1. The Promise and Pitfalls of Retailer/Vendor Collaboration The Promise and Pitfalls of Retailer/Vendor Collaboration IIR Shopper Marketing Conference October 14, 2009 Bonnie Carlson, President PMA Joe Robinson, President RPM Connect

2. Perspective PMA conducted two Shopper Marketing surveys to measure collaboration – 2008 and 2009 Surveyed 318 retailers, manufacturers and agencies Qualitative and quantitative approach Database included Nielsen Business Media Results: A Dangerous Collaboration Gap

3. Definition Aligned Objectives Metrics for Evaluation Strong Shopper Insights Joint Planning and Post- Program Feedback Experience Agree on increased sales as #1; differ on # 2-4 Mismatch: retailer’s #1 KPI not in mfr’s top 3 list; mfr’s #1 KPI is retailers #4 Only 40% of retailers satisfied with mfr. support; 32% of manufacturers satisfied 1/3 of retailers state planning cycles don’t coincide Collaboration – Criteria used by Retailers and Manufacturers

4. Key Take-aways Actionable Insights Case Studies to Guide You The PMA’s 7 Point Manifesto for Shopper Marketing Success

5. Collaboration Criteria #1 Aligned Objectives Retailers and manufacturers agree on increased sales as #1 objective Retailers place more priority on shopper relationships Manufacturers place more priority on retailer relationships

6. Aligned Objectives 2008 - 2009

7. Key Insights Retailer is more strategically focused on the shopper, and building shopper loyalty/store relevance Manufacturer is more focused on building marketing programs that are persuasive to retailers Retailer will “own” shopper relationship; manufacturer needs to shift tactical focus

8. Case Study #1 Shopper Marketing for the Shopper

9. Our client needed to ensure strong merchandising support during Safeway’s Q1. Quarterly programs at Safeway are all about shopper solutions. These take the look of multi-manufacturer group events. Top vendors are invited to pitch ideas to Safeway’s VP. Ideas that are self serving won’t pass muster. Ideas that provide solutions to the shopper will win. Situation

10. Mom-shopper still needs solutions for dinner Mom still wants to grab everything she needs - “make it easy on me” But, the economic downturn is changing consumer’s behaviors: Trading meals eaten out for meals cooked at home But, even trading down those meals to less expensive meals Insights

11. “Spend Time Around Your table” Italian Night and Mexican Night complete solutions MED Solution: Merchandisable End Cap Many partner manufacturers working as a team RPM Connect drove the concept and the initial creative Give and Take with the team Safeway creates the final creative “Make it Tonight” Solution

12. Solution

13. Inclusion in Q1 program Inclusion in MED Inclusion in Circular Improved relationship between retailer and vendor Brand equity driver???? Results

14. Collaboration Criteria #2 Metrics for Evaluation Different Objectives Lead to Different Metrics Unit sales is the manufacturer’s #1 KPI, but retailer’s 4 th KPI Retailer profit is #1 KPI for retailers– not in top 3 of manufacturer Brand/program awareness is tied for retailer’s #2 KPI, but not in top 3 of manufacturer Manufacturer’s revenue or profit is not even included in retailer’s metrics

15. Collaboration Criteria #2 Metrics for Evaluation Neither retailer nor manufacturer use the same KPI’s for evaluation

16. Key Insights It will be difficult to achieve collaboration unless there is mutual respect for each other’s KPI’s. Retailer’s emphasis on program / brand awareness metric reinforces strategic use of shopper marketing for building equity and brand differentiation Conversely, absence of brand-building or profitability goals in manufacturer’s top KPI’s reinforce tactical approach to shopper marketing Manufacturer needs to train or rotate marketers into shopper marketing function with different tools and mindset

17. Potential Reasons for Manufacturer Focus Manufacturer’s high ranking of unit sales KPI may be “holdover” from traditional sales focus Sales teams historically incentivized based on units sold Other potential reasons for manufacturer focus : More confidence in traditional marketing mix of advertising or price Marketers not as well versed in customer business issues Infrastructure shift / training needed by sales-marketing teams to promote more collaboration

18. Case Study #2 Shopper Marketing to Increase Profit (Retailer and Manufacturer)

19. 19 Situation Energizer wanted to promote across their portfolio between the core business and more specialized items (higher margin) at CVS. CVS wanted a typical extracare program with a large buy down on core business

20. 20 Insights Consumers don’t always put batteries on their list, they know they need a few different sizes, but they don’t remember which ones they are out of. Consumers don’t understand what the new battery technologies are (e.g., Lithium, Titanium, Rechargeable), and are too busy to take the time to learn these products features and benefits. Shoppers want to do better for the environment, but “make it easy on me.”

