April 26, 2007
PLBuyer: Pause and Effect
By Jill Rivkin
Through a special arrangement, what follows is an excerpt of a current article from Private Label Buyer, presented here for discussion.
Partly because television and radio ads are losing their effectiveness in reaching consumers, CPG companies are reallocating their ad budgets toward point-of-sale marketing efforts. For retailers already creating an in-store marketing presence for store brands, CPGs are encroaching their domain and enticing even the most steadfast retailers with funding. And for retailers not yet building store brand marketing plans, the competition for space and consumer attention will only become more challenging.
“The battleground for brand position is shifting from traditional media outlets, such as television and radio, to the store aisles,” writes Mike Waite, president and chief executive officer of the Retail Integration Institute, in the 2006 Trends Report from P-O-P Times. “Consequently, new challenges are on the horizon. The influx of brand messages in the store will put a greater burden on brand marketers to differentiate their product on and off the shelf.”
According to the report, 47 percent of CPG suppliers surveyed said point-of-purchase (POP) displays/signs would be receiving greater emphasis this year. Only 15.2 percent reported an increase in TV advertising, and just 12.5 percent reported an increase in radio ads.
“Savvy consumer goods marketers and retailers alike are beginning to realize that the point of brand-decision is coming closer and closer to the point of sale,” the report stated, pointing to Procter & Gamble’s naming a director of FMOT (first moment of truth) responsible for producing better and more sophisticated in-store displays.
Brian Harris, chairman of The Partnering Group, said retailers need to be looking ahead to where in-store media trends are headed to factor into marketing programs for store brands.
“There are some pretty dramatic trends happening as consumer-packaged-goods companies reallocate their media mix to put more in the store,” said Mr. Harris. “Retailers have to think about how to capitalize on newer tools and media to support store brands. It’s critical because the trend will only accelerate.”
However, Brian Mitchell, vice president of marketing with Thomas Nelson Publishers, believes national brands will be challenged because retail chains are increasingly limiting their selection of products and campaigns for which they will provide promotional space.
“Limited allocations for merchandising equates to less POP and higher costs per unit to the manufacturer,” said Mr. Mitchell. “Additionally, more retailers are taking control of POP and creating their own signage, shelf inserts and even floor dumps. While this approach makes sense for the retailer, allowing them to avoid clutter and create a cohesive, appealing look throughout the store, it dilutes the marketing message and its impact by homogenizing all products. Nobody wins in this situation.”
Finding the right balance between national brand and store brand marketing space within the store is a challenge set forth on many levels, from assortment and SKU counts at the shelf to signage, promotional pieces and big events.
“Retailers can do more in private label, but again it comes down to the value of the real estate and who’s going to pay the highest price,” said Tom Dowdy, chief executive officer of National In-Store, a division of Omnicom Group. “It comes back to an economic decision based upon sales per square-foot and additional funding.”
And clutter is always a concern because no one wins if the moment of truth is confusing.
“Retailers have to draw the line between distracting overload and appropriate,” observed Mr. Harris. “If you overload customers, they will switch because they don’t want clutter. You have to implant messages within the shopping experience so that it’s a comfortable experience.”
Discussion Questions: What do you make of CPG companies’ greater investment in in-store marketing? How do you think it will affect retailers’ private label brands? How can the consumer best be served given these seeming conflicts between marketing national and store brands at the store level?
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I believe that in-store marketing is an excellent way to reach consumers who are making more and more of their buying decisions at the point of purchase. In my CPG days we were among the early investors and gained valuable knowledge in creating effective in-store programs.
Retailers will always be prone to accepting CPG dollars to help cover their overhead costs and like trade promotion dollars, co-op or co-marketing dollars, in-store marketing dollars will be an additional source of revenue.
I think in-store marketing will continue to grow and retailers might best use these tools to better establish their Premium Private Label brands with the consumer.
There are lots of questions asked here all bundled together.
What do you make of CPG companies’ greater investment in in-store marketing?
This is the battleground of the future with much of the work being done as part of Category Management efforts no longer creating the value expected. Decisions need to be focused on the purchase criteria used by those in-store.
How do you think it will affect retailers’ private label brands?
The impact across all brands will be to raise the bar and create even better products, marketing, and promotion.
How can the consumer best be served given these seeming conflicts between marketing national and store brands at the store level?
The shopper is served by in-store marketing, NOT the consumer. They are not the same and therefore this question is a bit confusing.
