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The CPG Guys
Real Time Bidding in Retail Media with Macy’s Michael Krans and Pentaleap’s Andreas Reiffen
00:44:06
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- [00:00]
Andreas Srafen
Hi, my name is Andreas. I'm CEO and co founder at pentaleap.
- [00:05]
Michael Kranz
Hello, my name is Michael Kranz. I'm the Vice president of retail media here at Macy's Inc. And you're listening to the CPG Guys podcast.
- [00:14]
Peter V S Vaughn
Hello and welcome to the CPG Guys Podcast. Set at the intersection of commerce and tech, your hosts Sree Rajagopelan and Peter V S Vaughn explore how brands and retailers engage consumers in a digitally driven world. And now here are the cpg.
- [00:34]
Sree Rajagopelan
Hello and welcome to this episode of the CPG Guys podcast. I'm of course sri, your co host and also CRO and co founder of Think Blue Consulting, your trusted partner in your omnichannel development journey. Get in touch with me at sri@thinkblueconsulting co. Please do listen to my older daughter's music at www.riaraj.com and follow Lara Raj. My younger daughter is a member of the world's fastest growing global girls group, Cat's Eye. Now a proud winner of an MTV VMA. Two Grammy nominations. the time of release of this episode, we'll be a week away from being the floor and work in the red carpet at the Grammys. So do follow us. Riya and Lara were just featured on Vogue India this month as one of the top 10 Indians in globally influencing pop culture. Joining me today is my co host and co founder Peter V. S Bond who also moonlights his head of industry and client engagement at Flywheel, the commerce acceleration division of Omnicom. Peter, what's going on this hectic month of January?
- [01:27]
Peter V S Vaughn
Sree, I'm just trying to figure out where I'm going to get all the money to pay for Kyle Tucker now that he's come to the the Dodger. I mean, come on man, this is, this is good stuff here. I mean this is the George Steinbrenner approach to how to run a baseball team. Just throw a lot of money at.
- [01:46]
Sree Rajagopelan
It back to back. Get to 27 and then we'll call you.
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Peter V S Vaughn
That's all. That's all you've got at this point, Street. That's all you've got. 27 World Series.
- [01:57]
Sree Rajagopelan
That's all y' all have, man. Just throw more money.
- [01:59]
Peter V S Vaughn
We got two World Series with a three peat about to happen. Okay, we're enough trash talking a baseball sri. Looking forward to getting out to San Diego to spend some time with you at FMI Midwinter this week.
- [02:09]
Sree Rajagopelan
Yeah. Enjoyed nrf. You know, we were at ces. We were busy as heck, but a very learning a very Learning Conference is what I would call both of them. AI is here. AI is real. If you're following us, we talk about it literally every single week. If you're in the business of CPG or retail and you're not deeply immersed in AI, you are missing the bus. So make sure you're subscribing to our podcast on your preferred listing platform where you get our latest episodes and even go back to consume some of the 60 plus episodes we've already published. Published over five and a half years now. Let's get to our guests. Dre Srafen is the Founder and CEO of Penely. For the past six years he's been on a mission to disrupt the retail media ecosystem with the best in class ad serving platform focused on relevance, transparency and performance. Today, his work is fueling some of the top retail media networks worldwide. Originally from Germany, Andreas has been based between Berlin and New York City since 2016. Michael Kranz currently serves as the VP of Retail Media for Macy's Inc. In this role, he oversees the Macy's Media Network, the retail media network for the company's three nameplates, Macy's, Bloomingdale's and Blue Mercury. With extensive experience leading sales and marketing teams focused on digital media, e commerce and publishing, Michael joined Macy's in 2024 following his role leading the fashion team at Walmart Connect. Of course, Peter and I have now released over 20 episodes with Walmart. He previously worked at major publishers including Hearst and Conde Nast, overseeing a host of revenue growth, advertising and marketing initiatives in retail, home beauty and fashion. So join us in welcoming both of them to the show. Andreas and Michael, a warm welcome to the CPG guys. How you both doing?
- [03:45]
Michael Kranz
Fantastic. Thank you so much for having us. Thrilled to be here.
