avoid seeing the little packets of ice-cream wafers. What ... the more appealing a product is made to appear, ... They will therefore supplement their public.
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MANAGEMENT DECISION
I
mpulse buying — can it be predicted or even encouraged? Merchandisers are known as the "silent salesmen" and their skills cannot be ignored.
Can You Afford to Ignore Merchandising? by Francis Buttle
You are in the supermarket looking for ice-cream. You reach the freezer, peer in, make a selection, reach for a pack, turn to put it in the trolley, and then you can't avoid seeing the little packets of ice-cream wafers. What a good idea, you hadn't thought of that! It seems so obvious. So you scoop them up, and head for the check out. You have just made an impulse purchase. The evidence, mostly from the United States, suggests that related item displays, such as the positioning of icecream wafers near ice-cream, can increase sales by as much as 419 per cent more than when the component items are displayed separately. Why? Because such merchandising techniques increase the number of unplanned purchases. When you entered the store, you hadn't even thought of buying wafers.
Merchandising: A Definition Merchandising is any form of in-store promotion, other than personal selling, which is designed to trigger purchasing behaviour. It has been called "the silent salesman". Merchandising has become a "scientific art". It is scientific because the behaviour of customers can be influenced in predictable ways. It is an art because these known patterns can only be turned to the retailer's and manufacturer's advantage by the creative use of an everchanging battery of techniques. The range of behaviour-triggering devices available is wide. The list in Table I shows the most common techniques.
Table
I. Merchandising Techniques
Store fronts Name signs Dump bins Open/shut signs Window stickers Door stickers Working models Stack cards Leaflets Price tickets Paper bags Store layout Shelf positioning Music Demonstrations
Shelf talkers Display cards Crowners Swing tickets Packaging outers Trundler panels Mobils Bottle collars Brochures Carrier bags Posters Shelf space allocation Lighting Balloons Free standing display units
All these techniques can be used to sell both perishable and durable goods. Television can be excitingly displayed and hi-fis demonstrated; washing machines can be sold with the offer of free installation, and cars can be sold with the assistance of a trial run. Even houses and industrial goods can be merchandised. Show homes can help to sell houses, and industrial products like gear boxes and electric motors can be sold with the aid of exhibitions, warehouse displays, mobile show rooms, and cut-away models. Most manufacturers of well-known branded consumer goods rely on advertising to to pre-sell their products as well as merchandising at the point of sale. Occasionally, however, there are outstanding successes achieved by merchandising alone. McVities, the British biscuit manufacturer, once introduced a range of cakes to the UK market using merchandising only and achieved a highly profitable 15 per cent share of the market, second only to the market leader Lyons, who had 25 per cent. Why Merchandising Works Merchandising works because it makes goods more attractive and visible: • the more visible a product is, the more likely it is to be seen and therefore bought; • the more appealing a product is made to appear, the more likely it is to be purchased.
CAN YOU AFFORD TO IGNORE MERCHANDISING?
Merchandising works because many shoppers buy products on impulse — remember the wafers. Such shoppers are frequently highly susceptible to in-store influences. A team of consumer experts[l] have providedfigureswhich suggest that more than half the purchases made in supermarkets were "impulse purchases", and that unplanned purchases made up about a third of all transactions in variety stores and drug stores. Even in the rather conservative book trade, 31 per cent of purchases were found to be unplanned[2]. No wonder one expert has concluded that "the key to any successful merchandising programme lies in its ability to generate impulse sales" [3].
The Advantages of Merchandising
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products, simultaneously increasing their own sales and reducing those of their opponents. But the benefits of merchandising need not only be experienced by the big firms. It is equally important, if not more so, for the smaller manufacturers and retailers who cannot afford heavy media advertising. If they do not merchandise well they are placing their commercial destinies almost entirely in the hands of brand-loyal shoppers. It is in the store that the Davids can fight it out on almost (but not quite!) equal terms with the Goliaths, although some Goliaths have been known to retaliate by applying considerable pressure to prevent effective merchandising by minor competitors, particularly where they own the display equipment like freezers and cool cabinets.
