GfK -vlerick fmcg conference - the price sensitive shopper reality or fairy tail

© GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 1

THE PRICE FOCUSED SHOPPER: REALITY OR FAIRYTALE


GfK: Who buys what, where, when, how much…?


Total Belgium = Hyper + Super + Discounter + Proximity + Special Outlets + Other Food

Hypermarkets Supermarkets

• Rob

• Alma

•Bio Planet

• Caddy Home, Delhaize Direct/Wineworld

•Carrefour winkel Online

Discounters

•Ecomarché

•Profi

Proximity

•Louis Delhaize Super

• Delhaize Superette

• Prima

• Deli Traiteur

•Supra

•Spar (excL. Eurospar)

• Petrol stations

Special Outlets

•………….

Other Food

•TECNO

•Peter-Goovers

•Oth.Supermarkets (1-2 checkouts)

•Foreign Supermarkets

GfK: 1 in every 900 Belgian households is monitored across total FMCG

http://www.magasins.yves-rocher.fr/assets/site/accueil/accueil.asp

http://www.aveve.be/default.aspx?tabid=4238&language=fr-FR


At the end of this session…

We’ll answer the following question together:

Does the price focused shopper exist?

Option 1: YES, every shopper is price focused

Option 2: YES, and it concerns a large portion of the population

Option 3: YES, and it concerns a small portion of the population

Option 4: No, but this will very likely change in the near future

Option 5: No

Option 6: I have another opinion


How we will try to answer the question

Some Macro-economics

How price aware are you?

Price as a driver for Aldi’s growth?

Classification of Belgian Households

An eye on price elasticity

Impact of price promotions

The closing question











WHAT IS MISSING HERE?


Segmentation based on sensitivitiesHow price aware are you?

I’m used to buying this

product.

I love this BRAND

Last time it was

price X

This time it is more

expensive

Expected PRICE

Posted PRICE

GAP

Purchase

Purchase consideration

40%

40% does not notify the gap between

the expected price and the posted

price

Posted PRICE

Purchase consideration



What about your price sensitivity…?


Would you be able to rank the following products on their price

per liter / Kilo?



Price per volume (Kg / L)€ 1,53

€15,95

€ 6,6

1 2

€ 2,59

3

4

€ 12,18

5

€ 13,9

6

€ 3,63

78

9

€ 12,12

10

€ 13,10












PURCHASE POWER :Reality for private HH = Increase of Cost of living

Paradigm : Indexed salaries Vs Increase of costs

Some Macro-Economics


Q1 06

Q2 06

Q3 06

Q4 06

Q1 07

Q2 07

Q3 07

Q4 07

Q1 08

Q2 08

Q3 08

Q4 08

Q1 09

Q2 09

Q3 09

Q4 09

Q1 10

Q2 10

Q3 10

Q4 10

Q1 11

Q2 11

Q3 11

Q4 11

Q1 12

Q2 12

26

27

28

29

30

31

32

33

34

35

-3

-1

1

3

5

7

9

11

13

15PL shares Inflation

Private Label Value

Shares Western Europe

Source Europanel consumer index – 10 countries



BRAND LEADERS – A-BRANDS – STORE BRANDS - BUDGET

PRESSURE upon some categories versus OPPORTUNITY for others

OOH – SPECIALITY STORE – SUPERMARKET - DISCOUNTER

Assortment

Brands

Channels?

CONSUMER

NeutraalCrisis Resistant

Crisis Neutral

CrisisProne

Downtrading of some sectors can represent growth potential 4 Retail in FMCG












SOFTDRINKS | BREAD SPREADS |FEMALE HYGIENE




Δ % Volume

Δ % Price

Perfect elasticity, elasticity = 1

Very elastic, Elasticity > 1

Non elastic, elasticity < 1


1

0


Elasticity

Price per volume

Soft drinks

Bread Spread

Female Hygiene











Aldi has been growing in Sales value and market penetration since 2004. 2 questions can be asked what will they do in 2013 and what have been the main drivers for this growth?

