Business publications and news outlets bombard us with news about rising inflation and upcoming recession every single day. Our lives are impacted by higher costs of everything we need as consumers, but we also are facing business challenges as providers of goods and services.
In the past few years, retail customers have been through a lot. Having a supply chain breakdown, experiencing social isolation, or having difficulty finding products all combine to create a negative effect. Consumers are on edge as prices rise, and brands as well as retailers are keenly aware of this. Because of this, 29% of retailers are concerned that any price change may result in negative consumer reactions
Most business leaders know that there are limits to consumer price elasticity and hard decisions will have to be made in order to maintain the proverbial “ship” afloat.
Of course there are no simple, binary answers to these questions. However, it is critical to remember that this storm will pass too, but decisions that may help you to weather this storm may cause structural damage to your vessel, if you are not careful.
When a company is looking to cut operational costs it is far too often an investment into a retail customer experience coming first on the chopping block.
Retail Marketing Strategy - Tale of two brands
They say history does not repeat itself, but it rhymes. During the 2007 recession most brands closed up the hatches to weather the storm. At that time if you were looking to buy a sailboat, computer images and magazine ads were only means for “experiencing” a product which sells for hundreds of thousand of dollars. No dealer in the US had a product in their inventory to actually come aboard and to take for a sale. No dealer, except the one who signed with a European sailboat brand whose name starts with “B”. They took massive loans to finance boat inventory in the dealer's showrooms when American boat manufacturers were waiting out the recession. Today, nearly every second boat sailing American waterways proudly carries the brand “B” name on their bows. Are they better built boats? Hell, no. As a sailor with a few thousand miles of open ocean sailing experience, I can categorically say that the “B” boats are substantially lower quality of design and construction than most brands they annihilated by gambling on providing better retail customer experience. No they are lower priced.
Another example is an automotive brand starting with “H”. They remembered what the word “brand” means. To consumer brand means trust, and while other competitors reduced their call center staff that helped and supported their customers, the “H” launched a buy-back program in the middle of recession. They allowed Americans to buy a new car which could be returned if they lost their jobs. Sales for “H” rose 5% in January and February 2009, a time when much of the rest of the auto industry experienced steep losses. This move established their brand in the United States’ consumer’s mind where before their name was a favorite target of late night TV comedians.
Consumers are now unusually anxious because of the rise in the price of products, but consumer resistance to higher prices can be reduced by an opportunity to have a highly positive experience of the product prior to purchase.
In Store Product Demo is a part of Retail Marketing Strategy
Instead of reducing the volume or quality of your product while maintaining your price, you can explore an in store product demo as a better retail marketing strategy. The moment you do this, you take your prospect's eyes away from the price and let them see for themselves how the value trumps the price. Leverage promotional scheduling calendar to make in store demos an ever present part of your store experience to make your customers focus on their experience of new products instead of sticker shocks of the products they used to buy.
According to Shopify, In Store Product Demo helps you test new brands or products, enhance in-store experience, improve customer loyalty, Increase sales and gather customer feedback.
Shopify also advises to do the following before embarking on in store sampling: review inventory levels, consider hiring brand ambassadors, combine demos with promotions to boost sales, be selective with demo products and promotional scheduling during business peak hours.
The impact of inflation on customers cannot be overlooked. It is a reality that has come to stay and retailers must combat to ensure viability and profitability. It has been established that price reduction and discounts are not the best strategies to achieve the best retail customer experience. Adopting an in store product demo strategy seems to be a more feasible approach to tackling consumers' response to inflation. Retailers should also be vigilant to observe new consumer behavior by occasional market research.
Facing inflationary pressure, many retailers and established brands are prone to making exactly the wrong decisions - serving less product at the same price as before, or reducing customer service. These decisions are designed to defend decreasing profit margins at the expense of their customers’ experience. Yet it is their prior extensive investments in their customer experience that made them what they are today. Betraying trust of your customers opens opportunities for fledgling startups who care more about cost of customer acquisition than the next quarter margin. In store product demo is the best tool of experiential marketing strategy to steal customers from those established brands who are spooked by inflation.
