All participants receive a FREE summary of the findings in July. The survey is now running and closes on June 2. Click the link below to participate FREE in the online survey, which will take approx 30 mins to complete. http://www.ys3.net.au/surveys/5/y100514register.asp .

Forward to a friend in the industry! If you think someone else involved in, or with views of the shopper marketing and category functions, would be interested in participating (and receiving the findings), please send them this link -http://www.ys3.net.au/surveys/5/y100514register.asp .
The more the merrier for a robust sample and holistic view.

Thank you for your participation, we look forward to presenting you with the results!
. Details about the study below.

The POPAI & ShopAbility Shopper Marketing & Category Management Industry Study  will help provide FMCG and retail sectors with a comprehensive overview of how to optimise both their internal and in-store shopper marketing and category management opportunities.
The Global Association for Marketing at Retail, POPAI Australia and New Zealand and shopper research and strategy firm, ShopAbility, have combined forces to put together a new study to help industry professionals enhance the shopping experience in-store, improve in-store areas of influence and ultimately help boost sales.
The study has come about after reviews of related studies overseas. It will be conducted over April and May and will combine in-depth face-to-face and telephone interviews with an online opinion survey.
“We are excited to be involved in the first industry wide study in this area in Australia,” said POPAI Australia and New Zealand General Manager, Karen Spear.

“We have previously conducted studies on the point of purchase industry but with this study, the scope is significantly expanded to take a more holistic view of the various functions involved in Marketing at Retail,” she said.

Co-Director of ShopAbility, Norrelle Goldring, said the results of the survey will help deliver the information they need to map out an activity and resources path for retailers and manufacturers.

“The study will help us to evaluate how Australian shopper marketing and category management related functions compare with overseas markets, identify common issues and opportunities and outline key steps for industry participants to take to make the most of their capabilities,” she said.

Individuals responsible for creating or running shopper marketing, category management and trade marketing/point of purchase disciplines or those who have frequent dealings with these functions including sales directors, marketing directors, (group) category managers/development directors, insights and innovations professionals, trade marketing managers, customer/channel marketing or development directors are strongly urged to take part in this survey.

To participate in this Australian-first survey, please go to this link:

http://www.ys3.net.au/surveys/5/y100514register.asp .

Results will be available early in the new financial year. Survey participants will receive a free summary of the results of the shopper marketing and category management findings of the survey.

For further information contact:

Norrelle Goldring, Director
ShopAbility
M: 0411 735 190
E: norrelle@shop-ability.com.au
W: shop-ability.com.au

Karen Spear, General Manager

POPAI Australia & New Zealand
M: 0412 668 579

E: karens@popai.com.au

W: popai.com.au

About POPAI Australia and New Zealand:

POPAI (Point of Purchase Advertising Institute) is the only global, not-for-profit association exclusively dedicated to the retail marketing industry. It has a global network of 20 offices covering 45 countries dedicated to serving in excess of 1,700 member companies.

In Australia, POPAI’s mission is to advance the evolution of Marketing at Retail as a strategic and tactical advertising medium and an integral part of the marketing mix.

This includes promoting the importance of Marketing at Retail in the total marketing mix; improving levels of education in the industry; developing and encouraging improved standards of practice; representing industry views; promoting a better understanding of POP mediums; provide opportunities to exchange ideas and experiences; and to conduct research for more effective strategy.

Call POPAI on (02) 9984 9322, look us up at www.popai.com.au or email marketing@popai.com.au

About ShopAbility:

ShopAbility is a specialist FMCG & retail consultancy spanning multiple channels. We help clients improve both their thinking and doing capabilities to improve instore execution for increased sales results. We help clients understand shoppers, retailers and store; we develop standout strategies for market advantage; and we build clients’ capability to deliver them.  Our retail and go-to-market strategies are holistic, differentiated and shopper-driven. Our offers span insight/research, strategy, execution, capability and training. Call us on 1300 88 56 44 for more information, look us up at www.shop-ability.com.au or drop us an email to enquiries@shop-ability.com.au

What’s your occasion?

There is a lot of confusion about the role of the occasion in retail in Australia. We tend to stay safe and stick to category type displays without actively marketing in-store to specific occasions such as dinner tonight and lunch on-the-go, for example. We’ve been on to the gifting occasion for a while with Xmas, Mother’s Day, Father’s Day and Valentine’s Day, but gifting seems to be the only occasion that retailers seem to universally feel comfortable shouting out about.

Well,  not so in the UK. In-store marketing based on occasion is alive and well in UK Grocery and Pharmacy channels – and there’s a lot we can learn.

Take a look at this.

It’s the Marks & Spencer ‘dine in for 2 for a tenner’ campaign.  You’ve never seen occasion-based messaging quite so blatant or quite so well done as this. Here’s the deal: select an eligible main, a side, a dessert and a bottle of wine all for 10 pounds. A brilliant strategy in an economic downturn, with things still looking pretty dire overall in the Mother Country.

About half of the food section of the M&S store is dedicated to this promotion. Gondola ends contain signage (as per the image) and selections of each item ready to grab and go. An entire three aisles were dedicated to the eligible mains, sides and desserts – a huge range of ready to eat meals, all clearly labelled in terms of their quality, nutritional value and even sustainability credentials (e.g. ‘this salad nicoise is made from sustainable fish stocks’).

The promotion is signed clearly outside the front of the store, at entrance, overhead, on gondola ends and aisles and even blank walls.  And the shoppers LOVE IT.  A real buzz in-store, conversations among friends in the queues, and unsolicited praise about it from friends of mine living in the UK… this is occasion-based shopper marketing that is bang on the money.

Here’s another example: Boots pharmacies located in high-traffic urban areas are offering lunch-on-the-run deals for under 3 pounds 50 including a drink. Brilliant. People often stop in to the Boots for drugs or emergency items like stockings… now they can grab their lunch as well. In fact, I think Boots urban locations are becoming destination lunch-on-the-run stores and their rest of store offer is adding incremental sales to the lunch purchase. A terrific traffic driver.

Superdrug are doing a similar thing: sandwich, snack and drink lunch deals:

Meanwhile, another fabulous example of occasion-based messaging in the BHS department store in Bath. ‘ Beach-ready body for £30′ in the swimwear department. All the push-you-out-and-suck-you-in bathing suits all displayed together in one area for a fixed price. And even more brilliantly, BHS is literally right across the road from the new spa complex and the swimwear is positioned just inside the entry doors to capture all the impulse purchases from disorganised travellers who didn’t book their spa package in advance… like me!

Sainsbury’s, as ever, have all the occasions covered. On your way to a friend’s for dinner or off out on a date? Flowers and chocolates displayed together right at the front of the store with good price points and a service counter located nearby.

Sainsbury’s range of ready-to-eat meal solutions for the dinner tonight occasion also takes some beating! The English sure know how to do ready-to-eat. Gourmet salads, Moroccan, Indian, Thai – you name the cuisine, they’ve probably got it. Leaves our Australian range of overpriced fresh soups and gluggy instant pastas for dead. And the dinner tonight options are together in clear displays easily accessible without shopping the rest of the store.

Yep, the UK are leading the way in occasion-based shopper marketing in store. On the downside, some of these stores are undoing all their good work by only having 1 or 2 serviced checkouts and pushing everyone else through self service checkouts which they quite obviously and loudly hated (and were slow). But, that aside, there is a lot we can look at by way of leveraging occasions in Australian retail.

In Summary:

• What are the relevant shopper occasions for your category? Map your category to your shopper occasion to your channel. Some occasions will belong in one store type and not in another – you may need to change your occasion-based marketing based on channel type.
• What other categories are likely to be shopped by the same shopper for the same occasion and how can they be displayed and promoted together? Are there oppportunities for cross-supplier promotion based on occasion?
• Where in the store are shoppers likely to go to find what they need for the particular occasion? Is your display in the right place?
• Is there a clear value proposition and price point based on the occasion? Marks & Spencer ‘Dine in for 2 for £10′ is a great example of this.
• Is the occasion communicated multiple times on the shopper path to purchase and signposted clearly in terms of where to find it in store?
• Have you thought about the other occasions shoppers visit a particular store type for at what time of day, and how you might leverage the occasion opportunity? Examples are fuel before and after work and the snack / gut fill on the run opportunity, and the Boots-style lunch deals in inner city pharmacies when shoppers come in for emergency items.
• Is there a place for localised occasion-based marketing? A perfect example is the department store opposite the spa centre heavily promoting swimwear.  There may be localised opportunities in particular stores you distribute in.

So… just in time for Xmas… keep your eye out for the best occasion-based marketing of the season! How can you apply these principles to your product or retail offer? Time to think outside just the gift box.

-  By ShopAbility for Retail World Magazine

Last time, Alex discussed measuring your business performance as part of a crisis assessment. This assumes that you’re in the right business in the first place. Ie, that the things being measured are the right things.

In the first article, Margie alluded to determining your core business proposition as a core part of determining your diagnosis and what needs curing. We’re going to explore this further here.

Why is your business here?

What business are you in? Yes, the old clichéd management questions that are currently being jokily used in a banking ad on television are the ones we’re going to dig into here.  This is the first one.

Defining your core business proposition sounds straightforward on paper but is more difficult to define simply. Define your business too narrowly and you miss opportunities and the market might move on without you, like the American railroad company in the late 1800s who defined themselves as being in the railroad business rather than the transport business. In Australia Cobb & Co did the same thing, they thought they were in the stagecoach business not the courier or mail delivery business. Defining the medium can narrow your options.

On the other hand if you’re too broad in your definition you lose vision and flounder in a morass of indirect competitors. An example of this might be if you’re a confectionery manufacturer, and you define yourself as being in the ‘happiness’ business. This puts you in competition with a whole lot of leisure categories such as toys, games, entertainment, and escape/indulgence services like day spas. Useful to look for distribution opportunities and links perhaps, but not a clear proposition for consumers and difficult to do meaningful competitive analysis.

Your business definition needs to be easily understood by your staff, your retail customers and your end shoppers and consumers. It needs to consider the history of the sectors you’ve traditionally played in and the likely future of these and allied sectors.

Keep it straightforward and free of fluffy marketing waffle. Answer the question ‘why are we here?’ by answering ‘what do we do?’ and ‘what need does it satisfy?’

Using confectionery as an example, Figure 1 below provides some levels from a category and consumer perspective to help you pinpoint how wide or narrow you want to go.

Defining your business based on needs and capabilities may uncover sector or channel opportunities. Using the chocolate example above, if a chocolate manufacturer defined themselves as being in the desserts (occasion) business as well as treats business that opens up a whole lot of foodservice applications and opportunities. Or if defined as the ‘ingredient component’ business then the chocolate can be applied to ice cream, biscuits etc.

Making the right stuff

So now you’ve defined the business you’re in, are you making the right stuff to fit that definition? What new opportunities exist?

How is the market performing? Are the categories you are in – or now want to be in as a result of your new business definition – up, down, or static?  Static or even growing share of a declining category spells death in the long term, cash cows die eventually. If you’re in this situation – can the category be turned around? What would that take?

