Digital does not equal shopper – yet!

A few weeks ago, I chaired the Asia Shopper Marketing and Insights Conference in Singapore and I was struck by the volume of discussion on digital media. What is clear to me is that part of the industry increasingly sees digital and shopper marketing to be the same. They are not – or not yet anyway.

Firstly let’s be clear who is driving this convergence and no it’s not Google, Facebook or Microsoft. It appears to me that these players are pretty clear that the tech they offer has massive potential to enhance the marketing mix and enable marketers to do some truly awesome things. But none are saying that what the vast range of new communications vehicles and devices constitutes ‘marketing’. What they are clearly saying however is ‘look at how important the digital dimension is’ and ‘it’s time to start using this’.

Google’s ZMOT doesn’t propose online media as a new marketing model – it shows that a new marketing model must consider digital as well as traditional and in-store. Microsoft are busy innovating in how to get devices working together so that they can be used throughout the value chain and Facebook are giving us a great space to talk about what we like – even as their stocks disappoint.

The main proponents of tying digital to shopper marketing are the advertising agencies. And it’s here that they may be getting this wrong and where they may ultimately end up being burnt. Looking at some of the cases presented in Singapore and earlier this year in Sydney, it’s pretty clear that some agency-folk confuse parts of the marketing mix for ‘marketing’. It’s as if they are saying advertising is part of the marketing mix therefore advertising is marketing (it’s not!).

Many of the cases that have been submitted clearly show the amazing potential of digital media and the opportunity for great planners and creatives to use  this to create awareness and affinity. Fewer cases demonstrate the potential to increase the consumption of brands by getting people to buy more. For instance Dan Paris at Integer showed a great example of how Nissan used Facebook and Twitter to encourage targeted twenty-somethings to test drive a car whilst conducting a speed-date. This created a twitter buzz, delivered more likes in Facebook and I dare say made for a good showreel at Cannes. But how many cars were sold as a result? The answer was unknown. Sure this is a great case of blending digital communication and brand activation but is it great shopper marketing?

No. Really great shopper marketing changes the purchase behavior of a targeted group of shoppers in order to increase the consumption of a product or service. It’s output is measurable: penetration, frequency of purchase, weight of purchase or a combination of all three must increase amongst shoppers in the target group for it to be effective. So digital campaigns that cannot demonstrate these outcomes in a specific segment cannot be judged as effective shopper marketing. Simply put ‘likes don’t count – sales do!’

It would be a shame if agencies were to continue to tie digital and shopper marketing together in this way, since both may quickly become discounted by the cynical as a fad or fail to meet the financial requirements of the thrifty.

Instead agencies should seek closer partnerships with the tech firms to establish the full range of opportunity to utilize digital’s specificity in a way which demonstrably leads to increased sales. Since the technology now exists to define target segments precisely and lead those segments through integrated activities throughout the path to purchase, it’s time this was used to deliver really effective shopper campaigns.

We see this beginning to happen in cases such as Homeplus’ virtual stores in South Korea or New Balance’s run to the store campaign in New York. But it won’t be until the links between a digital campaign and actual changes in purchase behavior  are consistently drawn that digital will become a true component of shopper marketing. Until then, marketers should beware those who claim that their exciting digital campaigns are ‘shopper marketing’.

In the meantime marketers can and should take more accountability for ensuring campaigns bite. Briefs should clearly state the specific target shopper segment, define the change in purchase behavior required and identify in which channels this is likely to take place. Creative proposals (digital or otherwise) should be judged against these specifications.

Are 76% of purchase decisions REALLY made in store?

 

A recent report from POPAI stated that 76% of purchase decisions are made in store – this is a great sound bite but if you ask me it’s both misleading and counter-productive. Why?

 

Let’s start with the idea of a purchase decision. What the report is saying is that the final product choice is the only decision that shoppers make. Sure it’s the important decision – it’s where the rubber hits the road, it’s the FMOT and so on. But as we all know shoppers go through a series of decisions that lead up to the final choice – all of which are purchase decisions. Think about it: shoppers have to decide that they need to buy a product to meet a consumption need (like ‘I’m out of toothpaste’ or ‘We need salad for dinner tonight’); they have to decide how much time and money they want to spend in the shopping trip; they need to decide which store they are going to; they have to decide where in the store they’ll find what they need and finally shopper need to choose the actual product they are going to buy.

