own its own system rather than farm it out to a media company, said Bill Collins, a principal at WBC Narrowcasting Group, a Cincinnati-based media consulting firm.

By owning its own network, Target has a greater ability to build its brand image and ensure the marketing is consistent with what it is doing in print, billboards and other channels, Collins said. Target declined to comment for this story.

The burgeoning in-store TV effort reflects a drive by retailers to improve "point of purchase'' marketing as consumers stroll down store aisles.

It's a captive audience, all right, but one already bombarded daily by pitches for products and causes. The trick is to not appear merely to be adding to the din.

"People are in information overload," acknowledged Laura Davis-Taylor, head of Atlanta-based Retail Media Consulting. But she and others say well-executed in-store networks provide valuable information designed to make shoppers smarter, cutting through the cacophony of media messages.

"You can't TiVo it,'' Davis-Taylor said of in-store messages. In-store television, she added, catches consumers while they are shopping, encouraging them to buy advertised products during their visit.

"If you help and support the shopper, it is a home run, '' said Virginia Cargill, chief executive at SignStorey, a Connecticut-based media firm whose network TVs are in more than 1,200 stores of its retail clients.

Besides being a marketing tool, in-store TV also can be a source of advertising revenue. In 2005, U.S. retailers generated slightly more than $200 million in ad revenue from in-store television networks, according to Info Trends, a Massachusetts-based digital communications consulting firm.

In retail circles, Wal-Mart Stores Inc. is known as the best example of what industry insiders call the "media advertising model'' of in-store television. Advertisers pay anywhere from $35,000 to slightly more than $300,000 to show their commercials for a month, according to Premier Retail Networks, the nation's largest creator of in-store television networks, with screens in more than 6,000 stores.

San Francisco-based PRN estimates 42 percent of shoppers at retailers with in-store TV are viewers, a figure that means millions of consumers gaze at the screens anywhere from 15 to 30 seconds at a crack.

"For these large retailers, it gives them the opportunity to communicate one-to-one with their customers,'' said Peter Cullen, general manager of PRN's Home Electronics Networks.

RESULTS PROMISING; SOME FLOPS

So far, in-store TV generally seems to be paying off for retailers. Davis-Taylor said retailers are finding that products advertised on their networks show an average 10 to 20 percent increase in sales compared with normal periods and no advertising.

For example, a study of about 5,500 Wal-Mart shoppers last fall found patrons who saw products advertised on the discounter's in-store network had more of a positive feeling about those goods than customers who had not seen the ads (61 percent vs. 40 percent).

Further, 15 percent of respondents who saw the advertising were more likely to buy the product on the day it was featured as opposed to only 4 percent who had not seen the advertising, according to PRN, Wal-Mart's in-store media partner.

Best Buy officials noted a recent survey of their in-store HDTV programming found 87 percent of respondents felt the network was good, 77 percent found it informative and nearly 70 percent believed it had relevant advertising.

"A large number of consumers feel the network influences them (in buying decisions),'' said Spencer Knisely, senior manager of design integration for Best Buy's Experience Development Group.

Not all in-store TV efforts are successful. Macy's began testing in-store TV at a few locations in 2002 then quietly ended the trial program last year. And British-based Tesco has encountered some troubles with its in-store TV, scaling back network rollout plans from 300 stores to 100, according to media reports.

Industry observers warn in-store television may damage a retailer's business if it isn't well executed.

"It adds another element to the store that requires a great deal of management to understand what impact it has on the consumer,'' said Lou Carbone, president of Experience Engineering, a Bloomington-based consulting firm. "In many shopping environments, there is information overload with the bombardment of all of these stimuli. With so many (advertising) messages, it can be very energy-depleting.''

REVIEWS MIXED

That view resonates with shopper Jerry Weiss of Minneapolis, who recently visited Mall of America's Sam Goody as in-store TVs boomed out music video clips that included Eminem, Carrie Underwood and Paul McCartney. "They are noisy and distracting,'' Weiss complained. "I feel there is too much racket.''

Other shoppers, like 26-year-old Alana Lewis of Faribault and 18-year-old Jeremy Hughes of Stillwater, are less critical but still indifferent to in-store TV. "I'm not really intrigued by what they are showing,'' Hughes said as he flipped through discount CDs at the Sam Goody store.

Industry consultants and media providers agree there is plenty of room for error in running in-store TV networks. "If they are not done with the shopper in mind, it becomes an invasion of the shopper's space and an insult,'' said Bill Collins, a principal at WBC Narrowcasting Group, a Cincinnati-based digital media marketing firm.

Collins said that seemed to be the case in 2001 when a few dozen U.S. shopping centers were deploying network screens. One Orlando-area mall had a gigantic rear-projection TV screen suspended with giant ropes from the ceiling of its food court, which was flooded with bright sunlight from its overhead skylights.

"Visually, the image was not pleasant to look at,'' Collins said, adding the network's content was an unending reel of music videos and movie trailers that attracted little attention from shoppers.

EXECUTION IS KEY

For retailers, execution of in-store television is everything. Typically, retailers partner with media companies to develop their networks and content. The systems are usually run from central operations centers where the content is beamed to satellites or sent through the Internet and then relayed to the retailer's individual stores.

Industry providers said retailers face many issues in operating their closed-circuit networks, including what size, kind and quantity of screens to put in stores and where to place them.

COSTLY UNDERTAKING

Industry experts said national retailers typically spend millions of dollars to install and run their in-store TV networks. For example, capital expenses for a chain drugstore or grocer can run between $30,000 and $60,000 per location, said Kent Hodder, president of Minneapolis-based Met/Hodder.

At Albertsons, the Boise-based grocer has hired PRN to install small LCD screens at its supermarket checkout lanes. Meanwhile, SignStorey is supplying 42-inch plasma screens that are suspended seven feet off the floor in produce and deli departments — areas where the typical consumer spends eight to 10 minutes shopping. Screens in those interior grocery departments showcase store specials, meal tips and wellness ideas as well as product advertising.

Many retailers, including Musicland and Best Buy, update at least a portion of their programming weekly. Cullen said retailers frequently must switch out in-store TV programming to make sure it coincides with print and broadcasting advertising.

Meanwhile, what gets televised on in-store TV depends on each retailer, Collins said.

In the late 1990s, Best Buy largely adopted in-store TV as a way to block competing advertising messages from seeping into its stores and showing up on its display televisions, Cullen said.

Now, Best Buy is using in-store TV to, among other things, pitch new products and encourage shoppers to look for new releases or specials in other departments, Cullen said. Currently, about 11 million shoppers view Best Buy's in-store TV every month, he said.

Cullen said retailers can also incorporate advertising from major vendors into their programming, giving them a way to help pay for their networks.

Target has spent at least $10 million on hardware to install the new system, Collins estimated. He believes Target's move could give it a competitive edge if it discovers new wrinkles in how to get the most from its in-store network.

In time, Collins expects Target will add channels to its in-store television, bringing it to other departments.

In the future, Collins predicts stores' big-screen TVs will become interactive, providing a "pull down'' information option for consumers on, for example, specific products as they shop in different departments. He also expects that as in-store TV gains momentum, retailers will put more of their advertising budgets into that medium and less money into newspaper inserts.