TNS Retail & Shopper

The Store (Atlas: Categories and Geography)

December 28, 2011 - by Herb Sorensen, Ph.D., Scientific Advisor, TNS Global Retail & Shopper Practice and Adjunct Senior Research Fellow, Ehrenberg-Bass Institute for Marketing Science, Univ. of S. Australia E-Mail: herb.sorensen@shopperscientist.com.

This issue of the Views delves further into the relationship of shoppers to the store. Specifically, how a congruent cluster of stores actually performs in one major section of the store: the center-of-store aisles.

Atlas: The In-Store Behavior Map. The store segmentation we discussed in clustering large groups of stores (above,) was based on the patterns of total seconds distributed across the entire store. Now we take a deep-dive into the mechanics of how those seconds are converted to sales (or not,) in one section (the center-of-store,) for a group of stores - what we refer to as congruent stores. Congruent stores are similar across major design/internal geographic considerations. In this case, all the selected stores are right entry, similar sized, with no transverse aisles in the center-of-store area, etc. What these stores did have is a wide variety of specific category locations. That is, across the stores, peanut butter would be found in a variety of geographic locations.

For analysis purposes, each aisle was divided into six sections, front-to-back, and aisles themselves were grouped into six groups, from left-to-right. This effectively comminuted the four center-of-store Picasso sectors into three-by-three grids, giving 36 center-of-store locations, for study of their relative performances. The results are diagrammed below in terms of the double conversion performance of the 36 grid points. Again we are using the scientific approach of first distinguishing and naming/identifying parts of the total (36 distinct areas,) and then we will count behaviors within those areas, and finally compute the relationships among those areas. (See The Power of Atlas: Why In-Store Shopping Behavior Matters; also, "The Three Shopping Currencies," in the second edition of Shopper Marketing edited by Markus Stahlberg and Ville Maila, Kogan Page publisher, publication pending.)

To understand this performance diagram, consider how double conversion works. When shoppers move past merchandise, in order for sales to occur, the merchandise must induce the shoppers to stop, not just keep walking. This is stopping power, the first conversion. Then the merchandise must close the sale, by inducing the shopper to select and remove the merchandise. This is closing power, the second conversion. Of course, before either of these conversions can occur, the shopper must visit the immediate area of the merchandise. This constitutes reach for the merchandise. The fourth metric is time, that is, how long each of these other three take, in seconds.

For our purposes here, it is probably sufficient to note that leader and niche status are the most valuable, because both of them are good at completing the sale, although niche is not very good at engaging the traffic that goes by. On the other hand, high interest exhibits a lot of stopping power, but doesn't complete the sale. Those who have seen these classifications before have probably seen them related to categories, not locations. There is a reason that everything related to a sale is ordinarily associated with the products: the whole world, shoppers, retailers and their brand suppliers, think that shopping is about the people and products. IT'S NOT, at least in terms of shopping behavior.

Notice in this Center-of-Store Aisle study, that shopping behavior is associated with locations, not with the categories at those locations. In other words, it is the location that induces the behavior, not the products on the shelf. This is further supported by the fact that across more than a dozen stores, tracking hundreds of thousands of shopping trips across the full store - not just the center-of-store - fourteen different categories appear in at least one of the stores as a leader category. One of those, produce, was a leader in every single store. However, four of the categories were leaders in only a single store: candy, crackers, ethnic foods and pet foods. All four of these have significant presence in the center-of-store, and once you realize that only three of the thirty six center-of-store locations consistently produce leader results, it's not hard to understand how a lot more categories than perimeter categories can be leaders. Other than those already mentioned, canned vegetables, frozen dinners and salty snacks also showed up as leaders for the full store. This means there are locations (indicated in the diagram,) that are as valuable, if not more valuable, than many end-caps. Fascinating potential here for managing sales! (Note that all three of these leader areas are in the right half of the center of store, suggesting that the U-turn discussed in Tell 'em Where to Go; Tell 'em Which to Buy! may be driving this "leader" behavior.)

Display Domains. Now for explanatory caveats, and expansion beyond the geography domain. Note that in selecting a set of congruent stores for the center-of-store study, the selection of stores was deliberately constrained to assure some constancy of the types of displays. This is because of the recognition of the huge impact that varying display structures have on the shopping experience. A 2004 plan for modeling center-of-store aisles, identified the following behavioral domains, that is, display environments that virtually require shopper behavior distinct from that occurring in other environments.

• Race-track [perimeter] - exclusive of the following
• Center-of-Store Aisles - constrained straight path
• End-caps - 6ft radius
• Checkout - 6ft radius of entry to lanes
• Bazaar - produce/other non-forced paths with tables not blocking the view
• Service - requires assistance from staff
• Serpentine - constrained non-straight path
• Remainder - whatever is left

Each of these domains is significantly different from the others, on simple inspection, so that there is no reason to expect shopper behavior to be identical from domain to domain in any given store, or across stores.

Initial modeling of the center-of-store aisles was undertaken because of the large number of very similar aisles, in terms of width and length, that were available for modeling. The remainder of the store areas were judged similar enough from store to store, that variation in the non-center-of-store areas would have minimal impact on the center-of-store. Subsequent successful modeling of large numbers of end-caps across even more stores, confirmed that at least those two display domains could be successfully modeled. In fact, in both cases a mathematical model could successfully report category performance across display configurations, based on past performance in similar or related locations. This provides a means for management to conduct virtual experiments with "what if" placements to see monetary and behavioral results, without the cost or inconvenience of physically moving displays.

Summary

Given the huge impact on shopper behavior, driven by geographic location and the type of display for the merchandise, talking about item or category performance without specifying both of these domains, seems very inadequate for nearly any purpose. For example, saying it takes 16 seconds for shoppers to purchase a specific product or category is nearly meaningless without specifying both the display type, and its geographic location. It is not a trivial matter that within a store the shopper exists in a space/time continuum, that is warped across the store, and altered by the presence of the various display types.

