VERTICAL MARKETS; Why retailers basket in glory
March 28, 2006
Eight seconds: that is all the time the average shopper spends looking at products within a category in the supermarket. After someone has recoginised that they need to buy coffee, for example, the decision on which brand to put in the basket takes less that two seconds.
If you are a manufacturer that is trying to maintain your place in that basket, it is a narrow window of opportunity. Fortunately, habit is a powerful force that creates a lot of inertia. Around three-quarters of the weekly shop consists of products and brands that consumers buy week- in, week-out.
If you are looking to get people to switch, your company may not even offer the one in four products bought on impulse. So whether you need to maintain loyalty in a highly competitive category, or are seeking to steal customers from a rival, the message for packaged goods marketers is clear: get the work done before the consumer goes shopping.
Classic marketing practice has been based on the needs of packaged goods manufacturers. Pump out brand imagery at high frequency, via TV ads, then convert that interest into a sale using promotional techniques. This remains the model for many brands, especially those introducing new products.
But pressure has been growing for a new approach, due a number of key factors. Retailers are now the dominant force in grocery shopping, intervening between manufacturers and their customers. Loyalty programmes are also conditioning behaviour.
Yet at the same time fresh opportunities are arising that could offer brand owners new ways to influence customers direct. The question is whether they will change established practices in the face of shifting conditions?
Bo Hellberg, digital creative director at OgilvyOne Worldwide London, foresees problems: "A lot of brand managers are stuck in the old days, fuelled by media agencies. They set their budgets for media and advertising creative work, then the discussion turns to online. They don't acknowledge the Web's effectiveness and power," he says.
He argues that digital channels are opening the way for established marketing techniques to be revitalised. "Sales promotion mechanisms work even better online, because it is a very personal environment," argues Hellberg.
OgilvyOne has been working with Sunsilk across Europe to create its first online presence. This is supporting a new, jargon-free approach in the brand's advertising and packaging, focusing on specific hair problems.
Banners used in France allowed consumers to click on a hair colour and be offered a coupon for the appropriate product. Against a E80,000 (#55,000) spend, the campaign achieved 50,000 individual responses over three months. "I've never seen anything like it. Consumers are now aware of how the product looks, what it does, and have given us permission to contact them. It gives us a platform to work from," he says.
In another client project, the brand owner is creating a blog space in which consumers can earn promotional points by posting recipes and rating other postings. Despite the use of interactive media, Hellberg says "it is an old model - there is a human need to interact with other people". This same idea lies at the heart of Billington Cartmell's work for Unilever brand Dove. Using US-originated idea 'the campaign for real beauty', the website offers photographs of real women and the chance to vote on whether they are fat or fit. Consumers who register can qualify for a free T-shirt.
The concept has attracted two distinct types of people. "It is not just promotion seekers, but people who feel it is a good debate and are concerned about the issue," says James Timberlake, director at Billington Cartmell. Data from registered consumers has been added to the Jigsaw database, helping to build a more rounded profile of each individual.
By contrast to conventional mass-media, digital and direct channels allow companies to address discrete audiences in appropriate ways. Timberlake points to Pot Noodle as a prime example: "The ad focus is on youth and 15- to 25-year-olds. The tone is cheeky. But it also sells to mums who control what children eat and may be the buyers. So there is a dual message."
The brand's 'Win a Pot Noodle horn' campaign attracted more than 290,000 entries, allowing data capture and careful segmentation.
Reaching out to mums, as the decision-makers, also lay behind the creation of a simple customer magazine for Dairy Lea. The 12-page publication focused on the theme 'everyday summertime fun', providing ideas for days out, as well as information from nutritionists and doctors. "It was not just about selling cheese," says Timberlake.
Brand owners have found in the past that magazines can be effective communication vehicles, but are hard to sustain in the long term. Simple economics tend to be against printed direct marketing techniques - the price of a can of beans does not contain enough margin.
Other costs can also overwhelm conventional direct marketing. "If you are Muller Light and selling 70 million pots per year, the question is: how much will data capture set you back?" asks Clyde McKendrick, senior planner at The Marketing Store.
Capturing, maintaining and analysing large consumer datasets is not cheap, and only realises value in the long term. Most manufacturers find it hard to look beyond the next quarter.
That is not to say direct marketing does not pay off. Research by Dunnhumby for Royal Mail recently showed that a mailing can increase packaged goods sales by 20 per cent. In the short term, an average sales uplift of 21.2 per cent was demonstrated from direct mail, with a 5 per cent increase in penetration and 2 per cent rise in brand share. There are also long-term effects, with higher-than-average instore sales - up 12 per cent.
The impact of targeted marketing has never been easier to track, thanks to Tesco's Clubcard database. It effectively offers a research panel made up of nearly half the active adult population. This customer insight may go some way to offsetting the more negative aspects of Tesco's power - its primacy in the relationship with customers.
"One of the things we've found is that you frequently get a better response to brand communications and promotions if they are presented through the retailer," says Martin Haywood, director of consumer strategy and futures at Dunnhumby.
