Knowledge Bank Blog, Range & Portfolio, Channel Execution

Backing the Right Horses

Are you investing resources where you have the best chance of winning?

About 2 months ago the Liberal Democrats won the Richmond by-election.  They overturned a 23,015 majority to beat the current MP Zac Goldsmith.

Goldsmith wanted the by-election to be about the proposed third runway at Heathrow.  Instead, the Lib Dems turned it into an election about the EU referendum result.  Richmond had a strong remain vote in the referendum and the Lib Dems were strong remain campaigners.  There was a great fit between the people of Richmond and the Lib Dems position.

So, the Lib Dems threw lots of resources at the by-election.  Achieved a 22% swing.  And won.

Could they do this elsewhere in the country?  Probably not.  They don’t have the resources to invest across the board, whilst some parts of the country (perhaps Boston – 75% leave) might not be quite as receptive to the Lib Dem message.  In politics, like many other areas of life, you focus your resources where you have the best chance of winning.

So, why are we talking about this?  Well, take a look at brand or product performance across different retail channels.  You will see some big overtrades (a product sells a lot more than average) and some big undertrades (it sells a lot less than average).   The tendency is to look at this and focus attention on the undertrade.  Right, how are we going to correct this?  If we spend more in this channel, we can turn this around.

However, there are often underlying factors that contribute to a product selling less in a channel.  Things that brand owners or retailers have little control over.  So, even if you put more resource behind it, it may make little difference.  A bit like the Lib Dems trying to win Boston at the next general election.

These underlying factors contribute to what we call Shopper Fit.  This is the link between what you are trying to sell and where you are trying to sell it.  A strong shopper fit between a product and a channel = a good chance of success.  A weak shopper fit = a poor chance of success.

So, what factors determine shopper fit?  Well, we think there are 3 main ones.

WHO the shopper is? In the same way that demographics, such as age and level of education, were predictive of the way people voted in the EU referendum, demographics have a big influence on what shoppers are most likely to buy.  Take online as an example.  UK online grocery shoppers are typically younger, more affluent and more likely to have kids (than average).

These shoppers are more likely to buy certain types of products – for instance, premium products, healthier products, larger pack sizes.  So, if you have the choice to put resources behind one of two products online – the first fitting these characteristics, the second not – which horse would you back?

WHAT mission the shopper is on (or occasion they are buying for)? The mission profile can be significantly different by channel (often by retailer within a channel).  Co-op is an example of a retailer who have been playing specifically to this – positioning themselves as ‘little and often’.  It makes sense.  This is the typical mission the Co-op is best set up to serve.  Leave the bigger missions to the bigger box retailers.

So, for a manufacturer working with a retailer like Co-op, you want to be prioritising products (types, pack sizes, formats) that fit with the little and often mission.  The job is not to sell what you most want to sell, but to sell what shoppers are most likely to buy.

WHY the shopper chooses that store?  Shoppers have different reasons for choosing different channels or retailers.  For instance, shoppers go to Drugstores (e.g. Boots) for the range of products, to see what is new, for staff expertise.  So, products that fit well with this – premium products, specialist products, innovation – overtrade in these stores.

Shoppers often go to discounters and value retailers out of curiosity, to see what is different.  Therefore different products – different pack sizes, flavours or pack combinations (e.g. multipacks) have a good fit with the reason shoppers visit that store.  They are products that shoppers are more likely to buy in that type of store than more mainstream stores.

The same product has different chances of winning in different channels.  These chances are very dependent on the shopper fit (who the shopper is, what they are going to the store for and why they choose that store).  The shopper fit tells you which horses to back, where.

We can’t promise a share swing of 22%, like the Lib Dems got in Richmond, but a point or two might come in useful.

Feel free to forward.  Have a great weekend and speak to you next week.