TNS Retail & Shopper

How to Sell the Few, Among the Many?

May 9, 2011 - by Herb Sorensen, Ph.D., Scientific Advisor, TNS Retail and Shopper and Adjunct Senior Research Fellow, Ehrenberg-Bass Institute, University of South Australia E-Mail: herb.sorensen@tnsglobal.com

How to sell the few?

In the last issue of the Views we discussed in some detail the proper role of the long tail in attracting shoppers to the store, providing support for the big head and as a competitive imperative - not optional for survival in the real world of competition. But the dominant source of sales success in any store will be the mass of shoppers, and their preponderant interest in the big head! Here we will deal with specifically the question of how to sell the few, the winning big head, in the presence of the overwhelming tens of thousands in the long tail.

How to sell the few? The question itself goes a long way toward answering itself, by specifying "the few."

To illustrate, the reason that end-caps (end of aisle displays) sell so effectively is that they make a distinct offer: as the shopper sees it, a display with an open aisle on either side of it, and only a few items on it! The offer on the end-cap is clear and distinctive. (And as some retailers have found, it can be just as effective without the price marked down as it is with a cut-price.) Move around the end-cap into the aisle, and you face an indiscriminate display on both walls of the aisle, of maybe 5000 items. The end-cap is the antithesis of the clutter in the aisle. The end-cap IS clarity of an offer in the store. (But it is not the only way to do that.)

The blinking VCR in the grocery aisle!

In attempting to get inside the mind of the selling process, I find it helpful to rely on examples of real world super-salesmen, and others' perceptive analysis of it. Malcolm Gladwell is a very perceptive, analytical thinker about the human condition, often including commercial issues. In his essay on a family of super-salesmen who achieved very nearly unbelievable levels of sales of household appliances, over several generations, he illustrates some of the features that are sorely missing in the self-service retail world. The material and commentary below is provided so that marketers may judge for themselves how deficient what passes for "selling" in the self-service retailing world, really is - in relationship to the shoppers. (Read Gladwell's whole book, What the Dog Saw.)

"Thirty years ago, the videocassette recorder came on the market, and it was a disruptive product, too: it was supposed to make it possible to tape a television show so that no one would ever again be chained to the prime-time schedule. Yet, as ubiquitous as the VCR became, it was seldom put to that purpose. That's because the VCR was never pitched [sold]: no one ever explained the gadget to American consumers-not once or twice but three or four times-and no one showed them exactly how it worked or how it would fit into their routine, and no pair of hands guided them through every step of the process. All the VCR-makers did was hand over the box with a smile and a pat on the back, tossing in an instruction manual for good measure. Any pitchman [salesman] could have told you that wasn't going to do it."

This is an insightful perspective on both the VCR, and the way in which it was sold to shoppers. After showing us how a real salesman sells an appliance, Gladwell will return to the VCR, and how Ron Popeil might modify and sell it. Here's the super-salesman at work:

"Make the product the star."

"This was a lesson Ron Popeil never forgot. In his infomercial for the Showtime Rotisserie, he opens... with a series of shots of meat and poultry, glistening almost obscenely as they rotate in the Showtime. A voiceover describes each shot: a 'delicious six-pound chicken,' a 'succulent whole duckling,' a 'mouthwatering pork-loin roast...' [Ron] bangs a hammer against the door of the Showtime, to demonstrate its strength. He deftly trusses a chicken, impales it on the patented two-pronged Showtime spit rod, and puts it into the oven... All the time,... [he is] leading viewers through every step: 'All I'm going to do here is slide it through like this. It goes in very easily... Raise up my glass door here. I'll turn it to a little over an hour... Just set it and forget it.'"

Let's see how this can relate to selling in the aisles of supermarkets, super-centers, hypermarkets or other self-service establishments, because the principles apply to all. This is especially important because you can't have "Ron Popeil," personally, in the aisle with the shopper. Also, bear in mind that if you could have "Ron Popeil" in a few aisles, you could certainly increase the sales of those few items by at least an order of magnitude (10X) and possible by several orders of magnitude. We'll go over the significance of these large increases shortly.

The first thing to notice is that you simply can't sell, in this way, 40,000 items in the store, 2,000 items in the category, or 20 items in your brand line-up. But you can approximate this selling process for one or a few items in the brand or category, and probably a few dozen across the store. But why would it be worth it to focus on, and make a lot of effort on behalf of just those few? The answer to that question is because those few represent the greatest opportunity for accelerating sales and profits. They express, massively, the in-most desires and needs of the crowd of shoppers.

So, stay with me on this. It is a matter of easily verified records (transaction-logs from the scanner) that as few as 300 items out of 40,000 in the store contribute 25% of total store sales. Suppose we select 60 of those items, across the store and categories, and give them our "Ron Popeil" treatment (we'll discuss what that might be soon.) Suppose that we are able to not increase the sales of those by 10X, but more modestly, we will simply double the sales, on average, of those 60 items. Those 60 are contributing 5% of total store sales, and doubling the sales of those 60 (5% of sales) will essentially give you another 5% of total store sales. Sorry for all the numbers, but you'll be very happy for the extra sales and profits coming from those numbers.

The reality is that we have done this for the total store, but are equally confident that it will work for a category or brand, and have identified brand examples that are leveraging the principle... but always with one serious compromise. Whether retailer or brand supplier, whenever anyone identifies a "Ron Popeil" way of selling something, they always (in my observation) cut "Ron" off at the knees by trying to get him to sell, not a single item (or a few) but everything they want to sell. In this way the effectiveness is destroyed, because you can't spread that selling juice widely. It has to be focused. And in order to get maximum effectiveness, it has to be focused on where maximum sales can be obtained. And guess what? MAXIMUM sales can be obtained from what is already getting a lot of sales. Get OVER what you want to sell. Become a salesman, and SELL what the shoppers mostly want to buy. My fear for YOU, is that you may never catch on to the profound lesson in these few paragraphs, but some competitor may. :-)

Before concluding with some tips on being "Ron Popeil" in the aisles of the supermarket, let's see how Ron might have managed the blinking VCR:

If Ron had been the one to introduce the VCR, in other words, he would not simply have sold it in an infomercial. He would also have changed the VCR itself, so that it made sense in an infomercial. The clock, for example, wouldn't be digital. (The haplessly blinking unset clock has, of course, become a symbol of frustration.) The tape wouldn't be inserted behind a hidden door - it would be out in plain view, just like the chicken in the rotisserie, so that if it was recording you could see the spools turn. The controls wouldn't be discreet buttons; they would be large, and they would make a reassuring click as they were pushed up and down, and each step of the taping process would be identified with a big, obvious numeral so that you could set it and forget it. And would it be a slender black, low-profile box? Of course not. Ours is a culture in which the term "black box" is synonymous with incomprehensibility. Ron's VCR would be in red-and-white plastic, both opaque and translucent swirl, or maybe 364 Alcoa aluminum, painted in some bold primary color, and it would sit on top of the television, not below it, so that when your neighbor or your friend came over he would spot it immediately and say, "Wow, you have one of those Ronco Tape-O-Matics!"

If you find this short dissertation by Malcolm Gladwell to be scarcely relevant to selling toothpaste in a hypermarket, stay tuned as we illustrate one way to move personal selling skills into the self-service world. Eventually this will be done through iPhones and other personal "selling" devices, which will allow the consummate online selling skills of an Amazon to be deployed right in the aisle. (The Convergence of Online, Mobile and Bricks-and-mortar - COMB - retailing.) However, we can reap many of the advantages of personal selling, without the technology, in stores around the world, right now!

So here is an example of "Ron Popeil" in the aisle of the supermarket.

 

On the left you see the actual package with the "Popeil-like" indicia (center): "#1 Choice of Choosy Moms." This is one of the most excellent "Popeilisms" I have ever seen.

Think about it, as a shopper: So this is #1 for choosy mom's? Then perfect for me, and into the basket. Not only is the #1 never excelled - it's what #1 means - but this is using the very best of social marketing, "choosy moms," a group whose choices I want to emulate. Come to think of it, I'll just go with them. I don't need to make a choice, my autopilot can handle this one, so now it's a habit. (See Habit: The 95% of Behavior Marketers Ignore by Neale Martin.) Bear in mind that making choices is a psychically costly activity. Of course, sometimes people enjoy shopping, but way too many marketers have their heads in the clouds, thinking that people really love to shop, and buy their stuff. Rather, you are winning when they are buying you on autopilot, habitually - buying your products without thinking about it. Now, THAT's a pleasure! (For both you and the shopper.)

The illustration above is a well executed selling of Jif. But there are two further points to note about this execution. In the photo on the right, notice that there is only one jar of this product left on the shelf. (This is not a staged photo.) The store is one sale away from an out-of-stock (OOS.) Of course, OOS accounts for a lot of missed sales in stores, but this is what we call an "A" class business problem - running out of product. It proves that your "Ron Popeil," your salesman is working! Of course you can expect a lot more OOS problems when you start really selling stuff. In fact, this will be a reason to get down on your knees and thank the good Lord for OOS!