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Andreas Srafen
Fine. Excited to be here with you.
- [03:50]
Sree Rajagopelan
Awesome. In the digital liner notes of this episode, we'll of course include links to both their LinkedIn profiles and the company's corporate websites for our listeners to access while we go on with our conversation. So let me jump right in and this question is for both of you. Maybe Michael, you can go first. Retail search has evolved fast over the last few years from your vantage points and the roles you occupy. What's broken today and what you see. What's broken about Organic and sponsored Product search? They currently coexist with each other. Do they? Do they not like what's going on?
- [04:22]
Michael Kranz
Well, I think what's been broken historically as is that retailers have treated them as church and state, two completely different algorithms solving for different things. You've got on one side, organic search that's trying to solve for the customer, right? What is the most relevant black dress, for instance. And on the other side, sponsored search is solving for the bidder who is willing to pay the most to show a black dress. And I think historically, when those two systems haven't spoken to one another, you get a disjointed digital shelf experience. So you end up with a customer experience where the. Where, for instance, maybe the first row or for us, we used to lock sponsored products in the second row might be high margin for the advertisement, but lower relevance for the shopper. And so for us at Macy's in Bloomingdale's, where we live in really the fashion and lifestyle worlds, that friction is much more noticeable than it is, let's say at a grocery retailer. If you show the customer the wrong style of shoe just because the bid was high, you aren't just losing a click, you're losing their trust. And that's what we're trying to evolve and improve here at Macy's Inc.
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Sree Rajagopelan
Awesome, Andreas.
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Andreas Srafen
Well, Michael, you make my life very easy. I couldn't have articulated this in a. In a much better way. So what we see is in the previous world, in the old world, we had a clear division between paid and organic. So if you think about this from a user perspective, you already notice that this can't make any sense because users, they don't care about whether a product has a sponsored label or it doesn't. They want to find products that they are looking for and they want to find or have a frictionless experience. So in the previous world, we had an algorithm that was mostly designed to showcase products that came from the advertisers. While the E Comm experience sorted the grid by, let's say, a margin per impression that you would expect that an algorithm calculates. So a product that would deliver a very high margin per impression ranks first and then we have a descending order. So this factors in conversion rate. It factors also in the money a retailer makes. And opposed to this, we had slots for ads, and oftentimes we pushed products into those ad slots that people just didn't want to see. And we did that because advertisers were obsessed with showcasing those products. But as Michael said, you not only lose the click and that's how you make money in with sponsored products. Products also then don't convert. And the downside is that if you do this, you might make some ad money and retail media may celebrate, but you drag your conversion rate down and make it might happen that bottom line, you are worse off than just showing a relevant organic product. And that's what we are trying to fix here.
- [07:20]
Sree Rajagopelan
Peter. More importantly, I feel the advertiser is less inclined to come back to you and invest with you and those sort of higher cpm, lower ROAS environments. So Michael, from a retailer perspective, how do you balance this world of monetization requirement with protecting the shopper experience, which you just started discussing here, from potential friction impeding the journey, especially when sponsored results start to dominate search. We see that often on Amazon where you've got this full scores of sponsored results and it's actually, to be honest, quite annoying as a shopper.
- [07:53]
Michael Kranz
Well, it's a topic that comes up all the time here because we are very, very focused on the customer experience. And you mentioned Amazon and I think what they've built obviously is a very strong business model. But we recognize that our customer is not the Amazon customer. Our customer expects much more from us. And so we're very considerate and conscious of the ad load on the page. And again, we want to make sure that we're delivering the most relevant items that match the customer's intent. And especially for us, we deal in high consideration categories like beauty, furniture, fashion. So we have to be incredibly disciplined about relevancy thresholds. We cannot and will not allow a pay to play model where a low relevance item can buy its way to position one right up there in the upper left hand corner. We have to ensure the sponsored product is at least as good as the organic product. It's displacing. So it's really about protecting the customer journey first. The monetization naturally flows because the con, the conversion rates stay healthy. So if you flip that and chase the short term ad revenue, you end up degrading the very audience the advertisers are paying to reach.
