Collaborating for Growth - Grocery Manufacturers … · ... aren’t even top to tops a way to...
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Transcript of Collaborating for Growth - Grocery Manufacturers … · ... aren’t even top to tops a way to...
Collaborating for Growth: Using shopper data to drive Innovation
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Everyone is after the next big thing The world of ideas awaiting us – Henry P&G According to Forbes, over 250,000 new products were launched in 2010 alone. new products accounted for $1 trillion dollars across all channels (Pacesetters).
up to
90% of new items fail
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Expand – high rate of failure 66% to 80-90% failure rate In 2010, less than 25 percent of new items achieved $7.5 million in sales, with only 1.1 percent earning above $50 million. (Cisco) Hands in the air if you’ve touched a new product that ultimately failed. One of mine– charmin spacemaker Option 1 – building a time machine Option 2 – understand what your shoppers are REALLY looking for 96% of items fail to return the cost of capital (Doblin Group). This means that the overwhelming amount of new items fail to even break even.
Everyone feels the pain
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Everyone feels the pain People in this room are from both retailers and manufacturers, includes the shopper Our good friends, the retailer, they feel the pain too
Retailers waste a lot of time and money on failed new items
Assortment Meetings
Planogram Writing Promotional Planning
New Item Set Up
Inventory & Warehousing Costs
Discontinued Item Sell Through Costs Store Labor
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Expand – if my Kroger friends were here, they could spend all day on this slide it costs the retailer in terms of both time and money to continually bring in items to just delist them shortly afterwards. Category managers spend 1,000s of hours every year on assortment - sitting in countless New Item pitch meetings, Assortment meetings and add/delete meetings. RETAILERS IN THE ROOM – aren’t even top to tops a way to pitch new items? Retailers have to set up new items in their systems, making sure the new items fit on the shelf and in the planograms and ensuring there is a solid promotional plan to support the item. In addition to the time spent in human capital, retailers also spend thousands of dollars annually bringing in new items – from warehouse costs, to the store labor to physically add the product to the shelf and also the discontinuation costs of failed innovation. Betting big on the wrong new items costs retailers just as it does brands.
Delisting current products for innovation is risky
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Another large risk for retailers and brands alike is delisting something that engages shoppers only to bring in something that does not. Every time a retailer removes a product that has proved itself to make room on the shelf for innovation, there is a risk of alienating a loyal shopper. How annoying is it when you’re favorite item is delisted just to bring in innovation? When we look at our attitudinal research on why shoppers choose to shop at one retailer versus another, product selection is the second most important reason after price with one in five (20%) of shoppers saying that is the most important factor to them in selecting where to shop (Attitudinal Pulse from August 2013). The goal is to bring in more shoppers with the new innovation than what we lose with the delisted item, but we all know our new item projections are just that. The last thing we want is to lose 4 shoppers of a deleted item to bring in one shopper of a new item.
? !
? ! ?
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Real store – guess what retailer it is Almost more annoying – out of stocks and cluttered shelves Even if a retailer doesn’t remove a product, but just cuts back facings, there is a greater potential of shoppers not being able to find the product due to the volume of items out there or out of stocks. .
It all starts with the shopper
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We want to reverse the trend of new item failures by focusing on the Shopper. My CPG friends – please put aside the Philosophical debate on shopper v consumer for the next 30 minutes – you’re losing significant ground to retailers in understanding YOUR consumers’ purchase behavior through this debate. Just assume consumer and shopper is the same in the path to purchase continuum
96% of shoppers try at least
trying11 new items
new item annually 1
With the average shopper
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Expand While the investment is high, if done right the potential is high. Innovation is a great way to bring in new shoppers to your brand and expand into areas of unmet need for your shoppers. New Items keep shelves fresh and help variety seeking shoppers stay interested and involved in stores, categories and brands. More than this, shoppers are willing to give new innovation a try. Nearly 96% of shoppers were willing to try at least one new item in 2011. the average shopper buys 11 new items in 8 categories in a year – raise hands if this looks high or low to you Nearly a third of households (31%) are willing to try a new item in 10 categories. Top 5 Categories where HHs tried at least 1 new item: Bag Snacks; Cookies; Yogurt ; Frozen Novelties; Ice Cream
Shoppers are only willing to repeat
2 out of 11 new items tried
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Not a good repeat rate Average retailer often only gives a new product 6-9 months to prove itself (inc.com), so your item needs to prove its relevance as quickly as possible Always possible to BUY trial… I did with Spacemaker Innovation must be substantial enough to change habit American families, on average, repeatedly buy the same 150 items, which constitute as much as 85% of their household needs; it’s hard to get something new on the radar. The categories with the highest failure rate based on our shopper data: Sugars and sweeteners; Tomato products – SS; Fruit Snacks; Crackers; Frozen Meals
Shelves are becoming increasingly crowded …
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With real estate being as tight as it is, ensuring that innovation is focused in a way that maximizes your total portfolio is key. Unfortunately there isn’t unlimited space in the store to bring in every great innovation item and keep every existing item in the store. Due to real estate being limited, it has to be a trade off.
