Marketing by the numbers; scanner data moves processors closer to consumers – Market Research
Marketing By the Numbers
Scanner data moves processors closer to consumers
For most dairy processors, knowing individual consumers by name went out with the milkman. As markets have expanded and diversified, the individual consumer seems farther away than ever.
But it doesn’t have to be that way. Thanks to new technology, processors can get closer to individual consumers through seemingly impersonal numbers–the Universal Product Codes found on most food products today.
Designed in the 1970s to speed consumers through checkout lines while itemizing purchases, UPCs have become valuable data-collectors for marketing experts. From the volumes of data collected, dairy foods processors can tell who is buying what and how promotions and product location affect sales.
“Right now there is more data available than manufacturers have ever had in the history of marketing. That data is going to allow manufacturers to test things they haven’t before. It’s going to allow them to develop the best advertising and promotion strategy on a micro level,” says Neal Goldberg, vice president of Market Decisions, Northbrook, Ill.
By marketing on a “micro” level, dairy processors can please retailers as well. “Retailers want to increase transaction size to increase profitability, and the best way to do that is with a localized or micro-marketing concept,” says Stuart Armstrong, director of marketing for Information Resources Inc. in Manhattan Beach, Calif.
When it comes to localized marketing, the dairy industry has plenty of experience to draw from, Armstrong says. “The dairy industry should be very well equipped for micro-marketing because it really is a regional industry,” he says. “The milkman who furnished customers with milk or cheese or sour cream years ago had the same sort of customer emphasis that manufacturers are striving for today.”
So perhaps it makes sense that dairy processors are among the first food companies to adopt computerized space management programs.
The Haagen-Dazs Co., Teaneck, N.J., for example, has been using IRI’s Apollo Space Management Program for seven months in its New York market, and has increased space for its products as a result, says Mike Knapik, Haagen-Dazs’ vice president of sales.
The program, which analyzes scanner data on a store-by-store basis and uses computers to draw precise “planograms” of a supermarket’s novelty section, has allowed Haagen-Dazs to show retailers graphically what would happen if they gave more space to high-profit items like Haagen-Dazs pints.
But consumers benefit as well, Knapik says. “It definitely makes an impact on consumers. All of a sudden, they’re able to find all of the flavors because there are no out-of-stocks.”
While Haagen-Dazs is one of the first dairy processors to use the system–other users include Colombo Inc., Kraft and Land O’Lakes–some retailers are using it in conjunction with manufacturers.
Hannaford Bros., a Scarborough, Maine-based retail chain, staffs its product management department with 10 representatives from area brokers and manufacturers. Usually the reps are on loan to Hannaford Bros. for about 18 months, says Art Ledue, manager of product management. The program gives manufacturers “a certain amount of comfort to know their interests are being represented,” Ledue says.
As a result of the space management program and direct product profit (DPP) studies, the retailer has “dramatically” increased space for ice cream and novelties, Ledue says. Some Hannaford stores now devote 22 doors to ice cream and novelties, compared with the industry average of about 10 doors, he adds.
Space management is one way to improve your product’s position in the store, but a wealth of other scanner-based programs can help you decipher consumer patterns.
One way is through electronic single-source research, where consumers record purchases with portable scanners while their televisions are equipped with meters to monitor the shows and commercials they have on. By comparing purchasing information with exposure to promotions, processors can determine how a particular ad affects sales. It goes a step beyond most tracking programs.
“ScanTrack is your basic report card: It tells you what grade you got. And the household single-source program tells you why you got the grade you got,” explains Bill Lucas, vice president at NPD/Nielsen, Port Washington, N.Y.
NPD/Nielsen has equipped 15,000 households with home product scanners. And at least one-fifth of them also are participating in Nielsen’s Monitor Plus program, which records television viewing. NPD sells the data to manufacturers by category or region, Lucas says.
But analyzing data can be expensive and time-consuming for processors, experts say. “It’s information overload. Manufacturers have this enormous wealth of data but don’t necessarily make the best use of it,” says Nancy Borgeson, senior consultant at SRI in Menlo Park, Calif.
For manufacturers willing to pay for expert assistance, programs like Safeway’s Scanner Marketing Research Services promise to take the pain out of sifting through data to determine what it means. In fact, SMRS does more than analyze. It will work with the manufacturer to come up with an appropriate in-store test. Then it will conduct the test and explain the findings.
But it’s not cheap. Handling a test project from start to finish can cost from $20,000 to $50,000, says Louise Booth, manager of SMRS.
For dairy companies, typical experiments may determine: whether yogurt sells better when positioned next to cheese or sour cream; whether in-store advertising or sampling is more effective in promoting a product; whether shelf-talkers are worth the expense. “Anything we can manipulate in the store, we can test,” Booth says.
The real advantage to Safeway’s program, Booth says, is that all Safeway stores in a given area participate, so it provides more accurate regional data than many national reports. Likewise, Safeway buyers take the test results more seriously. “Our buyer’s are going to believe our figures,” Booth says.
If your product scores low in a marketing test, you may be able to boost its performance by participating in an “electronic coupon” program with a retailer.
Ukrops Supermarkets, Richmond, Va., has watched store sales rise 5 to 10 percent annually since February 1987 when it began testing a coupon program from Citicorp. Any consumer that signs up for the program becomes a “valued customer” and is entitled to extra discounts, in the form of electronic coupons, on about 200 items a month. When valued consumers present their membership cards at the register, the items are automatically discounted.
Ukrops’ buyers negotiate with manufacturers to determine what products will be featured in the coupon program every month. Manufacturers clamor to be included, because featured items sell 10 times as much as usual, says Carol Beth Spivey, marketing manager at Ukrops.
Ukrops occasionally uses the system to target a specific groups of consumers–such as pet owners or families with babies–with special coupons for their needs. But Spivey says the company has “a philosophical problem” using the program to delve into consumers’ buying habits or to encourage consumers to switch brands or buy a product they otherwise wouldn’t. “We don’t want to play big brother,” she says.
Other retailers may move in that direction in the future, experts say. Citicorp has plans to test an electronic rebate program, where consumers would earn points toward cash according to how much of a particular product they buy, says spokesman Bill Ahearn.
The rebate program likely will allow manufacturers to target specific consumers, Ahearn says. “Right now, we just don’t know how complicated or sophisticated the program may become,” he adds.
The test is scheduled to start in October or November. Industry sources say Dominick’s Finer Foods in the Chicago area and Giant Foods in the Washington, D.C., area are likely locations. But Citicorp–not individual retailers–will be handling manufacturers’ requests for participation, Ahearn says.
Whether it involves space management or electronic coupons, experts agree the use of scanner data as a marketing tool is here to stay. That’s because retailers and manufacturers alike need to get closer to the consumer, and scanner data can take them there.
PHOTO : The Apollo Space Management Program helped convince Hannaford Bros. to increase its ice
PHOTO : cream and novelty section to 22 doors, compared with the industry average of about 10.
PHOTO : Safeway’s Scanner Marketing Research Services promises to take the pain out of sifting
PHOTO : through scanner data to determine what it means. But the service can cost as much as
PHOTO : $50,000.
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