That's all to the good, but notice the shelf to the right of our winner. Sure enough, the marketer has slipped indicia similar to the one on the #1 product, hoping to sell it too! "Ron Popeil" would never lose focus this way on what he wants to sell, #1 only. The reality is that you are trying to sneak in some sales on the shopper's autopilot by having the product next door slip in, in a "me too, over here," mode. It obviously wasn't too effective, because the shelf is full - unsold product. This is OK for that product on the right, but not for #1, which is having its message diluted by asking "Ron" to help with selling this one, too. This dilution of the big head (#1) by the long tail is the most irrational, anti-shopper strategy, that hordes of non-selling marketers, both retailers and their suppliers have nearly uniformly adopted over the past one hundred years.

Before leaving the "blinking VCR on the grocery shelves," let me explain the choice of words. The reason the VCR has a blinking, unset clock on it, is that it has at least this one feature that is not absolutely necessary - at least for playing back a VCR tape - and it is not intuitive to VCR users how to set the clock. Technology devices are as plagued with proliferation of features as are stores with proliferation of products. It really is a parallel problem, because for every feature software adds, or hardware incorporates, there MUST be a path to access that feature. If that path is not simple and intuitive, that feature may as well be non-existent. It is even worse if the multitude of features so obscure what the main purpose is that a user cannot figure out how to use the device. Smart phones are proliferating features and apps at a horrendous rate. One response to this has been ultra simple cell phones that basically have no features other than dialing numbers to make a call, and answering when the simple phone is called.

 

Proliferation of products that are rarely purchased is an exact parallel to the proliferation of rarely used features. The principles of simplifying access to what is heavily used - the big head of features - are much the same as simplifying shopping for the big head.

Rather than being satisfied with accelerating sales of mostly what shoppers want to buy, most self-service retailers are willing to compromise these sales in hopes of selling something demonstrably less desirable to the shoppers. There is nothing wrong with having those long tail items within easy eyesight, even adjacent to the big head. But create focus on the big head - help the shopper's autopilot. Shoppers (the minority) who prefer one of the long tail items, are not disadvantaged because you provide better assistance to the great majority who want the big head.

The stresses of the global recession have created more interest in how to accelerate sales and profits. My own suggestion is to pay closer attention to what shoppers actually do (it's mostly what they want to do,) and help them to do it faster, so they can do more of it. Somebody is buying YOUR products right now. Help them to do it more efficiently, and they will do more of it.

Here's to GREAT "Shopping!"

Deciding What to SELL!

April 24, 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

Needs and desires are the foundation of sales

If we want to sell a lot of anything, we should be thinking about what people buy a lot of. The fundamental reason they buy a lot of anything is because they either need a lot of it, or they at least want a lot of it. And what would be the most reliable source of information about shoppers' needs and wants? Simply put, it is in the record of their purchases, ideally as revealed in the transaction logs, so we can see how many people buy, how much they individually purchase, what else they purchase, etc.

Past issues of the Views have drawn a consistent distinction between big head and long tail marketing. The big head is of course those (relatively) few items that contribute a large proportion of sales; while the long tail is the many which contribute minor to negligible sales, individually. In general, the big head represents the greatest opportunity for accelerating sales and profits, simply because the big head expresses, massively, the in-most desires and needs of the crowd of shoppers. In general, focusing on the largest impact items is equivalent to focusing on the most productive sales, leveraging some approximation of the Pareto Principle.

In this issue of the Views we will consider in greater detail, the rational role of the long tail and SKU proliferation, in relation to the big head; as well as tools (other than simple economics) to limit long tail growth. Our excursion here into the structure of the long tail should not detract from a focus on the big head, and with the next issue of the Views, we will get much more specific about exactly how to sell the big head in the presence of the long tail.

We have described before the proper role of the long tail, first in terms of attracting shoppers (not selling to them,) but also to the competitive imperative: for a supplier, the shelf space you do not occupy, your competitors will. Of course the long tail does generate some sales directly, but it also controls some big head purchases.

Any shopper who avoids a store because they do not carry that shopper's possibly desired single long tail item, will forgo all of that shopper's purchases, including their big head purchases. This is the foundation of my insistence that from the shopper's point of view, there is no limit to the size of the ideal long tail. I myself buy a few books a month, mostly from Amazon, primarily because I figure that anyone with 50 million books will probably have the one I want. : )

The "best" vs. the ideal or Growing the long tail from the big head

When we note that "the big head expresses... the in-most desires and needs of the crowd of shoppers," it means that if shoppers buy ten times more of item A than of item K, it is because they, as a crowd, likely have ten times more need or desire for A than for K. But does this mean that A is the ideal product? Not necessarily. The reality is that we are quite right to translate the sales curve into an expression of shoppers' needs and desires, in the aggregate. But this aggregate reaction to the properties of item A does not necessarily mean that item A has the most ideal set of properties.

Consider, for example, the sensory properties of item A, such things as sweetness, tartness, texture, color, etc. We know that from a sensory point of view, often there is no single ideal, for example, for texture. When it comes to texture, there are two broad groups of people: those who prefer crisper, harder textures, and those who prefer softer, smoother textures. In this case, if you produce a single product with a texture that comes closest to meeting the "average" need of the aggregate crowd, you will please no one as well as you could. The reality is that the response curve of texture exhibits two peaks — a bimodal distribution. As a consequence we have thin crust pizza, and thick crust pizza; extra crispy chicken, and original chicken; smooth and creamy peanut butter, and chunky peanut butter; etc.

This simple texture example illustrates why there may be NO single "best" product to address the needs of the whole crowd. The ideal, at least for texture, is often to have two "best" products, one for those tending to favor soft, and another for those tending to favor crisp. Here we are only considering one dimension of texture, to say nothing of multi-modes that occur with flavors, sweetness and dozens of other product attributes. Sensory scientists use analysis like Response Surface Methodology (RSM) to map sensory properties of foods, and to guide directions for product development.

The multi-dimensional sensory surface can look more like a mountain range, than just a few peaks. From those peaks, a plan for proliferating product options (SKUs) can emerge. Obviously, the more "peak" products produced, the greater the probability that every possible shopper need or want will be addressed.

To more sharply focus on specific product attributes like flavor, the "flavor profile" is ordinarily created by a small panel of trained-harmonized judges. In the diet cola aftertaste example above, the method was adapted for use with a large consumer panel, where the meaning of the descriptive words is not "trained" into the judge-respondents, but it is simply the meaning as hundreds of consumers might collectively use them.

RSM and flavor profiling are valuable tools to support proliferation of products to assure that not just a single "best," optimized for the mass is offered, but that other significant segments with tastes differing from those of the crowd, are also well served. We can see this proliferation as a "growing of the long tail from the big head."

How many "bests" should we offer shoppers?

We are mentioning these techniques, because there is a certain rationality to the multitude of options (SKUs) found in the warehouses of any major city. Typically, a retailer who stocks tens of thousands of items in their stores, has selected from a million or more items available in area warehouses. That selection process is obviously driven by competitive issues, including the brand-on-brand gladiatorial contest. However, upper most in the retailer's mind is that some share of shoppers may not be "reached" with whatever limitation in selection is provided.

Whether done formally or not, shrinking the range offering to the minimum necessary to meet the needs and desires of all the shoppers is the subject of TURF analysis, Total Unduplicated Reach and Frequency, one technique to guide SKU rationalization (SKU-rat.) TURF is adapted from media planning tools, where the media planner wants to reach an audience across a variety of media, and wants each additional media buy to reach as many new people as possible; not simply duplicate the reach already achieved by other media. The parallel for a product line with multiple flavors or varieties is, for each additional flavor to bring new shoppers, or new sales to the line, not simply to shuffle existing sales into new varieties. Just as RSM can drive proliferation, TURF can restrain it.

The mustard/ketchup marketing conundrum

For a real world study of success with proliferation, and some limitations, consider the mustard/ketchup marketing conundrum. Up until a few years ago, French's yellow mustard dominated the American market. Then, after Heublein discovered the potential for conversion of mustard users from French's to Grey Poupon, not only did conversion and proliferation of mustard SKUs get underway in a major way, but the market (at nearly three times the price per ounce) exploded. Today most supermarkets have an entire section devoted to varieties of mustards.

Subsequent attempts by others to repeat this astounding mustard proliferation success, with ketchup, remain struggling efforts. Why could mustard proliferate varieties/brands and ketchup could not (so far?) Malcolm Gladwell has discussed this in detail in his essay on "The Ketchup Conundrum." But mustard is by no means the only example of explosive growth through SKU proliferation. Decades ago yogurt with its multitudinous flavors became a mainstream major category in dairy, whereas before it had been a fringe product much favored in "health food" stores. Something like this happened with the mainstreaming of salsa as well, and pasta varieties have grown healthily - although the US market still lags Europe significantly for the category. Of course "ketchup" began in China as a sauce made of pickled fish and spices, and the current tomato ketchup, or catsup, is a far removed relative of some of its great great grandparents. Perhaps barbecue sauces and salsa do represent more ketchup proliferation than might be readily apparent. Could the growth of ranch dressing as a condiment be further "ketchup" proliferation?

The vast majority of proliferations show no signs of reproducing the successes of mustard or yogurt, but simply provides more clutter for the shopper, virtually burying the big head in the long tail, and thereby suppressing sales of those big head items which express, massively, "the in-most desires and needs of the crowd of shoppers." So we answer the question of, "How many 'bests' should we actively sell to shoppers?"... with, very few. That "very few" answer is partially driven by the practicalities of how we can possibly sell anything, rather than simply dumping it before shoppers and hope they buy it — classic "order taking," NOT "selling."

