Retail Media Spending Guidelines

The Mars Agency’s Kandi Arrington and Ethan Goodman tackle some of the most common questions that brands are asking about retail media strategy and activation.

QUESTION: What percentage of your overall marketing spend should be allocated to retail media? How much of that investment should be devoted to onsite vs. offsite activation?

Kandi Arrington: First off, we can’t stress enough how important it is to start any decision-making by looking at your business objectives and determining which retailers and channels will best help you achieve them.

Many brands have fallen into the habit of spending the most at their largest-volume customers; you plan flat compared to last year, and then try to figure out where you’re going to grow. But if you instead look for the gaps in the business, the additional market share that you should have, there’s a greater opportunity. Identify the households where you want to grow and find where they’re shopping most often.

Planning your allocations that way can make a huge difference, and it would help answer that second question: If you are looking for new households, they might not be onsite at that retailer, so you’ll want to invest more offsite. But if you’re just looking for an easy win by catching the shoppers who are onsite, you’ll probably want to invest more in search.

Ethan Goodman: For exactly that reason, we’ve started advising our clients to conduct a “bottom-up” negotiation when building annual plans with their retailer partners.

If the retailer comes to the table and says, “We want you to spend $30 million this year,” we want our clients to be able to respond, “We need to grow 6% through new households: Here’s our base volume, here’s our historical performance, and to achieve our goal, we believe we only need to spend $24 million.” You certainly can be open to discussing how to bridge that monetary gap, but it should be clear that you don’t need to spend that amount to drive your business goals.

We used to have pretty cut-and-dried benchmarks for allocating between search and display, for example, and then within display between onsite and offsite. It was 60/40 search/display, and then 60/40 onsite/offsite within display. But we completely backed away from that to consider the business objectives.

What’s more, a CPG’s business can have totally different dynamics at each individual retailer, and the capabilities of their retail media networks are totally different, so a one-size-fits-all approach simply doesn’t work.

We now use a bespoke model, looking at allocations brand by brand and retailer by retailer, to build custom plans based on the data, the objectives, and the other inputs we’ve outlined.

Kandi Arrington: Just to level-set, you won’t necessarily have to do this work every year. Once you’ve established the baselines for your brands, their categories and subcategories at each retailer, you’re then just continuously optimizing, learning and adjusting as new things pop up on the roadmap, or you face new business challenges, or you identify opportunities with different households.

But if you don’t reset and start looking at things based on your objectives, you’ll just continue to play a numbers game rather than a real business game.

Get more insights from previous Fast FAQs

What metrics should brands be using to measure retail media performance?

Are there any best practices for measuring iROAS?

In terms of collaborative joint value planning, what retailer is best in class?

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