GROCERY: Grocery Category Management: Space Cowboys
Category management's been around long enough that it's certainly earned the right to have its own conference -- and last month it finally got one, "Category Management, Development & Marketing," organized by the Institute for International Research (IIR).
Held over three days in Scottsdale, Ariz., the conference attracted more than 110 delegates, of which roughly just 10 percent were retailers, according to New York-based IIR. Sixty-one percent of the attendees were from manufacturing companies, while another 29 percent represented service providers, research firms, sponsors, and media companies, among other interested parties.
The event was subtitled "Re-engineering the Retail Environment to Increase Efficiencies, Profits, and Shopper Loyalty." However, it was clear that consumer insights -- how to more efficiently gather them, analyze them, and wield them to improve category performance and profitability -- comprised the overarching theme. More than 30 speakers were on the agenda, representing major retailers such as Wal-Mart, AutoZone, Woolworths UK, and Ace Hardware, plus manufacturers including Cadbury Schweppes, PepsiCo, Anheuser-Busch, General Mills, and Unilever.
That packed a lot of category management expertise into a single venue. One of the conference's earliest supporters -- indeed, its Official Supporter -- was CPG CatNet, a trade association for category development professionals, started in 2005. The following is an excerpt from a detailed report of the conference, prepared by CPG CatNet.
With about 50 executives participating, a full-day, preconference summit featured presentations from leading CPG firms, including General Mills, Cadbury Adams Canada, Tyson Foods, and Unilever. Meinhard Hausleitner, director retail planning for Scottsdale-based RTC, who was moderator for the day, fostered a level of spirited interaction.
General Mills laid out its approach to the practice in a presentation entitled "Leveraging Comprehensive Shopper-Focused Research for Strategic Category Plans." The vendor's main objective in CM, and that of its retail partners, is "profitable volume growth," according to Adam Dill, General Mills' director of category management. However, those retailers are also after "meaningful differentiation and shopper-centric focus," he said. "They come to us and ask us to 'help us be different.'"
General Mills formed a Shopper Insights Group five years ago to boost its expertise. Over time its research pursued the opportunity to better understand the shopper, the shopping trip, and the store. "This is still a work in progress," noted Dill. "We're not expert yet by any means, but we really are making strides." One example is General Mills' Shopper 360 Survey, developed with help from research firm TNS from 60,000 shopper interviews and 120,000 trips. Plans are to double the size of this sample in year two.
A goal of the research is to derive shopper-centric insights based on perceptions rather than behavior, going beyond what's possible using only loyalty card data, to probe shopper lifestyles, values, needs, loyalty to retailers, health concerns, and attitudes regarding time and money.
Analysis of shopping trips suggested three main groupings: Weekly Planned ($100 or more), Quick Trip, and Discovery Trip. General Mills divided these into subtypes, each of which for segmentation purposes can be indexed across retail channels. Shoppers based their perceptions of stores on their opinions of price/value, variety, and shopability.
Another General Mills presenter, Sharon Hoeting, the company's shopper insights manager, discussed the role of ethnographic research as a counterbalance to the scanner-based analyses most widely used in category management. One-on-one interviews revealed drivers behind some purchase decisions.
For example, "Families tend to under-index when it came to buying products that can help with weight control," said Hoeting, explaining, "Some moms see the family dinner as a 'derailer' of their own weight-control efforts. They also feel it can be expensive to eat healthy." This led General Mills to identify an opportunity in "Easy and Affordable Dinner Solutions."
Ace: tracking the path
What happens once shoppers are inside the layout of the store, and how does that affect category management? Ace Hardware, a retail co-op of 4,800 stores in the United States (as well as 70 other countries) asks itself that question. The retailer faces a distinct type of category management challenge compared with supermarkets or mass merchants. To begin with, customer visit frequency averages just four times per year, or 12 times for the top group, said Matt Bieber, category manager, and Chris Huot, group category manager, at Ace.
To optimize those close encounters of the in-store kind, Ace invested in trip management research to help it sharpen its recommended store layout and category adjacencies. Part of the goal was to improve department flow, product assortment, and product merchandising. Cluster analysis revealed four major trip classifications:
--Major trips (major projects and large-ticket items, $100-plus, 7 percent of dollar volume)
--Medium trips (multiple items, $25-$100, 18 percent)
--Quick trips (high-velocity items, shortest visit time, >$25, 48 percent)
--Specialty/destination trips (specific, low-velocity items that are essential to a project, 27 percent).
Ace used these insights to redesign the flow of departments in its prototype, applying the insights to identify a role for each major department. Electrical, for example, is a mixture of project-oriented destination items and high-impulse items.
The company designed its proposed layout to position the impulse items for maximum visibility and effect. It parked housewares close to paints, sundries, and cleaning supplies, because these categories tend to have higher involvement by females, for example. It treated plumbing, on the other hand, as a destination department in the rear, close to the service counter.
