deloitte shopper marketing study 2007

8/7/2019 Deloitte Shopper Marketing Study 2007

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Shopper Marketing:Capturing a Shoppers Mind, Heart and Wallet


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Key Insights:

The Store Is Comelling and an Ideal Marketing Canvas With 70 percent o purchasedecisions being made in-store1 and 68 percent o in-store purchases being impulse2, marketers have atremendous opportunity to reach consumers, build brand equity and stimulate consumption througheective shopper marketing.

Many Defnitions Exist, However Only One Matters Despite industry debates and dieringopinions, shopper marketing should be consistently dened rom the shoppers point-o-view. It shouldinclude all marketing stimuli, develoed based on a dee understanding o shoer behavior,designed to build brand equity, engage the shoer (i.e., a consumer in shoing mode),and lead him/her to make a urchase.

The Indstry Is a Believer With respect to shopper marketing, companies are making real changehappen in their organization backing it up with projected increases in unding (21 percent and 26percent CAGR 2004-2010 estimate or manuacturers and retailers, respectively) and consideringshopper marketing a competitive dierentiator well into the uture.

Transormational Change Is Reqired, and Its Qite Comlex Building shopper marketingcapabilities will require a signicant transormation o the status quo in marketing and salesorganizations. This transormation will include, but is not limited to, how insights are generated, how

much is spent on insight generation, how segmentation is perormed, how budgets are developed,how teams are structured, what skills are required, and how execution happens in-store.

Retailers Are Increasingly Defning the Agenda Retailers are becoming more sophisticated anddemanding marketers. Leading manuacturers are succeeding by becoming expert advisors to theirretail customers. Compelling insights and eective collaboration will drive competitive advantage orconsumer product manuacturers well into the uture.

Five Things Dierentiate Manactrers in the Eyes o Retailers Retailers view leadingmanuacturers as those:

Who are best aligned with their marketing plans and strategies;

With whom they have highly productive and cohesive relationships;

Who possess advanced shopper marketing competence;

Who develop unique and exclusive programs; and

Who can deliver powerul insights on the consumer and the shopper.

It Doesnt Need to Be the Cadillac Version Shopper marketing is not an all or nothing proposition.Brand strategies and positioning should dene the most appropriate role o shopper marketing and thespecic in-store and out-o-store tactics that yield the most eective results.

1Consumer Buying Habits Study, Point-o-Purchase Advertising Institute and Meyers Research Center, 19952Point-o-Purchase Advertising Institute (POPAI)

Shopper Marketing:Capturing a Shoppers Mind, Heart and Wallet


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Stdy Overview and Reort Strctre

Objectives and Methodology

To better understand the emergence o shopper marketing and its impact on consumer productsmanuacturers and retailers, the Grocery Manuacturers Association (GMA) Sales Committee engagedDeloitte Consulting LLP to research and identiy:

The industry denition o shopper marketing; The state o shopper marketing in the consumer products industry; Leading practices employed by retailers and manuacturers; and Go-to-market strategies or shopper marketing.

In-depth surveys and interviews with leading consumer products manuacturers, retailers and serviceproviders3 were conducted rom June through September 2007. In addition, this report draws upon publiclyreported company data and other published materials.

Reort Structure

This report is organized into the ollowing three sections:

Section : The Call or Shoer Marketing. This section ocuses on todays marketing complexities andthe emerging opportunity o the store as an eective marketing medium.

Section : State o Shoer Marketing. This section outlines the ndings o the study. It describes thedenitions o shopper marketing, the extent o industry adoption, and the transormational eorts andessential tactics necessary to succeed.

Section 3: View o the Ftre. This section discusses our predictions or the uture o shopper marketing inthe consumer products industry.

Acknowledgements

Deloitte Consulting would like to thank the GMA Sales Committee or providing us with the opportunity toassist in developing this in-depth report on such a strategic and important topic or the industry as shoppermarketing. Thanks to Grant LaMontagne, Vice President, Sales, The Clorox Company, and GMA SalesCommittee Chair, and the entire GMA Sales Committee or supporting our eorts.

We would also like to recognize the GMA Shopper Marketing Steering Committee. Specically, the ollowingindividuals provided signicant insights, guidance and support throughout the project. Their input played amajor role in the depth and quality o insights contained in the report.

Ski Aldridge Executive Vice President, Chie Customer OcerGMA Sales Committee Vice Chair

Pharmavite, LLC

Tim Cole Executive Vice President, Sales Del Monte Foods

Joe Craton President, Strategic Alliances CROSSMARK

Don Hrrle Vice President, Sales, Grocery Market The J. M. Smucker Company

Jack LarendeaVice Chairman Acosta Sales & Marketing Company

Tracy VanBibber Senior Vice President, SalesGMA Shopper Marketing Steering Committe Chair

The Dial Corporation

Deloitte Consulting and GMA would also like to thank the many individuals rom consumer productsmanuacturers, retailers and service providers who supported our research by providing interviews and/orcompleting the extensive survey.

Finally, we extend our special thanks to the GMA, specically Stephen Sibert, Brian Lynch and Troy Beeler whoprovided project oversight and acilitated the study or the past several months.

3Given the condentiality assurances made with survey and interview participants, their names and the names o their companies will not be disclosed in this report.


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3

The Call for Shopper MarketingWhere There Are Challenges, There Are Oortnities

Connecting with consumers and shoppers and creating loyalty is as challenging as it has ever been or consumerproducts manuacturers and retailers. Consider the ollowing prole o todays consumers and shoppers:

68 percent are brand switchers4

Only 5 percent are loyal to one brand5

73 percent shop in ve or more channels6

Only 26 percent are loyal to an average retailer7

These statistics are alarming, given the act that marketers are making every eort to create the exactopposite eect. Consider or a moment, the impressive depth o marketing penetration, convenience, choice,and innovation created by savvy manuacturer and retailer marketers:

Reach: 3,000 marketing messages a day reach the average consumer8,

Convenience: The number o retail channels have more than doubled in just 50 years,

Choice: Over 45,000 SKUs await the consumer in the average supermarket9, and

Innovation: 32,624 new products were introduced in 2006 alone10.

Given this substantial marketing eort, one would think the aorementioned loyalty statistics would bealtogether dierent. Unortunately, they are not. This has caused the industry to question and re-thinkwhether the right marketing messages are delivered to the right consumer, at the right time, in the rightplace, and with an impact that creates incremental consumption and loyalty.

Indeed, marketers are abuzz with re-ocusing their eorts on marketing to the consumer in a holistic andintegrated manner, sometimes reerred to as 360-degree marketing. However, in doing so, they are quicklyconcluding that there are many blind spots across the 360-degree view o the consumer. One such blindspot is perhaps one o the most compelling marketing mediums the retail store.

The Store as a Marketing Medim

The store is a critical and highly attractive touch point to reach and infuence consumers. 70 percent o

all purchase decisions are made in-store11

, and 68 percent o in-store purchases are impulse driven12

. Thepotential o the store to create impressions and build brand equity is tremendous, and it should be thought

Section :The Call or Shopper Marketing

4Nielsen Media Research: http://www.mediabuyerplanner.com/2006/08/29/nielsen_instore_ads_sway_68/5POPAI Consumer Buying Habits Study: http://www.ogilvyaction.com/Pages/ShopperMarketing.aspx accessed 7/2/07.6IRI Time and Trends: Channel Migration 20077General Mills Best-In-Class Shopper Loyalty8Maritz Loyalty Marketing: http://www.maritzloyalty.com/consumer_loyalty_programs.html9http://www.mi.org/acts_gs/superact.htm10IRI Research: CPG New Product Trends 200411Consumer Buying Habits Study, Point-o-Purchase Advertising Institute and Meyers Research Center, 199512POPAI


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o like any other marketing media. Each week, 127 million customers visit Wal-Mart alone13 compared to68 million people who watch ABC, CBS or NBC evening news on average14. The store is lled with engagedconsumers in shopping mode, already thinking about and pre-disposed to making purchases a marketersdream come true.

The store as a venue to convert consumers into buyers is not a new concept. Sales organizations have beenutilizing the store or quite some time through rather substantial trade promotion programs and investments.Brand marketers have only been targeting consumers outside o the store, leading them to the store butleaving them at the ront door. They have been neglecting an important moment in the consumers decisionmaking process, The First Moment o Truth.15 In order to execute holistic 360-degree marketing, marketerscan no longer overlook the store or the consumer-turned-shopper.

