Supabarn

Mustang Avenue Canberra

Well here we go! – I really was expecting to see something different with this store  based on what my FMCG contacts had to say. And I wasn’t disappointed – but in the wrong way!

I visited this store with another experienced industry figure and for the life of us, we could not work out if this store was trying to be a Costco clone, a little bit of Aldi, a failed Campbells Cash and Carry or a reversion back to the old Jewell super stores that popped up in the 90’s. Whatever the real answer, we were left with the view that this store just does not make it on any of those counts.

To be fair, we visited around 5.30pm on a bleak Canberra Thursday evening, dark and cold outside, drizzling with winter rain.  The store is located near the airport and we were one of about 6 other Customers in the store, so the tribal feel of a price driven shopping experience just was not there, if it is intended to be at all.

Apart from a woefully inadequate Fresh offer, in width of range, quality and in presentation standards the overall feel was one of a cold barn with long sterile aisles that had an inordinate amount of out of stocks.

A very shallow grocery range complemented the Fresh offer nicely. The ends were up but there was little cut carton action to tempt the moths out of the wallet. Ticketing and POS was reserved to say the least, not shouting a competitive set that embarrassed the majors or congratulating Shoppers for making the right decision to shop there and save! Plenty of own brands, imported branded products that were hard to recognise and a few large pack sizes in certain categories. But again not in the concentration that said what this store stands for.

Oddly General Merchandise is in a separate room off to the right as you walk in the entrance, somewhat like a decommissioned cool room with large doors and warehouse racking – no width or depth of stock at all – half or full shelves of SKU’s that one would think bore no resemblance to their actual AWS…or case size…or SRP unit…or anything else

Pricing appeared sharp, but what Price is adequate if the offer looks and feels inadequate and uncompetitive to a comparable Woolies, Coles or even an IGA for that matter.

In summing up, I hope I don’t appear too negative from the outset,  but either this store is under trading by a country mile and management is taking steps to frugally operate the store, or someone made a serious (and costly) mistake when the initial site and design assessment was completed.

Make your own mind up by either visiting the store or having a good look at the accompanying photos. I’ll also revisit and report back again before Xmas in the interests of fair play, maybe we just got them on a bad night…..maybe.

Coles

Dee Why

And here we go again! – now this is more like it, we are at the new Coles Dee Why on Sydney’s Northern Beaches, opened just 3 days before this scribe decided to do a Saturday afternoon visit.

True to form this is another development on the refreshed store theme that we are seeing pop up all over Australia and the one that continues to keep Woolies back peddling, and this is a brand spanking new store. From a Shopper perspective it is a pleasure to shop in and you can see the little improvements that are added as each “new” refreshed store is opened. Store location is a little awkward as it sits one floor above ground level reached via lifts or travelators – this may influence local shoppers as there is another Coles and a Woolworths within 2 minutes, and a new Harris Farm is directly below on the ground floor, time will tell but that does not take away from the ambience and standards shown in the store.

Unlike most new store openings, this one opened without the usual fan fair of 100’s of deep cut specials across the store, but with an elegant catalogue leveraging Masterchef and with a discount off for selected SKU’s and a $ offer off the total purchase value redemption vouchers. Obviously all of the regular Coles weekly specials were up and ready for action so the overall price thrust was still very evident.

For a change, Indian is at the front entrance rather than at the back adjacent to an on-the-run chilled case, and that has pushed Seafood and Meat to the back corner. Cheese and Deli is in the middle of these Depts and to the usual standard for this format and judging by the queues, were doing a roaring trade. The overall Fresh format is sufficiently well known by now so I am not going to comment on that, sufficient to say it is good, very good. One plus was that Coles have finally started to put some cross merchandising in and around  the open dairy and meat cases, little barrels of stock neatly ticketed – the whole area still cries out for more, much more but it may be a CODB issue or a decluttered feel that Coles want to continue to drive with the fresh area.

Bakery is located at the back of the store, again combining proprietary Branded bread and in house Bakery. Focus is on driving the baked fresh for you theme.

