Article by – Brian Ross, General Manager, Precima, and Win Weber, Chairman and CEO of Winston Weber & Associates Inc.
1. Key product assortments to best meet shoppers’ needs
Determining product assortment, unlike pricing, has been a little less technical – retailers and manufacturers traditionally used simple ranking reports, often augmented by consumer research. But while this approach ensures popular or profitable items remain listed, it may not align product selection with the interests of high-value shoppers. Instead, retailers and manufacturers should systematically scrutinize the baskets of best shoppers to understand which items are uniquely important to them.
For example, one manufacturer was asked to make recommendations on listing, de-listing and adding items in a grocery chain’s cereal assortment. In addition to reviewing sales and profit rankings, the manufacturer commissioned an analysis to determine which items were important to the retailer’s most important shoppers. It emerged that one cereal item, despite contributing a mere 0.2 percent to category sales, was in fact purchased by 80 percent of priority shoppers.
2. Pursue best shoppers across categories
That said, manufacturers and retailers should not limit their research within categories; they should target shoppers across them.
For example, a major retailer recently learned through a basket analysis that its best shoppers’ stock-up trips typically included soup, canned vegetables and wine. So the grocer merchandised all three together in a “stock-up-and-save” promotional event – with great success. The learning: If someone in the valuable time-starved segment has to walk all over the store to put together a meal, she may choose instead to walk straight out the door – dialing for a pizza on her smart phone as she goes.
The same logic applies to manufacturers. If the data points to cross-category behavior, the manufacturer may be able to say, “Look, when you run a cross-promotion featuring our product, the analysis shows that you don’t have to discount those complementary items. So you gain margin.”
3. Bring new precision to special-event promotions
Focusing on the shopper and not the category changes the game at every level, right down to deciding whether a promotion should go on the front of the weekly flyer, or whether a featured price should be $2.99 in one store and $3.49 in another.
To build an effective promotion, manufacturers need to identify what kinds of programs have worked most effectively with priority shoppers in the past – not just one-time cherry-picking, but driving significant behavior changes that can be sustained even with less-frequent promotions.
By pinpointing these behavioral differences among regions and locations, retailers and manufacturers can combine categories in a way that is meaningful to priority shoppers. And with the right desktop tools, they can track and adjust the effectiveness of their programs in real time.
4. Use shopper intelligence to optimize trade spending
For manufacturers, a shopper-focused strategy also opens up new opportunities to better allocate trade spending. Historically, manufacturers and retailers have negotiated multi-layered agreements that combine, for example, promotional co-op funding, over-and-above merchandising charges, exclusive-listing fees and one-time lump sums for achieving specific sales targets. These various spending buckets can be difficult to assess in terms of overall return on investment.
In the shopper-focused world, it’s possible to match trade funds to sales volume in key segments. So promotional investments can be reallocated to those items that priority shoppers really care about. For instance, if it is possible to reach sales goals for laundry detergent with fewer but more targeted promotions, the savings can be directed to, say, sun-care products.
5. Redefine manufacturer-retailer partnerships
After all, at the end of the day shoppers don’t think about categories any more than they follow planograms. They make lists of things they need, identify problems they want to solve, walk into stores and become inspired…they are seeking solutions.
Smart retailers recognize that manufacturers can be incredibly valuable allies as they lead this new drive to see the world as shoppers see it. And by rising above the old wariness around brand-centric biases, both sides share the same ultimate goal: to grow the category, increase overall sales and forge valuable, long-term shopper relationships.
There is general acknowledgement that the old ways of marketing will not suffice anymore. As retailers and manufacturers work together to meet new marketplace realities, they’ve begun redefining their own partnerships. Together, they’re finding new ways of aligning brand strategy with retail strategy to realize exponential gains – all thanks to a simple but monumental change in deciding which question comes first.
For retailers, the question was: “What do the weekly sales reports show?” And for manufacturers: “What does the research suggest?”
Now they can ask together, “What will get the attention of the shoppers who matter most – to both of us?”
About the Authors
Brian Ross 
Brian Ross is President of Precima, a shopper-driven insight and strategy firm operated by LoyaltyOne. He can be reached at bross@precima.com. For access to the case studies referenced in this article, please go to
http://www.precima.com/priority_shopper_download.html
Win Weber 
Win is credited with introducing retailer/suppler partnering in the US market in 1985; later expanding the concept to Australia, Mexico and Asia. He is also recognized as one of the original architects of category management, implementing and evolving the concept at HEB Food and Drug beginning in 1991. He was a resource for the Joint Industry Project on ECR:a resource for the Kellogg Graduate School of Management/Food Marketing Institute.
