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In s i gh t s t oday f o r t omorrow’s dec i s i on s
M a r c h 2 0 0 0
The World of e-Tailing: Where Clicks and Bricks Converge
Linking Consumer Attitudes and Actual Purchase Behavior
Trend Watch: Big Changes in OTC
The Role of the Internet in CPG
CONSUMERINSIGHT:
Linking
Consumer
Attitudes
and
Behavior
For More Information
150 North Martingale Road
Schaumburg, IL 60173
800.988.4ACN
World Wide Web site:
http://acnielsen.com/ci
March 2000, Volume 2, No. 1
3Delivering Consumer Knowledge for Action
For ACNielsen, our focus is to create aWorld Class Service Company. The
success of the business solutions we provide to you will be directly linked to our ability to deliver more effective and efficient direct-to-consumer marketing
and retail execution.
4The Role of the Internet in CPG:
A Conversation with Paula Sneed, President, e-Commerce, Kraft FoodsRecently, the staff met with the head
of e-commerce for Kraft Foods to discussthe near-term implications of the Internet
and e-commerce on the consumer packaged goods industry.
8The World of e-Tailing: Where Clicks
and Bricks ConvergeThink what the pundits were saying aboutthe Internet just five years ago. Who knewwe would come so far, so fast? Very soon,the CPG industry will represent one of the
largest online commerce categories.
13Linking Consumer Attitudes
and Actual Purchase BehaviorA strategic alliance between Market Factsand ACNielsen is now providing a break-
through approach that gives marketers thebest-ever insight into the relationship
between consumers’ attitudes and theirresulting behavior in the marketplace.
In every issue…16 Trend Watch—
Big Changes in OTC
Business Tools18 Retail Tracking
20 Retailers
21 Analytics
22 Merchandising
23 Consumer Behavior
24 Decision Support Services
Volume 2, No. 1
Publisher
ACNielsen
Editors
Mark Chesney
Art Massa
Design & Layout
Kathy Zonyk
Editorial Board
Gary Binkoski
Don Drews
Kathy Mancini
Elaine Noone
Mark Puccetti
ACNielsen Global Creative Services
Laurel A. Kennedy Marketing/Communications
Slack Barshinger & Partners
Copyright©2000 ACNielsen. Printed in USA. All rights reserved. ACNielsen, the ACNielsen logo, ACNielsen Workstation Information✽ Server,Category Masters, Convenience Track, Homescan,ICE, INF✽ ACT, Net Dispatch, PRICEMAN, SCANTRACK, SPACEMAN and SPACEMANEnterprise are trademarks or registered trade-marks of A.C. Nielsen Company.
SEGWAY is a trademark of A.C. Nielsen Companyand Market Facts, Inc. Microsoft, Visual Basic, theVisual Basic logo and Windows are either registeredtrademarks or trademarks of Microsoft Corporationin the United States and/or other countries. Otherbrand, product or service names are trademarks orregistered trademarks of their respective companies.
Consum
er Insight3
Our focus is
to create a
World Class
Service
Company
Steve Schmidt
ACNielsen
President, U.S.
The first quarter of the year
2000 is quickly coming to a
close. We all survived Y2K. The
“dot.coms” of the world domi-
nated the Super Bowl advertis-
ing environment. The economy
continues to grow. Presidential
campaigning is in high gear.
And thanks to you, the
Marketing Research business is
growing, driven by an intense
focus on better understanding
consumer behavior.
For ACNielsen, our focus for
this year and beyond is to create
a World Class Service Company.
What that means to you, our
clients, is a personal commit-
ment from me and the Senior
Management of this company
to direct the investments at our
disposal against four core
elements of our business:
• Enhance Data Quality
• Improve Delivery Options
• Increase Retail & Consumer
Coverage
• Drive a“Consumer Knowledge
for Action” Strategy
From our recent client satisfac-
tion survey, these were the four
areas that you felt would most
positively impact your business.
The success of the business
solutions we provide to you will
be directly linked to our ability
to deliver more effective and
efficient direct-to-consumer
marketing and retail execution.
Whether it’s data from our core
tracking services or insights
from our consumer panel,
ACNielsen will continue to set
industry standards. Similarly,
we are a player in the world
of e-commerce and all its many
facets. The cover story for this
issue speaks volumes as to what
lies ahead for the Consumer
Packaged Goods industry and
the Internet.
Kraft’s Paula Sneed is to be
congratulated for sharing
her thoughts with all of us.
I especially liked this insight:
“Now, through Internet tools,
we can open a true dialogue
with individual consumers
and gain a better understanding
about what’s valuable to
them, what they want and
what they need.”
ACNielsen’s measurement
and analysis of that consumer
knowledge is exactly what will
allow you to respond to your
customers’ needs with the right
product solutions and effective
implementation at retail.
Welcome to the new millennium!
Delivering Consumer Knowledge for Action
Con
sum
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ht4 Cover Story
Recently, the editorial staff of Consumer Insight met with the recently appointed head of e-commerce for Kraft
Foods to discuss the near-term implications of the Internet and e-commerce on the consumer packaged goods
industry. The conversation touched on a number of trends and emerging challenges that will redefine the way
all parties transact business and communicate with consumers.
The Role of The Internet in CPGA Conversation with Paula Sneed, President, e-Commerce, Kraft Foods
CI. How do you define uses for the Internet today—
both broadly as well as how it relates to CPG?
Paula. Internet-enabled tools and capabilities touch
all aspects of life—it will be as ubiquitous and trans-
formational as electricity. Today the Internet is provid-
ing an array of new tools and options, including new
ways to communicate with our consumers, customers
and suppliers; new ways to buy and sell products and
services; and new ways to work. CPG companies have
begun embracing the opportunities that the Internet
provides, working to capture the benefits. They are
moving from communication and limited commerce
to using it across the value chain.
CI. To summarize, for CPG firms the Internet has
transcended its initial mission as communications
vehicle and taken on the added role of transaction
facilitator. Along with that change, many established,
large firms recognize the need to compete in this
space. Still other companies are using the Internet
to build brands. Is that about right?
Paula. I see it in a slightly different way. New
Internet-based companies recognize that building
brands on the Internet is essential for their survival.
