Inside the Mind of the Shopper Survey results reveal what drives shoppers to action

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1 Market Track Perspective TM Inside the Mind of the Shopper Survey results reveal what drives shoppers to action Market Track s Shopper Insight Series To extend Market Track s mission to provide our clients clarity and insight into promotional and pricing execution, we have launched a primary research initiative called Market Track s Shopper Insight Series. This research is being conducted with an extensive shopper panel that is demographically segmented in a manner that allows us to examine promotional and pricing influencers by key category and product types across age, location, income, family and technical usage tendencies. In this first installment we will start with a discussion on the purpose of promotions and then dissect the shopper s desire for promotions and how that has impacted certain retailers decisions on promotional strategy. We will then transition to profiling different types of shoppers using results from a recent shopper survey conducted by Market Track. Finally, based on a wide array of demographic identifiers, we will emphasize the importance of reaching these different types of shoppers with an effective, multi-channel promotional plan. W hy do we promote? This may seem like a rhetorical question among retailers and suppliers, yet it is very easy to lose sight of the purpose behind promotional efforts and get caught up in the busy process of planning, developing, and executing those efforts. Advertising and Media teams spend their time planning promotional cadence, volume, and creative content. Marketing teams work around the clock on promotional messaging at the store, category and product level. Category Managers and Merchants pick and choose the product mix for each promotional engagement. Pricing teams work with their Merchants on sale prices and depth of promotion for the featured products. The list of responsibilities goes on. But why go through all the work? Why make the huge investment of time and resources into promoting? Is it because you always have? Is it simply the day-to-day process? Taking the time to step back and remind yourself why you go through the involved promotional process is an important practice. Reaching clarity on that purpose will likely improve the outcome of your efforts. Promotions are the primary driver of where people shop and what they buy. Promotions can give shoppers an incentive to make their purchases at your store rather than your competitor s, or buy your brand rather than your competitor s. They also serve as a means to drive traffic to a retail store or website, giving the retailer a competitive edge in ultimately making the sale. In short, retailers and manufacturers use promotions because they work they drive trips and increase sales. Given the power that promotions have in influencing shoppers, it is essential for both retailers and manufacturers to understand the thought process of shoppers. Who are you reaching when you run a print promotion? Which shoppers behaviors are you impacting when you run a promotion on Facebook or Twitter? Shoppers from different age groups, income levels, genders, and living situations have different tendencies, and they interact with promotional information in different ways at different points of the purchase cycle. If your promotional strategy does not account for the shopper, their tendencies and preferences, and the variety of information sources they access, then you are likely not optimizing your promotional investment.

2 What drives the shopper s decision as to where they will shop and what they will buy? Promotions. Nearly 80% of shoppers said in the past 12 months they changed where they normally shopped and the brands they typically buy based on a promotion. The cost of losing a shopper to a competitor goes beyond a single trip or basket it opens the door to losing that shopper on future trips as well. Figure 1: Brand/store switching driven by promotions There are many approaches to attracting shoppers beyond promotional tactics, such as relying on an attractive in-store experience, customer loyalty programs, high-quality products, excellent customer service, etc. While these can be successful strategies in attracting some shoppers, promotions are still most influential on purchase behavior. Shoppers that are promotionally driven will not hesitate to move away from their usual brands and/or shopping destinations if given the right incentive. In Market Track s Shopper Insight Series survey, respondents were asked a few questions about their loyalty to specific brands or retailers, and how promotions affect their regular purchase behaviors. On the brand side, 78% of respondents said that in the past 12 months, they have purchased a brand other than what they normally would purchase based on a promotion they received. This question was posed with everything else held constant, including product quality, past experience with the product, etc. For suppliers hoping to win and keep customers, this simple finding demonstrates the importance of presenting your shopper base with attractive promotions. Over three-quarters of your shopper base is at risk of switching to a competitive brand if that competitor is able to reach them with a promotional offer that they find appealing. When it comes to where they shop, consumers can be even more severe with their willingness to change given the right promotional offer. Not only can a promotion cause a shopper previously loyal to your store to change shopping trips based on a promotion, but can also change where they shop permanently. Of the shoppers surveyed, just fewer than 80% had changed where they normally shop at least once in the last 12 months based on a promotion they received. While over 30% visited that store to pick up the item on promotion, nearly 50% indicated that their purchases at your competitor s store extended beyond the promotion that brought them there in the first place. Put simply, nearly half of your shopper base as a retailer is at risk of moving their regular basket to a competitive store if they find that your competitor offers better promotional value. Impact and Reach Many retailers have tried to move away from a promotional strategy that attracted shoppers with discounts on regular purchases, and, more often than not, the results were worse than anticipated. Shoppers have shown they will go where the promotions are, and the results of our survey further emphasized the impact promotions have on shopper behavior. We discussed in the previous section why promoting is important, yet it is equally important to invest in a promotional plan that reaches your target shopper base, given your available resources. Over the past few years there has been a large focus on the part of both retailers and manufacturers 2 Market Track Perspective TM