The Shoer Is Not Necessarily the Consmer

Along with the store, the consumer as a shopper has been an evolving concept. Marketers, who traditionallyocus on consumers, are realizing the opportunity to address consumer needs in-store, in other words,shopper needs. When planning or engaging in a purchase, a consumer-turned-shopper may have dierentneeds and dierent behaviors. Consider the ollowing examples o two dierent shopping occasions:

Pantry Restocking: A woman restocking her pantry or her amily may purchase large product sizes

on sale, making package size and value pricing important considerations in infuencing her purchasedecision.

Grab-and-Go:The same woman, rushing to grab a bite beore a meeting, may purchase a priceysandwich and drink rom the prepared oods department, making convenient store layout, ast serviceand product assortment the most critical marketing variables.

In addition to shopping occasions, the industry has come to realize that the consumer who uses theproduct may not be the one purchasing it (e.g., a mother buys the cereal that her children consume). Somecompanies reer to this as the chooser (shopper) and the user (end consumer). In some instances theseare dierent human beings, in other instances they are the same person. Understanding this dierentiationenables marketers to develop appropriate strategies with the most eective mix o media and messaging totarget the right segments o consumers and shoppers.

Shoer Marketing Is Born

Retailers and manuacturers realize the stores potential as a strong marketing medium, and are nowtargeting shoppers in an eort called shopper marketing.

The next sections o this report will ocus on dening shopper marketing, investigating its penetrationwithin the industry, understanding retailers and manuacturers perspectives, analyzing the barriers toimplementation, and highlighting successul go-to-market strategies.

Section :The Call or Shopper Marketing

13http://www.walmartacts.com/articles/5274.aspx14http://www.stateothemedia.org/2007/index.asp15The Hub, May/June 2007


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. Consion Trms Clarity

Industry Defnitions Vary Widely

One would think dening shopper marketing would be airly straightorward. There is a shopper, you marketto the shopper and thereore, marketing to a shopper is shopper marketing i only things were so logicaland simple.

Wide ranging debate exists across the industry on what comprises shopper marketing. Most industryparticipants agree that the dimensions o shopper marketing reach, activities/tactics and program initiator should include the ollowing components:

Reach: In-store marketing (e.g., point-o-sale marketing materials)

Activities/Tactics: Brand-building promotions (e.g., promotions advertising product brand ormanuacturers)

Program Initiator: Both manuacturer and retailer (i.e., programs developed through manuacturer/retailer collaboration)

However, many argue whether the scope o shopper marketing also includes the ollowing marketingactivities:

Reach: Out-o-store marketing (e.g., direct mail, radio campaigns, Internet campaigns)

Activities/Tactics:- Trade promotions (e.g., a buy 2 get 1 ree on-shel promotion)- Product modications (e.g., modication o a product or packaging to satisy shopper needs)

Program Initiator:- Retailer (e.g., private label marketing, store banner promotions)- Manuacturer (e.g., product packaging innovation)

Companies, industry thought leaders and associations calibrate within these dimensions to create their owndenitions o shopper marketing. Upon examination, we ound six prevalent denitions o shopper marketing.

State of Shopper Marketing

Section :State o Shopper Marketing

Key Takeaways:

. Consion Trms Clarity

2. The Train Has Denitely Let the Station

3. The Status Quo Wont Do

4. Learning The New Tricks o the Trade

5. You Dont Need to Do Everything, Just Something


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For example, the Marketing Leadership Council denes shopper marketing as:

. Shoer MarketingIn-store advertising, promotion and design initiatives that align with andextend supplier equity-building objectives while simultaneously creating a source o dierentiationor participating retailers through tailored executions that address specic shopper need-states andactivate purchase at the point-o-sale.16

Otentimes, shopper marketing is being used synonymously with other marketing concepts. For example,retailers use the term customer marketing interchangeably with shopper marketing.

. Cstomer MarketingIn retail terms, shoppers are retailers customers. Thereore, shoppermarketing is what retailers have always been doing, but at a more sophisticated level. Nowadays,they are investing in gathering more inormation and generating deeper insights (e.g., behavioralstudies) to develop programs targeted at specic customer segments. They are redesigning theirstores and developing innovative in-store events to create a unique customer experience that leads todierentiation. Saeway is one notable example o this growing level o sophistication:

Saeway Cstomer Marketing

In 2005, Saeway introduced its Liestyle Store in more than 400 locations

The stores eatured warmer lighting and more readable product labels centered around the concept that there ishigh importance in the way merchandise on the shel touches the customer

Sprinkling its tagline, Ingredients or Lie, liberally throughout the store and its products, Saeway has ocusedon engaging the customers purchase interest by delivering a consistent brand message through every available

communications channel

Source: Grocery Headquarters Trade Journal

Manuacturers also use the term shopper marketing interchangeably with other marketing concepts. Tocomplicate things urther, manuacturers add another dimension to their denition ocus. Some companiesare more ocused on retailer satisaction, others on shopper satisaction. The terms they use interchangeablywith shopper marketing are:

3. Accont/Retailer/Cstomer Secifc Marketing customized marketing programs or key retailcustomers.

. Retail Marketing all marketing activities contained in a retail environment or specically at themoment o contact. For some companies this includes trade promotions.

. Shoer-Centric Marketing satisying shoppers need-states (i.e., marketing to consumers whenthey are in the shopping mindset to satisy the need that drove them to the store).

. Commercial Innovation any innovation developed based on shopper insights that does not requirea signicant packaging or product change.17


16MLC, Assessing Shopper Marketing, July 200517The HUB: May/June 2007


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Commercial Innovation

Shoer-Centric Marketing

RETAILER

Accont/Retailer/Cstomer

Seciic MarketingCstomer Marketing

MANuFACTuRERSHOppER

We have considered the merits o the six denitions o shopper marketing and have concluded that nonetruly captures the complete essence o shopper marketing.

One Defnition Shoer-Centric

The term shopper marketing is based on the underlying assumption that the consumer and the shopper are

the center o the universe. Dina Howell, Procter & Gambles shopper marketing chie, puts it best, It doesntreally matter what we think; it only matters what the shopper/consumer thinks.18

Shoppers do not care whether the marketing stimulus they are receiving is an advertisement, consumerpromotion, trade promotion, product package, or store placement. They do not categorize these stimuli,they do not care what the industry calls them and they certainly do not care who unds them. They just wantrelevant inormation, a pleasant store experience and an easy purchase.

Shoppers may be pre-disposed to make a purchase not just within a store environment, but on the way to thestore and rom the store at any point they are thinking about the purchase. Thereore, they are receptive tomessages about the product outside the store.


3

Shoer

Marketing

Retail

Marketing

Shoer Marketing =

Shoer Marketing Defnitions

Reach Activities / Tactics program Initiator Focs

In-Store Ot-o-StoreBrand

ActivitiesTrade

promotionprodct

Modifcation

BothManactrerand Retailer

(throghcollaboration)

ManactrerONLY or

Retailer ONLYShoer

SatisactionAccont

Satisaction

. Shoer marketing

(Marketing Leadership Council)

. Cstomer marketing

(Retailers)

3. Accont/retailer/cstomer

secifc marketing (Manuacturers)

. Retail marketing

(Manuacturers)

. Shoer-centric marketing

(Manuacturers)

. Commercial innovation

(Manuacturers)

a

a

a

a

a

a

a*

a

a

a

a

a

a

a a

a

a

a

a

a

a

a

a

a

a

a

a

a

a

NA

a

a

a*

a*

a*

*May or may not include

18The HUB: May/June 2007

Source: GMA/Deloitte Consulting LLP 2007 Shopper Marketing Study Results


The ollowing illustration summarizes the six above-mentioned shopper marketing denitions, realizing therecould be more.


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Shoer Marketing Stimli Any marketing eort that builds brand equity and has the potential to

engage or inuence an individual to shop or make a purchase. Some eamples o shopper marketing

stimuli include:

Product stimuli, such as the sie, shape, color, material and packaging o the product, and the

messages, graphics and language conveyed on the packaging

Price stimuli, such as price promotions conveyed in circulars, shel signs, coupon dispensers, and

personalied check-out coupons

Place stimuli, such as store design, layout, lighting, music, scents, and aisle, shel, and display

locations

Promotion stimuli, such as sampling, demonstrations, displays, oor advertisements, kiosks, in-

store visual or audio, intelligent shopping carts, and digital signage

Not everyone agrees that all o these stimuli should be considered shopper marketing. However,

rom the eyes o a shopper, price discounts, store design and product packaging is marketing to the

shopper.

