Roundtable: The Shopper Marketing Revolution

Our experts weigh in on industry changes, and how retailers and manufacturers must adapt to keep up.
IndigoFallWinter15

Whether it’s the advent of mobile changing the in-store experience, the influx of new competitors like Target, or simply the way online has changed the way we shop, everyone is suddenly talking about shopper marketing. Retailers and manufacturers are realizing that in order to compete, they must adapt – changing the way they understand their customers through data and analytics, or even adapting their organizational structure to meet new demands. Strategy assembled a panel of experts from across the shopper marketing disciplines to discuss the ever-evolving world of purchasing, and how to survive it.

Moderators
Joan McArthur, president, Joan McArthur Training & Consulting
Mary Maddever, executive editor, strategy

Panelists
Tony Chapman, founder & CEO, Capital C
Amey Harding, president, LPi Communications Group
Deirdre Horgan, EVP online and CMO, Indigo
Adam Horowitz, director of CPG, Precima
Kevin Lund, VP, global retail programs, Perennial Design
Melissa Martin, director, customer & shopper marketing, Kraft Canada
Martin Rydlo, director of portfolio strategy & initiatives, Campbell Company of Canada

 

McArthur: How is shopper marketing changing the overall marketing strategy for manufacturers?

Harding: I think one of the interesting things about shopper marketing is the collaboration required between the manufacturer and the retailer on the premise of shopper insights. Because the brand and the retailer have a certain set of objectives, they’ve been very operationally-oriented in the past. I think there’s a change in terms of how that dynamic comes to bear and the types of initiatives.

Lund: There are a variety of products available in a multitude of channels now that never existed before. When I look at global brands like Coke or Kraft or Campbell’s, you can buy that at a local gas station, at a drug store, at a convenience store, it doesn’t have to be in a grocery store environment anymore. Your product needs to interact with the consumer with a unique set of pre-set conditions for their trip mission. Because the speed with which these retail channels are changing, one solution doesn’t fit all anymore.

Martin: You have to have an eye to customization and to understand what [the retailer’s] priorities are, but [also] who their shopper is. Understanding the shopper at a Loblaws is very different from a shopper at Sobeys or at Mac’s,  how do you build a program that’s going to have arms and legs [and] that’s suitable for all our key retail partners? There’s a fundamental shift on our marketing teams. It’s not enough just to have the consumer as part of our intergrated marketing communications plans, we need an understanding of who that consumer is when they translate to a shopper, and how to most effectively communicate with them throughout that shopper cycle.

Horowitz: That’s where Precima and other analytics companies fit in. What we’ll do with both the retailer and the manufacturer is take the actual shopper transaction data, analyze who their most important shoppers are, which typically account for about 80% of the value brought to the retailer. And from there, they can then develop programs.

Lund: The best retailers understand that their destination is a brand, and they define that brand not only in the market but to the consumer. The best CPG players understand how their best brands are aligning in that space. So the difference between Loblaws and No Frills, one is hard discounts, it has a brand definition and a promise, and Loblaws is an inspiring food shop, your brand needs to come alive in an inspiring manner to have equal weight in that environment.

Rydlo: CPGs have realized that they need to start thinking like retailers as opposed to thinking like product manufacturers. What is the experience going to be in the store, and what are they going to do to help the retailer promote that type of experience? They all of a sudden have to become retail experts.

McArthur: I remember five or six years ago, Tony talking very persuasively about the power of the retailer and how there are a lot of marketers not appreciating that.

Chapman: Especially in countries like Canada and Germany where the consolidation is so great. In the States you’re dealing with 44 or 45 retailers who have an impact on your bottom line and here you have arguably three or four. Now they’ve got the new secret weapon which is data. They’ve got more intelligence on how consumers think, feel and behave than marketers ever have, so you’ve got to [have] game-changing ideas for them to really pay attention.

Horgan: I think retail is changing in that it’s becoming far more experiential. Indigo’s always been an experiential retailer, and now we’re extending it to the social atmosphere. You can learn so much from social engagement about the shopper, and I think you should only enter those realms of content and social if you know what you’re going to do with that information.
Our publishers are hungry for that information. And as we move into other categories, they’re hungry for not only the purchase info, but the colour and the emotion and the social engagement information as well.

Chapman: I think “engage” is the key word because it’s the oxygen of marketing, and consumers are increasingly disengaged because it’s a sea of sameness out there. That’s why 50% are shopping with smartphones now, because price has become the tie-breaker. The shopper is becoming more of a hunter than a socializer. Shopping used to be a great social experience, and maybe still in Indigo, but a lot more social experiences are happening on the web. If you don’t create an environment where people want to socialize and be engaged, then whoever sells the cheapest wins.

