Product Launch

5 things you must know about EDLP when you are going for growth

Tesco, ASDA and Morrisons are all talking to their suppliers about going to EDLP. Retailers do this because they believe (or at least they tell you they believe);

 

1. The only thing shoppers care about is price

 

This is, of course, entirely untrue. What shoppers care about is feeling they are not being ripped off.

 

However, most retailers, except Waitrose, have never been accustomed to delivering value. So the way they will look to increasing basket size is via a continuation of current promotions. Of course, we have been here before – at intervals ASDA has focused on EDLP as part of their parent companies raison d’etre. At the time they said, as they say now, take the margin you are using for your discounts, and give it to us, you won’t need to run promotions with us in future. As you can see when you walk through any ASDA supermarket, what they say, is a long way from what they do.

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Lidl on shelf offer

On top of this, the discounters also further discount and promote special offers. They realise that shoppers like to be given deals.

 

Moreover, just being well known simply for being cheap has not helped Poundland. They have seen profits fall in the year to 27 March in what chairman Darren Shapland said had been a “challenging” year for the discounter. Pre-tax profits were down 83.7% to £5.9m, with total sales up 18.7% to £1.3bn. The company said that excluding the 99p Stores acquisition, comparable profits were down 13.5% to £37.8m, with sales up 9.3% to £1.2bn.

 

Basically, the extreme EDLP of having a shopper pitch based solely on price has failed to deliver more profits. Highlighting the truth that depending solely on low margins is a precarious business. 

 

Obviously, retailers also feel (or at least they tell you they feel) that;

 

2. Lower prices will increase your sales

 

The KANTAR summary for the period to the 28th June was “Supermarket sales down as prices continue to fall”. Over the next 12 months, the focus shoppers for a branded business are declining in the core supermarkets.

What are the chances that, if you drop your price these incrementally fewer shoppers will consume incrementally more of your products next year than this?

 

If you believe they will, where will this additional consumption come from? Obviously from your competitors, who are also on EDLP. Under EDLP it would be true to say that you will need to increase your competitive edge just to stay still. Without help whatever you got last year, you will get less next year unless you go out of your way to becoming more competitive in your category.

 

Will EDLP do this for you? Of course not. It is designed to get people through the doors of the supermarket, what they do when they arrive is frankly left to chance. We have just completed a comprehensive study of the British shopper for and with the Grocer, and without giving too much away, it agrees exactly with recent reports from Mintel and Nielsen that shows the biggest gripe shopper have with the majors is not being able to find product they expected to be able to buy.

 

Retailers fail to understand that;

 

3. Shoppers like promotions

 

They like them a lot. In fact research I did with the IPM and iMotions (a groundbreaking eye tracking company who measure emotional involvement alongside where people look) revealed that;

 

On pack promotions had the same impact on they eye as low grade pornography leading to pick up and purchase when messaging was added to packs.

 

The research was carried out with IPM prize winning promotions. They proved to be very easy on the eye, and opened the purse strings of those people for whom shopping is a chore lightened by finding something more on the shelf than they expected.

 

Mintel store selection

Selected by 1800 UK main shoppers as being most important in their choice of where to shop

Nielsen research reveals that 51% of shoppers report that having a range of promotions on offer is important to them. What does this mean? – well retailers focus on price as a means of getting shoppers in the door. When they reach this objective they will rapidly realise that they then need to add excitement to the visit to avoid falling into the Poundland trap of finding it really hard to improve the basket size for the average visit. Typically the way they do this is with special discounts.  Special discounts are there to create a distinction from the run of the mill, and this distinction is badly needed. Whatever, if you want to reach half the shoppers, you know how to do it.

 

For the majors, a Mintel report in May 2016 found 59% agreed that  “Sainsbury’s, Morrisons, Tesco and Asda all have similar prices”. Only 20% disagreed with the proposition. Clearly the ASDA intention of getting within 5% of the discounters, and under the rest is having little or no traction at all. Meanwhile, the same report highlighted that 51% of these shoppers said that a “range of promotions and offers” was part of their selection for where to choose to shop.

