From insight to innovation

Professor Andrew Fearne Professor Andrew Fearne

Making the most of our access to From insight innovationdata dunnhumby (TescotoClubcard)

Orientation

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Who Buys My Food?

•

Structure  Partnership between NBS, dunnhumby, Tesco and InvestNI

•

Mission  To help small food producers improve their businesses by increasing their understanding of shopper behaviour

•

Delivery Model  UEA - Research assistant, students (PG & UG)  InvestNI – shopper insight team

Key Shopper Insights 1. Key Performance Indicators (KPIs): • •

Sales Growth Customer Penetration

•

Customer Loyalty

– –

% of shoppers Repeat purchase rate

3. Shopper Profiles •

Meeting a distinct need?

–

Segmentation (lifestage, lifestyle, family)

4. Store Performance •

Distribution –

Core Stores

5. Glossary of Terms

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What’s the catch?

• •

There are no catches!

•

Our network of 130+ small food and drink producers is an exclusive ‘laboratory’ in which we explore the value of shopper insight for SMEs and the barriers/enablers to its exploitation

NBS invest in the data access, infrastructure and research capability, supported by InvestNI

 Research (publications)  Extension (case studies and webinars)  Impact (relevance, rankings and revenue)

Outline

• • • • •

Context Behavioural insight Who buys my food?

Lessons learned Discussion

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What will you remember? ● Unparalleled complexity and uncertainty in the agrifood sector means organisations are increasingly vulnerable and sustainable food systems are an elusive goal ● Sustainable competitive advantage (SCA) requires a paradigm shift – from strategies based on opportunism and supply chain ‘push’ to strategies based on collaboration and value chain ‘pull’ ● This means business leaders need to change the way they think, allocate resources and incentivise people, in order to change the way their organisations behave ● Customer insight is a critical ingredient for ‘success’

CONTEXT

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Sustainability

Social

Environmental

Economic

Sustainability

Education Corporate Values

Social

Health

Succession Planning

Ethical Labour

Communities

Labour

Transport

FOOD Corporate

Climate Change Ecological Footprint

Ethics

Supermarkets Economic Profits

Soil

Environmental Waste

Energy Sources

Land Use

Consumers

Market Access

Water

Biosecurity

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Paying the price for excess!

Commoditisation

“Between us, marketers and retailers have trained an entire generation of shoppers to only buy on promotion. It’s not that they need to, but why shouldn’t they when price deals are available on key brands so often?

Future generations may well look back on this as a time of anti-marketing unless we take action now.”

Jacqui Hill: Unilever Marketing Development Director

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Shifting Focus •

Despite the billions of dollars spent on branded advertising to build customer loyalty, the Grocery Marketing Association of America (GMA) estimates that 70% of purchase decisions are made at the point of purchase, resulting in:

• significant shift in advertising expenditure

• significant growth in price promotions

The long tail of innovation

•

25% of new product introductions de-listed within first 12 months

•

Only 6% achieved weekly peak sales > £60k

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Where is the focus?

Sustainable Innovation

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Collaborative resource allocation that increases the sustainability of the chain as a whole  Add more value – effectiveness  At lower cost – efficiency  Faster than the competition – agility  Responsibly

Organisations cannot do this alone!

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Supply Chain ‘Push’

• • •

Opportunistic trading relationships (dysfunctional conflict) Weak information flow (transaction data – compliance driven) Cost-plus business model (inward looking)

Value Chain ‘Pull’

• • •

Collaborative trading relationships (functional conflict) Richer information flow (attitudinal & behaviour data) Value-adding business model (outward facing)

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Value Chain Innovation Value Chain Partnerships

Strategic Orientation

Value Design

Customer Relationships

Products & Services

Distribution Channels

Consumer Segments

Consumer Positioning

Costs

Revenue Success/Failure

Adapted from Osterwalder & Pigneur (2010)

Value for Whom?

Value capture (Firm’s bottom line):

Vs

Value creation (Chain’s top line)

The only way to grow the pie is by getting consumers to pay more ….

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Standard 59p

Segmentation par excellence?

Crusty ???

Organic ???

No crust ???

Seeded ???

Standard 59p Toastie ???

50/50 ???

Oatbran ???

Healthy ???

Dietary ???

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Any Surprises?

Standard 59p

Oatbran 65p

Crusty 83p

Organic 85p

Healthy 87p

50/50 £1.00

Toastie £1.18

No crust £1.22

Seeded £1.65

Dietary £2.16

Capturing the value Breeder

Retailer

Input suppliers

Distributor

Farmers

Baker

Merchant

Miller

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BEHAVIOURAL INSIGHT

Definition Insight is… “the understanding of cause and effect based on identification of relationships and behaviours within a model, context, or scenario” (Stone et al, 2005)

Descriptive  Statements of fact (what?)

Diagnostic

Insight

 Analytical and Explanatory (why?)

Predictive  Forecasting the results of a planned marketing decision (what if?)

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Relevance

We may believe (and even have proof) that our products are better than our competitors BUT what matters most is getting retailer buyers, shoppers AND consumers to believe it!

