USING ETHNOGRAPHY AND OBSERVATION RESEARCH TO UNDERSTAND CONSUMER BEHAVIOUR IN THE RETAIL AISLE Barbara Foster Cesar Carbajal Max Ruckman In order to increase sales, it is important to understand what happens within the mind of the consumer while in the retail aisle. This paper describes research conducted for Black & Decker, Society Brass Collection among consumers while shopping for door hardware. Consumers were observed, their behavior quantified, and additional in-depth interviews conducted. During the interviews, consumers shared insight into their shopping process and explained reasons for their observed behavior. Results present an in-depth understanding of how retail cues, product placement, brand loyalty and package design impact the purchase decision while in the retail aisle. INTRODUCTION Black & Decker, Society Brass Collection approached Market Research Associates with the need to understand how to improve retail sales at the point of purchase. Most consumers are unable to accurately report their behavior and define What influences their decisions? To overcome this barrier and provide Black & Decker with the necessary insights, we developed a process too thoroughly understand the sub-conscience motivators driving consumer behavior in the retail aisle. Using our observation instrument, a total of 521 consumers with intent to purchase were observed and their behavior noted and quantified. After being observed, 86 long interviews and 157 short interviews were conducted in which consumers shared insight into their shopping process and explained reasons for their observed behavior. Additionally, specific issues of language, claims, media and perceptions were probed.

This report details the findings of our research conducted among individuals who were shopping at Home Depot, Lowes and Expo. This research explores their product perceptions; brand reactions and overall aisle dynamics that occurred during the shopping process. Observations and intercepts were conducted in Los Angeles, Orange County, Dallas and Atlanta at Home Depot, Lowes and Expo. Behavior One: View and Observe Brands Observation Consumers enter the aisle with little category knowledge. Before shopping, the customer’s primary source of knowledge was a previous trip to the store. In addition, for the majority of shoppers, door hardware was not the only reason for visiting the store on this particular day. (See figures l and 2). In order to gain knowledge, consumers begin the shopping process from the center of the aisle. Of those consumers whose shopping process begins by “viewing and observing the brand” (45%) about 93% began their shopping process by viewing and observing Schlage, which in most cases is positioned in the center of the aisle. Finding The center of the aisle is the central point where consumers assess the relative price/value of all products in this category. It is from this physical position in the aisle that consumers determine where their product is located, whether high-end, mid or low-end. Consumers instinctively assume that lesser quality products are found to one extreme and higher quality products to the opposite extreme. The center therefore is viewed as the physical location where mid-end products are found. Anything to either side is perceived as either lesser quality or superior quality. Schlage is not necessarily the common reason why consumers gravitate towards the center of the aisle, as is the physical location of the brand. Consumers simply use the center to assess value (regardless of which brand is present) and “find their way” to the product category they are purchasing. It is worth noting, however, that although brand may not be the main reason why consumers gravitate towards the center, once in the center the brand is associated with a mid-end product simply because of its relative location to other brand categories. Implication A dominant center positioning for the brand will likely promote the brand as the standard by which other products are compared: The fact that most consumers start their shopping process “front and center” suggests that no other location is more effective in capturing the consumer’s attention in viewing a particular brand. Investing in the right aisle position may prove far more valuable than gaining side displays, bins, carts and space in other areas of the store.

Behavior Two: Price From Afar Observation In sequence, the second most observed activity is comparing price from afar. Price shoppers move quickly to a product at this point having already determined lowest price. Finding Because consumers enter the aisle with little category knowledge (the high-end is the exception) price is an important guide. Physical position of the brand, followed by determination of price creates the all-important perception of the best value for the consumers needs. About 31% compare price from a distance before physically engaging the product. Implication If price is to be a differentiating factor, it should be displayed in a manner that shoppers can see it from across the aisle. Behavior Three: Interacting with the mounted product Observation The next most frequent activity is physical contact with the product: Interacting directly with the mounted product. Nearly all consumers engage the mounted product displays. About 90% of consumers had physical contact with the interactive displays found in the aisle. Those least likely to touch and feel the displays were low-end customers and mainly because their purchase was quick and uninvolved. Observation High-end consumers are driven more by the feel of the product. About 21% of high-end consumers say that the feel of the product is “extremely influential” while only 9% of mid-end customers give a similar response followed by a mere 4% of low-end consumers who view the feel of the product as “extremely influential”. Finding The importance of being able to feel and touch the mounted product is exemplified by remarks suggesting that most of the time non-working displays result in loss of sales. This includes displays where the thumb latch is difficult to operate, knobs that are difficult to turn and levers that get stuck in one position. Implication A malfunctioning product can be fatal. A lock that is easy to break, that “struggles to get the job done” is inappropriate for security needs. Such signals of poor performance