Shoing Mode A person is in shopping mode when he/she is contemplating buying a product or

service whether the person is in-store or outside the store. For eample, a person is in shopping mode

when he/she is making a shopping list, driving to a store, researching inormation online, or browsing

the aisle in a store. A typical thought process o an individual in shopping mode may include: Do I need

this? Where should I buy? How much should I pay? What are the choices?

Note: The defnition o eective shopper marketing stated above was ormulated as a conclusion o

this study. This defnition was not used in the shopper marketing survey conducted or the GMA/

Deloitte Consulting LLP 2007 Shopper Marketing Study. Survey participants responses were based

purely on their companies own defnition and understanding o the concept o shopper marketing.

Ater positioning the shopper at the center o the universe and identiying what marketers need to target theshopper holistically, we signicantly broaden the aperture o the lens through which we think the industryneeds to view shopper marketing. We dene eective shopper marketing as:


pRODuCT pRICE pLACE

Packaging

Sie

Language

pROMOTION

Personal Check-out

Coupons

Circular

Coupon Dispenser

Personal Check-out

Coupons

Circular

Music

Lighting

Display

Sampling Demo

In-Store TVs

Floor Ads

Intelligent Cart

Shel Signs

Display


All marketing stimli,develoed based on a dee nderstanding o shoer behavior,

designed to bild brand eqity,engage the shoer (i.e., consmer in shoing mode), and

lead him/her to make a rchase


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Key Takeaways:

1. Conusion Trumps Clarity

. The Train Has Defnitely Let the Station


4. Learning The New Tricks o the Trade5. You Dont Need to Do Everything, Just Something


. The Train Has Defnitely Let the Station

So ar, we made the argument that shopper marketing is a compelling concept. However, the questionremains i the industry has embraced this concept and is making it a reality. The answer, based on ourresearch, is a resounding yes.

Irrespective o the conusion or interpretation o shopper marketing, companies are investing in it andmaking change happen19. Companies consider shopper marketing a competitive advantage and marketleaders have started mobilizing their shopper marketing eorts by allocating more unds, restructuringtheir organizations, investing in technology and resources, and re-evaluating their collaboration eorts with

partners and service providers.

Shoer Marketing Drives Cometitive Advantage

Both manuacturers and retailers believe that by executing shopper marketing properly, they can gain asignicant competitive advantage in the next 3 to 5 years.

19The ndings in this and subsequent sections are based on each companys own denition o shopper marketing.

Follow the Money It Tells the Story!

Recognizing the opportunity to gain a competitive advantage through shopper marketing, manuacturersand retailers are increasing their shopper marketing budgets. While overall marketing budgets are growingat 2 percent CAGR, shopper marketing budgets are growing at 21 percent and 26 percent CAGR ormanuacturers and retailers respectively. Note that the 1 percent CAGR decrease in trade promotion spendingis not directly related to the increase in investments in the online or shopper marketing budgets. According tomanuacturers, they are critically evaluating the eectiveness o trade promotion spending and are optimizinginvestment eectiveness. Retailers, on the other hand, are investing more in redesigning their stores andimproving their customer experience as part o their shopper marketing initiatives.

Eective Shoer Marketing as Cometitive AdvantageAverage Score (1 - No Advantage; 5 - Signicant Advantage)

5 - Signifcant

Advantage

3 - Some

Advantage

1 - No

AdvantageToday In 3 Years In 5 Years

Manactrers

Retailers

Note: N=19 Manuacturers, 8 Retailers



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0

Both manuacturers and retailers are also planning to increase their resources devoted to insights generationover the next three years.


Shoer Marketing Insight Generation Resorces over Next Three Years

Percent o Total Respondents

Note: N=19 Manuacturers, 8 Retailers; Percentage gures indicate portion o respondents who selected a particular metric

Manactrers

Retailers

Same or

Decrease

Increase

Somewhat

Increase

Signifcantly

0%

%%

%

3%

%


Marketing Bdget Allocation, by Marketing Mix Element

Note: N=19 Manuacturers, 8 Retailers; The height o the bars represents the sum o estimated marketing budgets(based on sales gures and survey responses) o all respondents.

Manuacturers Retailers

2004 2007 2010 Estimate 2004 2007 2010 Estimate

Marketing Mix Element CAGR(2004 - 2010 Est.)

Shopper Marketing 21%

Internet 15%

Co-Marketing 6%

Consumer Promotions (Incl. FSI) -1%

Trade Promotions -1%

Traditional (TV, Radio, Print) 1%

OVERALL Marketing Budget CAGR

(2004 - 2010 Est.) = 2%

Marketing Mix Element CAGR(2004 - 2010 Est.)

Other 2%

Shopper Marketing 26%

Internet 9%

Consumer Promotions 0%

Traditional (Print, TV, Radio, Circulars) -1%

OVERALL Marketing Budget CAGR

(2004 - 2010 Est.) = 2%

3%

%

%

%

%

%

%

%%

%%

%

%

%

%

3%%

3%


3%

3%

0%

3%

30%

%

%%

%

33%

%

%

%

%

%


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Make Way or Shoer-Centricity

Companies are also changing their organizational structure to support shopper marketing. In addition toallocating dedicated resources, companies are creating specic groups or departments within the sales ormarketing organizations to ocus on research, program development, relationship management and theexecution o shopper marketing initiatives.

The majority o shopper marketing departments contain one to ve ull-time-equivalents. However, leadingmanuacturers are creating more prominent shopper marketing unctions that are ully responsible orshopper marketing processes, rom insight generation to shopper interaction at point-o-sale.

Jum on the Bandwagon

In addition to manuacturers and retailers, other industry players are rushing to assist companies with

their shopper marketing eorts. Marketing agencies and other service providers are creating new shoppermarketing methodologies and approaches to help manuacturer and retail clients develop their presence inthe eld. In order to stay relevant and competitive, advertising and media agencies are creating dedicatedteams with required skills to support shopper marketing. Examples include:

At Saatchi & Saatchi X,we understand the dierence betweenconsumers and shoppers and how best to create eective

communications in the retail space. We believe that talking to

shoppers in the right way will have the single biggest impact ona clients business.

Source: Saatchi & Saatchi

Ogilvy Shopper Marketing division believes there are several

moments o truth leading up to the purchase decision, or whatOgilvy has termed the Last Mile. Ogilvy Shopper marketing

will thereore start the process o with a Last Mile Workshop

where sales people, brand marketers and Ogilvy Shoppermarketing work together to analyze the shopper situation. For

winning at the Last Mile is critical to a brands success... where

we move people rom attitude to action, say Couzyn.

Source: Spotlights on the shopper, Marketing WEB

Arc Worldwide has announced that Comcast Corporation,

the nations leading provider o cable, entertainment and

communications products and services, has selected the

company as a marketing partner in its eorts to expand itspresence at key retail outlets.

Source: Marketwire

CBSsaid it would buy SignStorey, a US company that broadcasts

advertising-supported television in retail outlets, or $71.5m. The

acquisition is evidence o the burgeoning popularity o in-store

advertising, which allows companies to target shoppers just asthey are about to make purchases.

Source: MSNBC


Nmber o Fll Time Eqivalent Resorces Working in Shoer Marketing

1-5

Manactrers

Retailers


Note: N=19 Manuacturers, 8 Retailers

3%

3%

0%

%

% 3%%

0%

6-10 10-20 21 or more

Number o ull time equivalent resources



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Shoer Marketing pays O

Companies that have invested in shopper marketing are seeing the benets. Leading manuacturers andretailers who are pursuing eective shopper marketing strategies and tactics have witnessed increased sales,shopper loyalty and ROI. For example, Krogers Customer First ocus increased its sales by 6.8 percent.

Best Buys sales gained 8.4 percent ater expanding its customer-centric program to 110 US stores rom 32pilot stores. Though consumer electronics is an adjacent industry, its retail environment utilizes innovativeshopper marketing practices and urther illustrates that shopper marketing is real and benecial.

Best-By Cstomer-Centricity

Best Buy expanded its customer-centric program to 110 US stores ater 32 pilot stores showed a sales gain o 8.4 percentcompared to the 2.3 percent or the non-pilot stores.

Best Buy has changed its one-size-ts-all approach to adopt principles o customer experience based retailing through:

Development o a unique customer segmentation strategy enabling the customization o stores around specicsegments

Analysis o latent customer data that identies their most protable customers and enables the customization ostore locations

Use o analysis in program development to increase the eectiveness o pricing and promotions

Source: Forrester Research, Inc. and www.money.CNN.com

Shopper marketing has arrived and is driving signicant change in the industry. Rather than being justanother great idea, shopper marketing is also demonstrating impressive tangible results. A new world ochallenges and opportunities awaits those companies that can successully deploy their resources against thisnew strategic imperative.


