Unilever Reaps Benefits by Collaborating with Retailers
By John Karolefski
Collaboration with trading partners has become a worthwhile way of doing business for Unilever. The country’s economic downturn has even made such work more desirable and necessary than ever.
Indeed, the maker of such well-known brands as Lipton, Hellmann’s, Vaseline and Dove is challenging itself to think differently because consumers are eating out less and shopping more on deal.
“What are we going to do about it? In these turbulent times, how do we step out of our manufacturer-retailer silos and come together to brainstorm solutions that are going to be right for our consumers,” asked Lisa Klauser, vice president of customer and consumer communication for Unilever North America.
“There is a foundation that we use to collaborate,” she explained. “It’s really about the consumer and the shopper, and understanding their unmet needs. It’s bringing to the table the objectives that Unilever has as well as the objectives that our customer/partners have, then finding that sweet spot. It is understanding the mutual profitable growth that we can deliver by working together. Both parties have to have skin in the game, and there clearly have to be KPIs and objectives that we set up front and measure against.”
She outlined her company’s approach to collaboration in a presentation recently at the National Retail Federation (NRF) convention in New York. Joining her was Keith Curtis, vice president and director of design for Miller Zell, a leading retail design firm.
They released the results of a Miller Zell study that showed how the shopping behaviors of men and women differ and have changed.
“Are male and female shoppers shopping differently in stores?” asked Curtis. “In today’s economy, {shoppers} are spending less, planning more, and are trading down. Overall, we need to improve communications within the store and build on a value proposition for survival.”
Miller Zell has built a state-of-the-art facility for Unilever to create an environment to study shopper behavior and foster even more collaboration with trading partners.
“When you talk about collaboration, it really requires sharing, and it requires acting,” said Klauser. “It’s not just about talking. It’s difficult enough to get things done within your own company. How are you supposed to align cross-functional teams in one organization and cross-functional teams in another organization to hit a home run?”
Klauser offered some suggestions that have worked for Unilever:
- You got to have trust. “There’s got to be a trusting relationship between manufacturers and retailers so that we come together and really understand one another. Understand what is important and what are the objectives that each are trying to drive.”
- You need champions. “Champions are willing to commission the work, see it through and are willing to marshall the cross-functional teams. And you need long planning lead time. It is not something that can happen quickly.”
- You need to understand shoppers and consumers. “You have to understand their needs both at home and in store. Most importantly, keep it simple.”
- You need a long-term perspective. “If it is not repeatable, it is not worth it. So you have to be committed to a continuous improvement strategy. You may not get it right the first time, but that’s OK.”
- You need a common strategy. “The most important thing you have to do, before you even start, is to agree on the mutual objectives are that you have trying to accomplish. Make sure they are clear. You have to see the end game; that is, what success would like to both parties. And then create that end game together.”
- You need great execution. “Most importantly, I am passionate about the power of great execution.”
Klauser presented a case study of her collaborative work with Shop & Shop/Ahold that won a special award from the Grocery Manufacturers Association in 2007.The goal was to gain more stock-up trips through a relationship marketing and merchandising program and really bringing that together in store to convert consumers to the center store categories.
“We pulled together a full-integrated execution team from both companies,” she said. “We lined up key functional areas – merchandising, marketing, operations – on both sides. We brought them together to agree on what those rules of engagement should be. We established metrics and talked about what each partner could bring to the party. We decided that we would integrate our collective assets.”
The trading partners created stations around the store based on the concept of solution-based selling. For examples, there were solution centers for meal ideas, laundry and cleaning.
The co-marketing promotions resulted in increasing shopper trips to the store by 90%, multiple category purchases by 80%, sales per trip by 25%, and total store sales by 138%,
Market Watch
Consumer Base Becoming More Fragmented: Catalina
By Rose Anthony
In today’s consumer product marketplace, CPG marketers must adjust to rapidly increasing fragmentation among shoppers, according to a new study released by Catalina Marketing’s Pointer Media Network, in association with the CMO Council.
Entitled Discovering the Pivotal Point Consumer, the report shows that the consumer base is surprisingly small for most CPG product brands due in part to increased brand proliferation
and specialization.
In tracking the purchase behavior of nearly 54 million American shoppers over a 12-month period, the study states that the traditional 80-20 rule (80% of sales come from 20% of shoppers) is an invalid assumption. Of more than 1,300 individual product brands analyzed, just 2.5% of shoppers accounted for 80% of sales for the average brand. Of the brands surveyed, which included all of the top selling products in their categories, only 25 relied on more than 10% of shoppers to drive 80 percent of sales.
