Seven & I revamps entire promotion system, more online ads

Build a store and the customer will come. But what if the store is a virtual one online? Given its clear aim to develop Japan’s first store-to-web omnichannel, Seven & I has taken the first step by entirely reorganising its advertising and promotion strategy. It will increase the volume of online advertising 10 fold in the first year and combine media channels. It will also bring much of its promotion planning and strategy development in-house.

Seven & I Holdings is to review its entire advertising strategy. In line with last month’s spate of acquisitions, all geared towards development and expansion of Japan’s first true ‘omnichannel’ retailer combining physical and online selling, the group plans to put more of its promotions into digital channels too. While this means expanding the volume of online advertising, it doesn’t mean cutting out TV ads and newspaper flyers entirely. Rather Seven & I plans to develop cross-media campaigns with more customer interaction. The overriding aim is to improve marketing effectiveness.

At present, Seven & I as a group spends around ¥100 billion a year on advertising and promotion – a tiny amount, representing just 2% of the group’s total turnover. Excluding ads run on the company’s free wifi service at its stores, only 0.8% was used for online advertising last year. In contrast, Dentsu reports that Japanese businesses overall spent 14.7% of their advertising budgets online in 2012. Seven & I will bring itself in line with these figures and very quickly too. In the coming year, it will put closer to 10%, around ¥10 billion, into online advertising, and the aim will be to drive customers to its own shopping sites.

In December, the group set up three new divisions to oversee this process. The Net Promotion division will oversee online sales, Media Promotion will coordinate promotions and events across the entire Seven & I retail portfolio, including spot ads on the wifi system, and Sales will remain responsible for planning and promotional development. Each division will be staffed by employees from all subsidiaries and retail interests, reporting back to their own units. Given its lack of expertise, Seven & I has also begun recruiting from online advertising companies and plans to bring in a couple of dozen more experienced specialists in coming months.

The aim is to keep much of the planning and marketing process in house, and so keep costs down, with Seven Net Shopping in effect taking on the role of an online advertising agency. In many ways this is the first real step towards Seven & I’s conversion into an omnichannel retailer.

Last year, Seven & I ran an experimental campaign for summer gifts involving Seven Net Shopping, Google Japan and Intage, the leading domestic market research firm. The campaign ran on Google Display Network (GDN) and YouTube, in addition to a TV commercial. Reportedly, 9.3% of people who hadn’t seen the TV commercial spotted the ad on GDN and a further 0.6% on YouTube, meaning 10% of customers saw the campaign only through the new media. Matching this result with actual purchases is striking; compared to a baseline of people who purchased gifts without seeing any advertising at all, 1.8 times as many purchasers had seen just the TV ad, but five times as many purchasers had seen both the TV ad and the online campaign. Even more impressive, although a mere 10% of total customers only saw the online promotion, 2.5 times more of these actually purchased gifts compared to those who’d seen no advertising, clearly demonstrating the power of the online campaign.

Given the vested interests within Seven & I in terms of existing relationships with external advertising suppliers, with each subsidiary having their own favourites and priorities, it took another six months of consensus building committee work before the new promotions system was put into place.

Seven Net Shopping plans to implement specific, group wide campaigns for things such as Summer Gifts, Winter Gifts and the group’s Seven Premium private brand range. Following this short learning period, cross-media campaigns are expected to become the norm, providing similar promotional content with different levels of direct viewer involvement. A further number of experimental campaigns will take place as a result, but the group fully expects online promotions to help boost the speed at which it can implement its omnichannel strategy.