What happens when that is wrong?  What does marketing do when it STARTS with the purchase?

This is an extreme version of what Procter calls “store back”.  However, based on shopper insights research I have conducted, I believe that, for grocery products, over half of first-time purchases are unplanned; in fact, the shopper might not even have been aware of the product before buying it.  In those cases, it all STARTS with the purchase and ENDS with awareness.  The purchase funnel is totally flipped.

When it all starts with the purchase, the role of marketing communications changes.  Now marketing must get the product noticed at shelf and impart meaning to it instantaneously for the shopper.  Packaging, shelf placement, thematic displays, signage, mobile messages that are location-aware, shopper offers based on that shopper’s history, and master brand familiarity become the main vectors for creating meaning.  In this communications model, when someone encounters a product they were unfamiliar with they should be able make sense of it instantly; to tell YOU (the marketer) what the product is about, rather than you having to tell them in a concept statement.  After the product is bought and being used, there is more sense-making that occurs.  If the consumer is really into the product as they are using it, now you have an opportunity to build engagement:  they might join a community, become a fan in Facebook, share comments, start seeking out advertising and recalling it, seek out the brand’s “creation story”, etc.  In this scenario, the impact of brand narrative, brand values, social media engagement, etc. come AFTER the purchase, so they solidify rather than precondition the brand-customer relationship. 

Could it really be that it all starts with the purchase?  Well, for certain types of products and retailing situations, I believe it does.  Consider this:

• Conduct a study to measure the percent of products bought for the first time that are discovered in-store (I got 50%+)
• Do you think the products bought for the first time on impulse in a Kroger’s, Trader Joes, Costco, Target, etc. are all the same and were previously known? If not, then you believe that brand adoption can START via the shopping experience.
• Consider shopping styles that people have, reflecting their relationship with a product category.  Can you imagine categories (e.g. artisan cheeses) where shoppers like to explore and find new interesting products to buy?

This last point is perhaps the most important.  People have different shopping styles for different product categories which means that the heuristics they use to make decisions are systematic.  You might not ever buy carbonated soft drinks the way you buy interesting dips that you just tried at a tasting station.  This is where behavioral economics intersects marketing; the study of how people decide is often more interesting than theoretical purchase intentions.  Hence, some products will predominantly be bought via a process that starts in-store.  Others will be bought based more on the traditional marketing model requiring awareness built via mass media. You need to study HOW people decide in order to understand when to start from the traditional end of the funnel and when you start from the other end of the funnel.

When it all STARTS with the purchase, everything that you thought was upstream becomes downstream and the thing that was the most downstream of all, the purchase, becomes the most upstream event. 

This is “store back” on steroids.

Now, the researcher in me has to ask the rhetorical question, “Does the marketing community have the research tools to act on this new way of thinking?”  Rhetorical because, I don’t think we do.

(This interview with Debbie Pruent, President of GfK Custom Research North America an auto industry expert is the second of a two-part series that began in Fast Company).

A couple of weeks ago, encouraged by new GM cars now being sold on eBay, I blogged in Fast Company that it was time to ”go all the way” and  reinvent the dealership and turn them into experience centers with web-enabled kiosks so people could buy a car without high-pressure sales tactics.  Car shoppers would welcome complete transparency on pricing, no “profiling” so women and ethnic shoppers would no longer pay more.  Dealerships would become more like apple stores and the anxiety that car shoppers, especially females (as reported by ABC news) would be gone!  I figured if the consumer is boss (as Procter says), why not… especially with GM having the ability to reinvent itself as it comes out of chapter 11.  (For the full blog text in @fastcompany, including some great comments, click here.)

Then, I got a dose of reality therapy; sometimes the consumer is NOT boss.  Sometimes federal and state laws are passed that institutionalize business practices in a way that are no longer serve the consumer but cannot be easily changed.  Welcome to what is called “Dealer Franchise Laws”.

To understand this better, I interviewed an auto industry expert, Debbie Pruent, President of GfK Custom Research North America and who, before that, worked at GM and a major auto industry marketing research firm.