Both retailers and their suppliers are woefully deficient in understanding the fundamental science of shopper behavior. Two examples: one of the top five global retailers, after being presented with the data on the relation of time efficiency to store sales commented: "Time doesn't matter, all that matters is the price, and whether the shopper enjoyed the trip." Another senior shopper researcher from one of the top five global brands, after hearing how the location being observed was impacting the behavior of shoppers said: "Oh, that's just background noise."

This level of superficiality in thinking about the shoppers' behaviors is not unusual. Major advances in retail performance are obviously there for the taking. But they will require understanding, driven by measurements. What is not measured, will NOT be managed. Another way to say that is that if you do not measure shopper behavior continuously, you will not manage it continuously. This is the doorway to the third great retail triumph: careful attention to the efficiency of what shoppers do, just as for the efficiency of what the retailer and/or supplier does. Any other so-called "shopper centric focus" is a step away from the real source of profits.

Here's to GREAT "Shopping!"
Your friend, Herb Sorensen

The Store (Component of the Science of Shopping)

December 28, 2011 - by Herb Sorensen, Ph.D., Scientific Advisor, TNS Global Retail & Shopper Practice and Adjunct Senior Research Fellow, Ehrenberg-Bass Institute for Marketing Science, Univ. of S. Australia E-Mail: herb.sorensen@shopperscientist.com

This issue of the Views delves further into the relationship of shoppers to the store. To do this it helps to put this into the context of science and shopping, and how to think about the 5 major entities of shopping. Without a decent view of the whole beast, it is very easy to hold inadequate views of even those parts that we might be expert on. So we begin with an overview of the five entities at retail - and will continue our focus on self-service retail, although for service-mediated retailing the entities are the same, with some obvious differences in function.

The Five Entities

The interrelations of the five entities, diagrammed here, is the key to understanding retail and shopping. It is particularly striking to contrast those relationships above the red line with those below the red line. The goal of this Views is to survey just one of the five entities: the store.

First, a brief excursion into the fundamentals of science, to ground our approach. The foundation of science is observation and measurement. As individuals, we are all subjective, but the world around us is objective, that is, us subjects can share in observing the objects about us. What any one can observe, all can observe. This is the foundation of scientific knowledge. For us to share our knowledge, as well as to expedite our own thinking, we must name objects, and organize things into categories. So we begin with naming five entities, and will proceed with the same approach in naming the component parts of the store.

Next, we are mindful of Lord Kelvin's admonition that: "If you cannot express your knowledge in numbers, it is of a meager and unsatisfactory sort!" In addition to counting the entities, we will count both the money and shoppers time involved in global retailing, as well as in the various areas of individual stores. For money it is $14 trillion annually; and for time it is something like a quadrillion seconds.

Of the $14 trillion shoppers spend over the year, the retailer sends $8 trillion on to their suppliers, spending the rest on building and operating stores. Notice that in the U.S. market alone, the suppliers return $1 trillion back to the retailers in the form of promotional fees, trade allowances, etc., which, given the very narrow net margins on sales, becomes the dominant source of profits for very many retailers!

The Store

Size. Probably the single most significant store factor is the size of the store. If we look at a range of stores, from very small to huge, it is obvious that they function differently. For tiny stores we sometimes comment that, "how shoppers shop in a closet is not very interesting!" From a scientific point of view, that really isn't true, it's just that the range and arrangement of stimuli in a small store is much less complex than in larger stores. However, we recognize that in taking a store from the size of a small convenience store, to a large mall center, there are transitions that occur in the shopping experience that are of a quantum leap nature.

For example, from the convenience store size up through most of the supermarket range, shoppers relate to the store as a single unit, and think of themselves as "shopping the store," not "shopping the produce, meat and dairy departments," even if in fact that is all of the store that they visit. Up to a size somewhere between 50,000 to 100,000 square feet, the store is considered a unitary whole. Above that size, the store begins to fragment into a compound store, with two or more distinct stores inside it. Shoppers then perceive these as conjoined stores, not a single store they visit. Of course the compound nature of a shopping mall is made explicit by architecturally separating the stores. But even if there are no walls separating the "stores" in the compound store, they will nonetheless take on more of a distinctive role for the shopper, than do departments in smaller stores. You can find something about the general relation between penetration of a store by shoppers and the size of the store in If you build it, they will NOT come!

Aisleness. This refers to the degree to which the store is subdivided into aisles, rather than left in a more open, bazaar-like structure, with lower "table" displays and less restriction on movement of the shoppers. There is more discussion of the impact of restricting shoppers, in The Aisleness of Stores.

The next three factors we will consider are what we refer to as the shopping domains. These are geography, display and product. These three interact in surprising ways inside the store, to deliver sales. Think of what follows as an introduction to the geographic domain, and how it interacts with types of displays as well as with product categories in consuming shoppers' time and money to deliver sales.

Sectors (Geographic Domains.) Shopper behavior in stores is amazingly dependent on just where shoppers are in the store, geographically. In order to investigate and demonstrate this crucial fact about shopping, it is first necessary to create a structure and language for store geography. This geography paradigm is especially essential for any type of large scale, multi-store study that compares shopper behavior across stores.

The simplest way to express geography in the store is to describe it as five general areas: front, back, left, right and center. This is the foundation of a sector scheme for classifying store geography. The most practical level of sectors is usually twelve (but could be 48, for greater resolution of detail, or any other number, suitable for the specific task at hand):

On the left here you see the basic plan referred to as "Quadrants Plus" since it relies on the idea of dividing the store into quadrants, but functionally uses a quincunx, which is a five component figure, rather than the four of the quadrant. This allows us to double the area of the "fifth quadrant" the center of the store, so when we further subdivide the store, we split the left/right/front/back into two sectors for each, and the center into four sectors. This creates a standardized shape that approximates the selling/service function of a lot of stores. We can use this to standardize metrics across the store, relative to these twelve geographic sectors, and retain some semblance of the relationship to the way people think about the layout of the store. It is important to understand this as the scientific way to look at stores, beginning with defining/naming twelve sector-buckets, we are then prepared to count the things in those buckets (shoppers and their time, e.g.,) as the means of understanding them, and distinguishing behavior bucket by bucket.