21. 21 Solution I In-Ad PDQ Tray

22. 22 Solution II Promo Card Mini-Wing

23. Masked Analysis Solution ISolution II National PromotionShrek $$$$$ None In Ad$$$None ExtraCare OfferAt Register $$$ Mail In $ CommunicationIn AdOn Display

24. Collaboration Criteria #3 Strong Shopper Insights Both retailers and manufacturers rank shopper understanding as the most important success factor (81% = very important) Both sides have increased shopper marketing staffs in 2009 (according to GMA/Deloitte) Retailers +60% Manufacturers+23% Both sides rank support from each other as improved in 2009 Retailers40% (+5% increase) Manufacturers32% (+12% increase)

25. Collaboration Criteria #3 Strong Shopper Insights Responsibility for Shopper Insights is not clear. Manufacturers and retailers each think shopper insights is their responsibility, with the other side in disagreement There is even a 2:1 disagreement on making this a shared responsibility (mfr:50% / ret:25%) Retailer Shopper Segmentation studies underutilized Used by 50% of retailers, yet manufacturers are inconsistent in using retailer segmentation models Majority of manufacturers develop their own segmentation, yet retailers could provide more information

26. Key Insights Seek agreement upfront as to Source of data for insight -- consider quality of data, resources, etc. Who owns the responsibility -- preferably developed mutually What constitutes an insight – insights are more than data and need to be actionable Don’t reinvent the wheel Manufacturers report a 62% increase in sales and stronger relationships with their retailers when they consistently use the retailer’s segmentation models 87% of retailers say they are very willing to share information The economy has changed shopper attitudes and behavior -- Now is the time for true collaboration!!

27. Case Study #3 Focus on the Shopper and Shopper Insights

28. Super Bowl Event Planning RPM Connect panel: Virtual ethnographies provided insight re: Walmart shoppers’ Super Bowl mindset Focus groups exposed brands’ role in the party Syndicated data highlighted differences in shoppers’ Super Bowl attitudes/behaviors provided overview of store environment at Super Bowl ROI projection tool guided appropriate investment levels by customer

29. Super Bowl Corporate Event Planning Shopper’s #1 Chain For Food WalmartPublixKrogerRalph’sSafewayAlbertsons Food LionSAM’sCostco SuperBowl Behavior/Attitudes Plan to Throw a Party 20.3% (100) 11.3% (56) 10.6% (52) 9.1% (45) 13.0% (64) 15.0% (74) 12.6% (62) 12.0% (59) 17.6% (87) Plan to Attend a Party 25.1% (100) 26.9% (107) 25.2% (100) 34.2% (136) 27.7% (110) 26.8% (107) 28.7% (114) 23.2% (92) 25.2% (100) Plan to Buy Food/Beverages 73.0% (100) 67.0% (92) 69.6% (96) 65.5% (90) 71.9% (98) 74.2% (102) 72.3% (99) 72.2% (99) 70.1% (96) Most Important Part of SuperBowl (Of those planning to watch) The Game 44% (100) 45% (102) 44% (100) n/a 51% (116) 45% (102) 44% (100) n/a Half Time 8% (100) 9% (113) 8% (100) n/a 7% (88) 6% (75) 7% (88) n/a The Commercials 27% (100) 27% (100) 30% (111) n/a 25% (93) 27% (100) 27% (100) n/a Getting Together With Friends 21% (100) 19% (90) 18% (86) n/a 17% (81) 23% (110) 23% (110) n/a Source: BIGresearch Consumer Intentions & Actions Survey

30. Collaboration Criteria #4 Joint Planning / Post-Program Evaluation Joint long-range planning is critical to an integrated marketing plan Retailers want to incorporate manufacturer’s marketing strategies into their plan but need sufficient lead time Metrics and post-program evaluation need to be shared across both organizations to prepare each partner for future programs Constant feedback and shared learning leads to continuous improvement – and higher ROI