For the categories you are or want to be in, will you drive change or follow it?

What will it take to be truly innovative, vs merely renovating what you already do with line extensions and brand extensions?

To be clear here, the majority of ‘new products’ in the FMCG sector are flavour or pack size variants of existing brands and lines, and therefore have a reasonably high degree of cannibalisation and substitutability. Trying to turn your company around by doing line extensions is like trying to save yourself rich. It’s incrementalism, and perhaps playing the existing game a bit better, but it’s not changing the game.

What is the role of brand to you? Do you need more brands or new brands? Should you be a company playing in brands or in private label, or both?

How extensible are your brands? Traditionally FMCG uses umbrella and sub brands (Arnott’s Tim Tam for instance) where companies like Virgin use the same brand across diverse categories (airlines, credit cards, mobile phones).

If you’ve identified new category or sector opportunities as a result of your business definition you need to determine whether your existing brands can play there or whether you need new ones, or at least new sub-brands.

How full is your innovation (not renovation) pipeline?

Doing the right stuff, for the right people

Once you’ve defined your business and therefore product and brand opportunities, it’s time to review who your customers and consumers should be, and the best options for servicing them.

Who are your target consumers, based on the occasions and categories you’ve identified? Where are they? Where will they buy and consume your product? What are the implications of this for who your retail customers should be?

By reviewing your consumer and shopper targets there will be both channel strategy and  route to market implications. This may throw out opportunities to amend your supply chain, eg to backward or vertically integrate. Or alternatively, to divest or outsource elements of your supply chain so you can be more focussed on manufacture.

This is also an opportunity to identify all potential channels you could be in and to size/prioritise them based on what the product/brand offer in each would be and what the degree of difficulty is in servicing them – barriers to retail entry, competitors etc.

This requires a review of the parts of the route to market you operate in – manufacturer, wholesaler, distributor, reseller, retailer.

In Summary

The above is a set of thought starters to get you thinking about your business at a broader level and get you out of the day-to-day. This type of review should be done every few years, not just waiting until the market has changed and the train has left the station.

Looking at your business purpose, your product offer and your customers (both consumer and retailer) is core in determining whether you’ve still got the ladder against the right wall, or even in the right room.

Next time: Risk Management. In the meantime, we welcome feedback from you. Email us at enquiries@shop-ability.com.au

If the average pharmacy ranges up to 4000 skus, and they’re mostly small bottles and boxes, what’s the best way to lay it all out? ShopAbility discuss getting best return from your store ‘box’ in this latest article in the series.

From our previous few articles you’d now have an idea of how to tackle what to range and how much of it.  The next retail question is then where do you put it all in the store so it makes sense to shoppers and they can find what they are looking for easily.

This article we’re going to discuss this under the headings Space and Layout.

What is space & layout?

Space and layout pertains to how shoppers navigate a store and an individual category – how they get to what they want and how easy it is to find an individual product. We will discuss both store and category levels.

Layout includes what categories go where (“Location”), in what order (“Flow”), and what goes next to what (“Adjacencies”).

Space considers how much physical space a department, category, category segment, brand an individual sku has. Physical space is typically calculated in metres, bays, shelves, and facings.  Levels of space are represented in Figure 1.

Space and Layout  = Easy to Shop

Space, layout and navigation are important because they are direct contributors to ease of shopping and the in store experience.  In most retail channels space attributes impact a shopper’s choice of your store. Attributes such as ‘easy to shop’, ‘quick to find what I want’, and ‘well laid out’ generally figure in the top 10 reasons shoppers choose your store over another.

Your store – the retail ‘box’ – is a finite space. You need to look at what return you’re getting on that space, particularly when you’re paying high rents. The most common way to do this is measuring your space to sales – sales per square metre, and number of ‘facings’ of an individual product vs its sale rate.

The role of space to retailers is a bit like Yield in air travel. There are only so many seats on the plane, so they manage the available space for best return.

Laying out your store

Think of your store as a box if drawn from an aerial view. Most pharmacies have the dispensary at the back of the box (if you draw the door at the front). Categories in the box are like bits of Lego that you can move around and stick next to each other. By looking at it as an aerial view you can quickly see where the traffic blockages are likely to happen.

In most pharmacies, since dispensary is the destination for up to ¾ of shoppers, the question is how do you expose them to the greatest amount of product on the way to and from the dispensary?  In other words, how do you lay out the pharmacy to invite impulse purchase? In grocery, more than 80% of shoppers deviate from the shopping list (they add to it) so ideally you want them to walk every aisle … to get more likelihood of an impulse purchase.

There are also non-dispensary categories that are destination categories eg cosmetics and analgesics. For destination categories, particularly ones that are a distress purchase (such as when the shopper is in physical pain) they need to be easily found.

So you need to find the balance between exposing shoppers to products, and making it quick and easy for them for find a specific thing. There’s no point in irritating them by turning your store into a maze.

When in doubt, err on the side of straight aisles that run from the front to the back of the store so they have a clear ‘run’ to the dispensary. Don’t put aisles cross ways as by doing this you’re effectively creating a block shoppers have to go around.

A very basic store layout might look like Figure 2.

Location, Flow & Adjacencies

Where you locate each category in the store says something about it to the shopper. If it’s in a corner and doesn’t have a lot of space dedicated to it then it mustn’t be an important category. Having an entire wall of cosmetics says that you are a specialist in and destination for cosmetics. The more space a category has, the more visible it is to shoppers and the greater the likelihood of purchase. When laying out your store, think about your range and competitive positioning and ensure that the categories you want to be known for are the most prominent and easily seen.

In grocery, retailers sometimes would place a low traffic or low basket penetration category in the same aisle as a high traffic one, which is why you’ll sometimes see the stationery in the same aisle as the confectionery. The thinking is that the high traffic category is the destination so you might increase your basket penetration of the low traffic one by impulse purchase.

However, shoppers generally think in occasions and solutions and are more likely to look for the stationery where the gift cards are, for example. So retailers are gradually moving toward putting relevant categories next to each other.

Other things to consider

Contributors to perceptions and actual experience of space are aisle width and fixture heights.
Considering the majority of pharmacy shoppers are female, with a fair few mothers, you need aisles wide enough for strollers to get through without knocking everything off shelves.

High fixtures can block light and decrease perceptions of space. And shoppers can’t reach beyond 6 feet anyway. Additionally, once shoppers get to a category the shoppable area – where they look and select from – is generally between shoulder and knee height.

Lower profile fixtures (or at least fixtures with a shoppable area finishing at shoulder height and an easily visible category or segment sign on top) create the illusion of space. But there’s not much point ranging anything on shelves below knee height as shoppers won’t see it, and older shoppers aren’t going to bend down to get it. So again, you need to find a balance.

Lastly, security measures – desirable theft items shouldn’t be next to the entry unless they are behind counter and selected by staff (like bottled spirits often are in drive through bottleshops).

Laying out a category

The principles of flow and adjacencies apply within categories as well as to the whole store.

Within a category, flow relates to what category segments are next to each other, in what order. In other words, how the category is broken down.

So you need to figure out, or work with your suppliers on, how the category is broken down – from a shopper perspective (not just on manufacturing specifics).

For cold drinks this broadly looks like Soft Drinks, Water, Juice, Tea, Flavoured Milk, Energy and Sports.

For categories in pharmacy the way you break it down by category may vary. When in doubt, by product purpose is a good way to go. Some categories you might segment by condition or ailment. Other categories might segment by body part. Eg painkillers might look like head, period/menstrual pain, stomach, back.

Once you’ve broken the category down (segmented it) you need to figure out what the flow and adjacencies of the segments are. There aren’t any particular rules for this. You might cluster body parts in similar regions together, or start with head at one end and work through to feet at the other.  Keep in mind that shoppers ‘read’ a category like a newspaper – from top left to bottom right.

Most categories work best using vertical blocking  – ranging the products in a block from top to bottom (rather than horizontally across the bay). Premium lines are generally on the top shelves, value and private label brands are down the bottom and the mainstream lines are in the middle.

Figure 3 is a visual representation of this – a ‘mudmap’.

Vertical blocking doesn’t always apply though. Tall skinny products that are all only going in one bay work better in rows (think like soft drinks in a vending machine) – you need the multiple facings across ways to be able to see what the product actually is.

You also need to consider how many products there are for a given segment and whether you should group like products together, or block by brand. Normally a shopper shops by category, but for some categories there MAY be a case for brand blocking … traditionally vitamins have been brand blocked, with Blackmores the ‘beacon’ brand, mainly because it’s a very dense category (lots of different products, all only 1 sku each, all in small bottles). However that’s not to say that’s the only or best way to do it.

Allocating Proportionate Space

So now you’ve sorted out what segments are in the category, you need to look at what each segment is worth of total category sales.

The principle here is space to sales. A segment or product should have a roughly equal % of category space to the % of category volume or value it represents.  This is where the concept of Facings comes in.

Each individual unit of a product is one facing wide, because its face takes up one space. The overall shelf display is measured in terms of the number of facings per product.
The more facings a product has, the easier it is to see. Note that facings are an expression of product width. Product and shelf depth (number of products sitting behind the front facing, from the front to the back of the shelf) is an indicator of stock holding capacity.

So for example, if Neurofen White is 30% of total painkiller sales then in theory it would get 30% of the space (ie 30% of the total facings). And if painkillers are a growing category and Neurofen brand is outpacing category growth, you might give it a bit more space again.

Some operational realities apply though. If giving Neurofen White 30% of space meant that a lot of other specific painkillers would have 1 or no space facings, then you might adjust it up or down a bit.

Pharmacy is interesting for category space allocations because there are so many skus, and most are small boxes or bottles.  For small products you need multiple facings simply to be able to SEE them.

From an operational standpoint, space allocations impact on stock holding and stock turn (and refilling/merchandising requirements. Things you need to consider include:
• Layout adjustments based on category performance and segment growth trends
• Match layouts against the shelf inventories to identify any operational impacts on stock holding and days of supply – if you have a fast moving product and ‘under-face’ it you will have to restock the shelves frequently.

You need to look at your Space and Layout if …

So, you might need to do a Space and Layout analysis on your whole store or a specific category if you answer yes to one or more of the following:
1. There are navigation and traffic roadblocks in the store
2. The categories that are your major points of difference are not easily seen, not easily found or hard to get to
3. Shoppers spend a long time trying to find a specific product in a given category
4. You have shelf refilling issues where some products need refilling all the time
5. The top selling products, brands and segments in a category have changed.

So that was a bit about how to make products easy to find using space. Next issue we’ll look at how to think about how you sign your categories to make things more visible within the available space.

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

By ShopAbility for Retail Pharmacy Magazine

Last article we talked about how you decide what things to range, taking into account your competitive strategy and shopper types, and concepts such as category weighting, segmentation, depth, and breath.

We looked at how to determine what your range should be at a total store level.

