November 2015

The Circular
Revolution
Changing the consumer
communications landscape
The Circular Revolution
The print circular is the single biggest marketing expense for CPG retailers, but is it still relevant to today’s
consumers? As consumers’ media consumption habits shift increasingly to digital—both online and mobile—
what role do print vs. digital circulars play in shoppers’ path to purchase? And what risks and opportunities does
the shift to digital circulars offer to retailers willing to transform this bastion of grocery marketing?
Today’s consumer landscape requires a new way of thinking about the creation and communication of weekly
sales. It’s no surprise that consumers are spending more and more time consuming digital vs. print media
across a wide range of applications—from advertising media and entertainment to news and lifestyle content.
According to comScore1, the total amount of time US consumers spend on digital media has increased 49% over
the past two years, due in part to a 90% increase in time spent on digital media on smartphones. Newspaper
circulation also has dropped 3% in 2014 vs. 2013, according to the Pew Research Center, with just over half
of newspaper readership now taking place exclusively in print2. Given the astronomical cost of printing and
distributing a paper circular—which according to The Wall Street Journal can cost to $1MM per run and reached
$5.84 billion in 2014—coupled with decreasing relevancy, retailers are sensing increased urgency in exploring
digital alternatives3. In addition, the rise of digital media has led to more customized experiences for U.S.
consumers, who have come to expect more personalized interaction with their preferred retailers.
To understand these implications to the grocery circular, Oracle Data Cloud partnered with eight regional grocery
retailers—Price Chopper, Marsh, Brookshire’s, Weis, SpartanNash, Bashas’, Martin’s and Southeastern Grocers—
to assess the market and create a roadmap for marketers to transition from print to digital circular distribution.
Facilitated by RDI Research, we surveyed 5,500 shoppers across these markets on attitudes and usage related
to both print and digital circulars4. In this white paper, we will highlight key findings from this primary research,
along with the implications for retailers considering the transition from print to digital circulars.

1
http://blogs.wsj.com/cmo/2015/08/19/digital-media-consumption-is-booming-as-investment-floods-in/
2
http://www.journalism.org/2015/04/29/newspapers-fact-sheet/
3
http://www.wsj.com/articles/retailers-cant-shake-the-circular-habit-1426113760
4
S urveys were conducted in April through July 2015, with each retailer surveying either 500 or 1,000 shoppers based on size. Surveys were fielded by email (65%) or by
phone (35%) and were balanced across shopper segments (Core, Opportunity and Fringe).

The Circular Revolution 2

 Shopper segments defined
Shopper segments are based on Oracle’s proprietary Customer Engagement Segmentation. Core shoppers shop
and spend the most with the retailer and are most loyal. Opportunity shoppers are cross-shoppers who likely use
the retailer as a secondary shop, but have the potential to trade up. Fringe shoppers are occasional shoppers with
low engagement and loyalty to the retailer.

Shopper Segments

1
Key Finding
Retailers have trained shoppers to use the print ad/circular. However, shoppers are open to
“retraining” on alternate ways of accessing critical information on sale items in digital form.

Sale items are a critical factor for many shoppers when deciding where to shop for food. When asked to rank a
number of key factors in deciding where to shop, Sale Items were ranked a close second behind Convenience
and ahead of Quality of Products, Coupon Usage, Fresh Deli/Produce and Store Cleanliness. The vast majority of
shoppers say that weekly sale items are Very Important (56%) or Important (27%) when planning a shopping
trip—particularly among Opportunity and Fringe shoppers who have lower levels of loyalty to a given retailer. In
our survey, 53% of shoppers say they have most of their sale items planned out and on a list before they shop
and 58% of the sale items that shoppers purchase are a result of ads and promotions seen before shopping, as
opposed to deals seen during the actual shopping trip. Clearly, having access to sale items ahead of shopping
trips is important to a sizable majority of shoppers.
It’s not surprising, then, that most shoppers say it is Very Important (55%) or Somewhat Important (25%) to
receive a printed grocery store ad/circular from the store, as the printed ad is the primary means through which
CPG retailers have communicated these sale items. When it comes to the importance of receiving an ad,
behavior aligns well with attitudes: those shoppers who say it is important to receive the ad do tend to shop
more heavily on front page and promoted items overall, while maintaining a similar level of spending compared
to those who rate the ad as less important.

The Circular Revolution 3

How important are weekly sales items? How important is receiving a printed ad?

