Let Consumer Behavior Drive Category Plans

Let Consumer Behavior Drive Category Plans

ACNielsen's Todd Hale expounds on category opportunities and the most important components of consumer buying behavior.

How consumers purchase products provides terrific direction for what categories a retailer should carry as well as how retailers should place, price and promote categories. The components of buying behavior provide a simple but extremely powerful formula for driving sales successes down to the category, brand and item level, according to Todd Hale, Senior V.P. of ACNielsen consumer insights.

The following are critical components of buying behavior:
? Household penetration: The percentage of households buying an item, brand or category within a defined period of time (penetration can be measured within a retailer, channel, market, region, demographic segment, etc.)
? Buying rate: The amount purchased or spent on an item, brand or category (per buying household) within a defined period of time (usually expressed in terms of either dollars, units, or an equivalent volume measure). This measure is a function of purchase frequency and purchase size.
? Purchase frequency: the average number of trips in which an item, brand or category is purchased.
? Purchase size: The average amount of item, brand or category volume purchased per trip

Grocery retailers command large shopper bases and high shopping frequency, but Supercenters and Warehouse Club retailers drive larger shopping baskets, according to Hale.

"Brand marketers leverage the above-mentioned sales components to set strategies around how they should focus brand growth efforts," Hale said. "That is, should marketing focus attention on building the size of a brand's buyer base, the frequency with which the brand is purchased and/or the amount purchased per buying occasion?"

Once strategic direction is set, marketers can consider adding new flavors and sizes; increasing advertising spending; acquiring new channels or retailers to carry their products, to increase the percentage of households buying a brand, Hale added. "Brand marketers can modify their promotion frequency, alter package sizes, etc. to drive changes in buying frequency," he said."Two-for deals, bonus packs and cents-off promotions are additional tools that can be leveraged to increase the amount of brand volume purchased per buying occasion." according to Hale.

So, how can retailers use the components of buying to drive their merchandising activities? First of all, they must leverage category strength and focus on "power categories" that drive high penetration and annual spending rates.

Power categories are purchased by at least 92 percent U.S. households and annual spending rates exceed $60 per household, according to ACNielsen Homescan. "With the exception of paper products and medications & remedies, food and beverage categories dominate the list," Hale said. Specific categories on the list include carbonated beverages, prepared foods, fresh produce, deli and bread and baked goods.

"Think about how many traditional non-food channels have increased their efforts to drive sales in these categories," Hale said. "Because of their strong reach and spending levels, these categories are terrific categories to drive store traffic, increase account-shopping frequency and build larger basket rings in many retail channels."





Convenience Stores, according to Hale, can drive success with focus on key categories. "Convenience stores continue to expand their offerings to include organics, fresh produce and even sushi in an effort to attract a broader and more diverse shopper. And the strategy seems to be working," he said..

The 144 categories that ACNielsen Convenience Track monitors in C-Stores measured a collective increase in sales of 5.9 percent versus the same categories' growth of just 0.9 percent in the combined Food/Drug/ Mass (excluding Wal-Mart) channel for the 52 weeks ending 1/22/05.


Beverage products, including carbonated beverages, water, juice drinks, beer and coolers, continue to rank as five of the ten top sellers in the convenience store channel; in fact, this channel now enjoys a 53 percent dollar share of beer sales in the combined food, drug, mass and c-store (FDM/C) channels, Hale said.

Those categories which amount to more than the average 26 percent of FDM/C sales highlight additional profit opportunities for c-store operators and risks for other retailers, he said. "On average, the top 35 c-store items are priced 7 percent higher than the grocery channel and 9 percent higher than drug, representing an opportunity for grocery and drug retailers to highlight their price advantages," Hale said.

While some retailers may not be too concerned that c-stores represent almost 83 percent of the $2 billion chewing tobacco category, most would agree that those categories showing declines in FDM and increases in c-stores may be at risk.

"Analyzing category sales growth in c-stores versus FDM is a telling exercise and reinforces the opportunity for traditional supermarkets to include a "mini convenience department" in their footprint near the front of the store for easy access," Hale said. "New formats such as Bloom and Marsh Lifestyle have built such departments and are reporting strong incremental sales.