Become an In-Store Merchandising Master
August 10, 2009 -- Consumer goods companies in general do a great job understanding what the consumer wants and how to connect with her or him. Despite some challenges, the industry is making great strides in analyzing a lot of information, translating it into insights, and developing ways to connect with the consumer through some form of advertising. But most forget how critical it is to also make that connection with consumers in the retail store. Here, Michael Ferrara, the former SVP, Marketing for Coty who now works with Mphasize developing various innovative solutions to improve marketing productivity and ROI, pulls from his career experience to share key strategies for bringing brands to life at retail.
CGT: As marketers, why must consumer goods companies focus on the in-store environment?
Ferrara: After investing so much in developing a brand message and equity, there is often a less than satisfying experience when the consumer shops for our products at retail. That's probably true more with fragrance than almost any other category in drug and mass retailers. Here's this highly aspirational, luxury product found in a poor store environment. Fragrance is often behind locked glass, with little organization to the shelf and very limited shopping assistance or ability to test the product. So in the past year at Coty, we invested as much on consumer insights at retail as we did on traditional marketing or product research. The company also partnered with some of our customers to test new concepts, which would significantly improve the shopping experience for fragrance. We also did a lot of similar groundbreaking work in cosmetics.
CGT: What key challenges or resistance should consumer goods companies expect from retailers when presenting new merchandising concepts?
Ferrara: It's hard to change the way someone's been doing business for many years. You have to get them out of the box they're in. What I find effective is truly partnering in a very collaborative relationship. Take your customer to focus groups. Let them hear what their customers are saying about them; where they feel they are as a retailer and where they would like them to be. It's pretty compelling when a retailer is faced with the huge amount of white space between those two points from a consumer's perspective. It's also critical to clearly identify and quantify the necessary investment, who will be responsible for which elements of the project, and what the potential return on investment will be in both the short and long term.
CGT: Did you tap outside sources of expertise when developing the potential return on investment for implementing these in-store merchandising strategies?
Ferrara: Absolutely! NPD quantified the total size of the market for us and was helpful identifying the key trends in beauty. Information Resources Inc. (IRI) was extremely helpful establishing the size of the opportunity for drug and mass retailers and the potential return on investment. They were a key partner of mine for a major industry initiative around "quick trips". The data provided by IRI on shopping trips or trip missions was very compelling to me. I was astounded by some of the figures, which really helped quantify the size of the opportunity.
-Only 20 percent of fragrance sales in the United States are in the food, drug and mass (F/D/M) channels. The other 80 percent represent a $5 billion opportunity!
-There is significant leakage coming from department stores as some chains are declining as much as 20 percent to 30 percent year over year in comp store sales. This is a big window of opportunity right now for mass and drug retailers.
-In two-thirds of all F/D/M shopping trips, the consumer has less than five items in the basket and spends an average of just $22. These quick trips represent a big opportunity for retailers to drive more impulse purchases, resulting in larger baskets and improved margins.
-IRI's data also helped us quantify that fragrance is one of the top five categories across all of Health & Beauty Care to drive incremental shopping basket size. In addition, consumer information illustrated that fragrance helped improve the retailer's image with their customers.
CGT: What other lessons did you learn in your research?
Ferrara: We learned that education is critical to helping consumers shop for fragrance. She told us repeatedly in research that shopping for fragrances was overwhelming and even intimidating. So, we teamed up with Lippincott, a very well respected leading design firm. Together, we developed a number of merchandising concepts which greatly improved visibility to draw shoppers to the department and organization of the shelf to better navigate the department. Much like wine, people are often overwhelmed with the selection and don't really understand the difference in products. In wine, it's obviously taste. And of course the challenge in fragrance is smell. Consumers don't have a very good understanding of scent notes, and because there is very limited availability of testers in mass retail, we focused a lot of attention on education. Describing scent notes in a way that's easy for the consumer to understand became a major priority. We tested the concepts with consumers. We used Perception Research and its advanced technology with eye tracking. We were thrilled with the results. Beyond in-store merchandising concepts, we began extending the education to our retailer ads, overall advertising and even in our packaging.
CGT: What will the retail landscape look like over the next few years?
