Supermarket Persuasion Suite 301 641 W. Lake Street Chicago, IL 60661 P 800.634.4941 F 800.998.0854 info@learningseed.com www.learningseed.com Supermarket Persuasion Page i of 12
Legal Niceties The Video Copyright 2003 Learning Seed. Supermarket Persuasion This video program is protected under U.S. copyright law. No part of this video may be reproduced or transmitted by any means, electronic or mechanical, without the written permission of the Publisher, except where permitted by law. This Teaching Guide Copyright 2003 Learning Seed. This teaching guide is copyrighted according to the terms of the Creative Commons non-commercial license (http://creativecommons.org/licenses/by-nc/2.5/). It may be reproduced, in its part or its entirety, for classroom use. No part of this guide may be reproduced for sale by any party. You are free: Under the following conditions: to copy, distribute, display, and perform the work. to make derivative works. Attribution. You must attribute the work to Learning Seed. Noncommercial. You may not use this work for commercial purposes. For any reuse or distribution, you must make clear to others the license terms of this work. Any of these conditions can be waived if you get permission from the copyright holder. Learning Seed Catalog and ISBN Numbers DVD LS-1273-03-DVD ISBN 1-55740-946-3 VHS LS-1273-03-VHS ISBN 1-55740-869-6 Our Guarantee We d love to hear from you, whether you d like a catalog, want to share your thoughts on one of our titles, or have a question. Please contact us at: Learning Seed Suite 301 641 W. Lake Street Chicago, IL 60661 P 800.634.4941 F 800.998.0854 info@learningseed.com www.learningseed.com Supermarket Persuasion Page ii of 12
The Program Summary Take a video trip to a supermarket and learn what marketers know about consumer behavior. Learn how grocers shape shopping behavior to encourage buying the most profitable foods. Supermarket Persuasion gives consumers the edge by revealing what marketers know. Learn seventeen rules marketers know that function in most modern supermarkets. Learn about continuity offers, bounce patterns, variable margin pricing, slotting allowances, shelf talkers, tie-ins, shelf hangers, and the rule of nines. Learn that every detail of a store from the size of the shopping carts to the color balance of the lighting in the produce department is a marketing tactic. Study shelf displays to understand color as a signal, the reasons a bewildering array of flavors and variations, and how shelf position influences sales. Learn how carefully orchestrated displays can increase sales, even without promising a reduced price. Learn the reason for frequent shopper cards and the merchandising tactics of the front end. Learn the value of unit pricing and discover some surprising tricks of the trade. Using the Worksheets Two worksheets are included in this guide. Permission is granted to purchasers of the video to copy these sheets for classroom use. The sheets are presented in vertical format for easy photocopying. Language of Food Merchandising The two page Language of Food Merchandising is both a vocabulary guide and a summary of many of the key points in the video. Scavenger Hunt The Scavenger Hunt worksheet lists 32 items for students to locate. Each item requires an understanding of supermarket persuasion as explained in the video. Most items require a trip to the local supermarket. To use the worksheet give a copy to each student and assign numbers at random from 1-32. Depending on the number of students in the class and the time available, assign each student from one to three items on the list to locate. Supermarket Persuasion Page 3 of 12
What Marketers Know The video points out seventeen general rules of food merchandising that supermarkets use to enhance profits. In the video, each rule is printed on a rotating card. 1. TIME = MONEY The more time shoppers spend in a store, the more they buy. A basic tactic of the grocery game is to keep the customer shopping for as long as possible. 2. BARGAIN HUNTERS SPEND MORE People intent on finding bargains so they can save money often spend more than casual shoppers. So a shopping environment that appears loaded with bargains tends to increase sales. Coupon clippers and bargain hunters typically invest so much time and energy in shopping that they have to spend enough to justify their efforts. 3. LOOKS SELL What s the best way to sell more produce? A huge, colorful display works great; even better than a modest price cut. A shiny, huge, bright red apple will sell faster than a more homely looking fruit that tastes better. 4. CONVENIENCE IS A PRODUCT Convenience sells. Much of a shopper s grocery bill pays for processing that makes the food easier to serve at home. Shoppers view even the smallest time saver as added value and are willing to pay for it. 5. THE PERIMETER IS FOR PROFITS The departments arranged along the outer walls of a store are often called the power perimeter. Departments such as produce, dairy, meat, and a deli usually produce far more profits than the packaged goods found in the interior aisles 6. PULL SHOPPERS INTO THE STORE Foods that appear most often on grocery lists (called demand items ) are often placed at the rear of a store in order to use their pulling power to move shoppers past other merchandising temptations. It might be more convenient for a store to have milk and bread at the front of the store so some shoppers can get in and out quickly but it would not be good merchandising. 