SPECIAL REPORT
WINNING
AT RETAIL
Insights and best practices for shopper marketing
collaboration with Walgreens, Amazon.com,
Hispanic Independents and the C-store channel.
p2pi.org
SPONSORED BY:
DECEMBER 2014
— The ArT of Conversion™ —
DATA-DRIVEN INSIGHTS
UNLOCK POWERFUL CREATIVE
In shopper marketing, the most beautiful results come from the
most rigorous effort. At Catapult, data-driven shopper insights
inspire creative that truly connects… transforming consumers
into shoppers, shoppers into buyers, and buyers into advocates.
It’s The Art of Conversion™… and it’s a sight to behold.
See for yourself at CatapultMarketing.com.
2
TM
WINNING AT RETAIL
Contents
PART 1:
6
Hispanic Independents
PART 2:
Striking the Right ‘Balance’
at Walgreens
10
PART 3:
Adapting with Amazon.com
14
PART 4:
Convenience Stores
19
About Catapult
Catapult is the behavior-based marketing services agency that delivers accelerated business growth
through the “Art of Conversion.” This unique data-driven approach identifies the core, actionable
insights that inspire brilliant creative with the power to convert consumers into shoppers, shoppers
into buyers, and buyers into loyal advocates. Catapult delivers channel-agnostic solutions that are
brand savvy, retailer smart, and digitally enabled. Catapult is an Epsilon brand.
p2pi.org
Executive Director – Chief Executive Officer
Peter W. Hoyt, (773) 992-4456
Managing Director – Chief Operating & Financial Officer
Chris Stark, (773) 992-4444
Managing Director – Member Services & Events
Maureen Macke, (773) 992-4413
Managing Director – Strategy & Development
Steve Frenda, (773) 992-4461
Managing Director – Platforms & Publishing
Chuck Bolkcom, (773) 992-4420
Managing Director – Content & Editorial
Bill Schober, (773) 992-4430
SHOPPER MARKETING
Executive Editor Tim Binder, (773) 992-4437
Managing Editor Linc Wonham, (773) 992-4432
PRODUCTION
Director – Production Ed Ward, (773) 992-4418
Art Director/Production Manager
Sonja Lundquist, (773) 992-4419
MARKETING
Director – Marketing & Communications
Michele Weston-Rowe, (773) 992-4440
Senior Manager – Marketing & Communications
Brittney Winters, (773) 992-4441
Manager – Audience Development Stacy Stiglic, (773) 992-4443
Art Director Stephanie Beling, (773) 992-4442
OPERATIONS
Director – Finance & Accounting Mike Bernal, (773) 992-4445
Manager – Office Services/H.R. Crystal Stone, (773) 992-4447
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Staff Accountant Sajan Kuriakose, (773) 992-4446
INFORMATION TECHNOLOGY
Director – Information Technology Jack Dare, (773) 992-4411
Director – Sites & Systems Rob Mahoney, (773) 992-4434
MEMBER DEVELOPMENT & SERVICES
Director – Member Development Pat Burke, (773) 992-4465
Director – Member Development Terese Herbig, (773) 992-4438
Manager – Member Development Quan Tran, (773) 992-4464
Marketing Analyst Carol Schiro, (773) 992-4463
Senior Coordinator – Member Services Cindy Hahn, (773) 992-4414
EVENTS & EDUCATION
Managing Director – Professional Development
Patrick Fitzmaurice, (773) 992-4466
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P2PI.ORG
Associate Director – Content Patrycja Malinowska, (773) 992-4435
Associate Editor – Content Samantha Nelson, (773) 992-4436
Associate Editor – Content Cyndi Loza, (773) 992-4439
Associate Editor – Content Sana Jafrani, (773) 992-4433
W
elcome to year two of a collaborative
effort called the “Winning At” (a.k.a.
“Retail Intimacy”) series. In 2013, you
may recall, Shopper Marketing presented five
extended how-to pieces on working with and
succeeding at Target, Walmart, CVS, Dollar
General and Kroger.
Bill Schober
We’re back again with another insider’s look at
Editorial Director
four key retail operations: Walgreens, Amazon.
com, independent Hispanic grocery chains and
convenience stores. In each of the four Shopper Marketing magazine
articles that comprise this Catapult-sponsored special edition, we tried
to get past generalities and zero in on specific strategies and tactics
for succeeding in these quite distinct channels. The keys are learning
the retail partner’s distinct cultures, planning processes and shopper
marketing priorities; understanding that each chain or channel
views the contributions of its vendors and business partners slightly
differently; and adjusting the game plan accordingly:
• Hispanic independents, for example, believe that their strong
community ties are at the foundation of their approach to shopper
marketing; • Walgreens’ embrace of all things digital as well as its evolving
loyalty card program spell opportunity for its marketing partners;
• Amazon.com needs to be engaged on a technical level and not in
the same way as brick-and-mortar customers; and
• many brand marketers see the c-store channel as a critical entry
point for reaching Millennial shoppers, who are often the target of
new products.
One way we were able to “keep things real” was by interviewing CPG
marketing experts who’ve come by their expertise the hard way – by
being “embedded” near or even within the chains they work with. Their
advice is home-grown, up-to-date, and most importantly, practical.
I hope you find it helpful and, as always, if you have any questions,
comments, complaints or suggestions, please reach out directly to me
via bschober@p2pi.org.
PLATFORMS & PUBLISHING
Managing Director – Special Content Peter Breen, (773) 992-4431
Director Craig Hitchcock, (773) 992-4422
Dir. – Market Development & Sales Rich Zelvin, (773) 992-4425
©Copyright 2014. Path to Purchase Institute, Inc., Chicago,
Illinois U.S.A. All rights reserved under both international and
Pan-American copyright conventions. No reproduction of any
part of this material may be made without the prior written
consent of the copyright holder. Any copyright infringement
will be prosecuted to the fullest extent of the law.
Cover illustration ©bigstockphoto.com/saicle
Editorial and Executive Offices
8550 W. Bryn Mawr, Chicago, IL 60631-3731
PHONE: (773) 992-450
FAX: (773) 992-4455
W
hat do seemingly disparate retail segments like Hispanic independent
grocers, Walgreens, Amazon and C-stores have in common?
Besides occupying a diverse span of the retail landscape, each offers
enormous opportunities to capitalize on the power of smart shopper marketing.
We partnered with the Path to Purchase Institute to develop a four-part series of
articles built around “winning at retail” to showcase for marketers and retailers how
they can succeed in today’s dynamic retail environment. Our goal was to leverage
the power of our retailer intimacy to provide both insights and concrete examples
of what strategies, approaches, and even which executional considerations can help
drive successful partnerships in these retailers and channels.
Peter Cloutier,
CMO
The first article focuses on the Hispanic independent channel. Marketers who’ve
collaborated with leading retailers in this channel know stores within this sector
are a natural for shopper marketing, given their flexible formats, receptivity to
merchandising and promotions, and the qualities of community and desire for
shopper experiences among Latino shoppers.
The second article covers the strides that Walgreens is making in creating a
multipurpose, omnichannel shopping environment, revamping its formats
through targeted brand partnerships, a re-invigorated Balance Rewards
program, and a new customer segmentation approach to connect with shoppers
in more engaging ways.
Article three provides a comprehensive review of the inner workings of Amazon,
especially as the e-tailer moves more deeply into grocery products. It’s true
that Amazon wields enormous clout in e-commerce as a channel. Yet this
retail powerhouse also provides a wealth of opportunities to craft distinctive
collaborative agreements for those marketers who can think and operate
differently. The key challenge is in recognizing that many of the familiar models
(skillsets required, funding, collaborative planning timelines) need to be rethought in an e-commerce world.
Joe Robinson,
President
Paul Kramer,
CEO
The fourth and final article in this series focuses on the vibrant shopper opportunities in the C-store
channel. This channel offers marketers a wonderful opportunity to test, learn and develop more
innovative merchandising and promotional platforms to drive business growth.
We hope you enjoy this article series and are able to incorporate some of the helpful insights and
strategies here into your own planning process. Shopper marketing is stronger than ever today, and
it’s a brave new world out there with tremendous upside. Our focus is firmly on what’s ahead, and we
will continue to share our learning and experience to benefit our clients, and our industry. We wish
you good luck.