Lund: I think there’s been a laziness in the last 20 years because of the fact that we were able to open doors, put products on shelves, and bigger got better.
If price is the final driver and it’s requiring transparency, then I think it’s requiring everyone to get off the price game, because [everyone wants] to win on price. But then when we get down to the details, the reality is you are indexed higher than your competitor. So if it’s not price that I’m going to win on, then what can I win on?

Chapman: I think you have to win on value and value-added. I look at the great retailers, they’re very single-mindedly focused. Dollar stores and Target are about a treasure hunt, Apple is about like-minded people…You have to be very good at one thing and differentiate, and that way you can create the experience. I think Loblaws lost its way when it got away from the passion of food, but now you’ve got the move towards turning home chefs into President’s Choice products [with Recipe to Riches], it’s [changing] what people think of Loblaws.

Horgan: I think you have to find and own a unique place in the hearts and minds of consumers, that’s your value proposition. Indigo/Chapters/Coles has always been a place for inspiration and information, so something to enrich your life. Now we’re moving to other products and categories, and that’s still the premise, how does this actually add value to your life? But you have to find that sweet spot as a retailer.

Martin: We really need to help our retailers get off of this price train. And a great example is Thanksgiving, you see turkeys deep discounted, that’s the highest demand for a turkey. So how can we create a solution that’s adding value, giving them a phenomenal Thanksgiving experience and they don’t mind paying that extra one or two dollars?

Chapman: If we ever thought from a user experience point of view when you walk in that store, the turkey, the gravy, the broccoli, everything that you expect to be there is there for you. Then people would be less focused on price and more focused on their gathering and you’d have an opportunity. But the trouble is it’s all about a discount and people are walking around disillusioned because it’s no longer about a gathering.
We’re getting so good at producing that we haven’t got the demand for it, so price becomes the primary tie-breaker just to keep the trucks full and the factories flowing. So I say, let’s get off the price bandwagon, but I just don’t see it happening.

Rydlo: We’ve long been promoting the idea of solutions and working with other companies to provide [them]. We’ve had greater lift having product in a convenient location than having that product discounted. Life is getting busier and busier, so as we take a look at the solutions we provide, it really has to be about the ease. This is where manufacturers working with retailers becomes so critical.
We worked with Metro in Quebec  on a program this fall where they had three chefs do live videocasts to their Facebook audience, and they had chefs in specific stores, had them do a basic recipe and then they said, here are different ways you can spice it up with Quebec ingredients.
The pick-up from that was amazing, not only from a Facebook community standpoint but they all went into the stores afterwards and looked for the product. That is the imagination of the retailers and manufacturers working together to come up with an idea that serves up a great experience.

Chapman: I think the greatest opportunity for CPG is that retail sales are flat, and retailers, for the first time, realize that they need you guys to engage and grow their business. Where I would say the last decade they needed your money but they really didn’t need you.

McArthur: That’s an important change because the retailer was king…Against that backdrop, what are the implications of U.S. retailers like Target coming to Canada?

Harding: I think Target has differentiated itself, and I think the challenge for the Canadian retailers is, if they haven’t been able to do that already, they better get their act together pretty quickly because Target has it figured out to a degree.

Horowitz: It’s really going to come down to protecting your best customers and having the interaction with the manufacturers around the data behind that, really tailoring your strategy towards those best customers and in the long run build emotional loyalty and engagement rather than focusing on short-term deep discounting.

Chapman: Five years ago Target was date night: [shoppers could] get a dishrag for 19 cents at Walmart, but for 22 cents, they could get a Stella McCartney dishrag. But H&M has taken that strategy, a lot of people have grabbed that. I agree they’re going to take business from people, but I think what we’re seeing with the small format stores from Sobeys, Walmart building out, and the new Longos – they’re creating a better user experience. I don’t see the buzz there used to be where people would drive across the border just to go to Target.

Rydlo: Manufacturers used to step back and say, it’s the retailer’s job to bring shoppers into their stores. And now we’re seeing retailers come up to us and say, we want to work with you on something, our Help Hunger Disappear program, for example. Last year we bought radio ads promoting some of the work happening to raise funds to alleviate hunger around what those specific stores are doing.

Lund: With Target coming, being on the defense is an inaccurate position to start from. The retailers that lost the most when Walmart showed up were the ones that changed their strategy to try to go head to head. If you do something well, keep doing it. Target’s not a place to shop for anything outside of that fun, disposable fashion category, and they’re really good at that. If you’re changing your business strategy to try to nibble away at what Target already has, you’re going to be in the same situation [as when Walmart came].

Martin: If we know [our shopper] well and we’re customizing something for them, that’s where we’re going to win, and the retailers are looking so heavily on the manufacturers, because honestly we’re paying for it. We’re trying to shift away some of the money that used to be in trade to fund this insight piece.

Chapman: Assuming you’re in control of placing that target, because the reality is, technology is eliminating a lot of intermediaries. I can take a picture of any product with my smartphone and find six people that will want to bid for my discretionary dollars, including someone that will deliver it to my door the next day. When you’re in the Nissan dealership, there’s no doubt in my mind that in two years you’ll get a Honda ad for [a similar] model. It’s a whole new game.

