Strategie shopper marketing
Shopper marketing has left the store. It now also includes before and after the purchase, which can take place in brick-and-mortar or digital points of purchase. With digitalization, fragmentation of media and purchase channels, channel blurring, omnichannel shopper behavior and always connected shoppers looking for convenience and seamless shopping experiences, shopper marketing has grown increasingly complex. An outside-in approach is essential to transform shopper journey insights into a route to purchase strategy to ensure the light offering for specific consumption occasions for a defined target group at the light time and place, activated across key touchpoints.
Shopper marketing has traditionally been a discipline with much academic research focused on attitudes and in-store behavior, and more lately including online search and decision behavior. It has evolved from describing shopper behavior to driving profitable sales by connecting the route to purchase with the route to market in line with the defined marketing strategy to ensure the availability of the right product and service at the right point of purchase at the right time activated in the right way. Strategic shopper marketing is based on several disciplines, such as category' management and ECR, trade marketing, channel management, consumer marketing in terms of shopper journey management, loyalty management. and sales and distribution.
Strategic shopper marketing is cross-functional in nature and integrates the management of shoppers, touchpoints, channels and distribution, and requires both business-to-consumer and -shopper, and business-to-business management skills.
The emergence of strategic shopper marketing
Shopper marketing, especially' in the new digitalized era. is steadily gaining in importance.1 The increasing investments in the field of shopper marketing show the growing importance for manufacturers of converting shoppers into profitable buyers.2 In recent years the spending in shopper marketing activities has continuously increased. Wliile classic shopper marketing spend is plateauing and even decreasing, the marketing spend increase is largely directed toward digital, including digital shopper activation.3
There is a shared view that shopper marketing brings value to manufacturers, retailers and shoppers alike.4 With the growing importance and spread of shopper marketing, the discipline needs to develop a more scientific approach.5 This includes moving beyond the traditional view of shopper marketing as a tool to drive conversion and sales in the short term at the point of sale, usually through presentation, promotions and discounts, which are short-term activities that could threaten brand equity in the longer term.6
Shopper marketing is confronted with many challenges, such as a lack of information and shared standards to measure results. Therefore, budget allocations are often not adapted to the challenges of shopper marketing, leading to sub-optimum alignments between manufacturers and retailer across multiple channels and points of purchase formats.7
The role of shopper marketing has moved away horn being description oriented to become an action-oriented discipline, from describing buying behavior to driving purchases. Shopper marketing has traditionally been very close to research and in many companies it is clearly related to the insights function.
Shopper marketing is still a young discipline with little literature.8 The shopper marketing service industry has traditionally been led by market research companies. Other types of consultancy have entered later or only partially. Shopper marketing is often located between several departments based on the internal organization by company activities, rather than the logic of the purchase process of the shopper.
The purchase process, the action of purchasing a product or service from a company, is one of the most crucial acts in the relationship between the company and its customers. No purchase, no revenues; and no revenues, no company. In other words, shopper marketing is of strategic importance.
Shopper marketing tries to ensure that the buyer, the shopper, meets the product or service. Then, more and more fine-tuning is needed: who is the target shopper; how to find a solution tailored to the shopper's needs, depending on the place, the time, and the situation; how to increase the conversion from shopper to buyer; and how to make the product or service available at each crucial moment. The basic idea of shopper marketing is to ensure that the shopper and product and service will meet at the right time and place to generate a purchase and thereby sales in a profitable way.
Internally, from an organizational point of view, it can be argued that shopper marketing is simply the function that ensures that consumer marketing is aligned with sales and distribution.
The roots of shopper marketing go beyond research of shopper behavior. Shopper marketing links the route to purchase and the route to market. Route to purchase, in short, is
Figure 2.1 Examples of shopper marketing organization
Shopper marketing is often organized as part of research, and sometimes as coordination between sales and marketing.