Kroger Cstomer First Focs

Krogers Customer First ocus increased its sales by 6.8 percent versus the 3.4 percent(non uel) or its competitors using the ollowing tactics:

Partnered with Dunnhumby, a data analysis rm to rene its marketing strategy

Harnessed data, integrating rich transaction data with customer reerence data

Conducted analysis and segmentation o data, identiying and segmenting best customers

Developed and executed loyalty marketing strategy and delivered specic oers to target segmented customers

Developed coalition loyalty oer by partnering with MasterCard to create a loyalty card that has multiple uses

Source: Forrester Research, Inc.


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3

Key Takeaways:



3. The Stats Qo Wont Do

4. Learning The New Tricks o the Trade5. You Dont Need to Do Everything, Just Something

3. The Stats Qo Wont Do

To say that it is challenging or consumer products companies to implement shopper marketing is a massiveunderstatement. Building shopper marketing capabilities and competence into the organization is a major disruptionto traditional marketing and sales organizational constructs, budgets, unding structures, processes, metrics andincentives, and many other oundational areas within consumer products companies.

Our survey data conrm that on their way to eective shopper marketing, manuacturers ace considerablebarriers that, i not addressed correctly, can hinder overall shopper marketing success. These barriers are:

1. Inconsistent understanding o shopper marketing programs in the organization;2. Lack o shopper marketing capabilities and skill sets;

3. Lack o alignment and support by necessary unctions;

4. Lack o unding or programs and inrastructure;

5. Lack o perormance metrics and/or measurements;

6. Inability to consistently execute programs in store; and

7. Lack o ability to generate specic consumer insights.

The good news is that manuacturers consistently say that leadership understands the importance o embracingshopper marketing (42 percent o respondents strongly agreed). However, leadership buy-in is necessary butinsucient to perorm such a massive transormation. Day-to-day execution excellence in setting up new organizationstructures, new roles, new processes, and new capabilities is necessary to achieve success.


Note: N=19 Manuacturers

Supported by Eecutive Leadership

Identifed Shopper Marketing as a StrategicEnabler o Growth

Allocated Dedicated Resources to SupportShopper Marketing Programs

Actively Measured and EvaluatedShopper Marketing Program Perormance

Supported by All o the Necessary Functions

New Organiational Structure and Processes Built

Clearly and Consistently Understood byRelevant Functions

3%%

%%

3%%

%%

%%

%%

%

LeadershiSort


Shoer Marketing Oortnities Addressed

Percent o Total Respondents Who Answered Strongly Agree

Manuacturers


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Why Is This So Comlex?

Through shopper marketing programs, manuacturers want to achieve a purely marketing objective reachshoppers and win their share o wallet. However, historically, retailers and manuacturers marketingdepartments have not been connected. The manuacturers sales organization and retailers merchandisingunction have controlled the store domain, while the retailers marketing department has owned the connectionwith the shopper. Thus, it would take our communication links (i.e., manuacturer marketing to manuacturer

sales/trade to retailer merchandising to retailer marketing) to reach the shopper. The most important link inthis picture is missing manuacturer and retailer marketing departments need to collaborate to convert theshopper to a loyal buyer.

Nevertheless, numerous barriers exist to getting marketing organizations to talk, including:

Sales and merchandising have a relationship that they have been cultivating or years;

Since marketing managers have traditionally been involved in national marketing, it is challengingor them to also take on the intricacies o the retail store;

Market research has traditionally been about collecting inormation on consumer segments.With shopper marketing, they have to develop capabilities to perorm shopper segmentationand analyze shopper data by store, cluster o stores and account an exponential increase in the

complexity and granularity o insights required;

Retailers marketing departments have traditionally had a closed door policy or manuacturers; and

Retailers processes (e.g., new product introductions, trade promotions, and in-store marketingactivities) are not aligned, partially because responsibilities or these activities reside within dierentunctions and departments.


SHOppER

Traditional Retailer and Manactrer Organizations

RETAILER

MARKETING

MERCHANDISING

3

SALES/TRADE

MARKETING

Communication Ste

MANuFACTuRER

?



17/36

Leading manuacturers have mitigated these challenges by developing cross-unctional customer businessteams or their key retail customers. These cross-unctional customer business teams consist o expertswithin such areas as merchandising, marketing, sales, supply chain, IT, and nance. They work withcustomers to address issues within each o their respective unctions. However, even those teams may attimes lack the expertise and knowledge required to address shopper marketing.

A New Aroach Marketing and Sales Integrate

Shopper marketing calls or a structurally dierent approach that requires the tight integration omarketing and sales.

To achieve this integration, manuacturers have been nesting the shopper marketing unction somewherebetween marketing and sales, depending on what works most eectively or their organizations.

We ound that manuacturers that dene shopper marketing as account specic marketing tend to includetheir shopper marketing unction within sales (45 percent o survey respondents). The other 30 percentinclude shopper marketing within marketing/brand management, and 15 percent within market research,analytics and insights. All these companies admit that even though shopper marketing personnel reportto one organization, they meet with the other on a regular basis to align objectives. The majority wishsuch interactions were more seamless and better dened. Only 5 percent o manuacturers have a shoppermarketing unction led by both marketing and sales.

Lack o Shoer Marketing Skill Sets

All companies interviewed concur that shopper marketing resources require both marketing and salesexperience and skills. About 54 percent o survey respondents reported that a lack o shopper marketingskills and experience is still a barrier to shopper marketing adoption. Shopper marketers need to be ableto communicate using retailer and manuacturer terminologies (e.g., metrics, segmentation, objectives)interchangeably. Thus, this would require speaking two languages (i.e., sales/merchandising and marketing)and two dialects (i.e., retailer and manuacturer).



primary Resonsibility or Shoer Marketing Fnction

Percent o Total Responses

Manuacturers

%

30%

%%

Other

Combination o sales and marketing

Sales

Brand/marketing management

Market research, analyticsand insights %



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Lack o Strategic Alignment Brand Marketing, Trade promotion and Shoer Marketing

To successully perorm holistic 360-degree marketing, companies should include shopper marketing into theoverall spectrum o marketing activities. However, our surveys conrmed that shopper marketing activitiesare not aligned with other national/consumer marketing activities. In act, survey respondents indicatedthat their shopper marketing activities are not well coordinated with traditional marketing programs (i.e.,received an average score o 2.3 on a scale o 1 to 5, with 1 being not coordinated at all and 5 being

extensively coordinated). Alignment o shopper marketing activities to national marketing activities can bea cumbersome process due to a dierence in approaches national marketing uses one calendar, one plan,one segmentation model, whereas shopper marketing utilizes many account calendars and plans, and manysegmentation models employed by dierent retailers. It is also extremely dicult to coordinate the timingo national marketing programs with shopper marketing programs since retailer planning processes andcalendars dier.

It is also important to integrate marketing and trade promotion activities. Trade promotion is just anothermarketing lever that infuences the consumer in the store. Marketing and sales should be aligned withtrade promotions purpose, plans and tactics. Thereore, when marketing to shoppers, companies need toblend trade marketing with shopper marketing, or at least be very involved in what the trade marketingorganization does with trade promotions. Sales owns the trade marketing unction, which oversees tradepromotion budgets and controls what happens in store. They typically do not seek input rom marketing.

According to one respondent, I have worked in ve companies, and marketing never had a say in sales.Blending trade promotion with other in-store marketing activities and aligning strategy and tactics can be avery painul process. However, it has to be done to achieve a consistent shopper experience that characterizessuccessul shopper marketing.

Leading companies such as Procter & Gamble are already transorming their organizations:


procter & Gamble Alignment o Trade Marketing with Brand Marketing

Objective:

Align Trade Marketing activities with advertising and consumer promotion activities to create a more genuinelydiscipline-agnostic Procter & Gamble

Crrent Sitation:

Trade dollars and in-store dollars are managed by the sales department

Trade marketing is oten overlooked by marketers who set brand strategy

Aroach:

Move retail-marketing strategy group to the brand group rom the sales unction

Move retail-marketing to the same budgeting, oversight and return-on-investment criteria as the rest o themarketing mix

Align decision making process

It represents Procter & Gamble, and to a lesser extent the industry, coming ull circle back to days when brandmarketers controlled the whole marketing budget.

Source: Advertising Age

Lack o Funding

Shopper marketing does not typically have an established, dedicated unding structure. Over 67 percent orespondents reported that unding is a signicant barrier to the adoption o shopper marketing. In some cases,shopper marketing reports to sales but is unded by marketing. At some emerging organizations, unds comerom both marketing and sales. Since the unding structure is not clearly dened, shopper marketing resourcestypically have to beg or additional unds. Without a clear unding structure, two problems arise:

How is the shoer marketing bdget allocated and controlled, given the multitude ounding channels?