7, MOVE SHOPPERS PAST FACINGS A facing is a display of a product on a shelf one across. Each facing has a column of packages behind it. If you see the faces of three Cheerios boxes on a shelf, that is three facings. In general, the more facings a product can display, the more it will sell. 8. SHELF CONTROL WINS The shelves look bright and colorful, but they are a battlefield where control for every square foot is a fight, and every percent increase in sales can be worth millions. Leading national supermarkets charge slotting fees to food makers as a sort of shelf rental. 9. LOCATION, LOCATION, LOCATION Marketers experiment constantly with shelf positions. One experiment increased sales of large jars of applesauce 500% by moving them from near the floor up to eye level. Marketers find the best possible location to maximize the profits for each square foot of shelf space. Supermarket Persuasion Page 4 of 12
10. SHOPPERS DON T KNOW PRICES Sale items build traffic and help draw attention to higher profit impulse buys. Shoppers are familiar with prices of items they buy frequently, but not most of the thousands of other foods. A large sign with the price and words such as special or special value will increase sales even though the price is not a reduction. 11. FAST TURNOVER WINS OVER HIGH PROFIT Supermarkets depend on volume and a fast turnover. Stores use mixed-margin pricing. That means the mix of sale and non-sale items remains steady. The grocery business operates on narrow profit margins. A saying in the grocery business is better a fast nickel than a slow dime. 12. UNIT PRICES ARE A SHOPPERS FRIEND Unit pricing allows shoppers to compare prices among different brands or sizes. 13. SLOW DOWN SHOPPERS Special displays, often at the ends of aisles, keep getting in the way. That's how they work, by grabbing attention and slowing shoppers. Special displays slow shoppers so they don t rush past merchandising offers. Displays that seem to block your way while shopping are often just that blockers designed to slow traffic. 14. MAKE THE PAST OF LEAST RESISTANCE THE MOST PROFITABLE Even bargain hunting shoppers will often follow the path of least resistance. Hundreds of non-food items from film to batteries are sold at higher than average prices in supermarkets. 15. OFTEN THE PACKAGE IS THE PRODUCT Sometimes the package costs more than what is inside. Marketers do not view packages as containers for food. They know that a package can actually be the main reason people buy the product. 16. CUSTOMER INFORMATION IS VALUABLE A loyalty card program does not lower prices for shoppers, but it does give the store information about buying habits. Customer information is a critical selling tool. Stores use the data gathered with these cards to control inventory and create targeted promotions. 17. SHOPPERS CAN WIN Hundreds of little moves help grocers win the game. But if you understand some of what marketers know about how food is merchandised, you will make better choices and win the game. Supermarket Persuasion Page 5 of 12
Language of Food Merchandising BOUNCE PATTERN The controlled movement of shoppers down an aisle. Foods are carefully positioned to stop shoppers often so as to increase the chance of a purchase. The key is to alternate items shoppers demand (see demand items) with higher profit impulse buys. CONTINUITY OFFER A special offer that requires repeated trips to the store. Favorite continuity offers include sets of dishware, encyclopedias, or kitchenware. Variations include saving grocery receipts to qualify for discounts on merchandise. Grocery stores offer film processing and video rentals not so much because they are highly profitable, but because they draw shoppers into the store more often. COUPONS Often used to introduce a new product. But coupons can also be used to undercut the competition, encourage shoppers to buy a larger size, or reduce overstock. Studies show shoppers who use coupons tend to spend more money than non-users. Some stores feature double coupon days in order to attract these higher spending customers. A shopper with a handful of coupons has to wander the aisles looking for the right products; this movement around the store tends to produce more impulse buys. DEMAND ITEMS Basic foods; those shoppers need and thus seek out. Stores are arranged so that in order to find these demand items shoppers have to travel around the store and be exposed to as many facings, sales, special displays, and other buying temptations as possible. END AISLE DISPLAY Displays of merchandise attractively arranged at the ends of aisles. These displays are often marked special. They can increase sales without a price reduction. Also called an endcap. Part of their effectiveness is that they are placed apart from the competing brands. A shopper who selects from an end aisle display will usually not look at the