Point of purchase marketing is most effective for new items, because trial is the key hurdle. And every decent retailer manages the POP clutter carefully. Otherwise the store ends up looking like a chaotic mess. Great retailers are great editors. They keep what’s meaningful and ignore the rest.
There are three factors that distinguish the in-store media experience from other media experiences.
1. Shoppers have a 360 orientation in the store. That is, they are NOT focused on a defined space in front of them, but in fact are immersed in a “total body” experience, unlike nearly any other media experience. This is unlike television and online where the media is clearly “over there,” not “all around me.”
2. In store media is already ubiquitous. That is, packages are media, too, and very likely the single most important media in the store. And the shopper is virtually bathed in this media. In a center-of-store aisle, 80% of a shoppers field of view is occupied by commercial images, most of which is packages on shelves. Around the open perimeter, that number drops to 50%, but it is still close to overwheming saturation to the shopper. (Imagine having two walls of your TV room at home totally covered with TV screens!)
3. It all happens at blazing speed. Any given image or message probably has 1-3 seconds in which to engage the shopper, and this is with formidable competition from other messages they are being bombarded with, simultaneously.
This is the reality of this powerful medium. Treating the shopper crowd as an “audience” is not misguided, but the opportunity is fraught with complexity.
My view is unpopular with advertising agencies; however, I strongly believe that point of sale (POP) promotion has always been a more powerful tool than television. The “clean store” trend and impact of the 1990’s hurt POP, however, it’s coming back strong now with “cleaner” approaches. POP allows the marketer to reach the consumer right where the decision is made while generating increased levels of business with “impulse.” When POP is designed tastefully, it helps to make the shopping experience more informative and exciting, and creates a more competitive environment beyond name brand recognition and price, alone. POP will not hurt store brands because the practice actually encourages comparison. Niche brands and smaller brands can compete on a more level playing field with the 800 pound bullies using POP assertively, skillfully, and effectively. I love it!
The shift of CPG marketing dollars from traditional media to the in-store media environment is a reflection of splintered audiences, alternative media, and the recognition of retail spaces as communications environments for brand messages. In short, brands know the store is the most reliable place to reach and influence target customers.
Marketers of store brands recognize the potential of shopper media too. They have relied on in-store messaging for decades. Now their options are increasing due to new in-store channels, including digital screens. Since retailers control their communications environment, they will elect to use shopper media to support their PL agendas.
Shopper access is a limited commodity (like TV airtime) and CPG marketers will have to compete for the best digital and POP messaging slots, and learn how to coexist beside increasingly sophisticated store brands.
Consumers will generally be well served by this competitiveness, but there is a caveat (isn’t there always?): Messaging overload will send shoppers packing. Figuring how much is too much will be a trial and error process, but ultimately it will define the inventories of in-store messaging slots and their cost.
That CPGs are putting more money into stores is awesome. The retailers, though, have to take control of the situation immediately.
They can’t overwhelm customers with competing messages and conflicting identities. They mustn’t lose control of their customer experience.
To do so would mean winning the battle (getting short-term revenue from CPGs), while losing the war (defusing their brand).
The retailer needs to create programs that would keep the retailer’s customer experience intact, while giving the CPGs a chance to pay for the right to speak their piece. The programs would be designed to allow the CPGs to participate, but in a game defined by the retailer. Perhaps use a permission-marketing model in store: Have screens that will play CPG commercials only if a customer wants to see those commercials.
Dividing shelf-space and in-store marketing between store brands and national brands is indeed a tricky trade-off between high margins and losing customers that may prefer national brands. Private label used to be associated with a cheap alternative to expensive national brands in commoditized categories with low differentiation, but this view is changing now with premium store-brands (Sam’s Choice, Tesco’s Finest). As store-brands continue to increase their value proposition against national brands, retailers will continually need to optimize this trade-off, while deciding in-store marketing allocation. As far as in-store and POS marketing versus mass-media channels like TV, Print and Radio, yes mass-media is hitting a lot of saturation and especially in reach. A lot of this is due to audience fragmentation due to media proliferation. The impact of mass media takes a little time to filter to revenues. In-store marketing, on the other hand, has the advantage of an immediate effect on sales. But in-store marketing doesn’t have the long-term brand building capability mass media has. In-store marketing and mass media are complementary to, and not substitutes of each other. Store brands that are looking to compete with national brands on features other than pricing therefore need to have both an in-store and mass media marketing strategy.
