Medium Rare

More than 70 percent of purchase decisions are made in the store.

If you’re involved in marketing in any capacity, you probably already knew that. The statistic has reached legendary status among P-O-P practitioners and nearly every speaker at last month’s P-O-P Show in New York City paid homage to it in some form or another. As is the case with so many legends, however, the details behind the statistic were sometimes explained differently: One speaker claimed that 70 percent of brand decisions were made in-store; another offered that 70 percent of all purchases were impulse buys.

Maybe that confusion explains why research that could have been viewed as a watershed for the marketing world caused barely a ripple.

The figure comes from a seven-year-old Consumer Buying Habits Study commissioned by Point-of-Purchase Advertising International. Through interviews with 4,200 consumers, the study determined that: 60 percent of all supermarket purchases were completely unplanned, meaning that shoppers had no preconceived intention to buy the product before they entered the store; six percent of purchases were “generally” planned, meaning shoppers had product intent but no brand in mind; and four percent of purchases were pre-planned but altered by something within the store environment. Thus, 70 percent of purchase decisions are made in-store, and a legend is born.

But that and $1.50 will get you on the subway.

The fact that consumers were making most of their decisions within the store — despite the thousands of marketing messages they were subjected to elsewhere — didn’t have much impact on strategic planning. Most marketers continued using a two-pronged approach, using the retail environment to drive sales (if at all) while employing other media channels to build brands.

E-mail newsletter Cool News of the Day, Westport, CT, polled marketing professionals last summer about the industry’s view of retail. Only 42 percent of respondents believed most marketers even have a retail strategy, while an equal percentage said that most marketers don’t. That’s because most marketers still primarily view retail as a means of distribution, not as a marketing channel, according to respondents.

“It is astonishing that so few [marketers] have considered the retail environment’s sheer creative potential, and astounding that so many are missing the opportunity to build their brands when and where purchases are made,” says Mel Korn, ceo of Publicis Groupe’s Collaborative Marketing Worldwide, New York City, assessing the survey’s results at Cool News affiliate Reveries.com.

It’s especially surprising given the vast amounts of money spent on trade promotion — as much as 60 percent of total marketing dollars (if you include account-specific marketing activity) and nearly 17 percent of gross sales for a typical packaged goods company, per estimates from Cannondale Associates, Wilton, CT. And those percentages don’t include what marketers spend on P-O-P displays, sampling events, in-store media, or other promotions targeted to consumers through retail — which represents at least another five percent of total marketing dollars, based on an examination of PROMO and Cannondale estimates.

The Media Dilemma

Recent industry events are bringing the focus back to retail. The consolidation of retail channels has given an inordinate amount of distribution control to a handful of chains, and the fragmentation of the mass media makes it a less effective means of reaching consumers.

Marketers question the efficiency of mass media advertising as the primary strategy. Technology is giving consumers greater control over what messages they’ll accept, and powerful retailers are beginning to treat their stores an awful lot like a medium — after all, who needs television when you can visit your local mass merchandiser to watch Britney Spears perform live on Wal-Mart TV? (The traffic-driver was presented July 27, courtesy of Wal-Mart marketing partner and Spears sponsor Pepsi-Cola.)

Bentonville, AR-based Wal-Mart has created its own mini-media empire with TV, radio, and print (circulars) capabilities as well as shelf fixtures, and floor coverings, for an unrivaled reach of 90 million consumers on a weekly basis.

Similarly, Walgreen Co., Deerfield, IL, sells and negotiates the various marketing opportunities inside its 3,800-plus stores as if it were Viacom or AOL Time Warner. (“Bring your checkbook,” advised vp-advertising Craig Sinclair to would-be partners during his P-O-P Show presentation.)

There’s no doubt, then, that retail is an advertising medium. But to classify it simply as “another” medium — even as the most effective medium — doesn’t give it the proper credit. The power of Wal-Mart’s in-store options isn’t that they can reach 90 million consumers. They can reach 90 million shoppers who could see or hear the message, then immediately pick up a product and buy it.

Washington, DC-based POPAI is in the midst of a landmark study designed to increase awareness for P-O-P advertising by creating performance-measuring standards for various display vehicles. Supported by leading packaged goods companies as well as the Advertising Research Foundation, New York City, the study is already alleviating what has always been a major setback: a lack of any general performance data that can be used to prove effectiveness.

But the study’s stated goal of making P-O-P “a measured medium,” complete with audience estimates and corresponding CPM calculations, diverts attention from the retail’s true potential: The ability to immediately drive sales — what Joe Rabaglia, senior vp-client services at Minneapolis-based Gage Marketing (and a P-O-P Show speaker), calls “results-oriented brand communication.”

Wal-Mart’s former chief marketing officer Paul Higham offered his own perspective on the debate between attitude-influencing vs. behavior-modifying marketing during P-O-P Show’s second-day keynote by recounting a now-standard tale (April PROMO). Higham spotted a pick-up truck with a decal of a comic-strip character urinating on the Wal-Mart logo (in Bentonville, no less). His outrage was mollified when the offending vehicle pulled into Wal-Mart and the driver went inside to shop. “Peeing Calvin in the back window is attitude. Shopping at Wal-Mart is behavior,” he said.

“Point-of-sale is at the top of the list in communicating to consumers,” Higham told his audience. “We can reach more people, more effectively in stores — thank God, [Wal-Mart] had the traffic.”

Checking the Options

Also driving an increased focus on retail activity are the new Financial Accounting Standards Board guidelines for reporting trade allocations, which will force the typical CPG to reduce its gross sales by 8.5 percent in 2002, according to Cannondale estimates. (See the June PROMO for an explanation why.) In a survey conducted in early 2002, 50 percent of marketers — and 62 percent of retailers — told Cannondale that addressing these changes will demand a total review of existing trade promotion programs and strategies.

These rules have attached a dollar sign to the trade promotion inefficiencies that brand marketers have railed against for years, but are loathe to address for fear of angering retailers. Now that top-line performance is at stake, marketers may finally have the impetus to ensure that retailer allowances — which often provide little more than guaranteed shelf space — are channeled into effective marketing programs.

Not that a stronger focus on retail marketing is a simple proposition. The store provides finite real estate, whether you’re talking about endcaps or frequent-shopper discounts. All 30,000 SKUs can’t get special attention at once, which inevitably leads to domination by the biggest-selling brands. (At Walgreens, it’s “pretty impossible” to obtain incremental display for more than 30 days unless you’re Pepsi or Frito-Lay, Sinclair noted.)

About half of all packaged goods brands rely solely on package design to attract attention, because they have neither the marketing budget nor the channel clout to negotiate anything else, noted P-O-P Show speaker Bob Swientek, editor-in-chief of Brand Packaging, St. Charles, IL. But that alone can be an effective strategy, Swientek says.

Still, there is a vast array of opportunities available. Many marketers confess to ignorance about the breadth of options available, but profess a strong desire to gain a better understanding. At this stage, in-store marketing needs more to be understood than to be measured.

After all, 70 percent of purchase decisions are made in the store. And that’s not just a legend.

Peter Breen is managing director of the In-Store Marketing Institute, Larchmont, NY. Reach him at [email protected].

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