SECRETS 074 Using the consumer decision tree to boost shopper loyalty with Daniel Lohman of CMS4CPG

Real shopper loyalty is not something that can be purchased through promotions or embossed on a plastic card. It is earned by consistently delivering exceptional value, trust, and loyalty. This gives brands a substantial competitive advantage on shelf. 

Before I begin, I want to remind you that there’s a free downloadable guide for you at the end of most every one  of my podcast episodes.  I always try to include one easy to download, quick to digest strategy that you can instantly adopt and make your own – one that you can use to grow sustainable sales and compete more effectively. This show is about you and it’s for you. Remember the goal is to get your products on more retailer shelves and into the hands of more shoppers. 

Here’s what you will learn on today’s episode.

Todays episode focuses on a strategy that helps you help your shoppers get what they want – the way they want it. This is how you build real shopper loyalty, sales and profits. You will hear how this strategy can help you standout from your competition giving you a substantial competitive advantage – one that can level the playing field.

Here’s today episode. 

When you talk to retailers and brands, they use terms like shopper loyalty and repeat customers. What do those terms mean and why are they important?  

Most retailer strategies are not focused on building a solid loyal shopper base. Instead they are really focused on the quick wins and continually focusing on reacquiring the customers again and again. Developing a real shopper loyalty requires a long term more sustainable strategy. It all starts with the consumer decision tree.  

The consumer decision tree, which shows how consumers shop a category, is perhaps the most difficult concept for retailers and manufacturers to act on. However, understanding consumer buying habits gives retailers and brands a leg up on the competition and demonstrates their commitment to satisfy their customers.

First, what is a consumer decision tree and why does it matter? Consider this, let’s say that you decide to go on a vacation. What are the different things that you need to consider before you jump on a plane? Do you want to go to an exotic tropical island or do you want to visit a local landmark? Next think of all the things that are required so that you can ensure your vacation meets and exceeds all your objectives. The way you pack for a tropical vacation is very different from the way that you might pack for a camping trip. Think about all the steps you need to take and all the things you need to consider as you begin to plan your adventure.

There are some similarities between this example and shopping. Your shopping list is similar to your packing list for your vacation. Is this a quick shopping trip or do you plan to stock your pantry? As you arrange your shopping list to make it as efficient as possible, where do you begin and what categories will you be focusing on? In other words, what is the most efficient way to get all the items on your shopping list without having to zigzag back and forth across the store multiple times?

The consumer decision tree focuses on how consumers shop a specific category. I want to challenge you to start thinking about the entire shopper’s journey as you develop your own consumer decision tree.  The pro tip I want to recommend is that you start with the customer’s shopping basket and work backwards to your category and how your items impact and complement their product selection decisions.

Another helpful illustration are the steps required to make a cake from scratch. While the vacation example above starts the thought process about the items we need to pack for each type of vacation, the cake example will help us better understand the order and sequence of how shoppers make decisions even before they enter the store. This level of clarity can be the difference between helping a customer cross things off their list and turning them into a loyal evangelist. Helping retailers focus on the latter is what sets you apart as a category leader.

When you bake a cake, there are a lot of different ingredients that are required. Some are dry and some are wet. Mixing them together in the wrong sequence in the wrong order will result in a huge mess – nothing that resembles the recipe you’ve chosen. For example, no one would ever consider baking half of the ingredients before you to mix them. Focusing only on your category and not the remainder of the shopping basket will deliver similar results.

A well developed and throughly thought-out consumer decision tree identifies and prioritizes all the decisions a consumer makes while shopping. Conversely, a poorly constructed consumer decision tree serves to only frustrate and alienate customers. Think about all the times that you’ve walked into a store looking for a specific item and you feel like you’re on scavenger hunt. This is what I mean by a poorly constructed consumer decision tree. Here’s why this matters and why you need a solid consumer decision tree to differentiate you from your competition.  

Benefits for retailers

Consumer decision trees seek to understand how customers shop the retailer’s store. Most stores are laid out in a “race track” format with perishable staples positioned around the outside of the store; produce, deli, dairy, meat, seafood and bakery. The center of the store usually includes dry grocery along with general merchandise and health and beauty products. 

General merchandise includes paper products, food storage, etc while health and beauty (called HBA) include soaps, shampoos, etc. These departments are designed to supply all of the items on a customer’s shopping list to hopefully keep them from shopping at retail competitors.   

Items around the perimeter the store should be merchandised and promoted to help drive consumers into the center of the store for the other items on the list. Sometimes this is a simple as merchandising shelf-stable sauces in the meat department or nondairy shelf-stable milk next to the dairy milk.  

Remember the goal, first and foremost, is to help make the shoppers journeys as easy as possible. Helping them find the items on their list in an easy-to-follow, well thought-out and organized way makes shopping convenient. 

A well-constructed consumer decision tree also gives the retailer an opportunity to encourage up selling. For example, merchandising super-premium items next to category favorites. Consumers are happy to pay extra for items with a greater perceived value. This is where I refer back to the bread example I use. If a customer buys the cheap generic bread they’re typically hungry within a few hours. However, if they purchase the best mainstream bread then they may be satiated for 3 to 4 hours. If they purchase the organic bread, they may be satiated longer if that bread better meets their nutritional needs. The point is that if the organic bread is merchandised next to the mainstream bread, then the consumer can decide for themselves which is the better value. This is how you up-sell the shopper, by making it easy for them to make the choices that are best for them and their family.