Regards,
Part 1:
Hispanic
Independents
By Michael Applebaum
Flexible store
formats, receptivity
to merchandising/
promotions and strong
community ties are
among the factors that
make Hispanic grocery
retailers a natural fit for
shopper marketing
F
or many grocery retailers today, achieving organic sales growth is an increasingly difficult feat. One major exception
can be found in the Hispanic independent
channel. In recent years, the surging U.S. Latino population has fostered a greater appreciation for Hispanic culture and culinary influences among American consumers, while
fueling demand for stores that cater specifically to the Hispanic shopper. Currently,
Hispanic grocery retailers operate in almost
every major metropolitan market, with the
strongest regional concentration in California, the Southwest, Texas and the Northeast.
In 2013, two of the largest American chains
– Anaheim, California-based Northgate Gonzalez Markets and Ontario, California-based
6
Nestlé and General Mills participated in Unified’s Celebremos (“Let’s Celebrate”) program in early 2014,
engaging shoppers at monthly storefront events that play off themes such as music, education and health.
Cardenas Markets – leapt into the top 10 of
Supermarket News’ annual ranking of the
top small chains and independents.
With stores that feature a relaxed shopping environment and management teams
that generally place fewer restrictions on
merchandising and promotional activity than
their mass-market counterparts, the Hispanic independent channel is a natural conduit
for shopper marketing. These retailers typically employ a more loosely structured and
open design concept than the dense aisle
format of traditional supermarkets. Vibrant
colors, abundant stacks of fresh produce
and a wide assortment of home-country
brands are all meant to create “a Mercadolike experience” for the Hispanic shopper,
says Roberto Siewczynski, EVP and general
manager, CatapultVista. “A lot of these
stores have been built from the bottom up
because of a need in the community.”
Strengthening ties with their local communities is a top priority for many Hispanic
chains. Therefore, CPG marketers have an
opportunity to participate in a packed corporate calendar that includes in-store promotions and sponsorship of a variety of holiday/cultural celebrations, sports programs
and entertainment events. “There are fewer
barriers put up. Managers have more control and autonomy over what goes into the
store,” says Siewczynski. “The beauty of the
independent channel is that shopper marketing is in their DNA and therefore they can
WINNING AT RETAIL
come up with some of the most innovative
and culturally relevant initiatives.”
Still, he says marketers must weigh the
need to create ground-up programming that
communicates their own brand equities while
meeting retailer objectives to grow basket
and category size. “Given that the channel is
more flexible they also tend to be very receptive to brand-specific programming. This allows brands to augment some of the vendor
programs with independent tactics,” says
Siewczynski. “With the evolution of digital,
the strong role social media plays with the
Hispanic shopper and their receptivity to
‘retail-tainment,’ there is a lot of runway to
ensure that sell-in gets sell-through.”
Some of the larger chains may employ
sales, merchandising and marketing teams
that are structured similarly to those of a
traditional supermarket. At Northgate, for
example, team leaders in center-store and
fresh departments work closely with the
retailer’s manufacturing partners to develop ideas for shopper marketing programs.
Northgate, which now operates 38 stores in
Southern California from San Diego to Los
Angeles County, invites hundreds of CPG
brand representatives to its annual planning
sessions beginning in January. During those
meetings, the company outlines its business
plan and solicits ideas from the manufacturing partners about how to meet their shared
corporate and marketing objectives.
“We don’t have shopper marketing in our
titles, but we approach the discipline with
some of the same practices that you’d find
at a mainstream grocer,” says Northgate
VP of marketing Mike Hendry, who previously worked in similar roles at Safeway and
Supervalu. “We’re trying to emulate the opportunities that are brought to the bigger
chains on a different scale. We’d like to think
we’re every bit as sophisticated about how
we go about our business. Plus, there’s not
as much red tape in working with our organization. We can come to an agreement
sitting around the table and put that idea
into action the very next day.”
Daniel Balcazar, director of marketing at
Garland, Texas-based El Rancho Markets,
says that his vendors approach shopper marketing differently from store to store depending on the various needs and interests
of customers in those locations. El Rancho’s
Latino shopper base averages about 60%
but may run as high as 95% in heavily popWINNING AT RETAIL
ulated Hispanic markets in central Dallas,
where the vast majority of customers are
from Mexico, followed by Puerto Rico, Guatemala and Cuba.
A variety of tactics are proven to work
well with El Rancho shoppers, says Balcazar,
including in-store product demos, signage,
raffles and product giveaways. The retailer’s
manufacturing partners have had some of
their biggest successes this past year in leveraging sponsorships at proprietary El Rancho
events, including concerts and festivals, during popular celebratory occasions such as
Cinco de Mayo (Bud Light) and June’s Brazil
World Cup (Coca-Cola).
HISPANIC INDEPENDENTS’
RECEPTIVITY TO IN-STORE
TACTICS
A-boards
Aisle Violators/Fins/blades
Balloons
Base Wrap
Ceiling banners/signage
Checkout Ads
rarely
often
sometimes
often
sometimes
rarely
Checkout dividers/separators
sometimes
Circular rack ads
sometimes
Counter cards
sometimes
Demonstration/Sampling kits
often
Digital signage ads
rarely
Employee apparel
sometimes
K-C, Clorox Clean Up
Endcap signage kits
Of course, there are some challenges to consider when developing programs at Hispanic
retailers. For instance, most do not have loyalty card programs, a natural vehicle with
which to deliver promotional offers to shoppers. Plus, many of these privately owned
stores have been reluctant in the past to
share category sales data with manufacturers, although some observers say that the
trend has begun to reverse in the last year or
two. “From a data and ROI perspective there
used to be a lot of gaps, but I have seen
major improvements in this area,” notes
Siewczynski.
Still, many major CPG marketers view their
Hispanic retail activation as an important
way to drive incremental sales and longterm growth. “It is very important for us to
win in this channel,” says Lizette Williams,
senior brand manager at Kimberly-Clark,
who leads the company’s overall multicultural marketing strategy, including working
on Hispanic shopper marketing programs.
Early last year, Kimberly-Clark brought its
previous kid-focused Sneeze Catchers campaign (see Shopper Marketing cover story,
May 2011) for its Kleenex brand to 3,000
shoppers at parking lot events at Northgate,
Vallarta and Superior stores. The program recorded a total of 13,000 “certified” Sneeze
Catchers and helped drive incremental sales
of 500 cases of Kleenex tissues. “Are we
going to drive the volume that we get out
of Walmart? No,” says Williams. “But we are
going to build credibility and a sustainable
foundation that we need to establish with a
core community.”
The Clorox Co. is among the most active
CPG marketers at Hispanic independent
Floor Decals
often
sometimes
Header Cards
often
At-shelf product demo/sample
often
In-line/category headers
In-store radio
rarely
sometimes
Inflatables
rarely
Outdoor signage
often
Neckhangers
often
New item showcases
often
Pole toppers
Printed materials/handouts
often
sometimes
Placeholders, on-shelf
rarely
Price-label messaging
rarely
Security pedestal ads
rarely
Shelf Blockers
rarely
Shelf Strips
Shelf Talkers
Shelf Danglers/Wobblers
sometimes
often
often
Shopping Cart Ads
sometimes
Side Panels
sometimes
Standees
sometimes
Take-one dispensers
sometimes
Tearpads
T-stand posters/stanchion signs
Wall banners
often
sometimes
often
Window clings
often
Window posters
often
Endcap Displays
often
Shelf trays/PDQs
often
Pallets
Floorstands/shippers
sometimes
often
Dump bins
often
Power wings/sidekicks
rarely
Category management systems
sometimes
Spectaculars/lobby displays
sometimes
Parking lot events (fairs, festivals)
often
Radio remotesoften
Source: Roberto Siewczynski, CatapultVista
7
To drive trial for concentrated bleach – a challenge with those Hisretailers, selling its entire
panic consumers who associate value with package size – Clorox used
portfolio of cleaning prodin-store merchandising with neck hangers and on-pack coupons.
ucts (including its dedicated
Hispanic Fraganzia bleach),
as well as other brands including Kingsford charcoal,
Hidden Valley salad dressing, Masterpiece barbecue
sauce and Glad trash bags.
About 70% of the company’s distribution within
the Hispanic channel occurs
within the Los Angeles and
Houston markets, per the
company. Its major West
Coast accounts include
Northgate, Sylmar, California-based Vallarta Supermarkets, Paramount, California-based El Super, and
Santa Fe Springs, Californiabased Superior Grocers.
