Last issue we shared some of the results of Australia’s first Shopper Marketing Industry Benchmark Survey from POPAI / ShopAbility and supported by TorchMedia.

Some compelling results show that Shopper Marketing is definitely on the rise, supported by 70% of business leaders with one third of companies actively increasing people and budgets. The Shopper Marketing Train is leaving the station.

A snapshot recap from last time:

* Nearly 7 in 10 said that Shopper Marketing is supported by Executive Leadership. One third plan to increase their program budgets and/or people budgets in the next two years. Just under 40% are currently measuring their Shopper Marketing programs
* 60% are engaged in Shopper Marketing activities
* 65% are undertaking category level and retailer initiatives
* Two in five are engaged in trials, whilst nearly three in five are not, due to a lack of one or more of resources, retailer engagement or lack of co-funding (budget)
* Almost half have undertaken shopper research of some sort
* A primary issue is lack of resource allocation to Shopper Marketing. Only 4 in 10 respondents are satisfied overall with focus, expertise, and people. All respondents are least satisfied with budget (23%)
* How Shopper Marketing is defined and what is included varied among respondents. A point of consensus is that Shopper Marketing targets shoppers at multiple touchpoints using and leveraging insights

The focus of our article this time is on who is best practice and what they are doing.

So, who is on the Shopper Marketing train and where is it heading?

The USA and UK were commonly nominated as international best practice by survey respondents, with participants typically perceiving Australia to be 8-10 years behind in activations. However, momentum is gaining.

In-store ‘theatre’ was a big indicator of best practice for survey respondents. Overseas retailers believed to be doing this well included Whole Foods, Trader Joe’s “making private label cool and branded”, WalMart for its WinPlayShow strategy and digital on shelf media.

Leveraging loyalty programs to inform the in-store offer was another biggie, with survey respondents citing Tesco for their Club Card program, ability to mine their shopper data and provide tailored offers, and in-store occasion based executions. Similarly Boots received honourable mentions for their loyalty program, understanding of multiple occasions and marketing to impulse.

Apple received top marks for its total experience including store staff, and totally different model of sales based on shopper experience rather than price or offers.

Marks & Spencer and Sainsbury were seen to be leaders in marketing successfully to shopper occasions (such as the M&S “Dine in for two for £10” campaign).

Global manufacturers rating most mentions included P&G for its ‘last 3 feet’ and ‘shelf back’ approaches, and Pampers World 4 Kids program; Coca-Cola for its understanding of tailoring pack and product sizes and formats to channels and occasions; and  Unilever for its Dove real beauty campaign with WalMart, which was subsequently taken global.

In Australia, quoted leading retailers included: Apple, McDonalds, Priceline, and JB HiFi (for its performance and results, although its methods polarised opinion). Improvements in the Health & Beauty departments of both Coles and Woolworths were frequently mentioned.

Manufacturer P&G came up trumps for its shopper understanding and seamless ATL/BTL/in-store execution as well as retailer collaboration.  As with their global counterparts, Coca-Cola was mentioned for its understanding of occasions and packs per channel, and its ability to change messaging consumers vs. shoppers. Unilever also rated highly for its “seamless integration and customer specific activations”. Colgate made the list for its engaging activations.

The common thread running through all organisations considered at the forefront of Shopper Marketing is their understanding of shopper behaviour, types and needs; their ability to execute against this consistently with tailored and customized programs; and their willingness to innovate and trial new concepts.

What makes Best Practice?

The intent of this first study was to provide an initial benchmark (with future studies aimed at measuring specific best practice activities now that we have a benchmark), so we have defined Best Practice by a certain set of overarching areas:

What this indicates is that while Shopper Marketing is still in relative infancy in Australia, 60% are engaged in Shopper Marketing activities (and 40% are not). Whilst 2 in 5 are engaged in trials, nearly 3 in 5 are not, due to a lack of one or more of resources, retailer engagement or lack of co-funding (budget).  There were relatively more category level and retailer initiatives, at around 65% each.

When it comes to Shopper Insights, around half have been or are involved in research programs, and most are using sales and/or store data regularly. For the half that are not researching, budget and resources constraints (including lack of co-funding) were nominated reasons.

Defining and executing best practice measures for Shopper Marketing is also a huge opportunity,
with under half of respondents using shopper metrics (AWOP, frequency, basket and household penetration, spend, traffic etc) with regularity – either due to a lack of awareness/understanding of what these are and how to apply them, or cost of buying the data.

Similarly, achieving best practice retailer / manufacturer collaboration is an area for growth. Whilst nearly 70% say they have joint category discussions and have identified initiatives, fewer have actually conducted joint initiatives. 1/3 either don’t have or only infrequently have joint category level discussions or have identified joint initiatives to try. Shopper insights can be used as a jumping off point for collaboration between retailers and manufacturers at category level, a reason to increase shopper insights resources on both sides.

Implications and Opportunities for Retailers

Retailers cited a number of challenges to progress, including a lack of expertise, resources and people, how to differentiate low growth categories, gain store compliance and get suppliers to think in categories not brands.

Manufacturers, on the other hand, were hitting hurdles with retailer’s clean store policies and lack of willingness to innovate and trial new ideas and their expectation that suppliers should fund all Shopper Marketing initiatives for their stores.

Both sides have called for more effective collaboration in order to improve the experience for shoppers (and therefore optimise sales).

In the USA some manufacturers have set up cross functional retail customer specific business teams to achieve more holistic points of contact between retailers and manufacturers (not just via sales teams/merchant buyers).

What needs to happen in Australia:

* Retailers’ marketing teams need to start to establish links with brand manufacturer marketing teams and vice versa, in order to create broad joint programs of activity.
* Mutual understanding of objectives
* Mutual data sharing and shopper insights provision from both sides
* Customised programs per retailer and category
* Co-funded trials and insights programs.

Study respondents identified a number of areas for improvement, opportunity and sources of future growth.  These opportunities exist at a number of levels, so for ease of reading we’ve divided these into Engagement, Activities, Processes and Tools.

Engagement and Education:
* Closer Sales & Marketing team collaboration in manufacturers (e.g. alignment on trade promotions, price, retail customer specific campaigns on specific brands) to achieve a consistency of shopper experience in-store
* Raising the profile and value of the Shopper Marketing function: Internal education (particularly of brand marketers in manufacturers) to understand the role of, and see the value in, Shopper Marketing and the benefits of truly integrated consumer/shopper in-store and pre-store campaigns
* Closer retailer and manufacturer collaboration, as discussed above.

Activities:
* Utilising pre-store touchpoints: creating awareness and consideration of not just brand but retail offers pre-store. Understand the role of all touchpoints, which ones need to be activated for your objectives and how best to activate them based on shopper behaviour
* Tailoring and targeting: Programs targeting specific occasions, shopper segments, store types, retailers. Data mining and segmentation via research and loyalty programs. Related to occasions, day-part and seasonal marketing, and better Shopper Marketing leverage of major events
* Occasion based solutions: cross category and cross supplier
* In-store theatre: The store is considered a marketing medium – take advantage of this with ‘theatre’
* Interruption: there is a perception that shoppers are becoming increasingly habitual and that the game is becoming about interruption. Trials of new mediums to interrupt shoppers
* Increasing channels of activation: much interest was expressed in online retailing/e-commerce and the related ability to market to shoppers via online, email, mobile marketing and social media.

Resources:
* People: dedicated Shopper Marketing people, ideally in a team that reports into Executive Leadership rather than into Sales or Marketing
* Budget: dedicated Shopper Marketing budgets, in particular dedicated shopper research and shopper data budgets.

