Marketing's 'Moment of Truth'

Welcome to the In-Store Marketing Institute, a new, content-driven association for marketers who consider the store environment to be the most important venue for reaching consumers.The concept of the store as an essential marketing channel -- if not the linchpin to brand success -- has been discussed for years. Just about anyone who calls himself a marketer can tell you that, "More than 70% of purchase decisions are made in the store."But while most marketers, and marketing organizations, will trot that statistic out from time to time, few have truly explored its implications. The fact that consumers make most of their decisions after they get to the store -- despite the thousands of marketing messages they're subjected to before then -- hasn't had much impact on an industry dominated by mass-media advertising. Most marketers continue employing a two-pronged approach, using mass media channels to build brands while employing the retail environment simply to drive sales.E-mail newsletter Cool News of the Day polled marketing professionals last summer about the industry's view of retail. Only 42% of respondents believed most marketers even have a retail strategy, while an equal percentage said that most marketers don't. That's because most marketers still primarily view retail as a means of distribution, not as a marketing channel, according to respondents. Last December, 53% of respondents to a P-O-P Times survey said their company was "aware" of the new view of retail as a marketing medium, but hadn't changed its strategy to address the concept. Eleven percent more cynically labeled "the store as media" concept as "just another buzzword." (On the brighter side, 36% said their companies take it seriously, and are increasing budgets in response.)That's astonishing, especially considering the vast amounts of money spent on trade promotion -- as much as 60% of total marketing dollars (if you include account-specific spending) and nearly 17% of gross sales for a typical packaged goods company, according to estimates from Cannondale Associates. And those percentages don't include what marketers spend on P-O-P displays, sampling events, in-store media, or other promotions targeted to consumers through retail -- which represents at least another 5% of total marketing dollars, based on an examination of estimates from Cannondale and PROMO magazine.The Media Dilemma Recent industry events are forcing the focus back on the store. The consolidation of retail channels has given an inordinate amount of distribution control to a handful of chains, and the fragmentation of mass media has made it a less effective means of reaching consumers.Marketers are questioning the efficiency of mass media advertising as their primary strategy. Technology is giving consumers greater control over what messages they'll accept, and powerful retailers are beginning to treat their stores an awful lot like a medium -- after all, who needs broadcast television when you can visit your local mass merchant to watch Britney Spears perform live on Wal-Mart TV?Wal-Mart has created its own mini-media empire with TV, radio, and print capabilities as well as shelf fixtures and floor coverings, all delivering an unrivaled reach of 100 million consumers on a weekly basis. But the power of Wal-Mart's in-store options isn't that they can reach 100 million consumers. It's that they can reach 100 million shoppers who can see or hear the message, then immediately pick up a product and buy it.Checking the Options Also driving an increased focus on retail activity are the new Financial Accounting Standards Board guidelines for reporting trade allocations, which forced the typical CPG company to reduce its gross sales by 8.5% in 2002, according to Cannondale estimates. In a survey conducted in early 2002, 50% of marketers -- and 62% of retailers -- told Cannondale that addressing these changes will demand a total review of existing trade promotion programs and strategies.These rules have attached a dollar sign to the trade promotion inefficiencies that brand marketers have railed against for years, but are loathe to address for fear of angering retailers. Now that top-line performance is at stake, marketers may finally have the impetus to ensure that retailer allowances -- which often provide little more than guaranteed shelf space -- are channeled into effective marketing programs.The first shot was fired from a little gun in April, when Marzena BodyCare Products from New Zealand, a little skin-care manufacturer, filed a lawsuit against supermarket giant Albertsons (2,300 stores, $35.7 billion in sales). Marzena claims that Albertsons' allowance and return charges were so onerous that, over a two-year-period, the vendor received no money for the product it delivered.The Time Has Come"The consumer with the cart walking down the aisle ... that is where the action occurs. When the consumer's hand comes in contact with the item, lifts it off the shelf, puts it in the cart, and pays for it at the check-out counter -- that's the desired action. Everything else is tangential."Those words come from John McCann, a professor of marketing at the Duke University Fuqua School of Business. He wrote them in 1995. Since then, little has changed about the marketing community's attitude toward retail.Procter & Gamble chairman A.G. Lafley presented a more recent version of McCann's dictum in his company's 2002 annual report: "P&G brands face their first moment of truth when consumers stand in front of a store shelf and decide whether to buy a P&G brand, or a competing product. A lot happens in that moment, as consumers assess the performance, quality and value P&G brands offer relative to other products on the shelf. When we strike the right balance between brand promise and store price, we win that first moment of truth."The marketing trade and business media endlessly discuss P&G's marketing strategy. Mostly, the discussion centers on whether the company is spending more money on media advertising or consumer promotion. Meanwhile, P&G has been diligently finding ways to make that "moment of truth" more effective. "We're working with more than 30 retailers to enhance the performance of their hair care departments. We've simplified the shopping experience, provided more consumer education and made it easier for consumers to find and ultimately use the products that best meet their needs," Lafley said later in the report. "These changes are delivering department growth ranges between 10% and 44% for retailers and P&G."There you have it: strategic marketing that drives sales -- not just for P&G, but for its retail partners.Placing a stronger emphasis on retail marketing is not a simple proposition. Developing a greater understanding of retailers -- not to mention their unique shoppers -- is a difficult assignment. Finding a way to tailor a brand's marketing to meet the needs of various retail partners is an even tougher one. And the store provides finite real estate, whether you're talking about endcaps or frequent-shopper discounts. All 30,000 SKUs can't get special attention at once. Still, there is a vast array of opportunities available. Many marketers confess to ignorance about the breadth of options available, but profess a strong desire to gain a better understanding.The In-Store Marketing Institute is here to help foster, and deliver, that understanding. I invite you to check us out. I encourage your feedback. And I welcome your support.

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