They recognize that, at the end of the day, the brands
that deliver on their consumer promise are the ones
that consumers will respond to and the ones that will
survive. As Internet-based companies launch, they
Consum
er Insight5
quickly move to mimic what traditional companies have
historically done—build a reputation, build trust, build
consumer loyalty by establishing a brand. For traditional
companies, the challenge is to deliver the full impact
of their brands through the Internet by magnifying
and/or demonstrating their brand promise. Their
opportunities are to build even greater brand equity
and even more brand loyalty. The Internet is a great
tool to build loyalty from existing users as well as
to attract new users.
CI. That’s a very important distinction, particularly
the loyalty-building aspect.
Paula. You are right. Now, through Internet tools, we
can open a true dialogue with individual consumers and
gain a better understanding about what’s valuable to
them, what they want and what they need. For example,
we have tools that allow more personal connections
with individual consumers on our website. With “Make
it Now!” consumers can input three ingredients they
have on hand, and we give them specific recipes using
those ingredients. Our new “Recipe Recommender” lets
consumers rate recipes by their appeal to the individual
visitor. We then make “suggestions” based on their
personal tastes. Make it personal, but also make it
simple—these types of things build loyalty.
CI. The sub-theme there seems to be interactivity.
Paula. Think of it as customized interactivity,
personalized interactivity.
CI. What do you see as the distinction between the
Internet and e-commerce?
Paula. Think of the Internet as a tool that enables
e-commerce. However, probably the best way to respond
to that is to differentiate between e-commerce and
e-business. Both terms are used interchangeably, but
they are different—one is a subset of the other. When
people talk about e-commerce, they mean transacting
or selling on-line. However, e-business is much more
encompassing. It includes all aspects of the business
value and activity chain that can be transformed by
the Internet.
For example, at one end of the value chain the Internet
provides a way to communicate with consumers. At the
other end of the value chain the Internet is changing the
way we source products. At every phase on the activity
and value chain, Internet-driven tools are changing the
way business is done.
CI. What are Intranets?
Paula. An Intranet is a network of computers within
a company versus the Internet, which is a network
of computers connecting across the world. We use
an Intranet to keep our employees informed about
company activities and benefits. For example, many
employees now have access to personalized benefit
information 24/7.
We use Extranets to communicate specialized
information between internally and externally net-
worked computers. For example, we use an Extranet
to streamline our package design process. We’ve
eliminated sequenced approvals, tons of trafficking
time and significantly reduced cost by conducting
design business over an Extranet.
CI. How does CPG stack up next to other industries
regarding Internet use?
Paula. Some other companies got there early because
technology was their core business, so evolving to
Internet-based business was a natural evolution. Most
CPG companies first used the Internet to communicate
with consumers. Now they’re expanding Internet usage
to include suppliers and other members of the value and
activity chain.
CI. Can traditional companies make the transition to the
Internet?
Paula. Absolutely! You need “t-business” (traditional),
and “e-business” (electronic) components to be
Con
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successful. Companies must learn to blend both to
succeed in the 21st century. We’re not going to walk
away completely from what made us successful enter-
prises. At the same time, we have to recognize that
without capturing new Internet capabilities we will
not be able to compete successfully in the future.
CI. What are some of the things that CPG companies
need to take into account to become e-businesses?
Paula. Traditional CPG businesses face two major
challenges. The first challenge has to do with historical
practices and behaviors. Much of what drove success in
a mass marketing environment will not work if directly
translated to the web. Companies have to be willing to
abandon some business practices and to modify others.
The second challenge has to do with organizational
boundaries and structures. As the web modifies our
work, we must evolve our structures to accommodate
the new ways work is done.
CI. Speaking of structures, you mentioned that the
process of package design has changed at Kraft because
of the Extranet. How did that affect structure and cor-
porate culture?
Paula. Package design, approval and printing has
historically involved lots of steps, meetings, paper flying
back and forth, and lots of re-work. The number of
person-hours associated with the process was staggering.
An internal champion emerged who challenged the
status quo because he saw a great opportunity to
speed up reviews while getting better results from
color separators and printers, and delivering the
package to the plant more quickly, all while saving
money. For example, color copies alone used to be
a major expense. Now, we are able to do away with
them altogether. Everyone views and exchanges
work electronically.
CI. How do you change an entrenched process like that
and make it electronic?
Paula. It takes three things: a strong advocate or inter-
nal champion who will proselytize a team; partners will-
ing to adapt to the technology; and finally, support from
the organization based on early wins.
Technology
enables us to
personalize
the message.
It’s also
about
communicating
much more
directly and
personally.
Consum
er Insight7
CI. It sounds as though a major cultural shift is needed
to become “e-enabled.”
Paula. There has to be a cultural and behavioral shift.
In the CPG world, success used to be based on the ability
to find the best consumer insight and translate it into
crisp mass media messages. Enter the Internet. Now, it’s
all about communicating on a personal level. Before, we
sold to demographic or psychographic groups of people.
Now, it’s to John Jones or Mary Smith as individuals
and self-segments or communities of very specific inter-
ests and needs. Technology enables us to personalize the
message. It’s also about communicating much more
directly and personally.
CI. What about the retail and broker side of the coin?
Paula. The same holds true for retailers and brokers.
We can communicate with them on a more personal
level than ever before. There are benefits for CPGs,
retailers and brokers to communicate more efficiently.
And together, CPGs and retailers will enjoy better
communication with the ultimate consumer.
CI. What advice would you give manufacturers
and retailers gearing up to become e-businesses?
Paula. Thanks to the Internet, the competitive set
is changing. Competitive tools are changing. The
economics of doing business are changing. And con-
sumer expectations are changing dramatically. With
the Internet, any company has the ability to personalize
and customize capabilities and services with all of its
stakeholders and potential stakeholders.
Therefore, I would suggest that we’ll all have an
opportunity to transform what we do and how we do
it, across the entire value and activity chain. Act now.
Begin to live in Internet time, shortening work/review
cycles. Acting quickly, responsively. Using e-business
tools gets us even closer to our customers, suppliers,
consumers and other stakeholders.
CI. How do you see the Internet affecting the capture
and exchange of information and insights?
