"A lot of profit with few customers"
In its 2001 Market Development study, Fuhrer und Partner analyzes Swiss retailers and manufacturers
Fuhrer und Partner analyzes Swiss retailers and manufacturers with the Market Development 2001 studyThe Swiss Sales Promotion Forum presented the Market Development 2001 study at the Promo-Power 2001 seminar. It deals with the conflicts between sales promotion at the POS and classic advertising as well as the competition between own and manufacturer brands. Martin Hotz is co-owner of the marketing agency Fuhrer und Partner, which conducted the study.what are the most important results of your study?
Martin Hotz: The importance of sales promotion is impressive. Understood as an investment in retail, it will become even more important in the future.
So is traditional product advertising losing importance?
Hotz: Experts are predicting the stagnation of traditional advertising. Retailers and manufacturers are looking for means and measures that lead to immediate sales success. Swiss companies are being forced to focus their financial and human resources more on retailers. The latter has the power of disposal over the POS. This is where the majority of purchasing decisions are ultimately made.
What tips does the study have for retailers?
Hotz: Price-based positioning is omnipresent in retail, in both the food and non-food sectors. Alternative approaches such as service, customer orientation and convenience, on the other hand, are still of secondary importance. There is great untapped potential here. Although low prices can generate sales volume and market share, they do not necessarily promote profitability.
Where is the potential of Swiss trade?
Hotz: Knowledge about customers and their behavior is the success factor of the future. This is a major weakness of the Swiss retail sector. Only a few can afford the egg-laying wool-milk sow, i.e. the business that offers everything for everyone. Everyone else has to strive for a niche policy. Retailers should therefore know exactly who they want to focus on.
But customer loyalty programs are not the yellow of the egg.
Hotz: Customer loyalty measures are often an electronic form of collecting discount stamps. Ultimately, only the bargain hunters benefit from this. Loyal customers, on the other hand, are the profitable customers. As a retailer, I have to concentrate on making a lot of profit with fewer customers rather than little profit with many customers. To achieve this, you have to position yourself very clearly.
Should retailers focus less on price leadership?
Hotz: Exactly. Today, pig farm advertisements announcing a price reduction are very dominant. You can't achieve any relevant differentiation with them. If you want to stand out from the competition, you shouldn't focus so much on price. Successful international companies such as Ikea, H&M or Fielmann always convey emotional lifestyle elements in addition to the price argument.
Has the time of universal retailers run out?
Hotz: Today, there is no sector in which there are not enough or too many providers. If you want to survive as a retailer, you have to specialize. Otherwise they will become interchangeable.
What demands does the study make of manufacturers?
Hotz: The balance of power between manufacturer brands and retailer brands is shifting in favor of the retailer brands. Manufacturers must deal with the topic of category management and be able to provide retailers with competent advice in their specialist area. They need to think more about the needs of retailers, who ultimately act as gatekeepers.
It would make sense for retailers and industry to develop their communication measures together.
Hotz: That would be the ideal case. Retailers want to be involved as early as possible, especially when it comes to new launches. Otherwise, it often happens that a retailer produces a private label before the brand manufacturer launches a new product on the market.
The integrated communication you are calling for is anything but original.
Hotz: The buzzword has lost none of its topicality. There is a conflict of interest between manufacturers and retailers at the POS: the manufacturer wants to improve the placement on the shelf, while the retailer focuses on its retail brand and wants to maximize the cash register coupon value. If the competition sells the same product in the same form of presentation, the retailer cannot distinguish itself. As a result, the key visuals of manufacturer brands often suffer at the POS.
Retailers are struggling with the idea of service. Consumers repeatedly complain that Switzerland is a service desert.
Hotz: This is because customers often cite service-related factors when asked why they no longer visit a particular store. Today's customers know that there is only one scarce commodity, namely their attention. Compared with the USA, there is certainly room for improvement in day-to-day business.
Are there valid rules for this?
Hotz: In principle, there is never enough service. But you have to think about which service suits your retail concept and how much of it you can offer. At Ikea, customers accept that they have to put the furniture together themselves. In the food retail sector, forced processes like those at Ikea had to be abolished.
On the one hand, the study states that the POS should become more emotional, while on the other hand the complexity of impressions must be reduced. How can these demands be reconciled?
