One of a series of articles previewing the annual Food Marketing Institute (FMI) show, scheduled for May 2-4 in Chicago.
The meat business is cooking. The popularity of low-carbohydrate diets means that the nation’s meat departments now are on shoppers’ must-visit lists…which means that retailers are looking for ways to get consumers to trade up and increase their transaction levels.
On Tuesday, May 4, from 1-1:45 pm, FMI will present a special “Close-Up” session entitled Trade-Up Strategies to Drive Meat Department Sales & Profitability, in which Mark Boyer of the PMG consulting firm will talk about how to influence shoppers to trade-up in their purchase decisions is a result of programs and strategies implemented within the entire department. This session will define the concept, show its applicability to meat operations, and address the implementation towards profitability.
To get a preview of the issues that will be discussed, MNB conducted an exclusive e-interview with Mark Boyer:
MNB: You outline four ways that retailers can drive sales in the meat department ˆ getting them to pay more for the same item, buy more of the same item, buy a higher priced item, and becoming less reliant on advertised items. Let’s start with the first one. It seems to us that this one would actually be the hardest to achieve, because it means raising prices in a high price-sensitive environment. True?
Mark Boyer: Understanding price-sensitivity is the key. You have to be right on price for the items we would consider "price impact" items. These are the items that are typically going to be in the A Block of your ads (front page, or large inside ad).
We also look at competitive pricing, to see where we might be under-priced to the market on a non-price image item. Let me illustrate how this might work. Let's say our lean ground turkey, which is not typically a price impact item, is $3.69 per pound. The rest of the market is in the $3.89-3.99 per pound range. Raising the price to $3.99 isn't going to cause me to lose a customer. And I've made another 30 cents per pound. There are more of these opportunities than you would think.
MNB: How well do shoppers know prices in meat departments, compared to other categories? What leads to this level of knowledge?
Mark Boyer: Sorenson conducted a study in 2002 on what consumers know about meat prices and the numbers were low. Only 32% could accurately tell within plus or minus 10% what they paid for roasts and ground beef, and these were the highest percentages in the department. (Conversely, milk and bananas were 56% and 53% respectively.)
We believe that consumers do know the prices of the things they buy most often, and they know the prices of frequently featured items. Boneless/skinless chicken breasts are a great example. Most consumers probably think they cost $1.99 because they are so frequently featured at that price. Everyday price is often $3.99 or even higher. These are not the items we would typically target for everyday pricing adjustments, although we would suggest testing other promotion price points.
MNB: Getting people to either buy more of the same item or trade up to a higher priced item seems to me to be the best strategy...but we suspect that it depends on being able to educate people in a way that many retailers don‚t today. Would you agree?
Mark Boyer: These are both excellent strategies. Particularly for perishable items. Buying more of the same item might mean that the retailer has won a meal occasion back from foodservice, which should be one of the goals. The consumer has more meat in their refrigerator and stays at home to eat.
We encourage the use of Value Packs or Family Packs on frequently purchased items. Even at a discount to the regular size packages the ring and total profit dollars are going to be higher, although gross margin will be less. The education piece is accomplished through on-pack discount labels, and a Value Pack/Family Pack set that alerts the consumer to this option.
Consumers are value driven. Where it makes sense for them to buy three pounds of a meat item instead of a pound because they are saving 20 or 30 cents per pound you should take advantage of this. It is also important to remember that the meat purchase drives the center of the dinner plate, and a lot of other items are going to be purchased to accompany the meat. If we can help the supermarket win back one more meal from foodservice it will have a huge impact on overall sales.
MNB: What do retailers need to do to get people to buy more or buy higher priced items? Can you give some concrete examples?
Mark Boyer: Use of promotion to generate trial works in the meat department. Retailers are also branding their cases more than ever, which we believes helps convey an image of trust and assurance of their products.
