Promotions – a hard habit to break


I work in an industry that is addicted to promotions.  An average consumer goods company will spend 10% of gross sales on promotions. Applied to the world’s 250 leading consumer goods companies this equates to an annual promotions spend of close to US$310 Billion. That’s roughly US$44 spent for every person on the planet and nearly twice as much as is spent on cancer research every year in the EU. And yet research suggests that less than one third of promotions break even (see page 18 of “The Shopper Marketing Revolution“). Promotions have become a habit that many will find difficult to quit, even if ultimately it may kill their business.

How did we get hooked on promotions?

Let’s be honest, promotions were not always a bad idea. Every now and again a great offer enticed new buyers to the brand and get loyalists to stock up or prevent them from trying something else. In those days promotions could be planned well in advance, production could gear up for them and they’d even become an event. Retailers, then, unlike now, were unconsolidated and the extra sales were a welcome bonus from an appreciated supplier.

Then the world of marketing changed, consumers stopped attending to adverts and retail became dominated by massive brands and so promotions became a more important part of the effort to persuade consumers to buy the brand in-store. As retailers grew, promotions then became an essential cornerstone of both their corporate profitability and their brand positioning. When the balance of power shifted towards the retailers, promotions became an essential part of the contracts manufacturers signed to get their goods into stores.

The pernicious promotions addiction

Today promotions are a habit. As shoppers we are used to stores and websites dripping with messages about the latest offers. Manufacturers dedicate not only huge financial resources to promoting but also huge human resources. Over the last couple of weeks, I’ve been working with two very different companies in very diverse markets and yet in both, managers estimate nearly 80% of the time is spent planning, executing and evaluating promotions. Retailers too are preoccupied by promotions; Morrison’s is just the latest UK retailer to announce further price cuts in response to declining sales.

This is a pernicious addiction: some brands claim that 80% of their sales are made on promotion and others report they are on promotion more often than not. Demand for most brands is simply insufficiently elastic to pay for this: Even a reasonably profitable brand (making say 25% EBIT) would have to sell 66% more in order to break-even on a 10% price discount (see page 219 of “The Shopper Marketing Revolution“). According to Deloitte’s, the average composite net margin of a global consumer goods business is 9.6%, so for most securing a break-even is probably economically impossible.

Promotions are a hard habit to quit

So why not just quit? The blunt answer is either fear or ignorance. Fear is a powerful reason for not changing behavior in any context. The risks of stopping promotions are clear: shoppers might go elsewhere; retailers might withhold support, or; competitors might fill the gap. All of these would be reasonable reasons to continue if they were proved true but so often they are not, which leads to the other reason why we continue to promote which is ignorance.

In truth most managers don’t know if shoppers would leave the brand or not, but even if they did, many managers have no idea which shoppers would leave. In most categories the market can be split into deal buyers and loyalists. The consequence of losing deal buyers would certainly be lower volumes but concurrently could also drive better profits. For many, today, it’s tough to access this equation so the risk of quitting remains unquantified.

Likewise discussions with retailers almost always revolve around price and margin despite nearly 30 years of effort to change this. In the absence of tried and tested alternatives, maintaining the status quo is far easier. Lastly, since most manufacturers are unprepared to change, it’s almost impossible to gauge what the competition will do and so the habit persists.

Breaking the promotions habit

Knowledge is the only cure for fear and ignorance. If brands want to learn what will happen if they stop promoting, they could just stop and find out, but that’s fraught with risk. The logical alternative is to test and learn in the same way tech start-ups do: Try a limited, targeted pilot and see what happens, take the learning forward into the next pilot and keep learning until you have so much knowledge about what works and what doesn’t that fear and ignorance become things of the past.

The technology now exists to micro-target shoppers and retail has always been a phenomenal laboratory, so defining a discrete shopper group and a small group of stores makes this sort of testing easier. If the risk is still too great then virtual stores can be a solution. And whilst its potentially costly to conduct research in this field, the payback is enormous – breaking even on every promotion would double the profits of the almost everyone of the top 250 consumer goods firms.