31. Collaboration Criteria #4 Joint Planning / Post-Program Evaluation High levels of dissatisfaction in importance vs. performance

32. Key Insights Develop a 12 month planning schedule (68% of retailers prefer a 6-12 month lead time) Accommodate specific retailer’s schedule if more time is needed Compromise is important to collaboration. Retailers rate this quality as “poor”; manufacturers give it a “fair”. Consider field sales experience as part of the brand manager career path. This helps manufacturers to gain a better understanding of retailers’ business issues.

33. Case Study #4 Joint Long Range Planning Developing Insights Together

34. Situation Situation Kroger and ConAgra were both looking for better ready-to-eat meal solutions. Both felt like an unmet need existed for consumers especially at lunch ConAgra had developed a new technology that they wanted to leverage on their business. Kroger wanted to work with ConAgra to best utilize this technology with Kroger shoppers.

35. “I like bringing a sandwich, it’s healthy.” “Prepackaged items tend to be a little messier to prepare, pour into a bowl, microwave and clean up afterwards. I like items with little liquid to prevent difficult clean up.” “I like a meal instead of a cold sandwich.” “I don’t want to feel ‘heavy’ but need energy to get through the rest of the day.” “I like spaghetti because it’s filling and cheap.” “Turkey sandwich, mac & cheese, Ramen noodles. They are all easy & fast to make. Plus, I can eat them and work at the same time on the computer.” “I don’t like leftovers because I’m the only one who eats them so I get a little tired of the same thing.” “I am too lazy to make and take my lunch to work.” ConAgra surveyed Kroger Shoppers and found many of their key needs were unmet in the current shelf stable meals and the lunch occasion. Source: Kroger Shopper Custom On-Line Survey, Communispace, Key Shopper Insight: There aren’t any fresh tasting, quality meals that are not only convenient to store and prepare, yet easily fit into a busy schedule. Insight Generation Insight Generation

36. Represents 34% of all Kroger Shoppers = A Worthwhile Investment! Source: dunnhumby Report, Total Kroger, Total Panel, 52 weeks 53mm Kroger Shoppers x XX% = XXMM Potential Kroger Shoppers Healthy Choice Fresh Mixers opportunity to target high potential Kroger Shoppers in the Watching the Waistline, Convenience at Home, & Finest segments Insight Generation Insight Generation

37. Solution Solution

38. Demo HandoutDemo Easel Card Front CoverBack Cover Inside Solution Solution

39. Two Floor Stands plus 24cs Open Stock Solution Solution

40. Stanchion Sign NAM Floor Talk NAM Shelf Talk Solution Solution

41. Customized shopper insights identified key shopper needs. Shopper needs were aligned to customers shopper segmentation. These insights led to a better understanding of the shopper inside Kroger. Achieved number one volume in category at Kroger in only six weeks! Results Results

42. It’s Worth It Unexpected Benefits

43. It’s Worth It The Light at the End of the Tunnel Shopper Marketing promises great returns for the industry Retailers are effectively differentiating their banner Manufacturers are extending brand equity up to “moment of truth” Shoppers are enjoying a better retail experience Shareholders can enjoy an improved ROI – up to 5:1

44. PMA Seven-Point Manifesto 1.Turn the war room into the win room. Get the key players from both organizations together in one place and embrace the practice of joint planning. 2.Schedule the celebration now. The best planned and executed programs still need to be measured and the key learning must be gathered and shared. 3.Lead with Insights. Successful shopper marketing begins and ends with the shopper, so work from that point.

45. PMA Seven-Point Manifesto 4.Speak a Common Language If the retailer has a segmentation model, use it. 5.Forge a Shared Vision of Success Agree how you’ll know when you get there. 6.Don’t Wait, Integrate Shopper marketing programs are more effective and efficient when they are planned and implemented as a core element of the entire marketing mix.

46. PMA Seven-Point Manifesto 7.Double Down on Sure Bets Shopper marketing has already proven to be the better long term investment, so take the lead from best practitioners and make a strong commitment to ensure the maximum return.