The key truth in what POPAI is saying is that the final decision shoppers make is in the store. But it’s misleading to say that all ‘purchase decisions’ are made in the store because, in the chain of decisions that shoppers  make, it’s really only the last two that can ever happen inside a shop.

Lets then look at the stats: POPAI states that the figure of 76% is derived by adding all of the occasions when purchases are unplanned to those which were ‘generally planned’ and those which were ‘category substitutes’. In the absence of a completely clear definition for these groups or quantification of them, we have to assume that before going into the store some (perhaps many) shoppers had already made a decision to buy a product in a category. POPAI’s claim suggests that the in-store environment is the only determinant of what these shoppers buy, when it needs to be remembered that the decisions they had made outside the store are highly influential on what they actually buy.

We know from our own research at engage and research by others as diverse as Nielsen, TNS and Harvard Business School that most people buy from a repertoire of brands and shop these brands habitually. The fact that people might switch within a repertoire is hugely important but so is the existence of this repertoire. POPAI’s headlines gloss over this.

Lastly let’s look at the implications of a catch all statement like “76% of purchase decisions are made in-store”: it would be fair to say that POPAI’s has a clear motivation to encourage consumer goods companies to spend in-store. Yet in-store expenditure is the fastest growing part of the marketing mix with Deloitte suggesting that its growing at 65%. Other data shows that trade spend is now the largest cost for CPGs after the cost of goods and that it eclipses traditional ATL by more than 50%. Finally, with returns running between 30 and 55 cents in the dollar – a lot of in-store money is being wasted – we estimate that the top 250 consumer goods companies probably lost near to US$200 billion last year alone. Statements like “76% of purchase decisions are made in-store” fuel this growth in expenditure and are widely quoted as justification for moving more money in-store. Instead, I personally feel that POPAI would be better at leading the way in illustrating how money should be spent more wisely.

Bearing the above in mind, here’s what I wish POPAIs would do: Firstly they should make their data widely available and for free, that way we could all understand the detail behind the headlines and use it to plan more effectively. Secondly, they should spend more effort propagating messages on how to get the best out of shopper marketing initiatives based on their experience and network. Thirdly, as Google have done in developing the ZMOT concept, they should be engaging a wider network of practitioners to ensure the industry is being lead with robust insights. Lastly they should be less focused on creating sound bites which might do their case more harm than good in the long-run.

The in-store environment is a hugely potent influencer on shoppers’ behavior, it has a diverse and complex role to play in the entire marketing mix and its influence varies across categories and channels enormously. To fully grasp the value of marketing to shoppers in-store, leaders in the consumer goods industry need a deeper understanding of how shoppers’ behave and how this behavior can be influenced. Simple statistics and generalizations like “76% of purchase decisions are made in store” are no longer enough to deliver real long-term returns on investment.

Is it me or is consumer marketing getting really flaky?

I meet a lot of marketers, responsible for a huge range of brands across some pretty diverse markets and after 20 years I’m beginning to worry.

As a practitioner in and observer of the consumer goods industry, I believe that despite recent improvements in performance, the industry continues to face some significant challenges: Input costs continue to escalate ahead of realized price points; the costs of effective media impressions continues to rise whilst trade consolidation pushes money into stores and quite frankly CPG is no longer the place to be if you are a ‘bright young thing’.

You’d think, in this environment, that it would be the expertise in consumer marketing that leading companies have that would drive the industry towards new growth horizons. And yet Deloitte’s analysis of the top 250 companies over the last few years shows a CAGR of just 3.7%. What’s going wrong? How come marketers can no longer deliver step change?
I think that the major reason is that as consumer marketing as a global discipline, born in the late 40′s and 50′s, enters its ‘third age’ it’s getting ‘flaky’.