With regards to building store brands versus national brands, this is just a new front in the same battle. Retailers have been making the trade offs between national and own label brands in circulars, displays, traditional POP, etc. all along. Digital signage and in-store networks are simply the latest medium.
On the question of how retailers should handle in-store media, the answer seems to be: VERY carefully. I heard a great quote from a retailer heavily involved in understanding this medium last week. In answering a question about how heavy-handed retailers and manufacturer advertisers should be with their in-store communications, he responded that retailers really don’t care if consumers TiVo commercials at home–but no one wants a customer to “TiVo my store.” In short–if you aggravate customers with an onslaught of price and other “salesy” messages, they will vote with their feet.
Store brands (i.e. Private Label) are not synonymous with Retailer Branding. At roughly the same time that CPG companies are turning to in-store communication, the retailers are waking up to their own branding requirements. This is not so much item or category driven as it is a high level strategic issue, which we at MVI have been talking about for several years.
For CPG suppliers who have brands that “fit” a given retailers brand–that support an increasingly clear and articulated retailer brand proposition–this is all sorts of fun and opportunities abound.
For suppliers who are focused on their own brand and who cannot find a way to make it align with the retailer’s, this seems threatening, and rightly so. Sure, they can stave off the inevitable through buying “airtime,” a desperate attempt to apply a “broadcast revenue” model that is already out of date in the media where it started.
But in the long run, it will cost too much and yield too little. Smart suppliers will face up to the complexity of modern retailing, and adjust their product offering and positions to fit their retailer outlets, even elaborating new items and programs for key retailers. Look around–it’s already happening.
Fundamentally, brands serve a retailers needs best when they drive a shopper into the store. The First Moment of Truth is a supplier concept, but for a retailer the First Moment of Truth is a shopper coming INTO the store, long before they make a product decision.
Worrying more about the point of purchase obviously makes sense if we believe the POPAI two-thirds rule (2/3 of the brand decisions made at the shelf). I don’t see the conflict between national brands and store brands–most shoppers have made up their mind which way they’ll go in a given category and every reason to expect the migration from national to store brand will continue. National brands focusing more on POP shouldn’t alter that equation very much.
When POPAI first reported that 70% of consumers choose their brand while in the store, there was a huge influx of in-store promotion, a huge increase in trade promotion, and a significant decrease in advertising expenditures. Over time, companies realized that they had trained consumers to disregard brand loyalty because they could find things on sale or on deal.
Then companies began to shift some money back to advertising but the erosion of a TV audience has made that difficult to do. Then came Sarbanes Oxley, requiring that companies provide documentation for trade promotion expenses. Over the last two years, money has shifted again: companies are spending more on advertising (but an increasing part of that pot of money has gone to internet advertising) and more money is spent on trade promotion (consumer promotion in the store which can be documented).
Companies face the same challenge they always have: do enough advertising to create brand awareness and brand image while spending enough on promotion to stimulate sales. Category managers in the stores need to understand their consumers well enough to know what items would be helped by promotion at what times without having brand loyalty eroded.
With the robust consumer data available, coupled with by-store sales data and a cheap mapping software, retailers should be looking for relationships between store locations and private label and/or national brand development in key categories. Some demographic groups may equal high development on private label; some may equal high development on national brands.
The in-store marketing should focus on the different consumers walking in the different stores–if they have a high development in private label, they should focus more of the in-store marketing on private label; and vice versa for national brands. A “one size fits all” approach isn’t going to work for more consumers, because of the mixed messages.
Just as trade promotion funds from CPG companies can work against good store brand marketing, retailers must be careful that in-store programs in which they participate do not detract from their store brand strategy and execution. The dollars available may not offset loss of sales and, more importantly, retailer equity, if not managed properly. Smart retailers should find ways to piggyback store brands on the In-store programs with coupons against related store brand items, signage that includes store brands and, in some cases, they can utilize a portion of a program for their own brands. Retailer marketing departments must MANAGE the inflow of programs and build a strategy that includes their own brands.
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I believe that in-store marketing is an excellent way to reach consumers who are making more and more of their buying decisions at the point of purchase. In my CPG days we were among the early investors and gained valuable knowledge in creating effective in-store programs.
Retailers will always be prone to accepting CPG dollars to help cover their overhead costs and like trade promotion dollars, co-op or co-marketing dollars, in-store marketing dollars will be an additional source of revenue.
I think in-store marketing will continue to grow and retailers might best use these tools to better establish their Premium Private Label brands with the consumer.
There are lots of questions asked here all bundled together.