Processes and Tools:
* Development of a suite of measures customised to different activity types and mediums
* Shopper budgets and headcount built into the annual planning and budgeting process and into operating costs.

You don’t need a first class ticket to get on board

Evidence points to a Shopper Marketing industry that, while currently relatively new, is gaining momentum quickly on the back of international successes.

In most cases there is (passive) executive leadership support in Australia. The challenge – and opportunity – is in making that support active to actually generate operational change.

In looking at international examples, it is clear that best practice Retailers have not been trying to be expert at everything. They’ve picked one thing – one area of priority in Shopper Marketing – and tried new things. With Tesco it’s loyalty. With Whole Foods it’s theatre. With Marks & Spencer it’s occasion-based marketing.

The lesson is – don’t wait until the Wizard or Witch of Shopper Marketing comes along to wave their magic wand and make it all happen for you. Just get started.

“Shopper Marketing: The Journey Begins” report is available from POPAI for $495 plus GST.
A survey findings workshop will be held on September 22 as part of the Retail and Marketing at Retail Expo, for those interested in making most use of the survey findings and implications.
Go to www.popai.com.au for more information, to purchase the report or to register for the workshop.

ABOUT THE SURVEY

The POPAI/ShopAbility Shopper Marketing Industry Benchmark Survey, supported by TorchMedia, involved depth interviews with leading companies (n=19) and an online survey (n=134) with a representative sample of company sizes and roles across the industry.

The resulting report, entitled “Shopper Marketing – The Journey Begins” outlines a comprehensive overview of Shopper Marketing in Australia – attitudes, status, activities, successes and roadblocks. It is available for purchase at www.popai.com.au Findings workshops will be conducted on Sept 22 in Sydney and tickets are also available at www.popai.com.au

ABOUT NORRELLE GOLDRING
Norrelle Goldring is joint director of ShopAbility. She is a category and channel strategy specialist with 20 years’ experience on both the manufacturer and retailer sides of the fence with companies such as Diageo, Coca-Cola and Vodafone.  Call Norrelle on 0411 735 190 or email her at norrelle@shop-ability.com.au.

ABOUT SHOPABILITY
ShopAbility helps improve manufacturer and retailer thinking and doing capabilities for increased sales in category and channel. Our offers span Research & Insight, Strategy & Planning, Activation & Implementation, and Capability & Training. We work with senior executives, sales departments, category/customer/trade marketing departments, insights people and brand marketers for an integrated 360 degree picture. Call us on 1300 88 56 44 to discuss your needs.

Although still in its relative infancy, the Shopper Marketing discipline is gathering pace in Australia, with 60% of our recent survey participants implementing Shopper Marketing activities.

Back in January in our Retail World article ’Where to Shopper Marketing?’, we outlined some overseas status and practices in Shopper Marketing. Now that the first POPAI/ShopAbility Shopper Marketing industry study (supported by TorchMedia) is complete for Australia, we have a number of points of comparison. And there are some striking similarities – both opportunities and challenges – to overseas markets, particularly the USA.

Here we’re going to look at some of the key findings of the Australian study, extracted from the report ‘Shopper Marketing – The Journey Begins’ (© ShopAbility 2010). In the followup articles in subsequent issues of Retail World we will look more specifically at the implications for both retailers and manufacturers.

Survey Sample

The survey comprised 19 in depth interviews and an online survey completed by 134 respondents (66% brand manufacturers, 10% retailers, 8% POS/production agencies, 16% other agencies).
Online survey participants’ roles were represented across senior executive, sales, brand marketing, category and channel management, trade marketing/customer marketing, activations/in-store presence/merchandising, and shopper insights.
The sample achieved for this first Australian industry study into Shopper Marketing not only equalled that of the first similar American GMA/Deloitte Shopper Marketing study in 2007, but surpassed it.

Theme 1: Shopper Marketing is broad, resulting in ‘lots of homes’

It is commonly understood that Shopper Marketing targets shoppers at multiple touchpoints using and leveraging insights. The where (at what point) is up for debate. A summary of participants’ Shopper Marketing definitions might be: “The application of shopper insights across the marketing mix, using multiple touchpoints along the path to purchase, to engage shoppers and increase sales”.

The scope of what is considered included in Shopper Marketing is broad, and includes ‘traditional’ category management (see Figure 1 below). As mooted in our article in January Retail World, Shopper Marketing includes activities currently falling under the current labels of Customer/Account Marketing, Trade Marketing, Retail Marketing, Merchandising, Activations and Instore Presence.

So rather than being a new discipline in and of itself, Shopper Marketing is in essence an amalgam and evolution of shopper and retailer facing functions already in existence, albeit with some broader marketing elements thrown in.

The inclusions are not limited to traditional executions, with in-store media the third most cited activity type and ambient/sensory in-store experience coming in 8th. This is indicative of the ‘emotional , not just rational’ line we took back in January, underscored by nearly all survey participants’ identification of ‘instore theatre’ as an area of opportunity.

Retailer clean store policies notwithstanding, the above demonstrates that companies are broadening their perspective on what Shopper Marketing activities are, even if they are not yet actually trialling or implementing some of the ‘newer’ forms.

The flipside of this breadth of inclusions and amalgamation of more traditional fields is that there are too many different activity types to have a natural home in one place (or that ‘one home’ would need to encompass ‘everything’). This, combined with the fact that Shopper Marketing is considered a new discipline, is leading to it having ‘too many homes’.

This in turn is impacting resourcing – both people and budget – as we shall see.

Theme 2: Shoppers start before the store

The idea of marketing to shoppers outside of store/pre-store is not new. Major retailers like Target have been doing it for years, advertising their ‘20% off’ department sales. However, among manufacturers, perceived wisdom had traditionally held that Consumers and Consideration were pre-store, where Shopper and Conversion were in-store.

The survey indicates this notion is changing, alongside the broad definition of Shopper Marketing. Over half (52%) agreed that shopper is a mindset and/or shoppers can be influenced at any point between home, work and the store.  A further 26% considered Shopper Marketing to be activities inside and immediately outside the store. Only 22% believe that Shopper Marketing is limited to what is done inside the store.

This has positive implications for ‘above the line’ media traditionally used by marketers in consumer awareness and brand building. It indicates that the industry thinks there is a shopper messaging role for touchpoints outside of retail environments for activities including, but not limited to, major promotions. A further implication is that some Shopper Marketing messaging and activities will then fall under the remit and budgets of brand marketers – which means that brand marketers will need to start to understand and apply Shopper Marketing thinking.

Theme 3: Mind the gap – between Thinking and Doing

The good news is that nearly 7 in 10 said that Shopper Marketing is supported by Executive Leadership. This figure did not vary much between the retailers and manufacturers. A further 56% said that Shopper Marketing has been identified as a priority and source of growth.

90% have recognised and/or defined Shopper Marketing in some way and identified priorities and support required, even if 30% think they’re still at basic level.

40% said they have dedicated resources for shopper programs. However, only 1/3 plan to increase their program budgets and/or people budgets in the next two years.  A lack of Shopper Marketing people and expertise, and particularly budgets, were the two most common issues identified by both retailers and manufacturers, as Figure 2 indicates.

Very few had a sizeable or dedicated Shopper Marketing budget, with most shopper marketers going “cap in hand to marketing or sales in order to get stuff happening, and even then we have to justify ourselves a lot”, as one interviewee put it.

There was concern that other departments internally do not understand or support Shopper Marketing, with less than 30% saying they have internal understanding or support outside of the Executive Leadership. This problem was common to both retailers and manufacturers, and for manufacturers it is specific to brand marketing teams. There is a significant education opportunity in getting other areas of each business to understand and engage in and see the value of Shopper Marketing so that appropriate budgets can be released to support it.