The more relevant the product the greater the demand

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Fragmentation & Differentiation

•

Differences in purchasing behaviour between market/customer/consumer segments may be significant and should not be assumed

•

Different market/customer/consumer segments require different treatment

Type 1 and Type 2 thinking •

Most buying decisions for FMCG (low involvement) are driven by Type 1 thinking – fast – instinctive – emotional

•

Type 2 thinking more relevant for capital/investment goods (high involvement) – slower – more deliberate – more rational

• Ehrenburg’s theory - “Building real and virtual availability is the sole goal of the marketer”

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People don’t always do what they say

Tesco Healthy Living Natural Greek Yoghurt

Changing Behaviour Point of Purchase (Behaviour) Change behaviour Attitude – Intention - Behaviour Gap Pre-store (Intensions) Change attitudes Necessary but not sufficient

Increase Knowledge

Raise Awareness

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Big numbers matter in a long tail market

Dunnhumby 2019

Behavioural insight – extends the line of sight Everyone in the value chain needs a much better understanding of

Who buys What? and Why?

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Behavioural insight – drives resource allocation The more limited the resources the more important it is to target

Cannot afford to ‘hit and hope’

Behavioural insight - shifts the balance of power

•

Informs

•

Supports

•

Enables

   

Strategic planning Supply chain design Marketing planning NPD

 Account management  Relationship development  Consumer segmentation  Targeted resource allocation

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Behavioural insight keeps your product on the supermarket shelf!

Tesco’s Customer Priority Score customers like the Repeat Rate • Do product? Are they repeat (30%) purchasing it? the product bought by Penetration • Is many customers in the (30%) category? this the most Favourite • Is commonly bought Share (20%) product in the category?

• What share of Share of customers’ expenditure Wallet (20%) is on this product?

Clubcard Data - Summary 2 years of weekly supermarket transactions •

1.9 million shoppers (10% sample)

•

30,000 food products (but shrinking)

•

Segmented by…

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Tesco Lifestyle Segmentation • Each product is categorised using a series of attributes

•Low Price

•Fresh

•Tesco Own

•Tesco Own

•Loose

•Pre-packed

•Value range

•Vegetarian

•Convenience

•Multipack

•Adventurous •Healthy

• They look for the balance of key attributes in each customers shopping basket

© Copyright, dunnhumby 2004 — confidential

Shopper DNA Adventurous Bigbox Branded Diet Healthy Hi-price Kids Lo-price Meat N-F overall Quick_cook Repertoire Scratch Single Smallbox Tesco own Time saving Traditional World Organic -3

-2

-1

0

1

2

3

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Lifestyle Segmentation Lifestyle segment

% shoppers

Convenience

14% (9%)

Regard food as fuel, are busy and rely heavily on the microwave

Finer Foods

14% (18%)

Time conscious, enjoy luxury products and are willing to experiment

Kids Choice

9%

Young families influenced by the needs of children

Mainstream

31%

Have broad tastes and favour established brands

Price Sensitive

24% (16%)

Look primarily for value and rely on staple foods

Mixed Traditional

8%8% (17%)

Enjoy the art of cooking but rely on a fixed shopping list so less likely to buy on impulse

Description

Source: dunnhumby (2019) 41

Case Study

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Assisted over 700 SMEs over the last 15yrs Poultry(2%)

Cereals (Bread, Flour, Oils, Cereals, Bakery)

Other (12%)

Fish(2%) Cereals (24%)

Meat (Lamb, Pork, Beef and Game) Fruit and Veg

Alcohol (10%)

Dairy (Milk, Yoghurt, Cheese, Eggs, Ice Cream)

Dairy (13%) Meat (23%)

Alcohol (Wine, Beer, Cider, Spirits) Fruit & Veg (14%)

Seafood and Fish

“The project has become such a valuable resource in enabling us to punch above our weight”

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53% have found the insight “extremely useful”  66% - market/brand development  33% - retain or grow their business with Tesco  33% - product development  25% - promotional planning

“The webinars have been brilliant and it has been great to have such intelligent direction rather than felling you’re bumbling along”

www.whobuysmyfood.com

•

• •

Marketing Planning & Decisionmaking

-

Promotion Distribution NPD Packaging & Communications

Ranging Organisational & Professional Development

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Case Study

Coastal Grains • 81 farmers - Cold-pressed rapeseed oil ─ 62,000t of committed cereal storage ─ 11,000t of oilseed rape

Seeking to: • improve the marketing of members’ grain • add-value where possible

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The story of how they moved From This

To This

To This

The decisions they had to take and the help we gave them

Various ideas explored... but limited knowledge of consumers and market potential to guide their decision-making

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Category Performance Limited distribution

Limited range

Significant negative growth

Lowest penetration

Lowest purchase frequency

Spotting a Gap (speciality oils) 160 140 120 100 80 60 40 20 0 140

Older Adults

Older Families

Young Adults

Older Adults

Older Families

Young Adults

Young Families

Pensioners

Mixed

120

100

80

60

Comparing the appeal of different products across different regions can highlight gaps in the market!

