for Retail World Magazine March 09 by Norrelle Goldring and Lee McAllistair – ShopAbility 
This is the first in a series of five articles about Achieving Retail Objectives from the team at ShopAbility. Our first article centers on how to increase the frequency of purchases and decrease the length of time between them.
Future articles will cover:
2. AWOP and transaction value
3. Basket penetration and incidence
4. Traffic driving
5. Trial management.
Focusing on achieving key retail objectives can help grow your category, your Retailer relationships and ultimately your bottom line.
What are the key retail objectives?
Aside from profit margin, the key indicators of retail success, and the ones retailers measure, amount to Frequency, Traffic, Incidence, AWOP, and Spend. We call this the 5-way multiple.
We’re recapping these retail objectives over the next few issues because in talking to suppliers, it has become clear that retailer alignment is not being optimized because these retail objectives haven’t been truly integrated into the way suppliers’ businesses operate.
Below is a refresher of the definitions all of the retail objectives we’ll be covering over the series. Today’s article focuses on the first two.
Frequency: The number of times your category is shopped over a defined period of time. For example, you might shop for milk 3 X per week = 12 – 14 X per month, but shampoo only once a month. This will also depend on what kind of shopper and household type you are (how many people you are buying for and their level of consumption). To drive category growth, the goal is to increase frequency. Relates to driving Traffic via repeat visits.
IPI: Inter Purchase Interval – the time between shopping trips to buy the category or product. Changes according to category and channel type. Back to our milk and shampoo example: the milk might have an IPI of 2.5 days and shampoo 30 days at the frequency level we described above. The goal here is the converse of Frequency (same concept but different lens) – we are trying to decrease IPI.
Basket penetration & incidence: What % of shopper baskets your category or product goes into. Some categories, eg staples like milk and bread, are in close to 100% of baskets. Other categories like pet food might only be in 15% of baskets. The objective here is to increase basket penetration.
Basket size: How many items are in each shopper’s ‘basket’ when they get to the checkout. ‘Basket’ here refers to total purchase. We want more items in the basket therefore we want to increase basket size.
Basket value: Total $ value of all items in the basket (sometimes called Transaction Value. Common ways to increase this are encouraging the purchase of either more items or higher value items via various point of purchase marketing methods. Amounts to an increase in Spend.
AWOP: Average Weight of Purchase. Sometimes refers to number of items, or weight in kilograms or litres. A common retail goal is to increase AWOP. Can also amount to an increase in Spend.
This article will focus on the first two: Frequency and Inter Purchase Interval.
How are retail objectives built in to your KPIs and planning?
Whilst suppliers may recognise and some measure key retail objectives via Homescan and similar products, often they’re not fully integrated into business operations.
If you know how frequently shoppers shop your category and product, but you have no plans to increase it, what’s the point? To demonstrate value to retailers as well as grow your own bottom line, retail objectives need to be built in to the business.
The obvious entry points for incorporating retail objectives into the business are in category plans, customer plans, marketing/brand plans, category/business/range reviews, promotions, and pricing strategy. Ultimately your category growth drivers will sit around one or more of the retail objectives. What is the main problem you’re trying to solve or opportunity to leverage? How do the retail measures/objectives for your products, segment and category compare to other similar categories? Where are the relative gaps?
Goals need to be specific and retail-oriented.
Part of the problem here is a lack of clarity and distinction. ‘Grow sales’ is not specific enough and it is not relevant to the retailer unless you specify how this will be achieved. ‘Grow sales in the hair care category by increasing frequency through more diverse consumer/shopper occasions’ is a relevant goal that relates to a retail objective. The HOW part might be ‘ new product development in the every day hair care range’ or ‘ introducing smaller, higher-value pack sizes to encourage more frequent purchase’.
The measure might be an overall increase in frequency of 7% over an agreed period of time.
Why Frequency and IPI?
Frequency and IPI are important to retailers because how often shoppers are shopping a category directly impacts on volume of sales for that category and has a direct correlation to foot traffic. By increasing frequency and decreasing IPI in a category, you are growing volume for the whole store.
Frequency and IPI are key ways to drive category growth. Companies like Kellogg and Sanitarium, for example, have pushed for total growth of the breakfast cereal category by creating more consumption occasions for it (eg afternoon snacking) and therefore increasing frequency of purchase.
