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The Value Equation the essential guide to shopper trends from Shoppercentric
Value is so much more than a low price More promotions than ever – but still wide of the mark? The dichotomy of shopping during the age of austerity As savvy shoppers become more aware of pricing, how much do you really know about what value means to them? Plus new regular features and revealing interviews
ISSUE
fourteen june 2012
ISSUE
fourteen june 2012
www.shoppercentric.com
ISSUE 14 | JUNE 2012
In addition to the work we do with clients, we regularly conduct our own research to explore the broader issues affecting shoppers. For our latest edition we turn the spotlight on what value means to shoppers. This reflects the increasing attention given to this issue as different retailers work with a range of strategies designed to tap into shoppers’ desire for value during the ‘age of austerity’. Our research is based on 1074 online interviews among adults aged 18-64 who are solely or jointly responsible for the household shopping.
ISSUE
fourteen june 2012
ISSUE
fourteen june 2012
PUBLISHED BY: Shoppercentric EDITOR: Alice Synge DESIGN: Mike Higgs
e: mikehiggs@mac.com
We welcome ideas for future articles and reports. Guidelines on our preferred format and style are available from Alice Synge e: alice.synge@shoppercentric.com
© Shoppercentric 2012 All copyright is vested in Shoppercentric unless expressly stated otherwise. No permission is granted for reproduction, use or adaptation of the material, save as to provide for under Statute, and any such use must be accompanied by the appropriate accreditation.
We are proud to lead the way in Shopper Insight in the UK. We are continually conducting our own trends research on current industry related issues and are very happy to be able to share our findings and opinions.
Welcome... Trends Research...
Danielle Pinnington,
Founder & Owner, Shoppercentric
Are your promotions creating long-term loyalty or a very short-term sales spike?
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Is the savvy shopper of today outwitting the retailer? The current trend for promotions may not be doing the stores any favours.
Welcome to another edition of WindowOn... This is our second edition of 2012 and there’s no doubt that all retail businesses are still having to work extremely hard to counter continued consumer pessimism. The tell-tale signs of this are rife, from January sales before Christmas to spring sales in February to constant promotions in store. All these efforts serve one purpose: to coax cautious shoppers to spend a bit more. Delivering ‘value’ is more important than ever. But what does value actually mean? Does its definition vary from shopper to shopper, or from store to store, or even category to category? How do pricing and promotions shift savvy shoppers’ perspectives on value? We answer these questions, and more, over the next few pages and you may be surprised by some of our findings. For instance, only 1 in 4 shoppers define ‘value’ as being about low, or lowest, price (see our second feature on The Value Equation). Similarly, we’re not shy of revealing exactly what we think of some of the retail strategies currently being employed: take a look at our first feature, on promotions, where we hope the industry will heed our warnings that promotions can’t be the only strategy, or risk damaging brands. We hope our unique shopper insights help you pause for thought and contribute to a better understanding of how to meet changing shoppers’ needs. As always, you know where to find us if you have more questions or want to develop this discussion. In the meantime, happy reading! Best wishes
www.shoppercentric.com
Working it out: the Value Equation
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Does low price really mean good value? The promotions visible in many stores right now are suggesting this, but our research tells a different story.
From Prada to Primark: The dichotomy of downturn spending
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How many shoppers are justifying wallet-busting luxury purchases whilst simultaneously counting pennies in the discounters.
Delivering Value: How do retailers compare?
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We all know what the retailers want us to think of them when it comes to value, freshness and great promotions, but how do they really stack up against each other on these attributes?