Given the opportunity, more than half would put more Shopper Marketing resources underneath shopper insights and research programs as their first priority.

Theme 4: One third plan new directions for the train; the other 2/3 watch it leave

The gap between thinking and doing is demonstrated in changes to planned activity types, with the 1/3 planning more or different Shopper Marketing activities behind the small changes to percentage splits. Although there is an interest in pre-store Shopper Marketing, this is not yet reflected in wholesale changes to planned activities. However, some increases in Social Media, Loyalty Programs and Digital/Online are expected.

N = 134

The changes to planned activity types were mirrored in planned budget changes.

Theme 5: Measurement – The Great Unknown & Opportunity

Inability to, or not knowing how to, measure was identified by participants as one of the greatest sources of dissatisfaction as can be seen in Figure 4. The three areas relating to measurement and effectiveness added together equal the single largest area of dissatisfaction.

N = 129

Just under 40% are currently measuring their Shopper Marketing programs.  However, the forms of measurement are rudimentary, based around hard measures (sales data), with little recognition of the role of softer measures e.g. attitudinal, behavioural, influence and impact.

N = 134

Note that which types of activities being employed is reflected in the effectiveness rankings for activity types. The less utilised activities rate lower in effectiveness as fewer are using them and thus fewer understand their impact.

Unsurprisingly, sales is the number 1 way in which measurement is applied, and likewise ROI is mostly being measured on spend/cost vs sales. However one of the challenges of Shopper Marketing is that it is difficult to prove that which specific type of execution is responsible for what % of the sales increase. There is therefore a role for softer measures (attitudinal, behavioural, influence, impact, reach) as drivers of the result (as opposed to sales – the result itself). As yet, this role is not broadly understood nor applied, with 30% or under using measures that do not directly relate to sales, ROI or executional compliance.

The Shopper Marketing needle will move faster around the dial once a comprehensive, and easily comprehensible, suite of measures is developed covering the scope of Shopper Marketing activities and embedded in organisations’ sales, shopper, category, and marketing functions.

So that’s some of the initial findings. Next time we’ll look at who is considered to be best practice, what they’re doing, some of the key opportunities in the Australian market and what retailers and manufacturers need to do differently to get the Shopper Marketing train to the next station quicker.

“Shopper Marketing: The Journey Begins” report is available from POPAI for $495 plus GST – click here
A survey findings workshop will be held on September 22 as part of the Retail and Marketing at Retail Expo, for those interested in making most use of the survey findings and implications. register here
POPAI can help you with  more information, to purchase the report or to register for the workshop.

The first Australian industry benchmark study into the Shopper Marketing function, conducted recently by POPAI and ShopAbility with the support of TorchMedia, highlighted the recognition of and growth in the discipline, and impediments to its acceleration.  Summarised below are some of the key themes for retailers, extracted from the report ‘Shopper Marketing – The Journey Begins’ (© ShopAbility 2010). These will be explored in more depth in the September issue of Inside Retailing.

Shopper Marketing is broad, and is not limited to in store

The scope of what is considered included in Shopper Marketing is broad, and includes ‘traditional’ category management, as indicated in Figure 1. Shopper Marketing includes activities currently falling under the current labels of Customer/Account Marketing, Trade Marketing, Retail Marketing, Merchandising, Activations and Instore Presence.

Rather than being a new discipline in and of itself, Shopper Marketing is in essence an amalgam and evolution of shopper and retailer facing functions already in existence, albeit with some broader marketing elements thrown in.

The inclusions are not limited to traditional executions, with in-store media the third most cited activity type and ambient/sensory in-store experience coming in 8th. Underscoring this, nearly all survey participants identified ‘instore theatre’ as an area of opportunity.

Retailer clean store policies are considered one of the major barriers to truly engaging with shoppers. Notwithstanding, both manufacturers and retailers are broadening their perspective on what Shopper Marketing activities are, even if they are not yet actually trialling or implementing some of the ‘newer’ forms.

Whilst the idea of marketing to shoppers outside of store/pre-store is not new for retailers, it is for manufacturers, who had traditionally held that Consumers and Consideration were pre-store, where Shopper and Conversion were in-store.

The survey indicates this notion is changing, alongside the broad definition of Shopper Marketing. Over half (52%) agreed that shopper is a mindset and/or shoppers can be influenced at any point between home, work and the store.  A further 26% considered Shopper Marketing to be activities inside and immediately outside the store. Only 22% believe that Shopper Marketing is limited to what is done inside the store.

Retailers prepared to recognise that clean stores are a hygiene factor and not an end in themselves, and to explore new shopper instore and out of store marketing alternatives with manufacturers beyond traditional catalogue and pallet/gondola displays, will find a willing audience.

Struggle for resources is slowing the pace of growth, even for retailers

Support for Shopper/Customer marketing is there, but it’s passive. Whilst 7 in 10 said that Shopper Marketing is supported by Executive Leadership and a further 56% said that Shopper Marketing had been identified as a priority and source of growth, only 40% have dedicated resources for shopper programs and only 1/3 plan to increase their program budgets and/or people budgets in the next two years.

Less than 2 in 5 retailers were satisfied with their overall shopper marketing resources, driven by a low 37% satisfaction with number of people/roles and organisational focus. A lack of Shopper Marketing people and expertise, and particularly budgets, were the largest areas of dissatisfaction, with less than 25% of retailers happy with their Shopper Marketing people’s expertise, and under 10% satisfied with their Shopper Marketing budget.

Smaller retailers are less likely to have any Shopper/Customer marketing capabilities, where larger retailers may have a larger Shopper/Customer Marketing department (generally reporting through to Marketing) but it competes for funds, resources and air time both with brand marketing and with Operations.

The lack of resources was mirrored in manufacturers, with only 35% happy with their people/roles and under 1 in 4 happy with their budget.

The struggle for resources (both people and $ for programs) to increase growth stems from several key obstacles:
* The role, scope and value of the Shopper Marketing function is not understood internally
* Shopper Marketing is still largely tactical and isolated rather than strategic and integrated, and sometimes viewed as an add-on
* Measurement of Shopper Marketing activities and impacts is piecemeal, inconsistent, and based around hard measures (sales/ROI), with little understanding of appropriate ‘soft’ measures (impact, awareness, influence, attitudes, behaviours etc). The range of appropriate measures is neither understood nor developed, leading to a difficulty in justifying spend.

Inability to, or not knowing how to, measure was identified by participants as one of the greatest sources of dissatisfaction outside of resource and funding competition.

Given the opportunity, more than half would put more Shopper Marketing resources underneath shopper insights and research programs as their first priority.

There is a significant opportunity in:
a) getting other areas of each business to understand and engage in and see the value of Shopper Marketing so that appropriate budgets can be released to support it
b) developing a suite of appropriate measurement tools and techniques that recognise the role of differing activation types, shopper behaviours, and touchpoints along the path to purchase, and understanding measurement of inputs versus outcomes
c) Retailers and manufacturers co-funding category level shopper research and trial programs. The current paradigm where retailers are looking to manufacturers to fully fund these activities isn’t working, as manufacturers don’t have sufficient resources either.

Opportunities, Directions & Trends

Based on what and who were identified as best practice, and understanding that Australia is broadly considered to be 8-10 years behind the UK and USA in Shopper Marketing activations, the future interest and energy in the Shopper Marketing space is behind:
* Dynamic and interactive POS, rather than static
* Understanding the role of each touchpoint on the path to purchase, and appropriate activation of each
* Digital, online and social media uses to drive traffic and sales conversion
* Cross category and cross-manufacturer occasion based promotions and programs
* Target market segmentation and data mining using loyalty programs to provide pinpointed offers to specific shopper segments
* Multichannel retailing and ecommerce
… based on a sound and consistent understanding of shopper attitudes and behaviours via insights and research.