On the right side above, you see this sector model overlaid on an existing floor plan. You may notice the stretching of the golden rectangle shape on the left in order to fit more closely to the dimensions of the actual store. When this is done mathematically, the store's floor plan is instead "poured" into the sector structure in such a way that every sector contains an equal amount of the shoppers' available traffic space, and the space of each conformed sector maintains its original relation to the adjacent sectors - boundaries, left/right, etc. The store conformed to the idealized sector structure is referred to as the "Picasso store," since just as the artist conformed his images to some personal perception, we can conform every store in the world into a standardized internal geography, suitable for counting behaviors by geography in individual stores, and for mathematical inter-comparison of any number of stores. (For more details, see In-store media rating system and method, US Patent 8,041,590.)

Just for starters, there are two valuable applications for geographically studying stores. The first of these is to cluster stores according to how shoppers use them. This is pushing far beyond standard retail practice of measuring store performance by the flow of merchandise through it, and the poorly discriminating metric of sales per square foot. Rather, we can cluster stores by the way shoppers distribute their time across these stores, allowing a more apples to apples comparison - within a cluster - or explicitly comparing apples to oranges, by comparing stores from different clusters.

In this diagram we see the distribution of shoppers in the four basic traffic types of supermarkets across America. The color codes indicate where shoppers spend their time. The range is from where shoppers spend a lot of time: red; with lesser amounts, progressively through orange, yellow, green, lighter blue; to where shoppers spend very little time, dark blue. This is of significance because where shoppers spend their time is where there is the greatest opportunity to sell to them - every second is another opportunity to sell.

Here we are looking at a few dozen supermarkets scattered across the United States. Each of these clusters has distinctive performance characteristics, driven in a major way by the shared architectural design of the stores. For example, we already know that left entry stores, as a class, perform more poorly than right entry stores. The purpose of clustering stores is to learn the impact of various design features on the performance of those stores, aka how well the stores meet the needs of the shoppers in them. Remember, success at retail is not just about products and shoppers, but the details of how those interact to deliver sales.

Now suppose this segmentation into clusters represented a single chain of hundreds or even thousands of stores. These clusters would then mean, that from the shoppers' usage points of view, there are a few basic types of stores in that particular chain, and those types have distinctive relationships to their shoppers. Rather than merchandise to the shoppers in those distinctive environments relying on "received wisdom," one can match more closely the merchandising to the store cluster. The advisability of this will become more apparent when we sharpen the focus on the four sectors in the center-of-store in a single cluster of congruent stores.

So the very fact that you can cluster stores by internal shopper traffic maps (density and flow, e.g.,) means that geographic structure has a far greater impact on the performance of the store than might have been imagined. Just because you, as management, see that the interior of two stores have the same general appearance and all the same displays and merchandise, does not mean that the two stores will perform approximately the same, even if the composition of their customer base is similar. So we will now look further into how a single cluster actually performs in one major section of the store: the center-of-store aisles.

Atlas: The In-Store Behavior Map. The store segmentation we discussed in clustering large groups of stores (above,) was based on the patterns of total seconds distributed across the entire store. Now we take a deep-dive into the mechanics of how those seconds are converted to sales (or not,) in one section (the center-of-store,) for a group of stores - what we refer to as congruent stores. Congruent stores are similar across major design/internal geographic considerations. In this case, all the selected stores are right entry, similar sized, with no transverse aisles in the center-of-store area, etc. What these stores did have is a wide variety of specific category locations. That is, across the stores, peanut butter would be found in a variety of geographic locations.

For analysis purposes, each aisle was divided into six sections, front-to-back, and aisles themselves were grouped into six groups, from left-to-right. This effectively comminuted the four center-of-store Picasso sectors into three-by-three grids, giving 36 center-of-store locations, for study of their relative performances. The results are diagrammed below in terms of the double conversion performance of the 36 grid points. Again we are using the scientific approach of first distinguishing and naming/identifying parts of the total (36 distinct areas,) and then we will count behaviors within those areas, and finally compute the relationships among those areas. (See The Power of Atlas: Why In-Store Shopping Behavior Matters; also, "The Three Shopping Currencies," in the second edition of Shopper Marketing edited by Markus Stahlberg and Ville Maila, Kogan Page publisher, publication pending.)

To understand this performance diagram, consider how double conversion works. When shoppers move past merchandise, in order for sales to occur, the merchandise must induce the shoppers to stop, not just keep walking. This is stopping power, the first conversion. Then the merchandise must close the sale, by inducing the shopper to select and remove the merchandise. This is closing power, the second conversion. Of course, before either of these conversions can occur, the shopper must visit the immediate area of the merchandise. This constitutes reach for the merchandise. The fourth metric is time, that is, how long each of these other three take, in seconds.

For our purposes here, it is probably sufficient to note that leader and niche status are the most valuable, because both of them are good at completing the sale, although niche is not very good at engaging the traffic that goes by. On the other hand, high interest exhibits a lot of stopping power, but doesn't complete the sale. Those who have seen these classifications before have probably seen them related to categories, not locations. There is a reason that everything related to a sale is ordinarily associated with the products: the whole world, shoppers, retailers and their brand suppliers, think that shopping is about the people and products. IT'S NOT, at least in terms of shopping behavior.

Notice in this Center-of-Store Aisle study, that shopping behavior is associated with locations, not with the categories at those locations. In other words, it is the location that induces the behavior, not the products on the shelf. This is further supported by the fact that across more than a dozen stores, tracking hundreds of thousands of shopping trips across the full store - not just the center-of-store - fourteen different categories appear in at least one of the stores as a leader category. One of those, produce, was a leader in every single store. However, four of the categories were leaders in only a single store: candy, crackers, ethnic foods and pet foods. All four of these have significant presence in the center-of-store, and once you realize that only three of the thirty six center-of-store locations consistently produce leader results, it's not hard to understand how a lot more categories than perimeter categories can be leaders. Other than those already mentioned, canned vegetables, frozen dinners and salty snacks also showed up as leaders for the full store. This means there are locations (indicated in the diagram,) that are as valuable, if not more valuable, than many end-caps. Fascinating potential here for managing sales! (Note that all three of these leader areas are in the right half of the center of store, suggesting that the U-turn discussed in Tell 'em Where to Go; Tell 'em Which to Buy! may be driving this "leader" behavior.)