“These findings surprise even the most seasoned CPG executives and is a new consumer truth that has been hidden until now by marketers’ lack of access to census level consumer data,” said Todd Morris, senior vice president of Catalina Marketing in St. Petersburg, Fla. “As consumer concentrations decline, marketers will need to become more targeted and precise in how they engage with consumers.”
Increased brand fragmentation is helping to reduce consumer concentrations for individual brands, according to the report. CPG manufacturers and retailers have responded to consumer demand for greater choice and personalization with an unprecedented array of targeted products and brands. The number of new CPG products reaching the market each year now surpasses 25,000, more than 10 times the rate of 1980.
“The good news is that CPG manufacturers do not necessarily need to win over a huge consumer base to launch successful new products, but they do need to engage the right shoppers,” said Dave Murray, an executive vice president and program director with the CMO Council. “These findings should lead many marketers to question the efficiency of large-scale mass media campaigns to support new or established brands that rely on very select groups of consumers for their success.”
Impulse Purchases Questioned
CPG products are typically placed on endcaps and in the checkout lanes to encourage impulse buying. But are unplanned purchases really the norm when people shop at
the supermarket?
According to a report from Wharton marketing professor David Bell and a couple of overseas academics, only some kinds of shoppers are more prone than others to making unplanned purchases and, as such, more susceptible to the influence of in-store marketing efforts. Households led by an older person and those that have larger families do 31 to 65% less spontaneous purchasing. The research is based on observing shopper behavior in the Netherlands, though Bell says the findings “can be applied generally to American retailers
as well.”
Generation Y Rewriting the Rules on How to Eat
Generation Y is rewriting the rules about food and eating in the U.S., according to a report
from the Center for Culinary Development (CCD) and Packaged Facts. These 75 million young consumers, between 13 and 28, grew up with habits and expectations about food formed during decades of unprecedented tech innovation, consumer choice and exposure to global cuisines.
This mega-consumer group will be demanding updated food and beverage choices, the report warns. Food marketers need to focus on this demographic or be forced to catch up.
JANUARY 2009
S.C. Johnson Promotes ‘Reinventing’
Center Store of Supermarkets
By Dale Buss
The center store is struggling. Packaged-goods manufacturers need to help their retailer partners figure out why – and play a central role in the revitalization of the core of the supermarket.
That’s the message David Milka of S.C. Johnson & Co. has been spreading lately at industry conferences and, even more important, within the Racine, Wis.-based CPG giant that manufactures and markets products ranging from Glade air freshener to Raid insecticide, from Windex to Zip-Loc bags. Milka, the company’s consumer-insights manager, is advocating nothing less than a “reinvention” of the center store based on shopper insights.
“We’ve got to make the center store more competitive and more relevant,” Milka says. While that crucial portion of supermarket real estate is “struggling,” he says, center-store woes can’t be attributed to a single cause.
But Milka says one key is to understand the stark contrast between what has been going on at the perimeter of the supermarket with what hasn’t been happening in the center store. Thanks to initiatives such as deli expansion, produce-department enhancement, and the addition of sushi bars, the real estate along the outer rim of supermarkets has been buzzing with improvement and excitement for several years. “Stores perimeters have become warm, inviting, exciting, genuine and diverse,” Milka says.
But the center store, where S.C. Johnson brands reside, has remained “cold, obscure, boring and non-differentiated,” he adds. And it is “really cluttered.”
In addition to retailers’ lack of focus on the center store, he says, there are at least two other reasons it is struggling. For one thing, consumers can buy packaged goods at so many other outlets, ranging from drug stores to dollar stores to mass-merchant discounters. And, says Milka, consumers don’t have time to browse the center store on a brief shopping trip.
What’s needed, he adds, is a good understanding of category management and its evolution, with an eye toward converting consumer and shopper insights into effective “reinvention” of the center store. For S.C. Johnson, the strategy emerging from this better understanding rests on three concepts: relevance, “shoppability” and the total shopping experience.
In terms of relevance, Milka explains, “Knowledge of consumers’ characteristics will be extremely important, so [CPG manufacturers and retailers] need to stay on top of that …
It’s the responsibility of both retailers and suppliers to understand the emotional drivers of purchase decisions.”
“Shoppability” deals with “clearly communicating a range of benefits and delivering on specific customer solutions,” Milka says. One such center-store application might be a “party kiosk” that holds and merchandises in one place – even on a seasonal basis – many of the things that a shopper might be seeking to stage a party for a relative or friend. From S.C. Johnson’s product lines, for example a “We Plan, You Party” kiosk could hold its Glade candles, Zip-Loc bags, and Raid insecticides.
