last March, when Chicago-based True Value Company made the decision to shift ownership from its shareholders and sell a majority stake to a private equity firm, it was a milestone that marked the end of a 70-year tradition as a cooperative. Fast forward, and the True Value transaction—which allows retailers to benefit from the return of approximately $230 million while retaining a 30% holding in the new entity—is paying dividends that can be measured in more than cash.
This smart move paves the way for the new True Value to embrace a “marketing-as-a-service” model, offering hyper-local and highly targeted marketing to stores as part of a larger program to raise the bar on customer experience and give e-commerce competitors and big-box shops a run for their money. “Our goal is to drive profitable retail sales by offering these independent retailers the programs and campaigns that enable their stores to compete in an omnichannel world,“ John Hartmann, True Value Company President, and CEO, tells me in an interview.
To this end, True Value has invested in the capabilities to offer retailers á la carte marketing and advertising programs that help promote their business locally. “We stopped charging a national advertising fee so that our local store owners could optimize their approach to traditional and digital advertising,” Hartmann explains. “It all boils down into one word: customizable.” The concept sits at the core of a global approach that True Value is rolling out this year to drive value for both sides of the sales equation.
For consumers, highly customized marketing that is geo-targeted and supported by opt-in relevant messaging on their mobile devices delivers a better advertising experience—on their terms. For store owners, access to a digital marketing program tailored to their needs ensures shoppers come in the door—and keep coming back. “In 2019, each store will have its own individual marketing program, and they will be able to adjust it as the dollars go up and down, right on the screen,” Dave Elliott, True Value Company Senior Vice President Marketing, said in an interview with Hardware Retailing magazine. “We’re putting that power in their hands because True Value marketing is about customization, so we are relevant locally.”
Going “Beyond the Radius”
To increase relevancy and reduce wastage True Value is working to redefine the concept of “location” in location-based advertising. Rather than investing in advertising to reach consumers in the vicinity of a particular store, True Value is working with agencies and martech partners to better understand and address audiences in the trade areas around physical shops. “For us, it’s the next stage in hyper-local advertising,” Sue Smolenski, Divisional Vice President, Marketing Strategy at True Value Company, tells me in an interview. It’s part of a company-wide strategy to help retailers optimize their ad budgets, not waste them.
In many cases, simply drawing a circle around a store reduces the effectiveness of location-based advertising because it ignores important geographical barriers and competitive landscapes. Imagine stores surrounded by mountains or confronted by big-box competitors strong to the north or south. Smolenski shares the real-life example of a True Value retailer in Queens, New York. “Clearly, if you just drop a circle around this store, it’s going to waste campaign budget attracting people who are across the river and not very likely to cross the bridge to go shopping in his store.” Prompted by this insight, True Value has invested in location marketing approaches that “go beyond location to deliver relevant and helpful content via digital ads by understanding of the customer.”
A prime example is a campaign that kicked off last summer to drive store traffic and sales of True Value’s EasyCare line of paint products. The campaign, in partnership with Converge, a direct response advertising agency headquartered in New York, harnessed the capabilities of S4M, a European martech company specialized in drive-to-store campaigns, to set the proper geo-target to reach audiences truly willing to make the trek to their nearby True Value retailer.
“It’s about looking at the audience visitation patterns unique to each store to maximize each ad impression and drive in-store sales by only serving ads to those consumers most likely to visit the store,” notes Kim Matio, Vice President, Media Operations at Converge. She tells me the campaigns did both, driving up to a 4X increase in store foot traffic—significant uplift that is demonstrably linked to the ability of S4M technology to “reduce waste and ensure each retailer location is treated uniquely according to the visitation patterns of those who live around it.”
The secret sauce is a real-time feature of S4M’s platform called Dynamic Catchment Area that defines ad targeting criteria based on the travel distance of the shopper and potential they will buy. (It’s also privacy compliant, as the focus is on tracking the device, not the owner.) To understand it, imagine a scenario where a device ID observed to visit a store and has also been seen often in that area. Using AI to understand the relationship between the data, S4M says it can conclude there is a high affinity between this targeting zone (where the device is) and the local store. “We aren’t just using mobile to bridge online advertising with the offline world,” Stan Coignard, Americas CEO of S4M, explains in an interview. “We merge technologies so marketers can manage, measure and optimize incremental visits, in real-time, to physical stores.”
The company, which has delivered more than 5,000 campaigns for global brands including Levi’s, L’Oréal and Subway, as well as leading media agencies, also lifts the lid on the “black box” of ad spend and attribution by working with impartial third-party measurement partners, including location data and analytics providers Factual, Integral Ad Science (IAS) and Placed, to validate campaign effectiveness and results. In an effort to answer the question how much bang advertisers can expect for the buck—and to ensure retailers don’t “over-attribute” paid efforts, cannibalizing valuable organic growth by paying for customer conversions they already own—S4M introduced an online tool to calculate the ROI for drive-to-store campaigns. It backed this up with a study that evaluates the Cost Per Incremental Visit (CPIV), making a clear (and measurable) connection between exposure to digital ads and visits to physical stores.
Connecting with Big Spender Millennials
Positive ROI and significant uplift delivered by Converge and S4M are the campaign results that cement retailer confidence in hyper-local advertising, Smolenski says. But it’s “the ability to dynamically identify the best customers in the trade area of an individual store and optimize the budget for that individual store, as opposed to optimizing it across a group of stores,” that’s the real game-changer. Scott Konopasek, Media Director at Noble People, a creative media agency based in New York City, agrees. “Being able to measure the impact of advertising on store traffic is one of the key ways physical retailers can combat e-commerce growth and competition, making sure dollars are allocated to tactics, channels and outlets that really drive those incremental sales.”
Marketing programs are a big part of the package that has allowed True Value to welcome more than 400 new retailers in the last year, according to Hartmann. Since the restructuring, he says, True Value has also made a $150 million investment to “modernize supply chain capacity and ensure True Value continues to offer the most competitive product fill rates for our customers in the industry.”
At one level, Hartmann says, it’s about serving and supporting independent retail. Store owners, equipped with marketing packages and services customized to their needs, are locally relevant and ultimately successful in driving in-store traffic and increasing sales. In fact, True Value data suggests digital marketing drives sales “34% higher for advertised items in stores that participate in the True Value Rewards loyalty program.” It follows that successful retailers have to restock their shelves more often—and they rely on one of the 13 True Value distributions centers to replenish the supply.
Boosting sales serves everyone in the ecosystem. But Hartmann says the prize is understanding new and better ways to capitalize on the differentiating strengths of local retail. “Physical stores are in business today because there’s something unique about being independent and local,” Hartmann says. “Our own observations indicate that Millennial consumers, particularly first-time homeowners, prefer local to the web-based trader.” It’s a huge customer segment—84 million Millennials in the U.S. alone—that will be the highest spending consumer segment in the home improvement market by 2020.
Fortunately for True Value’s independent retailers, it’s also a segment new to DIY jobs and eager to go to local stores for advice and supplies. “Our retail stores provide a high level of expertise and highly personalized service that young consumers crave,” Hartmann says. “That’s something you can’t get from a drone.”
This article first appeared on Forbes.