From our recent article series on leveraging retail objectives and point of purchase drivers in pharmacies, it should be evident that pharmacies are retail environments, albeit with a strong service element.

In our followup article series, over the next 12 months we are going to look at the role of service in pharmacies and how various pharmacies differ and what this means for execution by pharmacy type.

We thought we’d kick off with an overview of where pharmacies are different from, and similar to, other retail channels, so you can see where this will start to lead for differing areas of focus depending on who and what type of pharmacy you are.

Trip types by retail channel

Below is a brief summary of some typical missions by retail channel. You will see that whilst there is some overlap on trip types (eg a destination shopping trip may occur cross channel, but the categories will differ), different channels have trip types (shopping ‘missions’) that are almost unique to them.

(please note: click on the below to open up the table – too large to insert in to this post)

RetailPharmacy Table

You can see from the above that whilst there is some overlap in trip types across channels (eg top up, gifting, entertaining) the categories selected are different.

So where do pharmacies sit in all this?

As discussed in some of our previous articles, the major trip types for pharmacy shoppers include Script Fill (acute and chronic ailments), Distress/Emergency (pain relief), Health, and Destination/Specific Item (eg weight management, cosmetics, orthopaedic shoes). Some gifting (cosmetics, skincare) trips. All of these are health (intrinsic) and beauty (extrinsic) related one way or another.

Pharmacy is known for its service, advice and professional trust. Pharmacists are one of the most trusted professions aside from ambulance drivers. The importance of trusted advice in pharmacies is amplified because of the intrinsic, complex, unknown, unfamiliar, and potentially risky nature of health related categories and products to most shoppers.  Pharmacy is unique in its dispensation of prescription drugs and range of over-the-counter preparations.

Most retailers are based around one or more of 3 core propositions: Range, Service, and Value. (Also operational efficiencies, but that’s back of house rather than shopper facing).

Using the above table and the Range, Service, Value equation, this means that the Pharmacy channel’s true competitors are:
Grocery: for H&B aisle (haircare, skincare, pain relief) and Vitamins. Price will probably be lower in Grocery, range will be different (no ‘professional’ products, and probably breadth across category segments but no range depth meaning brands will be different) and obviously Grocery has no service element. In fact most shoppers view shopping in grocery somewhere between a necessary evil and a chore.
Health & Beauty specialists: for beauty based items (rather than health ones). They will probably have more haircare and skincare products (broader range) than pharmacies as this is their focus. Whilst they can offer advice from a beauty point of view, they do not have a health & wellbeing focus.
Department stores: similar to Health & Beauty specialists, their focus is on Beauty range, with elements of service (cosmetics applications etc). Very little focus on health and wellbeing.
Convenience: pharmacies have very little overlap here with the possible exception of emergency bathroom and feminine hygiene products, and even then that’s 2/5 of not much. Not a channel for pharmacies to worry about.
Route (mixed business): as per Convenience. Not a pharmacy competitor.
Specialty retail, liquor, hardware: Not a pharmacy competitor. Hardware, when done right (and potentially wine specialist bottleshops) are the only channels that even come close to the expected (and delivered) service that a pharmacy has.

What should be clear from the above is that although Grocery, Department Stores and Health/Beauty specialists can compete on range (and sometimes price) for beauty (and selected health) products, they don’t have the health and wellbeing range or service/advice focus that pharmacies do.

There is not necessarily an expectation that the average pharmacy has to provide exceptional price, as shoppers compute ‘Value’ on the service received as well as range and price. Yes pharmacies with the exception of Priceline may be more expensive than grocery – and pharmacies are never going to be able to compete with grocery on price because you don’t have the same buying power – but the role of pharmacies is to get trial … basket incidence. And for prescriptions, repeat traffic. Service and advice means the shopper may come back to you for repeat purchase for non-drug categories (rather than just going to grocery for repeat purchase because it’s cheaper).

Owning a Proposition

So what Pharmacies can own, that nobody else can, is their persuasive service, trusted advice and health/wellbeing product range. The real opportunities for Pharmacies are not to try to compete on price but to leverage their health services and advice offers to drive traffic and to increase trial, incidence and spend.

We’ll be looking at how to do this, and what to dial up or down depending on what sort of pharmacy you are, in more detail in subsequent articles.

Until then!

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 .

There are already some interesting findings coming out of our intial industry interviews, and we expect to be running workshops in July to work through the findings – stay tuned for details!!

You can support the benchmarking study further by forwarding 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!

From the outset let me state that this store has only opened stage one of a major refurb so the comments are not based on looking at a complete “new” store, but on one where there are still builders walking around looking busy, hoardings and plastic sheets covering the next stages and a centre store Grocery area that is yet to be touched.

But the word on the street is that this refurb is Woolies response to the Coles refresh program, so looking at the first stage as an indicator of what is to come is a fair and worthwhile exercise and relevant for industry discussion, especially when it covers most of the Fresh depts – and they are the key depts in a Shoppers mind that they use to determine their store of choice. So from a rollout/ on-going perspective this store is an important indicator of the evolving competitive playing field.

Also Woolies are using their local Shopper data base to publicise that fact that in their view certain of the Fresh Depts are open for trade and in their “final” positions and layouts etc .

New fresh departments at Woolworths Caringbah
Hi XXXX,

We’ve got some great news about the renovations at Woolworths Caringbah! Our new fruit and vegetable, deli and seafood departments are now open.

The new market-style fresh produce department is now lighter and brighter with wider aisles, giving you a better view of our delicious, quality produce and our great specials that you can enjoy every week.

There’s an exciting new deli with a greater range of local and international gourmet cheeses and delicious fresh cooked chickens. The seafood section now brings you live mussels – nothing comes fresher than that!
Thanks again for your patience during the renovations, and don’t forget to visit to take advantage of your 50% extra Qantas Frequent Flyer points offer!

We look forward to seeing you in-store soon,

Kris
Store Manager
Woolworths Caringbah

So game on for us to comment!

Looking through the obvious refurb mayhem, this store does not have the theatre or the market feel in the Fresh depts of the new Coles stores, it is certainly not a generation or two ahead.

They have moved and centralised Cheese and Smallgoods from the Dairy to the front of the Deli area, Proprietary Bread will obviously join in store Bakery at the entrance when it opens and they have used new fixtures, signage and educational prompts in Produce.

Plus fine tuning/ new locations/ new fixtures for Seafood (live mussels) and Hot Chickens, one small demonstration cooking table and another small table at the front with assorted fruit for sale at 0.50c a piece targeting kids.

Meat is in the back left hand corner and is yet to be finished by the look of it. Macro is present with an organics Produce range – they had 21 SKU’s when I was there.

The Produce black boxes are also absent, with stock now being hand packed onto the new style of fixtures that are quite small compared to the usual Woolies store and to the new Coles offer. The Produce wall on the right as you enter looks great, plenty of colour and the housekeeping was excellent, as you would expect with all of the staff walking around, they needed something to do!

The Deli, Seafood and Poultry cases were in one straight line, with some excellent graphics on the walls behind the Depts.

But again, most of what was there had been done already and it is felt that with the changes they had lost that bulky, chunky market feel in Produce which is the most important Dept for Shopper impact and perception. Deli/ Seafood and Poultry depts. were quiet clinical in the feel and visual personality.

But at least they had some cross merchandising using small Woolies branded wooden barrels, unlike Coles that still don’t use them to add some Grocery colour to the Fresh departments and target the impulse sale / increase transaction value.

The above may change when it all comes together in July and the whole store is complete – I look forward to returning for another visit, I may be mistaken, but on first glance this offer is very good, but not ‘step change great’.

The Shopper Marketing survey interviews we’ve been conducting during April are consistently identifying two key instore marketing areas of opportunity: occasion based solutions and instore theatre.

The major Australian grocery retailers’ relentless focus on clean store policies, particularly in centre store, is all well and good from an ease of shopping point of view. But an easy shopping experience isn’t necessarily a fun, exciting or enjoyable one.

Occasion based solutions and instore theatre provide a sense of delight and discovery that not only increase basket size but generate store and retailer loyalty by providing a genuine point of difference.

Following are some examples from overseas markets to demonstrate what can be done, with a few Australian iterations thrown in for good measure.