 

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Example of Lidl regular price offer

Special discounts appear right across the spectrum. Lidl does special discounts. Waitrose does special discounts, M&S do special discounts, in fact, they advertise them. What marks these retailers out to the shopper, though, is that their brand image is well understood, so shoppers have visited knowing what to expect. They stay to buy more because they are stopped down the aisle by a range of offers that persuades them to be more adventurous.

 

Special offers exist simply because shopper look forward to finding them, and, as a result, they buy more than they might have otherwise. ‘Which’ may feel this is a bad thing. But for brands and retailers, purchase outside of the standard shop is what turns a shopper journey into profit.

 

In a period when shoppers are buying in more varied outlets than ever before, closing out at least some of the larder to the next makes increasing sense. Except of course, right at the moment when buyers are promising no calls on promotion monies. Anyone believing them needs to remember the words of George Santayana;

 

Those who cannot remember the past are condemned to repeat it

 

 

4. There are other ways to add value and build sales in store

 

They have been around for years, but have typically been ignored since it was just so easy to simply do what retailers asked. With retailers basically driving branding out of sight, brands need to find ways to standout that are not driven by the Sales function, but by Marketing.

 

Stand Out on the Shelf in ways that are not controlled by the retailer in the knowledge that over half of the shoppers walking past you can be easily stopped if you make them an offer.

 

Extra Value FREE

 

Loyal shoppers will queue for this, and those simply browsing will appreciate the additional value. On top of this, the larger pack offers a greater standout, as well as value.

mars

On Pack Messaging and Promotions

 

28-07-2016 17-01-49You only have to look at the way people shop to see that they are drawn to the new, and the different. Often a changed message does not need to cost you anything, perhaps even just highlighting a product change that is a benefit. In the new tomorrow, product benefits will be really important. Don’t sneak them onto the shelves, shout them there.

 

On pack sales promotion messaging is still really important – an example being the Mars promotion – but there are a number more on the “In Place of Price” white paper you can access from the bottom of this blog.

 

Mars Chocolate UK announced it is bringing back its Sweet Sundays promotion for the fifth year running in 2016, offering consumers the chance to get hold of free cinema tickets for Sunday screenings.;”bringing back its Sweet Sundays promotion for the fifth year running, offering consumers the chance to get hold of free cinema tickets for Sunday screenings.” They also announced that “Sweet Sundays has been proven to drive bitesize category growth, increasing incremental value of the bitesize category by 13% last year. Returning bigger and better than ever, we’re confident the promotion will continue to increase in popularity with consumers so retailers are advised to maximise the opportunity for increased awareness in store, using our new range of POS solutions to capture their attention.”

 

Successful techniques haven’t gone away, they have just been forgotten.

 

Local Marketing, Signage and Supply initiatives

 

You can define your core by the shoppers – and core stores  (the 80/20) for you will have the following characteristics;

 

  1. They will sell 30% or better than the average store from the same space
  2. They will sell 60% or more the moment you go on promotion (and you will)
  3. They will struggle, and fail to cope with sales from the space that catman has allocated.

There is an opportunity to multiply the value of your sales in 20% of stores simply by identifying these, and making sure the store has enough product, and targeting your marketing support so they are able to consistently over-perform their peers.(Remember the store manager is competing with other managers in the same group, not other groups nearby).

 

You can do a really surprising amount in and around your core stores. For the store manager getting their local assortment right is more than simply useful.

 

Nielsen report that; “Only about half (53%) of global respondents believe that retailers always or mostly understand their grocery requirements, meaning that nearly half of those surveyed feel somewhat underserved. A core element in increasing share of wallet is understanding and responding to local consumer needs (my italics).”

 

It makes sense then, that differentiation from your competition could be an important way to build a competitive advantage. So what are consumers looking for? Mintel says; “40% of shoppers nationally complain the biggest issue they have with all their normal supermarkets is that products they want are not always available normally or on promotion – and that this issue is bigger than their concern about price now.”

 

Looking after your local consumer is inexpensive, gives fast returns, and offers a stable way to invest independently of what retailers may choose to do to your brand.

 

5. You have a choice – should you choose to accept it.

 

Brexit has forced a re-evaluation of what being British means. The actions of the retailers forces brands to decide whether they really are a brand, and investing behind brand values and margins OR simply selling on price. There is no middle course.