Paula. Hopefully, the information industry will trans-
form itself. There is so much new information available
we must find ways to get to it, analyze it and integrate
it with other information sources. This will increase our
ability to track and better serve our consumers. In the
end, the Internet is a tool, a powerful tool but still just
a tool. Tools only become useful when skilled people
put them to work properly. CPG firms have proven to
be excellent tool users in the past, and they will be in
the future as well. ACNielsen is in a unique position—
your informational products and services have helped
us grow our businesses over the past decade. Moving
forward, new informational products and services will
be required. By using e-capabilities and tools to gather
information and insights from new data sources, I’m
sure ACNielsen will continue to be an industry leader.
Feature
Con
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The World of e-Tailing:Where Clicks and Bricks Converge
The Internet is the fastest-growing consumer phenomenon the world has ever seen. In its short history as
a marketing vehicle, its penetration has been a nearly vertical curve compared to the adoption of other
20th century media such as radio, television or cable.
Three major factors have contributed to this unprecedented growth: 1) a robust economy which resulted
in available venture capital to jump-start new e-businesses; 2) the speed of change facilitated by almost perfect
information available in virtually real time; and 3) the extraordinary marketing measures adopted by e-businesses
which abandoned traditional business models and margin expectations.
ACNielsen has been actively involved in many aspects of this medium. Recognizing the need for a single, indus-
try-wide standard for e-commerce, ACNielsen formed a joint venture with NetRatings, Inc. to launch the first
global service for tracking audiences, advertising and user activity on the Internet. In addition, the company has
for some time been tracking the trends in e-business to better understand its potential for the CPG industry.
Leslie Warshaw
Vice President, Media and Internet Services
ACNielsen
by Bob Tomei
Senior Vice President, Marketing
ACNielsen
Consum
er Insight9
Excess or Success?Think, for a moment, what the pundits were saying just
five years ago. Some thought the Internet a fad, great
for chat and sending messages to friends. Others saw a
brave new world of marketing messages for consumers.
But who would have guessed that consumers would give
their credit card numbers online...or participate in an
auction, where the only test of a seller’s legitimacy is
based on the “self-policing” ratings of other bidders?
Look at the CPG industry. Who knew that consumers
would purchase their over-the-counter medicine
over-the-web? Or have their non-perishable groceries
delivered via UPS?
And who could have predicted that an Internet search
engine would have a market value of over $90 billion
before the year 2000? Or that an Internet service
provider (the number two or three player at that time)
would buy Time Warner?
Super Bowl Sunday was the perfect example of how
far we have come, how fast. Longstanding advertisers
like beer and soft drink companies found themselves
blocked from their usual time slots by aggressive
e-commerce firms like Netpliance.com, WebMD.com,
Kforce.com and Pets.com. The medium is the message
now more than ever, and everyone is looking for the
right model to cash in.
Expansion Mode ContinuesToday, many analysts predict that Internet growth will
continue unabated for a number of socioeconomic
reasons. Barriers to Internet adoption have been broken,
thanks to educational advertising, media coverage and
exposure through net-related organizations. Savvy net
marketers have also pressed for increasingly simple
software and technology to create a user-friendly
environment comfortable for new entries. And the
emergence of relatively inexpensive personal computers
has contributed to Internet user proliferation. Even
the federal government is fostering Net acceptance,
sponsoring programs to provide Web access to low
income families.
The CPG Equation: Just How Big Is Big?It’s hard to pin down the true size of e-enabled transac-
tions. For 1999 alone, estimates ranged from $3.9
billion to $36 billion. Some even see online sales
climbing to more than $100 billion in three years.
The message is clear: Activity will occur. How much
depends on many unknowns.
Whether one accepts the high or low number for
predicted online sales of consumer packaged goods,
the CPG industry will very soon represent one of the
largest online commerce categories—ripe for competition
by small, nimble e-businesses. In the landscape of CPG
channels, the number of dollars spent as a share of total
CPG will initially be small, representing just 1–2% of
total industry sales. This is tiny compared to today’s
“traditional” channels.
But consider the other side of the coin for a moment—
which brand manager would be comfortable losing
share points to a start-up? The number of consumers
is not increasing, meaning that the Internet channel will
have new players going after the same savvy and time-
strapped customer. The smart marketers are getting there
now, finding the right business model while the risks are
still relatively small.
Now Entering the Game...If it feels like you need a scorecard to identify the players
in the CPG game, you are not alone. During 1999, many
established grocery and drug operations began their
foray into the wired world, taking the temperature of
the water before initiating a sea change in the way they
come to market. Concurrently, many online grocers
started to tweak their offerings to better match the needs
of individual consumer segments. Still others modified
their distribution systems to achieve greater efficiencies
via central warehouses.
For example, Peapod, one of the first to use the Web
for its home-delivery grocery services, used to employ
an army of “pickers” who converged on local grocery
stores armed with Internet-generated order forms. They
literally acted as surrogate shoppers who found the best
fruit and freshest baked goods for an elite group of
connected consumers.
Con
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Peapod reconsidered this costly van-based, personnel-
intensive model, and opted to build central warehouses
in some markets as primary fulfillment centers. In addi-
tion, non-perishable products can be ordered via UPS as
part of the new “Peapod Packages” service.
Functionality Defines FormLooking across just the grocery e-commerce segment,
the list of players is long and diverse. Participants range
from pure Internet “e-tailers” who have no physical
store locations, like NetGrocer and Webvan; to the
“click-and-mortar” models like Albertsons and Whole
Foods, where the web site has the ability to drive either
traffic or product sales through the real estate.
And within these categories, there are a a wide variety of
sizes and flavors of business models at work. There are
nationwide services and localized van delivery models.
There are same-day services and two-day services. Some
businesses charge for delivery, others offer it free. Some
services deliver around the clock to in-home lockers;
others require an authorized person on-premise to
accept the order.
What format works best? It’s
too soon to tell, but look-
ing at the experiences
of other industries
may provide a clue.
In the shopping cen-
ter world,
organizations like
the International
Council of Shopping
Centers have gone on
record stating that
“there is great synergy
between the Internet and
brick-and-mortar stores, a
synergy that is greatly bene-
fiting both retailers and
consumers.” However, as
with all consumer-driven
businesses, the ones that
survive will be the ones that
engage the consumer easily and solve a need with the
least cost and hassle.