What do you make of CPG companies’ greater investment in in-store marketing?
This is the battleground of the future with much of the work being done as part of Category Management efforts no longer creating the value expected. Decisions need to be focused on the purchase criteria used by those in-store.
How do you think it will affect retailers’ private label brands?
The impact across all brands will be to raise the bar and create even better products, marketing, and promotion.
How can the consumer best be served given these seeming conflicts between marketing national and store brands at the store level?
The shopper is served by in-store marketing, NOT the consumer. They are not the same and therefore this question is a bit confusing.
Point of purchase marketing is most effective for new items, because trial is the key hurdle. And every decent retailer manages the POP clutter carefully. Otherwise the store ends up looking like a chaotic mess. Great retailers are great editors. They keep what’s meaningful and ignore the rest.
There are three factors that distinguish the in-store media experience from other media experiences.
1. Shoppers have a 360 orientation in the store. That is, they are NOT focused on a defined space in front of them, but in fact are immersed in a “total body” experience, unlike nearly any other media experience. This is unlike television and online where the media is clearly “over there,” not “all around me.”
2. In store media is already ubiquitous. That is, packages are media, too, and very likely the single most important media in the store. And the shopper is virtually bathed in this media. In a center-of-store aisle, 80% of a shoppers field of view is occupied by commercial images, most of which is packages on shelves. Around the open perimeter, that number drops to 50%, but it is still close to overwheming saturation to the shopper. (Imagine having two walls of your TV room at home totally covered with TV screens!)
3. It all happens at blazing speed. Any given image or message probably has 1-3 seconds in which to engage the shopper, and this is with formidable competition from other messages they are being bombarded with, simultaneously.
This is the reality of this powerful medium. Treating the shopper crowd as an “audience” is not misguided, but the opportunity is fraught with complexity.
My view is unpopular with advertising agencies; however, I strongly believe that point of sale (POP) promotion has always been a more powerful tool than television. The “clean store” trend and impact of the 1990’s hurt POP, however, it’s coming back strong now with “cleaner” approaches. POP allows the marketer to reach the consumer right where the decision is made while generating increased levels of business with “impulse.” When POP is designed tastefully, it helps to make the shopping experience more informative and exciting, and creates a more competitive environment beyond name brand recognition and price, alone. POP will not hurt store brands because the practice actually encourages comparison. Niche brands and smaller brands can compete on a more level playing field with the 800 pound bullies using POP assertively, skillfully, and effectively. I love it!
The shift of CPG marketing dollars from traditional media to the in-store media environment is a reflection of splintered audiences, alternative media, and the recognition of retail spaces as communications environments for brand messages. In short, brands know the store is the most reliable place to reach and influence target customers.
Marketers of store brands recognize the potential of shopper media too. They have relied on in-store messaging for decades. Now their options are increasing due to new in-store channels, including digital screens. Since retailers control their communications environment, they will elect to use shopper media to support their PL agendas.
Shopper access is a limited commodity (like TV airtime) and CPG marketers will have to compete for the best digital and POP messaging slots, and learn how to coexist beside increasingly sophisticated store brands.
Consumers will generally be well served by this competitiveness, but there is a caveat (isn’t there always?): Messaging overload will send shoppers packing. Figuring how much is too much will be a trial and error process, but ultimately it will define the inventories of in-store messaging slots and their cost.
That CPGs are putting more money into stores is awesome. The retailers, though, have to take control of the situation immediately.
They can’t overwhelm customers with competing messages and conflicting identities. They mustn’t lose control of their customer experience.
To do so would mean winning the battle (getting short-term revenue from CPGs), while losing the war (defusing their brand).
The retailer needs to create programs that would keep the retailer’s customer experience intact, while giving the CPGs a chance to pay for the right to speak their piece. The programs would be designed to allow the CPGs to participate, but in a game defined by the retailer. Perhaps use a permission-marketing model in store: Have screens that will play CPG commercials only if a customer wants to see those commercials.
Dividing shelf-space and in-store marketing between store brands and national brands is indeed a tricky trade-off between high margins and losing customers that may prefer national brands. Private label used to be associated with a cheap alternative to expensive national brands in commoditized categories with low differentiation, but this view is changing now with premium store-brands (Sam’s Choice, Tesco’s Finest). As store-brands continue to increase their value proposition against national brands, retailers will continually need to optimize this trade-off, while deciding in-store marketing allocation. As far as in-store and POS marketing versus mass-media channels like TV, Print and Radio, yes mass-media is hitting a lot of saturation and especially in reach. A lot of this is due to audience fragmentation due to media proliferation. The impact of mass media takes a little time to filter to revenues. In-store marketing, on the other hand, has the advantage of an immediate effect on sales. But in-store marketing doesn’t have the long-term brand building capability mass media has. In-store marketing and mass media are complementary to, and not substitutes of each other. Store brands that are looking to compete with national brands on features other than pricing therefore need to have both an in-store and mass media marketing strategy.