This time around let’s take this thinking one step further and look at how to make the most of your existing range within a given category, now that you’ve established what it should be.

What is Efficient Assortment?

Otherwise known as ‘Range Optimisation’ or ‘Range Rationalisation’, Efficient Assortment ‘right sizes’ your range in a given category based on the top selling products either or both of volume and value terms, and as measured against stock turn velocity and return on inventory.

Why is Efficient Assortment Important?

You might have the deepest or broadest range, or the most high margin products, but not all of it is necessarily moving or worth a lot to you.
Efficient Assortment helps you get best bang for buck from your available space for a given category, because it ensures you’re ranging the top selling and fastest moving products and minimizing space wastage on slow movers.

Which ‘level’ is Efficient Assortment performed at?

‘Efficient Assortment’ is normally performed at Category level, involving individual products and SKUs (see Fig 1). Traditionally, category segments, individual brands and unique SKUs are secondary considerations.

How it works – the 80/20 rule

You’ve heard of the 80/20 rule, otherwise known as the Pareto Principle.  Traditional Efficient Assortment uses the Pareto Principle to determine how many SKUs (individual products – stock keeping units) are worth 80% of category sales (the 80% analysis should be done for both volume and value).

Anything over the 80% line is called the ‘tail’. Anything that is in the Tail, unless it performs a unique role or is of high value, is ripe for rationalization – particularly if it duplicates the functionality of a product in the top 80%.

Below is an example Cumulative SKU graph (in both volume and value) for Category X. This kind of cumulative graph can be done very simply in an Excel spreadsheet, drawing from your sales data/point of sale system.
In Figure 2, the category is a sparse one (as opposed to dense one) because only a small number of SKUs make up the Top 80%. In this example there is a long tail.

Docking the Tail

The fastest way to shorten the tail is to ‘deduplicate’ it.
This simply means looking at the products in the tail and determining which ones have an identical function or role to their counterparts in the Top 80%.
In the Figure 2 example, though, there may not be many duplications as there are so few products making up the Top 80%.
So if they’re not duplicate products, how else can you determine what should go from the tail?

Return on Inventory

Look at what’s in the tail and what it’s worth to you – not just from a gross margin perspective on an individual item, but its stock turn rates.  You can’t bank margin – there’s no point ranging something that gives you 60% margin if you only sell one item a year unless it’s an extremely high $ value item. 60% of nothing is still nothing.
What we’re referring to here is GMROI – gross margin return on inventory. Using GMROI, a product with a lower margin but a high stock turn rate might actually be netting you more $ than a higher margin product that isn’t moving.

So in looking at the ‘tail’ in your category, have a look at the margins of the individual products versus their velocity – both hurdle rates (units per store per week) and annual stock inventory.
Products that are in the tail that are two or more of a) duplicates of something else b) low margin and c) low stock turn, should be the first cabs off the rank to be rationalized.

But make sure you don’t leave home without …

… checking what’s missing.
A traditional Efficient Assortment analysis tells you what to delete, but not what to range (which was the focus of the first article).  The 80/20 method of range rationalization looks at individual SKU contributions, but doesn’t look at coverage or unique needs.
So in doing an Efficient Assortment analysis, and looking at your Top 80%, you also need to keep in mind the following:

• Category coverage: Do my Top 80% skus cover most or all of the needs of the category?
• Segment coverage: Do my Top 80% skus represent products from each Segment of the category? Or are there products in the Tail that fulfill this function?
• Unique skus: are any of the products in the Tail a unique SKU that fulfills a special need and therefore can’t be deleted?
• New products: are any of the products in the Tail newly introduced (ie in the past 6 months)?

To mitigate the newness factor, Efficient Assortment analysis needs to be done on a quarterly or 6 monthly basis so you can track the progress of new product introductions and their potential entry into the Top 80% – ie to track trends rather than just dipstick one point in time.

So I’ve done my analysis, now what?

Once you’ve done your analysis you need to put the results into action instore. This might include:

• Out with the Old: Sell through (via special, promotion or other mechanic) or return the items in the tail that you’ve decided to rationalize (working with suppliers on how best to do this)
• Go with the Goers: Put a plan in place for how you will better support the products in the Top 80%. Decide whether you will focus on further supporting your Top 20% of skus or whether you will put focus on growing and improving the SKUs that sit between the 20% and 80% marks. This might include facing them up (giving them more facings on shelf), since you’ve now got more space to play with, or things like point of sale at the fixture and consumer promotions.

In summary: why you should look at Efficient Assortment

You might need to do an Efficient Assortment exercise on a category if you answer yes to one or more of the following:
1. You have a number of products that perform the same functions
2. You have a lot of products for a category but not enough space and you need to get rid of some
3. You don’t know which products are your top sellers and/or bottom performers
4. You are spending time and money promoting products that you suspect aren’t moving.

We’ve talked a bit here about the role of space on range. Next issue we’ll look at how to think about laying out a category and the products in it in more detail.

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

#1 Coles Balgowlah – Stockland Mall

Gee it’s nice to see a supermarket retailer doing something a little different and in some instances just plain logical. The new 4000 sq mtr Coles at Balgowlah is a hybrid of some of the initiatives unveiled at more recent openings such as Chatswood here in Sydney and Ivanhoe in Melbourne, plus they’ve added a few more whistles and bows as well.
It certainly marks a clear point of difference between the WW latest format and that of the old style Coles formats….and mostly for the better, and about time the trade are saying.

Theatre and Shopper intimacy have made a welcome return and don’t the locals like it!

Some great points:

• Open front without security gates or trolleys across checkouts which treats us all as valued Customers not suspected thieves
• Well lit open feel with wide aisles and low height fixtures, well merchandised and a good weight of stock
• Low height Dairy/ Chiller cabinets adjacent to Fresh depts. – logical
• All bread together, in house bakery and Proprietary bread – logical (shoppers buy bread and don’t intentionally shop either/ or – have a look at a shopping list!)
• Milk at the front of store – logical, for small baskets and big alike
• No big bulky ends – an aisle of value down the middle which is just as aggressive

Theatre:

• Open meat counter with real live butchers you can ask a question of
• Fish dept that again has a fish monger feel with knowledgeable staff
• Fresh vegies and fruit on ice
• Salad bars
• Indian naan bread oven
• Cheese, cheese and more cheese
• Plenty of sampling and spruiking
• Staff that are actually interested in helping you, bubbly pleasant personalities and plenty of them
• Pharmacy, Baby, checkouts, new uniforms….and the list goes on.

Points to work on:

• Why isn’t freezer near the entrance with the rest of the fresh/ chilled depts? This consigns the Freezer to back up supply only rather than the location of genuine dinner tonight or lunch tomorrow meal alternatives.
• Bakery would be better at the front, but hey, something has to give
• Home Entertainment (DVD’s and Magazines) looks like it was a last minute add on rather than a considered strategy/ location
• The Seasonal Wall in the back left hand corner appeared to be a patch up, seasonal stock requires a high profile location to get the most out of the impulse nature of seasonal lines and this location will get a low % of store traffic – it’s behind Petfood and Laundry
• Will they cross merchandise the store? The open space cries out for it.
• Location and access to  Vintage Cellars, pity it’s a fire/ smoke wall

Let’s wait and see:

• Will this store fade after the traditional new store opening honey moon period?
• Will the higher potential GP mix that is being targeted return the investment in fitout and higher running costs such as wages?
• Will the out of stocks and the poor standards return or will the current high standard be maintained?
• Will this store be the direction for the future (you’d have to think so based on the recent openings?)
• Will this snap WW out of their cookie cutting lethargy?
• Will this format be transferrable to other footprints? Will it translate to a 1600 sq mtr store for example as all stores are not of this size.

Conclusion – a great store – do yourself a favour and pay a visit!

The “New” Franklins at Mosman and St Ives

And now for something completely the opposite – we were pretty disappointed in these stores after hearing the PR that went ahead of the launch. Franklins supposed ‘store of the future’ looks like it is a throwback to the 80’s and 90’s and quite like an older generation WW or Coles store.

The St Ives store has a freshened feel about it with an added Deli/ Meals/ Bakery area but the fixtures and design treatment are dated.

• The font for the dept signage is white on a timber background and does not stand out
• Weight of stock and range was average and did not make a statement
• Grocery/ centre store felt cold and uninviting, very wide aisles with little merchandising, few cut carton displays or anything to tempt Shoppers
• Produce bins looked a direct copy of the old WW units
• Traditional layout with traditional category treatment – certainly not a progressive format
• Good South African ranging but if they couldn’t get it right in this store (and with the current ownership) I’d be pretty worried!

The Mosman store has just been relaunched, again with a refreshed feel. This store is adjacent to a booming Harris Farm Market and Franklins have added a small (read meagre) range of fresh and baked products plus a Deli area, but the width of range and display was poor leaving you with the impression they are going through the motions but not really serious about a genuine offer and therefore a genuine competitive contender.
Again :

• wide aisles but with little to no theatre
• traditional category treatment
• no real attempt to leverage the local affluent Shoppers
• No WOW to much at all in the store

Is Price the ace card Franklins used to play still valid? Still surfing off reputation more like it and these formats do little to support the myth.

Conclusion – Mr Luscombe and Mr McLeod don’t have much to worry about.

Check out this series of articles ShopAbility wrote for Retail World Magazine on this very topic:

#1: Introducing retail objectives: frequency and inter purchase interval
#2 Average Weight of Purchase (AWOP)
#3 Basket Penetration and Incidence
#4 Traffic Driving

Final article coming soon, on Trial Management! Let us know what you think / what you’d like to hear more about: enquiries@sh-opportunity.com.au

By ShopAbility for Retail Pharmacy Magazine

In our first article in the Shopper Marketing series we identified the key levers you can pull in store to convert more sales. We outlined the 5 way retail multiple and the key Point Of Purchase  tenets of ‘RSVP3’: Range, Space, Visibility, Promotion, Price and Persuasion (ie staff persuasion).

This issue we’ll focus specifically on Range. How can you use Range as a draw card for shoppers, avoid wasted retail space and differentiate the store offer versus competitors?

In this instance, we’re referring to your front-of-store and OTC products. Range is basically the amount and types of products your store carries.

Ranging needs to be considered at three levels – Store, Category, and Product. This can be represented as follows:

Store Level

What you range says volumes about you

Range is a key traffic driver. What you range – both quality and quantity – says something to shoppers about who you are and why they should shop with you.

Range talks directly to your competitive strategy. Who are you trying to be and what are you trying to do? If you are ranging the same items as competitors, but more are more expensive, then shoppers would need to see a different in store environment and service to make up the difference.

If you’re ranging the same products as competitors but more cheaply then you’re aiming to drive traffic based on price (which doesn’t necessarily lead to profit).

If you are ranging some similar but a number of different categories and products to competitors, then shoppers will come to know that your store has a range of items that other pharmacies don’t, and your pharmacy may become a destination for those items.

What you range vs your competitors also says something about you – how are you different or the same?