The Cross-Over PhenomenonWhen grocery and drug stores decided to enter the world
of e-commerce, they invited a new roster of investors to
the table. Amazon.com owns a 35% stake in HomeGrocer
and a large chunk of Drugstore.com. The founder of
Borders Books backed Webvan. E*Trade financed part
of PlanetRx.com. CBS owns a 20% stake in Rx.com.
The rapid infusion of capital, pronounced upstream
potential and unrelenting media exposure attracted
marquee players to the World Wide Web. George
Shaheen left Andersen Consulting to join Webvan as
CEO. HomeGrocer.com tapped Mary Alice Taylor of
Federal Express and Citigroup as chairman and CEO.
Streamline recruited Ed Albertian of Star Markets and
Staples to head its executive team.
An Established Advantage?Some in the industry feel established grocery chains
currently enjoy a competitive edge when adding the
Internet to their operating equation. For starters,
the brand equity and name recognition built over
the years will translates into immediate top-of-mind
awareness for the site and a positioning advantage
with Internet surfers.
CNET News (news.cnet.com) concurred. Reporter Troy
Wolverton asserted that “traditional grocery stores—
which already have warehouses and established names—
could enter the market. Veterans of cutthroat price com-
petition, the traditional grocers have the potential to
wage a price war that their red-ink-running online com-
petitors couldn’t sustain.”
Survival of the FastestHowever, when business is transacted at light-speed,
the need for quick service will be paramount. A recent
article in the e-Commerce Times (ecommercetimes.com)
noted that “the e-tailers that survive will likely
be those that streamline their sites for fast, easy
navigation and that can ensure rapid—or in some
cases same-day—delivery.”
Feature
Consum
er Insight11
The More Things Change...Regardless of the primary distribution medium, brick-
and-mortar and e-businesses share many of the same
fundamental operating issues:
• product assortment • marketing plan integration
• order fulfillment • peak management
• pricing • coupon redemption
• out-of-stocks • customer service
• loyalty • trade deals
• delivery—type, rates • product descriptions
• layout
Think of an e-tailer’s website as the “store.” Questions
such as “What products should I promote?”; “What are
my destination vs. impulse categories?”; and “How
should I configure my product assortment?” are many
of the same issues traditional retailers face.
The Role of Consumer InformationWhether it’s a manufacturer deploying the Internet to
conduct micromarketing, offer direct incentives, build
brand or franchise equity...Whether it’s a retailer deploy-
ing the Internet to engender store loyalty, attract new
customers, provide meal solutions or increase shopping
frequency...there is complete agreement on one issue:
consumer information plays the critical role.
All parties are hungry for a reliable arbiter of Internet
traffic and sales information, who can apply valid
research techniques to establish industry benchmarks.
As the world’s largest market research organization,
ACNielsen is in a unique position to leverage its scan
data model, consumer panel model, retailer and manu-
facturer relationships and international presence to cre-
ate that barometer of Internet performance. In addition
to our eRatings.com venture, ACNielsen is developing
several other products to help manufacturers and retail-
ers function more effectively in the Internet channel.
Like any other Internet venture, the keys to
success for information services remain:
actionable business insights, efficient business
processes, proactive strategies, collaborative
activities, scalable and customizable products,
and customer-friendly software applica-
tions—the hallmarks of ACNielsen.
Happy e-HolidaysThe online holiday shopping season proved to be a
success for many e-commerce sites. According to infor-
mation gathered by Nielsen//NetRatings, the service
marketed internationally by ACNielsen eRatings.com,
holiday shopping sites led the fastest growing properties
during the last quarter of 1999, with eToys topping
the list, followed by Sears, JCPenney and The Gap.
UPS found its web site affected by increased holiday
season gift orders.
“Among the top holiday commerce sites we find a
number of popular brands from the offline world,”
said Allen Weiner, vice president of analytical services
for NetRatings. “Sears, CBS, JCPenney and The Gap
are learning how to exploit the universal power of
their brand names on the Web.”
Lessons for 2000 As seen throughout the holiday season, brand rules on
the Web. The top 10 domains for the season are a mix
of the best known Web names (Amazon, eToys) and
time-honored brick-and-mortar names (Toys R Us,
Barnes & Noble).
The holiday season also saw the emergence of the
importance of commerce enablers (such as comparison
sites and focused gift-giving services) as a driver to all
sectors of e-commerce. Enablers provide Web consumers
with important information to facilitate decisions,
which lead to transactions.
Several of these comparison shopping and gift sites
experienced tremendous growth in traffic between
the months of November and December, including
Giftcertificates.com, 160.9%; mySimon.com, 146.2%;
Christmas.com, 118.9%, Flooz.com, 113.3%;
Ecost.com, 109.1%; and Redenvelope.com, 86.8%.
Nielsen//NetRatings predicts
that commerce enablers are
bound to be one of the
Web’s hottest sectors in 2000.
More information on
Nielsen//NetRatings can
be found via the ACNielsen
eRatings.com link at
http://acnielsen.com.
Con
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The Caveman ReturnsRecently, Good Morning America (abcnews.go.com) hosted an
experiment called “e-cave,” where participants were moved into
a completely empty, unfurnished apartment wearing nothing more
than a robe. Without leaving their apartment, these participants
were required to obtain food, clothing, and furnishings—even care
for their pet. Although the Internet channel is small for CPG
manufacturers and retailers, it has already changed the way
many consumers purchase, and has opened up the gates to new
competitors who could never compete on a brick-by-brick basis.
“e-commerce” or “e-business”?Many in the industry use these two
terms interchangeably. And just as the
industry, the meanings of these new
words are changing rapidly. At ACNielsen,
we define e-business as the conducting
of any business using the Internet—
whether it is information delivery, e-mail
requests, or actual exchanging of dollars
for goods. We define e-commerce as a
subset of e-business, focused specifically
on transactions over the web.
