GC Retail in Detail had the opportunity to interview Markus Stahlberg, CEO of Phenomena Group and co author of the Worlds 1st. Shopper Marketing Book.
Markus has been working with international shopper promotions since 2003 and prior to this he was involved with with mobile marketing and entertainment in two startups. Markus has a degree of Master of Science from Technology and he wrote his master’s thesis about mobile coupons.
Phenomena Group is a shopper promotions agency founded on 1999 in Finland, today the company is operating in 22 countries and creates more than 100 promotions each year around the globe, working together with clients such as Unilever, Nestlé, Anheuser-Busch InBev and Pepsico.
Markus, today in Latin America we are hearing about the concept of shopper marketing and the impact that it can have in the point of sale, but the truth is that it is still something new for most of the retailers and the small and medium manufacturers. Could you explain us which are the main differences between consumer marketing and shopper marketing concepts?
This is a very good fundamental question. A simple answer is that consumer marketing is focused around consumer and shopper marketing is focused to the shopper. Understanding this small difference is essential, because applying the methods of consumer marketing for the shopper always delivers disappointing results. The reason for this is that the context of the consumer is completely different from that of the shopper. Consumer is the person using, enjoying or consuming the product and shopper is the person who should decide which products to buy.
Consumers are typically reached through media in a setting in which they have time to chew on the messages and think about them – and more importantly, there is no immediate action required. Consumer marketing aims at creating awareness and preference of the product and brand and intends to create a desire to buy the product. Within overall consumer-shopper context this could be called the “mindspace” of the person. The mindspace has a crucial effect on within the shopper context but it is alone not enough to make sure the shopper buys the particular brand.
Entering the shopper’s world, we can clearly see that the environment is very different. The primary driver for the shopper is the need, sometimes referred to as the mission. In order to fulfill certain needs, the shopper enters the store to buy certain products that fulfill the need. The products could be presented within the shopper’s mind as categories (e.g. nachos) or brands (e.g. Doritos). Taking a typical supermarket as an example; shelfs are filled thousands of different brands and hundreds of categories to fulfill existing need or to create new needs impulsively. The key focus of shopper marketing is in the last inches of the shopper’s decision making process in front of the shelf. In this setting, the shopper will make the crucial decision, which brand to buy for the need. In this crucial moment, the Mindspace enters the picture.
The Mindspace, sometimes referred to as the “consideration set” has been created through the past exposure to (consumer) marketing communications, social interactions and product experiences and will state the order of preference for the brands to fulfill a specific need.
This is where the context of shopper marketing really kicks in. What happens after this moment will define the outcome of over 70% of purchase decisions taking place globally. The first crucial factor for determining the direction of the shopper’s actions will be the “shelf space”, which means where the product is placed in the store and shelf, what kinds of secondary placements are available how many facings the product has in general. This will determine whether the shopper will even see the product, or whether she will ignore it completely. Retailers control the shelf space, so for manufacturer’s shelf space can mainly increased through retailer-co operation and sales to the trade.
If the shopper notices the product, its appearance may or may not associate with the image of the brand, the shopper has in her mindspace. This is the context of packaging design. The final and very important determinant of brand selection for the shopper will be the “promotion” that can mess up the picture completely – like it usually does. Temporary price reduction is the most common type of promotion that any marketer will recognize as a crucial determinant of success. However, there are other types of promotions as well and the key determinant of the promotion for the shopper is how exceptional and attractive it is – when competing against price offs, majority of promotion mechanisms don’t have any chance. For marketers the key determinant is of course cost – and likewise all marketers will acknowledge that price discounts are not exactly the most cost efficient mechanism. This is the reason why our company Phenomena Group focuses on creating 5 to 10 times bigger promotions without increasing the budgets of our clients.
Can the culture and traditions of each country affect to understand the shopper behavior?
Again a very good question! My colleague Ville Maila, Phenomena’s Planning Director has dealt with this topic in details in his article for the 2nd edition of the Shopper Marketing book. Consumer marketing is heavily affected by the local culture and traditions, because products are consumed and used in a very different environment depending on the country. However, if you take a typical supermarket concept in China, India, Germany, US or Mexico, you will see only minor differences. This is the truly amazing thing about shopper marketing – instead of being local, it is universal. Anywhere you go, you will find out that the same fundamentals are operating; 70% of brand level decisions are made in-store, the more space you have from the shop floor, the bigger your sales will be and the price reductions almost always provide guaranteed uplift in sales. Having said this, there are some fundamental differences between the shopping behavior between the countries, relating to dominant store concepts (e.g. hard discounters vs. high end hypemarkets) or the overall climate of the area. Based on our experience, the hotter the climate is, the more the shoppers are willing to spend time in-store and the more they will enjoy shopping in general.
I would also ask you, if the shopper behavior could have some variations depending on the format of the store?
