You are meeting with a key retailer partner tomorrow and you are preparing for your discussion. As your eyes focus in on the report, your mouth falls open. You cannot believe what you are seeing. Your brand, which dominated sales within this category at this retailer for more than a year, is suddenly losing sales and share quickly. What’s worse? You have no idea what is going on. This. Is. Not. Good. Panic sets in.
Then you remember: You have valuable shopper data right at your fingertips. You can dig into this problem. You can understand why this shift is happening. You can identify corrective actions. And you can get it all done before your meeting tomorrow. Cue the deep sigh of relief.
You’ve heard the adage “The top 10% of your shoppers make up 90% of your sales.” That adage is incorrect. In reality, the top 0.01% of shoppers account for 10% of your sales. Knowing your shopper is more important now than it ever has been before.
Let’s take a step back and understand how the pieces of this puzzle are going to fit together. Where does shopper data come from? What does it do?
Frequent shopper program data — otherwise known as loyalty data — provides a granular perspective into how consumers shop within the retail banner. Many retailers have loyalty databases that store these detailed insights on millions — even tens of millions — of their core shoppers. Used with an integrated insights platform, loyalty data also provides a valuable point of comparison to what those same shoppers’ behaviors look like across the rest of the market. This comparison allows consumer packaged goods manufacturers to identify opportunities and challenges for the brand across the 360-degree marketplace.
A Framework for Inspiration
The chain drug industry is at a pivotal juncture. Drug retailers are serving omnichannel shoppers who have endless options of what to buy and where to shop. More than ever, creating a powerful customer experience is critical. If it was easy to create such experiences, it would already have been done and the battle for share would be over. But the battle is far from over. Retailers are locked in an unending footrace to win, protect and grow customer lifetime value not just within their own retail banners, but across the retail marketplace (both online and offline). And this is why shopper data is so very critical.
Within the retail banner, buyer trends reveal:
• Is the category adding or losing buyers?
• Are buyers spending more, or less, on the category?
• Are buyers shopping more, or less, frequently?
• Are/how are purchase sizes changing?
• What items do buyers consider substitutable?
And across the retail marketplace:
• Are buyers shopping the category elsewhere? With increasing, or decreasing, frequency?
• Where else are my shoppers going?
• What retailers are gaining share of wallet?
• Is/how is my shopper conversion rate changing?
Plan for Change …It Is Going to Happen
As illustrated in our opening anecdote, success today does not guarantee success tomorrow. In fact, we are living in an unprecedented age of change. Carefully tracking buying patterns allows for the rapid identification of shifts and recalibration of programs required to protect and grow the buyer base.
• How are buyer changes impacting the business?
• How are changes in buyer spending impacting the business?
• Have price-per-unit changes impacted any key buyer metrics?
It’s critical to understand that a decrease in buyers isn’t necessarily a bad thing. Oftentimes, less loyal buyers peel away, leaving the most loyal buyer base behind. Recalibrating plans to stay in lockstep with shifting patterns, particularly when done in close partnership with the retailer, can have a dramatically positive impact. Let’s explore this further through a real-life example.
Loyalty Insights Illuminate $4.7 Million Opportunity; Collaboration Creates Win-Win Situation
Let’s take a closer look at a personal care brand, which we’ll call Brand X. For a long time, this brand held a strong category share with a loyal customer base at a large drug retailer, differentiating itself at this retailer through a strength at driving bulk purchases. More recently growth patterns shifted, with competitors to Brand X driving a majority of category growth. While Brand X had recommendations on a turnaround strategy through different types of trade promotions and CRM campaigns, it was hard to convince the retailer’s merchant team to try alternate strategies, because the category was performing fine.
The supplier undertook a comprehensive analysis of the retailer’s frequent shopper data to get a better understanding of the situation. By integrating shopper data with market measurement and panel data insights, the supplier was able to create:
• A clear illustration of category headwinds and support for Brand X’s turnaround recommendations.
• A deep understanding of the value of retained versus net-new shoppers.
• Strong proof of Brand X’s right to win in this space.
The analysis revealed that competing brands were retaining existing shoppers and attracting new shoppers to the category, but retained shoppers were making fewer trips. Meanwhile, Brand X was not losing shoppers to competing brands — Brand X shoppers were simply buying less of Brand X. The less loyal buyers had peeled away, but Brand X’s most loyal shoppers remained.
Further analysis determined that 17% of the shopper base make four or more trips per year, accounting for 62% of category sales. These shoppers are 11 times more valuable compared to one-trip shoppers.
Two-thirds of shoppers were new to the category (i.e., did not purchase the category in this store during the prior year, but did purchase during the current year). The remaining one-third of shoppers purchased last year and this year (i.e., retained shoppers). These two groups were the drivers of category growth.
Brand X proved to play an important role in engaging key shopper segments:
• Brand X is overdeveloped across four-plus trip shoppers (+210 basis points).
• Brand X drives high exclusive purchase (74%) and a high share of requirements (78%) across shoppers within this personal care category, despite holding lower share versus competing brands.
• Brand X drives substantially higher consumption via multi-unit transactions (45%) versus competitors (range of 14% to 20%).
Focus Determines Success
It’s a chaotic marketplace, and there are no signs of it settling down. Like customers, drug retailers and suppliers can be easily distracted by the noise. With shopper data, it becomes easier to ignore the noise and channel marketing efforts on the highest-value opportunities. Your customers will appreciate that too — because they are also looking to escape the noise.
Engaging products and experiences will spur demand — for the retailer and the supplier — and create a rising tide that lifts all ships.
Buyer Engagement: Tips for Success
• Integrate shopper data with market measurement, household panel and/or supply chain data to capture a holistic view of omnichannel threats and opportunities.
• Invest to understand the impact of new, lost and retained shoppers at all times, and constantly recalibrate marketing programs to maintain the right balance.
• Leverage a retailer’s shopper segmentations to personalize offers and grow your target customers.
• Create strategic retailer-supplier partnerships to move beyond buyer movement monitoring and collaborate to influence emerging patterns: A rising tide lifts all ships.
Susan Viamari is principal of Collaborative Gateway Solutions at IRI.