Clorox is testing various mix-and-match offers that
Clorox has been chal- incorporate a new item alongside a proven winner
lenged to develop a value among Hispanic shoppers.
proposition for its core cleaning products that allows it to
compete with lower-priced Hispanic brands of The Sun Products Co.’s Sun
and ubiquitous private-label offerings. Its detergent. A similar Buy/Get
Kingsford and Hidden Valley value brands offer featured $2 off on a bag
do quite well at Hispanic retailers, while the of Kingsford charcoal with
premium disinfectant sprays and brands like purchase of fresh meats. “We’re doing a the offers on our digital properties – our
Pine Sol tend to fare better at mass outlets, lot of test-and-learn with all of our Hispanic website and mobile site – and the displays
according to Ruben Morales, Southwest retailers, driving trial through cross-promo- have a consistent spot in the store.”
regional sales manager/multicultural group tion and using couponing to help reduce the
Northgate tends to shy away from single
at Clorox. “We’re making inroads with our price gap,” says Morales.
brand or category offers, preferring to propremium brands by communicating their
Clorox further tapped into grilling occa- mote two or more differentiated items on a
superior performance,” Morales says.
sions by pairing Kingsford charcoal with typical shopping list. Last year, for example,
That strategy came into play as Clorox pro- Hidden Valley Ranch salad dressing in the a Pilon offer combined Axe deodorant with
moted the recent conversion to its new con- Pilon program at Northgate. Pilon, which Monster energy drinks to attract young Hiscentrated bleach – a particularly steep chal- roughly translates to “bonus,” is a Buy/Get panic males. The impetus for such partnerlenge with Hispanic consumers, who tend offer in which the manufacturer receives a ships may come from either side of the aisle,
to associate value in the laundry detergent front-page weekly circular ad and guaran- Hendry notes. “There are a lot of brand
category with package size. Clorox used a teed endcap display. Morales says the pro- teams that have internal company relationvariety of tactics throughout the channel, gram has been tremendously successful for ships, such as Anheuser-Busch and Frito-Lay,
including Spanish-language advertising and Clorox, generating sales lifts of up to 400% or PepsiCo and Frito-Lay. They’re already
in-store merchandising with neck hangers during the weeklong promotional period.
talking to each other so they’ll come to us
and on-pack coupons, to drive trial for the
Northgate’s Hendry cautions that a new with ideas,” he says. “At other times we’ll
new products during the February to April item may not achieve quite the same results make those linkages when we know there’s
2013 period.
as those of a familiar brand. Still, he says that interest from companies that may not be
Clorox has achieved some of its best re- manufacturers are “very anxious to get into talking to each other.”
sults with mix-and-match offers that incor- the program,” now entering its second full
porate a proven winner among Hispanic year. “Our customers are pretty value-con- Unified Draws Nestlé, General
shoppers. For example, in a 2013 program scious. We’re taking two items off their list Mills
that it plans to repeat at its major Hispanic in a unique way,” he says. “The program is Putting together a coherent strategy to adretail accounts, shoppers were offered a free very recognizable to shoppers. The signage dress the patchwork of U.S. Hispanic inde64-oz. bottle of Clorox bleach with purchase has a defined look and feel. We’ll promote pendent retailers can be a laborious task.
8
WINNING AT RETAIL
Many smaller chains do not even have
dedicated marketing functions; their management teams are primarily tasked with
daily store operations. This is where Unified Grocers is playing an increasingly vital
role. The Commerce, California-based company is a retailer-owned wholesale grocery
cooperative that serves more than 3,000
stores, including some 400 Hispanic independent grocery retailers, to whom it provides a range of services including marketing, merchandising, advertising, warehouse
distribution, procurement and IT. Over the
last several months, Unified has rallied its
competing members around the common
goal of attracting more marketing dollars.
Unified provides an entry point for manufacturers looking to create shopper marketing programs through its retail marketing
services network. “As an extension of our retailers’ marketing teams, we can tap into additional shopper marketing dollars that they
may not need,” says Nancy Lopez-Pedroza,
regional marketing manager. “We work
with brands to understand their marketing
objectives and help them decide whether
to provide scale across all of our members
or activate a program with one or two key
retailers.”
Nestlé and General Mills were among
the marketers that participated in Unified’s
Celebremos (“Let’s Celebrate”) program in
early 2014. The idea behind Celebremos is
WINNING AT RETAIL
to engage shoppers at monthly storefront
events that play off themes such as music,
education and health. Brands, meanwhile,
conduct outreach and sampling of products that the host retailer wants to highlight
that month, offering additional premiums
to attendees such as coupons or product
giveaways. Nestlé, for instance, handed out
branded coffee mugs and a Nesquik Club
plush bunny to consumers who purchased
the required number of Coffee Mate, Nescafe and Nesquik products.
General Mills participated in Celebremos
events at Cardenas Markets, Tresierras Supermarkets, Northgate, Rio Ranch and Super
King stores. The company interacted with
consumers at its branded tents, where it
handed out its Que Rica Vida custom lifestyle publication targeted to Hispanic moms
and distributed samples/offers on products
including Honey Nut Cheerios, Yoplait GoGurt, Nature Valley granola bars and Progresso soup. “We selected brands that our
marketing divisions are supporting with incremental spending. These are brands that
our research shows either have a great relationship with Hispanic consumers or ones
for which we’d like to build better relationships,” says Meghan Riley, account manager
at General Mills.
For example, while Hispanic consumers
over-index for Cheerios, they had yet to fully
embrace Chocolate Cheerios to the extent
they’ve purchased other chocolate-flavored
cereals. Thus, General Mills added Chocolate
Cheerios at the February events and planned
to leverage the program with additional
brands later in the year. “Celebremos gives
us a way to quickly activate with key retailers,” says Riley. “Had we tried to plan [and
execute] these events internally, it would
have taken much longer to do.”
In the program’s ensuing weeks, Unified
sends participating manufacturers an event
recap that includes an experiential summary
(e.g., numbers of visitors, samples distributed), along with photos and updates on
in-store display activity and a scan report
that includes detailed purchase data before,
during and after the event. The latter is key
to an ROI assessment that goes beyond engagement to show the direct impact of the
events on sales.
“You have an opportunity to go a little
deeper in shopper marketing to Hispanics because Hispanics shop differently and
what’s important to them may be very different than other shoppers,” says Riley. “We
did a mail-in offer a couple years ago for a
$25 gift card with the purchase of four cereals. It had very low redemption. We learned
that Hispanic shoppers want to see the value
of something now, or as they are leaving
the store. If you don’t do what’s relevant for
them, you’re not going to reach them no
SM
matter how good your ideas are.”
9
Part 2:
Striking the Right ‘Balance’ at
Walgreens
General Mills tapped into Walgreens’ Balance
Rewards program by producing custom
Cheerios boxes that were available at select
stores this spring.
By Michael Applebaum
With revamped stores, an evolving loyalty card
program and a friendly stance toward suppliers,
the leading drugstore chain gives its marketing
partners plenty of reasons to be ‘happy’
A
t Walgreens headquarters in Deerfield, Illinois, there’s a mantra that
neatly sums up the company’s strategic objectives for this year and beyond:
“Help people get, stay and live well.” This
ethos is reflected in the public balance
Walgreens strikes in juxtaposing its various
health and wellness initiatives against a market positioning that also embraces the indulgent side of consumption: “Walgreens: At
the Corner of Happy and Healthy.”
10
Here is how the retailer envisions its yinand-yang philosophy could translate into a
shopping trip at one of its stores: A loyal
Walgreens shopper, the mother of two children, goes to Walgreens.com to obtain information about her flu-like symptoms. She
is later treated at a Healthcare Clinic inside
her local Walgreens. A pharmacy representative consults with her regarding potential
remedies and directs her to the OTC aisles,
where she stocks up on nutritional supple-
ments as part of a new preventive cold-andflu regimen. She grabs a salad for lunch and
enrolls in the Balance Rewards loyalty program at checkout. Before completing her
purchases, she throws a candy bar or two
into her basket to placate her kids and, quite
possibly, to soothe her own soul.
On the surface, Walgreens has taken considerable measures to facilitate such a multipurpose – and omnichannel – shopping environment. Many of the chain’s 8,200 stores
in the U.S. have been revamped to include
a larger pharmacy section and bigger overall floorplan with cleaner, well-lit aisles that
feature fresh grocery items and high-end
cosmetics. Those enhancements echo the
much larger changes that Walgreens introWINNING AT RETAIL
duced at its 20,000-plus square foot flagship
stores – which include everything from sushi
bars to Look Boutique beauty destinations
– and expanded Well Experience formats
beginning in 2011.
Behind the scenes, Walgreens has begun
to use the data it has collected from the
more than 80 million active members in its
Balance Rewards program to develop more
meaningful profiles of its customers. The
retailer is currently in the process of updating its approach to shopper marketing with
a new segmentation model comprised of
different need states. For example, it has
identified groups of shoppers who buy certain OTC products for their specific health
benefits, and another group with a similar
pattern of purchases that is based on a desire to look and feel good.
