The Promise And Pitfalls Of Retailer/Vendor Collaboration

The Promise and Pitfalls of Retailer/Vendor Collaboration IIR Shopper Marketing Conference October 14, 2009 Bonnie Carlson, President PMA Joe Robinson, President RPM Connect

Perspective
PMA conducted two Shopper Marketing surveys to measure collaboration – 2008 and 2009
Surveyed 318 retailers, manufacturers and agencies
Qualitative and quantitative approach
Database included Nielsen Business Media
Results: A Dangerous Collaboration Gap

Definition
Aligned Objectives
Metrics for Evaluation
Strong Shopper Insights
Joint Planning and Post-Program Feedback
Experience
Agree on increased sales as #1; differ on # 2-4
Mismatch: retailer’s #1 KPI not in mfr’s top 3 list; mfr’s #1 KPI is retailers #4
Only 40% of retailers satisfied with mfr. support; 32% of manufacturers satisfied
1/3 of retailers state planning cycles don’t coincide
Collaboration – Criteria used by Retailers and Manufacturers

Key Take-aways
Actionable Insights
Case Studies to Guide You
The PMA’s 7 Point Manifesto for Shopper Marketing Success

Collaboration Criteria #1 Aligned Objectives
Retailers and manufacturers agree on increased sales as #1 objective
Retailers place more priority on shopper relationships
Manufacturers place more priority on retailer relationships

Aligned Objectives 2008 - 2009

Key Insights
Retailer is more strategically focused on the shopper, and building shopper loyalty/store relevance
Manufacturer is more focused on building marketing programs that are persuasive to retailers
Retailer will “own” shopper relationship; manufacturer needs to shift tactical focus

Case Study #1
Shopper Marketing for the Shopper

Our client needed to ensure strong merchandising support during Safeway’s Q1.
Quarterly programs at Safeway are all about shopper solutions.
These take the look of multi-manufacturer group events.
Top vendors are invited to pitch ideas to Safeway’s VP.
Ideas that are self serving won’t pass muster.
Ideas that provide solutions to the shopper will win.
Situation

Mom-shopper still needs solutions for dinner
Mom still wants to grab everything she needs - “make it easy on me”
But, the economic downturn is changing consumer’s behaviors:
Trading meals eaten out for meals cooked at home
But, even trading down those meals to less expensive meals
Insights

“ Spend Time Around Your table”
Italian Night and Mexican Night complete solutions
MED Solution: Merchandisable End Cap
Many partner manufacturers working as a team
RPM Connect drove the concept and the initial creative
Give and Take with the team
Safeway creates the final creative “Make it Tonight”
Solution

Solution

Inclusion in Q1 program
Inclusion in MED
Inclusion in Circular
Improved relationship between retailer and vendor
Brand equity driver????
Results

Collaboration Criteria #2 Metrics for Evaluation
Different Objectives Lead to Different Metrics
Unit sales is the manufacturer’s #1 KPI, but retailer’s 4 th KPI
Retailer profit is #1 KPI for retailers– not in top 3 of manufacturer
Brand/program awareness is tied for retailer’s #2 KPI, but not in top 3 of manufacturer
Manufacturer’s revenue or profit is not even included in retailer’s metrics

Collaboration Criteria #2 Metrics for Evaluation
Neither retailer nor manufacturer use the same KPI’s for evaluation

Key Insights
It will be difficult to achieve collaboration unless there is mutual respect for each other’s KPI’s.
Retailer’s emphasis on program / brand awareness metric reinforces strategic use of shopper marketing for building equity and brand differentiation
Conversely, absence of brand-building or profitability goals in manufacturer’s top KPI’s reinforce tactical approach to shopper marketing
Manufacturer needs to train or rotate marketers into shopper marketing function with different tools and mindset

Potential Reasons for Manufacturer Focus
Manufacturer’s high ranking of unit sales KPI may be “holdover” from traditional sales focus
Sales teams historically incentivized based on units sold
Other potential reasons for manufacturer focus :
More confidence in traditional marketing mix of advertising or price
Marketers not as well versed in customer business issues
Infrastructure shift / training needed by sales-marketing teams to promote more collaboration

Case Study #2
Shopper Marketing to Increase Profit (Retailer and Manufacturer)

Situation
Energizer wanted to promote across their portfolio between the core business and more specialized items (higher margin) at CVS.
CVS wanted a typical extracare program with a large buy down on core business

Insights
Consumers don’t always put batteries on their list, they know they need a few different sizes, but they don’t remember which ones they are out of.
Consumers don’t understand what the new battery technologies are (e.g., Lithium, Titanium, Rechargeable), and are too busy to take the time to learn these products features and benefits.
Shoppers want to do better for the environment, but “make it easy on me.”

