Heinz Optimizes Product Assortments
Heinz is a world-class marketer whose iconic brand of ketchup typically dominates the shelf set in stores. Package sizes range from 14 oz. to 64 oz. in three formats; traditional bottle, the Upside Down with Stay Clean Cap and the Fridge Door Fit.
"We have so many package sizes and types. Our consumer insights told us we had to make the options simpler. The benefits involved pushed us over the edge to look for solutions," says Barbarita Marbelt, the company's consumer and customer insights manager for all the ketchup, condiments and sauces businesses.
Reducing the Challenge
In essence, Heinz wanted to simplify the planogram in stores. Three kinds of packaging often confused the consumer and resulted in increased production costs for Heinz, according to Marbelt. One of the ways to make it easier for the consumer was to reduce the number of packaging options. Fewer options would also make it easier for the retailer to stock the shelf.
In considering which bottle sizes would satisfy consumers, Heinz was leaning toward the Fridge Fit pack. But focusing on this package might lead to a loss of equity for the Upside Down and the traditional bottles. So the challenge facing Heinz was to rationalize these various package types and sizes and produce an optimal assortment that would be a win-win for consumers and retailers.
Simplified Solution
Heinz turned to Decision Insight for its virtual shopping platform called SimuShop that enables product manufacturers to test options on the shelf. SimuShop measures actual behavior by testing tactical approaches in the context of a virtual shopping experience. Heinz worked with Decision Insight find out what would happen if certain SKUs were removed from the product assortment.
"We have so many package sizes and types. Our consumer insights told us we had to make the options simpler. The benefits involved pushed us over the edge to look for solutions," says Barbarita Marbelt, the company's consumer and customer insights manager for all the ketchup, condiments and sauces businesses.
Reducing the Challenge
In essence, Heinz wanted to simplify the planogram in stores. Three kinds of packaging often confused the consumer and resulted in increased production costs for Heinz, according to Marbelt. One of the ways to make it easier for the consumer was to reduce the number of packaging options. Fewer options would also make it easier for the retailer to stock the shelf.
In considering which bottle sizes would satisfy consumers, Heinz was leaning toward the Fridge Fit pack. But focusing on this package might lead to a loss of equity for the Upside Down and the traditional bottles. So the challenge facing Heinz was to rationalize these various package types and sizes and produce an optimal assortment that would be a win-win for consumers and retailers.
Simplified Solution
Heinz turned to Decision Insight for its virtual shopping platform called SimuShop that enables product manufacturers to test options on the shelf. SimuShop measures actual behavior by testing tactical approaches in the context of a virtual shopping experience. Heinz worked with Decision Insight find out what would happen if certain SKUs were removed from the product assortment.
Marbelt outlined her experience with the virtual shopping platform in Chicago recently at the Shopper Insights Conference. The event was hosted by the Institute for International Research (IIR).
Here's how the program works: A panel of qualified consumers was selected and a scenario was set up for a shopping trip. A combination of text and video cues set the context for an online shopping experience. Video takes shoppers from the parking lot into the grocery store and into the aisles. They can click on a product for more information such as size and price and to make a purchase. Consumers could buy or not buy any product, or even walk away without any purchase (this determines the "walk-away" rate).
"Virtual shopping is very powerful," says Marbelt. "You are observing shopper behavior rather than asking what they would do. Asking questions is not enough. We went with virtual shopping to see differences in behavior because what people say is not what they do. That makes the methodology more reliable as well as faster and more economical than in-market testing."
Previous research indicated that households with larger size bottles of ketchup use it for more occasions. That is key for a category with a penetration rate of 96 percent. Rather than focusing on attracting new users to grow the category, the obvious strategy for Heinz would be to get current consumers to use ketchup more often. Such thinking led to a focus on keeping the larger Fridge Fit pack in assortments.
Online testing of this strategy resulted in two conclusions:
Overall sales went down when the Upside-Down bottle was removed: There was a significant loss in buyers, volume and dollar sales.
Removing the smaller size bottles posed risks: While most buyers remained with Heinz, a small minority switched to a national competitor.
The solution provider believed that what these results clearly indicated was that the assortment could be cut too much. There was equity in the Upside Down bottle that the Fridge Fit pack couldn't keep.
In the follow-up study, findings indicated Heinz could reduce pack types from three to two by keeping the Upside Down bottle. Plus adding a smaller sized Upside Down bottle kept more customers.
Virtual shopping also indicated that reducing the set of products made it easier for the consumer to shop the category and increased overall category sales that benefited the retailers. Along the way, Heinz was able to reduce production costs while increasing brand sales as the category grows.
"Another reason why I went with Decision Insight was that I wanted to know the right planogram because it really impacts and alters the shopping experience," says Marbelt. "At the end of the day, we wanted to optimize the shopping experience. It would also help us cut costs and help the retailer because shoppers would frequent the aisle much more."
The online research was later confirmed with in-store testing at a mass merchandiser and a grocery outlet. "The fact that it validated the online behavior of shoppers with similar results tells me that if I have to do something quick and economical, I'm going with virtual shopping," she says.