Mike Anthony @ engage consultants

Mike Anthony on Shopper Marketing

Achieving Profitable Shopper Marketing

with 8 comments

Achieving Profitable Shopper MarketingWith so much money being poured into stores (be they of the virtual or bricks variety) there is always a danger that some of that money is going to be wasted. But our data suggests up to seventy percent of money spent on promotions is wasted.  Message to John Wannamaker – If you thought fifty percent waste was bad – don’t try shopper marketing!

And why does this happen? Yes there are lots of reasons: we could blame greedy retailers, difficult analytics, and just having too much to do; but today let’s focus on one thing at the heart of all of this. Too many shopper marketers don’t actually do marketing very well.

Sorry, but it’s true. Marketing is (according to one of my marketing heroes, Dr. Philip Kotler) “the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit”. Now the reason I’ve chosen Dr. Kotler’s definition for this piece, apart from the fact that I am a big fan, is that he uses two words often forgotten in shopper marketing: target and profit.

There isn’t a self-respecting consumer marketer who would create activity targeting all consumers, yet in the land of the shopper marketer it seems to be OK to talk about “the shopper”.  Too many shopper marketers still seem to dwell in that “Mad Men” era where the shopper was a generic housewife and all they all wanted was their whites to be whiter, their kids to be wholesome, and their husbands to appreciate the meal they put on the table.

Now I’m pretty sure that even back in those days shoppers weren’t always the same, but perhaps it was an approximation that was (just about) OK. Today that simply isn’t true: shoppers vary massively, and this, if nothing else, marks the advent of the age of shopper marketing. Shopper Marketing needs to market to shoppers, and that means targeting, and targeting means being selective about who we’re after.

So which shoppers should you gun for? There are loads of very clever, sexy, (and occasionally clever and sexy) segmentation models, but how do we boil this down to something everyone can work with and apply? It’s brutally simple. Which shoppers represent the majority of your current profit, and which represent the biggest opportunity to create future profits? That’s it. Simple isn’t it?

Or not. Because if it was that simple we’d all be at it.

The problem is that marketers too often get confused. We confuse sales and profit. We track loyalty without considering what it actually means. For example, a shopper who always buys your brand is great, but if they only buy it on promotion then they are less profitable.

We track customer satisfaction, when satisfaction hardly guarantees future behavior. I’m satisfied with lots of products, but it’s only when I’m delighted that you have won me over. Satisfied customers are at risk. Satisfied customers are the ones that increasingly need promotions to bind them to brands.

We measure repeat rates often without considering the conditions necessary for that repeat purchase to take place.  Repeat is where we make money but the real measure is repeat at full price. If this measure is deteriorating then a brand is really going to struggle. There is a big difference in the value of a shopper who is loyal at full price and a shopper who is loyal only at a discount (but that discount is frequent enough to ensure I never have to leave the brand).

What this comes to is that the model of success actually requires a marketer to understand both the behavior they are trying to create, and the circumstances within which this behavior is most valuable (ie the marketing mix). The goal would be loyalty without discount for most companies, so why do they continue to create a marketing mix which makes this impossible?

Marketing investment therefore needs to consider the following steps to be able to fully comprehend the profit value of a group of shoppers, and therefore the value of that segment:

The value of the consumption change that is unlocked. The sales value of a shopper segment depends on the consumption value it creates. Shoppers who buy to fill the larder are lower value than those that enable long term changes in consumption behavior.

The specific size of the shopper segment. How much of a particular consumption opportunity can be unlocked by a certain group of shoppers. Not all consumers are shoppers, and just because a population is homogenous as consumers doesn’t mean they are as shoppers.

The stores where the shopper can be influenced. Understanding this helps understand how to reach those shoppers (indeed can they be reached), but also goes to indicate the cost of the marketing mix required to to influence them.

This enables investment decisions to be made based on a true understanding of the value of a segment, as well as the cost of achieving that value: and that drives profitable shopper marketing

And if this seems difficult, or beyond the capability of your business right now, take heart. Tiny steps in this direction will make you stand out from the crowd – winners aren’t perfect, they are merely better than the others. Who knows, a couple of shifts in the right direction and you might get to match Mr. Wannamaker’s fifty percent yet, and that would be some achievement!

Featured image via Flickr

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Written by Mike Anthony

February 26, 2013 at 1:35 pm

8 Responses

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  1. I also think there’s a fundamental lack of innovation and creativity in-store, with most suppliers and retailers willing to play it safe, repeat simple promotional plans and never really commit to trying something different. They talk a good talk but most often fail to escape the ‘me-too’ style of shopper marketing (which lets face it is just trade marketing anyway) @GlacierIE

    Ken Hughes

    February 26, 2013 at 11:00 pm

    • Hi Ken,

      Thanks for this – I agree – there are often too many activities which are generic, caused by a lack of insight, a lack of creativity, an unwillingness to challenge the status quo amongst other things.

