Try before they buy

Editor’s note: Valla Roth is director of communications for Decision Insight, a Kansas City, Mo., research firm.

Is your business facing any of these questions?

“Are we ready to pitch the new shelf arrangement to Kroger? Will they accept it?”

“Should the new line extensions be placed with the parent brand at Safeway or in a destination with similar products? How does it affect conversion?”

“Which brand bundle on display generates the most incremental volume at Target?”

“Should we start flowing in the new packaging graphics at Costco and Sam’s?”

“Should we pull the trigger to increase pricing in the grocery channel? How will that affect purchasing of our brand? Will we lose volume? To whom?”

“Walmart is about ready to de-list our brand. How can we convince them they should keep it?”

“Is the retailer proposing to place their private brand side by side with our brand? How can we leverage our brand equity and save the category from trade-down?”

If shopper marketing issues such as these sound familiar, you are not alone. Shopper marketing is becoming increasingly important as the media landscape factures and the social influence of Web sites, blogs, Facebook and Twitter explodes. Yet, for many categories the final buying decision is made in the store, at the shelf or at the end-cap. Thus, the in-store shopping experience remains a vital marketing opportunity.

Metrics and insights

One tool for obtaining the necessary metrics and insights to screen and optimize in-store initiatives is virtual shopping. The information gathered measures both shopper behavior and the why behind it, to allow for better decision-making and to make the case for retailer activation.

A virtual shopping study has four steps:

1. Pick the appropriate shoppers. It may be based on category usage, brand usage, the retailer’s segmentation model, demographics, regionality, etc., or some combination of them.

2. Recreate the retail environment. Set the appropriate context by putting them in the buying mode in the channel or specific retailer.

3. Measure the sales impact. Allow the shoppers to navigate in the store and interact with the products as if they were actually shopping. Provide the experience of picking up a product, looking at all parts of the package and deciding how many of each product, if any, to put in their baskets.

4. Understand the whys behind the shopping behavior. You can do this with quantitative diagnostic tools that evaluate what shoppers saw/noticed in the “store” as well as their perceptions of the shopping experience and key brands. Real-time online chats can provide further qualitative diagnostics.

Develop winning strategies

Below are five applications for which virtual shopping research provides data to develop winning shopper marketing strategies:

Arrangement/Assortment: The right mix of appropriately-arranged SKUs improves category sales and shopper satisfaction. First, determine the right assortment of products for the right target shoppers at each retailer. Then the optimal arrangement and flow can be put in place. A leading manufacturer in the category often partners with the retailer to create several alternative planograms based on how shoppers view the category. Virtual shelf sets are made from the planograms and tested among shoppers in a virtual shopping study.

Arrangement case study - Hall’s cough drops: Cadbury used virtual shopping research to determine that a vertical cough drop shelf set (brands and private-label arranged in vertical blocks) was much more effective than the existing checkerboard layout (private-label SKUs adjacent to branded SKUs). The new planogram grew the category as well as Hall’s and private-label sales and shoppers found it easier to shop. These results provided the impetus for retailers to reset the section and they aligned very closely with in-market data.

Alternative locations: When a new brand or flanker enters the market, shelf placement is not always apparent. Should a flanker be next to the parent brand to take advantage of the equity umbrella or should it be with other competitive items in a subsection? The answer can vary by category and even by retailer.

Alternative locations case study -  Nestlé ice cream cups:
By using virtual testing to replicate Safeway and Kroger frozen foods departments, Nestlé found that ice cream cups should be placed together in their own dedicated area rather than adjacent to their parent brands. This learning prompted the vast majority of retailers to create an ice cream cups subsection, resulting in incremental space and strong cup sales growth.

Pricing: Having the right price affects the bottom line and positions the brand to the shopper in the context of competitive brands. Virtual shopping can be used to gauge customer reaction to price increases before they are implemented. What-if scenarios can be created where competitors do or do not follow the price increase, something that can’t be a priori tested in the market. Alternatives can be created where both the pack size and price are simultaneously varied in different ways to optimize the size/price relationship. ROI on promoted pricing options can be determined, such as evaluating various discount levels or different multiple purchasing strategies.