THEATRE STARTS OUTSIDE THE STORE

Westfield’s global retail tours highlight the creativity employed to draw traffic to store. The giant Louis Vuitton suitcase enveloping the Louis Vuitton store in New York comes to mind.

Figure 1. Just Sports exterior, Dallas, Texas

Figure 2. Whole Foods market, Los Angeles. Flowers and plants out front signify ‘Fresh’.

Outdoor chains in the USA such as Outdoor World, Bass Pro Shops, and Cabelas (the US versions of BCF – Boating Camping Fishing, except that they include large hunting departments) start the theatre outside the store with hunting trophies and stuffed animals. At centre store are huge dioramas of stuffed wildlife – deer, bears, mountain lions etc – as well as aquariums with live fish. These dioramas serve as points of navigation, dividing departments.

The stuffed animals ironically continue to ‘bring products to life’ at shelf.

Figure 3. Stuffed animals ‘enliven’ hiking boots in Bass Pro Shop, Nashville, Tennessee.

THE THEATRE OF FOOD – INSTORE FOOD PREPARATION

Mainstream and premium grocers in the USA ranging from HEB to Whole Foods to Bristol Farms increase their food sales margins by preparing food instore in front of shoppers.
At Whole Foods, for example, you can order your salmon cooked to specification.  At Bristol Farms you can sit in the coffee shop located in the centre of the store. Foodland Adelaide’s Finest at Fairview Park is doing a version of this with its instore cafe and takeaway coffee.

Some grocery retailers such as HEB have a chef’s corner (eg HEB’s Cooking Connection) where they not only prepare recipes of the day and display ingredients and complementary products, but also provide advice, effectively acting as an instore salesperson.

Figure 4. Cooking Connection in HEB, Fredericksburg, Texas

Feels like this is a natural extension of the Feed the Family and Curtis Stone programs in Coles, if they chose to go there.  Other Australian examples include SupaBarn in Canberra City, where they bake the bread in front of you (impulse sales based on the fresh bread smell alone!) and again Foodland Adelaide’s Finest, who have a chef’s corner.

THEATRE IN AISLE

Providing theatre in aisle and at shelf increases basket incidence of multiple categories by attracting top up shoppers who may otherwise only shop 1 category per aisle or second aisle. Australian examples of using fixturisation to increase category incidence include the much-cited and award winning Cafe At Home project from a few years ago. Below is an example of how Whole Foods approach the coffee ‘fixture.

Figure 5. Coffee ‘fixture’, Whole Foods, Los Angeles.

Figure 6. Craft beer tap handles in Old Chicago brewpub, Denver, Colorado

In US brewpubs (chain and independent pubs ranging many specialty and craft beers) the beer taps are centre stage, with the tap handles the engine room of discovery.

OCCASION BASED SOLUTIONS: SECONDARY DISPLAYS

One of the retail issues in the Australian market is that retailers are selling products, rather than solutions. Bunnings is a classic example, where by attempting to maintain a ‘warehouse feel’ they are missing the ‘this goes with that’ solution nature of the hardware category. Sure they have floor stacks in aisles, such as hammers where the nails are, but true solution based displays, eg ‘I’m building a deck, what are all the things I need?’, are thin on the ground.

Occasion based solutions, such as all breakfast elements (milk, bread, spreads, cereal etc) being placed together can drive AWOP as they increase the number of items in the basket.

However, for logistical, political and buying structure reasons, retailers aren’t going to just up and relocate a number of categories’ primary locations to group them together.

But shopper focussed solutions such as dinner tonight, lunch on the go, and entertaining can still be catered to with secondary and offlocation displays. (A nod here to Coles, where some of their renewal stores include a Food To Go chiller case). In the UK, pharmacy chains such as Boots and Superdrug offer food-to-go solutions in front-of-store chillers.

Figure 7. Food To Go area at Coles St Agnes, Adelaide SA

Figure 8. Takeaway Soup & Sandwich display, Whole Foods, California

This is the model being pursued in the USA, where smaller grocery and mass merchant suppliers who wouldn’t normally get an offlocation display look-in are banding together with complementary larger players to achieve impactful solution based displays.

Traditionally behind Australia in offpremise liquor execution, the USA is starting to catch up with a couple of ‘big box’ liquor chains gaining scale. Both Total Wine and Bevmo understand liquor consumption occasions. Aside from substantial gifting offers including boxes, bags, cards, glassware, wine openers etc in dedicated areas instore, they also play to entertaining occasions by ranging specialty cheese and gourmet crackers.

Figure 9. Cheese and Crackers unit in Bevmo, Arizona, USA. All that’s missing is the soft drink and mineral water.

So there are a few examples. Now that the basic ‘hygiene’ elements are in place, it’s time for Australian retailers to pick up their game.

We’ll discuss the role of interactivity and instore education in subsequent articles.

SHOPPER MARKETING SURVEY – HAVE YOUR SAY BEFORE TIME RUNS OUT

POPAI and ShopAbility are currently running the first industry benchmark study into the status of the Shopper Marketing, Category Management and POP functions in Australia.
Interviews have been conducted and now is your opportunity to have your say in the online survey, closes June 2. Participation is free, and study participants will receive a summary of the findings. To participate go to  http://www.ys3.net.au/surveys/5/y100514register.asp

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

In discussing promotion in last month’s issue we talked about ‘making the punishment fit the crime’ – that is, matching the promotion mechanics to the objectives you’re trying to achieve.

Here we’re going to discuss in more detail how you can best support a promotion based on its scale, objectives and mechanics.

DETERMINE HOW MUCH TO SPEND BEFORE YOU START

What’s the promotion worth to you – what sort of Return on Investment (ROI) are you looking for?
Based on your promotion objectives, is the promotion expected to increase sales or is it a ‘cost of doing business’ based on a broader strategic objective?
This determines how much you should spend.
If your objective is to increase sales of product/brand/category X by Y% over Z timeframe, you need to figure out how many incremental dollars (revenue and gross profit) that’s worth to you.
You can then decide for every extra dollar you make on the promotion, what portion you want to spend on supporting it.
It’s a bit like sponsorship … in successful sponsorships, for every dollar spent on sponsorship naming rights, generally a further $2 or more is spent on support.
Determining your budget comes back to the scope you have set for the promotion – how many products/brands/categories it is running across and how long will it run for.
Shouting works better than whispering in retail environments – if they don’t know about it, they won’t buy it, so you need to have enough budget to shout a bit. Spend too little on support and you’re dooming your promotion to failure. Spend too much, even if on the right things, and you may get great retail KPI results on traffic, frequency etc but lose money in the process.

TYPES OF PROMOTIONAL SUPPORT

Traditionally, retail promotions are supported by one or more of the following depending on their scale/scope:

* Advertising: radio, TV, print media, online, digital eg SMS, email, social media eg Facebook and Twitter
* Point of sale: shelf ticketing, posters, header cards, counter cards etc
* Catalogues
* Displays: in-aisle, co-located with another category, gondola/aisle end displays/standees and ‘spectactulars’, additional offlocation displays (often in standees or ‘dump bins’); impulse displays at counters
* Sales staff incentives
* Mechanic oriented POS: eg scratch cards, loyalty cards

Or you might come up with something else or some additional types.

Generally, better results are achieved when support mechanisms are combined rather than expecting all of one support type to do the work.

Advertising and broad based out-of-store activities are generally designed to drive traffic to the store. Some retail objectives can be executed very successfully using instore execution only, without any out-of-store activities.

The trick here is to figure out the right balance based on a) your budget/ROI, b) your objectives, and c) scale/logistical capability based on how many stores it’s going to be in. The store and your customer database should always be your starting point (better to be instore with no outside advertising than to have out of store advertising but no instore execution).  The size of the available budget and the potency of the offer will dictate how much instore vs out of store activity you do.

An example of this might look like the below (this is indicative, not exhaustive).

Figure 1: Determining support types for your promotion.  © ShopAbility 2010.

