Situation

As channel proliferation and changing consumer behavior reduce the effectiveness of traditional marketing efforts, consumer goods companies increasingly try to drive sales by using in-store marketing tactics, such as expanded shelf displays that tempt shoppers as they decide among competing products. One such company was a consumer goods manufacturer seeking to revive its sales in a mature, underperforming subcategory that—unlike newer adjacent ones—rarely attracted shoppers with innovative packaging or product technologies.

Complication

The manufacturer wanted to test a significant number of marketing techniques and tactics in order to understand the range of opportunities for influencing a variety of consumer segments. But one of its key retail partners was reluctant to undertake the months of effort that traditional multisite, in-store pilot programs require. The high number of proposed initiatives (originally 50, subsequently winnowed to the 20 most promising) heightened the perennial risks of confusing customers with different messages in different stores and of tipping off competitors about the retailer’s plans. Furthermore, the retailer had recently hired a new category buyer, whose focus was rapidly increasing category sales—not turning its stores into a massive shopper-marketing laboratory.

Resolution

The manufacturer developed an online interactive-shopping simulation to analyze the individual and collective impact of various in-store marketing tactics. Real-life participants browsed through a virtual store aisle, examined products, and “spent” a set amount of money. Of the 20 initiatives with the highest potential impact, the simulations helped to isolate 7 win-win opportunities (exhibit) that, as enacted, would collectively contribute more than $70 million a year to the margins of the two companies. These opportunities included redesigned shelf sets that highlighted the manufacturer’s charitable efforts, more sophisticated end caps (the displays at the end of shopping aisles), and in-store and on-shelf advertising. Subsequent in-store testing boosted sales in the subcategory by around 10 percent.

Implications

Simulations can’t test all in-store marketing tactics (say, free food samples) or accurately gauge interest in high-involvement categories such as apparel. They can, however, eliminate biases (for instance, the cleanliness of stores or the skills of salespeople) that often confound the results of traditional pilots. Moreover, online simulations allow manufacturers to save not only money but also time by testing thousands of shoppers simultaneously. Manufacturers can therefore roll out marketing programs before their rivals do—without risking actual sales. Such simulations also help manufacturers work more closely with retailers to develop marketing tactics that benefit both parties. Online simulations are applicable in multiple retail formats, including pharmacies, movie theaters, and banks, and in categories beyond consumer packaged goods.