3 Ad drops Page counts Figure 2: Percent change in circular page counts and drops In spite of reports that predict the demise of print in the near term, retailers still recognize from the shopper s perspective the circular is the most relied upon promotional media type. When deciding what course to take in terms of diversifying the promotional mix, there are two questions that retailers have to confront: First, how does the shopper wish to receive and use promotions, and secondly, what is your competition doing? to keep pace with the evolution of how shoppers consume promotional information. Shoppers have access to more information than ever before, as well as more options to interact with that information. They can research deals using traditional print media, opt-in promotions, social media messages via outlets like Facebook and Twitter, retailer websites, apps and messages on their mobile devices, banner ads on non-commercial websites the list goes on. How to reach shoppers with the right message at the right time in their decision making process is a challenge. Many media reports over the past few years have strongly predicted the inevitable move towards digital, and away from print media. Several retailers have started testing a more digitally focused strategy, citing the ability to personalize offers for each shopper, interact with their shopper base with media types that they believe are more widely used than the Sunday or midweek print circular, and cut costs in circular printing. This approach has limitations in terms of reach on a broad scale, yet has benefits in regard to relevance and targeting. There are two questions that retailers have to confront in these decisions: First, how does the shopper wish to receive and use promotions, and secondly, what is your competition doing? Let s start with the latter and examine the reality. In spite of its much heralded demise over the past decade, the data clearly indicates that the volume of printed circulars has remained steady over the past three years (see Figure 2). In the past, some companies have tried to move away from this expensive promotional vehicle, only to find themselves scrambling to reinstate the program while also explaining the sales drop at their quarterly earnings release. This follows the old western adage that until everyone agrees to put their guns down, if you put yours down first, you re likely to get shot. More relevant to this discussion, however, is the question of how shoppers want to receive promotional communications. The simple answer is that it depends, and likely includes multiple means. However, as nearly all the research of the past several years has indicated, and lift data continues to support, the print circular is still the centerpiece. It is, however, the centerpiece in a myriad of sources the average shopper will use to find deals. A cohesive promotional strategy incorporating both a print and digital approach will increase the potential for reaching your target audience. In Market Track s recent survey, shoppers were asked which media types they use regularly to find promotional deals. 69% of those surveyed said they use print, tied with retailer websites as the most used media type among shoppers. About half the survey respondents also indicated they use s from retailers, the weekly circular posted online, and TV ads to find deals on a regular basis. Clearly shoppers are leveraging multiple means to obtain promotions and one media type is not replacing another as opposed to an either/ or situation, according to shoppers it is more of an and, further reinforcing the importance of taking all media types into consideration when evaluating promotional efficacy. For retailers and manufacturers that have plans to move to either a predominately digital or exclusively digital promotional strategy, they are doing so in a time when shoppers still use print media more than nearly every other media type, which is primarily driving shoppers to the store. On a comparitive basis, The Power of Market Intelligence 3

4 Shoppers are more active in seeking out promotions than ever before of those surveyed over 80% frequently use more than one media type to access deals. All media types are relevant and important to take into consideration when optimizing promotional strategy. Figure 3: Promotional media types used by shoppers brick and mortar sales comprise the majority of retail sales overall. According to the STORES Top 100 Retailers report, more than 15 years into the dot-com revolution, online transactions account for less than 15 percent of total retail sales. This illustrates not only a willingness, but a preference among shoppers to make the majority of their purchases in-store. That said, if there are marketers that are unwilling to invest in a digital promotional strategy, they are foregoing engagement opportunities with the nearly 70% of shoppers that use retailer websites, 52% that use , or 45% that look at the weekly circular posted online. With the rate of digital sales continuing to increase, the opportunity cost of not tapping into those shoppers is high. Leveraging a multi-channel promotional approach is not only a strategy to improve your promotional reach, but also an effective way to influence both planned and unplanned buying decisions. When presented with a promotional offer on an item that shoppers did not plan to purchase, the number of buyers spiked drastically. Market Track s shopper study found that among all shoppers, 83% have made an unplanned purchase after receiving a promotion for the product in the past 12 months. Of the 83% that have made an unplanned purchase, 82% claim to use two or more media types to find promotional deals, 68% three or more, and 50% four or more. To summarize, the majority of shoppers that are prone to exploring multiple media types to find promotional offers have a higher propensity to make unplanned purchases based on a promotional offer. More unplanned purchases mean larger basket sizes. As a marketer, this provides a true business incentive to engage shoppers with multi-channel promotional offers. Audience Preference Understanding which shopper segments are impacted most by certain media and offer types is an extremely detailed process, Of the 83% of shoppers that have made an unplanned purchase as a result of a promotion, 82% claim to use two or more media types to find promotional deals, 68% three or more, and 50% four or more. Figure 4: Promotions driving unplanned purchases 4 Market Track Perspective TM