and lack of durability undermine feelings of safety — rendering all other value-added features such as style and finish irrelevant. A brand that “proudly” displays faulty merchandise sends a strong brand message regarding untrustworthiness and low commitment. Rigid store checks ensuring absolute compliance to functioning products are mandated by the purchasing dynamics and consumer expectations driving this category. Incentive programs that motivate and reward compliance should be implemented. Implication Beyond assurance of durability, the high-end consumer needs to feel a sense of superior craftsmanship, in this case communicated by a “special experience”. A malfunctioning product always loses the sale. A good feel can often make the sale. Behavior Four: Holding and Physically Examining Box, Reading the Front and Side of the Box Observation Upon picking up the box, the typical mid and high-end consumer looks at the front for about 10 seconds on average, then turns the box to one side and reads for about 35 seconds, then sets it down and steps back to survey the aisle. He then pauses for about five seconds and then engages a different product and performs a similar behavior. The low-end customer picks up the box and looks for pictures/writing mainly illustrating the installation process, or whether it’s a closet, office, room, bath, kitchen, keyed entry or interior product; typically spending about 20 seconds reading or viewing the box. Finding Following basic messages of style/finish/security and function bulleted on the front, the consumer moves quickly to the assurance of easy installation: among the most critical factors taken into consideration when purchasing door hardware. Using a five-point scale, consumers give easy installation a 3.71 rating and 61% say it is an “extremely important” issue in the selection process. (See figure 3.) Finding Later in the process, following additional interactions, the dominant functional question the consumer asks a floor salesperson regards key compatibility with other products. It can be assumed at this point that the consumer is looking for but cannot find such assurances on the package.

Implication The need for a package to project user friendliness is fundamental. Overt assurances of ease are essential. Given the involvement in the side of the package where such information is prominently displayed, the importance of clarity, simplicity and intuitive ease should be a priority. Implication The need to overtly address ease of keying is great. There are two issues in this regard: l) the ability of one key to work different locks even within the same brand; and 2) compatibility with different brands. A message of one key for all major brands would be optimal. Behavior Five: Comparing Different Brands and Within Brands Observation There is a compelling need for consumers to compare brands. Approximately 112 consumers observed and compared within the same brand and 64 compared between different brands. Even consumers that stay Within the same brand compare to other brands justifying superior value and a brand that fits their needs. Finding There is little brand loyalty as 65% report a willingness to trade their brand to get the features they want. It is not brand loyalty driving the purchase so much as the product that meets their specific needs: - A product with the right look (4.39 on a 5-point scale) -The product finish (4.34) -Matching the same style (4.13) -The security features (3.91) Implications It is very important to be cognizant of competitive claims. To match or exceed those claims provides important clarity and ease of determining best value for the additional cost. The consumers’ need to compare is much better addressed by the uniform display and slavish adherence to a seamless price-value spectrum giving the consumer exactly what they want: an easy Way to determine superior value based upon their needs. (See figure 4.)

Behavior Six: Consulting a Customer/Spouse Observation The next most observed behavior ir1 the aisle, particularly true of the mid to high-end consumer, is consulting with another person in the party which in most cases (60%) is a spouse or young child (17%). Finding Purchasing door hardware often requires spouse approval. This is especially true at the high end. Although husband and wife play a different role in the purchase process (husband looks for brand/durability, wife looks for style and finish) the decision to purchase is mostly a joint decision (37%). Implication Advertising should be tailored to appeal to the couple’s preference. Brand promotions on magazines typically read by males should emphasize brand quality and durability while those read by females should highlight the look, style and feel of the brand. Finding There are significant regional differences in spouse involvement. Although this study was not designed to identify regional differences, the data clearly suggests major differences with actionable implications impacting among other things an optimal media and communications plan. Implications The media implications of the differences between the South, as exhibited by Atlanta and the West are as follows: - In the South, a heavy emphasis on durability, toughness and security to a dominantly male audience would be most efficient. - In the West, a split emphasis recognizing the dual needs of style and security, and the gatekeeper role of the spouse, would be rewarded. Behavior Six: Seeking the Advice of a Sales Person Observation Following “consultation” with another customer or spouse, the consumer generally picks up a nearby brand for reasons of comparison, information, and clarification and in that same vein seeks a salesperson to provide similar