Each Dept is also fine tuned to the local area and Coles proudly boast of supporting local manufacturers – a boast that they live up to with products sourced from as close as Brookvale (a serious throw with a cricket ball) and Manly Vale (about 2k’s away). They also photos and wording to reflect the beach side site and Customer base, a nice touch to “localise” the store.

The key destination Depts that Coles have targeted such as Health and Beauty did look great, and you are hard pressed to notice that the range has been significantly cut. Entertainment and Paper Shop is also a “new” destination Dept and looked the part and was well frequented by the locals. Extensive GM ranges were also show cased, but in a separate aisle location and not cross merchandised. No clip strips were evident at all.

I am looking forward to seeing one new store with all of the key destination Depts completed and trading .

Coles have also made “promises” for service, out of stocks and PL performance which clearly positions their view of Customer service – and in this store it is all about the Customer, plenty of attention by plenty of knowledgeable and keen staff.

One thing that was out of place for a new store though was the Reduced to Clear tickets on some SKU’s – for a 3 day old store????

So overall another opening of another refreshed store.

Bring it on!!

Harris Farm

Dee Why

Well here it is – the latest Sydney based offering from the Harris family right underneath the new Coles described above, and also right in the middle of a fairly intense fresh food competitive area with two other well established fresh malls close by. Harris Farm also have stores at Manly/ Queenscliff and at Mona Vale so they are a known retail brand to the local Customers.

This is a small store with the usual forced flow through Fresh leading to an extensive Mediterranean range of Grocery products. It feels smaller than the Kings Cross store we reviewed in May, but the shape is also quite different. Again narrow aisles do not facilitate browsing as trolley clashes would annoy rather than excite. Presentation was standard HF fixtures, water fall stock and the fluro product and price tickets  = standard fare and why change if it works?

It did not look too much different to other Harris Farm stores apart from what seems to be a more defined Grocery offer at the end of the Fresh run, this may have been more to do with the type and location of the fixtures. Some of the Grocery ranges were normal products you’d find in Woolies and Coles, and the impression I got was that this store leans more toward the normal flow and departmentalisation of the traditional players, albeit without the dominance of the well known Brands, but with a slow creep of other Tier 2 and 3 products.

Overall a neat copy and paste of the regular Harris Farm offer and one that should carve out a solid business base in this area.

Who do you think you are (what your pharmacy is) vs how your shoppers see it?

Last article we talked a bit about various retail channels and store types, and why they are visited by shoppers. We’re going to break this down into more detail here specific to pharmacy types.

Subsequent articles will deal in more detail, per type of pharmacy, in the opportunities this presents.

Who are you?

Below is a summary table of pharmacy types that we have developed. It might not cover every individual pharmacy out there, but should cover the majority … if you’re a pharmacy that doesn’t fit into the below, let us know. Always happy to look at new channel segments!

The first row (marked with #1) is the most important indicators, then the second row are the next most important and so on.

Fig 1: Pharmacy Channel segments. © ShopAbility 2009

What is evident from the above is that at least who shops in your pharmacies, and how they shop (and thus what you sell) is going to differ depending on the type of pharmacy you are.

If you’re an Inner City pharmacy, for example, you’ll have a lot more corporate types in their 20s, 30s and 40s buying stuff for that night (stockings, condoms, breath freshener etc) in their lunch hour or to/from work. This means you need to staff up at peak transit periods, and range products that apply to their needs (no incontinence pads for this market!) “Service” in these types of pharmacies means ‘get me in and out as fast as possible’. These types of pharmacies are the law of large numbers – you might not see each individual very frequently, but you’ll sure see a lot of different people (traffic).

At the other end of the spectrum, if you’re a Community Pharmacy (generally located on a suburban strip) you’re more likely to have a number of regular older customers, often pensioners, who treat you and your store as a frequent social outing and are more likely to wander in throughout the day, looking for not only the script fill for their chronic ongoing ailments but also (aside from the aforementioned incontinence pads) products associated with aging such as specialist footcare like corns and bunions. “Service” here has to do with the personal nature of the relationship. Customers in these types of pharmacies rely heavily on you for advice.