21

2004

_Sum

mer

2004

_Wint

er

2005

_Sum

mer

2005

_Wint

er

2006

_Sum

mer

2006

_Wint

er

2007

_Sum

mer

2007

_Wint

er

2008

_Sum

mer

2008

_Wint

er

2009

_Sum

mer

2009

_Wint

er

2010

_Sum

mer

2011

_Wint

er

2011

_Sum

mer

2011

_Wint

er

2012

_Sum

mer

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

60

62

64

66

68

70

72

74

76

78Sales Value (€1000) Penetration (%)

Price as a driver for Aldi’s growth



2004_Summer 2004_Winter 2005_Summer 2005_Winter 2006_Summer 2006_Winter 2007_Summer 2007_Winter 2008_Summer 2008_Winter 2009_Summer 2009_Winter 2010_Summer 2011_Winter 2011_Summer 2011_Winter 2012_Summer

0

2

4

6

8

10

Offers Prices Quality AssortmentFresh Cleanliness Friendliness

2004

_Sum

mer

2004

_Wint

er

2005

_Sum

mer

2005

_Wint

er

2006

_Sum

mer

2006

_Wint

er

2007

_Sum

mer

2007

_Wint

er

2008

_Sum

mer

2008

_Wint

er

2009

_Sum

mer

2009

_Wint

er

2010

_Sum

mer

2011

_Wint

er

2011

_Sum

mer

2011

_Wint

er

2012

_Sum

mer

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

60626466687072747678

Sales Value (€1000) Penetration (%)

?



Sales resultsα* Price

Performance

β* Offers

γ * Quality

δ* Assortment

ε * Fresh

ζ * Cleanliness

η * Friendliness



Sales resultsα* Price

Performance

β* Offers

γ * Quality

δ* Assortment

ε * Fresh

ζ * Cleanliness

η * Friendliness

Price / Quality performance

No significant impact



Sales resultsα* Price/Quality

performance

γ * Fresh

β* Assortment

δ* Adjusting for seasonality

ζ * Adjusting for penetration

The sales performance of Aldi can be explained by the amount of Belgian

Households that visit the Aldi stores per season and their evaluation of the price /

quality ratio, the available assortment, and the performance of the fresh department!



2004

_Sum

mer

2004

_Wint

er

2005

_Sum

mer

2005

_Wint

er

2006

_Sum

mer

2006

_Wint

er

2007

_Sum

mer

2007

_Wint

er

2008

_Sum

mer

2008

_Wint

er

2009

_Sum

mer

2009

_Wint

er

2010

_Sum

mer

2010

_Wint

er

2011

_Sum

mer

2011

_Wint

er80000

280000

480000

680000

880000

1080000

1280000

1480000

1680000

Actual sales Sales Model 3

27

Sales Aldi = Basic sales – A * Price/Quality + B * Assortment + C * Fresh department - D * Winter/Summer + E * Penetration

Adjusted R² = 0.95



– A * Price/Quality + B * Assortment

+ C * Fresh department – D * Winter/Summer

Further improvements on the price quality ratio have not resulted in additional sales. Or any negative changes in the price performance

evaluation did not negatively affect the sales of Aldi

The assortment has been a driver of Aldi’s

success

The fresh department has been a driver of

Aldi’s success

Aldi performs less good during the

summer



_Sum

mer

2004

_Win

ter

2005

_Sum

mer

2005

_Win

ter

2006

_Sum

mer

2006

_Win

ter

2007

_Sum

mer

2007

_Win

ter

2008

_Sum

mer

2008

_Win

ter

2009

_Sum

mer

2009

_Win

ter

2010

_Sum

mer

2010

_Win

ter

2011

_Sum

mer

2011

_Win

ter

2012

_Sum

mer

2012

_Win

ter

2013

_Sum

mer

80000

280000

480000

680000

880000

1080000

1280000

1480000

1680000

Actual sales data Predicition Sales


+2.5%








Aldi continuous to improve or expand its assortment



Aldi continuous to improve or expand its assortment



The price gap is big enough for Aldi, they are not generating additional sales by lowering their prices.

