Frito-Lay Gains Competitive Edge
Using Ethnographic Research
By John Karolefski
If CPG marketers understand the mindset of consumers in the store as well their thinking beforehand and afterwards, they can conceivably position their brands more effectively into the shopping routine.
Frito-Lay believes in such an approach. To acquire this understanding, it relies on deep insights gathered by cultural anthropologists using ethnographic research. The mega-snack maker has been deploying these tactics successfully to drive consumer-driven innovation in its overall shopper marketing programs. It aims to forge emotional connections with shoppers to increase brand awareness and sales.
“Often we make assumptions that shoppers and consumers are all like us, but people have different perceptions and different views. Sometimes you have to negotiate those to get really close to the shopper,” said Donna Romeo, Group Manager, Consumer Strategy & Insights, Shopper Marketing at Frito-Lay.
“We have developed a tool kit that we call ethnography that helps us get immersed in the people we are trying to study. We are trying to get at that point of view. We do all of these things to see more clearly. To get innovation, it’s important to get close to those people,” said Romeo, who is a cultural anthropologist.
She and Michelle Adams, Director of Consumer Insights & Strategy Group at Frito-Lay, outlined their research work in a recent presentation at the Shopper Insights in Action conference hosted in Chicago by the Institute for International Research (IIR).
Anthropology is the study of people, according to Romeo. “It is holistic, which means that everything is important. Also, it’s about context,” she said. “People are always culturally and socially situated. There is something about them that is connected with somebody else. They carry this context with them and it impacts how we make decisions. We could have lots of numbers, but we need to understand the ‘why.’”
Romeo explained that ethnography is an inductive research method that employs in-depth interviews, video, analysis, participant observation, re-enactments and so forth. Frito-Lay relies on Ethnographic Insights for its ethnographic research.
The executives outlined their 360 Shopping Process that aims to understand the food shopping cycle from a holistic perspective using ethnography. The study was done during the economic downturn and demonstrated the impact of the recession on shoppers.
“We wanted to understand what people do and when they do it,” said Romeo, “and if ‘pre-shop’ really matters. Is there a lot going on before people got to the store?”
Romeo said the study sample was small – only 38 in-depth interviews. “I believe in small samples,” she said. “They can reveal tremendous amounts of information that can generate factors for the eventual qualitative analysis.”
There are three phases to today’s shopping routine:
- Pre-Shop (make list, gather coupons, research via web and word of mouth)
- Shopping Experience (provide consistency in the store; use end caps as anchors)
- Post Shop (food is easy to store in pantry and fridge; got value via deals; pleased family).
Nowadays, perhaps because of the recession, Mom has taken on more responsibilities and sometimes opts to stay at home with young children, according to Romeo.
Her three key insights:
- The New Frugality (Mom bears the brunt of deciding no Disneyland vacation this summer)
- Wants versus Needs (nutrition and main meals are first)
- More work and less pleasure.
“Because each shopper has her own view on category importance, companies must be aware of which purchases are planned at store level and brand level, and which purchases are not planned at all,” said executives with Smart Revenue, which also works with Frito Lay.
“Most pre-store decisions are brand driven: the shopper has purchased the product in the past and will continue to do so in the future. In-store decisions, however, are often based on perceived value, merchandising, and packaging. As a result, promotions and displays are a good investment.”
According to the executives, the old model insufficiently combined market research, marketing, sales, merchandising, operations, and external partners and data sources. A new integrated model is consumer- and shopper- centric, and internally and externally collaborative. The new model aims to optimize pre-store and in-store media, marketing, and merchandising to increase revenue and profits.
Smart Revenue relies on differentiated data for various sales and marketing platforms. To provide such data, the company has built a process called quantitative ethnography that deploys an international network of more than 1,000 ethnographers with social science backgrounds. They use wireless handheld technologies to integrate ethnographic observations with surveys, scanning, voice-recording, and video. They integrate multiple methods of data collection to allow the triangulation of multiple data points to provide a more robust and holistic picture of who shopper are, how they shopped, what they purchased, and why.
Market Watch
CPG Marketers Adapt to Serve
‘New Norm’ in Shopping Behavior
By Rose Anthony
The recession has dramatically changed how shoppers are spending their consumer packaged goods (CPG) dollars. These new shopping rituals are quickly becoming the “new normal” because consumers will continue to remain frugal long after the current recession ends. So, how have these new shopper attitudes and behaviors impacted the CPG world?