What does it mean?

We’ve had a go at representing some of the implications of these differences below. We’ll be going into more detail in future articles, but you can use the above and below tables as topline ‘ready reckoners’ of sorts.

You can see that the Range, Service, Value equation we discussed last time is dialed up or down in importance to shoppers depending on the type of pharmacy you are.

Fig 2: Topline Implications of Pharmacy Type. © ShopAbility 2010

So that’s a very general outline on the different pharmacy types. As mentioned, we welcome your feedback on the types and where your pharmacy fits (or doesn’t) as we discuss the opportunities per pharmacy type further in later articles.

Until then!

Rather than my usual ‘how to’ focussed pieces, your friendly Drinks Trade editors have asked me for an opinion piece on the impact of increasing the amount of imported beers made locally. I welcome your comments and points of debate, as what follows is simply ‘sample of one’ – albeit through the shopper’s eyes rather than mine.

Opinions are widely divided on the ‘locally made imports’ topic, ranging from the usual bland and commercial corporate standpoints of the big brewers, to highly emotional rants from some of the smaller suppliers looking for an opportunity to stick one up the ‘big boys’.

So let’s get back to shopper reality, shall we?

If a shopper/consumer finds out that the imported beer they usually drink is now being made locally, their first reactions are likely going to be:
* Do I care? (So what?)
* Should I care? (Why would I care?)
* Are they ripping me off, or can I get it cheaper because of this?

And the answers to all of the above are, it depends. On who I am, and why I’m drinking that particular beer in the first place, and what I’m paying for when I buy the beer – Name? Recipe? Taste? Tariffs?

If I’m drinking the Corona, Peroni or whichever locally made import, based on image and fitting in with my mates, then I’m less likely to care about where it’s made because it’s the badge/brand that’s important.

If I’m drinking it because I specifically like the taste, I would need to be assured that the recipe was the same and that the overall taste/quality hasn’t changed. There is a small – but growing – portion of (craft) beer appreciators who understand the impact of raw ingredients (particularly water and hops sources) on a beer, where water (and hops) are the beer equivalent of ‘terroir’ in wine. These are the guys who are most likely to decry locally made imports on the grounds of ‘inauthenticity’. So the question here is around how important is the recipe vs the point of origin?

If I’m buying it based on price, I would need to understand that the quality/taste was the same in order to justify the same price point as a fully imported version (because I know that fully imported versions carry tariffs in their pricing). I would probably expect a small discount on a locally made version vs the import, the discount differential being the expected level of import tariff.

So from the shopper’s point of view, unless it’s specifically brought to their attention, it feels like a lot of them wouldn’t look at the labels closely enough to judge. And if it were brought to their attention, there are 1 or 2 groups of shoppers and consumers who would care (based on price and perceived taste changes) and probably another 1 or 2 consumer groups who wouldn’t.

For me personally, the question is more one around ethics and legalities of pack claims … what is being disclosed and what isn’t. There need to be some quite clear labelling codes around ‘product of/made in’ vs ‘imported and distributed by’ vs ‘bottled by’. Ie where the beer has come from vs where the bottle packaging/labels came from.

Currently the labelling can be quite confusing. I was in a Vintage Cellars the other day and their Corona said ‘Product of Mexico’ on the front, ‘Imported and Distributed By Fosters NZ’ on the back, but the labelling had the NZ standard drinks logo on it, so it was obviously at least labelled in NZ. So was it actually made in Mexico, but labelled in NZ? I know it sounds like labelling for dummies, but something like ‘beer made and bottled in Mexico, labelled in NZ’ would be clearer.

Even if the locally produced versions of the bigger ‘imported’ brands start to eclipse the sales of the fully imported versions of those same brands, there are still enough other imported brands/labels  – and a growing craft beer and microbrew market – to ensure ongoing variety.

Global companies have been making locally produced versions of their brands and products (think Kit Kat, Coca-Cola, Mars Bar et al), often tailored to local palates and tastebuds, for years.