Regular Features... 6 The BIG Picture... 9 Shopper Talk... 9 Diary Dates... 12 An Experts Own View... From the High Street... 13
WindowOn... Issue 14, June 2012
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FEATURE
Are your promotions creating long-term loyalty or a very short-term sales spike? It is only natural when money is scarce, or we are worried about the future, that we become more cautious about our spending. One of the most noticeable trends over recent years has been the emergence of more savvy shoppers. These shoppers have a few characteristics in common: a greater awareness of pricing; a willingness to compare prices, even on the smallest of purchases; and the use of word of mouth or social media to share good deals. By Danielle Pinnington
Alongside this has been the increasing use of promotions, as retailers seek to deal with a sluggish economy, aiming to drive footfall and increase unit sales. There have never been so many promotions in-store, and the traditional sales calendar has been ripped up as stores use every tactic they can to encourage shoppers to spend. Yet the use of promotions doesn’t always create a benefit. Why promotions don’t always create a benefit: • Unit sales might increase, but profits drop • More promotions in-store means more materials to check, and if quality control can’t cope then mistakes emerge • Promotional materials add to the visual noise in-store, making shopping more difficult • Use promotions too often and shoppers re-adjust their price expectations to the promoted prices rather than RSP
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WindowOn... Issue 14, June 2012
Perhaps the biggest risk associated with seeing promotions as the answer to sluggish spending is the fact that promotions only ever create sales spikes; uplifts for the duration of the promotion, rather than a sustained increase in purchasing in the longer term. So, what do shoppers think of these efforts? How do they now relate to promotions? Before the credit crunch it seemed like any promotion would do, as shoppers approached their spending with the ‘I want it now’ mindset. How times have changed. Nowadays shoppers are asking themselves: ‘Is it worth it?’, ‘Do I really need it?’, ‘Do I want to spend that much?’ and ‘Do I need that much?’ It’s a very clear shift in mindset, and is another reason why promotions shouldn’t be the only tactic for the retailers. Of course, this change in mindset doesn’t mean shoppers aren’t buying on promotion.
76
2012
Promotions buying more of nowadays % Total sample
79
66
2009
69
50
53
53 47
48
45 35
36 24
21 14
Buy one get one free
Money off single items
3 for 2
Vouchers / Coupons
The promotions proving popular:
Loyalty Card offers
2 for £x / xp
Groups of products eg. meal deal
11
Offers including free gift / competition
Why? Possible reasons:
l BOGOFs and price reductions remain popular
l Shoppers are increasingly looking for rewards and are prepared to wait for them
l Vouchers / coupons have now overtaken multi-buys
l They are looking for solutions that make life easier. For example, link-saves. They don’t just get a sandwich, but lunch. Not just a pasta ready meal, but a real meal of main, dessert and wine
l Also growing in popularity are loyalty card offers, link saves such as meal deals, and even added value promotions like free gifts or competitions
A promotion on the right product, at the right time will increase sales. But do the current approaches used by retailers really tap into, or even understand, the shopper mindset? If shoppers are increasingly turning to mechanics that are more likely to reward mid to long term behaviour, like vouchers, why are the majority of promotions in-store still so heavily biased towards short term gain?
l Shoppers have grown cynical about promotions, sometimes believing that price cuts are achieved by hiking prices first, or by reducing pack size. They perceive rewardsbased offers as more trustworthy
The obvious answer is that sales spikes create those all-important sales lifts that satisfy our short-termist approach to business. We at Shoppercentric believe it’s high time we give up the ghost on these cravings for short-term hits of instant gratification. Shoppers have changed their behavior, so should brands and retailers. If they don’t, they risk missing a trick, or worse, damaging their brands.
WindowOn... Issue 14, June 2012
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FEATURE
Working it out:
the Value Equation What does ‘good value’ mean to you? Judging from the state of our stores, cluttered with the words ‘free’ and ‘cut prices’, it would seem for retailers that it is synonymous with low price, or even the lowest price. By Sharon Hodgson
But we asked shoppers the same question and their very different responses must be taken as a wake up call to the entire industry. Only 1 in 4 shoppers defined value as being about low or lowest price. ‘Getting the most for the money I spend’ is actually the definition that scores highest (28% of shoppers). Other important definitions are ‘getting the right quality for the money I planned to spend’ (21%) and ‘feeling that what I’m buying is worth the money I’m spending’ (20%). This feedback shows what most people know already, but have forgotten in the panic of the downturn: good value, or value for money, is about more than low price.