Feature
Who’s Who OnlineHere’s a look at some of the players in the online retail world:
OnlineMarkets
ProductsAdvantagesRetailer & Services
2,000 prescription drugs, 3,500 over-the-counter health and wellness, personal careproducts, vitamins, minerals, herbs, and private label products; e-mail of refill reminders;24-hr. access to registered pharmacists; 9000+ insurance plans accepted,VIPPS certified
Attached to CVS drug stores so customers can order on-line and have items delivered or can pick up at store; delivery
CVS/SomaSeattle,WA
NetgrocerNorth Brunswick, NJ
PeapodSkokie, IL
Pets.comSan Francisco, CA
WebvanFoster City, CA
HomeGrocerBellevue,WA
Drugstore.comBellevue,WA
DrugEmporiumColumbus, OH
13,000 items: dry grocery, meat, dairy, produce, specialty foods (ethnic and organic), flowers, batteries, film, videos, beer/wine, pet items
9,700 items: dry grocery, toys, videos, pet items, HBC, books, smallhome electronics
12,000-20,000 items (7,000 non-perishables): dry grocery, frozen,dairy, meat, produce, pet, beer/wine, tobacco, HBC, nationwide care packages
13,000+ items for dogs, cats, fish, birds, ferrets, reptiles, and othersmall pets; advice from veterinarians/animal behaviorists, subscriptionservice, wish lists
15,000 items: Dry grocery, meat, seafood, produce, gourmet deli,dairy, bakery, wine, prepared meals, HBC, housewares, office supplies
Delivery w/in 90 min. window; do everything inhouse (i.e., digital studio, programmers); multi-ple small warehouses service large areas
Only dry grocery items w/2–3 day FedEx delivery; national service
First and largest (on-line in 1995)
Has plans to expand into UK market(with equity investment inPetspark.com)
30 minute delivery window
Attachment with both retail stores and mailorder pharmacy
Has retail store brand recognition
16,000 health, beauty, wellness, personal care, pharmacy, and private label products;e-mail reminders to replenish regularly used products;VIPPS certified
20,000+ items: prescription and non-prescription medications, nutrition and wellnessproducts, cosmetics, HBC, around the clock pharmacy; automatic e-mail reminder service for prescriptions and preferred products; not VIPPS certified
50 United States
50 United States
50 United States
Seattle, Portland,Southern CA
National (48 states)
50 United States and U.S.Territories
San Francisco,Atlanta
Austin, Dallas/Ft.Worth, Houston,Boston, San Francisco/San Jose,Columbus, Chicago, Long Island-NY;National for Peapod Packages service
Consum
er Insight13
Market Facts and ACNielsen recently entered
into a strategic alliance to develop and imple-
ment a cutting-edge approach that links
consumer attitudes with purchase behavior in the
marketplace, called SEGWAY™. The following demon-
strates how marketers can use this analysis to enhance
precision marketing for their brands.
A primary goal for marketers is to be able to measure
effectiveness both quantitatively and qualitatively. The
old adage that “I know 50% of my advertising works,
I just don’t know which 50%” holds true for most
marketing executions.
This new alliance between Market Facts and ACNielsen
will enable marketers to do a better job than ever before
at determining how to allocate marketing resources,
develop the most meaningful messages for each consumer
segment, and build overall long-term brand equity.
Specifically, this is accomplished by providing the
decision-maker with a foundation from which not
only to determine resource allocations, but also to
distinguish consumer segments along retention and
acquisition parameters.
The Key Questions To retain current consumers, especially those who are
at risk of buying a specific competitor’s brand, one
needs to know several things.
• Who are my brand’s users, and how do I segment
and reach them?
• How much current volume do they represent for
my brand and the category?
• Which other brands do my users consider, as a likely
risk to my volume?
• How do I quantify the value of retaining households
at risk of switching?
• What messages, vehicles and tactics can be leveraged
to retain them?
• How do I measure the impact(s) of my efforts,
and integrate the findings into future programs to
continuously lift my effectiveness?
To acquire new buyers one must have similar
information.
• Who are my brand’s best non-user prospects, and
how do I segment and reach them?
• How much potential volume do they represent for
my brand?
• Which competitive brands do they currently use, as
likely opportunities to my brand’s volume?
• How do I quantify the value of acquiring such oppor-
tunity households?
• What messages, vehicles and tactics can be leveraged
to attract them?
• How do I measure the impact(s) of my efforts, and
integrate the findings into future programs to continu-
ously lift my effectiveness?
Feature
Linking ConsumerAttitudes and ActualPurchase Behavior
Con
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Improving efficiency in advertising and promotion is
also high on the priority list for marketers, who are
continually faced with doing more with less. To achieve
this goal, one must know to whom, where and how
to spend marketing dollars and how much to allocate
to each initiative. To avoid waste, specific consumer
segments must be defined at both macro and micro
(targeted) levels to ensure long-term strategic objectives
and near-term responsiveness. Marketers must also be
able to determine the attitudinal “availability” of
consumers, not only for their brands, but also for the
competitive brands vying for “share of mind” within
the desired category.
What’s Been MissingIn the past it has been difficult to fully answer these
questions. Marketers could draw implications from
consumer attitude data about their brands, but could
never link attitudinal segments with actual marketplace
volume. “Share of wallet” and “share of mind” had
no intersection.
Making the LinkThe two key elements of SEGWAY are the Conversion
Model, a proprietary segmentation tool for which
Market Facts is the exclusive licensee in North and
South America, and the ACNielsen Homescan
consumer panel. Linking the output from these two
well-established consumer insight methods creates a
powerful new instrument for marketers.
The Conversion Model is a leading measure of psycho-
logical brand equity. The key Conversion Model concept
is “commitment,” which is defined as the psychological
bond between the consumer and the brand. Relative to
users, the Conversion Model measures the strength of
their commitment to the brands they currently use.
For non-users, it gauges whether or not they are open
to switch to brands they currently do not use.
The Conversion Model assigns households to one of
four commitment classifications for each brand. Buyers
are grouped by whether they are “secure” to the brand,
in which case they are highly likely to stay with the
brand no matter what special incentives a competitor
may offer. Or they could be “vulnerable,” meaning they
would be receptive to other brand choices.
Non-buyers are grouped into whether they are “open,”
meaning they are receptive to the brand, or “unavail-
able,” making them poor prospects for acquisition
[see Conversion Model chart].
The key to this approach is the linkage of the Conversion
Model-classified households with the ACNielsen
Homescan consumer panel. This methodology enables
each attitudinally classified household to now be viewed
in terms of the dollar and unit volume each represents at
the brand commitment level. Finally, a proprietary vol-
ume “opportunity metric” associates the likelihood of
each household’s brand-volume migration in the context
of their actual purchase behavior. For example, a
marketer may assume that it would be too expensive
to acquire all its brand’s non-users in the open market-
place. However, if receptive non-user populations
(segments) can be classified as “open” to the target
brand, and are geo-demographically identifiable and
contained, then pursuing those segments becomes
a more realistic consideration.
