measuring retail collaboration

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p2pi.org As seen in erhaps the most fundamen- tal difference between the historic measurement of tra- ditional in-store marketing and the measurement of shopper marketing is this: Shopper marketing gauges impact beyond the brand. Since many programs must meet objec- tives set by both the manufacturer and the partnering retailer, their goals and metrics are often set at the category, portfolio or even store- wide level. Although the net is cast wider, the measurement techniques them- selves aren’t much different from those used in traditional practices. Underwritten by: 1 © Copyright 2012. Path to Purchase Institute, Inc., Skokie, Illinois U.S.A. All rights reserved under both international and Pan-American copyright conventions. No reproduction of any part of this material may be made without the prior written consent of the copyright holder. Any copyright infringement will be prosecuted to the fullest extent of the law. P n There essentially are three key steps in assessing the impact of collaborative shopper marketing efforts: 1. Aligning objectives 2. Assigning success metrics 3. Assessing and reporting results n Both brand and retailers must overcome intra- company hurdles, as well as partnership chal- lenges, to achieve truly effective collaboration. n Mutual success can be calculated in part by sales lift, but it can’t end there. Broader mutual benefits must be assessed, such as category effects, store- level sales, in-aisle shopper impact, and pre/post shopper perceptions for both retailer and brand. n Not all measures will reflect benefits for both partners all the time. Identifying mutual goals upfront can help cement the commitment to the program and the partnership. n While hard sales and shopper data are critical to gauging program achievement, both sides re- ceive the softer benefits of collaboration as part of the “return on relationship.” This can include a “seat at the table” for manufacturers and im- proved differentiation for retailers. Executive Summary But success is achieved only if all stakeholders win. In some cases at least, that means brand-specific ob- jectives must sometimes be sacri- ficed for the overall good. In 2010, the Retail Commission on Shopper Marketing proposed the following definition as part of its re- port to the industry: “Shopper Marketing is 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 man- ufacturers.” By Liz Crawford, Senior Industry Analyst The following is the fifth installment in a six-part series examining best practices for the measurement of shopper marketing. This article looks at effective ways to measure retail collaboration. The final article next month will examine directions for the future. To read the first four articles in the series, visit www.p2pi.org. Part 5: Measuring Retail Collaboration Best Practices in SHOPPER MARKETING MEASUREMENT ©iStockphoto.com/Robert Churchill

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Page 1: Measuring Retail Collaboration

p2pi.org

As seen in

erhaps the most fundamen-tal difference between the historic measurement of tra-

ditional in-store marketing and the measurement of shopper marketing is this: Shopper marketing gauges impact beyond the brand. Since many programs must meet objec-tives set by both the manufacturer and the partnering retailer, their goals and metrics are often set at the category, portfolio or even store-wide level.

Although the net is cast wider, the measurement techniques them-selves aren’t much different from those used in traditional practices.

Underwritten by:

1

© Copyright 2012. Path to Purchase Institute, Inc., Skokie, Illinois U.S.A.  All rights reserved under both international and Pan-American copyright conventions. No reproduction of any part of this material may be made without the prior written consent of the copyright holder. Any copyright infringement will be prosecuted to the fullest extent of the law.

P

n There essentially are three key steps in assessing the impact of collaborative shopper marketing efforts: 1. Aligning objectives2. Assigning success metrics3. Assessing and reporting results

n Both brand and retailers must overcome intra-company hurdles, as well as partnership chal-lenges, to achieve truly effective collaboration.

n Mutual success can be calculated in part by sales lift, but it can’t end there. Broader mutual benefits must be assessed, such as category effects, store-level sales, in-aisle shopper impact, and pre/post shopper perceptions for both retailer and brand.

n Not all measures will reflect benefits for both partners all the time. Identifying mutual goals upfront can help cement the commitment to the program and the partnership.

n While hard sales and shopper data are critical to gauging program achievement, both sides re-ceive the softer benefits of collaboration as part of the “return on relationship.” This can include a “seat at the table” for manufacturers and im-proved differentiation for retailers.