Retailers typically get their consumer decision trees from large mainstream brands. Here is an opportunity for smaller brands to provide real value to the retail partners. This is how you stand out as a leader in your category.

Some brands spend a lot of money hiring independent third-party consultants to construct consumer decision trees. These decision trees include research on how consumers shop and how they perceive the importance of each segment within the category. These models are typically extremely accurate and capable of increasing consumer loyalty within the brand and retailer.

Consumer decision trees frequently provide conflicting view points depending on the brand’s objectives. For example, some are brand focused while others are consumer focused.  I used to run into this bias a lot. Several years ago, my competitors would always assert that customers came into the store looking for their specific brand first. The problem with this theory is it overlooked and ignored what was important to the shopper. You see examples of this in categories that are brand blocked where an entire chunk of that category contains only one brand from top to bottom. This strategy is extremely effective when defending against competitive threats.

I’ve always disagreed with this methodology because it doesn’t give the customer an opportunity to compare items within a category to make the best decision for themselves. Think back to the bread example. 

When you realize the importance of the natural organic shopper in any store and across every category, you begin to appreciate the importance in the significance that your brand has in generating real category growth for the retailer. This is the real focus of all of my content, my podcast, and my courses – helping you get your product onto more retailer shelves and into the hands of more shoppers. 

Benefits for manufacturers

Retailers generically don’t make anything, they sell real estate and the form of space that your product occupies on their shelves. They need insights, real actionable insights to help them drive sustainable sales and stand out in their market. The harsh reality is that savvy retailers already know how well your product is doing on their shelves. They are unimpressed with canned top-line reports that provide no real additional value to them. A category leader is any brand willing and able to step up and help the retailer grow sustainable sales by leveraging the strengths of their products and the consumers who purchase them. A well developed consumer decision tree should be the most important tool in every brand’s toolbox. 

Now let’s dig deep into the consumer decision tree. This is where being an expert in your brand, your ideal customer, your competitors products, and your retail partner set you apart from every other brand in the category. This is exactly why I developed my free Turnkey Sales Story Strategies course.  

What does a consumer decision tree look like?

The consumer decision tree is a roadmap to how customers shop a category. What is the first decision they make as they enter the store? Do they shop the perimeter or do they shop the center of the store first? Do they grab their favorite item and then go on with their shopping or do they look to see what’s new and different in the category? Some companies have technology that watches a shopper’s eye movement as they scan the category. 

When the retailer gets to the category where they want to make their purchase, what decisions do they make and in what order do they make them? The first decision most shoppers make when first entering a category is on their favorite brand. Brands offer the promise of quality and consistency. Having an effective merchandising strategy is the key to building sustainable category growth. 

The next decision is typically regarding quality segments. This includes economy, premium and super-premium. These segments are typically well-defined within the category, making it easy for consumers to shop. Quality and value are typically made evident by pricing and promotion strategies within the segments.

The next branch of the consumer decision tree is based around product attributes including scent, color, flavor, packaging, etc. Products in these segments are typically grouped by like items, for example “lavender scent or vanilla flavored.”

Consider the different choices customers make when developing a merchandising strategy. Do they only focus on items at eye level or do they scan the entire category before making a selection? 

Focusing on what’s important to the consumer by paying attention to what’s in their shopping basket will help you identify what motivates them to make choices.

This is why this is so very important and why every brand needs to learn how to develop a consumer decision tree focused on the strengths of their brand. 

A well-constructed consumer decision tree gives consumers the opportunity to shop the category and easily perceive value between segments, product offerings and brands. Private labels should be sprinkled throughout the section, typically next to the category leader. Note that private label strategies should be used to augment branded strategies, not replace them.

If strategically implemented, consumer decision trees could be the difference between a strong committed loyal customer and an occasional shopper.

Share your comments and questions below on this podcast episode’s webpage. I appreciate and read every one of your comments.  

I am continually adding tools, tips, and strategies to the Resources page on my website to help you convert casual shoppers into loyal evangelists while saving you valuable time and money by avoiding the pitfalls most brands fall into. Keep coming back and reading my newsletters as I am continually updating the page with a focus on growing your brand. Check it out at brandsecretsandstrategies.com/resources.  

Today’s free guide is “Using the consumer decision tree to boost shopper loyalty”. You can download it and today’s show notes at  brandsecretsandstrategies.com/session74. 

Thanks for listening! I look forward to seeing you on the next episode.

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By |2018-08-14T19:40:37+00:00August 2nd, 2018|Category Leadership, Podcast|

About the Author:

Daniel Lohman, CPSA is Strategic Advisor in the CPG and Organic Industry. His company, Category Management Solutions (CMS4CPG LLC), provides innovative ideas, actionable insights and strategic solutions for companies interested in gaining a significant competitive advantage. He assists companies in expanding their retail distribution and improving their merchandising. His extensive knowledge and expertise reaches far beyond traditional category management and has earned him recognition throughout the industry as an expert, speaker, trainer and thought leader. Daniel can be reached at Dan@CMS4CPG.com. Connect with me on LinkedIn.

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