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20

0 Young Families

Pensioners

Mixed

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Spotting a Gap (speciality oils)

Older adults

Young families

Younger adults

Developing the concept/Focus Groups

Strong positive associations

Extra Virgin Olive Oil

Taste & Health

Lack of understanding of rapeseed oil cooking attributes

Rapeseed Oil

Taste & Health

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Developing the concept/Focus Groups ‘Health’ and ‘Local’ sufficient to drive trial purchase (provided the bottle catches the eye!)

but taste and functionality will determine repeat purchase

One year later…

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Olifeira was born

4 farmers, with support from a further 12 Full-time sales assistant and PR officer

‘Oleifera’ culinary oil • •

£6/bottle (600 bottles/tonne) 2,000% added value

Two years later…

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Borderfields was born

Fits on the shelf!

The product is called English Cold Pressed Rapeseed Oil and has a St George’s cross provenance appeal

Borderfields: Launched in supermarkets in 2009

Highlights the fact that it is rich in Omega 3

ÂŁ3.99 per bottle

Where are they now?

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Borderfields - Re-born

No.1 Cold Pressed Rapeseed Oil in the UK

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LESSONS LEARNED

Assumptions are the mother of all c*** ups!

Looking at markets in aggregate, from a distance, leaves us blind to the multiple ‘realities’ of people, products and process

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Strategic orientation is a critical barrier/enabler for success

Businesses that prioritise (long term) marketing orientation over (short term) sales orientation are more likely to achieve ‘success’ • • • •

Sustainable sales growth Business loyalty (B2B) Brand loyalty (B2C) More efficient (cost-reducing) and more effective (value adding) allocation of scarce resources

A strategic marketing orientation requires…

• •

Investment of time, effort and financial resources to establish a shared understanding (within and between organisations) of consumer demand and buyer behaviour Development of business routines (policies & processes) that embed the habit of evidence-based decision-making – Challenge the status quo – Search for continuous improvement – Trust in the process (‘Its not what you do buy how you do it’)

Agri-food sector has been slow to embrace the paradigm shift

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We ALL need to look more closely, listen harder and speak more clearly

Or else…

Thank You!

Prof. Andrew FEARNE University of East Anglia Norwich Business School Norwich Norfolk NR47TJ ℡

01603597239



a.fearne@uea.ac.uk

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Further Reading Didonet, S., Fearne, A. & Simmonds, G. 2020. Determining the presence of a long-term/short-term dilemma for SMEs when adopting strategic orientations to improve performance. 2020. International Small Business Journal, Accepted for publication.

Petrovici, D., Obal, M., Walton, B. & Fearne, A. 2020. The role of market knowledge type on product innovation performance, International Journal of Innovation Management, Accepted for publication.

Malik, S., Fearne, A. & O’Hanley, J. 2020. The use of disaggregated demand information to improve forecasts and stock allocation during sales promotions: A simulation and optimisation study using supermarket loyalty card data, Internatiional Journal of Value Chain Management, Accepted for publication) Golgeci, I., Santana, R. & Fearne, A. 2019. Customer Categorization, Relational Justice and SME Performance in Supermarket Supply Chains, Supply Chain Management: An International Journal, Vol.24, No.3, pp417-429.

Donnelly, C., Simmons, G., Armstrong, G. & Fearne, A. 2015. Digital loyalty card ‘big data’ and small business marketing: Formal versus informal or complementary? International Small Business Journal, Vol. 33(4), pp 422–442 Hornibrook, S., May, C. & Fearne, A. 2015. Sustainable Development and the Consumer: Exploring the role of Carbon Labelling in Retail Supply Chains, Business Strategy and the Environment, Volume 24, Issue 4, pages 266–276.

Yamoah, F., Duffy, R., Petrovici, D. & Fearne, A. 2014. Towards a Framework for Understanding Fairtrade Purchase Intention in the Mainstream Environment of Supermarkets, Journal of Business Ethics, 10.1007/s10551-014-2509-9 Yamoah, F. Fearne, A. & Duffy, R. 2014. Exploring Supermarket Loyalty Card Analysis To Identify Who Buys Fairtrade, The International Review of Retail, Distribution and Consumer Research, Vol. 24, Issue 3, pp328-346.

L.Cacciolatti, L. & Fearne, A. 2013. Marketing Intelligence in SMEs: Implications for Industry and Policy Makers. Marketing Intelligence & Planning Vol.31, No.1, pp4-26.

Duffy, R., Hornibrook. S., Fearne, A., Hutchison, K. & Read, A. 2012. Engaging suppliers in CRM: The Role of Justice in Buyer-Supplier Relationships, International Journal of Information Management, Vol.3, No.1, pp20-27.

Felgate, M., Fearne, A. Di Falco, S. and García Martinez, M. 2012. Using Supermarket Loyalty Card Data to Explore the Moderating Impact of Shopper Segments on Promotional Response, International Journal of Market Research, Vol. 54, Issue 2, pp. 221-240.

Donnelly, C. Simmonds, G., Armstrong, G. & Fearne, A. 2012. Small business marketing planning and retailer loyalty card marketing intelligence: Informal versus formal or complementary? Marketing Intelligence and Planning, Vol.30, Issue No. 5, pp515-534.

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