normal store display. FACING A single width of a product on the shelf. The most important single factor in selling food is to expose shoppers to as many facings as possible. A purchase cannot be made if the shopper never sees the item. In general, the more facings a product shows, the more it will sell. FILL-IN SHOPPING The shopper stops to buy one or two needed items. While at the store the shopper buys more goods to fill in his or her needs. Much of this fill-in is higher profit impulse buying. IMPULSE BUYS Most grocery purchases are on impulse -- unplanned. Grocers usually make more money on impulse buys than on sales of staples like bread, milk, and dry groceries. Merchandising means getting shoppers to spend more time in the store thus increasing the likelihood of impulse buys. LAYERED MERCHANDISING Moving products up or down on the shelf will increase or decrease the speed at which they sell. In general, the layer of foods near eye level sells best. LOSS LEADERS Sale items sold at such a low price the store makes very little profit or actually loses money. The low prices on these items leads shoppers to spend more. Loss leaders are often advertised on signs in store windows and in the daily newspaper MEAT DEPARTMENT A good meat department attracts loyal customers. Many shoppers claim they choose a grocery store based mainly on the quality of its meat department. MULTIPLE PRICING For many items, a price like three for two dollars will move more merchandise than a straightforward 67 cents each. Supermarket Persuasion Page 6 of 12
P-O-P Abbreviation for point of purchase. P-O-P refers to all the signs or devices placed where the product is displayed in order to increase sales. Banners, package copy and design, product towers, signs, samples, display cards, posters, recipe cards, etc. are all P-O-P materials. POWER OF PERIMETER Stores make the most profits from departments around the outer wall -- produce, meat, dairy, deli, and bakery. Interior aisles typically produce smaller profits. PRODUCE DEPARTMENT One of the most profitable departments of the store. Studies show stores make more money if shoppers enter the produce department first. This is probably because shoppers spend more freely at first -- they are still within budget. SHELF TALKERS - Small shelf signs with simple selling messages such as special value, unadvertised special, or Anew. These signs can increase sales 40% or more. Shoppers often assume any item tagged with a shelf talker is a price reduction. STORE BRAND (PRIVATE LABEL) A brand sold only in one store or chain of stores, usually priced lower than national brands. Stores usually make a higher profit on store brands than on national brands. TIE-IN Two items that tie together sold next to each often. Often one is on sale and the other at full price. For example: strawberries and shortcakes, vanilla ice cream and chocolate syrup. TUMBLE OR DUMP DISPLAY Food piled in a basket or cart. The disorder of the display says these foods have to be sold quickly at a low price. Sometimes, the price is not reduced. UNADVERTISED SPECIALS Similar to a loss leader. The special price surprises the shopper and sends the message that browsing through the shelves will be rewarded. The idea is to nudge the shopper toward saying yes instead of no to the buying temptations. UNIT PRICING Shelf tags showing prices per ounce, per piece, etc. Unit pricing allows shoppers to compare prices between similar foods in differing package sizes. VARIABLE PRICING (MIXED MARGIN) A common tactic in which selected items are sale priced while others are sold at higher prices. The sale priced items are advertised to give the impression of a store filled with bargains. The mix is carefully controlled to produce an acceptable profit margin. Supermarket Persuasion Page 7 of 12
Supermarket Persuasion Quiz 1. Explain the meaning of the phrase the power of the perimeter. 2. Name one merchandising tactic you learned about in the video that you have noticed in local supermarkets. 3. Near the beginning of the video we see a display of three types of tomatoes, each at a different price. What is the point of the video regarding the tomatoes? 4. Where would you find information to help you compare prices among three brands of paper towels? 5. What is the main reason stores issue loyalty cards to regular customers? Supermarket Persuasion Page 8 of 12
Scavenger Hunt 1. Compare the price of regular popcorn (kernels) with that of microwave popcorn on a per pound basis. 2. Estimate how much time and money instant rice saves over regular rice. 3. Compare the price of orange juice (not orange drink) in a carton or jar with orange juice made from frozen concentrate. Compare prices based on an eight ounce serving. 4. Compare the price of fresh fish with frozen fish sticks on a per pound basis. 5. Draw a map of a local supermarket that illustrates the meaning of the phrase power of the perimeter. 6. Take apart an example of aseptic packaging. Explain to the class what it is made of. Research required. 7. Prepare a list of ten common grocery items. Compare their prices in three stores. What does the total bill in each store for the fifteen items tell you about supermarket pricing? 