“It’s one way to apply the communications factor to draw the consumer in,” Milka points out.
And when it comes to the total shopping experience, he says, “Shoppers are seeking total store solutions.”
One tactic that embraces aspects of all three pieces of a center-store reinvention strategy is a layout that alters the straight aisles of the area in exchange for a sort of zig-zag layout like that found in many boutiques. Products would be merchandised more clearly in highly related categories using pods and interactive kiosks and creating many aisle adjacencies to tangential products and categories.
In general, design principles for a “reinvented” center store should include broadening the shopping experience by challenging norms, by rationalizing SKUs and by establishing solutions-based merchandising, Milka says. He offers an example of effective execution of this kind of design from the perimeter of a store: a display that says, “Warm up” with some French onion soup. All the ingredients are right there, along with a recipe – making everything easy for the shopper.
Milka says that retailers and suppliers can “improve the shopping experience with visibility, traffic flow and adjacencies.” Visibility concerns “the comprehensive overview” of an area, while better traffic flow can improve shoppers’ ability to shop. “And adjacencies integrate the experience so you have everything in one easy location.” Breaking up the shopping pattern, he says, can stimulate incremental spending.
Some progressive retailers, Milka notes, have been experimenting with such new approaches to the center store, including HEB Plus, which has laid out the center aisles of some of its stores more in the “destination” style of their perimeters.
“Manufacturers need to develop a center-store reinvention strategy,” Milka concludes, and “invest in product and packaging innovations. They need to align with retailers’ center-store strategies. And retailers need to cultivate these strategies after determining and analyzing opportunities and risks. They need to integrate center-store categories. And then monitor
their execution.”
Market Watch
Lower Gas Prices Lead to Increased Grocery Spending
By Lynn Cooke
Groceries are the top item on which U.S. consumers are spending their savings from lower gas prices, ahead of saving money, buying holiday gifts, and paying off credit cards, according to the results of nationwide research by retail analytics firm Precima.
Of those surveyed, nearly half (48%) said they’re spending the extra cash on groceries, followed by saving (42%), buying holiday gifts (37%), paying off credit cards (30%),
entertainment (10%) and other (14%).
Among those survey respondents who said they’ve suffered a direct financial loss during the recession, 55% said they’re spending gas savings on groceries, and for those whose annual income is under $35,000, the number is 59%. About a third of retirees said they’re spending gas savings on groceries. The number fell to 29% for those whose annual income exceeds $100,000.
“With relief at the pump, consumers are returning to some of the aisles they may have foregone in recent months,” said Brian Ross, general manager of Precima. “This significant trend builds on findings we uncovered in earlier research that showed that consumers are now eating more at home.”
In another significant finding from the survey, nearly two-thirds of respondents said the recession is changing the way they plan their grocery trips, particularly in regards to pantry-loading. More than a quarter of consumers (27%) said they can no longer afford to stock up on food and now buy only what they need week to week. Another 35% said they stock up more than they used to, but only when items are on sale. Of the 65% of respondents who said their stocking habits have changed, 5% said they stock up more, 54% said they stock up only when items are on sale, and 41% no longer stock up at all.
“These trends present real opportunities for grocers who target their strategies to meet the needs of cash-strapped consumers,” said Ross. “Given the importance of winning the stock-up trip in key center-store categories, this is a clear call to retailers to look at pricing and promotional strategies for these items.”
Out of Stocks Still Irks Shoppers
Retailers are losing sales of at least one item to as many as 20% of consumers coming into their stores, leading many consumers to quit shopping with the retailer altogether. This is a key finding from a new study from IHL Group, which goes on to state that warehouse clubs lose $1.78 and grocery stores lose $.68 in sales for every customer when consumers cannot buy that product or an adequate substitute.
IHL cites Safeway as having the best in-stock performance among grocers (14.7% of consumers experiencing out-of-stock of at least one item), while the worst performers are Food Lion and A&P (22.8%). Grocery customers leave stores not purchasing at least one item they planned to buy or a substitute product 16.6% of the time. Consumers aged 26-35 years of age experience out-of-stocks 11% more often than other age groups.
Consumer Trust of Private Label Rising
Private label products are currently enjoying a more positive view from consumers, with nearly three of four (72%) saying they are good alternatives to name brands, according to a recent survey by the Nielsen Company. Approximately 62% of respondents said that private label brand quality is as good as their name brand counterparts.
A significant portion of those surveyed have an excellent view of private label: one third consider some store brands to be of higher quality than name brands. As far as negative reactions, 16% believe that private label is not good enough when quality matters, while another 16% reported that store brands have “cheap-looking” packaging.
