Mike Anthony @ engage consultants

Mike Anthony on Shopper Marketing

Why Does So Much In-store Activity Lose Money?

with 5 comments

 

In  workshops or at speaking engagements  I often quote a figure of 70% of in-store work doesn’t make money. It’s based on a detailed analysis of hundreds of activities and whilst I know that it will be different for every business, we never get challenged. The truth is that the majority of people in the audience have no idea what their situation is because they – be they consumer marketers, shopper marketers or sales managers –  do not measure the impact of their activity. But the majority of managers in consumer goods organizations also know that all the evidence they do have would support my point:  that the vast majority of programs lose money.

So if your account team or shopper team is losing money on your in-store activities, what should you do?

Assuming that the activity planned is a good one, there are a number of factors which have an enormous impact on whether the activity you are planning makes money. These factors add up to one simple question that must be answered in both the planning and evaluation phase.

How many of my target shoppers actually get to interact with my activity?

If all of your target see and interact with your activity, then we’d be well on our way to success, so why doesn’t this happen?

Compliance – According to a previous comment on this blog left by Mike Spindler of Shelfsnap   and other surveys conducted, compliance can be as low as 50%. So potentially half of your shoppers have no chance to see your activity. If that doesn’t impact ROI I don’t know what will!

Out of Stocks – In our surveys, the vast majority (up to 83%) of out of stocks are promoted items. Out of stocks in some stores range up to 12% of total range. Applying even 10% out of stocks to the 50% of stores that installed the activity correctly, now leaves only 45% of shoppers actually able to buy.

Interaction levels – This is where it gets really scary. According to POPAI, the global association for marketing at retail, most shoppers don’t notice displays. They quote that in studies less than half of shoppers notice even one piece of POP (out of upwards of 150 in a store). In research studies by engage, we have found that less than 10% of shoppers have noticed a specific floor display (and these were pretty big displays).

Who interacts – Clearly the design of the activity will impact its interaction levels, but we could be looking at a number of 10% or less of shoppers actually get a chance to interact with a display. Now comes the killer question. Who actually interacts with our activity? For this I’ll focus on the two most common in-store activities, displays and discount promotions.

I’m not a big fan of standard segmentation models – segmentation should be driven by the brand’s strategy, not a generic model invented by an agency – but sometimes they are useful.

POPAI created a segmentation which divided shoppers into four groups: Planners, Bargain Hunters, Time stressed shoppers and Explorers

So which of these segments shop at displays? I’d guess explorers. And promotions? That would be the bargain hunters. So far so good. But how do these segments intersect with your brand’s target shoppers? How many marketers out there are actively targeting Bargain Hunters? I’d guess not many, and yet there is a good chance that much of your sales uplift during any activity is sucked up by them. How many of your target shoppers actually are within that small set of shoppers who see, and interact with your activity?

Return on investment is a function of the investment costs, compliance and interaction. As you can see it is easy to envisage a situation where only a few percent of your target market actually are impacted by your activity. No wonder so many of them lose money!

So how does a shopper marketer improve the ROI of their in-store activity?

1. Focus on compliance If it isn’t executed in the store, then we’re struggling already.

2. Be really clear about who your target shopper is. Value is created when the right shopper (your target) interacts with your activity. See the Venn diagram below: the Value Zone is the intersection between the two, but it’s impossible to work this out until there is a really clear view on who the target shopper is.

3. Understand which activities are most likely to create the behavioral change desired in the target Utilize research or evaluations of past activity to understand which stimulus or activity is most likely to be noticed by shoppers and most likely to lead to engagement.

The retail store is a tough, unforgiving environment, but as all trends suggest that more and more money is pouring into this arena, making small improvements in ROI will make a bigger and bigger difference as time goes by. And given that most activities deliver really poor returns, it doesn’t take much to outstrip the competition in this area

What in your opinion, should manufacturers and retailers do to make in-store activity more profitable for all? Is the answer to do less, or simply to do things differently? Do let me know

Advertisements

Written by Mike Anthony

August 24, 2012 at 9:34 am

Posted in In-Store

5 Responses

Subscribe to comments with RSS.

  1. Hi Mike. For my sins, I’ve only just discovered your blog and have spent a great deal of time reading many of your entries and nodding. A lot. Whilst it’s great to read that someone else has thought the same things as you (e.g. why brands aren’t all embracing Poundland, B&M, etc.), it’s rather annoying to know you were beaten to the punch!