Mailings that go out under the Tesco banner get a higher response than those sent direct from the manufacturer. "Irrespective of how high profile the brand is, the relationship with the retailer is deeper," he says.
Haywood identifies an important reason for the degree of trust consumers have placed in grocery chains - they simplify everyday life. With hundreds of products in each category, consumers rely on retailers to simplify choice by filtering them down. This may aggravate manufacturers which get delisted, but it compresses the dimensions of the decision that must be made within those eight seconds.
Another effect of retailers' dominance is the opening up of a new marketing frontier. The whole retail environment is now a critical marketing space in which both retailer and manufacturer messages have to operate. Given the push and pull between brands that are looking to attract switchers and those trying to build loyalty, stores have complex decisions to make.
Haywood continues: "It is an area we are looking at closely. We have got to get to grips with giving shoppers the right information, at the right time. If we can get to the bottom of it, instore media will become very powerful.
"Retailers are acting as agents to reduce choice. We can't abuse that and try to change too many things at once."
Retail space, in it broadest sense, is opening up as a marketing medium. Birmingham's Bullring has the highest shopper footfall of any space in Europe, for example. As a result, any available space is being colonised by brands via posters and face-to-face marketing. In some respects, this is reinforcing the classic model of packaged goods marketing. Manufacturers have to get into a consumer's mind long before they reach the store. Then at the point of purchase the final push has to be made. "Advertising has always done the job of shouting from the rooftops, while packaging is the silent salesman that closes the loop," says McKendrick.
He points to Innocent as a prime example of a brand which has managed to lock the two together tightly. It has also added a further dimension by offering its 'Banana' phone line for customer care and comments.
Other brands are trying to occupy space in the consumer's mind to get around the retailers' filtering process. Live events and experiential marketing are prime examples. "Brands are using these to good effect. We used to run the Carling programme a couple of years ago, and we now do similar things for Stella Artois, Castlemaine XXXX and Buddha Beer. It is about helping to deliver a brand experience," McKendrick argues.
While straightforward sampling often sits at the heart of such activities, it opens up the possibility of extended brand interaction outside of the sales process. By signing up consumers to ongoing programmes around subjects they are interested in - from films and music to football - the brand name gets embedded in the shopper's consciousness. The result is a shift not just in the way packaged goods brands market themselves, but potentially in what they define themselves as. McKendrick believes that, in the context of the attention economy, this will throw up some critical questions.
He asks: "As brands work to develop stronger relationships as providers of leisure or experiences, what do they become? Are they rooted in their product, or do they become a leisure brand?"
If you are a manufacturer that is trying to maintain your place in that basket, it is a narrow window of opportunity. Fortunately, habit is a powerful force that creates a lot of inertia. Around three-quarters of the weekly shop consists of products and brands that consumers buy week- in, week-out.
If you are looking to get people to switch, your company may not even offer the one in four products bought on impulse. So whether you need to maintain loyalty in a highly competitive category, or are seeking to steal customers from a rival, the message for packaged goods marketers is clear: get the work done before the consumer goes shopping.
Classic marketing practice has been based on the needs of packaged goods manufacturers. Pump out brand imagery at high frequency, via TV ads, then convert that interest into a sale using promotional techniques. This remains the model for many brands, especially those introducing new products.
But pressure has been growing for a new approach, due a number of key factors. Retailers are now the dominant force in grocery shopping, intervening between manufacturers and their customers. Loyalty programmes are also conditioning behaviour.
Yet at the same time fresh opportunities are arising that could offer brand owners new ways to influence customers direct. The question is whether they will change established practices in the face of shifting conditions?
Bo Hellberg, digital creative director at OgilvyOne Worldwide London, foresees problems: "A lot of brand managers are stuck in the old days, fuelled by media agencies. They set their budgets for media and advertising creative work, then the discussion turns to online. They don't acknowledge the Web's effectiveness and power," he says.
He argues that digital channels are opening the way for established marketing techniques to be revitalised. "Sales promotion mechanisms work even better online, because it is a very personal environment," argues Hellberg.
OgilvyOne has been working with Sunsilk across Europe to create its first online presence. This is supporting a new, jargon-free approach in the brand's advertising and packaging, focusing on specific hair problems.
Banners used in France allowed consumers to click on a hair colour and be offered a coupon for the appropriate product. Against a E80,000 (#55,000) spend, the campaign achieved 50,000 individual responses over three months. "I've never seen anything like it. Consumers are now aware of how the product looks, what it does, and have given us permission to contact them. It gives us a platform to work from," he says.
In another client project, the brand owner is creating a blog space in which consumers can earn promotional points by posting recipes and rating other postings. Despite the use of interactive media, Hellberg says "it is an old model - there is a human need to interact with other people". This same idea lies at the heart of Billington Cartmell's work for Unilever brand Dove. Using US-originated idea 'the campaign for real beauty', the website offers photographs of real women and the chance to vote on whether they are fat or fit. Consumers who register can qualify for a free T-shirt.