Calculating the OpportunityAfter establishing this linkage between the attitudinal
and behavioral data, the next steps involve quantifying
the specific category and brand volumes for each house-
hold, then applying the opportunity metric against actual
category and brand volumes observed within each com-
mitment classified household. By beginning with an indi-
vidual household’s commitment to a given brand, com-
bined with the consumption of said brand, an actionable
opportunity for gain volume or risk of loss volume can
be uniquely associated for that household.
The Conversion Model assigns households to one of four classifications for each brand
Users
Secure:Commitment-driven
Vulnerable:Market-driven
Non-Users
Open: Receptive to our brand
Unavailable:Not receptive to our brand
The Conversion Model
Consum
er Insight15
Precision MarketingOnce the opportunity (potential migration of volume in
terms of upside/gain vs. risk/loss) is determined, the tacti-
cal planning becomes more straightforward. For example,
after identifying your “secure” consumers, you might
consider how best to target them with reward, loyalty,
cross-sell or up-sell initiatives, given that you now can
associate any potential upside volume with specific com-
petitive brands at risk, all in a geo-demographic context.
To defend your at risk volume among your “vulnerable”
consumers, you could offer segment- or household-specific,
geographically targeted loading incentives, bonus packs or
retention rewards. To acquire “open” non-users of your
brand, you could offer high-value trial and awareness
building offers, incentives and samples.
The ability to effectively deliver meaningful messages and
offers, differentiated by desirable segments of consumers,
makes each marketing initiative strategically and financially
more effective. In each case, consumers may be defined,
qualified, and targeted through virtually any available
vehicle—from database marketing, the web and other
direct-to-consumer vehicles to radio, cable/network/spot
TV and print.
Combining the strengths of the Market Facts Conversion
Model with the ACNielsen Homescan panel, marketers
now have a seamless approach to linking consumers’ atti-
tudes with their behavior in the marketplace. This will
provide an invaluable tool for more efficiently allocating
marketing resources and building overall long-term
brand equity.
Assume a category with 50 MM purchasing households.
There are three brands in the category—Brands A, B and
C. Below is a Conversion Model analysis of an actual
household. The volume that is labeled “in play” shows
the opportunity volume for Brand A and the correspond-
ing at risk volume for its competitors—Brands B and C.
[See Analysis 1].
The Conversion Model analysis in this example showed
that 20MM of the category households are “unavailable”
to Brand A—not an effective target.
Of the remaining 30 MM households, 10 MM
are “at risk” and 20 MM are an “opportunity” for
conversion to Brand A. [See Analysis 2].
Using information from the ACNielsen Homescan panel,
one can measure the volume impact of each group. It
might be tempting to go after the larger group, the
opportunity households, but the analysis shows that the
at risk households buy far more category units than the
other group. Therefore, focusing marketing efforts on the
at risk households is a much more efficient initial play.
[See Analysis 3].
At risk10 MM
Opportunity20 MM
10 MM “at risk”
20 MM “opportunity”
60 MM “at risk”
40 MM“opportunity”
Sources of Opportunity and Risk for Brand A
Brand Classification # of HH purchases
Brand A Secure 10
Brand B Vulnerable 4
Brand C Vulnerable 2
Total HH Volume: 16Total Volume “in play”: 6
Category=50 MM HH
Analysis 1:
20 MM Households Are “Unavailable” to Brand A
Analysis 2:
Remaining 30 MM Households
Retain
Acquire
In Play
Category=50 MM HH
With this approach, Brand A can further help identify thebiggest payoff for its marketing activities.
Analysis 3:
Households Volume
Category=50 MM HH
x 6 unitsPurchase =
x 2 unitsPurchase =
Con
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There are big changes going
on in the over-the-counter
department. Believe it or
not, nutritional supplements now
account for nearly as much sales
volume as the mainstay shampoo
category, the number one Health &
Beauty Care category. As recently
as 1996, the dollar volume of sham-
poo was more than three times
larger than that of nutritional
supplements.
Now the third largest OTC
category, nutritional supplements
enjoyed $1.7 billion in sales last
year, a 19 percent jump from 1998.
Comparatively, shampoo accounted
for nearly $1.8 billion in sales—a
six percent increase. And the growth
in nutritional supplements is not just
a fad—average growth per year since
1996 is over 40 percent.
Even with the overwhelming growth
of the nutritional supplements catego-
ry, opportunity for future growth
looks good, given that household pen-
etration for this category is still under
50 percent. Category penetration is
skewed to middle-aged and older
adults, including childless couples and
empty nesters, segments that are
growing rapidly.
Big Changes in OTC
Consum
er Insight17
Category DefinitionsNutritional Supplements
Products taken for nutritional defi-
ciencies or to supplement the diet.
This could be because of illness or
deficiencies in the diet. Some of the
products may also include a vitamin
ingredient to help absorption into
the body. Examples include alfalfa,
ginseng, garlic oil, and antioxidants.
Brands include Centrum Herbals,
One-A-Day, Ricola Herbal Health.
Protein Supplements
Products which are taken to supple-
ment a protein deficiency or to add
protein to the diet. These products
are also used as dieting aids. Brands
include Twinlab RX Fuel and
Metabolic II.
The dynamic upswing of the
nutritional supplements category
is fueled by an increasing consumer
emphasis on health, fitness and nutrition.
In contrast to nutritional supplements’
excellent growth, appetite suppressant diet-
ing aids experienced a 13 percent decline
last year. Many consumers are moving to a “whole health”
way of managing their diets—pursuing weight loss through
healthier foods.
A recent trend toward “condition-
specific” products is also responsible
for the momentum in the nutritional
supplements category. Products such
as gingko, which is claimed to improve
memory, and St. John’s Wort, used to
treat minor depression, are having a
significant impact on the category.
The whole health trend is also positively impacting
another OTC category: protein supplements. In 1999,
protein supplements grew 51 percent
across all channels, with a stag-
gering 146 percent increase in the
mass channel alone. The profile
of protein supplement consumers
differs greatly from that of nutri-
tional supplement users, with most
protein supplement usage coming
from young, single consumers,
often to add a boost to their fitness regime.