Category Roles

Different categories play different roles. Typically, these roles are Destination, Preferred, Seasonal/Occasional, and Convenience. How you activate the other Point Of Purchase drivers (space, display, price, promotion, persuasion) can also have a role in how the categories are viewed by shoppers.

The Pharmacy channel is interesting in that a) pharmacies are health retail generalists, operating across a number of categories and b) several categories are Destination categories based on shopper/patient distress situations, such as Cough/Cold and Analgesics. Or your pharmacy may attract Destination perfume shoppers, for example, because your range of perfume is good and prices are competitive versus department stores.

Categories like Weight Management, Vitamins & Baby might be Preferred categories for pharmacy (over and above mass merchants or grocery) because of the staff knowledge and service element. Categories like Allergy/Hayfever are highly Seasonal. Convenience categories are ‘while I’m here’, impulse type purchases typically with a narrow range, such as confectionery.

An example of category roles and their impact on range and retail measures is provided below. Don’t forget, the Retail Drivers are where the rubber hits the road. As you can see, by understanding your category roles (and the impact of that on your range decisions), you can leverage your retail drivers to increase profit.

So you need to figure out which roles each of your categories play, and what that means for the kind of range in each you should carry.

Category coverage & weighting

To achieve basic level category ‘coverage’, ranging products across the top selling categories is the obvious place to start. Naturally you need basic offers across the top 10 OTC categories (according to Nielsen’s 2009 OTC report): vitamins & supplements; cosmetics; analgesics; cough & cold; skin care; gastro intestinal; allergies; wound care; baby; and weight management.

So the above gets you to a place where you’ve covered the basics and you’re all things to everybody.

From a coverage point of view, if you only range the above Top 10 categories, what is missing? Is there another category that you could range to gain competitive difference? Could you be known as the orthopaedic shoe specialists, for instance?

Weighting is about relative emphasis. If you range more skus and devote more space to a specific category, promote it, and provide staff training in it, you will eventually become known as a specialist in that category. Are there any particular categories in which you would upweight your range, in order to become a ‘specialist’? What could you be ‘famous’ for?

When thinking about this, it is useful to ‘profile’ what kind of shoppers you see most often in your store. How old are they? Male to female split? What are their most common needs? What ELSE is that kind of shopper likely to need that either you or your competitors are not currently providing? Look for gaps and opportunities… how can you increase your usefulness to your primary shopper?

Depth vs Breadth

Depth is having few categories, but lots of skus (stock keeping units = individual products/packs) within the few categories you stock. In bottleshops, an example is Vintage Cellars – lots of depth in wine (and a few boutique beers) but really only the basics for beer, spirits, mixers etc.

Breadth is having many categories but only a few products per category. The soon-to-open Costco warehouse club is an example of this – they carry many more categories than the average supermarket – only 40% of what Costco carries is food, 60% is ‘general merchandise’, including everything from BBQs to plasma TVs to Tiffany jewellery – but in each category they only carry 2 or 3 skus.

You need to decide whether you are going to go for Depth (ie be a specialist in a few things, and just cover the basics with everything else) or Breadth (try to be all things to everybody, in which case you’re competing with the Pricelines and Chemist Warehouses of the world … and you probably won’t be able to match them on price because you won’t have their economies of scale and trading term relationships with suppliers).

Category Level

Categories are broken down into subcategories or ‘segments’.  Depending on your depth/breadth ranging strategy, in theory you need to cover most segments within a category.

For skincare, the segments might look like Face, Hand, Foot, Body and Suncare.  For Vitamins & Supplements it might be vitamin type (Echinacea, Vitamin A, Multivitamins) or condition specific (arthritis, period pain etc).

For each category, you need to a) segment the category/divide it into product groups based on how SHOPPERS look at it, and then b) decide whether you’re going to range products in EVERY segment or just focus on specific segments (ie back to depth vs breadth).

You also need to think about whether there are any ‘unique skus’ that are effectively a one-product segment, servicing a particular market, and how you might treat those in your category segmentation.

Note that as per the Store Level, individual Category Segments may play different roles.  Eg Glucosamine is Destination within Vitamins & Supplements.

The theory of coverage and weighting applies at category and category segment level too -  are there any category segments in which you would upweight or downweight your range?

Product Level

At this level, you’re deciding which brands and individual items (skus) you’re going to carry. Eg for Analgesics Brand X, will you carry tablets, liquid capsules, powder capsules or all three? Will you carry only the all purpose painkiller, or also the period pain and injury specific varieties?

This comes back to your store level strategy (focus/specialty categories vs basic categories, and their roles) and the decisions you made at category level.

What you’re now deciding is how many different products of a specific brand you’re going to carry across segments and across the category.

You also need to decide the mix of branded products vs own-label/private label/generics you’re going to carry.

In order to do this, you need to understand the role of ‘beacon brands’ for a category (eg Nurofen is a Beacon Brand in analgesics), and how substitutable the products are. Beacon brands may or may not be substituted for other products by shoppers. If it is a Destination category (eg Analgesics) and a Beacon Brand (eg Nurofen) a shopper may abandon the purchase if you’re not carrying the beacon brand … or if you don’t have a persuasive argument as to why they should buy an alternative product.

Ways you can determine the core products to range include sales analysis and trends of your own product sales (volume and transactions per line item); space to sales; and hurdle rates (units sold per store per week … otherwise known as velocity); industry intelligence and reports as to what’s selling, and trend monitoring to see what’s new that’s selling that you’re not ranging. Note that seasonal products will have highly variable velocity rates.

At a more advanced level, smart operators also look at the cost of supply per brand and line item, the cost/benefit of a broad vs narrow range within a category, and build in space limitations.

In summary: explore your range of possibilities

With the foregoing in mind, have a think about:
1. Who is your typical shopper? What do they need?
2. What does your ranging point of difference and strategy need to be to appeal to that shopper more versus competitors?
3. What types of category and segment level additions or cutbacks would achieve this?
4. What changes do you need to make to your category mix and segment/product mix within categories?

We’ll be back in the next issue to talk you through how to then come up with the right range for the size of your available retail space … known as ‘efficient assortment’.

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

By ShopAbility for Retail World Magazine  

This is the fourth in a series of five articles about Achieving Retail Objectives from the team at ShopAbility. We have previously discussed Frequency and Inter-Purchase Interval, Average Weight of Purchase, and Basket Incidence (these articles are re-published here at www.sh-opportunity.com.au/news-articles if you missed them). The focus of this issue is driving Traffic to deliver growth.

What is Traffic?

Traffic relates to footfall – the number of shoppers crossing the store threshold in a given period (hour, day, week, month, year).

Essentially, there are two kinds of traffic: new and repeat. Traffic might be repeat to the retailer, but new at a store level. The importance of each changes depending on the kind of retailer. For example, given that 80% of Australian shoppers already frequent both Woolworths and Coles (based on proximity), it’s difficult to argue that very many initiatives will generate new traffic at a supermarket retailer level. However, increasing repeat traffic (ie increasing frequency) at a store level is a worthwhile goal in these outlets. As a supplier, if your category is a destination category, you can help to do this.

Who is responsible for Traffic?

In our view, creating new traffic at retailer level is largely the role of the retailer. They can do this by differentiating their retail offer and experience versus competitors in order to appeal to specific shopper types.

Driving traffic to the store is also largely the role of the retailer. It could be argued that it’s the retailer’s job to get the traffic to the store and the supplier’s job to help in providing the best experience at category, brand and product level once the shopper is inside. Ie

The line is blurred, however, for categories thought to be destination or traffic driving categories. There are also a handful of brands thought to drive traffic. For these categories and brands, suppliers need to consider their role in using their above the line and promotional activities to drive traffic to a retailer/store, as well as promoting brand purchase conversion in the store.  Destination categories and brands drive traffic at a store level and are thus important to retailers from a Spend point of view.

Suppliers therefore need to understand the role of their category within the store (destination, routine, convenience, impulse – and also whether it’s a traffic driver, frequency driver, AWOP or spend driver) in order to determine whether or not, or how best, to support their products with store-traffic driving activities.

In an environment where manufacturer brands are playing against private label brands, particularly in retailer store catalogues, in our view most suppliers need to focus their above the line marketing activity around brand building to generate brand conversion instore, and judiciously use above the line activity under specific retail drivers (traffic may or may not be one of them) once the category, brand and product opportunity instore is understood.

The more in demand your brand, or exclusive it is, the better you are able to argue it drives traffic (ie it becomes a destination).

Driving traffic to store is the retailer’s job, via catalogue promotions, other promotions and retail brand marketing.  Supplier brands may be part of the catalogue but are not solely responsible for traffic driving.

How is Traffic Driving built in to your KPIs and planning?

First cab off the rank here is to understand baseline store and category traffic vs promotional period traffic.

It may be worthwhile to include some shopper research in the assessment process. For example, instore observations on how many shoppers are shopping the category during the promotional period, versus off promotion baseline, in specific stores. These observations would also tell you purchase conversion rates (browsed vs bought) for both on- and off-promo periods.

Your measures for Frequency and Basket Incidence – if you’re using a Homescan product or similar – can also demonstrate repeat Traffic.

Why is Traffic Driving important?

Traffic is a critical retail driver. Assuming purchase conversion rates remain constant, and increase in traffic can equate to an increase in one or more of frequency, AWOP, and spend.

Understanding what drives shopper traffic is fundamental for any retailer. Their survival literally depends on it. If there are no shoppers, there are no $.

For suppliers, understanding what drives both new and repeat traffic to your category and brand enables you to help the retailer grow traffic to the store.

Traffic counting technologies assist in measuring footfall (although currently moves to differentiate new vs repeat shoppers via traffic counting are still in their infancy).  When measured store transactions, it’s possible to get a measure of conversion rates … and the size of the missed opportunity (the number of shoppers browsing but not buying, or abandoning planned purchase due to out of stocks or other reasons).

Traffic Driving applied to shopper behaviour

Traffic is linked to the drivers of individual store selection. Shoppers choose stores based on proximity, range, ease of shopping, value/price, occasion shopping for, and shopping trip type (mission), and special offers – in pretty much that order for grocery stores. (For other channels Service often ranks in the top 3 store choice drivers).

Proximity can’t be influenced but the rest can, and all do, influence traffic.

Improving store range and shopping experience is a long term retail goal and may result in increased store traffic over time driven by consumer preference.

The other drivers – range, value/price, occasion, mission, and offers are all tactical and thus easily influenced.

5 Ways to Increase Traffic

1. Catalogue promotions

• Bear in mind that this only appeals to a certain kind of shopper (price-driven) and that many shoppers don’t choose a specific retailer simply because they are going to save 5c on a can of tomatoes. However, catalogue promotions can be effective for specific shopping occasions (such as gifting or entertaining) and to promote new products. New products can help drive the buzz required to generate new traffic to the store, and to your category.