- [09:05]
Peter V S Vaughn
Wonderful. All right, so what I want to understand is why is unifying organic and sponsored search so critical to relevance and what happens to the actual performance when those systems are functionally operating in silos? They're not harmonized as you identified in the opening answer of some of these challenges.
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Andreas Srafen
I think there are two points to that. The first one, if you operate in dedicated ad slots, you usually use an ad algorithm that doesn't have the same sophistication as that is built into your organic ranking. So this is, let's say, AI defined efficiency that we don't see with organic products that show up. But if you then think about it, if you have, let's say, tile number Five reserved for a sponsored product. And that product is the product that comes in, has a $10 bid, it may make a lot of money to the retailer and it still qualifies, it's still relevant. So if you lift that to the very first position, you attract lots of clicks for the most relevant product. So in the end, you know, the unification means that you treat products or the ranking is unified in the sense that the product that makes the most profit ranks first. And this may be a product that has no sponsoring simply because it's hyper relevant and you sell it. But it could be that this is a product that doesn't make the same retail margin but has a tremendous bid and therefore the aggregate profit is higher. So if you operate in silos in swim lanes, there can never be an optimal rendering of the web pages. And that's why you need to bring those two worlds together into one single unified logic.
- [11:04]
Peter V S Vaughn
Yeah, I absolutely agree, Andreas. When I think about all the research I've seen says something very clear, which is that a large percentage of the add to baskets come from the top spots in search results. And if you're not delivering a relevant product to that consumer, it's just not going to get added to the basket. You have wasted an opportunity. That should be a no brainer. If you put something relevant in front of them, there's a high, high likelihood they're going to add it to the basket. And if you don't, you've just wasted that spot. So let me start with Michael on my next one then Andreas, I'll get back to you on on your thoughts on this. But Michael, how do shoppers respond when the relevance does break down and what signals tell you that experience is really starting to erode trust?
- [11:54]
Michael Kranz
We look very closely at that and the scenario you just described is one of course we want to avoid. And we call it pogo sticking. Right when you're coming in, clicking on an item, going to PDP and realizing it's not the item you want. And of course that customer is going to bounce out of that PDP immediately. And if we look at those rates that tell us that tells us that we broke the promise of the search experience on Macy's and bloomingdales.com so we've been monitoring that closely, particularly when we started working with Pentalief and we've seen that behavior changing. Right. As you said, we want the customer to land on PDP and we want those add to basket rates to increase. So as we analyze performance of those top slots, we see those Metrics rising. So that's definitely a great signal for us. But again we watch it very closely. We're very concerned about that customer journey on site. How they're navigating through the site and search is hugely important for us. We've got a browse customer as well. So as they're browsing items by category, we are looking very closely at those top browse spots to see what the behavior is after they're clicking. We want that high add to basket rate and then that high bag to check out and then the conversion.
- [13:12]
Peter V S Vaughn
Brilliant. Andreas, I was going to ask any, any additional thoughts on that?
- [13:19]
Andreas Srafen
I think this Michael got it pretty much to the point. It's one KPI that stands out as ctr. If you compare adjacent products, an organic one and a sponsored one from the old world, you will see a dramatic difference in click through rates, which is a signal from the user, does he or she like that product or not? And we saw in the test that the CTRs on average more than doubled, which shows that what we put in there is just much more relevant. If you then follow through and you take a look at how do sponsored products convert old world world versus new world, you will see that even the conversion rate more than doubles. So you have a double impact. You get more ad money in, but also the retail margin on those product actually increases. So I recommend taking a look at CTR and conversion rate and other metrics Michael already mentioned.
- [14:16]
Sree Rajagopelan
That's very good advice in between the lines, Peter. What I pick up is the level of focus on the analytics required these days is so high to keep these optimized. It isn't like the past where you can run your report with your advertising partner once every three months month after the campaign. Today's advertisers want to tweak a campaign midway through the process and absolutely want, you know, full closed loop ecosystems and we're going to kind of jump a little bit into that as we move forward. So one of the things, Andreas, that has happened over time with retail media is it's largely been built as closed ecosystems. Why do you see that as a limitation today or is it?