EXECUTING YOUR PROMOTION

As alluded to above, certain parts of the store should be executed irrespective of promotion.  A suggested model might look a bit like this, where the target’s ‘bullseye’ is where you start:

Included in ‘other areas of store’ are Dispensary Counter, Checkout Counters, co-locating the product in another category aisle, front window displays, front of store sale tables/dump bins, staff & incentives.  The importance you place on each of these will depend on the product/category type and the promotion mechanic. Eg if it’s a mechanic and a product that’s suitable for impulse you might put in on the checkouts and in front of store dump bins.

The areas of the store in which you execute the promotion also tie into the RSVP3 point of purchase drivers:
Range:            What products are you promoting, and with what other products?
Space & Layout:     Do you need to change the space or layout of the category you are promoting in order to ‘face up’ the promoted product? Do you need to put the promoted product next to something else instore also (related category)?
Visibility & Display:     How many points of visibility will you execute around the store? How many displays will you have (see ‘Other Areas of Store’, above). Note that ‘stock sells stock’ in a lot of instances. The more stock you have, the more noticeable the display/promotion is, and the bigger the brand looks. (However you don’t want to order so much stock in you’ll never move it all … you can be smart here by putting empty boxes on display). Stockweight on a display should at least equal the amount of POS (header cards, posters) on any one display. Displays shouldn’t be POS heavy or obscure the stock.
Persuasion:    What’s the role of staff upsell, companion sell or incentives in persuading customers to take up the offer?

GETTING THE MESSAGE RIGHT

As a general rule, point of sale for promotions should read, from top to bottom in order:
1. Incentive/offer/prize
2. What the promoted product is (specifying pack sizes, if applicable)
3. How (mechanic).

It needs to be kept as simple as possible, an example is below.

There needs to be a clear call to action, retail oriented (not the above-the-line advertising slapped on a poster) AND it needs to survive the ‘3 second walk past test’.  Ie because the POS is going to be in environments where shoppers are moving, you need to be able to walk past it yourself and digest the message in under 3 seconds. So keep words to a minimum. (All the promotion terms and conditions can go in very small at the bottom of the poster).

Message Hierarchies using the ‘Path to Purchase’

In principle, the closer a shopper gets to the product, the more detail should be available. (Or the further away they are from the product, the simpler the message needs to be).

This means that while the message remains consistent, the level of detail on the POS changes according to where in the store they are.
The level of detail also changes according to the size of the POS. It’s no good trying to fit War & Peace on a shelf ticket, or lots of small font detail in a window poster people walk past. For example:

Externals/Windows:             WIN + prize + product shot (no mechanics, just ‘see instore’)
Display signs, pallet headers, posters:    WIN + prize + product shot + mechanic (T&Cs down bottom in small print)
Wobblers at shelf:            WIN + prize + product shot (mechanics on back).

And as a final thought, you might be able to tie the promotion into an overarching retail occasion (Mothers Day, Fathers Day, Christmas) or a consumer occasion such as Back To School.

So that’s Promotion support.  Next time we’ll take a look at the role of store staff persuasion and how different selling techniques can achieve different things.

Till then!

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@shop-ability.com.au

Our previous article on shopper insights, way back in January last year, looked at deriving applicable findings from shopper research.

This time around we thought we’d take a more practical, hands on approach and look at the grocery shopping experience and behaviours from the shopper’s point of view to highlight gaps between what shoppers want and what retailers are currently providing. In other words, opportunities to improve execution and therefore sales.

Get me in and out quick

After location (‘Closest to my home/work’), the top reasons shoppers choose a grocery store are Range (‘they have what I want and need’) and Convenience (‘I know where everything is and can get in and out quick’). Price is further down the list.

You’ll retain shoppers over time if your store is laid out in a way that makes sense to them and makes it easy to navigate. (This is something to bear in mind for renewal stores, which can take shoppers up to a month to acclimatise to and ‘learn’ the new layout).

The biggest irritation factor in supermarkets is usually checkout waiting times. These average 6 minutes – and (ironically) longer for the ‘express checkouts’ queues in late afternoons/early evenings for all the Dinner Tonight shoppers (who have smaller baskets). There’s a relationship between the time to shop vs the time at checkout, a bit like reward vs time spent. The quicker the shopping time (the fewer the items in the basket) the faster the shopper expects to get out of the store. I’ve recently changed my preferred supermarket for this reason (along with one to do with better range).

My local supermarket always has long queues. Their competitor recently opened a store 10 doors up the road, and this new store has more checkouts open more of the time, and importantly (for me) self-scan checkouts. I don’t go back to the ‘old’ supermarket any more because it’s too much hassle. The only time is when I need items that the new competitor supermarket doesn’t stock … which is once in a blue moon. So the ‘old’ supermarket has effectively lost me as a shopper for logistical reasons. Nothing to do with price.

So aside from opening more checkouts at peak periods and adding self-scan checkouts, what can you do? Well, give shoppers something to DO at the checkout to keep them entertained whilst they’re waiting. Magazines, sure. But what else? There’s a role for digital media here – recipes, informercials, education about complex categories. ‘Did you know?’ type stuff, not just playing manufacturers’ or retailers’ brand ads. Also, sampling and demonstrations could be conducted at, along or near checkouts, with displays of the sampled stock near the checkouts so the shopper doesn’t have to break out of the queue and go back into the centre store to get the sampled item. Better yet, the sampling company could physically hand the desired item to those wanting them. This is a way to create further impulse opportunities without cluttering the checkouts with more gum, softdrinks, batteries etc.

My Fruit & Veg is getting squashed

In other words, lay it out in the order they shop it.

This one comes up a lot in shopper research. It arises from retailers putting supermarket entry through fresh fruit & veg as a way to position themselves as ‘owning’ fresh. Trouble is, unless you’re on a Dinner Tonight shopping trip (around 20% of trips) the reality is you’re going to be buying a whole lot of other stuff that winds up going on top of the fruit & veg in the trolley/basket because it’s been shopped first.

Supermarkets need to think about having multiple points of entry to mitigate this, and a proper compartmentalised trolley and basket solution.

Shopping traffic direction will vary based on the entry points of the store, but as a general rule shoppers move around a store according to the side of the road they drive on. Ie Australian shoppers will tend to shop from left to right of store, where Americans will do the reverse.

Anything that’s likely to melt or thaw out (ice cream, frozen meals) is generally shopped last.

So you could argue that the ideal departmental layout for a shopper would actually go something like this (from point of entry):
1. Non-food & General Merchandise
2. Ambient/shelf food
3. Fresh fruit & veg plus bread
4. Frozen foods.
(This will obviously change a bit based on trip type, there’s no perfect solution so the above is the closest to one-size-fits-all).

As many non-food items are at the higher value and margin end (think Personal Care) and/or are items purchased ‘so we don’t run out’ (like toilet paper), encouraging more traffic through this area upfront could net you profitable impulse sales.

Put similar things together

Old school retail thinking is to place unrelated categories in the same aisle for assumed ‘halo’ effect of increased traffic and strong category impact on the weak one. This makes for a confusing shopping experience. From the shopper’s point of view, unless it’s for a gifting occasion, why would (box) chocolates and confectionery be in the same aisle opposite gift cards and wrap?

To be fair, supermarkets have improved their category adjacencies within aisles in recent years so we now have most general merchandise together, most household cleaning together etc.

But what is not done here, and yes I am a broken record about this, is marketing by occasion (outside of major seasonal retail occasions like Easter, Xmas, Mothers’ Day and Back to School).

What I mean here is creating solutions around usage and consumption occasions rather than ranging by product, format or manufacturer type. Dinner Tonight, Entertaining, Lunchbox, Gifting, Ready Meals are just a few. These can be executed in-aisle and/or as secondary displays.

One of the major supermarket chains has started having a crack at this with a concept that combines cards, wrap, magazines, and DVDs. Given that these are mostly longer browse time type items in what is not traditionally a browse channel (certainly not to the extent that say Borders and book specialty is) I’d wager that the traffic in this area will be low but the browse to buy conversions for those shopping the area should be pretty good, and the value per item will be higher than in many other areas of the store.

Maximising impulse when 85% already do it

The traditional retail thinking is ‘Put milk at the back – make them walk the store as they might buy other things on the way’.

The reality is that more than 85% of shoppers deviate from (add to) their list anyway once they are in the store, irrespective of whether the list is a mental or written one.