! 56%
very important
! 55%
very important

! 27%
somewhat important
! 25%
somewhat important

During the planning stage, usage of printed ads/circulars is well entrenched and systematic for many shoppers.
Approximately 61% of shoppers say they always read the circular and 87% of shoppers say they look through
the whole circular, not just the front page or specific items or departments. Comparison shopping across
retailers also is prevalent, as 70% of shoppers say they look at more than one ad/circular and compare sale
items. Price-comparing circulars across retailers isn’t just for cherry-pickers either, as 60% of Core shoppers
compare sale items across retailers. As shoppers become savvier and access to information becomes
omnipresent, the importance of the circular is increasing: 26% of shoppers say they use grocery store ads more
often than a couple of years ago, compared to only 7% who say they use it less often.
All of this paints a picture of a deeply ingrained habit around usage of the printed circular that makes any
transition to digital seem elusive and far off at best, right? Well, yes … and no. The picture changes significantly
when we ask shoppers what they would do if they stopped getting printed ads/circulars delivered to their home
or mailbox. Despite saying the printed ads are important, 51% of shoppers would look for the ads on the Internet
(especially among shoppers who buy more on deals), and 38% would just go to the store and shop as usual
(especially among shoppers who buy less on deals). Additionally, 51% of shoppers already use some form of
electronic circulars today, indicating the transition has already begun.

What does the consumer think?

Verbatim responses show a wide range of reactions to a potential pull-back in printed circulars.
When asked, If you stopped getting printed ads/circulars delivered to your home or mailbox you would probably …

I think that I know where

Shoot myself!!! Just
kidding!!! Don’t take
my printed flyers away,
please!!!!
this is leading. I really like
getting printed ads, but if I
had to I would look online.
I really like getting my
printed ads!
I just throw the printed
ones in the recycle bin.
I look online at the
circulars.

The Circular Revolution 4

 What does this mean? Clearly the use of sale items to drive traffic with shoppers planning their trips is not going
away. Shoppers need effective means of accessing information on these sales and comparing across retailers
should they choose to do so. Flipping through the whole printed circular each week is a well-trained behavior
for shoppers and has been for decades. However, when we dig beneath the surface, we find that shoppers are
still open to alternate ways of accessing this information digitally—even before they are sold on the additional
benefits of digital circulars, such as increased relevance through personalization.

Key Finding

2
The transition to digital has started and Gen X is as plugged in as Millennials. Strong mobile solutions
will be key to the transition from print to digital.

Consumers across age ranges are plugged in today. Millennials (18-29 years old) and Gen X’ers (30-49 years old)
are more likely to use mobile than Boomers (50+ years old) and most households own Web-enabled devices.

What type of electronic devices do you own?

Boomers are more likely to own a desktop or laptop computer, while younger generations are more likely to
own a smartphone or tablet. Similarly, households use their smartphones/tablets for a wide range of functions,
from the basics (texting, searching the Internet, email) to the transactional (making purchases on websites,
comparison shopping among retailers) to the inspirational (get ideas for projects or recipes for cooking, planning
shopping trips). Gen X’ers are the most inclined to use mobile across functions.
If shoppers stopped getting the printed ad or circular delivered to their home from their primary grocery store,
most would seek out this information digitally.
Only 34% would look for the ad at the store, preferring not to engage digitally. This group skews to less-loyal
Opportunity and Fringe shoppers.

The Circular Revolution 5

How would you seek out your primary grocery store’s circular or ads?

Currently, 51% of shoppers look at grocery store ads on their computer, tablet or mobile phone. Those that don’t
primarily choose to use the printed ad delivered to their home, which highlights the fact that the widespread
availability of print drives much of this behavior. Those who do read electronic ads today primarily access them
via email distribution or by going to the store’s website via computer. Mobile behavior varies significantly by
generation—while 33% of Gen X’ers use an app to access e-circulars, only 20% of Millennials and 17% of
Boomers do.
Interestingly, when consumers do access electronic circulars, their behavior is largely consistent with the way
they consume print circulars. Approximately 70% of consumers who use e-circulars scroll through the entire ad,
which is similar to the percentage of shoppers who read through the entire paper circular (87%). This highlights
the need to make electronic ads optimized for the type of “lean-back discovery” consumers seem to enjoy so
much in print. Similarly, this points out an opportunity for increased relevance: while today’s shoppers need to
thumb through 14 pages to ensure they don’t miss must-have items for their shopping list, they’d likely be more
satisfied flipping through five pages of content 100% customized to their unique shopping habits.
In the future, both digital and print will likely continue to play a role. When asked about the importance of printed
and electronic ads, 39% of shoppers said they prefer to use both printed and electronic circulars, but print more
often; another 19% prefers to use both equally; and 24% prefer to use only printed ads or circulars.

The Circular Revolution 6

3
Key Finding
There is risk to rushing the transition from print to digital. A slower transition to digital, with sufficient
availability of both digital and paper ads, will be required to mitigate this risk and ensure that print-
focused shoppers are not left behind for competitors to acquire.

