News & Articles

Leveraging Retail ObjectivesTo Drive Growth: Basket Penetration & Incidence

In the third of a series of 5 articles, ShopAbility discuss the key retail objective of Basket Penetration; its applications for shopper behaviour, and how to leverage it for category growth.

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

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

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

This third article is all about Basket Penetration and Incidence.

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

What is Basket Penetration?

Basket Penetration is a core retail driver.

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

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

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

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

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

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

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

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

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

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

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

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

Why is Basket Penetration important?

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

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

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

Basket Incidence applied to shopper behaviour

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

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

Let’s break the category down further then.

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

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

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

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

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

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

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

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

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

And the list goes on!

5 Ways to Increase Basket Penetration

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

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

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

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

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

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

Address the Basket Case

Time to look closely at your basket case!

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

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

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

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