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WindowOn... Issue 14, June 2012
Based on how shoppers describe value, we have identified 4 attitudinal tribes: l Quality Matters (34% of shoppers) – for
whom the best quality for the money is key: ‘a fair price and quality’ l Low Price Hunters (23%) – for whom low or
lowest price is their focus: ‘lowest price for the best quality I can afford’ l Holistic Value Seekers (22%) – for whom
the value judgment is too subjective to break down into a single definition: ‘the least waste for the price’ l Pile It High (21%) – for whom quantity is a
key part of value: ‘price per 100g or similar’
The Value Equation Objective
Subjective
Quality
Emotional
Quantity
Price
Functional
The Value Equation opens up huge opportunities. Quality retailers and brands can – and should – be using more emotive messaging in their communications. Their benefits are about more than mere price. For example, solution-based promotions, such as meal deals, can work well because they give shoppers quantity, but also offer an emotional benefit by helping them organise their busy lives more easily.
Value
Getting my money’s worth
As our research clearly shows, different shoppers have different perspectives on value, but most promotions focus exclusively on price-driven consumers, who only account for a subset of the total. Retailers and their suppliers need to be more aware of the wider definition and cater for all shopper needs. Relying purely on price is not only a lazy strategy but, if used long-term, a damaging one too.
Value own label When Tesco first launched Tesco Value it was a breakthrough in terms of introducing price tiers within an own label range. The bold blue and white livery made it easy to spot amongst the vast range of products on shelf. Over time, however, that boldness became something of a millstone as shoppers grew almost snobbish about what Tesco Value represented.
In comparison, Waitrose took a more understated approach when launching ‘Essentials’ as a response to the credit crunch. This more muted approach is now being copied by Tesco as it relaunches value, in an effort to deliver better quality for their lowest price range.
A lesson to us all that cheap should be cheerful, not nasty.
WindowOn... Issue 14, June 2012
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WindowOn... Issue 14, June 2012
thebigpicture By Penny Ericson
Walk into any supermarket in the UK, push your shopping trolley up and down the aisles, and you can’t fail to notice the plethora of special offers, price-downs, roll-backs, buy 1 get 2 free and a multitude of other price promotions. What a difference compared with this haircare fixture that I spotted in a supermarket on a trip to Brazil recently. The products are allowed to take centre stage and the whole fixture looks like a work of art rather than supermarket shelving. In order to choose something to buy, you actually have to look at the products to make a considered choice based on product benefits rather than editing your choice by promotional POS. And this lack of promotional POS wasn’t restricted to haircare, but permeated across most categories throughout the store - product merchandising took centre stage. And I saw this same level of detail in how products were displayed in numerous other stores throughout my visit – a very refreshing change.
Photo: Maria Godfrey
WindowOn... Issue 14, June 2012
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FEATURE
From Prada to Primark:
32% of the John Lewis clothes shoppers we interviewed also shop in Primark.
The dichotomy of downturn spending One of the fascinating sales trends coming out of the downturn is the simultaneous success of retailers at opposite ends of the value spectrum: discounters and premium brands. It’s a trend that has been noted across a range of categories. We would expect discount brands to grow when consumer confidence is low, but why are premium brands growing? By Susie Spencer
It would be tempting to suggest that spending on premium brands is limited to a privileged cohort, who has yet to be troubled by the economic downturn. But that is too simplistic an interpretation as it assumes that those affected by the downturn will always look for the cheaper option. It ignores the fact that value is about more than low price. It also overlooks a key factor in this particular downturn: that shoppers have never had so much choice when looking at how to deal with budgetary pressures. They have: l A wide range of retailers with differing
price positions l Different channels offering different
price points l A huge choice of brands and own labels
ranging across the price spectrum
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WindowOn... Issue 14, June 2012
All this choice means that shoppers are tailoring their response to the economic downturn to suit their individual preferences or interpretation of quality of life. A Prada handbag or Burberry coat is expensive, but for some shoppers that cost is justified by the longevity of the products or classic fashion positioning. For some, the quality justifies the price point. It’s also entirely possible in this age of choice that the same shopper is then buying the rest of their fashion from Primark to manage their spending overall. In fact, 32% of the John Lewis clothes shoppers we interviewed also shop in Primark. That’s not quite as extreme as Prada vs Primark, but it still highlights the overlap between low price and higher quality. A similar pattern is evident in the grocery sector, with 35% of M&S Simply Food shoppers also shopping in Discounters.