      However innovation and creativity doesn’t always lead to big/standout activities. I’m not suggesting you are arguing this but ordinary is great as long as it is effective. As a build to this conversation – you might like to check out https://mikeanthonyengage.wordpress.com/2012/11/07/what-does-great-shopper-marketing-look-like/

      Thanks, and I agree – shopper marketing needs to be more creative, and do new things…

      Let’s watch this space!

      Mike

      Mike Anthony

      February 27, 2013 at 10:57 am

  2. Hi Mike,

    Do you mind telling where the survey conducted – the part with “seventy percent of money spent on promotions is wasted” – as this figure are quite frankly terrifying.

    Have you ever conduct this survey in Asian countries? Would really love to know if the result are similar.

    Regards
    Mario

    Mario

    February 27, 2013 at 4:34 pm

    • Hi Mario,
      Can’t give you too many details, but originally it was in North America, and we’ve seen lots of data in asia Whig is in line with this.

      It is, as you say, terrifying.

      What is more terrifying is that many companies have no idea as try don’t actually evaluate their activity.

      All the best,

      Mike

      Mike Anthony

      February 28, 2013 at 4:21 pm

  3. Hi, Its a really thought provoking article, much of which I entirely agree with. However I need to get a great deal more detail about the 70% that is wasted. In the UK, promotions (and here I have to guess that you primarily mean discounts) are deemed to be successful since they serve the goal of volume and not growth by brand or category. They are, in no sense a marketing tool, but a retailer tool supported by the sales department since it makes their job easy. In the marketing context, in the UK, more than 70% of the spend is wasted, I would say nearer 100%. Moreover, it actively drives promiscuity, since much of the extra demand is not met by product on the shelf. So it actively fights marketing objectives,

    Second point, stores serving core areas are very important (again as you say). They typically overperform their space, so adding more demand here typically leaves just larger gaps, unless you work with these stores to flex space and supply. These stores, again in the UK could be 15% of stores, producing 40% of sales. They are the ideal place for signage, targeted media, etc etc. If shopper marketing in the “back to store” P&G sense means anything to me it is linking up supply and demand. Of course, in a silo company, the Sales Department should want to, and be able to, manage supply side. In the UK they have access to all the data. However, they do not have marketing objectives on their horizon, they have either retailer objectives (I need this promotion) or production objectives (I need this volume).

    The lack of a concise company wide, marketing driven objective for me means that the 70% wasted is either much too high (yes we got the volume) or much too low (but in the process we actively lost 5% of our loyalists as their product was bought by price seekers). Of course the lack of serious commitment to measurement of any shopper marketing means that discount spend will continue to increase. After all, as the retailers say, our joint customers demand it. And who here has the data to disagree with them?

    Colin Harper

    March 1, 2013 at 9:21 pm

    • Dear Colin,

      Thanks so much – great added value.

      The 70% number is a simple measure – and isn’t designed to be a detailed analysis of waste – as you say this leads to a level of complexity that one stat cannot cover.

      It was based on a simple calculation of gross profitability – did the profit from the extra sales cover the cost of the discount (including fees). Its a relatively simple number, and is a relatively low threshold of ‘success’. It takes no account of additional supply chain costs, loss of loyalty, and countless other factors you mention.

      I agree with you, that if there was a clear situation whereby every activity had a meaningful objective (and by that I mean a business objective, and driving volume surely doesn’t meet that criteria – surely that is too low a threshold?) – if this were the case – the number would rise much higher than the 70% number.

      Lastly – the actual number matters less than the core point – we waste lots of money – and that has to stop. Whether it is 70%, 60% or 90% – if it were moved steadily in the right direction, then the consumer goods industry would be in a better state.

      And – as you say – the absence of meaningful marketing objectives is a big part of the problem.

      Thanks very much!

      Mike

      Mike Anthony

      March 3, 2013 at 11:00 am

  4. HI Mike, do you have any sources, or studies I can reference for the stat ‘70% of money spent on promotions’?

    Thanks,
    Camille

    Camille

    July 17, 2013 at 5:34 am

    • HI Camille,

      I don’t have access to the orgiginal report. It was done by a company called CAS who are now owned by Accenture: we at engage have since built our own studies which support this – so if you need to quote anything, suggest you reference engage

      Thanks, and apologies for not being more helpful.

      All the best,

      Mike

      Mike Anthony

      July 17, 2013 at 12:05 pm


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