- [14:58]
Andreas Srafen
I think what you're touching on is probably the number one most pressing issue currently in retail media. We have 200 plus walled gardens right now and if you compare the sheer size of those walled gardens to a Google Meta TikTok, that's tiny in terms of traffic volumes. So advertisers don't like that level of fragmentation and retailers in the end need to sell to advertisers who experience that friction. And this leads to a situation where most retailers are stuck with just repurposed trade budgets that are now funneled into retail media. But we all know trade scales proportionally with E. Com revenues. So if you want to grow your retail media business at a rate of whatever, 10, 20, 30%, none of the big companies can just rely on scaling trade budgets. So the question is, how do we meet brands where they already are, where they already spend money? And they all go through Google, they are probably spending through Trade Desk and Amazon and many other platforms. So the question is how do we attract real media budgets? And well, we have to make it easier for the brands to funnel money in. So retail media historically, well, in the very early days it was actually a network approach under Hook Logic. Then everyone copied Amazon and said, well, they sell all direct, so we do the same thing. But this is not comparable because nobody has the sheer size of Amazon. So we are now selling stuck at a point where scalability is limited. Hence we need to somehow open up and get access to the real media budgets. And that's through a combination of direct sales, but also now funneling or accessing those other budgets.
- [17:05]
Peter V S Vaughn
Yeah, I couldn't agree more. Unfortunately, in the United States we are to a degree beholden to a 90 year old federal government act known as Robinson Patman that dictates exactly how much trade funds are allocated to each customer. It's not something that is that CPGs and retailers outside of the United States often have to deal with. And as a result of that, they have a lot more freedom to figure out how to combine those budgets. And I think it probably says that there are some legal revisions that are going to need to take place in the governmental level to address the reality of the digital era. That to your point, you're holding back this incredible growth factor, which is where most of the growth that retailers and brands are seeing right now, which is in digital and E commerce to reflect the reality of today's situation. So I think that's, that's a pretty important point that you made, Michael. From, from your perspective, what do advertisers actually want when they say they want retail media to quote, meet them where they already are? What's, what's really grown going through their heads?
- [18:23]
Michael Kranz
Well, as Andrea said, they want friction reduction. As we know, for a long time rmns operated as these walled gardens. You come into my ad center, you use my specific measurement, my attribution window. And that was fine for a time. And now that there are dozens of and now that there are so many retail media networks, you've got brands and agencies who are frankly exhausted. And so when I think about the phrase meet us where we are, they mean let me buy your inventory through the platforms I already use today. And I've been doing some of that work with Amazon retail ad service in partnership with Pentalief. And so they want interoperability with their preferred DSPs, they want standardized measurement, they want to layer on their own data on top of ours without having to manually stitch spreadsheets together. And ultimately they want the Macy's high value audience and they want to buy it with the ease of the open web. So I think that's our strategy here is we want to give all of those buying opportunities to our brand partners, to our agencies, to our tech platforms and make our inventory available. And Penta Leap is an enabler to achieving that.
- [19:34]
Peter V S Vaughn
So building on what Michael said, Andres, it's great if you are, if to get the advertiser's interest you say, okay, I am going to make it available through the platform, I'm going to have that transparency, measuring and do those things. But in exchange for that, does Michael at Macy's have a realistic expectation that okay, I did it, so put your money where your mouth is, maybe.
