Issue #100: Does Your Retail Marketing Actually Work?

Before diving in, I want to thank you all for subscribing. Whether you have been here for one issue or a hundred, your support is greatly appreciated! Cannot believe we are a hundred issues in, and we are just getting started!

With the future in mind, I wanted to do a LAST CALL for signups for the event I am co-hosting tomorrow: Consumer Brews: Fancy Food Edition. Monday, June 29, from 8:00 AM - 10:00 AM in Midtown. It is going to be a great room of CPG and Retail founders, investors, and operators. Plus, you will get to taste some super delicious, up-and-coming CPG brands. Hope to see you there!

For whatever reason, marketing efficiency and financial discipline are all the rage right now, especially in CPG/Retail. I think they should always be cool, but that is a different soapbox for a different day. However, as members of the retail ecosystem, unlike our software, marketplace, D2C, and eCommerce friends, we do not have the luxury of having copious amounts of data tracking the purchase. It is much, much harder to do true, line-item level unit economics calculations in CPG. Sure, you can hack it by having bigger buckets, and that is helpful to a certain point, but it is not the same.

Today, I am going to dive into two metrics I recommend utilizing to measure the efficiency of your retail marketing as a CPG brand. These metrics will never be as close as unit economics, and the exciting developments in the industry, with receipt capture and other loyalty programs, you can get closer, albeit at a high cost. I am not recommending replacing those methods, but these metrics will help bridge the gap because they can be tracked in a spreadsheet pretty easily, as long as you are documenting and being strategic about marketing spend. With that in mind, let’s dive into the metrics:

The marketing efficiency ratio measures the relationship between your total revenue and your total marketing spend across all channels. You calculate it by dividing your total revenue by marketing spend. Rather than calculate ROAS for a specific channel or activity, this metric gives a great high-level view of what is going on. You have to be very careful, since in some ways this metric can be too simple. The important caveats are that marketing spend can lag investment for retail, so you need to be careful with time horizons. Additionally, depending on the stage and strategy of the business, you may be willing to have a worse ratio. Still, for a high-level metric, with the lack of data most brands have, this gets you a good bit there.

As I mentioned, MER is a little high-level sometimes, and you want to be able to dive deep into specific drivers, without having to get too deep and do receipt capture studies. Traditionally, LTV/CAC is the ratio of the value a customer delivers to a company over the long term to the amount a company spends to acquire each new customer. Since getting customer-level data is tricky and expensive in retail, you have to re-frame the customer as an individual store, not the end user. Then, you look within a cohort, whether that is a group of stores in a chain or a similar grouping of stores.

On the lifetime value side, you can either set a definitive timeframe for measuring sales, or you can do it based on the average length you are in an account (hopefully forever!). You may want to dive a level deeper here and use gross profit or contribution profit instead of sales to get a more accurate reading. On the customer (store) acquisition cost, you wrap up all your initial costs to get into the store (slotting, merchandising, etc.) PLUS your ongoing marketing spend in the same time period (retail media, promotions, trade spend, etc.). Then you divide those two, and you have your LTV/CAC adapted for the retail world. While it is not a perfect substitute for customer-level LTV/CAC, it is a more practical framework for looking at the return on retail marketing investments and comparing performance across accounts.

Finance people and investors, feel free to check me on this, but I strongly believe this is the most practical measurement of marketing efficiency. I still would recommend having an ongoing receipt sample or at least doing user-level panels a couple of times per year. Combine those, and you have a great way to measure this. Would love to hear your thoughts on this!

Instacart has been doing many interesting partnerships in the AI space. First, it partnered with NYT Cooking in a bidirectional partnership that was a major win for both parties in 2024. Instacart got the buy button on the NYT recipe page, where customers could just add the entire recipe to their cart with one click. Also, Instacart was able to embed the recipes in their app, and I assume are able to train their AI on the recipe data.

Now, Instacart announced another exciting partnership, integrating with Gemini. Instacart is the first grocery partner in the Gemini platform. Users build their basket in Gemini, often using voice, and then do the checkout in Instacart’s platform. As part of this process, customers are encouraged to link their Instacart account to their Google account, which allows Instacart to feed that customer’s data to Google. That feed of historical purchases and interactions then powers all the recommendations and basket building. On its surface, a simple feed, but one that requires a ton of complexity. Based on the press release, it does not seem like Gemini will be the sole partner.

Each year, it feels like Prime Day, and the de facto start of back-to-school shopping, is coming earlier and earlier each year. This year, Amazon Prime Day, which is no longer just a day, lasted from June 23 to June 28. The headline was that so far spending was up 9% compared to last year, to over $26B. However, a big reason for that increase was that many of these categories Amazon thrives in are seeing high inflation, so people are pulling forward spending on longer-lasting products. Despite discounts being on par with last year, Numerator found that across 178,000 Prime Day orders they sampled, the average order size was $47.66, down from $53.34 last year. This could be a sign of consumer confidence, and spending could be falling. However, we won’t know fully until the next couple of months, especially if this spending was pulling forward future spending. It will be interesting to see once Walmart reports its performance from its deal “day”, which was also from the 22nd to the 28th.

This week, big news came out in the connected/smart television space, with Walmart announcing the intent to acquire Vibe, a connected TV advertising platform similar to the one I recently interviewed. The purchase price is reported to be around $1.4B. Walmart has been trying to grow its advertising income in the smart TV space, even acquiring a smart TV manufacturer to make it happen. Now, this acquisition allows Walmart to have a self-service platform with Walmart’s audiences and closed-loop measurement. The deal will have to be evaluated by regulators and is expected to close by the end of fiscal year 2027. Walmart has been really pressing into the advertising space to grow its high-margin revenue, and this move will certainly accelerate it. About a third of Walmart’s operating income comes from advertising. Clearly, a major focus going forward.

The non-alcoholic beverage space is seeing a big growth, in retail, it is about $1B in sales annually, and that doesn’t even include on-premise. This week, there was some major M&A action in the space. The Zero Proof, a non-alcoholic beverage platform, today announced the acquisition of The New Bar, a West Coast-based non-alcoholic hospitality and cultural discovery platform. The New Bar started in retail, but eventually closed its retail location and focused on eCommerce and consulting for events/venues. There is clear consumer demand for the product, but like anything in the better-for-you space, consumers frequently vary their preferences and choices. From examining consumer demand patterns, sometimes they may want the better-for-you product, and sometimes they may not. In any group, there tends to be a variety. There is a reason Whole Foods is launching conventional products; even customers who buy organic products sometimes want Oreos. I think there is a huge potential in the consulting side, as more on-premise and retailers want to cater to more occasions. However, I could anticipate some of the eCommerce starting to struggle as consumers are able to buy a blended basket at their local retailer.

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To those who made it this far, I just wanted to reiterate my thanks for supporting this small little side project, whether this was the first issue you read or your a hundredth issue. What started with an observation that no one was talking about retail the way I thought they should has blossomed into so much more. A big thank you goes out to my family and friends who have supported me a long way. It hasn’t been easy to devote each Sunday to this, and I appreciate all your support more than you will ever know. Also, anyone who has taken the time to chat with me to answer my stupid questions or bounce ideas back and forth, that is very much appreciated. I encourage you to stick around, a lot more to come here than just a hundred more issues. Long retail!

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