2. Loyalty programs & rewards schemes

• These are all about repeat traffic, and dovetail with your other retail objectives of Frequency and Basket Penetration. Mechanics offered for your product can be tailored to other retail drivers such as AWOP, eg ‘earn 3x the points if you buy two Product Xs’.
• Loyalty programs and rewards schemes can be used to drive traffic at specific days and times (typically to boost lower traffic periods)  by offering ‘double bonus point’ days. This works brilliantly for retailers in the USA such as Petco.

3. Day and day part promotions

• Shoppers often demonstrate their different missions and occasions by shopping in different day parts. An obvious example is the ‘dinner tonight’ shop which is most likely to occur between 4 – 7pm and accounts for between 10 and 15% of all shopping trips. Day parts are underutilized promotional opportunities in Australia. Specialty retailers in the USA do this well by offering additional discounts, extra products or more bonus points on specific days of the week or during happy hours (back to the old ‘red light specials’ that used to happen in the 1970s).
• Pubs have been combating downward traffic trends (a result of the GFC) by ramping up their day and time specific promotions. Not just happy hours from 5-6pm, t ‘$10 steak Tuesdays, ‘half price mussels all day Wednesday’ and other day and day part specials that drive traffic. Cheap movie Tuesdays also succeed at this. How can you use day part promotions in grocery and in the other channels you operate in, such as convenience? Some convenience stores in the UK change their entire front of store displays according to day part, in order to drive traffic.

4. New product development / release

• New products and releases drive traffic. Offering an exclusive launch period on a new product for a specific retailer ‘New X – only available at Retailer Y’ can help drive their traffic (but may obviously antagonize other retailers, so approach with caution).
• Specific packs for specific retailers may assist with traffic driving but only IF it’s a destination category, a highly desirable brand, AND the product is differentiated and/or value adding in some way.

5. Themed Promotions

• Examples include consumer promotions that offer value or experience in a way other than pure price, such as tie ins with movies, television, special events and so forth.
• Retailer specific themed promotions (not just packs) may involve one or multiple suppliers, and could be a category wide promo or against an occasion with multiple suppliers. An example is the recent Coles ‘Feed the Family for $10’ promotion.
• It’s important to ground these kind of promotions in a strong foundation of consumer and shopper research; understanding who your primary shopper is and what is likely to appeal to them.

Green light for proactive planning

Time to take a look at the role of Traffic Driving in your planning process.

Who is responsible for what? Ensure you understand the role of your brand and category in traffic driving – within store and/or to store, and adjust you above and instore marketing programs to suit.

Clarify with your retail partner what shopper missions and occasions you plan to appeal to with your traffic-driving initiatives.

And measure your impact through shopper research, so you can demonstrate to your retail partner that what you are doing delivers positive growth for their store.

Next time; Trial Management. In the meantime we welcome feedback from you. Email us at enquiries@sh-opportunity.com.au

For Retail World Magazine, 8 June 2009, by Norrelle Goldring of ShopAbility.

This is the third in a series of five articles about Achieving Retail Objectives from the team at ShopAbility. The first article introduced the concept of the key retail objectives being a 5-Way Multiple: Frequency, Traffic, Incidence, AWOP, and Spend. It focused on Frequency and Inter Purchase Interval. The second was about Average Weight of Purchase (AWOP) (these articles are re-published at www.sh-opportunity.com.au if you missed them).

The point is to marry your strategies with objectives that are relevant to retailers, demonstrating to your trading partner what the benefits of implementing your ideas are for their overall store. No in-store initiative can work without the buy-in of your retail partners, and understanding their objectives is key to gaining that engagement.

This third article is all about Basket Penetration and Incidence.

The final two in the series will cover:
4.      Traffic driving
5.      Trial management.

What is Basket Penetration?

Basket Penetration is a core retail driver.

Also called Basket Incidence, this objective relates to what % of shopper baskets your category or product is in. Different categories have different Basket Incidence. For example, in a supermarket, toilet paper might make it in to 90% of baskets. Dishwashing gloves might only make it in to a small percentage of baskets.

In other channels like Liquor stores, beer as an overall category might make it in to 70% of baskets but liqueurs only in 2% of baskets.

As a supplier, one of your key retail goals may be to increase the basket penetration of a particular product.

As a retailer, increasing basket incidence of profitable items can increase basket spend and overall profitability. Increasing basket incidence of a number of items simultaneously amounts to an increase in AWOP and transaction value.

Part of your strategy, then, may be to link increasing Basket Incidence of your product to other relevant goals for your retail partner.

For example; by increasing the basket penetration of your premium pet food product, you are also likely to be increasing total Basket Value and Spend for the retailer, helping them to achieve overall store profitability.

By increasing basket penetration of your pet food product, you may also be increasing the Frequency of shopper purchase in the category, thereby also increasing total category growth and value for the retailer, and possibly even frequency of visitation to the store itself if your shoppers become brand loyal purchasers and can’t get the product anywhere else nearby (that one relates to increasing Traffic – we’ll talk about that in later articles).

You will need to demonstrate to the retailer, however, that increasing Basket Penetration of your product is not simply cannibalising their sales of other products – demonstrate that your strategies will actually drive growth for the entire category and therefore the whole store.

How is Basket Incidence built in to your KPIs and planning?

Do you know what percentage of shopping baskets your product is in?  What about the total category? How are you represented versus competitors in shopper baskets? What is the basket incidence of your product, category segment and category cross-retailer – who is the benchmark, who needs to improve? Importantly, do you know why shoppers select your product or category for their baskets and what is likely to increase or decrease that behaviour?

You will need to demonstrate Basket Penetration targets for your category, brand and product, and an overarching strategy for how to increase this, through a combination of sustained initiatives over a period of time as well as short bursts of activity such as promotions.

You also need to demonstrate a CategoryVision which differs by retailer – what is the role of the category to that retailer and how do you grow it in their particular store versus their retail competitors. Collaboratively, you set targets and a schedule of activity that are appropriate for the store as well as for you as a supplier.

Why is Basket Penetration important?

Understanding Basket Penetration, and the shopper behaviour that drives it, is core to understanding the role of the category overall – to the shopper and to the retailer.

If Basket Penetration of a certain category declines over time, it is only natural that the retailer will rationalize range and allocate less space in store to that category. So growing Basket Penetration is important to make sure you stay ranged and still have retail space in the future.

Basket Penetration is basically a barometer for your overall relevance in the scheme of things. If your category is in 2% of baskets, and you are sharing that 2% with competitors, you can expect to be allocated ‘marginal’ status unless you have some strong plans to grow your category and product penetration amongst shoppers – or unless your category is such a high value category that its role is about value rather than volume. Even then, you still need more than marginal volume in order to deliver value.

Basket Incidence applied to shopper behaviour

In our last article on AWOP, we got into milk, in all its shapes and forms. Let’s do that again in the context of Basket Penetration.

What % of baskets is milk likely to be in if you’re in Woolworths or Coles? Probably close to 100%.

Let’s break the category down further then.

What % of baskets is skim milk likely to be in, versus full cream milk? What about calcium enriched, flavoured, A2 and non lactose milks such as soy and rice milk?

It all depends on the type of shopper, their household type, who they are buying for (themselves but also others) and what type of shopping mission they are on.

For example, long life milk might make it into a larger percentage of baskets of shoppers who are there for a stock up weekly shop; versus shoppers who doing on a quick top up (they might just get the skim for their coffee and tea).

By understanding where your product fits into the total category for the shopper, you can start to get a picture of how you might need to market in store based on shopping trip type and consumption occasion.

Last article we talked about flavoured milk as an often impulse purchase, where secondary displays near the counter increase purchase – well this also increases Basket Incidence for the entire milk category.

Checkout coolers can also work for milk as a quick visual reminder to shoppers that they need to top up.

What other things could you do to increase the Basket Incidence of milk? Well, you could introduce new pack variants to make milk relevant for more consumption occasions. Major milk companies that have released ambient tetrapak milk for lunch boxes, for example, have increased Basket Incidence in this way.

You could add a functional benefit (such as protein) to milk and have it become a meal or breakfast replacement, also increasing consumption occasion – and increasing the number of channels of distribution. Sanitarium did this with Up & Go – whilst they were growing their breakfast category into breakfast on the run, the principle is still the same – and it has been phenomenally successful in Petroleum & Convenience, a channel where Sanitarium did not previously have real presence.

Then of course you have all the dairy variations of milk such as yoghurt. Yakult have been clever in marketing the daily vial for intestinal health. This grows consumption occasions and therefore Basket Penetration of yoghurt as a daily consumption for health benefit.

And the list goes on!

5 Ways to Increase Basket Penetration

1. Secondary displays based on occasion and shopping trip type
* Your in-store marketing strategy needs to be well-thought out and address shopping trip types as well as usage occasions. What categories should your product logically have adjacency to – where is best fit for secondary display locations based on shopper behaviour? How can you use the secondary display to communicate to a particular occasion? For example, a secondary location of crackers next to dip speaks directly to the hosting / entertainment occasion. How is this being communicated via the display?

2. Consumer promotions & sampling
* Encourage trial and the conversion of new shoppers to your product via strong sampling and promotions strategies. Support your consumer promotions with relevant above the line activity and tie your promotions in across media and channel types (e.g. movies, gift with purchase etc). Utilise the queues at the checkout for sampling, since most people queue in a grocery store for between 6 to 10 minutes with little to do aside from browse magazines whilst there!

3. Price promotion
* Price promotion is a short-term solution to increasing Basket Incidence. Best used sparingly – make it relevant to specific retail occasions. If your category is appropriate for the gifting occasion, for example, make sure you have enough promotional presence during the major retail gifting occasions such as Christmas, Mother’s Day, Father’s Day and Valentine’s Day.

4. New product development
* NPD initiatives applied to product but also to format and pack type / size, based what shoppers and consumers need and what the category is not currently providing. Where are the gaps?
* Support NPD roll out with sampling and trial packs – a surefire way to increase Basket Incidence of your product
* Increase your pack size range to increase relevance for new consumption occasions.

5. Visibility, Display & Theatre
* Make the category, and therefore your product, more exciting to shop!  Collaboratively develop a category vision with your retail partner that improves the shopper experience in your category. Introduce some theatre, ambience, excitement. Shopping is often a dull chore (especially for groceries) and categories that make emotional connections can increase their chance of making it into more baskets.

Point 6 here, which should really be point 1, is ‘conduct shopper research’ to understand the drivers of the current level of basket incidence – is the issue in store or in home? Without doing this you have no proven basis for your initiatives.

Address the Basket Case

Time to look closely at your basket case!

Is your category and product compelling enough to make it in to a high percentage of baskets? How can you make it more relevant – to shoppers and to retailers?

How can you encourage trial and build new armies of brand loyal shoppers for your product? Do you really understand the drivers behind how your shoppers are shopping, and what they need?

Next time; Traffic Driving. In the meantime we welcome feedback from you. Email us at enquiries@sh-opportunity.com.au

In the second of a series of 5 articles about achieving retail objectives, ShopAbility discuss the key retail objective of AWOP; its applications for shopper behaviour, and how to leverage it for category growth.