The idea isn’t new.  It just needs to be clearly disclosed on the product – for those who care enough to actually read the label!

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

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

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

Trip types by retail channel

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

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

RetailPharmacy Table

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

So where do pharmacies sit in all this?

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

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

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

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

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

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

Owning a Proposition

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

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

Until then!

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

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

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

New fresh departments at Woolworths Caringbah
Hi XXXX,

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

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

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

We look forward to seeing you in-store soon,

Kris
Store Manager
Woolworths Caringbah

So game on for us to comment!

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

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

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

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

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

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

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

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

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

SPAR ALEXANDRIA

Spar stores aren’t new to Queenslanders, but until recently there haven’t been many in the Sydney and Melbourne metro areas. The Alexandria store opened a couple of months ago in Sydney so we thought we’d take a look.

What it is and where it is:
* A small footprint supermarket, effectively a mini mart. More supermarket than convenience store though. Reminiscent of Tesco Fresh & Easy or WalMart Neighbourhood Markets in the US
* Elements of Thomas Dux/Harris Farm, with a small supermarket dry grocery offer
* Alexandria is a suburb full of high disposable income SINKs and DINKs living in medium density, brand new apartment blocks. The Spar store is only a couple of blocks from Danks St, which has the well known Danks St Depot cafe deli and a Whole House Foods organic supermarket. There isn’t a Coles or WW in the immediate vicinity.

First impressions:
* Fresh fruit and veg external signage and decaling similar to the FoodWorks Ryde store reviewed last issue.
* This Spar had an outdoors-facing cafe utilising the kitchen from the Deli department inside the store. Deli service was one side of the kitchen, facing into the store, and the cafe was on the other side of the kitchen, facing out
* I was greeted entering the store by a Movenpick (premium ice cream) demonstration and tasting person, setting the tone for a higher end product store.

Instore:
* Low profile bread racking and fresh fruit and veg tables. Small selection of fruit & veg but some interesting packs of nuts
* Large deli as a % of the store print, AND they had white anchovies (which are my yardstick for deli range), however the quality of the anchovies was poor as they were very hard and not fresh
* Whole chiller bay right next to the deli of duck cuts and duck ready meals, first time we’ve seen a bay of duck products. This one was all LuvADuck brand, looked like an initiative by them
* Range instore generally smaller pack formats (catering to the locals living in small apartments), high end ready meals and a lot of premium icecream brands
* Not many overtly ticketed price specials
* No real gondola ends, only a couple on two aisle ends near the checkout.

Checking out:
* Low profile gum & confectionery ‘aisle’ near the checkouts rather than at checkout
* Checkouts were messy but service was friendly

Verdict:
They know their local market well and have focussed on top up and dinner tonight shopping trips with their deli and ready meals emphasis.

WW Parramatta

We were led to believe whilst Caringbah is the ‘next generation’ WW store refurb, that the Parramatta store (located in the Westfield) is the WW version of Coles’ Oakleigh store. Ie, the ‘trial magnet’, where lots of different things are tested. So we scuttled off to have a look.

Wasn’t as much happening there as was expecting … but boy does that store get a shedload of traffic.
Health and Beauty was very obviously a focus, with two full-height aisles separated by a low profile walk-around aisle to total 3 aisles. It had very large overhead department signage in colours and font reminiscent of Big W.

The health aisle has been extended to include a low profile sports nutrition aisle.
Bread was ranged in its plastic trays (rather than on wire racking). Looked like the bread equivalent of shelf ready trays, but it was a bit ugly. As were the HUGE thick grey plastic trolleys, very obviously heavy duty but I’m not sure to what end.

Things that differed from the usual run of the mill WW store included more shelf media (but less floor media) than we’re used to seeing, used for information and recipes etc.  Also more brand blocking (particularly in dairy case).

Two apparent trials included various headers in the fruit & veg, confectionery and health/beauty aisles; and some educational aisle blades in the Coffee aisle which talked about the various types of coffee.

