02 Jul 09

The Integrated Shopper Marketing Revolution

By Toby Desforges

The consumer goods industry is going through a revolution in the way it thinks about marketing brands – a shopper marketing revolution. Shopper Marketing is not just a new buzz word in the marketing lexicon nor is it an initiative to encourage ever increasing expenditure on in-store media tactics. With the consumer goods industry potentially wasting up to 6% of its total turnover on unproductive activities in retail outlets, the concept of shopper marketing is provoking a profound change in the way companies market their brands.

In this month’s article Toby Desforges, engage’s Global Engagement Director, explores what shopper marketing is, and what it is not. He discusses why taking an integrated approach to shopper marketing is essential and explores what key questions consumer goods companies should ask as they consider their approach to shopper marketing.

What is shopper marketing – and what is it not?

We at engage define shopper marketing as being “the systematic application of elements of a marketing mix to affect positive change in shopper behavior and drive consumption of a brand”. We believe shopper marketing is the extension of marketing from its traditional consumer-focus to encompass influencing the behavior of shoppers.

This is a revolution as opposed to an evolution because it requires marketers to consider two "individuals" – the consumer and the shopper – when they develop the positioning of their brands and define the vehicles they choose for communication. For many this represents a step-change since traditionally the motivators of consumption and those of purchase have been thought to be the same. In this new world, marketers must recognize that the factors that make us desire a brand and those that make us buy a brand are potentially very different indeed.

For instance, consider the motivations of a woman using a skincare brand: A desire for a cleaner, purer complexion; a desire to appear beautiful and a desire to conform to the expectations of a community. Yet the same individual, as a shopper, might be motivated to buy based on the availability of a product in the outlet she chooses, the messages she receives from a product consultant and the attractiveness of a promotion in-store in addition to all of the messages she receives in the outside world.

Embracing this understanding and leveraging it for brand growth requires marketers not only to think differently but to act differently too: For shopper marketing to be truly effective it must be integrated with both the consumer marketing effort and the sales effort. Since retailers control what happens in-store, the execution of the shopper marketing mix requires their support. Such support will only be secured when retail partners are convinced of the business benefits to them. Effectively introducing shopper marketing therefore means that marketing, trade marketing and sales teams can no longer operate in silos.

We therefore believe that shopper marketing is much more than the introduction of new gizmo’s to entice shoppers to spend more: In the same way as advertising is only one aspect of the consumer marketing mix, so expenditure on ‘activation’ in-store is only one part of the shopper marketing mix. The implications of shopper marketing stretch much further than the provision of in-store activation, and will change the way brands are marketed and customer interactions are managed.

Why is it so important that shopper marketing is integrated?

According to OgilvyAction’s Global CEO, Rick Roth, investments in ‘shopper marketing’ have increased at nearly three times the rate of more traditional marketing disciplines. This observation highlights the massive growth in demand for in-store media tactics. Deloitte estimates that consumer goods companies spend 8% of their marketing budgets on ‘shopper marketing’ but this understates the situation as it excludes trade promotions. engage research has found that in certain environments this percentage could be well over 35% if all forms of trade promotions are included. Indeed, in Asian markets such as Hong Kong, Taiwan and, increasingly, Thailand, brand expenditure in sophisticated retailers tops 40% of net sales value and shows no sign of abating.

All are staggering statements, especially when one translates them into the hard cash: for every $100 million of turnover, at least $8 million will be spent in stores. Most of this money will be spent on promotions, which are unlikely to deliver a financial return on investment: when 700 promotions were tracked recently, we found only 30% delivered a profitable return to the manufacturer. In other words the consumer goods industry might be wasting nearly 6% of its global turnover every single year.

This expenditure is made in the belief that ‘the last mile’ is where 70% of purchase decisions are made. But what if this is not the case for your brand in your market?

Certainly we at engage have not found a single instance in any of our work across Asia where this is the case. In one category for instance, less than five percent of purchase decisions are made in-store. A recent survey by OgilivyAction, called “Shopper Decisions Made In-Store” concludes that the importance of ‘the last mile’ varies wildly depending on the market, the category, the brand, the channel and the individual.

A new, integrated, approach to shopper marketing is therefore not only a marketing, but also a financial imperative. engage’s experience has proven that integrating shopper marketing into the activities of the whole commercial team significantly increases returns on brand investment.

What are the key questions that consumer goods companies should ask?

With so much money being spent, companies need an integrated approach to shopper marketing: For every consumption opportunity, companies should define which shoppers to target, in which channels, with what activity to get best returns and then define the levels of investment required in each customer:

Addressing the issues facing a brand in this way enables businesses to focus investment on channels and customers in which they can truly influence shopper behavior. Within these channels, investment can be further directed to activities that influence shopper behavior in favor of the brand. This driving mutual benefits for both manufacturer and retailer, paving the way to high levels of execution.

To begin the process of adopting this integrated approach to shopper marketing, managers across marketing, trade marketing and sales should therefore challenge themselves to respond to the following questions:

1. What are the key consumption opportunities for each of our brands?
2. Which shoppers should we target to deliver these opportunities?
3. In which trade channels can we influence our target shoppers?
4. What activities are needed in our priority channels to deliver the shopper behavior we need?
5. What investments do we need to make in our customers to ensure the right activity is executed in store?

Learn more

In future articles members of the engage team will discuss each of these questions in turn. engage can help your company get better returns from your Shopper Marketing investment. Click here to contact us and find out more.

Further, Toby will be running a series of master classes on Shopper Marketing across Asia, the first of which will take place in Bangkok on 14th July.

To find out more details about this program please follow this link.

About the Author

Toby Desforges is recognized as a leading expert in the field of shopper marketing, having spent 16 years working in the consumer goods industry in Europe and Asia. Toby is the Global Engagement Director of engage and along with engage’s co-founder Mike Anthony, is one half of the partnership which created the company’s unique vision of integrated shopper marketing. Toby leads the company’s efforts to engage with managers who are frustrated by poor returns on retail investment. His practical support in the application of shopper marketing principles enable managers to implement valuable changes in their businesses and his work with global companies is widely respected. Toby can be trusted to demystify the buzzwords and convert the theory into practical actions and profit.