Joel. How do you think dealers would respond if auto manufacturers offered a plan to turn dealerships into experience centers, removing sales pressure?

Debbie. I’m oversimplifying a bit but dealers are primarily interested in selling cars to make money (oversimplifying because they also make a huge amount of their profit on the service side). So if manufacturers could “prove” that experience centers generate an ROI then a huge part of the battle would be won. But that’s not easy as it sounds. Dealers view manufacturers (generally) as product manufacturers and marketers, not retailers. They view themselves as the experts in retailing (and advertising!). And while P&G may decline to deliver a product to a retailer who doesn’t meet their “standards”, or discontinue a product altogether, automotive manufacturers do not have this luxury due to the franchise laws. This is why a manufacturer like GM is unable to quickly or efficiently reduce its overall number of brands.

Joel. Can auto manufacturers insist on a plan?  Can’t they retail their auto brands however they want to?

Debbie. Manufacturers have much less control than the buying public may think. Generally speaking, they can’t insist on anything unless they are willing to pay for it (and even then they need agreement from the dealers). Exceptions are start-up brands which can build-in certain requirements like “off-road test track” (Hummer) or Saturn (uniform look and experience parameters). For the most part they must get the dealers to agree that a change to the service model is in their best interest. And while they may be able to convince some dealers on certain things, it is nearly impossible to get a uniform retail/service model in place across all dealers. So the short answer is no – they can’t retail their brands any way they want to – which is a constant source of frustration internally for them.

Joel. Did this situation change when some auto manufacturers declared chapter 11?

Debbie. Not yet although this is what I’m sure GM is hoping for (the breaking of the franchise laws) as one of the positive outcomes of filing for bankruptcy. If anything, additional pressure is being put on Congress right now to pass even more restrictive laws (e.g. to prevent closing of dealerships) and we see a great number of dealers who are petitioning (filing suits) to be reinstated (which Congress appears to be supporting).

Joel. What shopping process would car buyers prefer if they were calling the shots?  What does research show?

Debbie. Like much of the retail research across other industries, new vehicle buyers are looking to “have their cake and eat it too”. They want an engaging, entertaining, service-oriented (but not obtrusive) buying-experience where information (both the manufacturer being shopped as well as the competition!) is transparent and… they get the lowest price! Such is the dilemma for all retail since the offering of “experience centers” requires a compensation model. And for auto manufacturers, still more than many other products, there is still a large product component (given the size, durability and importance of the purchase).  Even a “new” service model like Saturn did not deliver a return over time because the product was not always in sync with the needs of the target-market vs. competitive offerings.

However, brand extensions are not always a good idea.  Through the years, I have been involved with forecasting the sales potential of hundreds (maybe thousands) of line and brand extensions and wanted to share what I think are some important insights.

Insight #1—a brand extension strategy for launching a new product only works if your existing brand has high enough parent brand penetration.

The success of a brand extension as has much to do with pre-existing brand equities as it does with the characteristics of the new items.

In the early 80s, General Mills launched a new flavor of Cheerios called “Honey Nut Cheerios”.  Concept test results were good but not off the charts yet when this new flavor was launched, it got an unpredictably high level of purchase trial given its modest advertising and promotion budget.

When I analyzed actual in-market results regarding trial rates for Honey Nut Cheerios and many other line extensions separately by those who bought the parent brand buyers vs. non-buyers, I found that parent brand buyers had a 2-6X HIGHERHIGHER trial rate (e.g. 18% trial among parent brand buyers vs. 3% among non-buyers).  Furthermore, it was only partially explained by higher purchase intent.  The big factor was that the conversion of positive purchase intent into trial among parent brand buyers was much higher.  In fact, the knife cut both ways; people who did not buy your brand were LESS likely to try the new line extension relative to their stated purchase interest than if it had a new brand name.  Hence, overall trial for your new brand is the mixture of trial rates (one much higher, one a little lower), weighted by what percent of households buy your existing brand.  It’s easy to envision that there is a tipping point that denotes when your parent brand is big enough that a brand extension approach makes sense to consider.

