Vendors have increased their spend on trade promotion from 30% to 60% of their total marketing budget. This is due to three trends: media fragmentation, a greater demand for marketing accountability, and consolidation in retail, resulting in fewer outlets with much more power (think Wal-Mart). Some even say we’ve reached a tipping point, that in the years to come, tactical in-store programs and trade marketing will usurp branding as the prime focus for many national advertisers.
Most creatives probably shudder at the term ‘in-store communications’ and really, who could blame them? Most P-O-P doesn’t, well, pop.
But they’d better get over it because the Wal-Marts of the world increasingly rule, and retail marketing has dethroned branding for vendors.
In fact, we’re at the ‘tipping point,’ says Jonathan Kramer, CEO of the Stamford, Conn.-based J. Brown Agency, a new entity, created by New York-based Grey Global Group, which aids in the development of in-store communications.
‘It’s the beginning of the end of advertising as we have known it in the past. Finally an ad agency is taking responsibility in assisting its clients in selling their products. It’s no longer about building brand equity; it’s no longer about building brands. What it’s about is accountability, what it’s about is increasing volume.’
The J. Brown Agency is a joint venture between Grey’s own advertising and promotion specialist J. Brown/LMC Group and Dallas-based sales and in-store marketing firm Crossmark, in recognition of the fact that what happens on the retail floor is increasingly significant to packaged goods marketers.
In Canada vendors are also relying more heavily on trade promotion than ever before, causing major shifts in where they spend their marketing dollars. According to Ed Strapagiel, SVP at Toronto-based retail consultancy Kubas, whereas trade used to represent about 30% of a vendor’s marketing budget, in recent years it has grown dramatically, and now accounts for up to 60%.
J. Brown’s Kramer says the epiphany about the value of in-store marketing is being driven by three main trends: the fact that corporations are now being run by financial communities, which demand accountability of every marketing dollar spent; media fragmentation; and consolidation of retail distribution channels, which has placed much of the power in the hands of Wal-Mart and other mammoth chains.
Here in Canada, where there are fewer retailers, the power struggle is all the more daunting for marketers. But the fact that 40% of Canadians go through Loblaws weekly also presents opportunities. As CEO of Toronto-based Capital C, the promotional agency that has engineered in-store marketing campaigns for clients like Pepsi, Frito-Lay, and Cadbury, Tony Chapman knows a thing or two about this topic.
‘In-store marketing budgets are growing dramatically, partly because the trade is so concentrated in Canada…. They have incredible power, but more importantly, incredible potential to move a lot of product. When you look at total marketing spend, yes, you have to build your brand in conventional ways, but you can’t ignore the fact that you can make or break how successful you are with three or four retail accounts in Canada.’
Chapman cites another irrefutable rationale for marketers to covet retail floor space: In-store marketing, when done properly, works – mainly because the consumer is in the frame of mind to buy. And as a result, they’re also more open to suggestions.
In fact, IMI International’s PromoTrack study, which interviewed 1,700 Americans via telephone and the Internet in August/September 2003, found that 72% of respondents purchased a product or service due to a promotional offer in 2003, versus only 54% in 1997. Furthermore, 70% of participants could be swayed to try a brand other than their regular choice, if offered a great promotion.
However, negotiating a retail marketing program is a lot more work than a regular media buy: To make it fly, you have to consider the retailer’s goals as well as your own.
Says Chapman: ‘You have to demonstrate why your program is going to drive traffic and incremental sales and profit. You have to be very persuasive on the power of your brand, and the research that you have on the consumer who goes after the brand.’
It’s become a harder sell, too, not only because consolidation makes for fewer retailers to strike deals with, but also because the blurring of retail channels makes those that run the show more selective.
‘Communications within a store is a very big potential contributor to positive in-store experience,’ says Joe Jackman, chairman and CCO of Toronto-based strategic retail creative company Perennial, which counts Loblaws, Canadian Tire and Canada Post among its clients. ‘As they look to differentiate themselves, retailers are looking for any possible means to create in-store excitement, to get customers to enjoy the shop and have them spend more time, because enjoyment plus time equals incremental revenue and profit.’
That means racks and headers don’t cut it anymore. His advice? First, put as much energy and creative focus into marketing inside the store as you do outside, and secondly, build bridges between those two efforts. Perennial, for example, recently worked with Procter & Gamble on Smart Solutions, a program designed to communicate bundled offerings in participating chains like Wal-Mart. This linked back to an initiative outside the store; the packaged goods giant also created a magazine called Smart Solutions to showcase the product.
‘So it’s getting beyond individual elements but bringing forward full, cohesive, thought-through programs to retailers,’ says Jackman. ‘That is the future of marketing in the store, if you don’t happen to own the store.’
Campbell Company of Canada went beyond ‘individual elements’ too, with its recent Power2Cook campaign, which incorporates TV, direct mail, retail marketing and a Web site. Randy Weyersberg, VP of marketing, admits that perhaps in the past the in-store component would have been overlooked, but with media clutter it can no longer be treated as a last-minute thing.