A new report from Information Resources, Inc. (IRI) explores key changes in consumer shopping rituals brought about by difficult economic conditions. It provides actionable implications that will enable CPG marketers to create marketing strategies reflective of rapidly changing consumer preferences and behaviors.
“There is no question that consumers are looking for value,” said IRI Consulting & Innovation President Thom Blischok. “But consumer perception of value is morphing. Our report shows that the three key factors shoppers use in selecting a product is overall quality, price and trust. This is now the affordability equation in the minds of shoppers.
“While brand name is still a consideration factor,” he said, “it’s only important to about one-quarter of shoppers. CPG marketers cannot assume their brand name is enough to ensure shopper loyalty. CPG marketing strategies must continually evolve and address shifts in shopper behaviors and tout clear, persuasive messages based on the shopper's changing definition of value.”
One of the areas where IRI sees these strategies playing out is merchandising. After falling for several years, merchandising activity is rebounding in the downturn economy across all channels and is playing an increasingly critical role in providing value to shoppers. Targeted programs based on sound consumer knowledge are a recipe for volume growth and for building loyalty with the shopper.
The most effective merchandising tactics will be those that address the fact that consumers are increasingly making shopping decisions at home. As a result, IRI expects to see an increase in feature ads in the near term, likely supported by in-store merchandising initiatives. Price-based promotional activity will increase as well, providing consumers with sought-after price relief.
IRI recommends that retailers and manufacturers take the following action steps to effectively serve consumers’ “new normal” shopping behaviors:
- Monitor price point, price sensitivities and price gaps on a frequent basis to ensure that pricing strategies remain in line with corporate and partner goals, as well as with the needs of key consumer segments.
- Leverage a granular understanding of consumer attitudes and behaviors to develop highly-targeted, store-specific merchandising strategies against high-potential categories and segments.
- Re-evaluate marketing and merchandising strategies through a lens of home-centric living and pre-planned shopping strategies.
- Drive purchase behavior with solutions-based merchandising programs prominently featuring new, innovative CPG solutions; aggressively test pre-launch and track consumer response to enable mid-program modifications and builds.
“Consumer attitudes and behaviors are changing quickly,” said Blischok. “We are now entering the fourth stage of this economic sea change where shoppers are adapting to their trade offs, such as choosing private label over national brands and shopping in different stores where they believe they get more value for their dollars. CPG marketers must adapt to these new rituals and remain alert and ready for action. The ability to anticipate changing consumer attitudes and behaviors and react with innovative marketing campaigns is essential.”
Low Shopper Perception of CPG
A study by Ipsos Marketing, Consumer Goods, shows that when compared to other sectors, consumer packaged goods (notably, food and beverages, personal products and household products) rate among the lowest in terms of consumer perceptions of innovativeness. And within consumer packaged goods, household and personal products are viewed to be more innovative than food and beverages.
Nine of ten (80%) consumers said they would be interested in trying new food products at the grocery store. Eighty-six percent showed interest in new household products followed by 81% looking for new personal products. Ipsos polled 1,000 global consumers late last year.
No Money for Healthy Foods
The recession is playing havoc with shoppers’ access to more nutritious foods, says
a new survey by Techomic, a Chicago-based food industry research firm. While over half of consumers are more concerned about what they eat today vs. a year ago, 70% said that healthier foods are increasingly difficult to afford, 53% said they often buy less healthy foods because they’re cheaper, and 44% say their budgets keep them from eating healthier foods.
“Healthy eating is still important to consumers, but evidence strongly suggests that it is a lower priority these days,” said Technomic EVP Bob Goldin. “Consumers are economizing in their food expenditures and believe that one way to do so is to spend less on healthy foods.”
Buying Organic Rolls on
Consumers adhering to healthy, natural and organic foods are changing their buying habits to maintain these priorities during the recession, says a poll by Mambo Sprouts Marketing. These consumers remain committed to eating healthy with 9 in 10 (87%) reporting that they were not willing to give this up. Most (about 55%) would not forego healthy and eco activities such as natural and organic products, vitamins and supplements and “green” environmentally-friendly products.
Those adjusting their organic buying and eating habits (45% of respondents) are frugal shoppers seeking value and ways to purchase organics more economically such as being more selective when buying organics (67%), buying organics on sale (65%), using more coupons (50%), and buying more store brand/private label organics (48%).