5 Figure 5: Media type usage by age group but can provide a roadmap for creating a promotional plan that targets different demographics with promotions that will resonate most readily with specific shopper profiles. Marketers often consider demographic shopper segmentations to be of primary importance when discussing which media types different shoppers use. Most believe that younger demographics Gen Y and Gen X, primarily are more advanced consumers of digital information, including mobile, , websites, and social media. Meanwhile, the Baby Boomers may be more accustomed to consuming print media to find promotional is readily used across all demographics and is the most heavily used digital promotion among older groups: 50% of shoppers ages said they use s from retailers to find promotional deals, 43% of shoppers ages 50-59, and 56% of shoppers ages 60 and over. deals. Though these beliefs have foundation, there are surprising findings at both ends of the age spectrum relative to media usage. It is widely believed that there is a lack of print penetration within the younger demographics given their propensity to use digital media more regularly. However, the use of print promotions in finding deals is prominent with shopper segments from ages 18 to 60 and over according to our study. Over 60% of respondents in the younger age brackets of 18-20, 21-29, and said they use print promotions to find promotional deals. Those numbers do spike to over 70% for each of the older age groups (40-49, 50-59, and 60 & over), as marketers would expect, yet the use among younger age groups is still significant. Similar to the perception that print appeals more to older demographics, there is also a perception that digital media appeals more to the younger demographics. Our shopper survey results showed that, although generally speaking the usage rates for digital media were higher for the younger age groups, certain media types do have significant reach among the Baby Boomers. provides one example of digital penetration among older demographics. 50% of shoppers ages said they use s from retailers to find promotional deals, 43% of shoppers ages 50-59, and 56% of shoppers ages 60 and over. These responses were right in line with the responses among the Gen Y s and Gen X s, showing a very balanced reach for across all age groups. Where we really see some disparity in the responses between age groups is within Social Media and Mobile. Both are less mature media types compared to print, websites or . Just over 30% of respondents ages claimed to use retailer social media sites to find promotional deals, whereas under 20% of respondents ages 50-59, and under 15% of respondents ages 60 and over responded accordingly. The disparity is even more drastic among the mobile respondents. Roughly 30% of respondents ages said they use some form of mobile interaction (SMS, apps, mobile version of website) to find deals, while less than 10% of those ages 50 and over claimed to use mobile. Social media and mobile are great examples of media types in which more targeted messaging is required to have a promotional impact on a shopper segment. In examining the reach of each media type across different age demographics, you begin to see shopper profiles form, and how each profile can be reached through the use of a combination of different promotional media. Each media type has a unique set of strengths that marketers can leverage to target different shoppers. The print circular pushes a wide range and volume of promotions that shoppers use to discover deals on items that were not necessarily on their list of planned purchases. Knowing the reach of print was over 60% for every age group The Power of Market Intelligence 5

6 Figure 6: Shopping patterns by age group in our shopper survey, marketers can be confident that at least 60% of their shopper base is prone to exploring unplanned purchases through this delivery mechanism. Cross-tabulating the respondents who have made an unplanned purchase with the various media types A large segment of shoppers in the age group are making online purchases every week, giving retailers and manufacturers incentive to engage them more often. shoppers said they use to find deals, we find that in fact some 86% of shoppers who use print to find deals have made an unplanned purchase due to a promotion. Like print media, digital promotions have their own strengths that enable marketers to target specific shopper profiles. Social media and mobile, for instance, see the strongest usage among the 18-20, 21-29, and age groups. They are pull promotions as opposed to push, meaning shoppers initiate the interaction, and look to either a retailer social media site, or to their mobile devices for promotions. The shopper profile that starts to develop here is a younger shopper that is more prone to seeking out deals for specific items than shoppers in older demographics. The challenge with digital media, however, is the user directed nature that does not allow as many opportunities for discovery, as compared to the experience with the circular. Understanding Shopper Behavior The more advanced a retailer s or manufacturer s understanding of their shoppers and their behaviors, the more effective their promotional targeting and profiling can be. How often do they shop? What products do they buy? Where do they buy them? Information like this helps marketers understand where shoppers are in the purchase process, and allows them to maximize the opportunity to influence buying decisions. 6 Market Track Perspective TM