These trends in OTC products appear to be here to stay.
Through new product introductions, promotions and
education, the category shows signs of continued healthy
growth. New nutritional supplements
are being introduced at a rapid pace,
consumers are becoming more dedicated
than ever to a healthy way of living,
and mainstream retailers are devoting
more shelf space to such products
than ever before.
Con
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for Retail TrackingBusiness Tools Is your company having difficulty matching salesforce performance to regionally defined consumption data?
ACNielsen’s Advanced Sales Areas can help. New fromACNielsen, Advanced Sales Areas are a highly customizablecapability to create sales areas by definitions other than thestandard “state and county” method, making your datareporting aligned with the responsibilities of your salesforces or brokers.
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If your sales force needs to understand product movementby custom sales areas, ask your ACNielsen representativefor more information.
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Snapshots Plus offers affordable access to retailer-preferredcustom trading areas on a short-term basis. Snapshots Plus’module-defined category definitions provides quick access to information when a customized, ongoing database is not needed.
Now—The First Complete AccountLevel Service for Convenience ACNielsen Convenience Track™ now offers the first convenience store service with a truly complete accountlevel offering. Convenience Track combines retailer-specificscanner data with market-level benchmarking data so youcan perform category management in the convenience channel—an industry first.
Since scanning data is combined with ACNielsen’s superiorsampling and collection methodologies, you receive themost representative data in the industry, which is criticalgiven the low scanning penetration in Convenience.
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See us on the Web http://acnielsen.com/ci or call 1.800.988.4ACN
Snapshots Plus helps you to:
• Take advantage of new business opportunitieswith insights into non-entry categories.
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Consum
er Insight19
SAVE THE DATE!Plan now to join hundreds of representatives from the industry’s top retail andconsumer packaged goods companies at ACNielsen’s Category Masters Conference.
Category Masters is the premier industry event to learn and exchange ideas onconsumer focused business issues, such as globalization, retail consolidation,e-commerce, loyalty marketing and assortment. Through workshops, presentations and networking, you will gain the tools to convert your conference experience intoactionable solutions that will impact your organization.
A Category Masters conference brochure and registration form will be mailed to you inMay. Conference registration will also be available on the Internet as of June 5, 2000,at http://acnielsen.com.
We hope to see you at Category Masters!
Make Plans To Attend Category Masters™
August 13–16, 2000Disney’s Contemporary Resort
Lake Buena Vista, Florida
C AT E G O RY
MA S T E R S
Data
Trade AreasSuper-
SCANTRACKHomescanProduct
Reference
Store chars.Product chars. Cost, SpaceInventory
CategoryManager
NITRO
SPACEMANSuite
PRICEMAN
SPACEMAN Professional and SPACEMAN Enterprise
SPACEMANConnectivity
RetailWarehouseSolution(RWS)
InformationManagement
InsightDevelopment
In-storeImplementation
InternetDelivery
Con
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for RetailersBusiness Tools
Choosing the right category management approach to meetyour specific financial and marketing goals can be a daunting task. That’s why ACNielsen created intuitiveprocesses to help retailers and manufacturers sort throughthe full spectrum of integrated category management solu-tions in order to develop, evaluate and implement categorystrategies that address individual needs.
From initial category analysis all the way to in-store implementation, ACNielsen can help you design a categorymanagement program that best meets your needs and organizational structure. ACNielsen’s Analysis toImplementation approach starts with access to high quality data that directs store decisions. Measuring all retailchannels from supercenters to convenience stores,ACNielsen’s syndicated data coupled with consumer paneland retailer data provide consumer-focused results thatyield real opportunities to improve sales and profits.
Create Integrated Category Management Solutions—From Analysis to Implementation
Combined with retailer data, ACNielsen systems and information provide solutions:from analysis to implementation.
See us on the Web http://acnielsen.com/ci or call 1.800.988.4ACN
Management of data is a critical component to categorymanagement success. With products such as ACNielsen’sRetail Warehouse Solution (RWS), ICE, PRICEMAN™, andthe SPACEMAN® Suite, ACNielsen organizes the data tooffer ad-hoc reporting and access tools that help you easilymine and analyze the data.
ACNielsen’s expertise at drawing strategic insights from thedata is unmatched. By leveraging a full-line of analysistools, marketing and sales professionals can develop itemassortment, pricing, promotional and shelf space programsthat optimize category performance, meeting both retailerand manufacturer objectives. Once objectives are defined,ACNielsen can provide the right tools to implement in-storeexecution.
From Analysis to Implementation, ACNielsen provides thepathway that leads you to successful category managementsolutions.
SPACE PLANNING
FILES
SYNDICATEDDATA
ACCOUNTSPECIFIC
DATA
LOYALTYCARDDATA
PANELDATA
REPORTINGChartsReportsExports
DATAMART
ABC Now
ABC Now Lite
Logistics Optimizer
Logistics Lite
Space Optimizer
Space Lite
Assortment Optimizer
Assortment Lite
Price Optimizer
Price Lite
Promotion Optimizer
VISUAL EDITORData Cleansing
DefaultingUpdating
Promotion Lite
Consum
er Insight21
for AnalyticsBusiness Tools
Efficient assortment today is a $6 billion opportunity. And understanding assortment and Activity Based Costing(ABC) is key to arriving at shelf profitability.
The recent alliance between ACNielsen and Milton Merl & Associates combines powerful Performance Optimizerapplication with ACNielsen’s industry-leading assortmentmodeling capabilities. The combination of these powerfultools fills a major gap in the industry by clearly articulatingthe opportunities for using the most appropriate items tosatisfy store volume at increased profitability.
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Gain insight at every level of the assortment decision-making process. By uniting multiple data sources, optimization logic, activity-based costing and volume elasticities, Performance Optimizer provides a process that allows decision-makers to integrate volume, profit andconsumer strategic objectives into the planning process.
Performance Optimizer can be installed on laptop or desktop systems, and combined with ACNielsen’s advanced analytical models, provides ‘one stop shopping’ for maximizing your assortment profitability.