 

If you want to change your fortunes in just one day, then join us on the 29th September 2016 at the CIM in Cookham for our seminar – Overnight change without pain.

 

Resources: You can download a white paper reviewing the options from here.

 

The Profits in the Detail

Where are we?

We are going back to the 1990’s in the way the grocery trade is structured. Back then the major retailers had around 50% of the market. Savvy industry commentators are expecting this to be the place they end up, with all that ensues in the way brands will need to restructure their sales approach. If you want growth you will need to talk to more retailers and more buyers, who are all demanding more money than last year – often in the certain knowledge they will deliver less
Brands are also going back that far with shoppers as the number of stores they shop in is increasing up to nearly 4 a month. The brand destined for success needs to be visible in as many as possible. Back then shoppers were coming from a background of shopping in local butchers, green grocers and bakers. Now it is more likely to be for other types of meal or larder fill.
Effective distribution (working for your core shoppers) must come right at the top of your agenda, as must targeted messaging – reaching your core shoppers on the way to, or as they, shop. Targeting these will improve brand growth, the effectiveness of marketing investment AND your profile with the majors, all at a significant ROI in the year you invest.

Is price really the big issue?

Right pricing is the approach brands need to take, for the multiple they are negotiating with, since most people shop for convenience. Retailers need discounting to boost the image of their stores. Brands need to find the best way to profit from the footfall generated by all this noise.
The neglected loyalist can be reached in other ways than discounting, so a growth strategy needs to be developed by retailer that builds loyal shoppers for your brand. That objective will not be reached by discounting. The key value for discounting is volume, and building alongside retailer plans. So investing where you get the best value discount ROI is vital.
However, the Lidl/Aldi small store/restricted range format has bags of room for becoming local to many more people, as does the Waitrose/Booths end of the market. And don’t forget Amazon with their millions of existing customers, and Ocado with a now-profitable model with much more scope for growth and range extension than the Tesco store based supply.
All this adds up to more choice for shoppers, and a greater need for retailer differentiation. The Workshop looks at what this might be.
We can confidently expect that the majors, with their me-too strategies, will remain under pressure for some years to come.

Workshop Contents

What are the measures that brands and retailers need to focus on?

(Ideally these illustrations are drawn from a brands own data – illustrations we offer free contact )
Brands Need;
  1. To identify new benchmarks for success with their retail partners and within the company to get long term change. Two only are vital – stock cover and locating core shopper areas, and the stores in them. These two measures help driving hundreds of thousands of pounds value (millions for big brands)
  2. To identify the most profitable investment outside of discounting to gain growth. This requires investing in parallel in all distribution channels (including food services and online) in core areas
  3. To have a measure to evaluate the ROI from their discount activity – and be able to target better the next activity they undertake.

1. Benchmarking for success

 Do you know where your core stores are? They are the stores that really overperform for their size, and allocated shelf space. They are also the ones that struggle to keep their shoppers happy when demand ramps up.
What typifies them?
They sell more from the same space as their similar sized colleagues
They are much more likely to run out of stock at critical times

 Core measure 1

Stock cover (what you get when you divide weekly stock with weekly sales.)
sales price and stock
Stock cover is a mirror of sales success/shopper demand. However sales success will be limited if stock cover drops below a level at which an individual store can keep shelves full. You need to learn by product, the stock cover each product needs, and at that point you can see exactly which stores need to give you more space, and which really need central negotiation. Like this brand.
The Y axis is average sales y store. The X axis is distribution (how many stores are you in). By and large the high stock cover is the brands with lower sales.  Retailers do not range by anticipated demand, but by store size. Brand space is allocated by retailers based on their perception of your brand strength.
They often get this wrong. The grey blobs are own brands – and you can see that typically they perform less well, and have greater stock cover than the brands.
Bongrain relay
Yes, and these core stores also have the potential to respond really well promotionally – see this profile which is for thousands of products. They need more stock to be able to succeed. On the other hand the standard allocation leads to poor stores having excess stock simple because they don’t sell it.