Shopper Talk... Real words from the high street. Brought to you from the keen ears of the Shoppercentric team... I went to this restaurant where they had a parrot and food was amazing… the kitchen was all open so you could see them cooking it [we think she meant the food rather than the parrot]. If you buy organic boxes then you know only one or two pairs of hands have touched it, but you don’t know how many hands have touched it in a supermarket. I do online [shopping] for convenience… I hate it. Do we think about calories?! It’s a room full of women, what do you think?!
Let’s not also overlook the fact that even in tough times shoppers still like an indulgence every once in a while – whether it’s a once in a lifetime Mulberry handbag out of hard savings, or lunch from M&S rather than homemade. We can’t predict the specific factors influencing each individual decision, but we can say that shoppers are weighing up their decisions in a way that has changed because of the recession. As a result we can’t assume that in this, or future downturns, it will only be the cheap end of the retail spectrum that will thrive. The middle ground is where the real battle is raging, as mainstream retailers have to compete with both discounters and premium brands for a share of smaller wallets. Mainstream retailers that have been able to develop price tiering may be best placed to cope with the pressure from discounter and premium competitors. Being able to demonstrate that shoppers can find treats and economies within the one store can be a strong story for shoppers, perhaps preventing their eye from roving elsewhere!
Just bang it in… [Ready meals, not DIY]. Time and money is tight so we only spend what we have and no more. I treat supermarkets as if I am walking through a room full of pickpockets.
What have you heard? Tweet us at @shoppercentric with the tag #shoppertalk
2012 Diary JUNE JULY
Dates...
In-Store Show & Insights Show 27-28th June 2012 – Grand Hall, Olympia, London This year there is a dedicated Shopper area at the show which signaled clearly that it was time to get involved. Come and visit Shoppercentric on stand G106. Independent Retailer Month July 2012 Shoppercentric are proud to be sponsors of Independent Retailer Month, a global ‘Shop Local’ campaign that runs throughout July. The campaign highlights the important role smaller, local, independent retailers’ play in their communities, in the economy and in the retail sector as a whole. WindowOn... Issue 14, June 2012
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FEATURE
Delivering Value:
How do retailers compare? The UK grocery sector is one of the most fiercely contested in the world, with value at the heart of the battle. So, any discussion about value would be incomplete without some consideration of how shoppers perceive different retailers on this issue. By Claire Pearson
At a surface level there are no great surprises among the UK grocers. Despite a problematic start to 2012, Tesco remains the retailer most likely to be associated with good value by UK shoppers. 42 37
Grocery retail usage and value perception % Total sample 35 Offer good value
22
23
What’s more, the discounters that Tesco have seemed to see as their key challenge in recent years also score far higher on ‘low prices’, ‘helping me get the most out of my money’ and ‘prices that suit everyone no matter what their budget’.
Use most
25 22 18 13
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WindowOn... Issue 14, June 2012
2
1
2
3 1
1 Independents
Co-op
Morrisons
Discounters (Aldi/Lidl/Netto)
Sainsbury
Asda
Tesco
2
4
M&S Simply Food
5
Convenience formats of major mults
6
Waitrose
5
The real surprises, however, emerge when shoppers rate the retailers on different elements of value. For instance, despite giving Tesco a good rating overall, the supermarket’s highest score on individual factors is for ‘good promotions’, but ‘discounters’ and M&S score higher on this same factor. Meanwhile product quality, which has been criticised by shoppers in the past, continues to be a weak point for Tesco.
Another interesting performance is that of Asda, which achieves good ratings across the board. Is this a sign that ‘Every Day Low Pricing’ is more effective than a wide range of different promotions? Has Asda better understood their shoppers, enabling them to deliver the right value?
