optimise path to purchase and protect your margins
by: Emma Ditterich
There are many amazing brands out there that people seem to love, but somehow the sales data doesn't match up. Why is this the case?
As buyer power increases, so does the pressure on manufacturers to discount in-store. The money that many used to spend on advertising is now being spent on promotions — and it's eating into margins.
In this post, we explore this tricky issue and provide a win-win, shopper insight-driven solution for both manufacturers and retailers alike.
Australian manufacturers continue to face mounting pressure from retailers to fund much of what goes on in the store environment. Think merchandising, POS, insights, discounts, promotions and more.
Retailers often have greater control in the relationship and this can limit manufacturers in where they're able to spend their dough.
FMCG manufacturer margins and growth levels are, generally, slim in comparison to other industries. This means they need to make their spend and efforts with retailers work as efficiently as possible. All the while, they're having to reduce prices to attract and retain customers. Evidently, this erodes their margin.
Shoppers now have greater control over where they shop for food and drink with a smorgasbord of options available to them.
Aside from the big powerhouses — Coles and Woolworths — international retailers like Aldi and online retailers like Amazon are increasing competition. Meal delivery companies are popping up left, right and centre. People are prioritising local farmer's markets on weekends. Then there's the ever-growing number of restaurants as an enticing culinary option.
In this environment, retailers need to remain competitive in attracting the right traffic and increasing total FMCG spend in store.
Shoppers are repertoire loyal (to retailers and brands within categories i.e. they have a small repertoire that they regularly use), but often not brand loyal.
They're fickle beings with more choice than they know what to do with. But at the end of the day, satisfied shoppers offer a greater opportunity to charge a higher price (and earn more margin). So, we better keep them happy!
Creating a win-win.
So, in this situation, how can we increase category spend to benefit both manufacturers and retailers? How can manufacturers work with retailers by leveraging clever insight to get shoppers to spend more and shop more often?
The answer is in understanding the path to purchase, Not to mention, the barriers to category and brand purchase along that path (within the store). Here, you have an impetus for change that impacts shopper behaviour in-store and goes beyond discounting.
In a time when buyers have the power, it is important to operate from the perspective of what works for the shopper rather than focusing on what is easy to implement.
To optimise the situation for both parties, we recommend doing some 'pain point' shopper research. This way, you can uncover barriers that aren't just about price, but could be around flavour or location. As a manufacturer, you can then confidently go to a retailer and provide an opportunity to increase sales without the need for discounting.
For example, say you're a manufacturer that realises mums keep buying lollies as a treat for their kids on shopping trips. However, these treats are begrudgingly bought because they're full of sugar and other nasties.
Here lies the opportunity to interrupt the journey with higher-priced toys near the checkout. Their price point benefits the retailer (better sales = win) and are a more preferable option for mum (not as naughty as sweets = win).
Over to you.
Here at PLAY, we love all things shopper — from online surveys to accompanied shops and everything in between.
If you want to find out more about our solutions give us a call on 02 8097 0200 or touch base via email@example.com.