Professor Andrew Fearne Professor Andrew Fearne
Making the most of our access to From insight innovationdata dunnhumby (TescotoClubcard)
Orientation
1
Who Buys My Food?
•
Structure Partnership between NBS, dunnhumby, Tesco and InvestNI
•
Mission To help small food producers improve their businesses by increasing their understanding of shopper behaviour
•
Delivery Model UEA - Research assistant, students (PG & UG) InvestNI – shopper insight team
Key Shopper Insights 1. Key Performance Indicators (KPIs): • •
Sales Growth Customer Penetration
•
Customer Loyalty
– –
% of shoppers Repeat purchase rate
3. Shopper Profiles •
Meeting a distinct need? –
Segmentation (lifestage, lifestyle, family)
4. Store Performance •
Distribution –
Core Stores
5. Glossary of Terms
4
2
What’s the catch?
• •
There are no catches!
•
Our network of 130+ small food and drink producers is an exclusive ‘laboratory’ in which we explore the value of shopper insight for SMEs and the barriers/enablers to its exploitation
NBS invest in the data access, infrastructure and research capability, supported by InvestNI
Research (publications) Extension (case studies and webinars) Impact (relevance, rankings and revenue)
Outline
• • • • •
Context Behavioural insight Who buys my food? Lessons learned Discussion
3
What will you remember? ● Unparalleled complexity and uncertainty in the agrifood sector means organisations are increasingly vulnerable and sustainable food systems are an elusive goal ● Sustainable competitive advantage (SCA) requires a paradigm shift – from strategies based on opportunism and supply chain ‘push’ to strategies based on collaboration and value chain ‘pull’ ● This means business leaders need to change the way they think, allocate resources and incentivise people, in order to change the way their organisations behave ● Customer insight is a critical ingredient for ‘success’
CONTEXT
4
Sustainability
Social
Environmental
Economic
Sustainability
Education Corporate Values
Social
Health
Succession Planning
Ethical Labour
Communities
Labour
Transport
FOOD Corporate
Climate Change Ecological Footprint
Ethics
Supermarkets Economic Profits
Soil
Environmental Waste
Energy Sources
Land Use
Consumers
Market Access
Water
Biosecurity
5
Paying the price for excess!
Commoditisation
“Between us, marketers and retailers have trained an entire generation of shoppers to only buy on promotion. It’s not that they need to, but why shouldn’t they when price deals are available on key brands so often? Future generations may well look back on this as a time of anti-marketing unless we take action now.” Jacqui Hill: Unilever Marketing Development Director
6
Shifting Focus •
Despite the billions of dollars spent on branded advertising to build customer loyalty, the Grocery Marketing Association of America (GMA) estimates that 70% of purchase decisions are made at the point of purchase, resulting in:
• significant shift in advertising expenditure
• significant growth in price promotions
The long tail of innovation
•
25% of new product introductions de-listed within first 12 months
•
Only 6% achieved weekly peak sales > £60k
7
Where is the focus?
Sustainable Innovation
•
Collaborative resource allocation that increases the sustainability of the chain as a whole Add more value – effectiveness At lower cost – efficiency Faster than the competition – agility Responsibly
Organisations cannot do this alone!
8
Supply Chain ‘Push’
• • •
Opportunistic trading relationships (dysfunctional conflict) Weak information flow (transaction data – compliance driven) Cost-plus business model (inward looking)
Value Chain ‘Pull’
• • •
Collaborative trading relationships (functional conflict) Richer information flow (attitudinal & behaviour data) Value-adding business model (outward facing)
9
Value Chain Innovation Value Chain Partnerships
Strategic Orientation
Value Design
Customer Relationships
Products & Services
Distribution Channels
Consumer Segments
Consumer Positioning
Costs
Revenue Success/Failure
Adapted from Osterwalder & Pigneur (2010)
Value for Whom? Value capture (Firm’s bottom line):
Vs
Value creation (Chain’s top line)
The only way to grow the pie is by getting consumers to pay more ….
10
Standard 59p
Segmentation par excellence?
Crusty ???
Organic ???
No crust ???
Seeded ???
Standard 59p Toastie ???
50/50 ???
Oatbran ???
Healthy ???
Dietary ???
11
Any Surprises?
Standard 59p
Oatbran 65p
Crusty 83p
Organic 85p
Healthy 87p
50/50 £1.00
Toastie £1.18
No crust £1.22
Seeded £1.65
Dietary £2.16
Capturing the value Breeder
Retailer
Input suppliers
Distributor
Farmers
Baker
Merchant
Miller
12
BEHAVIOURAL INSIGHT
Definition Insight is… “the understanding of cause and effect based on identification of relationships and behaviours within a model, context, or scenario” (Stone et al, 2005)
Descriptive Statements of fact (what?)
Diagnostic
Insight
Analytical and Explanatory (why?)
Predictive Forecasting the results of a planned marketing decision (what if?)
13
Relevance
We may believe (and even have proof) that our products are better than our competitors BUT what matters most is getting retailer buyers, shoppers AND consumers to believe it!