Executive Summary

But success is achieved only if all stakeholders win. In some cases at least, that means brand-specific ob-jectives must sometimes be sacri-ficed for the overall good.

In 2010, the Retail Commission on Shopper Marketing proposed the following definition as part of its re-port to the industry:

“Shopper Marketing is 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 man-ufacturers.”

By Liz Crawford, Senior Industry Analyst

The following is the fifth installment in a six-part series examining best practices for the measurement of shopper marketing. This article looks at effective ways to measure retail collaboration. The final article next month will examine directions for the future. To read the first four articles in the series, visit www.p2pi.org.

Part 5:Measuring Retail CollaborationBest Practices in SHOPPER MARKETING MEASUREMENT

©iStockphoto.com

/Robert Churchill

Page 2: Measuring Retail Collaboration

SPECIAL REPORT

But the report later notes, “One word miss-ing from this definition is, ironically, the one that the Commission identified as most es-sential to effective shopper marketing: ‘col-laboration.’” While there are exceptions, most effective shopper marketing programs require brand-retailer collaboration. This is a business necessity for achieving optimal results.

This article examines ways in which brands and retailers can effectively measure the re-sults of joint programs while also examining a few of the obstacles they might encounter along the way.

There are essentially three steps that must be taken to effectively measure the impact of joint shopper marketing programs: 1. Align-ing objectives; 2. Assigning success metrics; 3. Assessing and reporting results.

That may sound simple, but it isn’t always easy.

1. Aligning ObjectivesThe Brand Perspective One of the brand-side challenges to even rudimentary collaboration stems from the brand-retailer dynamic itself: the brand is no longer a “client.” Over many years, brands have grown accustomed to buying media or research, which puts them in the driver’s seat. But partnering with retailers is very differ-ent, because brands don’t completely control spending. Retailers have different objectives, and can drive a hard – even intimidating – bargain. One anonymous brand marketer suggested that it’s like trying to befriend a bully: he keeps taking your lunch money, but you go on trying to please him.

Brands sometimes feel compelled to par-ticipate in trade programs in order to stay on a retailer’s good side, or to maintain mer-chandising support, or even to simply stay on the shelf. Occasionally, brands participate in

programs solely to block a competitor from gaining an advantage. For instance, some multi-brand programs allow only one brand per category to participate. And such cat-egory exclusivity requires brands to employ competitive, “bare-knuckle” tactics.

When these kinds of dynamics are in play, it is difficult – or even irrelevant – to mea-sure the return on investment. This is not a test-and-learn enlightenment model, but a warfare model, where defending turf and/or gaining ground are the key objectives.

Next, brands have intra-company dynam-ics that can hinder aligning objectives with retailers. Notably, sales and marketing teams can appear to operate at cross-purposes, es-pecially when they are in silo-ed departments with different compensation incentives. For many manufacturers, these legacy organi-zations are well-entrenched cultural forces within the company, and that makes getting

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Common Brand and Retailer Measures

Measurement buckets: Brand objectives, expressed as: Retailer objectives, expressed as:

Transaction dataLift, units/occasion, category share, brand loyalty, national campaign ROI, retail program ROI

Lift, category sales, comp-store sales, cross-category sales, basket size, profitability per square foot

Shopper behavior

List making, dwell time, consideration, shopper engagement, advocacy

Trip frequency, trip types, number of aisles shopped, shopper card penetration and participation, digital shopper engagement, shopper loyalty, household penetration

Attitudes and beliefsBrand equity measures: awareness, “brand for me,” “would recommend to a friend”

Retailer brand equity measures (ongoing measurements): shopper satisfaction, percep-tion of shopping experience (“clean store,” “friendly staff,” “quality products,” etc.)