Source: Weber, 2009
Figure 2.2 Connecting the route to purchase with the route to market
Optimal activation at the point of purchase is based on the shopper's needs (consumption need states), his or hers attitude toward the purchase (e.g. involvement and planning), the touchpoints and their interrelations with the shopper and the product/service brand (shopper journey), the choice of the point of purchase based on its role (attributes of the point of purchase based on tire shopping mission of the shopper), and the management of the points of purchase based on the prioritization and optimization of distribution to reach the points of purchase, and the necessary commercial organization.
the management of the shopping journey. The management of directing shoppers to products and services, the moment of truth, and how to finally convert the shopper into a buyer. The route to market is the management of the product and service to be available to the shopper at the moment and the place intended to maximize the conversion of shoppers into buyers, and the flow of money back to the company.
Shopper marketing has multiple roots. Academic research on purchasing behavior has traditionally focused on the behavior in stores, at the time of purchase, but also on the attitude of shoppers in terms of both involvement and purchase planning. Influencers have also been investigated, such as the influence of persons accompanying shoppers. Category management is another important root of shopper marketing and there are those who see the development of shopper marketing as the phase that has followed category management. Category management was bom out of the need to find productive ways of cooperation between retailers and manufacturers. This includes initiatives such as ECR, in response to which many companies have installed category management functions.9
Category management does not end with shopper marketing, but remains key in the management of the relationship between retailers and manufacturers, especially focusing on organized trade, and the organization, presentation and activation of categories in stores. Thus, it can be said that category management is a vital part of shopper marketing, which has contributed much to the development of the discipline.
Another important influence on shopper marketing is trade marketing, to activate the point of purchase through in-store marketing. It is no longer enough to manage channels to activate consumers and sales, it is necessary to activate the shopper at the final decision point in modern and traditional charnels. A long-standing discussion has been whether trade marketing should be part of marketing, to develop in-store marketing plans; or part of sales, to develop charnel strategies. As shopper marketing evolved, it started to include a focus out of the store, looking at the entire shopping journey to understand how the buying process works, rather than just the act of purchase. Shopper marketing has had to understand
Figure 2.3 ECR Scorecard
ECR Europe Scorecard, including the main areas of tire collaboration between manufacturers and retailers of demand and supply management, and enablers and integrators.
Source: ECR Europe, emnos & The Partnering Group, 2011
Figure 2.4 Development of shopper marketing according to the Partnering Group
The Partnering Group’s view on how shopper marketing is the next step in the collaboration approaches between manufacturers and retailers.
Source: ECR Europe, emnos & The Partnering Group, 2011
Figure 2.5 Commercial fonctions related to shopper marketing
Functions of the commercial organization that normally have activities related to shopper marketing.
how different touchpoints work between brand, product, service and shoppers and how the relationship between the shopper and the consumer works, especially in an environment in which shopper journeys become more individual.10 In that sense, shopper marketing utilizes consumer marketing insights, knowledge and tools. Shopper marketing, as it deals with customers of retailers and manufacturers, is much about loyalty and loyalty programs. In sectors like banking and telecommunications, the relationship is continuous and direct, in contrast to individual purchases of products, in which the shopper can have a preference, but the contractual relationship ends with the purchase. Other roots of shopper marketing come from the channel management side, such as sales and customer management to align interests and ensure preferences and activation at the point of purchase. This includes the distribution and availability of products at the defined points of purchase. Finally, shopper marketing has an important organizational aspect, determining how to structure and organize for a successful implementation.
Shopper marketing has a strategic focus with many different roots and incorporates many functions, or rather, it is part of many functions that need to be coordinated. By definition, a company has shopper marketing, even if it does not have a specific department for it.
Very often the challenge is not that there is no shopper marketing, but that it is spread across the organization, following the logic of the company rather than that of the market.
The importance and relevance of a business discipline is often linked to the specialists providing solutions to companies, the people in charge of it in companies, and the resources dedicated to the discipline. Some companies have established shopper marketing departments, but often they are relatively small and are part or report to other departments, such as sales or marketing.
