What You’ll Learn:
- How virtual shopping works and why it’s a great tool to really understand consumer behavior
- Why virtual shopping is different from other forms of market research
- The differences in virtual shopping for brick-and-mortar vs. ecommerce
Webinar Hosts 💻
Katelyn Cieslinski, Marketing, Blacksmith Applications
Alex Sodek, Chief Research Officer, Decision Insight
During this webinar, you’ll get an insider’s understanding of virtual shopping research for the consumer products industry.
Some shopper research tactics simply ask consumers questions (“Which packaging design do you prefer?” or “Would you order this menu item at a restaurant?). Not virtual shopping. Virtual shopping puts consumers in a digital environment and records their actual purchase actions. And, you guessed it, those actions are often different than how they would’ve answered survey questions.
Benefits of Virtual Research
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Decision Insight started as a small, regional research company in the Kansas City area. Hallmark, one of Decision Insight’s biggest clients, asked the research company to integrate visuals into market research.
Sodek says, “We’d take pictures of their products and competitive products; we created a shelf – where all the products were placed together. That was the advent of virtual shopping.”
The next time you buy a Greeting Card, think about how you navigate that section. Cards are organized via PIDs. There’s a big difference between the words “mother” and “mom” — how people navigate, and the words we use have a big impact on people buying certain products.
By introducing a virtual testing model that could measure the impact on sales, Hallmark gained a huge advantage – no actual product required. For Hallmark, there weren’t piles of Greeting Cards. Less inventory reduced the manufacturer’s cost and shortened the development cycle for testing new products.
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Then, the next big change came from working with PepsiCo. PepsiCo had a bunch of tools that did a great job at new product development, but they really needed a category management tool.
Decision Insight started working with Frito-Lay (a division of Pepsi). At the time, in the middle of the country, they had 80% of the market in salty snacks.
They needed a tool to measure portfolio. The things they cared about the most were things you can only test in-market:
- What products should lead off the aisle?
- If we swap Lays from the lead position with Doritos as lead position – what happens to performance?
- Where do we place better-for-you products to optimize category sales?
- Where do we place our new innovation to reduce cannibalization?
- What if we only have one facing instead of two facings of all of our products?
That’s when virtual shopping research became focused on category management and winning at retail.
After testing several in-market solutions with shoppers, “we learned that shoppers don’t always make rational decisions,” Sodek adds. “Because of this, we began to focus on Shopper Insights to help explain why shoppers make the decisions they make. Then, we dig deeper, using Diagnostics to understand why.”
The next big evolution for Decision Insight… Moving from category management to shopper insights.
After years of research, it was clear that consumers don’t make rational decisions – they use shortcuts to make decisions.
If we promote 2 for $5 – it was easy to calculate because people bought it.
If we promote 3 for $5 – it was challenging to calculate because people didn’t buy it even though it’s a better value.
Why don’t consumers make that rational decision? Behavioral economics.
Let’s dive deeper on decision making for a minute.
People make decisions using two different systems:
System 1 decision making is the brain’s automatic, intuitive thinking mode.
It’s the system that consumers use when making purchases in the grocery store.
Think about standing in front of the toothpaste aisle… You don’t rationally think through each of the 200 options of toothpaste. You take 20 seconds using your automatic System 1 to grab a toothpaste and go on your way.
System 2 decision making is the slow, rational, and analytical thinking mode.
This is the system consumers use when making a large purchase like buying a home or a car. Costs and benefits are weighed and thought through methodically.
Consumers like to believe that they use rational decision making in the grocery store, which is why in a survey where consumers are thinking through each response carefully, they will tell you their go-to afternoon snack is fresh cut veggies instead of potato chips.
But when it comes down to it, chips are often chosen for a variety of reasons (convenience, taste, etc.). What people say is not what they do…
Virtual shopping captures the magic of System 1 decision making. With virtual shopping, shoppers make quick, intuitive, automatic decisions. It corresponds very closely to actual sales.
