Archive for January 27, 2012

The Forgotten Category Metric…”Location”

I could very quickly list about a dozen metrics that category managers use with some regularity to evaluate  category performance.  Dollars per linear foot, percentage of total sales (distribution), days of supply, and inventory holding costs are just a few of those.   As a matter of fact, the savvy category manager more often complains of having too much data and too many metrics than not enough.

But yet among the plethora of information there is an almost “mystical” absence of any information about how the placement of categories and departments effects performance.

Let me explain.  Many of us have seen thermal maps that depict where shoppers go (and don’t go) when they shop the store.  Simply put, there are aisles, alcoves, and even perimeter locations that are dying from under exposure.  Shoppers just don’t go there.

The thermal map here depicts a supermarket all the various areas of the store that are well populated with shoppers (green-yellow-red) and those areas that are less frequently traversed, (blue-deep blue).  Notice there’s more blue than any other color?

The reason for these “vast wastelands of retail” are two fold.  One is rather intuitive.   The products that are merchandised there have little or no appeal to the shopper.  They are either redundant with other similar products that shopper has already purchased, or they are just very uncommonly purchased items, with very low household penetration numbers.

The second dynamic in play is less intuitive and almost completely off the retailer’s radar screen.  It is that there are overt reasons why shoppers shop the way the do, where they tend to go, and how they tend to get there.  These tendencies are so common and  have been proved to be so universal they are principles in my mind.  Without getting  into detail the individual principles here, (I would recommend you read some of the great work my mentor and ex-boss, and fellow RetailWire contributor,  Herb Sorensen has published on this topic), I will list several of the key principles for context.

1.  Shoppers like to shop counter-clockwise (right to left).  (Right handed stores are good Left handed stores, not so much)

2.  Shoppers are much more productive spenders early in their trip and spending diminishes as they progress through the store.  (There are diminishing returns on long trips)

3.  Shoppers spend only about 25% of their time “shopping” and about 75% “going” from spot to spot in the store to shop. (Improving “shopping time” can be very fruitful for the retailer)

4.  Shoppers migrate to open spaces, they don’t like aisles and cubbies, they also like open sight lines.  (Store design and layout implications are abundant.)

5.  When shoppers do visit aisles, they frequent the polar ends of the aisles much more so than the center of the aisle. (Be careful what you merchandise in the middle of the aisle, it may die of loneliness.)

Ok, I could go on and on with dozens of additional scientifically proved principals.  But I think you get the drift that with the aforementioned dynamics in play, it does matter where in the heck you put things in the store.  Here’s one example:

Looking at two nearly identical stores with similar square footage and layouts, the Household Cleaner Category in the left side diagram is place earlier in the shopper’s trip cycle when they are spending faster and in more volume and where 25% of all the shoppers are exposed to the category.

On the right side, we see the same category placement later in the shopper’s trip and in a aisle where only 12% of shoppers visit.  The end result is 6% of the shoppers make a purchase in the category in when the category is in a superior location….3X over the sales it generates in an inferior location.  This might be really important to know, if you find your Household Cleaner Category being commandeered by the big box stores.

I understand fully that not all categories can be placed in the stores “hot spots”.  But the point is that categories will perform radically differently depending up where they are placed in the store.  The good news is, there is a process that can rank and prioritize categories and match those categories to the where the shoppers are going in the store.  The results can be unbelievably lucrative for not only the category, but the overall store in terms of basket size, profitability and even shopper satisfaction….it works, I’ve seen it!!







Forget “New” Business Until You Maximize Existing Shopper Base

Ok, perhaps the title of this piece is  bit over dramatic, but I still maintain that retailers spend much too much time, money and newsprint on chasing new and highly unsustainable shoppers when they do next to nothing to “mine” more dollars from the shoppers they already have coming through the doors and web portals each week.