.. so new products need to cut through the clutter to win with retailers AND shoppers
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With limited shelf space available and more and more innovation coming out daily, retailers are getting more and more selective about what they are willing to take and demanding CPGs better manage their own offerings. • Our retailers, consumers and shoppers are demanding products that better meet their needs
Identify trends before they are mainstream
Quantify future trend potential
Identify areas you have a right to win
Maximize your portfolio
Watching shoppers allows us to:
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By analyzing your shoppers’ behavior you can follow the four principles to ensuring new item success Identifying trends before they are mainstream Quantifying the future potential of a trend (size of the prize) Identifying where your brand has the right to win Optimizing across your portfolio
WAY 1: TREND
IDENTIFICATION
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The first way that shopper data can help guide innovation is by helping identify trends
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Nearly every day, new trends emerge on the scene, but how do we know what’s worth pursuing? Which trends are going to bring incremental HHs and sales into your portfolio and the category? Sometimes, with all the trends out there it can be easy to get lost in the clutter. We hear from our clients: “our CEO dumps new trend items on my desk every Monday and asks if we should get into that business.” Make joke about inability to pronounce most of these
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Wouldn’t it be great to know which trends are worth investing in and which you should just let go. Shopper data can be the safety line that helps lead us in the right direction so we bet big on the next hot thing and not follow the wrong fads.
Identifying trends prior to mainstream adoption
1
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Set up the graph Small changes in shopper purchase behavior can signal trends before they occur Watching a subset of ‘trendsetting’ or early adopter HH can help us identify Quinoa as trend and be projected out to the broader population Helps us determine trends before on mainstream media (Dr. Oz) or broadly adopted
Shopper data enables us to track trends across the US
2010
1
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Trends don’t just happen all at once everywhere. It’s about geographies and not retailers. In this examples we can see how a trend (Kale Chips) moves across the US over 4 years Shopper data allows us to pick up trends when they first start out. this is an example for Kale chips from 2010 – 2013. When Kale Chips first launched in 2010, sales for the first 10 months were limited to a handful of Californian stores.
2011
Shopper data enables us to track trends across the US 1
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The trend slowly spread from California to Washington state in late 2011, but even the sales in these two regions began growing at such a rate that we could predict a bigger trend was on the way.
2012
Shopper data enables us to track trends across the US 1
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By the middle of 2012, Kale Chips were actively selling across the US and the trend was going mainstream.
2013
Shopper data enables us to track trends across the US 1
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By 2013, we saw the trend beginning to lose steam as it the growth steadied over time. By this time the trend was pretty stable, at its peak and steady in growth. Wouldn’t it have been great to know how big Kale chips were going to get back in 2010?
WAY 2:
QUANITIFYING FUTURE TREND
POTENTIAL
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The next way to leverage shopper guided innovation is to quantify the potential of a trend.
Shopper behavior helps predict the trend’s lifecycle and ultimate value
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Leveraging historical shopper purchase patterns enables us to build a forecasting model that anticipates the future trend direction and predicts turn signals These models will help us to understand the value of each trend today and in the future - how much will this trend be worth (different direction if it’s an $8mill opportunity versus $200 million) By understanding how hundreds of trends have behaved pre-peak, peak and post peak, shopper data show us when a trend might be about to take off versus one that might be dying off. This ensures we all (retailers and brands alike) are focusing our effort on the most effort-worthy trends.
shopper data allows us to understand how trends move across the store
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In addition to understanding how trends move across the country, we can understand how trends move across the store. Siracha (Sir-ahh-cha) sauce has been around for years in the Asian aisle with not much fan fair. Wouldn’t it have been great to know Siracha was about to become a growing trend and how relevant engagement in bag snacks and other areas of the store before it happened? We can understand where a trend starts in the store and how it’s moving as the trend picks up steam – is it moving from niche to mainstream, from natural foods to traditional grocery?