As a matter of fact they might have some potential to increase prices on “must buy”

products: e.g. female hygiene












Segmentation based on sensitivitiesImpact of price promotions

• Consumers react to uncertainty in the marketplace

• Focusing on saving• Purchasing items on promotions• Increased share of PL

• Specific group starts to buy more frequently

• Actually feel better doing so• Pleasure of getting deals• Obsessive deal seekers• These are:

• More knowledgeable• Brand conscious• Price sensitive

NO DEALS NO PLEASURE


Segmentation based on sensitivitiesImpact of price promotions

NO DEALS NO PLEASURE

That is €42 of Rexona products for only €12

Example send in by GfK panel member NL


DEEP DIVE INTO PROMOTION EFFECTIVENESS

SALES BUMP IN PROMO

TOTAL SALES

NEUTRAL

PROMOTION EFFECTS

BRAND SWITCHING:“Buying something else”

TIMING EFFECT:“Buying earlier”

VOLUME UPLIFT:“Buying more”

CATEGORY SWITCHING

RETAILER SWITCHING

INCREASED CONSUMPTION

CANNIBALIZATION

COMPETIVE SWITCHING

INCREASED BUYING FREQUENCY

STOCKPILING

LONG TERM

SHORT TERM

DEFENSIVE



DEEP DIVE INTO PROMOTION EFFECTIVENESSImpact of price promotions

Price promotion

coupon

Other Price

promotion

Volume promotion (e.g. 5+1)

Multibuy (e.g. 2+1

SKU)

Premium promotion

Retailer actions

(e.g. Pixar)

25% 24%17% 18% 18%10%

Brand Switching

25%

Extra volume

8%10%

20%23%

11%

Faster buying Shop Shifting

21%

35% 17%

20%23%

17%

10%

10%

10%

10%

15%

20%

42%

23%23%20%

45%30%


Buying development – Black Friday

Black Friday

• Radical deals on popular items

• To create publicity

• Encourage traffic into the store

• Increase the sales of other items on their shelves)











Segmentation based on sensitivities

In biology, specimen are classified based on their characteristics.

We can apply the same methodology on shoppers

Classification of the Belgian Households



In biology, specimen are classified based on their characteristics.

We can apply the same methodology on shoppers

SHOPPOLOGYClassification of the Belgian Households



PRICE FOCUS

QUALITY FOCUS

BRAND FOCUS

PROMO SENSITIVITY

ADOPTING TO INNOVATIONS

MEDIA SENSITIVITY

PRODUCT SPECIFIC FEATURES

RETAILER




150SPECIMEN FOUND IN

GFK DATABASE



AD

OP

TIN

G T

O IN

NO

VA

TIO

NS

PR

OM

O S

EN

SIT

IVIT

Y

BR

AN

D

FO

CU

S

QU

AL

ITY

FO

CU

S

PR

ICE

FO

CU

S

Early: 30%

Late: 8%

Brand oriented: 42%

Not brand

oriented: 2%

Family of the price focussed quality seekers

Family of the price sensitive quality seekers

Family of the price indifferent quality seekers


Indifferent:7%

Sensitive: 38%

Focus: 55%

Fair Quality:

3,5%

Premium

Quality: 3,5%

Fair Quality:

19%

Premium

Quality: 19%

Fair Quality:

11%

Premium

Quality: 44%

High promo sensitive: 38%

Low promo sensitive: 4%

High promo sensitive:11%


High promo sensitive:8%

Low promo sensitive:2%

Early: 2%

Late: 7%

Early: 2%

Late: 5%

Early: 3%

Late: 8%

Early:2%

Late:4%

Early: 3%

Late:5%


High promo sensitive: 10%




Price Indifferent:7

%

Price sensitive:

38%

Price Focus: 55%

Price

Quality

Brand

Promotions

Innovations

Media

Product features

Price

Price

Quality

Product features Product features

Media

Media

Innovations Innovations

Promotions

Quality

Promotions

Brand

Brand

Rel

ativ

e im

po

rtan

ce in

pu

rch

asin

g d

ecis

ion

Shopper decision hierarchy

123











At the end of this session…

We’ll answer the following question together:

Does the price focused shopper exist?

Option 1: YES, every shopper is price focused

Option 2: YES, and it concerns a large portion of the population

Option 3: YES, and it concerns a small portion of the population

Option 4: No, but this will very likely change in the near future

Option 5: No

Option 6: I have another opinion


More information?

Made by Sanne Van Hoef

Koenraad Dierick (BE)

Consultant Advanced Business

Solutions (ABS)02/558 0551 | 0473/33 47 70

[email protected]

GfK -vlerick fmcg conference - the price sensitive shopper reality or fairy tail

Business

price sensitivity

price elasticityprice

theexpected price

price focusedshopper

questionhow price aware

price focused option

price focused shopper

question gfk