In its approach to category merchandising and store design, Ace now makes every effort to be "fact-based and market-driven," said Huot.
Cadbury: psych lessons
Cadbury Adams Canada applied consumer psychology to support user segmentation and ultimately design and position products, said Mike Henry, consumer and shopper insights manager for the company. The value of this approach, he said, is threefold: knowing who your shoppers are, knowing how they behave in the store, and understanding how changing the in-store environment can help change their behavior.
Henry said applying psychology lets marketers take the shopper into consideration early on in product development. In categories where consumers act mostly rationally, a market can trigger desired behavior, using verbal dialogue. For more emotional products, however, pictures or imagery might be more effective.
Henry described what he called the manufacturer mindset as seeking "opportunities to trigger category interest through in-store merchandising and strategically placed triggers and messaging." Taking the retailer's interest into account, the manufacturer might also try "to increase brand sales by improving in-store performance through in-store shopper-sensitive initiatives."
Shoppers selectively edit the assortments they perceive, by "de-selecting irrelevant brands," said Henry, who added that marketers must accept that "the shopper's mind is always filled with other things."
Cadbury seeks to target consumers using both rational and emotional drivers. The challenge, he conceded, is "how to uncover their deeper needs and wants." A product like chocolate, which has a strong emotional component, is associated with sharing, giving, and self-indulgence. The company looks at such factors as mood state and usage occasion, category triggers such as displays and ads, and final decision factors such as taste, brand, and ease of obtaining the desired product. Among several techniques the company applies to capture purchases, he said, is the use of package imagery that "shows the flavor" of the product.
Cadbury Adams Canada used Videomining technology (which derives behavioral data from in-store videocameras) to obtain insights about confection shoppers. It found that while 52 percent of buyers browsed the store, the other 48 percent made a quick trip in and out.
The company applied these insights in the development of Cadbury Thins, a 100-calorie chocolate bar that has met with great success in the Canadian market and is being readied for rollout in the United States. Cadbury aimed it at a segment Henry described as "calorie-conscious Karen," who loves chocolate but hates calories. The manufacturer merchandised the bars in small clip-on displays that could be located in magazine aisles, near checkouts, and in gum racks for impulse triggering.
"When people go to a drug store, they start thinking about themselves. This is good for chocolate," said Henry.
This is just a taste of the detailed insights into the work in progress that is category management. For a more comprehensive report on the entire conference, visit CPG CatNet at www.cpgcatnet.org.
Held over three days in Scottsdale, Ariz., the conference attracted more than 110 delegates, of which roughly just 10 percent were retailers, according to New York-based IIR. Sixty-one percent of the attendees were from manufacturing companies, while another 29 percent represented service providers, research firms, sponsors, and media companies, among other interested parties.
The event was subtitled "Re-engineering the Retail Environment to Increase Efficiencies, Profits, and Shopper Loyalty." However, it was clear that consumer insights -- how to more efficiently gather them, analyze them, and wield them to improve category performance and profitability -- comprised the overarching theme. More than 30 speakers were on the agenda, representing major retailers such as Wal-Mart, AutoZone, Woolworths UK, and Ace Hardware, plus manufacturers including Cadbury Schweppes, PepsiCo, Anheuser-Busch, General Mills, and Unilever.
That packed a lot of category management expertise into a single venue. One of the conference's earliest supporters -- indeed, its Official Supporter -- was CPG CatNet, a trade association for category development professionals, started in 2005. The following is an excerpt from a detailed report of the conference, prepared by CPG CatNet.
With about 50 executives participating, a full-day, preconference summit featured presentations from leading CPG firms, including General Mills, Cadbury Adams Canada, Tyson Foods, and Unilever. Meinhard Hausleitner, director retail planning for Scottsdale-based RTC, who was moderator for the day, fostered a level of spirited interaction.
General Mills laid out its approach to the practice in a presentation entitled "Leveraging Comprehensive Shopper-Focused Research for Strategic Category Plans." The vendor's main objective in CM, and that of its retail partners, is "profitable volume growth," according to Adam Dill, General Mills' director of category management. However, those retailers are also after "meaningful differentiation and shopper-centric focus," he said. "They come to us and ask us to 'help us be different.'"
General Mills formed a Shopper Insights Group five years ago to boost its expertise. Over time its research pursued the opportunity to better understand the shopper, the shopping trip, and the store. "This is still a work in progress," noted Dill. "We're not expert yet by any means, but we really are making strides." One example is General Mills' Shopper 360 Survey, developed with help from research firm TNS from 60,000 shopper interviews and 120,000 trips. Plans are to double the size of this sample in year two.
