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Shopper marketing - the key to unlocking growth in a recession

Unlocking growth in a recession

During these difficult economic times, the key is to ensure that consumers not only continue to want use your brand, but also to ensure that shoppers buy your brand in the first place. Fail at this 'first moment of truth' and you will not even reach the second moment of truth – consumption. Win at 'shopper marketing' and you just might unlock growth in a recession.

So, what is shopper marketing? We define it as 'the capability to drive growth through insight-led, shopper-based demand creation and fulfilment'. In a nutshell, it's about institutionalising shopper insights to drive business growth. And it's hot. In May 2008, OxfordSM conducted a survey on shopper marketing among 28 top fmcg manufacturers and retailers on behalf of ECR Europe, revealing that companies already see shopper marketing as critical to success, and expect its value to rise dramatically in a downturn.

The deepening recession is changing consumer priorities, and disrupting their traditional buying patterns. Shoppers' category allocations and brand loyalties are shifting too. Recently, Sainsbury's announced that sales of its Basics range rose 30 per cent in the last quarter through its 'switch and save' campaign, which aims to lure shoppers to own-label goods from branded labels. And the search for value can drive more extreme retailer loyalty. The hard discounters Aldi, Lidl and Netto are claiming double-digit growth at present as a result of more people coming through their doors. Tesco is responding by positioning itself as 'Britain's biggest discounter', setting up specific discount aisles and promoting over 350 products in-store where customers could save up to £24 a week. So people are still consuming bread, beer and washing powder, but they are shopping for them differently.

Shopper changes are not limited to down-trading and discounting, though. More complex shopping behaviours are visible too. Datamonitor has shown that 15% of shoppers are now trading down and trading up in the same basket. For example, the wine category is already starting to polarise into 'below £4' and 'over £10' sectors, with the much vaunted £4.99–£6.99 price ranges losing shelf space.

Now, more than ever, it is vital to really understand the attitudes and behaviours of your target shopper. Some behaviours are unpredictable. Will cash-constrained shoppers be less likely to respond to multi-buys and favour price cuts on individual products, making bulk-buying a boom-time behaviour? Or are shoppers taking fewer trips to the supermarket to save on fuel costs, making bulk buying a smart option in the current climate? Or, conversely, are they shopping more frequently but with smaller basket sizes? Will they buy more online? Only by embracing and institutionalising shopper marketing in your organisation can you anticipate and capitalise on these developments.

Whatever the diagnosis for your category and brands, the credit crunch is putting a premium on the need to generate and act on shopper insight. Our 2008 ECR survey indicated a significant variation in how effectively and widely companies leverage shopper insight. Leading companies are those who are applying shopper insight most widely. The three broad applications are as follows.

1. EXECUTIONAL

This is about optimising and promoting the offer at point of purchase – through pricing, merchandising, display and promotion. If it is based on a true understanding of the shopper it can be very simple but highly effective. For example, P&G uses shopper messaging on outer cases via shelf-ready packaging, as in Fairy Antibacterial washing-up liquid stating 'Stop bacteria breeding on your sponge tonight' – an instant call to action versus other products with no message at all. Another example is Guinness, which drove sales by almost a quarter via improved visibility and navigation based on deeper shopper understanding.

2. CHANNEL AND FORMAT STRATEGY

This means finding where best to place the offer and flex the offer by format. Coca-Cola is the acknowledged expert in defining needs based on shopper mission and channel, and using that to drive range choice. Its lunchtime promotion – buy a sandwich, bag of crisps and a Coke – is a great example of understanding a broader shopper mission. Minute Maid replicated this in the US with its breakfast solution fixture – 'Squeeze a minute into your morning' linking Minute Maid orange juice to other breakfast items like bagels and newspapers. The result? Increased frequency and value of purchase from beverage shoppers. Minute Maid volume grew by 26% and retail profit by 32% (source: Research International).

3. STRATEGIC INNOVATION

Leading-edge companies listen and act on the voice of the shopper when taking strategic decisions including identifying new growth platforms and product innovation. For example, P&G has been looking at the total shopper experience and testing pop-up shops in Canada – called Look Fab studios. The concept is intended to get women to think differently about P&G's health and beauty line (Cover Girl, Pantene and Nice & Easy). In this new format, shoppers are treated to mini makeovers from Cover Girl, skin analysis from Olay and can book free hair colour and style sessions courtesy of Nice & Easy/Pantene.

The diagram on page 41 (Figure 1) makes the critical point that shopper marketing goes way beyond category management.