So a few minor tweaks, rather than anything revolutionary. And they need to lose the ugly grey trolleys that make aisles impassable!

And then there’s …

The Village Grocer, Balgowlah: situated 3 doors from a refurbished Coles in the Stockland centre, this store was like a Harris Farm or Thomas Dux store with a ramped up fresh meal and deli area as well as a broad range of imported dry grocery products ranging from cordials to chilli sauces. Great selection of dips with some interesting brands and products we haven’t found elsewhere.
Novelty brandy packaging in Dan Murphys: What is going on in the brandy category? Unclear whether these are specific to Dan’s, but they’re carrying Stiletto brandy (high heel shoe shaped bottle); Venus (bottle shaped like guess who); Bouzouki (packaging shaped like a type of  mandolin/banjo), and another shaped like a cello or double bass stringed instrument. Last ditch attempt to grow a struggling category by promoting the ‘high end’ with novelty products?

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

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

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

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

THEATRE STARTS OUTSIDE THE STORE

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

Figure 1. Just Sports exterior, Dallas, Texas

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

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

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

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

THE THEATRE OF FOOD – INSTORE FOOD PREPARATION

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

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

Figure 4. Cooking Connection in HEB, Fredericksburg, Texas

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

THEATRE IN AISLE

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

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

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

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

OCCASION BASED SOLUTIONS: SECONDARY DISPLAYS

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

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

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

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

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

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

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

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

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

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

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

SHOPPER MARKETING SURVEY – HAVE YOUR SAY BEFORE TIME RUNS OUT

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

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

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

DETERMINE HOW MUCH TO SPEND BEFORE YOU START

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

TYPES OF PROMOTIONAL SUPPORT

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

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

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

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

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

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

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

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

EXECUTING YOUR PROMOTION

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

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

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

GETTING THE MESSAGE RIGHT

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

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

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

Message Hierarchies using the ‘Path to Purchase’

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

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

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

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

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

Till then!

We welcome feedback on these articles – what you agree with, what you don’t – and what you’d like to hear about. Email us with feedback on enquiries@shop-ability.com.au

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

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

Get me in and out quick

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

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

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

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

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

My Fruit & Veg is getting squashed

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

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

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

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

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

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

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

Put similar things together

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

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

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

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

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

Maximising impulse when 85% already do it

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

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

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

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

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

Use the aisles.

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

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

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

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

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

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

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

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

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

How shoppers shop fridges

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

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

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

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

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

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

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

Beer Category Segmentation, Flow & Adjacency Options

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

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

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

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

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

Layout by Potency/ABV

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

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

Layout by Perceived Premiumness

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

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

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

For Retail Pharmacy Magazine

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

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

Begin with the end in mind – Promotional Objective setting

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

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

Well, duh.

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

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

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

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

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

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

FRAME OBJECTIVES WITHIN A SCOPE

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

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

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

SET GOALS YOU KNOW YOU CAN MEASURE

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

OUTPUTS AS WELL AS OUTCOMES

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

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

Mechanics – Make the Punishment Fit the Crime

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

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

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

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

IMPACTS ON SHOPPER BEHAVIOURS

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

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

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

Till then!

We welcome feedback on these articles – what you agree with, what you don’t – and what you’d like to hear about. Email us with feedback on enquiries@shop-ability.com.au

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

What is a Trial?

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

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

So, why implement Trials in the first place?

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

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

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

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

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

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

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

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

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

10. Differentiates Tactical from Strategic initiatives

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

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

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

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

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

Implementing a Trial

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

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

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

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

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

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

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

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

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

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

Who is it for?

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

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

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

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

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

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

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

What occasions is it targeting?

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

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

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

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

Where should it go instore?

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

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

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

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

Where should it go in the fridge?

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

However I saw it located within RTD in several outlets.

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

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

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

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

Kmart Keysborough

From the outside this store does not look any different from most other Kmart stores, but scratch below the surface and there are some neat initiatives being trialled:
1. smaller ranges in most Depts
2. more space for remaining SKU’s and ranges
3. clutter removed from the aisles
4. welcoming staff – what a difference!
5. clearer price ticketing with rounded $ price points
6. better housekeeping

No wonder the Customers and Sakes are returning, they’ve gone back to basics with an offer that the average Shopper can understand and relate to.