So you’re already getting a high degree of impulse shopping. The question is how much per shopper. This is a function of trip type and dwell time.

Putting milk at the back of the store for a shopper only wanting 2 or 3 items is pointless, because they’ll be going to the convenience store for the milk anyway in this instance … see the point above about standing in checkout queues for only a few items. Back to Get Me In and Out Quick -  shoppers prefer milk at the front of store. A study done a few years ago with a major independent grocer and major dairy supplier proved it when they dual located milk both in main dairy chiller AND in impulse fridges at front of store. Milk sales shot up by a double digit percentage.

But you can’t use the front of store for EVERYTHING. So aside from front of store and gondola ends/wing displays, then what?

Use the aisles.

Clean store policy is one thing, but hang sell and clip strips aren’t necessarily noticed in aisle by many shoppers. Without cluttering the aisles, I see a role for well-placed case stack displays of complimentary products to that category (not products from the category, all you’ll do then is create brand switch and trade down rather than an incremental sale).

Specific shopping missions (trip types) are more likely to get more impulse than others. Shoppers on stock up shops (approx 30% of shopping trips) will do an aisle by aisle shop regardless of what’s in each aisle (see Figure 1). These are the shoppers and trips likely to result in the most impulse.

Top up shoppers will potentially browse the aisles their destination products are in, but will avoid aisles that don’t have products on their list (see Figure 2). So you need to maximise the aisles they are likely to be in (or simply execute 1-2 small impulse displays in every aisle, that way you catch both the stock up and top up shoppers).

Dinner Tonight shoppers, depending on store layout, tend to ‘racetrack’ around the perimeter of the store. They concentrate on fresh fruit & veg, frozens, and shelf ready ambient and chilled meals. Your opportunity here is to put complimentary meal solution displays in these areas … salad dressings with the salads, chilled or shelf stable desserts near the pasta etc.

In summary, by reducing hassle (getting them in and out quick), laying out the store in the order they’d prefer to shop it, providing occasion based solutions by placing similar products together and providing impulse opportunities that make sense, you should not only increase your average basket values in the short term, but retain your shoppers’ business in the long term.

STOP PRESS – SHOPPER MARKETING SURVEY – CALL FOR EXPRESSIONS OF INTEREST
Following the response to our ‘Where to Shopper Marketing?’ article in the Feb 1 issue, POPAI and ShopAbility are running the first industry benchmark study into the status of the Shopper Marketing, Category Management and POP functions in Australia.
Interviews and online surveys will be conducted across April and May.
Study participants will receive a summary of the findings.
To register your interest in participating, email marketing@popai.com.au

Ian Kingham’s mini-tasting of low carb beers got me thinking about how to drive shopper exploration of low carb beers, where they should go in the fridge and thus about beer fridge layouts more broadly.

Sure the beer fridge layouts should be laid out in a way that makes sense for shoppers, but can you use the layout to get active uptrade or even impulse?

Below are some thoughts on different ways to lay out the beer fridges in a bottleshop, and their pros and cons.

How shoppers shop fridges

It will vary a bit by store layout and the angle/direction from which they approach the fridges, but generally shoppers tend to ‘read’ fridge doors like they read a newspaper. That is, diagonally from top left to bottom right, a bit like the below.

This means that there are some dead spots in the fridge, generally the bottom left and the top right.
However, this is mitigated a little because shoppers will generally look a little to the right of their intended purchase (rather than to the left). So when launching new products, in order to be seen they should generally go slightly to the right of the biggest selling or destination products.

Shoppers spend most time in front of or browsing the middle to right hand side fridge doors.  Assuming a 6 door and 6 shelf layout, the most heavily browsed shelf and door areas looks like the below.

Conventional wisdom would have it that shelf 2 – the ‘eye level’ (‘buy level’) shelf – is the key shelf but as seen in the above there are actually a number of ‘pole’ positions.

So the question is, do you put your destination products (eg VB longnecks, top selling domestic premium 6 packs) in the most browsed space, use it to try to turn around a declining category segment, or do you use the most browsed space to introduce new products, for fastest growing category segments or to get tradeup?

Do you:
a) go with what’s easiest for the shopper or
b) what might get you a better sales result?

In our view it’s b). An example is mainstream longneck beers. Shoppers of these destination products will find them in the fridge regardless of where you put them (generally the bottom two shelves). They don’t need to occupy the primary browse zone as these types of destination products aren’t browsed anyway.

Beer Category Segmentation, Flow & Adjacency Options

Let’s assume for simplicity that the beer category has six segments from the shopper’s point of view:
* Mid Strength (including Light)
* Low Carb
* Mainstream domestic heavy
* Domestic premiums
* Craft
* Imported.

(Dark and flavoured beers would sit in their appropriate segment eg Guinness in Imported).

There are a number of ways to look at how to group the segments, but the main ones are probably:
* By potency/ABV: but there’s not much ABV difference among Mainstream, Domestic Premium beers and many Craft and Imports have roughly the same ABVs as Mainstream beers
* By ‘premiumness’: where Mid and Mainstream beers sit together, Low Carb and Domestic Premium sit together, and Imported/Craft sit together
* By brand or supplier: which generally makes the least sense to shoppers unless it’s a sparse category with only a few brands in it. Again brand blocking may make sense for destination purchase items and for shoppers rusted onto a specific brand (the minority), but the reality is most beer shoppers have a repertoire.

Let’s look at how these options might play out in fridge door layouts.

We’ll assume for simplicity that there are 6 doors each with 6 shelves and that each door is a category segment (eg each segment has equal sales and therefore equal space). Each door contains a combination of pack sizes (stubby singles, longnecks, 6 packs) rather than there being longneck-specific or stubby-specific doors. It won’t be this neat in real life obviously, but you’ve got to start somewhere.

Layout by Potency/ABV

Assumes that Low Carb has the lowest perceived abv and that craft beers have the highest perceived abvs.

This layout puts Low Carb at a disadvantage because Door 1 traditionally has least browse traffic (depending on direction of store traffic flow).

Layout by Perceived Premiumness

Assumes that Craft beers are perceived to be more premium than Importeds due to their specialised nature. If this layout were by origin then the Craft and Imported doors would be swapped around.

There may be some conjecture around whether Low Carbs are perceived to be more premium than Domestic Premiums, but if your goal were to increase your sales of Low Carbs you’d run with it in Door 4 rather than Door 3.

Ultimately in determining your beer fridge layout you need to figure out which products you want shoppers to trade up to, and then layout out those products/segments in the middle and to the right in the planogram.

For Retail Pharmacy Magazine

In discussing price in last month’s issue we touched on price promotions and some considerations when pulling promotions together. That was the tip of the iceberg.

Here we’re going to examine promotion objectives, mechanics and probable shopper reactions in a bit more detail to help you put together promotions that work, because you’ll have figured out what it is you want them to achieve at the outset.

Begin with the end in mind – Promotional Objective setting

‘I want to increase my store’s traffic, average sale value and steal some share from competitors’ – if you’re a retailer.

‘I want to increase sales and improve my brand’s awareness and share’ – if you’re a manufacturer.

Well, duh.

But how? And how do you know which things work and which things don’t, viz the famed historic advertising guru David Ogilvy’s quip about ‘We know that half of all advertising works, we just don’t know which half’? And how do you measure it?

Be specific about you want to achieve upfront, as this impacts the promotion mechanics to be used, the level of support you should give it, how it should be executed instore and the likely shopper impact.

There are a number of types of objectives that all relate to promotions:
* Retail objectives (5 way multiple): traffic – more shoppers, average weight of purchase, item spend, basket spend, basket incidence and penetration, frequency of visit (same shopper more often)
* Shopper/category objectives: department growth, category growth, category segment growth, shopper satisfaction with category/department/store, shopper dwell time, past 4 week purchase; category/product sales velocity (units per store per week); household penetration
* Brand and Marketing objectives: brand share of category or category segment, past 4 week product/brand consumption, awareness levels of brand pre/post, trial or sampling penetration, brand perceptions/attitudes, brand/product ranging and distribution, brand preference
* Strategic objectives: eg perception of retailer’s brand or store (value, service, range propositions)
* Financial objectives: during promotional period the forecast total and incremental sales revenue and gross profit, minimum margin, floor price to achieve margins and GP
* Operational objectives: eg old stock clearance, product deletion clearance.