The more relevant the product the greater the demand
14
Fragmentation & Differentiation
•
Differences in purchasing behaviour between market/customer/consumer segments may be significant and should not be assumed
•
Different market/customer/consumer segments require different treatment
Type 1 and Type 2 thinking •
Most buying decisions for FMCG (low involvement) are driven by Type 1 thinking – fast – instinctive – emotional
•
Type 2 thinking more relevant for capital/investment goods (high involvement) – slower – more deliberate – more rational
• Ehrenburg’s theory - “Building real and virtual availability is the sole goal of the marketer”
15
People don’t always do what they say
Tesco Healthy Living Natural Greek Yoghurt
Changing Behaviour Point of Purchase (Behaviour) Change behaviour Attitude – Intention - Behaviour Gap Pre-store (Intensions) Change attitudes Necessary but not sufficient
Increase Knowledge
Raise Awareness
16
Big numbers matter in a long tail market
Dunnhumby 2019
Behavioural insight – extends the line of sight Everyone in the value chain needs a much better understanding of
Who buys What? and Why?
17
Behavioural insight – drives resource allocation The more limited the resources the more important it is to target
Cannot afford to ‘hit and hope’
Behavioural insight - shifts the balance of power
•
Informs
•
Supports
•
Enables
Strategic planning Supply chain design Marketing planning NPD
Account management Relationship development Consumer segmentation Targeted resource allocation
18
Behavioural insight keeps your product on the supermarket shelf! Tesco’s Customer Priority Score customers like the Repeat Rate • Do product? Are they repeat (30%) purchasing it? the product bought by Penetration • Is many customers in the (30%) category? this the most Favourite • Is commonly bought Share (20%) product in the category? • What share of Share of customers’ expenditure Wallet (20%) is on this product?
Clubcard Data - Summary 2 years of weekly supermarket transactions •
1.9 million shoppers (10% sample)
•
30,000 food products (but shrinking)
•
Segmented by…
19
Tesco Lifestyle Segmentation • Each product is categorised using a series of attributes
•Low Price
•Fresh
•Tesco Own
•Tesco Own
•Loose
•Pre-packed
•Value range
•Vegetarian
•Convenience
•Multipack
•Adventurous •Healthy
• They look for the balance of key attributes in each customers shopping basket
© Copyright, dunnhumby 2004 — confidential
Shopper DNA Adventurous Bigbox Branded Diet Healthy Hi-price Kids Lo-price Meat N-F overall Quick_cook Repertoire Scratch Single Smallbox Tesco own Time saving Traditional World Organic -3
-2
-1
0
1
2
3
20
Lifestyle Segmentation Lifestyle segment
% shoppers
Convenience
14% (9%)
Regard food as fuel, are busy and rely heavily on the microwave
Finer Foods
14% (18%)
Time conscious, enjoy luxury products and are willing to experiment
Kids Choice
9%
Young families influenced by the needs of children
Mainstream
31%
Have broad tastes and favour established brands
Price Sensitive
24% (16%)
Look primarily for value and rely on staple foods
Mixed Traditional
8%8% (17%)
Enjoy the art of cooking but rely on a fixed shopping list so less likely to buy on impulse
Description
Source: dunnhumby (2019) 41
Case Study
21
Assisted over 700 SMEs over the last 15yrs Poultry(2%)
Cereals (Bread, Flour, Oils, Cereals, Bakery)
Other (12%)
Fish(2%) Cereals (24%)
Meat (Lamb, Pork, Beef and Game) Fruit and Veg
Alcohol (10%)
Dairy (Milk, Yoghurt, Cheese, Eggs, Ice Cream)
Dairy (13%) Meat (23%)
Alcohol (Wine, Beer, Cider, Spirits) Fruit & Veg (14%)
Seafood and Fish
“The project has become such a valuable resource in enabling us to punch above our weight”
•
53% have found the insight “extremely useful” 66% - market/brand development 33% - retain or grow their business with Tesco 33% - product development 25% - promotional planning
“The webinars have been brilliant and it has been great to have such intelligent direction rather than felling you’re bumbling along”
www.whobuysmyfood.com
•
• •
Marketing Planning & Decisionmaking
-
Promotion Distribution NPD Packaging & Communications
Ranging Organisational & Professional Development
22
Case Study
Coastal Grains • 81 farmers - Cold-pressed rapeseed oil ─ 62,000t of committed cereal storage ─ 11,000t of oilseed rape
Seeking to: • improve the marketing of members’ grain • add-value where possible
23
The story of how they moved From This
To This
To This
The decisions they had to take and the help we gave them
Various ideas explored... but limited knowledge of consumers and market potential to guide their decision-making
24
Category Performance Limited distribution
Limited range
Significant negative growth
Lowest penetration
Lowest purchase frequency
Spotting a Gap (speciality oils) 160 140 120 100 80 60 40 20 0 140
Older Adults
Older Families
Young Adults
Older Adults
Older Families
Young Adults
Young Families
Pensioners
Mixed
120
100
80
60
Comparing the appeal of different products across different regions can highlight gaps in the market!
40
20
0 Young Families
Pensioners
Mixed
25
Spotting a Gap (speciality oils)
Older adults
Young families
Younger adults
Developing the concept/Focus Groups
Strong positive associations
Extra Virgin Olive Oil
Taste & Health
Lack of understanding of rapeseed oil cooking attributes
Rapeseed Oil
Taste & Health
26
Developing the concept/Focus Groups ‘Health’ and ‘Local’ sufficient to drive trial purchase (provided the bottle catches the eye!)
but taste and functionality will determine repeat purchase
One year later…
27
Olifeira was born
4 farmers, with support from a further 12 Full-time sales assistant and PR officer
‘Oleifera’ culinary oil • •
£6/bottle (600 bottles/tonne) 2,000% added value
Two years later…
28
Borderfields was born
Fits on the shelf!
The product is called English Cold Pressed Rapeseed Oil and has a St George’s cross provenance appeal
Borderfields: Launched in supermarkets in 2009
Highlights the fact that it is rich in Omega 3
ÂŁ3.99 per bottle
Where are they now?
29
Borderfields - Re-born
No.1 Cold Pressed Rapeseed Oil in the UK
30
LESSONS LEARNED
Assumptions are the mother of all c*** ups!
Looking at markets in aggregate, from a distance, leaves us blind to the multiple ‘realities’ of people, products and process
31
Strategic orientation is a critical barrier/enabler for success
Businesses that prioritise (long term) marketing orientation over (short term) sales orientation are more likely to achieve ‘success’ • • • •
Sustainable sales growth Business loyalty (B2B) Brand loyalty (B2C) More efficient (cost-reducing) and more effective (value adding) allocation of scarce resources
A strategic marketing orientation requires… • •
Investment of time, effort and financial resources to establish a shared understanding (within and between organisations) of consumer demand and buyer behaviour Development of business routines (policies & processes) that embed the habit of evidence-based decision-making – Challenge the status quo – Search for continuous improvement – Trust in the process (‘Its not what you do buy how you do it’)
Agri-food sector has been slow to embrace the paradigm shift
32
We ALL need to look more closely, listen harder and speak more clearly
Or else…
Thank You!
Prof. Andrew FEARNE University of East Anglia Norwich Business School Norwich Norfolk NR47TJ ℡
01603597239
a.fearne@uea.ac.uk
33
Further Reading Didonet, S., Fearne, A. & Simmonds, G. 2020. Determining the presence of a long-term/short-term dilemma for SMEs when adopting strategic orientations to improve performance. 2020. International Small Business Journal, Accepted for publication. Petrovici, D., Obal, M., Walton, B. & Fearne, A. 2020. The role of market knowledge type on product innovation performance, International Journal of Innovation Management, Accepted for publication. Malik, S., Fearne, A. & O’Hanley, J. 2020. The use of disaggregated demand information to improve forecasts and stock allocation during sales promotions: A simulation and optimisation study using supermarket loyalty card data, Internatiional Journal of Value Chain Management, Accepted for publication) Golgeci, I., Santana, R. & Fearne, A. 2019. Customer Categorization, Relational Justice and SME Performance in Supermarket Supply Chains, Supply Chain Management: An International Journal, Vol.24, No.3, pp417-429. Donnelly, C., Simmons, G., Armstrong, G. & Fearne, A. 2015. Digital loyalty card ‘big data’ and small business marketing: Formal versus informal or complementary? International Small Business Journal, Vol. 33(4), pp 422–442 Hornibrook, S., May, C. & Fearne, A. 2015. Sustainable Development and the Consumer: Exploring the role of Carbon Labelling in Retail Supply Chains, Business Strategy and the Environment, Volume 24, Issue 4, pages 266–276. Yamoah, F., Duffy, R., Petrovici, D. & Fearne, A. 2014. Towards a Framework for Understanding Fairtrade Purchase Intention in the Mainstream Environment of Supermarkets, Journal of Business Ethics, 10.1007/s10551-014-2509-9 Yamoah, F. Fearne, A. & Duffy, R. 2014. Exploring Supermarket Loyalty Card Analysis To Identify Who Buys Fairtrade, The International Review of Retail, Distribution and Consumer Research, Vol. 24, Issue 3, pp328-346. L.Cacciolatti, L. & Fearne, A. 2013. Marketing Intelligence in SMEs: Implications for Industry and Policy Makers. Marketing Intelligence & Planning Vol.31, No.1, pp4-26. Duffy, R., Hornibrook. S., Fearne, A., Hutchison, K. & Read, A. 2012. Engaging suppliers in CRM: The Role of Justice in Buyer-Supplier Relationships, International Journal of Information Management, Vol.3, No.1, pp20-27. Felgate, M., Fearne, A. Di Falco, S. and García Martinez, M. 2012. Using Supermarket Loyalty Card Data to Explore the Moderating Impact of Shopper Segments on Promotional Response, International Journal of Market Research, Vol. 54, Issue 2, pp. 221-240. Donnelly, C. Simmonds, G., Armstrong, G. & Fearne, A. 2012. Small business marketing planning and retailer loyalty card marketing intelligence: Informal versus formal or complementary? Marketing Intelligence and Planning, Vol.30, Issue No. 5, pp515-534.
34