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The past year has seen an explosion of interest in shopper marketing. Reportedly 60 percent of brands and retailers are investing in shopper marketing efforts, up from six percent previously. Most, however, admit to being in the learning stages of the emerging practice. Finding a common language is the first challenge. The term encompasses in-store media, brand marketing, trade relations and consumer promotions, as well as resetting shelves and rethinking categories, like the new initiatives recently announced by Walgreens. Basically, shopper marketing refers to marketing stimulus that is created based on a deep understanding of the shopper. The perceived benefits include increased sales, improved customer loyalty and overall return on investment, which certainly justifies the rush of interest. A short but impressive list of case studies, from the few retailers who’ve made their efforts public, shows that although the in-store frontier may seem like the Wild West of trade activities right now, the physical space offers significant opportunity to support growth. What’s exciting is the increased industry talk around two things. Improved collaboration between retailers and manufacturers in order to share information and build on what’s working, and a growing awareness that customers alternate between being “consumers” and “shoppers.” The switch is flipped at the point where people are actually engaged in window-shopping the store or aisle, perusing the shelves, browsing the website or paging through the catalog. Knowing what’s happening at that moment is key. That’s why a significant factor in shopper marketing is high-quality behavioral data from which to draw the actionable insights that help shape strategic plans. “We use the term to encompass the strategies and tactics that engage and influence the customer inside the store,” says Tim Murphy, vice president, Interbrand Design Forum. “It’s a more holistic take on shopper marketing that starts at the top level—brand positioning, which informs the mid-level channel strategies, retailer requirements and category management—and goes all the way down to the promotional level. For the last seven years, we’ve been working on an approach we call Shoppernomics, created around our ability to understand what drives shopper decisions and then deliver that at retail. We’ve seen some very exciting results from Shoppernomics. It has the ability to address the whole store from brand to basket and it’s affordable, unlike a lot of the tools out there that are too narrowly focused.” One store seeing a pronounced impact from the holistic approach to shopper marketing is arts and crafts specialty retailer, Michaels. By asking shoppers why they purchased, not just what, when and how much, it discovered their need went beyond craft materials to inspiration and fun. The store itself wanted more personality, so its brand positioning was brought to life through higher level category delivery, all the way to shelf and package level. Michaels concentrated on five categories transformational to their business. Shopper marketing helped find the most productive opportunities, optimize those spaces and allow the retail brand to shine through. The refreshed jewelry section especially delights shoppers. Innovative design, merchandising and staffing gave it a boutique look and feel, while shopper insights led to a new shelf organization with the right breakups, flow and SKU placement. As a result, store productivity has gotten a boost and customers are giving Michaels credit for being fresh and inspirational. The new store experience has craft-related blogs buzzing. Collaboration between manufacturers and their retail partners has always held the dual promise of reduced antagonism and gains in competitive advantage for both parties. Manufacturers often have more shopper data than their retail partners, who in the past simply merchandised categories based on POS data. But behavioral data from shopper marketing shows that consumers don’t think in categories. “I hope we see more collaboration, and maybe the current sense of economic urgency will help overcome resistance to that,” says Amanda Yates, vice president of strategy and analytics. “The toughest part of the two groups working toward a new strategy seems to be getting both of them to decide to compromise for the greater good of the category. That means moving away from the proliferation of brand extensions, excessive SKUs. Things that often lead to a less rewarding shopping experience. Shopper marketing takes your thinking well beyond the planogram.”
A Retail Publication Issue 2 • 2009
A deeper level of intelligence allows the retailer and manufacturer to anticipate the needs of the shopper and arrange the store to influence them, not merely accommodate them. That was the thinking behind Cadbury Adams/Halls’ study to find out how shoppers behaved around the cold remedy purchase. When the company conducted in-home and in-store research to find out what was involved in the decision-making process, it discovered issues around merchandising, packaging and experience. One surprising insight was that people shopped in a manner opposite to what the company previously believed. Additionally, it realized that light-reflecting metallic packaging was hard to read and soft bags were not conducive to storage at home. Findings such as these give a CPG company the ability to improve packaging, strengthen aisle communication and modify assortments based on shopping styles, and include strategic brand-blocking to make a statement at shelf. Such plans for orchestration of the shelf set are seeing greater acceptance from retail partners. “When you can flow with the shopper thought process, you have a better chance of connecting emotionally,” says Murphy. “It takes relatively little investment and has a huge upside. In the beauty aisle, for example, you may find that better educating her at shelf or including suggestions for new color combinations suits the prevailing shopping style. In a case like that, you’re not spending millions on media. You’re leveraging your assets to better connect with her needs.” With the ability to interpret insights from shopper data and translate that into the physical space, retailers and manufacturers have a better chance of getting to that sweet spot—the shopping experience that keeps people in the store longer, strengthens a brand’s position, increases share, enhances ROI, saves marketing/trade money—all the while making life easier for the customer.
