Monday, April 30, 2007

Shopper vs. Retail Research

Retail marketing has grown from its humble roots as a secondary function to brand marketing, to its position today as a marketing trendsetter. Stores such as Trader Joe’s, Starbucks, Target, and Whole Foods, have done an excellent job of defining their brand and driving it through everything they do. A 2005 Harris Interactive poll shows the’ corporate reputation of many retail brands rank in the top 30 of 60 leading companies. These retailers include Target (25th), Starbucks (23rd), Wal-Mart (29th), Home Depot (12th), Costco (18th) and Best Buy (30th). This puts them in the same league as brand icons such as Pepsi (17th), Apple (27th), and Nike (24th). Little wonder top brand marketers are increasingly making the leap to retail organizations.

Retail research is not just a matter of translating standard brand marketing techniques to retail brands. The differences are based on what is different about retail marketing, and they are important to understand if you are doing retail research.

What’s Different About Retail Marketing?
Retail marketing differs from brand marketing in several important ways. Here are just a few:
Store brands have more dimensions than product or even service brands such as location, merchandise selection, store design, return policies, etc. Retail marketing objectives and metrics are different (traffic and basket size vs. repeat purchase and loyalty) which translates to different research measures.

The Reputation Quotient study, developed jointly by Harris and the Reputation Institute in New York, was conducted in two parts. Between March and June, 6,977 respondents were asked to name the two companies with the best reputations and the two with the worst. The 60 companies named most often were then rated by 19,564 people in a separate survey between Aug. 30 and Sept. 26. Results were reported in the Wall Street Journal, December 2005.

Retailers often have greater access to consumer behavior data, which makes self-reported behavior information less relevant. The dynamic nature of the retail environment means that retailers have a shorter-term outlook and a greater need for timely information (how are we doing today? What will consumers want tomorrow?).

Retailers have a broader array of direct and indirect competitors. With the Internet approaching 5% of retail spending, a retail store competes not just with other stores in its vicinity, but also with the entire Internet for consumers’ shopping dollars. This makes understanding consumer motivations and decision-making more complex.

What’s Different About Retail Research?
With all these differences, it is little wonder retailers have different research objectives and needs. First, brand marketers study consumers, as defined by their relationship to a particular category and relatively finite set of brands. In contrast, retailers study shoppers, as defined by their extremely dynamic behavior relative to an often very large set of competitive stores. This explains why retail research requires larger samples and more frequent measures.

Second, while brand research is focused on product development and promotion, retailers, (who generally enjoy strong awareness and whose store locations and designs are relatively fixed), are more focused on how to drive people to their store more frequently and convert traffic to sales once they are there. This difference explains why mystery shopping, customer shop-alongs, and smart carts that observe customers while they aren’t looking are growing rapidly. It also has implications for sample design. For instance, we have learned it doesn’t make sense to do research with shoppers who are outside a reasonable driving distance from a store, 30 miles for a warehouse club, less for a grocery or convenience store.

Finally, while brand research is focused on questions of how to influence attitudes and perceptions that in turn drive loyalty, and willingness to pay a premium price, retailers are more focused on how to be perceived as the place to shop first for a variety of merchandise types and shopping occasions. This explains why retail research often focuses on issues of merchandising and selection and competitive benchmarking.

Shopper Research
Our retail market research experience has lead us to adapt traditional research tools to fit these differences. For instance, we generally recruit larger samples for quantitative research and have more stringent participation criteria for qualitative research. We stress national samples over a few cities. And to avoid lengthy questionnaires, we work with clients’ customer panels or national panels that already have extensive profile information when appropriate.

We also make extensive use of ‘hybrid’ quantitative and qualitative studies. This technique involves fielding a 5-7 minute online screening survey among a very large sample to identify consumers that exhibit the behavior of interest. This allows us to determine the incidence of this group in the larger population and assess their ‘value’ relative to other shoppers. In a second phase of research, pinpointed groups of shoppers selected on the basis of their survey responses are brought together for a real-time, online discussion. This forum is similar to a focus group, but composed of people from all over the country and with the advantages of anonymity for the respondents and reduced interviewer bias.

Multi-channel shoppers
We have used the hybrid approach successfully to study many shopping behaviors and shopper types for a major department store retailer that has a significant online business. In one study, the purchasing behavior of frequent multi-channel shoppers were compared to those of less frequent multi-channel shoppers and frequent single channel shoppers.

The study revealed that multi-channel shopping is more pervasive than was originally thought; among the retailer’s core demographic target (women 25-54, household income $75,000+) nearly two-thirds make an online purchase at least once a month and one third make two or more Internet purchases a month. We also learned that heavy Internet shoppers are twice as likely to purchase from catalogs and 60% more likely to be a heavy store shopper.

While this information was useful on its own, the real insights came from talking to heavy multi-channel shoppers. We learned they defy easy categorization, crossing all age, income, ethnic and lifestyle groups; the one unifying theme is their dedication to shopping; they are skilled, efficient bargain hunters who love to shop for the sheer ‘thrill of the hunt’. Heavy multi-channel shoppers move fluidly between online and offline shopping; the shopping process can start anywhere and end anywhere, with circulars, catalogs, store shopping and web shopping each informing and supporting the other channels.

These insights have helped our client to understand how to improve web site navigation and design, how and when to communicate online availability and the importance of reducing barriers to Internet shopping such as shipping charges.

Club Store Shoppers
Club stores have an unusually complex mix of shoppers. While anyone can shop at a club, the greatest value is for professionals and small business owners who, according to ACNielsen, account for 38% of warehouse club sales, but account for 51% of sales.

Business owners and professionals are a diverse bunch! They cut across a spectrum of business types from offices to ‘ma and pa’ retailers to schools to church and concession stand volunteers. In order to develop relevant communications for each of these audiences, an online panel to understand and profile the relationship between business type and purchases.

Unfortunately, the analysis raised as many questions as it answered. Why would oranges be among the top items purchased by medical office personnel? Why do schools purchase so little paper? Clearly more in-depth approaches were needed. Using the hybrid methodology described above, individuals were selected to participate in qualitative online group discussions based on their profile. After conducting dozens of groups, patterns began to emerge to explain what drives shopping frequency, basket size and the mix of personal and business items in the basket. These patterns suggested many ideas for more sharply targeted messages and new services.

Shopping research is fundamentally different from standard product or brand research. In many cases, panels can offer an efficient alternative to scanner data alone or traditional methods. They enable more frequent studies, among broader samples and more precise sample selection. Online focus groups can offer dispersed samples and an in-depth approach that provides insights not easily gleaned from analysis of scanner data and surveys. Hybrid designs allow the best of both worlds by putting the shopper group of interest in a larger context without trading off the insights afforded by qualitative research. In general, we’ve learned that it is important to remain flexible and not be bound by traditional brand research techniques and questions. Retail research is unique!

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