Why I am an online shopper, why my mother isn’t and what you can learn from this

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online shopper

I’ve just spent a long weekend in the UK. Not a big thing if you live in the US or Europe but a big stretch if you live in Asia! In advance of my trip my wife and I decided to take advantage of lower delivery fees to stock up on a few items that seem to cost twice as much in Singapore than elsewhere. After an hour of frenetic shopping we’d bought shoes and sports gear for the kids, tea bags and dishwasher tablets for friends in Thailand and (naturally) a horse riding helmet. In all we hit 6 websites including Amazon, Sainsbury, Boots, Sports Direct and two or three lesser known traders.

Upon my arrival on Saturday my mom expressed her amazement that so much stuff was waiting for me and indeed that a “very nice man” from Sainsbury had turned up to deliver tea bags. “Why,” she asked, “didn’t you get me to buy all this?” My mother’s bemusement at my behavior and the debate it provoked helps to illustrate how we have totally different needs as shoppers and what this might mean for the future of online and offline retail.

An online shopper’s needs

Let’s start with me. I guess that I’m a fairly typical online shopper – connected and brand aware but time poor. When I’m shopping, I’m looking to buy quickly and easily without compromising limited personal time. Like most shoppers I’m also anxious to ensure I get value from the stores I use.

Buying online suits me. I can shop at a pace that suits me, I don’t have to complete a purchase in one time segment; as long as I can meet a desired delivery slot, I can add to my order or change the products I buy when I choose. I can use ‘dead time’ to shop; adding to my shopping list when I’m stuck in traffic or between meetings. I don’t have to be ‘somewhere’ to buy because I can use my smartphone. And, I’m happy to exchange the time it would take to shop in the real world for the extra dollars I might pay for delivery services.

In all online shopping works for me because it meets my needs as a shopper.

An offline shopper’s needs

Now let’s think about my mom. She’s also connected and brand aware. Sure she belongs to a different generation, lives in a different environment and so on but if you look at many of the consumer brands we use, we have very similar preferences.

Where we differ hugely is in the way we shop. For my mother, shopping is a more leisurely activity. It’s an opportunity to leave the home and engage with other people. She’s happy to exchange her time for service and interaction. She enjoys exploring stores and her store choice reflects her preference for a pleasant shopping environment. As she ages, she believes that all these aspects of shopping will be become more important to her, not less.

Visiting real stores works better for her because they meet her needs as a shopper.

Different shoppers, different needs

If we were to look at a few of the brands we both use you might be lead to believe that as consumers my mom and I are relatively similar. But as shoppers it’s crystal clear that we have very different needs. This serves to show that brands do not have one type of shopper, but many. These shoppers have different needs, which drive different behaviors. My mom and I shop in different spaces, value different things when we are shopping, so applying the same marketing techniques to encourage us to buy is unlikely to work.

Too much of what I read about shopper marketing ignores this fundamental truth and too little of the activity I see recognises the opportunities. Successful shopper marketing ought to segment shoppers in ways that describe not just the consumption needs they serve but also their shopping behaviors. Marketers should prioritize which shopper segments are most important to their brands and learn how to influence each group of shoppers effectively, whether they are in the real world or online.

For some this will mean a major re-think and many will find the idea of marketing to multiple segments a stretch. However, those brands which embrace the challenge are likely to retain loyal consumers long into the future.

If you want to learn more about how to rise to the challenge, you might consider reading “The Shopper Marketing Revolution,” which gives marketers a step-by-step guide to bringing shopper thinking into the way they work.

Can big retail win shoppers in the future?


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big retailIt’s been an interesting week in the UK retail market. Just as February retail figures showed food discounts were dragging value from the market; Morrison’s a major British supermarket chain announced record losses. In the same week, Phil Clarke, the boss of the now-ailing Tesco, declared that future success is as simple as “putting the customers back at the heart of your business”. But is it that simple? I wonder, has the financial model of big retailers taken them too far away from the shopper?

Retail used to be governed by a relatively simple model – increase sales by enhancing shopper loyalty and seek to maximise operational efficiency, reducing cost. The net-outcome was a shopper-centric business that delivered profitable grow.

