Checkout Coupon King Catalina Takes Plunge Into Digital Buying

New Demand-Side Platform Targets Consumers in Real Time Based on Buying Behavior

By Published on .

Only 1.5% of shoppers account for 80% of a typical new packaged-goods product's sales, according to a study by Catalina Marketing. And they tend to already be heavy buyers of the category and brand from which the new product comes.

Potentially the bigger news: Catalina now believes it has a way to target these individuals with online banner and video ads in a system that could steer big portions of packaged-goods budgets into highly targeted digital advertising.

The upshot is that Catalina, best known for its retailer loyalty-card programs and Checkout Coupon machines that spit out offers at the cash register, is now getting into digital-media buying. It will be selling inventory from internet publishers, albeit potentially integrated with data from Catalina's own shopper-marketing programs.

Catalina has a partnership with Nielsen, and it is fueling the targeting system, called BuyerVision, by pairing individual purchase data from Catalina loyalty programs with Nielsen's online and TV-audience measurement panels.

The capability could allow marketers to spread the same amount of money to promote new products over a much smaller audience. As few as 1 million people make up the pivotal consumer base for most new products, said Todd Morris, exec VP-brand development. Even a relatively modest $10 million budget could let a marketer direct $10 at each potential consumer -- far more than typical campaigns spread over larger audiences can.

Todd Morris
Todd Morris

Catalina is using a demand-side platform, a sophisticated automated online-media-trading tool similar to the trading desks agencies and some marketers such as Procter & Gamble Co. have been using, to target consumers in real time based on their actual or predicted buying behavior. Catalina will sell the data, analytics, media and post-campaign analysis as part of a package under the venture.

One Catalina study across 600 campaigns found that applying the Nielsen Catalina Solutions analytics to guide selection of websites for ads could increase product sales 22 % compared with traditional demographic targeting. By going a step further to target individuals online based on their offline purchases, Catalina has generated even better results, said Todd Morris, exec VP-brand development.

Nielsen Catalina Solutions already has worked with CBS and General Mills to apply shopper segmentation to TV planning and buying. But Chris Henger, exec VP of Catalina Media Solutions, said that while TV eventually may be part of Catalina's offering, the company is starting with digital ads because the targeting capability is more precise.

"We're still not in a place where TV has this addressable audience," Mr. Henger said. "We may know that 'Desperate Housewives' overindexes much more than 'The Bachelor' for heavy wet-dog-food buyers. But you can't necessarily target the ad directly to [wet-dog-food buyers only] in the show."

Online, however, Catalina says it can do that among the 60 million households it covers. And it says it can target not only heavy category buyers, but heavy category buyers loyal to a specific brand.

Advertisers impressed
Marketers and agencies contacted by Advertising Age seem impressed. "The appeal of Catalina has always been that you can target the media with almost surgical precision," said Clorox Co. spokesman David Kargas. "There's no fluff, no guess on demographics or psychographics. It's what people are actually doing in store. ...So now when they're looking at being able to take purchase habits from real people and link them to the digital space, that 's definitely very intriguing and something we're interested in exploring."

"It sounds like Catalina has also identified a good opportunity in digital," said Jeff Lanctot, global digital head at Razorfish. "If Catalina can leverage shopper data to help us serve more relevant messages, I welcome them with open arms."

Exactly how this individual targeting will work online isn't fully clear. Catalina isn't revealing all the ingredients in its secret sauce. A spokesman explains it this way: "Once a target audience for a campaign is defined by utilizing aggregated, anonymized purchase-history data, offline data is matched with web cookies to address the same audience online."

Catalina also will follow up, analyzing within one purchase cycle of a campaign's end--generally around eight weeks--how targeted consumers are responding to ads.

Its study found that existing heavy category buyers are 3.8 times more likely than an average buyer to try new products, and existing heavy brand buyers are 5.8 times more likely to try such a product from a brand. Top category and brand buyers also repeated purchase 19% and 28% more often respectively than average buyers, according to Catalina research.

Prior criticism
Prior Catalina studies on the small consumer bases of existing brand products have been criticized by the Ehrenberg-Bass Institute, which contends that the individuals in that small group are constantly changing and that the best way to grow brand sales is to attract light or competitive buyers.

But the scope of the new Catalina study -- showing existing heavy brand buyers are also the richest source of new-product sales -- would seem to undercut that argument.

Mr. Morris didn't take issue with the criticism, but said Catalina's analysis and the online targeting tool are actually strategy-neutral.

Marketers can target lighter buyers or competitive buyers rather than their own loyalists; they can even target loyalists whose purchase frequency has waned. Given that existing heavy buyers already have been buying new brand products at a brisk pace even without an online ad targeting tool to reach them, targeting other groups to expand a brand's reach may work better.

Catalina's finding that existing brand and category buyers account for most new-product sales might seem to confirm skepticism of retail buyers who've long suspected the endless stream of new products is a zero-sum game. But Catalina found that 18% of sales for a typical line extension came from shoppers new to the category.

Different direction
Interestingly, Catalina's move doesn't really jibe with what some, including partner Nielsen, have been doing elsewhere in trying to create an online audience-demographic-measurement system media with the same reliability and third-party validation that exists for TV. The idea is to put TV and online media on an equal playing field for planning and buying.

But Catalina sees the need for offline media becoming more like online, with behavior-based buying as the real wave of the future. "We think this solution is going to shift dollars from demographic and contextual targeting [online] to more purchase-based targeting," Mr. Henger said. "We also think there's a shift from other media that is offline to more online solutions like this."

"The reason people have tried to get demos right is that that 's a surrogate for getting the behavioral right," Mr. Morris said. "Now you don't have to go through that filter to get what you were seeking in the first place, which is that profitable consumer."

In this article:
Most Popular