Summary Principles

The main points we have emphasized:

1. The big head expresses, massively, the in-most desires and needs of the crowd of shoppers.
2.  
   1. (a) From the shopper's point of view, there is no limit to the size of the ideal long tail - the longer, the more attractive.
   2. (b) For a supplier, the shelf space you do not occupy, your competitors will.
   3. (c) The long tail controls some big head purchases: if the shopper avoids a store because of a missing SKU, they will forgo big head purchases there, too.
3. The long tail grows from the big head as the interests of the "few" shoppers diverge from the interests of the "many."
4. Just as Response Surface Methodology (RSM) can drive proliferation, Total Unduplicated Reach and Frequency (TURF) can restrain it.

The reality is that big head items get inadequate focus and selling to shoppers. Many of them would receive double digit, if not triple digit increases, IF THE INDIVIDUAL ITEMS WERE PROPERLY SOLD!!! The impact on total sales of the brand, the total category, and the total store would compound out of all proportion to the few items focused on.

In the next issue of the Views I will explain in some detail how to use "personal selling" techniques, in the self-service store, to actually sell the few, in the presence of the many. Focus will be the watchword. : )

Here's to GREAT "Shopping!"

If you build it, they will NOT come!

March 2, 2011 - by Herb Sorensen, Ph.D., Scientific Advisor, TNS Retail and Shopper and Visiting Research Fellow, Ehrenberg-Bass Institute, University of South Australia E-Mail: herb.sorensen@tnsglobal.com

It helps to think about retailing, beginning with its basic elements. The driving force behind it is the needs and wants of people. Other people have produced those needs and wants, and it is a matter of getting the stuff together with the people who want and need it. Of course a driving force behind the small store movement is the effort on the part of retailers to get the stuff closer to where the people are, rather than having it in huge stores, where shoppers may have to travel some distance to get access to their needs and desires. But there are other important factors here, relating to what happens once the shopper gets to the store and goes inside.

First of all, just consider the view when the shopper steps inside:

It doesn’t matter whether it is a large store (supercenter on the right) or a small store (convenience store on the left,) the shopper is going to want to purchase only a small portion of all the items in the store. The twin challenges facing the shopper are:

• Where in the store are the items I want to buy?
• And, when I get there, which one(s) will be right for me?

We have dealt with these two issues extensively here in the Views in the past. But looking at these two photos illustrates an important point: Unless all you are looking for is something to drink and a snack to go with it, the store on the left may not fill your needs. On the other hand, the odds of the store on the right having anything you might want, is much higher. This is the foundation of the solid principle that very large stores with massive merchandise offerings are very attractive. That is, they ATTRACT shoppers. But the attraction will be all for naught if, upon arrival in the store, it is not clear just where they should go.

On the other hand, for the smaller store, attractiveness can be increased considerably by apparently having a larger array of merchandise. The emphasis here is on the apparently, that is, seems like, or it appears that. One way to add merchandise without cramping or cluttering the shoppers’ space is to put the merchandise where it can be seen, but not intrude on the shopping process. In the store on the left, for example, placing merchandise on blank walls, high on the perimeter, might create the image of a more generously stocked store, without actually intruding into the shoppers space. Also, allocating some of the existing slow moving space to a few new categories might be very helpful. Bear in mind that there are stores with no more SKUs than in this C-store, and yet hit a million dollars a year in sales! THINK!!!

The point is that a small store can compete more effectively with a larger store by increasing at least the appearance of more merchandise – especially additional categories, while the larger store can compete more effectively by enhancing navigation and selection. The larger store is a winner on attraction, but it’s selling juice is seriously attenuated.

So let’s see how this translates into how shoppers use stores of varying sizes:

From the small C-store to the large Super Center, there is a steady fall-off in the share of the store visited. In increasing the size of the store by a factor of five (20,000 to 100,000 sq ft) the coverage of the store by the average shopper drops by a factor of three (33% to 11%.) Hence, the title of this Views: If you build it, they will NOT come.

The comments about attractiveness, navigation and choice are intended to put you in mind of what is behind the, if you build [a much larger store,] they will NOT come [to all the displays inside.] This is a solid principle, and with a .96 correlation we can be quite confident of it. However, retailing is an incredibly complex issue, and the issues cited – attractiveness, navigation and choice – are by no means all that affect the issue of how much of the store shoppers will come to.

For example, drug stores do not fit on this curve, almost certainly because the merchandise profile is very different than for grocery stores. In fact, even with the high correlation, it would not be unreasonable to think that Super Centers do not properly fit on this chart, since without those, for supermarkets alone, the relationship is more linear in nature.

The fact is that I am often gratified to get correlations even in the .20 - .30 range: too large to consider the result to be just random noise, but not large enough to conclude that there is a clean relationship, unperturbed by the dozens of other possible variables. It is my opinion that the greatest advances in understanding of retailing are likely to be found in just such cross store studies, possibly for entire chains and ultimately allowing modeling of retail performance across the global industry, as we have done inside supermarkets alone. (See The Power of Atlas: Why In-Store Shopping Behavior Matters.)

Sell to Their "Shopping Lists" (Tell'em Which to Buy!)

December 20, 2010 - by Herb Sorensen, Ph.D., Scientific Advisor, TNS Retail and Shopper
E-Mail:herb.sorensen@tnsglobal.com

This issue of the Views provides further insight on how and why you can use the dominant path through the store to increase sales. Ten years ago I articulated "The Holy Grail of Retailing:"

1. To know exactly what each shopper wants, or may buy, as they come through the door of the store, and...
2. To deliver that to them right away, taking their money and speeding them on their way.

So we want to focus here first on "what each shopper wants, or may buy," and will use an expanded view/definition of the "shopping list" to encompass exactly this – what the shopper wants or may buy. It is a mistake to limit this "shopping list" to a piece of paper or other overt evidence of a shopping plan. In fact, with a better understanding of the role of habit (or the subconscious mind) in shopping, the "wants or may" abbreviates what Neale Martin refers to as the executive mind (wants) or habitual mind (may.) (See Neale Martin, Habit: The 95% of Behavior Marketers Ignore.)

First, let's deal with the fact that shoppers widely report that they use a shopping list, when in fact they do NOT! This became obvious over the years as we interviewed shoppers, in the store, about their shopping practices, and the number of shoppers that solemnly assured us that they always shop with a list. But when asked to see their list, it's "Oh, I guess I left it at home today – or I must have dropped it – or 'you fill in the blank'."

The reality is that, based on observation of supermarket shoppers, only about one fourth of them use an explicit shopping list – paper or electronic. But let's not be so hasty in dismissing then the idea that they did not have a list, and, other than a mental list, I suggest something else:

Most shoppers are familiar with the stores they are shopping in regularly, and most shoppers only buy 150-200 different items regularly – out of a store with probably 40,000 items. In fact, individual shoppers habitually follow a similar path week after week for similar shopping missions. Given the speed with which individual purchases are made, often only a second – or a few – it is obvious that no serious mental energy is going into the purchase. This means that their habitual, subconscious mind is simply playing out a script in the acquisition. If this is so, and I believe that it is, then the script is being triggered by what they sense (see,) on displays. Another way of putting this is that their "shopping list" actually consists of a series of triggers occurring on their usual path through the store. In this way, each shopper builds up, over time, a handy file of "shopping lists" for trips with various purposes.

Since I am not prepared to scientifically prove this concept, presently, I'll call this the store-based shopping list hypothesis or path list hypothesis, for short. Whether it is true in all particulars, at the least it accounts for a great deal of shopping behavior (purchases) and points the way to increased sales for the retailer – and increased satisfaction and ease for the shopper.

Of course the path list explains the shoppers belief that they always shop with a list, since in this new sense, they do. Further, the number of items needing remembering on any given shopping trip is often shockingly small:

 

Notice that the most common number of items purchased in a supermarket is one, with half of all trips buying 5 or fewer items. This means that a subconscious shopping list doesn't need to be very long. Couple this with the fact that most regular shoppers are in a store at least weekly – if not more often. The significance of this is that ordinarily, should the path list fail to achieve the purchase of some needed item, there will be opportunities to correct the lapse, soon, on a subsequent trip.

Now that we have a better idea of the nature of the "shopping list," if we are to sell to it, we need to inquire as to just what specific items are on it. Is this feasible, given the tens of thousands of shoppers who may visit the store? For sure!

We noted above that most shoppers have a basic list of 150-200 items that they purchase habitually. However, there is a second 150-200 items that they buy only occasionally – special occasions, holidays, etc. Now we introduce another very important concept that we have seen confirmed repeatedly: If you drop any 10,000 shoppers into a store, and observe exactly what each individual does, you will get an image of the behavior of the crowd. Now, if you drop any other 10,000 shoppers into any similar store, you will get nearly the identical image. We might call this the constancy of the crowd. Further, I will suggest that if you are a retailer or brand supplier, it is far more important to understand the crowd than segments or individuals in it. (There are vast fortunes to be made by the simple expedient of shifting to this perspective.)

So what is the result of layering tens of thousands of shoppers with short shopping lists, 150-200 regular items; plus 150-200 occasional items? Here it is:

 

It's no wonder that 300 items out of tens of thousands contribute 25% of the total store sales. It is simply a matter of fact that the shoppers in the crowd all have a strong tendency to buy what the rest of the crowd does, and they all do it over and over again. So, individual shopping lists begin to coalesce around a fairly constant set of merchandise. Hence – "The Big Head!"

