Brand Equity and Retail Media Effectiveness

Abstract

Retail media, where retailers allow brands to promote their products to shoppers for a fee, is a rapidly growing segment of the advertising industry. As more retailers adopt this model, brands face the decision of whether to allocate their marketing budgets to these emerging channels. Our study demonstrates that brand equity plays a moderating role in the impact of retail media on product sales. We develop and estimate a dynamic linear model of brand equity that predicts weekly UPC-level sales, enabling us to examine how brand-level advertising strengthens brand equity and, in turn, enhances the effectiveness of retail media. Analyzing 11 years of grocery sales data from the Diet Soda category, we find that brands with higher equity benefit more from in-store display marketing and exhibit lower price sensitivity. Comparisons with benchmark models show that more aggregated approaches to retail media and sales overlook a key advantage of brand building: the shift in consumer response to marketing efforts (Keller 2003). Our counterfactual predictions reveal how brands can strategically invest in building brand equity to achieve greater returns from retail media.

Keywords: brand equity, retail media, Bayesian inference, dynamic linear model, pricing