At CES 2020, H.S. Kim, President and CEO of the Consumer Electronics Division at Samsung Electronics, announced the “Age of Experience” during his opening keynote:
“The Age of Experience will be defined by personalized technology that meets your needs… [it] will help you make a tangible connection with technology in a personal way that was not possible in the past. Instead of changing your routine to incorporate more devices, your devices will work seamlessly for you.”
To put it in simply, the Age of Experience is using technology to create personalized experiences that make life more convenient, more enjoyable, and more meaningful.
The New Retail
In the world of marketing and brand building, especially in the digital space, the concept of creating a deeply integrated experience is likely familiar to you. With ever-growing competition, brands are more eager than ever to build lasting relationships with consumers. In parallel, consumers expect a more meaningful experience.
As with these growing demands, brands have felt the pressure to create a more personal and consistent shopping experience, which has been generally referred to as “omni-channel.”
What is Omni-Channel Marketing?
Omnichannel involves integrating each touchpoint to offer the customer exactly what they need, when they need it, anywhere they are and on any device. So, in theory, a customer can be shopping online from a desktop or mobile device, via phone, or in a brick-and-mortar store, and the experience of your brand will be seamless.
It’s a pretty simple concept, however, executing it is where it becomes tricky.
Take booking a trip to Disney, for example. Starting with your first experience on their website - whether you’re on a desktop or a mobile device, the experience is seamless. Once you book a trip, you can use the My Disney Experience tool to plan everything, from where you'll dine to securing your Fast Pass.
While In the park, you can use your mobile app to locate the attractions you want to see, as well as view the estimated wait time for each of them.
Furthermore, the release of its Magic Band program allows a consumer to use a wristband as an all-in-one park admission ticket, hotel room key, photo storage device, fast pass, and food ordering tool.
They are a tried and true example of how to blur the lines between online and the physical world to compete in the new Age of Experience.
CPG Brands in The New Age of Experience - The Problem
Unfortunately for many CPG brands, their ability to improve the experience of their customers is very often limited by their distribution partners.
In fact, there is a sensitive area of overlap where a retailer (e-commerce or brick-and-mortar) is more concerned about the value of their brand than the value of yours. If you don’t have a well-established brand, the retailer would have to decide whether granting you shelf space will hurt or increase their own value.
Most CPG brands often have very limited access to the consumers of their products in mass, because retailers consider the consumers of your products to be their customers. This greatly restricts the ability of a CPG brand to understand the experiences that customers have with their products, and to collect data. This can ultimately negatively impact their ability to drive a true omni-channel strategy.
To thrive in the Age of Experience, CPG brands have to find direct connection with the consumers of their products.
CPG Brands in The Age of Experience - The Solution
Similar to Disney, few understand the concept of omni-channel retail better than Jeff Besos. Amazon is still a poster child of a company designed around customer experience and that is the key to success of the Amazon brand. In fact, Amazon’s stated mission is to be “Earth’s most customer-centric company.”
While Amazon has vastly more resources than most brands today do, there are still lessons to be learned from their success - and it focuses on leveraging consumer data to improve experience.
So how do CPG brands accomplish this when retailers impede on your ability to connect with your consumers and gather important data?
The answer: tactile experience.
There is an old saying: “one picture is worth a thousand of words.” One of our customers, an experiential marketing firm called Flavor Fanatics, modified the saying to “one taste is worth a thousand pictures” (i.e. advertising images). This is a great testament to a power of tactile experience.
Take Le Tote, for example. They are an online fashion rental store who, in November of 2019 purchased the 194-year-old department store chain Lord & Taylor for $100 million. While it raised a lot of questions, founders Rakesh Tondon and Brett Northart defended their decision, stating:
“A lot of these digitally native brands are realizing there is a ceiling to how much you can scale, and how much you can really connect with a consumer online… There are real limitations, there is no tactile experience, there is a lot of lag and latency in the shipping experience.”
How CPG Brands Can Create Tactile Experience
I get it, not every business is capable of making a $100 million dollar investment to expand their offline footprint, nor do I think it’s advisable in many cases.
The point is that you must meet consumers where they are in order to build relationships and create a deeply integrated experience. An extremely effective way for CPG brands to do this, is through in-store product demonstrations.