Let me explain:

Despite what people would love to feel about marketing being an art, there is a hard commercial rationale at marketing’s root: marketers’ primary purpose is to grow sales profitably. This requires them to apply all of the tools available to them to grow consumption. At the risk of precipitating a barrage of disapproval; there are only three ways to do this: get more consumers to consumer more often and in great volume or at greater value (penetration, frequency and weight of consumption).

These are the only three ways to drive consumption and yet in the last six years I have not seen a single brand strategy that makes a clear statement about objectives in any of these areas. What I have seen are statements about the need to create awareness, innovation and to extend distribution. All are fine generic marketing strategies but the issue I have is their generisism: Surely they could be applied anywhere, to solve any problem? So without a clear statement of consumption goals to provide direction, these ‘strategies’ risk becoming feckless and wasteful.

Let’s take ‘awareness’ for instance. I saw data at a conference this week that demonstrated that there is little correlation between awareness and purchase and indeed that brands with low awareness can perform better in stores than those with almost universal awareness when the right mix is applied. Yet time and again we see consumer marketers justifying advertising only on the basis of creating awareness or impressions. Really, does anyone really not know Coke, Samsung, or Macdonalds?

What would be smarter would be to focus awareness driving actives on those who really don’t know the brand or its benefits Let’s take New Balance who in China were thought of as a local brand until the company began to create awareness of NB’s history (started on Boston in 1906 by the way) they are now out-growing the two leaders on the track.

Let’s look at innovation – the consumer goods industry has a fetish for novelty. Data suggests that in the US up to 10,000 new lines are launched every year yet only 5% of these ever go on to capture a sustainable share of the category. This novelty for the sake of novelty is counter-productive. It creates higher costs and injects unnecessary competition for often well-met consumption needs. Innovation should be focused on addressing unmet needs that expand consumption.

Lastly let’s look at expanded distribution. For many marketers the opening measure of distribution is “everywhere”. Obviously practicality bites and the ultimate outcome is constrained exuberance but what is most disturbing is how rare it is to find marketers who are able to clearly prioritize which retail environments are best suited to brands and SKUs. The demand for full distribution can lead to over stocked shelves, wasted distribution costs and unmet KPIs.

So what to do?

1) It’s time marketing got some real KPIs – simply put penetration, frequency and weight of usage should replace pure market share and objectives should be set against clearly defined consumer segments.

2) Marketing needs to move out of its box – brand managers should work not only on ‘love’ measures but also on ‘buy’ and ‘use’ measures.

3) Brand strategy must move away from being an extended media plan and towards a coherent business plan that looks beyond the generic and into the truly strategic.

4) CEOs, CFOs and CMOs need to challenge their marketers to be accountable for seeking and delivering untapped growth rather than incrementalism.

As consumer marketing enters its third age it’s time to embrace maturity, wisdom and mastery rather than regressing into adolescence.

Using effective merchandising to drive sales

 

On a recent visit to a toy store with my oldest son, I experienced an interesting phenomena. He kept asking me to lift him up!

Why? All the cool stuff was displayed above his head. Now he stands about 1.2m tall so at his eye level all he could see were the cheaper cars and action figures. By contrast all the cool things – playsets, tracks and so on were placed directly in my line of sight.

Now before we debate the morality of encouraging ‘pester power’ let’s look at the dynamics of the behavior. As a father I am the shopper, the purchase decision maker. My son is the consumer – he will actually play with the toys. The consumer in this case wants the higher value playsets and is extremely adept at influencing the shopper’s decision. Were the more expensive products placed in his line of sight, the retailer would probably have an increased chance of making a higher value sale.

This is not earth shattering – we know for instance that confectionery placed at checkouts and high-value Barbie dolls sited in a young girl’s eye line lead to incremental purchase value. What’s most interesting to me however is how few consumer goods companies actively seek to grow sales by leveraging effective merchandising.

Many trade marketers blandly state that the best position on shelf is ‘at eye level’. But whose eye-level are we talking about? In a diverse human population heights very enormously. Further, research always shows that shoppers don’t stare at the horizon, they angle their gaze at about 15 degrees below the horizon. Recent research that we conducted using TNS’ eye tracking technology showed how the eye level of milk shoppers is actually a blind spot.