Coles Flemington

Another of the Refreshed stores, although when we visited in February, the center was not yet completed with vacant stores and builders still walking around.
But the Coles store was ready – and how!
This store is a continued evolution of the new Refreshed stores that are popping up in most states. The store standard was superb for 9am, with plenty of staff wlking around fine tuning the presentation and answering questions and generally being attentive.
It feels like this store is under trading considerably, and will need to bed in with the local shoppers before it’s real potential can be reached.

Coles Oakleigh

This store is a trial store, similar to Donvale, and has many of the attributes of other Refreshed stores – but there is more!

Oakleigh is well worth a visit as there are many initiatives here that have not appeared at other stores as yet or are part of the regular roll out, yet they combine well to make a store that is definitely different and definitely progress on most of the others:

1. the Cooking Shop with black and grey headers and fixtures and has all of the home cooking needs well displayed and categorised

2. “Toblerone” signs in the Fresh depts. and on the gondola ends, a triangular shape that can be seen from all sides

3. food to go area with cold drinks, sandwiches and sushi located on a front gondola end
4. mid aisle “special” bays

5. Recipes on shelves in Grocery

6. separate weight loss/ control section that has been separated from the normal Health Foods offer. It also stocks a range of well known Protein supplements.
7. better sub-categorisation in Depts such as Pet Food and Health and Beauty
8. Branded supplier stands in Health and Beauty

9. shelf ready trolleys for high volume products
10. dedicated freezer doors and chiller sections for Specials
11. Market Fresh price tickets in the Fresh Depts – we did not like these as they do not drive a Price message at all. If you train your Shoppers to look for and respond to price driven Specials why hide then with different terminology. It appears hypocritical….
12. Seasonal events in an aisle not lost on a back wall or in a corner

The down side is that it makes the Depts such as Paper or Household Cleaning look positively boring  and they must be an opportunity for an astute and enterprising supplier to work with Coles to drive the Shopping experience to a new level.

No matter how much you like or dislike the proliferation of PL, it is here to stay. Apparenlty the PL mix in Coles is at 22.5% well on the way to their target of 30% of sales. By looking at some of the new packaging Coles are introducing they have already upped the ante with innovative edesigns and superb graphics – hello Marketing Depts!!

However I do not like the treatment of Confectionery – it is a retrograde step – harder to shop due to haphazard sub category adjacencies and flows, using Perspex dump bins for hang sell bags (please!!)and poor housekeeping. Certainly not in keeping with the rest of the store.

Coles continue to impress with the roll out of these stores and their trial programs. None of it is neck snapping rocket science, most initiatives have been done before either here or overseas, and copied inot these refreshed stores.

The difference is that we have come to accept bland supermarket offers as the norm, and any change is seen as a good change.

This store hopefully proves that these types of initiatives will eventually be developed and rolled out across the whole store and will be permanent, we’ve been holding oru breath long enough!

PS – let’s see what Woolies response is when they complete the Caringbah refurb later this year. Coles have left WW behind with their Refresh program and it will be interesting to see if and how they react with something other than just Price. – Peter Huskins

FoodWorks Infresh, West Ryde

This small footprint store was opened a month or so ago and its mission is ‘we help turn food into meals’. This message appears on posters, overhead signage and aisle ends throughout the store.  There’s a lot of large imagery of fresh food both externally and internally in an effort to reinforce the ‘infresh’ offer.

What we liked:
* Light, bright look and feel, low profile fresh fruit and veg section lends market feel and improves visibility, wide aisles made it easy to move around
* A good range of Asian meals and meal components (potentially due to the store’s proximity to Eastwood, a large Korean community) including pastes and dried fish
* Fresh made salads and pastas in the delicatessen available in a range of take-home size tubs, although the delicatessen itself was small and lacked a decent antipasto range
* In aisle signage delineating categories and categories segments was very clear. There wasn’t much aisle end navigation signage as there were really on 3 or 4 split centre store aisles
* In-store liquor section with a basic range of wines (in-store liquor offer in grocery is unusual in NSW due to licensing regulations).