It is important to recognize that the big head derives from the hearts and souls of shoppers, reflecting as it does the most essential items of their lives. This, in turn, brings the focus to individual items NOT categories. Bear in mind that the whole scheme of organizing individual items into groups, whether called categories, departments, or whatever, is NOT driven by shopper needs or requirements. It is in this sense that category management largely addresses the needs of retailers and their suppliers, and very nearly ignores the shopping crowd. Shoppers have been "trained" to adjust to what is mostly operating convenience for retailers. Again, I am not going to address here the scope and details of what has become the kluge of modern self-service retailing. Category management is a response to the need to manage tens of thousands of SKUs in the modern self-service warehouse, aka supermarket, supercenter, hypermarket or other self-service store.

Shoppers, on the other hand, never buy categories, but only individual items. A shopper in the aisle is essentially faced with the mayhem of a gladiatorial contest of brand against brand, with the careless Caesar-retailer accepting the tribute of all contestants. The delusional presumption that this is a shopper focused arena is farcical – with occasional exceptions, some of which I have detailed in earlier issues of the Views. I will clarify this comment in a discussion below on carbonated soft drinks.

So... Just what are those big head items? For supermarkets, usually bananas or 2% milk are at the head of the list. In fact, the top of the list is crowded by produce items. This is at least partially due to the fact that there is minimum "SKU" proliferation in produce. (Actually, PLUs, "Price Look-Ups" instead of SKUs.) This means that bananas face no competition with other bananas, typically. Any competition they face is more likely with apples, pears, grapes, etc. And even though some of these do have significant varietal selections, it doesn't begin to approach the massive confusion of soft drinks, cereals or frozen foods.

Probably the dominant characteristic of personal selling, as contrasted with self-service buying is that a seller focuses the offer on a single item as quickly as possible, the one the customer will buy. (Of course, squeezing out options at what seems an acceptable and reasonable rate to the customer.) Clarity and distinction of single items is the single most important component of SELLING!!! It is NOT the price, the selection, the brand or anything else. If you want to sell something to someone, the most important thing you can do is tell them to buy specifically THIS!!! Shoppers can't buy generalizations, groups, etc.

Bananas then are the top-selling item in supermarkets simply because they have no real competition in these self-service environments. You either want bananas, or you don't. Wham, bam, the decision is made. (Of course, if you don't like them, or they're too green, these factors can enter in.) But there is another point to be made from the top selling bananas. Obviously they ring the bell for a lot of people, over and over. But the reality is that almost certainly a lot more of them could be sold. First, the general principle here is that management tends to not spend a lot of time worrying about things that are going well – like the selling of bananas. Management is instead going to look for things that are NOT going well, and attempt to fix those things (Management by Exception.) It's inherent to our natures, but does not address maximizing performance of the organization, at large.

Second, for an example of what this means in terms of bananas, when an associate of mine became aware of the facts about bananas, his response was, "Really? I love bananas, but don't eat them very often." Turns out that his wife buys them regularly, but before he ever gets a chance to eat one, the kids have eaten them all! How many times do you think this situation repeats itself around the world? And for many other top selling items.

The point is that the top selling items are always the ones most amenable to large increases in sales. Why? Because shoppers are shouting loudly, if you will listen, THIS IS THE ITEM WE WANT AND NEED!!!

As we move our way down the list of items in the big head, we notice large representation near the top of the list, of all things beverage. This includes 2% milk, (which often outsells bananas,) sodas (Coke and Pepsi,) with waters, Red Bull, etc. This is a manifestation of the Maslow principle, in terms of physical needs: you can live –

1. A few minutes without refreshing your air supply,
2. A few days without refreshing your liquid (beverage) supply,
3. And a few weeks without replenishing your food supply.
4. Everything else is truly non-essential, including clothing, housing and transportation.

So, using this basic physiological scheme it is readily understandable that beverages would dominate the top of shoppers' expressed needs and wants, their path lists as reflected in the log of individual shoppers' purchases.

Of course in a grocery store one would expect to see food high on the list, but it is noteworthy that foods for immediate consumption, and snacking are especially high on the list.

These principles relating to sales of the whole store, can also help us understand categories and brands. The path shopping list for a category (frozen food) looks like this:

 

And for a brand (Coke):

 

So even for a brand, the Big Head/Long Tail paradigm prevails, with a top few items delivering the lion's share of the sales.

The path list hypothesis explains all this behavior, but even if the explanation is inadequate, the facts are not: the way to achieve large increases in sales is to simply "peek" at all the shoppers' lists, and make it easy and fast for them to acquire what they want. Focus on, and sell, a lot more of the few that are already selling well.

Now to the in-aisle gladiatorial contest mentioned above: the business realities of the store virtually require this brand-on-brand and item-on-item contest. What happens there, relative to the shopper, is less troubling than what does NOT happen there: genuine selling to the shopper, rather than just hoping the shopper buys something. We have dealt with this in several past issues of the Views, and will return to the subject soon.

Other than just calling attention to the serious contention in the aisle, I want to cite three necessities that justify it:

• No matter how large the store, shelf space is always limited, in relation to products available to put on them. Since there are well over a million different items waiting on manufacturer's warehouse shelves, to be sold to shoppers, even a store with 50,000 different items is turning away a lot of possibilities. This means competition for shelf space virtually has to be fierce. Moreover, it is not just a matter of getting an item represented in the store, but the number of facings that a brand manufacturer can assume some control over is crucial. For a brand, every facing they don't control, a competitor will control. And no retailer is going to give brands discretionary access to a large space to do with as the brand judges best. So SKU proliferation is the cutting edge tool to gain more facings. A line that includes 20 items, well distributed, supported with advertising, and ostensibly supported by consumer research, will justify more facings on the shelves than will one with 12 items. And from just the brute force of larger presence, the 20 item line may do better than a superior 12 item line, that just can't get the exposure on the shelf. SKU proliferation is a competitive imperative.
• Secondly, observers often overlook that stores ARE warehouses, where merchandise is made available for stock-pickers, known in self-service as shoppers, remove items from the shelf. The industry has addressed the resulting problem of out-of-stocks (OOS) when shoppers have purchased all the inventory on the shelf, and must switch items, substitute, or simply avoid purchasing. Studies have shown OOS to result in something like 8% of lost sales across the industry. I have often said that retailers and brands should thank God for out-of-stocks, because it means that something is selling here. Hot stores selling lots of merchandise fast are racing to refill shelves, sometimes simply working at breakneck speed to keep up with the shoppers. (I have seen two supermarkets in my life that were running flat-out to try to keep up with the shoppers.) These situations are at least partially buffered by having a larger amount of inventory on the shelves, so brand suppliers with greater allocation of shelf space have more protection from OOS.
• The third reason militating SKU proliferation is that the wider the selection of merchandise in a store, the more attractive that store is to shoppers. There is a crucial distinction here between attracting shoppers, and selling to them. Shoppers are very pleased to shop in a store that has 100 times more items in it, than they themselves will want to purchase. This is the primary role of "the long tail." Not to make sales, but to attract shoppers. The problem is when the long tail so dilutes and hides "the big head" that it suppresses sales of the top sellers by slowing shoppers down, in their quest for just the few items they want. Since warehousemen/retailers do not have to do all the stock-picking that the self-service shopper does, they are oblivious to the serious damage they do to their own businesses by failing to expedite the shopping process.

With this last reference to "the stock-picking that the self-service shopper does," we return our focus to the shopping list, which is essentially the stock-picker's prescription for what to remove from the warehouse-retail store. (They ARE all warehouses, after all. :-)) The number one failure of self-service retailing is not a failure to select and stock the right merchandise, it is a failure to make a distinction between the big head and the long tail, in the misguided hope that by slowing the shoppers, perhaps one more long tail item can be sold. Instead, the key is to accelerate the focus on, and speed of selling, of the big head, so that the shopper has plenty of (pleasantly surprised) time to buy one or a few more items. He that hath ears to hear, let him hear!

Tell 'em Where to Go; Tell 'em Which to Buy! (The "Path-to-Purchase" Ought to Be a U-Turn)

September 30, 2010 - by Herb Sorensen, Ph.D., Scientific Advisor, TNS Retail and Shopper E-Mail: herb.sorensen@tnsglobal.com

Recently I circulated a Views titled "The 'Path-to-Purchase' is Often a U-Turn." In order to get the full value of this issue, you should be familiar with the content of that issue. (Others, such as "The Misguided Bobbing of the Long Tail," would also be very helpful.)

The objective facts are that there are a few retailers who obtain outsize sales and profits in comparison to other stores carrying similar merchandise. Because these few have some obvious differences from the thousand-store chains, many retailers ignore the underlying principles that drive the outsize success of these super performers. Here it is my intention to explain the relevance of these super performers to all retailers, and how to leverage the principles that drive their success, without upending your own operations. That is, where they may be selling five times as much (500% more sales than you,) you don't have to go the whole way with their business and merchandising strategy to maybe get a 50% increase in sales yourself.