Core measure 2

Coreness – how well does it perform vs similar sized average stores. Core stores cluster together as core people cluster together, and you can stick pins into them on a map.
 Seabrook map
 Core stores will always have the least stock cover, the greatest risk of being out of stock and a disproportionate share of your business. There are clients much more skewed than this. Your core stores can become category drivers for your retailers. 
Core Store Strength
Core stores are core simply because they have a much higher percentage of the right kind of people in their catchment area. This means they could be situated regionally (As this brand was) or geo-demographically, such as along the South Coast where older, better off people might buy you.
One more thing – perhaps obvious – but core stores are much more sensitive to promotion offers whether money, or other appeals. The average core store across many thousands of products can give you a 10 times uplift, while non-core delivers 2. Most stores fall under the heading of average or poor stores. Core stores are a much higher percentage of your business the moment you incentivise their shoppers. Promotion performance
So you can identify a core store either by poor stock cover or higher sales.
ILLUSTRATION AND DISCUSSION
Tesco have now expressed their stock objective in stock turn terms. ie 4 days stock out of 7 on the now expanded shelves (stock cover .44) knowing what you know – will this meet the needs of their shoppers for all brands. Will increased availability overcome additional variety.

Summary

Core Stores have the potential to do much better than the average, and you can identify them because they are struggling
If you advertise they are the stores that will deliver you the uplift OR they will irritate your existing customers simply because the new users empty the shelves
DISCUSSION Asda have removed any and all store specific ability to support local demand. How much do you feel that this has contributed to their faster than average rate of decline for your brands. They no longer respond to reasonable requests for demand related allocations.
Is their supply chain actually fit for purpose? What can be done to overcome this barrier?

2. What are the most profitable investments outside price to gain growth?

Step 1 Satisfy your existing customers
Identify the level of stock cover that does not result in out of stocks – and the brands that need the help, and where. Use these insights to drive both immediate action and central negotiation.
Work with core stores on profitable actions to build their growth. (See three step approach)
Step 2

Retailers are very poor at managing your brand. Make sure you get at least what they offer you, and target more relevant products in core stores. Click on details to regain £680,000 per annum from stores that should sell – but don’t. (see the variability in stores selling in the chart above).

You can support them in a variety of ways that do not include field visits. Here simple additional central allocations will deliver £680,000 additional annual sales.
missing stores
Step 3
Going for Growth
Understand that any good shopper marketing investment into core areas will deliver great returns.
On pack promotions bring in new core users, that discounts don’t. If you want to build, discounts won’t do it.
Click here for shopper marketing ROI that you can gain if you understand supply and demand targeting  >> Case Studies

What about new products?

Mintel data shows the number of new food launches fell 33.6% year on year [12 months to June 2015], an acceleration of a three-year trend that saw food NPD fall 18.7% in 2014, and 10.7% in 2013. The last time food launches grew was in 2012. On top of this the market for brand innovation is shrinking fast as discounters take increasing shares of the market, and the major retailers shrink in proportion.
New products have to work fast or they will be dumped fast. We believe you will need to add promotions to build new core users. Check out the Case Studies to see example uplifts and ROI.
Step 4 Allocating your current budget
Strategically, you may want to allocate more investment overall to core areas, and to supply chain initiatives with the majors to build stock, in particular promotionally.
Different retailers will give you different ROI from investment in discounting. This can all be measured, as can any other directed activity, to identify best practice.

 

Why do you get up in the morning?

When 80% of what you do will fail

This is what we are told about your success chances for the next new product. There seems to be a comfort in applying the 80/20 rule to retail marketing even though it often flies in the face of the facts. But would you really get out of bed for a 20% chance of a good day?

Argumentum ad populum (Latin: an argument to the people) is the logical fallacy that if a lot of people believe something, then it must be true. Generations of politicians reach, and hold on to power by understanding that it’s not the facts that matter, it’s the beliefs. So lets look at the facts. 
In 2001 Schneider in conjunction with Boston University researched 91 significant companies – with revenues over $2.6 Billion about the recent performance of launches. The respondents reported that 58% of the products hit 8,9 or 10 on a scale that ranged from an overwhelming success to a dismal failure. The study called these Highly Successful launches.
What this means can be gauged from the fact that 71% of these reported that they had bettered forecasts. So if we were simply to take a simple, on forecast or better measure, you are looking at a very simple 41-50% success rate. They then went on to look further at the reported drivers for success. If you take out all of the planning and just focus on the Marketing they said;
  1. Focus on the consumer to improve success
  2. Gaining Shelf Presence and distribution are Key
  3. Spend money on products that are “new”

Interestingly they also said “Don’t put your CEO in charge of the launch!”

