News
Digital ads cast narrow retail net
Date Posted: Nov. 09, 2006
DENISE DEVEAU
Special to The Globe and Mail
Customers walking into the Tim Hortons on Ontario Street in Stratford, Ont., have become a captive audience. While waiting in line for their morning double-double, their eyeballs invariably fix on the overhead high-definition displays where they watch a rolling sequence of images promoting mouthwatering Tims products and exciting in-store specials. The shop is one of 2,000 locations participating in Tim Hortons Inc.'s $50-million rollout of digital displays, part of a nationwide marketing strategy aimed at delivering Tims-branded messages to its 100 million monthly customers.
It's called narrowcasting -- streaming specific data to specific audiences as opposed to traditional broadcasting, which targets a great swath of viewers -- but with a twist: The networking technology gives Tims the ability to control and tailor its messages from a remote location and target a specific audience at a specific time of the day (like lunch). It essentially creates a company-owned television network that runs nothing but Tims programming. "It allows you to run purpose-built, meaningful content that can be managed to meet the consumer experience," says Chris Lund, chief executive officer of retail consultant Perennial Group of Companies Inc. in Toronto. Narrowcasting with digital content has been a mainstay in airports and sports venues. It's only recently that mainstream companies wanting to capture consumer attention have been testing it. The technology's early adopters saw digital signage as a means to draw advertising revenue.
Frost & Sullivan Inc., a New York-based market research firm, reports that the digital signage industry in North America attracted $102.5-million (U.S.) in ad revenue in 2004. That number is expected to reach $3.7-billion by 2011. But despite the touted revenue-generating potential, finding the business case to justify the investment has been a challenge for many companies. Digital signage doesn't come cheap and, if not done right, then all it amounts to is an expensive, moving poster. "The roads have been littered with many who have tried and pulled out.
The key is in understanding your [return on investment] and establishing the right business case before putting it in," says David Clanachan, executive vice-president of training, operation standards and research and development for Tims. The problem, according to some observers, is even if a company is selling advertising on its digital network, it doesn't always translate into bottom-line results. U.K.-based Tesco PLC, which hoped its large-scale digital signage project would deliver big bottom-line results as vendors bought in-store advertising. However, the supermarket chain's plan failed when customers complained of the digital signs' intrusive nature and advertisers stopped buying ads. Giant retailer Wal-Mart Stores Inc. unveiled a massive digital signage project in 2005, which has recently reached Canada. Wal-Mart says its narrowcasting efforts have motivated customers to buy and has increased product recall. Analysts, though, are divided over whether this has actually translated into sales. Market observers agree that in these particular cases, the focus on ads has been too narrow. "The most successful networks are those with the blended objectives of revenue generation and corporate communications," echoes Stuart Kirkpatrick, CEO of signage firm Digital Display and Communication Inc. in Waterloo, Ont. With a better understanding of what can go wrong, businesses that held back from making the investment in digital signage early in the game are now starting to make their moves -- with caution.
Nick Prigioniero, CEO of EK3 Technologies Inc., a London, Ont.-based engineering media company, notes each type of business has a different motivation for implementing digital signage. "In food service, it could be increasing sales or just enhancing the overall customer experience. For financial institutions the value might be found in reducing perceived wait times."
For Jeff Srour, manager of business intelligence and application services for the over-the- counter division of Pfizer Canada Inc. in Markham, Ont., the real business value of digital signage -- which has been used to talk to employees throughout the facility for several months now -- has been its power as a communications vehicle. "It brings the culture together and allows us to communicate to colleagues and visitors in a visual and unified way," he explains. "It's integral to shaping our culture, disseminating key messages and driving corporate initiatives."
On a flat screen near you
Tim Hortons Inc.
The plan: Installing displays in more than 2,000 locations across the country to increase sales
What they show: Combination of in-store product promotions, community event notices, corporate messaging
Status: Rollout complete, to the tune of $50-million.
Tesco PLC
The plan: To launch Tesco TV in more than 300 locations and generate revenue through advertising and increased sales of promoted brands
What they show: Commercials from product suppliers
The result: Customers hated the displays and advertisers pulled out, stalling the project a third of the way through the rollout
Wal-Mart Stores Inc.
The plan: Installing ceiling-mounted displays with an in-store TV network to generate ad revenue that goes right to its bottom line
What they show: Commercials for products on the shelves
Status: Three superstores in Canada, with more to come
Other narrowcasting companies
Pfizer Inc.: Corporate communications
Toronto Transit Commission: Public service, advertising
McDonald's Corp.: In-store product promotions, community events
Future Shop Ltd.: In-store promotions