Retail Media Activation: Where the Budget Goes to Get Lost

Retail media activation is the process of buying and managing advertising inventory within retailer-owned platforms, whether that’s sponsored product placements on Amazon, on-site display on a grocery retailer’s website, or off-site programmatic inventory sold through a retailer’s data network. Done well, it puts your brand in front of buyers who are already in a purchase mindset, using first-party data that third-party platforms can only approximate. Done poorly, it becomes another line on the media plan that looks efficient in isolation and adds nothing to growth.

The problem isn’t the channel. The problem is how most brands are approaching it.

Why Retail Media Feels Like It’s Working When It Isn’t

Earlier in my career, I made the same mistake most performance marketers make. I overvalued lower-funnel activity because it was easy to measure and the numbers always looked good. A sponsored listing converts at a strong rate, the cost-per-acquisition sits within target, and the dashboard is green. What’s not to like? What I eventually understood, and it took longer than I’d like to admit, is that a significant portion of that conversion was going to happen anyway. The person searching for your product category on a retailer’s platform already had intent. You didn’t create that intent. You just made sure you were visible when it surfaced.

That’s not worthless. Visibility at the point of decision matters. But it’s not growth. It’s defence. And if your entire retail media strategy lives in sponsored search and nothing else, you’re spending to hold ground, not to take new ground.

The brands winning in retail media right now are the ones treating it as a full-funnel channel, not a lower-funnel efficiency play. That distinction is everything.

What Retail Media Actually Includes

It’s worth being precise about what we mean, because “retail media” has become a catch-all that means different things depending on who’s selling it to you.

At its core, retail media breaks into three layers. On-site search and sponsored products is the most established: paid placements within a retailer’s search results, product pages, and category browsing. This is where most brands start, and where most budgets stay. On-site display is the second layer: banner placements, homepage takeovers, and brand pages within the retailer’s owned environment. These sit higher in the funnel and are better suited to awareness and consideration. Off-site retail media is the third and fastest-growing layer: programmatic display, video, and social inventory purchased through a retailer’s data network but served outside the retailer’s own platform. This is where the audience data becomes genuinely powerful, because you’re reaching known shoppers across the open web, not just within the walled garden.

Each layer has a different role, a different cost structure, and a different measurement challenge. Treating them as interchangeable is where most activation strategies fall apart.

Retail media sits at the intersection of commerce and media strategy, and it’s increasingly central to how brands build their go-to-market approach. If you want broader context on how retail media fits within a growth strategy, the Go-To-Market and Growth Strategy hub covers the commercial frameworks that make sense of where this channel belongs.

The First-Party Data Advantage Is Real, But It’s Being Wasted

The reason retail media commands a premium over standard programmatic is the data. Retailers know what people actually buy, not just what they browse or click. That’s a fundamentally different signal from anything you can get through a third-party data provider or a social platform’s interest targeting.

A major grocery retailer can tell you that a specific audience segment buys premium olive oil every three weeks, switches between two competing pasta sauce brands, and hasn’t bought your product in the last six months. That’s actionable. You can build a win-back campaign, a trial incentive, a cross-category push. The data makes it possible.

What most brands do instead is upload a keyword list, set a bid strategy, and call it a day. The audience intelligence sitting inside the retailer’s platform goes largely unused because the activation team is thinking in search terms, not shopper segments. I’ve seen this pattern across multiple clients in grocery, FMCG, and health and beauty. The data capability is there. The activation sophistication usually isn’t.

The brands that are genuinely extracting value from retail media are the ones building audience-first briefs. They’re asking: who are we trying to reach, what do we know about their purchase behaviour, and what does the retailer’s data tell us about the gap between their current behaviour and the behaviour we want? That’s a different conversation from “what keywords should we bid on.”

The Measurement Problem No One Wants to Talk About

Retail media measurement is structurally compromised, and most brands either don’t know it or choose not to look too closely because the numbers are flattering.

The default attribution model in most retail media platforms attributes a sale to an ad if the shopper saw or clicked the ad and then purchased within a defined window. On Amazon, that window is typically 14 days for clicks. The problem is that the shopper may have been going to buy anyway. They searched for your product, they saw your sponsored listing, they bought your product. The platform credits the ad. But the counterfactual, what would have happened without the ad, is never tested.