Implications

From the above discussion, the following opportunities and implications apply to retailers:
* Closer collaboration with manufacturers (particularly those manufacturers who are ‘with’ the shopper marketing program – increasing the points of contact so marketers and category/shopper marketing people connect; co-funding programs and initiatives)
* Increasing dedicated Shopper Marketing budgets and people resources. Smaller retailers who don’t have budgets could potentially band together to syndicate for research and certain activities to achieve economies of scale
* Developing a comprehensive suite of Shopper Marketing measures and metrics (ideally in collaboration with manufacturers; this would require more collaborative data sharing)
* Broadening the scope of what Shopper Marketing activities and programs could include, both instore and prestore (particularly prestore media use)
* Mining market, retailer and manufacturer data to develop specific, tailored and customised programs and offers for differing shopper segments.

These and other elements will be discussed in more detail in the next hard copy issue of Inside Retailing.

The Shopper Marketing train is at the platform, ready to leave. What will you do to reach the next station faster?

*    *    *    *    *    *    *    *

About the POPAI/ShopAbility Shopper Marketing Industry Benchmark Survey

METHODOLOGY & SAMPLE
The survey comprised 19 in depth interviews and an online survey completed by 134 respondents (66% brand manufacturers, 10% retailers, 8% POS/production agencies, 16% other agencies).
Online survey participants’ roles were represented across senior executive, sales, brand marketing, category and channel management, trade marketing/customer marketing, activations/in-store presence/merchandising, and shopper insights.
Retailers taking part included some of Australia’s largest grocery, and mass merchant and convenience retailers as well as a number of small and medium specialty retailers.
The sample achieved for this first Australian industry study into Shopper Marketing not only equalled that of the first similar American GMA/Deloitte Shopper Marketing study in 2007, but surpassed it.

SHARING THE FINDINGS
A half-day findings workshop where participants will discuss and work through the survey outcomes and implications is being held on September 22 at Darling Harbour as part of Retail2010 conference and Marketing At Retail Expo. Participants will receive a copy of the full report valued at $495, a sector specific summary valued at $95, and a copy of the workshop outputs. Go to www.popai.com.au to register.
‘Shopper Marketing: The Journey Begins’ full study report is available from POPAI for $495 plus GST. Go to www.popai.com.au to purchase your copy.
Sector specific summaries (retailers, manufacturers, agencies) will be available from September from POPAI for $95 each plus GST. Email popai@popai.com.au with ‘Shopper Marketing Survey: Sector Summary’ in the subject heading to purchase a sector summary.

The first Australian industry study on Shopper Marketing involved depth interviews with leading companies (n=19) and an online survey (n=134) with a representative sample of company sizes and roles across the industry. This sample exceeded that of similar international research studies, so  thanks go to all the participants.

The resulting report, entitled “Shopper Marketing – The Journey Begins” outlines a comprehensive benchmark of Shopper Marketing in Australia – attitudes, status, activities, successes and roadblocks.

“Shopper Marketing – The Journey Begins” outlines robust research findings, along with the industry’s take on key opportunities and future directions.

The Survey  will be activiely discussed in industry media in forthcoming weeks.

The report can be purchased on the POPAI website via the following link http://www.popai.com.au/Market-Intelligence/documents/DocumentDetails.aspx?GUID=3c4d80e0-d802-4978-9264-c2b9aae21cdf

Workshops on the findings of the report will be held as part of the Retail and Marketing at Retail Expos at Sydney Convention Centre on Wednesday 22 September. Details at http://www.popai.com.au/Events/September-2010/Shopper-Marketing-Research-Findings-Workshop.aspx

Shopper Marketing: The Journey Begins

POPAI / ShopAbility Shopper Marketing Industry Benchmark Survey 2010

Supported by TORCHMEDIA

• Leverage the learning from Australia’s first Shopper Marketing Industry Benchmark Survey
• Harness the findings with implications and actions to move forward
• Participate in the industry discussion as solutions and frameworks are canvassed
• Be at the forefront of developments

If you want to know about the state of play in Shopper Marketing, please join us for this key industry discussion and applications workshop on the findings of the first Australian Shopper Marketing Industry Benchmark Study.

This workshop is designed for people working in FMCG, retail and related agency suppliers with responsibility for, alliance to or interest in Shopper Marketing.

It has also been developed for participants in the Survey who want to gain the most out of the summaries they have received.

On the agenda:

• The scope of possibilities emerging from the findings, including implications, opportunities, plans to move forward, and some initial solutions and frameworks development
• Discussion of results for those who did not participate in the survey
• Group / industry workshop of findings implications and applications

$395 standard price

$325 for POPAI members and Survey participants (individuals, not companies)

Includes:

• Copy of the full report, valued at $495 (emailed in pdf format along with workshop outputs)
• Sector specific (manufacturer, retailer, agency) report summary valued at $95
• Presentation and groupwork of implications and opportunities
• Summary of workshop outputs (to be emailed subsequent to workshop)
• Refreshments.

• Wednesday 22 September, 2010
• Half day seminar/workshop
• 9am – 12 noon
• (8.30am for 9am start)
• Bayside Terrace Room,
• Sydney Convention & Exhibition Centre
• Darling Harbour
• Held as part of the Retail and Marketing at Retail Expos

RSVP by emailing popai@popai.com.au with “Shopper Marketing workshop RSVP” in the headline

Or

Book online  - http://www.popai.com.au/Events/September-2010/Shopper-Marketing-Research-Findings-Workshop.aspx

One of the findings of the Shopper Marketing Industry Benchmark Survey (findings to be published in Retail World in August) was that most companies, if they had more shopper marketing resources, would devote them first to shopper insights and shopper research.

So there is a common understanding of the NEED for shopper insights, but less understanding of the scope of them or how to use them. One of the most common questions clients ask us when discussing shopper research is ‘how is it being used – do you have any case studies?’

So we’ll remedy that here with a bit of an overview of what shopper research encompasses, how it works and how to use the results.

INFORMATION VS INSIGHT

First, let’s clarify what is merely information vs what’s an insight, because the terms seem to be used interchangeably but they’re not actually the same thing.

Information is simply that. Often quantified. Eg, ‘40% of shopping trips in Category X in Retailer Y are Stock Up shops’.

So what?

The insight is what you infer from that information (which may be added to other information for the purpose of deriving insights). Insights will often be the ‘why’ behind something. Eg, ‘so what’s really going on here is …’.

Shopper data (such as Homescan – basket penetration, AWOP, spend etc) and shopper research (attitudes and behaviours) will yield information, but it’s your job and the research agency’s job to figure out the insights – and implications (‘so what this means is … ‘).

Not all information will yield an insight (some information is just background information), although all true insights SHOULD yield an implication.

Don’t feel you have to mine every data point for an insight, you might be looking for things that aren’t there because the shopper behaviour ‘just is’.

SHOPPER DATA AND RESEARCH SCOPE

Shopper research is attitudinal as well as behavioural, where shopper data is behavioural and/or the outputs of the behaviour. Shopper insights are most powerful when attitudes and behaviours are married to behavioural outputs. Ie, when you blend together

It’s even more powerful when you marry your shopper data and research with your consumer research (particularly usage occasions). There’s not a clear cut line from when the consumer becomes the shopper. The Shopper Marketing survey highlighted this, with 75% of respondents believing that shopper starts outside of or before the store, not just in it.