Display Domains. Now for explanatory caveats, and expansion beyond the geography domain. Note that in selecting a set of congruent stores for the center-of-store study, the selection of stores was deliberately constrained to assure some constancy of the types of displays. This is because of the recognition of the huge impact that varying display structures have on the shopping experience. A 2004 plan for modeling center-of-store aisles, identified the following behavioral domains, that is, display environments that virtually require shopper behavior distinct from that occurring in other environments.

• Race-track [perimeter] - exclusive of the following
• Center-of-Store Aisles - constrained straight path
• End-caps - 6ft radius
• Checkout - 6ft radius of entry to lanes
• Bazaar - produce/other non-forced paths with tables not blocking the view
• Service - requires assistance from staff
• Serpentine - constrained non-straight path
• Remainder - whatever is left

Each of these domains is significantly different from the others, on simple inspection, so that there is no reason to expect shopper behavior to be identical from domain to domain in any given store, or across stores.

Initial modeling of the center-of-store aisles was undertaken because of the large number of very similar aisles, in terms of width and length, that were available for modeling. The remainder of the store areas were judged similar enough from store to store, that variation in the non-center-of-store areas would have minimal impact on the center-of-store. Subsequent successful modeling of large numbers of end-caps across even more stores, confirmed that at least those two display domains could be successfully modeled. In fact, in both cases a mathematical model could successfully report category performance across display configurations, based on past performance in similar or related locations. This provides a means for management to conduct virtual experiments with "what if" placements to see monetary and behavioral results, without the cost or inconvenience of physically moving displays.

Summary

Given the huge impact on shopper behavior, driven by geographic location and the type of display for the merchandise, talking about item or category performance without specifying both of these domains, seems very inadequate for nearly any purpose. For example, saying it takes 16 seconds for shoppers to purchase a specific product or category is nearly meaningless without specifying both the display type, and its geographic location. It is not a trivial matter that within a store the shopper exists in a space/time continuum, that is warped across the store, and altered by the presence of the various display types.

Both retailers and their suppliers are woefully deficient in understanding the fundamental science of shopper behavior. Two examples: one of the top five global retailers, after being presented with the data on the relation of time efficiency to store sales commented: "Time doesn't matter, all that matters is the price, and whether the shopper enjoyed the trip." Another senior shopper researcher from one of the top five global brands, after hearing how the location being observed was impacting the behavior of shoppers said: "Oh, that's just background noise."

This level of superficiality in thinking about the shoppers' behaviors is not unusual. Major advances in retail performance are obviously there for the taking. But they will require understanding, driven by measurements. What is not measured, will NOT be managed. Another way to say that is that if you do not measure shopper behavior continuously, you will not manage it continuously. This is the doorway to the third great retail triumph: careful attention to the efficiency of what shoppers do, just as for the efficiency of what the retailer and/or supplier does. Any other so-called "shopper centric focus" is a step away from the real source of profits.

Here's to GREAT "Shopping!"
Your friend, Herb Sorensen

"How to Close Every Sale"

(Commentary on Joe Girard's book)
October 6, 2011 - by Herb Sorensen, Ph.D., Scientific Advisor, TNS Global Retail & Shopper Practice and Adjunct Senior Research Fellow, Ehrenberg-Bass Institute for Marketing Science, Univ. of S. Australia E-Mail: herb.sorensen@tnsglobal.com

What does selling mean?

Whenever a customer acquires something, with a commitment to pay for it, a sale occurs. In every case, this is a culmination of a series of external stimuli for the customer, with a parallel interior mental path for the customer. In general, we can divide all the sales in the world into two classes:

1. Sales-person mediated sales, where there are two people involved, the customer and the sales person, with one acquiring and the other guiding and expediting the purchase — selling the customer! 
2. Self-service sales, where another person is not directly and immediately involved in the purchasing process, the person "selling" is not there, having simply teed up the ball for the shopper to sell themselves.

Self-service retail essentially revolutionized the world of commerce 100 years ago, when selling in stores largely migrated from the first class of selling, to the second class of selling. Notice that in the first class of sale there is often a one-to-one relation with one salesperson addressing one customer at a time, guiding them to the sale/purchase. This can be properly designated as active selling. In the second class, where the "seller" is not actually present, we have, typically, passive selling. I discussed these matters in some detail in Selling vs. Order-taking, which could provide further helpful background to this present discussion.

In this issue of the Views we will select from the teachings of Joe Girard, who has been identified by The Guinness Book of World Records as "The World's Greatest Salesman." This continues my decade long quest to bring the very best of active selling into the passive selling, self-service environment, that dominates a huge share of the $14 trillion dollar annual retail business.

 

You might also review the earlier Views, The Amazonian Ghost, to get a better understanding of the selling mindset required for active retailing. I also recommend my commentary on the super-selling techniques of Ron Popeil. In many ways, the thinking of people like Joe Girard and Ron Popeil are right at the cutting edge of real selling in the self-service world. And the key to outsize increases in sales and profits!

From Chapter 1:
The Prospect's [Customer's] Time is Valuable
"Every sales person has had it drilled into his or her skull that time is money and should be valued accordingly. So I won't give you another lecture on time management. Instead, I'll emphasize instead the importance of also realizing the value of your prospect's [customer's] time."

Joe Girard's perspective here is exactly the same as my own principle that, "The faster you sell, the more you will sell!" No real sales person would ever be confused about this issue, and yet it is diametrically opposed to standard retailer desire to get the shopper to spend more time in their stores. As one senior shopper "expert" with one of the major brands told me, "We want the shopper to spend time carefully considering our merchandise." Both the retailer's view, and the supplier's, have the air of thoughtful consideration of the shopper and the sales process, but both are actually sales termites. They steadily erode the performance of the store and brand by impeding rapid selections of merchandise.

The fact is that every second longer that it takes for a supermarket to sell one dollar's worth of merchandise, costs the store a million dollars in annual sales. (See Shopper Efficiency vs. Total Store Sales.)