When I was judging the Effie Awards, one of the things that separated the strong entries from the weak ones was intellectual honesty about causality. The best campaigns didn’t just show strong ROAS. They showed incrementality. They could demonstrate that the advertising drove outcomes that wouldn’t have happened otherwise. That’s a much harder standard to meet, and most retail media reporting doesn’t come close to it.

Incrementality testing, running holdout groups, measuring the difference in sales between exposed and unexposed audiences, is the only way to know whether your retail media spend is genuinely driving growth or just taking credit for it. It’s not easy to set up, and not all retailers support it. But if you’re spending meaningful budget in this channel without some form of incrementality measurement, you’re flying blind with a very expensive instrument panel.

Understanding how to build feedback loops that inform your measurement approach is worth the effort. Tools that help you understand actual user behaviour, rather than platform-reported attribution, give you a more honest picture of what’s working. The Hotjar growth loop framework is one way to think about how feedback informs iteration, even if it’s primarily a product context. The principle applies to media measurement too.

Off-Site Retail Media Is Where Growth Actually Lives

Think about how a physical retail environment works. Someone who tries on a piece of clothing is dramatically more likely to buy it than someone who walks past the display. The act of engagement, the physical proximity to the product, changes the probability of purchase. The same principle applies in retail media. Reaching someone before they’re actively searching, when they’re in a receptive but not yet decided state, is where you can actually shift behaviour rather than just capture it.

Off-site retail media, served through a retailer’s programmatic network but delivered across the open web, social platforms, and connected TV, is the mechanism for doing that at scale. You’re using the retailer’s purchase data to find high-propensity audiences and reaching them before they arrive at the retailer’s platform. You’re building the consideration that makes the sponsored listing work harder when they do search.

This is where the channel earns its premium. Not in the sponsored listing that captures the shopper who was already looking for you, but in the off-site touchpoint that puts you in front of the shopper who wasn’t. That’s demand creation, not demand capture. And demand creation is what builds brands and grows categories.

The challenge is that off-site retail media is harder to plan, harder to buy, and harder to measure than on-site search. It requires a different brief, a different creative approach, and a different measurement framework. Most retail media teams aren’t set up for it. Most agency trading desks aren’t either, at least not in a way that’s genuinely integrated with the retailer’s data rather than bolted on as an afterthought.

How to Structure a Retail Media Activation That Actually Drives Growth

The brands getting this right tend to share a few structural characteristics. They’re worth examining in detail.

First, they treat retail media as a channel within a broader media strategy, not as a standalone trade investment. This sounds obvious, but in practice, retail media budgets are often managed by the trade or shopper marketing team, disconnected from the brand media plan. When that happens, you get duplication, conflicting messages, and no coherent customer experience. The brands winning in retail media have broken down that internal silo and are planning the channel alongside, not separate from, the rest of their media investment.

Second, they’re building audience briefs before they’re building keyword lists. The question isn’t “what should we bid on” but “who are we trying to reach and what do we know about them.” That shift in starting point changes everything downstream, from the creative brief to the bid strategy to the measurement framework.

Third, they’re investing in the upper layers of the retail media stack, not just the bottom. That means on-site display for consideration, off-site programmatic for awareness and reach, and sponsored products for conversion. The budget allocation across those three layers should reflect the brand’s growth objective. If you’re trying to grow penetration, you should be spending more at the top. If you’re defending share in a competitive category, more at the bottom. Most brands have the allocation backwards.

Fourth, they’re testing incrementality. Not perfectly, and not always at scale, but they’re building the discipline of asking whether the spend is genuinely driving outcomes rather than just measuring what the platform tells them. That discipline compounds over time. You get better at knowing what works, which means you get better at allocating budget, which means your returns improve.

Finally, they’re thinking about the creative differently. Retail media creative, particularly off-site, needs to do different work from a standard display banner. It’s reaching someone in a commerce context, even if they’re not on the retailer’s platform. The creative needs to be specific, benefit-led, and connected to a clear reason to act. Generic brand advertising doesn’t perform in this environment. Product-specific, audience-specific creative does.

The brands getting the most from creator-led content in retail contexts are finding that specificity and authenticity outperform polished production. This Later webinar on going to market with creators covers some of the practical thinking around how creator content converts in commerce environments, which is directly relevant to how you brief creative for off-site retail media.

