How would you explain the evolution in retail merchandising to someone just entering the field?
Over the years retail execution has been focused on statistics for merchandising: POS data, loyalty program data, syndicated data, etc… It was pretty much an automated system of collecting information about purchase trends and ambiguous shopping baskets. The industry then used this information to sell and stock shelf space with products based on what they thought would move. The risk is they planned these allotments for entire regions and chains with stale data, not down to the individual store with fresh data. Consumers were gradually getting lost in aisles filled with products they statistically should be looking to buy, but weren’t.
Traditional Data Management in Retail has:
- Little or no access to product or consumer data, or data is old and inaccurate
- Consumer and transaction data is disjointed and reports are days to weeks old
- Separate operational data and analytics by channel
- Disparate, disjointed and inconsistent silos of data¹
Historically, chains have been stocking shelves based on a “push” methodology that allocates merchandise according to what a retailer thinks its shoppers will want. …chains need to revamp their merchandising strategies and create assortments based on their shoppers’ needs and preferences.²
So where is merchandising headed?
Down to the unique store level — at the shelf where consumers make their decisions. Understanding who and what influence their purchasing decisions outside the store and in–store. Turning traditional hunter–gatherer shelves into an emotionally driven, consumer oriented marketplace. In other words, leveraging retail emotional intelligence to win the consumer back.
Merchandising strategies and tactics have not kept pace to address evolving consumer needs.³
Displays drive significant incremental volume, but remember — not all stores are created equally.³
Manufacturers with significant brand equity such as PepsiCo, P&G, Unilever, Microsoft and others are intent in extending their marketing mix to retail — These major manufacturers who have traditionally invested millions in traditional advertising dollars are now understanding that the store is a new media.³
Over the next several years, CPG retailers, manufacturers and MSOs will step up merchandising innovation to simplify the shopping experience, break through the clutter, better align with consumer shopping patterns and reach targeted consumer segments.³
What are some of the drivers behind the consumer changes?
Firstly, with the advent of today’s technology and the Internet as a medium, consumers are being influenced by their personal networks (friends, family, etc…). Secondly, the new technology has caused the “fragmentation of traditional media”³ and “fragmentation of consumer preferences”³.The ability to gain information rapidly has changed as tastes, preferences and purchasing patterns explode.³ Simply said, with existing methodologies no one can be sure what is going to sell in any given store. The goal is to have your finger on the pulse of the unique customer. And stores are really just that today — a collection of unique customers.
More and more, consumers are relying on advice from friends, family and even strangers to make purchase decisions… And many are giving — and getting — that advice online. Over 26 million US adults regularly share advice on products and services online (up from 23 million in 2006). 91% of US adults regularly or occasionally seek advice on products or services. 94% of US adults regularly or occasionally give advice to others about products or services. The most popular selection for the most effective promotions for US adult internet users are ‘Recommendations from friends’ with 58%. For comparison sake, regular TV ads scored 32%.4
How can you possibly keep track of all these consumer influences let alone market to them? And in the end, what is the equation that customers go through to arrive at a purchasing decision?
The quick answer is that you cannot keep track of all those consumer influences! But what you can do is understand the end customer and do so regularly. If you collect information about the decisions your customers are actually making, you can lessen the need to fully understand hyperactive consumer influences. In the end, regardless of what went through the customer’s mind to make a purchase (or even if they didn’t buy), you have captured what matters: the decision, and hopefully what caused the decision. The bottom–line is that you can report against individual customers in individual stores and stock those shelves in the best possible way. Every store will be different, but in the end you are relying on these valuable emotions and quality information to enhance your decision making process and not solely relying on statistical data like POS systems/loyalty programs. You are now utilizing retail emotional intelligence.
We’re definitely in an era where the ethos is, ‘I’ll judge for myself. I don’t need an expert to tell me what to think, or buy or see.’ 5
Where Users Prefer to Get Purchase Data Information: Website With User Reviews (62%), Knowledgeable Friend (59%), Website of the Product (52%), Newspaper or Magazine (25%).5
One positive review might not carry the same influence as a recommendation from someone a user knows and trusts. However seeing positive reviews from a range of happy customers changes the equation. Web users tend to study online reviews for someone just like themselves, whose opinion, experience and needs are similar. And even if they don’t find a response from someone who appears to have the same taste and needs, the weight of 10, 20, or 30 positive reviews can give them confidence that a product or service delivers on its promises.5
Consumers now have more choices, more convenience, lower prices, and more control over their shopping experience. They can go to a club store and work hard to get the best price, or they can order over the Internet for delivery and barely lift a finger, but at a significant cost premium. Or they can decide to do both, depending on mood and present circumstances.6
The point is that consumers are in command. They have more information and more resources than ever before, and they are becoming quite adept at using them.6
Best Practices…
- Adapt category management to focus more on the consumer and not what the retailer or manufacturer thinks should sell. Further, bring familiarity to the consumer’s shopping experience by shifting categories from salad dressings to “Dinner Tonight” for example.
- Deploy tools and processes to capture and report against collected customer data. Share this data with trading partners to maximize benefit to the end customer.
- Take advantage of handheld devices to optimize customer data collection at the time of interaction.
- The goal is a unified view of data that is easily shared.
- Do not wait to deploy a solution. The dynamics talked about in this column are already in play. In the interim, use your quantitative data as best you can while pushing for the emotional qualitative goal.
Some interesting market stats and facts…
Consumers fill three critical roles — end user, shopper and buyer, all of which are interrelated and must be addressed in marketing and merchandising plans; while the roles are universal, behavior within them varies across global markets and categories.7
National Association for Retail Marketing Services (NARMS) 2007 ROI Study
What kind of analytics do you take into account in determining store level merchandising activities?
55% — Study of shopping activities around daily routines and shopping missions
55% — Habits and behavior actions associated with the shopping routine
47% — Impact of flyers, newsletters, coupons, ads, etc…
53% — Impact of in-store activities like sampling, contests, events, etc…
58% — Product affinity to other products in the same or different category³
Survey of Consumer Goods Companies
(70% of these respondents are category captains or regularly provide insights to their retail partners)
What area of Category Management are you currently most focused on?
7% — Pricing
47% — Assortment
10% — Promotion
22% — New Product Introductions
14% — Other8
Do you outsource your category analytics needs?
5% — Yes — to vendors of syndicated data source
11% — Yes — to analytics service providers
43% — No — entirely done by Category Teams
27% — No — entirely done by Business Intelligence/Strategy Team
14% — No — Other8
A category’s unique trip mix will dictate distinct product adjacency, promotion and advertising requirements to grow category sales and attract and build target trip types.7
There are unique trip–based marketing and merchandising opportunities across categories.7
An information gap exists today between product arrival at the store and the point of sale. Mantis from Metaworks is focused on retail execution and helps bridge the gap of missing information that is so needed right now.
Call for further information:
Jim Dorey
Manager, Product Marketing
877–265–0075 x25
1 Merchandising Best Practices — Consumer Goods Technology Webinar, May 2007
2 Leaping into Localization — Chain Store Age, July 2007
3 NARMS 2007 Return On Investment Study
4 The Rising Roar of Word of Mouth — eMarketer, June 2007
5 Dramatic New Data on How User Reviews Influence Purchasing Decisions — Marketing Sherpa, July 2007
6 Navigating the C’s of Change — Progressive Grocer, February 2006
7 Marketing to the Multi–tasking Consumer — IRI Study, June 2007
8 Customer–Centric Merchandising — Consumer Goods Technology, November 2006