You don’t have to construct objectives for every type, just select one or two.  You can use SMART (Specific, Measurable, Actionable, Relevant, Time Bound) to flesh them out.

For example, you might want to ‘Improve the awareness of our cosmetics offer by increasing sales of lipsticks by 20% over April and May’.

Be aware that some objectives may conflict with each other and by increasing one element you may decrease another. This is demonstrated in Figure 1 below.

FRAME OBJECTIVES WITHIN A SCOPE

How ‘big’ is the promotion – on how many products is it going to run? Will it be run store wide, ie across every product in the store or at least a number of products?  (The current – and somewhat controversial – Woolworths ‘Same Prices as a Year Ago promotion is an example of this).

Will it run on in a specific category, brand, single product only? (How does this fit with your catalogue strategy, which may be category led or more likely specific single items from selected categories?)

When will it run and for how long? Are there any seasonal impacts to consider? Do you need to ‘discount turkeys at Christmas’ (eg, cut price on Claratyne and Telfast during hayfever season to drive traffic) or are you better off focusing on your range (as opposed to price) or companion selling of these during season since the traffic is there anyway, or on increasing out-of-season product sales?

SET GOALS YOU KNOW YOU CAN MEASURE

What do you already know about the category, brand or product sales? How have past promotions performed? (Be careful here, past promotions may have performed poorly due to anything from wrong mechanic to poor execution). What does your POS system tell you about average product sales levels and purchase frequencies? What have you observed anecdotally, eg on average how many items do shoppers walk out of your store with? What reports are available to you that might help with category or industry averages?

OUTPUTS AS WELL AS OUTCOMES

A promotion is only ever going to be as good as its execution.

Most of the objectives we listed above would be measured as outcomes (ie results). In order to measure a promotion’s effectiveness you also need to review the outputs (ie, what was achieved). This may include things like what support it received (see below, eg how many ads ran, was it in catalogue), how many stores did the promotion run in, how many stores ranged the products on promotion, how many stores ran the point of sale materials (and which ones), how many people were sampled etc.

Mechanics – Make the Punishment Fit the Crime

Promotions generally fall under two headings, Retail Promotions and Consumer Promotions. See Figure 2 below for some examples of these.

The key here is to match the mechanic to the objective. Make the punishment fit the crime.

For example, multibuys like 2fors may drive average weight of purchase (AWOP) and increase your average spend, but depending on the category you may simply be pulling sales forward (pantry stocking – see below) because you decrease frequency. But if it’s a category with expandable consumption (if you promote, they buy more and consume more – snack foods, confectionery and shampoo come to mind) you’re likely to get an incremental sale.

‘Win’ mechanics may drive basket incidence, or potentially category purchase frequency by shoppers loyal to that brand or product, and may increase that brand’s awareness temporarily, but may not do anything for traffic. Which is OK, if your goal is to drive basket incidence.

IMPACTS ON SHOPPER BEHAVIOURS

Based on objectives, and if you execute with mechanics and support per your objectives, a number of different things might happen as a result of a promotion.
Dynamics to look for and  understand include:
* Trade up (which you want)
* Trade down (which you don’t want … shopper planned the purchase and now they don’t need to spend as much, pulling your transaction value down rather than increasing it)
* Pull sales forward or pantry stock: you decrease purchase frequency and increase the time between purchases (interpurchase interval … IPI)
* Decrease transaction value/basket spend: this can occur if your promotion is based around frequency (like those Buy 9 get 1 free coffee cards) which means they come back more frequently but buy less per trip (but overall this should add up to more sales, IF you’re not trading them down whilst they’re there)
* Switch products/cannibalise existing products: sales may increase of the promoted item but decrease of a similar item, so you need to consider the overall category sales not just the promoted item’s sales
* Abandon the sale (shop elsewhere): this happens if you go out of stock on the promoted item or they can’t find it in the store
* Buy in addition/incrementally to the planned item: yes, you want this. Traffic driving promotions hopefully result in impulse purchases during the shopping trip, if you’ve executed your impulse categories and lines right.

So that’s a start on things to think about when designing a promotion or reviewing a promotion pitched to you by a supplier or manufacturer.

Next time we’ll look at what support, advertising & promotion and execution a promotion should get based on its scope and objectives.

Till then!

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@shop-ability.com.au

So what are Trials, who does them, when and why….and how do I go about even starting to run a Trial?
Common questions with an equally evasive answer, as the points to consider are complex at best and downright confusing at worst.

What is a Trial?

So, let’s start off with a broad definition of what a Trial actually is:
“the implementation of a business initiative, measured through a controlled assessment that as closely as possible reflects the regular trading environment of the category”
Trials are run by Retailer and Supplier alike to test a business hypothesis – usually an initiative or business case that has been developed targeting total category growth.
For a retailer it may be:
* A new store format such as a small store or an alternative offer(eg Thomas Dux)
* An environmentally friendly format stuffed with new technologies and applications all designed to leave a negative operating footprint (continual focus of all retailers)
* Alternative category layout, adjacencies or flows within a store
* Secondary location alternatives
* POS or Shopper engagement strategies (eg the new Coles tickets)
* New fixture designs
The new Coles formats that been trialled in various guises in various State locations are a really good example of the above.

For a Supplier it may be:
* A Category based solution (eg the Cantarella coffee unit)
* A themed seasonal secondary location (eg Xmas cards and wrap, or boxed chocolates)
* A new fixture or stand targeting a particular Shopper trip (eg a refrigerated front end drinks unit targeting immediate consumption or an impulse confectionary gum unit)
* A particular layout reflecting usage occasions or a possible add-on sales opportunities
* A fresh location in the store, a new aisle location for the category for example
* Pack sizes, shapes and formats for particular channels or usage occasions
* NPD initiatives

So, why implement Trials in the first place?

1. Shopper and Consumer information is essential to be able to truly work with the retailers to manage and develop Category growth strategies, regardless of Channel.  Leading companies are then using this information as a basis for strategic planning, and then undertake controlled Trials to prove their strategic hypotheses.

2. With the changes occurring throughout the retail trade, it is essential that we establish and properly Trial the corporate position on many aspects of our offer to the Shopper and the Consumer

3. Trials are used to not only prove a hypothesis but also to show your retailer partners your commitment to driving total Category growth.  Often the Trial enhances your role as the thought leader in the category.

4. Enrols the Retailer not only in the process, but also the reason why the trial is undertaken in the first place – to test a category growth strategy in that retailer, in that channel.

5. Enrols responsibility and commitment across the internal silos of both the retailer and the Supplier

6. Proven knowledge of specific in-store activity and the corresponding responses is becoming vital as we move to store specific marketing in Space, Visibility, Range, Price, POS and Promotion. Well run trials of targeted programs provide this knowledge.

7. Shoppers are becoming more promiscuous based on Trip type, and traditional methods of “one size fits all….well nearly” is not appropriate. Continual fine tuning and differentiation is essential.

8. Trip type Shopper marketing is an evolving science and as the Baby Bomer, Gen X, Gen Y and soon to be  Gen Z profiles further evolve, Trial management will be instrumental in fine tuning the differences

9. We need to have justifiable results that our sales and field people can use to “sell the story of our category” to all our retail partners across other Channels or within the existing Channel.

10. Differentiates Tactical from Strategic initiatives

The common denominator for both Retailer and Supplier trials are that they are testing a hypothesis – the concept is only a theory until actually proven in the context of the real trading environment where Shoppers determine the success or failure of the initiative.

The real key for a Supplier is Retailer engagement. Retailers must be involved in every step of developing the initiative, from as far back as commissioning the Shopper research questions and content to the design of the final unit or fixture. Joint ownership of the initiative and the final outcome is the only way to secure internal commitment from both participants.

There are a number of issues where the Retailer can have a critical input into the success of a trial. These are not strategic issues, but a set of important tactical considerations that can influence the timing and success of a trial.