WAY 3:
BRAND RIGHT TO WIN WITH TRENDS
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Just because there is a trend does not mean it’s the right trend for your brand This is where a lot of brands get it wrong.. Just because something is hot everyone thinks it is the right thing for them The third way shopper data can help us is understanding where your brand has the right to win.
Analyzing shopper purchases helps pinpoint which trends fit a brand
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Brand Buyers
The Trend
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While Siracha (Sir-ahh-cha) might be one of the hottest trends around, that doesn’t mean every consumer or every brand connects with that trend. Looking at your shoppers can help you understand where you have a right to win. Shopper data can tell us how strong the relationship is between your brand buyers and a trend. Step 1 -Knowing if your buyers are already buying with that trend in other categories across the store – one of the big advantages of shopper data: ability to look beyond your category, aisle or department Step 2 - understanding if your buyers have a similar profile to core buyers of the trend.
Gourmet Chips
Small Pack Size
Sweet Vinegar
No GMO’s
Homemade Taste
data above is illustrative
Not every trend is right for a given brand 3
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All trend opportunities are not created equal for your brand. Even if a trend is on target for your category, it doesn’t mean that every brand has the credibility to carry the trend. For example, if your shoppers aren’t interested in health, then trying to leverage a health-oriented trend likely won’t resonate with them. You may have more success with another trend that leverages your core strengths and benefits. Looking at your competitors is critical so you are not lured into an idea without having a holistic understanding the competitive landscape.. Companies looking to acquire other companies with a specific right to win OR might be to introduce a new brand if your current brand isn’t a good fit
Gourmet Chips
Small Pack Size
Sweet Vinegar
No GMO’s
Homemade Taste
data above is illustrative
And understanding the “size of prize” will help brands avoid costly mistakes
$ 60 M
$ 25 M
$ 10 M
$ 8 M
$ 12 M
$ 5M $ 3 M
$ 2 M
$ 21 M
$ 6 M
3
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Understanding the size of the prize for your brand with a given trend, help you prioritize on those biggest efforts since new item innovation is so costly. The potential of a very niche idea like veganism or wild mushrooms might have a more limited total potential than a broader appeal trend like gluten-free. Additionally, this can help your brand understand whether the innovation will pay for itself. If the total potential of an item is $500,000, but new item development and launch support is going to cost double this, would you still want to invest in the idea? Likely, you may focus effort elsewhere. By narrowing down options to focus on the strongest, you can chase down the best ideas instead of following after each hot fad as it surfaces. This allows the innovation development cycle to shorten and the new item to get to market more quickly.
WAY 4:
PORTFOLIO EVALUATION
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The last way the shopper can help with innovation is through prioritization and balance across the whole of your portfolio.
Ensuring you maximize your shoppers’ needs through portfolio optimization
4
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Portfolio balance is the key to long term brand health 2010 88% of food and 90% of non-food items were line extensions When looking at 4 years of new item launches in bagged snacks, we saw 94% of new item volume was just switching – not bringing in new shoppers or growing current shoppers Leveraging shopper data helps you understand where to focus in your portfolio for future innovation
HOUSEHOLD ENGAGEMENT AND LOYALTY
RISK OF VOLUME
TRANSFER OUTSIDE
PORTFOLIO
Focusing innovation in the most impactful areas of your portfolio will drive success
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By understanding how your shoppers engage with your items– how they buy your products day in and day out, you can begin to identify those items they can’t live without and those that they can. Will removing this item cause shoppers to riot and mass exodus the brand, category or store for another brand/retailer? (And take their entire basket with them?) Shopper data can help you understand if the volume of a delisted item is expected to transfer outside of your brand
Identify trends before they are mainstream
Quantify future trend potential
Identify areas you have a right to win
Maximize your portfolio
Watching shoppers allows us to:
Presenter
Presentation Notes
By analyzing your shoppers’ behavior you can follow the four principles to ensuring new item success Identifying trends before they are mainstream Quantifying the future potential of a trend (size of the prize) Identifying where your brand has the right to win Optimizing across your portfolio
Leveraging shopper based insights can help your innovation cut through the clutter
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Retailers are becoming more sophisticated in analyzing their shopper data to make these decisions Manufacturers still look at shopper data as though it is only for the Sales function – Kroger/Safeway/Walgreen shoppers are your consumers! Additional risk is that private label offerings will use this type of data to innovate in a bigger way than national brand manufacturers
