Big Changes Are in Store For Advertising Industry As Retail Focus Widens Marketers' Shifting Spending Habits Create New Opportunities, Challenges

Millions of Viewers at Wal-Mart

By EMILY NELSON And SARAH ELLISON

Procter & Gamble Co. believes shoppers make up their mind about a product in about the time it takes to read this paragraph. This "first moment of truth," as P&G calls it, is the three to seven seconds when someone notices an item on a store shelf. Despite spending billions on traditional advertising, the consumer-products giant thinks this instant is one of its most important marketing opportunities. It created a position 18 months ago, Director of First ,Moment of Truth, or Director of FMOT, (pronounced "EFF-mott") to produce sharper, flashier in-store displays. There is a 15-person FMOT department at P&G headquarters in Cincinnati as well as 50 FMOT leaders stationed around the world. P&G's insight is helping to power a shift in the advertising business: the growth and increasing sophistication of in-store marketing. Almost a cen- tury ago, P&G popularized the concept of mass-market advertising. Now, in response to the fragmentation of television and print ads, it wants to tout its brands directly to consumers where they are most likely to be influenced: the store. In part for this reason, the decades-old hierarchy that ruled the ad

industry is under assault. Previously, ad executives who designed TV com- mercials looked down on those who worked on in-store promotions. Now, executives with retail exper- tise are gaining clout as the world's biggest advertising firms build up departments to handle an area in which they have little expertise. One marketing firm has even hired an expert on the durability of corrugated cardboard.

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Changes Are in Store for Ad Industry