Binge Drinking by Seniors
A new study has uncovered a significant level of binge drinking among seniors. Duke University researchers, working with the National Survey on Drug Use and Health, report that 22% of men and 9% of women ages 50 to 64 engaged in binge drinking — five or more drinks at a time — within the past month of the survey.
The survey also found that 19% of the men and 13% of the women had two or more drinks a day, considered heavy or “at-risk” drinking under American Geriatric Society guidelines for older people. The research was based on a survey of 11,000 men and women that took place in 2005 and 2006.
AUGUST 2009
Coca-Cola Aims to Connect
With Recession-Weary Shoppers
By John Karolefski
Coca-Cola is mounting a major marketing offensive as it tries to connect with shoppers keeping a tight grip on their purse strings in these challenging economic times.
The comprehensive strategy is centered on creating an engaging experience across the retail landscape, one outlet at a time. Coke aims to leverage insights to develop in-store programs that resonate with shoppers.
The brain trust behind the world’s most valuable brand knows the stakes are high for its diverse beverage portfolio that includes such products as Minute Maid, Vitamin Water, Powerade, Nestea, Fruitopia, among others, in addition to its iconic soft drink.
“We know shopping trips are changing,” said Diana Wallace of Coca-Cola. “We know they’re shifting from grocery into dollar stores. We know that people are looking for price points that are entry into a category. We know that private label is becoming a more powerful brand.
We believe these pressures are real and that they’re not going to change quickly even if the economy does rebound,” said the vice president of shopper marketing, speaking at a Shopper Insights in Action conference hosted by the Institute for International Research (IIR) in
Chicago recently.
Coca-Cola is trying to live by four principles in every corporate activity and when working with retailers:
- Maximize shopper relevance in every outlet possible
- Create easy-to-shop environments
- Provide shopper solutions to drive baskets, revenue and profits for the retailer
- Create efficiency and productivity in everything done in the outlet with the shopper.
“Whatever we put in outlets with those retailers today has to be as productive as possible to generate the velocity and the credibility with their shoppers and have a return to their bottom line,” she said.
Wallace calls the strategies being deployed “time-tested and foundational.” The sour economy is forcing Coca-Cola to go back to basics
“But at the end of the day, it’s all about execution,” she said. “If we can’t get it in the outlet, it’s not going to be there for the shopper to find. All of this comes together in what we call our ‘Look of Success in Outlets’ to create that connection of our brands with the shopper.”
Meanwhile, earlier this year Coca-Cola North America announced that it would sponsor the creation of a commission dedicated to shopper marketing. The Retail Commission on Shopper Marketing aims to enhance the shopping experience, increase same-store sales and boost profit performance through the design of a next-generation model for retailer/manufacturer collaboration. The overarching goal is to standardize the approach to shopper marketing from the retailer’s perspective. The commission will be guided Dr. Brian Harris, chairman of The Partnering Group, which created the traditional category management process.
In her presentation, Wallace listed four components to Coca-Cola’s shopper solutions:
Occasion-Based Approach
“This has been a significant shift for us over the last couple of years,” said Wallace, “but it’s a tried and true approach that has worked in other global markets for us in tough economic times. It’s really getting very relevant about what you offer with what shoppers are looking for. We’ve begun to seize the prize of the dollar opportunity in beverages and then segment out the value of that opportunity by consumer drinking occasion.”
She explained that Coca-Cola has placed a value on the occasions when people drink beverages. It is focusing on two occasions: Chilling Out at Home Watching TV and Eating Meals at Home.
“People are eating at home a lot more. It’s a phenomenon which is occurring and we don’t think it will change drastically. So that’s one of the reasons why we’re going at this approach,” she said.
Shopper Segment and Merchandising
“This is something we put into the market last year and we’re fine-tuning it this year,” she said. “Each store has a different mix of shoppers, needs and occasions occurring. It’s the store’s shopper DNA. We know that we have to figure out a way to get the right brands, the right packages, occasion messaging, the right price and the right placement in store to be able to meet those needs and benefit the retailer, our business, and the shopper.”
Coca-Cola has created smaller segments and tailored solutions to each of them. Then it merchandises against the predominant shopper cluster within each outlet.