Would you get up in the morning for a 20% chance of having a good day? Now you don’t have to.

However, there are a myriad less important new products that companies launch as range extensions that they creep onto the shelves. They take up important shelf space from other variants that need it (certainly promotionally). They bleed time and attention from executives, and investment from the real successes.
You need to treat even range extensions as new products, and give them the attention they deserve to make sure they reach their targets and become an active part of your range – even if this means removing products that have failed.

The real price of failure is the products that get removed when you launch new ones. The ones that, quite possibly, were never given a chance in the first place as they were simply “drifted” on to the market.

Best to make sure, then, that your products are not amongst them.
There are 3 key hurdles you absolutely need to overcome, store and consumer.
They require coordinated sales and marketing action right down to store level. They all actually MAKE money.
 Almost no-one hits all the targets. Do you?
LaunchControl (1)
For your free book, and a chance to get a performance check on your product launches Click Here
PS Check out Chapter 4 and the Rumsfeld effect, Chapter 7 – In Place of Price and Chapter 8, The Long and Winding Road.

Invest in Layers for Maximum Return on Investment

You need Growth BUT you also need ROI…

Best ROI across 15 years  of IPA award winners came from 3 stacked messages on the Path to Purchase (See Page 69  Beyond Shopper Marketing or refer Shoppernomics).9781472424853

Objective

1.Accelerate growth by gaining additional stores, facings and ranging

2.Accelerate growth by building shopper/consumer awareness and standout all the way to the pack

The closer you invest to the shelf and the store the closer the relationship to sales, the greater the immediate ROI and the easiest to measure. The further you get away from the pack, the more people you can reach, but the less direct the impact on sales. Obviously stage 1 before you embark on any other support is to check PULSE Profit to make sure you are getting all the sales you should be from your negotiated space, identify where your core is, and build as much store space, stock and ranging as possible. You would be surprised how much additional support simple actions taken here will pay for.

(The internet is also close to the shelf for on line purchases and increasingly used for in store purchases)

Layer 1 – Pack and Shelf Based Advertising

Affinity on pack sticker

On Pack delivers up to 40% Sales uplift and appeals more to potential loyalists than discounts

Shelf Adder2

Shelf adders scream out at people if the shelf is not full – they typically add 5% to sales

Closest to the pack is the pack itself – this needs to shout pick me up against the other packs around. So use NEW if you can. If not deliver other benefits. A send away price offer on pack can deliver the same impact as a 60p drop in price – for significantly less than 1p per pack. It’s your pack, and what it says is wholly under your control. Don’t waste the opportunity.

Shelf based signage makes sure that your space is only filled with your product – this is a huge issue in the UK where space is negotiated but not guaranteed. This placement can often be achieved by simple discussion with store managers. You need to be sure, though, that material can be easily removed if shelf locations change.

We have developed a type of sign not typically used  centrally-the shelf adder – that is very acceptable to the store. This could easily incorporate a QR code giving access to review sites, or the advertisement. Holding space – and keeping it filled is your number one priority. This is vital in you core areas. KOS redemption siteCore areas are those where more of your shoppers buy than the average. The shelves run out sooner and all your marketing effort will give you better return – but only if you make sure you get better supply there. And yes, it is entirely possible to focus sales, supply chain, and marketing effort on specific stores. While QR codes are touted as having a relatively small usage at the moment, our smartphone usagerecent research with the Retail Bulletin revealed that 40% of what will by 2017 be over 40 million people are currently using it. So the most powerful way to add value in a small space available to you.  Interestingly, while it is always felt that all people are interested in is price, this is far from the truth. Sure, price comparison web sites are important, but reviews are growing in importance almost as fast.

Lastly off shelf display is typically by central negotiation. In the most stores, however, these can also be negotiated at store level. So absolutely no excuse.

Layer 2 – Path to Purchase near the store.

This is vital for building sales and awareness where you have localised distribution or in your core areas. There are many types of local support such as local internet, outdoor, sampling, leaflets, coupons of various types. RVS have measured the impact of most channels.