Shopper marketing, or rather, the activities associated with shopper marketing, are often found in research, trade marketing or key account management. Shopper marketing is often
Figure 2.6 Location of the shopper marketing department within commercial organizations Departments where shopper marketing normally is located in the organization (USA).
Source: Madlberger, 2011
a responsibility of the research department to generate shopper insights, or support in category management efforts. More rarely, it is situated within the marketing department.
Many see shopper marketing as the next step of category management. But in many companies shopper marketing is still understood as category' management, and category management is equated with a decision tree. Clearly, there are many cases and companies that focus successfolly in the area of shopper marketing, but broadly speaking they are more the exception than the title. However, by definition, every company is doing shopper marketing. In fact, it cannot exist without shopper marketing, as it is the basic task of bringing products and services and buyers together to generate sales. Normally, the activities of shopper marketing are organized across different departments, such as marketing, trade marketing, sales, and distribution. Nevertheless, some companies have a department specialized in shopper marketing and when this is so there is often a focus on research, category management and trade marketing.
Category management is often only partially implemented. Cooperation between manufacturers and retailers normally works better on operations, like logistics, where interests are more aligned, than on commercial issues.
The internal positioning of shopper marketing is well reflected in the types of provider of shopper marketing solutions. The continuous development of markets makes it necessary for companies to look to external expertise, so solution providers are usually consultants..
A simple categorization of consultancies can be made along two dimensions. One dimension is the level of solutions provided. The two extremes of that dimension are research-focused companies on the one hand and strategic consulting companies on the other. The other dimension is that of focus, that is, whether they are consulting firms that offer a broad palette of services, or specialists who dedicate themselves to one discipline or one industry. Not included in this simplified categorization is the size of the consultancy, ranging from one person to multi-billion-dollar international consultancies.
Examples of research houses are Nielsen. Kantar, IPSOS and IRI, companies that according to the American Marketing Association (AMA) are among the largest market research companies. These are all companies with an international presence that also offer shopper marketing services focused on insights. Many of these companies also
Figure 2.7 Implementation of shopper marketing in company organizations
Percentage of companies that have resources dedicated to category management and shopper marketing, how many have these activities embedded into the organization, and in how many shopper marketing and categoiy management are either a shared or a divided department, across 14 countries in Europe. Source: ECR, 2015
Figure 2.8 Categorization of consultancies
Consultancies categorized according to their focus and level of solutions delivered.
want to move into the consulting side, but are partially limited due to their operational model and differences in allocation of the number and level of resources dedicated to projects. Market research companies often have expertise in specific methodologies and technologies.
When it comes to solution providers, there are the classic consultants, such as the big three, McKinsey, Boston Consulting and Bain & Company, as well as the strategic departments of the big four: EY (Ernst & Young), Strategy& (part of PwC) and the consulting departments of KPMG and Deloitte. Additionally, there are many specialized and boutique companies.
Strategic consultancies have gradually put more focus and emphasis on shopper marketing. As an example, McKinsey developed the idea of jointly agreed growth (JAG), which is categoiy management with growth objectives and a strategic touch, and recently changed the name of one of its practices from consumer marketing to consumer and shopper marketing.
Shopper marketing has traditionally focused on shopper insights and in-store activation. This understanding is shared by the shopper marketing definitions of the In-Store Marketing Institute (today the Path to Purchase Institute), GMA/Deloitte, and the Retail Commission on Shopper Marketing.
The In-Store Marketing Institute definition of shopper marketing used to focus on in-store activation:11
The use of strategic insight into the shopper mindset to drive effective marketing and merchandising activity in a specific store environment.
With the change from the In-Store Marketing Institute to the Path to Purchase Institute the definition of shopper marketing has become focused on the shopper journey and the need for cooperation across functions:12
A cross-functional discipline designed to improve business performance by using actionable insights to connect with shoppers and influence behavior anywhere along the path to purchase.