Solution I In-Ad PDQ Tray

Solution II Promo Card Mini-Wing

Masked Analysis On Display Mail In $ None None Solution II In Ad Communication At Register $$$ ExtraCare Offer $$$ In Ad Shrek $$$$$ National Promotion Solution I

Collaboration Criteria #3 Strong Shopper Insights
Both retailers and manufacturers rank shopper understanding as the most important success factor (81% = very important)
Both sides have increased shopper marketing staffs in 2009 (according to GMA/Deloitte)
Retailers +60%
Manufacturers +23%
Both sides rank support from each other as improved in 2009
Retailers 40% (+5% increase)
Manufacturers 32% (+12% increase)

Collaboration Criteria #3 Strong Shopper Insights
Responsibility for Shopper Insights is not clear.
Manufacturers and retailers each think shopper insights is their responsibility, with the other side in disagreement
There is even a 2:1 disagreement on making this a shared responsibility (mfr:50% / ret:25%)
Retailer Shopper Segmentation studies underutilized
Used by 50% of retailers, yet manufacturers are inconsistent in using retailer segmentation models
Majority of manufacturers develop their own segmentation, yet retailers could provide more information

Key Insights
Seek agreement upfront as to
Source of data for insight -- consider quality of data, resources, etc.
Who owns the responsibility -- preferably developed mutually
What constitutes an insight – insights are more than data and need to be actionable
Don’t reinvent the wheel
Manufacturers report a 62% increase in sales and stronger relationships with their retailers when they consistently use the retailer’s segmentation models
87% of retailers say they are very willing to share information
The economy has changed shopper attitudes and behavior --Now is the time for true collaboration!!

Case Study #3
Focus on the Shopper and Shopper Insights

Super Bowl Event Planning
RPM Connect panel: Virtual ethnographies provided insight re: Walmart shoppers’ Super Bowl mindset
Focus groups exposed brands’ role in the party
Syndicated data highlighted differences in shoppers’ Super Bowl attitudes/behaviors
provided overview of store environment at Super Bowl
ROI projection tool guided appropriate investment levels by customer

Super Bowl Corporate Event Planning Source: BIGresearch Consumer Intentions & Actions Survey Shopper’s #1 Chain For Food SuperBowl Behavior/Attitudes n/a n/a 23% (110) 23% (110) 17% (81) n/a 18% (86) 19% (90) 21% (100) Getting Together With Friends n/a n/a 27% (100) 27% (100) 25% (93) n/a 30% (111) 27% (100) 27% (100) The Commercials n/a n/a 7% (88) 6% (75) 7% (88) n/a 8% (100) 9% (113) 8% (100) Half Time n/a n/a 44% (100) 45% (102) 51% (116) n/a 44% (100) 45% (102) 44% (100) The Game Most Important Part of SuperBowl (Of those planning to watch) 70.1% (96) 72.2% (99) 72.3% (99) 74.2% (102) 71.9% (98) 65.5% (90) 69.6% (96) 67.0% (92) 73.0% (100) Plan to Buy Food/Beverages 25.2% (100) 23.2% (92) 28.7% (114) 26.8% (107) 27.7% (110) 34.2% (136) 25.2% (100) 26.9% (107) 25.1% (100) Plan to Attend a Party 17.6% (87) 12.0% (59) 12.6% (62) 15.0% (74) 13.0% (64) 9.1% (45) 10.6% (52) 11.3% (56) 20.3% (100) Plan to Throw a Party Costco SAM’s Food Lion Albertsons Safeway Ralph’s Kroger Publix Walmart

