Hershey Leverages ‘Need States’
To Optimize C-Store Sales
By John Karoleski
The Hershey Company is betting that incremental candy purchases in convenience stores can be triggered by placing its products in the right place at the right time.
The world-class company is basing its strategy on the results of research conducted last summer in six C-stores operated by three chains. It was part of a nationwide study of all product categories in which 350,000 shopping trips were video recorded and analyzed.
C-stores is one of the biggest initiatives for Hershey this year. Account teams are meeting with retailers to explain what they learned from the study and to set up tests of the tactics suggested by the results.
The chains in the study were 7-Eleven, Chevron and Road Ranger with stores in six markets: Dallas, Miami, Los Angeles, Seattle, Baltimore and Chicago.
“When trips to C-stores are down, there is a need to attract people and make sure that every person who comes through the door buys as much as possible,” said Susan LaPointe, director of global innovation and shopper insights at Hershey. “And that’s where candy comes in because candy is often not a destination. We’re just not a reason to go to the store, but we’re a perfect add-on. So we always look at candy as the potential to put one more buck into the basket before somebody checks out,” she said in a presentation at a Shopper Insights conference hosted by the Institute for International Research (IIR).
Hershey sought to figure out the difference between somebody who buys or doesn’t buy
candy, and how to understand them. To learn the “who, when and why” of store trips, the company turned to Video Mining Corporation. The State College, Pa.-based firm offers proprietary in-store video technology to measure and provide visibility into the shopping process at every retail touch point. The technology was used for the study’s segmentation and need-states analysis.
“We started looking at some of the classic things like demographics and just saw no differences between buyers and non-buyers in those kind of metrics,” said LaPointe. “We weren’t quite willing to give up at that point, so we said, ‘Okay, let’s just take all the people who bought and all the people who didn’t buy and look at every measure and see where the differences are.’ When we did that, we found that day parts showed us some really different patterns of behavior.”
Hershey came to understand the “path to purchase” by day part because shopper behavior changes with the hours. For example, the “need state” at 7-8 am is a daily snack; noon-1 pm, it is a meal enhancer; 3-4 pm, it is for energy; 6-7 pm, it is a snack; and 9-10 pm, it is habit
or social.
Using Video Mining’s technology, here were the kinds of metrics that Hershey studies in an overall C-store environment:
- Store Traffic How many people are coming in?
- Category Traffic How many people were actually shopping the candy category in the aisle and in any one of the different places in the convenience store?
- Engagement What happens to the person passing by the category and to those interacting and shopping the category?
- Conversion How can you convert that person to actually picking up a product and buying it?
“At the end of the day, what are the kinds of things we can do when you start to understand traffic patterns and particularly when you begin to dig down a little deeper and understand there are differences by shopper groups and needs?” LaPointe asked.
In general, she stressed the importance of keeping the shopper at the center of the process in three ways: one, understand the decision process of the various shopper segments; two, track segment composition and behavior trends, and three, test the response of each segment to new strategies.
More specifically, she outlined the following;
- Location “You want to be on that ‘path to purchase.’ It has a sense of purpose for these people, so understand where they’re going. Be there when they’re on the way there or, better yet, on the way returning because we’re not a destination.”
- Assortment “At each location, assortment differs because people are looking for different things and the brands do serve different purposes in their lives.”
- Promotional Partners “If it is going to be a candy bar with a drink or a candy bar with that meal or something, let’s run a promotion for those things.”
- Message Content “Time-of-day messaging. We know that there are people coming into the convenience store in the morning for more than just coffee and doughnuts. You should be telling those people to stock up on their snacks to make them feel like this is the right thing to be doing.”
There are multiple locations for candy in the convenience store, according to Rajeev Sharma, CEO of VideoMining, who also spoke in the presentation along with his vice president of shopper insights, Priya Baboo. “You have candy at the checkout, you have an aisle where you have candy, and then you have several displays in the store. So what we also did was [study] how each of the locations played a role in generating a conversion for candy. What is the incrementality that candy is getting from each of the locations?
“So based on some of the things that we identified,” he sent on to explain,” there some locations that are good and some locations are not good. That’s what {Hershey} is testing this year – trying to move displays to a better location to get more exposure and engagement,” he told CPGmatters in an interview following the conference.
According to Sharma, part of the process is understanding the reason for visiting the store in the first place? What is the need state? Are you there for food or for snack or for beverage?
“It is getting that kind of understanding of how people navigate the store based upon their need state,” he said. “The big deal was analyzing the need states very carefully, and how did it translate to physical movement in the store. Physical movement translates to traffic patterns which can be the place for positioning the products more effectively.”
Sharma said demographic segments also play a role with traffic flow, as do times of day. “So by working them into all of the different groups and different times of the day, you can actually start getting to the right match-up for people and their movement to displays."
According to Baboo, understanding how a category responds in the store in terms of segmentation and need states was not available before. “That is what we provided. This was the first observational study of this magnitude in convenience stores."
Market Watch
More Optimistic Shoppers
Approach End-of-Year Holidays
By Lynne Cooke
American consumers plan to enter this year’s end-of-year holiday season more hopeful, resulting in greater spend than during last year’s holidays, according to new research from Information Resources, Inc (IRI). Even so, consumers are taking a more strategic approach
to shopping this year and are heading into stores with shopping lists in hand and a budget
in mind.
IRI surveyed about 1,000 households about their 2009 holiday shopping rituals and discovered other shifts in consumer behavior, such as the consumption of meals and beverages at home, purchasing private label, and bargain hunting, will also continue this holiday season.
Consumer attitudes and concerns surrounding gas prices, cost of utilities, job stability, the rise in food prices, and the recession are all seeing a decline in how these factors will affect this year's holiday shopping rituals. Consumers’ holiday shopping rituals will be less affected by economic factors than last year, especially regarding the price of food.
Principal survey findings include:
- Consumer concern about the price of food has dropped more than 20% this year (98% in 2008 versus 77% in 2009)
- Concern over the effect of gasoline prices on holiday shopping has dropped by 10%t compared to 2008
- Overall effect of the recession on shopping decisions decreased nearly 5%.
In keeping with their focus on spending time with friends and family, Americans will consume most of their meals and beverage consumption at home or at a friend’s house. Nearly two-thirds of consumers plan to eat their holiday meals at home, half plan to dine at their friends’ homes and holiday parties, and almost all plan to consume alcoholic beverages in their friends’ homes or holiday parties.
Such communal eating and drinking is actually a cost-cutting strategy and a major contributing factor to why consumers note that they plan to spend the same or less this year than in 2008 on holiday meals. More than nine of ten (94%) plan on spending no more than $500 on food and nearly the same (90%) plan on spending no more than $200 on holiday beer, wine, and spirits purchases.
To help prepare for the holiday gatherings, dollar-stretching techniques, such as list-making and private label, continue to be top of mind for shoppers. Only one of ten (11%) of consumers mention they will shop without a grocery list.
Private label is expected to again take a seat at the head of the holiday table as 90% percent of consumers make private label food an important part of the holiday meal, up from 87%
in 2008.
Grocery stores are expected to remain busy with shoppers piling in their private label selections in their grocery carts. Survey findings include: Budgeting (79%) and matched quality to name brands (60%) remain leading reasons for the switch to private label; 92% of consumers will be doing their holiday food shopping at the grocery store based on sales and discounts, product selection, and variety of items in stock.
Organic Skeptics Still Buy
Consumers of all-natural and organic foods know the reputed benefits of such products, and
if affects their shopping choices – sort of. More than 75% of consumers in a new survey
said would buy organic and all-natural products if they were priced the same as comparable leading brands.
Findings of the study conducted by Harrisburg, Pa.-based marketing agency Pavone should brighten the spirits of marketers – sort of. “Consumers are smart and getting smarter, especially in this economy,” said Pavone president Michael Pavone. “They’ve been inundated with products claiming to be all-natural or organic, so they’re naturally skeptical. It’s up to manufacturers to explain very clearly why their product meets certain criteria and why consumers should believe it.”
‘Healthy’ Teens Weigh in
Ninety-two percent of teens aged 13 to 17 say that health and a healthy lifestyle are important, according to a study from New York-based Scarborough Research. When asked to give themselves a “health report card,” three of four (76%) gave themselves a grade of B- or higher.
When these teens do turn to the Internet for information on health, they’re more likely to rely on a search engine than they are a social network. “Teens are considered to be at the forefront of social networking,” said Steve Seraita, executive director of Scarborough Research, “but, when it comes to seeking health information, we can see the power of search outweighs that of social networking. However, with half of all teens going to the Internet for health information, marketers must create a comprehensive and diversified online marketing plan -- otherwise they will miss reaching half of their target audience.”
Local Trumps Organic
Shoppers are more likely to buy locally grown fresh produce than organic of the prices are the same, according to researchers at the University of Minnesota – Twin Cities. Four of ten (40%) of study respondents said they bought local produce “most times” they shopped, but only just 14% said the same for organic.
The key motivator to purchasing locally produced products was “freshness” compared with “good for health” for organic. Consumers considered both locally grown and organic “safe to eat” and suggested that growers stress this in their marketing.
Correction
In the story about Frito-Lay’s ethnographic programs earlier last month, it was originally reported that Smart Revenue conducted a recent research study for the PepsiCo unit. The study was actually conducted by Ethnographic Insights, Inc. CPGmatters regrets the error, which has since been corrected (see story below).
SEPTEMBER 2009
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, Inc. 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. “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.