Most Sales People Are Negative
"How in the world can anyone look at somebody and determine if he's going to buy? I've been in the sales field for many years and still have no idea what a buyer is supposed to look like..."

This is a direct challenge to formal segmentation methods that presume to assist in identifying a "target demographic." I have often quoted the retail executive who said to me, "Our target demographic is the stock-up shopper." This was said, even though half of all the shoppers in his stores are buying five or fewer items. Clearly, management of this chain was negative about the large number of quick-trippers in their stores. These quick-trippers are actually "stock-up" shoppers, they just aren't on a stock-up trip. Shoppers change their segmentation identity, sometimes multiple times in a single trip!

Sometimes I think I have seen more brand supplier shopper segmentation schemes than the law allows. All attempting to identify "their shoppers." And I've had any number of clients, in the research environment, confidently assert that the particular shoppers we have in front of us "are not our customers" — especially if one of them has rendered an opinion inimical to the brand narrative.

One of the most insightful observations I have ever heard was from Sandy Swan, then at Dr. Pepper/7 Up, when he said, "I don't care whether the shopper is a sixty year old businessman driving up in a late model BMW, or an eighteen year old coed arriving in a beat-up VW, all I care is if they buy my product!" A great deal of segmentation is misguided, because shoppers move from segment to segment with disturbing regularity. (See Byron Sharp's How Brands Grow., particularly chapter 11, "Why Loyalty Programs Don't Work.")

From Chapter 2:
The Invisible Sign, "Make Me Feel Important!"
"I think it's a matter of showing people that you are sincerely interested in them."

Here we need to return to the device of The Amazonian Ghost, where we have to project ourselves into the aisle, with the shopper, even though we cannot be there with them personally, while they are making their selections. The question is, how can we make a shopper walking past a display know that we "are sincerely interested in them?"

We're on new terrain here, but I will make some suggestions. For example, in the wine department, perhaps don't simply point out, "Your discriminating palate will join the connoisseurs who enjoy this selection," but nearby give a budget, near equivalent, with the notice, "The connoisseur with the sharp pencil enjoys this selection." Now, I would ordinarily not recommend such wordy communications with shoppers who are parsimonious with their time. But a good marketer who understands the sentiment given here and is skilled in conveying words with symbols, pictures, color and the like, should have a superior way of saying to the shopper, "We're sincerely interested in you."

Bear in mind that in the entire wine department, only one or a few matched promotional suites along this line might further express that the retailer and/or brand is "sincerely interested in you," the shopper. Of course such things as quick chillers and other amenities can say this to the shopper as well. The point here is to "personalize" the spirit of your communication with the shopper. And to look at ALL your shopper communications and ask yourself, "Does this say to the shopper, I'm sincerely interested in you?"

From Chapter 3:
Assuming the Sale
"When you continually assume the sale... You're relaying a signal to the prospect's [shopper's] subconscious that he or she will buy your product. His or her subconscious mind is picking up the message 'Buy, buy.'"

Since the package is your in-store "salesman," make sure that all six sides of the box have at least a subtle sale assumption message. One of the most powerful of these is what I call "social marketing" — giving a message about a group that the shopper is affiliated with, or would like to be, at least. "#1 Choice of Choosy Moms," is an example for Jif Peanut Butter. "Connoisseurs choice" is suggested in the wine example above. Rather than words, photos placing the product in the consumption or usage scene of the social — or family — group, would be more effective. This is also one of the powerful motivators mentioned in Robert Cialdini's book, Influence: The Psychology of Persuasion, which I recommend.

In a sense, a picture of a celebrity endorser or cartoon character is also an assumptive seller, since the assumption is that if this endorser or character is associated with this product, the shopper wants to be associated with the endorser-character-product.

From Chapter 4:
Being a Good Listener
"It's too bad they don't teach us more about listening in school."

Indeed, in the store it is a case of the shopper shouting at the top of their lungs by their behavior. "Actions speak louder than words." Personally, I don't have a reputation for being a good listener. But when it comes to shoppers, I am a detailed and meticulous "listener," that is, observer and measurer of just exactly what shoppers do. Where they go in the store, how long they spend doing anything, exactly what they buy, their reaction to all the media and non-media in the store, etc., etc.

That's how I learned the critical importance of the dominant path through the store, and of the top sellers that the shoppers keep shouting about (by buying them.) (See Tell 'em Where to Go; Tell 'em Which to Buy!) It's all about listening to the shoppers.

From Chapter 8:
Choices of Three
"Over the years, I have discovered that the more choices presented to prospects [shoppers,] the more difficult it becomes for them to make up their minds. While I don't have concrete evidence backed by formal research, I have observed that when people have to choose from more than three choices, they have a hard time determining which to pick... I recommend offering a maximum of three."

This principle reinforces what we say about focusing on the top sellers. You can only use Joe Girard's selling principles selectively in the store, if you expect them to be effective. If you use them widely, you are trying to "sell more than three," and your efforts, no matter how good they are, will be diluted severely, and simply become more "noise" in the shopping environment. Fortunately, you can be pretty sure that your competition is churning out a lot of noise. This is your opportunity to provide selective selling to just a few items (a few dozen for a 40,000 item store, but a literal few, 3, for a few dozen items in a brand — or category.)

Go ahead, try targeted selling of your few best selling items, those that shoppers are telling you they most want to buy, because that is what they already buy MOST of!

By the way, the formal research that Joe didn't have can be found in abundance in Sheena Iyengar's book, The Art of Choosing.

From Chapter 9:
Creating a Sense of Urgency The Limited Offer
"Department stores and supermarkets use it to peddle everything from mattresses to frozen orange juice... Failure to buy within a certain timeframe means that you lose the opportunity to get a good deal. Limited offers work, and this explains why the American public is constantly bombarded with such inducements."

This is sometimes called the "take it away" strategy. It is true that most people are more motivated to keep what they have than to acquire something they don't have. With a take-it-away offer, you are essentially giving an opportunity to the shopper, something they can make use of right now, versus losing what they have, the opportunity, by delaying till later.

