Frustrated with allocating trade promotion funds for marketing programs that are never executed, Nestle has devised a pay-for-performance plan that will require retailers to prove compliance beginning in 2005, according to an article in the Sept. 13 edition of Advertising Age. If retailers don't comply, "we'll just move to a different account where we can better move product through," a Nestle executive told the magazine.

Meanwhile, Safeway chief executive Steve Burd told Wall Street analysts that he expects promotional allowances to ultimately "pretty much just go away" as the supermarket chain moves toward "dead-net pricing" deals with product vendors. "The way supermarkets typically buy goods is more complicated than it should be," Burd told attendees of a Prudential Equity Group conference in early September.

Although they address different aspects of the issue, both announcements acknowledge that the current retailer-product manufacturer relationship often leads to wasteful spending and missed sales opportunities. The true potential of in-store marketing is hindered by a system that rewards the "buy," but hardly ever evaluates the "sell."

The much-discussed demise of mass media as an effective marketing channel (examined in this month's featured Desktop Conference presentation from IRI's J.P. Beauchamp) leaves the door open for greater resources to be deployed at retail. But media advertising still has at least one thing going for it: When you pay for a 30-second TV spot, you can always tell whether or not it aired.

The same isn't true for merchandising programs. Short of spending a fortune on in-store audits, the typical brand marketer -- or, for that matter, a retail chain's marketing director -- has no reliable way of ascertaining execution levels for a given campaign. And without that information, it's impossible to gauge how effective in-store marketing can be.

Widespread adoption of radio-frequency identification (RFID) technology could change that. The technology will initially be used to track pallets as they move through the supply chain, thereby helping to reduce inventory shortages and large-scale theft. But it also has the ability to check compliance and measure the effectiveness of P-O-P displays. While many believe this utilization of RFID to be years away, several leading companies are already experimenting with it.

For now, it's reassuring that companies such as Nestle and Safeway are taking some of the steps necessary to establish the store as a viable marketing channel. The readiness is all.

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Peter Breen
Managing Director, Content
In-Store Marketing Institute

After a decade of denial over the erosion of mass media channels, some of the largest CPG manufacturers have begun to shift money away from traditional TV to explore new ways of connecting with consumers, says J.P. Beauchamp, vice president of the Analytic Insights Group at Information Resources Inc.

In a presentation delivered last May to the Institute's advisory council, Beauchamp examines the new technologies that are hastening the demise of TV advertising while providing avenues for stronger interaction with consumers.