CPGmatters: Hershey Leverages ‘Need States’ To Optimize C-Store Sales
By John Karolefski
Through
a special arrangement, presented here for discussion is a summary of
a current article from the monthly e-zine, CPGmatters.
The Hershey
Company is betting that incremental candy purchases in convenience stores
can be triggered by placing its products in the right place at the right
time.
The world-class
company is basing its strategy on the results of research conducted last
summer in six C-stores operated by 7-Eleven, Chevron and Road Ranger
with stores in six markets. It was part of a nationwide study of all
product categories in which 350,000 shopping trips were video recorded
and analyzed.
To learn the “who,
when and why” of store trips, the company turned to Video Mining Corporation,
which offers proprietary in-store video technology to measure and provide
visibility into the shopping process at every retail touch point.
“We started
looking at some of the classic things like demographics and just saw
no differences between buyers and non-buyers in those kind of metrics,” said
Susan LaPointe, director of global innovation and shopper insights at
Hershey, at a Shopper Insights conference hosted by the Institute for
International Research (IIR). “We weren’t quite willing to give up at
that point, so we said, ‘Okay, let’s just take all the people who bought
and all the people who didn’t buy and look at every measure and see where
the differences are.’ When we did that, we found that day parts showed
us some really different patterns of behavior.”
Hershey came
to understand the “path to purchase” by day part because shopper behavior
changes with the hours. For example, the “need state” at 7-8 am is a
daily snack; noon-1 pm, it is a meal enhancer; 3-4 pm, it is for energy;
6-7 pm, it is a snack; and 9-10 pm, it is habit or social.
Using Video
Mining’s technology, Hershey was able to delve into such metrics as store
traffic, category traffic, engagement and conversion.
In general,
Ms. LaPointe stressed the importance of keeping the shopper at the center
of the process in three ways: one, understand the decision process of
the various shopper segments; two, track segment composition and behavior
trends, and; three, test the response of each segment to new strategies.
More specifically,
she outlined the following;
Location
“You want to
be on that ‘path to purchase.’ It has a sense of purpose for these people,
so understand where they’re going. Be there when they’re on the way there
or, better yet, on the way returning because we’re not a destination.”
Assortment
“At each location,
assortment differs because people are looking for different things and
the brands do serve different purposes in their lives.”
Promotional Partners
“If it is going
to be a candy bar with a drink or a candy bar with that meal or something,
let’s run a promotion for those things.”
Message Content
“Time-of-day
messaging. We know that there are people coming into the convenience
store in the morning for more than just coffee and doughnuts. You should
be telling those people to stock up on their snacks to make them feel
like this is the right thing to be doing.”
Discussion Questions: What
value do you place on understanding the ‘need states’ of consumers
at the store level? Can many other categories benefit from this analysis?
Would you like to see much more time-of-day messaging and overall strategies
across retail?
There’s an old grind that says “Retail is easy. All you have to do is have the right product in the right place at the right time at the right price.”
Anything that can help enhance those 4 “rights” will produce incremental sales. In Japan, it’s common for the C-stores to re-set the floor several times a day to better reflect the needs/wants of the customer base at different time frames during the day.
The primary beneficiaries of this kind of strategy are the C-stores and food stores, although every retailer could benefit from a better understanding of their customers’ shopping habits at different times of the day, week, and month, and an operating strategy to flex the offering (particularly at check-out) to reflect these shopping habits.
Need states, missions, occasions…big buzz words in retail these days as the focus moves away from demographics and into psychographics.
Time-of-day considerations were an obsessive focus for Tesco as it fleshed out its Fresh & Easy concept here in the States; notice the little clock in the Fresh & Easy logo set to a bit past 4:00? That’s when customers start thinking “what’s for dinner?”
Walmart’s in-store network (Smart Network) is all about getting the right message to the right people at the right time and Walmart, Walgreens, and Target have all revisited adjacencies based on pyschographics. Walgreens CCR (Customer Centric Retailing) push has psychgraphics at its core, promising to arrange the store by how shoppers shop vs. how buyers buy.