Collaboration Criteria #4 Joint Planning / Post-Program Evaluation
Joint long-range planning is critical to an integrated marketing plan
Retailers want to incorporate manufacturer’s marketing strategies into their plan but need sufficient lead time
Metrics and post-program evaluation need to be shared across both organizations to prepare each partner for future programs
Constant feedback and shared learning leads to continuous improvement – and higher ROI

Collaboration Criteria #4 Joint Planning / Post-Program Evaluation
High levels of dissatisfaction in importance vs. performance

Key Insights
Develop a 12 month planning schedule (68% of retailers prefer a 6-12 month lead time)
Accommodate specific retailer’s schedule if more time is needed
Compromise is important to collaboration. Retailers rate this quality as “poor”; manufacturers give it a “fair”.
Consider field sales experience as part of the brand manager career path. This helps manufacturers to gain a better understanding of retailers’ business issues.

Case Study #4
Joint Long Range Planning
Developing Insights Together

Situation
Kroger and ConAgra were both looking for better ready-to-eat meal solutions.
Both felt like an unmet need existed for consumers especially at lunch
ConAgra had developed a new technology that they wanted to leverage on their business.
Kroger wanted to work with ConAgra to best utilize this technology with Kroger shoppers.

ConAgra surveyed Kroger Shoppers and found many of their key needs were unmet in the current shelf stable meals and the lunch occasion. “ I like bringing a sandwich, it’s healthy.” “ Prepackaged items tend to be a little messier to prepare, pour into a bowl, microwave and clean up afterwards. I like items with little liquid to prevent difficult clean up.” “ I like a meal instead of a cold sandwich.” “ I don’t want to feel ‘heavy’ but need energy to get through the rest of the day.” “ I like spaghetti because it’s filling and cheap.” “ Turkey sandwich, mac & cheese, Ramen noodles. They are all easy & fast to make. Plus, I can eat them and work at the same time on the computer.” “ I don’t like leftovers because I’m the only one who eats them so I get a little tired of the same thing.” “ I am too lazy to make and take my lunch to work.” Source: Kroger Shopper Custom On-Line Survey, Communispace, Key Shopper Insight: There aren’t any fresh tasting, quality meals that are not only convenient to store and prepare, yet easily fit into a busy schedule. Insight Generation

Represents 34% of all Kroger Shoppers = A Worthwhile Investment! Source: dunnhumby Report, Total Kroger, Total Panel, 52 weeks 53mm Kroger Shoppers x XX% = XXMM Potential Kroger Shoppers Healthy Choice Fresh Mixers opportunity to target high potential Kroger Shoppers in the Watching the Waistline, Convenience at Home, & Finest segments Insight Generation

Solution

Demo Handout Demo Easel Card Front Cover Back Cover Inside Solution

Two Floor Stands plus 24cs Open Stock Solution

Stanchion Sign NAM Floor Talk NAM Shelf Talk Solution

Customized shopper insights identified key shopper needs.
Shopper needs were aligned to customers shopper segmentation.
These insights led to a better understanding of the shopper inside Kroger.
Achieved number one volume in category at Kroger in only six weeks!
Results

It’s Worth It Unexpected Benefits

It’s Worth It The Light at the End of the Tunnel
Shopper Marketing promises great returns for the industry
Retailers are effectively differentiating their banner
Manufacturers are extending brand equity up to “moment of truth”
Shoppers are enjoying a better retail experience
Shareholders can enjoy an improved ROI – up to 5:1

PMA Seven-Point Manifesto
Turn the war room into the win room.
Get the key players from both organizations together in one place and embrace the practice of joint planning.
Schedule the celebration now.
The best planned and executed programs still need to be measured and the key learning must be gathered and shared.
Lead with Insights.
Successful shopper marketing begins and ends with the shopper, so work from that point.

4. Speak a Common Language
If the retailer has a segmentation model, use it.
5. Forge a Shared Vision of Success
Agree how you’ll know when you get there.
6. Don’t Wait, Integrate
Shopper marketing programs are more effective and efficient when they are planned and implemented as a core element of the entire marketing mix.

Double Down on Sure Bets
Shopper marketing has already proven to be the better long term investment, so take the lead from best practitioners and make a strong commitment to ensure the maximum return.

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The Promise And Pitfalls Of Retailer/Vendor Collaboration

by Promotion Marketing Association, Inc. on Oct 20, 2009

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