Virtual shopping is a great predictive tool to figure out what’s going to happen in the market.
Why Virtual Shopping?
Virtual shopping is better than other forms of market research.
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“We spend a lot of effort to create the context of the environment. How people shop Wal-Mart is different than how they shop Kroger – which is different from how they shop CVS – which is different from how they shop QuikTrip,” Sodek says.
“We spend a lot of time to ensure we have the correct price, assortment, and arrangement,” Sodek continues. Then, it’s the magic of the process – where consumers act as they do in real life. They actually look at the aisle. Notice the product. Reduce that set (in salty snacks, there’s 300+ products). Then, choose the product to purchase.
Virtual shopping mimics how consumers first deselect products, then select within a reduced competitive set.
The proof is – virtual shopping correlates to actual sales at 90% or higher.
Behavior vs. Attitude
Virtual shopping is an ideal way to understand where we’re sourcing volume from. If we add a new product to the set, is it incremental to our portfolio and the category or is it just cannibalizing current sales?
The only way to do that is to understand how consumers are making trade offs. Virtual shopping focuses on behavior. Behavior-focused. Measuring behaviors tells you what will happen in the market place. The vast of majority of research in the past focused on attitude – which is further away from the decision process.
The best example – Sodek explains – “Our clients try to expand the market and come out with a lower-cost product at a smaller size to get incremental purchases.”
Let’s say, we’re selling Lays for $3 / 12oz. We want to come out with a 6oz. bag of Lays for $2. What happens? We actually tend to trade more people down. We trade people from buying that $3 bag to now buying the $2 bag… instead of capturing incremental purchases of Lays. It’s a net loss in sales for us and it’s definitely a net loss in dollar sales. That’s never a story you want to bring to your retail partners.
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Understanding volume sourcing is important. Like the example above, you need to know if new products are cannibalizing volume or capturing incremental volume. Are you sourcing from private-label brands or other national competitors? Working with certain retailers, that’s more important than others. But they all care about private-label sales.
You need to show that if you introduce a new product, it does no harm to their private label, it’s incremental to the category, and fulfilling an unmet need.
How do you create a win – and from the very beginning – we start with, how will we sell this into the retailer?
What is Virtual Shopping? How Does Virtual Shopping Work?
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Who is the shopper? Consumers are invited to attend. They come from a double opted-in panel. They agree to not divulge any information in the survey. To qualify, they are screened by demographics and past purchase behavior. Virtual shopping is mobile compatible. Shop from your phone, computer or tablet!
Where are we shopping? The platform sets the context for the store. This example is a Safeway in California. This is important – people shop differently at different stores. Each store has unique pricing strategies and the consumer comes in with a particular mindset.
What are we shopping for? In this trip, shoppers are buying premium chilled juices.
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What does the shopper see? The aisle is full of a realistic competitive set, a particular product arrangement, and accurate in-market pricing. It’s pretty exact to what is in the market place.
The shopper is able to scroll to view the entire aisle. They can zoom in on the shelf view and can click on any product. The shopper decides whether to purchase it and at what quantity – or put it back on the shelf.
What does virtual shopping pay attention to? All of the shopper’s behavior matters. What’s at eye-level really matters; that’s where consumers start to shop. Is there a pause on the first two or three products on the aisle? Do consumers see the top shelf? Do consumers see the bottom shelf? How people navigate this virtual shelf is very close to how they navigate the real shelf.
Sodek notes, “We’ve consistently seen that products at eye-level do best. Products leading the aisle off do better. Products at the top or bottom are more difficult.” You can improve performance by improving contrast on the aisle – where can you draw the consumers attention? All of these things matter in virtual shopping (and real life).
Virtual Shopping Validation
It’s a great predictive tool. It helps CPG manufacturers make decisions on what to do in the market place. The correlation on virtual shopping to actual sales:
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Virtual shopping isn’t isolated to one or new products or a specific competitive set – it’s in the context of the category.