Insight #2—Brand extensions that are not connected with the meaning of the base brand are destructive even though they might hit year one sales targets.

If you launch brand extensions that don’t reinforce the parent brand image you might be turning your brand into a Frankenstein’s monster of spare parts. That’s why naming Spaghetti Sauce “Prego” rather than “Campbell” or calling a premium line of autos “Lexus” rather than “Toyota” made so much sense.  It’s also why I question Starbuck’s instant coffee. What the marketer thinks is a brand extension the consumer might not view the same way. Here is how you can tell. In concept testing, if positive purchase interest towards the new product isn’t at least 30% higher among parent brand vs. non-parent brand buyers that means that your buyers are not seeing the connection between the new product and your existing brand.  This is a warning sign that, while the sales potential for the new product might be acceptable, unconnected products will share the same brand name.

Insight #3—Emphasize brand-building (e.g. advertising, social media) to build the master brand and shopper marketing and couponing to sell the brand extension.

The key point is that line extensions are bought out of preference for the brand and acceptability for the line extension, not preference for the line extension.

An extension of a brand someone buys enjoys instant credibility because users trust anything they connect with that brand. For new flavor and size line extensions you might not need anymore than to be visible in the store or offer a coupon.  Because line extensions are bought out of acceptability, there is random component to whether they buy it or not.  Therefore, the more SKUs your brand already has, the lower the trial rate will be among your own parent brand buyers.

Marketers want to use brand extension strategies as much as possible today because it is a more affordable way to introduce products but the key is having enough rocket fuel, i.e. brand equity, to get the rocket (i.e. brand extension) off the ground.

• Media habits approach: How does a marketer’s target consumer spend time with media and specifically, which media properties are “target rich” environments?  For example, online publishers often use a media habits argument to explain why they should get a share of ad dollars that is closer to share of media time.
• Touchpoints influence approach: Services like Integration or Compose are centered on self-reported approaches to prioritize which brand communication touchpoints influence someone’s brand choice regarding a particular type of product/service or in conveying a certain brand benefit.

Let me add a third approach to the mix that comes from the field of shopper insights that would have a big impact on the allocation of media spending.

• “Path to purchase” approach:  Understand the journey by which shoppers come to buy a particular brand, product, or service.  Did they decide before or after entering the store? Did they do research as they started their shopping process? How did they research their purchase?  What are the media touchpoints that best map to each leverage point in the path to purchase process?

Understanding “Path to Purchase” will change marketing and media priorities.  In most cases, it is likely to increase the budget for search, comparison shopping, and particularly in-store shopper marketing vs. using a media habits approach because those places don’t have a big share of media time but they are where the “lean-forward” action is.  Shopper insights research shows that, for many products, 50% or more of purchases and brand choices are decided on right in the store.  For such products, to put it in terms that media planners can relate to, shopper marketing is like recency on steroids.

The touchpoints influence approach might miss the mapping of a touchpoint to a brand objective.  Brand teams should have two broad classes of communication goals: creating and maintaining desired brand meaning, and reminding people of the brand as close to the decision point as possible (recency). If different touchpoints best map to specific marketing goals, the logical implication is that impressions and “reach points” across media platforms are not interchangeable or additive; this suggests that multi-platform reach calculations, a main purpose of media habits studies, become more of a media insight than a quantitative measure needed for creating a media plan.

A more important media calculation might be to create meaningful recency and  “likelihood to see/hear”  (LTS)factors for different media.  For example, in comparing TV to shopper marketing, TV might have a higher LTS factor (20 or so commercials in a show vs. 40,000 SKUs in a grocery store) but a lower recency factor vs. advertising that is right at the point of purchase.  Hypothetically, cinema advertising might have the highest LTS of all touchpoints (you’re sitting in the theatre waiting for the movie to start) but a really low recency factor.  However, the recency factor itself might be less important when marketing’s main objective is “imparting brand meaning” (say during the launch of a brand).

