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In-store or in-house, businesses are relying on digital-television networks to get their message out.
Russ Banham, CFO Magazine
September 1, 2006
Despite the hype, viewing television on a high-definition liquid crystal display isn't all it’s cracked up to be. Hi-def content is limited, moving images tend to blur on screen, and standard-definition programs look like they've been run through a taffy puller.
But retailers love hi-def sets, and not just because consumers are willing to shell out $3,000 on a home appliance they once paid $300 for. The fact is, high-definition televisions draw big in-store audiences — audiences that tend to stand in front of the giant screens for long periods of time.
Retailers, clever bunch, have spotted an opportunity in this accidental audience. Many have started to run internally produced digital programs on the hi-def televisions they carry. They've also placed the TVs all over their shops. Wal-Mart's 2,650-plus stores now boast an astonishing 100,000 screens. Those screens reach 336 million shoppers every month with news updates, concert excerpts, and repurposed broadcast content.
The programming, called digital in-store media, is a hit not only at retailers but at many other kinds of companies as well. Some — eager to cut T&E costs — have launched in-house digital satellite networks that beam training sessions and internal corporate communications to TV sets in far-flung offices (see "A Little Help from Above" at the end of this article).
Retailers are taking a more top-line approach. Wal-Mart, for instance, posts 12 minutes of advertising every hour on its network, including 5 minutes of house ads. Research sponsored by the company found that brand recall among in-store viewers was 65 percent. By comparison, brand recall for at-home viewers is closer to 23 percent. Says Nikki Baird, a senior analyst at Forrester Research, "An advertiser can tailor its messages to specific shoppers matching its target demographics."
Apparently, the tailoring suits customers. In a study conducted by media-research specialist Arbitron, nearly a third of shoppers reported making an unplanned purchase after seeing a product advertised on an in-store digital satellite network. What's more, digital programming generates ad sales dollars from vendors. Combined, the two revenue streams can add up. The UPS Store (Canada) launched a digital in-store network in June. Malcolm Houser, executive vice president and chief operating officer of the Toronto-based retail chain, expects a big payoff: "We anticipate a 300 percent return on our investment within five years."
Time of the Signs
It's hard to get that kind of return with old-fashioned signs. "In traditional settings, signs stay up for a selling season, depending on the retailer," says Baird. "Digital in-store media allows the message to be changed by the hour, based on who is shopping at a given time."
That's been the case at CompUSA. Prior to the launch of a digital in-store media network in April 2004, salespeople at the Dallas-based retailer played whatever they liked on TV monitors on store shelves. Usually, that meant sports. "The traditional signage we had in our stores sent an inconsistent message and didn't showcase the products the way we wanted," says acting CFO Todd Whitbeck. "We felt there was an opportunity to combine the signage with the screens."
The electronics purveyor worked with In-Store Media Networks to create the architecture to broadcast high-definition content and advertising. ISM Networks also develops the ads and content, which are then stored on a file server at its facilities. The company transmits via satellite to 215 of CompUSA's 240 retail outlets.
The broadcasts can be honed to individual store needs. When managers at a particular CompUSA store want to broadcast a particular set of ads, ISM uses a multichannel, high-definition, playback-and-storage server at the store to pull the content off a satellite. Ads from vendors like Hewlett-Packard are pitched around the content, which is typically of the technology-tutorial type. Whitbeck says the revenue from advertisers has more than covered the cost of hardware, broadcast fees, and other expenses. A control test also indicated that sales of the items advertised on the network were 25 percent higher than at stores without the digital ads. Says Baird: "Consumers who tune out advertising at home can be reached at a point when they are naturally receptive to sales messages."
Most observers don't see digital in-store media truly taking off until 2008 or so. But broadcast networks and cable TV providers are already preparing for a decline in ad revenues stemming from the expected switch to in-store digital selling. And Baird says some vendors are experimenting with new ways to leverage the technology. One example: a few retailers are experimenting with RFID-tagged products that trigger digital-TV commercials when the items are picked up. Says Baird: "Pick up another product and you'll get another pitch."
Indeed, it appears that retailers are just beginning to tap the enormous potential of digital satellite networks. For his part, The UPS Store's Houser is already convinced of the merits of the technology. The logistics company, which worked with Real Digital Media and Connections Canada to get its network up and running, has deployed the system at 10 stores. Another 45 will follow. Houser says the in-store hi-def broadcasts enable the company to flog products to customers who initially walk in just to mail a package. "TV educates the consumer in an entertaining way," he says. "Before, we found it hard for sales associates to sell other services. There was no automatic upsell, like 'Would you like fries with that?'"
As it turns out, we would.
Russ Banham is a contributing editor at CFO.
A Little Help from Above
Companies turn to satellite technology to cut training costs.
Upselling isn't the only reason businesses are uplinking these days. Pest-control specialist Orkin Inc. recently went on-air with its own digital satellite-television network. The reason: to provide continuing education to the company's 8,000 employees scattered across 400 U.S. locations.
In the past, the Atlanta-based business kept workers up-to-date on the latest pest-management technology by sending them to traditional classroom seminars at the corporate training center or regional locations nationwide. But the T&E budget for all that instruction was sizable. In 2005, Orkin spent $1.2 million on lodging and meals for program participants. Eager to trim those costs, the company went live with its distance-learning programming in January. The move made sense, says Craig Goodwin, Orkin's director of training. "We have a studio here at our corporate university, along with significant video-production assets."
Orkin's network is digital, meaning it is interactive. In training sessions, workers can submit questions and receive instant feedback from teachers. The broadcasts are recorded on Tivo-like devices, enabling employees to replay and interactively participate in past broadcast sessions.
Keven Cahoon, vice president of enterprise services at GlobeCast America, says satellite broadcasting used to be too expensive for most companies. "But the price has come down substantially in the last 10 years," Cahoon says. How substantially? Running a digital satellite network used to cost about $5,000 per site. Today, the bill is closer to $1,200. With the drop, corporate interest in in-house digital networks has picked up. Already, GlobeCast services a legion of clients, including Pfizer, State Farm Insurance, and Apple Computer. High-bandwidth broadcasting over satellite delivers higher-quality video, which is a big selling point. "Image quality is important to our customers," says Cahoon. "When Steve Jobs wears a black turtleneck against a black background, he doesn't want to look like a floating head." — R.B.