Increasing shopper satisfaction for the entire category is one of the few goals retailers and manufacturers genuinely share. In the current inflationary and recessionary environment, agreeing to focus on shopper satisfaction can deflect from potential arguments about margin and price too. This is where the savviest branded manufacturers focus, using shopper marketing as an opportunity to build their relationship with those retail customers who are open to a genuine strategic dialogue.

This requires a really deep understanding of each retailer's goals – their priority customers, formats, market positioning, competitive dynamics, operational needs and corporate imperatives. Those manufacturers best placed to win will be those who truly understand shoppers and shopper behaviour, and use this to develop solutions that meet the specific needs of each priority retailer or channel.

Typically, discussions have focused on the right-hand side of the 'value creation' model (Figure 2) – how to improve overall margin, and how to drive profit. This is typically viewed at an individual category level. However, what manufacturers and retailers are also increasingly interested in is driving growth through the left-hand side of the equation – via increased penetration of shoppers, shopper frequency and basket size. This can require a multicategory perspective. So how ready are you and your team to leverage the potential of shopper marketing? The shopper marketing readiness box on page 5 has some questions to help you assess your readiness.

In thinking about this checklist, it's important to maintain a sense of perspective. We work with leading fmcg players as well as grocery retailers, so we see 'both sides', and even the biggest and best names in fmcg-marketing are still working hard to fully embed and leverage shopper marketing. (see Appendix 1).

For the marketing leader navigating the journey to strategic shopper marketing, it's helpful to hold on to some straightforward principles, as outlined below.

Know Where You are Heading

P&G and Coca-Cola started with a vision of what this could do for them, and have learned and evolved over those years. Start by defining what shopper marketing means to your organisation.

Define a Clear Business Challenge that Shopper Marketing can Help Deliver.

Too often teams just set off to do 'shopper marketing' and the result is some slightly more compelling merchandising. So before doing anything the team should be clear on the business challenge they are trying to solve with the approach.

Generate Broad Shopper Insight.

Challenge your teams to ensure they appreciate all the sources of relevant data can be accessed. The richest insight comes from making connections across data sources.

Share and Apply Shopper Insight.

Make sure insight reaches the decision makers and that insight is applied by thinking broadly about how the business challenge can best be addressed using multiple shopper levers at your disposal. Understanding the shopper can open up powerful growth opportunities. For example, Boots analysed shopping patterns among loyalty card holders and found a link between baby products and photographic goods – this subsequently drove co-location of photographic products with nappies.

Build Your Own Shopper Marketing Talent.

While organisational design is important, new organisational structures are not necessarily what is needed. A strong shopper vision and great cross-functional working practices will get you further. Moving forward, to really win at shopper marketing a company needs to develop its talent in this area. The 2008 ECR study highlighted this as a critical issue as there already a shortage of talent.

Ensure the Business Learns and can Re-Apply.

Ensure programmes are scaleable, activities are measured and what works or what doesn't work gets shared fast. On measurement ensure you have core and simple measures that apply to all activities. More sophisticated measurement tracking can be put in place for key initiatives, but applying complicated success measures across all activities can hinder the organisation (and often nothing at all gets measured). Build partnerships with retailers where possible and look to leverage external suppliers too for expertise.

In our view, shopper marketing is set to grow and become a staple discipline of modern marketing. And the next few years will prove its value in delivering the greatest bang for the credit-crunched buck. For the fmcg marketing director, the challenge will be to really understand shoppers and retailers, as well as consumers, and to work together with other functions and with retailers to anticipate and respond to the ultra-rapid changes in shopper behaviour.

APPENDIX 1 – SHOPPER MARKETING READINESS CHECKLIST

1. a. Am I really clear what 'shopper marketing' means and how it relates to, and complements, consumer marketing?

    b. Is my team?

    c. Is my company?

2. Do we really understand the relevance of shoppers, as well as consumers, in driving our brands' performance?

3. a. Is our shopper insight really good enough?

    b. Is it shared effectively with key decision makers?

    c. Have we understood the full implications of how the credit crunch has, and will, affect shopper behaviour?

4. Does my team know enough about our priority retailers' goals and strategies, and how the credit crunch may affect them in future?

5. Does my team have the right skills, knowledge and attitude to harness shopper marketing opportunities?

6. Do the current organisational design and roles and responsibilities help our shopper marketing performance?

7. a. Do we work closely enough with our sales/customer marketing/category management colleagues?

    b. Do we work effectively as 'one team'?

8. Do we have the right metrics to measure and track shopper marketing?

Figure 1: Shopper marketing evolution

Figure 2: Shopper marketing driving real value


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