Let us help

We’d be delighted to help you quit your promotions habit, if you’d like to know more about how we can help, contact me.

Fixing Shopper Research


Shopper research
Market research

Over the last six months we’ve concluded a number of shopper research projects with clients and each one has left me more and more concerned about the way research is being conducted around the world. To be clear my ‘beef’ is not with the principle of conducting shopper research, which I think is essential. Rather I’m more frustrated with the process itself.

Here’s my top three peeves and what I think should be done:

Shopper research is too broad!

Have you ever sat through a research presentation? Wow, are they boring! Research presentations can run to hundreds of slides, many of which have very little practical value. In most presentations I read one chart in 20 has something useful on it and even then the data can be hidden or miss-presented.

It would be easy to blame the agencies who produce the presentations, but in reality it’s often the managers who commissioned the survey who are at fault.

Agencies in the main do a fair job of providing the information they believe the client wants. Often the client wants a lot. Many studies have objectives that are extremely broad (in the shopper space a common objective is simply “To understand shoppers”), few articulate clear hypotheses that have been evaluated before the brief and in many cases additional questions are added to make commissioning a survey ‘more efficient’.

All of this means that the agency tries to cover every eventuality and meet as many needs as possible. The end product? Ten charts out of 200 that tell you something useful.

Shopper research is too slow!

Big studies seem to take forever. Think about it, a major study can take up to twelve weeks to conclude. But that’s just the field work, add to this the time it takes to get the study of the ground: from internal approval, through briefing, into procurement then there’s questionnaire design, training and recruitment – all of which need to be done before you start field work. Accounting for data processing, ‘insight’ development (see below) and presentation it might take 24 weeks to conclude a study. That’s 6 months! Before you can do anything!

When one considers how much change there’s been in the last six months, surely there must be a way of speeding things up?

Shopper research is not insightful!

I remember a conversation with a client who’d just finished an extended piece of work into shopping behavior and when I asked how it had gone he said, “We didn’t really learn anything”.

“You mean you didn’t learn anything new?” I asked.

“No” he said, “we didn’t really learn anything at all!” Imagine the disappointment! Months spent conducting a study and you learn nothing! But the reality is that research presentations rarely do tell their recipients anything valuable. This is because the research presentation is not the end of the road, it just the beginning.

To drive real value from research, managers often have to combine the new findings with other pieces of secondary data to create insights upon which they can act. This a painstaking task which can add further delays to actually realizing business gains from the research that’s been conducted.

3 ways that make shopper research work

I believe there are three things that can be done differently to deliver better results, faster and at lower cost:

1)      Focus research on learning how to realize business opportunities:

Research projects should begin with the development of clear research hypotheses based on what is already known. For instance, we encourage our clients to focus on testing hypotheses that if true would enable teams to increase sales. These focus on learning how to drive new shoppers to the brand, how to encourage shoppers to buy more often or to spend more. By selecting only the most valuable hypotheses two things happen: 1) Research projects become more focused and therefore potentially cheaper and 2) The returns the company enjoys from acting on research can be much greater.

2)      Apply methodologies that deliver answers quickly:

With focused research hypotheses, it’s easier to apply methodologies that give accurate responses more quickly. By seeking out technical solutions that minimize the time lag between data collection and analysis teams can get into developing insights faster. For instance, we recently worked with a client who used a tablet-based app to capture traffic data in stores and to capture shoppers’ responses to focused questions. The data were instantly transmitted to a dashboard so our client could work on the outcomes of the survey immediately.

