RETAIL VIEW: Data key to retail marketing
- by Tim Linden | February 19, 2007
It wasn't too long ago that "seat of the pants" might have been the best phrase to describe the retail produce marketing techniques employed by most suppliers. Retailers at least had their own data on which to rely, so their efforts could have been described as "advanced seat of the pants."
After all, it wasn't until the early 1990s that the universal product code began to find its way onto produce packaging. And it was a few years later when the price lookup code was developed to address the specific needs of the bulk- oriented produce department. When these codes started to be used in a widespread fashion, it brought the retail produce department closer to its center-store counterparts in the area of using hard data to craft merchandising strategies.
Bruce Axtman, president and founder of The Perishables Group, said that 10-15 years ago, there wasn't much information available to help produce suppliers or retailers maximize their sales opportunities.
At the time, Mr. Axtman was working for a retail consulting firm that spent a lot of time working with grocery and hard-good items using the data created by the UPC bar code to develop and implement retail merchandising programs.
The UPC label was first developed in conjunction with a scanner to make a checkout clerk's job easier, quicker and more accurate. But bean counters soon discovered that when fed into a properly programmed computer, this scan data could reveal lots of valuable nuggets of information. Soon the retail consultant cottage industry had another tool at its disposal to help suppliers and retailers maximize their sales and profits.
As the produce industry joined the game, Mr. Axtman's previous firm dipped its toes into the produce department, but soon he ventured out on his own to specialize in the perishable industry with The Perishables Group, which was launched in Chicago in 2000. The company started with about 12 employees, but it has now grown to more than 45 associates with multiple offices around the country.
The company offers many consulting services to its clients, but it is safe to say that information garnered from scan data is the lynchpin to its operation. Mr. Axtman said that the company took a big leap forward in the area of information gathering when it formed an alliance with the Nielsen Group in 2004. That company, famous for the information it gathers from television viewers, also has a division that has long had an information-gathering relationship with the nation's retailers.
Nielsen contracts with retailers all over the country to mine their scan data for valuable information. On a weekly (or more frequent) basis, scan data from literally thousands of stores are downloaded into Nielsen's data bank.
The Perishables Group, in turn, contracts with Nielsen for the produce data, as well as the information in other perishable departments in which the firm consults.
Of course having raw data is one thing, but knowing what to do with it is no doubt the key to the firm's success. The Perishables Group has developed its own proprietary software package that has allowed it to drill deep into the data and emerge with usable information for its many customers.
Mr. Axtman said that the firm's customer list is composed of about 75 percent suppliers and 25 percent retailers. While the company offers many services and is very proud of its work in new product launches, the common thread to that work is using past data to predict and control future results.
The company's chief executive officer said that the scan data could be used in countless ways to compare chains, individual stores, products, price and promotional activity.
For example, using The Perishables Group's data, a supplier can work with a retailer in developing proper price points and promotional opportunities for virtually any produce product. The data can reveal at what price a product sells best and when past promotional activity has returned the biggest bang for the buck.
Retailers can use the information to analyze the success of their food page ads and see which combination has worked the best in the past.
Mr. Axtman said that almost any shipper or retailer of any size could utilize this information for its benefit. Of course, a larger shipper or retailer might have a bigger budget for such information, but he said that baseline reports are relatively inexpensive and can offer information for any supplier.
"We have lots of different ways we can work with folks, from full programs to providing reports," he said.
But Mr. Axtman did agree that as the sophistication of the information grows, it does lend itself to a more sophisticated marketing approach that is typically associated with larger companies.
Year-round supplies of a large volume of produce and being equipped with these data tools can help retailers develop and manage a category program. Obviously, a seasonal supplier of limited supplies has a much more limited opportunity to participate in this more advanced effort.
He said that it is much harder to be successful today based solely on being a good grower of product. Successful suppliers have to offer their retailer partner more than that. "But," he added, "there is always going to be room for the niche supplier in the produce industry."
In the new-product launch category, Mr. Axtman said that it is very important to be armed with the proper information. His firm has specialized in that arena by developing successful promotional strategies based on the data it has collected. The number of SKUs in the produce department has mushroomed in recent years, and it is now very difficult to get shelf space for a new product without being able to present a compelling story to the prospective buyer. Even a great product can fail without the proper support during the launch campaign, Mr. Axtman said.
The Perishables Group has also done a lot of work for commodity groups in the past, and it continues to do so. While that work is important, Mr. Axtman said that the sophistication of the information now available could be utilized better by the direct suppliers and buyers of the product. Commodity groups, by their very nature, deal in generic terms and generic information.
Mr. Axtman points to numerous examples of successful campaigns that The Perishables Group has waged for various suppliers and retailers. Its list of produce-centric clients reads like a Who's Who of both the supply and retail sides of the equation. Mr. Axtman said that its three main areas of support are category management, marketing service and new product development. But the key to understanding the success of The Perishables Group is not a recounting of its past promotional victories but rather the underlying philosophy that knowledge is power.
The information available to a supplier is light years ahead of where it was just a few regular years ago. The produce department has always prided itself on being a different animal than other departments and selling a product that is inherently different.
"Yes and no," said Mr. Axtman. "Produce is different, but it still has the same needs [as the other departments] and can use the same tools to fill those needs."