What needs work:
* Delicatessen selection was largely what you’d see in a mainstream supermarket, only less of it
* Fresh-to-go sandwich and drink cabinet inside the front door – I assume this was meant to be a bit like the Munch offer in 7Eleven – was out of stocks and lacked signage, looked like it was to be decommissioned
* Quite a small range of fresh fruit and veg – doesn’t deliver on the ‘InFresh’ proposition and signage
* No ready meals or pre-prepared meals in the meat chillers, given the ‘we turn food into meals’ proposition
* Very small bread selection. All bread, crumpets, muffins chucked together in a single display bin
* Jury is out on the raw pallet offlocation displays of washing powder and other items … bargain basement feel.

Verdict:
Covered most of the basics. I’d go for the Asian meals, but there’s not a wide enough range for stock up shops and it’s not delicatessen enough for dinner tonight/entertaining shopping trips, particularly given the store’s proximity to Top Ryde City which even in its current incomplete renovated state has a WW, Aldi, Franklins, delicatessen and a dedicated Asian supermarket.
I’d use it a bit like an IGA … duck down the road to pick up some basic things you’ve run out of when you can’t be bothered dealing with shopping centre carparks and crowds.

Franklins, Top Ryde City

Given David Burton’s preview of the Franklin’s Top Ryde City store in Retail World recently I was expecting something a bit special. Sadly this was not the case. It’s quite similar to the Franklins St Ives Peter reviewed mid last year.
Entry is confusing as it’s way over on the left, with an open space on the right that I entered and was promptly told I’d come in through the express checkouts.
Their loyalty program signs are everywhere, and the checkout person asked the customers prior to me and asked me as well, whether we were members of their loyalty program or wanted to be. The customers ahead of me were signed up on the spot. The Franklins staff obviously got the memo about the loyalty program.
Cut case offlocation displays in aisles were the right idea to attract impulse purchase but the execution let them down … offlocation breakfast cereals in breakfast only prompt switch rather than incremental purchase, and unrelated displays in some aisles had obviously not been shopped. Better to put an offlocation display in a complementary category (eg savoury crackers next to cheese barges etc).
The low-profile bread area is quite small and actually makes the range look smaller, particularly given it was only one side of the aisle (international meals were on the other). The POS itself is quite dated looking.
On the bright side, there’s an entire aisle of gluten free products next to fruit and veg.

Verdict:
We’re still in the ‘80s.

And then there’s … Golden Banana

This was a bit of a pleasant surprise. Located in Top Ryde City shopping centre it looks like a standard fruit & veg shop from the front (it bills itself as a ‘fruit market’) but is actually more like a Harris Farm Market in both range and store footprint.
Huge range of fresh fruit and veg … an entire wall of Asian-style greens, and lots of fruits you don’t see very often like Kiwanos.
Chillers contained premium dips, yoghurts, cheeses, ice creams, and pasta brands. A dry store of several aisles contained the (by now ubiquitous, and apparently compulsory for this suburb) Asian meal components plus a large selection of fresh pastas.
A large delicatessen serviced antipasto and sliced meat needs, and there’s a separate pasta and salad bar at the front of the store for quick takeaway lunch trade.
At this stage Golden Banana looks like a one-off (I couldn’t find any online references to them as a chain) but it’s certainly a concept that could be franchised. Aside from Harris Farm its closest cousin would be something like the Colonial Fresh Markets in Westfield Doncaster.

Verdict:
This is a destination store for fresh fruit & veg but competes with the delicatessens for the gourmet dollar too … lots of interesting stuff to try. It would be even better if they had some recipe cards so you knew what to DO with some of the more obscure products. – Norrelle Goldring

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

Category Pricing

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

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

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

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

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

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

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

Brand & Sku Level Pricing

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Till then!

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