Hotz: Retailers need to generate as much customer footfall as possible and increase the value of checkout coupons. Remote communication must lure customers into the store, the POS must inspire and surprise them. However, the promotional rhythm at the POS has led to information overload. Interview: Bruno Amstutz
Market development 2001
Martin Hotz: The importance of sales promotion is impressive. Understood as an investment in retail, it will become even more important in the future.
So is traditional product advertising losing importance?
Hotz: Experts are predicting the stagnation of traditional advertising. Retailers and manufacturers are looking for means and measures that lead to immediate sales success. Swiss companies are being forced to focus their financial and human resources more on retailers. The latter has the power of disposal over the POS. This is where the majority of purchasing decisions are ultimately made.
What tips does the study have for retailers?
Hotz: Price-based positioning is omnipresent in retail, in both the food and non-food sectors. Alternative approaches such as service, customer orientation and convenience, on the other hand, are still of secondary importance. There is great untapped potential here. Although low prices can generate sales volume and market share, they do not necessarily promote profitability.
Where is the potential of Swiss trade?
Hotz: Knowledge about customers and their behavior is the success factor of the future. This is a major weakness of the Swiss retail sector. Only a few can afford the egg-laying wool-milk sow, i.e. the business that offers everything for everyone. Everyone else has to strive for a niche policy. Retailers should therefore know exactly who they want to focus on.
But customer loyalty programs are not the yellow of the egg.
Hotz: Customer loyalty measures are often an electronic form of collecting discount stamps. Ultimately, only the bargain hunters benefit from this. Loyal customers, on the other hand, are the profitable customers. As a retailer, I have to concentrate on making a lot of profit with fewer customers rather than little profit with many customers. To achieve this, you have to position yourself very clearly.
Should retailers focus less on price leadership?
Hotz: Exactly. Today, pig farm advertisements announcing a price reduction are very dominant. You can't achieve any relevant differentiation with them. If you want to stand out from the competition, you shouldn't focus so much on price. Successful international companies such as Ikea, H&M or Fielmann always convey emotional lifestyle elements in addition to the price argument.
Has the time of universal retailers run out?
Hotz: Today, there is no sector in which there are not enough or too many providers. If you want to survive as a retailer, you have to specialize. Otherwise they will become interchangeable.
What demands does the study make of manufacturers?
Hotz: The balance of power between manufacturer brands and retailer brands is shifting in favor of the retailer brands. Manufacturers must deal with the topic of category management and be able to provide retailers with competent advice in their specialist area. They need to think more about the needs of retailers, who ultimately act as gatekeepers.
It would make sense for retailers and industry to develop their communication measures together.
Hotz: That would be the ideal case. Retailers want to be involved as early as possible, especially when it comes to new launches. Otherwise, it often happens that a retailer produces a private label before the brand manufacturer launches a new product on the market.
The integrated communication you are calling for is anything but original.
Hotz: The buzzword has lost none of its topicality. There is a conflict of interest between manufacturers and retailers at the POS: the manufacturer wants to improve the placement on the shelf, while the retailer focuses on its retail brand and wants to maximize the cash register coupon value. If the competition sells the same product in the same form of presentation, the retailer cannot distinguish itself. As a result, the key visuals of manufacturer brands often suffer at the POS.
Retailers are struggling with the idea of service. Consumers repeatedly complain that Switzerland is a service desert.
Hotz: This is because customers often cite service-related factors when asked why they no longer visit a particular store. Today's customers know that there is only one scarce commodity, namely their attention. Compared with the USA, there is certainly room for improvement in day-to-day business.
Are there valid rules for this?
Hotz: In principle, there is never enough service. But you have to think about which service suits your retail concept and how much of it you can offer. At Ikea, customers accept that they have to put the furniture together themselves. In the food retail sector, forced processes like those at Ikea had to be abolished.
On the one hand, the study states that the POS should become more emotional, while on the other hand the complexity of impressions must be reduced. How can these demands be reconciled?
Hotz: Retailers need to generate as much customer footfall as possible and increase the value of checkout coupons. Remote communication must lure customers into the store, the POS must inspire and surprise them. However, the promotional rhythm at the POS has led to information overload. Interview: Bruno Amstutz
Market development 2001
The recently published third edition of the study Marktbearbeitung Schweiz 2001 provides a comprehensive overview of facts, analyses, trends and benchmarks relating to the design and use of the various communication disciplines. The work (136 pages) is based on an empirical study and can be ordered at a price of CHF 850 by calling 01 716 13 73, e-mail [email protected]