3)      Spend time and effort on creating business impact

Much of the time and effort put in by agencies after a study is directed at tabulating data and creating a presentation, which as we’ve seen above, no-one will use! It would be so much better if effort and time were spent on creating actionable insights instead.
For instance, in the shopper space, much of the work done in implementation is done by the sales team, working with customers. Sales people don’t need lengthy presentations on what the research says, they need pragmatic solutions they can discuss with their customers. Converting research findings into a compelling commercial proposition that illustrates the business benefits that your customers might enjoy helps you sales team realize business gains from research quickly.

If you’re contemplating your next research program and would like some useful tips to getting the most out of your investment, why not read our ebook “The Introductory Guide to GREAT Shopper Research” 

engage Launches in Africa

engage Africa
engage Africa

Nearly 10 years ago, Mike Anthony (the co-author of The Shopper Marketing Revolution) and I founded engage. Since then engage teams have worked with over 20% of the top 250 consumer goods companies across three continents. Having established have offices in Hong Kong, Malaysia, Singapore and Thailand, we’ve been investigating an African opportunity for over three years.

I’m therefore delighted to announce the foundation of engage Management Consultants Africa with Jason (Frich) Frichol, at the helm. Frich, a South African born and based specialist in shopper and retail marketing, has been working with us to bring the firm’s offering to Africa. Identifying a gap in the African Consumer Packaged Goods sector, Frich recognized the need for our “Total Marketing” concept.

Frich states: “When I started my shopper marketing journey as a director of a FMCG company the return on investment, market share gains and growth achieved by applying shopper marketing were unparalleled in respective categories and territories. The company was mobilized around a shopper-centric approach with heavy investment in training and development of our team. After leaving the company I tried to replicate these results with other brands and businesses, and although the returns have been favorable, they haven’t reached the exponential heights previously experienced. The challenge is compounded by weak turnarounds and poor execution levels due to a lack of inter-departmental synergies. It is mainly for these reasons that I have been lobbying for engage to come to Africa and launch its development and training platforms, which also cover customer management and field sales marketing.”

Our objective is always to provide our clients with tools and tactics that deliver improved efficiency and greater profitability for their businesses. “In a nutshell, it’s all about integrating development solutions and ensuring shopper-centric strategies translate into accelerated returns” says Frich. With increasing formalization of retail in Africa and the burgeoning middle-class, we’re looking forward to participating and engaging in this incredibly dynamic environment.

engage Management Consultants Africa will focus on delivering a broad range of tried and tested training and coaching approaches and bespoke training accreditation platforms as well as engageAssess™ and People First™. engageAssess™ identifies internal opportunities across commercial functions, benchmarks performance and defines the root cause of current performance by assessing over 150 marketing, shopper marketing and sales activities. People First™ is a systematic approach to people development planning which focuses human resource on business priorities through effective organizational design and competency development.

Please contact Frich with any inquiries about our services in Africa.

Category Management 3.0

Sunrise Over SuperiorBelieve it or not, Category Management is now 25 years old. First formalized by Brian Harris in 1989, Category Management has played a significant role in framing relationships between brands and retailers around the world. Like all business processes Category Management evolved in response to changes in the business environment and, as the business environment continues to evolve, so does Category Management. I believe that as we enter the next quarter century of this process’ existence we are about to see some major changes.

The fall of Category Management 1.0

The original 8-step process that Brian created all those years ago was designed to enable brands and retailers to work together. At its heart was the simple precept that if both could collaborate to grow the total turnover in the category, both would benefit from the increased spoils. The process help re-cast the definition and segmentation of categories based on consumer and shopper behavior and to define growth objectives based on the insights this produced. Strategies and plans to realize these objectives where the developed and, at least in theory, committed to.

I remember the first rush of enthusiasm for this process, especially from brands as it offered the potential to respond to the pressures of retail consolidation and media fragmentation by leveraging a wide retail base to market directly at the point of purchase. But over the next 15 years I also saw this enthusiasm deflate. Promised execution failed to materialize, the process was long and unwieldy and retailers proved to be fickle partners. By 2005 ‘doing Category Management’ had been reduced to horse trading over on shelf space and both brands and retailers seemed to have consigned the process to dust heap.

