For as long as I care to remember the adage that 70% of purchase decisions are made in-store has floated around in conversations and articles in the retail community and been used as a justification for investment in in-store shopper marketing activity.
In recent years there has been much conjecture over the 70% figure. So where does it come from?
In fact the basis for the figure dates back to 1965 when Point of Purchase Advertising International (POPAI) first developed the Instore Decision Rate in order to raise awareness and the profile of in-store marketing within the wider advertising mix.
Over the years since its inception POPAI has conducted a number of studies to measure the Instore Decision Rate in various markets, with results varying from around two thirds to three quarters of decisions having been made in-store. The 70% figure itself actually comes from one such study conducted in 1995 in the US.
Naturally however POPAI as a spokes body for the industry have a vested interest in elevating the importance of the work that they and their members do; so to what extent can we believe the figure is grounded in fact?
To understand the figure we need to know how it is developed.
The Instore Decision Rate is actually calculated from survey data of shoppers. Shoppers are approached as they enter a store and asked about their purchase intentions. On exit they are approached again and asked about what they bought and their answers are compared.
Purchases are classified into 4 buckets:
Purchases the shopper specifically identified by name in the pre-shopping interview and subsequently bought.
Purchases that were referred to generically (e.g. by category) in the pre-shopping interview and bought.
Purchases that were specifically identified by name in the pre-shopping interview, but the actual purchase reflected a substitute.
Purchases that were not mentioned in the pre-shopping interview and consequently bought on impulse.
The c.70% rate calculated in POPAI studies is in fact the aggregated level of three of these four buckets:
- Generally planned, plus
- Substitute purchases, plus
- Unplanned purchases.
As such the only products to be bought which are categorised as having had the purchase decision made out of store are those which were purchased following their specific identification in the pre-shopping interview.
Fair enough, I hear you say, all the other buckets of products show a degree of influence having been exerted by the in-store environment in order to bring about their selection, be that in terms of finalising the brand or variant selected or in some cases the category itself.
But let’s consider that this is a survey and is based upon the verbal reportage of the shoppers being interviewed.
As such, to what extent is the level of unplanned purchasing down to the shopper simply having omitted to mention that they intended to buy the product when they entered the store?
To what extent is the level of generally planned purchasing down to the fact that the shopper typically refers to the product as ketchup, when in fact they always buy Heinz without even thinking about the alternatives available?
And to what extent is the level of substitute purchasing the result of availability issues as opposed to a true influence of in-store marketing and promotional activity?
When we think about it in these terms the actual Instore Decision Rate may be considerably lower.
Another point to consider is that the Instore Decision Rate is a fairly generic measure. What it’s saying is that the selection of 7 out of 10 products in a shoppers basket on average have been influenced in the store. Inevitably however, this may vary considerably. One shopper may work with a list and be very brand loyal whilst another may be far more slap dash with less affiliation to one brand or another. In fact the same shopper, on different purchase occasions, may show varying behaviour owing to the context of their shopping trip. Even how close I am to my next pay cheque may influence how open I am to a deal on a brand I wouldn’t typically buy.
Furthermore in some categories product selection may be far more open, whilst in others very blinkered. So whilst I might be quite happy to buy whatever loaf of bread floats my boat on the day, I may never deviate from the precise brand and variant of shampoo that I select.
As such whilst the 70% figure makes great headlines it cannot be used as a guideline as to how much opportunity is available to the shopper marketer of any given brand in any specific category in the store.
All this taken into account, it may seem like I am creating an argument for divesting in in-store marketing activity. However that couldn’t be farther from the truth, just that as a shopper marketer you cannot rely upon an assumption that you have the opportunity to shift a potential 70% of purchasing towards your product.
Shopper marketing activity can and does work as we have seen in the studies that we conduct at SRI where we observe real shopper behaviour in-store in A/B testing studies. However the magnitude of the shifts we observe tend to be considerably lower than 70%. This does not mean that it is not worth investing in shopper marketing. On the contrary, grocery retail is a volume business where a shift in purchasing behaviour of just 1% can have a huge impact on brand sales when multiplied across an entire retailer estate for several weeks. And with a relatively low investment level compared to other marketing activities such as ATL TV advertising, in-store marketing may well yield a good return on investment.
But to know whether that investment is delivering a return requires that you know what the baseline is and measure the impact of your activities specifically and with enough observations to give confidence in the results. Only by doing this can you empirically evidence the role that shopper marketing plays for your business.