We look at shopper research as covering a mix of what we call the ‘5Ws and 5Hs’: Who, What, When, Where, Why, How, How Often, How Many, How Much, and How Long. See Figure 1.

Fig 1: The Shopper Research 5Ws and 5Hs. © ShopAbility 2009.

Some of the 5Ws and 5Hs will yield tactical insights and others will provide more strategic direction. As a general rule, the Hows tend to be tactical and the Ws are strategic. This varies depending on the category and channel.

What shoppers can tell you – and what they can’t
Shoppers can tell you about what they think now – what they like, don’t like and why. They can tell you about things they prefer or would like to see (different category layouts etc).
What they can’t do is forecast the future or tell you what the category or channel drivers are. That’s your and the research agency’s job to figure out.

SHOPPER RESEARCH AND INFORMATION METHODS

Good, holistic shopper research combines exploratory (qualitative) and evaluation (quantitative) methods. It combines both ‘claimed’ (what they say they do) and actual (‘what they do do’) behaviours.

This is because just running instore components won’t tell you Whys or Hows in depth (particularly in a 5 minute instore interview where you’re  in a chilled area and shoppers don’t want to hang around), and just running qualitative interviews or focus groups won’t give you How Manys, for example.

Claimed methodologies will give you things like perceptions and attitudes, why they behaved that way, frequency, trip type, who buying for, purchase and usage occasions, and intended vs actual purchase.

Actual behaviour capture methodologies will provide you with things like where they go instore (navigation), how many go where (traffic), how long they take (duration), what they do (interactions – browse vs buy), and who they are (gender, age).

Figure 2 is an outline of what types of major shopper research methodologies answer which of the 5Ws and 5Hs. (Note that it’s not exhaustive, rather it’s indicative). Quantitative methodologies like instore interviews and online surveys can be used to put numbers around what comes out of the qualitative depth interviews, particularly for Hows and Whats, so it’s not completely clear cut.

Fig 2: The Shopper Research Methodology Matrix © ShopAbility 2010.

Instore observations (as opposed to interviews) do not interact with the shopper. At the other end of the spectrum, techniques such as instore workshops and instore focus groups can be used to get shoppers to perform tasks and exercises – and gather perceptions and experiences from these – in real time and in more depth than an instore interview would normally yield.

Where there’s not scan data, home scan or actual data available, if you have to you can run with claimed behaviours (eg online surveys and omnibus) for things like frequency, AWOP, and spend.

Techniques like Eye Tracking, which are essentially a form of video footage taken from the shopper’s point of view so you can see exactly what they are looking at (or what they aren’t) are normally a part of a broader methodology like Accompanied Shops or Shopper Diaries. This is because just looking at the footage in isolation without commentary around what they were there to buy or what they are thinking isn’t particularly useful in itself, for how much it costs (except perhaps maybe for quantified category layouts).

THE NEED TO BE CHANNEL AND RETAILER SPECIFIC

Shopper behaviour and perceptions changes by retailer, and individual retailer objectives and priorities vary.

Whilst some findings will be common across similar retailers in the same channel, not all of them will be. And they certainly vary by channel, starting with who the shoppers are, to what trip type they are on (shopper mission) and degree of planning/openness to impulse, among other things.

An example of channel variation is grocery (Coles, Woolworths) vs mass merchants (Big W, Target, Kmart). In grocery around 30% of shopping trips are stock up shops. Stock up shops largely don’t exist in mass merchants, as evidenced by the small number of trolleys employed in mass (outside of Christmas). Where grocery the majority of grocery trip types fall into the Stock Up, Top Up or Dinner Tonight categories, mass merchants skew more to shopper missions like Destination, Gifting, Entertaining and Leisure/Browsing.

Within channel, behaviours also change. An example is IGA vs Coles and WW in grocery. IGA shopping trip dwell times are around only half the average trip time in Coles and WW because IGA shoppers are doing more Top Up, Dinner Tonight and Entertaining shopping trips than they are Stock Up. The trip time, missions and shoppers all skew differently.

If you do research specific to each retailer you can blend together brand supplier and retailer objectives, hypotheses and priorities. These all vary by retailer and by supplier so you need to cover all bases, yet with a tailored methodology.

The other benefit of this is that all parties are engaged upfront ,and can be confident that the results that come back will answer the key things they are interested in.

What we haven’t discussed here is specific types of shopper research based on a specific brief, eg price and promotional modelling and choice modelling, which can get pretty technical. If you’re interested in these let us know and we can discuss in subsequent articles.

APPLYING THE FINDINGS

So now you’ve done a piece of research answering your 5Ws and 5Hs. Now what do you do with it?

First off, do the insights derivation exercise where you look at all the data that’s come back and ask – ‘What’s really going on here?’

Then you need to determine what the implications (‘What this means is …’) arising from the insights. A good screener question to ask here is ‘Do we care?’ to make sure you’re focussing on the big hits rather than sweating the small tactical stuff.

Lastly, you need to turn the implications into an action plan (‘What are we going to do about it?’), with priorities, and allocate who is responsible for what actions. Then you and the relevant retailers/manufactures need to get together to discuss what is going to go into market, either as a trial or as an initiative that is rolled out on scale.

Sounds easy, doesn’t it?!

So, we hope that helps clarify a few points and shopper data, shopper research and shopper insights.

In our next contribution we’ll walk you through some of the key findings from the Shopper Marketing survey … interesting stuff!

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!

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

The economic downturn has changed shopper behaviour. There are opportunities, and there are risks. What are the impacts on YOUR business?

On July 1st, Nielsen released research results indicating that nearly two thirds of Australian consumers believe the country is in a recession.

Despite recent economic data showing that Australia is not in a technical recession, shoppers are still battening down the hatches and cutting back on spending.

The losers – Out of Home Channels and ‘Nice to Have’ Categories

Some 63% of Australian consumers say they have changed their household expenditure versus last year. The big losers are take-away meals and out-of-home entertainment, with almost two thirds of respondents saying they have cut back on these items.

Aussies are staying home to eat, socialise and entertain themselves.

Other losing categories are new clothes (59%), premium grocery brands (56%) and gas & electricity (55%).

The winners – In Home Channels and Categories

Supermarkets, and many grocery suppliers are the winners, as are retailers in the discount and mass channels.

According to Nielsen, there is strong growth in ‘back to basics’ food categories aligned with a shift back to in-home cooking (and the phenomenon that is Masterchef!). Frozen meats, tomato paste and purees, salad dressings and pudding and cake mixes are all performing extremely well.

This is quite a change from data over the past few years that had indicated supermarkets were losing ‘share of stomach’ to out of home channels (like cafes) and specialty stores. Now, the supermarket, mass or discount department store is seen as the best value proposition. Small retailer = expensive, in the new mindset.

Anecdotally, we hear that the in-home entertainment categories are also performing well versus their cinema and theatre counterparts.

Shoppers we’ve spoken to are also indicating their current premise for off premise rather than on premise liquor channels – again it’s all about home.

The opportunities: negotiating the shifting sands

Tip #1 recession buster: occasion-based messaging at point of sale directly speaking to in-home occasions
* Are you in a category that can capitalize on the in-home trend? Right now there are more in-home occasions than ever. For example, we spoke to one shopper who was in a supermarket ‘buying mystery box ingredients’ (Masterchef game of culinary skill) for her husband to make a  mystery box surprise dinner. Now we have a new in-home occasion: the mystery box dinner!
* We have spoken to other shoppers buying things for in-home entertainment ‘because it’s cheaper to entertain the whole family at home’. Not only films and music, also applies to ‘activities’ (whether sport, craft etc), old-fashioned board games as well as the newer Wii wonders of the world, books… the list goes on.
* Keep your POS messaging simple, compelling and occasion-based. ‘New ideas for creative cooking’. ‘Fun stuff for rainy days’.