- [20:02]
Andreas Srafen
Michael, I read something from Sarah Marzano where you mentioned a little bit how many new brands got activated. I think it's better to share your experiences a little bit quickly up front. We have to imagine there's old world closed walled gardens, no demand coming from the outside world. So we've been selling to the brands that sell well, in this case through Macy's in a direct fashion. Now we offer those new opportunities and this will be a gradual shift in my opinion. It's not that this is a radical thing. Now everyone buys elsewhere. This is also, if I can say that, probably not what Michael intends. We all want to have direct brand relationships and we do want to sell direct to those brands and we hope we will attract media budgets, but we know it's somewhat limited and we hear from the brands that they don't like the level of fragmentation. So now there are those new capabilities. In the future you will be able to connect on Amazon and Google and Trade Desk and Teats in combination to the private market that you already have. So brands will have to choose and many of them will choose convenience and they will go through other platforms because then they run one campaign and they target a broader network of retailers. And they could do that from, for example, within Google or within Amazon. But now, as this is brand new, we will have to give the market some time to catch up. But we know there is a lot of pain. So it's not a coincidence that Amazon launched their ad network model because they know there's too much fragmentation. They know from their brands that they don't want to talk to a good dozen of different retailers. I think we will see growth coming through this already starting in 26. My assumption is that at some point this will even out 50%, maybe direct sales, 50% network.
- [22:13]
Michael Kranz
If I could just add on to that to Andres comment, I think it will be a slow transition. We are, as Andreas refers to it, in that trade marketing trap, I think you call it. So what we need to do is of course move closer and closer to those brand budgets. And of course, everyone in retail media has been making that effort over the last five years through a direct sales effort. And I think what this does now is it brings more credibility to the retail media offering, at least for us, because now you have the more parties involved. I spoke at NRF recently with our friends at Hanes Brands and Flywheel, and their experience with retail ad service is a very positive one. And all of the right, they, they use their performance metrics, their attribution, they stacked it up against international campaigns and there was, there was parody. And so having those new voices at the table brings us inches us closer and closer and closer and sort of evolves a brand's thinking about how they should spend that marketing dollar. Where is that dollar best spent? Where am I going to drive the best business outcomes? And when you have more folks around the table credentialing that experience, that helps us move the shift. As Andrea says, it's not going to happen overnight, but one by one. And as other brands watch their competitors in their category or outside and they see them making that move, it's just going to continue to stack on and build that credibility and it's going to help us make that shift. You think about it as a credibility spectrum.
- [23:51]
Sree Rajagopelan
Gentlemen, well said. Let me remind our audience that we're speaking with Andrea Sreiffen from Penteleaf and Michael Kranz from the Macy's Media Network. This question is for both of you. What does opening up retail media really mean in practice? Is there such a word? And what misconceptions do people have about that idea of let's open up retail media networks? I can you go first, Michael?
- [24:14]
Michael Kranz
Well, I think there's a misconception that opening up means a retailer loses control or data security that's the fear. So if I open the pipes, I'm giving away my first party data advantage. But really in practice, opening up means modernizing the transaction layer. It means allowing a brand to bid on our inventory programmatically while we still control the floor pricing, the brand safety guidelines and the customer experience. It's really about moving from a managed service mindset to an infrastructure mindset. So we aren't really giving away the keys to the castle. What I like to say is we're installing automatic doors so partners can enter more easily.
- [24:51]
Andreas Srafen
There's another misconception. The key word here is retail media rtb. That's a new technology that's kind of borrowed from the programmatic world, but it got adapted so that it's viable for sponsored products now. So if we talk about retail media rtb, people are like, oh God, now random brand brands from the outside world will be able to ingest whatever product into Macy's and it's going to be a whole mess. And they click out and oh God, like visibility issues and old programmatic fears. Basically. The reality is this is all still endemic. So it's the same sponsor products ranking on Macy's. There's no click out, there's. Nobody sees that. It's just the question out of which front end are those budgets actually coming? And this can come out of the Macy's incumbent retail media player. It can come out of Amazon res in the future, out of a Google or whoever holds those budgets. But on the front end side on Macy's, that's a super clean, well organized website that is not cluttered and there's no wild west here. And that's probably one of the misconceptions that is somehow attached to rtb. That doesn't have the best reputation. But it's a whole new world here and totally different.
- [26:19]
Peter V S Vaughn
Yeah, I, I will add that when I often think about retail media networks, I hear the term walled gardens being used and I think we're evolving to a phase where they're not so much walled as they are hedged.
- [26:35]
Sree Rajagopelan
Right.
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Peter V S Vaughn
I can reach over a hedge, I can move things around, I can do things. It's still the retailer's data, it's still they own that, they own their, their own customers.