The GMA/Deloitte definition includes the process towards purchase and the importance of brand development:13
The employment of any marketing stimuli, developed based on a deep understanding of shopper behavior, designed to build brand equity, engage the shopper and lead him/ her to make a purchase.
The definition of the Retail Commission on Shopper Marketing speaks of shopping experience and the goal of improving the outcome for manufacturer and retailer:14
The use of insights-driven marketing and merchandising initiatives to satisfy the needs of targeted shoppers, enhance the shopping experience, and improve business results and brand equity for retailers and manufacturers.
Shankar in his definition goes further and includes all marketing activities that are related to the shopper and to purchasing:15
The planning and execution of all marketing activities that influence a shopper along, and beyond, the entire path-to-purchase, from the point at which the motivation to shop first emerges through to purchase, consumption, repurchase, and recommendation.
However, shopper marketing clearly also has a strong association with the supply chain, as products and services in order to be purchased have to reach the shopper.16
The basic idea of shopper marketing is to ensure the encounter between shoppers and products and services. This implies the right product and service that best meets the needs of the shopper, at the right place and time. From a business standpoint, this means capturing the opportunities in the marketplace by converting shoppers into buyers, and in the longer term building brand equity and loyalty. The definition of shopper marketing in this book is therefore strategic and brings together the important facets of attracting shoppers, as well as securing availability:
Profitably and sustainably convert shoppers into buyers by maximizing the preference during the purchase process by optimizing value offering, shopping experience, touchpoint management and availability at the right time and place along the shopper journey based on relevant shopper, customer and channel insights through a coherent management of the involved functions.
One of the key points of the above definition is that it views shopper marketing as cross functional. It goes beyond just including the shopper in the marketing strategy.17 Successfill shopper marketing is dependent on an integrated management of shoppers, channels and touchpoints.18 It also includes the offer, the products and services, as the most important shopper loyalty driver.19
To many companies the cross-functional aspect poses an important challenge. The way companies are organized and structured has its roots at the beginning of the last century. Then, the key challenge was internal efficiencies and the focus was less on the market and on marketing. There was, at the time of industrialization, a strong focus on production. In addition, society was less educated and certainly more authoritative. The basic idea was to group similar tasks to gain efficiencies, and then coordinate different departments when bringing the products and services to the market.
Tasks had to be very well defined with clear assignments of responsibilities. This basic concept of organization is still dominant in many companies. Often, there is a logic to this approach, as few people would see the marketing department as responsible for logistics or production. However, these functions are key for a successfill marketing strategy and value offering.
Normally, the marketing department is responsible for the relationship with consumers, sales for the relationship with customers, production for manufacturing and logistics for the efficient availability of products and services. Moreover, there are the support functions, such as finance, human resources, legal, etc. As companies become increasingly complex, new departments have developed whose affiliations are not always clear. Is design and innovation part of production or marketing, or is it a department in itself? Is distribution part of logistics or sales? Is trade marketing part of marketing or sales? Different companies solve this in different ways, depending on their specific situation. Some companies are organized in business units by type of customer, e.g. institutional customers and residential customers, or
Table 2.1 Classical organizational theories
Classical organizational theories and then' key principles.
Source: Shafriz et al., 2011
by product categories. Project organizations have become more frequent, as a way to ensure the interconnection between different departments.
With the objective of connecting shoppers with products and services shopper marketing is by its nature cross functional. Ensuring the availability of the right product and service for a specific consumption occasion for a defined target group at the right time and place, and activated to draw consumers’ attention goes across several functions. It includes marketing, sales and logistics and ranges from defining the optimum offering and target groups, to deciding on the appropriate communication strategy, developing and activating the right channels to reach the target group and activate the point of purchase, to ensuring the availability and presentation in the most efficient manner at the defined points of purchase.
Shopper marketing has to ensure that there is coherent management across the functions to ensure that shoppers encounter products and services as profitably for the company as possible. On one side, shoppers need to be directed toward the products and services. On the other hand, the products and services need to be directed toward the shopper.
