Quality Promise Program: Empowering Consumers As Your Quality-Control Agents

Decision Analyst

Quality Promise Program

September 28, 2010

Empowering Consumers As

Your Quality-Control Agents

Copyright© 2010 Decision Analyst

In Pursuit Of The Prize

Private brands represent great strategic opportunity for retailers:

Build sales revenue

Boost profit margins

Strengthen consumer franchise and build customer loyalty

Differentiate from competitive retailers

Insulate from competitive attack

Compete with major advertised brands worldwide (ultimately)


Private Brand Growth

Growth of private label products has been explosive over the past several years, even prior to the recession.

Store brands accounted for nearly 1 in 4 products sold in U.S. supermarkets last year.* “Over the past five years, annual private label sales have increased by 34% to $55.5

billion in supermarkets.” *

* Source: PLMA website (data from The Nielsen Company)

Our data shows – and agrees with other sources – that consumers are now much more accepting of private brands.

Many have “traded down” in recent times and discovered very satisfying products.

Some are likely to return to national brands in more prosperous times, but they may be the minority.


Trends And Attitudes

Over the past three years, the U.S. economy and consumer confidence have really suffered.

Base = Approximately 2,800 interviews per month; U.S. adultsSource: Decision Analyst’s Economic Index

Decision Analyst U.S. Economic IndexJanuary 2006 to July 2010

80

85

90

95

100

105

110

115

Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10



Interest in saving money, at the expense of national brands, has been trending up significantly over the past four years.

Base = 15,209 American consumers who shop for groceriesTop-2 Box -- Agree completely/somewhat with statements about grocery shopping

Source: Health And Nutrition Strategist™

20%

25%

30%

35%

40%

45%

Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10

I usually buy the least expensive brand whether it is a brand name or not

I’m willing to pay more for nationally advertised brands

I almost always buy well-known brand name products

Looking for least expensive brand,

regardless of name.



Confidence in “store brands” has grown during the same time frame.

Base = 15,209 American consumers who shop for groceriesTop-2 Box -- Agree completely/somewhat with statements about grocery shopping


35%

40%

45%

50%

55%

60%

65%

70%

Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10

Store brands are just as good as national food brands most of the time

Brand names don’t matter to me

Store brands are just as good as national

food brands.


Keys To Private Brand Success

QFocus on

product quality

Reach the right

customers

Deliver consistently


The Big Picture

In order to win big, private brands must move from legacy of low-price, “generic” status…

…to high-quality, formidable competitors of national brands.

Low-Quality Perception

Low-Price Positioning

Q


The Big Picture

Generic Preferred Brand

Q


Are All Shoppers Created Equal?

Of course not.

In regard to grocery shopping, we’ve identified five shopper types, or market segments.

Budget Buyers

Brand Loyalists

Full-Price Shoppers

Power Shoppers

Store Brand Fans


14%

20%

20%

29%

17%

Q


Segment Overviews

Budget Buyers

• Hate grocery shopping

• Get in/out quickly

• Lowest price shopper

• Store brands: - Equal to national - Good value for money

• National brands: - Never buy them - Not willing to pay for

• Responsible for: - Little food shopping - Little food preparation

• Older men

• Low income

Brand Loyalists

• Enjoy grocery shopping

• Enjoy browsing aisles

• Enjoy seeing new prod.

• Organic & natural

• National brands: - Always buy them - Willing to pay more for

• Responsible for: - Food decisions - Food shopping - Most food preparation

• Trusted advisor

• Middle-aged women

• Children join shopping

• Average income


Full-Price Shoppers

• Brand names matter

• Not coupon users

• Not seeking specials

• Do some or little: - Food shopping - Food preparation

• Younger men

• Often single

• Well educated

• Higher income

Q


Segment Overviews (Continued)

Power Shoppers

• Detailed shopping list

• Seek out specials

• Bargain hunters

• Active coupon users

• Responsible for: - Food decisions - Food shopping - Food preparation

• Often married

• Spouse joins shopping

• Lower income

Store Brand Fans

• Enjoy browsing aisles

• Enjoy seeing new prod.