- [26:42]
Michael Kranz
They.
- [26:43]
Peter V S Vaughn
But I have a little bit more visibility to kind of what's going on on the other side of the, of the hedge. It's not this entirely tall wall where I'm just like putting money through a little slot in the door and saying, hey, give me some outcomes. Hopefully they Meet what I'm looking for. So let's go a little bit further. Andreas, on the rtb, that can sound fairly abstract. Can you break that down into what's actually new here and why you think it matters?
- [27:12]
Andreas Srafen
Yeah. What we had previously was ad server technology that came with the actual ad serving tech and some front end that was connected. And what we then saw is, for example, Criteo, they had API connections and they had PackVue and Sky plugged in and a Flywheel. The downside for the market, not less so for Criteo was those API connections are very, very hard, expensive to build and maintain. So it was a privilege for the market leader to be able to connect demand from the outside world. And with rtb, this has fundamentally changed right now. So what Macys effectively is currently using is RTB to mediate the incumbent Amazon ras and whoever else will come in at some point. So the way it works is an API connection means that, let's say Flywheel would submit a campaign from their tag through the API into the ad server backend from where this campaign then, well, it physically lives there and gets executed as ad requests come in. So with rtb, that's an immediate request that goes out. There's an ad response that we fetch on the fly from a multitude of different sources. Can be two, can be 10. So we get a broad range of potentially relevant products and in real time those products get served. So why is this a difference? It's because it's super. Once you have built it, it's super easy to connect demand and it democratizes the playing field to a great extent. So demand from the outside world with functional RTB tech is much easier to plug in. It's almost cost free to maintain. And that's why RTB will change the game fundamentally towards exactly what you said, Peter. It's now, let's call it a hedged garden model. You still operate in your walled garden, sell media direct, but you also open an app for those who want to come from the outside world. And RTB is the enabler. We've been doing this for two years now. There are two use cases. One is you can basically replace whatever ad serving. If you work with an ad server that has a front end, we can fetch those ad responses and serve ads in a smarter way, but then we can also connect whatever other source from the outside. Both is technically rtb.
- [30:02]
Sree Rajagopelan
You know, here on the cpg, guys, we agree with you that RTB is going to open up. You know, more important than anything, it's going to cause a lot of conversations and open up a lot of dialogue in the industry, especially with retail media networks who haven't played catch up at that point and therefore. Michael, I think it's important to get you your viewpoint on this one. What does it unlock for a retailer when you can connect demand partners and swap ad servers without losing control of the experience?
- [30:29]
Michael Kranz
Well, I think it really just unlocks agility and yield. I think historically our men's were tied to a legacy ad tech stack and your roadmap was their roadmap. And so if you wanted to test a new video format or any new ad placement, you might be waiting a year, two years, sorry, a year or two years for that development cycle. From our point of view, by decoupling the demand from the ad serving, which is what technologies like Pentalaf allow, we can plug in multiple demand sources. So we have our direct sales team competing against programmatic demand in real time and that competition drives up yield cpc. But more importantly, it ensures that the highest value ad wins. Although we still maintain relevancy, it turns our ad server into a true marketplace rather than a just, rather than just a delivery truck. And so we're doing that now with Penta Leap. We are getting demand from multiple sources from our legacy partner Critio and now from Amazon retail ad service in near real time. And we're mediating that demand through pentalap. So we're layering in multiple demand sources to increase the chances that we'll have highly relevant products to serve. So for our customers that means much tighter ties between what we're serving organically and promoting through sponsored products. And for our advertiser, that means higher clicks, click engagement, conversion rate, conversion value, roas. And then for us as a retailer, it means that we're optimizing the total value of our pages, we're driving customer behavior in a healthy direction and layering the ads on top of that.