Continued From First Page that produces forecasts for the imitation of the annual ad- To fill a store's giant canvas with communications industry, says sales extravaganza, known as advertising messages, ad agencies companies in the U.S. are ex- the upfronts, put on by the are now charged with designing pected to spend about $18.6 networks. PRN, which is everything from in-store TV billion on in-store marketing owned by Thomson Corp., commercials to special shelf and in-store ads this year, up says its rates are comparable displays and packaging. The work from $17.6 billion last year. to those of cable TV. is more elaborate than traditional Overall, companies are slated Last year, 122 new in-store marketing, typically signs to spend almost $200 billion products were launched on posted at the end of supermarket on standard types of advertis- Wal-Mart TV, says Charlie aisles. For all the excitement, ing this year, including TV, Nooney, chief executive of agencies face huge challenges print and the Internet, up from PRN, including goods from coordinating so many pieces. Some $188 billion in 2004. P&G, Unilever and Gillette, are stumbling over new problems, P&G, the maker of Tide, which agreed to be acquired such as how to measure and charge Crest and Pampers, won't say by P&G earlier this year. The for these services. how much it spends on in- TV sets, which have sound, When Gillette Co. introduced store marketing But it has cut are located in parts of the a new women's razor last spring, its commitments to advertise store where people tend to the Venus Vibrance, its first TV on cable channels for the gather, such as the deli, and ad ran on just one network—the current season by 25% and its will soon be installed in one inside Wal-Mart stores, broadcast-TV allotment is checkout aisles. which has become a powerful down about 5%. At the same Stewart Stockdale, chief advertising medium. To market time, overall ad spending rose marketing officer of mall slightly. operator Simon Property Pampers diapers in the U.K., One vehicle that is Group cites research it P&G persuaded retailers earlier helping change this commissioned from Arbitron this year to put fake doorknobs traditionally mundane Inc., a media-research firm, high up on restroom doors, to re- advprtising medium is Wal- showing that shoppers are mind parents how much babies Mart Stores Inc.'s in-store more likely to recall an ad need to stretch. Grey seen in mall than one seen at TV network. It is seen by Synchronized Partners, owned home. The company has a 130 million shoppers a by WPP Group PLC, created pilot program at the month, according to ratings last year a display for Absolut Roosevelt Field mall on New data produced by Nielsen vodka that lit bottles with York's Long Island that airs Media Research for San TV commercials on giant colored spotlights corresponding Francisco-based PRN Corp., digital screens. Advertisers to their flavor. The display's look include restaurant chain matched the label's traditional print which runs the network. Wendy's International Inc. advertising. Through it, Wal-Mart has, and Coca-Cola Co. Joe Celia, Grey Synchronized's in effect, recreated the mass Even as TV viewers scatter chief executive, first started audience that marketers among a multitude of working on in-store displays six used to easily reach on channels, the broadcast net- years ago. Earlier in his career, network TV. works remain unique in their "marketers would create the Wal-Mart even sells ability to deliver a big product and the brand image and advertising like TV networks. audience, in a single shot, to then throw it over to us to see what Yesterday, Wal-Mart was advertisers. The Super Bowl we could do inside the store," he scheduled to host pro-football championship says. "Now, we all start together manufacturers in its hometown game, TV's most-watched from the beginning." of Bentonville, Arkansas, to event, drew 86 million Veronis Subler Stevenson sell blocks of advertising time viewers last year and its 30- Partners LLC, an investment bank for the coming year, a direct second commercials sold for $2.4 pitch products in a novel way. footprints on the floor of the million, Nielsen says. The theme for Pampers was: diaper aisle. On shelves, it In addition, some TV executives "Babies First." In stores, the added pull-out cards with say, in-store advertising isn't company handed out informa- information about Pampers necessarily competitive. Viewers tion on childhood that read: "do not pull," a play are relaxed at home, notes Chris immunizations, car-seat safety on the fact that babies like to Carlisle, executive vice president of and healthy diets while pro- do the opposite of what they marketing for News Corp.'s Fox moting its diapers and wipes in are told. Elements of the mar- network. In the store, they're rushed, other parts of the store. The keting plan appeared in "with people pushing their campaign was sponsored by several major chains, shopping carts, going down their P&G, Wal-Mart and the including Asda, which is lists," which makes for a different American Academy of owned by Wal-Mart, and selling environment. Indeed, Fox Pediatrics. Tesco PLC. itself buys ads on in-store networks To market Pampers in The new emphasis on in- to pitch DVDs. England, P&G hired Publicis store marketing is forcing At Procter & Gamble, Dina Groupe SA's Arc Worldwide, advertising agencies to add Howell, the director of FMOT, says an agency that specializes in unfamiliar services, such as she wants to take in-store marketing, store marketing. Late last year, shelf-design consulting. They "from an art to a science." P&G has Arc managers designed and are also hiring and promoting developed a series of tests to pitched P&G several ap- managers with expertise in measure the success of its proaches. They all dovetailed those areas. At Leo Burnett, packaging and in-store marketing with the distinctive green color which is owned by Publicis, efforts. P&G won't divulge specific of Pampers' packaging as well executives trained in direct details. But broadly speaking, Ms. as the company's TV ads, marketing now sit with Howell says packaging should which show the world from creative designers when they "interrupt" shoppers on their the perspective of a baby. meet clients and have an shopping trip. P&G has developed For diapers, called nappies equal say. Clients are telling a set of questions that a package in Britain, Arc designed a ad agencies, "if you can't must answer: "Who am I? What am clammy-feeling green gel provide it, we'll shop else- I? Why am I right for you?" cover to wrap over the handle where," says Richard Pinder, When ad agencies submit ideas, of a shopping cart. It read, president of Leo Burnett's P&G invites them to two facilities "This is how it feels when operations in Europe, the it built several years ago in your nappy needs changing." It Middle East and Africa. Cincinnati and Geneva. These suggested putting mirrors in Nearly every client pitch mock stores double as research shopping baskets to show done by rival Grey Global centers where P&G can rearrange babies looking at the world Group, a unit of WPP, now shelves and see how its products around them. includes retail strategy. The look alongside those of the P&G rejected the handle, company last year appointed competition. The company also however, after focus groups executive vice president brings in focus-group participants said it reminded them of Jonathan Dodd to head its to study how they shop. something they didn’t want to "First Moment of Truth For the U.S. launch of Kandoo think about. The mirros were Initiative" which works with wipes— flushable baby wipes for also nixed after retailers said P&G and other companies. toilet-training toddlers—P&G the idea was impractical. Andy Murray's marketing persuaded retailers to place the P&G did go for some of firm helps clients advertise packages low on shelves, so they Arc’s pitch. On the doors to inside Wal-Mart and other would be at a toddler's eye-level. It restrooms with baby-changing stores. The agency even buys also created display shelves in the facilities, Arc added big fake samples of Wal-Mart shelves shape of the product's frog mascot doorknobs, unreachably high to see exactly how products to attract children's attention. up, and the message: "Babies would look in a store. A One of P&G's most prominent in- have to stretch for things. former P&G executive, he store promotions has been for a That's why they like the extra started his new firm nine new line of Pampers. In the U.S., stretchiness of Pampers Active years ago with less than a P&G came up with what it calls "a fit." dozen staff members. Since shopper concept" —a single The consumer-products then, Mr. Murray's agency promotional theme that allows it to company printed huge has grown to about 300 people and was recently acquired managers to install them or, in time-consuming task. by Publicis' Saatchi & Saatchi. some chains, make sure the There is also the matter of Now named Saatchi & Saatchi X, television is on at the right how ad agencies get paid. For it has some unusual expertise for an time; they aren't always good years, agencies were paid a advertising agency. Mr. Murray at complying. percentage of the overall ad hired a structural engineer to assess Some stores charge budget. P&G changed that how long a corrugated cardboard marketers a fee for in-store model several years ago display will last. The agency uses displays—as if they were sell- because it worried agencies pink shrink-wrap to prevent ing space on a roadside would naturally gravitate products from getting lost in vast billboard. Others don't have toward costly TV ads. It now storage warehouses. It also devel- the clout or think they will be ties agency compensation to oped software that can track a compensated through the product-sales increases. Ad- consumer's eye movements. overall boost to sales. Those agency executives say The growth of in-store marketing that charge face another another factor will soon be has made ad agencies' lives more wrinkle: there is no standard thrown into the mix: the cost complicated. For starters, ad system for measuring the of new services they are agencies now have more than one audience for in-store ads and being asked to provide, such master to please: the client and the therefore no easy way to as installing and monitoring retailer. Even after a retailer agrees charge for the space. The fees in-store displays. to a newfangled in-store display, it for each project are negotiated often falls to individual store on a case-by-case basis, a

To fill a store with advertising messages, ad agencies are now charged with designing everything from in-store TV commercials to special shelf displays and packaging.