The Retailer Relationship Matters More Than the Platform

One thing I’ve noticed, working across FMCG, health and beauty, and consumer electronics clients over the years, is that the brands extracting the most value from retail media are the ones with the strongest retailer relationships. Not because they’re getting better rates, though that helps, but because they’re getting access to better data, better audience segments, and better measurement support.

Retail media networks vary enormously in their data maturity and their willingness to support incrementality testing. The major players, Amazon, Walmart Connect, Kroger Precision Marketing, and the large European grocery networks, have sophisticated capabilities that most brands aren’t fully using. But accessing those capabilities requires a relationship, a commercial partnership that goes beyond buying a sponsored listing through a self-serve interface.

That means having conversations at a senior level, not just at the media buying level. It means sharing your brand objectives with the retailer, not just your media brief. It means treating the retailer as a strategic partner in your growth plan rather than a media vendor you’re transacting with. That shift in posture unlocks access to capabilities that simply aren’t available to brands treating retail media as a commodity buy.

Commercial transformation in retail media, like commercial transformation in most areas of marketing, tends to follow the quality of the relationships and the clarity of the strategy behind them. The BCG commercial transformation framework is a useful reference point for thinking about how strategic partnerships and go-to-market clarity compound over time.

What a Sensible Retail Media Budget Allocation Looks Like

There’s no universal answer here, and anyone who gives you a specific percentage split without understanding your category, your competitive position, and your growth objective is guessing. But there are some principles worth applying.

If you’re a challenger brand trying to grow penetration in a category dominated by established players, the majority of your retail media investment should be in off-site and upper-funnel on-site placements. You need to build awareness and consideration before you can convert it. Spending heavily on sponsored search when your brand has low awareness means you’re competing for a small pool of already-decided shoppers. You’ll win some of them and lose money doing it.

If you’re a market leader defending share, you have more justification for a heavier lower-funnel allocation. Your brand is already known. The sponsored listing is protecting your position at the moment of decision. But even then, a pure lower-funnel strategy is a slow bleed. You’re not recruiting new buyers. You’re just holding the ones you have. That’s not a growth strategy. That’s a maintenance budget dressed up as one.

The brands with the most sustainable retail media performance tend to run a roughly balanced allocation across the three layers, adjusted for their specific situation, with a genuine commitment to testing and learning rather than setting and forgetting. Semrush’s market penetration analysis is a useful framework for understanding where your brand sits in terms of category reach, which should directly inform how you weight your retail media investment across the funnel.

Retail media strategy doesn’t exist in isolation. The decisions you make about budget allocation, audience targeting, and measurement connect directly to your broader commercial growth objectives. If you’re working through how this channel fits within your wider go-to-market thinking, the Go-To-Market and Growth Strategy hub covers the strategic frameworks that give retail media its proper context.

The Temptation to Over-Automate

Retail media platforms, particularly Amazon, have become increasingly sophisticated in their automated bidding and campaign management tools. That sophistication is genuinely useful. It’s also a trap if you let it replace thinking.

Automated bidding optimises for the objective you set. If you set it to optimise for ROAS, it will find the highest-ROAS placements. Those are almost always the lowest-funnel, highest-intent placements, which are the ones that were most likely to convert anyway. The algorithm is doing exactly what you told it to do. The problem is that what you told it to do is not the same as what you actually need it to do.

I’ve seen this play out repeatedly across clients managing large retail media budgets. The automated campaigns look excellent on the platform dashboard. The incrementality numbers, when anyone bothers to run them, tell a different story. The gap between reported ROAS and actual incremental return is often significant, and the automation is the mechanism that widens that gap by concentrating spend in the most measurable, least incremental placements.

Automation is a tool. It should serve your strategy. It should not replace it. The brands that maintain a clear strategic brief, set their automation parameters accordingly, and regularly interrogate the outputs rather than accepting them at face value are the ones that get genuine value from the technology. The ones that hand the campaign to the algorithm and check the dashboard once a month are the ones funding the platform’s margins more than their own growth.

Scaling any marketing channel well requires the same discipline: clear objectives, human oversight, and a willingness to challenge what the data is telling you. BCG’s research on scaling agile approaches applies here, the principle that speed and scale without strategic clarity creates more problems than it solves is as relevant to retail media as it is to organisational design.

About the Author

Keith Lacy is a marketing strategist and former agency CEO with 20+ years of experience across agency leadership, performance marketing, and commercial strategy. He writes The Marketing Juice to cut through the noise and share what works.

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