15 Nov 10

Invest in the Right Customers

The Customer Challenge: Where Do You Invest for the Best Results?

by Toby Desforges, engage

Have you decided yet which customers you are going to invest in for 2011? With trade spending escalating every year, you need to ensure that you get the most value from your investment. Otherwise, it’s just an expense. While you’re in budgeting mode, stop and think before you put the same funds—or more—into the same customers and the same activities. If you didn’t see any traction, in the form of increased market share, over the past year, nothing will change.

Now is the time to re-evaluate your plans, so that you can start the new year on the right track to gain more value from your trade investment. Before you can determine who gets how much money, take a trip down the path to purchase. At the very start, is the consumer, that valuable individual whose desire for a brand sparks the purchase. Follow the trail from consumption, because your consumers drive shoppers. Shoppers then make the purchase, in the retail outlet of their choice. Without understanding the needs and behaviors of both the consumer and shopper, you are not prepared to determine how much to invest in your customers—and even which customers have value for your brand.

A logical system for making these decisions is based on the 5-Step Shopper Marketing Model:

1. Know your consumers. What consumption opportunities exist? Recognize their needs and priorities so you can influence them. It all starts here!
2. Know your shoppers. Which shoppers support consumers and consumption of your brand? Understand their shopping behavior, you can stimulate purchase.
3. Prioritize your channels. Where can you best influence your shoppers? Identify which channels are valuable to your brands and what opportunities exist to influence the shoppers.
4. Build the right in-store marketing mix. What activities are required in-store? Execute the activities that motivate your shoppers to buy.
5. Invest in your customer. What investment is needed to affect the changes you seek in-store? Spend money on a performance-based plan that focuses on delivering mutually beneficial outcomes.

If you want to know which customers to invest in, you need to know which channels are important to your brand. Today, retailers often function across various channels. Morrisons, a leading player in the UK, recently announced its expansion to the digital channel. Dairy Farm Group’s Giant, Cold Storage and Guardian function under different banners but the same ownership.

Behaviors vary from channel to channel, so it’s critical that you understand the distinctions.

Deciding on what customers to invest in is therefore the last step. Once you work through the first four steps, you are prepared to take the fifth step, and you might be surprised by the information you uncover. You might, for example, learn that your biggest customer is not delivering the shoppers you want, or cannot influence then to divulge their purchases behavior. Perhaps a customer with multiple channels presents opportunities in some outlets, but not others. Tesco, for example, operates in five different channels in Thailand: hypermarkets, supermarkets, convenience stores, gas stations and discount stores. If the knowledge gained from the 5-Step Shopper Marketing Model identifies that convenience stores are your most effective channel based on your shopper’s behavior, you have key insights to leverage in your negotiations. You can advise Tesco that you choose to invest money into the convenience stores where they have more influence, rather than put money into hypermarkets where incremental value is hard to secure.

Look at those retailers who deserve your trade money, and build your terms accordingly. Certainly, arresting or reducing your trade spend presents a challenge. Your customers have become accustomed to seeing an annual uplift in fees and points. Whether you hold your terms or increase them, you must ensure that you get the most value from your expenditure. Invest in influencing the right shoppers with the right activities in the right customers.

The 5-Step Shopper Marketing Model has proven to be a valuable tool in gaining more control over trade spending. To gain greater value from your customer investment, talk to me about applying this process to your brand so you can improve the return on your customer investment.