by Ken Wong
Small increases in the average value of consumers’ shopping carts can have a huge impact on a store’s profitability. Not surprisingly, grocery stores have blurred the lines between the types of products they sell. Clothing, kitchenware and small appliances can now be found alongside other middle-of-the-store grocery items. How can we know whether a new item is right for our store? This is the second in a five-part series on how to evaluate new offerings.
- Continuing problems imply continuing demand (more volume).
- Consumer price sensitivity is lower the more important the problem being solved (better margins).
- Consumer predispositions to attend to marketing communications vary with the salience of the problem to their everyday life (more productive marketing).
- If the problem is complex, we can identify complementary products to offer.
Once the problem is known, we can proceed to ask, is it an “appropriate solution?” This is easier said than done, since the definition of “appropriate” is often tied to consumers’ core beliefs and values. These are philosophical in nature and cannot be changed via empirical evidence. For example: automation is often the most efficient way to provide customer service, but some consumers prefer human contact. Marketers refer to this as “compatibility with values” – incompatible new products are difficult (and expensive) to change via marketing communications.
While you cannot change customer values, you can evaluate the profitability of a new product by determining how well that product aligns with your store brand.
Think of your store brand as a “set of associations connected to your identity.” These are qualities customers come to expect when they do business with you. Brand marketing assumes these associations underlie why customers shop with you versus the competition. The question then becomes, “is this the kind of product people would expect from our brand and will they search for (and buy) a product like this from us?” For example, imagine a new, premium-priced frozen pet food that promises proven health benefits. Would the consumer be more likely to look for this at a grocery store or at a pet food specialist? If in your store, would they be thinking about buying pet food in your frozen food section? What would be the cost of informing the consumer via signage or customer assistance?
Marketing is about getting people to do something they would be unlikely to do in the absence of a marketing intervention. When a product lacks compatibility with your store’s brand, the intervention becomes more complicated and expensive, and the profit impact is minimized.
Ken Wong is a distinguished professor of marketing at the Stephen J.R. Smith School of Business at Queen’s University