How to align the trade marketing send with shopper marketing objectives?


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Inconsistent Execution

According to manuactures survey responses, execution is considered to be one o the key barriers toshopper marketing adoption 58 percent o respondents consider it a signicant barrier. As opposed totraditional media, which is being closely monitored to ensure accountability, retail execution has very ew,i any, ways to veriy perormance other than small, sample audits. Ironically, this is an area where retailersbelieve collaboration between them and manuacturers will grow the least. They acknowledge this is a

problem, but unortunately:

They oten lack resources on the ground to ensure compliance; and

The resources responsible or planning shopper marketing activities are dierent rom the onesresponsible or executing.

Todays data suggest that the simplest o displays unded through trade promotion only gain a 60 percentcompliance rate across retailer stores. You can appreciate how challenging it will be or more complexshopper marketing programs to be executed fawlessly.

Lack o perormance Metrics

Traditionally, manuacturers marketing managers have been using such metrics as requency, reach,

impressions, and gross rating points (GRP) to measure their national programs. The standard measurementsor the sales department have been revenue, volume, distribution, return on investment (ROI), andincremental sales generated by trade promotions.

Today, since shopper marketing involves both organizations, there is little clarity on how to measure theeectiveness o in-store marketing programs. An industry-wide metric is yet to be established to measureimpressions, the purpose o the P.R.I.S.M. initiative (see below). Most companies we interviewed primarily usesales-related metrics to measure shopper marketing perormance. In act, 59 percent o respondents reportedthat lack o perormance metrics and/or measurement is a barrier to shopper marketing success. As onesurvey respondent puts it, Sales perormance metrics are relatively straightorward to measure. Brand equitymetrics are much more dicult to measure or shopper marketing programs.

Moreover, manuacturers now need to embrace and use retailers perormance metrics (e.g., conversionimpact) to ensure that the program also satises retailers objectives.

The p.R.I.S.M. Initiative pioneering Research or an In-Store Metric

Backgrond: Objective: To reach a standardized, syndicated measurement model to evaluate in-store consumer reach Leaders: In-Store Marketing Institute, Nielsen In-Store and a consortium o manuacturers, retailers, media and

promotion agencies Concept Launch: Data is expected to be available in 2008

Objectives: Conrm that in-store consumer reach can be measured and predicted Assist marketers in understanding which consumers are exposed to their in-store messages and promotions, and how

oten

Support retailers in understanding how eectively their in-store media can convert shoppers to buyers, by category Allow manuacturers and retailers to eectively improve the shopping experience or consumers Provide the advertising, media and retail industries with the means to increase the eciency o the media buying and

selling process

Source: Nielsen In-Store



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Inability to Generate Secifc Shoer Insights

Historically, consumer products manuacturers have been investing their time and budgets in consumerresearch understanding consumer behavior, likes and dislikes, usage patterns, and consumption patterns.Unortunately, such inormation is not sucient to understand the shopper a consumer in shoppingmode (i.e., consumer thinking about the purchase, making the purchase or evaluating the choice ater thepurchase). Specic inormation on shopper behavior in-store, shopper need-states, shopping occasions, and

reaction patterns to particular in-store stimuli can help companies be eective shopper marketers.

While leading companies have started to ocus on this area, the majority still have a long way to go beoreit becomes their competitive advantage. For example, data collection or shopping occasions, one o thecritical components o generating shopper insights, is trailing that o general consumer trends: only 36percent o manuacturers collect shopper insights data on a regular basis compared to 75 percent who collectgeneral consumer trends research.

The key reasons cited or such low adoption o shopper insights data are their granularity and complexity, thediculty o turning data into insights and, o course, cost.

Granlarity and Comlexity: I companies think that dealing with consumer research (e.g., ocusgroups, surveys, intercepts) is dicult, then dealing with shopper insights can be a nightmare!Due to the increased granularity o shopper data, which can be available by shopper segment, byshopping occasion, by region, by store cluster, and by dimension (e.g., shopping in store, pricesensitivity, occasions, needs), it is extremely complex to structure and analyze such data. As oneparticipant puts it, The number o permutations is overwhelming.

In addition to the level o granularity o the data, there is little alignment across retailers and

manuacturers as to the appropriate shopper segmentation models. Manuacturers have to collectshopper data separately or each retailer. Each retailer has its own segmentation model and expectsmanuacturers to be knowledgeable and insightul about its segments. This requires signicantinvestment rom the manuacturers side and a clear understanding and prioritization o how manyshopper insight generation resources should be allocated to each account. In some cases, the datado not exist to probe the insights at the level the retailer desires.

80%

General consumer

trends

Shopping occasion/

mission

Continosly

At reglar and

reqent intervals


60%

40%

20%

0%

%

%%

%

Freqency o Shoer Marketing Research

Manuacturers




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Moreover, integrating shopper marketing data with other marketing inormation is a complex process.Many manuacturers admitted that they do not make any connections between their consumer dataand shopper behavior data. The next level o complexity comes when shopper segment data needs tobe combined with orecasting, new product pipeline and sales planning.

Difclty o Trning Data into Insights: Raw data does not guarantee insight. The NielsenCompany says, Data only gets you part o the way there, as you still need to have the knowledgeand skill sets to nd and cull the most important actors rom the inormation and make decisionson what to do rom a strategic and tactical standpoint. Since data involves many components, itis extremely dicult to analyze and turn into credible insights. Otentimes, behavioral data is beingcollected in a qualitative orm. It is extremely dicult to connect and compare qualitative insightswith the quantitative data to get to credible conclusions.

Most ethnographers estimate that analyzing the data consumes 70% to 80% o their time. Ater all, asingle trip may yield several thousand photos and hundreds o pages o notes, says Jan Chipchase, anethnographic specialist with the communications rm Nokia.

Source: Executive Secrets, Redefning Research HEM, Spheresmagazine.com


Insights Are Exensive! Due to the number o specic dimensions and permutations, databecomes increasingly expensive to collect, manage, analyze, and translate into insights. Mostcompanies hire third party data-providers, such as Nielsen or IRI, to collect and analyze data orthem. The cost increases with the number o customers/segments/store groups and the analyticalservices provided. In addition, leading companies have their own employees conduct someethnographic studies to get a eel o their shopper which is a signicant investment o time andresources.

Clearly, shopper marketing is not easy to implement. While each o these barriers can impede successulshopper marketing execution, it is important or companies to keep their eyes on the prize. As shoppermarketing continues to evolve, leading companies will master the proper techniques to overcome thesechallenges, and become successul.


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0

Alication o Shoer Insights to Strategy. Retailers address shopper marketing opportunitiesby ocusing on developing comprehensive segmentation models and applying segmentationinsights to their strategies. In act, all leading retailers (e.g., Saeway, Wal-Mart, Kroger, Sams, CVS,Best-Buy) use segmentation models to understand the dierent types o customers that they aretargeting, and develop strategies to appeal to them.


. Learning The New Tricks o the Trade

Retailers Are Becoming Highly Eective Marketers Collaboration is Key

Retailers are turning into more sophisticated marketers, thereby increasing their already high levels o infuenceand power with consumer products manuacturers. They are becoming much more knowledgeable, demandingand selective.

Compared to only a decade ago, retailers have raised the bar in terms o both understanding and satisying theirshoppers and leveraging their suppliers to achieve their goals. As a result, signicant changes have occurred in

the ollowing areas o marketing:

Investments in Shoer Insights. According to the survey, 89 percent o retailers collect shopperoccasion and need-state data, loyalty data and customer experience data on a regular basis. Retailersacknowledge that shopper insights give them an advantage in stealing market share and customersrom their competitors and other channels. According to The Nielsen Company, Retailers recognizethat there is much spending that occurs outside o a particular retailer that represents the opportunityto close the gap with competition. Shopper insights also enable retailers to develop targeted programsthat delight customers in-store, increase shoppers basket size and cross-sell and up-sell to shoppers.

Retailer Benefts rom understanding Shoer

Gain a complete picture o the whole perimeter o a store

Measure what their shoppers spend in the most critical dierentiating retail sectors Understand what CPG items can be leveraged to increase a basket size

Optimize adjacencies or perimeter departments such as prepared meats, Rx or lm processing

The Nielsen Company

use o Segmentation by Leading Retailers

A multi-layered segmentation approach provides new views or lenses to understand households. Theselenses add insight into customer thinking, current purchasing habits, spending levels, household dynamics ormotivation to respond to promotions.

