1. “Paying Attention to Your Customers” National Produce Market Managers Association Dallas March 27, 2010 By Larry E. Lund Real Estate Planning Group Chicago

2. It’s All About Customers Markets have two Kings – Vendors – Consumers Ultimately the Public is King Real Estate Planning Group

3. A Theory of Shopping Shopping Demonstrates Social Relationships – What do we care about? Shopping is a Devotional Rite – Pleasing others – Shopping as a “treat” - pleasing oneself Veblen – “Conspicuous consumption” – Shopping as “thrift” Hegelian dialectics – household interests (saving money) vs. community interests (Green). Shopping as a moral act Shopping as Personal Identity Source: Daniel Miller writings Real Estate Planning Group

4. Four Behavior Patterns You Need to Know with Fancy Names Real Estate Planning Group

5. Law of Convenience Every additional step that stands between people's desires and the fulfillment of those desires greatly decreases the likelihood that they will undertake the activity. Real Estate Planning Group

6. Zipf’s Principle of Least-Effort This Principle predicts that most people, most of the time, are turned back by modest hurdles that they know could be overcome, with effort. To be habitual, an action must be relatively effortless or carry a particularly LARGE PSYCHIC REWARD. And in what constitutes a "large reward," opinions and motivations vary widely across individuals. Real Estate Planning Group

7. Nash’s Equilibrium Theorem the Principle behind Markets In Game Theory, two vendors selling the same merchandise will maximize their locational advantage by locating right next to each other at the mid-point: where half their consumers are located Real Estate Planning Group John Nash won the 1994 Nobel Prize in Economics for his theorem. Beautiful Mind was the 2001 film about his schizophrenia.

8. Reilly’s Law of Retail Gravitation Reilly's Law of Retail Gravitation states that larger retail offerings will have larger trade areas than smaller ones, meaning people travel further to reach a larger retail offerings. Real Estate Planning Group

9. Trade Area by Surveying Customers Real Estate Planning Group

10. Competitive Market Analysis Real Estate Planning Group

11. Drawing Power Real Estate Planning Group

12. Market Share Selected StoreEstimated Area (S.F.) Estimated % Market Share (Fresh Food Items Only) Lexington Market74,400 (240,000) 30% Safeway50,00014% Superfresh35,00013% Hollins Market15,500 (50,000)12% The Avenue Market17,360 (56,000)6% Stop Shop & Save - Pratt 15,0005% Cross Street Market27,900 (90,000)4%

13. Market Potential vs. Realty Selected Fresh CategoryHollins Market Potential from Huff Forecasting Model Bakery$234,000 Meat & Poultry$1,342,000 Fish & Seafood$97,000 Fresh Fruit & Vegetables $219,000 Real Estate Planning Group

14. Marketing 101 Three P’s of Marketing Product Place Price Promotion Real Estate Planning Group

15. Produce Market Upside $47.1 Billion in Fresh Produce Expenditures for at home consumption (BLS 2007) 2007 Census of Retail – Produce: 2,908 Produce establishments with employees $3.413 Billion in sales avg. $1.173 Million/store 8,274 Sole Proprietors produce establishments $487,636,000 in Sales, avg. $58,935 annually – 3.9 Billion or 8% of produce purchased at Produce est. Real Estate Planning Group

16. Changes in Expenditure Share Source: BLS Real Estate Planning Group

17. How is your Diet?

18. Organic Farming 14,540 farms & ranches certified organic 20% organic farms are in California representing 36% of organic sales U.S. Organics $3.16 B -- $1.94 B in crops, $1.22 B livestock, poultry, etc. 83% organics sold to wholesale channels 10% organics sold direct to retailers 7% organics sold direct to consumers ($221.2 M) Source: 2008 Organic Production Survey, USDA

19. Local the New Organic?

20. Public Markets Finding the Opportunity 92 Percent of Americans do most of their Food Shopping at Supermarkets – So Where is the Market’s Niche? – Choice/Assortment Internal Competition – Costs High Margin/Low Margin – Quality – Organic/Local Real Estate Planning Group

21. What Does Market Research Do? Research is sometimes about Reducing Risk Research sometimes Tests Hypothesis All Research is about answering a Question Research is not a Product, it’s an Interactive Process Real Estate Planning Group

22. General Overview of Research Opportunities Assess your Market’s Potential Help Identify Best Customers Improve Adjacencies Indexing to Norms Importance/Performance Market Segmentation Behavioral Mapping Real Estate Planning Group

23. Focus on Core Customers Pareto’s Principle 80/20 Rule states that for many phenomena 80% of results stem from 20% of the effort. In other words, focus on those who buys more at the Market. Real Estate Planning Group

24. Core Customer Geographic Origins Market Segmentation How do you Reward your Core Customer? Real Estate Planning Group

25. Core Customer Benefits Percent of Core Shoppers Making Purchase by Food Category Food Cat.Percent Core Customer Making Purchase Index of Core Customer Making Purchase to All Customers Eat at Market44%.90 Foods to Go29%1.45 Meat/ Poultry40%1.90 Fish/ Seafood33%2.20 Bakery37%1.37 Produce66%1.50 Real Estate Planning Group

26. Geographic Market Segmentation Live Downtown / Work Downtown Live Downtown / Work Outside Downtown Live in City Outside Downtown / Work Downtown Live in City Outside Downtown / Work Outside Downtown Live Metro Outside City / Work Downtown Live Metro Outside City/ Work Outside Downtown Live Downtown/ Not Work Live in City Outside Downtown/ Not Work Live in Metro Outside City/ Not Work Live Outside Metro/ Not Work Real Estate Planning Group