The rise of Category Management 2.0

And yet, the concept of working together to drive better performance at retail was far from dead. Retailers began to replace Category Management platforms with joint business planning approaches. Data from service providers such as Dunnhumby and latterly Australia’s Quantium have added a richness to this process and retailers like Tesco have continued to leverage their supplier base’s thinking by asking leading brands to share ideas to drive the category in open forums.

Concurrently, retailers themselves have taken greater initiative in develop their own category propositions and the process and science of Category Management has in general become more retailer driven. But all of this has felt very much as if the whole field is a period of transition. The major question being, in transition towards what?

The dawn of Category Management 3.0

I believe that Category Management is about to begin a major renaissance as new pressures force major retail chains to re-think their models and as brands wrestle with sluggish growth and meagre returns. The consumer goods industry has been a laggard in embracing technological changes which has often meant that in the last decade, many companies have been slow to embrace the dawn of big data but today the volume and range of available data is about to precipitate a major change in this behavior. Equally big retail is being squeezed by the advance of convenience retail, a ‘shrinking middle’ which sees discounters rising and specialty stores cream the top of the market. And the whole process of developing annual plans and long-term strategies is becoming increasingly pressurized by rapidly shifting market dynamics.

In this world we are increasingly ready for Category Management 3.0 – a new way of for brands and retailers which fully leverages today’s technology.

Category Management 3.0 will be ‘always on’

The Category Management processes of the past were ‘one shot’ projects that required extensive joint working to define a mid-range plan. The future of Category Management is one where plans are constantly refined and updated to respond to the latest data. This will more closely emulate the real world of retail where small adjustments are made constantly and targets are reviewed and recalibrated weekly, if not daily.

Category Management 3.0 will be focused on one shopper in one store

The Category Management processes of the past looked at ‘the shopper’ in ‘the store’ as if both were homogenous. In future Category Management will leverage micro-targeting of shoppers and adjust individual stores to address their needs. Oh and the ‘store’ is unlikely to be a purely physical environment as retailing bridges to online to offline world. What this means is that the shopping experience will begin to feel more personalized and tailored especially in on-line environments. This will be married with changes to physical retail environments where ranging and promotion calendars will become more responsive to geography, day part weather and the aspirations and behaviors of shoppers in the locality.

Category Management 3.0 will apply the most appropriate tools (not just the sexiest)

Category managers have always used point-of-purchase tools. In the nineties these were confined to range, merchandising, price and promotions. The category managers of the future will have a much broader set of tools influence shopper’s behavior. Some of these will be super-cool innovations but in the end they will all revolve around delivering the right product availability to the right shopper with the right message in the right media and supported by the right offer. Category managers will be able to blend tools to meet the demands of each shopper they serve. So shoppers who respond to digital tools will be served these but equally shoppers who need personal attention or just simply products that are easy to find will benefit also.

Category Management 3.0 will be machine-led

The first Category Management processes I led involved extended meetings, spreadsheet calculations and a lot of judgment and inference. This will be unsustainable in the future – data sets and complexity will exceed the processing power of humans and the limits of group work. In order to respond efficiently and effectively and constantly optimize delivery algorithmic models and machine brains will be essential. Decision making will have to become more automated which will create challenging requirements for human capital in the future. Higher levels of talent will be needed both in retail and in manufacturing and different types of skills will be become essential. Data analytics and interpretation will become key competencies in both environments as concurrently the need for creativity and strategic thinking will increase.

Category Management 3.0 requires the re-invention of brand and retail relationships

This is perhaps the area which will require the greatest level of effort from retailers and manufacturers. It may be an unfair observation to make, but I don’t believe that the last decade has hailed any improvements in the relationships between retailers and manufacturers. At best god relationships have been maintained but at worst poor relationships have deteriorated. The behaviors of both parties in the commercial transactions seem to have worsened and Tesco’s current woes serve as a clear example of the consequences of this.