You can spend millions of dollars using beautiful copywriting and top-notch design to tell of the greatness of your product, without showing a cent of change in perception of your brand by actual customers.
Alternatively, you can invest $2-$4 per customer, allow them to touch, smell, and/or taste your product, and get direct on-the-spot feedback. This strategy not only benefits your brand’s ability to innovate, but also it benefits your relationship with your consumers. They feel like they’re being heard - not by a robo-chat, or a generic email survey, but by a real person, in real time. And not a "survey", but actual conversation.
Now, isn’t that the better customer experience?
Field Marketing is More Effective
Field Marketing is more effective than any other form of advertising because it can measurably impact sales in a very direct and accountable way.
“Half of my advertising budget is wasted away. Unfortunately I don’t know which half” is the quote attributed to John Wanamaker, Philadelphia retailer and marketing pioneer. Even with the advent of digital advertising it is difficult to account how ads exposure and clicks translate into actual unit sales.
Difference Between Solid ROI and Lost Sales
“Per our study (Adweek), in the U.S. 39 percent decide brand choice inside the store and that decision is most frequently triggered by a product demo versus other activities. Twenty-nine percent of shoppers buy products impulsively in-store. How would you rework your marketing if you had this information about your brands?
Activating brands in-store is the single biggest investment most manufacturers should make today, and using a shopper insight-based approach will be the difference between solid ROI and lost sales.”
In Store Demo Campaign
Any field marketing manager can easily figure out the complete cost of in store demo campaign. Understanding factors that contribute to return on this investment is a little more challenging. Most brand builders realize that the product sales during in store demo are only one piece of this puzzle. While it is easy to measure it is only the tip of the proverbial value iceberg.
Another contributor to in store demo profitability is the product residual sales uplift that often lasts weeks after initial event. You need help from the grocer’s POS data or your distributor”s sales reporting to detect and measure it. Keep in mind that grocers benefit greatly from your in store demo investment, as these events lift sales of an entire product category and promote more traffic in their stores. Your demo reports data also has value to both grocers and distributors, and can be used to incentivise them to pool your information resources together as it enhance the value of this information for all.
Brand Awareness contribution of In Store Demo
Lastly, the brand awareness contribution to profitability of in store demo is often targeted, but rarely measured. We have borrowed a methodology from CAC (Customer Acquisition Cost) calculations as it is commonly used in digital marketing to simplify brand awareness contribution estimates and incorporated it into the Demo ROI Calculator available free of charge.
To build this Calculator, we analyzed data collected during thousands of in store demos, including sales numbers for demonstrated products, day of the week variations of foot traffic during the events, and number of shoppers who tasted a product without purchasing it. We also looked at follow-on sales of these items for four-five weeks after the events. This data is a critical asset in your drive to secure more and better shelf space in the stores.
Retail transactions done online afford customers, wholesalers, retailers and even the manufacturers, the luxury of conducting business anywhere at their own convenience. With speed and accuracy, operations can be carried out smoothly - one can therefore see the dilemma traditional independent grocers face. The concerns about falling traffic in your stores are very real as over 71% of consumers trust that they can find better prices online.
So how do you as a traditional retailer survive and most importantly thrive amidst the disruption and turbulence caused by ecommerce? Below are some ideas to increase sale in retail stores.
The first key to survival is to retain and increase foot traffic in your store - this is one of most important grocery store marketing strategies. The good news is that 94% of retail sales are still conducted in brick and mortar stores. Even with the ease of ecommerce, people still prefer a physical experience, a relationship, an interaction with the product or the retailer. This is what defines us as humans - our desire to interact.
The Major Keys to Survival in this Volatile Retail Environment
One of the best strategies to boost number of customer visits in your stores is to leverage this human desire to interact and to discover new experiences. Try to re-imagine your store as an event space which your customers see as being a fun place to visit - not just the place they need to go for weekly provisioning. Promoting limited time price discounts (TPR) on popular and well known products only leads to erosion of margin.