information. Observations reveal that a substantial number of consumers (187) at some point needed clarification or assistance from the sales representative. While low-end consumers are less likely to seek help from the sales person (only 30 individuals approached the sales person), mid-end (64) and high-end (93) are more likely to speak with the sales representative. Finding Sales representatives play a key role in the purchase process. Approximately 160 respondents felt that the sales representative played an influential role in the purchase process and rated them accordingly. Although consumers give higher influential ratings to spouse (3.95), contractor (3.31) and friends (3.23), suggesting that sales representative’s role is significantly less influential, comments reveal that in terms of selection and product understanding the sales representative is extremely influential (3.21). This clearly suggests that consumers view the sales representative as an authority figure with category knowledge, which can influence product selection. (See figure 5.) Using ethnography and observation research Implication Ensuring floor sales support is critical when creating positive product perceptions. In that most decisions to purchase are made in the aisle, the role of the sales person is highly influential (3.21 on a 5-point scale). A low opinion of floor sales p6I‘SOI1l'l6l toward a product puts an additional burden on the impact of display, demonstrators and mounted product. A strong focus of floor salespersons on the importance of security is best addressed with packaging claims that meet and exceed competitor security claims item by item, allowing for greatest clarity and ease of comparison. Behavior Seven: Some Purchase a Different Product than Intended Observation Some consumers, who intended to purchase one brand when entering the store, purchased a different brand instead. Finding When a particular brand is under consideration for purchase, it is likely to be purchased. However, some consumers change their mind while in the retail aisle. (See figures 6 and 7.) INTENDED BRAND PURCHASE BY PURCHASED BRAND

Implication

There is opportunity to educate the consumer and change their mind while in the retail aisle. Particularly for this category, the retail aisle should be managed with as much effort and strategic planning as any other portion of the marketing plan. Using ethnography and observation research The High-end Consumer Observation High-end consumer’s purchase process is very involved, influenced by contractors and advertisements and driven by the look and feel of the product. (See figure 8.) Finding When comparing between brands, product finish is paramount. Over one-third (37%) of high-end customers indicate the product finish influenced their decision. In addition, high-end customers are twice as likely as mid-end consumers and three times as likely as low-end consumers to be influenced by the feel of the product. Finding Because Society Brass has a large competitive set, a consumer emphasis on finish is a two-edged sword. Consumers are clearly Willing to trade down from Baldwin for the finish they want. Consumers are also willing to favorably compare Society Brass to Schlage Artisan for the finish they want. In that comparison, the superior value of Society Brass is easily lost. To achieve conversion and grow the brand, Society Brass must address this issue. Implication It is important to understand the censurer’s need for a communication or assurance of superior craftsmanship at the high end. To fill this need, it is important to provide cues that consumers can quickly understand. Such messages are best communicated in an intuitive and “demonstrative” fashion. “Let me see for myself.” “Show me.” The opportunity is to force more interaction with the product through display, driving greater brand consideration. Greater involvement with the brand and display should result in significantly greater sales, the greater the brand involvement, the greater the conversion.