Tip #2 position yourself as the light at the end of the tunnel; the reward for noble frugality
* If you’re in a premium  / luxury category, it’s tempting to deep discount so hard that your brand equity is damaged in the long term.
* The fact is, shoppers will still allow themselves SOME treats. They will trade down on some things in order to trade up on others. So, if this is you, focus on being in their consideration set when they allow themselves a treat.
* Base your messaging around earned reward and move away from any previous positioning around overt flashiness and status symbolism (this is now officially ‘on the nose’ along with all those glitzy handbags with designer names spray painted all over them). Remember, we’re in a time of austerity, but a little naughtiness is allowed as long as it is earned and as long as it still represents ‘value’ in a broader sense. Still focus on quality – quality NEVER goes out of fashion.
* Hang in there and keep communicating. The Nielsen survey showed that consumers say some of their behaviour is considered a ‘short-term fix’. Almost 80% don’t believe they will still be curbing entertainment spending in the longer-term, for example.

Tip #3 Review your channel strategy
* Have you changed your trade spend in each channel and segment according to how it is performing in the current climate? Have a short, medium and long-term plan to adapt and move through the current shifting sands.
* Who is your primary shopper, and where are they NOW? Is it the same as 12 months ago? Find out where shoppers are looking for your products in the current climate and put your immediate focus there. Conduct shopper research.
* Short-term, you should be spending more of your focus and budget in your in-home channels and less in your out-of-home channels than you normally would, but with a weather eye on timing and your long-term strategy to leverage OOH channels when Australians venture out of the house again.

Tip #4 Review your business big picture
* Now is the perfect time to think about your business regeneration.
* What sorts of new systems, tools, structures, processes and strategies do you need to meet the challenge of the post-GFC era?
* There is no doubt that the GFC has changed the way we think about business, and that change is likely to be permanent.
* Time to get the mothballs out of the cupboard and renew with an eye firmly on the horizon (and beyond).

How we can help

* Business Regeneration

* Channel strategy and route to market

* Shopper Research

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

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

So, you’re thinking of conducting a shopper research project?

In our last Talking Shop issue we discussed what questions you need to be asking before you embark on such a project to ensure you get relevant, usable information.

In this issue, we thought it would be pertinent to explore the relationship between the three core elements required for a 360 degree view:

1. Shopper research
2. Trade research
3. Data (sales / basket / market / channel data)

The role of data

The primary role of data in the research equation is to establish the size of the opportunity. There is no point conducting a major quantitative shopper research project if the size of the prize doesn’t warrant it, so we want to establish this as early as possible.

Having said that, often times what the data provides is a sense of what the opportunity might be based on yesterday’s sales. It has limitations in terms of tomorrow – you may be creating a new category with your NPD initiative, or servicing an entirely new channel where your category is not currently present. In those instances, we would use data to inform a series of assumptions in order to ‘guesstimate’ the size of the opportunity.

The secondary use of data in research is to inform assumptions around sample sizes, shopper profiles, ‘strike rates’ for instore research components such as intercept interviews and exit interviews, and best placement instore for observations.

Basic information such as channel/category sales, basket penetration (homescan), and co-purchased products (other products in the basket) can assist with shaping the above.

In channels such as grocery reasonably sophisticated data is available, including category and sku splits and market shares, basket penetration and so forth. In less sophisticated channels, we are reliant on claimed sales versus actual scan data (eg many of the BIS Shrapnel and IBISWorld reports), or no data at all, in which case we build it from the bottom up by making assumptions based on trade interviews.

That brings us to the role of trade research.

The role of trade research

This is where the rubber really hits the road. The data might tell you it’s a big opportunity, but will it fly with the retailer / customer? Trade research acts as a ‘realism reflector’ for what you plan to do, helping to underscore the trade motivations that will make your category or product fly and any barriers or roadblocks to be aware of in getting your instore category strategy or product executed.

During trade research, we determine the key commercial considerations for your potential growth opportunity. These will be different from project to project.

Examples include: what is the role of the category to the channel, and the channel to the category? Does the retailer use the category as a loss leader, or as a high margin low volume profit driver, or to drive frequency, penetration or AWOP? How important is the category to the Customer, versus other categories in the store? How do competitor brands compare to yours – who does the Retailer consider your competitors to be (might not be what you think). What kind of average weekly unit sales are expected? How many shoppers are walking through the store each week and how do they behave (from the Retailer’s perspective)? What sort of sales and service model is ideal for the Retailer? What pack sizes and formats are working in the channel, and why?

When you combine trade research with data, you can arrive at reasonable forecasts for a market opportunity. For example, the data says X is a $200M category in a given channel. Your trade research has helped you to establish that you think you can snare 25% share by adapting your pack size and format  – something the Retailer said was an opportunity nobody has currently looked at.

The other benefit of conducting at least some trade research upfront is that it both engages them in the project, so they’re more likely to believe the results, and it helps identify the best outlets in which to run the instore components of the shopper research.

Now you need to see if that would be likely to work, from the shopper perspective.

The role of shopper research

So, you have determined that the size of the prize is worth researching further, the trade  said that adapting your pack size and format would enable you to leverage the opportunity. Now you need to test that with shoppers.

Some shopper research is ‘diagnostic’ (asking questions to understand a category or attitude) rather than testing a hypothesis, so the shopper research methodologies employed will vary from project to project depending on your objectives. You may use any number of in store methods such as intercepts, interviews, accompanied shops, eye tracking, immersions – or out of store methods such as focus groups, diaries and online surveys.

Ultimately what you want to discover is what we call the 5Ws and 5Hs of shopper behaviours and attitudes:

The 5 Ws:

1. Who (are your shoppers)
2. What (they buy, what else they buy with it)
3. When (they buy it)
4. Why (occasions and missions, why they didn’t buy)
5. Where (channel choice and within store).

The 5 Hs:

1. How (they buy eg purchase decision hierarchy)
2. How many (items do they buy at a time)
3. How much (do they spend)
4. How often (do they buy the product or category)
5. How long (do they spend in store, aisle etc).

Exploratory / diagnostic research covers most or all of these, whilst issue specific research will cover some of them.

Once you’re clear on how shoppers behave in your category and your channel, you’re in a position to determine how realistic your potential opportunities for growth are.

Combining the three elements

What the Holy Trinity of shopper, trade and data research ultimately provides is commercial direction.

It might be incredibly interesting that shoppers look at nutritional guidelines on breakfast cereal more than in other categories, but what are you supposed to DO about it and how are you supposed to GROW your category as a result?

Too many shopper (and consumer) research projects get relegated to the ‘interesting but not useful’ pile over time because there is no real sense of the commercial size of the growth opportunity and to what extent the idea will fly with the Retail Customer.

By cross referencing market data with trade and shopper research, it is possible to arrive at a quantified commercial case, hone in on where specifically the opportunity is and determine what the go to market strategy and picture of success might look like.

It’s even possible to witness a miracle – like the resurrection of a declining category – with the application of good, 360 degree Insight drawn from the Holy Trinity approach.

So, time for a ‘Holistic’ view of your next research project!

By Peter Huskins, Director of ShopAbility, for Retail World Magazine February 2009 issue

Sitting here quietly thinking about Valentine’s Day, if I am game enough to forget the chocolates again this year, I got to thinking about the amount of possible gifting occasions that occur in this half of the trading year. The second half is the busiest half of the year with more well recognised occasions for gift giving than the first half – Christmas is obviously the largest and busiest and is in the first half of the trading year, but ask any retailer (particularly food) to nominate the next busiest trading period and it is Easter. But we also have Valentine’s Day, Mothers’ Day, Australia Day, Halloween throughout the year to name a few, and what about all of those birthdays/ weddings/ anniversaries/ bridal showers/ births/ engagements … the list goes on and on! So how do we go about understanding what the market may look like, or even more importantly – how do we crack it and gain our rightful share of each of these occasions, or at least the biggest ones.

