“Paying Attention to Your Customers” National Produce Market Managers Association Dallas March...

““Paying Attention to Your Customers”Paying Attention to Your Customers”

National Produce Market Managers National Produce Market Managers AssociationAssociation

Dallas March 27, 2010Dallas March 27, 2010

ByLarry E. Lund

Real Estate Planning GroupChicago

It’s All About CustomersIt’s All About Customers

Markets have two Kings– Vendors– Consumers

Ultimately the Public is King

Real Estate Planning Group

A Theory of ShoppingA Theory of Shopping

Shopping Demonstrates Social Relationships – What do we care about?

Shopping is a Devotional Rite – Pleasing others– Shopping as a “treat” - pleasing oneself

Veblen – “Conspicuous consumption”

– Shopping as “thrift” Hegelian dialectics – household interests (saving money) vs.

community interests (Green). Shopping as a moral act

Shopping as Personal Identity

Source: Daniel Miller writingsReal Estate Planning Group

Four Behavior Patterns You Four Behavior Patterns You Need to KnowNeed to Know

with Fancy Nameswith Fancy Names


Law of ConvenienceLaw of Convenience

Every additional step that stands between people's desires and the fulfillment of those desires greatly decreases the likelihood that they will undertake the activity.


Zipf’s Principle of Least-EffortZipf’s Principle of Least-Effort

This Principle predicts that most people, most of the time, are turned back by modest hurdles that they know could be overcome, with effort. To be habitual, an action must be relatively effortless or carry a particularly LARGE PSYCHIC REWARD. And in what constitutes a "large reward," opinions and motivations vary widely across individuals.


Nash’s Equilibrium TheoremNash’s Equilibrium Theoremthe Principle behind Marketsthe Principle behind Markets

In Game Theory, two vendors selling the same merchandise will maximize their locational advantage by locating right next to each other at the mid-point: where half their consumers are located


John Nash won the 1994 Nobel Prize in Economics for his theorem. Beautiful Mind was the 2001 film about his schizophrenia.

Reilly’s Law of Retail GravitationReilly’s Law of Retail Gravitation

Reilly's Law of Retail Gravitation states that larger retail offerings will have larger trade areas than smaller ones, meaning people travel further to reach a larger retail offerings.


Trade Area by Surveying Trade Area by Surveying CustomersCustomers


Competitive Market AnalysisCompetitive Market Analysis


Drawing PowerDrawing Power


Market ShareMarket ShareSelected Store Estimated Area

(S.F.)Estimated %

Market Share (Fresh Food Items Only)

Lexington Market 74,400 (240,000)

30%

Safeway 50,000 14%

Superfresh 35,000 13%

Hollins Market 15,500 (50,000) 12%

The Avenue Market 17,360 (56,000) 6%

Stop Shop & Save - Pratt

15,000 5%

Cross Street Market 27,900 (90,000) 4%

Market Potential vs. RealtyMarket Potential vs. Realty

Selected Fresh Category Hollins Market Potential from Huff Forecasting

Model

Bakery $234,000

Meat & Poultry $1,342,000

Fish & Seafood $97,000

Fresh Fruit & Vegetables

$219,000


Marketing 101Marketing 101Three P’s of MarketingThree P’s of Marketing

ProductPlacePricePromotion


Produce Market UpsideProduce Market Upside

$47.1 Billion in Fresh Produce Expenditures for at home consumption (BLS 2007)

2007 Census of Retail– Produce:

2,908 Produce establishments with employees $3.413 Billion in sales avg. $1.173 Million/store 8,274 Sole Proprietors produce establishments $487,636,000 in Sales, avg. $58,935 annually

– 3.9 Billion or 8% of produce purchased at Produce est.


Changes in Expenditure ShareChanges in Expenditure Share1901

Food42.4%

Housing23.5%

Apparel14.0%

Entertain1.6%

Other18.6%

1972

Food19.3%

Housing30.8%Apparel

7.8%

Trans19.3%

Health6.4%

Entertain8.6%

Other7.8%

1950

Food29.7%

Housing27.2%

Apparel11.5%

Trans13.4%

Health5.2%

Entertain4.4% Other

8.6%

Source: BLS Real Estate Planning Group

2008

Food12.8%

Housing33.9%

Apparel3.6%Transp

17.1%

Healthcare5.9%

Entertain5.6%

Ins/Pen11.1%

Other10.0%

How is your Diet?How is your Diet?Diet for Food at Home

0% 10% 20% 30% 40% 50% 60%

Healthy as Can Be

Healthy Enough

Could be Healthier

Lot Healthier

US Detroit Office Reading Mkt Core RTM

Organic FarmingOrganic Farming

14,540 farms & ranches certified organic 20% organic farms are in California representing