Every category can benefit from tapping into psychographics and indeed, most are. The rub is that retailers are already far along this path so any suppliers/brands that consider this a eureka may find themselves at loggerheads with retailers. Retailers are not lacking a point of view on psychographics!
We’re poised to move from “what merchandise sold this quarter” to “what merchandise sold this hour and why.” These sophisticated analyses will help chain retail to regain the insights that independent operators have maintained. As manufacturers and retailers better understand their customers’ motivations, they’ll be able to deliver targeted messages that are really appealing. There can be no downsides here!
Great pragmatic approach. How do you know the product is where you wish it to be? ShelfSnap just did a study in C-Stores that indicated that the assortment voids of “must have” items were just awful, and that even in permanent fixtures such as coolers and freezers, nothing was where it was supposed to be.
The data was derived from simple, quick pictures that field sales people took while in the stores. ShelfSnap identified the important deviations from the plan, put them on a simple to-do list and the rep fixed the problems on the next trip to the store.
Plans such as Hershey’s are only as good as the execution. And SOME execution is going to happen, so it might as well be the RIGHT execution. That will not happen without measurement. Execution according to plan is worth better than 10% sales increases in this case.
In this tough economy, every manufacturer should try to understand the shopper better and promote their products appropriately. To attract shoppers these days, it is not just as simple as running a promotion. Understanding the need-state segments of shoppers like bargain hunting, immediate consumption, speedy fill-in, household stock-up or just simply browsing is key.
Shopper trip analysis is just one part of the equation, however. Manufacturers should also be looking at shoppers’ store experience and their satisfaction; lifestyle and attitudes would be yet another critical area to consider.
The shopper’s need state of the moment figures into channel choice, the location shopped at, even the form of the product selected (i.e., soft drink in a cup or in 12-pack cans).
It is my intuition that for some categories and purchase occasions, need state drivers completely overwhelm traditional differentiators such as demographics and psychographics.
This is one reason why the C-stores in Tokyo make the considerable investment to reset large areas of their merchandise by day part. But the implications are even wider than that. Need state begins to explain why product sales velocities may vary with time of day, day of week, season of year and stage of shoppers’ lives. Understanding this at a detailed level is the key to unlocking share of wallet.
This is an under-investigated aspect of retail selling that has implications for price-setting, promotion, in-store implementation, assortment and space management. You could write a book…come to think of it, I think I might….
Hershey’s work is a step ahead for them. Nothing frustrates shoppers like not being able to quickly locate something in a C-store. Understanding why shoppers are in the store and how their objective fits into your category can lead to more effective in-store merchandising.
Finding the best place in the shopper path and how they shop a category is critical to the design of merchandising displays. And within that shelf set, package impact and placement attract shopper attention and drive purchases.
The general focus here is good, but I doubt the practicality of day part management in most cases. So why do people focus on day part? Because they can – they have clocks and watches.
Need states vary as the shopping trip progresses. For example, many shoppers rush into the C-store for the specific purpose of getting a drink. Check the hierarchy of need – beverages before food.
It is a fact that the shopper’s need state changes at the cold vault. Before then they “need” a soft drink, and are less interested in snacks, including candy. Once they have selected their cold beverage, on the way to the checkout, they are more susceptible to purchasing a snack, whether candy or otherwise.
Although demographics are fixed, psychographics are as changeable as the wind. But like the wind, they may at least be partially understood.
Specific to C-stores, there are far fewer true “shoppers” in these retailers, versus impulsive consumers. People go into these stores to buy…quickly. Therefore, the less thinking and interpretation required, the better for the store and the consumer.
This all has roots dating back decades when we first put candy at the POS, of course. Today we have sophisticated analytics tools, however, we are still trying to make scientific sense out of what is still an “art” to a degree. We need to be able to respond to as many conceivable moods, need states, missions, or whatever next week’s buzz word will be. Looking at thousands of transactions begins to show patterns, and we have found that giving the consumer what they already understand, rather than trying to “train” the customer, is most always a better bet.
Hershey is just rediscovering the basics of marketing and the 4 P’s: product, price, promotion and place. They have also realized that by better differentiating their product they can maximize their target market segmentation and increase their sales/marketing reach, which results in more sales. No news here! Stick to the basics, Hershey, and you will be successful!