% rating excellent on each statement – Based on those stating that retailer offers good value Tesco Asda
Sainsbury’s
Morrisons Discounters
Coop
Waitrose
M&S
Helps me get the most out of my money
17
31
14
18
38
10
20
19
Offers good promotions
26
26
21
23
27
13
20
40
Prices that suit everyone no matter their budget
22
28
17
23
29
13
18
24
Low prices
18
30
9
18
45
7
14
21
Offers good quality fresh produce
22
24
25
32
17
21
55
62
Fresh foods that last long enough
19
24
21
26
21
20
37
45
Other strategies are also evident here: l Morrisons’ drive to deliver real freshness
at good prices, shows it out performing Sainsbury’s on all factors, although not yet challenging the much stronger ‘freshness’ positions of Waitrose and M&S
l The premium offer in Waitrose and
M&S is clearly defined around freshness, although M&S has also benefitted from its more consistent programme of solutions-based promotions, such as ‘Dine in for £10’
Our research should be a wake-up call for Sainsbury’s as it shows that it has yet to really differentiate its value proposition from the competition. This is despite the success of initiatives like ‘Feed your family for a fiver’ and ‘Love your left overs’ and
Cut-Out and Keep
good sales overall. The current ‘brandmatch’ campaign does not appear to have made a real difference to shopper perceptions. Could this be down to the fact that there are times when brandmatch tells you your basket has cost several pounds more than a competitive shop? In which case the fact that Sainsbury’s will give you your money back on your next purchase feels like a backhanded compliment. When shoppers are feeling the pinch it is important that retailers understand their needs, and align their offers to the new shopper requirements. Those retailers that take a stand on a specific issue, such as quality or price, better differentiate themselves in shoppers’ minds. This differentiation is vital when shoppers have access to so many different retailers.
✄
Keeping on the value track: useful questions to ask yourself l How is value defined in our store / by our brand? Do we know which part of the equation are we targeting?
l Do our promotions reflect that? Or should they be used to emphasise particular factors?
l Do shoppers know which part of the equation we are targeting?
l Can we better differentiate ourselves from the competition by approaching value in a different way?
l Is that the right definition for the shoppers we are targeting?
l Are our promotions honest and clear?
For more information, contact us on info@shoppercentric.com
WindowOn... Issue 14, June 2012
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An Experts Own View Name: James Foord Job Title: VP Business Development Sector: Online Grocery Shopping
In this value issue of WindowOn we get some thoughts from James Foord of mySupermarket, the grocery shopping site that allows you to compare your basket between the major online grocery retailers. It’s a confusing world out there. Consumers need simplicity, transparency and honesty. Sophisticated retailers and brands are fighting in arguably the most developed grocery shopping marketplace in the world, each for a share of an ever-stretched consumer wallet. Offers, deals, price guarantees, brand matching, price dropping, best this, best that… what does it all mean? Value is personal. For some there will be certain products or commodities they use as determinants for their own perception of value, e.g. price of a pint of milk, a litre of petrol. Everyone has their own individual way of assessing value, based on the products relevant to them. A BOGOF on a product you never buy might be incredible value but worthless to you. A challenge for retailers is repetition. Invariably the same items go on and off promotion in cycles - after a while any value perception gained just disappears. Today’s promotion is tomorrow’s expectation. After a while the promotional price becomes the ‘real’ price in the eyes of the consumer. For example let’s take a brand of shower gel. If you look across the five online supermarkets, that product will be on promotion in one or more of them for over 90% of the year, and there are dozens of such products like this. So what is the ‘real’ price in the eyes of the consumer and what is their perception of its value? Let’s not forget about brand loyalty. That much sought after aspiration of manufacturers (and retailers). For all but the small minority of brands, value outweighs loyalty. Let’s go back to shower gel for the moment; consumers are loyal to the promotion, and the brand becomes irrelevant. As soon as a customer realises a certain product or product area is ‘always on promotion’, you can forget brand loyalty.