Our first article  introduced the concept of the key retail objectives being a 5-Way Multiple: Frequency, Traffic, Incidence, AWOP, and Spend (this article is re-published here at www.sh-opportunity.com.au if you missed it).

By orienting your strategies around these retail objectives you grow your relevance and relationships to Retailers and Shoppers, thereby driving category growth and profitability.

While the first article focussed on Frequency and Inter Purchase Interval, today’s article centres on Average Weight of Purchase as a lever to drive growth.

Future articles will cover:
3.      Basket penetration and incidence
4.      Traffic driving
5.      Trial management.

In our experience many suppliers are not yet aligning their business strategies and operations clearly enough with retail objectives. These articles focus on specific retail objectives and how to use them for win-win growth for both you and the retailer.

What is AWOP?

Average Weight of Purchase is one of the key retail drivers.

AWOP:     Average Weight of Purchase refers either to the number of items in the basket, or their weight in kilograms or litres. A common retail goal is to increase AWOP, which can also amount to an increase in Spend. A common way to achieve this retail objective are promotions such as ‘2 for the price of’ and ‘3 for the price of’ to drive multi-item buys. Alternatively, promotion of larger pack sizes can result in a higher weight in kilograms or litres.

A related retail objective is Basket Value (also called Transaction Value).

Basket value:    Also called Transaction Value, this is the total $ value of all items in the basket. Common ways to increase this are encouraging the purchase of more items (increase basket size) or increasing the value of selected items via uptrade to bigger packs or higher value products.  Achieving this retail objective also amounts to an increase in Spend.

The relationship between AWOP and Basket Value

Increasing AWOP will either have no impact on basket value or will increase it.

The relationship between AWOP and Basket Value can be described in the table below:

Fig 1: Relationship between AWOP and Basket Value © Shopportunity 2009

The only way in which basket value would decrease when AWOP increases is to offer multiple items or larger sizes for LESS THAN the price of a single item or smaller size. This is a highly unlikely scenario and you’d only pursue this as a loss leader strategy short term share grab.

How does AWOP relate to Frequency?

In our last article we discussed Frequency, which is the number of times your category and product is shopped over a defined period of time.

What increasing AWOP and Basket Value essentially does is achieve more dollars or more items this trip, by either encouraging more items in the basket, or higher value items.

What increasing Frequency does is achieve the same dollars more often with more trips. The same dollars more often = more $ overall, over time.

Whilst the objectives are separate, one can negatively impact the other – see Diagram below.

Fig 2: Relationship between AWOP and Frequency © Shopportunity 2009

You need to find the balance between Frequency and AWOP as you can’t increase both at the same time.

How are AWOP and Basket Value built in to your KPIs and planning?

Do you know what the AWOP is for your category, subcategories and at brand level vs how your particular product performs against competitors? Do you know what the AWOP is in similar categories, and what shopper behaviour drives that?

Do you have plans to increase AWOP both strategically over time and tactically using specific promotions? Do you have clearly defined targets for both your brands and the retailer? Your relationships with retailers will strengthen to the degree that you have clearly defined retail objectives in your category, marketing and customer plans.

Why are AWOP and Basket Value important?

Because they have a direct relationship to dollars per shopper per trip. Increasing AWOP and Basket Value in a given category helps drive the top line for the whole store.

A key point with AWOP is that unless you marry your average weight increase with an increase in consumption for your category, you may merely bring sales forward, particularly in categories with non-expandable consumption. Great for short-term targets, but no real benefit in the longer term. How do you address this?

Understanding shopper behaviour and consumption occasions in your category is key. By increasing relevance through occasion-based marketing you can increase AWOP for the long term, not just the short term.

Let’s take skin care. Once upon a time, the skin care usage occasion generally involved three simple steps: ‘cleanse, tone, moisturise’. Now we have ‘cleanse, exfoliate, treatment, moisturise, protect ‘(from sun and ‘free radicals’). ‘Treatment’ as an occasion example can also include several products: masque, serum, pigmentation treatment, eye treatment, spot treatment; the list goes on. All of these specific purpose products serve to increase AWOP in the skin care category, by increasing the number of items in the basket. It is also likely that Basket Value is boosted through higher value items in the basket, such as the ‘treatment’ products. Another common way to increase AWOP in the skin, hair and personal care categories in general is via gift and multi-packs; buy the shampoo and conditioner pack for a value price compared to just the shampoo.

AWOP can also increase brand loyalty by expanding the range of products with which the consumer has a relationship (such as the skin care example). By demonstrating value with the shopper and consumer, either through value-based bulk packs and pricing, or more products in the basket, you create total value perception.

AWOP applied to shopper behaviour

Similarly to our last article on frequency, AWOP in a given category also 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.

Let’s look at milk. A family of four may default to a 2 or 4 litre carton of white milk in their stock up or top up shopping basket. But what about the occasions for different types of milk based on different family members? The adult female in the family may choose a 1 litre skim or lite option just for herself. If there is a mid to later life stage female in the family, she may opt for calcium enriched, also in a 1 litre. Children in the family may enjoy flavoured milks for occasions such as gut fill after school. These may be in 250ml packs, or even less. You may have a health-conscious member of the family that prefers to buy soy or long life organic milk from the ambient aisle.

By understanding all the occasions for milk in this particular family, you can increase AWOP substantially by promoting across the range to a single shopper, beyond just upselling to larger packs.

How would you activate against that in store? It depends on the channel. In grocery, you may think about secondary locations for different types of occasion. Flavoured milk, for example, can also be an impulse purchase as part of a top up shop, and may work on a gondola end or near the counter. Simply having your flavoured milk near the counter may increase the number of milk items in the basket from one (plain white milk) to two or three.

Last article we discussed how retail objectives need to be considered in relation to each other. You don’t want your increased AWOP to result in decreased frequency, for example. Again, this depends on the category and shopper / household type. Looking at milk again, by increasing the appeal of a range of milk options you are expanding the category, not just bringing sales forward and decreasing frequency.

The relationship between range and AWOP is critical in terms of increasing the number of items from the category in the basket. Therefore, new product development (NPD) can also be a key way to grow AWOP in your category. This can be especially effective if you are targeting a particular type of shopper and their profile. Back to skin care: the thirty or forty-something female shopper who cares about the way she looks, is concerned about aging, but is not likely to buy high-end products, may shop for skin care in grocery. Brands like Olay and L’Oreal play to this shopper brilliantly; producing a never-ending range of reasonably priced anti-aging skin care products that increase the number of skin care items in the basket, increasing AWOP, and increasing the $ value of items in the basket, thereby increasing overall Basket Value.

5 Ways to Increase AWOP

1. Increase the range of products and pack sizes shoppers can select, based on occasions
   • By increasing range, you avoid simply bringing sales forward through larger pack sizes for only one product
   • Offer a range of pack sizes for each product to increase consumption occasions (such as the 250ml flavoured milk for a treat or gut fill immediate consumption occasion versus the 2 litre white milk for planned stock up shop purchase)
2. Smart multi-buys across product portfolios
   • Instead of 2fors and 3fors of the one product, span your multi-buy promotions across a range of products so as to increase consumption rather than just bring sales forward. Example: shampoo, conditioner and treatment packs.
3. Trial pack promotions
   • Promote your newer or less popular products by combining them with your tried and true products in trial packs e.g. buy this doggie roll bulk pack and trial a free pack of doggie treat. This way you increase AWOP whilst growing the overall category and building brand loyalty.
4. Differ your AWOP pack strategy by household type
   • Have you considered all the types of shoppers that purchase your products and what kinds of households they come from? Don’t forget that people living in small spaces with limited storage can also drive AWOP buy purchasing multiple small, high-value items.
5. Introduce value and bulk lines
   • Introducing a value line in your category can increase AWOP through increasing kilograms or litres purchased.

Love your Weight

Let’s face it, the AWOP opportunity is one of the few times in life where you can enjoy increasing your weight, so do it with relish!

Think about your shoppers, consumers and retail partners. Think through the consumption and shopping occasions for your category, portfolio and products.

Identify the gaps; range, pack sizes, promotion strategy… what’s missing? How can shoppers be encouraged to by more litres or kilograms of your product, or more items from your portfolio? How will this contribute to overall category growth?

Measure where AWOP is now, in relation to your overall category and your company portfolio. Set a realistic target to increase it either through weight per item or number of items, or both. Develop a holistic plan across category, brand, customer and promotions.

Make sure you consider the 360 degree view, and how increasing your AWOP may affect other retail objectives such as frequency.

Then, enjoy your weigh-in … both you and the retailer will be The Biggest Winners rather than The Biggest Losers.

Next time, Basket Penetration and Incidence. In the meantime we welcome feedback from you. Email us at enquiries@sh-opportunity.com.au

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

Why zagging when the others zig will help you maintain traffic and profit in economic downturns

So we’re in an economic downturn, and shoppers are consolidating their shopping trips and becoming more value conscious. The good news is that alcohol purchasing remains fairly constant throughout economic peaks and troughs, so you don’t need to panic. Here are some thoughts on ways you can further minimise the impact of the current economic situation, without dropping your profit trousers.

Provide Perceptions of Good Value

‘Value conscious’ doesn’t necessarily mean shoppers change stores just to find the lowest price.  It’s unlikely you’ll be able to compete with the big guys direct on price anyway, as they have more buying power. And discounting heavily won’t necessarily bring more shoppers to your store as the number one reason people choose a specific store is convenience (location). All you’ll do is trade them down further, at a loss of margin to you.

What you need to provide shoppers with is a perception of good value, which can mean a number of things from the shopper’s perspective other than just the cheapest price:

• I got a good range of items for the total price that I paid (total basket spend)
• It’s in the price RANGE that I expect
• I got an unexpected bonus/gift/product/larger size for the same approximate spend
• It was a good use of my time (I learnt something; they treated me well; I got special service).

A number of these actually enable you to increase your average weight of purchase (AWOP), which leads me to .

Increase AWOP

Most alcohol categories have expandable consumption (that is, if they buy more, they consume more). This means that you can increase average weight of purchase without simply pulling sales forward or decreasing repeat visit frequency.

In addition, two-thirds of bottleshop ‘baskets’ are single item baskets – shoppers are leaving with the one thing they came in for, and not being suggestively sold to or buying on impulse.

There are a number of ways to increase average weight of purchase, the following is a selection:

• Multibuy and pick’n’mix type promotions
• Providing and communicating the saving when shoppers trade up to a case from a single bottle or 6 pack
• Promotions where the shopper gets more for the same (or marginally higher) dollars eg bonus packs, intermediate sizes, 20% free
• Train your staff in incremental sell, eg to ask something like ‘would you like a mineral water or a Coke with that’ (particularly with wine and dark spirits purchases respectively)
• Train staff to upsell, eg into a slightly more expensive product (particularly wine, where brands play less of a role than they do in beer) or into a bigger pack size
• Placement of sundries such as Coke and chips next to the checkout (considering you probably make more $ profit from a large bottle of Coke than you do from an on-promotion case of regular beer).
• Increasing repertoire/discovery within a price point (service)
• Accessible high end brands for gifting.