Promoted pricing case study - Evaluating many what-if scenarios: A CPG manufacturer wanted to test potential promotional scenarios - over 40 of them - varying the promotions of its brands and those of its competition. Testing the scenarios using virtual shopping, it discovered that discounting the largest size had a more positive revenue impact than discounting the smallest size, which had been its traditional tactic.

Packaging: A package can be thought of as on-shelf advertising that is on-air 24 hours a day. It’s important that it works hard for the brand, especially in the context of competitors that are only inches away. Virtual shopping determines whether a packaging change will affect the brand’s sales, the most important measure of success. It also provides feedback on whether a new package breaks through the clutter, can be easily found at the shelf and communicates the brand’s messages to increase brand equity, all in a real-world competitive context shelf setting.

In-store communications: Circulars, temporary price reductions, bundled displays, shelf talkers and solution selling can have a significant effect on short-term volume. Displays with different combinations of brands and varying unifying messages can lead to a wide range of incremental sales. Virtually testing several alternatives prior to implementation allows for experimenting with more outside-the-box programs that may be home runs in the market but too risky to try without shopper feedback.

Maximize the effectiveness

With the growth of shopper marketing programs in store, virtual shopping research is an excellent way to gather shopper insights to maximize the effectiveness of these initiatives. Virtual shopping studies can be used to screen and optimize alternatives prior to an in-store test and in some cases can be used in place of an in-store test. It depends on the magnitude of the business issue. In recent years, we have found that retailers have become more confident in virtual shopping research findings and are resetting their shelves and activating marketing programs based on that information.

Virtual shopping studies have advantages over traditional concept tests. First, virtual shopping simulates behavior, going beyond attitude questions such as liking or price value. Second, the real-world competitive context of virtual shopping replicates actual shopper buying decisions. And third, virtual shopping measures category growth not just estimates of brand shares or merely intent to purchase for a brand. This provides key insights for both retailers and manufacturers.

And, compared to in-store tests, virtual tests are more controlled. There is no need to worry that the shelves weren’t restocked or that a competitor bought all of the product off the shelf. In addition, physical products aren’t necessary, avoiding the production-related problems that can accompany pre-launch tests.

Virtual shopping studies can be more effective than relying on historical data or informed judgment as to which program will work best. Even sophisticated approaches such as marketing-mix modeling rely on the past, which may not be a good indicator of shoppers’ future behavior. Using history to generate alternative approaches (such as alternative planograms, pricing scenarios, display alternatives) is a good start. Testing them within a competitive context, with an eye to the future, is the appropriate next step.

Critical components

Whether you have yet to conduct your first virtual shopping study or you are very experienced with them, there are critical components to consider as you design a study.

Represent the channel or retailer. Shoppers’ mind-sets and purchasing behavior can widely differ by channel or retailer, so with virtual shopping, one size doesn’t fit all. Choice sets, aisle layouts and price points vary by venue and can have a large effect, especially in categories with strong private-label and regional brand presence. For example, a well-known analgesics manufacturer wanted to assess the viability of introducing a flanker brand. To make an informed decision, it conducted the online virtual testing in Walmart, Target, CVS, Walgreens and Kroger virtual stores.

Create the right competitive context. Large categories such as ready-to-eat cereal, ice cream or carbonated soft drinks have hundreds of SKUs. While they can be accommodated in many virtual shopping platforms, are they all necessary? It depends on the objective of the study. If the issue is at the category level, such as assortment and arrangement, having the shopper interact with the entire category is imperative. Measuring category growth is a key deliverable. If the objective is at the brand level, such as a packaging change, then showing the entire category may not always be necessary.

Target the appropriate shopper segments. Who you test among is just as important as what you show them or what information you collect. Respondents must reflect the population you intend to reach. In the case of online virtual shopping studies, Internet usage is now so widespread that attaining representative samples is no longer a concern for most business issues. In most cases you want to screen for category users because most shopper efforts are designed to grow share. In some cases a broader sample is appropriate, such as for a breakthrough product in an emerging category. It’s also important to test among shoppers who shop the channel or retailer portrayed in the study.

Take advantage of every strategy

Against a backdrop of a changing media landscape and increasing competition, product makers and marketers must take advantage of every strategy to inform their decision-making when it comes to in-store marketing and research. Virtual shopping research is an important tool in the shopper marketing arsenal. It measures consumer behavior in a realistic environment and can lead to insights that translate into winning programs in the marketplace.