To address these issues of how to begin integrating shopper marketing and off-premise advertising into a well-informed media strategy, on August 20^th, the upcoming ARF Shopper Insights council will bring together gurus from their respective worlds who have not been on the same panel before to discuss this issue.

• Herb Sorensen –  Ph.D., Global Scientific Director, Shopper Insights TNS-Sorensen Associates (legendary shopper guru)
• Erwin Ephron – Partner, The Ephron Consultancy (father of recency)
• Paul Donato – EVP, CRO, The Nielsen Company (media industry leader)
• Mike Hess – Director of Research, Carat Insight (branding, shopping, and media expert)

ARF members can register for this event at no charge by going to MyARF.  For those who can’t make it, I’ll report back via this blog on what should be an amazing and long-overdue discussion.

Here is my list of 10 reasons you should care about the shopper.  Please add your own reasons to the list.

#1:  50% or more of product and brand decisions are made in-store; numerous shopper insights studies agree (e.g. POPAI, Ogilvy Action). When shopping for a new car or consumer electronics, people consider multiple brands. Why isn’t brand equity enough? Why are people still deciding in-store?  What is influencing them? You need to learn how to win more than your fair share of purchases that are up for grabs.

#2: Shopper marketing offers immediacy and reach and is projected to be the fastest growing part of the media mix over the next few years.  Wal-Mart offers a bigger audience than any prime time show. Target is up there too. In the era of fragmented media audiences, delivering a huge audience, right at the “first moment of truth” should not be ignored.

#3: What people care about as shoppers is different.  As shoppers, people are in action mode.  They are making many decisions during the course of a shopping trip, filling their cart with diverse products, taking only seconds per decision.  When people are shopping they are motivated by different messages than they are as consumers (more price-related and solution-based).  Shoppers want a highly shoppable environment which is tricky because 99% of the products in the store are irrelevant to the shopper’s mission on a given trip.

#4: Shopper marketing gives you unique opportunities to be relevant. Retailers have different store formats that are geared to serve their local clientele. Some formats match the local ethnic concentration. How will your brand presentation be customized in each store format?

#5: Product marketers are getting into retail. Apple, Coach, Estee Lauder have all been successful.  Procter just bought specialty retailer chains and a number of marketers have been using pop-up stores. If you do not study shoppers, you will not see this opportunity.

#6: Shopper insights are currency for building strong customer relationships.  Retailers are battling for shoppers and seek manufacturer partners who bring insights about how people shop that translate into ideas that increase traffic, category and aisle sales.  Manufacturers must master shopper insights or they will not be chosen as “category captain”.  That means that a competitor of yours will work directly with the merchant to determine your place on the shelf…if any.

#7: Advertising agencies must master shopper marketing to have a complete offering: those who do not offer shopper marketing services will be viewed as incomplete in their messaging and media planning approaches.

#8: Shopper insights and consumer insights are different things. Consumer insights study the relationship and expectations a person has regarding brand alternatives.  Shopper insights study how people put preferences into action in the context of replenishment needs, search for solutions, promotional offers, and the retail environment.  The research tools, questionnaires, and mental models are all different.

#9:  Studying the path to purchase offers a new approach to media planning.  Some product categories are characterized by brands being decided on before entering the store (e.g. cigarettes, soft drinks, iPhones).  For them, shopper marketing is less important and off-premise is more important.  Other brands are chosen in-store mostly (store brands, lower priced alternatives, impulse items) and shopper marketing is a must.

#10: The recession is leading to big changes that are SHOPPER-centered. For example, how people plan their shopping trips, their increasing purchase of store brands, retailers de-SKUing all reflect economic pressures.

If you’re still not sure how important shopper insights are, consider what was just reported in Ad Age:  “Walmart has launched an aggressive push to have marketers divert their consumer media and marketing budgets into the giant retailer’s growing ad budget and in-store marketing programs, using a simultaneous push to clear underperforming brands off its shelves as extra leverage.”

Shopper marketing is real and the need for shopper insights is acute.