Within retailers that have already adopted this approach, their teams speak in terms o real people everyday because their segmentations describe customer groups in sucient detail to change aceless data into adynamic view o customer behavior.

Retailers even label their segments either by name or by shopping activity to refect idealized customers. Theyreport on customer segment measures on a regular basis to show where they are over and underperorming ata store, category, and product level. The knowledge gained drives remedial or opportunistic marketing activitiestargeted eectively at the most appropriate customers as opposed to costly mass marketing channels.

The Nielsen Company

Key Takeaways:




. Learning The New Tricks o the Trade5. You Dont Need to Do Everything, Just Something


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Stricter Reqirements or Manactrers. Focusing on improving shopper experience, bannerloyalty, brand consistency, and overall look and eel, retailers started to introduce new requirementsor manuacturers enorcing clean store policies, banning promotion tactics and placingrestrictions on certain types o advertising. For example, the number o displays in grocery storescontinues to decline. At mid-year 2007, displays were down 4.4 percent versus 2006 and 9.1percent versus 2005.20 To make matters worse, retailers allow a maximum o two to three shoppermarketing programs per category at any given time (see exhibit).

Unless CPG marketers nd new ways to re-establish relevance in stores where resh, prepared oods

reign supreme, they will nd their products shunted to the least desirable section o the store, doomed tominimal in-store exposure and lethargic turnover.

In-Store Marketing Institute

20IRI, Times & Trends, CPG Merchandising Trends 2007


Note: N=8 Retailers

.Beverages

.

Packaged and

Processed Food

.Household

.Fresh Food

.3Healthcare

3Personal Care

Maximm Nmber o Shoer Marketing programs at a Given Time at Retail, by Category

Average Response


Retailers have become very selective and extend the most valuable oers to their diamond vendors(e.g., certain avored manuacturers are able to place their displays, end caps, and banners in-store inspite o clean store policies). Some manuacturers will likely be excluded or crowded out.

So what can manuacturers do to join the coveted inner circle? What can dierentiate them rom competitors?

Game plan or Manuacturers

There are a number o actors that can help manuacturers eectively work with retailers. According to retailers,the top ve items that dierentiate manuacturers rom their competitors in relation to shopper marketing are:

1. Alignment with retailers overall marketing plan2. Relationship depth and quality3. Shopper marketing capabilities and skills4. Customized and innovative shopper marketing programs5. Quality o consumer and shopper insights


24/36


Given these actors, the implications or manuacturers are ar reaching. To eectively collaborate with their retailcustomers, manuacturers should:

Know Yor Retailer. It would do no good or a manuacturer to approach a retailer with a proposalocused on meeting the manuacturers objectives alone. Any program, calendar or promotion proposalhas to be relevant to the retailers overall marketing plan and shopper base, and be aligned with theretailers corporate objectives. Retailers value manuacturers ability to understand the issues rom theretailers point o view and nd ways to solve them. This is not a new idea leading sales executiveshave been doing this all along with how they showcase trade promotion impact on growing the overallcategory and not just optimizing their own brands. Now it is time to do the same with shopper marketing.

Source: http://www.generalmills.com/bic/BestinClassShopperLoyalty.pd

Bild Relationshis. No matter how much a manuacturerunderstands its retail customers strategy, it is dicult to get aseat at the table without strong relationships. Lately, shoppermarketing/segmentation experts tend to reside within the retailersmarketing department, access to which historically has been closedto suppliers. It is extremely important to develop relationships withretailers marketers as some merchandisers still lack the skills tomake eective decisions on shopper marketing programs.

To build these relationships, manuacturers have to think beyondtheir own brands. They should bring insights and programs thatwill increase store trac, lit entire category sales and increasebanner loyalty. Manuacturers in eect should become expertadvisors to retailers. An innovative example o such an advisoryapproach is General Mills strategy in helping retailers build storebanner loyalty (see the cover o the brochure developed or aretailer by General Mills). Retailers are welcoming such advisoryservices according to the survey, 100 percent o manuacturersexpect collaboration in the area o strategy development to increase over the next three years.

Be an Exert. Leading retailers are becoming extremely adept in segmentation, targeted marketingand customer experience strategies. They want to talk to manuacturers who have the same level o

expertise and understanding. Other retailers, or whom shopper marketing is still in the embryonic phase,need to be educated by manuacturers on how to better target their shoppers. In act, 100 percent oretailer respondents agreed that having shopper marketing capabilities and skill sets will dierentiatemanuacturers rom others. Hence, the skills o the shopper marketing account manager are extremelyimportant. They should be able to:

- Seak Two Langages and Two Dialects. They should be able to communicate using marketingand sales terms, and retailer and manuacturer terminologies (e.g., metrics, segmentation, objectives)interchangeably.

- Think Strategically. A retailer-manuacturer meeting is not an average vendor sales meeting and itis no longer just about pushing products, getting shel space and tracking merchandising. Accountmanagers should be adept at strategic discussions about how to achieve retailer objectives.

Create Cstomized Soltions. Retailers value shopper marketing programs that are specically tailoredto their business objectives and improve their competitiveness. A common complaint rom retailers isthat manuacturers bring generic programs to the table. The one-size-ts-all approach does not work.Retailers are under intense competitive pressure and they aim to outrun competition by increasingshopper conversion, improving the stores banner marketing and maintaining a consistent store strategy(e.g., resh and healthy oods, best value and clean store). Thus, each retailer needs a unique shoppermarketing program customized to t its needs.

More retailers tend to develop strategies specic to a cluster o stores or to store ormats. Accordingto the survey, on average, 33 percent o all retailer programs are customized or specic store ormatsand 32 percent are customized or regional clusters o stores. Currently, all manuacturers do customize


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3

Sampling/Demo Shel Signs Displays Personalied

Mail/E-mail

Floor Ads Smart Carts

Loyalty Programs Coupon Dispensers In-Store Visuals/Audio Checkout Coupons Interactive Kiosks SMS Promotions

%%

0%

%

%

0%

%

%

%

%

0%

%

3%

% %

%%

3%%

%%

%%%

0%

at least part o their programs or specic retailers. However, only 50 percent o manuacturerscustomize programs or clusters o stores and they customize, on average, only 21 percent oprograms. Customization to the store cluster level requires additional time, resources and investment.Manuacturers need to think careully about the upside benets rom delivering against such adetailed and exclusive level o programs.

In order to create customized solutions or specic stores or clusters o stores, manuacturersshould have access to store level POS data. Store level POS data is critical to understanding theshopper and the eect o shopper marketing programs on specic stores or cluster o stores.Companies can use store level POS data to calculate return on marketing investment and developscenario testing models to analyze perormance o dierent promotional tactics. This issue is arecognized opportunity; in act, leading sales agencies such as CROSSMARK have been investingquite signicantly in acquiring and making available store level POS data or their customers.

Innovate, Innovate, Innovate. Innovations in programs, products, experience and services willnot only help manuacturers dierentiate themselves, but also help retailers become relevantto their shoppers. However, according to the survey, traditional tactics (e.g., demonstrations,sampling, loyalty, shel signs, coupons) seem to be the norm.

More innovative tactics such as foor advertising, interactive kiosks and smart carts are still rarelyused. The risk and cost seem too high only a handul o manuacturers venture into new tacticsthat they believe garner both relationship and shopper premiums. Most companies all into the Iam doing well enough, why change? trap. Unortunately or them, the industry is evolving rapidly.Retailers are embracing new digital media and innovative methods o in-store advertising (e.g.,Wal-Mart in-store network).

Oer Sond Shoer Insights.Retailers control the store domain and, thereore, own the dataon their shoppers. Leading retailers have started collecting and utilizing shopper insight data. Manymanuacturers would consider this a threat retailers owning the data puts them at a disadvantageat the strategic negotiation table. However, our study ound examples o manuacturers who haveconducted their own independent sophisticated research on the retailer shoppers. This helped themshit the power at the negotiation table and dierentiated them rom competitors. Manuacturersshould remember that although retailers have access to the data, two problems exist: shopper datais expensive, and conversion o data into insights is even more expensive.



