Shopper Marketing ROI: Benchmarking What Works

It’s not sexy, but ConAgra Foods’ definition of shopper marketing, straight from an internal training document, lays out not only what it does, but whom it’s supposed to benefit: “Shopper marketing is understanding how our target consumers behave as shoppers in different channels and formats and leveraging this intelligence to the benefit of all stakeholders – our brands, their core target consumers, our key retailers and the mutual shopper.”In a new benchmarking study, Rick Abens, an analyst who counts ConAgra as a client, found that bottom-line benefits to retailers are a hallmark of high-performing shopper marketing programs. But even Abens, the founder of Foresight ROI, a Chicago-based marketing analytics firm, concedes that most shopper marketers only “kinda sorta” understand just how important retailers are to their success. For example, in The Hub magazine’s rankings of shopper marketing practices, “retailer relationships” ranked a rather distant fifth out of 13 performance criteria in the collective opinion of executives (See Related Articles). Foresight ROI’s 2013 benchmarking study, by contrast, identified 10 best practices based on hard data from actual programs, not industry consensus.The data – from more than 8,600 shopper marketing events deployed by leading CPG companies at all major grocery retailers – was crunched through standardized sales and marketing response models that “measure ROI and the synergies between shopper marketing and other program elements,” says Abens, who held senior-level market research positions at ConAgra, Kraft Foods, ACNielsen and Kellogg Co. Collaborating with retailers, he adds, is a key driver of success that cuts across Foresight ROI’s best practices.To be clear, shopper marketing at its best prioritizes the concerns of shoppers. “It involves understanding and addressing shoppers’ needs,” says Abens, a charter director of the Marketing Accountability Foundation’s Marketing Accountability Standards Board (MASB). “Very often, shopper marketing is centered on making it easier to shop.” But Foresight ROI’s benchmarking study brings into focus retailers’ influence and importance, if not their exact role, in maximizing shopper marketing ROI.Here are some findings to keep in mind when working with retail partners:Brands’ and retailers’ actions drive each other’s success. (See chart #1)The most profitable shopper marketing programs for brands tend to produce bottom-line benefits for retailers as well. For retailers, the profit lift comes through increased category sales. “Manufacturers want a return on investment for their marketing spend, but without category growth, it’s not a win-win,” Abens says. “If it’s just a brand win but doesn’t grow the category, then the manufacturer may need to change tactics to ensure continued retailer support. You’ve got to give to get.”While the brand’s ROI depends greatly on in-store display support, the retailer’s objective of increasing category sales comes largely from pre-store tactics that the brands pay for and control.Pre-store activities can work to both parties’ advantage. (See chart #2)Pre-store tactics (direct mail, feature price ads, coupons) are one way to increase category sales while expanding program reach and increasing brand penetration. “Reaching shoppers at home and in-store with both a message and an offer is one pattern that works well,” says Abens, adding that pre-store tactics motivate or remind shoppers to put the brand or category on the shopping list, sometimes with a specific retailer depending on the offer.Though a “full path to purchase” approach costs more due to the number of tactics involved, shopper marketing programs with multiple touchpoints offer brands a 21% better ROI, Abens says, while typically benefitting retailers as well.Retailers know that advertising price reductions in FSIs helps build store traffic, sales volume and profitability by diverting customers from competing stores, so it’s not surprising that brands in feature-price ads get preference when it comes to display space. But Foresight ROI found that the preference is pronounced, with featured products 30% more likely to receive display support.Pre-store tactics are particularly important for high-low retailers since their target shopper habitually looks for deals when planning trips. At everyday low price retailers like Walmart, in-store activity ups the ROI by differentiating the brand where it cannot stand out based on price.Trade and shopper marketing need each other. (See chart #3)Shopper marketing almost always works better aligned with good trade promotion support. This alignment effectively gains shoppers’ attention as well as retail support. “Some people might not like to hear this,” Abens says, “but shopper marketing programs that aren’t integrated with trade promotions [discounting and merchandising at retail stores] typically don’t do as well.”Of the thousands of programs analyzed for ROI, “trade promotions with a shopper marketing overlay” tended to perform best, Abens adds.This finding is consistent with a 2011 Booz & Co. Trade Promotion-Shopper Marketing Intersection survey suggesting that CPG companies “can capture greater returns and competitive advantage by more closely aligning shopper marketing initiatives with trade promotion activities.” According to Booz & Co.’s report, “When this alignment is achieved, shopper marketing programs will produce signiﬁcant gains in return on investment (ROI) and brand equity, while also strengthening