 

Notice: Great Deals While They Last. In other words, buy it now or you may lose the opportunity. Costco deploys this strategy every time they bring in a special shipment at a terrific price. You wanted one of those canoes? Sorry, maybe again next year!

From Chapter 11:
The Law of Diminishing Returns
"The greater the lapse of time, the less chance you have of closing the sale."

The longer you take to close the sale, the greater the chance that you are never going to close the sale. If the shopper has been in the aisle a full minute and has not yet put a product in the basket, the odds are great that she isn't going to. On the other hand, if she puts one in within the first 10 seconds, the odds of a second going into the basket, skyrocket.

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So we have reviewed 8 great principles that the world's greatest salesman relied on to achieve that distinction. If you try to implement some of these principles as slick strategies... Rather, your own super sales capabilities will come from a change between your ears and in your heart. It is a burning desire to become a self-service "Joe Girard," learning from the best in order to be YOUR best!

Here's to GREAT "Shopping!"
Your friend, Herb Sorensen

 

Three Purchase States

(Modes of Purchase Hypothesis)

August 21, 2011 - by Herb Sorensen, Ph.D., Scientific Advisor, TNS Global Retail & Shopper Practice and Adjunct Senior Research Fellow, Ehrenberg-Bass Institute for Marketing Science, Univ. of S. Australia E-Mail: herb.sorensen@tnsglobal.com

Bucketing Shopping/Purchasing

There is a sense in which every single purchase, of every single item, by every single shopper, is a unique event, distinct from every other purchase. To understand these global trillions of unique events, annually, we look for similarities so that we can group them into something smaller than trillions of buckets. In this Views, I am boiling down the trillions of unique events into three simple buckets. And although a great deal of statistical research has gone into these ideas, this is not strictly a scientific, mathematical segmentation. So I will refer to it as my purchase states hypothesis.

The Routine/Autopilot State

The first and largest shopping state must be the Routine/Autopilot State. When you buy something over and over again, in time it becomes a habitual process. When this happens, there is a shift from the shopper consciously thinking about the purchase, to an autopilot state that will efficiently make the purchase, without giving it a thought. It is this "over and over again" purchasing that Neale Martin refers to as "the 95% of behavior that marketers ignore." 

Everyone got direct experience with this habit forming process by learning to tie their shoes. The first few times you tied your shoes, it was a laborious, thought-fraught process, as you concentrated on, "now cross the laces like this... then that one goes around so..." and so forth. But after some number of times, the knowledge of how to do this moved from a series of steps consciously executed by the fingers under the direction of the brain, to the fingers, having learned how to do it without guidance. The knowledge has essentially moved from the brain to the fingers, where it is really needed. The net effect of this striking increase in efficiency, is a resulting increase in speed. Faster sales mean more sales!!!

So just how many purchases does it to take to habituate all, or part, of a purchase. If you have purchased 10 computers over 20 years, has any part of the process become habitual? Maybe the brand? The retail source? Peripheral devices? 

How about orange juice, purchased twice a month for the past ten years? Or shoes, maybe purchased several times a year? 

I don't know the specific answers to all these questions, but I do know that the habitual purchase plays a huge and dominant role in convenience stores, drug stores, supermarkets and supercenters around the world. Consider: the typical household purchases only 300-400 distinct items in an entire year. Half of those, 150-200, they buy regularly (habitually,) week in and week out, over the year. The other half are purchased irregularly - some we'll discuss below. In any event, trying to communicate with a shopper on autopilot is a tricky business. As often as not, the brand manager grabbing the shopper's attention is interfering with the autopilot purchase of the brand's own product, and possibly not effectively communicating with the autopilots programmed for other, competitive products.

Here is one example of excellent management of autopilot purchasing: 

Notice the position of the two words, "Campbell's" and "Soup", in 1895. Two years later the redesigned label introduced a tomato-red color, but lost the Campbell's brand. One year later the red moved up, the brand was re-inserted and a quality indicia was stamped right in the middle. Then, in 1900, the visual appearance became essentially what it is today, 111 years later. Question: How many habitual minds around the world recognize Campbell's soup, without bothering the shopper's conscious, executive mind? How much Campbell's soup finds its way into shopping baskets around the world, largely on autopilot? Of course it is a delicate process, that can be impacted favorably or unfavorably by small or large tweaks. (Alphabetizing the soup display reduced sales but the gravity feed dispenser accelerated them.)

Several major marketing disasters, widely reported, over the past few decades, essentially confirm the accuracy of Neale Martin's observation about the "95% of behavior that marketers ignore." Here is some further confirmation of the driving force of habit: 

This Kantar WorldPanel data shows that on subsequent shopping trips, 80% of the time the shopper buys either the exact same item on the next trip, or perhaps a different variety of the same brand, while 20% of the time they may purchase a different brand from that category. A recent issue of the Views gives more detail on this subject in, "How to Sell the Few, Among the Many?" 

The Surprise/Delight

State Now that we have discussed the reality of the dominant form of purchase of trillions of annual purchases, we turn our attention to what wishful thinking would like the dominant state to be: Surprise/Delight. There are some obvious examples of the Surprise/Delight State: You find out that the new car you were expecting to pay $35,000 for, is available for $29,000. Or you have been looking for just the perfect outfit for an upcoming party, and there it is! Or you simply don't have time to prepare the dessert you wanted to, and coming around the corner of an aisle, you spot something that solves that problem for you. 

Obviously, Surprise/Delight is a worthy marketing objective. But think about this a bit. Of your own last 10 purchases (be sure to include the soft drink from the C-store) how many of them were "surprise/delight" for you? I don't have specific numbers on this, but if you are doing regular shopping, it is hard to imagine surprise/delight constituting more than a few percent of your purchases. 

There is one HUGE problem with retailers attempting to surprise/delight their shoppers: almost invariably, the retailer instinctively turns to price as the tool of choice. And this problem is compounded by two factors: 

• They intend to use the brand supplier's money to surprise/delight the retailer's customer. Further, like the little boy hitting his sister with his rope as he swings it about, and says to his mother, "she likes it!" the retailer says the brand manager "likes" it.
• Secondly, the shoppers mostly are NOT surprised and delighted. As Glen Terbeek reported in "Agentry Agenda," half the shoppers buying on promotion were unaware that the price was marked down, and half of those who were aware, didn't care anything about the reduced price. 