• Lowest price shopper

• Store brands: - Equal to national - Good value for money

• National brands: - Never buy them - Not willing to pay for

• Responsible for: - Food shopping - Most food preparation

• Often married

• Younger women

• Children join shopping

• Lower income & edu.

Source: Health And Nutrition Strategist™ Q


Private Brand Quality

The PLMA discusses private brands on its website, saying:

So how can retailers ensure their quality standards are met?

With the proper tools and systems in place, retailers can monitor and dramatically improve the quality of their private brands.

And, it can be done in a highly visible way to make a statement about commitment to quality.

“Store brands are made of the same or comparable ingredients as the national brands and because the store's name or symbol is on the package, the consumer is assured that the product is manufactured to the store's quality standards and specifications.”

Q


A “Quality Promise” Program

Focus on private brands is important, given strategic potential

Develop a program to rigorously test products on a regular schedule Determine if each product is optimal or not Provide diagnostic feedback Guide product improvement

Customer feedback = Primary mechanism for monitoring quality

Key is volunteer network of your shoppers

Q


Create A Dedicated CommunityLarge online community or panel of regular customersVolunteers agree to test products in their homes

Drawings for free groceries to encourage participation

Design the program so volunteers: Buy the products on their regular visits Use during a specified window of time Provide ratings online

If hundreds of products involved, control roll-out across products Start with those lagging in sales (greatest impact on revenue) Low-performing products trigger additional testing

Q


Fully Integrated System

Ideal to centralize management of all tasks Dedicated panel website Large database to compile and manage panelist registration information Master product-testing questionnaire Survey/Product test execution and management Standardized and centralized reporting/online library Normative database of test results by product category

Q


Recruitment

Retailer conducts recruitment efforts: Search engine optimization “Quality Promise” labeling on products Recruitment button on website In-store promotions Point-of-sale (POS) invitation Employee advocates Social networking sites Traditional media advertising

Thank you for purchasingXYZ products.

Please join our volunteer panel.

www.XXXQualityPromise.com

Q

Number of members depends on number of products and size of customer base


Panel Registration

Registration screener should capture some shopping and purchase behavior, as well as household demographics

This allows you to: Identify incidence for key product categories Eliminate the need to repeatedly ask demographic questions

This massive database of customer data can also be utilized for marketing planning purposes.

Profile category shoppers geographically, demographically Profile product rejectors Analyze cross-usage patterns for cross-promotional opportunities

Q


Survey Logistics

Master survey to cover all product categories Some tailoring for each product

For each test: Identify panelists based on registration data Prepare product-specific screener Set up questionnaire (customized attribute ratings)

Use digital images to ensure correct product match Customize/Send email invitations Remind nonresponders during testing period

Want to capture ~ 150 to 200 evaluations per product test

Q


ResultsLook for key metrics dashboard

Utilize diagnostic ratings… To understand consumer preferences To improve underperforming products To optimize all products

Q

Too Sweet Not Sweet Enough

Too Dark Too Light

Too Soft Too Firm

Too Much Salt Not Enough Salt

Too Crunchy Not Crunchy Enough


Ultimate Benefits

Improved quality of private brand products

Quality accountability system

Increased market share as improved quality drives repeat purchase

Enhanced retailer brand image as product quality improves and visibility of the Quality Promise program grows

Added pricing leverage Hold prices constant, or perhaps increase them, as product quality

and/or quality perceptions improve

Formation of a massive database of your private-label product consumers

This Marketing Planning Database could be used to help profile your brand or product users by key demographics, media habits, psychographics, etc.


Ultimate Benefits

The prize is in hand


Keys To Private Brand Success

QFocus on

product quality

Reach the right

customers

Deliver consistently


Decision Analyst Contact Information

Felicia L. RogersExecutive Vice [email protected]

Diane BrewtonSenior Vice PresidentMarket Intelligence [email protected]

604 Avenue H EastArlington, TX 76011

817-640-6166

www.decisionanalyst.com

Quality Promise Program: Empowering Consumers As Your Quality-Control Agents

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