Maintain Traffic by providing reasons to visit you

As shoppers reduce their number of trip types, retailers are moving from competing for shoppers to competing for shopping trips. You need to understand the reasons why shoppers visit your store (what your retail point of difference is, and what occasions they are buying for) and play to those to provide reasons to visit, and repeat visit.
Get your positioning and range right
What’s your retail point of difference? What are you known for? You’re not going to be able to outgun the big guys on price so you need another differentiator.  Shoppers choose bottleshops based on convenience/location (close to work or home), good value (as discussed above), good range, and service in that order.

Whilst you may not be able to control your location, you can control what you range. Shoppers expect to be able to find what they want so ranging the biggest and best known brands is the starting point. From there you need to cover off a selected range within each category segment and across price points. But you can be known for a good range without having thousands of skus in the store (which serves to confuse rather than energise shoppers). Bear in mind that in beer around 60 skus make up 80% of the sales, in white wine it’s around 140 skus making 80% of sales and red wine it’s about 180 skus for 80%. In other words for beer and wine you can less than 400 skus in the store will be 80% of your sales.
Occasion occasion occasion
By communicating a range of occasions instore you provide shoppers with a reason to make you their one stop shop. Example occasions include ‘entertaining’ , ‘bbq’, ‘everyday quaffers’, ‘party’ , ‘dinner’ , ‘footy finals’ and ‘having friends over’. These occasions can be communicated on both point of sale and by arranging cross-category floor displays by occasion eg a BBQ Zone or a Party Zone, for instance.

Give them reasons to come back

• Do you provide reasons for shoppers to come back to visit you?
• Do you have a loyalty program? Or at least offers encouraging repeat purchase. Gloria Jeans and Baker’s Delight do this well with their cards and stamps.
• Create traffic by hold events, demonstrations, and tastings. Provide theatre and interactivity.
• Promote discovery and by providing and communicating what’s new. Could you do a ‘new releases’ area, or ‘Top 10’ at the front of the store, like music stores do?

By providing a reason to visit, a reason to come back, good range, good value and a good instore experience you will optimise your ability to weather economic storms.

Macro consumer & economic trends impacting shopper behaviour and how to leverage them

We are living in interesting times for retail. On the one hand we have a growing pool of high income earners and the ubiquitisation of luxury brands, and on the other a set of economic factors that are beginning to curb retail spend.

In this article we will cover the major consumer and economic trends impacting retail, likely changes in shopper behaviour, and implications for marketers.

The headline trends we will discuss are:

• Changes in household makeup
• Market polarisation and trade up/trade down, growth of the discounters
• Affordable luxury and masstige
• Health, wellbeing and obesity
• Sustainability and organics – the rise of the ethical shopper
• Economic slowdown, rising fuel and food prices.

Trend #1: Changes in household makeup – the role of segmented marketing

The facts:

According to Australia Scan, Roy Morgan and other sources, single person households are now nearly a quarter of Australian households, and 1-2 person households are nearly half of all households. The white picket fence, 2 adults and 2.6 kids (well, 1.8 kid) family still exists, but it represents under half of households, and only in certain geographic areas.

Men are increasingly shopping for themselves, with up to half of all grocery shoppers now male. Whilst the traditional ‘MGB’ (main grocery buyer) might be Mum shopping for the family in the mortgage belt, in inner-city areas shoppers are more likely to be singles of both genders shopping for themselves, or share households shopping together.

Implications for shopping behaviour:

Different household makeups have different product and pack requirements. Bulk packs are bordering on meaningless for DINKs living in small apartments with little cupboard space. Increasing average weight of purchase (AWOP) for small households living in small spaces might look like getting them to buy more units of a small item, rather than uptrade to a larger pack size.  The reverse is true for larger households with kids in the mortgage belt.

What marketers need to think about:

• Consider your portfolio strategy. Do you have brand and product offers catering to all relevant household types? Review your pack strategy and pack sizes by lifestage and household type.
• Explore segmentation with retailers. Understand how your category is segmented by shopper type and what products should be ranged where.

Trend #2: Market Polarisation – Trading up where I care, and down where I don’t

Facts and Behaviours:

Private label is reaching 20% of grocery sales, and Aldi is gaining momentum with approx 5% share of total grocery.

Shoppers are increasingly trading down on products and categories they don’t care about, and trading up in the ones where they do.

Trading up can be seen across a number of categories that are gourmet or involve entertaining, including coffee, cheese, dips, chocolate, pet food, and beer.

Categories with the highest involvement and degree of personal risk are the ones most resistant to private label.  Health and beauty (haircare, skincare etc) and pet food have so far proved reasonably resistant to private label despite the retailers’ best efforts as shoppers ultimately place more importance on the product’s efficacy (is it good quality/effective for my hair, skin, pet …) via strong brand associations, than the price.

Trading down occurs in low involvement, low perceived risk categories where the product is a (potentially invisible) component of a larger whole (think baking ingredients such as flour) or products in the category are perceived to all do roughly the same job. Papers, foils and wraps is such a category.

In addition, shoppers are more likely to trade down when products are for their own usage, and trade up when the product is for use by others, entertaining, gifting or special occasions.  I.e they trade up when image, indulgence, and efficacy are important.

What marketers need to think about:

• Marketers need to understand where on the trade up/trade down scale their products fit, and which types of retail channels they are therefore best suited to.  What kind of category are you in? What channels are your product categories bought in? You don’t have to be everywhere, just in the right places with the right product.
• Understand the usage of your product. Is it primarily for use by self, alone or by and with others? Is it predominantly for everyday occasions or special events and entertaining? What are the implications of this on likely trade up or trade down scenarios?
• Determine your private label participation or defence strategy. Is your category a candidate for private label (if it’s not already present)? Will you provide both branded and private label products? If you stay with branded products only, how will you position yourselves against private label – where do you stand on the ‘good, better, best’ scale?  How will you shore up your positioning with above and below the line communications to ensure shoppers select your brand over private label or other brands?

Trend #3: Affordable luxury and masstige = importance of getting into the consideration set

Facts and Behaviours:

Once-exclusive brands are becoming not only aspirational but affordable due to broadening retail distribution networks, lower prices based on economies of scale, and the advent of shopping tourism.  And it’s compounded by the celebrity culture and endorsements, and the access to ‘sneak peaks’ inside celebrities’ lives.

Once considered bastions of visible achievement reserved for the select few, it’s now not unusual to see 23-year-old team assistants sporting an $800 Louis Vuitton handbag or a $500 pair of Manolos. There is an increasing expectation that luxury brands be available to the mainstream, hastened by the advent of outlet malls and more recently premium outlet malls (such as those in Las Vegas), which sell luxury brands at heavily reduced prices.

This is placing downward price, positioning and profit pressure on other brands in specific categories.

What marketers need to think about:

• Determine the role of your category. Are you in an expressive category, which shoppers and consumers believe says something about them?
• Where do you sit versus other brands in the category? Which are the aspirational brands? How will you reinforce your brand positioning?
• What does this mean for your price positioning? How will you balance the aspirationality of your brand with the expectation that it be available, in at least some channels, at a reduced price? How will you balance price promotions so brand equity is not eroded?

Trend #4: Health, wellbeing and obesity – making it easy to be healthy

Facts and behaviours:

Australia recently overtook the USA for the world’s top spot in the obesity stakes, driven not just by poor diets but also lack of exercise.  School canteens in most states now operate on a traffic light system, ranking food and beverages and limiting their sale according to their likely obesity contribution levels.

Our work hard-play hard culture has created spin off indulgent ‘take time out for me’ behaviours ranging from couch potato-dom to the growth of indulgent products such as imported chocolates to eating on the run.  Consumers are rewarding their hard work with consumable indulgences. L’Oreal’s ‘because I’m worth it’ tagline perfectly captures this mindset.

The counter trend is age denial – ‘looking after me so I look good for longer’. This is evidenced not only in the growth of day spas and massage services, but also the mainstreaming of chemical and cosmetic appearance enhancements via Botox and elective surgery.

The proverbial sweet spot is in products and categories that deliver both indulgence and functional benefit without compromising their proposition (who wants a diet chocolate?!)  Not ‘Product X is now minus the calories’, but rather ‘Product X now has added goodness stuff to make you look/feel younger, your liver perform 10% better’ etc. Functional waters are a good example of this trend. Breads are now being produced with added vitamins and minerals. And functional products command a price premium at the shelf, providing you with a measure of protection against excessive price promotion.

What marketers need to think about:

• ‘Naughty’ categories don’t have to be black-and-white, opt in/opt out propositions. Indulgent products can be made ‘permissible’ with smaller pack sizes and portion control packs, and labelling that clearly indicates their functional and daily intake benefits as well as contribution to intake limits.  Such initiatives should be supported with both instore and above the line communications to create airspace between yours and competitors’ products.
• Consider the positioning of your product and category. Is it an out-and-out indulgence category whose proposition is clear and shouldn’t be sullied, or could it can have ‘functionality’ added to it?

Trend #5: Sustainability and the rise of the ethical shopper

Facts and Behaviours:

According to studies by the Natural Marketing Institute (NMI) in the USA, LOHAS consumers (lifestyles of health and sustainability) now number approximately 30% of all consumers. LOHAS shoppers are those for whom sustainability, environment and ethics are of primary importance when making product and brand selections instore.  There is another substantially sized shopper group for whom sustainability and ethics are of at least secondary importance.  Taken together we have a sizeable portion of the population for whom sustainability is now a major means of instore decision making – ‘ethical shoppers’.

This is playing out in the retail environment in the growth of traditional fruit and vegetable shops, and butchers, at the expense of grocery. The perception is that the produce in non-grocery stores is fresher, less chemically altered, has fewer ‘food miles’ from farm gate to store, and is more likely to be organic.  Further evidence of the growth of perceived ‘fresh’ is in the shift to markets and organic stores such as Macro, Harris Farm, and various farmers’ markets.

Whilst LOHAS consumers have higher disposable incomes, downward economic pressure means that suppliers and retailers won’t be able to charge a price premium for sustainable/organic products for very long – there will soon be a consumer expectation that sustainable and organic products are priced the same as ‘regular’ ones.  Organics are quickly becoming the cost of entry for a sizeable proportion of shoppers.

What marketers need to think about:

• How to make products and packaging sustainable – both environmentally and economically.  Impacts of this and other organisational sustainability initiatives on product labelling.
• Communication of your sustainability propositions at shelf and above the line – and quickly, for first mover advantage.  We anticipate there is only a 6-12 month window where sustainability will be a point of difference, and that from late 2009 it will simply become a way of doing business.
• Over time, ensure labelling, sustainability practice and messaging and organics are communicated across every point of engagement as a lack of sustainability initiatives and messaging will become barrier rather than source of competitive advantage.
• Reconsider channels to market for fresh and food based products. Think about where ethical shoppers are shopping – it’s not just traditional grocery.