The misuse of price in misguided efforts to surprise/delight is quite typical of the insensitive efforts of retailers. Any technique that shows the slightest positive effect, will usually be seriously overused, with the result of diluting or destroying any possible positive effect. For further discussion of pricing issues, see the economic analysis by Huang and Dawes of the Ehrenberg-Bass Institute, Report 43, "Price Promotions, How much volume is discounted that you would sell anyway at the normal price?" Also, for a balanced discussion of the role of price in promotions, see "Mind Your Pricing Cues," by Anderson and Simester in the Harvard Business Review.

Abusive, ineffective efforts to achieve the Surprise/Delight State should not discourage properly targeted efforts to actually surprise or delight shoppers. For example, the vast majority of a category's purchases may be habitual. But there could be a subcategory of, for example, special occasion items, where shoppers are more open to new products - willing to investigate and browse, using the executive mind. In fact, "new" is an entire marketing strategy that can be effectively used to break through the habit-filter. However, overuse, or not delivering on the claim, will reduce effectiveness of the technique, over time. 

The Frustration State

The term "frustration" may be a bit strong for this state, although the "search/drudgery/occasional" state is often afflicted with frustration. First of all, simply finding something that you might buy every two years may be a chore, unless you are in the habit of seeing it regularly, even though you don't buy it regularly. For example, you need shoe laces, a piece of luggage that is "just right," or maybe a sauce that you can't figure out how the store has it classified, for display purposes. Not to mention buying a house or other major, rare purchase. 

Again, I have no specific numbers as to the frequency, but my own shopping experience suggest that the Frustration State is a lot more common than the Surprise/Delight State. In fact, since I don't do most of the routine shopping for our household, these latter two states may constitute a larger share for me than for many other shoppers with more routine shopping experience. 

Summary

Now for some comment on why all this is important. First, the previous issue of the Views pointed out that as valuable and essential as category management is to managing stores, it falls well short of addressing the item purchases of shoppers. (See The Dinner Party in the Pantry.) That is, there is a great gulf between retailers, brand suppliers and the shoppers they presume to serve. As I have often pointed out, shoppers do NOT purchase categories, they purchase individual items. Nor do "trip missions" adequately account for the diversity of experiences a shopper may have on any given trip.

By focusing on these three purchase states related to items, I have recognized the diversity that may occur from purchase to purchase, on a single trip. This is by no means the only way to classify individual purchases. I'm particularly thinking of the phenomena of licensing, whereby shoppers who have purchased "meritorious" products (healthy, green or otherwise) may feel they have accumulated sufficient "excess merit" to give them license to buy some less worthy product, like candy or ice cream.

These three states also illuminate some of the issues in the continuing evolution of retailing across online, mobile and bricks-and-mortar. Although online can deliver some surprise/delight, it seems like bricks-and-mortar may always have an advantage in this area. The emotional, immediate experience in the "real" world would seem to give the advantage to the physical store. However, in terms of search, especially for unfamiliar items in "the long tail," it's hard to see how the bricks-and-mortar store will be able to compete, without a HUGE inventory, and shopper electronic search capabilites - smart phones, for example.

This leaves the routine/autopilot purchase as a real battleground between bricks and clicks. Automating routine purchases is a potential winner for the online store. However, bear in mind that surprise/delight may seriously alleviate the drudgery or blandness of the routine in the bricks store. The real challenge for the bricks store is to minimize frustration by moving as much purchasing into autopilot as possible, and spicing the mix with a limited amount of surprise and delight. Spice is good, but only in limited amounts. ;-)

Here's to GREAT "Shopping!"
Your friend, Herb Sorensen 

 

The Dinner Party in the Pantry

(Category Management vis-à-vis Item Management)

June 20, 2011 - by Herb Sorensen, Ph.D., Scientific Advisor, TNS Retail and Shopper and Adjunct Senior Research Fellow, Ehrenberg-Bass Institute, University of S. Australia E-Mail: herb.sorensen@tnsglobal.com

The first great challenge of retailing

With the growth and prosperity of free markets over the past 100 years, a plethora of merchandise has been developed by a very large number of suppliers, hoping to reach shoppers and fill at least some part of their voracious needs and wants. The glut of merchandise options is so great, that in most major metro areas, the warehouses in that area have in stock for ready delivery to stores a million or more items ("Stock Keeping Units" - SKUs to the trade.) This is the first great challenge for any retailer: which of those million items to offer in their store(s)?

But that is only the beginning response to the full challenge, which is illustrated here:

The challenge here is, how to get from the one million available items to the five that the "typical" shopper puts in their basket? (The "5" is discussed below.) Going from a million to 40,000 items in the store is a huge step for the retailer, but getting from that 40,000 to the five is the primary challenge for the shopper. For the brand supplier, the challenge is simply getting as many of their own items into the 40,000 as the first in a two step process.

Retailers and Brands Manage Categories; Shoppers Buy Items

Whatever the number of items in the store, the retailer must have some organizational plan for arranging/managing their merchandising. Arranging items by category makes sense. But defining categories is neither simple, nor inconsequential. After all, you can organize everything into 30 categories, 80 categories or 150 or more. Category definitions are not written in stone, nor do they necessarily mean the same thing to the retailers, brands and shoppers.

The problem is well illustrated by the "juice" category, which in nearly all stores becomes as many as four categories. Bottled, canned and powdered juice are dry groceries, frozen juice is in the frozen food section, refrigerated juices in dairy, and freshly squeezed (and sometimes "natural,") in or near produce. This is the usual organizational structure, although some stores have experimented with putting all juices in a single location to help shoppers deal with the "juice category." Putting all "beverages" into a single aisle or section is another approach to making the category more sensible for the shopper.