7 Figure 7: Shopping preferences by category Just as we saw that different age groups have preferences toward different delivery mechanisms for promotions, they also have different shopping patterns. Depending on the age and the point of purchase whether in-store, online, or on a mobile device marketer s opportunity to engage shoppers promotionally may vary significantly from shopper to shopper. Of the age groups polled, those ages Shopping patterns vary based on category as well. Shoppers indicated they prefer to purchase items that can be confidently researched online, like toys/games and entertainment, wherever the best deal can be found shop more regularly than any other age group, especially online and on their phones (see Figure 6). More than 40% said they shop on retailer websites at least once a week, for example, while only about 20% of shopper ages 60 and over shop online weekly. When varied shopper behavior is this pronounced between two age groups, does it make sense to try to engage with both groups with the same set of promotional offers? A large segment of shoppers in the age group are making online purchases every week, giving retailers and manufacturers incentive to engage them at least that often. Those in the 60 and over demographic, on the other hand, may only require one or two promotional touch-points per month through certain media types based on their shopping patterns. Shopping patterns vary based on category as well. Items that require a trial or where tactile assessment of the product is important, such as a dress shirt or a pair of jeans, may require shoppers to go in-store. Shoppers indicated they prefer to purchase items that can be confidently researched online, like toys, wherever the best deal can be found. Shoppers across all demographics indicated a strong preference to purchase grocery items in-store, at just under 90%. At the other end of the spectrum, over 75% of respondents said they either prefer to buy toys and games or entertainment items online or were indifferent about location and would simply make the purchase where they could find the best price. Reaching grocery shoppers with promotions that bring them to the store, or promoting toys and games on a retailer website are both strategic engagement decisions based on knowledge of the shopper. Category buying preferences further segments shoppers in another dimension that enables retailers to create a more targeted promotional plan. The Power of Market Intelligence 7

8 Figure 8: Prevalence of showrooming Conclusion In this first installment of Market Track s Shopper Insight Series, we emphasized the importance of the shopper, their habits and tendencies, and the strategy of using those tendencies in the construction and execution of your promotional plan. We discussed that promotions influence shopper behavior, and thus influence traffic and sales. Additionally, we confirmed from shoppers directly that different shoppers consume promotional information in a variety of different ways, and from a variety of different sources. Given these realities, constructing a promotional plan that caters to the audience you are trying to reach is of paramount importance. There is no one correct formula for promoting effectively each company within the retail industry has different target shoppers they are trying to attract. Understanding who your target shopper is, their shopping behaviors, and what resources you have to reach that shopper are critical steps in creating a strategic promotional plan, rather than simply promoting for the sake of promoting. The Market Track s Shopper Insight Series is an ongoing study on the interaction between retail promotions and shopper behaviors. In our next installment, we will shift our focus to the confluence of the digital and in-store shopping experience. One phenomenon on that topic with which retailers have struggled to grasp is showrooming. With the abundance of promotional and product information available to shoppers in every stage of their purchase cycle, many shoppers have integrated both in-store and online shopping trips into one shopping experience. 77% of shoppers claim that over the past 12 months, they have found a product they want to buy in-store, and then left the store to purchase the item for a lower price online, as seen in Figure 8 above. Conversely, nearly 80% of shoppers also claimed that they engage in reverse showrooming or webrooming by researching product online, and then coming into the store to touch, try-on, or test the product prior to purchasing. This is the showrooming phenomenon at its definitive level. For many retailers, in-store sales have suffered as a result. We will touch on showrooming, along with a litany of other concepts around the ever evolving integrated shopper experience, in our next installment of Market Track s Shopper Insight Series. About Market Track Market Track is a market intelligence firm dedicated to increasing our customers returns on their promotional investments. Through innovative technology and marketplace expertise, we monitor and analyze over 200 U.S. and Canadian markets for every channel of trade in order to provide retailers and manufacturers with superior tools to monitor promotional activity, support dynamic decision making and turn information into market intelligence. Key Takeaways Given the limited resources to dedicate to promotions it is important to optimize these resources using a combination of competitive promotional insights and shopper data. Different shoppers use different media at various rates to find promotional deals. Strive to achieve an understanding of who your target shoppers are, and allocate promotional resources to attract those shoppers. Product category can help determine what messaging and shopper behavior you want to drive. This is another way to plan out a promotional calendar that caters to the needs and wants of the shopper. Retailer promotions have deep penetration among each shopper age group working to monitor competitive activity in this quick response media could help explain shifts in performance. Learn More For more insight into the entire promotional landscape or an analysis of your digital and print strategies, call Market Track at or perspectives@markettrack.com Market Track. All rights reserved.