Todays’ big retailers seem to be working a different business model. Today’s mega-retailers have huge balance sheets, with assets that include huge amounts of property and inventory. With so much capital at stake seeking optimum returns on this capital seems to have become an overwhelming priority.

You might conclude that big retail is no longer in business to sell stuff to shoppers but rather to make money from real estate and stock.

Four ways to win in big retail

If increasing returns on capital employed is your key outcome as a retailer, then operationally your goals become much more focussed on generating cash and your strategies become more structured around optimising returns on inventory. There are practical four ways to achieve this:

  1. Drive bigger margins – The first sure-fire strategy to win in big retail is to secure a bigger margin. If margins can be consistently increased, even standing still in sales terms can deliver yield improved return so big retail constantly seeks ways of enhancing margins.
  2. Pay slower – The second way to drive better returns on inventory is to hang on to cash for longer. Slower payment terms keep cash in the business, covering short-term costs and creating the potential for investment income.
  3. Buy less inventory – The third way to enhance returns is to invest less in the key component of retail working capital. Whilst this might lead to greater efficiency it can also lead to reduced availability which actually works against customer service
  4. Sell faster – The fourth but most risky way of driving returns is to drive sales. Encouraging greater numbers of shoppers to the store, more often and getting them to buy more was at the core of most retailers’ strategies in the 90’s. But today’s hyper competitive environments make this harder and more risky. Its perhaps because of this that price has become so important. There’s an overarching big retail belief that lower prices drive traffic and sales. Since most suppliers will pay for discounts, this is a cheap way of securing better returns.

None of these levers requires the retailer to be more “shopper centric” and perhaps, this is why so many big retailers are struggling.

Online retailers win shoppers because they use simpler model.

As traditional retail is coming under pressure from online, it’s worth noting that online retailers do hold to a simpler, more profit-led model: drive shopper loyalty and keep costs to a minimum. For example Amazon’s found Jeff Bezo’s has been quoted as saying, “We’ve had three big ideas at Amazon that we’ve stuck with for 18 years, and they’re the reason we’re successful: Put the customer first. Invent. And be patient.” Much of big retailer’s woes are now tied up in the difficulties they have in competing with this model and many are failing.

Can big retail win shoppers again?

Possibly yes, but, there has been a tendency over the last few years to put more emphasis on tried and tested financial strategies rather than to innovate in the shopper space. These retailers need to have more faith in their shoppers and more understanding about what they want. They also have to believe in themselves a little more. There’s plenty of talk about enhancing customer experience, and precious little investment against this in either retail stores or retail brands.

Big retail continues to try to be all things to everyone in a big box, when more agile competitors are winning by being more specifically targeted. Too many retailers are ignoring the opportunity to sell-down some real-estate in favour of having a leaner more shopper-centric models and, despite the talk of multi-channel, too many retail managers would have their cake and it by maintaining physical stores which are now surplus to shopper requirement.

Future success will therefore require some major re-engineering.

What does this mean for manufacturers?

In a nutshell, retail is at a turning point. It would appear that no retailer is too big to fail and a number of global players have stumbled in the past years. This is an opportunity for brands: as the way we shop changes, the structure of retail will follow. Manufacturers should be thinking ahead to how and where their future shoppers will interact with their brands. Phil Clark is right in his conclusion that the shopper-centric retailers will win so manufacturers need to identify these retailers and work proactively with them. This creates the opportunity to re-balance customer portfolios and to restructure investment and support accordingly.

Taking steps now to learn about changes in shopper behaviour and the potential growth customers of the future is likely to reap rewards. We specialise in supporting companies going through this process and would be happy to offer support. Please get in touch with me if you need help.

Are you wasting money on in-store displays?

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Have you ever been told by your friendly retail partner, “We have millions of shoppers, invest in our in-store displays and you’ll have access to this huge audience”? Chances are that if you’ve worked with any of the world’s major retailers you have.

in-store displaysFor many this has become a powerful rationalisation for expenditure in-store, especially as media fragmentation and retail consolidation fuelled a boom in point-of-purchase advertising. Indeed POPAI – the industry’s leading association, continues to heavily promote the benefits of in-store displays by publishing studies claiming that in excess of 70% of purchase decisions are made in stores.