A goal of the research is to derive shopper-centric insights based on perceptions rather than behavior, going beyond what's possible using only loyalty card data, to probe shopper lifestyles, values, needs, loyalty to retailers, health concerns, and attitudes regarding time and money.
Analysis of shopping trips suggested three main groupings: Weekly Planned ($100 or more), Quick Trip, and Discovery Trip. General Mills divided these into subtypes, each of which for segmentation purposes can be indexed across retail channels. Shoppers based their perceptions of stores on their opinions of price/value, variety, and shopability.
Another General Mills presenter, Sharon Hoeting, the company's shopper insights manager, discussed the role of ethnographic research as a counterbalance to the scanner-based analyses most widely used in category management. One-on-one interviews revealed drivers behind some purchase decisions.
For example, "Families tend to under-index when it came to buying products that can help with weight control," said Hoeting, explaining, "Some moms see the family dinner as a 'derailer' of their own weight-control efforts. They also feel it can be expensive to eat healthy." This led General Mills to identify an opportunity in "Easy and Affordable Dinner Solutions."
Ace: tracking the path
What happens once shoppers are inside the layout of the store, and how does that affect category management? Ace Hardware, a retail co-op of 4,800 stores in the United States (as well as 70 other countries) asks itself that question. The retailer faces a distinct type of category management challenge compared with supermarkets or mass merchants. To begin with, customer visit frequency averages just four times per year, or 12 times for the top group, said Matt Bieber, category manager, and Chris Huot, group category manager, at Ace.
To optimize those close encounters of the in-store kind, Ace invested in trip management research to help it sharpen its recommended store layout and category adjacencies. Part of the goal was to improve department flow, product assortment, and product merchandising. Cluster analysis revealed four major trip classifications:
--Major trips (major projects and large-ticket items, $100-plus, 7 percent of dollar volume)
--Medium trips (multiple items, $25-$100, 18 percent)
--Quick trips (high-velocity items, shortest visit time, >$25, 48 percent)
--Specialty/destination trips (specific, low-velocity items that are essential to a project, 27 percent).
Ace used these insights to redesign the flow of departments in its prototype, applying the insights to identify a role for each major department. Electrical, for example, is a mixture of project-oriented destination items and high-impulse items.
The company designed its proposed layout to position the impulse items for maximum visibility and effect. It parked housewares close to paints, sundries, and cleaning supplies, because these categories tend to have higher involvement by females, for example. It treated plumbing, on the other hand, as a destination department in the rear, close to the service counter.
In its approach to category merchandising and store design, Ace now makes every effort to be "fact-based and market-driven," said Huot.
Cadbury: psych lessons
Cadbury Adams Canada applied consumer psychology to support user segmentation and ultimately design and position products, said Mike Henry, consumer and shopper insights manager for the company. The value of this approach, he said, is threefold: knowing who your shoppers are, knowing how they behave in the store, and understanding how changing the in-store environment can help change their behavior.
Henry said applying psychology lets marketers take the shopper into consideration early on in product development. In categories where consumers act mostly rationally, a market can trigger desired behavior, using verbal dialogue. For more emotional products, however, pictures or imagery might be more effective.
Henry described what he called the manufacturer mindset as seeking "opportunities to trigger category interest through in-store merchandising and strategically placed triggers and messaging." Taking the retailer's interest into account, the manufacturer might also try "to increase brand sales by improving in-store performance through in-store shopper-sensitive initiatives."
Shoppers selectively edit the assortments they perceive, by "de-selecting irrelevant brands," said Henry, who added that marketers must accept that "the shopper's mind is always filled with other things."
Cadbury seeks to target consumers using both rational and emotional drivers. The challenge, he conceded, is "how to uncover their deeper needs and wants." A product like chocolate, which has a strong emotional component, is associated with sharing, giving, and self-indulgence. The company looks at such factors as mood state and usage occasion, category triggers such as displays and ads, and final decision factors such as taste, brand, and ease of obtaining the desired product. Among several techniques the company applies to capture purchases, he said, is the use of package imagery that "shows the flavor" of the product.
Cadbury Adams Canada used Videomining technology (which derives behavioral data from in-store videocameras) to obtain insights about confection shoppers. It found that while 52 percent of buyers browsed the store, the other 48 percent made a quick trip in and out.
The company applied these insights in the development of Cadbury Thins, a 100-calorie chocolate bar that has met with great success in the Canadian market and is being readied for rollout in the United States. Cadbury aimed it at a segment Henry described as "calorie-conscious Karen," who loves chocolate but hates calories. The manufacturer merchandised the bars in small clip-on displays that could be located in magazine aisles, near checkouts, and in gum racks for impulse triggering.
"When people go to a drug store, they start thinking about themselves. This is good for chocolate," said Henry.
This is just a taste of the detailed insights into the work in progress that is category management. For a more comprehensive report on the entire conference, visit CPG CatNet at www.cpgcatnet.org.