In the distant past (or as I like to think of it, the early nineties) Mars were able to calculate the sales impact of moving products into a hotshot (the center of a supermarket shelf between hip and shoulder level). Products in this zone delivered sales that were 40% greater than base sales in a neutral position.

Pepsi’s UK bottler Britivic inverted this logic to secure key positions in chillers by persuading retailers that Coke had to be in the prime eye-level position and that the number 2 brand, Pepsi should be immediately below.

We have found that even in static categories, significant growth can be gained from watching shoppers and implementing merchandising strategies that either encourage value creating behavior or disrupt shopping patterns that reduce basket value. For instance in one declining category we were able to increase total category sales by 10% through more effective merchandising.

Virtual store research like that offered by Bergent in Australia enables the potential gains from merchandising to be accurately quantified and applied.

We believe it’s time that less money and effort be spent in ineffective promotions (see Mike Anthony’s blog from last week) and greater focus be placed on learning about how merchandising can be improved.

To learn more about this, you could participate in our Batchelors in Shopper Marketing programs or contact us directly to learn how we can help develop strategies that activate purchase behavior

If manufacturers aren’t researching then they’re probably guessing

I happened to be shopping this weekend for an accessory for a personal electronic device. Nothing special but it was a little specialist and knowing this I thought the best place to head was Singapore’s Funan IT Mall. Here over several floors you’ll find a range of specialists offering everything from high end audio to hello kitty iPhone covers.

Many of these guys are sole traders, a few of which might have a couple of outlets in the mall. Most of the staff know their stuff and if you happen to know exactly what you want and can find the store that sells it, there’s a good chance you’ll get just what you need.

But here’s the thing, what if you’re not sure? Well then it’s a frustrating experience in one store after the next your met with blank looks or faint recognition which ultimately ends in disappointment. But here’s the kicker – when you, the shopper ask, “do you know where I might find something like that?”, there appears to be a complete reluctance to suggest somewhere else. Why? In case someone else gets the sale!

The following idea may seem utopian but here’s where the world of online could help. Millions of microsites and blogs earn decent money out of referral revenue – they get paid for directing shoppers to where they can find an item. Why can’t this happen in the the bricks and mortar world? Everyone wins – the shopper who finds the product, both the retailer who makes the referral and the referee who makes the sale and finally the manufacturer.

So why is that these things don’t happen? I see three key reasons and they all spring from the manufacturer. The first is that few manufacturers really make the effort to find out the role independent retailers play for shoppers. In discussions with TNS recently, a friend in the know estimated 10% of revenues came from shopper studies – that’s up nearly ten times since a decade ago but still not a lot of investment. If manufacturers aren’t researching then they are probably guessing. Guesswork is rarely the best way of understanding human behavior.

Secondly manufactures underestimate independent retailers in their prioritization of different trade segments. You only have to listen to the language they use – “general trade”, “traditional trade”, “distributed trade” of perhaps worst of all “lower trade” are common terms to discernible independent retailers. Traders are seen as being low volume and so they are often de-prioritized in favor of more ‘organized’ retailer channels. Big mistake! independent retailers can be huge influencers of shopper behavior in many cases and often deliver higher profitability.

The last reason is that the solutions manufacturers create for independents don’t look at the opportunities for everyone to make money, rather they focus on shifting more stocks.

If independent retailers play an important role in the path to purchase and they represent a profitable vehicle for influencing shopper behavior, then it’s high time manufacturers started to think more creatively about marketing in these outlets. 

Are Sony Centres and Nike Stores examples of engaging the shopper?

A question I was recently asked from a marketer in China:

Are Sony Centres and Nike Stores examples of engaging the shopper?

Answer: Absolutely! Concept stores are a vehicle to engage the shopper but the key questions are which shoppers and to what end?

Concept stores are great environments to showcase a brand . They provide wonderful opportunities for people to understand their own needs, explore how products might fulfill their desires, to experience the feeling of brand ownership and to cement a feeling of community membership. All of which are a great draw for potential consumers or existing members of a brand tribe.