Ferrara: We'll see a lot of evolving formats as many chains will attempt to be the consumer's primary destination on various shopping occasions. And as the media landscape continues to fragment, retail will increasingly become an effective venue for brands to communicate with consumers. All of us as manufacturers have an opportunity to marry our expertise in understanding consumer insights with the retailer's knowledge of their customers. For those who work collaboratively, I truly believe everyone will win -- consumer, retailer and manufacturer.
CGT: As marketers, why must consumer goods companies focus on the in-store environment?
Ferrara: After investing so much in developing a brand message and equity, there is often a less than satisfying experience when the consumer shops for our products at retail. That's probably true more with fragrance than almost any other category in drug and mass retailers. Here's this highly aspirational, luxury product found in a poor store environment. Fragrance is often behind locked glass, with little organization to the shelf and very limited shopping assistance or ability to test the product. So in the past year at Coty, we invested as much on consumer insights at retail as we did on traditional marketing or product research. The company also partnered with some of our customers to test new concepts, which would significantly improve the shopping experience for fragrance. We also did a lot of similar groundbreaking work in cosmetics.
CGT: What key challenges or resistance should consumer goods companies expect from retailers when presenting new merchandising concepts?
Ferrara: It's hard to change the way someone's been doing business for many years. You have to get them out of the box they're in. What I find effective is truly partnering in a very collaborative relationship. Take your customer to focus groups. Let them hear what their customers are saying about them; where they feel they are as a retailer and where they would like them to be. It's pretty compelling when a retailer is faced with the huge amount of white space between those two points from a consumer's perspective. It's also critical to clearly identify and quantify the necessary investment, who will be responsible for which elements of the project, and what the potential return on investment will be in both the short and long term.
CGT: Did you tap outside sources of expertise when developing the potential return on investment for implementing these in-store merchandising strategies?
Ferrara: Absolutely! NPD quantified the total size of the market for us and was helpful identifying the key trends in beauty. Information Resources Inc. (IRI) was extremely helpful establishing the size of the opportunity for drug and mass retailers and the potential return on investment. They were a key partner of mine for a major industry initiative around "quick trips". The data provided by IRI on shopping trips or trip missions was very compelling to me. I was astounded by some of the figures, which really helped quantify the size of the opportunity.
-Only 20 percent of fragrance sales in the United States are in the food, drug and mass (F/D/M) channels. The other 80 percent represent a $5 billion opportunity!
-There is significant leakage coming from department stores as some chains are declining as much as 20 percent to 30 percent year over year in comp store sales. This is a big window of opportunity right now for mass and drug retailers.
-In two-thirds of all F/D/M shopping trips, the consumer has less than five items in the basket and spends an average of just $22. These quick trips represent a big opportunity for retailers to drive more impulse purchases, resulting in larger baskets and improved margins.
-IRI's data also helped us quantify that fragrance is one of the top five categories across all of Health & Beauty Care to drive incremental shopping basket size. In addition, consumer information illustrated that fragrance helped improve the retailer's image with their customers.
CGT: What other lessons did you learn in your research?
Ferrara: We learned that education is critical to helping consumers shop for fragrance. She told us repeatedly in research that shopping for fragrances was overwhelming and even intimidating. So, we teamed up with Lippincott, a very well respected leading design firm. Together, we developed a number of merchandising concepts which greatly improved visibility to draw shoppers to the department and organization of the shelf to better navigate the department. Much like wine, people are often overwhelmed with the selection and don't really understand the difference in products. In wine, it's obviously taste. And of course the challenge in fragrance is smell. Consumers don't have a very good understanding of scent notes, and because there is very limited availability of testers in mass retail, we focused a lot of attention on education. Describing scent notes in a way that's easy for the consumer to understand became a major priority. We tested the concepts with consumers. We used Perception Research and its advanced technology with eye tracking. We were thrilled with the results. Beyond in-store merchandising concepts, we began extending the education to our retailer ads, overall advertising and even in our packaging.
CGT: What will the retail landscape look like over the next few years?
Ferrara: We'll see a lot of evolving formats as many chains will attempt to be the consumer's primary destination on various shopping occasions. And as the media landscape continues to fragment, retail will increasingly become an effective venue for brands to communicate with consumers. All of us as manufacturers have an opportunity to marry our expertise in understanding consumer insights with the retailer's knowledge of their customers. For those who work collaboratively, I truly believe everyone will win -- consumer, retailer and manufacturer.