8. Describe three merchandising tactics in the produce section of a local supermarket. 9. Visit three local supermarkets. Note where the dairy section in each is located. Explain why. 10. Clip three food coupons from your local newspaper. Find the items in a grocery store and compare prices with other brands (especially store brands). How do they compare in price? 11. Find an example of three brands of a food packaged to make price comparisons almost impossible. 12. Use unit pricing labels in a local supermarket to find to find a product in which you actually spend more per unit when you buy a larger size. 13. At a local supermarket compare prices for a national brand of toothpaste, hair spray, and batteries. Compare prices with the same items in two non-supermarkets. What can you conclude? 14. Study the detergent section in your local supermarket. Find out which companies are behind the brand names. Estimate what percentage of shelf space is controlled by the two leading companies. 15. Estimate what percentage of shelf space is controlled by the two leading companies in the soft drink section of your local supermarket. 16. Study the cereal display in your local supermarket. Which companies control most of the shelf space? 17. Use library research to determine which brands of food are sold by a company called ConAgra. 18. Use library research to determine which brands of food are sold by a company called General Foods. 19. How many shelf talkers can you find at a local grocery? What is the most common message? 20. Find three brands of the same food in packages that appear to be the same size but contain differing amounts of food. Supermarket Persuasion Page 9 of 12
21. Find three boxes that appear to be the same size but contain differing amounts of food. 22. Find a package that appears larger than a competing brand yet contains the same amount or less food. 23. Find a full-page newspaper ad showing food prices. How many of the prices end in the number nine? 24. Find an example of a tie-in display at a local grocery store. Is one item on sale, both items, or neither? 25. Use unit pricing to find the largest price spread per square foot in the paper towel section. 26. Find an example of a large package with very little food content. In other words, illustrate over-packaging. Show the actual package and the contents. 27. Find a local supermarket with a high quality house brand. Compare prices of three store brand items with the same foods in national brands. How do they compare in quality and price? 28. Find a local supermarket with generic foods. Compare prices of the generics with national brands in four items. How do they compare in quality and price? 29. Only one shopper in four can correctly estimate the prices of common grocery items within five percent. Conduct your own study and compare shopper estimates with the actual prices. 30. Compare the quality of a store brand with a national brand of a frozen or canned vegetable. Is one clearly superior or are they practically identical? How do they compare in price? 31. Find a local supermarket with either a salad bar or bulk foods section. Compare prices at the salad bar with the same foods found elsewhere in the store. 32. Look at three end aisle displays in a local supermarket. Do the displays represent the best price for those items or are there other brands of equal quality selling for less but not part of a special display? Supermarket Persuasion Page 10 of 12
Resources Food Marketing Institute is a trade group of food retailers and wholesalers. They offer statistics on consumer expenditures, supermarket facts, and current trends in the supermarket world. Try their website at www.fmi.org. Grocery Revolution: The New Focus on the Consumer by Barbara Kahn and Leigh McAlister (Addison-Wesley Longman, Reading, MA. 1997). This is a collection of readings about the evolution of packaged goods and consumers grocery shopping behavior. Recommended for students in Marketing or Consumer Behavior classes. The Theory of Supermarkets by Jack Hitt in New York Times, March 10, 1996, Sunday Magazine Desk. The mission of the supermarket, like everything in our culture, is supposedly dedicated to one end: choice. But it is not your choice; rather it is the retailer s. It turns out that every inch of space is scientifically calibrated to hold only what you will buy at the highest possible margin. The Food and Brand Lab at the University of Illinois. Website at www.consumerpsychology.com. The lab s survey of over 400 homemakers in five states revealed that 12% of grocery purchases never get used. These forgotten items sit on pantry shelves for an average of 2.7 years. Reports studies on consumer behavior. Phil Lempert s Supermarket Shopping and Value Guide by Phil Lempert (Contemporary Books, Chicago. 1996). Lempert occasionally appears on TV to show grocery shoppers how to get the most value for their food dollars. This is the best practical guide to food shopping available in book form. Aimed at consumers rather than marketing students. For more information on loyalty cards and privacy issues see www.nocard.org. Supermarket Persuasion Page 11 of 12