“This gives us the ability to connect with shoppers at outlet levels,” she said. “We have to segment what we’re doing. That’s how we get really distinctive and tailored at a chain or outlet level by product.”
Bundled Solutions
“This has been a very important strategy for us this year and it will be into next year in terms of how we create the most relevant and innovative bundles out there,” she said. “These bundles have significant benefit. This is feedback that we have gotten from shoppers and from retailers as well as our own partners within the system as well as other CPG companies that we’re working with on this effort.”
She described bundled solutions as the best combination of product, food and beverage in stores for shoppers.
“Bundling enables you to group things together on price points, which also gives you a unique opportunity to begin to separate yourself out from the everyday deep discounting that sometimes can occur in some of our categories,” she said.
Packaging Solutions
“How we begin to segment our packaging, matching it to occasions and shopper missions, is absolutely critical,” said Wallace.
As an example, she pointed to the contour two-liter bottle of Coke, a package that lifted
sales by double digits. Another new product is the 16-oz.-99-cent “entry” package offered cold in stores.
“We believe in being able to execute all of this together in an end-to-end marketing approach,” she said. “The ad on TV is the same ad online. It’s the same ad on billboards. It’s the same ad for the point-of-sale message in-store.
“One of the things that we’ve learned,” she went on to say, “is we’ve got to think very differently about how we talk to shoppers in store and create various sizes and shapes, improving our messaging. Putting the right package on those merchandising racks has been one of the most important elements of our plan and has reaped wonderful results for us in markets where we’ve been able to execute it,” she said.
Wallace illustrated her points with a case study of family home meals which she called one of the largest beverage-drinking occasions in the U.S. It’s an example of how Coke has taken the depth and breadth of insights around consumers, shoppers and family and begun to put them into play to drive business.
“We know that when families eat meals together, it improves the quality of the life of the children,” she said. “We also know that Coke and meals create social interaction, togetherness, and optimism. So it’s important that we use that power in outlets to connect with the shopper. And finally, we believe that nothing beats the great taste of Coke with food.”
Wallace said Coca-Cola has created several strategic alliances and transactional relationships with various companies to build the program to offer value to shoppers and to retailers on an everyday basis. The company is creating TV ads that embrace the experience of the family eating together at home by making Coke an integral part of the meal.
“All of that comes together in our ‘Look of Success in Outlet.’ We hope that the power of our brands creates the irresistible shopper experience,” she said.
Market Watch
‘Shopper Insights in Action’ Educates CPG Execs
By John Karolefski
Creating innovative experiences driven by shopper behavior was the theme of the recent Shopper Insights in Action conference hosted by the Institute for International Research (IIR) in Chicago. A mix of speakers from different segments of the industry presented case studies and persuasive points of view at the popular event for manufacturers and retailers.
Here is a summary of some of the presentations:
Virtual Shopping Platforms
Decision Insight’s virtual shopping platform enables product manufacturers to test options on the shelf. The program measures actual behavior by testing tactical approaches in the context of an actual shopping experience. Why virtual shopping? It's time- and budget-sensitive, behavior based, validated and actionable.
The speakers outlined three case studies of virtual shopping in action. In the first, Frito-Lay’s marketing objective was to increase sales of family size bags through optimal shelf placement. The research objective was to evaluate shelf placement alternatives to identify which might increase sales the most. The result: Locate family size bags on the end of the shelf, an approach that was validated in store. Overall category sales increased by 7%. Other case studies on Heinz studied SKU rationalization and one about Kellogg focused on improving sales through new packaging.
Aligning the Departments
The key to shopper marketing success is organizational alignment among marketing, sales and research. Organization alignment builds brand equity and strong partnerships, drives category and brand sales, and leverages the store as a marketing medium.
As practiced at Johnson and Johnson, shopper marketing is an umbrella over category management, shopper insights and retail activation. It informs, engages and inspires consumers along the path to purchase. It creates a purchase intent or need in the mind of
the consumers.
John Troy, director of category management and shopper insights, says the core principles of shopper marketing are: one, insight to strategy to activation; two, enterprise wide, not just sales; three, one J&J capability.