The two most important advantages of merchandising are: (1) It is one of the most cost-effective tools of the promotional mix. It can generate surprisingly large sales increases at relatively low cost. (2) It influences shoppers in the final stages of purchase decision-making — at the point of sale. Cost Effectiveness Merchandising is an inexpensive tool, particularly if a company is skilled and experienced in its use. In a company with limited promotional funds merchandising can be vital because many of the techniques, such as better shelf positioning and product facing control, may involve no additional expenditure. While some merchandising does involve expenditure (for instance, shelf talkers — product information cards attached to the shelf, display backing cards and working models) this expenditure can be rigorously controlled. But merchandising is not only cheap. It is also effective: • Special displays of new health and beauty-aid items achieved between 100 and 400 per cent more sales than did normal on-shelf locations. • "As advertised" signs, "Cents off" signs, and product identification signs increased sales by 124, 23 and 18 per cent, respectively. • An experiment to test the effectiveness of end-ofaisle displays in twelve drugstores showed increased sales of between 142 and 217 per cent. End-of-aisle displays are situated at the end of a row of gondolas, where the shopper is normally moving from one aisle to the next. Influence at Point of Sale Most manufacturers will do everything possible to establish an awareness of, and preference for, their brands before the shopper enters the store. They are not willing to risk wasting this expensive pre-sell by losing the sale in the store. They will therefore supplement their public relations and advertising with merchandising, which is relatively inexpensive. This is particularly true when competition among brands is fierce. Large manufacturers are especially keen to tie up limited shelf space with their
Merchandising Techniques In this section, we give more detail about the five most powerful forms of merchandising. Manipulation of Traffic Flow One of the most effective devices for increasing sales is the management of traffic flow in the store so that shoppers are exposed to the largest proportion of the selling area as possible. In the USA and, to a lesser extent, Europe, Australasia, Africa and Asia, stores are specifically designed to guide shoppers around as many areas of the store as possible. There are three reasons for this: • • •
customers who shop in an entire store buy far more than those who shop only in selected areas; the longer a customer stays in a store, the more he purchases; traffic tends to remain on the periphery of the store if it is not manipulated.
Example A liquor store was redesigned with the aim of improving traffic flow; the redesign resulted in a considerable upturn in sales per customer. Before the store was redesigned, customers could buy beer and spirits in a quick service area. Liqueurs, table wines, sherries and non-liquor lines such as nuts and snacks were stocked on gondolas in the self-service area of the store. Customers for beer and spirits had no need to pass these gondolas. Analysis by store management revealed that a large percentage of customers were buying beer and spirits only. In fact, this original design meant that very many customers were not being exposed to some 90 per cent of the floor area and the lines carried there. The opportunity for impulse sales was hence severely reduced. The required change was simple. The beer fixtures were immobile, but the spirits were moved to the back of the store in order to draw traffic past the other product categories. Traffic flow was also improved by removing one checkout and closing one door. The effect of these changes was an upturn of six per cent in sales per customer.
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MANAGEMENT DECISION
Aisle Design Aisles must be designed for maximum exposure of the shoppers to the merchandise. Traffic management studies can be used to show how shoppers move around the store and hence to identify those areas of the store which receive little exposure. The most common — and effective — layout of a supermarket is the grid pattern. The shopper generally enters at one corner and moves up and down the aisles which run in parallel. The larger the store, the more likely there are to be cross aisles. However, these diminish traffic circulation and, therefore, product exposure. Continuous aisles — as in the grid pattern — promote traffic flow, exposure and sales. Example The inside of a small neighbourhood supermarket was transformed with the loss of only half a day's sales. Before the layout was changed, the two central island gondolas were not well patronised. In addition, the dual function entry/exit (focusing on a hinged door) was often congested, and the merchandise located near this point sold poorly. The changes made in the layout of the supermarket involved: • Installing a single new gondola in the central area. This opened up the shop, making the merchandise much more visible from the street. • Altering the shop front to induce a clockwise traffic flow. Two retractable doors were installed and the checkout located between them. This gave the shop proprietor complete control over the movements of shoppers once they had entered.
• firstly, he is able to position demand categories in such a way as to draw customer's attention to other lines to induce impulse sales; • secondly, he can position the most profitable sizes and brands at eye level in order to sell more; • thirdly the retailer can place a popular brand next to an overstocked, and therefore cost-incurring, slower mover. This guarantees a higher level of consumer exposure to the product. Spate Allocation There are two views about the way in which space should be allocated in supermarkets. There are those who think that shelf space should be allocated between brands in proportion to their sales. This view is primarily held by market leaders who, of course, want the maximum exposure for their brands. They point out that if shelf space is allocated in any other way then the staff of the supermarket find themselves frequently restocking the shelves of the fast moving items when they could be better employed eleswhere. Furthermore, by "overstocking" the slow moving lines, the store condemns itself to reduced sales. However, those with a lower share of the market argue convincingly that space should be allocated according to the future sales potential of their products, and not according to their past sales achievements. Future sales potential is generally greater for new brands which are attacking the established positions of the leaders. Moreover, the fastest selling lines may not be the most profitable for the retailer. Slower movers with higher margins may be better.
The result of these inexpensive alterations was a net gain in turnover in thefirstyear of 11 per cent. A portion of this was due to increased patronage; the balance was earned by greater sales per shopper.
Point of Sale There is a huge variety of point of sale (POS) materials, the most popular of which are shelf talkers (materials attached to the shelf bearing the brand), window banners, price tickets and posters. There are three main purposes for this material:
Merchandise Location and Shelf Positioning The prime issue in locating merchandise is the amount of pull a line exerts. "Power" or "demand" lines attract customers to the store. They are items which people need often, like bread, or dairy products or newspapers, which many shoppers buy every trip. "Loss leaders", which are sold at below cost, and specials, such as temporary price deals, are also lines which have the power to draw the customers towards them. Strong traffic stimulators such as these can be used to draw traffic past impulse items.