The concept has attracted two distinct types of people. "It is not just promotion seekers, but people who feel it is a good debate and are concerned about the issue," says James Timberlake, director at Billington Cartmell. Data from registered consumers has been added to the Jigsaw database, helping to build a more rounded profile of each individual.
By contrast to conventional mass-media, digital and direct channels allow companies to address discrete audiences in appropriate ways. Timberlake points to Pot Noodle as a prime example: "The ad focus is on youth and 15- to 25-year-olds. The tone is cheeky. But it also sells to mums who control what children eat and may be the buyers. So there is a dual message."
The brand's 'Win a Pot Noodle horn' campaign attracted more than 290,000 entries, allowing data capture and careful segmentation.
Reaching out to mums, as the decision-makers, also lay behind the creation of a simple customer magazine for Dairy Lea. The 12-page publication focused on the theme 'everyday summertime fun', providing ideas for days out, as well as information from nutritionists and doctors. "It was not just about selling cheese," says Timberlake.
Brand owners have found in the past that magazines can be effective communication vehicles, but are hard to sustain in the long term. Simple economics tend to be against printed direct marketing techniques - the price of a can of beans does not contain enough margin.
Other costs can also overwhelm conventional direct marketing. "If you are Muller Light and selling 70 million pots per year, the question is: how much will data capture set you back?" asks Clyde McKendrick, senior planner at The Marketing Store.
Capturing, maintaining and analysing large consumer datasets is not cheap, and only realises value in the long term. Most manufacturers find it hard to look beyond the next quarter.
That is not to say direct marketing does not pay off. Research by Dunnhumby for Royal Mail recently showed that a mailing can increase packaged goods sales by 20 per cent. In the short term, an average sales uplift of 21.2 per cent was demonstrated from direct mail, with a 5 per cent increase in penetration and 2 per cent rise in brand share. There are also long-term effects, with higher-than-average instore sales - up 12 per cent.
The impact of targeted marketing has never been easier to track, thanks to Tesco's Clubcard database. It effectively offers a research panel made up of nearly half the active adult population. This customer insight may go some way to offsetting the more negative aspects of Tesco's power - its primacy in the relationship with customers.
"One of the things we've found is that you frequently get a better response to brand communications and promotions if they are presented through the retailer," says Martin Haywood, director of consumer strategy and futures at Dunnhumby.
Mailings that go out under the Tesco banner get a higher response than those sent direct from the manufacturer. "Irrespective of how high profile the brand is, the relationship with the retailer is deeper," he says.
Haywood identifies an important reason for the degree of trust consumers have placed in grocery chains - they simplify everyday life. With hundreds of products in each category, consumers rely on retailers to simplify choice by filtering them down. This may aggravate manufacturers which get delisted, but it compresses the dimensions of the decision that must be made within those eight seconds.
Another effect of retailers' dominance is the opening up of a new marketing frontier. The whole retail environment is now a critical marketing space in which both retailer and manufacturer messages have to operate. Given the push and pull between brands that are looking to attract switchers and those trying to build loyalty, stores have complex decisions to make.
Haywood continues: "It is an area we are looking at closely. We have got to get to grips with giving shoppers the right information, at the right time. If we can get to the bottom of it, instore media will become very powerful.
"Retailers are acting as agents to reduce choice. We can't abuse that and try to change too many things at once."
Retail space, in it broadest sense, is opening up as a marketing medium. Birmingham's Bullring has the highest shopper footfall of any space in Europe, for example. As a result, any available space is being colonised by brands via posters and face-to-face marketing. In some respects, this is reinforcing the classic model of packaged goods marketing. Manufacturers have to get into a consumer's mind long before they reach the store. Then at the point of purchase the final push has to be made. "Advertising has always done the job of shouting from the rooftops, while packaging is the silent salesman that closes the loop," says McKendrick.
He points to Innocent as a prime example of a brand which has managed to lock the two together tightly. It has also added a further dimension by offering its 'Banana' phone line for customer care and comments.
Other brands are trying to occupy space in the consumer's mind to get around the retailers' filtering process. Live events and experiential marketing are prime examples. "Brands are using these to good effect. We used to run the Carling programme a couple of years ago, and we now do similar things for Stella Artois, Castlemaine XXXX and Buddha Beer. It is about helping to deliver a brand experience," McKendrick argues.
While straightforward sampling often sits at the heart of such activities, it opens up the possibility of extended brand interaction outside of the sales process. By signing up consumers to ongoing programmes around subjects they are interested in - from films and music to football - the brand name gets embedded in the shopper's consciousness. The result is a shift not just in the way packaged goods brands market themselves, but potentially in what they define themselves as. McKendrick believes that, in the context of the attention economy, this will throw up some critical questions.
He asks: "As brands work to develop stronger relationships as providers of leisure or experiences, what do they become? Are they rooted in their product, or do they become a leisure brand?"