Regular readers will know I’m not an advocate of this point of view, but I recently came across a post by Herb Sorenson, one of the world’s leading thinkers in shopper behaviour, which puts a very different spin on the value of in-store displays. In Herb’s post “The Incredibly Shrinking (In-Store) “Audience”” he presents an extremely well researched case that your in-store displays might only engage a tiny proportion of shoppers.

Herb suggests that as little as one in 140,000 shoppers are likely to engage with a specific in-store display. If this is true why invest in-store displays?

The evidence: shoppers will never see every in-store display

There’s a commonly held view in retail that a small proportion of products that account for the bulk of a store’s sales. Herb reckons this to be around 5%. With many shoppers buying less than five items in-store, it stands to reason few of us visit every part of the store. Herbs research tells us that shopper visit about 33% of a small supermarket just over 12% of a superstore. So potentially 80% of the ads in an average-sized grocery store never get seen.

The evidence: shoppers can never see every in-store display

Stores might be stuffed full of displays but having eyes located on the front of our heads means that we have a limited field of vision – a cone of 130°. So this means that even when we are surrounded by messages we could only ever see a third of these. As a result we miss nearly 93% of all in-store displays. Weirdly, we did some research a few years ago into the way mums shopped for milk powder in Asia and one of our key findings was that only 6.9% of people noticed a milk powder display.

The evidence: shoppers can never engage in every in-store display

Shopping is not like watching TV, we aren’t static and focussed on one thing. When we shop, we move our gaze every tenth of a second, Herb shows. It’s suggested that people are often working on autopilot in stores. This has been proven to be the case by the behavioural economist Ken Hughes (click here to see him talking). Ken shows us that few of us are engaged in the shopping process until we need to be.

When we do engage, we focus. This means we miss even more of what’s going on in-store. When we focus, our attention is drawn into a cone of just 2° – just 1/4000 of our total field of vision.

The inference – very few shoppers engage in an in-store display

Putting all Herb’s evidence together, the picture is fairly scary. For instance think about Tesco UK. Their website boasts that they service 75 million shopping trips a week. Let’s pretend, for fun, that this means they have 75 million shoppers a week. Using some of Herb’s numbers 15 million pass any given display, of which a third might notice it in their field of vision. That’s potentially 5 million shoppers who might see your display BUT only 1200 will actively engage in it.

If you think about what a display might cost in Tesco, the cost per impression is looking pretty high – but is it a waste of money?

Making in-store displays work

A few fundamental lessons can be drawn from all this:

  1. Target your shopper carefully – know who you want to communicate to and focus on getting your message across to them. Randomly targeting a message in store is unlikely to work so specificity is likely to deliver better results.
  2. Put your messages in places where they will see them – if you want to change someone’s behaviour, you first have to understand their current behaviour. If you’re targeting a shopper who habitually visits a part of the store – site messages in that part of the store and prioritise work in the home shelf if that’s where most sales are made.
  3. Use the whole field of vision – hoping that someone will focus on a tiny part of the shelf is unlikely to work. So avoid small pieces of point-of-sale material. Instead, use large blocks of colour and big, simple, pictorial messages to draw them to your brand.
  4. Use multiple media – hoping that one message will get through is unlikely to reap rewards so combine multiple media to get the message home. Combining old and new technologies like mobile-in-store with point-of-sale materials, colourful category themes and effective promoters reduces the chances you’ll be missed.

We’ve helped hundreds of managers develop inventive in-store solutions that drive better returns. If you suspect you could get more from the store, contact me to arrange a conversation about how you might do that.

