When manufacturers work closely with retail partners, they may find they get bogged down in specific tactical issues and lose focus on the strategy behind growing the business.
David Sheehan, VP/Managing Director of Trade Development for Nestle Purina, definitely found himself in this position. Mass market and specialty stores within the pet care category had a firm commitment to selling pet products -- but what about grocery retailers?
“It’s a higher hurdle for a grocery store,” Sheehan says.
Working with a team of researchers, he came up with a targeted six-step approach to accelerating growth within grocery retailers.
-> Step #1. Select a single retailer to focus on
Sheehan wanted a retailer that was already doing well selling pet care products. He also wanted one that was successful in going head-to-head with the mass market and pet specialty stores.
For strategic reasons, he chose to look in Central/South Texas.
He decided on H-E-B, the main grocery retailer in that area and a chain whose main competition is mass market. “They have great store loyalty, great traffic, a lot of inherent strengths, and are committed to store brand development,” he says.
The object was not to “fix something that’s broken,” but to build on the existing strengths of the retailer to help them retain and regain sales that may have been lost to other channels while in turn (of course) growing Nestle Purina sales.
-> Step #2. Market assessment
The team looked at H-E-B stores, as well as other retailers in the Austin and San Antonio area that H-E-B reaches, to identify market and category trends in the following areas:
a. Sales: Based on a million dollar ACV (all commodity volume), they identified which stores were selling the most within the category.
ACV looks at relative sales on the category level rather than at absolute dollar sales.
b. Varying factors within stores: They looked at each store’s “total commitment to pets,” based on these factors: Signage Pricing Promotions Product assortment In-store personnel Call-outs at the ends of aisles Location of the category within the store Adjacent categories Presence of specialty items (dog leashes, pet toys)
c. Idea generation from other categories: They also studied how retailers in the area support different categories, such as the chip or baby care aisle, in their stores.
Which categories, they wondered, were stores making an obvious effort to make a customer destination?
-> Step #3. Isolate variables
Using a linear regression model, the team looked at a statistically significant number of the stores they had studied to understand exactly what effect individual criteria have on sales.
“Basically, we go in and diagram store shelves and take a look at the entire store environment to understand how the pieces fit together,” says Frank Saulsbury, Managing Partner of Nestle Purina's research partner for this project, Trademarketing Incorporated. “From that we come back with a better understanding of the effect of each of those variables.”
-> Step #4. Identify best practices
Based on ACV and the effects of the different factors within stores, they identified what the successful stores were doing.
“We don’t know what we’re looking for when we start a project,” says Saulsbury. “We look at dollar sales and then go in to try to see what’s causing the difference.”
-> Step #5. Research analysis
Nestle Purina already had quantitative and qualitative research on H-E-B’s customer market and the market in general, including syndicated data, household panel data, and consumer segmentation data.
So, the team combined the existing data with the new data to measure how good a job H-E-B was doing of converting customers to buy within the store, and to benchmark that information against other retailers.
Results: They discovered that marketing pet care as a category destination drove the higher-volume stores. The opportunity for greater sales lies in categoric expansion, which leads to upselling the consumer.
“What’s important to the retailer is how to develop the category, whether it’s total pet care or total canned vegetables or total chewing gum,” says Saulsbury.
This is less of a new initiative than it is a “re-focus on category,” Sheehan stresses. Specific recommendations included better in-store signage and fixtures.
-> Step 6. Communicate to the retailer
While Sheehan and his team have shared some of the insights with H-E-B, the main recommendations will be showcased during a top- to-top planning meeting within the next month or so.
The meeting will include senior level management from H-E-B in merchandising, assortment and promotion plans, store operations, and marketing.
“Some of our recommendations -— what their stores look like, signage, fixturing -— will require an investment on their part,” Sheehan says. “For it to actually be implemented, we’ll need store operations support. It’s important to get senior level endorsement.”
Coming out of this meeting, Sheehan imagines they will have come up with a shared action plan to grow H-E-B’s pet care category and to increase Nestle Purina sales.
Bear in mind that this is not a promotion of the month, Sheehan says. Don’t expect to have a 30-day turn-around.
Sheehan’s team had originally thought they’d give recommendations within three months; in reality, it will take more like six.
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