As a young management consultant to retailers in the late 80′s, one of my first engagements was helping a large women’s apparel chain conceive, develop and implement a merchandise testing program.  The basic idea related to an old rule in fashion retail: 20% of items are huge winners, 20% are huge losers, and the rest are well, average.  Identifying both winners and losers with a small initial investment had huge potential benefits.  At the core of the test program was an effort to understand the demographics, psychographics, geography and volumetrics of the stores and the creation of “clusters” that allowed merchants to look at manageable and distinct subsets of the chain.  At the time, this was cutting edge stuff, and really paved the way not just for testing, but for localized assortments, at least at the cluster level. Since then, technology has provided more data, and the grocery industry has taken the lead on localized merchandising.  But it remains an imperfect science.  This week, RetailWire published an excerpt of an excellent article from Bill Emerson of Emerson Advisors entitled What Localization Means.  Emerson’s article describes in some detail what it might take to get to the next level of localization in retail.  The many detailed responses in RetailWire’s BrainTrust forum are an indicator of how hot a topic localization remains in retail.  For me it was a trip to the past, as well as a link to my current passion for the DOOH space.

Emerson asserts that localization recognizes that customer preferences vary by markets and locations, and that retailers can gain incremental margin and loyalty by catering to those differences in preferences.  Makes perfect sense.  The article goes on to describe the various structural roadblocks in most retail organizations to getting localization right.  Much of that seems applicable to digital signage.  In fact, when retailers get localized merchandise assortments right, they can turbocharge the impact with localized messaging on their digital signage network. So it would make sense that marketers should learn from the pain endured by their merchandising peers as they strive to optimize localized digital signage content.

Here are some of the lessons learned, borrowing from Emerson’s key points:

1. “… only a percentage of the assortment needs to be localized”: Localized merchandise exists within a framework of a chainwide assortment.  To be effective (and both manageable and profitable), the local elements do not need to overwhelm. They only need to impress the customer and address their special preferences.  So it is with digital signage.  While networked displays and most software solutions provide the ability to localize playlists down to the location/display level, the ability to execute on localization is high.  However, the becoming completely and uniquely local may not be necessary or practical.  It seems to make sense that there  is a point of diminishing return on the investment of time and resources to localize content.  There must be enough to engage and inform customers, but not so much to drive operational costs off the charts.
2. Localization is a big task: For network operators to create effective localized presentations and to work co-operatively with retail partners, it is necessary to recognize that the traffic function within a network can not be an underfunded afterthought. On the contrary, for a network to differentiate itself based on localization, resources need to be redirected toward content and traffic management.
3. It is either strategic, or not: Given the costs associated with localization, an investment in the effort is required.  There will be higher costs for content and content management, and low end or homegrown software may make it hard to carry off. As Emerson notes with regard to localized merchandising, it is better not to start at all unless management “has the long term commitment and endurance to see this through”.  So true about so many things, isn’t it?
4. Integration: In the retail environment, having the ability to understand how the merchandise is localized is on the critical path to properly localizing the messaging on the digital signage network.  In non-retail environments, identifying external systems and feeds that can enhance the viewer experience will be equally important to the effort. In fact, this may be the final hurdle for most digital signage networks in terms of becoming fixtures in all environments, but especially in retail.

Digital signage networks have long had the ability to target content to specific locations or screens.  Generally, that ability has been used to accommodate advertisers. Localization utilizes many of the same functions, but exists primarily to engage viewers by recognizing differences in their preferences.  As network operators look to enhance their value proposition to advertisers, they would be well served to enhance their engagement with the viewers that advertisers covet.  There are lessons to be learned from decades of localized merchandising efforts at retail. Look for resources to begin to shift toward content management and traffic functions as networks recognize the value of localization done right.