Examples could include:
* Customer range changes post a range review
* Availability of in-store secondary display slots
* Meeting seasonal requirement eg Xmas
* Availability of warehouse slots
* Customer systems capability and compatibility
* Retail Operations consultation and acceptance

Retailers may also have minimum hurdle rates that must be met:
* Specific target % Gross Margin
* Net category profit (accounting for cannibalisation)
* Minimum number of units or cases sold per week per store
* Minimum or maximum SOH
* Specific OP or product sizes and weights

Implementing a Trial

When agreement is secured for a Trial a critical path schedule must be jointly developed.  This will help ensure that commitments are met and will go a long way to remove barriers to implementing the Trial

Establishing carefully audited trials and widely publishing results is a critical success factor.

Evaluation of the trials must be carefully made to measure against the pre-set KPI’s or an agreed set of measurable goals before commencing. Often this will be factors other than just sales. Consider exit interviews – interviews with store & merchandising staff, also transaction size, profitability, associated category sales etc.

Agreement must be reached on how the results will be measured and then results must be presented vs goals/ KPI’s that have been agreed. Sources of the agreed data are also agreed and responsibilities assigned to gather and group the data, and interpret the findings, including interim recommendations.

Each partner must fully understand what they are setting out to test and pass that understanding on to those implementing the trials. Launch booklets from all of the information gathered through the development of the Trial parameters and any other discussions that may have occurred will form the basis of the selling presentation made by Field teams to the trial stores. These launch booklets are given to each trial store to ensure consistency of implementation between Field and Stores.

Conduct the trial over a minimum of 6 weeks, ideally 8-12 weeks. Maintain a running register of the trial stores vs the benchmark stores during the trial period.  If the trial is obviously failing then serious consideration must be given to abandoning the trial and revisiting the key tenants of the trial

Ensure that the trial conditions are rigidly adhered to at store level during the period of the trial – any changes must be reported (these may abort the trial at worst or effect the measurement at best). Running a Trial in a store where there is an imminent refurbishment, or a major competitor opening will skew the results terminally. These impacts need to be considered and changes accommodated to ensure both the Trial and control stores are clear of any internal or external influences that will taint the agreed measurement criteria

Once the trial is complete, a fully documented report must be submitted to the retail partner, together with clear recommendations for the next steps. The format and reporting style is based on the previously agreed KPI’s and parameters and the final presentation is made to the key Retailer and Supplier sponsors and stake holders to ensure that the key decision makers are aware of the results and are in a clear position to make a decision to further roll out the Trial concept.
The Trial has then moved from category concept to category realisation, and becomes a fundamental basis of how the Category is marketed.
The evolvement of Shopper marketing hinges on the creation, trial and implementation of new  Category initiatives , and progressive Retailers and Suppliers alike are continually developing new concepts to address different and ever changing Shopper purchase behaviours.
It is clearly felt for example, that the current global economic meltdown has indelibly changed the way Shoppers are wired to make purchase decisions. Out with premium product assortments and eating out to be replaced with house brands, weekly specials/ multi buys and eating at home.
So how are you developing your inititiatives and getting them to market?
Are you maximising your opportunities?
Are you managing the critically important aspects of Trial management to the best possible outcome?

Having trawled a number of chain, banner group and independent bottleshops recently looking at Cider, it seems to me that Cider is currently a bit of a confused teenager. That is, in a growth spurt but a bit all over the place … in its targeting, positioning and instore execution.

Here’s my two cents’ worth on how instore execution could improve to assist the cider category to ‘grow up’ and thus increase sales.

Who is it for?

Empirical evidence (people observed drinking in pubs) combined with cider product formats (stubbies not cans) and packaging that echoes premium beer cues, would suggest that it’s an alternative to or substitute for beer for guys.

There’s also been a shift into premium cider products like the shift to premium and imported beers. Premium-positioned cider product manufacturers such as Pipsqueak and Mercury Artisan have a stated intention to get cider into beer drinkers’ repertoires.

The cider production process is not dissimilar to beer, potentially strengthening the case for ‘beer substitute’. But how many punters would actually know what the cider production process is, or care?

On the other hand, the RTD tax excise in 2008 is partially behind the manufacturers’ focus on cider innovation, with cider seen by the industry as an alternative to RTD – for girls as well as guys.

The nett result is that it’s not clear who cider is targeting, because the some of the industry isn’t clear on it themselves, and most are trying to have an each way bet.

For my money I reckon we’re missing a trick here … there’s an opportunity to target more sophisticated women who want to portion control but don’t want teenager ‘lolly waters’ and ‘pink drinks’. And potentially to communicate some ‘healthier’ positioning benefits on pack and at shelf as well, as a point of difference against RTDs/capitalise on the Blonde trend in beer.

And if cider is being positioned as a beer substitute or alternative then it needs to be clearly communicated as such. Which brings me to …

What occasions is it targeting?

Why would one drink a cider instead of a beer or an RTD (or a wine for that matter?)
What occasions are we talking to here? Eg:
* Refreshing alternative to beer
* Sophisticated alternative to RTD
* Portion control … know how much you’re drinking
* Palate cleanser
* First drink of the evening, ‘light start’ before moving on to ‘heavier stuff’
* Last drink of the evening, ‘finish light’
* It’s a bit different ,and something old/authentic that’s new again
* Great with food (is it? Pairing with food is traditional wine, and lately premium beer territory … what types of foods?)
* Party alternative – something a bit different to offer guests
… etc.

Part of the issue is shoppers in the offpremise and consumers in the onpremise don’t know when to choose a cider, because we haven’t told them.

As an industry we need to pick a couple of the key occasions for cider and communicate the hell out of them.

This has side benefits for bundling in the offpremise ie for stock up or top up beer shops there might be a cider offer promoting the occasion eg “Great for parties! Cider pack for $12 with any case beer purchase” etc.

Where should it go instore?

For the near dozen stores I visited looking at ciders, the range was quite small, only between 1 and 3 products … when I could find them. I had to ask if cider was stocked in a number of cases because I couldn’t find it in the fridge or in the coolroom.

Since around 85% of premixes and single/small pack beers are purchased cold for immediate consumption, cider needs to be in the fridge. Preferably adjacent to a dominant category so it’s seen.

It’s not enough to just range it in the coolroom (with no fridge or shelf presence), like in a few chain outlets I visited. For shoppers, can’t find it = store doesn’t have it. And shoppers are not going to run around the store looking for it. Cider’s got to be in the fridge to be seen.

You would do additional coolroom execution if you have excess stock and/or you’re targeting beer shoppers. Otherwise, excess stock goes on the floor supporting promotions or on shelf. But the fridge is where the vast majority of the action is.

Where should it go in the fridge?

Ciders have traditionally been made by the brewers, a tradition continued with newer releases like Tooheys 5 seeds. This has led to ciders being ranged next to or part of beer fridge doors (6 packs, singles, longnecks) in bottleshops.

However I saw it located within RTD in several outlets.

If we’re going continuing to attempt to have the best of both worlds, in utopia executions cider would be located between the beer and the RTD in fridge. And ideally the last door of beers before the ciders would be premiums and imports, or potentially Blonde beers (but not mainstream lagers).

If cider category sales and growth figures justify it, the cider category should get its own door in the fridge (yes this may mean it’s slightly overfaced) so it’s clearly delineated vs beer and RTD.

On shelf (ambient), cider ideally would be executed as per fridge for consistency. Ie between beer and RTDs.

Basically, cider needs to be more visible, found in the same place in the fridge instore, more of the time, and clearly communicated who it’s for and why buy it.

Note that the focus and scope of this discussion is OTC, S2/S3 and merchandise products, not S4 prescription items.

Category Pricing

Once you’ve decided your overall store pricing strategy (EDP, EDLP, Hi/Lo) the question is then do you apply it equally to every category?

Probably not. There’s no point doing yourself out of dosh if you don’t need to.

The good news is that unlike a lot of FMCG products with use by dates or that function on newness (think milk or DVDs respectively) the idea of having to price along a product lifecycle is less applicable to pharmacy products, so that’s one complicating element removed from the mix.

The role each category plays to the store is different (see Figure 1).  Here you need to consider your overall store positioning and ranging strategy. For the categories you want to be known for, do you want to be known for them based on price – ie are there loss leader categories? More importantly, do you actually need to be known for them based on price?