Use the financial crisis to spark fresh thinking and more powerful executions.
One of the mistakes made most with new concepts is the lack of an idea that’s powerful enough to get you where you want to go. Companies know that doing something is better than doing nothing. And some are closing under-performing stores intending to do a better job with their best stores. But if your goal is disruption, you’ve got to really fire up the passion around your brand and find an aspect to dramatize. Recession or no, our research shows that shoppers enjoy finding something new in the store. It’s human nature. Whenever retailers bring energy and inspiration to the game—even when shoppers are thinking long and hard before opening their wallets—they still give the store credit for a better shopping experience. And from a better experience comes all good things: the engagement, loyalty and bottom-line bolstering that smart businesses seek. “Something new” encompasses a lot of territory. It can be a new prototype, a store-within-a-store, a value product, a time-saving service or an educational program. For our client Burger King, it’s a combination of value and excitement, from Burger Shots to the Whopper Bar, a hip new restaurant we helped them create. The Whopper Bar is a great example of what many brands are trying to do right now—be more interruptive, opportunistic and dramatic with their innovations. A key differentiator of the BK brand is flamebroiled burgers. We brought this attribute to life through various design elements. The overall look is darker and urban-industrial with textures of fire and metal, yet the space is simple to use and friendly. The smaller footprint of this concept has opened doors to new real estate opportunities. That plus the revitalized brand twist is helping BK enter venues no one would have considered them for previously. The second most common mistake in retail seems to be lack of speed. While looking back on other times of crisis, a CEO of a dot-com recently recalled how his company managed to survive and thrive because he pushed for radical new ideas. But in hindsight he realized his biggest mistake was moving too slowly. Had he been quicker, he’d have a bigger share of the market today. The same often happens in retail. Last year our clients were urgently asking us for “Quick Wins” in the store. This year they are more cautious. Despite the increased challenges facing them, moves are being carefully evaluated to minimize risk and preserve capital. But time is of the essence. We can’t let uncertainty rule. Surveys suggest that shoppers are taking more time to research their purchases both at home and in the store. That means they’re looking at your competition. Most companies are quick to cut costs, but slow to find and execute the ideas that deliver a new bundle of value to the customer who’s looking for a retailer to help them reach a balance between frugality and the indulgences they’ve had to give up. Today you can tap into the many innovative tools that help speed up decision making, such as research and modeling to create a business case for change or to deliver the solid insights needed in the creation of fresh strategies. Collaboration tools can help cut across silos so you can speed up productivity. You can make decisions with a replicable process that offers scale, speed and flexibility. There are also optimization tools available. We’ve got one of the best that keeps proving itself very powerful and effective, StoreBoard. So if it’s simply not wise to make a radical change to your business, you can still do what you do better than anyone else. A top priority for your brand right now is generating ideas for improving relationships with customers. We’ve noticed creative retailers are putting more emphasis on service, getting credit for solving customer problems and earning trust. That will definitely score points. Whether you decide on a dramatic reinvention of your brand or a more simplified retail experience that’s emotionally engaging, the intelligence and invention available today can help you look past the challenges to see the opportunities. You can add intensity and difference without compromising— sort of like Angry Sauce on a Whopper. Thoughtfully,
D. Lee Carpenter
A Retail Publication by
7575 Paragon Road, Dayton, Ohio 45459 P +1 937 439 4400 F +1 937 439 4340 firstname.lastname@example.org D. Lee Carpenter, Chairman & CEO Jill Davis, Editor Lucas Human, Design/Production
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If the economy is going to recover, Americans need to start taking risks again.