For major brands and their retail customers this must change!

The commercial viability of both parties depends on their ability to service shoppers better, if they fail, shoppers will go elsewhere it’s a simple as that. Brands should be much more cognizant of the behaviors of their shoppers and the roles retailers play. Retailers should be much more aware of the value and role that brands play in enhancing shoppers’ experience. Both must embrace that retail is not a zero-sum game and that through effective collaboration profitable growth is a sustainable outcome.

New Year, new Category Management

As we enter a new year and a new quarter century of Category Management, I’m personally interested in how the industry can advance its ways of working and its utilization of technology to deliver this. I’d like to invite readers to post their thoughts and opinions on the future of Category Management and to collaborate with me to shape this change so please do get in touch.

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Three simple in-store strategies to drive impulse

Driving impulse
Impulse merchandising

I recently spent a few weeks in the UK and as always I trawled the local superstores looking for in-store strategies to share. In the past I’ve headed straight to the aisles of Tesco, Sainsbury and Asda, but as price competition continues unabated and all three battle with challenges from hard discounters and online alike, I found little that would inspire the global reader.

In mild desperation I turned my attention to seeking out examples of really-well executed but simple strategies. One thing UK retailers seem to be doing really well is driving impulse. Here are three tried and tested approaches that work, with some more current examples of their execution:

Simple in-store strategy 1: Use the queue


Impulse merchandising
Use the queue

UK retailers are increasingly turning to self-serve payment points. This is changing the queueing environment as lines become consolidated. Retailers like WH Smith, BP Connect and Marks and Spencer are responding to this by creating ‘queue zones’ which segregate shoppers who are checking out from those in the main store. These ‘queue zones’ are excellent environments to drive impulse purchase, offering a space for shoppers to top-up their baskets with extra treats that boost store profitability. Brands in impulse categories can capitalize on this space by optimizing their position on shelf, creating engaging communication devices and by creating offers to increase purchase weight.

Simple in-store strategy 2: Site it right

Secondary display
Site it right

Secondary locations have been a common strategy brands for years but few optimize secondary sites effectively (see Mike’s blog). Here’s a really great use of secondary siting for a product that would probably be lost on a regular shelf. This works because as a flavoring for regular mineral water the secondary site reinforces consumption.

Simple in-store strategy 3: Nail the display

Seasonal merchandising
Halloween display

Off-shelf display is a regular order of business for most brands but so often displays on gondolas do little to arrest shoppers. This Halloween-themed display is a great example of how to create stopping power. There’s a number of impulse options that shoppers in this Marks & Spencer Simply Food store would probably add to their basket during the season. It’s effective because it’s sufficiently far into the store whilst being visually impactful. Pumpkin anyone?

The key – outstanding in-store execution

All of these examples are cited because they are great at driving impulse both for the product and the retailer but they’re also, on observation, consistently well executed across the retail base. It’s clear that significant time, effort and expense has gone into ensuring that plans have been carefully drawn up, equipment has been efficiently designed, manufactured and delivered and store managers have been well briefed.

The casual observer might imagine that these ‘simple strategies’ are easy to execute – they’re not. For brands who really wish to capitalize on the impulse opportunities modern retailing offers I would offer a few words of advice:

  • First set a clear behavioral objective – define what additional consumption you want to create and think carefully about how the behavior of your target shoppers needs to change to drive this. Be clear about where this behavior will happen and what needs to be done to deliver the change.
  • Second share the upside with your retail partners – retailers are rightfully retrospect about throwing themselves behind impulse initiatives: They have to deliver economic benefits as well as resonate with the strategy the retailer is following. Successful propositions illustrate how the brand is likely to deliver against all relevant factors.
  • Third keep it simple – in retail, if it can go wrong, it will go wrong! Pair back the concept to its essentials and then communicate what is needed, where and when, clearly and concisely to everyone.

Does this ring true for you? If so share your experiences below.