MIAMI BEACH, FL — April 22, 2002 — Food retailers are increasingly recognizing that a strong retail brand is a top business driver and strategic investment, according to a new Food Marketing Institute (FMI) report New Directions in Advertising: Marketing the Retail Store as a Brand. The first-ever report was released during the 2002 Supermarket Advertising/Marketing Executive Conference being held here.

Composed of strategic guidance by experts, case studies and survey data, the report examines where the industry stands today and ways food retailers can better develop their stores as a brand for the future. Brand-building, communication, customer loyalty and advertising are key strategic areas that are defined, with a particular emphasis on cross-functional planning.

“Supermarkets have long been defined by what they sell and how they sell,” notes Michael Sansolo, senior vice president of research, education and emerging technologies at FMI. “Now they must create a brand that resonates with the consumer — emotional and rational reasons for being the shopper’s store of choice.”

Creating A Strong Retail Brand

Food retailers can no longer compete only on price and must develop messages that
provide effective solutions for time-starved consumers, according to the report.
Positioning the store as a brand — beyond the basic concepts of price, convenience and assortment — pulls consumers into the store.

The report defines several fundamental tenets of brand creation:

Commitment: A successful brand must have a commitment from the entire organization, from the CEO to the checkout clerk.

Distinct Products and Services: A strong retail brand must have recognized and established departments. Produce, meat, seafood, in-store bakery, deli, prepared foods and private label are all areas in which stores can establish an image.

Branding the Store: The brand image must extend into the physical space of the store, incorporating displays, arrangements and design schemes to create a distinct look, feel and sound.

A retailer’s product mix and placement are equally important to the brand-building strategy, according to Joan Treistman, senior vice president/co-director of Starch Communications Research at Roper ASW, who contributed to the report.

“In the store, the marketer gets the time the consumer is willing to give for the category, the brand and the product selection. Beneficially leveraging the unknown amount of time depends on consumer insight, intelligence and the integration of that learning creatively. Without that effort, the opportunity for lost sales escalates.”

Treistman suggests that a product’s shelf impact must be balanced with package design; that product selection must convey variety without confusion; and that private label brands must be consistent with the branding message of the store.

Communicating the Brand

Communication of the brand is defined by the message that is delivered each time a customer visits the store, according to the report. Each visit builds brand equity, which represents the propensity for customers to buy again in the future. Brand equity is also integral to the differentiation of stores, and critical to retail success as competition increases.

“Retailers must make their stores part of the customer’s agenda, fill their needs, address their values and have a place in their lives,” states Mary Christ Erwin, director of Porter Novelli’s International Food, Beverage and Nutrition practice. “And while values continue to be a key driver, the definition has changed and differs according to consumer lifestyle and life stage segment.”

Erwin goes on to emphasize that the brand offering must be sound, must deliver on the brand promise and it must target a defined audience. She also suggests that it is critical for supermarkets to become trend-spotters, staying current with the total retail landscape, as well as the grocery-shopping component. Erwin notes that a contemporary branding strategy should address current consumer trends, including:

• Consumer desire to be healthy amidst a growing obesity crisis
  
• Consumer demands for low prices and bargains
  
• Growing interest in premium products
  
• Increasing presence of, and consumers’ need for, ethnic traditions and cultures
  
• Time-deprived consumers’ need for simple solutions
  

Erwin reiterates the importance of employee participation in building the brand:

“A company’s best and toughest ambassadors are its employees. Their understanding of and pride in their brand is a critical element of its success. Employing the power of employees and enlisting their input can be a powerful tool.”

The report explores other methods of building and communicating the brand:

In-Store Promotions: Designed to
attract customers to products, these can be especially helpful to the marketing of private label products.

Loyalty Programs: Sixty-four percent of U.S. retailers operate a loyalty program. Of stores with a card program, 79 percent of store sales come from loyalty customers and 70 percent of stores use loyalty data to support ad decisions.

Cause-related Marketing: Nearly two-thirds of all companies have an ongoing cause-related marketing campaign, with chain stores far more likely (76 vs. 33 percent) to have a defined program. According to a Cone/Roper Citizenship Study, corporate citizenship is becoming more important to Americans — 79 percent of consumers think companies have a responsibility to support causes. Such programs can also enhance employee morale.