by Daniel Gross
The aisles of the flagship Saks Fifth Avenue are so quiet you’d think you were in a library. The restaurants and shops at Rockefeller Center are open as usual, but they seem oddly depopulated. Where are all the tourists and office workers, the hordes of junior analysts lining up in Starbucks? Something less tangible is also absent: the spirit of risk-taking and spending that dominated our culture and propelled the economy. With the economy in its 16th month of recession and the markets scythed in half, it seems we’ve all either switched to decaf or simply lost the taste for risk. We bought houses with no money down, took on huge amounts of debt and let the booming stock and housing markets perform the heavy lifting of saving. After all, new technologies, securitization and derivatives permitted financial wizards to slice, dice, sell—and, ultimately, banish—any type of risk. But the intellectual scaffolding surrounding that culture of debt and risk has fallen along with the stocks of Citigroup and AIG. And now the zeitgeist has spun 180 degrees. Squeeze your nickels, slash debt, stop gambling. In January, Nevada’s casinos reported, gamblers lost 14.6 percent less money than they did in January 2008. “The precautionary behavior of every entity in the global economy has gone up,” says Mohamed El-Arian, CEO of the giant bondinvestment fund PIMCO. “We’ve gone from an age of entitlement to an age of thrift.” In January, Americans saved 5 percent of disposable personal income, up from 0.4 percent in the fourth quarter of 2007—and our newfound desire to squirrel away cash seems likely to continue. When pollster Scott Rasmussen asked investors what they’d do with new money in February, 32 percent said they’d save it, and only 16 percent said they’d invest in stocks. Even though they offer virtually no returns, money-market mutual funds, now guaranteed by the federal government, have attracted $3.8 trillion, up from $3.4 trillion a year ago. The non-financial members of the S&P 500 are sitting on more than $800 billion in cash. The rush to hoard cash and pinch pennies is understandable, given that some $13 trillion in net worth evaporated between mid-2007 and the end of 2008. But while it makes complete microeconomic sense for families and individual businesses, the spending freeze and collective shunning of nonguaranteed investments is macroeconomically troubling. Especially if it persists once the credit crisis passes. For our $14 trillion economy to recover and thrive, hoarders must open their wallets and become consumers, and businesses must once again be willing to roll the dice. Nobody is advocating a return to the debtfueled days of 4,000-square-foot second homes, $1,000 handbags and $6 specialty coffees. But in our economy, in which 70 percent of activity is derived from consumers, we do need our neighbors to spend. Otherwise we fall into what economist John Maynard Keynes called the “paradox of thrift.” If everyone saves during a slack period, economic activity will decrease, thus making everyone poorer. We also need to start investing again—not necessarily in the stock of Citigroup or in condos in Miami. But rather to build skills, to create the new companies that are so vital to growth, and to fund the discovery and development of new technologies. Economists warn that if we don’t manage to jolt the economy back to life soon, we run the risk of repeating Japan’s “lost decade” of the 1990s. Would that be so bad? After all, while Japan endured a prolonged period of slow growth, nobody starved, there was no social unrest in the aging country, and its biggest companies continued to innovate. But America is different. Thanks to our continually rising population, we need significant growth just to maintain our standards of living—and the health of our democracy. “When people experience progress in their material living standards and they have some degree of optimism that it will continue, they’re inclined to support public policies that reflect tolerance, opening of opportunity and commitments to democracy,” says Benjamin Friedman, a Harvard economist and author of “The Moral Consequences of Growth.” Saving cash and building up reserves is a necessary first step to recovery. But eventually the mountain of cash has to be put to work. The market’s recent rally is a sign that investors are putting money to work again. And retail sales in February provided another hint that purse strings may be loosening. But there’s more work to be done.
Daniel Gross, Author Senior Editor, Newsweek
Journalist, author and editor Daniel Gross specializes in business history, political economy and the money culture. He’s known for making complicated matters understandable and engaging. In his third book, Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation, he pieces together the building blocks of the debt-fueled economy, and distills the theory and personalities behind our late, lamented easy money culture.
Free Press, 112 pages, 2009 Available in trade paperback and eAudio
It’s possible that all we need is another bout of enthusiasm to jolt the nation out of its torpor. Recession-Plagued Nation Demands New Bubble to Invest In, ran a headline from the satirical magazine The Onion. But the antidote to a spell of mindless debt, spending and investment isn’t necessarily another binge of mindless debt, spending and investment. Between 1996 and 2007, according to the Kauffman Foundation, about 0.3 percent of the adult population started a new business each month, or about 495,000 per month. There’s no reason to think such entrepreneurial activity will decline in this recession, The markets, and the economy as a whole, are continually buffeted by the twin forces of fear and greed. For the past year, fear has clearly had the upper hand. But over time, as fear subsides, our inborn instincts to improve our lot—Adam Smith would call it self-interest—will make a comeback.