Your starter for ten: are the following statements correct or incorrect? “If we can make sure our brand satisfies consumers needs, then they will reward us with their loyalty, which will translate into increased profits for us.”
“It is inevitable that the grocery industry will experience a continuing decline in total ‘share of purse’ as other industries such as health, travel, leisure and entertainment, telecoms and home computing expand.”
If you answered yes to either of these questions, then you might be part of the grocery industry’s marketing problem rather than its solution, according to the latest thinking from Efficient Consumer Response (ECR) Europe, the body co-ordinating the efficient consumer response movement.
According to ECR Europe all grocery industry players, manufacturer or retailer alike, are jointly confronted by two related challenges. First, the industry’s declining share of purse – the UK packaged goods industry is typical within Europe, losing three per cent share of wallet each year over the past decade, while sectors such as entertainment, telecoms, travel and education have all grown.
As Tony Belloni, a regional vice president for Procter & Gamble Europe, warned the recent ECR conference in Hamburg: “The income they get, we will not get.”
Enter the second challenge: the need to enthuse consumers rather than merely satisfying them. Unless shops become places where people go “not only for food and other groceries, but also to enjoy themselves, to meet people, discover new things, touch and smell, learn something, just to have fun, somebody else will allow them to do that, within or outside our industry”, added Tesco supply chain development director Graham Booth at Hamburg.
The trouble with the notion of customer satisfaction is that it is not enough to achieve long-term profitable growth, argues ECR Europe in its new report, “How to create consumer enthusiasm”.
Satisfaction answers functional, articulated needs, whereas enthusiasm is usually associated with intense peaks of emotion. “They are different psychological states,” argues Anita de Hart, promotion manager at Dutch retailer Albert Heijn. Satisfaction and enthusiasm constitute different axes on the psychological graph, agrees Ralph Bernstein, an AGB researcher working on the ECR “consumer enthusiasm” project, which has so far embraced 30,000 consumer interviews across Europe.
Satisfaction is a relaxed, passive emotion whereas enthusiasm is energetic and motivated: “You can’t extend satisfaction into enthusiasm. You have to warp from one dimension to another,” says Bernstein. The challenge, as presented by ECR Europe therefore, is to regenerate consumer enthusiasm to win back share of total purse. The question, of course, is how.
The ECR Europe report lists the usual suspects: innovation, communication and information. But it also adds another vital ingredient – what it calls co-revolution. Often, it argues, “companies’ internal potential for increasing effectiveness and profits growth has already been exhausted”.
But by working together with other businesses from the same or different industries they can discover new ways to transform what they offer and unleash all manner of synergies, including “enormous loudspeaker effects”.
That is what co-revolution is about: companies “working together to attain common objectives in strategic activities … to increase the appeal of the industry as a whole, as well as improve the perception of individual companies… [and to] eventually operate on a much larger base than any companies standing alone”, says the ECR report.
One small example discussed at Hamburg was silver knives. If you were the marketing director of a cutlery maker how would you increase your sales by several orders of magnitude? A TV advertising campaign, or special offer in an upmarket magazine, perhaps?
In fact, what happened was that, in an attempt to explore the notion of consumer enthusiasm, Albert Heijn decided to experiment with the idea that “dining becomes an emotional event when food is served on a beautiful table with crystal and china”.
When it presented this idea in its stores, within three months it sold three times more silver knives than had been sold in the entire Netherlands in the previous year. “We were meeting unarticulated needs,” says de Hart.
Another example from outside the grocery industry is the American National Basketball Association (NBA), which has built itself as a global brand through carefully crafted alliances with the likes of Nike, McDonald’s, Coca-Cola, TV networks, and individual sports stars.
By connecting with consumers through avenues such as food, drink, apparel and TV entertainment, which were way beyond the reach of any local team or even the NBA itself, the NBA became a much bigger part of US consumers’ lives, argues Alex Lintner, a partner from Roland Berger consultants which is co-ordinating the consumer enthusiasm project for ECR Europe.
As a result, over the past ten years its revenues from ticket sales, TV rights, licensing and promotions have increased twelvefold. Throughout, notes Lintner, its strategy has been to use third parties to help increase the appeal of the whole league (and therefore individual team franchises), rather than vice versa. As a result, the NBA’s revenues are now four times greater than the combined revenues of all the football clubs and associations of the UK, Germany, France and Italy put together.
By focusing too much on the competition between them, and failing to co-operate to build their industry, the European football clubs have “tamed their growth potential”, argues Lintner. In the same way, consumer goods marketers must find ways to increase the total cake together, he argues – not only by retailers and manufacturers working arm in arm, but also by working with celebrities and personalities and other companies with strong brand franchises.
Intuitively this seems right. If something like shopping or cooking becomes a chore, consumers will seek to minimise the time they invest in it – to zero. But if it becomes a pleasure, they will pour more and more time and money into it.
Transforming the total grocery experience, however, is almost certainly too big a challenge for individual companies. As Tesco’s Booth told the Hamburg conference: “We have to look at our trading partners as strategic allies with whom we can exploit common growth opportunities, share knowledge, skills and ideas.”