• to restate an advertising message in the store; • to attract the shopper's attention to a particular item, bearing in mind that he or she may well spend only ten minutes in a shop which contains up to 6,000 different lines; • to provide the shopper with a motive for making a purchase. American research shows that simple signs advertising a "special" can increase sales by as much as 30 per cent[4]. However, it should be remembered that such signs are only effective when they are clearly visible and stand out from the mass of visual stimuli in the store.
The same principle applies to the positioning of stock on the shelves of a supermarket. There are two forms of shelf positioning — horizontal and vertical. In horizontal positioning, individual sizes and brands within the category are positioned along the length of the shelf. In vertical positioning, they are stacked on all levels of the gondola. Of the two, vertical positioning is certainly the better from the shopper's viewpoint because he can find the brand he wants without having to walk the length of a gondola. The retailer also benefits from vertical positioning:
Special Displays A special display is an arrangement of a quantity of merchandise separate and apart from its normal location on the shelf. The aim of special displays is to attract the attention of shoppers and to stimulate impulse purchases. According to an American study of 7,000 shoppers, 30 per cent made purchases on impulse and half of these were made in response to displays. Four main principles govern the use of displays.
CAN YOU AFFORD TO IGNORE MERCHANDISING?
• Displays should be located where most people pass, slow down or stop. Location is very important. Normally, displays sell well at gondola ends. • The display must attract the shopper's attention. The same factors which draw attention to point-ofsale material also work for displays. Displays should be big enough, appropriately lit and should include clear signs bearing an effective sales message. • The product on display must be easy to pick up and look as if it is selling well. If the display is full, neat and tidy it is unlikely to move merchandise. This is because many customers believe the product is not selling well, or feel reluctant to disturb the order. Therefore, astute retailers leave a few gaps to give the impression that the line is popular. The day of the pyramid of perfectly placed products is past. • Displays should be frequently changed; otherwise they lose their dramatic appeal and become fixtures. Non-food displays lend themselves to a little more variety. For example, a vignette scene showing the product in use, often with related products, is frequently used to good effect by furniture retailers. A display of kitchen units in a conventional kitchen layout, together with appliances, cupboards filled with dummy packs, wall-mounted spice racks and dishes on the sink drainer gives added interest to the main product and gives shoppers some idea of how the units might look in their own home. A variation of the in-store display is the window display. These are the "eyes of the store" looking out on the shopper. The main objective is to get the passer-by into the store. This is commonly achieved by displaying a new product in such a way that its novelty attracts interest, or by displaying signs announcing loss leaders or specials. The function of window dressers is to arouse the curiosity of the pedestrian. To do this they need the skills of the lighting technician and the stage designer. They need not regard the shape of the window as a major constraint since masking tape, paint, drapes or blinds can be used to obscure parts of the glass. The major item, such as a product on temporary special, should serve as the focal
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point. The designer should bear in mind the type of shopper to whom the store wishes to appeal, and should go on to make appropriate use of shape, colour and movement. In order to gauge the effectiveness of such displays some retailers count the numbers of passers-by who look at the window; others go further and see how many first look and then actually come into the store.
A Merchandising Plan To be most useful, the merchandising devices described above need to be part of a merchandising plan. While the contents of each plan will vary according to the needs of the planner, there is much to be said for adopting the following ten-point format. At the very least, it forces the retailer to examine his merchandising problems and to adopt a systematic approach to their solution. (1) Fact gathering: — sales performance by product category — stock turn rates — traffic flow pattern — profit contribution by product category. (2) Identification of merchandising problems. (3) Objectives for the coming trading period. (4) Merchandising techniques to be used. (5) Timing of implementation. (6) Departments, staff, and material suppliers involved. (7) Training requirements. (8) Likely competitor reaction. (9) Budget. (10) Means of evaluation. Followed through, such a plan can make a significant contribution to profits. Remember those wafers. References
1. Engel, J.F., Blackwell, R.D. and Kollat, D.T., Consumer Behaviour, Holt, Rinehart & Winston, 3rd edition, 1978, p. 483. 2. "In-store Survey of Book Purchasers", Massey University Market Research Centre, 1978. 3. Impact Two, Vol. 1, March 1979, pp. 1-2. 4. "Sales Go Up with Signs", Retail News, October 1979.
Francis Buttle is a member of faculty in the Department of Hotel, Restaurant, and Travel Administration at the University of Massachusetts. He has worked in marketing management, education, and consultancy across three continents.
Application Questions (1) Are customers likely to make impulse purchases of your goods? If so, does your organisation actively encourage impulse purchasing? How does it do this? (2) In what ways could the goods and sevices provided by your organisation be sold more effectively through merchandising? (3) Could your organisation change so that it could in future make more use of merchandising technqiues? What kind of changes would be necessary?
Action Points • • •
Re-assess the place of merchandising in your promotional mix, whether you are involved in manufacturing or retailing. Identify your organisation's merchandising problems. Draw up an action programme for your organisation's merchandising activities.