With regards to building store brands versus national brands, this is just a new front in the same battle. Retailers have been making the trade offs between national and own label brands in circulars, displays, traditional POP, etc. all along. Digital signage and in-store networks are simply the latest medium.
On the question of how retailers should handle in-store media, the answer seems to be: VERY carefully. I heard a great quote from a retailer heavily involved in understanding this medium last week. In answering a question about how heavy-handed retailers and manufacturer advertisers should be with their in-store communications, he responded that retailers really don’t care if consumers TiVo commercials at home–but no one wants a customer to “TiVo my store.” In short–if you aggravate customers with an onslaught of price and other “salesy” messages, they will vote with their feet.
Store brands (i.e. Private Label) are not synonymous with Retailer Branding. At roughly the same time that CPG companies are turning to in-store communication, the retailers are waking up to their own branding requirements. This is not so much item or category driven as it is a high level strategic issue, which we at MVI have been talking about for several years.
For CPG suppliers who have brands that “fit” a given retailers brand–that support an increasingly clear and articulated retailer brand proposition–this is all sorts of fun and opportunities abound.
For suppliers who are focused on their own brand and who cannot find a way to make it align with the retailer’s, this seems threatening, and rightly so. Sure, they can stave off the inevitable through buying “airtime,” a desperate attempt to apply a “broadcast revenue” model that is already out of date in the media where it started.
But in the long run, it will cost too much and yield too little. Smart suppliers will face up to the complexity of modern retailing, and adjust their product offering and positions to fit their retailer outlets, even elaborating new items and programs for key retailers. Look around–it’s already happening.
Fundamentally, brands serve a retailers needs best when they drive a shopper into the store. The First Moment of Truth is a supplier concept, but for a retailer the First Moment of Truth is a shopper coming INTO the store, long before they make a product decision.
Worrying more about the point of purchase obviously makes sense if we believe the POPAI two-thirds rule (2/3 of the brand decisions made at the shelf). I don’t see the conflict between national brands and store brands–most shoppers have made up their mind which way they’ll go in a given category and every reason to expect the migration from national to store brand will continue. National brands focusing more on POP shouldn’t alter that equation very much.
When POPAI first reported that 70% of consumers choose their brand while in the store, there was a huge influx of in-store promotion, a huge increase in trade promotion, and a significant decrease in advertising expenditures. Over time, companies realized that they had trained consumers to disregard brand loyalty because they could find things on sale or on deal.
Then companies began to shift some money back to advertising but the erosion of a TV audience has made that difficult to do. Then came Sarbanes Oxley, requiring that companies provide documentation for trade promotion expenses. Over the last two years, money has shifted again: companies are spending more on advertising (but an increasing part of that pot of money has gone to internet advertising) and more money is spent on trade promotion (consumer promotion in the store which can be documented).
Companies face the same challenge they always have: do enough advertising to create brand awareness and brand image while spending enough on promotion to stimulate sales. Category managers in the stores need to understand their consumers well enough to know what items would be helped by promotion at what times without having brand loyalty eroded.
With the robust consumer data available, coupled with by-store sales data and a cheap mapping software, retailers should be looking for relationships between store locations and private label and/or national brand development in key categories. Some demographic groups may equal high development on private label; some may equal high development on national brands.
The in-store marketing should focus on the different consumers walking in the different stores–if they have a high development in private label, they should focus more of the in-store marketing on private label; and vice versa for national brands. A “one size fits all” approach isn’t going to work for more consumers, because of the mixed messages.
Just as trade promotion funds from CPG companies can work against good store brand marketing, retailers must be careful that in-store programs in which they participate do not detract from their store brand strategy and execution. The dollars available may not offset loss of sales and, more importantly, retailer equity, if not managed properly. Smart retailers should find ways to piggyback store brands on the In-store programs with coupons against related store brand items, signage that includes store brands and, in some cases, they can utilize a portion of a program for their own brands. Retailer marketing departments must MANAGE the inflow of programs and build a strategy that includes their own brands.