For manufacturers, this deeper segmentation analysis represents an opportunity to
leverage brands across multiple categories. It
is a key part of Walgreens’ strategy to “link
the front and back of store,” says Alysia Margiloff, account director and Walgreens team
lead at Catapult. “Walgreens is looking to
its brand partners to help them grow basket
size by creating programs that are specific to
different kinds of shoppers.”
The Balance Rewards program itself has
opened up new opportunities for Walgreens
suppliers, albeit slowly. “Our merchandising
and vendor collaboration teams are partnering with suppliers to help them understand
the value of the program and to build strong
promotions that feature point offers,” says
Rick Ton, senior manager of brand and program innovation at Walgreens.
Ton works alternatively with suppliers on
merchandising programs to drive traffic to
stores and with digital/social media teams
to develop editorial strategies for Walgreens’
online communities. His inbox is typically
jammed with solicitations from marketers
seeking to align their brands with the Balance Rewards program. However, he says
that Walgreens is proceeding “cautiously”
so as not to dilute the program’s core message of rewarding customers for healthier
living. An extension of the larger program,
Steps with Balance Rewards awards points
to members for logging their physical activities and immunizations.
Still, unique partnerships are attainable for
brands whose DNA matches closely enough
with these priorities. General Mills, for examWINNING AT RETAIL
ple, recently featured a prominent Balance
Rewards offer on custom Cheerios boxes
at select Walgreens stores. “The Cheerios
brand embodies the values of a healthy lifestyle,” explains Ton. “It was a win-win for
both of us.”
WALGREENS’ RECEPTIVITY
TO IN-STORE TACTICS
A-boards
often
Aisle Violators/Fins/blades
often
Balloons
sometimes
Programs of All Shapes and
Sizes
Base Wrap
sometimes
Companies that seek to partner with Walgreens on shopper marketing programs
should clearly understand both the opportunities and limitations of working with this
critical retail customer. On the one hand,
Walgreens is generally considered to be
supplier-friendly and open to doing a variety of innovative merchandising and promotions at its stores. “We are always looking
for [shopper-based programs] that enhance
the customer experience and create shared
value,” says Ton. “We welcome ideas of all
shapes and sizes as long as they meet those
goals.”
At the same time, much of Walgreens’
programming is tied to seasonal/themed
events (e.g., “Game Day” for the Super Bowl
or March Madness, and Women’s Health
Month in May) for which it requires consistency of messaging, alignment with its creative style guidelines and maximum funding
from marketing partners. Brands that buy
into such programs receive a package that
includes TV and radio advertising, in-store
displays, Balance Rewards incentives and
placement on the front covers of Walgreens’
circular and coupon book. In order to forge
new territory with breakthrough programs,
brands must work diligently to bring something unique to the table – namely, a concept
borne out of meaningful category insights
that actively assists Walgreens in meeting
one or more of its key marketing objectives.
Procter & Gamble has done just that in a
multipronged tie-in with Walgreens’ sponsorship of the P&G-owned People’s Choice
Awards. Major elements of the program included branded integrations during the live
telecast and Twitter parties offering beauty
tips to participants along with a chance to
win a gift bag with $250 worth of products.
In-store, endcap displays featured P&G products throughout the six-month promotional
period with Balance Rewards offers on participating brands including Olay, Pantene,
Secret and Crest.
Kenny Olson, shopper marketing leader for
Checkout Ads
often
Checkout dividers/separators
rarely
Circular rack ads
often
Ceiling banners/signage
often
Counter cards
often
Demonstration/Sampling kits
often
Digital signage ads
sometimes
Employee apparel
rarely
Endcap signage kits
often
Floor Decals
Header Cards
At-shelf product demo/sample
sometimes
often
sometimes
In-line/category headers
often
In-store radio
often
Inflatables
rarely
Outdoor signage
often
Neckhangers
sometimes
New item showcases
sometimes
Pole toppers
sometimes
Printed materials/handouts
often
Placeholders, on-shelf
sometimes
Price-label messaging
often
Security pedestal ads
often
Shelf Blockers
Shelf Strips
Shelf Talkers
Shelf Danglers/Wobblers
Shopping Cart Ads
often
sometimes
often
often
sometimes
Side Panels
often
Standees
often
Take-one dispensers
often
Tearpads
often
T-stand posters/stanchion signs
often
Wall banners
rarely
Window clings
rarely
Window posters
often
Endcap Displays
often
Shelf trays/PDQs
Pallets
often
sometimes
Floorstands/shippers
often
Dump bins
often
Power wings/sidekicks
often
Category management systems
rarely
Spectaculars/lobby displays
often
Source: Path to Purchase Institute Analysis, May 2013.
11
the Walgreens team at P&G, says the program
was built around a shared objective of establishing Walgreens as a top-tier beauty retailer.
“Our solution helped customers build a beauty
and skin-care regimen in which every aspect
of treatment was made available through our
products at Walgreens stores,” he says. The
program drove total category growth at Walgreens on the strength of multiple P&G brands,
Olson notes.
Olson says that P&G works closely with
Walgreens to identify the retailer’s strategic objectives in the appropriate categories,
12
mission are a key component of the strategic
discussion around program development,
says Michael DePanfilis, general manager of
global e-commerce and U.S. shopper marketing at The Hershey Co.
“It’s critical to the success of this
process to have a solid shopper foundation and understand the ‘size of
the prize’ to allocate the appropriate
resources to your plan,” DePanfilis
says. “We then discuss the objectives and strategies in order to determine which touchpoints are needed
to influence shopper behavior and
drive demand for the category and
Hershey brands.”
In the second half of 2014, Walgreens planned to work with various companies to promote themes
Examples of successful collaboraaround convenience, such as “minition at Walgreens include the
occasions,” in the immediate conannual People’s Choice Awards
sumption category. “The idea was
effort with Procter & Gamble and
the retailer-driven Vitamin Angels
to tap into the impulsive nature of
initiative supporting Walgreens’
Walgreens shoppers and offer a
Way to Well Commitment.
quick snack solution,” explains Katie
Goldlust, management supervisor at
then determines the brands and specific Catapult. “These kinds of programs take admarketing tactics that could help meet those vantage of the conveniences that Walgreens
goals. “Walgreens operates with a high de- offers, such as ample parking and easy ingree of discipline and planning. It’s impor- and-out access to its stores.”
tant to open up the conversations early if
you are going to be a successful partner with New Programs, New Shoppers
them,” he says. “For the shopper marketer, Going forward, Walgreens will look to its
that means being ready to hit their dates and manufacturing partners to develop ideas
understanding what is necessary in terms of for programs that support its new customer
the right elements for a program so that you segmentation approach. “It’s an opportunity for suppliers to come in and say: ‘I am
remain consistent with their timeline.”
At the front of store, such as in the con- the category leader and here’s how we can
fection category, factors that influence trip connect to customers in a new way,’” says
WINNING AT RETAIL
Jessica Campbell, a research analyst with
Boston-based Kantar Retail. “Walgreens is
looking for solutions that allow it to convert
customers to other categories across the
store. That’s where they’re headed.”
Thus, a company like Bayer HealthCare
could leverage its brands not only to support Walgreens’ Way to Well Commitment
– which includes cause marketing initiatives
for Vitamin Angels, a global child disease
prevention program – but also to deliver
insights that may lead to cross-merchandising opportunities in beauty or personal
care aisles. “Walgreens’ new segmentation
model identifies a group of consumers we
don’t normally engage with: women who
are focused on beauty versus traditional
OTC,” says Bob Schultz, director of sales
at Bayer HealthCare’s Consumer Care division. “With over 100 million shoppers in
this segment, we are taking a closer look
at our brands to identify opportunities for
incremental growth. We have the data and
insights at our disposal to base innovation
around fulfilling a true shopper need.”
Such partnerships support Walgreens’ efforts to strengthen ties with its core boomer/
senior customers (who are generally more
focused on wellness) and younger shoppers
(who might fit in more closely in the “look
good and feel good” segment). Already,
data shows that Walgreens’ shopper base is
gradually becoming younger, more affluent
and ethnically diverse, says Campbell. As of
Q2 in 2013, for example, 21% of Walgreens
shoppers had incomes of at least $100,000,
and 26% were either Hispanic or AfricanAmerican, per Kantar’s research.
Data and insights derived from the Balance
Rewards program will continue to fuel efforts
to reach these various groups, says Kathryn
Zajac, vice president and general manager of
client services at Epsilon, a loyalty marketing
services firm which hosts the electronic platform for the program. “The information is
incredibly useful for a company like Bayer
or Johnson & Johnson in working with Walgreens to create targeted programs and to
put together a product assortment that is
relevant for Balance Rewards shoppers,” she
notes.