While the overall findings show that most shoppers are open to the transition to digital, a small group of
shoppers are truly at risk if print circulars go away. To estimate this risk, we focused on shoppers who rate the
printed ad/circular as very or somewhat important AND who say that, if they stopped receiving the ad, they
would shop somewhere else. These at-risk shoppers account for 6% of households and 7% of dollar sales.
This risk profile varies by retailer, as well. At the high end of the range, one of the eight retailers had 13% of
households and 14% of dollar sales at risk, while at the lower end of the range, one retailer in eight had only
4% of households and 3% of dollar sales at risk.
Similarly, the “digital-readiness” of shoppers varies by retailer across generations as well. One retailer saw 46%
of Millennials using a mobile app to access the electronic circulars, while another only 6%. One retailer saw 44%
of Gen X’ers using the mobile site to access the electronic circulars, but another only 20%. One retailer saw 82%
of Boomers receiving the electronic ads through email, another only 58%. Retailers with the lowest risk profile
are on their way to “retraining” shoppers to access information on sales items in digital form through mobile,
Web or app, depending on their comfort level and preference in terms of digital media consumption.

Given the sales risk associated with a heavy pullback on print and shopper preferences to use both the print and
digital circulars in the near future, a slower transition will be needed. During this “retraining” period, electronic
circulars will need to be available and communicated broadly to shoppers while distribution of the print circular
continues. Retailers will need to take a longer term view of the potential cost savings associated with shifting
circular distribution from print to digital, and approach this as a two-step process. First, a period of increased
investment in circular distribution as digital distribution runs parallel to print. Then second, significant cost savings
as print circulation wanes and digital distribution becomes the dominant means of communicating sale items.
Rushing this transition to realize short-term savings could leave print-focused consumers behind for competitors
to acquire.
That said, in this race, it doesn’t pay to be either the tortoise or the hare. Certainly retailers should not rush the
transition to digital at risk of losing at-risk shoppers. But, as increased personalization offers the opportunity to
become even more relevant to shoppers, retailers also should avoid being the last to the table in terms of their
digital offerings.

The Circular Revolution 7

The Recommended Journey
Retailers considering the transition from print to digital circular distribution need to be prepared to “retrain”
shoppers minimally for six months to a year, with a number of key initiatives to pave the way.
First, the retailer needs to consider digital distribution overlays across multiple channels, while ensuring the
continuation of print. This is likely to require additional investment in circular distribution, although some of this
investment may be recouped either through increased sales performance from the enhanced digital distribution
(if the digital ads are ROI-positive in the short term) or by pulling back on print in a more limited fashion as an
initial step (e.g., by trimming distribution or by reducing page count). Cautious retailers will likely want to test the
impact of changes to print and digital distribution before making across-the-board changes and consider shopper-
based research as an initial step to assess risk levels in their markets.
Second, the retailer needs to ensure that mobile solutions are available and connected to provide a seamless
experience, tied to a unique ID, regardless of the way in which the shopper accesses the ad. Optimizing
electronic ads for mobile viewing and ensuring strong electronic circular functionality through the mobile app
will be critical for Gen X’ers used to using their smartphones as a command center for daily activities.
Third, savvy retailers will invest in technologies that enable a truly personalized digital ad experience.
Personalized recommendations, coupons, offers and content are so ubiquitous across such a range of retail
experiences that consumers not only want but expect a tailored experience from their favorite retailers. Greater
relevance of the ad to shoppers can be the carrot that drives their transition to digital, enabling retailers to reap
the dual benefits of greater ad performance and lower distribution costs.
Our research showed the power of personalization in driving a competitive advantage with shoppers who can easily
comparison shop on the basis of circular prices alone. When asked how they would respond if they received special
direct mail coupons on items that appealed to them but were not from the store they shop at most often, 75%
of shoppers said they would definitely or probably make a trip to the other store. If occasional personalized offers
have the power to drive such compelling shifts in trip behavior, imagine the power of offering shoppers who crave
information on sale items a fully customized experience when they access electronic ads every week.

75%

The Circular Revolution 8

For the consumer, the benefits of personalized ads are greater relevance and less “noise” from competing
retailers clamoring for shoppers’ attention. The benefits to the retailer are numerous. Personalized ads offer
significant performance upside relative to today’s mass vehicles, both in terms of greater household spending
and in terms of greater efficiency5. Personalized ads also drive efficiency by enabling the retailer to offer the
right products at the right discounts intended to motivate and reward the right shoppers, instead of offering
scattershot deep-discount deals that reward cherry-pickers. The personalized experience offers the opportunity
to set up a true loyalty feedback loop. More relevant content drives greater shopping frequency and engagement,
which provides even deeper data to customize the next week’s offerings.
Finally, retailers will need to work with their media partners to push for optimization among existing and new
platforms for electronic ads. Today’s ability to distribute a relevant and robust digital ad is limited by platform
capabilities, image and text rules along with a fast-changing digital advertising landscape. Technology platforms
are evolving in their ability to deliver multiple product ads and much iteration is needed to close the gap on the
digital to paper experience. Retailers and CPGs alike will benefit greatly by developing key partnerships in this
space to drive the evolution of the electronic ad across multiple platforms.

5
Based on the Oracle Data Cloud analysis of personalized e-circulars vs. static e-circulars with select retail partners.

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