The fundamental reason these super performers get the results they do is because they make effective use of the 80% of shopper time that is wasted in typical retail stores. Think of it this way: In just about any type of store, but especially supermarkets, the "typical" shopper comes through the door looking to buy 3 to 10 items. The problem they face with 20,000 to 100,000 items scattered across a large sales floor is two-fold - where in the store are the items I'm interested in; and, when I get to where they are, how will I know which one of the hundreds offered I should buy? These two problems (twin time wasters) can be summarized as navigation and choice. However, these two are also huge opportunities.

You can make massive improvements of these two problems/opportunities by two simple expedients:

• Tell the shopper where to go!!!
• Tell the shopper which to buy!!!

These may seem like revolutionary ideas to you, but they are based on solid shopper science.

The Opportunity and Challenge of Self-Service

Before self-service retailing was common, retailers personally, or through staff, mediated all sales to the shopper, with no need to tell them where to go, and telling them which to buy mixed into the shopper/staff interaction. This is not very efficient, and the advent of mass production, mass distribution, to mass markets, provided massive advances in efficiency for everyone involved: shoppers, retailers and their suppliers. This led to the past 100 years being dominated by self-service retail. The future will also be dominated by self-service retail. But something more than the old "pile it high, and let it fly," plan of the self-service retailer is needed. Pile it high; let it fly, is an anti-"tell'em where to go; tell-em which to buy" selling strategy. The first is passive in nature, and the second is active. Hence, my continuing observation that retailers are too passive, and that active re tailing is the wave of the future.

Technology has some solutions relevant here, but it will be some time before everyone will be fully engaged with those solutions. You need the profits NOW! And the reality is that the program I'm outlining here will only be further accelerated by technology, by and by.

Telling Shoppers Where to Go

So let's return to the problem of your shoppers coming in your door, and buying maybe five items out of 40,000 you have available. Just remember that the shopper is more skillful at eliminating 39,995 of those items than they are at finding the five they want. But you should know that "The 'Path-to-Purchase' is Often a U-Turn." So if you are really going to understand and work with your shoppers, you should make a prominent and logical U-Turn in your store that takes them from the door to checkout on a path that you can be an expert on, and can work with them on.

That's right, the only way for you to really engage with your shoppers is to stop trying to get them to spread all over your store in the hopes that they will find something to buy.

We're dealing here with the first requirement mentioned above: "Tell the shopper where to go!!!" You may think, "won't they be offended if I tell them where to go?" And what about all the rest of the places I would like them to go? We'll discuss how the super performers do this soon, but just be aware that retailers all over the world are obstinately refusing to help shoppers buy a lot more from their stores, instead insisting that the shopper respond to obsolete ideas about store design and merchandising. Every super performer does tell people where to go and which to buy, but in gentle and subtle and effective ways.

I'm telling you that you should tell them to go on a U-turn in your stores, first and foremost because that is their natural tendency, anyway. And secondly, it is so that you can begin to plan and strategize how to sell to them on that specified U-turn. The U-turn is the grand-daddy of all shopping trips, the true archetypal shopping trip.

Most of the deficiencies in retailing arise because retailers are faced with managing overwhelming options. The first of those overwhelming options is the multitude of optional ways of navigating the store - literally millions of possibilities, even in a quite small store. The super performers sometimes still have a multitude of options, but they have created one dominant pathway. Hint: It's a lot easier to manage ONE than millions.

Look at the impact on shoppers trips, comparing a store with diffuse paths (Safeway,) with one with a single "U-turn-type" path (Stew Leonard's.)

The Safeway store here is the typical multi-aisle store, with a nearly unlimited number of path possibilities. The U-turn is the most common form, but even that is diffused across multiple aisles in this store. Most of the shopping trips here are in the 5-20 minutes range, with a rapid fall-off from the peak 10 minute trip. Stores of this type typically manage $15-30 million in annual sales. The Stew Leonards store, on the other hand, has few very short trips - 10 minutes or less, with large numbers of shoppers in the 15-30 minute range. Stew Leonard's stores typically deliver $100 million in sales. Remember that 80% of shopper time wasted or "lost" in the typical store? Not at Stew Leonard's. Some substantial portion of that time is recovered and converted to purchasing instead of worthless (to the retailer) and frustrating (to the shopper,) time spent wandering about the store. See the Wharton publication, "The Traveling Salesman Goes Shopping."

Before we move on to telling the shopper which to buy, we should note that there could be more archetypal trips in a store than just the U-turn. (We've already noted multiple U-turns.) Having said this, we have attempted to discern other archetypal paths in drug stores, with no real success. The reason, in retrospect, for not being able to find other archetypal trips is that the store was designed to deliberately spread traffic across the store. We have found this strategy elsewhere, and have found stores with the most uniform traffic across the typical multi-aisled stores, are also anecdotally the poorest performing in terms of total store sales.

Telling Shoppers Which to Buy

I would NEVER tell shoppers to buy something they are not already predisposed to buy. Way too much retailing is really desperate hectoring of shoppers, hoping they will buy something more. Suppliers have literally millions of items they would like to sell. But shoppers have a massive filter in place to ignore the vast majority of what is in the store. It's a matter of shopper-survival.

How do you know what they want to buy? How about checking what they are already buying? I'm not talking about loyalty cards and one-on-one merchandising, but selling to the crowd. Just as the U-turn is a good representation of "the crowd," so "the crowd" quietly announces exactly what they want to buy in each store. How so? Check the transaction log, listing all the individual shoppers, and their individual purchases, item by item sales per shopper, every day, week or quarter. There really are only a few hundred, of the tens of thousands of items, which are actually making an outsize contribution to store sales. That's because those few hundred items are what the shoppers are telling you, "This is the stuff we mostly want to buy."

SO... How about telling "the crowd," this is the stuff YOU probably want to buy? This is my conception of "social marketing," and it works very well. Let's face it, no matter the class of merchandise (automobiles or toothpaste,) shoppers are reassured and comforted to know that they are buying the top selling item. After all, there is something to "The Wisdom of Crowds," (James Surowiecki.) When millions of people, or all the shoppers in your store, choose a particular item far more often than all other items, it is probably the best choice for me and you, too. In each category, subcategory or brand, one item and only one item is the winner - and that is the only item you need to tell the crowd of shoppers to buy. It doesn't mean that you eliminate all or any of the others. All those others are very attractive at getting shoppers into the store (and some people really, really want something other than the winner.)

But retailers all over the world are cutting their own throats by simply refusing to help the average shopper just get their stuff and get the heck out of here. Stop playing games!!! Tell them which ones are the winners NOW, and start reaping additional sales and profits NOW! End the "treasure hunt" as a justification for what is really substandard retailing, even if it is received wisdom and practice by most of your competitors.

The Super Performers

Rather than going into more detail on paths and products, and more on how to "tell" the shopper, let's illustrate how super performers tell shoppers where to go, and which to buy, and continue our comparisons to more conventional retailers. Beginning with Walmart and Costco:

Both of these retailers have a broad array of merchandise, across consumer electronics, clothing, furniture and household items, pharmacy, food, automotive, etc. Here we see that both retailers have much longer trips than the grocers discussed above. But most noteworthy is that Costco trips are dominated by the 30-45 minute cohort, as Stew Leonards is by their 15-30 minute cohort. Stew Leonards, you may recall, has the constrained serpentine path so that all shoppers essentially execute the same path, which leads to this clustering of trip lengths. So this similar clustering of Costco trip lengths suggests that maybe clustering of trip paths into a U-turn is going on here, too. In fact, this particular Costco hits sales of a million dollars a day often enough to achieve $270 million per ye ar, according to Jim Senegal, founder and CEO. (This is more than twice the typical Costco at $125 million in annual sales.

It is interesting that both the Costco and the Stew Leonards essentially adhere to the U-turn type of store. For Stew Leonards, it is essentially a single entry into a serpentine path leading to a single exit into the general checkout area. Topologically, this is identical to a U-turn. Think of it as a winding U-turn. But for the shopper it IS effectively doing a U-turn path. For the Costco store the entry leads into a broad aisle that moves to the back of the store, across the back, and returns to the front.

This photo shows the interior of one store:

The entry is behind the camera, with the wide, main aisle moving slightly to the left of the large home electronics department on the right. Notice on the right, beyond home electronics are tall "warehouse" racks with merchandise displayed on the lower level and storage above. The path of the U-turn moves past those warehouse displays on the right to the rear of the store, and then crosses that large central open area, and past the food at the rear, and then returns to the front just this side of the tall, warehouse displays on the opposite side of the store.

This is a very important design which I refer to as the inverted perimeter. Think of your typical supermarket as a perimeter design, where the wide U-turn moves around the perimeter of the store, with those visually blocked "warehouse" aisles crowded into the middle of the store - "steel canyon" center-of-store aisles. Inverting this as Costco has done means that all of the best selling, most profitable merchandise (the Big Head,) can line the wide aisle, and at the same time the total store (the Long Tail) stays visible to most of the shoppers in the store, most of the time.

This visual availability is a HUGE issue. For the shopper, if you can't see it, it's not there. So the inverted perimeter gives ample exposure to the big head, without hiding (or compromising) the long tail. That is, instead of trying to get shoppers to come to the merchandise, Costco puts the high volume merchandise into the path that shoppers will almost surely pass. This is Costcos way of telling the shopper which to buy. Stew Leonards does the same thing, by only having a single path. But Costco is able to carry a much larger selection of merchandise (big selection = more attractive) but doesn't let it get in the way of selling the popular stuff. This is done with all those warehouse racks that ascend to the heavens around the perimeter. (This same conceptual design is beginning to be used very effectively by CVS drug stores, and a number of other retailers have tested or are moving in this direction.)