Ton says the program is not only driving transactional value but also motivating
shoppers to become more deeply engaged
with the Walgreens brand. “Our customers
are spending more time with us,” he says.
Four Keys to Winning at Walgreens
‘No’ Doesn’t Necessarily
Mean ‘No!’
“Don’t be reluctant to approach Walgreens with a new idea. Just because
the chain hasn’t done something
in the past doesn’t mean it won’t
consider it in the future. Walgreens
publishes very detailed worksheets
for its vendors, but if it sees a good
idea, it will find a way.”
Embrace Digital
“Walgreens is investing heavily in
digital in an attempt to become truly
omnichannel. It is looking for vendor
partners to help blur the line between
mobile, online and in-store by innovating within the category and incorporating all of these formats into merchandising and promotional plans.”
WINNING AT RETAIL
“We’ve seen tremendous interest when
we’ve posted content online at the Steps
landing page, such as features on stretching techniques and how to shop for healthy
foods on a budget. Thousands of people
read these articles. That’s sparking conversations with shoppers and building loyalty for
Walgreens.”
Indeed, all of these efforts appear to be
paying off. According to research from Brand
Keys, a New York-based firm that produces
an annual study of customer loyalty engagement metrics, Walgreens’ loyalty scores have
moved up by about 10% in a two-year period as of the latest report in January 2014.
The company still trails No. 1 CVS/pharmacy
in the drug store/retail category, but it is
closing the gap, says Brand Keys president
Robert Passikoff. “Balance Rewards has certainly played a part in this,” he says. “The
brand scores moderately for the benefit of
extra points but gets even more credit from
a corporate reputation perspective of supporting a healthy lifestyle.”
That’s gratifying news for Walgreens. “It’s
all about innovating and helping people make
healthy choices,” Ton says. “We’re always
SM
looking for unique ways to do that.”
By Alysia Margiloff, Catapult
Leverage Balance Rewards
“In the coming months, there will be
an intense focus on leveraging the insights gleaned from Balance Rewards
data. Use this data to bring insight
into how the box is being shopped,
and to target promotions based on
spending patterns.”
Focus on Shopper Experiences
“Help Walgreens create a memorable
shopping experience by using shelf,
display and endcap space in new and
innovative ways. Partner with Walgreens on in-store services like beauty
advisors and clinics to offer expert
advice. Work with its creative teams
to make sure you present your brand
assets in a way that aligns with Walgreens’ style guidelines.”
13
Part 3:
Adapting with
Amazon.com
By Peter Breen
Amazon.com has a lot to learn about the grocery
business; CPGs are probably the best teachers
T
he landing page for Amazon.com’s
new Prime Pantry home delivery service has a rotating carousel of five
ads. The first two depict products from multiple manufacturers. The other three present
exclusive groups of brands from Procter &
Gamble, Coca-Cola and Unilever.
Launched in April, Prime Pantry is just one
of the services that e-tailing giant Amazon
is rolling out to accomplish in the packaged
goods world what it has already done in
books and other general merchandise categories: “achieve global domination,” to use
a phrase offered only half-jokingly by Brian
Cohen, executive vice president and general
14
manager of Catapult eCommerce, Westport, Connecticut
A steadily growing presence on the U.S. retail scene for nearly two decades now, Amazon.com blatantly crashed the party in 2013
when its domestic sales – roughly $44 billion,
according to Boston-based Kantar Retail –
made it a top-10 retailer for the first time. An
estimated 20% of all e-commerce transactions are taking place through Amazon.com.
Granted, sales of food and beverages are
just a sliver of that total. But the e-tailer already
is a major player in at least a few non-food
CPG categories. What’s more, in addition to
steadily growing its own sales, Amazon has
become the go-to place for shoppers to begin
their information gathering: about one-third
of all retail product searches start on Amazon.com, according to Forrester Research,
New York. And 90% of those searchers are
ultimately buying somewhere else, as even
Amazon itself acknowledges.
“The impact that Amazon has on the entire retail landscape is huge,” says Douglas
Straton, the director of Englewood Cliffs,
New Jersey-based Unilever North America’s
E-Commerce Center of Excellence. “At the
brand level, it goes beyond the sales numbers.
You have to begin understanding the true ROI
that investments with Amazon – or any other
online retailer – have on offline behavior.”
“Amazon is one of the most-watched retailers in the world,” adds Cohen. “Its practices have widespread influence both online
and offline.”
WINNING AT RETAIL
Facing Facts
Some industry practitioners also note, however, that Amazon can be an extremely difficult and frustrating customer because it:
nrelentlessly
works to deliver low prices,
which can mean dropping prices on a SKU
multiple times in a day (then later sending the manufacturer a chargeback). And
it isn’t above playing hardball with suppliers that won’t play along. “It can cause a
great deal of channel conflict,” says Wes
Shepherd, chief executive officer at online
price tracker Channel IQ, Chicago.
nisn’t
inclined to police the actions of its
Amazon Seller third-party vendors, the estimated 2 million “retailers” who account for
about 40% of total site inventory – which
all too often includes expired product, overseas diversions and flat-out fakes. “Ama-
zon’s goal is profitability, and the third-party sellers help that,” Shepherd notes.
ndoesn’t
care which brands get bought
and leaves most product marketers to
fend for themselves on the site. “Everything they do is designed to ease shopping, and that entails the commoditization of products,” says Shepherd.
While Amazon maintains some close vendor relationships, “they focus on working
with well-known players in well-developed
categories. It depends on how large you are
and how much funding you have,” explains
Angela Edwards, vice president of marketing
at Catapult eCommerce. “But to Amazon,
ultimately, every widget is just a widget.”
Thus, top-selling categories may have more
than one vendor manager – but many lesser
categories don’t have any.
Recently, Amazon has been looking harder at turning a profit at the behest of Wall
Street, which, enamored of the company’s
growing share and limitless potential, has
long given the e-tailer a pass income-wise.
That means it’s paying more attention to the
SKUs that are being offered on the site.
“This is a good thing in the long term because, obviously, Amazon needs to make a
profit,” says Julie Fernandez, manager of
sales support at Catapult eCommerce. “But
in the short term, it makes things very difficult for our clients. Amazon wants highermargin products, and they’re weeding out
lower-margin SKUs.”
On the positive side, Amazon does seem
to be making strides as it continues building
a plan for the CPG market. The company
held its first-ever summits for health & beauty and grocery vendors in 2013; attendance
there proved to be fruitful for ConAgra
Foods because “it really allowed us to start
making broader connections” within the etailer, says John Stichweh, director of digital
and social shopper marketing at the Omaha,
Nebraska-based manufacturer.
“If you’re expecting the typical [buyerseller] discussions around data, you’re going
to have a pretty tough time,” says Stichweh. “If you expand the conversation, we’ve
found Amazon to be very collaborative. But
they still act like a Silicon Valley startup, so
you have to come in with a very different
approach.”
“Amazon is incredibly progressive, incred-
Keys to Success at Amazon.com The Catapult eCommerce blueprint
1. Take the plunge: Make a significant (three- to
five-year investment) in both merchandising and media. First, set a good foundation by doing all the basic
blocking and tackling: presenting a full assortment,
perfecting item detail pages, reducing supply chain
problems, optimizing and driving search, developing
and understanding analytics. This will let you make
the right investments that can deliver ROI.
2. Remember the offline impact: At this stage,
you won’t find any ROI if you only measure sales
from Amazon.com. Brands must look more broadly to
understand that, for every $1 in direct sales, there is
$6 or more sold elsewhere because Amazon is also a
WINNING AT RETAIL
consumer research engine: 9 out of 10 site shoppers
buy offline, which makes getting the experience right
on Amazon.com even more crucial.
3. Build the bandwidth: There’s a constant influx
of new talent and shifting responsibilities at Amazon, which can add to the company’s overall resource
constraints. Therefore, managing the relationship
requires a lot of hands-on attention and monitoring.
Dedicated resources, either internally or at a broker
partner, can help engage Amazon at a higher strategic level; the bigger the investment, the more important a dedicated effort becomes.
15
ibly aggressive, and incredibly innovative,”
says Straton. “The roadmap may not always
be clear to others because they’re learning
their way through it and the model is clearly
different from traditional retail.”
Learning the Grocery Ropes
But the roadmap is forming, and seems to
be offering more opportunities for brand
collaboration. Among the key components:
Prime Pantry: Extending the e-tailer’s entertainment-focused Prime platform (which
costs $99 annually), Pantry lets subscribers
select from about 2,000 SKUs of “household essentials” until they fill up a box of
four cubic feet (or 45 pounds) for home delivery at a flat rate of $5.99.