Shoppers choose the stores they visit based on their needs and the needs state how they will behave in-store. For some needs or “shopper missions”, the shoppers respond more probably to impulse offer and for some needs it is the complete opposite. Also, the average price of the products and the amount of items in the shopping basket will have a big impact on the behavior. Generally, the higher the average price of the product, the longer the decision making process will be and the more items in the basket, the shorter time will be used for picking each one.
Today, when a consumer goes to the supermarket to get a product to satisfy his needs, once he enter the shop and stop in front of the shelf, he realizes that there can be more than 10 or 15 products (depending on the category) to satisfy that need, so which are the key factors to succeed for a brand in order to be chosen among the others?
The key factors are getting a primary preference position within the shopper’s consideration set, maximizing optimal floor and shelf space for the product, succeeding in package design to stand out and to match with the mindspace expectation for the brand and creating exceptional promotions that are impossible to bypass without making a purchase.
After developing hundreds of promotions for different companies in different categories, which is your opinion about price off’s at the store, one of the most common promotions we can find at the supermarkets?
Temporary price reductions are an efficient but unintelligent promotion mechanism. The problem with price offs is that they are extremely expensive and completely non-selective. In other words, a big number of shoppers would buy the product anyway even without the price off, so for these shoppers it’s pure waste of money. On the other hand price offs are an easy promotion for shoppers that offer a tangible and instant benefit. Retailers love price offs for various reasons, so the best approach is to learn to optimize how they are used in conjunction to more innovative promotion mechanisms.
In order for a brand that is not at the top of the mind or the case of a newly launched product that wants to increase its sales and start creating loyalty, which type of promotions do you believe that are the most appropriate in this case?
First of all, we would not recommend a brand that is not in the top of mind or is a newly launched product to think about loyalty at all with their promotions. Instead, they should get their penetration up, and fast! Amount of the different people who buy and try the product will be the key determinant for success or failure of the product – if the retailer’s doesn’t see a clear trend of increasing penetration and consequently repeat purchases, the product is doomed to lose it’s shelf space and disappear. Unfortunately this is the destiny of majority of product launches nowadays. In the scenario of a product with low penetration, the key is to maximize the different people trying the product, ensure that the product quality matches the expectations and make sure shopper virtually bumps into the product every time she is shopping.
What is your opinion about combining the online channel with the off line in order to support a shopper promotion campaign?
We have experienced an immensely fast trend from in-store to online during the past few years. 5 years ago most promotions were mainly executed in-store through leaflets and various in-store materials. Today 99% of promotions are based on taking advantage of online as participation channel. Our prediction is that within a couple of years majority of promotions will also include a strong social media and mobile dimension through the emergence of smart phones. Online and digital channels in general provide a very good environment to enforce the brand’s key messages in order to maximize the probability for a repeat purchase or improve the preference position within the consumer’s mindspace. Furthermore, digital channels provide a possibility for a continuous interactions mainly through acquiring email direct marketing permissions .
Assuming that a manufacturer has thought about a shopper promotion, the truth is that the stores are not of them and in most of the cases, he can’t decide if it will be possible to execute it or not, he will have to first talk about it with the retail buyer and then the retail buyer will have to think in lot of things such as if it the promotion will help to increase the value of the category, if there will be changes in the planograms or if he will have to manage space to include some external supports for the product. How can the manufacturer deal with this problem in order to increase the probabilities that the campaign will be executed?
The key thing is to stand out from the competition through exceptional approach, which is something the retailer truly gets excited about. It is very difficult to compete with the price reductions with ordinary promotions, which is the reason why our clients have opted for the approach of creating 5 to 10 times bigger promotions. This kind of approach will stand out from the clutter of ordinary promotions suggested by majority of competitions and is guaranteed to excite the buyer just like it excites the shoppers. Furthemore, we always recommend to invest into an excellent trade story to make sure the buyer understands the value proposition of the brand for them and benefits of the proposed activities.
Which tips would you give to small and medium enterprises manufacturers in order to start increasing it sales with the retailers and win market share on their categories?
Realize the fact that you can steal 70% of the buying decisions from your competitors as long as your brand can be found from the consideration set of the shopper. Forget about expensive and cluttered mass media. Take advantage of online and social media as inexpensive ways of improving your brand’s position within your target consumers’ shopper’s consideration set.Invest your money to great relations with the trade and provide constantly innovations for them. Do smart promotions, bigger is better and less is more – make sure the promotions are based on fixed cost element instead of variable cost one – for example through using promotion insurance.
At last I would like to ask when the new edition of the book is coming and what can we expect of it?
Markus Stahlberg, CEO of Phenomena Group
The book is coming out internationally in April 2012. The new edition has been completely revised and includes series of exciting new articles regarding the future of shopper marketing and shopper marketing from the international perspective. Additionally it includes an all new foreword by one of the most prominent marketing guru’s in the world, Philip Kotler. You can preorder the book from Amazon at: http://amzn.com/0749464712
You can read the full interview in Spanish here:
http://www.gcretailindetail.com/noticias-de-retail/2011/10/12/Exclusiva-GC-Retail-Entrevista-a-Markus-Stahlberg-CEO-de-Phenomena-Group/
