In-store Services: Retail Wrangling

Spending on in-store services declined despite an increased focus on in-store marketing in 2001.

Chalk it up to the economy. Last year’s slowdown led to a 6.0 percent drop in spending to $850 million, according to PROMO estimates based on industry sources. “In-store promotions continue to be a quick cut when budgets need to be reduced, because it’s a big-ticket item,” says Tim Hawkes, managing director of Greenwich, CT-based Chain Reaction (formerly Trade Zone).

Part of the decline was caused by setbacks among kiosk manufacturers, most notably the demise of InterAct Electronic Marketing in the U.S. (May 2001 PROMO). Sales slumps and budget cuts have also prompted brand marketers to place a greater emphasis on measuring the effectiveness of in-store promotions. Consumer packaged goods makers especially “want to have a better understanding of the impact of an event beyond the day of the event,” says Rick Tysdal, executive vp-business development at Mosaic Retail Solutions, Irvine, CA.

Targeting is leading to greater efficiencies. Manufacturers are using retailer databases and third-party research to limit promotions to those stores in which a given product category is strongest, Hawkes says.

As throngs of consumers head to superstores, warehouse clubs, and drug stores for purchases traditionally reserved for the local grocer, brand marketers must increasingly appeal to each retailer with tailored efforts.

“It’s a bottom-up planning environment,” says Chip Hoyt, director of consulting for Bristol Technology’s Kenosia Product Group, Danbury, CT. Instead of creating one-size-fits-all campaigns, agencies must develop customizable promotions that can both support the retailer’s brand and appeal to that particular store’s consumers. “You can’t design a strategy if you don’t know who the accounts are and you don’t know what the real demographics are,” says Hoyt.

At the same time, grocers are increasingly following the precedent of mass merchandisers by adopting “clean store” policies that severely limit the presence of third-party in-store services. That has created “a lot more need to use your own packaging” for promotional announcements, says Bill Carmody, chief marketing officer at Seismicom, San Francisco.

All About Targeting

Frequent-shopper programs are on the rise, with just over half of all retailers now conducting some type of program, according to the 2002 Industry Benchmarking Study from Cannondale Associates, Wilton, CT. Retailers are calling for greater participation from manufacturers, but manufacturers are not yet sold on the potential benefits, the study says.

Programs that target specific subsets of shoppers such as new parents or dog owners, are gaining in popularity. “They’re creating a relationship between the household and the store,” says Sue Klug, president of Catalina Marketing Solutions, St. Petersburg, FL. Retailers are also establishing partnerships with local businesses and organizations to make frequent-shopper programs a community resource.

Meanwhile, in-store events add entertainment and education, bringing a product’s brand message or benefits to the forefront. These activities also play to retailers’ desires to make stores a community resource.

In-store service companies expect spending to pick up in 2002. “As long as you have a captive consumer in a store surrounding where you can influence their purchases, then in-store will continue to gain favor,” says Michael Kent, president of Schaumburg, IL-based PromoWorks.

The future may rest with technology. Catalina and Symbol Technologies, Holtsville, NY, have developed a hand-held Personal Scanning System that will let shoppers scan products and collect discounts as they move through the aisles.