Observation High-end consumers come to the store armed with information. High-end consumers are more likely to mention magazines, contractors and locksmiths as sources that assisted them in making an informed decision. Finding Magazines and some television shows are an influential source. High-end consumers report with higher frequency that advertisements play an influential role in the purchase decision (3.0 (high) vs. 2.5 (mid) and 1.9 (low)) on a 5- point scale. Aside from the aisle and personal trial and error experience, magazines are the third most commonly mentioned source of information where consumers learn about door hardware (17%), in particular, Architectural Digest, while the television show This Old Home also garners high recall. (See figure 9.) Implication Promotion of Society Brass in popular magazines such as Better Homes & Gardens, House & Garden, Architectural Digest, and Metropolitan Home may prove most effective in reaching as Well as convincing not only consumers but other professionals that influence the home owner’s decision to purchase. Finding High-end customers are significantly more likely to be undertaking major remodeling of the home. Results indicate that they are over 2 1/2 times as likely as Mid-end customers. Implication Target major remodeling contractors. The incidence of major and minor remodeling explains the relatively high standing of television show This Old House among consumers in the market for door hardware. Advertising on this television show could extend the reach of Society Brass to include more of this important market. Also consider a direct mail campaign to elite remodeling contractors. Structuring a contest along the lines of the successful Society Brass direct mail campaign to Custom Home builders Would tap an important and especially relevant market Observation Sales personnel are respectful of all high-end brands. They tend to play a role of consultants rather than “pushing” one brand over others, mostly confirming what consumers already feel or know.

Finding More often than not, high-end consumers enter the aisle looking for handle sets. These consumers are about three times more likely to purchase handle sets than mid and low-end consumers. The most popular item purchased by high-end consumers was the handle set (72%) followed by deadbolts (17%) and interior levers (17%). (See figure 10.) Implications Show Society Brass handle sets on a variety of distinctive architectural exteriors. Put the product in context for the greatest number of potential customers. Leverage the use of Society Brass handle sets to increase sales of interior knobs and levers. Consider package inserts that promote the entire line. The Mid Consumer Observation Unlike the low-end consumer, the shopping process for the mid-end consumer is very involved where brand is important and security features, look and finish are more seriously considered. Finding Mid-end consumers spend close to two minutes in the aisle. The amount of time spent in the aisle is a reflection of the importance attributed to the selection of the product. Consumers in this segment want assurance that their selection is based on serious consideration of the features as well as price. Mid-end consumers tend to spend a significant amount of time in the aisle comparing within the same brand. This, however, may be due to the perception that aside from Schlage no other comparable products exist. Finding The mid-end consumer takes the investment seriously. The typical consumer in this category usually visits the store about two times before deciding to purchase, which reflects the seriousness of the product consideration (1.81 numbers of visits). Implications “Serious” is the operative Word here. For Kwikset Maximum and Kwikset Ultra-Max to be considered serious alternatives against competitors, messaging must match or eclipse competitor messaging on measures of durability and security. This includes subliminal messages as well as overt messaging. This task places

considerable importance on mounted displays with functioning product and encourages prominent and intuitive messages of security, quality and durability. Sales associates should be trained to respect the product and know the story. Finally, displays must be crisp, uniform, well stocked and effectively presented. The Low-end Consumer Observation Low-end consumers’ shopping process is relatively uninvolved, fast, entails little thought and virtually no research of the product. Finding Low-end consumers want a fast and easy shopping process. Low-end consumers spend the least amount of time (1.25) in the aisle when compared to mid-end (1.83) and high-end customers (1.98) and require only one trip to decide which product to purchase. They typically, but not always, start at the center of the aisle then quickly identify the location of the lower price product giving little thought to which brand they select. Among the most common reasons why a low-end customer selects a product are the need to replace damaged hardware (53%), price (45%) and replacing “existing product just like it” (26%). Finding Few influence the low-end shopping process. Only 19% of respondents who were with someone report being accompanied by their wife, suggesting that spouses are not likely to be involved in the shopping process (only 27 respondents were seen accompanied by someone in the aisle). In addition, they are less likely to be influenced by magazines or TV advertisements 1.90 compared to 2.92 high-end, 2.70 mid-end (on a 5-point scale). Implications Selection of product for low-end consumers must be made easy, convenient and easily identifiable in the aisle. User-friendly displays are the indicated action. Using language to identify the product’s function such as bathroom knobs instead of interior door knobs/levers, or kitchen knobs/levers instead of keyed entry, closet knobs/levers instead of dummy knobs/levers may also help simplify the shopping process. Intuitive icons, friendly pictures, assurances of ease are all recommended.