How Big Could The Market Be?

Understanding what the possible size of the market may be for Gifting is the first step. This information is not freely available and has probably never really been estimated, and therefore it provides a general overview rather than being targeted. The below table seeks to estimate the size of the overall small gift market, for the sake of the argument, for gifts under $30. The figures are purely an estimate and have been constructed to give some idea of the potential size of the prize we are missing out on.

Figure 1: Estimated size of gifting market. Source: Shopportunity estimate.

As can be seen, it is estimated that the small gift market, defined as gifts <$30, is around $4 billion per year.   Supermarkets do not traditionally target the broader gift market and yet enjoy around 17% share of sales of the categories we have nominated, around $700m in total. That leaves a market of around $3.5b currently being serviced by other small retailers, alternate chains and formats. Supermarkets generally target Confectionery – primarily boxed chocolates – wrap and cards, flowers, a few toys but not a really concerted effort to uncap hidden opportunities that exist in current or new categories Does this offer an opportunity to target Gifting across Grocery, and also across other channels we service as well?

It Starts With An Occasion

For household categories that are guest-facing, you might be able to uptrade shoppers to a higher quality product.  Several studies have highlighted the tendency for consumers to trade up to higher quality items across most categories during celebration seasons due to ‘snob value’ – the need to impress guests.  Products in this category include beverages such as juice and coffee, and personal care items such as soaps, handwash and, yes, toilet paper. Also paper towels and air fresheners work well.

In Summary: Know which bag of shopper tricks you need

Here is where Valentine’s Day comes in – and any other occasion for that matter. It does not have to be one of the well known and well worn “public” events that dominate the calendar and the cycle of public holidays. Each of us has a series of occasions in our circle of family and friends that are regular (birthdays and wedding anniversaries) and ad hoc (engagements, dinner parties, 21st’s). It has been estimated that the average supermarket has nearly 6,500 gifts bought each week from the catchment area they serve. Now multiply that by a possible average sale of $20 and the potential gift market could be around $130,000 each week – that is only from that store’s existing customers!

Figure 2: Potential value of gifting per store. Source: Shopportunity estimate

Who is the shopper buying for?

a) Is There a ‘Type’ of Gift Shopper? For example:

• ‘On a budget’,  eg I only have $X to spend across everybody, or $X per person
• ‘Desperate’ – last minute Xmas shopping in Intimate Apparel or Cosmetics at Xmas for example, money no object – just get me out of a bind!
• ‘I’m Sorry’ – speaks for itself really.
• ‘Thank you’ – maybe as a dinner guest or for a special friend
• ‘Responsible’ – buying a gift on behalf of others, a farewell gift for example
• ‘Oh yeah’ – those that have forgotten an occasion or it’s not on the radar yet
• ‘Give me an idea’ – really shopping for ideas, but one step before ‘desperate’
• ‘The right thing’ – I want to buy them the right thing to show I care, regardless of the cost

In reality, a shopper might be one of, or a mixture of, the above depending on who they are buying for, the occasion and how much time they have before the event occurs. b)What’s their relationship to the ‘giftee’? The shopper’s relationship to the gift recipient is at the core of what they are likely to buy and what they’re likely to spend. But in what channel they chose to buy the gift is also at the heart of solution. Let’s look at three levels of relationship – Intimate, Close, Distant – and their impacts on gifts bought.

Intimate

• Who they are: immediate family such as mothers, fathers, kids, wives, husbands
• Shopper mindset: I want to show that I spent time and effort in thinking about them and make sure that they I get exactly the right thing for them. Price is not very important. I am happy to spend several hours getting the right thing.
• What they buy: specific, high value products and brands, potentially with a degree of uniqueness or customisation. Unlikely to be gift box format unless a very high value item.
• Categories: books – specific authors; music – specific artists; home entertainment; perfume – premium and couture; fashion accessories – belts, scarves, ties, handbags; jewellery; digital and electronic devices; toys and games – higher value; tools; sports and leisure eg golf clubs, fishing rods; high value vouchers; chocolates (high end, as additional present to the primary one).

Close

• Who they are: close friends seen frequently, aunts and uncles, nieces and nephewsShopper mindset: I’m happy to spend a few dollars on something nice that shows I know them but isn’t too intimate.  And I don’t want to spend hours looking for it.
• What they buy: category may to be matched to individual recipient, but may or may not be brand or product specific. May be in gift pack format.
• Categories: books, music and DVDs – category specific;  liquor – focus on bottled wine, sparkling wine, spirits, imported, micro and home brewed beers and kits; gift wrapping and cards including tags, bags; perfume – mainstream, gift boxed; personal care pampering – bath packs, footcare packs, skincare; homewares – kitchenware eg platters, particularly with an entertainment focus, candles; toys and games (low cost) – for both kids and pets; pot plants and flowers; cosmetics – giftboxes; chocolates mid to high end eg Lindt, Cote D’Or.

Distant

• Who they are:  friends seen only occasionally, acquaintances and work colleagues, clients, extended family eg cousins
• Shopper mindset: I need to be seen to be doing the right thing but don’t want to spend too much time and money. How many people can I knock over all at once in one store for a total of $X? What can I buy in bulk?
• What they buy: categories not matched to individuals. Generic, ‘safe’ categories, lower value items, likely in gift box/value pack format. Multiple recipients may receive the same item.
• Categories: liquor – red wine, gift boxed liqueurs with glasses; gift wrapping and cards including tags, bags; homewares – candles; toys and games – stocking fillers; pot plants and flowers; chocolates including themed eg Santas; food items eg hampers.

Impacts on POP Execution

So, the type of relationship impacts what is bought.  This in turn impacts how the category should be executed. Let’s look at how each of the Relationship categories would work instore:

Intimate categories Brands in categories falling under Intimate relationships should focus on their own branding, uniqueness and point of difference.  Ensure your Retail Media and POS embodies your brand and reinforces shopper decision why they should buy you. Do NOT use seasonal colours in the point of sale for example.  Focus on shelf, and ideally an additional display in the immediate vicinity of the category, as the category is a destination. Price point is relatively unimportant for high emotional involvement purchases.

Close categories Products in categories falling under Close should concentrate on quality and value for the money, particularly for gift boxes. Retail Media and point of sale should carry images of the gift pack and outline its contents and the price point i.e. “For $XX you receive all this … “  Displays should ideally be located at the front of the store, or at the least within the category vicinity. High attraction to well located secondary displays with branded display units.

Distant categories Front of store rules for displays in distant categories.  If you’re not at the front of store or on a gondola end, don’t bother. Colour up your Retail Media and point of sale to reflect possible themes, decide on a sharp price point, and communicate value – provide an incentive to buy your product vs the competitor’s. Quality is less important here than price and convenience. Ideally use promotional staff to communicate your product and generate trial if necessary.

This can be summarised thus:

What about other categories?

So what if you’re not in an Entertaining or Gifting category? Eg, what if you are:

• Apparel (lingerie, socks and jocks, and apparel vouchers excepted)
• Staple foods eg milk, bread, toilet paper
• Health foods and health products
• Personal care staples eg shampoo, toothpaste
• General household goods eg garbage bags?

