Ad It Up

Old 20th century advertising tricks are becoming increasingly passé, as the supermarket industry heads deeper into the new millennium, industry experts say. Retailers must continue to wean themselves off price-oriented promotional practices and become more people friendly.

"I think the trend is going to be that supermarkets are going to refocus attention on customers," says Dr. John Stanton, professor of food marketing at St. Joseph's University's Haub School of Business and a decade-long judge for the National Grocer Association's advertising and merchandising awards. "It's a natural evolution. Fifty years ago, the corner merchants knew everyone in the store, and only ordered the products customers told them they wanted. Then supermarkets came and started to lose touch with the customer base. The stores started to be run by accountants, rather than by people who love food."

Supermarkets, he adds, got trapped into a cycle where retailers are more interested in what suppliers think than what customers think. The cycle, in the near future, will make its way back to customers. "When that happens, we will see advertising become more focused on what's important to consumers, not suppliers," Stanton says.

Stanton points to a color circular that H-E-B has run, presenting a five-day meal plan for families. "You're going to see more of this type of advertising in the future, where stores start addressing what customers expect to see in a supermarket," he says.

Supermarkets, he adds, lag behind other retail classes in the types of ads they run. "In most ads you see, the advertisers give a reason for liking or buying the product, telling you what's good about the product or store," he explains. "Supermarkets don't do that. Their advertising is very circular-driven, very item-price driven. They use price to get customers into the stores. As a result, there's very little branding done and there's no way they can establish what makes their store more successful, better, more unusual, etc. All they tell you is how much Coke is, but you can buy Coke anywhere. They should be saying why consumers should be shopping in their store and not the competition's."



Tight Purse-Strings

Additionally, the money supermarkets spend on advertising lags significantly behind the average expenditures for other types of retailers, says Neil Stern, a partner at Chicago-based Macmillan Doolittle. Department stores, he says, spend about 5 percent of their budgets on advertising, consumer electronics outfits shell out about 5 percent to 6 percent, and discount stores are on the low end, spending about 3 percent. Supermarkets spend between 1 percent and 1.5 percent on advertising. "When they do spend, traditionally half of those expenditures are co-ops where a significant amount is paid for by manufacturers," Stern points out.

A significant means of differentiating one's store from the competition involves promoting private label products. Historically, supermarkets have paid little attention to their private label products in ads, Stanton contends. "Traditionally, they seldom advertise private label products because it's been viewed as an expense they didn't want to incur," he says. "So, if they had advertised the product, it was out-of-pocket and reduced the margins."

However, the tide will shift, Stanton predicts, as differentiation increasingly becomes the name of the game in supermarket promotions. "Private label will have to become a vehicle for advertising and provide consumers with a reason to come into a store," he says. "You'll see more of it, maybe not a lot more, but definitely more."

The future of supermarket promotions is Darwinian, Stanton believes. "A lot of people think Darwin said it's survival of the fittest, but it's really about adapting to your environment. Just like animals adapt to their environments, supermarkets will have to adapt to their changing environments." Retailers that try to fight the old battle, he says, won't be around much longer.



Look Across the Pond

Some experts say U.S. supermarket chains should take a cue from their European counterparts, especially those in the United Kingdom. "If you go over to the U.K., you don't know what's a national brand or private label," says Chris Hoyt, president of Scottsdale, Ariz.-based marketing consultancy Chris Hoyt & Co. "If the quality of private label lines is as good as that of the national brands, as the stores say, the demarcation line in the consumers' minds between what's national and what's private label will begin to dissolve."

Stern cites British chains Sainsbury and Tesco for producing advertisements centered on events. "They're really in the business of building brands," Stern says. Some U.S. chains are starting to build their ads around events and family with a tone much different than the price-oriented promotions. "The one that comes most readily to mind is Publix," says Stern. "Publix has been branding who they are and what they are, with ads geared toward events and the family."

He notes that the Florida-based chain's Thanksgiving advertising is not the 39-cents-a-pound turkey that one sees in many stores' ads. The ads show families and extended families enjoying the holidays together. "Publix is really selling the lifestyle, the event," Stern says. "Almost all other advertising starts with 'How low can I get my turkey prices this year?'"

The chain's ads are similar for warm-weather holidays such as Memorial Day, where the promotions feature backyard-barbecue vignettes.

"I think with all the consolidation we're getting bigger companies that need to become brands," Stern says. "Kroger needs to become a brand; Safeway needs to become a brand. It's not that they need to move more products, they have to move more of their own offerings. I definitely see other chains shifting to doing more of that kind of advertising as well."

But what it all boils down to, says Hoyt, is a question of control. "If there are any manufacturers who have any doubts about who's in control, they should do some store checks," he says, adding that any manufacturer that doesn't believe the retailer calls the shots "is in serious denial." With the power in the hands of the retailer, the time is ripe to capitalize on the situation and start marketing stores as brands.