relationships with retailers.”Simply stated, “Retailers tend to support trade promotions with shopper marketing programs more than those without,” Abens says, because they expect insights-based, solutions-oriented shopper marketing to “increase demand and sales velocity.”Indeed it does, especially if the programs are “highly relevant” to shoppers. High relevance factors as defined by Foresight ROI include good timing or seasonality; themed programs; programs offering a solution (often by bundling products for a basket-size boost); partnering with a charity; and simply supporting the brand’s positioning with consistent, compelling messaging. The ROI for “highly relevant” programs was 18% higher on average. Again, this is consistent with Booz & Co.’s conclusion that “shopper solutions added value beyond price discounts” and brought better returns. (See chart #4)Brands should fund their best customers. (See chart #5)Brands will see greater returns at certain retailers. Based on these measures, “a slight change in budget allocation can generate large profits,” Abens says, because a brand’s top retailers help generate returns four times greater than the lowest performers. Shifting $1 from the lowest retailer to the best is equivalent to delivering an extra $1 in profit on $1 spent on shopper marketing, Foresight ROI found. Furthermore, brands that funded their best customers through small reallocations increased their returns on shopper marketing upward of 5% on average.Establishing metrics for retailers is easier said than done; indeed, it is among the services Foresight ROI sells. But while Abens wants to sell services, as a MASB member he sincerely shares that organization’s mission to “enhance the credibility of the marketing discipline, improve the effectiveness and efficiency of marketing activities, and enable continuous improvement over time.”Shopper ROI is usually better than trade, but also more variable (See chart #8)On average, shopper marketing delivers a better return on investment than trade promotion, although its performance varies to a much greater degree. While most trade promotions tend to be pretty average, shopper events can be very good or very poor from an ROI standpoint. The reasons for the greater variation are clear. First of all, measurement of trade promotions has been well established for years at all major CPGs, who know well what works and act accordingly. Shopper marketing measurement is much less developed, so companies have less knowledge of what works and must experiment with strategies, platforms, event design and tactics.Every event in the top 30% that Foresight has measured are shopper marketing events because there are more vehicles available and therefore more options available to motivate shoppers. Also, shopper programs can be more specific to meet the needs of targeted shoppers.On the downside, most of the bottom 20% of events are also shopper events. Since CPGs don’t have good knowledge about what works, they also don’t know what doesn’t work. As a result, they often execute programs that don’t work well, sometimes repeatedly. Measurement with a "learn-change" process can improve a company's knowledge of key performance drivers and lead to more successful execution in the future.Benchmark data was standardized for comparison (See chart #9)The benchmark metrics were compiled from thousands of events at leading CPG companies in all top supermarket and supercenter retailers. Source data measurement and models were standardized to make the benchmark comparisons. The sales response and financial models link marketing actions to P&L. Sales response models measure the conversion rate from a shopper exposure (shopper impression) to extra purchases by the shopper that would not have occurred otherwise. Financial models use standard cost and P&L measures to compute ROI and diagnostic metrics. These metrics and model methods have been audited by the Marketing Accountability Standards Board (theMASB.org) to assess the characteristics of an ideal metric.Standardized metrics are needed to establish a common understanding — a common language — to foster more effective collaboration. The metrics must be comparable in three ways: in terms of time, elements and industry-wide. These valid comparisons will allow for better decisions with less guessing about expected outcomes. For example, managers of CPGs make resource decisions across brands, channels, customers, events, and tactics. Meanwhile, retail managers have choices about support types and levels for manufacturer brands. They also choose what programs and media to offer vendors.High-equity brands perform better (See chart #10)Pre-store tactics containing an offer like a coupon or feature price ad typically have a higher ROI than tactics that focus on supporting the brand’s equity position. This makes sense, since it reflects deal-seeking shopping trip behavior. Once in-store, equity messages tend to differentiate the brand at the first moment of truth.Bigger is better ... sometimes (See chart #11)Should shopper marketers “Go Big or Go Home?” Is a big, in-season event always the right way to go, or are there times when smaller, more frequent programs make sense? While big events can generate high ROI and lift (although typically at high cost), there are situations in which it makes sense to execute more events at lower cost to maintain a promotional frequency that fits the product's consumer purchase cycle.

Shopper Marketing ROI: Benchmarking What Works

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