Getting the consumer to trade up to a higher priced item has long-term rewards, particularly in a category like beef, where the chances of an improved eating occasion are significantly increased. When a retailer trades a consumer up from a Select cut of beef to Choice not only is the overall ring higher, the consumer is going to be happier with how the meat tastes and its tenderness. You will see more branded beef being offered that follows this logic. Sterling Silver and Certified Angus Beef are two that come to mind that cost more, but simply perform better. Fresh pork is also headed down the same road.
There are myriad other tactics, including adding value to items, such as stuffed, thin cut, marinated, pre-seasoned, oven ready, pop-up timers, etc.
MNB: Does de-sensitizing people to advertised specials also mean taking a risk that one could be identified as high-priced in a price-sensitive marketplace?
Mark Boyer: Your question is excellent, and one that should not be taken lightly. The strategies we suggest for trading consumers up can be successful whether you are an EDLP or HILO operator, or somewhere in-between. Our recommendations do not change the retailer's operating strategy; they are intended to work within the system, regardless of operating philosophy.
A HILO operator will still use promotion to drive sales. His challenge is to understand the price points he needs to meet the sales budget. We have repeatedly shown retailers that deeper promotion prices don't always stimulate more tonnage, just lower margins. The challenge is to know the sweet spots. It's not difficult to figure out.
An EDLP operator can still evaluate and adjust prices against the market. And offering higher value items as part of their mix works just as well here as it would for a HILO operator.
MNB: Does getting people to trade up in meat mean that they’ll actually spend more in the store...or are they just moving the dollars over from one category to another? (Not that this is a bad thing if dollars are moving from low-margin to high-margin categories...)
Mark Boyer: So much of what we have already covered deals with this issue, but it is so important because of the role the meat department plays to the rest of the store. It is conceivable that we might just be moving dollars around because the consumer is either working within a budget, or only shopping for a fixed number of meal occasions. But, if we move them to higher margin items the retailer wins.
If the consumer has a more satisfying eating experience, the retailer wins even bigger, because they are coming back looking to replicate that experience. This keeps them coming to the store's meat department, and it might even mean an additional meal prepared at home.
The meat business is cooking. The popularity of low-carbohydrate diets means that the nation’s meat departments now are on shoppers’ must-visit lists…which means that retailers are looking for ways to get consumers to trade up and increase their transaction levels.
On Tuesday, May 4, from 1-1:45 pm, FMI will present a special “Close-Up” session entitled Trade-Up Strategies to Drive Meat Department Sales & Profitability, in which Mark Boyer of the PMG consulting firm will talk about how to influence shoppers to trade-up in their purchase decisions is a result of programs and strategies implemented within the entire department. This session will define the concept, show its applicability to meat operations, and address the implementation towards profitability.
To get a preview of the issues that will be discussed, MNB conducted an exclusive e-interview with Mark Boyer:
MNB: You outline four ways that retailers can drive sales in the meat department ˆ getting them to pay more for the same item, buy more of the same item, buy a higher priced item, and becoming less reliant on advertised items. Let’s start with the first one. It seems to us that this one would actually be the hardest to achieve, because it means raising prices in a high price-sensitive environment. True?
Mark Boyer: Understanding price-sensitivity is the key. You have to be right on price for the items we would consider "price impact" items. These are the items that are typically going to be in the A Block of your ads (front page, or large inside ad).
We also look at competitive pricing, to see where we might be under-priced to the market on a non-price image item. Let me illustrate how this might work. Let's say our lean ground turkey, which is not typically a price impact item, is $3.69 per pound. The rest of the market is in the $3.89-3.99 per pound range. Raising the price to $3.99 isn't going to cause me to lose a customer. And I've made another 30 cents per pound. There are more of these opportunities than you would think.
MNB: How well do shoppers know prices in meat departments, compared to other categories? What leads to this level of knowledge?
Mark Boyer: Sorenson conducted a study in 2002 on what consumers know about meat prices and the numbers were low. Only 32% could accurately tell within plus or minus 10% what they paid for roasts and ground beef, and these were the highest percentages in the department. (Conversely, milk and bananas were 56% and 53% respectively.)