Lund: If we’re smart with permission-based marketing, we need to stop over-exposing individuals to stuff they have no interest in. There is no reason a single man at the age of 20 should be getting a coupon for diapers. When you look at the literary industry or even Netflix, they understand your purchase patterns and who you are. [Fashion retailer] Lane Bryant was the first and earliest at understanding that they had a consumer that was waiting to be spoken to – plus-sized women that nobody was talking to. Individual text-message blasts to say, here’s a commodity product that most retailers aren’t interested in selling you, it’s on sale right now at Lane Bryant. We need to be more surgical with our messages.

Rydlo: I think there’s a change where manufacturers can no longer sit back and say, “we might think about that next year.” It is now to the point where we’ve got to think like a small company. And we’ve got the privilege here at Campbell’s where I can go back to the kitchen and say, we need to develop something for this particular customer in two months. And we’ve had to do that because other retailers have been very nimble.

Chapman: Why I do see so much more lift and adapt from packaged goods companies if we’re on this innovation bandwagon? Or am I just cynical because I think we’re doing less and less innovation and creativity in Canada. I see these global deals being cut where advertising and the package is all being centralized and the fastest we can get it out across the world in the most uniform manner wins.

McArthur: Let’s talk about mobile in terms of shopper marketing and what’s happening there.

Chapman: Fifty per cent of consumers are now shopping with their smartphones in the U.S. I think we’re going to see one of the greatest shopping revolutions of all time. And it’s going to be an interesting battle because retailers are going to become showrooms like Apple is.

Horgan: We’re seeing 10 to 15% of physical books move to digital right now. So our strategy is to replace that shelf space and those sales with other products. We are starting to see our general merchandise compensate for the loss of hard books.
Mobile is bringing the price game into every single store, but it’s also allowing you to extend the experience in someone’s hand. I think pricing is the biggest issue with respect to mobile. But once that hurdle is reached, I see it as a very big opportunity. We’ve seen a dramatic increase in our mobile traffic. We’ve been forced to, and rightly so, deliver that mobile experience to the customer.
One of our strategies is incenting the customer to consolidate their purchases, rather than fragment them. So last April we launched Plum Rewards, which is our new loyalty program and we’ve got over 4.5 million members. And rewarding them with points is just table stakes, it’s all about being able to understand and deliver them relevant communications that are respectful of their time.
The expectation around a loyalty program is changing, and the consumer is becoming more demanding, If I’m going to join and put another card in my wallet, there better be something meaningful to me, more than just recommendations.

Horowitz: Today the average Canadian participates in about nine loyalty programs, but the whole point about being in the loyalty program is not the points themselves, it’s the data and the ability to target, and that is where your ability to protect the customer and grow your sales, and to stop folks from buying digitally,  will [save you] in the long run.

Rydlo: Two years ago we were one of the first [CPG] companies to launch a cooking app – Cook with Campbell’s – that you could get on your phone. Everyone knows our tomato soup and our chicken noodle, but all of a sudden those specialty ones like tomato with basil, that’s where we saw the lift.
But we’re eagerly awaiting a retailer to bring on board the technology that will allow the scanning of coupons via smartphones, and the smartphone becoming wallets themselves.When that happens, mobile will really skyrocket because all of a sudden you’ll be able to close the cycle. I think it’s [up to] us to work with retailers to encourage them in terms of making sure that that technology continues to keep up.

Horgan: Would manufacturers be interested in helping, co-investing in the digital upgrade of these stores of the future so there are more direct means of communicating with customers? Because margins in retail are extremely thin and consumers are demanding a richer, more experiential environment. Who should bear the cost?

Rydlo: I’m sure the discussion happened 50, 60 years ago around flyers. I think we’re going to see a similar thing with mobile, it’s dependent on the collaboration of the two groups.

Maddever: What are the best, most innovative examples from around the world of a retailer or manufacturer doing something that really engages shoppers?

Chapman: I like the new Loblaws store at Maple Leaf Gardens. I love the smaller footprints. I think people are getting tired of shopping at 125,000 sq. ft. stores. People are getting better at smart, smaller formats.

Horgan: I think on the manufacturer side, the most interesting trend I’m seeing is mass-customization. On the high-end it’s Burberry, you can actually create your own trench coat. And then on a more accessible level, Nike is doing tremendous things with respect to customizing your own footwear.
On the retail side, I don’t think retailers have yet caught up to what can be the store of the future. A bunch of screens and advertising in the store is not [it]. It needs to be a seamless, fully integrated way of addressing consumers’ needs, and I don’t think anyone has really done a tremendous job of it.
We’re aspiring to create what will be a prototype for a much more digitally advanced, interactive and experiential retail experience, which will launch at the end of this year.