Sunday 14 February 2010

Consumers and Shoppers – The Importance of Understanding the Difference.

From The Institute of Grocery Distribution comes a timely reminder of the difference between shoppers and consumers, consumers being the person who ultimately eats or uses a product and the shopper being the one who buys the product from the shop. Sometimes they are one and the same person, but not always. An example would be mothers buying food for the family where Mum is the shopper but the family eats what she buys (mostly!). Or in the case of a gift, the shopper buys but the consumer is the recipient. And when in the store, what someone feels as a consumer can be trumped by the immediacy of making a shopping choice.

The notion of differentiating the two has been around for years, but the point the IGD makes is that shopper understanding has become a multi million pound science. Retailers, engaged in a ferocious war for market share, are spending vast sums on understanding their shoppers in a climate where people are very picky about how they spend their money, and low inflation makes it doubly hard to get sales growth.

So, in this shopper is king (as IGD calls it) environment, suppliers approaching a retailer stands a better chance of getting heard if they bring deep knowledge about the way people shop for their particular product. Finding fresh insight is not easy given the enormous amount of data possessed by the retailers themselves. Tesco for example via their 83% owned subsidiary Dunnhumby reads the data of 22 million Clubcard holders every year.

Having said that, increasing sales is not just a matter of numbers, its also about psychology. IGD tells us that 70% of brand choices are made in store, and that 68% of product purchases are made on impulse. This seems a high number but it is not difficult to imagine products suddenly finding themselves in the shopping basket as a result of a stunning display, a slot alongside an obvious partner, or simply because it solves a shopper’s problem like what to dish up for dinner.

The snag with all this of course is that it stretches suppliers’ profits even more thinly. Not only do they have to be able to give retailers the margins they want, and cough up increasing sums for value based promotions, they now have to match retailers in shopper understanding, as well as spend money on marketing to build their brands with consumers.

This may give a clue as to why the big branded manufacturers want to get bigger. Size gives them the economies of scale they need to handle retailer demands both in the UK and globally, for the same retailer game is being played world wide. Such pressures may help explain moves like the Kraft bid for Cadbury.

It is clear though that anyone who supplies products under a retailers own brand name must be very conversant with shopper behaviour.

Which leads to an interesting dilemma for the levy boards - DairyCo, EBLEX, BPEX et al. Are they better spending money on broad messages to the consumer, as EBLEX have just started to do again, or would it be more productive to carry out forensic, in depth research on shoppers.

I'd vote for shopper research on the grounds that the findings would be valuable to all producers, large or small. No concrete case has been made about whether generic advertising works, yet a thorough understanding of how people shop a category could lead to fresh ideas and a much needed rise in sales.



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