Data accessible to re-spective stakeholders

Sales: scan data

Insights: media consumption, in-home ethnography and consumption data, qualitative insights, cross-channel data, national panel data

Sales: Scan data, shopper card data

Insights: trips, in-store traffic, in-store video or tracking data, website traffic, shopper profile-level, basket data

Non-shopper, business-to-business relationship benefits

A “seat at the table,” increased feature and display support, favored vendor status, category captain designation

Brand-based programs that meet the re-tailer’s specific business needs (such as trip frequency, category sales); improved differ-entiation

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everyone on the same page with the cus-tomer a challenge.

In many classes of trade there are key mar-keting weeks for different categories. Getting a brand promoted at retail during that week is critical to achieving annual sales goals, so winning that week equates to success – and financial compensation – for many salespeo-ple. Thus, temporary price reductions (TPRs) remain entrenched.

Shopper marketers in that same company, on the other hand, may see things differently. Co-marketing dollars used to fund TPRs can miss strategic objectives. If trade money is being spent to help the retailer “throw in a gallon of milk” with a threshold-dollar pur-chase, brand equity goals and shopper be-havior goals may be lost completely. There-fore, some programs are designed primarily with sales goals, not brand goals, in mind.

The Retailer PerspectiveMost retailers think that few brands are savvy about re-tailer values. According to the retailers interviewed for this series, fewer than 30% of brands address retailer priorities in their shopper marketing proposals. When program objectives are only brand-centric, retailers may view the metrics as self-serv-ing or irrelevant.

To illustrate this, consider a typical brand proposal. Brands begin their presentations with shopper insights – a good start, but one that rarely ladders up to the retailer’s objectives, which are based on busi-ness issues that often are quite different from the brand’s. For example, in the grocery class of trade, trip missions are blurring across channels; drugstore chains sell ice cream and convenience stores sell cat food. This puts intense pressure on the competition for trips. So retailers would like brands to help them prompt a trip mission that could only be ful-filled in their store. Providing insights and designing programs to solve this need would lead to a brand win.

On the flip side, retailers aren’t al-ways transparent about their strategies, so brands can be left relying on secondary

data and back channels to understand their real priorities. One down-to-earth retail ex-ecutive admitted, “Sometimes even the buyer won’t give you a straight answer!” When in doubt, brands must keep marketing goals broad, which in turn leads to fuzzy objectives.

Ultimately, retailers interviewed for this ar-ticle contend that the ideal brand proposal sets meaningful differentiation for the re-tailer as a core objective. The best programs are those that include a total store solution, provide a critical point of difference vs. a com-petitor, or deliver a real shopper solution. The corresponding success metrics would include, respectively, comparable-store sales lift, at-titudinal shifts among shoppers, and cross-basket analytics.

One retailer remarked, “We also keep our eyes on the size of the prize.” So, objectives

also must show substantial retailer payoff, beyond brand lift.

Additionally, brands aren’t alone in dealing with internal issues that can create stumbling blocks for collaboration. Retailers have legacy organizations with silos, too. For one, buying centers sometimes aren’t incented to cooper-ate with each other, so developing holistic shopper solutions across departments (like skin and hair, say) can be very difficult. Cross-departmental solutions may be hard to estab-lish because one of the buyers doesn’t “get credit” for the sales.

2. Assigning Success MetricsFirst and foremost, retailers want to drive top-line growth for their stores. According to one executive, “For many retailers, the

mentality is, ‘If you aren’t growing top-line, you are dead.’” Key performance indicators (KPIs) will often include year-over-year cat-egory growth, comp-store sales growth, and increases in basket sizes and trips. Brands can use this as a starting place for aligning success metrics with their partners.

Brands, too, are interested in top-line sales for their business. So mutual success can be calculated in part by sales lift – but can’t end there. Broader mutual benefits must be as-sessed, such as increased units per purchase occasion, incremental cross-basket purchas-es, growth in category-purchase frequency, new user penetration, and shopper delight, among others.