We have shown before that the faster you sell, the more you will sell. ("Shopper Efficiency vs. Total Store Sales"). We are now showing the impact of selling speed on a wider variety of stores, including those discussed here. The results are striking:

These numbers show us that Walmart and Costco have very similar "average" trip lengths, with radically different basket sizes - Costco having something like 5X the basket size as the Walmart SuperCenter. Both stores are very large in floor space, but the Walmart is carrying two very heavy disadvantages:

• The winning, top selling items are buried in an indiscriminate sea of options, maybe 100,000 SKUs. Indiscriminate, because there is nothing telling shoppers which items are the ones they are most likely to need - based on the purchases of the rest of the shoppers.
• For the few items most shoppers will want to buy, there is NO clear path that connects those products. There is no clear U-turn, creating the typical "treasure hunt" model common amongst retailers, who comfort themselves that shoppers enjoy this frustration.

The result is that with similarly broad category lines of the two stores, Costco manages to sell a dollars worth of merchandise in a scant 15 seconds. The same dollar's worth of merchandise takes the Walmart Super Center 73 seconds, nearly five times as long. Once again confirming that the faster you sell, the more you will sell. This is Sorensen's first principle of retail selling, and more confirmation of the principle is accruing regularly.

We don't have basket totals for Stew Leonards, but do note that with a 50% increase in average trip length (and probably a lot less traffic,) Stew Leonard's outsells Safeway by 4-5 to 1. Safeway is struggling under the same two disadvantages as Walmart - and the rest of the retailers operating on the same basic principles.

I should point out, though, that NONE of the four stores do a particularly exemplary job of "telling the shopper which to buy." In both the Stew Leonards and Costco examples, those stores have greatly reduced SKU counts compared to the Safeway and Walmart stores, and only increase their focus on top sellers by simply not carrying as many of the long tail. It is important to note here that it is NOT the reduced SKU count that sells more, it is the FOCUS on the top sellers which is virtually forced by a reduced SKU count. In a sense, Stew Leonards and Costco are "Big Head" stores, like Lidl, Aldi and Trader Joe's. The others are "Long Tail" stores, with vast and very attractive merchandise selections. (Attraction and selling are two VERY different functions.) If "Long Tail" stores would properly emphasize and focus on their own "Big Heads," by telling the shopper to bu y the big head, they should outperform those "Big Head-only" stores. This would require an item focus, item management, if you will, which can be done as an overlay on the widely used category management. Category management was a great advance when it was introduced 20 years ago, but when allowed to preclude item management, it becomes an albatross around everyones' necks: shoppers, retailers and brands.

Although I have said that the big head stores are not really conceptually telling shoppers which to buy, they are effectively doing this, particularly by explicitly endorsing item management. Some quotes:

"Well, we have never been a category company - that was decided long before I came . . . We look at it item by item. That doesn't mean we don't have a fair representation with a category. But usually it's only the top five or six items in that category, and we look at them as items!" "So our traffic is up, our sales are up. We're in the 3% range right now over last year" - Charlie Burnett, COSTCO

"If an item doesn't pull its weight in our stores, it goes away to gangway for something else." - Trader Joe's

"What's not to like? They're very good retailers [Trader Joe's], and we admire them a lot." - Jim Sinegal, co-founder CEO, COSTCO

Having a wide selection may help get customers in the store, but it won't increase the chances they'll buy. "It takes them out of the purchasing process and puts them into a decision-making process," explains Stew Leonard Jr., CEO of grocer Stew Leonard's, which also subscribes to the 'less is more' mantra. [From the Fortune article on Trader Joe's, linked above.]

Again, "less is more" only if you refuse to focus on, and tell the shoppers to buy the less, in the presence of the more. And that's all I have to say about that - at least for now.

The "Path-to-Purchase" is Often a U-Turn

April 6, 2010 - by Herb Sorensen, Scientific Advisor to TNS Retail and Shopper
E-Mail: herb@herbsorensen.com

Maybe the title here should be, "The 'Path-to-Purchase' Ought to Be a U-Turn." But that's getting ahead of our story. The reality is that when shoppers enter a store, they will often make their way, early in the trip, to the back of the store. At that point, most often they will turn left and shortly thereafter, take another left, and return to the front of the store for checkout and exit - effectively creating a U-turn path.

Of course that is not the only path, but it is more common than might be thought. And why not, when the single most common number of items purchased in any store in the world is ONE! Half the trips to a drug store purchase three or fewer items; half the trips to a supermarket purchase five or fewer items. This means that a simple and short path really is adequate for most trips, so shoppers will, if at all possible limit themselves to that type of path.

Now these are facts that the brand supplier and retailer can either leverage to their profit, or dismiss as irrelevant to "our target customers." It's usually more profitable to work with the shopper than to try to get them to work with you. Shoppers shop this way, not because they want to, or have made a conscious decision to do this, but because it instinctively fits their own needs. Probably they are not even aware of it. In fact, shoppers are as poorly informed (aware) about their own behavior, as are the people asking them about it.

Before we look at a way to make money with this knowledge, let's look at a common retail strategy that kills profits. You will notice in the above store how that shoppers enter the store near the right side of the store, and there is heavy traffic from that point (on the right,) back through a broad aisle bounded by the service deli and service bakery, to the well lit and bright produce area in the right rear of the store. This aisle accounts for a significant proportion of the stores sales and profits.

Now let's look at another comparably sized store. In the store at the right, again you have the service deli and service bakery leading into the produce, which is aligned up the right side of the store. But notice the dearth of traffic in that area. The entrance is center-right, more or less right at the front of the most attractive area of the store. Then why is the traffic moving to the back of the store in the center-of-store aisles to the left of produce? Having the doorway as far toward the center, instead of nearer the right is a contributing factor. But here is a scene you will see in the entrances of stores - and many other places:

The produce is there, off to the right, well barricaded behind various and sundry displays and signs pushing a variety of merchandise, all NOT produce. Although this photo is not from the same store, these two stores and tens of thousands of others are possibly unwittingly creating artificial barriers to where they really want shoppers to go, essentially suppressing sales and frustrating shoppers. Faced with the entry above, this third store is getting major flow to the back of the store through the center-of-store aisles to the left of produce, just like the second store is.

These are not isolated instances, or minor independent stores, but major national and regional U.S. supermarket chains. They, and many others, freely violate the principal that shoppers are attracted to open spaces. That's why they shop mostly on the perimeters of stores and avoid those steel canyons crammed together in the center of the store. It is NOT solely a function of the attractiveness of the merchandise. The top selling Costco manages to regularly move a million dollars of merchandise per day. A major factor in their stores is the huge open area, bazaar-like, that dominates the center of the store, with the "steel canyons" innocuously and conveniently arrayed within ready eye-shot, accessible but out of the way, around the perimeter.

But, enough on the sins at retail. An old Chinese proverb says, "better to light a candle, than to curse the darkness." So, back to our observation that "the path to purchase is often a U-turn," or as we will see, at least ought to be a U-turn. And by "U-turn," we mean that often the early part of the shopping trip is the shopper making their way to the back of the store, a left turn for one or a few aisles (usually to the first few that return to the checkout area,) and then that second left turn that returns them to the front of the store.

Knowing that this is common, retailers ought to make that easy, and define the path for the shopper, deliberately, rather than leaving to chance (and possibly ignorance,) of just what the dominant path is. We can illustrate this as on the left here. Since we already know that shoppers have a natural proclivity to follow something like this path, let's help them by removing ALL displays and placements that block the center of this path. It should be at least eight feet wide in its very narrowest points. And why not further distinguish it by a series of banners maybe 25 ft (8 m) apart, overhead along the length of the path, saying something like, "[STORE BRAND] EXPRESS - This way to convenient shopping?" The point is to open up the path - if you open it up, they will come - and then advertise innocuously what you have done.

You may notice that the return path here encompasses two aisles. I would suggest chopping that gondola that separates the two aisles down to a maximum of 5 ft tall, and put a "cut-through" half way down the aisle. These two measures will increase the open-ness of these aisles, and allow shoppers to move between them. Of course, simply removing the middle gondola would be very acceptable, as well, and would provide an ideal environment for six or eight "mid-caps" ( See: Mid-Caps: Break Out of the Pack).

The point of all this is to stop running the store like a treasure hunt for the shopper, and instead to assist the shopper by providing a logical convenient path through the store - maintaining visual connection to the rest of the store - so that you can merchandise more intelligently, engineering your sales plan, step by step as the shopper moves along this path. That step by step sales plan will be the subject of a subsequent Views. But we will conclude this issue with the historical roots of this plan, and how it has actually been deployed in stores today, with as much as five times the sales of conventional supermarkets.

A massive shift in retailing occurred 100 years ago with the explosive growth of self-service retailing. Mass production, mass distribution with mass self-service created a mass market with large benefits for shoppers (more selection, lower prices, faster shopping,) retailers (greater efficiency, less staffing, "pile it high, and let it fly!") and suppliers (mass production, manufacturing and distribution efficiencies, and access to burgeoning markets!)