- [32:02]
Andreas Srafen
Maybe a quick comment if I can chime in here. If you take a look at what Amazon has built, it follows a very similar idea. Amazon has built its own ad serving tech, but they allow any other tech provider who has a front end, has access to brands to plug into their ad serving and serve ads on Amazon. So what Pentaleap does for Macy's is we help actually optimize the website in a holistic way across organic and paid. Same thing Amazon does, but then we do not have to run the front end. So whether Michael wants to plug in some front end orchestration tool or now Amazon ras, whatever it is he can make those demand sources compete, but they are decoupled from the ad serving and that's exactly also what Amazon has done. So in the old world you had to go with one player that did it all. And since we have now modular composable stack, you can just have that ad serving piece and whatever suits you. Different front end orchestration tools, demand stitches in.
- [33:18]
Peter V S Vaughn
All right, so Michael and Andreas then can you share a real world example of how real time bidding driven retail media improves the outcomes for everybody involved, the retailer, the advertiser and ultimately the shop offer at the same time?
- [33:34]
Michael Kranz
Well, I again point to our relationship with Amazon retail ad service and also at the same time working together with Critio. We're mediating those two demand sources and working with Pentaleep to ensure that we're delivering the most highly relevant product search result to the customer while also keeping an eye on revenue generation.
- [33:55]
Andreas Srafen
Yeah, that's a good example. We've done this now I think for more or less two years. So the way retailers have used this new technology was usually it started all with a lack of relevance and complaints by the E. Comm department, hey, we don't like what we see surfacing there. So instead of saying okay, we don't like that legacy tech, we rip it out and replace it by something new. What they did is they used this new RTB to fetch the ad response, funnel it into our ad server and make sure that that relevance problem is being fixed. And that same piece of technology, rtb can now be used to connect new demand sources into the same ad serving.
- [34:46]
Michael Kranz
That's how it works.
- [34:47]
Sree Rajagopelan
Well said guys. Andreas, let's say this model continues to scale, which it will. How should brands rethink their approach to retail search and retail media investments? A little bit of a primer here would be helpful.
- [34:58]
Andreas Srafen
Yeah, I think for a brand you have to make a decision whether you want to engage with your strategic partner, the retailer in a direct fashion to really run your media with them, or if you rather want to have, let's call it a catch all and put your money into some ad tech product and rather have convenience by targeting a broader range of different retailers. And every brand will have to make that decision. And it also depends to a great extent how the ad tech partners evolve, how actually well those campaigns are executed, how aggressive they become on the sales side. So it's for the brand simply a new add on something new, a new possibility. Nobody is forced to now spend through Amazon or Google anybody else, it's just a new opportunity Those who have complained about fragmentation now have other options and retailers no longer have to bug those brands all the time trying to get some more trade budget in. It's a more frictionless approach going forward.
- [36:19]
Peter V S Vaughn
All right, so Michael, looking ahead, I want to talk about best in class in terms of retail search and media from a shopper's perspective, right. How close are we to achieving that nirvana where everything just gels and the consumer gets the perfect experience? Are we getting closer?
- [36:42]
Michael Kranz
I think we're inching closer and closer. From the Macy's media network point of view, we think best in class media really should feel like a personal stylist, not a billboard. Right. It should be serendipitous. So best in class media means that they're the distinction ultimately between organic and sponsored dissolves because the sponsored content is so hyper relevant, so personalized that the customer is actually grateful to see it. So we want to move it, move ads from being interruptive to actually additive. That's our North Star for mmf.
- [37:14]
Sree Rajagopelan
Well said indeed to both of you. As we close this out, what's your one big advice you would give retailers or brands listening today that they should start doing differently? Based on this conversation, I can go first.
- [37:27]
Andreas Srafen
I think with the new tech we currently have, there's a tremendous opportunity to have a best in breed approach. Means you choose the best in class ad server and then you are free. You can plug in whatever avantage or osmos or whoever runs front end orchestration. You can stitch in demand sources, but you are free in a way that you just choose the best components and you can replace them on the fly. Gives you more flexibility, gives you access to demand, solves the relevance issue. It's clearly something that wasn't available in the past, but now we see many, many companies taking that approach and I think there are good reasons for many others to follow.
- [38:14]
Sree Rajagopelan
Michael?
