CHICAGO — As the president and chief executive officer of the market research company Information Resources, Inc. (I.R.I.), Andrew Appel is surrounded by data — Lots of data. That information, which in many ways is the lifeblood of his company, is collected, segregated and then distributed to a variety of people, products and applications that analyze the information and then develop insights that are distributed to the company’s clientele. In the end, the goal is to help I.R.I.’s customers stay ahead of the trends that are shaping and, in many cases, reshaping the market for consumer packaged goods.
In an exclusive interview recently, Appel discussed many of the trends in C.P.G., but also looked ahead to the future of shopper marketing. He argued that in the not-so-distant future the speed with which companies act on insights will become as important as the insights themselves.
“Speed is probably one of the three or four most important needs of the industry,” Mr. Appel said. “I would assert it’s two or three, but it depends on a company’s needs. In the end a lot of this is going to be automated decision making; it will be driven by automated parameters, because you can’t make decisions that quickly.”
As an illustration, Appel points to the weather.
“Let’s say we know it’s going to be zero degrees in Chicago next week,” he said. “If you are a retailer, what do you do about it? You can’t move fast enough to make assortment decisions. You need algorithms to automate it.
“You know there is a segment of the population that will do a stock-up trip with an adverse weather forecast. What do you do with that information? The firms that are able to pull these data sets together at the geographic, brand and consumer levels are going to benefit.”
In 2013, companies defined as small and extra-small by I.R.I. grew by 4.3%, according to the company’s Growth Leaders Report. Large companies experienced 0.5% growth. Appel attributed part of the difference to speed and agility.
“Small manufacturers are outgrowing big ones,” he said. “How you solve that issue comes back to the consumer. What do consumers want and how do I find the ones that want a specific product? That’s the confluence of information.
“That’s what small companies do. They find niche trends and they move, because they are nimble. They don’t have annual planning cycles, because they don’t need them. Yet they increasingly have access to the same tools as larger companies.
“Understanding the increasing uniqueness of consumers and what they want is critical. If you can master those two things at a micro-segment, or ultimately, the consumer level there are benefits. How local can you get? It’s all about capturing the individual.”
Local is a theme Appel returned to frequently. He pointed to efforts by such retailers as Wal-Mart Stores, Inc., Dollar General and Walgreens to grow their store count by opening smaller, more local store formats and offering product assortments that are targeted at the local population.
“We definitely see what we call a fragmentation or an increase in the number of places that people buy stuff, in general,” Appel said. “So, I think what we are seeing is the localization of retail. Over time that means more and smaller outlets, a more tailored assortment and different consumer segments. In addition we see more purchasing with e-commerce, which will further fragment the retail environment.
“That shows up in the changing demographics of our country. The population is aging and that brings a certain type of retail format around the age group. Hispanics will be near 50% of population over the next 10 years. Then you have the millennials (who are) starting to move into the purchase period. Those three consumer trends are all leading to retailers being more customized.”
By local, Appel also means shopper marketing efforts are going to become more personal.
“I think we are at the beginning of how digital advertising, digital access and, in the end, how consumers are getting their buying behavior influenced by a significant number of sources,” he said. “We are still at the beginning of that trend. The implication of it is how marketing will evolve in this industry — It will be very different. Messaging is going to be much more local; a more personal experience.”
Access to information prompts change
Consumer technologies, most notably smartphones and tablets, are changing the dynamics of marketing. Today, consumers are actively seeking information rather than passively receiving it. It’s an evolution that Mr. Appel said is just starting in the United States and expanding around the world. Yet C.P.G. companies are seeing the results of some of this change as consumers alter their purchasing patterns toward products that are more fresh and natural. For example, the supermarket perimeter accounts for 34% of C.P.G. sales, and perimeter sales have climbed 5% in the past year while center store sales grew 1%, Appel said.
“It’s about the trends we have been talking about; it’s about eating healthier, freshness and convenience,” he said. “Those are the three trends that I think are driving the perimeter formats and the traditional categories. Center store categories are the ones that have to reinvent themselves.”
In his opinion, Appel said digital media exposure gives C.P.G. manufacturers an opportunity with shopper marketing to reinvent themselves.
“It’s a huge, untapped opportunity for retailers and manufacturers to get to the segment-of-one marketing,” he said. “We’re beginning to see the dramatic effectiveness of digital marketing.”
He said companies now have the ability to identify the ads consumers watch and then follow their purchases during the next 12 months.“From there you can tailor advertising to shows and websites — To the people who actually buy your products,” Appel said. “This is basically the next generation of shopper marketing. At some point the day will come when we can effectively touch each individual consumer and track their sub-segment; how their exposures impacts what products they purchase. If you are a manufacturer and you are trying grow your business in a relatively flat market this is a big opportunity to differentiate.”