This illustration of the four usual "juice" categories contrasted with the alternate single juice category, or a beverage aisle (category,) reflects the stark difference between the retailer's needs for managing operations with different forms of juice (shelf-stable, frozen, refrigerated or fresh,) with those of shoppers, who are more likely to be focused on filling a meal menu. The result is that the usual juice organization in stores is driven more by store operational needs, than by the needs of the shopper. The alternative experimentations ("single location" or "beverage aisle") are driven by marketing thinking, (trying to get closer to the needs of the shopper,) rather than by operational thinking, doing what works best for the store - that is, the store management and staff. In general, the mind-set of store management is very different from the mindset of shoppers. Not s urprisingly, store management thinking dominates the store - not shopper thinking.

Twenty years ago, the strategy for management of stores widely moved to category management, CatMan to the trade. Just as 80 years earlier, when self-service retailing yielded massive benefits for shoppers, retailers and their brand suppliers, so CatMan yielded another wave of massive benefits for shoppers, retailers and brands. However, just as with self-service, CatMan retailing is driven more by the perspective (and operational needs) of retailers and brands than it is driven by the needs of shoppers. Both are permeated by a "pile it high, and let it fly" mentality.

Let's begin with the observation that the retail problem is massively simplified by reducing from one million to maybe 40,000 items in the store. And then the problem is further massively simplified by reducing those 40,000 items to 80 categories with 500 items each (typical). So a category is a bite-size management chunk. And typically, the number of brands involved in a category is relatively small, with two or three brands dominating the category. This arrangement vastly facilitates the retailer's challenge, because now they can more effectively integrate the brands' knowledge and expertise for managing the category, with the retailer only needing to coordinate, supervise (and overlay their own interests) on what becomes "the brand on brand gladiatorial contest" in the aisle.

But here would be a good place to point out that brands necessarily have very narrow and parochial interests in the store. The bottom line is that stores are built and managed for super efficiency in meeting the needs of retailers and their suppliers, with the presumption that the self-service shopper has all that they could need to satisfy themselves from the category managed store.

The problem is that no shopper has EVER, in the history of the world, purchased a category. SHOPPERS DO NOT BUY CATEGORIES, THEY BUY ITEMS!!!

In our diagram above, we show that the "typical" shopper buys 5 items from the total store. Views readers should be well aware that the number of items purchased is a power function, with half of the shoppers buying 5 or fewer items, and half buying 6 or more. (See, for example, "Deciding What to SELL!" and "How to Sell the Few, Among the Many?") We've been shouting these facts from the housetop for years, with limited effect in the retailer and brand world. The reason for this apparent retail obtuseness is very simple: mostly, retailers and brands get as far as category management which is founded on their own self-interest, and that of there dominant retailer partners, but does NO T include the dominant interest of shoppers: which single item here should I buy?

What we want to show is that item management, the next big thing in retailing, has a shopper centric focus, not so much focusing on the shopper, but focusing on what the shopper is focusing on. I hope that this distinction does not elude you, because it is worth a vast fortune. ;-)

The foundation of true selling at retail

So... let's turn that decrescendo illustrated above into another useful perspective on the exact same set of facts:

At first it was very important to understand the massive shrinkage of the offering from what suppliers have produced (one million) to meet the needs and wants of shoppers (five.) Now it is important to see this as, instead of shrinkage, as a massive foundation for meeting the needs and wants of shoppers. And just as the massive foundation and infrastructure of your home (plumbing, electrical, etc.,) serves you well, that foundation and infrastructure is NOT what the home is about to the user.

Looked at from this foundational perspective we see that category management is imperative in managing a store with tens of thousands of items. Simply put, stores with those numbers of items require some form of organization to get within striking distance of the shopper making purchases. At the same time, category management does not go the final mile in reaching the shopper.

The problem in the store is that the store does a very poor job of focusing on what the shopper focuses on there. It would be more accurate to say that the store does a very poor job of promoting just what the shopper wants to buy. I do not use the bastardized meaning of "promoting" where "promotion" means cutting the price, essentially paying the shopper to buy something. (An issue that is larger than the space we have for it here.) Suffice it to say that there is no need to pay shoppers to buy what they really want to buy. Instead, most stores offer a vast smorgasbord, with their bastardized "promotions" focusing more on what they and their suppliers want to sell, than on what shoppers want to buy. For a store, a few hundred items drive total store sales, because those few hundred specific items massively fill the needs and desires of the shoppers. For a category, a dozen or fewe r items play the same role. And for a brand there are a few items that dominate what shoppers want. Managing distinctly, and promoting distinctly these items that constitute tiny fractions of the whole is what leads to outsize sales and profits. This is what Item Management, the next big thing in retail, is all about.

I like to think of it as a dinner party in that fine home mentioned above. A great dinner party has as one component a careful selection of the menu by the host. A great deal of thought will be given to the particular tastes of the guests, and perhaps they will be offered limited choices. The kitchen and pantry will probably have a lot more in stock than the guests are offered for the dinner. Seeing the parallel at retail, most stores simply usher their guests into the pantry and let them shift for themselves. It's nothing like the party that it could be - and I'm not talking about prepared foods - but matching what you promote (in the true sense) to the inmost needs and desires of the customer. It's in the transaction log. The exact record of what individual shoppers buy, across thousands of shoppers, also reveals the focus of the crowd on a relatively few number of specific items for the store, for the category and for the brand.

The final conclusion is that item management is an over-lay which builds on the foundation of category management. The need for item management is the need to actually sell something to the shopper, rather than to simply set up a display, in the hopes that shoppers will buy something, or anything here.

Summary

The major points that I hope you got from this are:

• Shopper's individual purchases are the result of a selection funnel that begins with huge numbers of items, which are funneled down to only a few items.
• Retailers and brands manage the huge shrinkage down to the category level, but are very ineffective in assisting shoppers with that final selection - managing the tip of the funnel.
• Rather than dealing with the vast shrinkage problem, shoppers build on the foundation of category management to make their own few final choices.
• The net result of those thousands of choices by the crowd, result in a few specific items that deliver outsize sales results. Item management is about selling by focus on those few items - offering those few as the menu for the "dinner party," without eliminating the pantry. The pantry (store) contains tens of thousands of low selling items in the store.

Here's to GREAT "Shopping!"
Your friend, Herb Sorensen