It’s one of the few ways that you can actually measure in-market performance. You can answer the important questions to get sell-in. You can tell the retailer with confidence that it will be good for them (and good for you).
Influence Strategy Planning
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We do a lot of A/B testing. Is arrangement A better than arrangement B? Who are the winners and losers?
- If I lead the aisle with better-for-you products, does anyone else lose sales?
- If I lead the aisle with import beer, what happens to premium beer?
The bigger the category, the more important the arrangement is. As a CPG product, if you’re in a really big category – 30 feet long – what leads off the aisle and how products are arranged have a big impact on sales. Maybe even more important than assortment, considering what’s the 101st and 102nd product in the set – when all those products you added have less than 1% of sales. Leading the aisle off with the most productive products, trading people off, instilling strategies that upsize people- all have bigger impact on your portfolio and on the overall sales for category.
We test a lot of assortment. Can we get rid of poor performers and insert new performers and lift sales for the category? (We usually do.)
We test SKU rationalization. Generally, 10% is great – if we can get rid of 10% of SKUs, we’ll increase sales. 20% reduction in products is too much – people walk out of the aisle, they’re dissatisfied. The magic number is somewhere in between.
Decision Insight works hard to generate a win/win/win.
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A win for the shopper- easier to shop.
A win for the retailer- increase overall category performance.
A win for the manufacturer- improve sales for their brands.
We talked about how consumers shop differently from one brick-and-mortar retailer to another… when it comes to online shopping, people again, shop differently.
Decision Insight has been doing ecommerce testing for a long time.
- How do we lay the page out?
- How can we get the highest conversion?
- How do we maximize the site to make it easier for consumers to shop?
Look at the two extremes of online shopping:
- Amazon.com (direct to consumer): Amazon shoppers look at a lot of pages, buy few products, and the basket usually has less than 10 products. The products in the basket are (sometimes) very specialized. Even with COVID, the basket sizes are smaller compared to other retailers. On Amazon, shoppers can see reviews and other products can cross merchandise.
- Kroger (click and collect): With Kroger click-and-collect, it looks like a stock piling trip. Basket sizes are very big – it’s similar to what shoppers would have bought in brick-and-mortar. You can buy from the landing page or product assortment page (you don’t have to go into the product page). At Kroger, shoppers typically never get to the product page.
What we’ve learned is we have different levers:
- Taxonomy (like in-store arrangement)
- Featured Ads (like an end cap)
Like an in-store experience, Decision Insight can recreate an online shopping experience. Out of the store, different things are important. Online – the product shot has to communicate so much. There can’t be distractions, it takes the shopper only a second to skip over your product.
We tested some online packaging images for wine. The first thing we saw – if we had 3 bottles – that confused people – so they skipped over it.
The visual is important. Has it communicated everything it needs to communicate (and quickly)?
POSITIVE MENU TRANSACTIONS
We’ve worked with Pizza Hut for more than 10 years. We tested the transition from ordering on the phone to ordering online.
The goal is to maximize the profit.
We’re always thinking, how can we impact the percentage mix of sales or get that average ticket price up.
- Are we selling more or less side items?
- How can we increase drink orders?
- What if we come out with sweet potato fries? Will this lead to incremental sales?
- How do our ideas fit into our overall strategy?
- How can we maximize our assortment to get a high conversion for side items?
If we come up with a new product, where will it source volume from? Operationally, you have to think about costs.
If we come out with a steak salad, what does that do to the order? At lunch, most people trade up (from their $10 burger to the $15 steak salad) at little risk. We have to sell enough and maintain its position on the menu. That same item might not work at dinner. At dinner, the steak salad might trade people down (from a $25 steak dinner to a $18 steak salad).
Virtual shopping finds the impact on percentage mix of sales within your product. Know whether or not your assortment is profitable.
What people say is not what people do.
That’s why virtual shopping research can accurately predict in market sales, participants actually shop instead of rationally verbalizing what they think they would do.
You should use virtual shopping research from Decision Insight to inform your next category reset, pricing action, packaging change, and new menu item introduction.