Amazon Fresh: For $299 annually (which
includes all Prime benefits), subscribers get
free same-day or next-day home delivery with
$35-minimum orders of packaged and fresh
groceries. Despite a flurry of expansion rumors, the service is still only available in the Seattle, San Francisco and Los Angeles markets.
Subscribe & Save: Users save 15% off the
total receipt if they order at least five non-
16
food packaged goods for free monthly replenishment by mail.
Niche clubs: Amazon Prime subgroups like
Amazon Mom and Amazon Student add
exclusive benefits for eligible shoppers.
“I think there’s great opportunity for collaboration with these new formats,” says
Straton, because they’re taking Amazon and
other e-tailers into uncharted waters. As an
example, Unilever has been lending marketing support to Amazon Fresh’s expansion.
Simply put, Amazon needs to start acting more like a grocer and find ways to increase trip frequency and basket size among
a shopper base comprised of what Straton
calls “spear fishers.” UK-based Research
Farm quantifies that: The typical shopper
places roughly six orders per year and buys
about one item per order. In comparison,
early Amazon Fresh adopters are buying 20
units per week.
Finding Mutual Benefit
A one-minute animated video running on
Amazon.com in June plugged the e-tailer’s
replenishment service thusly: “Just sign up
for Amazon’s Subscribe & Save program
for automatic delivery of your Gillette razor
blades and you’ll never run out of blades
again.” At the same time, display ads running across the site positioned various P&G
products as “Campus Essentials,” while other ads touted the launch of Gillette Fusion
ProGlide razors with Flexball technology.
P&G treats Amazon like one of its key accounts, providing co-op advertising, paid
search and exclusive packaging, among other
tactics. Late last year, CoverGirl’s promotional
tie-in to “The Hunger Games: Catching Fire”
had five exclusive overlays: Walmart, Target,
Walgreens, CVS/pharmacy and Amazon.
Of course, key account activity normally doesn’t also involve dedicated space in
distribution centers: Media reports last fall
outlined a pilot project through which P&G
lets Amazon ship orders directly from the
manufacturer’s warehouses.
P&G isn’t alone, of course. A growing
number of top CPGs are busy finding ways
to strengthen relations with Amazon. And
the e-tailer knows that it needs help in such
areas as “delivering the right experience” in
WINNING AT RETAIL
key product categories like men’s grooming,
or in building a site-wide coupon program
for consumables, Zach Johnson, Amazon’s
director of media partnerships for CPG and
automotive, said in 2013 while speaking at
the Shopper Marketing Expo. He also noted
that Amazon Fresh’s recipe program was
suggested by a CPG partner. (Amazon.com
declined to be interviewed for this article.)
“You need to find areas where Amazon
is underdeveloped or bring them a concept
that’s new,” says Stichweh. “If a sharp marketer can prove it has something of value to
add, digital shopper marketing can be truly
collaborative at Amazon and elsewhere,”
adds Straton.
Work on the Basics
The first piece of advice for working with
Amazon might be the most obvious, but it’s
something that many old-school CPGs have
found difficult to address: “Amazon has
more digital and technical sophistication,”
says Brian Christensen, director of e-commerce at Kimberly-Clark, Neenah, Wisconsin
“It needs to be engaged on a technical level
and not in the same way as brick-and-mortar
customers.”
That’s not necessarily bad, just different.
“Managing the digital shelf and the pace of
online innovation requires a different set of
competencies than managing a brick-andmortar business,” Christensen says. “Many
of the annual brick-and-mortar processes
are more fluid online,” where resetting the
shelf just once per year would be downright
archaic. “That said, we have many typical
buyer-seller relationships. We work together
to jointly grow the category and have pretty
typical negotiations on typical issues.”
Experienced marketers all agree that the
most important action for a brand to take on
Amazon.com is perfecting its own product
pages. “It’s still all about the content in a
lot of ways,” says Straton. “If you can get
shoppers there and get them to interact with
your product page, then you’ll do well.”
A strong content strategy requires not only
presenting all the right information but also
gaining input from consumers themselves:
research finds that even lackluster reviews
on a product page (2 out of 5 stars) can
dramatically increase purchase likelihood.
Some suggest moving beyond the free,
but restrictive, basic product page to pay for
the “A+” program, which allows for a more
WINNING AT RETAIL
customized brand experience. “The costs
aren’t prohibitive and it shows your commitment,” says Stichweh.
Amazon.com now also hosts roughly 500
“brand stores” (Amazon.com/Dove, for example), which can deliver an even stronger
presence on the site. Costs range from zero
up to $70,000, depending on how much
work Amazon needs to do.
Others recommend securing a Strategic
Vendor Services contract, which costs a few
hundred thousand dollars but earns the
manufacturer a dedicated rep. “It’s critical
for getting things done within the Amazon structure,” Christensen says. However,
participating manufacturers must already
be identified as a strategic partner, which
means they’re already spending a lot more
with the e-tailer. (And, if you’re a strategic
partner, chances are Amazon came looking
for you.)
Such exclusivity makes developing the
right content even more crucial because, for
many CPGs right now, product pages are the
only opportunity they have.
“Amazon has indicated that it’s interested in more collaboration with CPGs, but it
doesn’t necessarily have the corporate structure in place, or the culture, to do that,”
says Edwards at Catapult eCommerce. The
e-tailer still wants most product marketers to
handle things largely on their own through
the automated Vendor Central portal.
Work on the Back End
Building a fruitful business partnership with
Amazon isn’t all about the website, though.
It also requires efficiency with packaging
and distribution, which Stichweh calls “the
secret to unlocking the relationship.” So a
go-to supply chain member is just as important for the account team as the sales and
marketing people. “You need that mindshift internally,” Stichweh says.
Attention to “e-commerce ready” packaging is twofold: making it easy and costefficient for Amazon to reship, and making it attractive for the shopper to buy. A
good example of providing both is four SKUs
shrink-wrapped together that can be sold
and shipped just like that. “Amazon loves it
when they can just get the box, slap a sticker
on it and send it right back out,” explains
Stichweh.
“Brown boxes are OK and often preferred,” says Christensen. “In some cases,
we can save costs in packaging, and in some
cases it can cost more if we need to overbox. [And] all of this must be done in the
context of not proliferating SKUs.”
“Not everyone has these capabilities right
now,” notes Fallon Schmitt, associate manager at Catapult eCommerce. “But they
need to start having the conversations internally because this is the future.”
Meanwhile, optimizing the supply chain
“is probably even more critical than it is with
other retailers, “ says Stichweh, because of
the need to keep delivery periods short. And
managing the demands of the Pantry and
AMAZON.COM
Top Advertised Grocery
Categories, 2013
OVERALL
RANKING
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Paper products11
Laundry22
Candy25
Coffee & tea26
Pet care27
Snacks28
General breakfast30
Nutrition31
Skin care32
Cosmetics33
Top Grocery Brand
Advertisers, 2013
2014
RANKING*
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Bounty8
Charmin7
Tide Pods93
Enfamil138
Vanity Fair11
Lipton28
Kind79
Duracell135
CoverGirl58
Ekobrew146
*Through May 31
Source: OASIS
17
Fresh programs “presents new challenges,”
Christensen says, especially since their initial
scale is so low.
“Amazon’s forecasting is always behind
and their ordering system is clunky. You
need to provide extra guidance and support, especially with a hot product,” says
Catapult eCommerce’s Fernandez. “The ordering system is automated and takes place
weekly – and they want vendors to compress
lead times accordingly. So you have to work
to stay ahead.”
“In a rapidly growing business, it’s hard
to just rely on historical tools to accurately
predict volume – especially since it’s hard to
predict when social media or some blogger
will pick up a promotion and drive significant
lift,” Christensen says. “But we’re learning
together how to do that better.”
Work on the Front End
Elsewhere, marketers who’ve been working in the Amazon trenches strongly recommend buying ads through the Amazon
Media Group (AMG). “Amazon’s holistic
evaluation of partner profitability includes
the buy,” explains Schmitt. Buying media
also can help a manufacturer earn strategic
partner status, a designation that gets factored into the site’s search algorithm (which
also considers product sales, conversion
rates, page views and content quality) and
opens other doors as well.
Advertising at the category-page level and
deeper on the site is the domain of Amazon’s
vendor management group. All “higher”
pages are handled by AMG and are treated
as a straightforward media platform with
impressions, click-throughs and purchase
consideration as the success metrics, not
sales. (Since Amazon.com drew 122.5 million unique visitors in April 2014, according
to comScore Inc., the site isn’t a bad option
as far as national buys go.) AMG also manages an off-site network of ads on consumer
sites (like People.com) to drive traffic.
