New Age Media – Shopper Marketing

Manufacturers and retailers are increasingly leaning towards in-store advertising or shopper marketing, according to a recent “Deloitte Consultancy”: survey of 19 FMCG majors and eight retail giants in the United States. With rapid growth in organised modern retail in India, ad agency “Madison World”: has already launched a specialist `shopper marketing’ consultancy called MASH – Madison Shopper Marketing – for its Indian accounts. Other ad agencies/marketing consultancies are also expected to follow suit. This article reports on the findings of the Deloitte survey to give marketing professionals some idea of the increasing importance of this new age marketing discipline.

As a “Hindu Business Line report”: points out rather succinctly “shopper marketing is a new-age marketing discipline that aims at converting `shoppers into buyers’ at the retail outlet. It leverages the store as a marketing medium and helps brands and retailers win the battle for the shopper’s wallet by developing joint marketing platforms.”

“As modern retail grows and shoppers become more savvy, the store emerges as a key `moment of truth,’ where purchase decisions are made, altered or reinforced. In this context, brands and retailers need shopper marketing solutions that see the store through the eyes of the shopper – a theatre of dreams and not just a piece of real estate,” the BL report adds.

The Deloitte survey as “reported in Advertising Age”: has come out with the startling revelation that ad spend on shopper marketing is growing at an even faster rate than Internet advertising. While package-goods (FMCG) marketers and retailers haver doubled their spending on this “media” in the past three years due to a spend growth rate of 21% annually, Internet ad spending has been growing at only 15%. Ad spending on both these new age media is growing far faster than the 2% growth projected for spending on traditional media such as print, TV and radio in the current year.

In India, while Internet ad spending has been projected to grow far faster (it is expected to explode to 10 times the present level of about Rs 210 crore in two years) than on traditional media despite the fact that growth in traditional media spending is expected to be over 45% annually over the next two years, it remains to be seen how quickly ad spend on shopper marketing picks up. Going by the US trend, however, one is pretty sure that it is just a matter of time, perhaps months rather than years, before we see a similar phenomenon here as well.

Coming back to the Deloitte survey, it turns out that ad spend on shopper marketing has grown from 3% of the overall marketing budgets of the 19 package-goods manufacturers surveyed in 2004 to 6% this year. The manufacturers expect it to reach 8% of marketing budgets by 2010, a draft report of the survey says.
The survey, done on behalf of the Grocery Manufacturer’s Association, points out that this growth has come despite the fact that marketers have yet to figure out how to define, measure or administer their shopper-marketing efforts.

Compared to manufacturers, retailers are boosting shopper-marketing spending even faster, which isn’t surprising since much of the spending takes place in their own stores, the survey says. The report pegs growth there at 26% annually, even as spending on traditional media by the eight retailers’ surveyed declines about 1% annually.

The growing importance of shopper marketing could tilt the industry’s balance of power even more toward retailers, which, besides being the distribution channel, also ultimately own the fastest-growing advertising medium for their suppliers too, the survey claims.

Shopper marketing is often confused with old fashioned point of purchase (PoP) trade promotion – money that marketers pay retailers, or deduct from the cost of goods to receive such things as temporary price reductions, special merchandising displays or features in store circulars. But Deloitte’s survey of manufacturers actually projects a compound annual decline of 2% in such conventional trade spending.

The findings are in line with the recent move by global FMCG giant “Procter & Gamble Co. to restate its reported ad-spending figures”: to reflect shopper marketing. Based on the movements in P&G’s restated advertising figures over the past 11 years and a definition similar to that used in the survey, the company appears to be spending at least $500 million out of its total $8 billion in global ad spending on shopper marketing.

Despite the growth, shopper marketing still lacks any generally accepted definition, the report acknowledges. “There is wide-ranging debate across the industry on what comprises shopper marketing,” the draft report says, noting that views vary on whether trade promotion, private-label marketing by retailers, or advertising that occurs outside the store but is directed at a retailer’s shoppers should be included.

Officially, however, the report opts for the broadest – and perhaps fuzziest – possible definition: “All marketing stimuli designed to engage the shopper, build brand equity and lead him/her to make a purchase while he/she is in ‘shopper mode.'”

The report’s own spending survey, however, uses a narrower definition that separates such things as trade promotion and co-marketing (or joint manufacturer and retailer marketing programs) from shopper marketing for the purpose of the analysis.

The survey found that even after leaving out the spend on such old fashioned PoP trade promotion, whatever is left of shopper marketing – which would appear to be largely made up of in-store media such as TV, floor or shelf ads as well as in-store signage and displays – is still growing considerably faster than those other categories of spending.

The survey points that such tremendous growth is taking place despite the fact that shopper marketing is still hampered by lack of audience-reach measurements comparable to other media, which in turn makes it hard for marketers or agencies to make spending decisions or do post-campaign effectiveness analysis on shopper marketing the same way as for traditional media.

But then that’s something industry players are seeking to address, in conjunction with Nielsen Co., as part of “Nielsen In-Store,”: which has already initiated efforts at developing ways to measure effectiveness of in-store marketing. In fact, Nielsen Company and the In-Store Marketing Institute, in collaboration with the P.R.I.S.M. Consortium of leading retailers, manufacturers and media agencies, “today (September 27, 2007) announced substantial progress”: in a breakthrough project that will make stores a measurable marketing medium.

Despite growing demand for in-store marketing opportunities, retailers increasingly are restricting supply, the survey has said. Because of “clean-store policies” that restrict the number and types of in-store ads or merchandising displays, the total number of retail displays have declined 4.4% in the past year and 9.1% in the past two years.

“Retailers have become very selective and extend the most valuable offers to their ‘diamond vendors’ (e.g. Pepsi is able to place their displays, end caps and banners in store despite clean-store policies),” the report says, noting that some manufacturers will be crowded out.

Retailers are getting increasingly sophisticated about transforming the store-as-medium into a business, the report notes, as the industry shifts from manufacturer-initiated offers to retailer-initiated ones. The report cites the Meijer Mass Marketing program from the Midwest-based supermarket chain, which offers several in-store media and tactics to manufacturers.
Profit margins on such programs are likely to be considerably higher than the low-single-digit net margins common in retailers’ core business of selling merchandise to consumers, the study says.

The growth of shopper marketing has also created yet-unresolved issues for how marketers organize their efforts. P&G recently began moving most of its shopper marketers into the same brand groups that handle the rest of the marketing mix, but that’s still the exception, not the rule, according to the study.

Of the 19 manufacturers and eight retailers surveyed, only 30% put primary responsibility for shopper marketing in their brand or marketing groups, 45% put it in sales, 15% put it within a market research or analytics group and the remaining 10% divided it between groups or had a separate unit for it.
Indian retailers are you listening?

  • Anindya Chatterjee

    Extremely well written and timely advice for the burgeoning retail industry in India.