Winning Her Wallet
Everybody has a different definition of shopper marketing. For Chris Gray, vice president of shopper psychology at Saatchi and Saatchi, shopper marketing is a behavioral science that increases sales and basket size, promotes trial, and encourages return trips to the store. He lists eight drivers of shopping behavior:
Sanctuary: Break away from everyday life (example: Air Wick scented candles)
Connection: Develop, maintain and deepen relationships (sampling at Costco)
Sport: Pursue excitement and competition (Black Friday)
Security: Maintaining home and family (Wal-mart promotion for coming flu season)
Play Time: Engage in fun and amusement
Self Creativity: Expressing one's identity
Mastery: Acquiring and expressing skill and knowledge
Dreaming: Explore possibilities (Wal-Mart's pre-prom event)
Putting Marketing Back into Shopper
The emerging and evolving practice of shopper marketing can be segmented into Brand Shopper Marketing (with the focus on the brand), Customer Shopper Marketing (with account teams working with individual retailers) and Category Shopper Marketing (with bigger ideas for the category across many retailers).
Jonathan Philips of Glendenning US says most CPG manufacturers are in the muddy middle. To get to the Promised Land of Category Shopper Marketing, manufacturers need leadership and traction. They need to integrate their brand and shopper teams.
Winning companies have Singularity (focus on a big idea like P&G and its First Moment of Truth), Leadership (Unilever CEO declares that success calls for deep shopper insights), Traction (P&G’s got it after a 10-year journey with a focus on the shopper), and External Focus (focus on shoppers like at Kroger, Target and Whole Foods).
Finding Shoppers Online
How can you find shoppers online? Jim Lencinski of Google recommends using digital ads to find the shopper to talk to That’s where most of them are instead on front of TVs.
In the current economy, people are watching every dollar they spend. Consequently, they research the purchases they intend to make very thoroughly before they buy – and see online searches as the best way to conduct this research. Lencinski recommends using both search as well as display (banner) online ads to reach shoppers. Online search ads can communicate deals when they are keyed to search query words; they can keep your brand top-of-mind with a 'virtual end cap'; and can utilize hot-links within the ads to drive qualified leads to your advertorial websites.
He encouraged CPG manufacturers to work together with trade managers, brand reps, customer reps and retailers to unify efforts to dominate search result pages. He also advocated including paid search as a line item in all sales collateral budgets.
‘Greentailing’ in Tough Times
It’s not easy being “green,” but retailers and manufacturers better start if they haven't already. It may wind up being a distinct competitive advantage. Going green and reducing costs can go together. According to studies, the current recession has not hurt the green movement that much. Six of ten consumers say green affects their shopping behavior – where they shop and what products they buy. However, seven of ten consumers won’t pay more than 5% more for a green product.
So maybe it’s time to embrace Greentailing 2.0, the latest generation of going green (the first in the early 1990s fizzled). Author Neil Stern says the types of green products are: organic, local, natural, recyclable, energy efficient and ethically sourced. The elements of green are: Think Green (must be a core value of the company like at Wal-Mart and Whole Foods), Act Green (in supply chain, packaging), Sell Green (Wal-Mart, Office Depot, Tesco), Convey Green (corporate responsibility).
Bringing Insights Indoors
Bass Pro Shops has been called “The Ultimate Customer Experience.” That's because each store is customized to its locale, and has 50% of the store dedicated to non-selling space (aquariums, rock climbing walls, etc.). Customers are so loyal to these outdoor living themed stores than more than half of them travel over 50 miles just to shop there, and then spend an average of 2-4 hours in the store. So is it any wonder Stan Lippelman, Vice President of Marketing, said “CRM is not the icing on our cake. It is the cake.”
Lippelman advocates creating a customer culture that uses highly targeted marketing efforts, which he refers to as “one to some instead of one of ton.” In fact, 70% of what they do is targeted. And the key to Bass Pro Shops' sales success can be summed up by the following five guiding principles:
Advanced Analytics for More Insight
Dick’s Sporting Goods won’t be running in circles when it tries to sell more athletic footwear. By digging deeper into its shopper data, the chain has figured out how to vary its merchandising approach and get a leg up on the competition: Kohl’s and The Sports Authority. Why were consumers shopping there for their Air Jordan's instead of at Dick’s?
Research showed that consumers preferred full-service help in the store for football, tennis and soccer footwear, while self-service was the preference for running, walking and cross training gear. John Schulte of Maritz Research explained that the goal was to improve shopper satisfaction. What to do? Dick’s gained a competitive edge by adding self-service racks in some stores, and providing employee training programs in others.