Promotionally, “Amazon is still very new
to the game, so everything is basically pricebased right now,” says Fernandez. “There’s
a lot of ‘test and learn’ taking place. But they
are trying to develop best-in-class programs.”
Aside from the tactics already mentioned,
marketers point to other programs such as
Amazon Vine, which puts product samples
into the hands of a by-invitation group of
star reviewers from the site. And there have
18
been a few cases of manufacturers uniting for cross-merchandising programs, although getting two Amazon vendor managers working together is even harder than
aligning a pair of Walmart buyers. (Trying
to get AMG and vendor management together on a program can be just as hard,
by the way.)
Bringing unique, account-specific ideas
that meet Amazon’s needs “show that
they’re top of mind with you,” says Stichweh, who notes that ConAgra has had success with programs built around football
and other traditional programming themes.
Marketers also should consider off-site efforts that drive traffic to Amazon in general
and their own product pages specifically.
The More Things Change
Some marketers are sanguine about the
pricing issues and see keeping Amazon itself in plentiful stock as a solution. “You
have to get in there to become the best
possible provider of your own products,”
says Stichweh.
“It’s hard for smaller players to offer a
lower price point if Amazon has the scale,”
agrees Channel IQ’s Shepherd, who also
recommends taking a “carrots and stick”
approach to negotiations: Since “Amazon
demands heavy margins,” marketers should
be willing to provide returns allowances, coop dollars and other funding that will incentivize them to not reduce prices later on.
Some also are hopeful that the third-party
issues will gradually improve. “Amazon is
starting to move on that front, but they’re
still mostly looking at sensitive categories like
medications,” says Shepherd.
“It does impact the customer experience,
and that’s something Amazon is concerned
about,” says Schmitt. “It’s funny: If a customer complained about a product, Amazon
would probably shut it down immediately.”
Ultimately, winning at Amazon.com requires “finding the optimal mix of media,
shopper marketing and digital savvy,” summarizes Straton. That means, despite all its
obvious differences, Amazon might not be
so unique after all.
“It’s just like with any other retailer,” Stichweh says. “If you can get the relationships
SM
going, things will start to flow.”
WINNING AT RETAIL
Part 4:
Convenience
Stores
By Michael Applebaum
Boasting solid growth and an attractive cohort of
Millennial shoppers, c-stores are an essential marketing
partner for many leading CPG manufacturers.
S
hopper marketing is alive and well
at convenience stores. With steady
increases in store count and sales
growth over the last few years, the c-store
channel continues to thrive amid a challenging economy. Total sales (excluding motor
fuel) at the approximately 15,000 U.S. cstore locations grew 2.4% last year to $204
billion, according to the National Association
of Convenience & Fuel Retailing in Alexandria, Virginia. Much of that growth is being
driven by the foodservice category, which
now accounts for about 18% of combined
c-store sales and is second only to tobacco
(see chart on page 20).
WINNING AT RETAIL
Convenience stores are an essential marketing partner for many leading CPG manufacturers, having long since outgrown their
humble origins as mom-and-pop operators.
In today’s fragmented retail environment, cstores compete directly with higher-volume
chains in the drug and dollar channels, says
Esperanza Teasdale, senior director of shopper marketing for PepsiCo Beverages. “There
is quite a bit of channel blurring among
small-format stores. Everyone is competing
for that highly profitable on-the-go occasion,” Teasdale says. (Indeed, even Walmart
began testing a c-store concept, Walmart
To Go, near its Bentonville, Arkansas, head-
quarters earlier this year.)
PepsiCo and other major beverage companies view c-stores as a critical entry point for
Millennial shoppers, who are often the target of new products such as fortified waters,
energy drinks and flavored carbonated soft
drinks. Millennials are active smartphone
users, and they are generally receptive to
offers via mobile apps and other digital promotions. They also tend to have larger basket sizes than the average c-store customer,
according to recent loyalty card data from a
major convenience retailer.
Pepsi’s ability to leverage innovation across
its portfolio can “bring shoppers back” in
19
What’s Driving Sales?
Category breakdown of in-store sales at
convenience retailers in 2013
n
Tobacco (cigarettes and other tobacco products): 37.0%
n
Foodservice (prepared and commissary food; hot, cold and
dispensed beverages): 18.0%
Packaged beverages (soda, alternative beverages, sports
drinks, juices, water, teas, etc.): 15.5%
n
n
Candy, salty and alternative snacks: 9.9%
n
Beer: 7.9%
n
Other: 11.7%
Source: National Association of Convenience & Fuel Retailing
categories such as diet sodas, where sales
have declined in recent years as consumer
tastes have shifted toward healthier beverages, says Teasdale. “C-stores are a great vehicle for driving trial of new products, given
the focus on smaller package sizes and the
opportunity to conduct events with many of
our accounts on a large scale.”
Richard Moulton, director of shopper marketing at Dr Pepper Snapple Group, agrees.
“We have national sales teams on a multitude of convenience store accounts, but we
tend to focus on the national players with
respect to our shopper marketing programs.
It comes down to scale and where we can
make the biggest impact,” Moulton says. “It
is very important that we do well in the channel. C-stores are a large and growing class of
trade. In addition, this is an important channel for trial of new items given the immediate
consumption nature of the shopper.”
As c-stores continue to add to their growing
inventory of customer-friendly products and
services, these trends should continue. Many
c-store chains now feature loyalty card rewards
programs and have expanded the footprint of
their stores to accommodate a larger selection
of fresh food and beverage items.
“The convenience channel is rapidly
changing to meet shoppers’ broad product
needs. There is a major shift away from the
older ‘small boxes of basics’ to far more dy20
namic and often larger stores that focus on
two or more key trips,” says David Marcotte,
senior vice president of market insights at
Kantar Retail. “Most retailers in this space
are looking to expand the basket. A c-store
focused on prepared foods will be seeking
products to expand a meal solution, whereas a grocery-directed store will be interested
in additional items associated with a fill-in or
immediate consumption trip.”
Along with these investments, however, come rising overhead costs. While this
can be a drag on short-term profits, it can
also motivate retailers to push further into
shopper marketing programs as they move
quickly to support new sources of growth,
says Doug Middlebrooks, assistant vice
president of shopper marketing for CocaCola Refreshments. “Convenience retailers
are increasing the number of employees per
store as they add foodservice and focus on
reducing customer wait times,” he notes.
Grab ’n’ Go Still Dominates
According to Coca-Cola’s research, the
“Grab ’n’ Go” mission continues to drive
the majority of trips within the c-store channel. More than half of all trips to c-stores
currently fall into that category, and most of
those visits include a beverage purchase. Fillin trips account for the next largest mission,
but only 60% include a beverage purchase.
“Our packaging strategy is designed to meet
these needs,” says Middlebrooks. “We will
continue to use our 16-fluid-ounce cans as
an entry package at a 99-cent price point.
The 16-ounce and 20-ounce PET [recyclable]
bottles serve as our frequency packages,
while the 1-liter bottle will continue to be
our value package offering.”
Coca-Cola’s overall shopper marketing
strategy at c-stores mirrors its approach to
other retailers, says Middlebrooks. “Our
goal is to develop a solution that provides
a ‘triple win’ for our shoppers, retail customers and brands. Therefore, our approach
doesn’t vary by channel,” he says. “One important difference in c-stores, however, is
that in most cases, the shopper is the actual
consumer. Because of this dynamic, our programming is primarily focused on the Grab
’n Go occasion that drives the business.”
PepsiCo’s Teasdale adds that within the
c-store channel, it may be wise for a company to make subtle adjustments to its shopper marketing strategy. “There are nuances
across our largest customers in terms of
what they are trying to solve for,” she notes.
“Some of the larger accounts have extensive
databases, and this enhances the process of
creating shopper programs.”
Other marketers are seeking new ways to
drive incremental growth in the channel. At
Mars Inc., a concerted effort is underway to
identify untapped “hot spots” inside c-stores.
“C-store shoppers move through the store
and make buying decisions quickly, so secondary displays are key,” says Sue Barkalow,
shopper marketing team leader at Mars
Chocolate North America. “By having second, third and fourth interruption points, the
c-store operator has a big opportunity for a
larger, more profitable ring.” Major hot spots
include areas near the register, cold vault,
foodservice/deli and fountain drink counters.