36% of organic sales U.S. Organics $3.16 B -- $1.94 B in crops, $1.22

B livestock, poultry, etc. 83% organics sold to wholesale channels 10% organics sold direct to retailers 7% organics sold direct to consumers ($221.2 M)

Source: 2008 Organic Production Survey, USDA

Local the New Organic?Local the New Organic?Reasons for Buying Local Grown Products

0% 20% 40% 60% 80% 100%

Freshness

Help Economy

Taste

Source

Price

Nutrition

Environment

Appearance

U.S. Detroit Reading Terminal Mkt RTM Core

Public Markets Finding the Public Markets Finding the Opportunity Opportunity

92 Percent of Americans do most of their Food Shopping at Supermarkets – So Where is the Market’s Niche?– Choice/Assortment

Internal Competition

– Costs High Margin/Low Margin– Quality– Organic/Local


What Does Market Research What Does Market Research Do?Do?

Research is sometimes about Reducing RiskResearch sometimes Tests HypothesisAll Research is about answering a QuestionResearch is not a Product,

it’s an Interactive Process


General Overview of Research General Overview of Research OpportunitiesOpportunities

Assess your Market’s PotentialHelp Identify Best CustomersImprove AdjacenciesIndexing to NormsImportance/PerformanceMarket SegmentationBehavioral Mapping


Focus on Core Customers Focus on Core Customers Pareto’s PrinciplePareto’s Principle

80/20 Rule states that for many phenomena 80% of results stem from 20% of the effort.

In other words, focus on those who buys more at the Market.


Core CustomerCore Customer

Geographic OriginsMarket SegmentationHow do you Reward your

Core Customer?


Core Customer BenefitsCore Customer BenefitsPercent of Core Shoppers Making Purchase by Food Category

Food Cat. Percent Core Customer

Making Purchase

Index of Core Customer Making

Purchase to All Customers

Eat at Market

44% .90

Foods to Go 29% 1.45

Meat/ Poultry

40% 1.90

Fish/ Seafood

33% 2.20

Bakery 37% 1.37

Produce 66% 1.50Real Estate Planning Group

Geographic Market SegmentationGeographic Market Segmentation

Live Downtown / Work Downtown

Live Downtown / Work Outside Downtown

Live in City Outside Downtown / Work Downtown

Live in City Outside Downtown / Work Outside Downtown

Live Metro Outside City / Work Downtown

Live Metro Outside City/ Work Outside Downtown

Live Downtown/ Not Work

Live in City Outside Downtown/ Not Work

Live in Metro Outside City/ Not Work

Live Outside Metro/ Not Work Real Estate Planning Group

Cross Vendor Shopping MatrixCross Vendor Shopping Matrix

What Vendors are Customers Shopping?What Type Vendors are Attracting

Customers?


2009 Cross Category Shopping Matrix

Category EatIn

Prepare

Foods

Meat

Poul. Fish/Sea

Bake

Prod.

Oth.Foo

d

NonFoo

d

Total # 738

175 72 41 28 37 86 198 91 10

% N=401

44% 18% 10% 7% 9% 21% 49% 23% 2%

Eat-In -- 25% 22% 25% 19% 30% 24% 52% 90%

Prepared 10% -- 20% 7% 8% 13% 12% 23% 40%

Meat 5% 3% -- 36% 32% 16% 18% 12% 10%

Poultry 3% 3% 24% -- 16% 12% 11% 4% 20%

Fish/Sea 4% 4% 29% 21% -- 9% 16% 7% 20%

Bakery 21% 15% 37% 29% 22% -- 19% 27% 40%

Produce 27% 33% 88% 79% 86% 43% -- 35% 30%

Other Food

27% 29% 27% 14% 16% 29% 16% -- 60%

Non-Food 5% 6% 2% 7% 5% 5% 2% 7% --Across: 27% who Ate In bought Produce/24% who bought Produce Ate In

Indexing Market Performance

Market Survey

National Survey

Index

Variety of Fresh Food

3.24

Quality of Fresh Food

3.36 3.2 1.05

Ambience/Atmosphere/Character of Place

3.36

Local Products 3.21

Average 3.16

Cleanliness 3.09 3.3 .94

Convenient Location

2.97 3.0 .99

Adequacy of Parking

2.82

Pricing 2.64 3.0 .88

Selection of Ethnic Foods

2.58 Real Estate Planning Group

Importance / Performance Matrix of Primary Food Store Where Customers

Spend the Most Money

Quadrant IIAreas Important to Customer but Primary Store Does Not Meet Expectations. Market Opportunity Area:Lower PricesItems on Sale