“If consumers come to expect price cuts as the rule rather than the exception, then price promotions lose their ability to boost sales and become unprofitable. “
Consequently, one of the major keys to survival in this volatile retail environment is the creation of exceptional customer experience in your stores. Retail leaders realize that customers now have a plethora of choices available to them. Surely, the store that provides the best experience is certainly where the customers will throng to. In essence, the traditional grocers have the advantage over ecommerce giants in providing quality customer experience through in store demo and other event based marketing strategies.
According to a survey of 1,786 US grocery shoppers conducted by Food Marketing Institute.
“Among all regular food shoppers, brick-and-mortar supermarkets continue to enjoy a clear edge over online grocery retail in perceived performance on key evaluation criteria, especially in providing fresher produce (a top store-selection driver) and better customer service,”
According To a Survey
With the ever dynamic nature of retail today, there is no way you can talk about improving customer experience without including in store demos. This refined tactic helps to draw customers, boost sales of demonstrated products and also improve the sales of other products in that category. To withstand the barrage of online competitors, you have to think of an in-store demo as a network of events rather than one elaborate show. Knowing the right product to demo, duration of each demo and location for the demo are very crucial to your stores survival. In order to measure the impact of in store demos on your stores’ Sales Per Customer Transaction, you have to consider
Understanding return on investment for these promotional strategies can go a long way in attracting the sponsors for them. Analysis of data, collected effortlessly by your POS, holds the key to leveraging vendor’s promotional budgets for increasing foot traffic in your stores. Any quality in store demo agency or vendor’s field marketing organization collects valuable data specific to the demo events they conduct. Cross referencing POS with demo data can produce empirical evidence, that would entice vendors to demos in your stores all day long, and that will lift:
In retrospect, arming yourself with the right information and tactics will give you sufficient leverage in the unstable 'waters' of retail. Reaching out to your customers, giving them the very best and improving on your operations are essential tips for relieving the pressure of online competitors.
There are several write ups about Amazon acquisition of Whole Food Markets with everyone attempting to clearly state their own opinion. This is seen from different sectors including pundit specification from industries which is channeled towards an unavoidable disruption of the grocery industry. This is with the primary aim of having an analysis of the Whole Foods price reductions. Joining the choir was my own way of offering my opinion and observation from an industry ecosystem participant perspective.
Whole Foods Stores
Over the years, there have been a scale up in the traffic seen with Whole Foods stores. This was noticed only after the acquisition as well as lower pricing of some selected items. However, vendors, distributors and brokers have sent no reports showing that they are dissatisfied with the internal operational changes. Complaints about the availability and quality of organic produce on the store shelves are becoming quite disturbing and these complaints are received mainly from the Whole Foods shoppers.
Whole Foods Management
There is currently no evidence to indicate a positive change from the perspectives of shoppers or the grocery ecosystem. There are only indications to show that a hands off approach to Whole Foods management was adopted by Amazon as they continue with the implementation of operational initiatives even before acquisition takes place.
Major grocery retailers are already announcing their significant investments into technology. This is with the aim of combating Amazon’s scour for food to their territory. The likes of Kroger have already started to court smaller, regional product brands threatened by Whole Foods abandonment. This may be a good development for nonindustrial food manufacturers, when and if it materializes.
Analysis you would find are only focused on the impact of the Whole Foods changes on publicly traded companies. There are only few write ups about how the food brokers, independent groceries, demo agencies, small batch product manufacturers and merchandisers are affected by the changes. In fact, there are only evidence to show that there is lower foot traffic as well brand promotional activities on the store floors of the aforementioned. However, many grocers we spoke to are in denial that a small grocery eco-system will be materially affected. And that is a mistake.
Thanks to Jeff Bezos's relentless focus on the quality of customer experience, i.e. long term sustainability of Amazon business, everyone assumes that the acquisition will produce some magical result and force a major change in how we buy our food. So far this "earthquake" is yet to produce a tsunami of change. Amazon does not always succeed, but it succeeds most of the time. Change now. Before you have to.
The small and independent grocers can obviously not compete with bigger technological investments, rather they can mobilize partners within their ecosystem to provide a better and more personal experience to their shoppers. This should be their prime focus because Whole Foods sidelines their trade partners who helped them to become successful, independent grocers could use this opportunity to forge closer alliances to provide more engaging shopping experience in their stores.