Engaging High-Value Shoppers in CPG and Retail

You just got the results back from your latest advertising campaign. Performance wasn’t exactly what you expected. In fact, sales were flat. During testing, the creative received high marks. Reach and frequency were as expected. The campaign was even viewable! And you used audience data to reach heavy buyers in the right geographic location. So what went wrong? One important thing you may not have checked was if the campaign audience was high-value. What’s a high-value audience? For CPG brands and retailers, this is a group of shoppers who spend the most not only with your brand, category, or retail banner but also have high rest-of-market spend. And your ability to reach high-value shoppers can often spell success or failure for a campaign. Precisely reaching high-value shoppers is important for three key reasons:

  • High-value shoppers are, well, valuable.
  • Shoppers are rapidly changing the way they make decisions.
  • The ability to reach individual shoppers is more real than ever.

High-Value Shoppers Are, Well, Valuable

In CPG and retail, winning companies are increasingly focused on their highest-value shoppers. Surprisingly, this is an often overlooked metric when evaluating a campaign audience. Consider these facts about the top 20 percent of shoppers by channel:

  • For grocery, the top 20 percent of shoppers represent almost half of all sales.
  • In the drug channel, the top quintile represents 70 percent of spend.
  • For mass and club, the top quintile represents almost 60 percent of spend.

High concentration of spend is true for individual categories as well. For example, in the laundry category over 60 percent of spend is from the top 20 percent of shoppers. These observations are not new. The concentration of sales among high-value shoppers in each of the previously mentioned channels has remained relatively unchanged over time.

Shoppers Are Rapidly Changing the Way They Make Decisions

Unlike spend concentration; shopper purchasing behavior is changing fast. The iPod shipped one million units in its first eight quarters of sales. For the iPhone, that number was twenty million. The iPad? Sixty-five million. Adoption of Apple’s technology is simply a proxy for the market’s propensity to rapidly change consumer behavior.

Channel boundaries are also blurring. Consider these statistics: Fifty-seven percent of consumers shop and research online before making an in-store purchase. Sixty-eight percent of consumers prefer brands that are available through multiple channels. The average shopper consults 10.4 sources before making a purchase, which is double the number of sources just two years ago.

Multi-channel retail is nearing the point that it can be called “table stakes.” On top of that, consumers are looking for immersive and relevant experiences from the retailers and brands they patronize. The pace of change and convergence of channels have rapidly remade how shoppers make buying decisions. Fortunately for marketers, it has also afforded numerous new opportunities to stay top-of-mind with high-value shoppers.

The Ability to Reach Individual Shoppers is More Real than Ever

Total shopper value is a function of both current and potential contributions. Most retailers already have access to the data required to analyze the first component of that formula, which is current sales within their own banner’s stores. However, few retailers and CPG manufacturers have truly understood the second component—potential sales—until now.

IRI ProScores™ uses predictive models, advanced analytics and data mining techniques to estimate spend for each and every U.S. household across thousands of CPG categories, subcategories, brands and retail banners. IRI is already using that information to drive more intelligent decisions with retail and CPG clients.

For example, a retailer has been applying the IRI ProScores methodology in combination with its own transactional data to identify high-value shoppers. This retailer quantifies “share-gap” by comparing each household’s total market value with the current value that the shopper is driving in the given category or brand. IRI has consistently found that targeting advertisements to high “share-gap” households generates incremental sales versus control.

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