Of course, not all measures will reflect benefits for both partners. Retailers often don’t care about a brand’s share of category;

conversely, brand teams are usually retailer-agnostic about sales (although their custom-er-team counterparts would feel quite differ-ently). But identifying mutual goals can help cement the commitment to the program and the partnership.

When it comes to identifying mutual goals, mapping retailer shopper segments to brand buyers is a frequently cited technique. How-ever, recognizing overlapping brand equities is at least as important. Common equity will help with program development, but will also help determine metrics of success. Both retail-er and product perceptions can be included in pre-post shopper surveys, for example.

Once objectives are aligned, identifying the corresponding metrics is fairly straight-forward, because the measurement options

SPECIAL REPORT

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Mutual goals and mutual respect: “If we do nothing else but that on a regular basis, it’s a win-win.”

Catherine Lindner, vice president, retail marketing, Walgreens

Page 4: Measuring Retail Collaboration

SPECIAL REPORT

The following case study resulted from pilot programs conducted by members of the Retail Commission on Shopper Marketing as a way to validate its model for effective collaboration. It was presented during the 2010 Shopper Marketing Expo. (For more information, visit p2pi.org.)

Hershey and Walgreens teamed up in summer 2010 to de-velop a back-to-school campaign that would drive store trips and increase basket size while boosting candy sales.

Walgreens chose as its target “Efficient Eileen,” the chain’s most important customer segment in terms of pharmacy sales, but a shopper who typi-cally does not buy candy during her trip. Hershey, meanwhile, chose to tar-get “Em,” its core con-sumer segment.

The partners then set about finding the points of intersection between “Eileen” and “Em.” While a key component of collaborative shopper marketing is to “make sure you create alignment” between the retailer and manufacturer’s key targets, “don’t get too caught up on being perfect,” advised Catherine Lindner, Walgreens vice president, retail marketing. “ I think we got the best result ... without a lot of crazy math” and additional spending on the effort, she said.

They also devoted time to determining mutually ben-eficial objectives and the methods through which results would be measured. The metrics included sales/unit ve-locity, dollar share vs. other retailers and incremental lift on the sales side, and awareness, unplanned purchase impact, purchase barriers and likelihood to recommend on the attitude/behavior side.

“We don’t sit down [with manufacturers] and align on metrics early enough – or often enough,” Lindner said.

“When you don’t do that, our idea of success is different from our vendor partner’s idea of success.”

Rather than employing the standard seasonal theme of preparing for the return to school, the partners devel-oped creative that leveraged Hershey insights into the mindset of “Mom,” who views the final few weeks of summer as the last chance to have fun with the family, according to Phil Stanley, then Hershey’s vice president of customer marketing.

A “Don’t Stop Summer Fun” theme fit well into Wal-greens’ overall brand position of “inspiring a well life,”

execution of which largely “resides in the healthcare space,” Lind-ner explained. “But [the Walgreens shopper] doesn’t just think about the health aspects. She thinks about the fun and the happiness. And she knows that when she’s happier, she’s healthier, and vice versa. [So] it was a position that we knew resonated with our con-sumers.”

The program ran in a handful of markets (selected for their prospects for suc-cess) and employed displays, circular features, local radio spots, coupons and online components. “All of these were existing tools that we already had in our portfo-lio,” said Stanley. “We just brought them together and aligned on the objectives.” “Ultimately, we didn’t spend more as an organization,” added Lindner.

Although specific results were not disclosed, both Stan-ley and Lindner deemed the program a financial success. But both executives were effusive about the effect the process had on the nature of their business relationship.

“We know a lot about confection consumers. But Wal-greens knows more about its shoppers than we could ever hope to know,” said Stanley. “The goal was to see if we could really drive performance. And I think we’ve proven it here.”

How Walgreens and Hershey Spent Their Summer Vacation

Page 5: Measuring Retail Collaboration

generally become readily apparent (see chart, page 2).