For retailers, the reduction or elimination of their sales team/staff, meant that their focus moved to logistics, supplier management/negotiations, and matching merchandise selection with their shoppers. No real selling was needed. Again, self-service means, "shopper, sell yourself." But the death of retailer selling (as contrasted with merchandising) was resisted by a few retailers. One in particular, Clarence Saunders, continually pressed for more efficiency in selling, and patented the store design represented here:

Notice the vestibule area at the front of the store, where shoppers can enter the display area, on the left, and pass in a serpentine path up and down a series of aisles. The purpose of this serpentine path was to allow the merchant to introduce the shopper to an "appropriate" offering of merchandise in a systematic way. In this way, Clarence Saunders retained control of the selling process, and was able to assist the shopper with their purchases. In effect, in these serpentine stores, the retailer assumed responsibility for selling, to an extent, instead of passively abdicating this responsibility for the sale to the shopper.

Obviously, instead of following this lead, retailers the world over abandoned Saunders' serpentine path, multiplied aisles, for which manufacturers generously rewarded them, and turned shoppers loose, to their own devices, in mini-warehouses. Retailers became passive in the process of shoppers making purchase decisions, essentially allowing selling skills to atrophy.

It is no wonder shoppers waste 80% of their time in the store, wandering about seeking something to buy - not to mention vast options when they finally arrive in an area where a purchase will actually occur. But there are modern incarnations of the serpentine store. Ikea is probably the best known global example. But for the CPG/FMCG market the pre-eminent example is Stew Leonards, where they achieve something like $100 million in sales with the serpentine path. HEB has Central Market stores following this model quite closely, presumably with similar results.

The U-turn path is just a simple form, a segment of the serpentine path, using the natural tendencies of shoppers, without the coercive restraint of path offered by Ikea, Stew Leonards and HEB Central Market. In fact, it is exactly the million-dollar per day model used by Costco. Any retailer who ignores the potential is probably addicted to the crack-cocaine of supplier payments, that obviate the need to care about lost selling skills.

In the next issue of the Views we will consider in some detail how to use the U-turn in shopping to efficiently sell to shoppers a greater volume of the merchandise they really want.

Elemental Retailing

March 5, 2010 - by Herb Sorensen, Ph.D., Global Scientific Director, TNS Retail and Shopper
E-Mail: herb.sorensen@tns-sorensen.com

At Retail Wire there was a recent discussion headlined "Consumers Go for Bad Idea and Buy Food in Tire Stores," suggesting that it was a bad idea for Canadian Tire to begin selling groceries. However, a review of some retail fundamentals can provide both retailers and their suppliers with important help in the search for opportunities for expanding business – "outside the box." Bear in mind that retail is the final commercial link between who people are, and the things they need, want or aspire to. Taking our cue from Maslow's "hierarchy of [emotional] needs," we extend such thinking to other kinds of needs, which will lead us to retail merchandise.

On a hierarchical basis, the very most basic physical need that people have is for air. This need is so impelling, and the supply so bountiful, that we often give it little thought. But we do require replenishment of our air supply, at a minimum, within a few minutes. If deprived of air, we will single-mindedly focus on our need for air, very soon.

Water or liquid is our second most urgent need. Depending on our circumstances, we can survive many hours or a few days without replenishing our supply of water or other beverages.

Our third most urgent need is for food – nourishment. For that need we prefer to replenish multiple times per day, but can in fact survive as many as a few weeks without nourishment. Again, it depends on circumstances.

These three are the only absolute physical needs, as clothing, shelter, transportation and a host of other aids to comfort and survival, can be foregone for long periods – if not permanently.

So what does this all have to do with Canadian Tire selling groceries? Simple, the most likely thing shoppers in a Canadian Tire store will need, other than tires, is probably something to drink – and the second most likely thing will be something to eat – for snacking now, or maybe adding to the larder at home or office, later.

Thinking like this requires a retailer to abandon their single-minded obsession with the merchandise they sell, and move to a single-minded obsession with the shoppers in their store. This doesn't mean there is no place for merchandise specialization, but simply that that specialization ought not to ignore the wider human element of the customer. Shopper centricity requires a proper recognition of the most urgent needs of shoppers, which are food and beverages. (The world's largest industries!)

Given these considerations, it seems like a no-brainer for a store that often requires a significant amount of waiting by the customer – a tire store, to expand into a wider line of groceries. Historically, retail trends like this created modern "drug-stores" from what were apothecaries dispensing only medicinal and health related items, to emporia for broader human needs – lately in a sensible rush to get into the convenience store business, themselves. But then, those convenience stores were, in turn, the outgrowth of "gas stations" adding convenient purchases to go with the refueling stop – aided and abetted by the refusal of supermarkets to properly serve the 50% of the supermarket shopping trips that purchase 5 or fewer items – one third of total store sales, typically.

The most important asset any retailer has is NOT their merchandise, but the traffic and time that their shoppers spend. Another need that the traffic has – which can become urgent – is the need for rest rooms. Now that we are onto customer centricity, can we use clean, modern rest rooms as a traffic builder? Well, fast food restaurants are probably the premier, reliable supplier of these facilities to an automotive public, followed by convenience stores. Outstanding traffic builders, all!

We often note that, "retailing is at the cutting edge of social evolution – always has been, always will be." The examples cited above are simply the tip of the iceberg for this concept. If it helps you broaden your vision, and at the same time to sharpen your focus on what shopper centricity really means, mission accomplished.

Opportunities in the Traditional Trade of Emerging Markets

December 6, 2009 - by Arnaud Frade, TNS Retail and Shopper E-Mail: arnaud.frade@tns-global.com

 
Four billion people live on less than two dollars a day in the developing world. These people represent a huge and growing market for goods and services. For those of us who are familiar with the sophistication of modern retailing, it is easy to forget that the vast majority of people around the world still shop in far simpler stores. These simpler "stores" are collectively referred to as the traditional trade, to distinguish them from the modern trade, common in the more economically developed world. It is the traditional trade that plays a large role in the growing cities of India, Indonesia, Brazil and China - in fact, in cities, towns and villages all across the developing world. The traditional trade ranges from well organized independent players, to small road-side shacks and single market stalls. How can brand suppliers best understand this growing retail opportunity? What are the key challenges to consider in order to be an effective supplier to this trade? This issue of the VIEWS will shine a light on some of these challenges and opportunities.

Challenge #1: The store is not four walls...

Supplying the traditional trade forces a rethink on what constitutes a store – market stalls, roadside shacks and even itinerant sellers are all relevant, but do not fit the classic selling model of the modern trade. In some locations, at-home stores and even back-of-bike operations are common. Supplying these markets requires different approaches in both marketing and distribution. One key focus can be on approaching the community and isolating local leaders or opinion makers, who may be able to provide understanding to the marketer; and drive local acceptance by the market.

From a manufacturer's perspective, this also means considering things like how a lack of continuous electricity may affect the ability to actually sell, for example, cool beverages or treats. Having a link with the local communities through their leaders may help with finding unusual but highly effective solutions. These solutions may then be deployed across markets and regions.

Some may be surprised that internet retailing plays a growing role in the traditional trade. In many markets, the only means to use the internet is via mobile phone and smart phones. These are already becoming common day-to-day tools in even remote areas of major economies such as India and China. The question then becomes, when the internet is seen on a 2" by 2" screen, how can companies optimize the experience to deliver a clear and effective online sales proposition? This is both a major challenge and an opportunity for the years ahead.

Challenge #2: Shop keepers are gate keepers

In contrast to modern trade, where stores are designed to be self-service and shoppers are more autonomous, in traditional trade stores the emphasis is on the shop keeper, for several reasons:

• For security reasons, trade may be conducted via gated doors.
• For practical reasons, not all items may be on display.
• For credit reasons, the shop keeper offers credit within a community.
• For guidance reasons, advice and reassurance for selecting products.

These last two reasons make the shop keeper an integral and personal link between the community and the products and services they need.

There are several ways for a manufacturer to leverage the realities of the traditional trade: Firstly, the distribution network plays a crucial role. Using the regular delivery team to "partner" with the shop keepers can be an excellent strategy. Secondly, credit terms and sales aids may provide very tangible benefits and support a brand campaign.

Thirdly, in smaller shops, the owner will in many cases buy directly from a larger supermarket or a cash & carry, far away, and then re-sell the goods locally. So understanding these needs and offering suitably packaged products could also be, indirectly, a great way to drive traditional trade sale. This last point means that re-thinking the packaging could very well generate substantial gains for major manufacturers, with packages which can double-up as display stands; or offer advice for selling and merchandising items.

Challenge #3: Merchandising has a different meaning for the traditional trade – focus on channel-relevant execution

Merchandising and Point-of-Sale Materials (POSM) play a radically different role in the traditional trade – many stores have limited shelf organization and POSM is not replaced regularly and might in fact overlap across competing brands. Manufacturers tend to have very few customized solutions – some will provide storefront decoration services (awnings or walls painted the colors of a brand, especially relevant for beverages and cigarettes); others will focus on very similar materials provided to the modern trade, knowing these are likely to be discarded or incorrectly implemented. Yet there is significant potential to have unique and relevant POSM or merchandising solutions – ranging from unique storage to distribution or refill options, to facilitate the delivery of products in the traditional trade.