SHOPPING TRIGGERS A Need to Replace Damaged Hardware Observation Among the most common reasons why consumers in general are in the store is to replace damaged hardware. These consumers (replacing damaged hardware) typically select the brand that provides an exact match (25%), with the right look (22%) and the right finishes (27%). High-end consumers are typically doing some remodeling while mid and low-end consumers are replacing existing damaged hardware. Finding Customers purchasing handle sets and keyed entry knobs are more likely than customers purchasing other products to be driven by a need to replace existing damaged hardware. Approximately half of respondents purchasing a keyed entry knob (53%) and those purchasing a handle set (48%) say that the main reason for visiting the store is to replace existing damaged hardware. Consumers replacing an existing damaged keyed entry knob are mostly driven by security needs that are perceived as being compromised as a result of the damaged hardware. Implication Leverage the vulnerability of this consumer: A security message or a call to upgrade security “Don't just replace it, upgrade it” might be especially meaningful to locksmiths, and to target in do-it-yourselfer publications. Remodeling Their Home Observation The second most common event that puts consumers in the market is remodeling, including major and minor remodeling and new doors (47%). Finding Consumers remodeling their home are more inclined to select the brand because of the look (41%), the finish (28%), security features (19%) and feel of the product (19%). They are also more likely to be purchasing handle sets (37%), combination packs (30%) and interior knobs and levers (29%, 20% respectively).

Finding Consumers purchasing levers are more likely to report that major remodeling is the main reason for their purchase. Nearly 41% of those who purchased an interior lever report major remodeling as the reason for their purchase of door hardware. Only 21% of those doing major remodeling report purchasing interior knobs and about 18% report purchasing handle sets. Implication Installing interior levers instead of knobs may be perceived as the modern way to remodel. The data reveals that levers are the product of choice when remodeling, suggesting that levers may have a stronger esthetic appeal to homeowners doing major remodeling. Promoting levers as the modern way to upgrade or improve home appearance may be an effective communication message. Depicting levers in advertisements in home improvement magazines may prove persuasive, as consumers will have a visual understanding of how levers look in modem homes. Promoting an upgrade to levers on interior knob packages may also stimulate consideration. CONCLUDING REMARKS This research proved valuable on several levels. First, our careful combination of quantitative, qualitative and ethnographic techniques uncovered insights our client needed. Second, we uncovered key motivations experienced by their retail customers that were subsequently used to increase sales. For Black & Decker, Society Brass Division, the benefits were numerous. Following the research conducted by Market Research Associates, Society Brass Collection embarked on a rebranding project for Kwikset, Kwikset Plus and Kwikset Titan products. The research performed with Market Research Associates gave them insights on how Society Brass Collection wanted to be presented both on shelf and off-shelf. After viewing the research, Society Brass Collection decided to create a position both above and below Schlage, especially since this competitor had the perfect position in the aisle based on the research insights regarding where the consumer begins shopping. Society Brass Collection worked with a branding company to help develop their new brand image which included new packaging, brand names and a new position against Schlage. As a result of the research, Society Brass Collection also developed new sub-brands as follows: -Kwikset became Kwikset Security -Kwikset Plus became Kwikset Maximum Security -Titan became Kwikset UltraMax

Society Brass Collection used the Kwikset Maximum Security to position just below Schlage in price and aisle position. They also used Kwikset Ultra-Max to position above Schlage in price, performance and aisle position. Based on insights provided by Market Research Associates regarding packaging, Society Brass Collection changed their packaging to Red. Ultra-Max was given a foil printed finish and Maximum Security a non-foil finish. This change made it easy to tell the difference between the levels of brands. In addition it was also easy to see that all sub-brands belonged to the Kwikset (Society Brass Collection) family. By positioning the product on both sides of Schlage, Society Brass Collection was able to create a sea of red which helped draw the consumer away from the middle of the aisle and do a better comparison among the product offering. This allowed Society Brass Collection to communicate their product and brand story. The end result was a 48% increase in POS at Lowe’s in 2002 vs. 2001. This was in addition to the increase in 2001 of 27% which included approximately six months of the new product launch. Society Brass Collection took serious market share given that the lock category at Lowe’s increased only 15% during that time. Society Brass Collection also reinvented our off-shelf program with end caps and pre-packed shippers which allowed the store to unwrap displays with product ready for in aisle positioning. The strength of the insights provided by Market Research Associates is evidenced by what happened at Home Depot. Home Depot did not take on the entire program like Lowe’s, and the result was that at Home Depot, Society Brass Collection saw a lower increase of just 12%.