When mentioning this obession with new customers to my colleagues in the past, the almost instinctive answer is that we have to have both…new and existing shoppers and if we fail to chase and capture our fair share of new shoppers each week, marketshare and sales will suffer and some would insist that  disease and pestilence will reign over the countryside.  I  disagree.  But there are ways to use mass media more intelligently, so that in the process of reaching out to new shoppers, you are not alienating the ones who pay the bills for you

Let’s start the conversation with the Grand Daddy of Mass Communications, of course, I’m talking about the weekly supermarket circular.  First of all, I am not advocating the total destruction and abandonment of the weekly circular.  So let’s agree that the circular is far from extinction.  But let’s also think about using the circular in a smarter more targeted way above and beyond it representing a means to extract trade dollars from the brands.


Despite all sort of new and targeted ways to reaching shoppers, the weekly broad sheet or tabloid is about is close to a sacred cow as it gets in the grocery business….and other retail channels aren’t far behind in their reverence to this aging beast.

But there are ways and means to use the circular to better understand who is using it, buying from it, and more importantly, answer the questin, “How are the best and most profitable customers using (or not using) the weekly ad”?

Best and most profitable is another way of saying “Top or VIP Shoppers”, which most retailer have some means of identifying.

Here are five quick questions that can be answered through some pretty basic database queries:

1.  What percent of best shoppers purchase from the front page of the circular?

2.  How do VIP Shopper basket sizes differ from best shoppers who do did not purchase from the front page, and how do they differ from other shopper groups that did or did not make a purchase from the front page?

3.  Which items, over time, resonate the best with top shoppers, more casual shoppers, and the ultra price sensitive that shopper predominantly for specials and deals?

4.  For more advance applications and segmentation practices, which deals are more apt to be purchased by social media community shoppers?

5.  By store type or geographic segment, which items attract a larger percentage of shoppers and what are the associated weekly sales by store segment and geography with various combinations of front page items.

Armed with this basic intelligence, circular adds can be a great learning tool for making offers more efficient and strategic.  Purchase indices can be quickly calculated to help merchandising understand  which items and item combinations are more attractive to the each shopper segment.

Now, back to VIP Shoppers.   Most supermarket retailers report that even the very best shoppers are only sourcing about 65% of their grocery requirements from their favorite store.  If you happen to be that favorite store, you know two things for sure,

1.  These shoppers like you better than anyone else (at least at this point) and are very familiar with your store (s).

2.  There is still much more potential business available for these households.

Using circular ad analysis to better target VIP Shopper segments is pretty basic stuff.  But it works and allows you to draw even more ROI out of  your ad program by using the data to refine future ad combinations and versions, designed to build basket size with your very best shoppers.

I have found it always much more fruitful to attempt to get shoppers to do more of what they are already doing ….than chasing new shoppers and spending 3x to 5x of markdown investment to get them to change their behavior and still not assured you have created any real loyalty in the process.

I am truly adamant about focusing on existing shoppers.  They offer much more upside than most retailers recognize.  I will write more on this topic very soon.






Mobile Loyalty…Shoppers on the Move

With more than half of the U.S. now has a smartphone.  With this new audience that clearly represents “critical mass”, new applications and businesses are sprouting up like dandelions on a Spring day.  This is especially good news for many of the loyalty programs in the supermarket channel who have struggled to find a way to communicate with their card holders in an affordable, convenient way.

But that is only true if they the supermarkets, understand the medium and how it is different from other media they have traditionally used.  There is a downside for retailers that comes with new mobile touch points, its called “consumer options” .  Not necessarily good news for retailers who already see even the best shopper’s share of wallet dwindle each year.  Now shoppers have the means to comparison shop at anytime during the store selection process.  New mobile applications are putting new pressures on the retailer’s hold on the shopper.

Mobile applications have also made it much easier for shoppers to view deals and offerings from many different retailers, before making their choice.  Point of decision for these shoppers is now a pre-shopping exercise, long before the walk through the doors of the brick and mortar store.

Retailers are at a critical fork in the road….embrace the new technology and its customer implications, and create a customer enterprise system and culture that enables a consistent view of and conversation with the shopper.  To do this effectively a single, master customer database collects and assembles all shopper activity whether it be from the checkout in-store to the downloading coupons on-line, or even a social media interaction.  Knowing the preferred method of interaction for each shopper will also enable the CRM program to communicate with the shopper on their terms and along the point of purchase path at just the right moment.

As I have said before in many meetings and at industry forums….”Somebody will figure this out.  It might as well be you!”