We researched how people purchase TV’s in China and found that TV shoppers use stores like the Sony Centre to build their understanding of a brand offer but rarely make a final purchase there.  Instead, most shoppers prefer to seek price deals in multi-brand stores or online. It’s clear that without the influence of these stores some shoppers may not buy the brand that’s bring showcased.

Other research we have conducted has demonstrated that when paths to purchase are extended (for example in buying kitchen appliances), rapid conversion of engaged shoppers is a great way to cement brand preference. As the opportunity to purchase online becomes universal, concept stores offer the opportunity for brands to offer personalization and customization that multi-brand traditional retail may not be able to grasp. Further, they present the potential to create more exciting dynamic and flexible environments that shoppers, jaded by bland big boxes, are increasingly seeking.

All this said, manufacturers should not automatically conclude that they must create their own showcase stores. Paths to purchase vary by category, brand and shopper so it’s important that this variety is understood before investments are made. It’s essential that that the process starts with a clear understanding of who is going to use the brand and for what purpose, then to define who is going to buy the product and the role that different retail environments play in their purchase behavior.

Here’s a personal example that I’ve lifted from the text of our forthcoming book “The Shopper Marketing Revolution”:

‘About eight years ago, I got it in my head that I needed a physical challenge—a very large physical challenge. I decided to set as my goal that I would compete in a triathlon. Considering I hated running, this was perhaps not the best choice, but I made the decision in spite of that.

With steadfast commitment, I hired a personal trainer. He analyzed the way I cycled, swam, and ran. After this study, he announced that he was going to run with me twice a week for ten weeks to teach me how to run properly.

At the end of the ten weeks, I was lighter and fitter but was suffering incredible pain in my shins and calves. My trainer advised me to buy better running shoes that offset the imbalance in my stance. Having always used Nike shoes I went to the Nike store. I walked in and saw an entire wall of impressive looking running shoes. I asked one of the salespeople for help finding a running shoe.

“Well, here are 20,” he said, pointing to the display and looking at me like I was an idiot for not seeing the great wall of running shoes.

Brilliant.

“Which is a good one?” I queried.

“Well, this one is on promotion,” he responded, picking up one shoe.

“That’s fine, but I need a really good running shoe,” I insisted.

He then grabbed another shoe and said, “This is the most expensive.”

Clearly, he wasn’t understanding my question. I proceeded to explain my problem, the pain in my legs, and my fervent desire to compete in a triathlon. I asked him again for a recommendation, to which he responded, “I don’t know. I play basketball.”

Nike invested a ton of money on the in-store merchandising of this outlet, a place to showboat the power of its brand. And I expect a lot of basketball players had a fantastic shopping experience here. But I left empty-handed.

Shortly after this disappointing shopper experience, I was heading to the UK for a visit with my family and decided to get advice from my father, an avid runner, while I was there. He pointed me to a shop called Advance Performance in Peterborough. In those days it was a small shop that specialized in shoes for runners. When I walked in, I marvelled at the unusual environment. The polar opposite of the sleek Nike store, Advance Performance was at the time cluttered. There were shoes everywhere, and a running machine in the corner. (In deference to my friends at Advance Performance have to say they now have two very nice new outlets in Peterborough and Cambridge).

A rather average-looking man approached and offered his help. Already, I experienced a shopping difference from my Nike visit. I explained the problem with my legs and he told me to take off my shoes. He knelt down and took a look at my legs and feet. Then he asked, “When did you break your ankle?”

Surprised that he could know about my accident, I answered that it happened about ten years ago.

“Did you do any physical therapy?” he asked.

“Not much,” I replied.

“It shows,” he said, not unkindly. He explained that my feet were pronated and that the injury aggravated the problem. The salesman—fast becoming a trusted advisor—then put me on the running machine and conducted a gait analysis. He watched to see the way my feet hit the ground when I ran. He had me try on six different pairs of running shoes and get on the machine to test each one, videotaping each effort. After viewing the tapes, he prescribed the shoe that would best meet my particular needs. As it happened, the choice was about 40 percent more expensive than the running shoes I had been wearing. I bought two pairs of these godsends and continue to order online from Advance Performance whenever I need replacements. This salesperson responded admirably to my need. He didn’t need the spit and polish of a slickly merchandised store, nor did he sit back and rely on brand performance. He burst through the performance barrier and instilled my faith in the shoe.”