From a brand perspective, frequency of purchase reinforces the brand loyalty relationship. Frequency is a means of increasing brand loyalty and commitment (movement up the ‘commitment scale’), and a key lever in increasing sales from an existing consumer base.
Frequency applied to shopper behaviour
Shopper frequency and IPI in a given category depend on the nature of the category, the number and type of occasions the product is used for, what kind of shopper they are, and from what household type.
Take laundry powder. A two-parent family with three children under fifteen may wash clothes 3 – 4 times per week. A double income no kids household may do the washing once a week.
The family with three kids might therefore buy washing powder once a week, while the DINKs might buy it once a month. The IPI for washing powder is therefore changing from 7 days to 30 days depending on the type of shopper and household type.
Laundry powder is not an expandable category – that is, unlike categories such as alcohol and confectionery, shoppers won’t do the washing more often simply because they buy more (however they might use a bit more, like they do with shampoo and conditioner). And there aren’t really multiple occasions for it either.
However, you can play to frequency and balance the AWOP of different households using pack sizes – smaller packs for smaller households (with smaller cupboards), priced at a premium, means they have to buy more often. Larger households require larger packs. If you upsell a small household to a large multiserve pack or multipack you might increase your AWOP but you’ll decrease your frequency by bringing sales forward (pantry stocking). Finding the balance between AWOP and frequency is critical.
Shopper type here also applies to shopper profiles, for example the LOHAS shopper (Lifestyles of Health and Sustainability). A LOHAS shopper might purchase from the health foods and vitamin categories more often than other types of shoppers. By increasing the point of purchase appeal of the health foods category to the LOHAS shopper, frequency of purchase may go up.
5 Ways to Increase Frequency
1. Increase & communicate the number of consumption occasions
- The more frequently they consume, the more frequently they buy. What consumption occasions can be grown? What are new consumption occasions that have yet to be associated with the category?
- Market directly to the occasion at Point of Purchase. Show how your product should be used and how it solves the problem or occasion. Eg, is your category suitable for ‘dinner tonight’? Then communicate the dinner tonight occasion clearly in store.
2. Review your pack size and format portfolio
- Frequency and IPI are driven by the kind of shopper. Identify which of your pack sizes and formats per category segment are frequency related, profit related, or AWOP driven. Be clear on who each type of pack is for – different packs will suit different consumer and shopper types. Tailor your store by store ranging recommendations to retailers based on this (ie mortgage belt suburbs = bigger packs, inner city = smaller packs).
3. New product development
- New products for new occasions within the category. Suncare is a good example of this. First we had sunscreen and after-sun care, then fake tan creams. Then we added exfoliants especially for fake tans. Then instant spray on tans for the times you can’t wait 24 hours. How about chemical fake tan remover? Hmmm, fake tan for face might be different than for body. Spray on – now that’s great, people don’t have to rub it in PLUS three quarters of it gets lost in the air so you have to buy it more often. You get the idea.
4. Put it in the right place, or multiple places
- This one sounds obvious, but shoppers will buy it more often if it is where they would expect to look for it. Which categories with the same occasion should you co-locate with? Cheese and crackers co-located in store is a good example.
5. Run frequency driven promotions
- Gloria Jeans, Bakers Delight and your local corner coffee cart specialize in these – all those ‘Buy 9 get tenth one free’ promotions drive both traffic and loyalty by creating frequency. How can this tactic be applied to grocery or P&C/route channels?
Avoiding unintended consequences
Retailers and suppliers alike often look to pricing strategy to improve Frequency and decrease Inter-Purchase Interval. The problem with this approach is that price promotion may simply bring your sales forward and push out your IPIs, rather than reduce them, due to stockpiling.
Ultimately, to truly increase frequency, consumption must increase. Otherwise it’s just bringing sales forward.
Understanding the nature of the category (is it expandable or non-expandable consumption?), shopper types for your category and what their consumption occasions and shopping missions are and how to expand them lies at the heart of driving category growth through Frequency and IPI. Achieving this is a win-win for both retailer and supplier.
Next time, Basket Penetration and Incidence. In the meantime we welcome feedback on these articles – what you agree with, what you don’t – and what you’d like to hear about. Email us with feedback on enquiries@sh-opportunity.com.au