The touchpoints and the way of leading to the purchase of a product is normally named shopper, customer or consumer journey In addition, path to purchase is used. In this book, the term route to purchase is introduced. The difference between the journey or path versus the route is the design of a deliberate strategy. Once a company has mapped and understood the shopper journey, it can start designing the strategy to best manage this journey and turn it into the managed route to purchase. In other words, it is the difference between a description of how the shopper arrives at the product and service, and the management of this process to ensure that the shopper arrives at the product and the service in an optimum way for the company.
The management of the route to purchase includes the definition of the product and service suitable for each type of consumption occasion and target group, and the touchpoints involved in managing the purchase process and building awareness and preference until the final selection at the time of purchase. Shopper marketing is no longer only about the store, but before the store, and after the store. In addition, with both e-commerce and digital touchpoints, it is about the point of purchase, wherever it happens, digitally or in a store. Modem shopper marketing needs to be well coordinated with marketing, sales and distribution, and needs to view the shopping process from the perspective of the shopper, rather than organizing and managing it from the inside out, from the perspective of the company. Shopper marketing requires an integrated view and approach.
On the other side of the equation is the challenge of how the products and services should reach the shoppers in the most profitable way possible. Key elements when purchasing are normally variety and choice, availability of the preferred options, service and experience, as well as price and special offers. When shoppers choose the point of purchase, the point of encounter between shopper and product and service, they normally choose the place, both brick and mortar and digital, with the attributes most fitting their needs and expectations. The management of the process to meet these expectations in the most optimal way is referred to as the route to market. In some cases it is also referred to as go to market. It denominates the step from mapping the channel and distribution reality of a market to developing a strategy to meet shopper needs and expectations in the most optimal and profitable way.
Route to market strategies touch important points, such as the management of stores and other points of purchase, including digital ones, the distribution to the points of purchase or directly to shoppers and consumers. Sometimes it includes logistics and warehousing.
Finally, the route to market strategy has to ensure that the right products and sendees are at the right points of purchase at the right time, and activated in the right way. In addition, it needs to ensure that the money from the purchase flows back to the company.
As an example, having a snack on the way to work or having dinner with friends both cover a need to eat, but the consumption occasions and motivations are very different. Therefore the experience and shopping service looked for are different. Based on needs and expectations, the optimum offer for the expected consumption situation has to be defined and delivered. The task of the route to purchase is to understand these needs and activate the products and services accordingly, and the role of the route to market is to ensure that the products and services are available. Strategic shopper marketing is about connecting the route to purchase with the route to market in line with the defined marketing strategy in terms of consumption occasions, target groups and offering.
When defining where to focus, the key is to understand the market opportunities, as well as the strengths and weaknesses of the company. Different tools have been developed in this area, e.g. SWOT analysis (strengths, weaknesses, opportunities, threats). Porter’s value chain analysis, or McKinsey’s 7S analysis. In the end, it is about identifying possibilities for competitive differentiation. The strategic point of defining objectives and direction in the case of shopper marketing is referred to as capturing the shoppertunity, i.e. how to generate sales and optimize profits by converting shoppers into buyers.
Strategic shopper marketing has an outside-in perspective. As the shopper is external to the company a good market understanding is key to defining the shoppertunity, as well as aligning the internal processes to capture it. It is crucial to understand the ecosystem in direct contact with the shoppers and their purchase process, e.g. touchpoints, sales channels, distributors, competitors and stakeholders in order to be able to manage it in the most optimal maimer. Without a consumer there is no shopper. Understanding the consumer and the consumption process is fundamental to understanding the reason for the purchase and the role of the shopper. Additionally, the influences on the purchase during the shopping journey need to be mapped, as well as the route to market landscape in terms of channels, distributors and other suppliers. Only with a clear understanding can a profitable route to purchase and route to market strategies be designed.