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Leveraging Retailers Loyalty Card Data

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Retailers Loyalty Card DataFollowing my blog  last week on the volume of narrative data now available to marketers, I’ve been thinking a lot about the relative value of retailers’ loyalty card data and whether it can help manufacturers. I got the chance to chat with two friends, Nik Laming (formerly at Aimia and now working with an airline to build their loyalty program) and Mike Hawkins (a Dunnhumby and Kantar World Panel veteran) to get their points of view and see if they resonated with mine. Here are some of the key questions we debated and my conclusions:

Why do retailers invest in loyalty cards?

For more than a decade, retailers have been developing loyalty propositions to greater or lesser effect. Many have watched Tesco’s success with the Clubcard in the UK with envy and sought to emulate this globally. It’s fair to say that few have been hugely successful in this, so why do they continue to invest?

The core response to this question is that engendering greater shopper loyalty is central to successfully leveraging the financial model that underpins retail. Unlike other businesses, the retail model is heavily focused on return on capital employed. The proof of this is the ongoing growth of mega-retailers despite the delivery of wafer-thin margins. Retailers drive ROCE by constantly seeking to drive topline growth and gross margin whilst minimizing inventory and leveraging available cash.

Ensuring that footfall constantly increases underpins growth, as does increasing basket sizes: The offer of tasty rewards in exchange for a shopper’s custom supports this and the potential to target those rewards on a more personal level makes the offers more enticing (or so the theory goes). Equally the promise of deep insights, increasingly targeted promotions and ‘partnership’ is enticing to vendors too. As such those retailers with a compelling loyalty offer can often secure higher margins through negotiating fees for data exchange, analytics and targeted discounts.

Is retailers loyalty card data useful to manufacturers?

The potential to understand the shoppers who frequent your largest retail customers better and to target them with specific activities is extremely compelling for many brands. Not only that but the ability to get feedback on what is working or not in-store could enable many marketers to plan investments more effectively. Indeed the really effectively applied loyalty systems can enhance the whole value chain, keeping ranges focused, driving more accurate forecasts and ultimately reducing working capital for both parties.

And yet despite this potential few retailers are actively using their data to the full extent. Beyond a few isolated success stories, many retailers continue to focus on competition on price over more elegant and targeted approaches and fall back to using their card data as a lever to drive margin rather than sales. Consequently, manufacturers often complain to me that they feel they gain little from the data they are purchasing. This is compounded by a general data overload in many businesses which often constrains the team’s ability to analyze data with sufficient pace and quality.

Should we buy a retailers loyalty card data? 

Since the decision to buy or not to buy comes with a relatively high price tag on the one hand and the thinly veiled threat of reduced support on the other, it’s worth considering a few key questions:

  1. Do you know enough about the drivers of your brand growth? Loyalty card data is narrative data. It can only tell who has done what, when. With sufficient insight into which consumers and shoppers you are targeting you can define whether or not the  retail customer you are negotiating with is valuable to you. With clear objectives for target shopper behavior, and a good understanding of the roles that each retail channel play you may decide that the retailer is either key to your strategy or not. Without this you may be purchasing a white elephant – measuring the behavior of and marketing to entirely the wrong shoppers.
  2. Does the retailer offer sufficient scale? Big retailers got big because lots of people shop in their stores. It stands to reason therefore that the larger the retailer, the greater the number of shoppers you can access in their stores. In these circumstances, even if you don’t have all the answers to the questions posed above, there is still a chance that you could derive value from large volumes of shoppers.
  3. Will the retailer work with you? Embracing and using loyalty card data is going to be cost intensive and labor intensive. Since many cite compliance as a key barrier to working effectively with retailers, you need to know that the retailer in question will act with you to implement initiatives. If not frankly you will only be increasing their margins at a greater cost to you.
  4. Can you handle it? Much loyalty card data is sold as offering huge insight. Sometimes this is true, but often it’s not. What a retailers’ loyalty card data can tell you is who has bought into the brand, at what frequency and in what quantity. Further it can offer benchmarks which might enable you to identify potential areas in which you can grow. BUT what it can’t tell is why this has happened – in order to know this you potentially face another research bill to help you realize the opportunity.

I’m always delighted to hear of case studies where things have gone well in this field so if you have successes you’d like to share, please do so. On the other hand, if you are grappling with what to do with data you’ve acquired, or just want some advice, I’m always happy to provide coaching on this. Feel free to contact me if you need help.