Performance Optimizer Now Available with ACNielsen Analytical Models
See us on the Web http://acnielsen.com/ci or call 1.800.988.4ACN
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The SPACEMAN® Suite Sets the Standard for Visual MerchandisingContact your ACNielsen representative today for a freeSPACEMAN demonstration CD or visit our web site athttp://acnielsen.com/merchandising/
Evaluate multipleplanogram scenariosand identify the planthat best meets yourcategory financialobjectives. Theninstantly view youroptimal planogramwith the Restore key.
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See us on the Web http://acnielsen.com/ci or call 1.800.988.4ACN
SPACEMAN products help you to:Increase Productivity• Automate routine merchandising tasks to provide more time
for concentrating on competitive merchandising strategies.
• Use existing data sources to import current product and financialinformation quickly and easily.
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• Save time with intuitive graphical interface, which allows users to become productive planogrammers in a few hours.
Reduce/Eliminate Costs• Enhance profitability throughout the supply chain by
creating and implementing consumer-focused category merchandising plans.
• Extend the use of point-of-sale, market-level and consumer data.
• Eliminate the need to invest in a data translation system byimporting and exporting multiple planogram file formats.
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Make Better Business Decisions• Implement a total category management solution.
• Strengthen category management presentations with detailed,fact-based reports and graphics.
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Effective visual merchandising plans are a sure way to maxi-mize profits on a store-by-store basis. Today’s sophisticatedmerchandiser must design planograms that deliver financialobjectives for each category and each store and deliver themquickly and efficiently to the target audience. With TheSPACEMAN Suite, these complex tasks are made easy.
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Visual Basic® for Applications offers unparalleled flexibilityand customizability—allowing you to work the way youwant to. Only SPACEMAN Professional Application Builderoffers these capabilities through the same industry-standardtechnology and open architecture found in Microsoft Office.
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The SPACEMAN Suite gives you the power to become moreproductive and focus on developing effective category merchan-dising plans designed to improve your return on investment.
for MerchandisingBusiness Tools
Consum
er Insight23
See us on the Web http://acnielsen.com/ci or call 1.800.988.4ACN
for Consumer BehaviorBusiness Tools
Category Management ApplicationsNow Available! ACNielsen’s Syndicated Category ManagementApplications are now available for 2000. These three keyHomescan applications are guaranteed to represent moreconsumer shopping trips than any other category manage-ment tool anywhere. You simply cannot find a more complete look at consumer shopping behavior across channels than with ACNielsen.
With ACNielsen Consumer✽ Facts, Channel✽ Facts andAccount Shopper Profiler, you have the “common language” between manufacturers and retailers. And withthe included Microsoft Excel-based templates, you are ableto quickly analyze and focus on key business opportunities.
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ACNielsen’s Homescan Syndicated Category ManagementApplications contain many added upgrades for 2000—including a mid-year update. Talk to your ACNielsen representative today for more information.
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Quantify Shopper LoyaltyAn important, but often overlooked, element in the loyaltyequation is knowing where your consumers shop outsideyour store. ACNielsen Homescan Cross Outlet✽ Facts is asyndicated report which provides a cross-outlet shoppinganalysis of shopper loyalty by showing retailers which competitors they lose business to. Cross Outlet✽ Facts is also an instrumental category development tool pinpointingwhich categories are potential opportunities and risks.
Used in conjunction with ACNielsen’s other syndicatedreports, Consumer✽ Facts, Channel✽ Facts and AccountShopper Profiler, you can gain a complete sales story forkey retailers in each market.
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Decision Support ServicesBusiness Tools
See us on the Web http://acnielsen.com/ci or call 1.800.988.4ACN
Use the Web to Receive YourMarketplace ReportsACNielsen NetDispatch™ is the industry’s premier subscrip-tion service that lets you receive marketplace insights via the Internet. Leveraging the capabilities of the Web,NetDispatch maximizes productivity and business intelli-gence by empowering you to select the unique products,markets, facts and time periods critical to your decision-making. NetDispatch automatically places these selections in either syndicated and/or custom templates, allowing youto quickly download and identify opportunities in productassortment, pricing and promotion.
NetDispatch lets you retrieve reports one-at-a-time or asdefined sets—allowing you to select exactly what you want,when you want to receive it. And since NetDispatch reportsare delivered as familiar Microsoft Office files, you spendless time learning software and more time deriving insights.
ACNielsen has also developed NetDispatch Retail andNetDispatch C-Store—reports designed from the retail perspective—the industry’s first web deliverables to beshared by retailers, manufacturers and brokers.
Workstation Information✽ Server 2.0with NITRO–Working the way you doACNielsen Workstation Information✽ Server™ was the indus-try’s first 32-bit, object-oriented decision support tool. Version2.0 represents ACNielsen’s continued integration with indus-try standard applications—designed to work the way you do.
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link your database informationdirectly into MicrosoftPowerPoint, Excel, and Word.And the ACNielsen informationremains “live,” retaining its properties for consistent multidi-mensional viewing, manipulationand analysis within MS-Office.
Imagine the gains in productivity!And since WorkstationInformation✽ Server 2.0 leveragesMS-Office, think of the reductionin application cost and training.
Workstation Information✽ Server 2.0 with NITRO includesother productivity improvements:
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Talk to your ACNielsen representative or visit our web site today to learn more about ACNielsen Workstation Information✽ Server 2.0.
Use NetDispatch to:
• Access syndicated information using the Web—with dimensions customized to your requirements.
• Save time and increase efficiency by receiving information in Microsoft Office file formats.
• Create a repository of standard reports accessibleby your user group.
• Quickly identify opportunities in assortment, pricing and promotion.
See ACNielsen at theseupcoming industry events.
April8-13 Western Association of
Food ChainsAnnual ConventionMarriott Desert Springs ResortPalm Desert, California
29-3 National Association of Chain Drug StoresAnnual ConferenceThe BreakersPalm Beach, Florida
May7-9 Food Marketing Institute
Supermarket Industry ConventionBooth # 5330 – North HallMcCormick PlaceChicago, Illinois
18-21 Consumer Healthcare Products AssociationAnnual Executive ConferenceThe GreenbrierWhite Sulphur Springs,West Virginia
June9-12 Grocery Manufacturers
Of AmericaExecutive ConferenceThe GreenbrierWhite Sulphur Springs,West Virginia
25-28 National Association of Chain Drug StoresMarketplace ConferenceBooth # t/b/aNew Orleans Convention CenterNew Orleans, Louisiana
Upcoming Industry Events
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