Shopper trip types differ (distress purchase vs top up or stock up) and based on the shopper’s purchase decision hierarchy (the order in which they make decisions about a category – see Figure 2) the role of price will therefore differ.

You also need to consider the breakdown of the category into its segments and whether specific segments can command a premium due to either their specialized nature or the brands in them.  This links to your range. Pharmacy specific or ‘professional’ ranges not available in other channels can command a price premium because shoppers don’t have an easy point of comparison (however, the product efficacy and benefits over and above the brands they know would need to be clearly spelt out to justify paying a higher price).

Each category segment plays a role within the category also, you can apply the table from Figure 1 at the category segment level. This will help you determine which parts of the category you need to promote more heavily than the others.

Brand & Sku Level Pricing

Here again you need to consider the role of each brand to the category. There may be specific brands, or more likely specific products, that can be used as loss leaders. However before pursuing this you need to consider a) whether everyone else is doing it on that product – fish oil comes to mind, and b) whether by loss leading on that product you will actually drive incremental traffic or sales, or simply be giving shoppers already planning to buy that product a better deal (and doing yourself out of dough in the process).

Grocery tends to use a ‘good/better/best’ levels model, where value brands are on the bottom shelves, mainstream brands are in the middle, ‘beacon’ brands are eye level and premium brands are top shelf. Each pricing level is a predetermined percentage range higher than the last. Brands within each ‘level’ are priced roughly the same, with variances per sku based on product format and size (the discount curve – the bigger the pack the better the deal for the shopper) but very little variance based on flavour or type. With products or brands that have a one-size-fits-all format or size, there is virtually no price differentiation between skus (unless a particular sku is being delisted and therefore on a run-out special).

You also need to consider private label (store brands). If private label applies to a category you stock, you need to consider what the price differential will be between the private label brand and the value/mainstream brands. Ie what % cheaper the private label will be.
Other considerations Depends on the terms (margins) negotiated between retailer and supplier, matched against the market (for price ranges) and against shopper expectation.

Promotions – the slippery slope
Price promotions are probably your biggest short term sales driver (depending on the product), and depending on how you’ve structured your trading terms either one of your larger sources of revenue or your largest costs.

Price promotions contribute to shopper’s value perceptions of a store … how many things are on special at any given time, rather than the price points or depth of discounts. Happily, there is less of an expectation of this in pharmacy than in grocery (grocery have created a rod for their own backs in some respects).

BUT price promotions are a delicate balance. Do it too deep, too often and shoppers will only visit you when you have a big sale on (think Target). Don’t do it often enough or on enough things and shoppers may not have a reason to visit you outside of scripts (however if your store pricing strategy is EDP – Every Day Pricing, then that’s OK).

And from a brand point of view a balance is required of equity vs sales. Underpromote a product or brand (depending on type) and it won’t sell. Overpromote it and you damage the brand’s equity and reset (lower) the brand’s expected price in shoppers’ heads.

A way to look at this at a category, category segment and brand level, and avoid or course correct, is to look at baseline vs incremental sales (see Figure 3).  This indicates where you may be eroding your ‘everyday’ sales and selling more on promotion.

The key aspects to consider for price promotions are Frequency and Depth.  Do you want shallow promotions more frequently, or deeper discounts less frequently? (Going the route of deep promotions, frequently could spell disaster unless you have deep pockets).

Depth of discount can be used for different things. Shallow discounts can be used for profit or trial. Deeper discounts are used to get brand switch, drive your share of a category’s sales or drive traffic.

However, approach deep discounts with caution. You need to be clear that the product you’re discounting will actually drive new traffic and sales if you put it on promo. Are you just creating a short term sales jag or would there be residual effects – new shoppers of the store, the category or the brand? Typically residual effects are very hard to quantify.

Another risk of deep discounting is onselling or leakage, where another retailer buys off you (cheaper than they can get it from the manufacturer) and sells it in their own store. Which you may consider to be fine if you’re not fussy about where your sales come from, but the practice is questionable.

You also need to consider cannibalization. The deeply discounted product may simply be switching a sale from another brand or product, and not actually getting you an incremental sale. So you need to consider where the increased sales of discounted Product X are actually coming from … which products/brands have gone down while Product X was on promotion?

Frequency of promotions needs to be based around how often shoppers shop the store and the category. In general, keep something on promotion much longer than 2-3 weeks and it becomes wallpaper and is not seen by the shopper.

Of course, the success of a promotion will also be dependent on how you support it and how loudly you shout about it. For example, if you just do shelf ticketing you might get brand switch, but will it make you any money? We’re going to talk about promotional support and devising promotions that work next time.

Till then!

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

Shopper Marketing – A Round Up

The notion of Shopper Marketing is gaining pace, but the discipline is still in its infancy.
Following is a round up on current Shopper Marketing thinking and doing (activity types). We’ll build more specific examples, and report back on, this in subsequent Shopper Marketing related articles during the year.

The category and shopper game has been evolving apace over the past few years, where Category Management is now an adult and has spawned an infant in the form of Shopper Marketing.

CURRENT THINKING

One of the longest standing Category Management conferences in the USA, running for nearly 20 years, last year became the Shopper Marketing Fusion conference – fusing Category Management and Shopper Marketing.

Now we have the Retail Commission into Shopper Marketing, announced last year and spearheaded by Brian Harris (from The Partnering Group – one of the ‘fathers of Cat Man’), Coca-Cola and a number of major US suppliers and retailers. The upcoming April Commission confab aims to come up with a ‘method’ for shopper marketing, in the way the 8-Step Category Management process was developed. And to determine the linkages between Category Management and Shopper Marketing.

In 2007 and 2008 GMA/Deloitte released some fairly comprehensive reports into the state of Shopper Marketing in the USA. They are worth the read. The GMA/Deloitte definition of Shopper Marketing is:
“All marketing stimuli, developed based on a deep understanding of shopper behavior,
designed to build brand equity, engage the shopper (i.e., a consumer in ‘shopping mode’), and lead him/her to make a purchase.”  (Author’s italics).

We question whether retail environments in Australia currently BUILD manufacturers’ brand equity (they might build their own retail brands and private labels if done right, but some promotional and pricing executions of supplier brands in grocery have eroded brand equity rather than built it).

In any case, broadly this definition dovetails with our view that the retail environment should be used for marketing, but that this is in embryonic form in Australia.

Shopper Marketing includes activities currently falling under the current labels of Customer Marketing, Trade Marketing, Retail Marketing, and Account Marketing.  Where Category Management sits is still in debate, as is the role of pre-store vs in-store.  What is commonly agreed is that shopper marketing is shopper centric, with a deep understanding of shopper behaviour at its core.

Using the traditional point of purchase drivers, RSVP3 (range, space, visibility/display, price, promotion, persuasion), the current scope of Shopper Marketing activities vs Category Management might look a bit like this:

Fig 1: Scope of Shopper Marketing  © ShopAbility 2010

HYGIENE VS SELLING

What is becoming evident is that Category Management is effectively a necessary hygiene factor. It makes retail environments easier to shop, but not necessarily more fun or enjoyable and is not ‘marketing’ per se.

EMOTIONAL, NOT JUST RATIONAL

What is also clear from the above, and was underlined at the Shopper Marketing Fusion conference we attended in Florida at the end of last year, is that the current scope of Shopper Marketing activity is promotionally focussed … not ‘all marketing stimuli’ as the Deloitte definition specifies.

What’s missing from the current activity scope is the role of instore experiential marketing – theatre, ambience. The type of stuff that Harrods, Whole Foods and Bristol Farms do so well.

We have an opportunity to ramp up the ‘marketing’ aspects instore and to use the store environment to promote discovery, delight, awareness and education. This means dialling up the roles of instore media, advertising, information kiosks, educative POS, sampling and demonstrations

In other words, many of our retail environments in Australia play to RATIONAL aspects, when what is also required (and generates more sales) is EMOTION.

WHAT’S HAPPENING NOW

So, where is Shopper Marketing activity at and what are people doing at the moment?
Following are some of the takeouts from the conference as to USA shopper marketing activities.