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WindowOn... Issue 14, June 2012
It’s not just about price, it’s about being savvy. It’s about consumers making conscious decisions about what they buy on a product by product basis. We see on mySupermarket that a customer seldom switches from the store they start shopping with - even though our site is designed to encourage this and makes it dead easy. What we see customers doing is managing their budget within their preferred store. It’s psychological too. Seeing the total of their basket in all of the retailers at once has a strong effect on how they manage cost within the store they are using. There are items a customer is happy to buy at the lowest price, with a saving that allows them to continue buying the items or brands where quality matters more than price. This is a real shift in behaviour. Years ago buying economy lines was seen by some as embarrassing. Now it’s fashionable. A shopper with a mixed trolley of economy and premium products is savvy something to feel proud of - they are ‘playing the system’ without compromising. At mySupermarket we create transparency: A level playing field. We have all the offers and deals in the one place. And we compare unit prices so shoppers can see the best value. We tell shoppers where spending a bit more will give them a cheaper unit price so try that bigger pack or bulk buy. We don’t care which retailer shoppers ultimately choose to send their basket to, we do care that they get the best value. On average, customers save around £20 on each shop they do with us. We know from customer feedback that this can be someone’s last £20.
An Independent Retailer Perspective
A View from the High Street Louise Lear talks to Gary Cady, owner of Give+Take, East Dulwich, SE London
Breakthrough’s spending goes into research and they have no stores of their own). Or, customers can buy new items (including new designer for less so you may be lucky enough to pick up a £1,000 Jaeger coat for £300) and the store will add a £1 discretionary donation to Breakthrough on all purchases over £10.
Now, we’ve all been there – that jumper bought on impulse that we thought was such a great buy (as long as we lost a couple of pounds) that has languished at the back of the wardrobe ever since? A survey done last year by the shopping channel QVC revealed that the average woman has about 22 garments in her wardrobe that she will never wear but absolutely refuses to throw out because of guilt over wasting money. So, how about the chance to redeem ourselves with a guilt-free shopping experience?
This is what customers are promised at Give+Take, a new concept store that opened on the High Street in East Dulwich just over a year ago by actor Gary Cady and his wife, Jane (who used to be the Product Director at Aquascutum). They were inspired by people choosing to recycle fashion and by companies creating high-quality products in support of good causes and have created a unique proposition on the high street that brings together three distinct business models. Firstly, customers can exchange their desirable, but no longer wanted, clothes and get credit of 50% of the item’s net selling price to spend in store. Alternatively, they can donate items and 100% of the profit goes to Breakthrough Breast Cancer – the store’s chosen charity (three quarters of
So the store delivers on the ‘guilt free’ but what about the experience? Give + Take has a gorgeous boutique feel with exposed brickwork, stripped floorboards and the smell of luxury hand-made candles by True Grace greets you as you step over the threshold. The store has seen fantastic footfall in its first year and has been able to make over £10,000 for Breakthrough. Gary puts their success down to hitting the current zeitgeist; tapping into consumer trends around spending and environmental concerns “Ethical is bigger than it has ever been and recycling is another big thing (and the whole idea of frock exchanging is recycling). Plus, money is tight and people like a bargain but they also want to spend responsibly”. It’s not been all plain sailing – High Street retailers continue to face sky high rents and business rates and Gary had the additional challenge of developing a suitable EPoS system that could cope with the different demands of this unique business (eventually he adapted a system used by dry cleaners!). And, of course, shoppers remain cautious about spending. But if you ever needed an excuse to push the boat out and buy that item you may actually never end up wearing, then I can’t think of a better one than the opportunity to recycle it, do some good and maybe pick up a bargain in the process!
www.giveandtakeshop.co.uk
WindowOn... Issue 14, June 2012
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thelastword... We thought we’d let our clients have the last word by telling you what they think of us...
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I just wanted to say thank you very much for the last two days (and probably the next two days too!), and for dealing with a rather unusual working context. Account Manager, Digital Agency I really enjoyed the workshop last night, and it was particularly motivating to see customers get beyond the functional mindset of grocery shopping. Project Manager, Digital Agency
Thank you for the toplines – a comprehensive pack – we felt the building blocks were particularly useful. Also, I was glad to meet such a lot of you and realise we have lots of expertise in the group. Market Research Manager, Grocery Retailer By the way, my congratulations to you and your team on a) an excellent website and b) a really well written and informative magazine. MD, Digital Agency The insight from your last project was so clear that it helped remove all the internal debate and discussion. Research Manager, Electronics Manufacturer
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