Internet: Approximately 78 percent of companies are using the Web for some kind of marketing, with most companies planning to increase Web spending by 34 percent in the coming year.

Building Customer Loyalty

“Developing customer loyalty in grocery marketing goes far beyond the financial transaction,” states Phillip Herr, senior vice president with Millward Brown, a Connecticut public relations firm. “The measure of customer loyalty is based largely on the depth of the relationship consumers hold with each brand.”

Marketing expert David Diamond, president of emerging business and chief vision officer for Catalina Marketing, reviews loyalty strategies associated with frequent shopper cards. The key benefits of card programs, according to Diamond, are:

• They allow for 1:1 relationship management with existing customers.
  
• They complement the overall media plan.
  
• They reward their best customers and provide relevant savings and incentives to their shopper base, thereby increasing total sales per customer.
  
• They allow for mass targeted promotions.
  

“Loyalty marketing programs must be implemented at all stages of the media plan, from television and print advertising to consumer and trade promotion with key suppliers. As retailers develop their frequent shopper card programs to become a true loyalty builder, these integral ideas will become the foundation of all programs associated with the card.”

Diamond also examines the development of targeted marketing promotions without a card. He suggests that targeting can be done in a variety of ways:

• Use of demographic and psychographic data. For example, delivering promotional offers to new residents.
  
• Use of actual purchase data on a current transactional level. For example, a discount for purchasing items on special.
  
• Use of purchasing preferences and buying habits to drive purchases in certain departments or to certain products, such as private label. For example, provide a coupon for a prepared food item each time a frozen meal or entrée is purchased.
  
• By order size. For example, a five-dollar discount with each $50 purchase.
  
• Membership in store clubs, such as a wine club, pet club or baby club.
  
• Continuity coupons and offers. For example, a coupon for a free loaf of bread with your next visit when you purchase a gallon of milk.
  

With or without a card program, retailers have many opportunities to develop an emotional, lasting bond with their customers.

Advertising the Message

According to the report, food retailers spend only 1.17 percent of annual sales on advertising, with 75 percent of ad budgets devoted to selling branded products at a competitive price and 8.0 percent spent on private label promotion. The majority of ad dollars — 80 percent — are spent on print advertising (newspapers, circulars and mailers). Interestingly, chain stores spend 10.2 percent of their ad budgets on TV, compared with 2.7 percent for independents.

“For a strong retail brand to be effective, advertising must change and must be less about price and more about image,” according to Dr. John Stanton, professor of food marketing at St. Joseph University’s Haub School of Business. “Advertising messages must influence shopping behavior, ultimately encouraging the consumer to develop an emotional attachment to the brand.”
Stanton cites examples of effective advertising campaigns that go far beyond price:

• Yokes Supermarkets began raising its own herd of Hereford cattle to play into the company’s claim to have “great meat.” The ads featured a cowboy with their herd.
  
• Giant Foods reinforced their claim to be “produce leaders” by featuring the very farmers growing the produce in their advertisements.
  
• Publix’s “Aprons” program advertises all meal ingredients together; the products are also merchandised together in the store.
  
• H.E. Butt’s ads show complete meals and the recipes for preparing them; the recipes in turn become part of the shopping list.
  

Retailers must also stay abreast of consumer trends with regards to advertising, according to the report. Approximately one-third of shoppers check ads and circulars every time they shop, but 20 percent never do. Younger shoppers are the least likely to check ads, whereas older shoppers and lower-income shoppers are the most likely.

“Retailers need to have multiple strategies for multiple audiences,” notes Mark Harsha, president of Harsha and Associates. “Effective advertising relies on consumer research, unique selling propositions, established objectives and strategies, budgets, planned media mix and commitment to approach and implementation.”

Harsha continues by defining key advertising venues and the benefits limitations of each. Television, newspaper, radio, direct mail, outdoor/billboards, and point-of-purchase advertising methods are examined.

The report also describes how to measure advertising effectiveness and impact, how to recruit an advertising agency and how to measure the performance of the overall brand strategy.

Purchasing Information

To order ($45 FMI members, $89 associate members and $105 nonmembers), or for more information, please contact FMI Publication and Video Sales at 202-452-8444 or visit the FMI Web site at www.fmi.org/pubs.