Making Shopper Marketing Work

Consumer product manufacturers and retailers are aggressively improving their shopper marketing expertise and beginning to see the fruits of their labors, according to a report by Deloitte Consulting commissioned by the Grocery Manufacturers of America.Over the next three years, companies will increase their spending on shopper marketing at a greater level than they will for any piece of the marketing mix besides interactive (as in online marketing), and at significantly higher levels than they will for any mass media advertising channel, according to the report, entitled "Delivering the Promise of Shopper Marketing: Mastering Execution for Competitive Advantage." (See file attached at right.)What's more, companies embracing shopper marketing have found that it provides a return on investment rivaling that of any other strategy: More than 70% of manufacturer respondents and better than 80% of retailer respondents ranked the practice among the top four marketing activities for delivering ROI. (See chart at right.)Using results from an online survey of more than 100 companies and interviews with 40-plus marketing professionals, Deloitte has created a "natural lifecycle" for companies looking to develop shopper marketing expertise, and devotes much of its report to explaining the process. The three key stages are:Incubation: Dedication of resources and the initial development of shopper-centric programs, often on an ad hoc or pilot basis. Scaling: Creation of sustainable shopper marketing "groups, tools and processes," including in-depth analysis of activities and the formal strengthening of partnerships with retailers. Culturally Embedding: Integration of shopper marketing throughout the organization as a "critical lever" for all marketing, sales, merchandising and category management activity.The farther along the lifecycle a company has advanced, the greater its returns have been thus far, Deloitte suggests. And many companies are ramping up quickly: While a similar study conducted by Deloitte and the GMA in 2007 found that only 6% of manufacturers and no retailers had "significant shopper marketing organizations" (defined as headcounts of more than 20 people), the 2008 study finds that those numbers have "jumped to 29% and 60%, respectively."Still, only a handful of companies have gone beyond the first stage of development. "A few companies have significantly outpaced everyone else in understanding and implementing shopper marketing," the report suggests. "The 'sophistication gap' between these leaders and the rest of the industry is growing."Deloitte's report identifies two best-in-class companies: Procter & Gamble is lauded as an industry leader for creating a "developed and skilled organization" that has instilled a company-wide, shopper-centric mindset through a process initiated in the 1990s. At the execution level, Kimberly-Clark is praised for a collaborative program with Target that put "Training Center" merchandising areas in stores to help moms and toddlers transition from diapers to training pants.Manufacturers and retailers willing to take the steps necessary to create a true shopper-centric organization are positioned to reap great rewards, according to the report. "Companies that have embraced shopper marketing as a key component of 360-degree integrated marketing are growing 50% faster than the [product] categories [in which] they participate. The most advanced companies are growing at almost double the rate of their categories," the report states. "Moreover, 90% of manufacturers with more advanced capabilities report that shopper marketing helps them effectively meet retailer needs and boost top-line growth."But Deloitte (which, not incidentally, has a shopper marketing consulting practice) warns that the window of opportunity is closing for companies that have yet to begin the process. "There are a limited number of seats at the table, and retailers are already beginning to choose their favorites. The winners will likely have greater influence with their chosen partners, greater access to data, and increased opportunities to influence shoppers at the "moment of truth" within stores.The Role of DisplaysThe report makes a noteworthy distinction between "in-store activities" that can be classified as "shopper marketing" and product "displays," which are intertwined with "trade promotion" in the survey questions. (See charts.)The exclusion reflects the historical viewpoint of product displays as sales-driving tools that don't build brand equity, according to Rob Holston, Deloitte's shopper marketing practice leader. True shopper marketing programs must be based on shopper insights, support brand equity and ultimately drive conversion, he said.Product displays that meet those criteria would classify as shopper marketing, said Holston, adding that the industry seems to be "evolving away from secondary displays that are product-centric" to more strategically driven merchandising activity.Nonetheless, trade promotion/displays were often cited as among the best generators of ROI. And a significant number of respondents said they would increase spending in these areas over the next three years. (See charts.)The Grocery Manufacturers Association (GMA) represents the world's leading food, beverage and consumer products companies. The Association promotes sound public policy, champions initiatives that increase productivity and growth and helps to protect the safety and security of the food supply through scientific excellence. The GMA board of directors is comprised of chief executive officers from the Association's member companies. The $2.1 trillion food, beverage and consumer packaged goods industry employs 14 million workers, and contributes over $1 trillion in added value to the nation's economy. For more information, visit www.gmaonline.org.Deloitte Consulting LLP is one of the world's leading consulting firms for business strategy, operations, technology, and human resources planning. Deloitte Consulting provides services that are designed to bring together the unique experience, scale, and capabilities of their professionals to help clients in their efforts to address their most complex business problems. Please see www.deloitte.com.

Making Shopper Marketing Work

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