U.K. retailer Tesco wants advertisers to see it as equal to any traditional media partner

Digiday caught up with Tesco Media’s client development director, Nick Ashley, to talk through why the company hosted its latest upfront, the importance of measurement and shopper data, as well as how much its ad business impacts the retailer’s profit margins.

This conversation has been lightly condensed and edited for clarity.

Can you walk through Tesco’s retail media set up?

Our RMN is powered by our ongoing partnership with Dunnhumby [a global customer data science and analytics company — best known for building and running Tesco’s Clubcard loyalty program].

The retail media business had existed for a while, but a couple of years ago, Tesco took a strategic decision to really invest in it for three reasons. One, retail media, when done really well, can be a growth driver for brands, accelerating their sales and business performance within the Tesco ecosystem. Two, customers should get more relevant, personalized, helpful messaging from brands that matter to them. And three, from a media revenue perspective, it’s a new income stream for the Tesco Group.

Why did Tesco host the latest upfront?

We want to be positioned as a media partner that advertisers would use and consider in the same context as traditional media owners. That’s why we think it’s an important moment in our calendar.

Oct. 9 was our fifth upfront and the makeup of who attended has changed quite significantly. This year we had really good turnout from senior agency execs, from non-endemic clients, as well as our core clients. I think it’s a recognition that not just us, but retail media across the board, is playing a much broader role in advertisers’ marketing plans than it did before, particularly in the context of media fragmentation. All of those traditional ways of building brands and running advertising are changing, so people are thinking about retail media as another opportunity for them.

During last month’s [October’s] event, we announced quite a lot of news. This included the launch of our video proposition, our Mindsets Research, which talks about what mode customers are in when they’re shopping. We also used the event to talk about AI, the audiences we create on the back of our Clubcard data, as we have various tiers of different audiences advertisers can work with us on. And we also talked about our new creative studio which launches next year. As a marketer, you’ve got to produce assets for so many different platforms and so many different publishers nowadays. We want to help make it easier.

How do you measure the success of the upfront? 

We do a perception study on the back of it, and receive feedback from that. We look at sales on specific products that we talked about. And we have an ongoing client satisfaction survey that checks in on all of those different things.

Is measurement a way for Tesco to be more competitive when taking budget from all parts of the media plan?

Yes. In most instances, behavioral sales data is absolutely critical, and that’s what Clubcard gives as a closed loop. Whether that be through A/B testing in stores, or whether that be running a new format online, we’ll always have Clubcard data at the heart of that to make an assessment about whether it’s had an impact.

Do you see the value in using your shopper data as a way to power advertising across the wider web and not just in Tesco’s own ecosystem?

I think, yes, largely from a planning perspective. This year is the 30th anniversary of Clubcard and 24 million U.K. households have access to and use Clubcard, and 84% of all Tesco transactions take place with one. So it’s significant in its scale and it can provide insights into how people are thinking, behaving and interacting with individual brands. The core thing is the insights. The channels advertisers then activate against it, is secondary.

We’ve also had an off-site business for a while, but I still think there’s a significant opportunity for us to grow. We’ve got partnerships with all of the broadcasters, Meta, Pinterest and The Trade Desk, and there will be some more partners next year. 

Data and insights can fulfill a really important role in helping address whatever problem you’re trying to use those particular channels for. For example, being very targeted on a specific audience, or running a certain specific creative against a particular group. So I think it can play a really important, broader role, simply because of the scale.

What efforts has Tesco put in place to ensure the retail media offering isn’t cannibalizing existing shopper marketing budget?

A lot of our clients are going through positive, organizational change themselves. So this explosion of retail media is actually helping connect client teams. We’re getting heads of media, brand, shopper and e-commerce teams, all of whom have different roles to play within this retail media landscape, working together in really collaborative ways. 

That’s really exciting, because in the past there were different KPIs for different teams, and they weren’t necessarily creating one plan. It’s not as simple as brand advertising just drives brand, it doesn’t drive performance, and vice versa. They all do a bit of everything.

And advertisers are also looking at media as an investment, rather than as a cost. So how are they using media to really drive growth in Tesco and beyond? That starts with a brilliant understanding of your customer, who is the opportunity to build your business even further. If you start with that, then you usually get it right.

Are you seeing the ads business have a material impact on the retailer’s profit margins?

While Tesco Group doesn’t disclose that information, I can tell you it’s supported right from the top. From the CEO and CFO of Tesco Group, through to category directors at Tesco. They’re supportive because they see it as a brilliant way for brands to grow within the Tesco environment.