The challenge that arises here is logistical: The brand typically has some of the necessary data, and the retailer has the rest. While both sides have access to scan data, retailers are obviously more interested in their own shop-pers than in a national panel of category buy-ers. Yet brands don’t normally have retailer-specific shopper data. The retailer, therefore, owns the information that is most meaningful to him. And it is this data that will prove the benefits of the brand’s program to the store, including shopper card data, store-level sales data, on-shelf audit information, in-aisle vid-eo monitoring analysis and ongoing shopper attitudinal studies.

3. Assessing and Reporting ResultsThe participating brand will be at the ready to report results to prove program effectiveness because it is in their immediate best interest to do so. But will the retailer? As noted earlier, the retailers own the data that will help the brand prove its case.

Many retailers seem reluctant to share results, probably at least in part because it would require them to shoulder some of the expense and effort involved in analyzing them. In fact, one executive pointed out that retailers themselves rarely anticipate or ac-

count for the “fully loaded cost of measuring results.”

This makes upfront commitment all the more critical. But it also means that only pro-grams big enough and profitable enough to make the analysis worthwhile will be read. Realistically speaking, that won’t be more than two or three programs per year.

Brands should be prepared to shoulder most of the burden of analysis (and related expense) as a “cost” of establishing a deeper partnership. However, there are potential benefits for retailers who share the burden: gaining insight into how their shoppers re-spond to different stimuli, category by cat-egory. Retailers also will be able to gauge which brands are driving more effective and efficient programs, thereby increasing the sophistication of their alliances.

The Return on RelationshipWhile hard sales and shopper behavior data are critical to evaluating program success, each partner gains softer benefits from the collaboration as well. This is the “return on the relationship.”

On the brand side, the benefits can include a general increase in feature and display sup-port and even a coveted “seat at the table,” the latter of which means that the brand is consulted on category-level decisions. A solid brand partner can also enjoy official category captain status.

By the same token, the retailer’s business will improve by working with brands that truly understand their needs and can help drive their objectives effectively. As an example, Diet Pepsi’s “Skinny Can” launch at Target (discussed in article three of this series) en-hanced the equity of both partners among the retailer’s shoppers. Ultimately, such mu-tual equity enhancement is what makes shop-per marketing more worthwhile than tradi-tional collaborative activity.

The potential for mutual benefits goes be-yond program impact to encompass busi-ness-to-business effects such as cost reduc-tion, profit growth, and long-term customer loyalty and satisfaction. These benefits are measurable over time. Because shopper mar-keting is a relatively new discipline, however, there are few companies that can identify them as yet.

SPECIAL REPORT

Series Schedule

Part 1: Rationalizing the Investment

Part 2: Measurement of Shopper Behavior

Part 3: Measurement of Brand Impact

Part 4: Effective Integration Practices

Part 5: Retail Collaboration

Part 6: Directions for the Future

Liz Crawford has more than 20 years of brand management and consulting experience with a concentration in strategic innovation. Over the last few years, Crawford has focused on developing integrated shopper marketing strategies for Fortune 500 clients. Currently, Crawford is an analyst and contributing writer for the Path to Purchase Institute. McGraw-Hill released her book, “The Shopper Economy,” in March.

About the Author

JWT/OgilvyAction Inc., conducting business under the OgilvyAction and JWT Action brands, is a fully integrated, end-to-end shopper marketing and ex-periential marketing agency with main offices in New York, Chicago and Akron, Ohio. It is part of the WPP Group.

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Finally, the process of collaboration offers its own reward. “It’s that mutual respect that oftentimes gets left in the lobby. If you walk in with the idea of mutual goals and mutual respect, it really goes a long way,” said Cath-erine Lindner, vice president-retail marketing for Walgreens, while speaking in fall 2010 at a Retail Commission workshop. “If we do nothing else but that on a regular basis, it’s a win-win.”