Staples don’t require being “gifted” up as they bear little relevance to the occasion. Eg, it’s hard to see role of toilet paper on Easter promotion unless there’s a novelty roll of loo paper with bunnies etc on it.   You can capitalize on the stock up shopping occasion and additional store traffic with price promotion and ‘just in case’ retail media messaging without turning everything to bunny rabbits and adding to the clutter.

The Uptrade Opportunity

For household categories that are guest-facing, you might be able to uptrade shoppers to a higher quality product.  Several studies have highlighted the tendency for consumers to trade up to higher quality items across most categories during celebration seasons due to ‘snob value’ – the need to impress guests.  Products in this category include beverages such as juice and coffee, and personal care items such as soaps, handwash and, yes, toilet paper. Also paper towels and air fresheners work well.

In Summary: Know Which Bag Of Shopper Tricks You Need

So as we’ve seen it’s all about the occasion and the shopper’s relationship with the gift recipient.   If you’re a Distant category then it’s all about Zigging – rollout out the POS and the sharp price point and ‘buy in bulk’ messages. If you’re a Close category or entertaining occasion the focus is on communicating the occasion, quality/value equation and convenience of one-stop-shop. And If you’re an Intimate category or a household staple not related to the occasion you should Zag -  stay away from the themed colours and messaging and instead concentrate on branding and uptrade. Are you in a gifting occasion category?  If not, can it become gifting by changing pack format or gift boxing – eg single serve chocolate bars vs gift box chocolates? Can your category ramp up the indulgence factor to play in gifting occasions? Who would buy your category, for whom? And what does this mean for pricing and execution?

How to ensure your shopper research projects are mined for maximum actions and shopper impact.

In a retail environment where most of the easy wins are long gone, suppliers are increasingly turning to shopper insights to earn credibility with retailers and stay ahead of the competition.

But just crying ‘We need shopper insights!’, without knowing which ones you need, or what you’ll do with them, could mean your several hundred thousand dollar research project just sits on the shelf.

So how do you optimise shopper research for maximum application, rather than just keep up with the Joneses? Here are some tips for getting traction within your organisation, with shoppers and with retailers.

PART A: DOING THE RIGHT RESEARCH

1. Know what problem you’re trying to solve
   What are the business objectives the research will help answer ?
   For example, are you losing share and want to understand why? Do you want to demonstrate category leadership with customers? Do you want to minimise the risks of a pack change? Are you spending too much on POS and want to cut back by focusing on just the key pieces?
   List the main reasons why you are conducting the research.
2. Determine whether the research is generic or specific
   Generic shopper research is fine to get a base level of understanding of how a category or channel works and is shopped, to identify major opportunities and executional elements, and to showcase knowledge with customers.
   Generic shopper research covers what we call the ‘ 5Ws and 5Hs’  (who, what, when, where, why, how, how much, how many, how often, how long).  It also covers things like degree of purchase planning, major occasions shopped for, the purchase decision hierarchy, and key missions (shopping trip types).
   Specific research answers specific problems and questions. Eg:
   • What are the maximum prices we can charge before we lose sales? (price optimization/sensitivity monitor)
   • What is the optimum pack mix for this channel (occasion/brand/pack/channel study)
   • Where should we be putting displays instore for best shopper offtake, and what should go on them? (shopper movement tracking).

   Specific research should also cover the 5Ws and 5Hs at a baseline level, for context.

3. Match the methodology to the problem and research type
   For shopper research to be robust, it doesn’t have to have a sample size of thousands.
   If it’s exploratory – understanding how shoppers think – it’s more likely to be qualitative, eg focus groups (claimed behaviour) and accompanied shops/channel immersions, as well as online diaries and surveys.
   If it’s behavioural (shopper movement and tracking etc) it’s more likely to involve instore intercepts, observations, and maybe video or eye tracking.Shopper research can be conducted both instore and out of store for a holistic view. Eg consumption profiles can be captured on-line, where instore communications and location require instore/in situ approaches.
   The methodology will change according to the type of insights required.
4. Know what you will do with the results
   Specify in the brief what will be done with the research and how it will be applied. Eg, will it be used to devise new shelf layouts and planograms? Adjust pricing strategy? Change your POS materials? Determine where you should put displays? Change your packaging?
5. Write a specific brief
   The more thorough and specific the brief, the more applicable the results. A format we find works well is the following ‘funnel’:
   • Business objective (problem to solve/opportunity to leverage)
   • Research objectives (main things to find out)
   • Research questions (detailed questions)
   • How it will be used/applied
   • Timing and budget
   • Any preferences for methodology and sample size
   • Key stakeholders (internal and external).

   When writing the brief it’s best to start with the business objective and the applications of the research outputs. The research objectives and research questions should then become apparent.

6. Don’t forget about the trade
   Not only should you run the brief past the customer upfront for their inputs and best engagement at the results presentation, you’ll be needing their permission for the instore components of the field research.
   Good shopper research also often involves trade research: trade observations of shoppers, the category, the channel, and their motivations, barriers and minimum entry/play requirements.The trade provide a sense check on what the go to market realities are, irrespective of what shopper utopia might be.  The earlier you engage them, the better traction with results you’ll get.
7. Stay involved during the research fieldwork
   At risk of becoming a thorn in your research agency’s side, at a minimum you should review and feedback on, at each stage of the project:
   • Recommended samples
   • Interview and discussion guides
   • Survey questionnaires
   • Feedback should be based on the brief

   Do the discussion guides and survey questionnaires cover what was asked in the brief? Will they answer the main business and research objectives?It’s also a good idea to attend focus groups (as an unseen, unobtrusive observer) and where possible the instore research. This is for quality control – you can not only gain first hand insight into whether the research is delivering what you need (and adjust accordingly), it’s also a way to keep tabs on the quality of the field personnel the agency are using (and thus the likely quality of the end result).

PART B: YOU’VE GOT THE RESULTS BACK, NOW WHAT?

Has the brief been answered?
Vet the initial results presentation before it goes to a wider audience. Cross check it against the brief. Have the business objectives and research objectives been answered?
What are the main implications of the research – what are the opportunities and ‘do differentlys’ ? What needs to change as a result of the research? What are the applications (see below)?

How will the results be applied?
Not every slide from the results deck will have an implication or application, but most should. Here is a starter list (not exhaustive) of the main research components and their applications.

Getting internal understanding of the results and implications
The best way to do this is to run a series of workshops with various functional teams. The implications and applications of the research will differ slightly for each of:

• Sales
• Marketing
• Trade marketing/activation/category
• Customer.

There may also be some broader business implications (eg supply chain) come out of it. For this reason you should do an initial topline presentation to the senior team before cascading it down into the functional workshops.

The purpose of the workshops is not just to present the information but to capture and workshop the implications. You can either do this during the presentation, or run a separate workshop (or both).

The implications (and applications/activities arising) need to be both prioritised and have people/departments (and ideally timeframes) allocated against them.

Once there is an internal view of all of the implications, THEN the research should be shared with the customer.

Wrapping up

Provide the research agency with feedback. The agency will require two types of feedback:

a)    Any further data mining and interrogation required as a result of the workshops
b)    How the entire project went. What worked, what didn’t, what to do differently next time. This should be a two-way feedback session so they can tell you how the process can be made better from their point of view.

After the workshops and implications prioritizing has been completed, do a cut-down version of the results and implications presentation decks and put them somewhere that everyone can access them (eg intranet). The more people have access to your research, the more engaged they will be and the more it will be used.

ShopAbility has a major shopper field research division available for qual and quant shopper studies. Call Troy on 0416 270 812 or Norrelle on 0411 735 190, or email enquiries@sh-opportunity.com.au if you’d like an analysis or discussion of your shopper research needs.

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.