OCCASIONS & SEASONS, NOT JUST PRODUCT & PRICE
Manufacturers and Retailers in the USA work together to build calendars of seasonal, and micro-seasonal, activities. Examples of this include programs such as:
* ‘Spend time around your table’ (Thanksgiving)
* ‘Make it tonight’ (effectively ‘dinner tonight’)
* ‘Superbowl At Home’ (marketing to one of the world’s most watched sporting events)
* Season within season (micro season) eg Season = Winter, MicroSeason = Cold & Flu.

Occasion based solution marketing requires not only catalogue inclusions and often couponing, but also that elements of the ‘solution’ are co-located in store. This is currently mostly being executed via large, themed, offlocation displays (including chillers/frozens) rather than changing category locations or adjacencies (which would be the next step). These offlocation displays are a way for smaller manufacturers to get offlocation all together where they wouldn’t normally have enough scale by themselves. Complimentary suppliers of occasion based solutions work together with specific retailers to achieve tailored programs.

TAILORED, NOT MASS

There is a shift to understanding and marketing to specific trip types eg Dinner Tonight trips, entertaining trips. This is overlaid with what that trip type looks like for different shoppers, based on the retailers’ shopper segmentations.
In the USA, retailers are driving manufacturers to not only use the retailers’ shopper segmentations in framing all instore initiatives (not just range).

IMPACT, NOT JUST ACTIVITY

Because the Shopper Marketing discipline is new (or evolving out of instore promotional activity), there has been a focus on activity but not on measurement.
This is changing, with increasing recognition that shopper marketing activities and initiatives need to be measured not only by the historic profit, sales revenue and product sales volume but also by ‘traditional’ marketing measures such as reach and awareness.
Methods for measuring ROI are being developed and tested in the larger companies.

INTEGRATION, NOT ISOLATION

This is the one that most companies are struggling with because it requires the biggest paradigm shift in thinking & structure.
In a 2009 Interscope/Futurescope study of the top US manufacturers and retailers regarding Shopper Marketing, slightly more than a third (37%) of companies had already established Shopping Marketing functions while 43% of companies are supporting Shopper Marketing within existing functions. The Shopper Marketing department is a year old or less at four of ten (41%) responding companies. Of those with shopper marketing functions, the Shopper Marketing department is a year old or less at four of ten (41%).
Opinion is divided on where the Shopper Marketing function sits. In the Interscope survey results, the SM function currently reports into Marketing (25%), Executive Management (23%), Sales (23%), and Category Management (10%).
Because the nature of the Shopper Marketing function is integrative (blending Marketing, Category, Sales) companies are struggling with processes to resource and embed it.
However, those companies with Shopper Marketing functions reporting into Executive Management are performing better than those where the function reports into either Marketing or Sales.

There is a recognition that shopper marketing is currently under resourced and underfunded and that to realise its potential there needs to be not only dollars thrown at it but a true ‘discipline’ (set of methods and processes) developed.

Interesting times! The next year or two will be critical for the development of Shopper Marketing. We’ll be coming back to you during the year with updates and more details. In the meantime if there’s anything specific around Shopper Marketing  in Australia you’d like to see explored, investigated or discussed, email us enquiries@shop-ability.com.au

Aside from range, pricing (and price promotion) is the area that retailers and manufacturers tend to spend the most time on and is the most hotly contested, because it has such an impact on the bottom line.

The contention also comes because there sometimes isn’t an overarching pricing strategy on one or both sides … prices may have been historically set by slapping on specific margins across the board, or slavishly matching the competition.

In this and future articles we’re going to discuss considerations that go into building a pricing strategy.

Levels of pricing

Like with ranging, pricing strategy needs to be looked at from a ‘top down’ (or left to right) perspective, starting with store level and finishing at sku level. This is illustrated in Figure 1. This article discusses store level. We will discuss the other levels in subsequent articles dealing with price and promotion.

Pricing roles and objectives – store level

Similar to our first article on ranging and what it says about your store, you need to think about what your pricing says about you in the context of who you are and what you’re trying to do, and which of the retail objectives you’re talking to.

Given the high percentage of pharmacy traffic that is script driven, and that most front of store categories are destination or stress purchase rather than impulse, it could be argued that a pharmacy doesn’t need low prices to drive traffic.

From a number of shopper and pricing studies we have conducted across channels and categories, most shoppers choose their store based on location, convenience and service. They don’t drive miles out of their way to save 3 cents on something (unless it’s petrol). Most are aware of price ranges for a category or product type, but not specific price points (low income families on tight budgets are the exception, and that’s driven by catalogues allowing price comparisons). They compute a store’s value by the average prices the store charges across the board, and how many specials they see each time they go in, weighed against the service they get … but these computations are largely subconscious.

It’s a bit like coffee … they can tell you what’s a good one or a bad one (ie who is a store providing value and who isn’t), but not the components contributing to this perception. This means you have room to move in your pricing strategy and still be considered value without price gouging.

In setting your pricing strategy, have a think about what your pricing is trying to do:

• Drive traffic? From whom – walk past impulse traffic?  Which categories? What type of traffic – one off vs repeat traffic? (What’s the role of your store type and location in this?)
• Steal traffic and purchase from other stores? Other pharmacies or other retail channels? Is this realistic, based on what you know of why people come into your pharmacy in the first place?
• Increase the basket size (AWOP, basket penetration) of the shoppers already in your store?
• Drive profit by taking the highest margin possible?
• Drive existing shopper frequency by offering best value? Is this possible if frequency is script driven and/or ailment driven?

Competitive pricing

Once you’ve figured out what you’re trying to achieve with your pricing it then obviously needs to be put in competitive context based on who your direct and indirect competitors are.

This requires understanding, defining and mapping who your competition is, at a whole store and department/category level. Who do your shoppers perceive your competition as being?

Why do shoppers come to you vs other similar stores? When do they choose other stores over yours? Answers to this give some indication as to how you should price vs your competition (and how that may need to differ per category). You don’t need to loss lead when you don’t have to.

There are basically three ways to price vs competitors: Lead, Follow or Independent (maverick).

If you’re going to price lead, this assumes that shoppers see you as a leader, that you can and do lead the market and set the expectations, and that you’re proactive in your stance. If you price lead, unless it’s a major event, you don’t generally react to competitors’ moves.

Price leadership generally means being first to increase or drop price. Price leaders need to be prepared to take the consequences – good or bad – of changing the market price perceptions.

Price following (or market pricing, or price matching) is a reactive strategy and the path of least resistance for many. However it can lead to unnecessarily doing yourself out of dough if you’re following the price leaders and discounters into a price war. If you’re going to price follow, you need to figure out what the price ranges in the market are, and where you want to sit in them based on the value perceptions you want your shoppers to have.

Independent pricing is where you run your own race irrespective of what the competition does, based on your unique offer or proposition. You may decide you want to be known for exceptional service, or stay open late for example, and that this justifies a price premium.

A simple way to figure out what your current stance is vs competitors is to ask the question: “If our competitors do this, what will we do? Do we care?’”

Pricing levers to pull

Once you’ve decided your competitive price position and to what extent you are sensitive to competition, your next decision is which pricing lever (strategy, operating ethos) you will pull.

In general there are three overarching pricing strategies:

1. EDLP: everyday low price (this is where the Big Ws of the world position themselves, and often involves price matching/price beating competitors)
2. EDP: everyday price (not necessarily low)
3. High/Low: everyday prices are higher but you have reasonably frequent price promotions to achieve lower prices. The thing here is that if you’re a market leader and  you do Low often enough it winds up resetting (lowering) the shopper’s perception of the average price … we’ll discuss this more in subsequent articles.

Note that you can change the strategy per category depending on its dynamics, but it helps to have an overarching view first.

Summary

In setting your store level pricing strategy, key questions to ask yourself are:

• What is our current pricing strategy? Do we have one and is it working? Why is this the pricing paradigm? Does it need to change, and if so, what to?
• How do our shoppers compute value? Why do they choose us or others and what’s the role of price in this?
• Who is our competition and do we care how they price? Will we price lead, follow or act independently?
• What is the best pricing strategy for us? EDLP, EDP or Hi/Lo?

Next time, pricing by category, brand and product, and discussion of price promotions.

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@shop-ability.com.au