Today, few areas are more discussed by suppliers and retailers than shopper insights. Everyone realizes the importance of the critical moment of truth - the moment shoppers meet the retail environment.

Yet, the state of this research remains in many cases fragmented, informal and anecdotal. The suppliers funding much of this work are finding it difficult to move the conclusions beyond the specific category / retailer being studied.

Retailers are increasingly frustrated by insights suggesting solutions that fly in the face of what they know to be true, or that are impossible to execute.

What's the problem here? Our philosophy is that this research is missing two key elements:

1) Processes to tie these insights into the core work that retailers and suppliers already do, in order to meet their shopper's needs

2) Frameworks to understand how to think about these more broadly, to enable the reapplication of learnings and best practices.

This article explores the concept of "Shopper Return On Investment" - a simple framework for understanding shopper insights from the shopper forward. We'll also look at some top-line implications of that framework for pricing, promotion, assortment planning and branding.

During the last 25 years, marketing research in retail settings has been transformed by technological change. The first wave of change occurred when retailers adopted point-of-sale (POS) systems with UPC barcode scanning. This provided companies with real-time data on purchase transactions and accurate estimates of product sales and market share.

Retailers used this information in combination with shelf space allocation and product inventory information to measure the productivity of their stores. By modeling these data as a function of causal variables, such as product price, display activities, and feature advertising, marketers were able to assess the performance and profitability of their marketing investments (e.g., Blattberg and Neslin 1990).

UPC scanning served as the foundation for syndicated research services such as A.C. Nielsen and Information Resources, and led to the development of brand and category management. Scanner data are in widespread use today and support many critical business decisions.

Brands today operate in markets where the battle for share is tougher than ever. Many packaged goods manufacturers are promoting themselves in-store using more generous price promotions or multi-buy offers, some are modernizing packaging or extending line ranges, while others are turning to newer techniques such as ads on petrol pumps, shelf wobblers, on-floor ads and in-store TV screens. To help seal a deal, online flight operators offer incredibly low advance air fares and email specials, while car manufacturers are providing fantastic finance packages - and even a free cappuccino while you wait!

Increasingly creative channel possibilities both excite and unnerve marketers. Which of these opportunities will genuinely help to close a sale? And which are just a potential waste of time and money?

Fred Reichheld's "The Loyalty Effect" is known as the bible at Tesco.

In this book the former Bain consultant outlines how vital to revenue and profit growth it is to win the lifelong loyalty of customers.

Winning this enduring loyalty from shoppers became a mission within Tesco from the early 1990's onwards.

Recently, Reichheld has gone on to look at how to measure loyalty, and crucially what metrics will predict loyalty. In his seminal paper, "The One Number You Need to Measure" he outlines that there is only one consumer metric that counts and that is a "net promoters" score. This hasn't got anything to do with the internet but instead nets off those neutral to negative about a brand versus those who say they are "extremely likely" to recommend the brand. He found that in the ISP and banking sectors those brands with high net promotion scores were subsequently more likely to grow revenues and profits.

Today's shopper faces a dizzying array of retail choices, all of which satisfy their need for food and household basics.

As discount and drug stores add more space for food and supermarkets add more non-food sections, retailers have moved to the muddled middle and shoppers no longer distinguish retailers along channel lines.

Instead, shoppers choose where to shop based on a retailer's ability to deliver what they are looking for, whether it is the lowest prices, bulk sizes or unique products.

A new study entitled Redefining the Retail Landscape, released by Cannondale Associates in conjunction with panel provider Lightspeed Research, presents a shopper-based approach to segmenting retailers and identifies actions to differentiate the retailer segments.

Cannondale studied over 5,000 shoppers at more than 1,100 retail banners to understand their shopping behaviors and attitudes. According to Ken Harris, Managing Director at Cannondale, "This new tool provides a terrific way to understand what shoppers value to best meet retailers' needs."

From Cannondale's shopper-based retailer segmentation approach, four distinct retailer segments emerged, each with key points of differentiation based on behavioral and attitudinal strengths and challenges.

1. Routine Replenishment, whose shoppers make frequent trips and like the shopper card program, store services and wide/consistent selection
2. Big Shops, whose shoppers spend a lot per trip and like the bulk products
3. Experience Makers, whose shoppers spend less time shopping, but like the unique products
4. Quick Shops, whose shoppers spend the least time and money, but go there because it is quick to get in and out of the store

Benefits of the new segmentation approach:

The following excerpt from the study emphasizes the need to create a destination with differentiation. If retailers can't demonstrate distinct meaningful benefits to shoppers, they lose their reason for being. With a clearly defined retailer segmentation approach, manufacturers can help retailers in developing a unique selling proposition.

The retailer segments differ from traditional channel groupings because seemingly dissimilar retailers often fall into the same group. For example, Target is generally considered a mass store, but it appears with Trader Joes, Whole Foods and CVS in the Experience Maker segment, while Stop and Shop is grouped with Wal-Mart and Costco in the Big Shops segment. Similarly, Rite Aid is grouped with 7-Eleven and Dollar Tree in the Quick Shops section because all of these shoppers are focused on getting in and out of the store as quickly as possible.

The shift to a shopper-centric approach to retail segmentation is crucial as the traditional lines between channels continue to blur.

Cannondale's innovative model of grouping retailers based on their shoppers attitudes and behaviors helps manufacturers to tailor programs and approaches to fit each retailers specific needs. Manufacturers who can provide this level of customization and assist retailers in differentiating themselves will be the thought leaders and indispensable trading partners of tomorrow.

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