    Anyway… the POPAI research confirms some research I’ve done before around the relatively small proportion of customers who have time to actually “shop” the store, as opposed to just trying to get around the store and out in as quick a time as possible. What this shouts to me is that any POS, FSDUs, etc. really need to be created in a way that reduces shoppers “friction” and helps them get what they want, and quickly. Yet how many are created in a way to look the fanciest they can, or just to shout about the brand itself? Where are the clever stands that fulfil specific shopper missions, or almost literally put the product in the customer’s hand? Or tailored to the store’s demographics (e.g. shorter units with smaller pack sizes in for areas with a more mature demographic – e.g. Broadstairs!)? Your images of all the huge dump-bins (such an appropriate term, don’t you think) on a previous blog made me weep as they do nothing except get a large volume of product in a single place, and then play the numbers game that a customer is likely to pick up x% of all products in the store, so the more we have of product Y, the more likely that this will be in their x% – sadly, this assumes a customer shops in an entirely random fashion.

    Actually, that’s made me start thinking about the short-termist approach of many retailers to make customers walk around the store for their typical “top-up” products (bread, milk, eggs, etc), with the assumption that the customers will then end up buying more things. But how many customers actually do? And how is making them do a long walk building any kind of loyalty? Is it not possible (or probable?) that a customer who successfully does a very efficient top up shop, would be more likely to make the store a regular destination for a full shop? But that’s something else..!

    Thanks for sharing, and apologies for the length of this reply (it’s a little stream-of-consciousness!).

    Nick

    Nick D

    August 24, 2012 at 11:12 pm

    • Hi Nick,

      Better late than never 🙂

      Seriously, many thanks for your very kind words – really great to get positive feedback and know that at least some of what I say resonates.

      The more I see, the more I get the feeling that there is something terribly wrong with the consumer goods industry, or at least parts of it, that were simply built a long time ago in a different world. Your point about using categories such as bread to “force” shoppers to walk the store in an attempt to encourage impulse purchases illuminates this point brilliantly. Written as you write it, it just feels like an arrogance – the idea that we can treat shoppers in this way, and an arrogance built out of knowing that shoppers have very little choice. Stores have been built for the benefit of the retailers, rather than the benefit of their customers, and that simply is not sustainable when those customers now have so much more choice.

      The good news is that this means that the industry has a huge opportunity to transform the way that consumer goods products are marketed and sold. And that has to be exciting!!!

      Thanks again for taking the time to comment!

      All the best

      Mike

      Mike Anthony

      August 27, 2012 at 4:29 pm

  2. […] Bookmarked Why Does So Much In-store Activity Lose Money? « Mike Anthony @ engage consultants […]

  3. Hello Mike,

    Your article certainly resonated with me and I too had not come across your blog before but certainly pleased I now have!. In-store trade and promotional spend represents a significant investment by CPG manufacturers with their retailer partners, given that it can often involve 10-20% of their revenue. Where I have seen frustrations from a manufacturer perspective is during the assessment of promotions e.g. half of my activity is working, but which promotions represent that 50%. You also find a level of promotional inertia whereby a product has always been promoted on a 2 for 1 offer and the habit is to always do that whether it be profitable, grow the category or not. This too can be compounded by retailer account pressure for the manufacturer to provide support for deals of this nature.

    I see this as an excellent opportunity for CPG’s to stand up and be counted with retailers by taking the lead on a joint business planning approach. To do this they need their own houses in order and connect internally as often the different business units and support functions are not always aligned. The only real way of having a united front and taking control of the critical areas of promo eval, account plans and profitability of in-store activity is by driving visibility across the relevant departments as the promotional plans are built with each retailer account. By them being visible between trade marketing, finance, account managers, sales management the manufacturer can plan future activity more effectively because the focus is on plans that meet company objectives, of which profitability and category growth must be key drivers. If it isn’t the same mistakes are made, opportunities missed and the relationship with retailers is not as level a playing field as it could (should) be.

    Whilst I know it can be tricky for a manufacturer to push back and deny a promotion or level of trade spend that the retailer has enjoyed historically, retailers generally want to work with long-term partners and build sustainable category growth. If they grind manufacturers down by demanding activity that is not mutually beneficial the investment well will dry up or the manufacturer will go under. Manufacturers need to be co-ordinated internally with their planning first, understand what works well for themselves as well as their retailer accounts and be able to build a story to justify it.

    Thanks for your conversation on this subject as I know there are plenty of CPG’s who need to address this area

    Matt

    Matt

    September 25, 2012 at 6:04 pm

    • Hi Matt,

      Thanks very much!

      Your points are well made – especially about CPGs getting their houses in order first. The other point is to go in to retail with an alternative. If a retailer feels you are denying them funds or support, they will not be pleased: but if there is an effort to explain that the funds are being diverted to something that would be more productive for both parties, then CPGs will always stand a better chance (whether this is delivered via JBP or another engagement approach). Whilst sometimes buyers can seem a little “one track” in their demands, often this is because few of their suppliers come up with credible, well positioned alternatives.

      Time to stand up and be counted! FOr sure!

      Thanks again for reading and especially for taking time to comment and add.

      All the best,

      Mike

      Mike Anthony

      September 26, 2012 at 12:46 pm


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: