You know that business is getting more complex. Competition is growing, and the stakes are getting higher. CEOs like you need the marketing staff to step up. But how? And more importantly: Who?

Eighty percent of CEOs says growth is the No. 1 priority, but fewer than 20% of you are satisfied with their organization’s marketing efforts. CMO life spans are short, and structure is ever-shifting: 70% of marketing organizations reorganized within the past three years. How long has your CMO been in place? When did you reorganize last? And when is the next reorg planned?

For your marketing department, it’s tough to know what you want. Fewer than 25% of marketers say that information flows freely within their organization, and over 75% of decisions, once made, are second- (and third-) guessed. Only about one-third of marketers believe that strategic decisions are quickly translated to action in their organization.

Where is your company’s new “center of gravity”? Customer service? Resource allocation? Brand-building?

As you navigate the shifting landscape, one constant remains: Success is ultimately measured by sales results. The transaction is still the linchpin. For brands that do business at retail, Ground Zero is the cash register . . . and the cash register should inform the corner office.

The most direct impact on sales comes through Shopper Marketing: 73% of CPG manufacturers and 86% of retailers rank shopper marketing as the No. 1 activity that delivers meaningful return on investment. (1)

Shopper Marketing is the only discipline where it all comes together – advertising, promotion, customer service, consumer insights, R&D, trade relations – all focused relentlessly on driving sales.

INTERNAL MEMO TO THE CEO

DATE: APRIL 15, 2011SubjEcT: YOuR FuTuRE Is YOuR sHOPPER MARkETINg ORgANIzATION

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It’s time to promote your best shopper marketers into senior management roles, asap!

Who better than Shopper Marketers to understand the growing complexity of business and navigate it successfully, in a collaborative way? Who better to bring the cash register into the Corner Office? Who better to help the CEO and the CMO do better marketing?

“Results are only in the marketplace.” – Sam Walton

Like a jack of all trades, Shopper Marketers are the only ones in the organization to touch all aspects of marketing and coordinate with all stakeholders – brand management, sales, retailers, shoppers. Shopper Marketers work closest to consumers, with a unique vantage point and authentic insight that comes from working in the trenches.

The expertise of Shopper Marketers matches the current – and coming – needs of general management as businesses adapt to changes in consumer habits and attitudes; heightened expectations for brands; and increased competition from all sides, in every avenue of communication.

EvoluTion of MArkETing DynAMicS AnD EMErgEncE of ThE ShoppEr MArkETEr

Marketing has evolved, and with it come new goals and strategies.

RECOMMENdATION

The locus of marketing has spent the last 15 years shifting from the TV screen to the store aisle. Business structure and culture are still catching up. (Maybe that’s why so many marketing orgs get restructured every three years.)

The biggest growth has been in Shopper Marketing, and for good reason: It suits the way consumers shop now, and the way business is done now.

Art + science science + ArtAwareness ActivationProducts ExperiencesBrands ConsumersActivities AccountabilityMass Targeted/TailoredIncremental BreakthroughProcesses Best PracticesBuying BuildingFew Tools Many ChoicesVolume ROI

2

GMA and Booz & Co.

say the rapid growth

of Shopper Marketing

has been “fueled

by the need to shift

spending further down

the purchase funnel,

get beyond price and

inject more equity into

in-store marketing,

and develop greater

retail intimacy.” (12)

ShoppEr TrEnDS

“The Purchase Funnel has been replaced by the decision Ecosystem, a cloud of information from all sources, available anytime” (2)

83% of shoppers make purchase decisions before entering the store – up from 60% four years ago (3)

81% of shoppers conduct research before they shop, typically for an hour or more (4)

Online search for deals is up 288% (5)

62% of shoppers engage in at least one digital deal activity for half or more of their shopping trips (6)

73% of shoppers make a rough/mental shopping list (7)

24% of purchases are unplanned … and 75% of shoppers plan to make unplanned purchases (8)

66% of smartphone owners use them in the grocery store

By 2014, 53% of all u.s. retail sales will be influenced by e-commerce

40% of u.s. shoppers are ‘trading down’ in household goods to save money (9)

67% of retailers say shopper loyalty to a specific store is waning (10)

Two-ThirDS of touchpoints during active consideration are consumer initiated (11)

MArkETEr TrEnDS in SpEnDing

• CPGcompaniesspentabout$38billiononShopperMarketingin2010(13)

• Between15%and20%ofCPGmarketingdollarsareearmarkedforShopper Marketing

• 83%ofCPGcompanieswillincreaseshoppermarketingbudgets (14)

• 55%willboostspending15%ormoreby2013(15)

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MArkETEr TrEnDS in SpEnDing conT.

Social Media

internet brand Advertising

Shopper Marketing

Mobile Marketing

owned Media

paid Search

consumer promotions

other paid Media

Television

print Media

Trade promotions

Increase >5%

Increase 0-5%

Decrease 0-5%

Decrease>5%

41%

45%

28%

45%-3%

-3%

-10%

-10%-3%

-17%-7%

-14%-14%

-24%-17%

-24%-7%

34%

34%

28%

24%

17%

7%

10%

14%

7%

7%

3%

24%

24%

38%

55%

41%

52%

Expected growth in cpg Manufacturers’ Advertising & promotions Mix(Average Annual Increase or Decrease over the Next 3 Years)

ShoppEr MArkETing iS ExpEcTED To hAvE ThE highEST AnnuAl growTh

Note: Neutral data was excludedsource: gMA/Booz & Company survey of CPg Manufactureres and Retailers, summer 2010 (manufacturer responses only)

The growth in Shopper Marketing spending outpaces Ad spending growth, and with good reason: You’d have to double your ad spend to get a 1% to 2% bump in sales. The averagereturnon$1spentonadvertising? Fifty-four cents. (That’s a ‘loss’ of forty-six cents!)

“We are convinced that shopper Marketing is the way in which we will achieve our growth objectives in a depressed market. We are equally convinced that we will have to dramatically overhaul our business model to activate shopper marketing.”

– CEO of a Fortune 500 consumer goods company (17)

ADvErTiSing: ExpEnSivE, AnD ignorED

TurnED up

It takes a 100% increase in ad spend to add 1%-2% in sales (16)

Only 18% of TV ad campaigns generate positive ROI

54 cents: the average return in sales for every $1 spent on advertising

TV ad costs (CPM) jumped 256% in the past decade

It took 117 prime-time spots in 2002 to reach 80% of adults . . . in 1965, it took just 3

TunED ouT

Consumers are exposed to 3,000 ad messages a day

Only 14% of people trust advertising information

90% of people who can skip TV ads . . . do

56% of people avoid buying products from companies that they think advertise too much

65% of people believe they are “constantly bombarded” with advertising

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DEMAnD: A holiSTic pErSpEcTivE

Much work has been done to streamline and integrate the supply chain: procurement of raw materials, manufacturing, inventory-keeping, shipping, order fulfillment, inventory cycling, warehouse expense reduction, IT upgrades, make to order, lean practices, R&d to design, forecasting and more.

The next opportunity is to calibrate the demand side – all the elements that stoke Consumer demand:

• Customerservice• Pricing• R&D• New-product

development• Marketresearch• Retailerrelations• Adstrategyand

schedules• Promotionalcalendars• Account-specific

marketing• Packagedesign• Sales• Developmentofnew

distribution channels

Businesses that refine their demand components will be in the best position to compete as marketing dynamics continue to shift.

The expertise of Shopper Marketers matches the current – and coming – needs of the CEO as businesses adapt to changes in consumer habits and attitudes; heightened expectations for brands; and increased competition from all sides, in every avenue of communication.

Former CEO of P&G A.G. Lafley said, “Effective marketing is the key driver of future cash and shareholder value.” In the emerging marketplace, Shopper Marketers are the orchestra conductor of effective marketing. Shopper Marketers are the key drivers of future cash and shareholder value.

Shopper Marketers are closest to consumers and best-positioned to talk, listen, and observe shoppers . . . then build that insight for the CEO, the CMO and the full organization to do better marketing.

Peter Drucker said, “The final question needed in order to come to grips with the business purpose and business mission is: ‘What is value to the customer?’ It may be the most important question. Yet it is the one least often asked. . . What a company’s different customers consider value is so complicated that it can be answered only by the customers themselves. Management should not even try to guess atthe answers; it should always go to the customers in a systematic quest for them.”

As Shopper Marketing expands beyond the aisle, past the First Moment of Truth, to embrace the Shopper Mindset whenever and wherever it happens – the Shopper Marketer will continue to be the vanguard of consumer insight and retail relations, integrating all marketing elements to crystallize the moment of transaction. That, in the end, is the best way to do marketing.

I welcome your thoughts and ideas and questions, anytime, in any of the multiplicity of communications vehicles!

Jim Holbrook

jim@dobettermarketing.comjim@neighboragency.com

twitter: @jimholbrooklinkedin: Jim Holbrookslideshare: jimholbrookfacebook: Jim Holbrook

Do bETTEr MArkETing – ToDAy AnD ToMorrow

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1962: The first Wal-Mart, Kmart and Target stores open

1970s: MASS MArkETErS rulE

rElATionShip: Brand g Consumer: Dictation. “The consumer isn’t a moron. She is your wife” – David OgilvyDATA: GRPs; shipment data by geographyEnAbling TEchnology: TV, print, radio – mass media

Brands control the message; retailers are passive. Consumers are the Captive Audience.

Few brands, national scope. Many retailers, local/regional scope.

MArkETErS MASTEr: The dispersion of brand messagesMAnAgEMEnT bEnEfiTS: Clear brand messaging, mass reach

1972: Wal-Mart goes public (with 15 stores)1977: Kresge becomes Kmart Corp.

1980S: TrADE MArkETErS EvolvE

rElATionShip: Retailers g Brands: Pay for access DATA: Warehouse withdrawals, chain-level sales dataEnAbling TEchnology: Scanners at checkout

proliferation of Stores: as Retailers build out, their clout grows. proliferation of Skus: Brands flood the market with unprecedented level of new products, spurred by Howard Moskowitz, whose 1986 research on Prego spaghetti sauce quantified consumer preferences for choice. As Brands fight for shelf space, Retailers leverage new-found clout (and shift financial risk to Brands).

“Promotion” = trade allowances, case discounts, slotting feesBrands begin to evolve “Account-Specific Marketing” (mostly promotion menus) to direct at least some trade dollars towards consumer marketing

MArkETErS MASTEr: The balance of Retail demands and Brand needsMAnAgEMEnT bEnEfiTS: Marketing addresses two audiences at once

1980: Wal-Martsaleshit$1billion.CPGslabelthechain“Non-Grocery”or“Alternative Channel”

1983: Sam’s Club launches

dECAdEs OF CHANgE CREATE THE HIgHLY EVOLVEd sHOPPER MARkETER

1970s

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1989: Wal-Mart is national, with 1,402 Walmart stores, 123 Sam’s Clubs–and$26billioninsales

1990s: cATEgory MAnAgErS gET ShArpEr ToolS

rElATionShip: Brands court Retailers with promise of Efficiency DATA: Store-level sales data; primarily used for stock-keepingEnAbling TEchnology: Hand-held scanners, store-level data, UPCs

Brands, Retailers strike Partnerships

Just-in-Time Replenishment

ECR (Efficient Consumer Response): Retailers and Brands streamline inventory, then rethink product assortment, pricing, merchandising, balance of trade/consumer promotion

SKU Rationalization favors the No. 1 and 2 brands – and Private Label

Private Label explodes with premium Store Brands: President’s Choice

EDLP vs. promotional: Retailers with “Every Day Low Pricing” hobble Brands’ sales-price tactics and discount-based displays

Brands embrace Category Management to keep a seat at Retailers’ table

Category Captains leverage their Brands’ research to keep shelf space

MArkETErS MASTEr: Management of the category, not just the Brand. Evaluate, prioritize, justify SKUs. Drive trafficMAnAgEMEnT bEnEfiTS: Supply-side efficiency; fewer, stronger SKUs; promotion strategy replaces widespread discounting. Strategic insights improve competitive stance

1995: Amazon.com launches

1997: 18.6% of U.S. homes have Internet (Dept. of Commerce)

2000: Broadband launches

1990s

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2000s – in-STorE MArkETErS bring cATEgory MAnAgEMEnT To lifE

rElATionShip: “Consumers” become “Shoppers.” Retailer fg Shopper DATA: Household, then individual purchase history; shopper data; loyaltyEnAbling TEchnology: Shopping basket analysis, shopper segmentation, RFID tags, reward cards – and also YouTube, Facebook, cell phones, SMS

CRM (Customer Relationship Management) – the “Customer” is really the Shopper … not the Retailer

Frequent-shopper programs proliferate

Rewards cards gain a foothold with shoppers, then morph from general discount cards to data-based club cards a la Tesco (Kroger taps dunnhumby in 2004-05 to test cards with demographic and purchase data)

Shoppers defined by type – and later, by individual – via store-level demographics and household purchase history

Marketing activity revolves around the Store: “The Last Ten Feet”

Retail = Community: “The Third Place”

Mass Customization (design your own Nikes)

Social Conscience emerges: Consumers want to make the world better. They think brands should make the world better, too.

Consumers = Active Community (not Passive Audience)

Consumer-Generated Content: Brands initiate CGC to engage Consumers in conversation.

1) Consumers like being creators of content (YouTube uploads, 2009: 20 hours of video per minute), want the stage that brands offer (backed by media budgets and grants) for their own voice and ideas: Pepsi Refresh; AmEx Members’ Project

2) Brands increasingly take their cue from consumers, adopt more of consumers’ values … and cede the floor to Consumers.

MArkETErS MASTEr: Reading consumer cues; granular shopper research; engaging Shoppers based on their interests/needs; refining in-store elements; providing resources for Retailers that benefit the Brand MAnAgEMEnT bEnEfiTS: Closer, authentic connection to Shoppers. Collaborative strategy with Retailers. Research/insight/trend analysis chops. Speed and decisiveness

2001:U.S.onlinesaleshit$65billion

2000s

8

2004: Facebook launches

2005: YouTube launches; 8 million views/day

2009: 68.7% of U.S. homes have Internet – 63.5% have broadband (Dept. of Commerce)

now: ShoppEr MArkETErS

rElATionShip: Shopper g Retailers and Brands: Give me what I want, when I want it.DATA: Individual purchase and browsing data; on-demand shopper research (price, ingredients, reviews, availability) EnAbling TEchnology: Wireless, smart phones, social networks, GPS, QR codes, 2D codes, Google Maps, “Amazon.com recommends”

Digital freedom: Shoppers are no longer tied to the store. Retailers and Brands have to work harder

Instant research = Retail-agnostic Shoppers

Brands walk the full Path to Purchase

“First Moment of Truth” = the Holy Grail

Great Recession: Shoppers re-focus on price, plan ahead, do more research, search out bargains, wait out Retailers (holiday sales became a game of chicken)

Digital accelerates Participation: “Perhaps the coolest thing about the web, social media and the multi billion-dollar infrastructure … is that we can actually do things of value. We can effect positive social change … by uniting like-minded people, inviting participation, understanding the appeal of extrinsic rewards and leveraging the communities we join and build.” -- Edward Boches

MArkETErS MASTEr: the building of community; evaluation of new digital tools; value-add strategy to ameliorate price-shopping; nimble adaptation to Shopper cuesMAnAgEMEnT bEnEfiTS: Channel-agnostic equity; self-determination; responsive demeanor; stronger customer service 2010: YouTube exceeds 2 billion views per day; 24 hours of video uploaded per minute

2011: Wal-Mart has 4,400 U.S. stores including Wal-Mart supercenters, discount stores, Neighborhood Markets and Sam’s Club warehouses

now

9

2011: Facebook = 500 million users

2014: U.S.onlinesales=$249billion(Forrester) 53% of all U.S. retail sales will be influenced by e-commerce

TbD: shopper marketers move into senior level positions at manufacturers and retailers, based on their real-world training and holistic view of demand creation

1 - Industry Week, “Shopper Marketing is a Supply Chain Partner’s Next Frontier,” 1/18/2010http://www.industryweek.com/articles/shopper_marketing_is_a_supply_chain_partners_next_marketing_frontier_20781.aspx?ShowAll=1

2 - McKinsey, “The Consumer Decision Journey,” 2009

3 - IRI, “CPG Purchase Decisions,” 2009

4 - GMA, Booz & Co., and SheSpeaks, “Shopper Marketing 3.0 Survey”Google, “Path to Purchase” presentation

5 - Google, “Path to Purchase” presentation

6 - GMA/Booz & Co., “Shopper Marketing 4.0,” 2010

7 - GMA/ Booz & Co., “Shopper Marketing 3.0,” 2009

8 - Journal of Consumer Research, “Planning to Make Unplanned Purchases?” 2010

9 - Booz & Co., “Forever Frugal,” 2010

10 - Food Marketing Institute

11 - McKinsey

12 - GMA/Booz & Co., “Shopper Marketing 4.0,” 2010

13 - In-Store Marketing Institute

14 - Booz & Co.

15 - Booz & Co.

16 - Advertising Research Foundation

17 - Industry Week, “Shopper Marketing is a Supply Chain Partner’s Next Frontier,” 1/18/2010

18 - Industry Week, “Shopper Marketing is a Supply Chain Partner’s Next Frontier,” 1/18/2010

fooTnoTES

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