Image Source: JoeLogon

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Making market research work

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market researchOver the last few weeks Mike Anthony and our team at engage have been working with a client to draw insights from the huge bank of market research data they have amassed in the Asia Pacific region. Our purpose is simple: to identify key strategic growth drivers. As we come into the final weeks of our work on this, I’m surprised at how much data we’ve worked through and how little of it is actually applicable to the task at hand.

Perhaps it’s time I questioned why my threshold of surprise is so low! After all, I’ve been doing work like this for nearly 15 years and no matter where I go around the world and what sort of company I work with, I always find the same thing – most research data is useless when it comes to supporting strategic decisions.

What’s wrong with market research?

The truthful answer is nothing, when it’s actually research. However, most of the ‘market research’ companies buy is not research at all, rather they buy narrative data. Narrative data tells stories: It allows us to see what has happened in the market, it helps us understand who has done what and sometimes it even helps us learn why things have happened. Note that these stories are always in the past tense – even ‘real time’ data tells us what has just happened. And, like the stories I read to my kids at night, some are interesting, some not so much and only a very few offer real insight into the nature of the world we live in.

The main reason why companies are awash with narrative data is because it’s cheap (relatively speaking) and because it enables consistent measurement. Think for instance about the Nielsen Retail Audit data. Nielsen have become world leaders in manufacturing narrative data by developing a highly systemized, internationally duplicable data gathering and management model that regularly produces relatively accurate market reports. These reports are delivered at a fraction of the cost that an individual manufacturer might incur to get the same data.

The global consistency of retail audit data has made it the de facto measuring tool for market share, and so everyone with a research budget feels like they ought to buy this data first. As budgets grow, companies add products like Kantar’s World Panel data and Millward Brown’s brand tracking data to the mix. And today those with deeper pockets are adding transaction data like that which Tesco offers under the Dunnhumby brand – all of which when aggregated together form an amorphous mass of “Big Narrative Data”.

Is it all narrative?

Taken together most of our clients’ ‘market research’ budget is spent on this kind of narrative data. Once all these products have been purchased, what’s left in the budget is spent on either ad hoc studies conducted to test product or advertising concepts or on larger usage and attitude (U&A) surveys that are run periodically. Yet again the methodologies used to conduct these surveys just seem to add to the pile of narrative data.

Take for example U&A studies. Most seek to understand how a target market is using a group of products. A sample is selected randomly and a standardized set of questions is posed to deliver a relatively standardized output which  describes how the sample behaves. The result? A description of behavior and a description of attitude. Narrative data!

What’s wrong with narrative data?

Narrative data is useful but only under certain circumstances – it’s brilliant when used to measure progress against KPIs. The trouble is narrative data are lousy at helping managers decide what the KPIs should be.

This is because it’s extremely difficult to identify business growth drivers that KPIs measure using sources like Retail Audit or World Panel. Sure, they can point to the general area where there may be opportunities – for instance a lag in market share or a shortfall in penetration. But because of the mass-production methodologies applied in gathering the data, they simply can’t provide enough detail to define why these gaps might arise.

The return of the scientific method

When defining what’s going to grow your business, a completely different process for research is needed. Most of us already know how to do this – we were taught it at school – it’s called the scientific method. The scientific method is pretty easy to get your head around and it consists of some very simple steps – so easy in fact that my seven year-old showed me something similar to this on the internet:

market researchNarrative data helps form hypotheses, it’s the stuff you use in step two of the process. For example if your question is, “how will I grow my brand?” narrative data will give you clues as to where to look. Using those clues and what you already believe to be true, you can develop hypotheses. Real research is what’s done to test these hypotheses, and its value is that if your hypotheses are proven you can create concrete strategies for growth.

So many of us have forgotten this simple precept and as a result we are drowning in narrative data. In order to help, we’ve written a short eBook called The Introductory Guide to GREAT Shopper Research that gives a step-by-step guide to applying the scientific method to learning about shoppers.

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