Freqently/Continosly

Occasionally/Inreqently

Freqency o Tactics usagePercent o Total Respondents

Manuacturers



26/36


Thereore, retailers seek manuacturers who can add to the knowledge base o shopper in-storebehavior and share experiences on successul shopper programs and products. Quality shopper insightsshould dier by region, by store cluster, and sometimes even by store; they should also outline acompelling business case on the retailers benets and costs. Leading manuacturers have been usinginsights to transorm their categories and improve category sales. Procter & Gamble, or example,signicantly improved shopper experience by redesigning shel layout within the pet ood category:

procter & Gamble using Shoer Insights to Imrove Shoer Exerience

Insights:

Buying ood or pets is as important in the minds o their owners as buying ood or children The category is conusing dry/wet, type size and age o pet, additives, package size

Soltion:

Arranged the aisle according to how the shopper thinks about shopping type o pet, wet/dry, age o pet,package size

Provided inormation at the shel on product perormance and usage

Reslts:

Retailers implementing this approach have increased category sales by 15 percent

Source: Da Marketing Code Conerence, Philippine Marketing Association, May 2007

Since it is very costly or manuacturers to generate unique shopper insights or each specicretailer, manuacturers should segment their customer base and develop their respectiveinvestment strategies by tier o retailer. They should strive to be included as part o the retailerannual planning process to be aligned with the retailers shopper segmentation strategy andunderstand which insights they should collect to help retailers better meet their goals.

Think Cororate priorities. Retailers have a number o corporate priorities that may have asignicant impact on the uture o marketing. Based on Deloittes study Sustainability: BalancingOpportunity and Risk in the Consumer Products Industry, retailers are increasingly becomingenvironmentally responsible. Also, according to the survey, sustainability comes as the thirdpriority to retailers ater private label development and supply chain management. Thereore,manuacturers need to be prepared to oer, or example, environmentally sustainable displays toaddress retailers priorities.

Bold 4-sided advertising grabsconsumers attention

Brandliter our art graphic panelsuse less than 3% o average displaymaterial at a total weight o 1.65 lbs

- Pre-built displays can use in excesso 100 lbs. o corrugate

- The average pre-built moduleuses 33 lbs. o excess corrugate

Reduces between 1 to 3 tons onet corrugate waste per store peryear

Eliminates the look o a sold downpre-built pallet module at retail

Source: Brandliter LLP (www.dotsink.com)

Weight o product

suppresses thepallet table to 14above the oor

Consumers shop

rom top layerscausing table to lit

Pallet table stopsas last layer iseposed

Layers are ed totop by hydraulicspring lit system

Shoppers see highimpact advertisingon all our sides

Environmentally Sstainable Dislay


27/36

There are also a number o other considerations that may not necessarily be at the top o the retailersagenda, but that create residual eect improve program eciencies and shopper satisaction.

Ensre Exection. One o the major challenges manuacturers experience in the shoppermarketing eld is inconsistent execution. Even though it is impossible to completely eliminate thisbarrier, in-store execution is an area where manuacturers can improve the situation. For example,they can collaborate with retailers to include merchandisers in upront strategy meetings to makethem understand the real implications (nancial and strategic) or retailers business resulting romnon-compliance on shopper marketing programs and overall in-store execution.

Follow One Strategy. Manuacturers should not put strict boundaries between trade promotions andshopper marketing programs. Both are stimuli that infuence shoppers in the store. First, manuacturersshould start aligning trade promotion with shopper marketing programs. Then, they should approachretailers with one plan/calendar that has all the programs that infuence a specic shopper segment.

Evalate perormance. Even though industry-wide shopper marketing metrics have not beennalized, manuacturers should strive to evaluate every program based on the available metrics andshare results with retailers.

Leaders in Shoer Marketing

Since shopper marketing is an emerging eld, there are a handul o manuacturers and retailers that areconsidered industry leaders. Retailers identied the ollowing manuacturers as industry leaders in developingeective shopper marketing programs:


Manactrers Identifed by Retailers as Leaders in Develoing Eective Shoer Marketing programs*

Overall Fresh Foods

packaged andprocessed Foods(incl. pet) Beverages Healthcare personal Care Hosehold

Krat Foods

P&G

PepsiCo

Unilever

Coca-Cola

Hormel Foods

Fresh Epress

Dole

Tyson

Krat Foods

P&G

Campbells

JM Smucker

General Mills

PepsiCo

Coca-Cola

Anheuser-Busch

Cadbury

P&G

McKesson

Johnson &Johnson (J&J)

Pharmavite

Leiner

P&G

Neutrogena(J&J)

Unilever

Kimberly-Clark

P&G

Unilever

SC Johnson

Cloro

Dial


*N = 7 retailers; companies are listed in decreasing order o cited requency

These manuacturers have utilized shopper marketing to dierentiate themselves rom their competitors.Some examples o leading practices include:

Retailer-Secifc Strategies. Developing retailer-specic strategies and collateral that explain toretailers how to grow their businesses using manuacturers products.

Demonstrating Imact. Presenting program results and demonstrating credible eects onretailers business.

Innovation. Constantly identiying new ideas to delight consumers and shoppers and, at the sametime, dierentiate their companies in the market.

For example, partnering with Aholds Stop and Shop, Unilever developed highly innovative shoppermarketing programs to increase shopper trips, category purchases and sales yet, another exampleo tangible results stemming rom eective shopper marketing.


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Shoer Insights. Continuously learning about shopper behavior, shopper needs and shopperlikes and dislikes. This knowledge is being actively used not only in the marketing organization, butalso by other unctions (e.g., new product development, supply chain, orecasting).

Bsiness Model Flexibility. Re-assessing the business model and program results on an on-goingbasis and developing plans to close the gap.

In turn, manuacturers identied the ollowing retailers as industry leaders in successully playing in theshopper marketing arena:

Food Lion Meeting Shoer NeedsInsights:Through its segmentation analysis, Food Lion ound that 30% o customers were retired customers on xedincome.

Soltion:In order to cater to this segment, the company made changes to meet customers needs: Changed theproduct assortment and variety; Added in-store senior seating area with ree coee and health inormation;Introduced smaller grocery carts.

Reslts:Sales increased by 8.8 percent; Transactions increased by 6.2 percent; Items increased by 10.7 percent.

Source: ECR Europe Forum & Marketplace, Stockholm, 2006

According to manuacturers surveyed, the ollowing actors signicantly dierentiate these retailers rom others:

Ability to consistently execute in store; Recognition o shopper marketing as a strategic priority; Clearly dened and ormalized shopper marketing objectives; Availability o data; and Quality o consumer/shopper segmentation (see the Food Lion example below).

unilever The 00 CpG Award or Innovation and Creativity

Unilever was awarded the 2007 CPG Award or Innovation and Creativity by the Grocery ManuacturersAssociation (GMA) in conjunction with its Associate Member Council (AMC)

Ater partnering with Aholds Stop & Shop, Unilever drove center store sales by increasing conversion romood to health and beauty care

It executed its program with a three-pronged approach that used:1. Co-marketing promotions to incent consumers to make larger shopping trips2. In-store programming to increase purchases by shoppers across categories3. Simplied and enhanced low-trac aisles to ease the shopping experience

Unilever reported outstanding results: shopper trips to the store up by 90 percent, multiple categorypurchases up by 80 percent, sales per trip increasing by 25 percent, and total store sales up by 138 percent

Source: Grocery Manuacturers Association

Retailers Identifed by Manactres as Leaders in Develoing Eective Shoer Marketing programs*

Overall Grocery Drg Mass Clb Convenience Dollar

Wal-Mart

Kroger

Target

Publi

Wegmans

Kroger

Saeway

Publi

Meijer

Food Lion

CVS

Walgreens

Rite Aid

Eckerd

Longs Drug

Target

Wal-Mart

Kmart

Meijer

WinCo

Costco

Sams Club

BJs

7-Eleven

Circle K

Eon

Sheet

Hess

Dollar General

Family Dollar

Dollar Tree


*N = 14 manuacturers; companies are listed in decreasing order o cited requency


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. Yo Dont Need to Do Everything, Jst Something

Shoer Marketing Is Not Just or the Big Guys Its or Everyone

I you conclude rom this report that only conglomerates like Procter & Gamble and Unilever are tacklingshopper marketing, you would be wrong. Our survey data have proven otherwise. The maturity o shoppermarketing21 eorts has almost no correlation with the size o the company. Thereore, given that shoppermarketing is moving ahead with ull speed, all companies, regardless o size, should start thinking about howthey can play in the shopper marketing eld.