Burns Petfood Sainsburys proximity 6-sheet

This layer can be structured so you have impact on the Head Office, the store and the shopper. Buyers are comfortable to give you more if you demonstrate (and they can see) you will be investing alongside them.

The most effective short term use of posters is close to store, and in conjunction with specific in store activity. There are a number of studies we have done, this is the most recent;

Although the primary objective of the 6 sheet posters was to introduce the NPD lines, it also increased awareness of the brand name in general which in turn increased the average sales of all the brands products in these stores

Poster results

Without stripping away the other forms of activity, the 6 sheets looked to generate around £60k in added value sales.

This level can give real interaction with the brand – as an example a link to a site with the commercial on, or to a competition. This can be achieved through the use of a QR code – and this can be augmented with a direct click through link (try it and see). This links to a current promotion in store redeemed through our research/reward site yousay. QR codes have a much higher penetration to the under 35’s.

The graph shows the difference between control and poster stores. The content was in support of NPD and a promotion in the store BUT the impact was seen on all associated products

Layer 3 – National media.

Here you can have a national reach if the market is right with social media, or through smartphones. We have conducted extensive research into the value of smartphones you can access here. The value of interactive content to the 43 million people who will own them by 2017 cannot be underestimated. Click here for our industry white paper with the Retail Bulletin > showrooming in stores

However, National TV in local areas can be purchased within a budget of £20-40,000. If content Burns pet food 48 sheetalready exists this “National Equivalent” can be very effective in giving a national profile to buyers, for a young brand. With more limited distribution it is important to tell people where exactly they can buy the product – view this.

Posters can, in their own right, also deliver national impact. As with this 48 sheet poster as part of the pet food campaign alongside small format posters above.

Balanced marketing is a mix between the three areas – you need to remind people on their Path to Purchase to get their full attention. However you must keep all three layers in place, and in proportion as you grow to get the benefit.

Spending on digital advertising is expected to comprise more than half of total advertising expenditure in the UK this year. However, while there are clear opportunities to drive brand engagement in stores with the huge number of smartphones, it is still important to remember line of sight whenever, and wherever, this can be leveraged.

Where Should you direct your investment for ROI today?

Every brand has a core user base. The type of people that want to hear what you have to say. These people tend to cluster together, and to shop in the same stores. Waitrose core shoppers enjoy house price rises where a new one opens up – it’s that important to them. You need to identify who your core customer is, and where in the country they cluster together the most. Investment there will get you the greatest return. List in new outlets to make their managers and shoppers happy. Combine the two actions for guaranteed short, and long term, growth.

The latest census, that we use, is the most insightful yet. Combined with store by store sales data you can identify your strengths, and measure the return from your carefully targeted activity.

You will hear people tell you the contrary – you should work hardest where you are weakest. However, you are weak there for a reason. If you spend your budget talking to people who are not that interested in hearing, you will need to invest much more to convert them. Wait until you can afford national advertising to build here. There is a direct relationship between the more people who buy your product, and the more loyalists you have. Build first where it is easiest – and don’t just relay on discounts to do this. See why here

Refine your Message

If you want to deliver impact AND ROI it is vital you understand the media to use, and the kind of message that appeals to your target market. Here RVS is working with the British Population survey and redemption data from the largest handling houses in the UK in an initiative we call PULSE Promotion. Not only can we tell you where your core customers live, but we can also tell you which media they are most in touch with, and the appeal they are most likely to respond to.

The IPA say that “Advertising and Promotions are a match made in Heaven” based on analysis they carried out of the most successful campaigns since their records began. This, naturally, agrees with the principle of not letting one channel carry the load on its own.

We identify 3 major groups of people – in terms of their general response to appeals – broken into 20 UK subcategories of people. The largest two sections we call face to face and face to screen. There is a huge divide between them. The former keep their friends close, they prefer to talk to them, and have little interaction on social media. However, they can be extensive users of the commercial internet. The latter use all aspects of the internet heavily, but they are still a small proportion of the UK population. There are a crossover group that use ALL appeals heavily.

If you know who you are talking to, you will get cut through. Click for Case Studies

Don’t just target consumer impact – target shopper sales