Only one in three c-store shoppers buys
items at the front end of the store, and most
of these shoppers purchase tobacco or lottery tickets, notes Barkalow. Given the highly
impulsive nature of candy purchases, Mars
is also experimenting with merchandising
strategies aimed specifically at shoppers in
the checkout line.
“Retailers can take advantage of this
‘dwell time’ by encouraging consumers to
shop while they wait,” says Larry Lupo, vice
president of sales at Mars Chocolate North
America. Floor displays – such as those adWINNING AT RETAIL
vertising promotions and seasonal confections – perform well in this location. A new
display dubbed “Skinny Tower” maximizes
promotional space while keeping the floor
clear, notes Barkalow.
Mars Chocolate and Wrigley teamed up
on a 2013 Front-End Best Practices study
whose recommendations were implemented by several c-stores, according to the sister
companies. “One regional c-store retailer
saw a 7% lift on front-end conversion,” Lupo
says. “We advised this retailer to revise its
assortment in a freestanding display by the
checkout. Now all four sides employ a splitribbon strategy, so each side displays two of
these power categories: confectionery, salty
snacks, sweet snacks or meat snacks.”
The seasonal confectionery category is
another ripe area for further growth. Seasonal confectionery sales within the c-store
channel were up 19.7% in the 52 weeks
ended Aug. 9, 2014, per Nielsen. “We’ve
found that the most successful displays encourage family and friends to gather around
key moments, such as sporting events, holidays and exciting consumer promotions,”
says Barkalow. A Mars Chocolate “Share
the Joy” miniwing display has been featured
during the Super Bowl, NASCAR races and
a summer-time movie promotion in 2014,
and is also running at select c-stores during
the holidays.
Collaborate With Marketing
Teams
With its vast and complex network of ownership, the c-store channel presents some
unique challenges for shopper marketing
development. Experts highlight several distinctions in executing programs at a national
chain like 7-Eleven or Circle K, for instance,
versus at a smaller, independently owned
store. Most of the larger chains now employ a dedicated marketing department
that works in tandem with buyers, many
of whom have cross-category responsibilities. Thus, it is incumbent upon brands and
their agency partners to undergo a greater
deal of collaboration with each of these independent functions, says Jeff Compo, vice
president at Catapult Marketing.
“Whenever possible, you want to try to
get both the buyer and the marketing team
leaders in the same room at the same time,”
advises Compo. “This approach to the collaborative process ensures that you have skin
WINNING AT RETAIL
Mars Chocolate uses its “Share the Joy” displays to
encourage family/friends gatherings such as the Super
Bowl and NASCAR races. Coca-Cola’s updated Freestyle
countertop dispenser, offering about 80 brand options,
is set to launch at c-stores in mid-2015.
in the game, and that you’ll be able to develop bigger and better ideas that bring total
solutions to the shopper.”
There are pros and cons to working with
c-store retailers of all sizes, he adds. “While
larger chains can achieve greater scale, many
of the smaller stores are ideal environments
in which to test and develop concepts quickly – and push the boundaries on innovation,”
says Compo. “Since this is such a deep channel, brands have to be strategic about their
investment. Many of our clients have been
successful in focusing on the handful of accounts where they have had good working
relationships.”
Smaller stores also tend to be more flexible when brands seek to “own” original
elements of a program, adds Jon Fiondella,
account supervisor at Catapult. “The big
chains are becoming more templated in their
in-store designs, and brands need to help
maintain a certain level of consistency,” he
explains. Many of the larger chains are also
adopting CRM/loyalty platforms, a move
that has significant implications for shopper
marketing. “The CRM strategy is important
because retailers are recognizing that they
need to build a deeper relationship with
their customers,” says Fiondella. “By doing
this they will optimize their databases and
will be able to leverage geographical targeting and daypart strategies to develop more
targeted offers.”
Within this newer “pay to play” CRM
structure, brands may have to pay out more
dollars to retailers to sell-in incremental merchandise than would be required at a smaller
chain. However, Fiondella says, “Over time,
brands will be able to drive incremental transaction by understanding purchase behaviors
and leveraging data to find new shoppers by
product affinity, offers by segment type and
location frequency.”
All of these developments are part of the
ongoing evolution of c-stores as they institutionalize more formal marketing and operating structures, says Compo. “It’s been happening for a long time in grocery/mass, and
now you’re seeing the same process unfold
at convenience stores,” he says.
21
Did You Know?
n
The average time it takes for someone to get in and out
of a convenience store with a purchase is 3 minutes,
33 seconds.
n
Combined with motor fuel sales of $491.5 billion, overall
convenience store sales were $695.5 billion in 2013. Sales
outstripped restaurants (projected at $683 billion for
2014), supermarkets ($620 billion) and drugstores ($238
billion, not including prescriptions).
n
Convenience stores employed
2.2 million people and generated $174.5 billion in federal,
state and local taxes in 2013. Overall, c-stores sales represent
4.0% (one out of every 25 dollars) of the $17.4 trillion U.S.
gross domestic product.
Source: National Association of Convenience & Fuel Retailing
A Mobile Future
Most industry observers agree: Mobile will be
integral to the future of shopper marketing
at c-stores. Major manufacturers are working
closely with their retail partners to uncover
“the next big thing” in mobile marketing.
At MillerCoors, a consumer/shopper insights
lab known as The Incubator is devoted exclusively to the development of solutions that
are rooted in a mobile-first approach, says
Dilini Fernando, digital marketing manager
at MillerCoors. “In 2015, MillerCoors will
test unique [c-store-based] programs around
proximity messaging, driving [gas] pump to
store traffic and mobile loyalty,” she says.
22
Elsewhere, marketers have already begun
to see the fruits of their labor. Last summer,
PepsiCo and Frito-Lay exclusively advertised
a Doritos “Fully Loaded Fridays” program
through the 7-Eleven mobile app. During
the month-long promotion, customers who
purchased an order of Doritos Loaded (the
new cheese-stuffed fresh snacks introduced
at 7-Eleven) received a free 20-ounce bottle
of Pepsi-Cola Made With Real Sugar (also
launched in the summer). In stores, shelf
displays prominently featured Doritos Fully
Loaded products along with bottles of Pepsi
Made With Real Sugar in regular, cherry and
vanilla flavors.
“[‘Fully Loaded Fridays’] helped meet the
objective of establishing 7-Eleven stores as
a primary destination for on-the-go meals,”
says Teasdale. “The program drove significant growth for Pepsi single-serve and generated higher run rates on 20-ounce bottles
of Pepsi Made With Real Sugar. So it was a
win-win for both of us.”
To make further inroads with health-conscious Millennials and female customers, cstores are also introducing a variety of new
fresh food and beverage items. In the fall,
7-Eleven began testing a line of sandwiches/
wraps, salads and cold-pressed juices developed by famed P90X fitness guru Tony Horton. “These new fresh food offerings are a
way for c-stores to increase trips and basket
size, presumably stealing share from QSR
chains,” observes Compo. “We have seen
Wawa c-stores invest in this area for years.
As a result, the [Wawa, Pennsylvania-based]
retailer now enjoys close to a 50/50 split between male and female shoppers, whereas
the channel overall is typically about 70/30
male to female.”
Going forward, quality control will likely
be the biggest challenge for the large chains
with on-site food preparation, as these perishable items require specialized distribution
and labor, Compo says. “I think it will be a
slow build to test and see what moves.”
In the meantime, marketers are increasingly
drawn to c-store retailers as a robust laboratory for shopper innovation. With dedicated
research and insights that can power compelling solutions around the ever-expanding onthe-go occasion, marketers like Coca-Cola’s
Middlebrooks see “huge growth potential”
ahead for c-stores. “That is why retailers in
other channels are racing to join the business
SM
of ‘convenience,’” he says.
WINNING AT RETAIL
Ranked #1 Shopper Agency by the Hub Magazine, Catapult is the behaviorbased marketing services agency that delivers accelerated business growth
through the Art of ConversionTM. This unique data-driven approach
identifies the core, actionable insights that inspire brilliant creative with
the power to convert consumers into shoppers, shoppers into buyers, and
buyers into loyal advocates. Catapult delivers channel-agnostic solutions
that are brand savvy, retailer smart, and digitally enabled.
Headquartered in Westport, CT, Catapult leverages the expertise of
more than 300 employees across 12 offices in major retailer geographies
including Minneapolis, Bentonville, Chicago, Cincinnati, Dallas, Nashville,
Los Angeles, Pleasanton, Phoenix, Tampa and Seattle. Catapult is a member
of the Epsilon Agency Services network, providing direct access to rich
data and world-leading technologies that help enable more powerful client
solutions.
For more information, visit our digital portals:
www.catapultmarketing.com
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24
WINNING AT RETAIL