27. Cross Vendor Shopping Matrix What Vendors are Customers Shopping? What Type Vendors are Attracting Customers? Real Estate Planning Group

28. 2009 Cross Category Shopping Matrix CategoryEat In Prepare Foods MeatPoul.Fish/ Sea BakeProd.Oth. Food Non Food Total # 73817572412837861989110 % N=401  44%18%10%7%9%21%49%23%2% Eat-In--25%22%25%19%30%24%52%90% Prepared10%--20%7%8%13%12%23%40% Meat5%3%--36%32%16%18%12%10% Poultry3% 24%--16%12%11%4%20% Fish/Sea4% 29%21%--9%16%7%20% Bakery21%15%37%29%22%--19%27%40% Produce27%33%88%79%86%43%--35%30% Other Food27%29%27%14%16%29%16%--60% Non-Food5%6%2%7%5% 2%7%-- Across: 27% who Ate In bought Produce/24% who bought Produce Ate In

29. Indexing Market Performance Market Survey National Survey Index Variety of Fresh Food3.24 Quality of Fresh Food3.363.21.05 Ambience/Atmosphere /Character of Place 3.36 Local Products3.21 Average3.16 Cleanliness3.093.3.94 Convenient Location2.973.0.99 Adequacy of Parking2.82 Pricing2.643.0.88 Selection of Ethnic Foods 2.58 Real Estate Planning Group

32. Importance / Performance Matrix of Primary Food Store Where Customers Spend the Most Money Quadrant II Areas Important to Customer but Primary Store Does Not Meet Expectations. Market Opportunity Area: Lower Prices Items on Sale Quadrant I Areas Important to Customer and Primary Store has High Performance Market challenged to compete with these High Quality Produce High Quality Meats Clean and Neat Store Convenient Location Good Variety Quadrant III Areas of Lesser Importance to Customer and Primary Store Performs Poorly Market has marginal opportunity Improved Safety Outside Store More Natural Foods More Ethnic Foods More Local Foods Better Recycling Programs Quadrant IV Areas of Lesser Importance to Customer and Primary Store Performs Well Market has very marginal opportunity Knowledgeable Staff

33. Importance / Performance Matrix of with Market Customers Quadrant II Areas Important to Customer but Primary Store Does Not Meet Expectations. Market Needs Improvement. Lower Prices Neat and Clean Having Items on Sale Quadrant I Areas Important to Customer and Primary Store has High Performance Market Strengths High-Quality Produce High-Quality Meats Convenient Location Good Variety Quadrant III Areas of Lesser Importance to Customer and Primary Store Performs Poorly Market improvements will result in marginal results Improve Safety Outside Market More Natural and Organic Products Improve Recycling Efforts Quadrant IV Areas of Lesser Importance to Customer and Primary Store Performs Well Market performs well, but not valued highly by its customers. Good Selection of Ethnic foods Serves Local Food Products Has Knowledgeable Staff

34. Grocery Market Segmentation Spending and Trips Real Estate Planning Group

35. Grocery Market Segmentation Cluster Analysis Care for Family – 27% of spending 19% of trips. – Trust and High-Quality, Fresh Products Smart Budget Shopping – 18% of spending, 15% trips – Value for Money, sales important Efficient Stock-Up – 16% of Spending, 13% trips – Ready to eat meals Real Estate Planning Group

36. Segments Continued Bargain-Hunting – 10% of spending and 13% of trips – All about saving money travel different stores. Discovery Buyers – 9% of spending and 7% of trips – New items, selection and atmosphere Specific Item – 9% of spending and 11% of trips – Mission and Convenience driven Real Estate Planning Group

37. Segments Continued Small Basket Grab & Go – 5% of spending and 9% of trips – Same as Specific Item, but buy more items and want other services like banking, video rental Reluctant Buyer – 4% of spending, 8% of trips – State of mind, not like shopping, self-service Immediate Consumption – 2% of spending, 5% of trips – Convenience, snacks, eat in store Real Estate Planning Group

38. Farmer’s Market Segmentation Real Estate Planning Group

39. Farmer Segments Continued Enthusiasts – 32% – Professionals with high education and incomes – High Quality Fresh Products Organics and want full market experience Basic Shoppers – 30% – Educated with medium-high incomes – High Quality Fresh Products – Doesn’t need to be at farmer’s market Real Estate Planning Group

40. Farmer Segment Continued Serious Shoppers – 18% – Have Children at home and likely younger – Variety important enough to over inconvenience of shopping at Market. Low-Involvement – 11% – Highly educated and high incomes – Male shopper, not primary shopper Recreational – 9% – Younger, less educated, lower incomes – Enjoy Market events and non-produce products Source: Consumer Segments in Urban and Suburban Farmers Markets, April 2010 Real Estate Planning Group

41. Behavioral Mapping How long at Market? How many vendors do people visit? What vendors are anchors? What is your geographic syntax? Real Estate Planning Group

42. Focus Groups Qualitative research About Listening to Customers Can lead or follow Quantitative research Real Estate Planning Group

43. Knowledge Can Transform Your Market Use Different Techniques for Discovery – Customer Surveys – Sample Size/Correlations (Quantitative) – Focus Groups – Memories (Qualitative) – Behavioral Tracking – Memory vs. Reality Watch the Cool-Aid Real Estate Planning Group

44. Thank You Larry Lund Real Estate Planning Group Chicago 312-751-1250 Larry@REPG-Lund.com