Talking Shop with… Derek Smith

The vice president of global industry marketing for DemandTec says retailers and manufacturers are sharing more data to drive customer-focused promotions.

Grocery Headquarters: How are trading partners collaborating to create more compelling pricing and promotion decisions based on shopper insights?
Derek Smith:
Retailers have been giving manufacturers access to their sales information directly or indirectly through syndicated data providers for several years. Now, they are starting to share insights that come from science-based analytics, such as consumer demand forecasts. This deeper level of insight incorporates the impact on not only the promoted products but also the remaining non-promoted items in the category to highlight the possible effects of cannibalization. This approach enables the manufacturers to create a more customer-focused promotion plan that supports the needs of specific retail shopper segments. We are also seeing trading partners share shopper insights on demographics, segments, and buying behavior, so they can make more prescriptive promotion and pricing decisions that accomplish their objectives for target segments and optimize the allocation of trade funds.

How are supermarket retailers using shop­per insights to more effectively manage product assortment decisions?
By incorporating shopper insights into product assortment decisions retailers can determine how different shopper segments are expected to respond when items are added or removed. Retailers may find certain products that do not sell very well overall but are extremely important to their best shoppers—meaning that these shoppers are highly sensitive to that particular item, and removing that item would have larger negative consequences. A recent example of this is from a retailer who was considering delisting a relatively slow selling item in their condiments category. The category buyer liked the product but felt he had to delist it because there were so many other related items that were doing better. The buyer ran the numbers on the item through DemandTec’s assortment optimization service and very quickly realized that the item had tremendous incremental demand. If he delisted that item from the assortment, shoppers would not buy something else in the aisle, but rather would buy this specific condiment, and likely other items, from another retailer.

The bottom line is that retailers need to make sure they are making the right trade-offs between total business and best business, and making a forecast for each segment allows them to do just that.

How can shopper insights help grocers understand their most loyal shoppers?
The real benefit fr om shopper insights is that retailers can identify their most loyal shoppers and better target promotions and other marketing vehicles to those shoppers. Doing this helps grow the retailer’s share of wallet for that shopper segment and will help make these shoppers even more loyal, and thereby better positioning the store for sustainable long-term growth.

What steps can grocery merchants take to make shopper insights actionable for planning and store execution?
Retailers can start small, but need to choose a project that has continuous analysis, so they can quickly adapt to a changing marketplace. The project must be comprehensive, so the retailer understands shopper behavior across all marketing levels, including promotions, assortments, pricing, advertising, circulars and social media. Finally, the project should be collaborative; retailers need to collaborate internally among departments and externally with trading partners to make the best decisions.

It is also important to bring shopper insights to the key decision makers directly within their everyday workflow.

Merchants should also use segment profiles and dashboards to communicate the appropriate information about each shopper segment, including the most effective way to reach each segment. When these steps are properly planned and executed, retailers will know in advance which items will resonate with each shopper segment and will be able to more accurately determine how to drive profitable sales and incremental traffic to the category and encourage deeper shopper loyalty.

How can grocery retailers drive shopper analytics into their merchandising, marketing and trade planning processes to optimize joint decisions with trade partners?
Several leading grocery retailers have recognized the power of sharing merchandising and shopper insights with trading partners through a third-party, web-based analytical network. A shared analytical platform should support a common understanding of the buying behavior of shopper segments, and surface these shopper insights into related price, promotion and assortment offerings on the network. This collaborative optimization network should deliver these insights to trading partners, help them understand the retailer’s objectives, and improve response times for tailored offerings that meet the needs of the shopper.

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