Key Takeaways:




4. Learning The New Tricks o the Trade. Yo Dont Need to Do Everything, Jst Something

21To dene maturity o shopper marketing eorts, Deloitte developed the Shopper Marketing Composite Score based on responses to survey questions in six

key areas: Sel-Assessment Compared to the Industry, Strategy, Organizational Structure, Shopper Insights, Program Evaluation, Partner Collaboration


Matrity o Shoer Marketing Eorts vs. u.S. Sales

00uSRevenes(uS$million)

Basic

25,000

Intermediate Advanced

20,000

15,000

10,000

5,000

0

Maturity o Shopper Marketing Eorts

Note: Each dot reresents a srvey comany resondent

Basic: Shopper Marketing Poorly Dened; Organizational Alignment None to Minimum; Resources Limited; Insight Generation LimitedIntermediate: Shopper Marketing Somewhat Dened; Organizational Alignment Some; Resources Shared; Insight Generation AverageAdvanced: Shopper Marketing Well Dened; Organizational Alignment Fully Aligned; Resources Dedicated; Insight Generation Advanced


One Size Does Not Fit All

Although the need or and benets o shopper marketing are very apparent, manuacturers should not all

into the trap o shopper marketing as panacea syndrome. They have to careully calibrate their shoppermarketing strategy across multiple dimensions.

Successully implementing shopper marketing may or may not mean that companies have to utilize the mostadvanced in-store programs and tactics. A companys strategy or a particular category o products, region,consumer/shopper segment, and market should dene the appropriate shopper marketing approach.


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For example:A price player should not waste its resources on improving the shopper experience or on tactics like

in-store kiosks. However, it could benet rom shopper analytics and insights to better understandthe price points and price promotions that are most eective with shoppers. They can also engagein shopper marketing by utilizing relevant smart value propositions in all messaging.

A premium brand can improve its image by using the most state o the art tactics, such as in-storeTVs, narrowcasting displays and smart shopping carts. This brand can also signicantly benetrom shopper analytics in order to understand the behavior o their shoppers in-store and how toinfuence them in a certain need-state.

In order to aid companies in thinking through how their product and brand strategy can dene their shoppermarketing approach, the ollowing Shopper Marketing Sophistication Model highlights key decision points.The key is to calibrate within the dimensions o the model to nd the right set o strategy and executionlevers that create a dierentiating competitive advantage or an individual manuacturer.

Holistic 360-

degree andintegrated

marketing

to shoppersin-store and

out-o-store

Shoppers

segmented

by behavioror accounts

/ regions /

cluster o stores

/ individualstores

Innovative

programsutiliing the

most eective

combination

o tactics

Advanced

granular

behavioralsegmentation;

advanced

analytical

capabilities

Established

unction and

operationsthat are ully

aligned andcoordinated

with the entireorganiation

Institutionalied

use o

consistent,holistic in-store

and out-o-

store metrics

(including

P.R.I.S.M.)

Collaborative

development

o strategy,objectives,

insights, programs

and metrics;

collective

accountability

ADVANCED

INTERMEDIATE

Some ad-

hoc brandmarketing

in-store in

additionto trade

promotions

Account /

retail customershopper

segments

Combination

o traditional

tactics

Some basic

shopperinsights and

analytics

Group opersonnel

ocused on

opportunitiesin shopper

marketing

Tracking o

some basicmetrics (e.g.,

sales lit)

Minimum

sharing o

strategy,objectives,

insights, data,and results

BASIC

Trade

promotions

No shoppersegment

targetidentifed

A ew

traditionaltactics (e.g.,

displays,signage,

coupons)

No shopper

insights

No personnel

dedicatedto shopper

marketing

Nomeasurement

o programresults

Minimum

interaction (e.g.,

regular sales andmerchandising

meetings)

NON-

ExISTENT/BAREMINIMUM

APPROACH/

STRATEGY TARGETPROGRAMS &

TACTICS

SHOPPER

INSIGHTS &ANALYTICS

ORGANIzATION

& STRUCTURE

PERFORMANCE

MEASUREMENT

PARTNER

COLLABORATION

Strategy Considerations Exection Considerations

LevelofShopperMarketingSophistication

Deloitte Shoer Marketing Sohistication ModelTM

In-store

and out-o-store brand

marketing

and tradepromotions

Shopper

segmentedor accounts

/ regions /

cluster ostores

Combinationo traditional

and state-o-

the-art tactics

Shopper

segmentation;shopper

behavior

insights;analytical tools

Established

unctionand some

processes

integratedwith other

departments

Regularly usedset o in-store

and out-o-

store metrics

Sharing o

strategy,

objectives,

insights, data, and

results, and some

collaborative

development o

programs

Source: Deloitte Consulting LLP

Lowest

Highest


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The ollowing steps outline the thought process marketers should go through when deciding on theirshopper marketing approach.

Ste . Strategy ConsiderationsMarketers should assess their product and brand strategy based on the ollowing attributes:

Product category

Type o product commodity vs. dierentiator

Brand prolieration and strength eponym (e.g. Band Aid, Xerox) or a regular brand

Premium brand vs. average brand

Market share / position within category

Additional considerations include:

Relevancy o retailer shopper base to product/brand portolio

Retailer value proposition

Corporate priorities

These attributes, along with others, dene how a company plays in the overall marketing space.

The brand/product may be a price player (i.e., mostly competing on price) or a brand dierentiator (i.e.,competing on a certain dierentiating actor). Thereore, in order to dene shopper marketing, the companyshould decide on the ollowing strategic considerations:

Strategy: Is the brand or product a price player or brand dierentiator?

Target: How granular should I approach segmenting my shopper/consumer?

programs & Tactics: Which tactics should my company use to support the strategy? Which tacticswould better communicate the brand strategy and convert shopper into buyer? Would my activitiesinclude out-o-store tactics or just in-store?

Ste . Exection ConsiderationsOnce the company has decided on these three strategic considerations or the overall product portolio, itshould develop inrastructure to support these strategic considerations. That inrastructure should include:

Shoer Insights & Analytics: In order to support the target, which types o data does my companyhave to collect?

Organizational Strctre: How many resources should my company commit to support this unction?

perormance Measrement: Which perormance metrics should be utilized?

partner Collaboration: Which retail partnerships should be leveraged to play in the chosen shoppermarketing strategy?

For each o the seven dimensions o the sophistication model, companies need to nd their ideal position tosupport the strategy they pursue and execution tactics they choose. There is no one answer that ts or allcompanies. Companies must thoughtully consider what strategies will work best or them to ully capitalizeon the opportunities shopper marketing presents. Given the complexity o adopting shopper marketing,manuacturers should ollow a step-by-step approach. They should take small steps to slowly embrace changeand capitalize on short-term opportunities, but at the same time have a longer-term vision or where theywould like to be in the uture.



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Section 3:View o the Future

View of the FutureBigger, Better and More

Shopper marketing is a phenomenon that is quickly penetrating the consumer products industry. We predictthat in ve years shopper marketing will become bigger, better and more.

Bigger within the Industry and Marketing

Shopper marketing is going to penetrate the industry and the marketing world.

Bigger within the Indstry: Shopper marketing will spread its roots throughout the consumerproducts industry. It will be a password to join the game. Retailers will dene more and more o theparameters or the strategy and execution o shopper marketing programs. Manuacturers need toaggressively invest to prepare themselves and earn a seat at the table.

Bigger within Marketing: Shopper marketing will become a much more prominent part o themarketing mix, a new marketing medium, joining the arsenal o traditional vehicles that are nowused to holistically target the consumer and shopper. It will be as signicant as mass-marketingused to be and as online marketing has become.

Better Inrastructure

We orecast that companies will employ better collaboration, insights, targeting tactics, measurements, andtechnology as shopper marketing grows.

Better Collaboration: Its a win-win game or manuacturers and retailers. As opposed to traditionaltransactional relationships such as you pay more, I will provide more shel space, manuacturersand retailers will depend on each other to eectively reach their shoppers. Due to growing costs andcomplexity in understanding the shopper, partners will need to share insights and ideas, and developsynergies to more eectively target the shopper rom insight generation to program perormanceevaluation. Manuacturer-retailer relationships will become more streamlined and organized in the waythey interact. They will create easier processes to share insights and program evaluation results.

Better Insights: The industry will develop and rene methods o collecting primary inormationon shoppers, resulting in higher quality insights. Companies will be oered a rich variety oinormation and will even become selective. Retailers will be able to gather more data themselvesgiven better technology. Prioritization and scoping o research and analytics are going to be key.

Better Targeting: Targeted marketing will evolve. Companies will keep nding new ways to targetindividuals in-store based on comprehensive shopper data. New ways o using these data will emerge(e.g., automatic customization o screen messages based on the shopper prole). Store, productand media solutions will advance. Companies will constantly be looking or innovative solutions todelight the consumer (e.g., scan product or a recipe recommendation) and to satisy the retailer (e.g.,sustainable displays).

Better plann

deloitte shopper marketing study 2007

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