Looking at this, you might begin to see how insight into the roles channels play for target shoppers can be extremely valuable. At the time I was a “novice triathlete” potentially a valuable shopper for a manufacturer of running shoes. As a novice, I was looking for information and to get that information I went first to a concept store. When my experience in the Nike store failed to deliver the advice I needed, I turned to a different environment, the “independent specialist” – Advance Performance. Both channels performed the same role for me – to provide information and guidance. Armed with both the shoes I needed and the necessary information, the next time I buy my shoes I may turn to a chain store, like Foot Locker, because I know what I need and getting the right shoes at a deal has become important. You see, not only did the ‘independent specialist’ have the potential to strongly influence my buying behavior eight years ago – but its influence continues to the present day, some 20 pairs of shoes later.’

2012 Path To Purchase Summit – Review

Having returned from this years Path to Purchase summit in Sydney, I thought it might be worth offering up some of the key take outs I got from the event.

New Media Influence

The first and perhaps key take away for me, is that given the huge volume of commentary on the importance of digital interactions, no one in consumer goods can afford to ignore the influence that new media has throughout the path to purchase. This has interesting implications for retailers and manufacturers alike.

Retailers face a huge opportunity and an enormous threat. As shoppers seek ever greater convenience proximity and flexibility, bricks and mortar retailers may find their customer bases dwindle as shoppers are attracted online. Yet those who embrace the potential stand to gain, not only from lower barriers to entry into new markets, but also from new ways to enhance loyalty.

Manufacturers could be the beneficiaries of closer relationships with shoppers and of more personalized and social communications techniques which offer the potential to create stronger bonds between brands and consumers. They risk falling behind the curve and becoming eclipsed by competitors who prove themselves to be more relevant or by failing to capitalize on growing online retail environments.

Shopper Behavior – asking the wrong questions

My second key take away is the huge importance of constructing an in-depth understanding of consumer and shopper behavior. Much was made of the importance of insight and the conference exposed the value of both traditional and emerging techniques to get inside the minds people along the path to purchase. What strikes me is that this is an industry that doesn’t lack data but rather struggles to find insight.

In part I feel this is because many ask the wrong questions: seeking a commentary on what currently happens rather than exploring what does not. Too often companies seek to understand those who currently buy and use a brand rather than those who do not, thus limiting the potential to apply data to assess new opportunities.

What’s Next?

My third take away from the summit is that having listened to a vast amount of analysis and commentary I feel many will be left asking, “what next?”. A recent POPAI report  showed the majority of businesses lack a process for managing marketing through the path to purchase. I believe that without a framework to filter information we struggle to apply it. Mike Anthony and I devised our five- step process to help in this. We seek first to understand consumption priorities then decide shopper behavior in order to prioritize channels. This enables the development of a marketing mix and helps construct a framework for investment.

Using this approach I’d summarize my learning from the Path to Purchase Summit as follows: we are learning more and more about what consumers want everyday and in general we see the desire for individuality and social relevance becoming more important.

We find shoppers have massively extended choice and access to information which helps then make smarter decisions. We see that online and offline retail environments enable shoppers to channel hop in search of best value. This means that marketing mixes will need to be applied more dynamically in the future based in a clear understanding of what behavior is to be encouraged. This will inevitably change the investment environment which is likely to have a profound impact on advertising agencies and retailers in the future.

In closing

Will participants walk away happy? I think many will; there’s much to be gained from hearing from the experts that spoke at the event about the developments in the field and how they might affect changes in the industry. I think some may go away feeling that more specific input on practical application would have been useful and many noted that the talks given by the teams at Kraft and at Heinz offered some really valuable inputs. I’d personally like to thank the organizers of the event for giving me the opportunity to offer my advice in this area.

If you’d like to see the slides from my ‘Strategies To Enhance Shopper Marketing’ presentation please go here

If you’d like to see the slides from my ‘Decoding The Path To Purchase’ presentation please go here