Quadrant IAreas Important to Customer and Primary Store has High PerformanceMarket challenged to compete with theseHigh Quality ProduceHigh Quality MeatsClean and Neat StoreConvenient LocationGood Variety

Quadrant IIIAreas of Lesser Importance to Customer and Primary Store Performs PoorlyMarket has marginal opportunityImproved Safety Outside StoreMore Natural FoodsMore Ethnic FoodsMore Local FoodsBetter Recycling Programs

Quadrant IVAreas of Lesser Importance to Customer and Primary Store Performs WellMarket has very marginal opportunityKnowledgeable Staff

Importance / Performance Matrix of with Market Customers

Quadrant IIAreas Important to Customer but Primary Store Does Not Meet Expectations. Market Needs Improvement.Lower PricesNeat and CleanHaving Items on Sale

Quadrant IAreas Important to Customer and Primary Store has High PerformanceMarket StrengthsHigh-Quality ProduceHigh-Quality MeatsConvenient LocationGood Variety

Quadrant IIIAreas of Lesser Importance to Customer and Primary Store Performs PoorlyMarket improvements will result in marginal resultsImprove Safety Outside MarketMore Natural and Organic ProductsImprove Recycling Efforts

Quadrant IVAreas of Lesser Importance to Customer and Primary Store Performs WellMarket performs well, but not valued highly by its customers.Good Selection of Ethnic foodsServes Local Food ProductsHas Knowledgeable Staff

Grocery Market SegmentationGrocery Market SegmentationSpending and TripsSpending and Trips

27%

18%16%

10%

9%

2%4%5%

9%

Care for Family

Smart Budget Shopper

Efficient Stock-Up

Bargain-Hunting

Discovery Buyers

Specific Item

Grab & Go

Reluctant Buyer

Immediate Consumption

21%

17%14%11%

8%

2%9%6%

12%


Grocery Market Segmentation Grocery Market Segmentation Cluster AnalysisCluster Analysis

Care for Family – 27% of spending 19% of trips.– Trust and High-Quality, Fresh Products

Smart Budget Shopping– 18% of spending, 15% trips– Value for Money, sales important

Efficient Stock-Up– 16% of Spending, 13% trips– Ready to eat meals


Segments ContinuedSegments Continued

Bargain-Hunting– 10% of spending and 13% of trips– All about saving money travel different stores.

Discovery Buyers– 9% of spending and 7% of trips– New items, selection and atmosphere

Specific Item– 9% of spending and 11% of trips– Mission and Convenience driven


Segments ContinuedSegments Continued

Small Basket Grab & Go– 5% of spending and 9% of trips– Same as Specific Item, but buy more items and want

other services like banking, video rental Reluctant Buyer

– 4% of spending, 8% of trips– State of mind, not like shopping, self-service

Immediate Consumption– 2% of spending, 5% of trips– Convenience, snacks, eat in store


Farmer’s Market SegmentationFarmer’s Market Segmentation

9%

11%

18%

30%

32%

Enthusiasts Basic Shopper Serious Shopper

Low-Involvement Recreational


Farmer Segments ContinuedFarmer Segments Continued

Enthusiasts – 32%– Professionals with high education and incomes– High Quality Fresh Products Organics and want

full market experienceBasic Shoppers – 30%

– Educated with medium-high incomes– High Quality Fresh Products – Doesn’t need to be at farmer’s market


Farmer Segment ContinuedFarmer Segment Continued

Serious Shoppers – 18%– Have Children at home and likely younger– Variety important enough to over inconvenience of

shopping at Market. Low-Involvement – 11%

– Highly educated and high incomes– Male shopper, not primary shopper

Recreational – 9%– Younger, less educated, lower incomes– Enjoy Market events and non-produce products

Source: Consumer Segments in Urban and Suburban Farmers Markets, April 2010


Behavioral MappingBehavioral Mapping

How long at Market?How many vendors do people visit?What vendors are anchors?What is your geographic syntax?


Focus GroupsFocus Groups

Qualitative researchAbout Listening to CustomersCan lead or follow Quantitative research


Knowledge Can Transform Knowledge Can Transform Your MarketYour Market

Use Different Techniques for Discovery– Customer Surveys – Sample Size/Correlations

(Quantitative)

– Focus Groups – Memories (Qualitative)– Behavioral Tracking – Memory vs. Reality

Watch the Cool-Aid


Thank YouThank You

Larry LundReal Estate Planning Group

Chicago312-751-1250

[email protected]

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