We believe that consumers do know the prices of the things they buy most often, and they know the prices of frequently featured items. Boneless/skinless chicken breasts are a great example. Most consumers probably think they cost $1.99 because they are so frequently featured at that price. Everyday price is often $3.99 or even higher. These are not the items we would typically target for everyday pricing adjustments, although we would suggest testing other promotion price points.
MNB: Getting people to either buy more of the same item or trade up to a higher priced item seems to me to be the best strategy...but we suspect that it depends on being able to educate people in a way that many retailers don‚t today. Would you agree?
Mark Boyer: These are both excellent strategies. Particularly for perishable items. Buying more of the same item might mean that the retailer has won a meal occasion back from foodservice, which should be one of the goals. The consumer has more meat in their refrigerator and stays at home to eat.
We encourage the use of Value Packs or Family Packs on frequently purchased items. Even at a discount to the regular size packages the ring and total profit dollars are going to be higher, although gross margin will be less. The education piece is accomplished through on-pack discount labels, and a Value Pack/Family Pack set that alerts the consumer to this option.
Consumers are value driven. Where it makes sense for them to buy three pounds of a meat item instead of a pound because they are saving 20 or 30 cents per pound you should take advantage of this. It is also important to remember that the meat purchase drives the center of the dinner plate, and a lot of other items are going to be purchased to accompany the meat. If we can help the supermarket win back one more meal from foodservice it will have a huge impact on overall sales.
MNB: What do retailers need to do to get people to buy more or buy higher priced items? Can you give some concrete examples?
Mark Boyer: Use of promotion to generate trial works in the meat department. Retailers are also branding their cases more than ever, which we believes helps convey an image of trust and assurance of their products.
Getting the consumer to trade up to a higher priced item has long-term rewards, particularly in a category like beef, where the chances of an improved eating occasion are significantly increased. When a retailer trades a consumer up from a Select cut of beef to Choice not only is the overall ring higher, the consumer is going to be happier with how the meat tastes and its tenderness. You will see more branded beef being offered that follows this logic. Sterling Silver and Certified Angus Beef are two that come to mind that cost more, but simply perform better. Fresh pork is also headed down the same road.
There are myriad other tactics, including adding value to items, such as stuffed, thin cut, marinated, pre-seasoned, oven ready, pop-up timers, etc.
MNB: Does de-sensitizing people to advertised specials also mean taking a risk that one could be identified as high-priced in a price-sensitive marketplace?
Mark Boyer: Your question is excellent, and one that should not be taken lightly. The strategies we suggest for trading consumers up can be successful whether you are an EDLP or HILO operator, or somewhere in-between. Our recommendations do not change the retailer's operating strategy; they are intended to work within the system, regardless of operating philosophy.
A HILO operator will still use promotion to drive sales. His challenge is to understand the price points he needs to meet the sales budget. We have repeatedly shown retailers that deeper promotion prices don't always stimulate more tonnage, just lower margins. The challenge is to know the sweet spots. It's not difficult to figure out.
An EDLP operator can still evaluate and adjust prices against the market. And offering higher value items as part of their mix works just as well here as it would for a HILO operator.
MNB: Does getting people to trade up in meat mean that they’ll actually spend more in the store...or are they just moving the dollars over from one category to another? (Not that this is a bad thing if dollars are moving from low-margin to high-margin categories...)
Mark Boyer: So much of what we have already covered deals with this issue, but it is so important because of the role the meat department plays to the rest of the store. It is conceivable that we might just be moving dollars around because the consumer is either working within a budget, or only shopping for a fixed number of meal occasions. But, if we move them to higher margin items the retailer wins.
If the consumer has a more satisfying eating experience, the retailer wins even bigger, because they are coming back looking to replicate that experience. This keeps them coming to the store's meat department, and it might even mean an additional meal prepared at home.
- KC's View:
