Why 2007 Will Become
The Year of ‘Shopper Media’
By James Tenser
If 2006 was the year when CPGs focused on shopper marketing and measuring in-store impressions, 2007 is shaping up to be the year when they capitalize on “shopper media” as a central element of the total in-store experience.
Shopper media is the latest catch-phrase to describe everything from digital video network devices mounted in-aisle, at-checkout, on shelf-edges, and on shopping carts, to more traditional printed shelf signs, floor decals, coupon-dispensers and at-checkout printing.
The stage has been set by a series of developments related to media, money and measurement:
- Tens of thousands retail stores in the past year have seen a rush of new and upgraded shopper media entrants, especially digital devices.
- CPG spending on shopper media messaging easily topped $1.5 billion for the year, and forecasts suggest a growth rate of 50% per year or greater is likely.
- With so much investment at stake, several industry groups have made publicized efforts to measure in-store “opportunities to see” or Gross Rating Points (GRPs). These include the initiative called P.R.I.S.M. (Pioneering Research for an In-Store Metric) fronted by the In-Store Marketing Institute and a similar research effort by the Point-of-Purchase Advertising Institute’s Digital Signage Group.
- Several leading CPG companies have separately engaged in individual (and sometimes closely guarded) efforts to model and evaluate returns on investment across the total media mix, with emphasis on determining the relative ROI contributions of shopper media versus trade promotion versus traditional advertising.
- The push for reliable in-store measurement has refocused the industry on the challenge of in-store implementation. The P.R.I.S.M. consortium correctly reasoned that no shopper media rating can be considered reliable in the absence of positive evidence that programs are correctly executed within each store. This logic applies both to the messaging itself and the underlying category plans.
Marketing analysts believe these activities collectively raise the stakes for brand communications at retail. More media options and higher spending levels require that CPG firms pay closer attention to in-store ROI and the cumulative impact of media, promotions and merchandising on the total shopper experience.
“It's going to be more complicated,” says Frank Beurskens, president of in-store kiosk network operator Shop To Cook, Inc., Buffalo, N.Y. “If you are a CPG company, the fragmentation of connection points to touch a shopper can either make it far more costly or require more search and discovery to determine which do what for them.”
Shopper media deliver a blend of product information, entertainment, service content and persuasive or ad content. The substantial increase in the number and variety of messages confronting each shopper on each visit means greater competition for their limited attention.
The relatively new discipline focused on creation of shopper media content may be expected to expand and grow in sophistication. The past year saw several major ad agencies forming units with focus in this area.
The growth of shopper media is also likely to affect category planning and implementation in the coming year, according to in-store experts. As CPG marketers face an increasingly complex matrix of influences on brand performance, they must do more than find ways to ensure that their messages are delivered in store. They must also ensure execution of the underlying merchandise plans, since a simple out-of-stock can undermine the ROI of an otherwise flawless shopper media campaign.
There’s hard work yet to be done in measuring and defining the benefits. The dialogue surely will rise above in-store GRPs to address direct measurement of shopper interactions, and later sales lift and customer loyalty.
In-store observers predict that 2007 will be the year of shopper media. There will be more messaging options in more stores and greater spending by more CPG brands. The quality of the messages themselves will improve. And the industry will continue to search for best practices that ensure payback.
Sampling Ranks High
Among Shoppers: Report
By Rose Anthony
There is a science behind shopper purchasing behavior, according to two recent studies.
The first report, entitled “Touch America – The Consumer Connection,” maintains that there is a fundamental nature of shopper marketing as well as various dynamics that influence a customer to buy a particular item.
A follow up study called “The Shopper Connection” analyzes consumer behavior and impulse shopping at America's retail outlets, highlighting the benefits of in-store marketing with surveys and on-site interviews.
The bases of these reports are five nationwide studies conducted and analyzed last year. The studies analyzed the purchasing behavior of thousands of respondents from various backgrounds, shopping at a variety of retail outlets.
Mass Connections, the Cerritos, Calif.-based firm that sponsored the reports, uncovered the reasons why shoppers frequent particular retail outlets, what motivates the purchase of impulse items, and how signs and in-store merchandising affect purchase decisions. Results were reinforced with additional data and interpretations.
A sampling of conclusions:
- 76 percent made a purchase as a direct result of in-store sampling;
- 83 percent reported that at least a few of the items they have sampled at an in-store event became a recurring purchase;
- 63 percent claimed that “new and different types of product signs and displays” would enhance their shopping experience;
- Three studied populations said they might stray from their usual grocery store to seek out free samples or fun events.
“We are committed to making it easier for the marketing and retail community to deliver programs that are motivating for shoppers,” said Mass Connections' President and CEO Caroline Nakken. "'Touch America - The Shopper Connection" and other studies we've published underscores our commitment and furthers our mission to empower the industry.”
Reports can be accessed by visiting http://www.touchamerica-instore.com.
DECEMBER 2006
RFID Offers Potential to Boost
Effectiveness of POP Displays
By Jack Grant
Radio Frequency Identification (RFID) is proving that it can increase efficiency in the CPG industry. Most of the news and buzz have occurred in logistics and supply chain activities, notably involving Wal-Mart’s well-publicized mandates to its supplier partners.
Meanwhile, progress is quietly taking place in stores. RFID has the potential of improving the location and placement of in-store displays to maximize their effect on sales. Testing and initial results show that real-world benefits for CPGs and retailers are not too far away.
“At this moment, several national chains are testing or actually rolling out RFID-driven tracking systems for vendor-supplied displays,” said Bob Michelson, president of Goliath Solutions, speaking at the In-Store Expo in Chicago recently. “CPG marketers and their agencies must become fluent in this new technology to remain competitive and ensure they are adequately positioned to realize the sales/profit potential resulting from RFID-based tracking systems.”
Walgreens, the nation's largest drugstore chain, is a front runner in the use of this new technology. An RFID tracking system (offered by Goliath Solutions) was piloted earlier this year at 50 Walgreens stores in Chicago. By mid-2007, the chain plans to partner with 15 CPGs to track their in-store displays at more than 5,000 stores. Focus will be on displays for over-the-counter drugs, candy, cosmetics and seasonal items.
“The Goliath solution will help us customize our merchandising on a store-by-store basis and ultimately increase sales and profit per square foot,” says George Riedl, Walgreens' senior vice president of marketing at Walgreens. “It also will help both our own purchasing department and our vendors evaluate past promotions and plans for future programs. In terms of efficiency, it will help us ensure that the proper displays are put out at the proper time in all of the stores.”
Goliath just finished tracking 150,000 displays across four retail channels: convenience, grocery, chain drug and office supply. More than twenty CPG manufacturers took part and have analyzed it the data. As a result, many of them have changed their relationship with POP manufacturers because they are in a better position to ask questions about how displays can maximize sales.
“I think the old 80/20 rule applies here, in that 80% of the benefit is in of 20% of the occurrences,” said Michelson, explaining the results of the testing. “The occurrences for us would be displays and the benefits would be sales and profits.”
The studies found that the average execution across the four retail channels is less than 50%. While it makes sense that displays generating the most sales should have the highest execution, that was not the case. Low-performing displays received as much execution as top performers.
“It is very important for a retailer to know what is working and not working and to re-merchandise those stores based on performance and displays, the location of the displays, and the duration of the location,” said Michelson. “When retailers are reporting their financial data to Wall Street, they do not talk about execution but about in-store sales. If together we can identify the merchandising, the displays, what works best in each store, the retailer is in a best position to maximize sales.
“What is at stake for the CPG?” he asks. “They need to understand which displays work. They want to be able to leverage trade dollars and for displays that aren’t working. We have had many of our customers eliminate ones that don’t.”
In real estate, location is of the utmost importance. POP placement is no different. In retail, significant resources are poured into creating plan-o-grams that specifically map out the best locations for displays and which adjacencies maximize their performance. Inevitably, 5% of store managers do not follow the plan-o-gram and either put displays in the wrong location or do not put them up at all.
So it is critical to understand that an opportunity for improvement exists here. The industry can generate greater “display velocity” when there is sharper execution on the best-performing displays as well as fine-tuning the ones that are not generating sales.
Using real-time data, it is critical that store managers and third parties act promptly to resolve all POP issues within the store.
According to Michelson, retailers must know which displays work and which do not. Stores should be re-merchandised based on three display factors: type, location and duration. In the event that displays are not performing, CPGs must be informed so that the POP can be deployed or discontinued. Trade dollars can then be allocated back to retailers more efficiently.
Manufacturers need to produce winning displays and ensure a solid location for them within the store. If sales figures are on the upswing as a result, they can increase trade funds to the retailer with conditions; for example, paying 50% more for 85% execution.
“For CPGs, this is not a solution that can be done independent of the retailers,” said Michelson. “To add value, you need a collaborative effort. Being able to look at your promotion programs is important, but being able to see it against all of your promotions gives you the full spectrum.”
Here’s how RFID works: Chips are placed either in the back, underneath or inside a display in stores equipped with antennae and electronic readers. The former sends out signals to determine where the display is located while the latter records the location of the display and the exact time it was scanned.
The information is then transmitted to the corporate office through a central unit called HUB. Throughout the day, HUB collects data from all stores in the chain, aggregates it, and transmits it to a database. Users can access the database through a secure Web interface where both ad hoc and pre-determined reports can be pulled off and alerts are sounded.
Alerts go off when pre-determined criteria are not met or somehow violated. For example, if a display garners $1 million in incremental sales for a chain by getting 10% execution, that would warrant an alert.
Data is provided in real time. CPGs and retailers will be updated regularly concerning the performance of a particular display at a particular time of day. This real-time information enables swift corrective action within the stores should any display issues occur.
RFID chips will ensure that displays are “compliant,” meaning that the display is physically in the store, in the right location, and that it was put up at the right time and used for an appropriate duration. True compliance means that the entire chain meets these requirements, not just a sampling of stores.
Performance is measured by determining which displays provide the greatest value. By analyzing a display’s performance, both parties are made aware as to which stores have either under-performing displays or none up at all. Prioritizing stores will then result in optimizing sales.