Challenge #4: Basic considerations are Prime considerations

For low income consumers just as for everybody else, basic needs come first – although for them, satisfying these basic needs is very much a critical survival requirement. Ensuring that goods bought are safe, un-contaminated, storable and transportable are key issues. In this context, manufacturers have a tremendous opportunity to help improve daily lives whilst also building their brand, by providing packaging and distribution solutions which support these basic needs. Furthermore, supporting these basic considerations may provide forward-thinking companies with a tremendous opportunity to play a more active role in communities – by championing these needs (or failing to do so) a brand owner will seal its future. For example, understanding usage occasions combined to storage requirements has provided leading brand manufacturers with the opportunity to introduce innovative single-usage packs, providing both an affordable solution and a true brand experience to low-income consumers in the Philippines or China.

Challenge #5: Brands are important… but are they real?

Brands are both a reassurance and an aspiration and as such play a critical role in traditional trade – but this also presents some serious challenges. Firstly, consumers are savvy, no matter what they can afford – so brand equity is very much a precious commodity when dealing in the traditional trade, as shoppers  seek the reassurance and guarantees a well-known brand can provide. In some markets, counterfeits abound, and ensuring that what you buy is genuine is a very real consideration. Secondly, whilst not all brands are necessarily represented in the traditional trade, it should not prevent manufacturers from seeking to engage consumers – the aspirational nature of many brands may help drive future consumption but can also have an immediate role in communities. Finally, the risk for a brand is to have, either via counterfeiting or via an unscrupulous local associate, its image tarnished – taking extra care of how the brand is used (POSM, sponsorship, actual products on shelves) should be a major priority in developing markets – the global future of your brand may just hinge on this.

Overall, marketing to traditional trade shoppers requires not just local knowledge but a true mindset change for international brands. competing against well-established local players, faced with an incredibly fragmented distribution network, you need to re-engineer your entire marketing strategy to match the needs and complexities of these retail channels. The investment is significant but the pay-off may well be worth it – establishing top-of-mind in the fastest growing and most populated economies in the world might well be tomorrow's pay-day. Note: Arnaud Frade is based in Singapore and covers 50 markets across Asia-Pacific, Latin America and the Middle East & Africa as head of TNS' Retail & Shopper practice. Amongst these are some of the world's most populous countries, some of the fastest growing economies and true frontier markets. He has previously worked in Europe for a leading retail tracking specialist firm and a major financial services company. His expertise in understanding independent retailers complements well my own focus of supporting global retailers.

Arnaud can be reached at arnaud.frade@tns-global.com.

The Amazonian Ghost

July 31, 2009 - by Herb Sorensen, Ph.D., Global Scientific Director, TNS Retail and Shopper
E-Mail: herb.sorensen@tns-sorensen.com

In the movie Ghost, with Patrick Swayze and Demi Moore, we see the spectral Swayze trying to reach his real world lover, by the power of the mind. He had some instruction on this matter by another cranky ghost, in the subway.

This is not totally unlike the problem that the modern self-service retailer faces. First, just like the Swayze ghost and his love, Moore, the retailer (the ghost) effectively inhabits a different world than his beloved, the shopper. Here, I will provide some down to earth, uncranky assistance to retailers seeking to bridge their own gap. :)

First of all, let's acknowledge that the gap is real. It is a gap in communication, largely broken 100 years ago when much retailing became self-service. Self-service, of course, limited the amount of personal communication that could occur between the retailer and the shopper. The exact form of personal selling that was common 100 years ago is unlikely to ever become a huge component of self-service retailing again.

However, in the past few years, another form of retailing has arisen that recaptures many of the original personal selling features, and we can learn from this something of how "personal" selling can be returned to self-service retailing, without all of the real-world staff that that might conjure. Just as with Patrick Swayze, the real adjustment that opens communication between the two worlds of retailer and shopper, is an adjustment between the ears of the retailer. So we begin with a renewed understanding of how to SELL to someone you cannot physically reach.

We must take our learning here from the world of online retailing, the Amazonian Ghost. The metaphor is apt, because, like Swayze, the online merchant cannot be physically present with the shopper. And yet Amazon, and other online merchants, sell aggressively, their wraith-like avatars doing the work for them!

 

First of all, as soon as you arrive at Amazon, their goal is to get you to the book or merchandise that you may be seeking, as quickly as possible. It is a fact that the abandoned shopping cart is the bane of online selling. Notice the "one click" option, and overnight delivery - speedy checkout - in the upper right hand corner. Amazon is ready to consummate the sale immediately, and at all times. Every personal salesman in the world knows that the longer a shopper takes to make up their mind, the more likely they are to decide to not buy.

Assuming you were looking for a book, as soon as you arrive at any book page, Amazon tells you what else people frequently buy with this book, and, further down the page they will tell how this specific book ranks in comparison to all the other 50 million books they sell, and more specifically, how it ranks compared to the other books in its category. Of course there are book reviews as well.

What is going on here is that the "salesman" avatar at Amazon is doing all they can to close a sale. First, responding to your expressed interest (a search that brought you to this page,) and secondly, seeking to reassure you about your choice by telling you that most people who visit this page, buy this book. But at the same time they are going for the close ("One Click" - close early and close often,) they are teeing up alternates in case, they can sell you two books here, or maybe close on an alternate if you reject this one.

All the rankings and reviews play two crucial roles that are intertwined:

• To get you to the close
• To drill into your mind for post close, that you made the right decision

This second role is often overlooked in selling, although it is inseparable from the first. Buyer's remorse does not just occur because of poor product performance after delivery. It also occurs because advertisers and sellers (retailers) fail to adequately reassure customers that, "You made the right choice. Given all the options out there, you made a smart selection." Even if there are flaws - everything has flaws, that's life - YOU are one step ahead of the game!

Now, Mr. Retailer (or brand supplier,) let's see if we can "borrow" the Amazon avatar to help us SELL in the aisle of a bricks-and-mortar store.

So here you are, hovering like a ghost over an aisle, as a shopper turns into the aisle. This is her first "click" (Amazon, remember?) giving you a clue as to just what you might be able to sell her. Although this doesn't have quite the specificity of the individual book that the Amazonian avatar gets for starters, it's close enough for you to start making a single intelligent offer. Remember, this is about YOU selling, not passively standing by to see what she will buy.

Hmmm! So just what should you sell, of the thousands of products in this aisle? "Amazon" will check to see what most other shoppers have purchased in this aisle. It's in your transaction logs. The number one item sold in this aisle is _____! Tell them what it is. Simple statistics tells you what the crowd buys most of, is what you are most likely to SELL to an individual. So, if you are going to sell something to this shopper, your best bet is a Top Seller for this aisle, for this category, for this brand, etc.

Remember, even though you are the Amazonian Ghost lurking above the aisle, you can make your presence felt by putting those "Top Seller" or "Shoppers' No. 1 Choice" notices on the few appropriate items in the aisle.

Continuing our Amazonification discussion - we think, but what if she doesn't want to buy what the crowd is purchasing? No problem, you, like Amazon, have thoughtfully provided many alternatives - the long tail. The shopper will be reassured in her purchase from the long tail because she has consciously rejected the crowd's choice and expressed her individuality by selecting from the rest of the options. Remember, the long tail attracts shoppers to the store, but it can also provide reassurance to shoppers who reject, and some level of purchases from those who reject the big head. So all are not only aided by your selling to them, but are reassured they got what was best for them, whether they bought the big head or the long tail.

New type of shopper research studies non-purchasers

October 12, 2009 - by Siemon Scamell-Katz, Founder TNS Magasin
E-Mail: siemon.scamell-katz@tns-global.com

TNS Magasin has launched a new service which promises to deliver additional sales by answering the age old question: when shoppers don’t buy, why don’t they? Because these non-purchasers are a huge potential source of extra business – in the store, in the aisle and at the category - understanding what goes wrong here, and putting it right, is set to deliver unprecedented rewards.

Magasin starts by identifying attrition amongst shoppers at every stage of the shopping process, from the whole retail outlet through individual category to SKU. For example, a shopper may enter a store but not a certain aisle or browse an aisle but not a particular category. And of course all shoppers interacting with a given category will spurn most SKUs within it.

Non-purchasers at every level are recorded using filming or path tracking techniques, with more detailed observation at the category level. A statistically significant number of non-purchasers are interviewed to establish perceived and actual barriers to purchase. By quantifying shopper ‘drop-out’ rate - and, most importantly, why this happens - TNS Magasin is able to pinpoint the areas of greatest opportunity for our clients.

A recent project for a brewing company has identified the additional conversion opportunities within beer and delivered strategic advice for action based on these insights. The initial research revealed how successful the beer category is at converting store traffic to purchasers; who the beer shopper is and how sub-categories perform in various locations.

Using these findings combined with knowledge gained from nearly two decades of studying shoppers, TNS Magasin was able to provide a raft of detailed recommendations to unlock barriers to purchase and capitalise on previously overlooked opportunities.

Traditional research has concentrated primarily on purchasers. By focusing on non-purchasers, we are illuminating the stages in the shopping journey at which our clients are losing customers and why. Clearly, the biggest opportunity to increase sales is with those potential purchasers who are in front of the fixture but not buying.

This approach provides a highly-tuned diagnostic for focusing further research attention and benchmarking change, because it brings every single area of under-performance into sharp relief. What’s more this pioneering angle on shopper decision-making not only provides a huge advantage to our clients, it also delivers actionable insights pretty well immediately.

Siemon Scamell-Katz