Thus, retail was included in the planning of the overall Power2Cook campaign, which is based on the insight that consumers don’t cook from recipe books, but rather learn cooking methods and then apply them. Power2Cook delivers the message ‘one method, endless possibilities’ in all of its marketing functions, whether it’s spokesperson/chef Damon whipping up a stir-fry in a 60-second instructional TV segment, or a Web site presenting similar tips.
At the store level, Campbell’s communicated to shoppers through new labels – with a greater emphasis on recipes – flash cards with ‘colourful and enticing food imagery,’ and a ‘cooking technique booklet,’ similar to the DM piece.
But Campbell’s couldn’t roll out the same program everywhere; it had to customize the in-store initiative to abide by certain retail partners’ objectives. For instance, Weyersberg says Loblaws has strict guidelines as to what they’ll permit in-store. ‘They wanted to take a different approach as to how we’re going to create ‘in-store theatre’ and it’s linked to in-store kitchen demonstrations.’
Weyersberg also points out that Power2Cook involved a collaborative effort between marketing, sales and PR. ‘Often we think of retail initiatives being tactical and really about moving product. Not only do we achieve that with this program, but it’s also about brand building.’
Other brands have also successfully hooked their in-store marketing into a bigger event. One such example is the Doritos Juno Fan Choice Award campaign for Frito-Lay, which Capital C helped craft. The contest was promoted through multiple points of contact with the consumer, including online banners engineered by Bell Globemedia and TV advertising produced in-house at CTV. Displays, which were erected in 25,000 stores across the country, featured the likes of Avril Lavigne and Nickelback, while P-O-S explained how to enter. The grocery channel grew total business by 13% and Doritos by 27% during the period of the promotion.
Dale Hooper, director of marketing for Mississauga, Ont.-based Frito-Lay Canada, says the company has taken a much more integrated approach to in-store communications. ‘We recognize it as an important way to communicate with consumers; we recognize the importance of having a consistent brand message. We use it as another communication tool, as well as a reason to put product on display.’
Frito-Lay has been particularly successful at selling its ideas to retail partners because it has paired up with Pepsi and other brands within the PepsiCo portfolio, a strategy Chapman calls ‘power of one.’ Retailers are more likely to buy in when there are more players involved, because there is the potential to increase their basket size.
It also introduces solutions to the consumer. A recent example is a Super Bowl co-promo between Frito-Lay, Pepsi and Gatorade, which just completed its fifth consecutive year and even incorporated miniature football stadiums built out of Pepsi cases.
Having ‘landed the lobby’ of grocery stores, it has been able to lift sales during a typically slow period, according to Pepsi-Cola’s director of marketing Richard Burjaw.
‘Whenever you can serve a consumer’s needs in one stop, that helps retailers too, because instead of having consumers go to one store for their Pepsi and one for their Lay’s, they get it all in one place.’
For Burjaw, while in-store has always been integral to an impulse category like cola, it is becoming more so, due to media fragmentation. ‘You do lots of hard work to drive your brand saliency, but when you get to the point of sale, it always helps to close the sale with some reminders and some attention-grabbing in-store theatre.’
Having said that though, there’s still a huge percentage of the marketing community that ‘overlook, undervalue and underleverage’ the communication potential within the store, argues Perennial’s Jackman. And he thinks there is still a propensity for vendors to rely on individual tactics, as opposed to the ‘energy and creative thought that goes into creating a broadcast campaign.’
He adds, ‘I work with a lot of retailers, and I know that some of the programs shown to them are just dreadful. It may not be true in every organization, but sales still tend to drive retail communications while brand marketing tends to drive mass communications and brand-building campaigns. And that shows.’
‘Head, heart and hand’: Tips on in-store execution
Marketers should treat in-store communications as a medium unto itself. For instance, a common error is when companies use a version of a magazine or print ad at retail, says Joe Jackman, chairman and CCO of Toronto-based strategic retail creative company Perennial. Specifically, marketers should strive for simple, powerful executions that either present a benefit up front or are very explicit on the value proposition.
‘Communications that talk about brand platitudes don’t work,’ he says. ‘You can talk about the brand and overall image and bring that to life, but you need to do that secondary to either getting a clear benefit or proposition across.’
Capital C’s Tony Chapman agrees and describes his creative philosophy as ‘head, heart and hand,’ meaning, ‘it’s easy to understand, exciting and I don’t have to jump through hoops to participate.’
It’s also a good idea to change your program often and, if possible, hook it into other displays or store events. For instance, Perennial once organized a customer acquisition campaign at Loblaws for President’s Choice Financial, called ‘Squeeze Out Fees.’ Lemons and lemonade were put on sale alongside the ‘massive displays’ for PC Financial. (Of course, it was easy to get retail support because PC is Loblaws’ private-label brand.)
‘What we wound up creating was in-store theatre and excitement, which helped bring more weight and presence to our message,’ says Jackman.
