The minute a shopper walks into a supermarket, 50,000 items start clamoring for his or her attention. The final bill may reflect dozens of promotions, from “buy one get one free” deals to coupons to free samples. While shoppers probably do not think too deeply about the reasoning behind those purchases, creating campaigns that capture consumers’ attention is serious business for stores and manufacturers. In recent years, companies have been getting more sophisticated about what they now call “shopper” marketing — and they are spending a lot more money on its execution.
Shopper marketing is gaining popularity as stores and consumer goods manufacturers seek a way to capture the attention of a consumer whose spending is increasingly siphoned off by websites and other media. But while businesses believe the goal of shopper marketing is laudable, they do not agree on a definition: Is it characterized by in-store deals, out-of-store promotions, digital coupons or all of the above? Does it take into account what a consumer thinks before he or she starts shopping, or merely what he or she sees once inside the grocery store? A panel of experts from major consumer goods makers, a private label company and a market research firm reflected the industry’s differing views on the matter when they spoke at the recent Wharton Marketing Conference.
“The industry has gone on endlessly over the last few years discussing what is shopper marketing, but for the most part, it is simply recycled consumer marketing with the ‘shopper’ name put on it,” according to Herb Sorensen, scientific advisor for the retail and shopper practice at market research firm TNS Global. “A shopper is someone inside the four walls of the store, or they are at the website and actually shopping.” But Geoff Jackson, director of integrated shopper marketing at Campbell Soup, has a broader definition. “Shopper marketing is bigger than just customer marketing,” he noted, because it takes into account what the consumer is thinking when he or she is outside the store and not planning an immediate purchase. Tommy Hillman, a marketing manager at General Mills, put forth an explanation that includes working closely with retailers “to help them win their share of wallet, aligning with their programs, offering solutions that are going to ultimately benefit them the most.”
However they define it, manufacturers and retailers certainly feel the pressure to engage in some version of shopper marketing. The brands do it in part out of self-preservation, to prevent stores from getting the upper hand. Retailers engage in it to try and take greater control of how products are displayed in the stores and to foster closer connections with consumers. “If we don’t do it, the retailers will be left with no choice but to do it themselves. If they figure it out, [manufacturers] are in really bad shape,” said Campbell Soup’s Jackson.
But roadblocks remain to successful shopper marketing; it is not easy to change habits that have been ingrained for decades. For one thing, grocers are accustomed to using slotting fees, trade allowances and promotions to determine how much shelf space products receive at any given time. Also, their merchandising departments traditionally have not worked that closely with the manufacturers’ sales and marketing teams. To properly practice shopper marketing, panelists said supermarkets and brands have to collaborate more effectively.
Changing that culture will not be easy, but grocers and other retailers that refuse to do so are making a mistake, noted Andres Siefken, vice president of brand strategy and marketing at Daymon Worldwide, which manufactures and manages private label products for retailers. “If you continue with that mode of accepting the money as a trade allowance [absent other changes], the reality is you are actually letting a national manufacturer control your store environment.”
Another problem is that manufacturers still are trying to figure out the complexities of shopper marketing, and they are uncertain about which strategy is the most effective, according to a study released in November by the Grocery Manufacturers Association and Booz & Co. But that has not stopped companies from stepping up spending: 83% of food, beverage, health and beauty and household product manufacturers said they plan to spend more on shopper marketing over the next three years, the survey found. Just over half said spending in this area will grow by more than 5% a year, compared with 36% saying the same thing about digital media, itself a fast-growing channel. The big picture: Marketing money is shifting away from traditional media such as TV and newspapers, and moving closer to the point of purchase.
So what is all the fuss about shopper marketing? Consumer product companies have continued to pour money into traditional advertising and trade promotions but they are not seeing much of a sales lift in a mature and competitive marketplace. Shopper marketing is the latest way to improve their game, with its emphasis on retailers and manufacturers working together to attract shoppers. For example, a Wal-Mart executive told General Mills’ Hillman that mothers are lining up outside stores at midnight at the end of the month waiting for their paychecks to clear so they can shop for household goods. That indicates to him that people still are struggling to make ends meet in this economy. General Mills can use this insight to craft the right messages and promotions to appeal to these customers — such as offering a deeper discount on basic necessities — instead of rolling out its usual deals.
The Brands Rise Again
The relationship between stores and manufacturers is like that of a man walking on a tightrope: At any given moment, the pole tips to one side or another, depending on which has the stronger pull. One hundred years ago, TNS’ Sorensen noted, retailers rolled out self-service, allowing customers to pick out and pay for what they wanted to buy instead of having a sales clerk sell it to them. It made the process more efficient, but sales clerks lost their selling skills and retailers lost some clout. Fifty years ago, retailers became more possessive about their customers, saying that customers’ relationships were with the stores and not with the manufacturers. Supermarkets began to exert dominance in their relationship with the manufacturers, which resulted in the rise of private label goods or store brands, among other things, Sorenson said.
But a reversal in this relationship is coming in the next 10 to 20 years, Sorensen predicted, because retailers are losing control. Their in-house discounts and promotions used to be the main criteria that customers considered before making a purchase. But many consumers now walk into a store to make a purchase only after using the Internet to research what brand they want to buy, downloading a manufacturer’s coupon to their phones, or reading consumer reviews about the products that interest them. According to the GMA study, 62% of shoppers look for deals online prior to at least half of their shopping trips. That means the balance of power is shifting to brands, which have a greater opportunity now to reach consumers and influence their purchasing habits before they walk into the store.
According to Hillman of General Mills, the company is getting more adept at reaching shoppers with targeted messages by using social media and other digital tools. The goal is to “build a relationship with them so that they take that relationship into the stores and you don’t have to work as hard to win in that moment when they’re at the shelf.” Campbell Soup’s Jackson said the digital age gives manufacturers a way to regain lost clout. For instance, he noted, Wal-Mart has tight control over its stores, and the company determines which products will appear on its shelves as well how they are portrayed. “The beauty of digital is they can never take that away from [the brands],” Jackson stated.
But according to Chris Holahan, oral care shopper marketing manager at Johnson & Johnson, it is too early to discount the power of the store just yet. As an example, he said only 0.1% of oral care products from his company are purchased online; the vast majority is bought at retail stores. Johnson & Johnson is monitoring the effect of digital technology on consumer behavior, but is in no hurry to change its stance. “We still spend most of our resources … on the bricks-and-mortar,” Holahan noted.
According to TNS’ Sorensen, the game is going to change nonetheless. Consumers will no longer see purchasing goods online, via mobile phones or from retail stores as three different activities. “It won’t be, ‘Here are three different channels,'” he said. “It’s one channel, and the people who win going forward are people who are going to play all three channels properly.”