- [38:15]
Michael Kranz
Well, I would say for brands listening, stop looking at retail media is just a conversion channel at the bottom of the funnel. Yes, sponsored products is hugely important in the customer journey as they move from awareness, consideration and conversion. Right. We want to hit that customer at the bottom of the funnel. But but I think brands need to start looking at the branding power of these environments. You have millions of high intent shoppers on sites like Macy's. Brett should use those data signals. We have to tell a brand story, not just to move askew. And I would say for retailers, make sure you don't lose the art in the data science. We can optimize algorithms all day, but at the end of the day we are really inspiring humans to make purchases that make them feel good. The tech should support the inspiration, not replace.
- [39:00]
Sree Rajagopelan
You know, Peter and I couldn't agree more with what you just said. Number one, retail media is media. I think this has been debated for a long time. This lower funnel aspect is the way it started and then blossomed over Covid. But now with the offerings retailers have, which is on site, off site, you know, the ability to leverage a full closed loop360 retail media should be treated as any other media channel. But actually, I'll take it one step further. It's actually better than any other media channel because you actually have that conversion component as well, making it it. I don't care if anybody says the word is old. Full funnel marketing in its best form. Probably one of the only mechanisms where you can get full funnel marketing. There is absolutely no debate in my head. The second thing, Michael, that I picked up is technology. Technology changes every single day. You know, we started this episode talking about AI, so staying in touch with the latest updates in technology, the latest platforms, the latest capabilities. One such capability actually comes from Pentalink. So staying in touch with technology and capabilities. And finally on the retail side, the quality of the analytics that's being put out and the quality near real time, like these things come together. So what a fabulous dialogue. Peter, what's your one big takeaway today?
- [40:10]
Peter V S Vaughn
SRI for me, I think it was said up front that consumers are expecting a rather remarkable customer journey if a retailer wants them to be loyal. And when you are putting in front of them advertising that is not relevant, the site's just not sticky. And moreover, what that means is you need more relevant content. Retailers can provide more relevant content is plugging into systems, right, that bring that content to them so that they can share it with consumers. So I think the, you know, the real time bidding mechanism that breaks down these walls and lets advertisers use the platforms they have rather than having to become an expertise expert in every single new retail media network that pops up. I mean, my God, Cherie. It seems last year in particular, every week we were announcing another one coming in. And that doesn't bode well for particularly the ones that are on the tail. You know, the retailers like Macy's will do and fare better than a lot of these other small ones. But that's not really how this ecosystem should work. So what I hear both Andreas and Michael saying to us today is, is, you know what, we'll make it easier for the advertisers to get there. And we'll make the experience more relevant for the consumers. Everybody wins.
- [41:31]
Sree Rajagopelan
I agree Peter. Real time bidding is a game changer. The thing about brands I think of is before really putting full energy into it learning, and I think retailers can do a better job of coaching how real time bidding works. If they don't, what'll happen is the brand will take it out of construct and use it in ways that it isn't designed for in the first place. We've seen the story repeat a hundred thousand times previously on Retail Media, but I think it is a game changing moment. Real time bidding that said, let me remind our listeners, you can find all of our content by simply going to a web browser and typing cpguys.com as the URL 560/ episodes 3 every single week if you or someone you know has something to contribute to this ongoing discussion on the CPG Guys, please drop us a line@contactpguys.com that easy to our audience. Thank you for the clicks, likes, comments, direct messages, meeting us at trade shows, coming to our events, recording episodes with us like today, and of course all of our sponsors. We are always grateful for you. Without all of your community, the show doesn't exist. You work with us all year and we're grateful to have you as your audience and partners. Thank you, thank you, thank you. Andreas and Michael, thank you for making time for us on a Tuesday morning to appear on this podcast.
- [42:41]
Andreas Srafen
Thank you. Thank you Michael. Thanks Sri and Peter, it was a pleasure to be here.
- [42:45]
Michael Kranz
Thanks for having us. Enjoy the conversation.
- [42:48]
Sree Rajagopelan
Thank you folks. And that's a wrap of this episode of the CPG Guys.
- [43:04]
Peter V S Vaughn
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