And the big one that’s beginning to bite now …

Trend #6: Economic slowdown – making every shopping trip count

The Facts:

Economic events outside the control of the everyday household such as interest rates, the highest inflation levels in 20 years, the housing bubble, rents, personal debt levels, stock market volatility, the cost of energy, petrol and food price climbs of 5% p.a. all combine to mean that shopping behaviours are modifying to meet the new economic climate.

Cost of food is increasing due to drought, climate change and dwindling supply, and it’s not temporary. Some categories, such as rice, have stock limits and allocations.

Recent findings from Nielsen in the US show that:

• More than 50% are eating at home more and eating out less.
• More are entertaining at home
• More are taking lunch with them
• 63% of American consumers are reducing their spending to compensate for rising gas prices
• More than 7 households in 10 (72%) are ready to reduce spending on household necessities if economic conditions worsen
• 78% combine shopping trips and errands
• 39% stay home more.

Changing what they buy:

Shoppers are becoming focused on buying what they have to have, as opposed to buying what they want to have. People won’t stop using toilet paper, but they will stop using other discretionary products and brands.
Responses from a recent Unilever US survey indicated some interesting behaviours and attitudes towards the future purchase patterns in certain categories during economic slowdown.

The top 5 categories shoppers would stop buying were largely discretionary and included air fresheners, cookies, beer and wine, frozen dinners, and soft drinks.

The top dozen categories shoppers would not abandon were those covering food, household cleaning and personal hygiene necessities. These categories included deodorant, batteries, canned veges, fresh meat and seafood, hair care, household cleaners, laundry detergent, margarine, pain relievers/cold medicines, soap and personal washes, pet food, and toilet paper/tissues.

Changing How They Buy:

There are three major consumers trends occurring that vary by income:

1. Those making under $40,000 a year are redefining what goes into their shopping baskets and where they shop. They’re finding ways to stretch the household dollar by going back to just the essentials, effectively trading down to different cuts and different qualities of product. Also promiscuity is growing as they hunting out bargains and low prices to stretch even further.
2. The mid-tier consumer in the $40- $100,000 income range is “selectively deselecting”. They’re choosing to buy cheaper products in low emotion categories but are willing to keep the little indulgences that make life that little bit easier.
3. Those earning $100,000 and above are changing their priorities about which products they buy as well as the brand and unit price. Do I really need to spend $50 on a bottle of wine for dinner or can I get away with a $25 bottle?

Price has become more important to a broader range of shoppers. Being a “smart shopper” is becoming a necessity for more and more American families. So, how are they reacting to this changing environment?
In an economic slowdown there are a number of predicted shopper behaviours:

• Trading down – searching for lower priced sub-brands and house brands to stretch the household budget even further
• Specials – buying products on special, or deferring purchases until the products come on special, cherry picking from catalogues as well as pantry stocking when products are on sale.
• Value mining – hunting around the whole store for other value based options in other categories. Buying pasta instead of rice, beef instead of chicken for example
• Attracted to outlets with a fuel docket offer
• Reduce overall spend on everything, some categories to a great degree others to a small degree
• Fewer small basket quick trips as people conserve fuel. Consolidated shopping trips – swing back to stock up missions to conserve fuel. Quick trips are 70% of all baskets and the fastest growing profile so the effect will be strong
• Move to the internet to make purchases (>$100k p.a. profile) with non-food and general merchandise lines making up most of the basket
• Cherry pick for specials across the retailers
• Pantry fill specials, particularly high SKU value non-food items such as laundry
• Just stop buying that specific brand
• Moving consumption behaviour back to the home, forsaking restaurant and take away meals for meals prepared and eaten at home

Changing Where They Buy:

Shopping trips are less secure in today’s environment. One consumer in four (24%) would shop for groceries in a less expensive store if food prices continue to rise.  Store repertoires are therefore widening, with increasing disloyalty and promiscuity.  If shoppers are increasingly looking for the best deal, how will retailers create store loyalty?

As the economy and retail spending tightens, trading down will also occur at a channel and store level, not just within/across categories or among brands.  Shoppers will shop locally to conserve fuel and ‘food miles’ (this ties back into the sustainability/fresh fruit and veg trend). Aldi will get a huge kick along as will Costco when they open. The dollar discount stores such as Reject, Crazy Clarke’s and Go Lo will do really well. The Victorian based NQR stores will thrive in this trading environment.  Some of the small privately held clearance shops and chains such as Cunninghams are trading very briskly.

The Petroleum & Convenience channel will struggle as the queues get longer and people want to get out of the store that is associated with extra $ spend. Impulse milk, bread and snack sales have already started to slow.

There is a definite trend to eat at home as well, which will assist Woolworths and Coles. The smaller local retailers could possibly get a double benefit, firstly from the eat at home trend but also to local/ short trips to save fuel – and add the healthy aspect of home cooking and they may just be on a winner!

What marketers need to think about:

• Review your channel strategy with regard to holistic vs promiscuous shoppers. The game is not just about grocery in the future. Could some of your products and brands be ranged in discount stores and warehouse clubs? How important is the Petroleum Convenience channel for your products? Which baskets do your eggs need to be in?
• Reconsider your category’s role. Is it a discretionary or necessity category?. If discretionary, how will you maintain relevance? If a necessity category – see the trade up/trade down questions around the role of brand vs private label.
• Consider the role of trade spend, and managing a positive return for the investment without eroding brand equity. If shoppers continue to trade down, two levers may well be applied: 1. Applying the spend across a wider range of products with a smaller price drop – again to leverage shopper in-store perceptions and to maximize the spread of products on special, or 2. Focussing the discount to create stunt price points. This has already been happening for some time, but the temptation to do it may prove irresistible.
• Ensure you have a rock solid new product launch sell story and rationale for retailers. In this environment, the role of Brand development for suppliers becomes crucial as range extensions, or repackaging and new product development will have higher and higher performance criteria to achieve as retailers want more from less. The usual balance will be disrupted possibly permanently as retailers become more critical about the returns they are getting (or not) from untested products.
• Consider how you can assist retailers to help their shoppers stretch their grocery dollars. Examples include Whole “The Real Deal ” catalogues, and a friends and family discount card program for repeat purchases to encourage store loyalty.

What is a category plan? What isn’t it? What goes in one, how do you go about constructing it and most importantly, how do you get traction on it?

It’s that time of year again for many suppliers – annual planning time. Yet many suppliers have category plans that are in-store tactical expressions of the brand or individual customer plans, rather than category plans in their own right. Based on discussions with a number of you recently, we thought it topical to provide some thoughts on best practice category planning.

Why have a category plan?

Category plans provide a common platform and overarching framework for all marketing, channel and customer activity. A good category plan helps you:

• Grow the entire category and over-index in your share of that growth
• Take category leadership and expert position with retailers
• Provide an overarching vision and platform for all activities in the category
• Weld functional teams (sales, marketing, category/trade marketing)  and plans (marketing, category, customer) together
• Acquire, and demonstrate, in-depth category understanding
• Identify and go after the big plays for maximum growth.

Good category plans and strategies that have business-wide engagement are capable of re-engineering the business and the way it goes to market.

What is a category plan?

A future focussed strategy that covers the entire category, and all players, in it. The chart below illustrates the key characteristics of category plans.

But isn’t that what a category review is?

No. Category reviews historically have been about analysing yesterday’s data to provide tweaks for today for range and space, and introducing new product ideas to the retailer at a time that suits them. Whilst category reviews are an opportunity to showcase and update the latest consumer and shopper insights, review category trends and impacts for the category, ideally the reviews should be conducted in the context of what the broader category plan is.

Category plan scope

So what goes in a category plan? Many of the same in-store drivers you see in a category review, but at a much higher level and incorporating consumers, shoppers and channels at a macro level.

The structure of a category plan is pretty similar to that for a marketing or business plan e.g.:

Vision: a simply expressed future focussed goal for the category (not the supplier) e.g. ‘healthy breakfast everyday, anywhere’ or ‘a white wine for every occasion and palate’. Visions are mostly expressed in consumer and shopper terms and indicate what the growth drivers are likely to be. Range, space, price, display and promotion are all levers that can be pulled to achieve the Vision, but are rarely visions in themselves.

Mission/objective: quantification of what achieving the vision is worth in volume and value terms for the category, and then for the supplier

Definition: a clear definition of the category and its purpose, and the key segments in the category from the shopper’s perspective

Strategic pillars: strategic pillars cover a combination of consumer, shopper, occasion, channel, and in-store platforms to achieve the Vision.  The actual pillars will vary by category. Sales and Supply functions are generally (but not always) enablers of the category plan rather than pillars in themselves. Some pillars may be more in-home than retail focussed, e.g. ‘get into the pantry’ or ‘increase pantry stock’ is an in-home strategy, but the resulting tactics will be in-store focussed (and in this instance likely related to price and promotion).

Tactics: supporting the pillars, these are the top line activity implications of the pillars such as major adjustments to space and layout; range e.g. specific pack, product, or product line introductions; major changes to price and promotional strategy; working with related product suppliers; in-store marketing and retail marketing mix; focussing on specific store drivers or areas of stores; store staff incentives etc.

Enablers: one or two lines on people, capability, financial and supply resources required to achieve the strategic pillars. Examples include ‘25% field sales force increase’, ‘new plant ‘, ‘route to market reconfiguration’. Enablers are the things without which the tactics cannot happen.

Constructing the plan and getting engagement

Category plans should form an integral part of the overall annual business planning process.

However, typically most suppliers have brand and individual customer plans, developed in parallel but often not mutually, that are then turned into in-store tactics. The chart below demonstrates this.

In the integrated model, the category plan is developed at the same time as marketing and channel plans, and there are cross functional joint workshops and input to ensure relevance and consistency, per below:

In the integrated model, the initial analysis and insights and analysis is performed by each function but the outputs are jointly shared. In reality this middle stage will normally go through several iterations and workshops.

The inputs into the category analysis are also prepared by various cross functional teams, covering category, channel, consumer, shopper, product and pack innovation, point of purchase activation, price, profit, promotion, communications and media. The trick here is to stay topline and stick to macro trends and implications rather than analyse the nth degree out of something (which will simply yield a tactical change but not a strategic one).

The strategy workshops are used to share and agree the topline implications and big ticket opportunities, and likely strategic pillars, for each type of plan. Once the strategies are agreed the plans are taken down to tactical, operational level by the relevant functions and budgets set.

For the customer plans, this also involves building a category story for retailer engagement. This story then becomes the referral point for all future category reviews, with subsequent range and space recommendations put in the context of the overall category vision and strategic pillars.

The above assumes that your first go at a category plan is as part of the annual planning cycle.
However, if your next annual planning cycle is a way off you should still build the basic category plan using the format described above as an initial, cross functional exercise, and then revisit or slot it into the annual planning process.

The sooner you have a category plan in place the sooner the business can start kicking growth goals, rather than being mired in tactics.

For more information on how to construct category and channel plans, and implement new category strategy, contact us at enquiries@shop-ability.com.au